IREN's 800MW in Australia, Zcash bug, and Google upscales to $84b

Summary

Blockspace: AI & Bitcoin

Episode: IREN's 800MW in Australia, Zcash bug, and Google upscales to $84b
Date: June 3, 2026
Hosts: Charlie Spears (B), Will Foxley (A)
Guest: Giannis (C)

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Episode Overview

This episode dives deep into the intersecting worlds of bitcoin mining, AI infrastructure, and crypto market culture, with a packed agenda covering:

• A market update on Stretch, MicroStrategy's high-yield credit product
• IREN’s massive new 800MW data center deal in Australia and its global expansion
• An in-depth discussion of the Zcash soundness bug and broader privacy/crypto philosophy with guest expert Giannis
• Google’s headline-grabbing $84 billion capital raise to fuel its AI ambitions, and the meaning of preferred equity in both the traditional and crypto-native financial world
• Joe Weisenthal’s viral thesis: Is this the "coldest crypto winter ever"?
• A look at ERCOT’s changing rules and the end of 4CP for Texas energy and data center markets

The tone is fast-paced, conversational, critical, and deep on industry insights.

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Key Discussion Points & Insights

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1. Stretch: MicroStrategy’s High Yield Credit Plummets

[01:56 – 04:21]

• Market update: Stretch, a "short duration, high yield credit" linked to MicroStrategy, is trading below its $100 par (as low as $94–$95).
• Mechanics: Stretch is a perpetual preferred equity—not debt, but yields like one, and is supposed to trade at par.
• Concerns:
  • Decline tied to Bitcoin’s price drop under $65k.
  • Michael Saylor (MicroStrategy) sold $2.5 million BTC to test market liquidity.
  • Uncertainty over whether Saylor’s treasury can cover future stretch payments if BTC keeps dropping (now $50bn vs $70bn positive BTC coverage before).
  • Noted that a large stablecoin operator was using Stretch’s yield to drive up their own coin, which could unravel if Stretch remains troubled.
• Hosts’ take:
  • Will: “I don't really see this, like, completely unwinding at this point. I think, like, the Ponzi is the Ponzi. It's going to keep existing.” [04:21]
  • Charlie: “Please save us daddy sailor. Buy more bitcoin. My bags are sweating right now.” [04:21]

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2. IREN’s 800MW Data Center in Australia: Aggressive Global Expansion

[04:21 – 10:52]

• Deal details: IREN (Iris Energy) announced its first Australian site, an 800MW data center in Bundy, South Australia. Expected to energize in 2028.
• Pipeline: IREN’s total pipeline now surpasses 5GW (including a 5GW AI buildout deal with Nvidia, and partnerships with Microsoft, Dell).
• Industry context: Previously, “gigawatt pipelines” were often just speculative ‘LoIs’ (letters of intent); IREN’s pipeline appears closer to true buildout and operational.
• Stock moves:
  • IREN hit $70/share on the news—up astronomically from a $1 bottom in 2023.
  • The company has developed something of a cult following.
• International angle:
  • Australia is a mature market, and the ability to run subsea cables to demand centers like Singapore and South Korea makes the project globally significant.
  • “You kind of get like an international thing going on…which I think is kind of a cool part of this press release.” – Will [08:18]
• Challenges ahead:
  • Labor market: Difficulties in finding enough workers for massive data center constructions, potentially mirroring US labor shortages.
  • “Does Australia have the ability to run some of these larger campuses that take 2000–2500 workmen over a two-year period?” – Will [09:57]

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3. Zcash: The New Soundness Bug & the Privacy-Value Tradeoff

Guest: Giannis, Zcash expert/former Electric Coin Co
[12:49 – 26:42]

High-Level Summary

• Background:

  • Zcash employs "shielded pools" for privacy—Sprout, Sapling, and now, Orchard, the latter launched in ~2022 and currently holding ~4.5M ZEC (~27–28% of supply).
  • Shielded pools use zero-knowledge proofs to obscure transaction details and ownership.

• The Bug:

  • Called a “soundness bug," it allowed potentially invalid transactions in the Orchard pool (invalid state transitions/double spends) without public detection due to Zcash's privacy features.
  • Patched quickly by devs, but no way to prove it wasn't exploited while live.
  • “A feature of shielded pools is that they're very private. A bug is that you cannot discern…what notes are in the shielded pool, what coins are in there, whose they are, how many have been kind of created after the fact.” – Giannis [18:54]

• Risk & Uncertainty:

  • Turnstiles limit withdrawals from shielded pools to only what's gone in, but can’t prevent attackers from inflating/pillaging the shielded pool itself.
  • “My argument, however, is that we just cannot be sure. And I wish the communication in Zcash was a little bit clearer that there is potential that this was exploited and we just don't know.” – Giannis [18:54]

• Zcash’s True Use Case:

  • Giannis: “My recommendation to people was always treat Zcash as a way to spend money, but never as a store value due to this property that you cannot audit the supply of shielded pools.” [21:48]
  • Currently, Zcash is being marketed as a store of value, which he calls “short sighted” and inconsistent with its technical limitations on auditability.

