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Blockspace: AI & Bitcoin
DeFi’s $13B Exodus, OPNEXT 2026 Recap, NYDIG Eyes Alcoa Plant for BTC Mining
01:16:51
The latest Lazarus Group-led DeFi exploit set off a $13 billion exodus from DeFi platforms, and we cover the spiciest talk on Bitcoin and quantum computing at OPNEXT.
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Foreign.
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Welcome back to Block Space Live, brought to you by CleanSpark for today's top story, the North Koreans are making everyone in crypto poor again after one of the most damning DEFI exploits to date that led to a $13 billion cascade of withdrawals from various defi protocols. For interviews today we have Jay Patel of Lygos Finance on to talk about risk within crypto. A perfect, very timely interview given that DEFI exploit specifically as it relates to some of these lending protocols. And also the bitcoin digital credit instruments we've seen from MicroStrategy and Strive. We also have Hive CEO Ayden Killikon to talk about their most recent convertible note and the state of some of the M and A that we're seeing in the bitcoin mining landscape. And we'll also be doing a recap of our op next conference after the interviews. Charlie's going to take that one away. We're going to be giving you a lowdown on the most important talks after our week in New York City. And for our final two stories, we will be covering how aluminum smelter and industrial company Alcoa is apparently looking at NYDIG to purchase one of its currently defunct aluminum smelting sites. And for our final story, Strategy and Bitmine are the only ones buying crypto right now. That's kind of an exaggeration, but they had two monster buys last week and they were some of the only crypto treasury companies still actively hoarding coins right now.
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That's right. We talk about aluminum smelting on our Bitcoin show. Blockspace goes live Monday, Wednesday, Friday and noon Eastern featuring quick hits on the latest in bitcoin mining, AI and emerging tech. Make sure to hit like and subscribe, especially if you're on YouTube. Hit that notification bell so you get the mobile push notifications when we go live. This is a podcast after we wrap up the live stream so you can find that anywhere podcasts are found. Spotify, YouTube drop us a review if you're listening to this and if you like what you hear, you will Love our newsletter. Newsletter.blockspacemedia.com we just got back from our conference in New York City this past week. Make sure to pay attention to the op next YouTube channel. It's a different YouTube channel than the Blockspace one that this goes live on. We are posting the vods and presentations from that conference but yet it's Monday. We may be bleary eyed but we are here. Back at it. Colin, we may have been talking about Bitcoin technical stuff this past weekend in New York. But while we were doing that, holy smokes, Defi just collapsed. Contagion ripping through the market. I think we're just going to try to ham fistedly explain what is going on before we do that. The show is brought to you by CleanSpark Ticker CLSK on Nasdaq. More on them later on the show. Let's kick it off. So
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perhaps you should have been talking about eth stuff.
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I know honestly we should have been talking about ease. The Lord knows they need it. I'm going to share a screen here and let's put this weakened into context. So before we explain what the hack was, we're going to comment on it with Jay here in a little bit. But before I explain what the hack was, let's put this into context because it's been a bad time for Defi, especially eth related Defi. This past hack which has kind of created a bit of contagion through the ecosystem was for over 200 million. Specifically I believe 293 million. Biggest DeFi hack of 2026. But it's not the only one in this thread by Jeremy BTC it looks like there's over 600 million stolen from DeFi protocols in the past two weeks across multiple protocols. Kelpdao we had the Drift protocol which is again North Korean hackers using very sophisticated social engineering. Months of social engineering. We had Rafinance, Grinex, Hyperbridge, a bunch of others in the median six figure range and we had like a front end issue with Cal Swap, one of the privacy or one of the more like preferred non mev inducing dexs out there. But they had a front end hijack where they basically were redirected to hacker site. But it's been a bad time and this is coming at like broader markets down. We're having a bunch of like pretty critical exploits across these protocols across a number of ways. It's not just like, it's not just phishing, it's not just like a protocol exploit. It's kind of everything at the same time. And we're staring down rumors of Claude Mythos coming in and exploiting things all across the Internet, not just crypto. So okay, what happened? So let, let me try to explain what happened this week.
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So with the Alphabet soup of Defi names that you're going to have to
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go through, I hope you like letters
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because we have a lot of them.
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So you have for those of you who just spend your time in Ethereum or in Bitcoin I'm so sorry, I'm going to have to throw a bunch of Campbell's Alphabet soup at you. So you have Ethereum, right? And you can stake Ethereum instead of proof of work. Then what's happened over the past half decade has been that these staked ETH can get wrapped and reissued as liquid staking tokens. So you stake your ETH to secure the protocol and you get liquid staking tokens. Then what happens is those liquid staking tokens which have been roughly trading like one to one for their eth, like wrapped staked eth, they go out and people start lending against them and doing defi things. So that is the context here. One of these liquid staking tokens from kelpdao Dao, which issues the staked eth, has a token staked eth token called RS little RS eth and that's used across ETH and other protocols, not on eth. And you have this like people will argue whether it's a bridge or whether it's a layer zero, but basically
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this
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Ethereum, this, this staked Ethereum is held by a custodian or bridge and put elsewhere across the crypto ecosystem. That particular communication between KelpDAO and the, the interoperability layer called Layer 0 was the source of the exploit. So basically the hacker or exploiter was able to create a bunch of this fake state eth that help DAO issues and go to one of these real like core lending protocols, AAVE in particular, and start trading that for a much more real asset wrapped eth w eth. And so from that you have pretty significant contagion across defi you had because of.
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Yeah, I want to highlight this point because I think that's what's really interesting about this. So reportedly this hack was the Lazarus Group, North Korean syndicate, black hat hackers that work for the North Korean government. They've been all over the place recently. They were a part of the Drift hack. We covered them as part of the Telegram phishing scheme that is still going on right now that is kind of spreading through crypto. But what they ended up doing to build on what Charlie said is they tricked the kelp DAO into letting them withdraw staked eth that they never deposited. It's like 116,500 which is worth roughly 293 million. And then like Charlie was saying, they redeposited that into other staking protocols, into other defi contracts to then try to withdraw other current, to withdraw other liquidity from those pools. And Ended up like AAVE had like a short like 195 million in bad debt because these, these staked eth that the Lazarus group was depositing. You know, obviously they don't actually own them. They stole them from the protocol. And this led to widespread contagion to the point where $13 trillion, 13.21 or sorry 13 trillion billion was unwound from DeFi protocols over the last 48 hours. Over the weekend, AAVE alone saw 4.8.45 billion in exits as a result.
