CoinGecko Podcast - Bitcoin & Cryptocurrency Insights

CoinGecko Meetup #2 - Thoughts on the Upcoming Bitcoin Halvening

May 18, 2020 Bobby Ong Season 1 Episode 12
CoinGecko Podcast - Bitcoin & Cryptocurrency Insights
CoinGecko Meetup #2 - Thoughts on the Upcoming Bitcoin Halvening
Show Notes Transcript

In this episode, Bobby Ong, co-founder of CoinGecko is joined by Alejandro De La Torre, Vice President of Poolin, Edward Evenson, Director of Business Development at SlushPool, and Koji Higashi, Founder of Koinup for CoinGecko's Second Virtual Meetup that took place on 8th of May 2020. Bobby interviewed Alejandro, Edward and Koji about the third bitcoin halving that happened on the 11 May 2020.

[00:00:02] Intro
[00:01:20] Introduction of the guests
[00:04:45] Thoughts on Bitcoin halving
[00:07:39] The most efficient mining equipments
[00:11:26] Thoughts on Binance Pool
[00:15:23] Why does China have such a strong dominance in the Bitcoin mining industry?
[00:19:45] What will happen after the halving?
[00:25:03] The average cost of mining a Bitcoin
[00:28:09] Differences between Lightning and Liquid Network
[00:34:36] Tokenization on top of Bitcoin

Quotes from the Episode

“For those who don't know, the Antminer S9 is the most successful mining ASIC out there. You can kind of think of it like the AK 47 of mining machines. It doesn't quit. It's pretty resilient.” [00:06:30]

“Some people disagree with the term 'inflation' because technically, Bitcoin already exists. It's just kind of like being released.” [00:07:00]

“I'm gonna say many mining pools are affected because the manufacturers are all based in China and there's a lot of miners and mining farms in China. So what's been happening is that these machines are too costly to stand out because the whole logistic prices skyrocketed because of Corona.” [00:18:22]

Bobby Ong:   0:02
Welcome to the CoinGecko podcast. I'm your host Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at I highly encourage you to join our newsletter where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.

Bobby Ong:   0:39
Welcome to the CoinGecko podcast. My name is Bobby. I'm the co-founder of CoinGecko. For today's episode, this is actually a recording from the CoinGecko second Virtual Meetup that took place on 8th of May 2020. In this episode, we talk about the third bitcoin halvening or the third bitcoin halving, which is basically an event that happens every four years, where a number of generated bitcoin rewards per block will be halved. This halvening happen on 11th of May, where the block reward reduced from 12.5 to 6.25 bitcoins per block. For this episode, we had the owner or welcoming three distinguished guests, Alejandro De La Torre, Vice President of Poolin and Edward Evenson, Director of Business Development at SlushPool and Koji Higashi, founder of Koinup.  

Bobby Ong:   1:20
Welcome to the show, gentlemen. Maybe for a start right, give us a simple introduction of yourself. What do you do? And how do you first end up buying your first Bitcoin?

Alejandro De La Torre:   1:29
Well, my name is Alejandro De La Torre. Thank you CoinGecko for organizing this. VP Poolin. Poolin is the mining pool, one of the largest Bitcoin mining pools. We also mine ample of other coins. Before that, I was co founder of Another big mining pool and the rest of the co founders of Poolin were also the co founders of So in all in all, we have a lot of experience in the mining pool industry. Now, my first Bitcoin I bought in 2013 because, you know, I thought that this is a great tool for financial freedom, and I believe very much in it. Those days were the early days. But it's been, ever since I bought that first, well it was not even a whole bitcoin, still I got into bitcoin and I never, never left. That was it.

Edward Evenson:   2:12
I'm Edward from SlushPool. We've been around since 2010 as Bobby mentioned.  We're actually the inventors of Stratum V1, which is the mining protocol that all the other mining pools currently use. Stratum V2 currently under development, which we support a version of right now. Open source mining protocol, anyone's welcome to tinker with. As far as when I got into bitcoin, I knew about it for a while before I actually jumped in and bought my first one just because my friends in university were kind of tinkering around with it. While I was studying like econ and history, a lot of my friends were in computer science, so they were talking about it quite frequently, but it's always kind of just something in the background, it's not something I really dove into until around late 2016, when I was living in China. I had just moved to Shanghai and after, I fell in pretty hard, pretty quick, several months, maybe like six months after fully getting into bitcoin, I started working for a mining company based out of Beijing, called F2Pool. And then, after spending about, I think three years in total in China, said I wanted a change of scenery and I got an offer from SlushPool. So I moved out to Prague and I'm working for them now.

Koji Higashi:   3:22
Okay, so I am Koji. I've been involved in the bitcoin space since 2014. I've done different things, but mostly in product management and media. Though I was doing a lot of tokens stuff pre-ethereum using Counterparty protocol on top of bitcoin. Probably not many people remember this, but yeah, I was doing digital collectibles, stuff like that. A little bit too early. And also I do some media stuff. [inaudible] I bought my first bitcoin right after the Mt. Gox incident, which took place in Japan, actually, so around the time. All the Japanese mainstream media basically said, "Oh, it's a scam". And some random French guy got arrested or something like that, right? It was very, very shady at that time. That's like, I looked at it, "Oh, this must be a scam. But what is this like? What is this bitcoin thing? So I decided to look into it a little bit and saw a lot of, like, you know, decentralize money, etc, and just started asking myself a lot of questions that I didn't really think about before. And then ever since then, I just did, as I did more research, I got more just excited about it. Is this something new? And since then, I basically just left everything else and started working on that full time sometimes in 2014.

