WBD620 Audio Transcription
The Frontier of Bitcoin Mining with Lee Bratcher
Release date: Friday 17th February
Note: the following is a transcription of my interview with Lee Bratcher. 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.
Lee Bratcher is President of the Texas Blockchain Council. In this interview, we discuss the important work of the Texas Blockchain Council in educating decision-makers and providing a link to Bitcoin businesses, which has helped Texas to become a global leader in Bitcoin. We also talk about the risks of introducing any form of CBDC.
“This industry has so much potential to be a demand side battery for any grid (but especially the Texas grid, because we have so much of it and we have so much stranded energy that because of transmission congestion) that it could be revolution — it could do for the Texas grid what batteries will do for grids in the Northeast or in Western Europe.”
— Lee Bratcher
Interview Transcription
Peter McCormack: Good morning, Lee Bratcher, how are you, man?
Lee Bratcher: Good morning, I'm great.
Peter McCormack: Good to see you.
Lee Bratcher: Likewise.
Peter McCormack: You came in from Dallas?
Lee Bratcher: Yeah.
Peter McCormack: Can you turn me up a little bit, Danny?
Danny Knowles: Yeah.
Peter McCormack: Did you drive or fly?
Lee Bratcher: Fly.
Peter McCormack: Okay, why?
Lee Bratcher: Traffic.
Peter McCormack: Is that the main reason?
Lee Bratcher: Yeah, I35 is a mess.
Peter McCormack: I've done that drive before, I'll tell you a funny story. It was the first time I came to Austin, I came for South by Southwest, but the direct flights to Austin were too expensive. It was like ten years ago and I was broke. So, I flew to Dallas and thought I'd just do the drive, because the flight was under half the price. So, I drove all the way in and I was staying back in the Omni for one night before going back to the UK. So, I put the Omni in my Sat Nav, set off, and then I stopped to get petrol, or gas, what you call it, and I was like, "I'll see if there's anything interesting on the way", and I found out the Billy the Kid's grave, or one of a pair of graves, was on the way.
Lee Bratcher: That's amazing.
Peter McCormack: Yeah, so I put that in my Sat Nav, went to see it, stopped at a pie shop, had pie with this guy who was celebrating his 98th birthday, and then I put the Omni back in my phone, and I was about I think an hour out of Dallas. Anyway, I'm driving along and about two hours in I'm like, "How am I not at Dallas yet?" I started to recognise things and what I didn't realise is there's an Omni in Austin. So, I'd put the Omni in Austin back in my Sat Nav and driven pretty much all the way to Austin.
Lee Bratcher: Oh!
Peter McCormack: So it took me, what was that, two, three, four, about seven hours!
Lee Bratcher: That's rough.
Peter McCormack: Should have flown.
Lee Bratcher: Yeah!
Peter McCormack: Anyway, nice to see you and thank you for inviting me to the Summit to interview Ted Cruz, I'm going to ask you about that.
Lee Bratcher: That was fun.
Peter McCormack: You know what the first question is, don't you?
Lee Bratcher: Oh, I do.
Peter McCormack: When are you going to change it, man? When are you going to become the Texas Bitcoin Council?
Lee Bratcher: It's a great question. Yeah, I think people know we are a Bitcoin-first industry association. And your next question is, "Well, if they know that, then why not change the name?"
Peter McCormack: Yeah. Rebranding is a lot of work.
Lee Bratcher: It's a lot of work and here's another thing that we think about. So, when we meet with politicians, elected officials actually is the better terminology, we know it's important to differentiate so that they have a clear understanding of the landscape. So, we do bring them a copy of The Bitcoin Standard and Inventing Bitcoin, so that's our first step in the education. We've done that with Senator Cruz, with Governor Abbott, with several other state and local state senators and state representatives.
Then, the ones that we've had an ongoing relationship with for several years, we've actually talked to them about this very thing and they'll say, "Hey, you guys really just do Bitcoin mining and other things in the Bitcoin ecosystem, you do a little bit of other, broader advocacy for the broader ecosystem", and they'll ask us to keep it the same, because they want the largest possible coalition supporting them for their effort in getting educated; and that voter block, that's what they want.
Peter McCormack: So, when are you going to change it to the Texas Bitcoin Council?! Look, I get it. So, I imagine for a lot of politicians you're working with, a lot of them don't see the difference, they just see the cryptocurrency industry, and a lot of work is in explaining the difference, and I get that because I have the same whenever I'm talking to somebody at the Football Club about it and they've not heard of it, they see it as one big thing. I think for us bitcoiners, we're like, "It's so obvious how different Bitcoin is", its immaculate conception, everything. I'm very empathetic to people who come and they literally see no difference between any of it.
Lee Bratcher: It's a little easier for us than the DC politicians though, because in Texas, mining is such a big deal for job growth, tax revenue, they've heard about it and they understand like, "Okay, well these other coins don't use proof of work". That's their entry point, is hearing about mining, so they already know that it's a little bit different.
Peter McCormack: I was actually really impressed with Ted Cruz's knowledge when we did the interview, very, very impressed actually. When I did the interview, a lot of people wanted to talk outside of that, of their opinions on Ted Cruz, whether they love him, they hate him, his trip to Mexico, you know, outside of all that. He had a really deep knowledge of Bitcoin.
Lee Bratcher: So, the first time that I met him, we were in DC with his staff and they had ordered a slew of books, with Saifedean's at the top of the list, and I think he read them all. So, he's done an equivalent amount of research that most bitcoiners have done. For a politician, that's saying a lot, because they usually just read the executive summary.
Peter McCormack: How did you think that interview went?
Lee Bratcher: I thought it was great.
Peter McCormack: You think it was all right?
Lee Bratcher: Yeah, you pressed him a little bit, but you didn't press him too hard; it was perfect.
Peter McCormack: I'd like to interview him again actually, I'd like to do a proper long-form podcast interview. But I think I said to you before, I would like to get him and --
Lee Bratcher: Ro Khanna.
Peter McCormack: Yeah, Ro Khanna, a Democrat, anyone, just have the two together and just have the kind of conversation I like to have, which is very balanced and gentle and just talk through some issues. But I was impressed. Let people know a little bit more, because not everyone's going to know the Texas Blockchain Council, what you're doing or about you. I know you, I've got to know you over the last year or two. Let people know a little bit more, because it's going to be an important context for the things we're going to talk about.
Lee Bratcher: Sure. Yeah, we're a unique organisation. We're a trade association, industry association, so we do two things primarily. One is, we do lobbying, education, advocacy at the state level, a little bit at the federal level as well; and we also do business development for our member companies. So, we have over 100 corporate members and we help connect them with various people in the industry that they want to be connected to, and trying to drive value for them as a member. So, that puts us in a unique position to both see the industry unfold and also see behind the curtain on how the sausage is made on politics and policy.
Peter McCormack: And for some people listening, half my audience is in America but half isn't, and a lot won't fully understand the difference between law-making at a state and federal level. Is there an easy way to explain it?
Lee Bratcher: No, there's not an easy way, but I'll say that pertaining to Bitcoin, it's about a 50/50 split what matters at the state level and at the federal level. At the federal level, it obviously matters that this is going to fall into the purview of the CFTC as a commodity; I mean, obviously we're headed in that direction, which is great. And then you have things at a federal level like tax implications; that is certainly federal.