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And so AAVE is sitting here, AAVE is sitting here with a bunch of basically bad debt. They let the, you know, the hackers took out real assets and the AAVE portal is sitting there with you know what, something I forget. Million tens of millions of dollars of bad debt. And AAVE has kind of a backstop for this. They have kind of a treasury, they call it the umbrella fund or something and it's you know, 50 to 80 million dollars and. But the debt exceeds their like a bill that they're, they're basically their treasury backstop. And because of this, the way defi pools work is you kind of have to have like one to one depending on the pool, like asset A, asset B. And because the hacker was withdrawing asset B weth that meant that the pool utilization was 100% so that other people who have these real assets stuck in there can't get them out. So because AAVE is kind of critical and a backbone of all the rest of the ecosystem, this is creating a lot of people who have like exposure to wrapped ethics, a lot of issues. Just for context, here is a post by Fishy Catfish listing all the protocols that had to freeze their interop. That had to freeze because of this. And this says this is layer zero. But layer zero is kind of like this interoperability layer to let the different protocols talk to each other. So Athena, there's a big one like that Stablecoin algorithmic Stablecoin or whatever you call it, Etherfi, Tron Dao, Major One Curve Finance. Again Stablecoin protocol Bitgo wrapped Bitcoin wrapped assets custodian, again wrapped Bitcoin. River Inc. Not to be confused with river, the bitcoin company. But these are protocols which have generally proactively, like just paused operations and maybe not necessarily that they've been, they themselves have been exploited. So they just want, they saw like contagion ripping through the ecosystem. They want to make sure that their users aren't affected. But like it's bad man. There's a lot Going on. There's, there's multiple levels to this. I was reading about how a lot of these, which you might call bridges or layer zeros, they're struck. The structure of them is,
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I would
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just say it's kind of laughable because they're supposed to be these multi sigs where you have multiple parties, stop gaps to have to sign and make sure that the assets exist and transfer. But apparently a lot of these are actually not really multi sigs in the real spirit of the word. They're really just one of one.
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You're telling me that the DEFI is not actually decentralized?
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Yeah, I mean the thing I'd have
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to say though is like, we'll leave it after this. But you know, at the end of the day when something like this does happen, it's kind of actually nice that there's a little more control from these platforms because then you can stop bad things from happening. Right. You can have these stopgap solutions to hopefully do some damage control with this. But the other thing I would just say that really blows my mind about this story is the contagion effect. Just to be very clear, AAVE and these other platforms didn't have any vulnerabilities, but Kelp Dao's vulnerability is now their liability because funds were stolen and then locked up in their pools. That creates, like Charlie said, bad debt because the hackers don't actually own that money and now they can use it to, to leverage these other platforms to drain other user funds.
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And it's wild because it's a quarter billion dollars, which is a lot of money. But considering the overall tvl, the total value of all the DEFI assets out there, for significantly more for this amount to be able to start kind of cause a mini contagion across the ecosystem is huge. And that's what we're going to talk about with our guest Jay here in a second because this like. Well, I think we should bring them up here because.
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Yeah, like who's. Whose risk is it? Yeah, yeah, go ahead and bring Jay up.
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Okay, we're going to bring on Jay. Jay, welcome back to the show.
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Hey, how are you guys doing?
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Good.
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Always good to have you. So I want to put a pin in this is really quickly because I don't want to get too out of order with the questions that I have for you. Maybe it'd be cleaner to just jump right into it since we led with that. But I have to ask this because while we were at op next week, Bitcoin started ripping not Saying it was because of OP next, but, you know, coincidences, who knows? That being said, we are seeing Bitcoin back above 75k for the first time since I believe we had the 25 liquidation event. And a lot of this is with hopes of the Iran conflict ending. Been some mixed review, mixed signals on that. We're told the street was open at the end of last week. Now we're told it's closed again. Regardless, though it rallied pretty heavily. Are we back, Jay, or are you a little cautious here?
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I'm definitely still cautious, but I'd say we, you know, I wouldn't rule out another trip back towards 60k, but I think the big driver for the downward move, say from 10:10 late fall last year into February, I think that's kind of fallen to the side. There were some good pieces about it where basically a lot of the sell pressure on Bitcoin was basically correlated portfolios that were taking off risk because they were long, these SaaS equities. You've seen all the charts where IGV correlations to Bitcoin were basically at all time highs. And historically bitcoin trades like SaaS. So when SAS sells off, bitcoin sells off. I think we've kind of broken that correlation and I don't think that'll come back because I think intuitively SaaS companies can get displaced by AI like Bitcoin probably does well in a world of abundance where any kind of software or business model can be replicated with zero or low marginal cost. So I think that pressure is gone, which is good. There could always be some sort of idiosyncratic thing that pushes us back towards 60k. But I feel like we're probably on an upward trajectory once again, especially with all the purchases from Saylor and MicroStrategy. And I think the Iran conflict, while it's not resolved, there's some like, quantum superposition there where it's like this trade is both simultaneously open and closed. And you know, like, I think at this point the, you know, the. While there's not certainty. I think like the market does have a sense that like, if things get really bad, Trump will, you know, reopen the strait or tweet that there's been some sort of negotiations with Iran. So there's, there's definitely this idea that the Trump put is in effect. So I think that takes some downside risk off the table.
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Okay, let's talk about defi. You put out this tweet shortly after the hack. I think this was April 18th. You said there is way too much capital in Defi that is completely risk insensitive. Quote. I think the acceptable return for most OC lending protocols are likely to 12 percent. I think this is a really interesting angle to take this because we let you know we can put aside defi technical risk. What you have some interesting insight on is composability risk. The defi rates might be mispriced. Explain this tweet.
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Yeah, so I think it links to what you guys had mentioned earlier, which is this kelp dao compromise. I think one thing that's probably pretty interesting and I'm by no means qualified to talk about it, but the complexity of this attack, we usually think that, oh, smart contract exploits where someone got access to the mint function and they just minted a bunch of tokens. This drift, all these past few compromises have been incredibly complex, like multiple attack vectors. Everyone's talking about the mono sig, but if you look at Layer zero's report, someone got access to the RPC endpoints that the layer 0 node uses, figured out which ones can be poisoned with malicious binaries and DDoS. The rest, this is not the smart contract exploits of old, but I think the mispricing of risk on Defi is mainly that everyone thinks that, oh, I'm a depositor in these blue chip assets on aave, I'm lending USDT against wrapped bitcoin, wrapped eth, whatever, whatever. What you don't realize is that the only reason that there's so much TVL in these protocols is because the composability like you mentioned, the fact that I can take, and this is very, I like to say that most of DEFI was built in a zero interest rate environment. It's like building like a bridge for zero gravity. And now there's gravity and shit starts blowing up. But you have just staked eth and now we want liquid staking, so we have liquid staking tokens. And now you want to be able to restake your liquid staking tokens on eigenlayer for more yield. And now as if that's not enough, you want to be able to borrow ETH against that. So there's a bunch of looping and if that's not enough, there's liquidation venues that let you take this composed borrowed wrapped liquid, staked liquid, restaked eth and each one of these kind of interlocks each of these protocols. Right? So maybe AAVE didn't have an issue, but the fact that AAVE has a wrapped ETH market that allows people to borrow wrapped ETH against all these derivatives means that wrapped ETH is now exposed. But one of AAVE's core designs, I think it's different than Morpho. But one of the reasons AAVE has been so successful in terms of utilization is the fact that they have shared liquidity. So when I take my ETH and borrow against it on aave, it goes into the wrapped ETH pool, which means that someone could borrow that wrapped ETH against their kelpdao ETH rse. And so now if I had a loan on AAVE with eth, I can't withdraw my ETH even if I repay the USDT loan. And then what's even worse is, as you mentioned, these attackers, right, they don't own these assets, so they're just trying to get out into something that they can use to fund whatever they do in North Korea. So obviously they swapped it for eth. But if you can't swap it for ETH anymore, if there's no ETH to withdraw, let me at least borrow some USDT against it. So, so now there's no USDT to withdraw. So now if I'm just a lender of usdt, completely isolated from wrapped eth, I had no idea I was even related to this market. I can't withdraw my usdt. And now what if I was lending usdt thinking that there's Bitcoin and ETH on the other side and I can't get out my assets? So there's this contagion effect. Because one of the nice things about DEFI is there's such a little friction. So when we think that, oh, all these Legos, you know, we can stack them on top of each other and make something really cool, but it's very hard to break the pieces apart when, you know, one of the ones in the middle has an issue.