• Speculation vs. Privacy:

  • Most ZEC used for speculation, not privacy, although newer wallets make shielded pool usage more accessible.
  • “More people have clearly been moving funds from the transparent pools over to the Orchard pool…which was formerly known as Zashi.” – Giannis [24:10]

Notable Quotes

• Giannis: “You’re trading off auditability for privacy. And for some people that’s fine… But I think they should just be more clearly articulated.” [21:48]
• Charlie: “Zcash has been having an absolute year… From a year ago it was in the $40s, now it’s $600. Every influencer pivoting to Zcash…” [23:11]

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4. Google Upscales to $84 Billion for AI – The CapEx Boom & Preferred Equity

[27:49 – 36:03]

• News: Google is raising a massive $84.75 billion for its AI/data initiatives, including $15 billion of “preferred equity.”
• Strategic implications:
  • Google's AI infrastructure race pits it against Meta, Amazon, Oracle.
  • Distinct advantages: proprietary hardware (TPUs), dominance in ads/data, and user base.
  • Question debated: Why use equity over debt? Theories: absorb liquidity before OpenAI/Anthropic/SpaceX IPOs, avoid expensive debt, or bet on an AI capex boom.
• Preferred equity in focus:
  • Considered “the armpit of American securities,” not true debt or true equity, but with regular yield and subordination in case of loss.
  • Crypto’s influence:
    • “Crypto brought this preferred equity out of what was the armpit of American securities and into the limelight as something that's more valuable long term.” — Will paraphrasing Jeff Park [30:25]
  • MicroStrategy (MSTR) set precedent with Stretch; Google now follows, signaling traditional and crypto finance converging.
• Crypto-native advantage:
  • Charlie: “Crypto natives may have some advantage here being able to navigate the rapidly changing landscape…” [33:57]

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5. Coldest Crypto Winter Ever? (Joe Weisenthal’s Take)

[41:10 – 45:52]

• Joe Weisenthal’s thesis:
  • Lists 12 reasons why “it’s the coldest crypto winter ever,” including:
    • Crypto drawdown happening amid dollar anxiety
    • Friendly regulatory environment already achieved, removing catalysts
    • AI has siphoned away all marginal/venture capital
    • Rapid institutionalization (e.g., BlackRock involvement) hasn’t powered a new bull run
    • Crypto Twitter/community energy is essentially dead
  • “AI sucked all of the money out of the room.” — Charlie [44:12]
  • Will: “A lot of the things that people were fighting for with crypto, happened. So the institutionalization…this year was just kind of cool as opposed to being like, oh, my gosh, BlackRock is here.” [42:26]

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6. ERCOT 4CP & Data Center Grid Gaming: The Changing Texas Power Game

[47:06 – 52:29]

• ERCOT changes:
  • Rising grid demand in Texas from bitcoin mining and new AI data centers is forcing grid operator ERCOT to rethink its “4CP” demand charge system.
• Bitcoin miners & grid ‘gaming’:
  • Miners turn off at peak demand not only for flexibility, but because “it's an economic question…They don't want to spend on energy during those really hot periods because it's more expensive and you don't make money. So they turn off.” – Will [50:36]
  • New plans may switch to “12CP” or similar, ending 4CP’s cost advantages for large loads = higher costs for data centers/miners.
  • Map data shows massive concentration of high-power facilities in Texas, plus moves to Oklahoma, Pacific NW, and British Columbia.
• Energy market complexity growing:
  • The future operating environment for bitcoin miners and AI/HPC data centers “is going to change,” with uncertainty around how future grid pricing and interconnection will work.
  • Other regions (Oklahoma, PJM, California) may soon follow suit with their own regulatory changes.

Notable Quote:

• Will: “As we have more data centers in Texas and more bitcoin miners becoming AI data centers or edge data centers or full NEO clouds, you're going to see more complexity around this.” [51:51]

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Notable Quotes & Timestamps

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 04:21 | Will | "I don't really see this, like, completely unwinding at this point. I think, like, the Ponzi is the Ponzi. It's going to keep existing." | | 08:18 | Will | "You kind of get like an international thing going on...which I think is kind of a cool part of this press release." | | 12:49 | Giannis | "Zcash is a really complicated protocol and it's very hard to understand. And I would say that people who work on zcash are incredibly intelligent, incredibly smart and doing very hard things." | | 18:54 | Giannis | "A feature of shielded pools is that they're very private. A bug is that you cannot discern…what notes are in the shielded pool, what coins are in there, whose they are, how many have been kind of created after the fact." | | 21:48 | Giannis | "My recommendation to people was always treat zcash as a way to spend money, but never as a store value due to this property that you cannot audit the supply of shielded pools." | | 23:11 | Charlie | "Zcash has been having an absolute year… From a year ago it was in the $40s, now it’s $600. Every influencer pivoting to Zcash…" | | 30:25 | Will | "[Crypto] brought this preferred equity out of what was the armpit of American securities and into the limelight as something that's more valuable long term." (paraphrasing Jeff Park) | | 33:57 | Charlie | "Crypto natives may have some advantage here being able to navigate the rapidly changing landscape..." | | 42:26 | Will | "A lot of the things that people were fighting for with crypto, happened. So the institutionalization…this year was just kind of cool as opposed to being like, oh, my gosh, BlackRock is here." | | 44:12 | Charlie | "AI sucked all of the money out of the room." |

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Segment Timestamps & Flow

• 00:05 – Stretch price woes & Saylor’s bitcoin treasury
• 04:21 – IREN’s Australia buildout & global data center expansion
• 10:52 – Labor, demand, and international data pipes
• 12:49 – Zcash soundness bug deep dive (with Giannis)
• 27:49 – Google’s $84b capex bomb and preferred equity lesson
• 41:10 – Joe Wiesenthal: The coldest crypto winter ever
• 47:06 – ERCOT, 4CP, and the future of data center grid participation

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Takeaways

• Crypto/AI convergence: Old and new worlds of finance are merging through instruments like preferred equity.
• Bitcoin mining’s future: Shifting from pure mining to powering global AI infrastructure, with regulatory and cost uncertainty ahead.
• Privacy comes at a price: Zcash’s technical prowess in privacy comes with a fundamental challenge: auditability and risk assessment are difficult at best, possibly impossible.
• Energy & infrastructure: Grid pricing mechanisms are being upended by the data center and mining boom, especially in the US’ deregulated Texas market.
• Crypto winter’s chill: Despite institutional acceptance, the heat (and capital) has moved into AI, leaving the crypto community in rebuilding/reflection mode.