Bobby Ong:   4:45
Cool. So let's jump straight into the topic of Bitcoin halving right? Are you guys excited about the halving? What are your thoughts about it? Why is this important in your own words?

Alejandro De La Torre:   4:56
I'm excited. It is important because well, that's the way bitcoin works. And it kind of goes with the theme of the stationary currency that bitcoin is. It's also very interesting at the mining pool operator, because we see now we're gonna probably see new entrance into this market. I think it's a net positive for the mining industry because of that. New mining operators will be able to, you know, know that in the next four years there's only gonna be 6.25, so less bitcoin given out so they'll be able to forecast and build farms with that in mind.  I think it's ultimately a positive in that sense. So I am excited to see all this new activity in the mining industry that coming out. Yeah.

Edward Evenson:   5:39
Yeah from a mining perspective, it's really interesting because you're going to see a couple things. One, I think you'll see a lot of the older gen machines shut off. At least the ones that are located in geography that have higher electricity prices, so you could see a pretty sharp short term drop in the hatchery. However, what I think may happen is that will definitely be short term because, as we saw from the leap of around 38X a hash with the global network share of hash rate all the way up to around 122, which 125, which it is now. There wasn't a whole lot of machine shutting off despite the difficulty kind of skyrocketing during that period. What you see is a short term shut off and then the machines change hands and they seek out the cheapest electricity. So especially with the current price increase, I think the margins are still decent enough that you won't see too many of like the S9s shut off that you may expect. For those don't know, the Antminer S9 is like the most successful mining ASIC out there. There's millions, and you can kind of think of it like the AK 47 of mining machines. It doesn't quit. It's pretty resilient, especially with new optimizing from where you can get, like, 70 Joules per terahash, which means it's really efficient for having been released in like 2016. So I think you'll see that and then also, it's kind of exciting from a monetary like a hard money standpoint. Some people disagree with the term inflation because technically, the bitcoin already exists. It's just kind of like being released. But, um, once after this, halving when the block reward decreases from 12.5 down to 6.25, bitcoin will officially have a lower inflation rate than gold. So it's kind of the first time that it's actually going to be more scarce then gold. Yeah. I mean, there's a lot of things that can potentially happen after the halving. I think it'll be much less of an event than people suspect. I think it will be more of a whimper than a bang, but yeah, I guess we'll just wait and see.

Bobby Ong:   7:39
It's very interesting that you brought up the Antminer S9 right, which is I like how you put it as the AK 47 of the mining machines. I don't follow the mining equipment that well, so I'm just curious. Like, what are the, some of the most efficient mining rigs out there these days? What models and Antminer, which was manufactured by Bitmain, has been a mainstay in the industry for longest period of time? Do you see Bitmain gaining or losing more market share in terms of this mining machinery in the coming year or so, for example?

Edward Evenson:   8:11
Um, I think it will be stagnant or a relative decline and just pure sales, it could increase, but relative to some of the other manufacturers, it could decline in market share. I think this is for a couple of reasons. I guess most recently, and that's at the top of my head, is there's a lot of problems currently with some of their newer gen models, the S17 and T17 series. If you run them in perfect environments, you know, submerged in liquid for better cooling and airtight data centers, there's only like a 2% failure rate for those machines, but they've had a lot of problems with the ones that are exposed in any range of temperature. So many people are experiencing upwards of 20% failure rates for their machines. It is theorized that this is probably in large part due to a supply chain shift away from Shenzhen towards Malaysia for a lot of the models, because they really had the process nailed down in Shenzhen for a while. But they sought out new, basically manufacturers in Malaysia that didn't have the experience or process nail down for these ASICs manufacturing. So WhatsMiner basically didn't have those problems, which is their main competition right now, and they were wildly successful in 2019. Their M20S ship over 600,000 units. I know I can't speak too much to Canaan and in your silicones, I think their market share will relatively declined as well. But I think in the future you'll see more and more market taken up by MicroBT, WhatsMiner, [inaudible], whatever name you want to call it.

Alejandro De La Torre:   9:38
I agree. I agree. MicroBT has been doing very well. What's actually interesting is that MicroBT has shared similar stories to Poolin. These guys all started at Bitmain, just like Poolin. And they left and they started a company that's done very well against Bitmain. Bitmain has [PCR common ampoule]. We're Poolin and we're doing better than them now. MicroBT left the Bitmain and is doing better than now in terms of the new generation miners. So just a quite interesting note there, that the basically all former Bitmain guys have started companies now doing better then Bitmain. 

Bobby Ong:   10:10
Yeah, I always like to say, like this Bitmain thing is kind of like, I always like to compare this alumni of Bitmain sort of like the Paypal mafia. Like these guys graduated from Paypal and then go around and do new companies that will be good then the original company was. But in this case, like the alumni came back and compete against a parent company.

Alejandro De La Torre:   10:34
Yeah. It was a bittersweet moment when Poolin took over in terms of hash trade above It was a bittersweet moment, but it was more sweet than bitter, that's for sure.

Koji Higashi:   10:46
I was just looking at the mining hash rate distribution and I didn't know you guys  number of one and two. I was not aware.

Alejandro De La Torre:   10:58
Yeah, we started mining Bitcoin about a year ago, and we came from nothing from zero to number one, although, I mean, every day, F2Pool gives us a good competition, but we're usually number one, So yeah, in the last year we've grown exponentially.

Koji Higashi:   11:15
F2Pool. I used to work with F2Pool.  [inaudible] But yeah, F2Pool and Poolin are number one and two now. That's cool!