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So I want to latch onto something really quickly that you said there, Jay. You're talking about, you know, people think that they're. I don't want to put words in your mouth, but I'm going to kind of just reformulate what I think you said. They're more comfortable with some of the interest rates and the risk on some of these things because they think they're, you know, their liability is like a blue chip asset, right? Or the deposit is a blue chip asset like USDC or usdt. And I guess my question is, are we seeing rates priced based on the asset that is being deposited? Whereas if this were like, you know, sweet potato finance token or yam you know, like back in the Defi yield farming somewhere, there were all these crazy yield farming tokens where you'd see the rates being much higher because the risk was greater because it was a shitcoin. Just speaking very bluntly about it, versus this, where you have USDC or usdt, you have these blue chip stablecoins. What you're saying is these things maybe right now, or at least the way that I'm hearing it, and tell me if this is wrong or right. They're being priced almost because of that, rather than you said the composability risk behind the actual platforms that they're on. Like people aren't. People are pricing in the risk for the asset, maybe less so than the platform and higher lending apparatus.
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Yeah, yeah, I think exactly like these. I'll say one thing is all of Defi does a very poor job of surfacing risk to users, which is why you have this. In some cases, the incremental product on Defi is pitching a slightly higher yield and users are like, I'm getting 3.5 or 4 or 4 and a half percent instead of what I had before and it seems pretty safe. And they're saying lending against blue chip assets, and I'm going to go ahead and do that. What you don't realize is all of the composability underneath the morpho issue a few weeks ago was the fact that curators automatically enable certain markets that are tight on liquidity, which you might think is great. Like, oh, I'm putting in these dollars and this curator is doing me a service where if someone is paying 15% interest, they'll go ahead and lend into that market because it really needs liquidity. Well, what if they're paying 15% interest because someone hacked some, stole some assets and they're borrowing it on that market? You don't actually want to be a lender there. On the AAVE side, though, I think what you're pointing out is right, is if there were no technical risk, I think these rates make sense. Right. If you actually think about these protocols, if you look through the history and liquidations, I think isolated from technical risk, I think AVES had a couple hundred dollars in bad debt over the last year or two. Like it's, it's, it's minuscule. The problem is like that, that is what these rates are priced on. And I don't think that's the primary risk that anyone on these platforms is taking. When I deposit into aave, I'm not thinking, oh my God, Bitcoin might gap down 70% in a minute. Like that's probably not why you're going to lose money. Why you're going to lose money is one of these far tail things that you can't foresee because everything is so interconnected.
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Yeah. The default risk and the loan going bad isn't the risk here. It's the fact that you might be frozen from withdrawing that loan. Someone deposited a bunch of junk that they stole from another defi platform and now you're kind of like your hands are tied. I mean that's just one example. But there, like you said, there are a number of these edge cases and Charlie really laid out at the beginning, it seems like they're getting, I won't say worse and worse, but it's been a very difficult year thus far for these exploits on Defi I I Unless you have. Do you have one more thing to add there, Jay? Otherwise I'd like to shift gears and go into the land of digital credit.
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Yeah, I think one piece to what Charlie mentioned is I think part of that is this increasing interconnectedness. Right. So if you think about like the sweet potato BM finance days of old, it was new yield farm pops up. They're printing some fake token out of thin air and it's just who can rug each other faster. But it's kind of isolated. Most of these recent exploits are layers on layers on layers of interconnectedness. Which is why I think it's much harder to foresee if there was a protocol that just said, hey, we have our own bridge bitcoin token and we have our own stablecoin and we don't interoperate with anyone else, that'd be fine. But the problem is no one would use it. People want to loop and most of this TVL I think one of the things that was really exposed over this past weekend is a lot of it is people who have levered up 10, 15 times with their wrapped ETH or random stablecoin derivatives. And so when it unwinds, it hurts. And it's not just one protocol, it's many.
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We have comment in the chat from friend of the show Matt Listow saying refreshing that bitcoin is unfazed now. I would agree. But I think let's talk about the credit side of bitcoin which is the
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hot button word digital credit. Okay, so J, this will be our final question. Just take it wherever you want. But we saw recently we covered this on Block Space. Strive has increased the regular dividend from its preferred Stock SATA from 12.75 to 13%. Big numbers for anyone who knows anything about what high Yield Savings accounts are yielding right now. We also have seen Strategy increase its dividend for its stretch, which is its most popular preferred stock. They've upped it seven times so far since July 2025, from an initial 9% to about 11.5% I believe it is now. The last rise was in was 25 bips in March. We were going back and forth before the show and you were making the point that a lot of investors and maybe some unsophisticated investors will see this and they'll think this is a great benefit to them. They're going to get a larger dividend on their prefers that they hold from these companies. But you were arguing that it's more of a risk. Can you unpack that for us?
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Yeah, I think, look, if you're one of these holders of preferred equities, you love it, right? You were, you know, I think when STRC first started, you were getting 9%, something like that. Now, you know, Strive is paying 13% on their preferred. So rates have definitely gone up for you. But if you're a common equity holder, if you're a MicroStrategy stockholder or you're a Strive asset, Strive stockholder, what's basically happening is the cost of capital for the company that you've invested in is going up. Like Saylor is buying more Bitcoin. But the incremental Bitcoin purchase takes a higher and higher interest rate to pay for the new issuance of preferreds. And obviously you could say that over time Bitcoin becomes more stable in terms of its return profile or maybe the interest rates prevailing interest rates go down. But my sense is that demand for these preferred equities would not be as high if STRC was paying less. Right. The reason that they're having to raise the rates is to keep them at par. If all of a sudden STRC was paying 8.5 or 8%, I don't think you have nearly the amount of demand. So I think one thing they will have to solve for is how do you get demand when the rates are not as high? And I think the MicroStrategy CEO even tweeted this a while back, I think thinking that it was like a flex, but probably not, which was that 80% of STRC is held by retail. If you want this to become broadly distributed with lots of capital, you're going to need institutional investors to want to put money into this so called digital credit. And I think to make that happen, you need to turn it into real credit and not preferred equity. Look, I'm not like a fan of the Coffeezilla piece from last week. I think there was a lot that he missed. But one of the things that was true is like, this is not credit. Like as much as name your bitcoin treasury company Shill on Twitter will tell you, oh, this is all the same as credit and game. Theoretically, it's not in the interest of whoever. We're all invested in Bitcoin because we don't believe in the game theoretic incentives of rational actors around us doing whatever you want to trust in something that's more concrete than that. And especially institutional credit investors, there's a reason that senior secured debt has negative covenants and it has all these rules for what the company can and can't do. The fact that they can't just stop paying me if they don't want to, because 99.999% of the time, I'll be fine. But if that 0.001% of the time, things go wrong and I lose my principal. That's like years and years of investing for me to recover. And so I don't think these preferred equities are going to be the instruments that get institutional adoption. And if MicroStrategy and Strive and these other companies want to keep the flywheel going and get more capital in the space, they're going to need some better products for institutions. Otherwise you're just going to be pulling dollars in from the retail crowd. And it might be people who would have otherwise invested in Bitcoin, which is not great.