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For Listeners

Whether you’re a mining operator, financial innovator, privacy wonk, or crypto culture veteran, this episode offers a sharp, candid analysis of the state of the industry—one where old assumptions are being shattered and new models are quickly taking over.

Transcript

[A]

Foreign.

[B]

Welcome back to Block Space Live. You got Charlie and Will this time calls traveling across the country on a secret block space mission. We have a banger of a show today. We're going to kick off monitoring the stretch situation. It appears to be crashing. Then we're going to talk about iron inking an 800 megawatt transmission connection agreement in Australia going back to their homeland. We got zcash. Zcash is ripping, but we have some cold water to throw on it. And Google was not done raising. They actually upsize it. We'll talk about that. And is this the coldest crypto winter ever? Joe Weisenthal from Bloomberg thinks so. We're going to talk about that. Blockspace go live on weekdays at 1pm Eastern featuring quick hits on the latest in bitcoin mining, AI and emerging tech. Rather AI, emerging tech and maybe a little bitcoin sprinkled in. This is a podcast. If you are listening live, that's great. But if you're trying to catch it later, we turn into a podcast shortly after. You can find that wherever podcasts are streamed will Coindesk as well.

[A]

We're leaving the Coindesk network here shortly. So if you listen to us on Coindesk or have enjoyed listening to us on Coindesk in the past, you're listening to it right now. Be sure to go to your Spotify, your Apple or wherever else you listen to podcasts and search for Blockspace and add us. Make sure to give us that five star review and then hit that bell notification so you can get info whenever we go live or whenever we publish a show which is around 5pm Eastern. Again, this is daily hits on emerging tech, AI, HPC and a little bit of crypto mixed in there as well. Charlie, really full show today. Kind of really full show.

[B]

I want to emphasize this show is brought to you by CleanSpark ticker CLSK on NASDAQ. We'll hear more about CleanSpark later on the show. Yeah, will we have to monitor the situation? Look at this stretch. Short duration, high yield credit by Michael Saylor is down 95. It dipped into 94 like at, you know, 30 minutes ago.

[A]

Do we have like a, a price tracker? Yeah, that's always more scary. Yeah. Look at that. Yahoo Finance. Another place you can find us is on Yahoo Finance later in the day as well. So down five bucks basically for a preferred. Right. For those who don't know what stretches, it's like a perpetual preferred and you get a nice high interest rate. It's not a debt Instrument, but it acts like one. It's actually an equity instrument and it's supposed to trade at a par of 100 bucks. It's not obviously, right now. It's been dropping ever since bitcoin went down. Saylor tested, sold $2.5 million worth of BTC to kind of prove they could sell bitcoin. And now the market is starting to run away with it. Charlie, where's the bottom for this? Is there a bottom?

[B]

I don't know, Will. The bottom for everything is technically zero. I have a hard time seeing that. But I think it was Francis who said last week we had Francis from Ligos on who said Saylor had $70 billion worth of Bitcoin lined up to fund Stretch payments and dividends. But now with the bitcoin price decline now crossing into 65k, that's down to like 50 billion. So he's got a giant treasury and a giant pile of bitcoin to fund this, but that bitcoin goes down whenever the price goes down.

[A]

I'm not super worried about this long term, to be honest. I think I've seen enough of these things. There's a few things that might need to unwind. There is apparently a very large stablecoin that has been buying Stretch and using that yield quote unquote, as a reason for people to buy the stable coin and kind of boot up. And maybe that needs to unwind in order for Stretch to kind of get healthy again. But I'm not super worried long term. I think they have the cash on hand. I think they can just keep hitting their MSTR atm. I. I don't really see this, like, completely unwinding at this point. I think, like, the. The Ponzi is the Ponzi. It's going to keep existing.

[B]

Yeah, I'm not too worried either. We've seen, I think, Stretch go down to 93 bucks and buy. But again, Bitcoin wasn't 65k when it did that last time. We'll have to see. Please save us daddy sailor. Buy more bitcoin. My bags are sweating right now. Okay, let's get into some fun news. Iron inked a big deal. Uh, and yeah, and they're going back to Australia, going global. So if you're not familiar air and hails from Australia, if you don't, you can't tell from their accents from Daniel Roberts, Dan Roberts accent. They're from Australia. So Iron announced it, signed a transmission connection agreement for a planned 800 megawatt data center campus in Bundy, South Australia. This is their first announced Australian data center campus. And according to the company, according to this announcement, one of the largest data center developments announced in the Asia Pacific region to date. Energization is expected to begin in 2028. And this brings Iron's total power pipeline to above 5 gigawatts. If you remember, the company signed that 5 gigawatt deal with Nvidia to deploy 5 gigawatts worth of AI infrastructure. On behalf of of Nvidia, Will, we wrote about this. What's your initial take on this?