Bobby Ong:   11:26
I'm curious, right? Talking about the ranks of mining pools in bitcoin. So, like the newest player in the industry is Binance Pool right? So what are your thoughts about Binance launching a mining pool. I'm hearing that they are charging the lowest fee and Binance being Binance, they want to be number one in everything. And they so Bitmain being so big and dominating, maybe they won't get the machinery, but they saw mining pool as opportunity, which they think that they can compete. Like what do you guys think about Binance? Do you think they are out to get your lunches or do you think they have no chance?

Alejandro De La Torre:   11:57
Look, before [inaudible] also had some good talks about this. But let me just say that a lot of people are concerned about centralization from pools, right and what not? But then the talk about Binance. Binance already holds most of the bitcoin in the market. I'm not sure how much share they have, but there's a lot of bitcoin in this exchange. Now, if you add on top of that a mining pool, that's a disaster. All bitcoin is gonna be in one entity. Let's not forget that maybe a couple months ago, CEO of Binance wanted to what was it, backlog the bitcoin Blockchain. That's a really bad bad bad thing. With Poolin, our CEO Kevin Pan released a statement on Twitter that we would never, ever do something like that. So it is definitely a concern. Maybe not so much for us because we feel confident in what we can do. But for the ecosystem as a whole its definitely a concern. When one entity that has in the past asked for to backtrack  the blockchain, is now gonna be in control in already much more bitcoin with the mining pool. They're gonna be creating there. They're gonna be holding it in the exchange. If you're mining farming, you want mine own Binance Pool, you're more or less required, you're not required but you get all the benefits if you used Binance exchange. So they're kind of locking their miners in the exchange, which is a huge, huge, huge concern of centralization, security risk, there's so many just down the list. I don't think it's a good thing.

Edward Evenson:   13:19
Yeah, just to echo some of that. I would be cautious of supporting anyone who's suggested a [locker] of the Bitcoin network because of their own security breach, their own incompetence to be frank because it was brought about because their "hot wallet" was hacked. Someone gained access to it, right? And I think it was like $40 million that was stolen from them or something like that. And you know, just because your security wasn't tiptop shape doesn't mean you should try to put the entire network at risk and devalue it for everyone else. But yeah, I mean, by lowest fees, I think you mean zero fees. It's what they're offering.

Bobby Ong:   13:57
Well, you can always go below zero negative fees.

Edward Evenson:   14:01
But basically, that's their short term strategy to on board hash rate quickly, right,?Because they're doing a PPS payout method. And basically what that means is the pool takes on the risk for variant. So if the pool has bad luck, they have to continue paying out the miners bitcoin even if they don't mine blocks. So mining, having a pool that PPS at 0% fees essentially means you have to have unlimited reserves because when you're have under 100% luck, you're just constantly paying out the miners more than you're actually mining. So I think it's till the end of May this month that they'll have the 0% fees and then they start implementing, they haven't said what price game they want. They've made public that if you want to extend the free period, you have to contact them, which just means if you're a large enough miner with enough hash rate, then they'll be nice to you to incentivize you to come on board. It may come with certain strings attached, like you have to mine with us longer if you do that. But you know there's no real value add. There's no value proposition that they've brought to the space in this way. They just said, Oh, hey, we know miners are like profit seekers in their most base form as the system was designed. So we're just going to try and improve your margins as much as possible by offering zero fees for the time being. But you know, they're not actually building anything for mining, the mining industry or providing services beyond extremely low fees for a mining pool.

Alejandro De La Torre:   15:21
Exactly, good point.

Bobby Ong:   15:23
So you guys work in chinese bitcoin mining companies before. I'm gonna ask this question. Many reports that point out that China controls most of the bitcoin's hash rate somewhere between 55 to 65% based on different reports that you read. Why do you think this is the case? Why do you think China has such large control of the Bitcoin hash rate? And do you think this is a probably decentralization? I know whenever people talk about decentralization, and they say this mining pool is to strong. Everybody asked them to move to SlushPool, which is based in Czech Republic. So just wanna hear your thoughts on why do you think China is such a strong dominance in the bitcoin mining industry?

Edward Evenson:   16:00
For me, it's just a couple of things. First and foremost, it's supply chain. So the real centralisation in the space is the ASIC manufacturers. They're all Chinese companies, and that's where all the machines shipped from. So they're always first a market in China, and the industry has developed really well there because of that. Second would be the infrastructure that's been built up in Xinjiang and Sichuan. Sichuan, especially during the rainy season, May through, I think it's like September. There's just such cheap electricity due to the hydropower there during that time of year. So when you combine relatively cheap electricity with the fact that all the mining machines are produced from that region and then you have a kind of neutral stance towards mining from the government from this whole time, then there's no reason why it shouldn't flourish there.

Alejandro De La Torre:   16:48
Yeah, to add to that I mean, a lot of people want ASIC manufacturers to be outside of China, which I think is a good thing. I mean, look it's great. I think having everything, all of manufacturing, one region, wherever it might be, China, whatever. It is never a good thing. We need to, we should have it in the global, or at least in many other regions. But the reality is trying to have, you know, the strongest manufacturing sector in the world. They have all factories, they have all flight change filled out. They have the all built out and many other regions around the world are lacking. So it's just the reality of situation. But we have been seeing a trend in Poolin. One of the reasons why you know, we actually have office in Berlin and we're hiring because we have been seeing trends of some hash rate leaving or hash rate growing in other regions around the globe, like Northern Europe or America, Canada, some parts of South America. So the pools are also moving outside of China, and you need to have to keep in mind that a mining farm can be anywhere around the globe and still be mining with Poolin or whatever chinese pool. But they could be in Sweden or in Norway. And then also another important point is that a mining farm can change pools very quickly, right? There's nothing like they have to stay with that pool forever, and they take about maybe a minute to change to another pool.