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The digital credit meme is on par with DEFI in a lot of regards in terms of how misleading it is, I think for the average investor. I do think this really does bear mentioning. Strategy and Strive can at any point change the redemption guidelines for these things. And the interest rate, they could completely rug you and then make the interest rate 0 if they wanted to. I mean, they're not like there'd be a nuclear scenario in which they remove these benefits.
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Right.
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I don't know in what situation they would change it to make it so low unless there was a lot of demand. The fact of the matter is you don't have the same investor protections that you do. Like Jay was saying, this is something like a convertible note or actual credit instrument that an institutional investor would hold. And on that note, Jay, we cover a lot of the bitcoin miners and AI pivoting miners right now. This is obviously Some banks would have maybe more interest in these products than others. Other investment banks are actually trying to lend during this whole capex boom. But like, why would you buy this when you can go out and buy some sort of convertible note from a bitcoin miner pivoting to AI or a blue chip NEO cloud where the credit risk on that is much. I mean, that's actual credit first of all, but the risk on it is much lower compared to something like, like this. And, and to me it's kind of, I just wonder like where all this is headed. Because if we look at Strategy's last bitcoin buy, which we're going to cover in our Last segment today, $2.18 billion for that buy were furnished from sales of Stretch. And so like this is becoming a meaningful portion of their equity issuance week in and week out. At least it's a growing pie. It's usually much lower than that. I'm not really sure what happened over the last couple of weeks where they got that many inflows, but it's really starting to pick up and they're issuing a lot of this. I mean, is there any scenario in which you would start getting a little nervous at how much Stretch is out there? Like what? Is there a threshold that where at some point you say we need to maybe pump the brakes on this?
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I don't think it's an amount, but I think if, if the incremental purchase starts to go down in size, if they're not able to make the same size of issuance that they were previously, or I think the even bigger thing is, let's say over the next two years Fed funds rate comes down and bitcoin chops, or maybe we even go into an up market. If they're not able to keep the issuance increasing while reducing the rate that they're paying to these holders, then you have a real problem. Because right now you might say, hey, there's so much demand from retail to buy STRC that it's going to be okay. But is there as much demand if it's paying 10% or 9% or 8%? Because you can't pay 13% or 12% forever, right? I think that's something that you really have to consider. The other thing that you mentioned with this parallel to the converts for the AI, the miners pivoting to AI is one of the reasons STRC is so attractive is because it's a very liquid product. But retail investors have a revealed preference for highly liquid products regardless of what the risk is institutional investors are very different. I would rather take, if you're an institutional investor, a six month, one year lockup or a long duration instrument that has a redemption period for more risk reduction covenants, direct lien on collateral, senior secured position, whatever it might be. And so they're going to have to navigate that if they feel like this retail pool of buyers is not what's going to carry them to the next $50 billion of Bitcoin purchases.
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Well, Jay Patel, Lagos Finance. Thank you so much for joining us, man. Always fun talking to you about the latest headlines when it comes to credit and all these fun toys that we're building and bringing to bitcoin.
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Right.
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Anyway, cheers man. Thank you so much and thanks Jay. We'll see you next week.
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A
All right, we have our next guest on Truly iden of Hive. But before that we have a word from our sponsor, CleanSpark.
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We are CleanSpark, America's Bitcoin miner. A publicly traded company with the largest
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operating hash rate powered entirely by self
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operated infrastructure structure across four states. This is our proof of work.
- [34:16]
D
We are setting the standard for what's next. Learn more about the intersection of energy and bitcoin@cleanspark.com
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B
Alrighty. And with that we will bring our next guest, Aiden Killick to the stage. CEO and president of Hive Digital. Aydin. Welcome back to the show, sir. Good day. Welcome back.
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D
Hey guys, good to see you. Thanks for having me.
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B
Yeah, always man. Always nice to have you on. So y' all had an announcement I believe last week about an upsized $100 million senior secure or a senior note offering. Can you give us a rundown of this offering and what Hive intends to use the proceeds for?
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D
Yeah, so we announced last week originally it was going to be a $75 million deal. There's overwhelming demand. It was received incredibly well and it was upsized to 100 million 0% coupon. So it just shows the strength of the demand. It's interesting, I think your last guest was talking about different financing options and some people are paying 12% and I guess he's in that world. And our Coupon was at 0%. Institutions were still obviously very bullish on it. The bonds traded up on Friday. Our stock was up on a two month high on Friday after the deal was priced. So I think really it's a strong vote of confidence that the street is excited for us to execute on our 2026 targets. And so to answer your question, what the use of proceeds is for is exactly what we've Been telling the street we're going to do this year and let's get to $200 million of GPU cloud revenue. We've got some really exciting things in the pipeline, some large 2000 cluster GPU deals that will form that ramp to the 200 million ARR. And that's all in our investor deck. And you know, we're very intentional with our market communication and we put out a press release with Bell Canada a few weeks ago that said we 4x star capacity with them. And that's exactly what that was as a lead in to to say now we've got the data center capacity ready to go. Now the merit facility I believe was effectively ready April 1, so it's ready for GPUs to get plugged in and next is to announce definitives and march towards that target. So I think that once we break, we're at 35 million ARR today by the way, with 5,500 GPUs in our cloud. And our target this year is to effectively Double that to 11,000 GPUs in the cloud and 200 million revenue. Now you may say, well hold on, if you've got 5,500 GPUs doing 35 million revenue, how is doubling the GPU count going to 6x your revenue? Well the new GPU, the GB2 hundreds GP300, so much more profit dense per watt. So a GPU, sorry, GP300 is upwards of 350 an hour per, you know, on a long term contract rate. By the way, going forward we've been targeting multi year long term fixed contracts rate. That's what the street wants to see. The street likes steady cash flows that they can easily underwrite and put multiples on, especially as it applies to colocation contracts. We'll talk about that in a sec. And so we still got legacy GPS. We've got a 40s that are renting at 44 cents an hour. And we've been running those cards since 2022. I mean those cards used to mine Ethereum and then we pivoted them in 2023 to AI to GPU cloud. Even before ChatGPT exploded we were still selling these on aggregators. That's when we grew from 1 million to 10 million GPU cloud revenue now. 20 million. And so we've been doing this for a long time, so we're really good at it. We used to have 130,000 GPUs. We're mining Ethereum, so we're data center builders and operators. We also are really good at orchestrating and operating compute whether it's bitcoin mining, ethereum mining or GPU cloud and so I think that we've got a really good track record. I mean 2025 guys we went from 6 to 25x a hash in 6 months so that was 18x a hash in 6 months when we were sprinting we're doing almost an extra hash a week. I think we might have broken industry record and so this is a good reminder to the street. Hi's been around since 2017 like two Bitcoin havings and ethereum merge. We built our own miner with intel we've done it all. There's no other company right now that can tick all those boxes So I think that it's going to be a very exciting year. As we ramp and then just coming back on the colo we've also got some surprises there. I mean they're not surprises, it's in our, in our projections, in our deck but our facility in New Brunswick. One thing I got asked a lot last weekend, really just this quarter is well what's going to happen with your bitcoin hash rates? We have 25x hash reminding just under 11 bitcoin a day right now and actually closer to 11 bitcoin a day and so that's our cash flow that propels the business and in addition to that the 35 million ARR from the cloud business and so Bitcoin at 75,000 you could kind of figure out the math. Now we have a lot of new gear so the 18x hatch we brought online in Paraguay was S21 plus hydrogen even got some S21 XP hydros in there so we've got on a blended basis sub 15 joule per tera hash compute in Paraguay high efficiency. We expect that the cash flow through the next having and then we do have some legacy gear in Toronto and sorry New Brunswick and Sweden and as those approach end of life like we're still running underclock J pros right? But as those and even our buzz miners who are still running as those approach end of life we'll decommission them and then we'll consolidate the most profitable miners in the first three buildings in New Brunswick and Lashute. New Brunswick is a four building campus and so we will in stages convert New Brunswick to HPC. We bought 32 acres of land, we put a press release about that. We've been going through permitting, design, development and then of course we have our Toronto airport site which is only 7 megawatts, but it's a phenomenal edge site. We've had reverse inquiry demand a lot, you know, from, from let's just say factions of the Canadian military and super strong enterprise demand and of course our partnership, Bell Canada, they're even interested in. In helping out with New Brunswick as well because they've got a lot of enterprise demand. So we want to have a lot of long term steady cash flows that the street can easily underwrite. And our target would be 100 million on the HPC colo. Which will constitute New Brunswick, our little Bowdoin site and the Toronto Airport site in addition to the 200 million GPU cloud.