[A]

Yeah, I think the big story here is Iron continues to one add power to its pipeline. They have well over 5 gigawatts of power in their pipeline now. And I think when we looked at the history of some of these build outs, a lot of people, especially during the bear market, we said we have a 1 gigawatt, 2 gigawatts in our power pipeline. These were often just like Lois, didn't really mean much. And a lot of people had power pipelines that actually overlapped with each other. And it didn't necessarily mean like you had that power under management or you're currently building on it or operating it by any means. You were very early in that stage. From what we're seeing here with iron, I do think that a lot of that power is actually more so being built out in the immediate future than some of the other operators. And then we can also look at some of the recent transactions that they've had with Microsoft, Dell, and then of course the big one with Nvidia where they agreed to a 5 gigawatt build out. Most of that's going to happen at their children's campus down in Texas. I believe it's a 2 gigawatt build out when it's all done, or at actually the Sweetwater campuses. Sorry, I'm mixing them up, but they have quite a few campuses in both West Texas, British Columbia, and now they're adding Australia to their lineup. They might even have a few other campuses in a few other locations. But I think the point being here that they are adding a lot to their pipeline aggressively and they have the preferred deals on hand with some of the big guys like Microsoft, Dell, Nvidia, in order to not only build out these campuses, but fulfill the contracts and the revenue. That was like a big question mark that a lot of the haters, I would say in the other side had questions around. Iron was are they actually going to be able to keep this hot ball of money rolling? And so far they're aggressively adding the Gigawatts to their platform and then they're also able to come up with interesting financing deals in order to close it. And then of course the stock has been performing really well. On top of that, I think it retook 60, maybe 70 here.

[B]

Yeah, I mean iron's like the stock you've developed a cult following because it hit that bottom three years ago in 2023 of like a dollar. We're looking at 65. It crossed 70 on the news actually this morning because it jumped from 6,667 to 71 at the market open. But it's, it looks like it's down 2% right now.

[A]

Yeah. So yeah, nice little trade iron on Coinbase there with, with the top there. The last thing I'll say is just the Australia connection. Right. So a lot of the gigawatt buildouts have been in the US and I think that's mostly because a lot of the mature demand is in the U.S. right. The credit backed deals and investment grade opportunities have mostly been in the US to date. And then a lot of the bitcoin miners had large portfolios in the US so they were already US domiciled and able to get onto Wall Street a little more quickly because Iran is in Australia and Australia also has a lot of demand for this as well, being a more mature market as well. That's why you're seeing a build out of this size. And I think one cool part that they included in this is there is a demand in Singapore, Indonesia, South Korea and elsewhere where they can route some of this data flow through subsea cable. So you kind of get like an international thing going on there, which I think is kind of a cool part of this press release.

[B]

I was wondering where Bundy Australia was and lo and behold I pull up Google Maps. It's a very, very empty looking county. But if you really want to know, it sits in southern Australia here, north of Adelaide, which I don't. I only knew where Sydney was, basically in Brisbane, but it's here in the south and it's just an absolute like empty wasteland. Probably where they film Mad Max. I don't know, I'm just guessing. So looks like a perfect place to build data center. Not too many data center protests or protesters you might imagine.

[A]

Yeah, I'm curious. We're going to get to this later on in the show and talk about Texas and the ecom market which is having a lot of shakeups. But I'm curious what the transmission costs are like down there. Some of the costs of producing in South Australia, where I'm assuming there's less of a population load. And then there's other considerations as well, like does Australia have a pretty built out market for laborers? There was a recent talk by Core Scientific CEO Adam Sullivan talking about how labor is actually one of the key bottlenecks for building out AI campuses because you're competing against the big guys, the Googles, the Microsofts of the world, and you can't have a team walk off site because they got a different contract elsewhere. Does Australia have the ability to run some of these larger campuses that take 20002500 workmen over a two year period? These man camps, which I know you're familiar with living in the, in the Tulsa area.

[B]

Yeah, actually, if you go on Facebook, you'll see Facebook boomers make it a part time job to hunt out the data center man camps of a bunch of trailers and Winnebagoes pulled over. So there's been a lot of false flags of just normal trailer parks. But yeah, the man camp is going to become an, an icon of the data center build out. Kind of probably similar to, you know, other major industrial revolutions. Okay, we are going to keep rolling. We have a guest on. We got Yanis who's going to talk about the zcash bug here in a moment. Coming up next. But that's after a word from our sponsor, CleanSpark. We are CleanSpark, America's Bitcoin miner. A publicly traded company with the largest operating hash rate powered entirely by self operated infrastructure across four states. This is our proof of work.

[C]

We are setting the standard for what's next.

[B]

Learn more about the intersection of energy and [e-mail] and just a reminder, we are leaving the Coindesk feed. So if you go over to Blockspace feed, search Blockspace on whatever platform you're listening on. Subscribe to that, leave us a review. But the important thing is we're leaving Coindesk. So go head over and sub to the Blockspace feed. All right, let's talk zcash will, because zcash has been having a moment. It's been absolutely ripping, but is it all that people think it's going to be? I've got Giannis in the wings. I'm going to bring him up now. Giannis, welcome back to Blockspace.

[C]

What's up guys? Can you hear me?

[B]

Yeah.

[C]

Cool, cool. How are you guys doing?