Koji Higashi:   18:06
I read some articles that say there's some disruption or basic shipment and stuff like that because of Corona virus there. Is there any direct influence or like you know, damage to mining pools because Corona virus?

Alejandro De La Torre:   18:22
I'm gonna say many mining pools are affected because the manufacturers all based in China and there's a lot of miners and mining farms in China. So what's been happening is that these machines are too costly to stand out because of the whole logistic prices skyrocketed because of Corona. So what's been happening that basically a lot of the Chinese miners have benefited from this and have gotten the new equipment quicker than the rest and well, as a pool operator we're still okay because these pools, these mine farms [inaudible] anyway, so.

Edward Evenson:   18:52
Yeah, just to echo that, the shipment networks within China are pretty much back to normal from what I understand now. So the data centers in China can receive the newest generation of equipment much quicker and for much cheaper. Whereas there's been a lot of delays for other parts of the world. So what I think you'll just see is a increase in the amount of hash rate that's in China relative to the rest of the world. It will be higher than 65% soon. I've never heard the 50 conservative estimates of 55%. I think it's definitely closer, like 65, 70. And I would also note that because of the success of mining in China, a lot of Chinese miners have reinvested into different sectors that cheaper electricity. So just because the data center isn't in China doesn't mean it's not run and operated by a Chinese company. They do a lot of work in Iran, Kazakhstan, Russia, the other keep electricity places, yeah.

Bobby Ong:   19:45
What do you think is gonna happen like after these? Once the halving comes by, it's kind of like saying your revenue goes down in half for the miners, right. So since the effect of halving will make all miners shut off, mining won't be profitable for many. Won't this sleep through some sort of centralization? Do you see many mining farms shutting down or do you see MNA happening in terms of mining farms, or what do you think that could happen and maybe talk a little bit more about the hash rate and difficulty as well? What do you see happening there?

Edward Evenson:   20:09
Well, I think the form, I mentioned it briefly before the form of MNA that would come out of this would just be a transition of machines from one minor to another. From the regions that it's not profitable for, to the ones that do have cheaper electricity. So I think that will happen. You're right. The revenue will get cut in half. However, depending on the BTC price. If it does go up, that won't matter as much. Yeah, I mean, it's kind of like we can theorize and speculate what happens, but no one really knows what's gonna happen. You're gonna have to kind of wait and see. And then also the fact that the mining network finds, it's self regulating. So it finds equilibrium, right? So if a bunch of people become unprofitable, then they shut off their machines, then it's actually a week after having that the difficulty adjustment is so if a bunch of people shut of their machines, then when the next difficulty adjustment comes and there's less hash rate, it's going to be much easier to mine a bitcoin. And then you'll see some of those machines turn back on until it, you know, constantly finds a point where the most people that can profit mining Bitcoin are.

Alejandro De La Torre:   21:11
Yes, I agree. It's a beautiful thing. That's the beauty of bitcoin. Now I think, I think after, like Edward said, it's gonna be a week after the halving that the difficulty will still reflect what it was before the halving. So it probably would be pretty high. We haven't seen, we actually hit last difficulty adjustment 16 T, which is 16 trillions difficulty. The highest has ever been all time high in difficulty, and I don't think it's gonna definitely it's not gonna stop. Most miners would try to squeeze out many profits now before the halving, especially because the bitcoin price is going up too. So it's a double whammy for them. It's the best scenario possible basically, for these miners that were just like hanging by. Now, the week after the halving, they're gonna, these miners that you know, that have all the machines or higher electricity costs will be facing an issue because the difficulty will be still from the last, from before. And the reward is halved. So yeah, we do see some, these miners will have to probably shut down now, like ever said, the difficulty will readjust down in this case. And then these guys might get back on but down the line as the new mining machine start being you know, once the shipping recovers and the costs are low again or whatever it is, and people received these new mining machines across the globe, then you're gonna see them turn on and that's gonna suddenly keep increasing the network difficulty, which will then definitely see the older machines have to shut down. There's no other choice. A lot of people say that the effects can be sent to other parts of the globe for where it's really cheap electricity or whatever the case is they can run it, whatever it is. But people fail to understand, that I cost a lot of money to send the S9 to across the globe, so it might not be probable at all to send it and maybe cost couple, I don't know how much money and then, so sometimes, you know, I think S9 are gonna be something of the past in a couple of months, for sure. What's great is that this kind of allows for, you know, these new mining machines, the new entrance to the market to forecast into the next four years with confidence. They know how much reward is gonna come out. They know that the machine are tested and they and they won't be increasing exponentially in power anytime soon. So I think it like I said earlier, it's a positive for the industry. And I don't see the mining industry decreasing out there. I see it actually increasing money many, many times. Of course the hash rate is gonna continue. I'll be at the momentary drop because of the halving.

Bobby Ong:   23:40
All right, so very interesting insights that you guys shared. Coming up the next question, right, I think Koji can share his opinions here, let's talk about price movement, right? What do you think gonna happen to the price post halving? Do you think the price will go up further, will it go down? I mean, everyone's really excited about the halving, like you said, price is gonna go up this year. Well, it did happen. It did go up, but not before it went down  40% in March and that it weent back up to 10,000. So well, the price did go up but like, you know, we had to suffer through something. So what do you think was gonna happen in the short, medium term if you guys have to make a prediction on price?

Koji Higashi:   24:14
Well, the answer is, nobody knows, but my personal opinion is that historically after the halving the price tends to drop a little bit. So I absolutely, this is what's going to happen this time as well, just because it has happened before. And then eventually in the mid to long term, because scarcity increased in, like just the other two guys mentioned. Probably hash rate is going to stay, where it's going to increase. So I'm pretty bullish in terms of the bitcoin price midterm. But and you know, the other factor is because Corona, all the global macro economics hurt, in they are like doing more printing of money basically, so it's interesting because it's going the other direction now. So that's what I would say.