The other half though is at the state, and a lot of people don't understand that. Money transmission licences are issued by states. The banks, most banks have a dual regulatory framework, but they fall under the Texas Department of Banking, Texas charter banks do. So, there's a lot of things at the state level, including what are we thinking is a state about central bank digital currencies, about the transactional nature of that; when is this going to be used for everyday transactions and that sales tax, that's point of sale. A lot of that is state and local.
Peter McCormack: So, there's a lot you do. You're kind of at that conduit between companies and people who are interested in industry; but at the same time, you're trying to protect industry, you're trying to educate law-makers. There's a lot you guys do.
Lee Bratcher: Yeah, we do quite a bit. We do what our members want us to do, and we have a set of values that the members know coming in. And then, within that context, within those values and those parameters, we work to advance their interests and advance the interests of the industry and consumers in Texas that are adopting.
Peter McCormack: And those values are -- can you repeat them; do you know them off by heart?
Lee Bratcher: Yeah, I mean we have four values. Membership matters, so we want to take the members seriously, we wouldn't want to just take membership revenue and then do what we're going to do anyways. We want to engage them and see what's important for their business. We want to enhance diversity, and that's not the typical form of the word "diversity" that you would expect; it's diversity of thought, diversity of opinion, diversity of bitcoiners from different socioeconomic backgrounds or different geographies, etc, diversity of businesses, from Deloitte to a mining company to a law firm, so to maximise the different specialities that are getting involved in the industry. We want to influence policy, so we want Texas to become the global leader in Bitcoin blockchain and digital assets at large.
Peter McCormack: And Texas has really started to become this home of Bitcoin now. Why do you think that is?
Lee Bratcher: The ethos of Texas just matches up with the ethos of Bitcoin, and it does in other places as well, so it's not just that. There's also an amazing start-up ecosystem in Austin. You've got people that are really driving the thought leadership: on the technical side, like Jimmy Song, who are here; on the more kind of general business side, like Parker Lewis, who are here. And mining, that was just a function of our free market, energy-only marketplace, which is ERCOT, and the abundance of excess stranded power. And so those three factors combined. And we like to think that a little bit of our advocacy work on orange pilling people like Senator Cruz and the Governor has helped as well. So, I guess there's four factors.
Peter McCormack: Yeah, it's really fascinating to see. You come to Texas and there are these external pressures that maybe are coming from regulators in DC or specifically Elizabeth Warren, who we'll likely talk about. But if Texas was left the fuck alone, Bitcoin would just be this industry that naturally grows, naturally continues. There's no internal questions really within the state, I don't see; I mean, you might know of it, but it seems to me just like a flourishing industry within Texas.
Lee Bratcher: It is and I think from the outside, it may look like that was an easy fit, but there's still a ton of education. We did a survey of all Texas voters. Of course, this a representative sample, 2,000 participants, so a margin of about 2%, and this was back in March, so things have changed quite a bit since then. But we found that the favourability ratings for Bitcoin amongst Texas voters is a net plus ten positive, so that's favourable and very favourable, so that's a net plus ten on that survey.
The ownership of Bitcoin or other digital assets is 29% of Texas voters, which is significantly higher than the national average. Now, that data is a little bit skewed, because this is of likely voters, not of all Texans, so that skews slightly to the more educated and to the more digitally savvy. So, the real number might be slightly under that, but it's still significantly higher than the national average.
Peter McCormack: And try and explain this kind of Texas DNA, which has this natural fit to Bitcoin itself, because I've been coming here since that South by Southwest, but really I would say the last three years coming regularly. I've been to Houston, I've been to Dallas, I've spent a lot of time here in Austin. When you spend time here, whether it's going to your summit, whether it's going to some of the meetups, whether it's going to the Bitcoin Commons or just hanging out, you just also spend time with Texans, you listen to what they talk about, with regard to sports and guns and culture. You see their natural fit, which by the way I've also seen in Nashville. But try and explain that DNA to an external person who's maybe never even been to the US, let alone Texas.
Lee Bratcher: Yeah, it's that function of history and geography, and there's a sort of narrative that's in popular culture around Texas, which is mostly just hype and untrue. But there are elements of it that are actually legitimate. I mean, there is a great deal more of independent thinking and a willingness to buck the status quo, and an interest in going out and being more entrepreneurial and not leaning on any external, whether that's state support, or what have you. So, there is just a different vibe, for sure.
Peter McCormack: Are you from Texas?
Lee Bratcher: Yeah.
Peter McCormack: Okay, let's get a little bit into mining and the energy side of things. There is a flourishing mining industry here. It's probably best to talk a little bit about the grid. You obviously know ERCOT very well, the independence of the grid here in Texas. Why has that made this such a natural fit for Bitcoin mining?
Lee Bratcher: Yeah, the energy-only marketplace in Bitcoin sends really strong price signals. So, as we think about economics and free markets, there's other ISOs, which are different grid operators in parts of the world that have functions of free markets; but ERCOT is probably on the bleeding edge of the free market, as far as pricing for energy, which sends clear signals about where energy is cheap and where it's expensive. And so, that allows miners to find sites where they can acquire either wholesale PPAs, as we call them, but think about it as a hedge power price, in a jurisdiction that's friendly, either partnering with some behind the meter generation asset, like a solar facility or a windfarm; or, just taking power from the grid, but they're taking it at times and at locations where the grid doesn't really need as much and pricing is reflected in that.
If you're going to go to downtown Austin or Dallas or Houston and try to set up a 100 MW Bitcoin mine, you're going to be paying exorbitant amounts for your electricity, because those are geographies where there's way more supply than demand, so you're not going to do that. But Texas is so large --
Peter McCormack: Wait, is it the other way; way more demand than supply?
Lee Bratcher: You're right, yeah, way more demand than supply. Texas is so large that you're going to go out in West Texas, or Central Texas, or other parts of the state and you're going to find that inversed.
Peter McCormack: And, how smooth has that rollout and integration with mining into the grid been, because there have been accusations labelled at the industry that it's actually drawing energy away that is required. There's been criticism, I think probably unfounded or uneducated?
Lee Bratcher: Yeah, there were some concerns by ERCOT for sure and there still are. They instituted an interim interconnection process back in March that significantly slowed down the amount of interconnection, because at this time, there's 38,000 MW of large flexible loads waiting to interconnect on the ERCOT grid. To give some context, that is the size of the New York power grid, the whole state of New York.
Peter McCormack: Wow!
Lee Bratcher: And most of that is Bitcoin mining. But what we had to tell them, and what they kind of knew already, because on the generation side you see something similar with solar, there's like ten times the amount of solar wind interconnect than will actually materialise, we had to tell them the same thing, "Guys, people are applying for load in triplicate", they've got 100 MW that they want to build and they're applying in three different locations and you're seeing that three times. It's people just throwing mud against the wall to see what sticks. So, the real number that's actually coming is about 10% of that.