[A]

Good, man. Zcash is ripping. Well, it's down a little bit the last few hours, but it's ripping overall.

[C]

Yeah, I have to admit, when I was working over at the former electric coin company, everyone left and they're now working in a company called Zodel. The price was at like, $19, so I would imagine that sentiment, maybe up until this weekend, was probably pretty high. But, yeah, this bug is big news, so happy to dive into it. Yeah.

[B]

And we'll have to kind of ease into this because this gets a little hairy. We're not going to get too technical, but I like to lead with. Zcash is up 10% on the news that a possibly critical inflation bug was discovered. Now, this bug, they put out a post saying that this bug was discovered a few days ago and was quickly patched in. Quote, nothing bad happened. And you have some takes asking, do we actually. How do we actually know that? So let's have. Hey, walk me through how zcash works. Maybe explain at a high level the, you know, the shielded pool idea.

[C]

Yeah. So effectively, zcash is a transparent, fully transparent public blockchain, just like Bitcoin. The majority of the zcash supply lives in an environment that is a fork of Bitcoin, an old version of Bitcoin Core. It has spending scripts very similar to Bitcoin script, but zcash has added these extra protocols called shielded pools. And shielded pools are effectively additional environments where users can move their money into and they can do a different style of transactions that are made private through the use of this technology called zero knowledge proofs. And the way to spend money, you have these specific types of spending restrictions. That money can only be spent if you provide a valid zero knowledge proof. And that proof is verified by zcash consensus, and the transaction is added to the chain. The kind of difference between the shielded pool and a normal public zcash transaction is that no one can discern publicly from like a block explorer or a full node or something of that nature. They cannot discern who the parties are involved in a transaction. They cannot discern what amounts are being spent. They can only see that a valid transaction took place and that there was a fee paid to add it into the chain and it's been added into a zcash block. So it is effectively a way to obscure the transaction graph and make transactions within a specific pool very private. And zcash has three shielded pools. The original pool called Sprout, an additional pool called Sapling, and then the most recent pool called Orchard. And they all work in a similar way, but they have different technical nuances. And Orchard is the most recent pool that was added in around, I think 2022, it was a part of the network. I think it was the fifth network upgrade in Zcash uses a relatively new proving system called HAL2, which was. Or Halo, sorry, which was created by Zcash engineers. And yeah, it has the most value. So I believe there's about 4 and a half million Zcash tokens locked in this pool. So it is by far the largest and most widely used shielded pool where this bug was discovered.

[B]

And so these arboreally named pools, the newest one, the biggest one, orchard, biggest by a long shot, was discovered to have an issue. And there was a quote, remediation at the same time that zcash blocks suspiciously, I believe, stopped maybe perhaps during this upgrade, I don't know. Take a stab at trying to explain this in like a, you know, fifth to a fifth grader.

[C]

What like zcash is a really complicated protocol and it's very hard to understand. And I would say that people who work on zcash are incredibly intelligent, incredibly smart and doing very hard things. The bug that was found is known as a soundness bug. So I'm not sure if it was an inflation bug that was. So in the original zcash pool there was an inflation bug where someone could effectively inflate the supply in the shielded pool and then try to exit back to the main transparent chain. I believe that was the bug in Sprout. This bug is a soundness bug. So what this bug effectively allows you to do is, for lack of a better term, create invalid state transitions and invalid transactions that will be added to the chain. So an attacker, for example, if I sent Charlie some zcash and then I went and sent Wilson zcash with the same kind of zcash that I own. So effectively double spending Charlie, both of these zcash transactions would be added to the chain and both of these coins or notes, more rather, would be added to the chain and would be technically valid. So then an attacker could create potentially a large number of notes in Zcash. Notes are private UTXOs and leave the shielded pool. And there's some consequences to that. So the bug, from my understanding, was a bug that allowed an attacker potentially to create invalid state transitions and those state transitions would be considered valid under CCASH consensus through the bug, which has some consequences which we can talk about.

[B]

Yeah, and one of the things is we can only explain this soundness bug so much. But you had a tweet, a take on this, and I'll let you expand on this, just this idea that you could never be sure that while the statement from the zcash devs said that they didn't think anything happened, your point is that we can't be sure that the vulnerability wasn't exploited. Is this like a feature, not a bug of zcash that we can't tell?

[C]

It's a little of both. Right. So a feature of shielded pools is that they're very private. A bug is that you cannot discern kind of what notes are in the shielded pool, what coins are in there, whose they are, how many have been kind of created after the fact. If you have, you spend one coin, create two UTXOs, you can't really tell if that was created. So there's no way to prove that this was not exploited within the shielded pool. So what zcash uses is, like I mentioned, there's various pools and there's like a main transparent chain. So let's say the transparent chain has 100 coins, and someone moves in 10 coins into the shielded pool. They have a mechanism called turnstiles. And what turnstiles do is they only allow 10 coins to come back from the shielded pool max, like at maximum, back to the main chain. What that does not prevent is that does not prevent someone creating more coins and inflating the supply or doing an attack in the shielded pool, creating new coins for themselves, exploiting that, and moving 10 coins back to themselves in the main pool, leaving all of the other users in the shielded pool kind of holding the inflated bag, for lack of a better term. So there is no way to prove that that this was not exploited. I would imagine that this bug has existed for a number of years, since the Orchard protocol has been live. Zcash through a new wallet application and new hype has moved a lot of value into the Orchard pool. Only in the last six months did it cross sapling in terms of TVL and is now accounting for maybe 27 to 28% of the Zcash supply. So there's no way that we can see that this was exploited. But what we can see is that no one has moved a substantial amount of Zack out of Orchard, so Zack the zcash token out of Orchard. So we can have a pretty strong confidence that no one has tried to exploit this yet in the sense of moving value back to transparent Zack and trying to sell it. My take is that I very highly doubt that someone did an exploit. I believe that the zcash security engineers found this exploit before any attacker did. My argument, however, is that we just cannot be sure And I wish the communication in zcash was a little bit clearer that there is potential that this was exploited and we just don't know. So that's kind of my main talking point or main kind of, I guess concern with all of this is that we will never have an assurance that this is ever been exploited. This is the same with the bug in the sprout shielded pool. We will never know if these bugs have been exploited until someone tries to move a massive amount of zack back into the transparent chain through some, through some, through some attack.