Bobby Ong:   25:03
Talking about the price, right, like from your point of view, I mean, the price has kind of a tendency to follow the cost of mining, right? So I guess Alejandro and Edward you know, what's the rough average cost of mining a Bitcoin these days?

Edward Evenson:   25:17
I think it completely depends on the region. It could be a huge difference, right? I mean, and that's that's another reason why it's so popular in some regions of China is because labor costs are so much cheaper than they are in North America. You know, if you're paying some of your farm operators like 10,000 RMB a month, you can afford to have a lot more, doing a lot more than it would take to pay someone in Canada doing the same operations where you also you know, providing them healthcare and presumably, like somewhere close to a six figure salary. And not to mention the construction of the data centers themselves. Speaking with some people that run data centers out in Canada, it can take millions and millions of dollars over the course of over a year, two years to get these things actually built. And then you put the ASIC machines in, which is the biggest part of the investment. So whereas you know, I've seen some of these buildings pop up in a couple of months. So a lot of it, when you look at the cost to mine a bitcoin, it's a lot of people tend to look at it in how much does it cost in electricity to produce that one bitcoin, whether it's five cents per kilowatt hour, four cents per kilowatt hour, and then look at the price of Bitcoin and if it's under or what their margin is and they keep doing it right. But there's so many other expenses you need to take into account. I think it's much more useful to look at it in terms of the cost to deploy one terrahash of hash rate versus the revenue you get for one terrahash of hash rate. And when you do that, you include things like capital expenditure in the beginning, just to get everything set up, operational expenditure. Because you know you're having to deal with a lot more expenses than just paying electricity. You're dealing with labor. You're dealing with construction. You're dealing with repairs. You're dealing with all sorts of overhead, so I guess from current stand or so, like if you're gonna try and average everything and throw together an estimate. Some people threw out 4.5 to 5 cents per kilowatt hour as a global average. But global average doesn't necessarily mean that's where you're mining the Bitcoin. So moving forward after the halving assuming a stable price, I'd say so long as you're you're under the 4 to 3.5 cents per kilowatt hour range, you're doing pretty well.

Alejandro De La Torre:   27:20
Yeah, so that I get this question a lot and actually a lot of mining pool companies on their side. They have, like Poolin, we have, like a calculation tool where you can just put in all the variables. There's a lot of variables to get that number. The cost of the miner, the cost of electricity, like I said, network difficulty, these things have to be considered. And then you take that number and then you can get the cost for you, for yourself or your mining operation, how much it cost you to make, create that bitcoin. So it really all depends a lot of things in the mining industry. It's very hard to stay abroad or general, to give a general answer of the industry because every single mining farm operation is a different, completely different story. So it's very hard to. There is tools online that help you get to a certain number.

Bobby Ong:   28:09
All right. So Koji, I'm gonna ask you next right. After halving, what's next for bitcoin, right? What are the sort of development that we will see coming in bitcoin? I mean, a lot of people are talking about lightning network, Blockstream's going out building the liquid network, and they are talking about the tokenization on top of this network as well. Maybe you could start with a brief intro, what are the differences between lightning and liquid, and then what do you see happening in this space?

Koji Higashi:   28:32
Sure, for those who don't really understand or not familiar with lightning and liquid. Lighting and Liquid are sometimes compared, but they're different. They have different trust models. Lightning network is so called second layer technology. So you use your real bitcoin and use basically multi sig contract and look up your bitcoin. So on the channel you can send Bitcoin more efficiently. So that's what lightning network is. It's pretty trustless, although it's different from on chain transaction. While Liquid is federated side chain developed by blocks [inaudible]. So you have to trust the group of exchanges. So you basically send your Bitcoin to a multi sig address where a bunch of exchanges control, and then they give you LBTC and using LBTC you can send more private transactions. So lightning network there's no sort of different tokens involved, while liquid is a little bit more centralized, but it's more. Well, lightning is kind of private as well but it's a different thing, but they're kind of similar, but they do different things. In terms of features, liquid is more suited for you know, sending bitcoin back and forth between exchanges, larger amount of money. While lightning is better for micro payment and transferring smaller amount of money. So they do different things. Also, you can build lightning network on top of liquid as well. So that's one of the things Blockstream's trying to do because it is not really for scalability. It's more for privacy, so they still need to build lightning network on top of liquid for faster and more stable transaction.  

Edward Evenson:   30:18
I have a quick question for you, Koji about lightning. When I was, I don't know when this was, when I was first kind of trying to look into it. I was going through the IOS and Android app stores, looking for some of the best lightning apps to use, and I quickly noticed that there was a big debate in the community of whether you should use a custodial or non custodial lightning wallet. And to me, it seems like custodial was fine because, like you said, it's for micro payments anyways, you know. If you can't trust a third party with, like 100 bucks, then you know, it's probably gonna be an issue. But what's your stance on that one, you know, does it really matter if its custodial or not? And two, do you see that as a significant barrier? Cause when I was looking through it, it seemed like Blue Wallet, which is custodial, is by far the most simple to set up. You just kind of click "Create wallet". You can transfer BTC from your regular separate wallet over to the lightning wallet, and then you just scan something in 2 to 5 seconds later it's paid for, which actually I use a lot in Prague. I think it has the highest concentration of, like, Bitcoin accepting vendors, and they have bitcoin ATMs everywhere across the city, so it is useful in that respect. But how do you balance that? The noncustodial version has, you know, 100 extra steps and a bunch of things you need to do versus the custodial ones where you can just kind of plug and play and go.