So, once you start to put it back into perspective, it's a little less concerning. And so, we've worked with ERCOT through the Large Flexible Load Taskforce, which is the name that they created, it's kind of a mouthful; but it is mostly Bitcoin mining. And they don't want to call it the Bitcoin Mining Taskforce, because they wouldn't want to seem like they were discriminating against industry. But this industry has so much potential to be a demand-side battery for any grid, but especially the Texas grid, because we have so much of it and we have so much stranded energy because of transmission congestion, that it could be revolutionary. It could do for the Texas grid what batteries will do for grids in the Northeast or in western Europe.
Peter McCormack: But you say they still have some concerns; what might they be?
Lee Bratcher: It's the speed at which the miners are wanting to connect.
Peter McCormack: Can you explain that?
Lee Bratcher: So, a Bitcoin miner wants to get their machines hashing in as little amount of time as possible, because they're wanting to capture -- the machines are the most expensive input, and so they've already ordered the machines, the delay is significant to their bottom line. Other industrial-scale projects will take years to ramp up and that's what ERCOT's used to, that's what the whole world is used to.
Peter McCormack: Right, so they're not used to this speed?
Lee Bratcher: Not at all.
Peter McCormack: So, is it more just a kind of nervousness around the speed at which they're connecting, whether ERCOT can handle…?
Lee Bratcher: It's a concern around the speed for reliability, but they pretty much all see the same data that we're seeing, which is Bitcoin miners turned off. They're very price-sensitive, so whether it's because they've entered into ancillary services and they have a strike price where they have to turn off, or the price signals are such that it's unprofitable to mine Bitcoin greater than $100 per MWh, they're all going to be off.
Peter McCormack: Yeah, what was interesting, we had Shaun Connell in here yesterday, and my expectation of this relationship between ERCOT and the miners was like, "Look, we've got a massive increase in demand, get them on the phone and say, 'Hey, can you turn those off?', because I had heard about perhaps maybe a concrete plant or a steel plant…", that's actually what would happen, there would be a call. And he was explaining, "No, the price signals automate this". Yeah, this is the chart we saw.
So, as soon as the price went up, that signal automated them and they just naturally switch off. So, there isn't a phone call that's needed to make. And the really interesting thing about this, or the ironic thing I was saying to Shaun is that, Bitcoin itself is so volatile, but what it's actually doing is reducing volatility within the energy grid, which is fascinating.
Lee Bratcher: Bitcoin could be volatile by 10%, 20% in a day, and it doesn't really affect the strike price that much. You could even double the strike price and it doesn't matter. ERCOT is only worried about a miner staying on at, say, $1,000 a MWh, it doesn't matter if it's $90 and $120. You see the scale difference there.
Danny Knowles: You mean the breakeven price there, by $90 to $120?
Lee Bratcher: Correct, the breakeven price. So, if Bitcoin's at $100,000, the breakeven price for miners, again difficulty level is a big factor in this equation, so we'd have to know the difficulty level before we knew exact numbers, but it's going to be under $1,000 for the breakeven. So, the highest I've ever seen it is about $300 when Bitcoin was ripping a year ago at all-time highs.
Peter McCormack: So, we understand their nervousness about it. It's more because their primary concern has to be delivering power to the people of Texas and if there was ever a scenario where the people of Texas weren't -- worst-case scenario, there was a rolling blackout, and that was because the Bitcoin miners weren't switching off, we know that would cause some kind of negative PR.
Lee Bratcher: Absolutely.
Peter McCormack: But that's a nervousness. Do ERCOT as a whole see Bitcoin as this revolutionary technology that they're very fortunate to now have as part of the grid; do they really appreciate it?
Lee Bratcher: Some do, most don't yet. Most think about it as, this is a tool in the tool belt and in their tool belt for compressing the duck curve, for having more flexible load that's going to pick up the valleys of the duck curve overnight and during times when we're not using a lot of electricity; but it's going to shave the peaks off the top during peak times at 4.00pm on 1 August when it's just blazing hot in Texas.
Peter McCormack: But you know, you understand this has made a huge difference?
Lee Bratcher: Huge difference. And I think the potential for it to make an even greater difference, when the communication is even better than it is now. Right now, we still get a call every now and then. So, on Christmas Eve, Danny and I were talking about this, on Christmas Eve when the Arctic blast was coming through, I got communication from ERCOT saying, "Hey, we still see some miners on". They can't tell you obviously who, because it's proprietary information, but I said, "All right, well let me think about it, let me think who it might be, call me back in 15 minutes". And then, it turns out the price continued to go up and those miners did turn off. It was just a slight lag. So, there was a little bit of a concern for a moment, but it was quickly dissipated.
Danny Knowles: You can see the hashrate drop by like 25% or something in a day.
Peter McCormack: I mean, they're thinking ahead, whereas the system worked perfectly.
Lee Bratcher: It worked perfectly.
Peter McCormack: Yeah, it's fascinating. And so, I know you're operating here in Texas, but I know the rest of the grid is interconnected and there's complicated relationships between who manages which parts; but are other parts of the grid now looking at this; are they aware; are they enquiring, coming to visit?
Lee Bratcher: They are, and they're capable. There are some ISOs that couldn't, like the California ISO just wouldn't make sense, based upon how their market is set up.
Peter McCormack: ISO? Independent something?
Lee Bratcher: Now you're going to catch me.
Peter McCormack: Is that like an energy operator?
Lee Bratcher: It's the grid operator.
Peter McCormack: Yeah, okay. And it wouldn't make sense for California because…?
Lee Bratcher: Their market is a little bit more regulated. You have a capacity market there, so the price signals don't work the same way. But in other parts of the country, even with interconnected grids, there's different ISOs and Danny's probably going to --
Danny Knowles: Independent System Operator.
Lee Bratcher: That's what I was going to guess.
Peter McCormack: But would you argue that the California ISO is poorly structured, or is it something specific for them? I don't know.
Lee Bratcher: For someone who believes that markets are not perfect, but they can send really good signals and are the way that we should go, yes, the California ISO's poorly structured. They're leaving money on the table. Their citizens are paying more for their energy than they should.
Peter McCormack: Than they need to, yeah, interesting. But have there been visits down here by other ISOs? I'm using that term like I know what it is now!
Lee Bratcher: I know there's been Zoom calls, I don't know if there's been visits.
Peter McCormack: But there's definitely an interest.
Lee Bratcher: Yeah.
Peter McCormack: And, what do we have here? 25% of the Bitcoin hashrate might end up in Texas by the end of this year?
Lee Bratcher: I think that might be a little strong, but 20% would be my current estimate.
Peter McCormack: Where did you get your 25% from?
Danny Knowles: I think that was from your tweet, to be honest, Lee!
Lee Bratcher: No, I did tweet that about two years ago.
Peter McCormack: Okay. So you think about 20% now?
Lee Bratcher: Given the slowdown from ERCOT and the market slowdown, I think it's probably more going to be like 20%.
Peter McCormack: That's quite a density of the hashrate in a small location and that could grow. And if the US grid rapidly adopts this, we could see a massive amount of the hashrate here within the US, which I see trade-offs. Firstly, I think regulatory protection, which is great. But then I also see potential regulatory capture. So, there are these big trade-offs. Do you ever consider thinking about, could we end with too much hashrate here?