[A]

So what do you do in that case? If it's perhaps we find out later, 6 months, 12 months, 18 months that there was an exploit.

[C]

Yeah. So this is a. And maybe, you know, back when I was working on zcash, my recommendation to people was always treat zcash as a way to spend money, but never as a store value due to this property that you cannot audit the supply of shielded pools. They're unauditable and you do not know what the actual supply is. You just have a strong confidence and through the use of turnstiles you cannot technically inflate the transparent ZEC supply or the supply more rather at whole. So my kind of argument was you should always treat this as a cryptocurrency to buy goods and services with because it is very private, but it should never be considered a long term store value. In my opinion. If you're looking at zcash as a long term store value, you should just understand that there is a potential that this was exploited and that you might be caught holding the bag in the future if someone tries to exit. If they exit and max out the turnstile, that means you can never leave the shielded pool and you're effectively left with worthless tokens or worthless notes. More rather. And my just argument to people or my recommendation would be just understand kind of the risk that you're taking. You're trading off auditability for privacy. And for some people that's fine. Some people believe that is a certainly worthwhile trade off. I think others don't fully understand that that's the trade off they're making. And it's just a decision every individual has to make for themselves.

[B]

You know, in light of your point, Giannis, zcash has been having an absolute year from a year ago it was 40 in the $40, now it's 600. You have every influencer pivoting to Zcash, every influencer saying that they're pro privacy and a lot of like people saying that they're investing in zcash and this, this is pretty much the opposite of what you describe, which is as a spending like a, like a money base. And I remember you saying something and I haven't done the numbers. It looks like people, most of zcash use and ownership is actually just people speculating on the price and not actually using these shielded pools. Am I correct? And then does that really like, does that challenge like the whole purpose and narrative around zcash?

[C]

Yeah, it certainly does. Because you know, myself back in, you know, maybe late 2000 and tens when I first got into, I guess, cryptocurrency as a whole, like I was using zcash way back in the day and I was holding it in something, a wallet called Exodus. And I was holding transparent zcash and I didn't even know that it wasn't private because at the time Exodus Wallet didn't support transparent, I mean shielded addresses. So it only supported transparent. So I was holding kind of private Bitcoin, but it wasn't private. So it was just a kind of fork of bitcoin that had no value or had way less value, more rather. Sorry. So I think my thoughts on all of this is that more people have clearly been moving funds from the transparent pools over to the Orchard pool. I think a lot of that has to do with the improved user experience that the Zodl company has done with the wallet called Zodl as well, which was formerly known as Zashi. And that is while very exciting that more people are moving over to a more private version of cryptocurrency and privacy is something I guess we can all stand behind. Having the risk of a soundness bug in the entire shielded pool I think really weakens the confidence as a long term store value. That's the current pitch because zcash does have pretty slow block times. It can't compete in terms of throughput with centralized stablecoins. It's not as scalable as things such as the lightning network. And people have now pivoted to less of a spending currency but more of a store of value to just kind of compete with Bitcoin. I think that that's incredibly short sighted and I think this soundness bug that has been revealed over the weekend proves that this is a short sighted approach. And that store value I think needs to be very directly correlated with auditability and zcash currently can't provide that. So I guess it's been weird kind of leaving the ecosystem and not being. I haven't been really involved in Zcash over the last four or five years or maybe three or four years and kind of seeing people pivot to that in the last year or so. It's definitely a new narrative that has just caught on, I think for marketing purposes. But I hope people kind of understand the trade offs that they're making. And again, people might be fine with those trade offs, but I think they should just be more clearly articulated.

[B]

Giannis, thank you so much. You're my favorite privacy influencer. If you are interested in what Yannis is working on on, he's been teasing it on his Twitter. Go check that out, Giannis. We might invite you back on to talk more privacy in the future.

[C]

Awesome. Thanks guys. Appreciate it.

[B]

Thank you. All right, we are gonna keep on rolling. We're gonna talk Google, we're gonna talk crypto Winter, we may talk ercop. Before that, a word from our sponsor, Ligo Luke 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, adjusting power settings to live hash rate and energy markets. ERCOT backtests show over 10% more profitability versus binary mining. Commander Pro is 100 bucks per megawatt or 25 basis point pool fee adder, which is roughly half the price of competitors with a 60 day free trial. Get started at Luxor Tech/Commander. Will, we're going to talk Google. Explain this to me.

[A]

Yeah, talk about Google. Just with the Luxor ad read there, that kind of fits nicely into the last topic we'll get on, which is the one I think I'm most excited for talking about 4cp for any of our data center friends out there. This.