Koji Higashi:   31:34
Yeah, that's a great question. And there's a bit of divide within the lightning community as well right. When custodial wallet came out I was not a big fan of it because, well, it's custodial is one. Sure, lightning is for micro payment. But if you, if there's trust involved anyways, why would you use lightning anyways right? So you can just use, like a regular exchange wallet. It's kind of the same thing. But now I use both custodiol and noncustodial wallet. Do you guys, have you guys ever used non custodiol Lightning wallets and set it up?

Alejandro De La Torre:   32:08
I know it's hard. 

Bobby Ong:   32:08
I use Bitcoin Lightning  Wallet before, BLW. I think that's noncustodial, if I remember correctly.

Koji Higashi:   32:16
It's non custodial, right.

Bobby Ong:   32:18
Yeah, it was a real pain setting up a Lightning wallet. That was the only one that sort of work for me. And I don't know if things are getting easier today, but it feels to me that things are not easier today compared to what it was when I tried it one year ago, so I don't know what's happening in terms of development here.  a plane is.

Alejandro De La Torre:   32:36
I echo what Bobby said. It's difficult still.

Koji Higashi:   32:38
Yeah, it's true. It's still very difficult to use non-custodial Lightning network, most of them. So from that stand point, in order to on board more users, custodial wallets are useful and it just gives you, like the first experience of Lighting. Okay, this is how it works, but the most difficult part, confusing part for non custodial wallets is the, I think is the concept of inbound capacity. So in your mind, if you set up a channel, let's say I lock up 10,000 Satoshis on the channel, I should be able to send and receive freely like that 10,000 Satoshis. But that's really not how it works. So even if I set up a channel, I have to request a different node to give me inbound capacity. Otherwise, I cannot receive any Satoshis on Lightning. So there's just different things involved. They have to decide which node you connect to and you have to request inbound capacity otherwise you cannot start receiving bitcoin on Lightning, so just different things. So in that way, I'm right now, I  would support both. For certain use cases, I use custodial. For others, I use noncustodial. But at the same time, there's a lot of new technologies and tricks that make it easier to set up noncustodial wallets as well. So, for example, some of the wallets such as Breeze, when you install the mobile app, they give you inbound capacity in the background [inaudible], so you don't have to worry about requesting inbound capacity, you can still start receiving up to $10 on the channel or stuff like that. So there's a lot of attempts to make it easier to use noncustodial wallet. So I'm hoping eventually we don't have to rely on custodial wallets as much. So to answer Edward's question directly, I used both and right now you probably, its better you use both kinds for different use cases and non custodial wallets are getting better in terms of UX.

Bobby Ong:   34:36
What do you think about tokenizations on top of bitcoin? So initially there was Counterparty, right. And Counterparty didn't take off, all the developers left and Omni came about, I think it was Mastercoin. I think Omni came up before Counterparty actually. Omni came about. Tether is a token issued on top of bitcoin blockchain. And of course, now we know Tether is like more popular on Ethereum blockchain, the ERC 20. Tether is more popular than Omni Tether. And a lot of guys are also attempting to do this. RSK guys are looking to do tokenization on bitcoin. They have a lot of hype. But to be frank, I just haven't seen much outcome from their work and also the Blockstream guys, they did a token sale with BTSE exchange, where they did BTSE token on top of bitcoin, but I don't hear much discussion on bitcoin tokenization. I just wanna hear your thoughts like what do you think? Is that a trend that will still have a chance to proceed in the future? We never see tokenization on bitcoin, all go to Ethereum.

Koji Higashi:   35:32
Sure. So before Ethereum, there's Omni, Counterparty, Colored Coins like open assets because there's no other option basically right. But they do kind of simple, simple stuff, like sending, receiving and kind of primitive decks. But now a lot of the, most of the token applications went to Ethereum. So from that standpoint, I don't think, there is newer protocols such as liquid. You can issue tokens on Liquid as well. And the interesting thing is for tokens on Liquid you can also use confidential transactions so you can hide the amount of token you've sent and even hide the name of the asset you've sent. So that's interesting. That's an interesting feature that other blockchains don't have but I don't really expect Liquid to take over old token application from Ethereum. They just do different things. But for if you want to send tokens more privately, you should definitely use Liquid in my opinion. And my personal opinion is that I think Tether is a better fit for Liquid than Ethereum. And I was kind of expecting the migration from Ethereum toLiquid to happen  not very quickly, but slowly. So far, you know, Ethereum is kind of dominating. And most of the tokens went from Omni to Ethreum. So the shift is kind of taking time. But if Ethereum starts having issues because of Tether, you know, increasing fee and stuff like that, some of the volume probably move to liquid. So different use case. I think Liquid is good for something like Tether. For others, you know, building DeFi on Liquid, for example. That's probably difficult.

Edward Evenson:   37:12
Isn't that why it switched from Omni to Ethereum in the first place? Because the Omni fees were insane. Okay, so do you think that as far as tokenization of assets or just tokenization on Ethereum versus BTC, do you think that there'll be more on BTC or side chains currently? If there was no, then Ethereum, if there was no crazy ICO boom in 2017, do you think developers would have stuck with that? Or do you think that it still would have kind of gravitated towards Ethereum anyways?

Koji Higashi:   37:43
Um, it's hard to say, but I would probably say the latter. Developers will probably still be gravitated towards Ethereum because it just does more. I mean, it's a trade off. Some people say it's not very secure, and I completely understand. But it's just easier to do more things using token on Ethereum, it's true.

Alejandro De La Torre:   38:04
I mean, it was built for that right?  

Koji Higashi:   38:06
Right. Exactly.

Edward Evenson:   38:08
Also if you can raise $50 million in a day that helps too. 