Lee Bratcher: I don't think so, because these companies are all very independent, competitor companies, and you have different states that are competing. By the way, the Foundry numbers -- Foundry's a great company, they put out great products, but a lot of the Texas miners aren't using them as a pool. So, that's why Georgia is oversampled in their numbers. People are like, "Georgia is the largest state for Bitcoin mining in the US!" It's because they're using the Foundry pool's numbers.
Peter McCormack: It's really interesting, because who is it we were talking to about incentives; do you remember?
Danny Knowles: No, I can't remember.
Peter McCormack: It kept coming up. We were talking about incentives and why incentives matter, and one of the really interesting things, was it Colorado that firstly decriminalised marijuana and then made it legal?
Lee Bratcher: They were one of the first states.
Peter McCormack: Yeah, and I seem to remember something like $1 billion say in tax revenue came in, and then very quickly other states switched. And all that history of, "Drugs are bad and marijuana's bad" kind of dissipated. And, look, I know not every state has changed. I think even here in Texas, it's still illegal, but the incentives matter. In a period where there's a massive amount of people looking at energy and the energy sector, especially in Europe because we've got our own issues, when you have something which stabilises the grid, brings jobs, brings revenue into the country, lowers energy prices, it becomes very difficult for people to make a solid argument against it.
Lee Bratcher: Yeah. So, everything you said is true, but the one thing it's most difficult to prove is the energy price piece, because from the outset, you increase demand, you're going to increase the price. Miners are using more power, so the price should necessarily go up, and that is true just in a general sense. However, it's really about the geography and the time of day. So, I would envision a future where a miner is playing that energy arbitrage, they're monetising their optionality, and they're turning off 45 minutes a day, every day, in the summer and some days in the winter.
So it's not about -- the general consumers are like, "Well, they're using energy, that's bad", it's 100% about where and when, because we want them to use a lot of energy at 2.00am, because if they don't, then we'll have a low of power plants go out of business.
Peter McCormack: All the prices will go up though, Lee. What will happen is they won't go out of business, because you will need the energy.
Lee Bratcher: Well, so the combined cycle plants, they need to make their money, because they have to run 24/7. They lose money if they start to power down.
Peter McCormack: But what would happen to them if they went out of business?
Lee Bratcher: Then you would have higher prices for the consumer, because there would be less supply.
Peter McCormack: So, you've just made the argument back that actually it does lead to lower prices, or it prevents higher prices.
Lee Bratcher: That's what I'm saying. It can prevent higher prices, but it's a little counterintuitive. You have to see that the miner is using energy at times and in locations where you're supporting increased generation and you're supporting that generation to stay online and stay efficient. It's more about efficiency of the grid and transmission congestion than it is about the market.
Peter McCormack: Yeah, I'm just going to push back, because you said you would see these companies go out of business, therefore the consumer will see higher prices.
Lee Bratcher: Well, so the generators go out of business. So, if a natural gas generator goes out of business and they, say, represent 5% of generation in Texas, then you'll necessarily have 5% less generation available for consumers, and could conceivably see an increase in price because of that.
Peter McCormack: So, Bitcoin is keeping the price down! Do you see what I'm saying, Danny?
Danny Knowles: I see what you're saying.
Peter McCormack: I feel like you can't say this, which is fine.
Lee Bratcher: I agree with you, but it is a more nuanced argument than -- the common person that's just studied economics would say, "Oh, you're increasing demand for power, you're necessarily going to increase price", because I'm talking about two different things. I'm talking about generation, which is on the supply side, and Bitcoin on the demand side.
Danny Knowles: I think a key part to that probably as well is how ERCOT price their energy and how regularly they price their energy. Do you want to explain to anyone that might not know how that actually works?
Lee Bratcher: Yeah, it's unique, right. They have no price-setting authority; they let it function as a free market. We don't see this as a consumer, because we get a consumer contract with a retail electric provider that's going to price our energy at 13 cents per kWh, regardless of the time of day or how hot it is outside. But in the wholesale markets where Bitcoin miners operate, it is a floating market. So, you could see overnight prices plummet.
In fact, in West Texas, if there's a lot of wind and there's not enough transmission line to get it to the population centres of the world, you could have negative prices out there. And the wind developers could eat those prices, because they have a subsidy from the federal government to operate their generation. So, you could have about 15% of the time in West Texas where you're just seeing negatively priced power; but in Dallas, power in the wholesale market could still be -- it's a different zone, it's a different pricing zone.
Peter McCormack: I have found this weird paradox in Texas in that it is a Republican state and there are a lot of Democrats here, I understand that, especially in Austin, but it is a Republican state with very traditional values. And, when the issue of climate change is discussed, I've found it tends to be more from the left and there's some suspicion and doubt with the policies around climate change, and how serious it is tends to come a little bit more from the right; would you say that's fair?
Lee Bratcher: Yeah.
Peter McCormack: Yeah. At the same time, Texas seems to be the state that has done, and correct me if I'm wrong, but has had the biggest investment and the most work in developing renewables.
Lee Bratcher: That is true as well.
Peter McCormack: It's weird, I don't understand it. Is that just because incentives matter and there are these subsidies and there's entrepreneurs here?
Lee Bratcher: Texans like to make money.
Peter McCormack: Okay, fuck it, take the money then!
Danny Knowles: Is it also because of how independent ERCOT is?
Lee Bratcher: It's several reasons, yeah, three primary reasons. The incentives are there, federal government subsidies; the ERCOT marketplace; and the geography. The wind region of the state is, we call it the wind corridor. All the wind is there. It's either there or off the coast or in the Rio Grande Valley, and we have a lot of cheap real estate for solar as well, because you need a lot more real estate to develop a megawatt of solar than you do wind. So, geography on the wind corridor when the wind's blowing the most, and then cheap real estate for a lot of sunny days in Texas. So, those three factors combined, it's just simple economics, people are just going to develop renewable energy in Texas.
I think the legislature in Texas doesn't care how they get the energy. They want it to be reliable, so we do need to match these flexible loads when we talk about energy, so natural gas is the core of any grid globally, it has to be. Or, I mean I guess in the developing world, it could be coal, which is unfortunate. But natural gas has to be that base generation.
Peter McCormack: It can't be nuclear?
Lee Bratcher: It could. Unfortunately, people get freaked about that, I don't know why. I mean, we know why but it's unfounded fear. Texas is about 8% nuclear.
Peter McCormack: We just made two shows last week in Nashville regarding nuclear. We interviewed somebody who'd worked on nuclear subs and then worked on the aircraft carriers, on the nuclear reactors on there, and then he's been involved in consulting and he's been involved with Fukushima; and his argument for it, I'll leave it to you to listen to, leaves you in no doubt that nuclear should be a central part to any energy grid, especially if you are targeting a carbon-free future.
Lee Bratcher: I 100% agree. The only problem with it in Texas is because of the market function, it's just not economical. Wind and solar are way cheaper to develop on a per-megawatt basis.
Peter McCormack: And quicker.
Lee Bratcher: And quicker, and natural gas is also more economical than nuclear.
Peter McCormack: Yeah. So, knowing everything you know about Texas, all the work you guys have done, you've seen the growth in jobs, you've seen the growth in the industry here, when Elizabeth Warren writes to you, who does she actually write to?