- [41:12]
B
Thank you for that, man. That's a good rundown. I appreciate the comments on the bitcoin mining side specifically because I think a lot of people are interested in that. A kind of a follow up question to this financing. This is coming at a time when we might expect private credit markets to be slowing down. We've covered this a few times on the Pod Blue Aloe, Apollo and Blackrock have changed the redemption guidelines for their private credit funds. They are capping redemptions for certain clients and they can't withdraw their full amount because they've had a few heavy withdrawals recently. I'm curious if any changes Hive is seeing on the ground for. For private credit, especially since y' all just closed this.
- [41:57]
D
So I think what you're referring to are, is slightly different than those are not necessarily players in the convert market. Those guys are more lenders in project financing for data center is this is just kind of different buckets.
- [42:14]
A
Right, Right.
- [42:15]
B
Is there any spillover effect though into the convert markets? I mean basically the question being is credit being harder to come by right now or not regardless of what the instrument is?
- [42:27]
D
No, I would think that my opening comment that we started $75 million offering that was upsized to 100 million and we did 0% coupon because it was overwhelming demand would. Would be an incredibly strong indicator that there was a huge amount of demand. And so no short answer. No. And I would say more broadly the reason why I think it's important to distinguish between the different types of lenders. We're seeing an entire plethora of blue chip lenders that see GPUs as an asset class. And so for example, a big part of expanding the GPU cloud business is working with good lenders who will lend you what we're targeting single digit debt on the GPU hardware and you're looking at a DCSR trying to target 1.2 and you ensure that what you're renting the GPUs for and what your debt servicing looks like, you cash flow positive over the term. By the way, we know the street wants to see at least 3 returns on the GPUs because then as people generally know after cost, you're typically two and a half year ROI on GPU cloud to, to pay off the full value of the GPUs. So if you're doing a three year contract, then you've fully paid off the GPUs and then some. If you do a five year contract, you've effectively 2x paid off the GPUs and then you still have the residual value of the GPUs. At the end of the term, you'll loan them outright and at the five year term still we know the street doesn't want to speculate on only residual value. Like people don't want you to do two year contract, pay the GPUs off by 90% getting two and a half year ROI for the full thing. And you say, well if I, if I pay them off 90% and the GPUs are going to be worth 60% of their face value after two years, we're still ahead 50%. The street doesn't want to hear that like Wall street, they don't want to speculate. They want the GPUs fully paid off and then the residual values of sweetener. Now my sort of counter argument, but there's no point arguing, you just give the street what they want and you structure the deals at cash flow. But, but just because we've been doing this, because we bought 38,000A series cards in 2021, you can look up our press release in July. We spent $66 million buying 38,000 GPUs. 4,000 of those today are still on our cloud. But we sold 34,000. That's a lot of GPS. We've built 34,000, a 40s, a 5000s, a 4000s for 80 to 90% of their MSRP three years after the fact. Is this a fact? It's just a fact. We took that money and then we invested, reinvested it into H1 hundreds and H200. So we know, we know that GPUs have a much longer economic life cycle than ASICs. And by the way, I wanted to get a temperature so I had Mario and my team go and get a quote on a 40s today. They, they quoted $3,000 per GPU and The, the new, the brand new price on those was 4, 200. So after like almost five years there's still 70 of what they're worth. Why? Because I mean look, obviously China has a huge amount of demand and they're trying to get whatever, maybe they can't buy the latest and greatest, but they're allowed to buy the older gear so they'll take all that stuff. Right. So anyway, I think that's just good color for your listeners out there who understand the nuances. Like we're experts in bitcoin mining. You know, if we were going to talk about hash rate and having economics, I'd be talking about joules per tera hash and hash price and the interstitial components. But now that we're kind of in this HPC and GPU cloud era, I'd like to educate and explain to the viewers what are kind of the gears that make this all tick and how do you set up for long term success? And so just summing it up, you've got to negotiate a three year term, four year term, maybe even five year contract with your off taker and that sets your top line. And then of course you've got your opex. Are you running the data center yourself? Are you Nicola, whatever that may be. And then of course you've got other corporate overhead in servicing that and then the debt and can you still cash flow positively? Why I mentioned that is because a lot of our peers in the last year, year and a half that scaled the GPU cloud business didn't even bother really having deals at cash flowed, they were just scaling to scale and after debt servicing they'd be cash flow negative because again, two years ago people were paying 19% to lease GPUs. I'm sure you guys might remember that. I mean we know because we're very much on the inside, but we never played that game, right? We've always been best roic, lowest cost of capital and so we're a bit more patient, a bit more conservative. But I would look back at every capital deployment we've looked at has been a win. And the one thing is we do have a more aggressive depreciation schedule. We've always appreciated ASICs over two years and GP is over three years even though the economic life cycle in the real world is much longer than that. That's just how we structure it high. So I do want to make that distinction but I hope that stuff's helpful.
- [47:34]
A
Yeah, I'll toss a question here, just following up kind of on the point. You were making. It's interesting because ASICS and Bitcoin hash rate has been pretty commoditized and we really haven't seen these rigs go up in value since the last cycle. Whereas GPU compute is very different because it is not commoditized across the entire asset class. And I'm seeing analysts look at how these different frontier models and the different just the path that AI is taking and people who are developing these models like they, like we have a headroom on how much silicon we can produce. We have a headroom on like the newest and fastest gpu. So it seems almost like there's an argument that models will, will over the coming years could optimize for the existing compute that's out there. Which is a very bullish case for anyone with compute on hand already. I'm curious your thoughts because if you know, you know, you might not be buying, if you're not buying the newest stuff from Nvidia, it might not matter because you already have existing compute. Do you see what I'm, do you hear people who make this point? And I'm curious your thoughts about that.