[B]

Yeah, it takes a special person to be excited about 4cp. And if you're excited about it and you're watching the show, we found our audience.

[A]

You know those, those clippies out there are important too. If you can pull up one of these articles, you've got the Bloomberg one. Here is great. Yeah. So yesterday we had this announcement. I think Colin and you talked about it. We wrote up the article and doing pretty well because a lot of people are clicking over interested in why Google is issuing $80 billion worth of equity in order to fund its AI program. And I've seen a bunch of different takes across the timeline, whether that be Twitter or my email inbox with Shrutakeri. And then just a lot of people in DMs talking about this because there's tons of implications, depending on how you read this, for what's actually happening with the AI capex boom when it comes to the large guys out there. So for Google, they're obviously one of the largest companies on earth and they're competing against, I would say Meta, Amazon and Oracle in terms of getting their tech spread, build out, AI focused and first and then kind of gobbling up all the users. Google has a few distinct advantages, one of them being that they're building a lot of their custom in house TPU stuff, which is meaning they don't necessarily have to lean on Nvidia as much as some of the other guys have to. They also obviously have the Google empire, whether that be all the data from everyone's email inbox to the search information or whatnot. And then lastly, I'd say like the advertisement model. And there's a huge argument that AI data and AI platforms will be mostly useful for matchmaking on advertisements, which really is the foundation of the Internet. The reason the Internet is free is because we have this ability to have advertisements everywhere and if AI just makes matching better, then we get cheaper, better services. Google's in the middle of that and they can soak up a lot of the value. So those are some of the takes out there on like why Google is important in the space for the AI industry.

[B]

This yeah, Jeff park had a post and in classic Jeff park fashion eludes me a bit because I don't spend. I unfortunately spent the past 10 years looking at crypto and not tradfi.

[A]

So I'll get to this point. It's actually very interesting how Jeff is kind of pulling this in. I sent him a text this morning, was like love that you're thinking about this because I actually missed this. Like they issued a preferred equity just like stretch. So I'll get to that in a second. I think from like the takes yesterday that we had, the ones that were kind of like most interesting to me was around like why are they doing this with an equity versus a debt? And then what does that mean for the capex boom? Are they perhaps putting this equity out to soak up all the equity value before SpaceX, OpenAI and Anthropic go public. That could be sort of like a, a financial markets angle to compete against those IPOs and soak up liquidity in the market? Is it because there's just a huge boom that Google knows is coming because they have all proprietary information and no one else knows? Is it a debt based argument where it just at the size it makes more sense to issue equity versus take on expensive debt and hurt your profile going forward. There's a lot of questions there. I think at the very basis you can look at and say $80 billion, Google's putting that much out for through an ATM. We're only going higher in terms of spend on things. Now let's go to the Jeff park piece and kind of tie it in because I did kind of recap some of the things we talked about yesterday, but I'm obviously excited about it and a lot of people are like, this is in so many DM conversations I'm having right now. This was kind of like big, big news for the CapEx cycle. This Jeff park piece basically touches on why did Google, in this $80 billion package, which was upsized to 84.75 billion, include a preferred equity? Preferred equity, again, just means it's not really preferred. It's actually as he says here, like the armpit of American securities basically means you're putting a security out that is not a debt instrument and it's not a senior instrument and it's, it's not paid out in the worst case scenario. It's just like you're kind of screwed. And it trades normally at some sort of par value. A lot of times in crypto we see the $100. I think this one's actually going to trade lower than that and then you get an interest on top of it, a yield, if you will. Looking around, it looks like it's like around 6% yield for this. And they're issuing about $15 billion of this preferred equity as a part of the package of the 84 billion. Jeff's whole point is that crypto brought this preferred equity out of what was the armpit of American securities and into the limelight as something that's more valuable long term. And he thinks this is another thesis for why crypto in financial markets is important and interesting because it has been able to take certain parts of the corporate stack for creating capital and rethinking them, reimagining them. We saw Fong Li, CEO of MicroStrategy, highlighting that this morning, talking about as well that Google's doing this. MSTR has been doing this for a while with Stretch and a few of their other ones. This is the way forward for a lot of these companies that they want to raise money for whatever their capital intensive businesses are. But people don't want the up and down of a stock. They just want yield. They want high accretive yield for their portfolio that can compound over time. And I do think like just point's really interesting. I do worry about the microstrategy stuff long term even though I think it's fine in the present. The Google stuff seems to be based more in reality, right where it's like we have GPUs backing all this long term debt.

[B]

My one takeaway from Jeff was that his angle is that crypto natives may have some advantage here being able to navigate the rapidly changing landscape in a world where the past 60, 80 plus years have we've trained ourselves to expect like you know, risk free, you know, value investing and it's it. The game has changed now and the the crypto natives can pivot to these unconventional structures. So bullish. If you're in crypto, maybe the value won't be captured on chain quite as much.

[A]

I think it's an interesting point, right? Like if you're in crypto you have to wrap your mind around so many weird financial primitives as they like to call them, 95% of them are Ponzi schemes. But that even like sharpens your ability to kind of look at anything else because most of financial markets do involve some sort of scamming or some sort of preferred. Right. Like you have debt obligations that are stacked against each other, you have different payout methods. Where does the yield actually come from in these situations is a question. Right? These preferred equities, they're not debt and they're not equity in the sense that you get to rise the price valuation of the stock based on how the company is doing. These do convert over time, which is notable. They convert into either stock A or stock C tranches for Google, which could obviously be valuable over time. But I think Jeff's point is you just become a little bit smarter long term and then maybe the secondary point is that crypto with MSTR and ASST has moved the needle on how corporations perhaps think about creating debt. I think you could argue with that one for a little bit because there's a long term history of companies using various financial vehicles to raise capital. But I'll take the point for today.