Lee Bratcher: The CEO of ERCOT. But she mentioned me and the Texas Blockchain Council in the letter.
Peter McCormack: Yeah, I remember. When she does that, how are you then actually feeling, what kind of emotions are you going through, because there is that part that it's a function of success? It's a function of success that she cares that much, but she's never at one point ever demonstrated any real understanding of Bitcoin and what it is. I think there are people out there who do make solid criticisms of Bitcoin, things you should question. Hers always seem unfounded and come from a position of ignorance. But how did you feel about that?
Lee Bratcher: Well, you said it. At first we thought, "This is great". It's frustrating though, because you read the letter and you're like, "There's so many inaccuracies here, there's so many things taken out of context", so that's frustrating. But she elevated us in the conversation as sort of the -- there were three components to that conversation. There was the industry association, which is us; the grid operator; and the elected officials. And to be in that conversation, that's where we want to be. A couple of years ago, that would not have been the case. So, we welcomed it.
We'd also welcome the opportunity to talk with her about -- we did jab back a little bit in our response, we threw a little bit of --
Peter McCormack: Dig it out, Danny!
Lee Bratcher: Yeah, so Massachusetts, we have 17 times more renewable energy in Texas than Massachusetts, so we put that out there, right; 17 times.
Peter McCormack: That's not a jab, that's a fact.
Lee Bratcher: Yeah. And I also would continue to tweet about the power prices, the day-ahead markets in New England, because they refused to get natural gas from Canada and their citizens up there are just paying crazy prices for their electricity. So, we did throw a few jabs back and said that she should focus her efforts a little closer to home, because they're struggling in the Northeast with their reliable generation, with power prices, all that stuff.
Peter McCormack: Can you find a copy of her letter? We won't read the whole thing.
Lee Bratcher: Seven pages!
Peter McCormack: Can you summarise what she was saying, asking, expecting?
Lee Bratcher: It was pretty unprecedented by the way. Nobody that I talked to had ever seen a senator from a different state ask the CEO of a grid operator in another state for these kinds of things. So, she asked for several things for ERCOT to respond around the load; can the grid handle it; is it healthy for the environment, all these kinds of questions. So, the load, the grid and the environment were the three main things that she asked about.
Peter McCormack: Who is Pablo Vegas? By the way, fucking great name!
Lee Bratcher: Yeah, it is. He's the new CEO of ERCOT.
Peter McCormack: Okay, oh, Brad Jones, okay. So, it was the opening that got me, "Dear Mr Vegas, we write seeking information about crypto mining operations in Texas and the impact these operations may be having on climate change, the stability of the energy grid, and subsidies ultimately paid by retail consumers that the Electric Reliability Council of Texas (ERCOT) is providing to crypto mining companies to curtail their operations during times of peak demand".
What's really interesting about that intro is that this letter could have gone two ways. It could be treated like a negative, "We want to know what the fuck you're up to"; it could be like, "It seems like things are going pretty well down there, we want to learn from you".
Lee Bratcher: Well, if you keep reading, it gets --
Peter McCormack: Yeah, I know. Any key sections for the listeners you think we should just dig out?
Lee Bratcher: She starts to throw out some crazy FUD around page two or three. But Danny, if you stay there on page one for just a second, you'll see the word "subsidies". That was an intentional word choice. Bitcoin miners get zero subsidies from the State of Texas. They operate just like any other load here, there's no difference. In fact, we get treated with a little bit more scepticism because of the speed at which we interconnect. So, if anything, we have more to prove. So, zero subsidies.
What she's referring to is economic incentives to curtail. Well, every grid needs that, you need economic price signals for loads to be more flexible. You don't want every consumer in their home, when it's like 100°F outside, to crank their AC down to 65° because you could literally cause rolling blackouts. You need people to be thinking about when and where we're using electricity. So, that baffles me.
Peter McCormack: Scroll down, Danny, to the next one. Let's see if we can find any juicy. "They will be using enough energy to power the entire city". There's a lot of citations. I want to see what she's actually asking for. Oh, wait, these are the questions.
Lee Bratcher: These are all the questions, yeah.
Peter McCormack: Go back up, Danny, just a touch. So, question 1, "For the year 2022 to date, and for each of the previous five full calendar years, what has been the annual electricity consumption used for crypto mining in Texas… and how many tons of emissions…? How do crypto mining companies plan to scale their operations in Texas? What other crypto mining companies…?" Is there any -- a possible response to this is, "This is none of your fucking business".
Lee Bratcher: That's pretty much what they said. So, they've responded with a letter and said, very tactfully, it's the grid operator, but basically they said that.
Peter McCormack: What do you think her motivation was here to step so far out of her lane?
Lee Bratcher: Political.
Peter McCormack: This is all political?
Lee Bratcher: All political, yeah.
Peter McCormack: Okay, explain further.
Lee Bratcher: I think maybe she has a genuine concern. I do want to assume the best in people, so I think she has a genuine concern and probably no time to really get educated on it.
Peter McCormack: So, this would be staffers informing her?
Lee Bratcher: Probably. Certainly staffers that wrote it. So, she has a dual motive. She has genuine concern, but she also has political points to score.
Peter McCormack: Okay. Where's the bit where you're mentioned.
Danny Knowles: I'd have to Ctrl F!
Peter McCormack: Come on, you know what page and paragraph! Here we go, love this, "While many businesses and retail consumers are asked to voluntarily conserve power during these times, there is no requirement for them to serve, though some companies have enrolled in ERCOT programmes under demand response agreements that pay them for curtailing their operations during periods of high of demand. Lee Bratcher, the President of the Texas Blockchain Council, has said of the July heatwave that, 'Over 95% of industrial-scale Bitcoin miners curtailed their power consumption during peak demand over that week'".
I mean, part of this, they are actually telling what a great story Texas is doing. That's pretty cool that you're in there, man!
Lee Bratcher: Yeah!
Peter McCormack: Have you got the reply?
Danny Knowles: I'll find it. Is that on your website?
Lee Bratcher: It was a press release, "Texas Blockchain Council responds to Senator Warren's Letter".
Peter McCormack: Did she then respond to that letter?
Lee Bratcher: No.
Peter McCormack: She just went silent?
Lee Bratcher: Yeah.
Peter McCormack: Okay, let me take a step back. I've talked about this in the show, but I don't know if you heard it. I mentioned him actually when I was interviewing Senator Cruz. I got this email six months, seven months ago from this guy, Jason Maier, he said, "I'm writing a book, Pete, it's A Progressive's Case for Bitcoin".
Lee Bratcher: I know Jason.
Peter McCormack: Oh, you know Jason. So, I said to Jason, "This is great, do you want to come on the show and talk about it?" and he did, and for me, I've said this over and over again, I think this is the most important book being written about Bitcoin for conservatives, okay. The reason being is, Senator Warren doesn’t want to hear from Ted Cruz why Bitcoin mining is good, because it seems to me there's very little bipartisan support for ideas, everyone just wants to fight. And I know we have had Senator Gillibrand and Senator Lummis working together, it does happen, but generally speaking. And also, just when I see someone more on the left and they tweet about Bitcoin, all the people underneath repeat all the FUD.