- [49:03]
D
Yeah, sorry. So the question what like we acknowledge that hash rate has become commodity. Hash price is commodifying.
- [49:12]
A
Yeah, hash price is pretty commoditized but
- [49:14]
D
there's more resilience in the demand for.
- [49:17]
A
Yeah, but GPU compute is pretty different depending on the cards you have. And so. Yeah, and so I think it's a pretty strong case for blended compute in your portfolio which you guys have. So I'm curious because you talk about this three year GPU depreciation schedule and the reality is that's what the street wants to hear. But like you know, allow me to
- [49:47]
D
clarify the three year depreciation schedule for gpu. That's just an accounting treatment. Yeah, auditors or Darcy or CFO is the longest hanging CFO in the game. Conservative. It's great to have a conservative long standing cfo. All I'm saying is that when you look at our financial statements and you look at the bottom line that an income statement if it's negative because we've just got all this accounting treatment, very short cycle depreciation which means you've got higher intra quarter depreciation. That's all I was referring to as a CEO structuring deals, running this hardware in the real world. We've been running these a 40s. We got first delivery of them in late 2021. So they've been running for all of 2022, 3, 4, 5. They're in their fifth year now, 2026, five years and running. And the spot price of these a 40s just went up 10%. I said 44 cents an hour. A month ago they were 40 cents an hour. So yeah, there's absolutely more resilience in, in the demand. And I think one thing to be aware of, you did talk about hash price was in this cycle, in this bull cycle. It's really the first time we've seen it since the industrialized era. Bitcoin mining. Hash price did not rally above prehabbing levels. It didn't. And I think 10, 10 really clipped the wings of this bull cycle, which is unfortunate. In 2021, we saw hash price eclipse pre having hash price from 2020 by a long shot. 2017, forget it. I mean, 2017, you know, that's when Hive went public. December 20, 2017. Bitcoin was at 20,000 for the first time ever. I was in Fideli's office in Toronto raising money when I was taking my company public. And it was, it was hash price in 2017 had eclipsed 2016 pre market or pre having ashrace by a long shot. That didn't happen this time around. So I think, you know, in addition to massive demand overall for the
- [51:47]
C
growth
- [51:47]
D
of AI application, be it LLM or robotics, I mean they're. We're seeing crazy stuff. You see today, as Frank was sharing a video, there's like a marathon robots in China now. They're like beat a record that a human ran.
- [52:01]
A
Yeah. Zooming past the Chinese, you know, the runners.
- [52:04]
D
Yeah. And, and, and you know, a couple weeks ago we announced a partnership with amc. And so they are a AI robotics company. Shout out to AMC that they have like those Boston Dynamics robot dogs, but they're equipped with security cameras and they're meant for patrolling logistics, yard, warehouses, whatever. Just, you know, kind of industrial security application. And just as a quick moment just to kind of illuminate the application, use case of AI and why you need this. Compute. So it's not just chatbots on an LLM. So they have a sister company and the sister company makes this is amc. Their sister company makes not public security cameras for seniors homes with fall detection. But it's like a fixed camera in a room. And if it just is watching a room and everything's static and someone falls, it's like, hey, event detection alert. We saw it. If you put a camera on a dog now it's mobile. So the field of vision for the robot dog is constantly moving. So how do you process that? That's where you need AI level compute to be able to process constantly morphing video images and be able to detect, well, is this an intruder or am I just passing by a dumpster? What's going on? So anyway, you know, we're seeing so much demand. You know, Jensen's keynote, I highly always recommend everybody to watch it. We've gone three years in a row to GTC and he highlights so many use cases. So anyway, I think to your, to your point. Yeah, GPU compute, as we have emerging demand and broadening use cases. And then of course, deeper need as the fundamental model builders are getting more and more advanced, I see it getting deeper and wider the expanse and need for GPU compute. So I don't see it getting commodified anytime soon. And just as a kind of closing thought on that notion, I think it's very relevant and helpful. I started my career, I did electronics engineering. And so I worked as a radio frequency engineer at a company called Sierra Wireless for the first four years of my career. This was kind of mid 2000s. Everyone was using the Motorola Razor. Remember the flip phone? It was like a kind of a crappy camera and you just had T9 text input. Well, back then, like that was it, right? And everyone's using like GPRS or 3G. And in the lab at Sierra we were developing 4G and so we had the ability to do streaming video. I remember in 2007, I'm in the laboratory, I'm a young engineer and all the senior guys, like, who are we building this for? Like, everyone has like these crappy flip phones. You're taking a grainy photo, maybe sending it to someone, somebody who needs streaming video. Is it for like Japanese people on, on the subway that watch, you know, tv? Because back then, you know, we just always perceived it to be so much more advanced in, in markets like Japan. And nevertheless, we're building the technology, like whatever, it's our mandate, you know, we're going to build this stuff. Then the iPhone came out, changed everything. The application layer, location based services, video streaming, you name it. People are tagging where they are now, like how much, how much? And then of course, cell phones went from minutes of talk time to bites of data. And I remember when my cell phone bill was in megabytes and then it was inflection point where your cell phone bills hit a gigabyte. You remember that? And how much, how much talk or how many gigabytes do you have on your cell phone now?
- [55:22]
A
I don't even know. It's so many.
- [55:23]
D
Exactly.
- [55:24]
B
128 or something.
- [55:25]
D
Isn't that crazy? Like if you went back five or 10 years ago and told yourself, yeah, you're going to be having 100 gigabyte cell phone plan, you're crazy. No way. Like, you know, and now it's just, we just use more and more and more data as part of our everyday life. And so I think that the more that we rely on data, it's the same way even before AI, there's still massive data center growth to support all this stuff. Right? And so you think about every time you hop in an Uber or you watch a show on Netflix or you do E commerce and all this information that's constantly flowing and predictive analytics and targeted marketing, like you realize how much information is floating out there in the cloud. And so my point is, is that you hit this inflection point. And so I think with AI, we still haven't even hit that inflection point where some product is going to come out that is going to impact and change how we use it. And look, the Xai's of the world for sure, they're working on all this stuff, but one day something is going to come out and it's just going to change how we go about business or day to day life. And look, I use cloud for Excel. It's frigging amazing. But that's still pretty niche. There's going to be something like an iPhone that will come out that will harness AI technology and the amount of compute that we need will just continue to exponentially grow. Now, as a CEO of an AI compute company, fundamentally naturally on both sides of the sector. But look, I see these growth sprits in technology as pretty cyclical. Let me turn to you guys. Do you agree or disagree?
- [57:03]
A
I totally agree. I'm bullish on compute. Pretty much all compute hash rate, hard to say. Depending on Bitcoin price,
- [57:13]
B
I would say that's probably. I, I would agree with that too. It's. It seems to me to be the trajectory that we're headed in.
- [57:21]
A
I didn't.
- [57:22]
B
Thank you so much for joining, man. We gotta move on to our next section. But as always, you come with a lot of good. Takes a lot of stuff to unpack. So thank you for joining the show. We'll have to have you on again soon.
- [57:34]
D
Yeah, and a lot of good merch. Come get a hat in Vegas. BDC Vegas, baby. Will be out there, give away the hats. Okay.
- [57:43]
B
Okay. Thank you. I didn't appreciate it, man.