Koji Higashi:   38:11
Yeah, I mean [inaudible]  the ICO bubble for me because at the time I was using still Counterparty right, and because of the block size debate and they clogged main pool, the fee of Counterparty transactions went skyrocketed. It's like you know, to send $1 token, I have to pay like 60 cents or maybe like $2 something like that, so it doesn't make any sense to use tokens on bitcoin. But putting a lot of activities in so many kinds of tokens on the main chain has trade off issues as well. So actually, there's more value transferred in stable coins than Ether itself on Ethereum [inaudible]. So that creates some, you know, perverse incentive for miners as well. It could destroy the, you know, security model mining if there's a lot of tokens that have value, so I don't know if, if Ethereum can just sustain the current token stuff, but we'll see. If it starts having issues, for example, miners start gaining Ethereum system because, you know, there's a lot of more stable coins transfers that Ether itself. So why don't you just kind of sit up? Then it might come back to something like Liquid or a different side chain like Rootstock, RSK. So we'll see.

Bobby Ong:   39:31
You guys realize that there hasn't been much talk about bitcoin scalability issues in the past like one year or so. I would like to get your thoughts,like do you think like, not so sure I haven't been really observing the blocks, are they full or like are we at full capacity, are we at 50% capacity? Can we scale furthermore before we get like high fees again and all?

Alejandro De La Torre:   39:49
Look, a thing to consider is that the fees, if there's a lot of activity in bitcoin and the transactions, the fees will go up. But people tend to forget that most mining pools provide the fees as a reward to their miners. So this actually help the bottom line of the miners. Down the line when the block size or when the block halve again in four years and then another eight years after that, we'll see less reward coming in for each block mined. And the theory is that the fees itself will pay for the mining infrastructure, the mining, all the miners across the globe. So it is a healthy thing that you know that the fees go up, which then paid more money to the miners, which helps people system grow and continue to stay as secure as it is right now. So I think it's the way the system works, the way system, I guess, was intended to do. There's a lot of debate about scalability. I was there with [inaudible]. My God, those days were a nightmare.

Koji Higashi:   40:45
Last halving in 2016.

Alejandro De La Torre:   40:51
Yeah. There's still people who are still stuck on [inaudible] I mean, move on, guys.

Koji Higashi:   40:58
Disclosure, in 2016 the last halving I was, you know, celebrating with other community members in Japan like including Roger. At the time everbody was kinda friendly and market's relatively small and four years later, everybody just left.

Edward Evenson:   41:19
It still shocks me that people are kind of clinging onto that right. Especially it just really, and that's another sector of the network where miners were really important because they, in a real way, decide what the real bitcoin is, right. Like, where's all the hash rate directed to. I mean, even, which is obviously a big blocker and supporter of Bitcoin Cash. Most of the hash rate, nearly all of it I think going to their pool is going towards BTC because in the end, they're profit seekers. So I don't think it's really a debate that needs to continue to happen you know. If you want to fork of your own version of BTC and have bigger blocks then you're welcome to do that. People have done that with BCH and BSV. And I think time will tell whether or not that that was a good idea.

Bobby Ong:   42:01
Yeah, I think a lot of people in the core community will say, good riddance for these people.

Edward Evenson:   42:08
Because Bitcoin Cash and BSV for miners, I'm just thinking everything of course from mining perspective, it's really just a way to increase your margin now. So [inaudible] chain algorithms where you can direct your hash rate between the various shot to 56 points and then depending on liquidity of certain exchanges and price points, you can sell them with on like, five minute periods so you can increase your margins like 2 to 5% in some cases, if you start switching between the coins. So if you look at bitcoin hash rate, the network hash rate is pretty sturdy, you know, way up here and then if you've looked at Bitcoin Cash and Satoshi's vision recently, it looks kind of like a double helix, they're going over and over and over again because the idea is the hash, like not the entirety but a good portion of it is switching between the two.

Bobby Ong:   42:55
I discovered this kind of by accident. I have to move some BCH I can't remember which one, I think BCH, and I also made a transfer from my wallet to an exchange. And I was wondering, I mean, Roger goes around saying that BCH is good for payments, you have fast transaction. So I was expecting a fast confirmation time. Right? But what happened was I had to wait like I don't know, like, four or five hours before you have even the first confirmation. So it got me really curious. Why is this happening on BCH? The hash rate is high but like, and what I realize was because of all these miners switching between BCH and BSV and before the retargeting happening. I think retarget happens every one or two days, something like that I believe.

Alejandro De La Torre:   43:36
Yeah, yeah.

Bobby Ong:   43:37
So all the miners going to BCH and the difficulty goes up and after that move to BSV because of difficulties low and then BCH is kind of stuck there and nobody gets confirmed, which is kind of like, makes both blocks kind of unusable to a large extend.

Edward Evenson:   43:52
Yeah, it's kind of crazy, I think Alejandro knows more about this. But during the Bitcoin Cash halving which, of course, BCH and BSV happened before last month. And I think directly after the BCH halving, like a block was mined for like, how long was it, how many hours was it Alejandro?

Alejandro De La Torre:   44:10
4 or 5 hours, I believe. Yeah, maybe that was when you said the Bitcoin Cash [inaudible].

Bobby Ong:   44:15
Actually that was before that. That was in January or February, so there was issue happening. But I realized it was happening in March as well, I think during the halving. 

Alejandro De La Torre:   44:25
Yes, yes. Most major mining pools have, you know, a hash rate switch and it's part of the part of the game. It helped our miners make more bitcoin, we do this at Poolin. We don't even pay our BCH and BSV to the [inaudible] who came in bitcoin as well. That's the reality of situation. It's the mining game. The mining industry is about making money and making profits. It's very much a capitalistic designed system, and if there's option that you can switch real quick and make a little bit more money, then we'll do it.