So, we do not want Bitcoin to be a partisan issue, we want it to be apolitical. Therefore, it doesn't matter how much you hate progressives and you want to fight them, the best people to defend Bitcoin to progressives are progressives, and therefore this is good for conservatives. That's my argument for it.
Lee Bratcher: I'll read it, for sure, I think it's very useful.
Peter McCormack: What can be done to get to somebody like Senator Warren and just say, "Look, just take a step back, let's deal with facts. If you had Bitcoin mining within the State of Massachusetts, these are the benefits you're going to get and your constituents are going to get. If people were able to legally own and use Bitcoin, these are the benefits to your constituents"; how do you get to somebody like that?
Lee Bratcher: I think you need more data, we've got to get more data and we're working on it. We are compiling data, it just takes time. We know these things are true because we've seen it first-hand, and also philosophically we know it should work this way. But for someone that's sceptical, that doesn't work, they need to see the data.
Peter McCormack: Who on the left is pro or Bitcoin curious?
Lee Bratcher: In Texas?
Peter McCormack: No, nationwide.
Lee Bratcher: Ro Khanna, Rep Darren Soto in Florida is strong. The list runs out real quick.
Peter McCormack: Damn!
Lee Bratcher: Ron Wyden, Senator Wyden.
Peter McCormack: Yes. Have you found the letter?
Danny Knowles: I think this is the press release.
Peter McCormack: Okay, "… 'With the nation's largest wind production and fastest pace of solar generation installation, Texas produces 18 times more renewable energy than Senator Warren's home state of Massachusetts'", that's fucking brilliant, absolutely brilliant, "said Lee Bratcher, President of the Texas Blockchain Council. 'Texas Bitcoin miners act as a flexible load that soaks up excess power capacity during times of low demand and turns off on hot summer days when Texans use more energy. Bitcoin mining is also helping to mitigate the effects of flared gas, lowering the carbon impact by more than 63% by redirecting that gas to productive mobile datacentres'.
"The information that will help set the record straight: Bitcoin mining produces no scope 1 emissions". What does "Scope 1 emissions" mean?
Lee Bratcher: Direct. You're sending air through these machines, so they're not actually producing carbon dioxide.
Peter McCormack: Okay, "Globally, Bitcoin mining uses 66.1% sustainable power mix, including nuclear power. Bitcoin miners do not receive subsidies from Texas… Texas Bitcoin miners curtailed over 50,000 MWh in July 2022… Bitcoin miners act as a buyer of first and last resort for renewable generation that is constrained by transmission capacity… Bitcoin miners are either the largest or second largest employer in three Texas counties", wow, I didn't know that.
Lee Bratcher: There's 254 counties though, so we have a ways to go!
Peter McCormack: All right, but still, that's a start, "In 2020, there were 8 million MWh of wasted and curtailed wind energy in the US. Bitcoin miners turn this wasted resource into domestic wages, tax revenues and income". Bang, bang, take that, Senator Warren! I mean, it's just facts, here you go, fact, fact, fuck off!
Lee Bratcher: Yeah.
Peter McCormack: By the way, Pablo Vegas, what a name! I mean, congratulations, well done. I found her whole letter particularly weird and I think your response is brilliant. I feel like she should be coming down here to look at what's being done and see what she can learn and take back for her own state.
Lee Bratcher: You would think.
Peter McCormack: Well, this is where incentives are so weird, this is where I think the transparency of how bullshit politics and media is right now in that, maybe it's in other industries as well, but working in an industry that is attacked so often and people are so wrong so often, it really exposes the incentives of these people.
Lee Bratcher: That's very true. I mean, like I said, the dual incentive there, it is a pretty strong incentive that she has personal conviction on this, but even stronger is what she's getting from her base when she makes these kinds of accusations.
Peter McCormack: Which is why someone like Jason's book is so important, because we need her base to understand she's incorrect and she is spreading misinformation to her constituents about something that will benefit them.
Lee Bratcher: I've got some crazy data for you. Only our members have been exposed to this data, so just putting it out there to the world.
Peter McCormack: Exclusive!
Lee Bratcher: Exclusive.
Peter McCormack: Right.
Lee Bratcher: On this survey that we conducted, Democrats in Texas were more likely to own Bitcoin than Republicans.
Peter McCormack: Interesting.
Lee Bratcher: Democrats had a higher favourability of Bitcoin than conservatives.
Peter McCormack: Would that correlate with a similar poll on technology?
Lee Bratcher: Yes, it does, so it is mostly about age.
Peter McCormack: Okay, age?
Lee Bratcher: Democrats are typically younger. 54% of people between the ages of 18 and 24 own some kind of digital asset in Texas, 54%.
Peter McCormack: Interesting. I mean, this is going to be a generational shift. So, do we have good, younger politicians coming through?
Lee Bratcher: It's hard at the state level. In Texas, elected officials, state reps and state senators truly have to be a public servant, because they make $7,000 a year; they have to have a second job. So, they make a little bit more in per diem and there's other ways that they can make money, but it's not lucrative. So, you can't just be 30 years an accountant and quit your job and become an elected official. You have to be someone with an established business, family money, or you're an attorney, you practise, and there are a lot of things you can do, but that makes it tough for young, elected officials to come up.
The ones that do make it up nationally are just showboat people, you've seen that; they're just Twitter personalities.
Peter McCormack: Yeah. What about the staffers, do the staffers tend to be younger?
Lee Bratcher: Yeah.
Peter McCormack: So, if the staffers tend to be younger, there is going to be a skew towards them perhaps owning these assets and wanting therefore to educate. But then, would they want to go against the politics of the senator they represent? That's a tricky one.
Lee Bratcher: Well, the senator gets a lot of signals from their staff, so I don't know if it's necessarily going against, it's just a staff meeting and they say, "Well, actually, sir [or] actually, ma'am, here's a little bit of information that may colour your opinion on that", and they have a lot of influence, because you think about this senator here. She has a million briefing binders to read and they're going to take their staff's word for a lot of stuff.
Peter McCormack: Yeah. I really just want Bitcoin -- because in the UK, Bitcoin won't be something where it's like, "Oh, if you're Labour, you're against it and if you're Conservative Party, you're for it", we don't have that kind of partisanship in the UK. I see it potentially happening here, but not as big as an issue on something like guns or abortion. You can see the signals, but I think there's a chance to avoid it, because so many people do own Bitcoin.
So, I think it's just about the work you're doing, the Bitcoin Policy Institute, Coin Center, all this work being done to just educate people, which is why it's so important that we have you and Coin Center and the Bitcoin Policy Institute, and why it's so sad we don't have the equivalent in the UK, and that's why we're being perhaps held back.
Lee Bratcher: I've met a few in the UK.
Peter McCormack: Yeah? I haven't met any! Maybe it's because it's your line of work.
Lee Bratcher: They probably struggle for funding, because the way these industry associations are funded is a direct correlation to the influence they can have on the policy process. So, DC-based associations can make a lot of money on say the exchange ecosystem, the DeFi ecosystem, what people think about when they think about the broader market. The Texas Blockchain Council is funded 65% to 70% by the Bitcoin mining industry.