- [57:45]
D
Thanks.
- [57:46]
C
Cool.
- [57:47]
B
Alrighty. And we will move on to a quick op next recap. But first, an ad read for our sponsor, Luxor. This episode is brought to you by Luxor's Commander Bitcoin miner management software built for enterprise operations. Commander gives you real time fleet monitoring, bulk remote commands across your fleet. And Intelligent Miner, an automated profitability engine that runs every five minutes. Adjust your power settings to live hash rate and energy markets. And ERCOT Backtests show over 10% more profitability with Intelligent Miner versus Binary Mining. Commander Pro is $100 per megawatt or 25 basis point pool fee adder, which is roughly half the price of competitors. But you can also test drive it for 60 days with a free trial. To learn more, go to Luxor Tech forward slash Commander. All right, Charlie.
- [58:38]
A
Yeah, we're going to do, we're going to do a little dog food in here. We're doing a little dog food. We won't, we'll keep this short. So we had our conference this past week in New York. Up next, huge success, packed house, almost too packed. And we had kind of a who's who of the bitcoin developer and investor community there and presenting. I think we were going to do a quick brief reflecting on it. I think one of the highlights for us, Colin and I can, if I may speak a bit for both of
- [59:18]
D
us,
- [59:20]
A
was the investor panel. This was kind of, this was quite a notable panel that you led, featuring Robert Michnick of blackrock, David Duong of Coinbase, Boaz of Anchorage, Raghav of Tefra Digital. You guys talked about Quantum pretty much the whole time. And my assessment of it as I got around to watching this was that all these folks represent capital allocators, custodians who do have opinions on Quantum and Bitcoin. And this is interesting because I would say most of the bitcoin developer community believes that bitcoin is appropriately responding both in the bitcoin developer community is appropriately treating the issue, whereas the investors seem to believe that this is an imminent, probably a near term problem that they want to take proactive steps in, in, in various types of mitigation solutions. Is that a proper framing, do you think? I think that is.
- [60:45]
B
I mean, this is. So I basically got around to three questions with them because they had so much to say, which was great.
- [60:51]
A
Yeah.
- [60:51]
B
First question is, what are you guys thinking about Quantum? You talking about it internally? Are you freaking out? Second one is what are clients asking you about it and are they freaking out? What kind of questions are they asking? And then the third one which was the spiciest. And we'll maybe close our discussion on this with this one in a bit. But will your institutions play more of a hands on role in Bitcoin soft fork and upgrading process to solve for the quantum computing risk? Some interesting answers to that, but to what you were just talking about then, that was something that Robert Michinik really highlighted during his response to that first question. This idea that investors like concrete timelines and capital allocators like having some sort of roadmap. I mean, I mean, you know, you can look at what Aydin just said about the depreciation schedules for GPUs, right? Like all of these, the financial world loves to have everything modeled out down to the last penny. And so the idea that there wouldn't be a clear process to upgrade Bitcoin right now is kind of anathema to them when they're looking at the US Government, Google, all of these other institutions put forth these timelines. Whereas I think what you pointed out in your initial foray into this question was really important. The bitcoin development community thinks that they're on track for how they do things for this. Right? And I think that's a really important distinction is that the bitcoin developer timeline and institutional investor other important stakeholder timelines are not going to match up one to one because the process is so much different. Bitcoin development is typically very slow moving, it's decentralized. It's not the same as the timeline or the development process for one of these big centralized institutions when they're making a decision on something technical like this. It's very easy for bank or Google to say we're going to update our, our encryption for quantum. There, there. It's totally centralized. There are a few key decision makers that are going to sign off on that.
- [62:52]
D
Right.
- [62:52]
B
With Bitcoin, it's not the same. The one analogy that Robert used that I think is really good though for framing why people on the quantum alarmism side are really frustrated is he said, imagine you're a commander of a fortress and you're, you're given intel from your scouts that an attack is going to take place between midnight and 6am you wouldn't go to your troops and say, okay, everyone man the walls at three, we'll split the difference. You would have them up on the walls at 11 to get ready for an attack at 12.
- [63:23]
C
Right.
- [63:24]
B
And I think his point in saying that is he would, he would like to see, you know, some sort of solution be proffered in moving towards it more quickly than not. Whether or not you think, you know, they are moving towards that solution, I think is going back to that first problem about timelines. That's kind of a question of whether or not you think the current response is good. But the real meat of it though, because, you know, they said some of their clients were saying that they were interested in quantum. You know, some of them were starting to ask questions. They did not indicate that there is very much selling as a result of this. Actually, that's an important.
- [64:00]
A
I'll interject that one revelatory comment from similar comments from multiple of these guys, Coinbase, BlackRock, Anchorage, was that their clients are not yet broadly concerned. Their clients are not banging down their door right now to solve the quantum issue, but they do anticipate that becoming a thing now for listener, this quantum topic has really is really only like a year and a half old in its modern form. And only in the past, I'd say three or four months, has it become a like really quickly forefront topic. So this could be, this could change a lot. Yeah, some, a lot of interesting comments. I don't think we, we've seen point guys from these large institutions really comment in kind of a shared, you know, in a share on a shared platform at the same time as we did at OP next that you led.
- [65:02]
B
Yeah. And also I would just say I was really impressed with the length and details in their responses. I think it's really easy to get cynical about a topic like this and think the investors don't know what they're talking about, the developers barely know what they're talking about, the quantum physicists barely know what they're talking about.
- [65:19]
C
Right.
- [65:20]
B
But I was really impressed with how well thought out their answers seemed to be and how much they had to say about it too. I think that was really, you know, for me, an optimistic sign. Now for some though, I actually think that's going to be a pessimistic sign for my last point here and then maybe we can close on this with final thoughts from you, Charlie. My third question was, you know, okay, taproot took a long time. Bitcoin developers move very slowly. We are in a specific moment in time now within Bitcoin where not only is quantum computing a problem, but it's a problem now when Bitcoin is its most institutionalized ever. There is more capital at stake than ever and there are more stakeholders who really want to make sure their investments don't go to zero. Some of those stakeholders are the wealthiest institutions on the planet like blackrock.
- [66:07]
D
Right.
- [66:08]
B
And some of these other big banks. And so I asked them, do you foresee your institutions getting involved in bitcoin development for this problem and taking a role, whether that's researching it, whether that's funding development, et cetera. And I was basically given answers to the effect that, yes, that would happen. They all kind of danced around it, right? They were very diplomatic. I mean, Robert Michnick of blackrock basically said, we're very leery of having a big institution like blackrock insert itself into these discussions. But he did say that this is enough of a concern to where we will probably want to have some sort of say in how things are going. And this, I think, was one of the most controversial aspects of the conference. You know, you had some folks, the usual suspects, who are very leery of institutionalized control over bitcoin, of course, as they should be.
- [67:00]
A
One of those being Alex B. Here with this tweet quote, yeah, this is a block size moment. They think they can come in and steer consensus. Going to be a wild ride. I do think that is. I mean, he obviously tweets very spicy stuff, but I mean, as far as the trajectory of things go for the previous fork attempts, we have not seen, I would say large institutions come in and try to take a major role in pushing forward bitcoin development since the block size war. And again, that was two bitcoin eras ago and it was a private company. Bitmain, the larger, the larger driver. Now you have a pretty cross demographic or like from pretty wide, big, more big tent here from a lot of the institutions who all say, we're aware that this can be. Can look bad. But they do indicate that they want to, you know, have a. They have a concern. They have a position.