Edward Evenson:   44:58
And there isn't a whole lot of downside to that, either. The only downside potentially and not everyone really cares is you won't receive quote, unquote like virgin coins, the coins directly generated from the coin based transaction. You'll have to obviously send the BSV and BCH to an exchange and then provide them the BTC from that because none of the mine, I'm sure there's some but as Alejandro said, when people do coin switching, whether it's for alt coins or between the shot to 56 coins, everyone collects payment in BTC, for the most part, they're not interested in the whole the other one. So that just creates, you know, more downward selling pressure on some of the other projects. So we'll see. See how long it lasts.

Koji Higashi:   45:38
Yeah, they're slowly losing the hash rate share against BTC anyway, so it's slowly becoming more and more relevant.

Alejandro De La Torre:   45:46
I mean, it's a question of now, like, was it a good decision to speak with [inaudible] 56 algorithm? That's the, but this is all right, [inaudible].

Bobby Ong:   45:58
I hope Lightning becomes more usable and more widespread. So we don't, we can say, "Oh, you can use it as cash as well".

Edward Evenson:   46:08
Me too. I would love that.

Bobby Ong:   46:09
I mean, it's supposed to be the way where we pay for our coffee, right? Lightning is supposed to be the way like go to a coffee shop, pay with Lightning, get our coffee. That is supposed to be the way. We're waiting for the day to come by.

Edward Evenson:   46:20
It's actually pretty common in Prague. 

Alejandro De La Torre:   46:30
But Prague is probably like, come on in Prague you can buy bitcoin. It's really big in Prague. Bitcoin is really big in Prague. It's amazing. I love going to Prague and see bitcoin all over the place. True, it's one of the only locations around the globe that has infrastructure built around bitcoin. Because there's a lot of big bitcoiners there. The Slush guys are since 2010 so they tackle the city. Great, I love [inaudible].

Koji Higashi:   46:55
I think I was one of the first guys to buy coffee using Lightning. So Lightning network developer, Alex, I forgot his last name. He works for Lightning Labs. He set up a lightning payment on the random cafe in Palo Alto. At the time, I was just, you know, I was in the area so I was like, I saw the tweet "I just set it up". "That's cool. I'm gonna go down, you know, be the first one to buy a coffee." Yeah, cool story for me, But yeah, it's easy actually. You can really use Lighting to buy simple stuff like coffee. But for larger amounts of payment like, you know, larger than $100 worth of something. It could be difficult.

Bobby Ong:   47:40
All right, gentlemen. We spent nearly an hour on this meetup. Can't believe how fast time flies, right? Didn't feel like one hour at all. Any last words from you guys before we end this session?

Alejandro De La Torre:   47:52
Um, sure. As a normal bitcoin user you have nothing to worry about for the halving. Bitcoin will work just as intended, security will be strong as ever was. Nothing to worry about at the normal bitcoin user. Miners will be fine at the end of the day. Efficiency is the name of the game nowadays and thank you CoinGecko for providing the webinar. I'm very happy to have joined.

Edward Evenson:   48:16
For me, I'm not a trader. I'm more of a, you know, just accumulate as much BTC as possible and hold it. My entire salaries paid in BTC. So as far as price is concerned, for people that are interested in how that may affect them, I would just say, manage your risk as any decent investor would. So there's been a pretty sizable price movement upwards up before halving. Maybe secure some of those profits and then hold the rest if you want. Not financial advice, of course. But as far as I'm concerned, I'll just be continuing to hold the BTC. Pretty much ignoring the price. Because as Koji previously stated, I'm kind of looking at more of a long term play for BTC. I don't see, I don't have any interest in trading or pay attention to price too much, but yeah, as Alejandro said, you don't really have anything to worry about. Just make smart decisions and try not to gamble.

Koji Higashi:   49:10
For me, I hope more people start experimenting with Lightning and more interesting that. On the surface it might seem there's not much going on, but underneath there is a lot of interesting stuff happening. Different newer standards to improve UX of Lightning and stuff like that. It kind of feels like right now, Lightning feels like Ethereum before ERC20 token standard came to be. So around that time there, it's very difficult to just use token on Ethereum as well and all those projects are not interoperable. But Lightning, that's what's happening now. There's a conversion of standards, different new tech. So I hope more people would just pay more attention to Lightning.

Bobby Ong:   49:57
All right. Sounds good. Thank you very much. Alejandro, Edward, Koji, for joining us on the meetup. I think your last words kind of summarize up a lot of the questions that people have been asking in the chat group. I hope all of you enjoy. We still have 150 live attendees towards the end. So very happy that all of you stayed on towards the end. We have a special gift for all of. So I've just posted a comment here. Thanks for attending the meetup. We are giving a free $5 coupon for any of you who wants buy some merch on CoinGecko store. So use the past promo code CoinGecko5. And you get a $5 off from some CoinGecko t-shirt. I'm wearing one, you can see here. CoinGecko bottles or you get a "How to DeFi" book that we just published recently as well. So I just wanna say thank you very much for all of you, to all of you for joining our meetup. Very happy to see all of you here. If you have any questions, any feedback, feel free to drop us a line at and we would love to hear your feedback and once again to our guests, Koji, Alejandro, Edward thank you very much for joining us on this meetup.  

Alejandro De La Torre:   50:55
Thank you guys. Appreciate it. Go bitcoin.

Bobby Ong:   51:02
All right, that wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out or please leave us a review on iTunes. Do you have any feedback? Do drop us an email at Join us for more next week. See ya.  

Bobby Ong:   51:22
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