Peter McCormack: Right, okay, and I guess this is where it starts to get a little bit weird. I think the way lobbying and influence happens in the US is a bit weird, because I see the good work you guys are doing, really important, good work, same with the Bitcoin Policy Institute, same with Coin Center. But you see the perverse incentives when you see Sam Bankman-Fraud making massive donations to the Democrat party which show what he's wanting to achieve. So, you can see how the system incentives is great for the honest players and good actors, but also offers perverse incentives to the bad actors.
Lee Bratcher: Yeah, and there's different rules around political giving at state level versus federal level. So, SBF actually gave $1 million to Beto, the gubernatorial candidate that opposed Governor Abbott in this most recent election that was decided in November.
Peter McCormack: Beto, was he the one who a few years ago --
Lee Bratcher: Yeah, "We're going to take your guns"?
Peter McCormack: Yeah, but before he did that, he was seen as the first real chance to flip the state blue.
Lee Bratcher: Right, because he almost beat Senator Cruz.
Peter McCormack: Yeah, he did, and then he fucked it all up by trying to take the guns.
Lee Bratcher: Yeah, well he ran for president and said a bunch of crazy things. So, the governor was able to send a tweet basically saying -- because people were asking him, "This SBF" because he's been an advocate for the industry, "is this related to the things that you're doing here in Texas?" and he was able to say, "No, SBF, he made bad investments. He gave $1 million to my political competitor". So, he was able to shape it in that way.
But at the state level, all political donations have to be from private money, there's not corporate money, there's no super PACs, there's no dark money at the state level. Now, there's different ways, I'm sure, that people are using to get around that, but at the federal it's much easier because the Supreme Court protects political giving as a form of speech, and you've got a ton of corporate money in federal politics.
Peter McCormack: That's fucked up, but I get it!
Lee Bratcher: It's a stretch.
Peter McCormack: Yeah, free speech. The incentives there are that you can distort speech by buying speech. I think speech is freer when there are no incentives around it, or more honest.
Lee Bratcher: But who has the megaphone though?
Peter McCormack: The person you give $1 million to.
Lee Bratcher: Yeah.
Peter McCormack: SBF and various other bad actors have brought a lot of negative attention to this industry; although ironically, I think the FTX thing actually proved why Bitcoin is so powerful and so important.
Lee Bratcher: Because they had zero on their balance sheet!
Peter McCormack: Yeah. They had zero on their balance sheet, they created a huge Ponzi by creating all these tokens like FTT and all those other weird ones they created. They proved that honest, good money's important, ironically, but that's brought a lot of attention to the industry. The fear then is that brings new regulation. But you were saying off-camera before we started, actually you expect a deadlock within federal because of the House being Republican and the Senate being Democrat.
Lee Bratcher: Yeah, so most observers don't expect any progress at the federal level, so then it turns to the states. The states that are large enough to effect national change are Florida, California, Texas and New York. So, California doesn't have a hit track record of being able to pass legislation in this industry. There are other states that do, Wyoming, North Carolina, Arizona, Pennsylvania; they're doing great things, but they're just not large enough to set the standard. California sets the standard for the whole country on emissions for vehicles, because they pass the strictest emission rules, so everybody else complies.
Peter McCormack: Why?
Lee Bratcher: Because it's too cost-prohibitive to create different standards for different states and manufacturers. So, same with exchanges. We think that if Texas acts, and we are working currently with our legislative partners on legislation for consumer protection around exchanges, that would require exchanges to create a plan for proof of reserves and liabilities, Merkle-assisted, proof of reserves and liabilities, that the Texas Department of Banking overseas in order for them to retain their banking licence.
We're doing this in concert with subject matter experts like Caitlin Long, Nic Carter, even some of the exchanges themselves. We're not letting them off scot-free; they're still sweating in these conversations, they're like, "This makes us a little uncomfortable, we're not ready to go there yet". But we're telling them, "Hey, the Texas legislature's going to go there. You'd better do it as part of the process, or else if you're not at the table, you're on the menu".
Danny Knowles: Can that work with the bankruptcy procedures that they've done in Wyoming, where the customer gets paid out first, if one of them goes belly-up?
Lee Bratcher: That would be a little bit different legislation, but that is in the same vein, absolutely. This would be to try to prevent those scenarios by giving their auditor visibility into their liabilities and reserves, with Merkle-assisted liabilities and reserves.
Peter McCormack: So, you're trying to have Texas become the place that sets the ground rules for this industry?
Lee Bratcher: We think that the Texas market is so large, no exchange will not comply nationally, because they can't lose 12% of the consumers in the US.
Peter McCormack: And, to the people out there who look at the Texas Blockchain Council, Bitcoin Policy Institute, Coin Center and they're like, "What are you doing? Just ignore these people, tick tock, another block, just keep building, forget about politicians, stop asking for regulation", what is your response to that?
Lee Bratcher: I think they should just keep building. They have no interest in the things that we are working on and that's totally fine, we need people like that, we want them to be heads down and building, so that's good. I would probably question them on how loud are they being on that, because if they're trying to be really loud and destructive, they could be harming their own goals by destabilising the regulatory environment.
Bitcoin doesn't care. I've heard many people on your podcast say that in a variety of different ways. Bitcoin is going to continue, there's going to be a new block every ten minutes, it's going to win, but how fast does it win; in what jurisdictions does it win; in what demographics or how fast does it get adopted across these different geographies? Those things are all very political and policy oriented. So, my answer would be love it, keep building, but just keep your mouth shut on the things that we're trying to do to create the level playing field.
Peter McCormack: Don't bring unnecessary negative attention.
Lee Bratcher: Right.
Peter McCormack: Yeah. Okay, what else are you guys working on?
Lee Bratcher: So, we've got a joint resolution from the Texas Legislature that would condemn Central bank digital currencies. We've got a lot of support for that.
Peter McCormack: How realistic do you think it is of the chance of the US actually bringing out one?
Lee Bratcher: I think it's pretty high.
Peter McCormack: And can Texas itself do anything to say, "We reject this", because Senator Cruz, he made the case when I interviewed him that he is firmly against this, what it means and what it stands for?
Lee Bratcher: I think that we, as a state, can influence the federal government, because Texas has the second largest congressional delegation, so the second largest, most powerful state in DC. California has the largest delegation, Texas the second largest, so we can influence. I think there will not be a retail central bank digital currency in Texas or in the US. By that, I mean a direct Fed account for every citizen. That's a CBDC.
Peter McCormack: So, Texas can reject that?
Lee Bratcher: We can work with our allies to reject it. We can't just reject it for our citizens, but we will be able to have enough influence in DC to say, "Absolutely not". When it gets murky and when we lose a lot of our Texas delegation is an intermediated CBDC that's between the Fed and banks. So, they totally get that there's way too much totalitarian, China-level CBDC control when you're talking about a direct-to-consumer CBDC. They start to lose their conviction on a Fed-to-bank CBDC, because that is similar to what Fed now is.
Peter McCormack: Yeah, I was going to say, how does that differ from what exists nowadays? It's a more efficient system.