- [68:07]
B
100 and then I'll leave it after this. Marty Bent quote tweeted Alex B's and quoted from the talk. I, I want to caveat this. I don't have the transcript in front of me, so I don't know who said this exactly or how accurately Marty quoted this. He was in the audience, though. I made eye contact with him, or maybe not eye contact, but I was looking at him a few times being like, oh man, he's gonna. He's gonna love this last question. And he said, quote, he said here, quote, it's not the same bitcoin. The strategies of the world, the coinbase of the world, the blackrocks of the world and the anchorages of the world are part of this community. There is a clear threat. We'll make sure the protocol updates on a timely manner, end quote. And then Marty said, yeah, this is going to be fun. And I do just want to leave it with that in the sense that you don't have to get conspiratorial with it. But I do think you have to recognize that this question of how much, say, do the big institutions have over this upgrading process, coupled with the question of what do we do with the coins, is going to make the quantum debate probably the most toxic thing ever for bitcoin. I actually think this is going to be significantly more toxic than the block size wars for a number of reasons. And it goes back to what they had.
- [69:12]
A
More toxic than the block size war.
- [69:15]
B
Yeah, but it was going back to what Neha was saying the week before we or two weeks before we did off next, the last full week of streams that we had. She said, look, the quantum computing risk for Bitcoin is a problem that has multiple different stages to it. First stage is just figuring out some sort of quantum invulnerable address scheme and getting that patched into Bitcoin. Then you have this second really thorny problem, which I didn't even touch on this because we didn't have time to get to it during the panel. What do we do with all the quantum vulnerable coins? And we'll leave that for another show. But that's going to be a very schematic question, I think, for a lot of the bitcoin community.
- [69:53]
A
Yep, there's going to be plenty of fodder for us to cover on this. And we will, we will. We are. We commit to you, dear listener, to try to do our best journalistic integrity, to cover all sides as long as they're quality perspectives.
- [70:12]
B
And with that, I'm going to do a quick ad read from our other sponsor, Lygos, and then I am going to really quickly run through the last few news items because we're running up on time. But first, from Lygos, hedge funds are getting liquidated. Is your Bitcoin safe? It's not just Bitcoin's price driving up big lending desk hedge funds institutions are reeling after the notorious 10, 10 and 25 liquidation events. Counterparty risk is rampant. So it's more important than ever to know who controls your Bitcoin. And with Lygos, that person is you. You are always in control of your Bitcoin stack when you take out a loan. With Lygos, Lygos uses Bitcoin smart contracts to protect your stack. They are our preferred lender so we recommend you give them a try. If you're looking to leverage your bitcoin stack with Lygos, you always know where your bitcoin is. Hold your keys. No wrapping, no bridging, no hypothecation. Get competitive rates for as low as 10% APR. Go to Lygos Dot Finance to learn more. All right, and with that, we will go quickly through the last few stories today for our next one. Alcoa is in the news because it is ostensibly looking or reportedly looking for a buyer in NYDIG for one of its defunct aluminum smelters. I'm quoting directly from Coindesk. Alcoa is in advanced negotiations to sell its dormant Messina E smelter in upstate New York to bitcoin mining firm Nydig. Nydig is a really interesting case. They are, you know, a bitcoin financial institution and they are leaning into bitcoin mining at a time when a lot of bitcoin miners are leaning out and, and going into AI. But with this most recent news item, if this is true, they are trying to buy this smelter from Alcoa, which has been sitting idle since 2014. Just became too expensive to operate it with overseas options. So Alcoa shut it down. Alcoa is reportingly looking to offload 10 such sites, nine similar sites to this one, as it looks to sell them to data center companies that are looking for large industrial sites with the electrical footprint already on site so they don't have to go through all the approval process and building out things like transformers and substations. Now, the reason I chose this was number one, we wanted a good bitcoin mining story. We like to throw our bitcoin mining listeners a bone. So always got to remember our roots. But again, going back to what I was saying about Nydig, Nydig really has been leaning into bitcoin mining when a lot of bitcoin miners have been leaning out into AI. They were in the news most recently, I think, for one of the bigger headlines over the last year for them when they, when they started negotiating with Crusoe to buy all of Crusoe's bitcoin mining assets. I'm not sure if that deal has closed or if they're still negotiating it. I'm pretty sure they're still negotiating, but that's pretty huge. Crusoe, one of the largest oil and gas miners in the world, they're moving into AI like all the other bitcoin miners Nydig coming in to fill in the gap though. And that acquisition made a lot of sense to me because NYDIG's parent company Stoneridge has a huge oil and gas portfolio. Maybe they're trying to see how well this can work at scale and deploy it across that portfolio. Who knows. But all that being said, it's very fascinating to me to see a company like Nydig really double down on bitcoin mining, take advantage of some of these cheap ASIC prices and some of these good deals on some of these sites at a time when no one else is wanting to. That's all I have for that though. Charlie, I don't know if you have anything to add.
- [73:44]
A
Nah. Alcoa sites have been at the center of a lot of very notable bitcoin mining deployments. Thinking back to the Bit Deer and Riot sister sites down in Texas shortly after the China mining ban.
- [74:02]
B
But yeah, we'll close on this the story with Strategy and then also a companion with Bit Mine because they're the only ones buying bitcoin. But strategy raises 2.5 billion buys 34,164 Bitcoin I believe I saw a CoinDesk headline that said this is like the third largest purchase ever. And so Strategy as always back in the news it now holds over 815,061 Bitcoin. After this purchase in which it bought 34,164 Bitcoin, I was doing I was running the numbers here and Strategy according to data that I scraped with Claude, Strategy has purchased purchased 89603 Bitcoin in Q1 alone and they are like one of the only treasury companies buying currently. I could have some incomplete data so apologies if I do and if you see some discrepancies here, please point it out to me. But Meta Planets purchased 5075 over Q1 and Strive increased its treasury 6114. I believe that is largely from the the similar scientific acquisition. But if you look at a lot of the other ones Pro cap up by about 457 bitcoin in Q1. Most of them not really making any moves to that front to that end of accumulating more bitcoin. In fact some of them are scaling back their bitcoin treasuries and in tandem with this if Strategy is the only company buying bitcoin bit mine for whatever reason is the only company buying Ethereum. This is Tom Lee's bit mine. They purchased 101,627 ether worth over 230 million in largest equal haul of 2026 last week. So at the time that these crypto prices are popping, maybe we have two entities to thank for that. That being said, strategy and the strategy of Ethereum bit mine really seem to be the only big players currently operating in the treasury landscape. Maybe a good move. Maybe they're buying the bottom. But as Jay said in his answer to our first question, we will see hard to be totally bullish here but hard to ignore this reversal with that. Charlie, I think we did with that.
- [76:16]
A
We are doing this Monday, Wednesday, Friday noon Eastern. Make sure to tune in on X or YouTube. This becomes a podcast after we wrap up. You can find that rubber podcasts are streamed Spotify and Apple. Leave a review, give us five stars and make sure to hit that button that bell if you're on YouTube. Otherwise thank you so much. We'll catch you on Wednesday with another banger show. See ya.