Lee Bratcher: It is more efficient and it's very similar to what exists now. But what we would say, and I think what you would say too is, it is a slippery slope.
Peter McCormack: Yes, of course, yeah.
Lee Bratcher: So, I think that is where the real battle will be. We feel like with Texas and other states, even Democrats, Republicans, whoever, people do not want a Fed-to-consumer central bank digital currency where the federal government knows everything about your financial activity and could put a negative interest rate on your account, or could -- these things that we talk about quite a bit. It gets a lot less convictional for people, a lot less fundamental Bill of Rights level, style, when you talk about an intermediated CBDC between the Fed and banks.
Peter McCormack: I see zero chance that people of Texas, when they understand what a CBDC is, accept it. Maybe that's when they get their guns out!
Lee Bratcher: Exactly. So, we feel very strongly that that resolution will pass. Now, this is just going to be a signal, this doesn't have the force of law because this is a federal issue. This will be a signal to the Texas delegation, to our 38 members of the Texas delegation, senators and representatives, to oppose any kind of central bank digital currency.
Peter McCormack: Is there any ability to argue against a central bank digital currency through the Constitution?
Lee Bratcher: I think there is. I would hate to get to that point, because then you need that case to work up through the lower courts and by that time, it's been implemented, because they're retroactive cases.
Peter McCormack: Right, okay. So, it needs arguing before that. I think if you really explain a CBDC to people, nobody would really want it, so who's pushing for this?
Lee Bratcher: So, I think it would mostly be people who are ignoring the potential control and totalitarian aspects of it, and people who think, "This could help us collecting tax, with tax evasion, this will help us with money laundering, this will help us with data and collection", and things that are probably good things, right, and they would be sacrificing liberties at the altar of convenience and it would be them.
Peter McCormack: Did you say to me, Danny, there's been progress with a UK CBDC?
Danny Knowles: Yeah, something was out yesterday. I'll pull it up.
Peter McCormack: Yeah, I mean we will literally just bend over and take it in the UK, we're fucking idiots.
Danny Knowles: I saw they've kind of moved away from calling it a CBDC as well, which is probably very intentional.
Peter McCormack: Yeah, because it's associated with control; what could we -- CBDC; Chinese Banking Digital Control, there we go! Have you found it?
Danny Knowles: I'm just trying to find it.
Lee Bratcher: It's Orwellian, that's probably the best way to say it.
Peter McCormack: Here we go, "UK Treasury considers plan for digital pound. The government is considering introducing a 'digital pound', the Economic Secretary has told MPs. The UK was committed to becoming a world crypto hub". Fuck off; literally, fuck off, "And the government was a long way down the road to establish a regime", regime, I love that term, "for the wholesale use for payment purposes of stablecoins…"
Lee Bratcher: So, they're only talking about wholesale as well. Wholesale is the intermediated model.
Danny Knowles: So, this is what Dan Tubb was talking about when he was on the show, Pete, that it starts off as wholesale, maybe goes corporate paying taxes using it, and then it just creeps.
Peter McCormack: Yeah. So, we need to have a show in the UK -- I feel like we come over here to the US and we do a great job in building a podcast, but we're missing our duty to protect and educate people in the UK about things like this. Rogan would talk about this and he would create that groundswell against it. We kind of have a duty to be educating people about this. Any one of my friends, you put that in front of them, they've got no idea of what that really is, the Orwellian nature of this. They'll just say, "Oh, it's a new technology, a digital pound".
Lee Bratcher: Do you guys read George Orwell in the UK?
Peter McCormack: Yes, we do!
Lee Bratcher: Okay!
Peter McCormack: Yeah, I've read 1984, also watched the film version. Have you seen the film?
Lee Bratcher: No.
Peter McCormack: It's got a guy in it who was a character called Rab C Nesbitt; do you remember Rab C Nesbitt? He's in the film. That was just the thing when I first watched it, I was like, "What the fuck's Rab C Nesbitt doing in it?"! Yes, we are aware, we just don't have this history of independence like you guys do. We have a history of, well here in the US, getting our arses kicked!
Danny Knowles: I mean, there's people in the UK talking out, like Maajid does quite a good job of talking out, we just need to do more.
Peter McCormack: The problem with the voices talking out against it, they have a very difficult job in the UK of trying to explain these topics without sounding like some conspiracy theorist, right-wing nutter because usually, the kind of people who are discussing this are discussing a number of things that we should be questioning and thinking about. But I often put that meme up on Twitter of where -- go and get my pinned tweet, and this will explain to you the issue I have moving between the UK and the US.
Danny Knowles: Is it this thing here?
Lee Bratcher: But you're the perfect person, because you're more moderate and progressive.
Peter McCormack: You've seen my pinned tweet. This will explain to you what I'm dealing with, because I might be moderate and progressive here…
Lee Bratcher: That's amazing!
Peter McCormack: Yeah, that is literally how -- look, I try and be a centrist and being a centrist, I'm considering like a screaming, woke leftist in the US and basically Alex Jones in the UK, and you do not want to be classed as a right-wing conspiracy theorist in the UK.
Lee Bratcher: Because there are some UKIP people that are pretty out there.
Peter McCormack: Yeah. I did the Nigel Farage interview, but I'm going to be careful to distance myself to a number of things he stands for and talks about, because we're a very collectivist society and things that are seen as on the extreme ends, we reject; we reject extremism.
Lee Bratcher: I wish the US did a little bit more of rejecting extremism.
Peter McCormack: Of course, but at the same time, you at least challenge ideas better. We will roll into a CBDC in the UK, it will just happen. So, I just feel like maybe we have a bit of a duty for that in the UK. What else are you working on?
Lee Bratcher: We have a bill that would exempt severance tax, which is the tax paid on gas that's sold, natural gas that's sold, if the gas was formally flared and redirected into a generator for mobile data centre use onsite, so it's very narrowly scoped. But there is a 63% reduction in the carbon impact from a flared stack to generator.
Peter McCormack: All right, man. Well, listen, I absolutely loved coming to the Summit, I will come next year if you will have me. It was a real honour to interview a senator on stage. It's very weird when you set up a podcast as a hobby to suddenly find yourself in that situation, but I was really honoured that you asked me and I hope I did a good job. How can people listening support what you're doing, where do you want to send them to?
Lee Bratcher: Sure, so texasblockchaincouncil.org, that's where they can learn. Our policy page has all of our policies, eight different initiatives, so they can go there to see that. I'm on Twitter @lee_bratcher and the last thing that I think is relevant, given that our mind is on Bitcoin mining so much, is we need an American ASIC machine, we cannot continue to buy Bitmain and MicroBT machines indefinitely. Not only are they gouging us, but it is putting a -- that's a big area of risk for Bitcoin.
Peter McCormack: Have you taken a look at these Intel machines?
Lee Bratcher: The Intel chips perform as advertised, but they're having a lot of trouble with some of the control boards, and they're not yet up to snuff.
Peter McCormack: Okay, come on Intel, pull it out. Okay, well look, we'll share that on the show notes, we'll put both those letters in the show notes as well, your reply, etc. Keep doing what you're doing. Anything you need, just reach out to me or Danny. And, yeah, thank you.
Lee Bratcher: Appreciate it, thanks for having me on.