[B]

Well, we're going to keep talking about crypto with a little bit of reflection on Joe Weisenthal's post about why this is quote the worst crypto winter ever. And we're going to talk about ERCOT and 4CP. But before that, a word from our sponsor Lygos. Hedge funds are getting liquidated. Is your BTC safe? It's not just bitcoin Price drying up. Big whales, hedge funds and lending desks are going under after the notorious 10, 10 and 25 liquidations. Counterparty risk is rampant. So it's more important than ever to understand who actually controls your Bitcoin. Don't be the next FTX or Celsius victim. If you are working with another loan provider, do yourself a favor before it's too late to check out Lygos Finance, Blockspace's preferred non custodial Bitcoin lender which uses native Bitcoin smart contracts to protect your stack. With Lygos I got a question.

[A]

I mean you can finish the ad read but I got a question.

[B]

Yeah, with Lygos you always know where your Bitcoin is. Hold your keys, no wrapping, no bridging, no rehypothecation. Get competitive rates as low as 10% APR. Go to Lygos Finance to learn more. Will question.

[A]

Well question and some info. So obviously Lygos is a sponsor and they do some paid segments.

[B]

See the logos?

[A]

Yeah, you see the logos but their rates are down to 8.5% per some conversations I've had with them recently which is interesting. That's not every rate or every loan

[B]

duration broken into the single digits, baby.

[A]

Well, I think I just want to bring up really quick while we have a moment. I don't think we have any more guests on today so we can chat for a second. It's interesting to see the capital stack for some of these Bitcoin backed lending products that popped up the last two to three years mature and they're getting stronger and better and there's more capital that's willing to bet against it and give money into this at the same time. Bitcoin is going down in price. Right. So I wonder how some of these lending companies that are behind the scene are kind of thinking about these things. And then the other question I'll just kind of toss to you is how do you think about taking Bitcoin back loan out at the moment? Given that Bitcoin's cascading downwards, I would assume you'd want to take a loan as near the bottom as possible because that really protects you long term against any liquidation point in the future. And you don't have to put as much capital in in the future.

[B]

Yeah, look, it's easy to say, hard to do. Take your loan out, do not take your loan out at the top. A lot of folks are sweating right now who may have taken loans out near the picot top of 120 some odd k but you know, you're kind of asking people to make trading decisions. My general feel is a loan should not represent your entire bitcoin stack because you need to assume a couple scenarios. Bitcoin gets cut in half. We're almost there. You need to consider the reality that bitcoin could draw down 80%. Although that seems like it. You know, I have a hard time believing that'll happen. And you need to consider capital call margin calls. But the thing is, a lot of folks who've been in the game for a long time have to consider the tax obligations. And when you take a loan against your bitcoin that is not quite the same tax obligations fact, it can be a tax advantaged way to take profits. So you got to consider the full cycle of everything. Again, not all our audiences in the United States. I can only speak to that. But yeah, it just intuitively it feels better to take a loan out at 65k than it does at 120k. Just in turn if you're considering your risk. Yeah, but I don't know. This is your decision for you, not me. Bitcoin has seen six digits, which means that it's this incredibly valuable asset. And I think that it would be a shame if bitcoin all if it just stayed ones and zeros. The whole point of the bitcoin narrative is to turn it into things that

[A]

affect your real life, into the USD.

[B]

Well, I didn't say that. Maybe things that USD can buy.

[A]

Okay, well, I dragged that one out because I was interested to talk about it, but we can go to the last story for the day or we have two more.

[C]

Actually.

[B]

Yeah, we don't have to linger on this too much, but this thread from Joe Wiesenthal did resonate with because he wrote back in February in his newsletter 12 Reasons why It's the coldest crypto winter ever. His original list in February was 10 reasons why and he since added two more. Now I'm only selecting a few reasons that he wrote about originally, but the crypto drawdown is happening at a period of rising anxiety about the dollar. To me, this seems that just should go hand in hand because people who are in crypto are probably already skeptical of the dollar. The regulatory environment is as favorable as it gets and so there's not like as much of a catalyst ahead. The DAT companies are hemorrhaging, or rather maybe not buying as much. And then AI, AI, AI. Like all the marginal dollars are going to AI Will. From Joe's piece, is there anything that stood out to you maybe you disagree or strongly agree with a point he makes.

[A]

No, I agree with him. I think that a lot of the things that people were fighting for with crypto happened. So the institutionalization of it. We had blackrock show up to our event in April. That was kind of head turning four or five years ago, but this year was just kind of cool as opposed to being like, oh, my gosh, blackrock is here. You have government right now. During this recording, there's news breaking that Besant, the acting Treasury Secretary for the US Is wanting to continue to move forward with the Bitcoin reserve. And then there's all the other parts about the ecosystem he mentions on that list. Joe does that Crypto Twitter is dead. And it essentially is. The room's pretty quiet at this point. Most people are just kind of bickering over old lawsuits like Swan and Proton and there's a few other things, but

[B]

it's not because we're covering it.

[A]

I know, I know.

[B]

We're locked in here with them.

[A]

Yeah. Like the people who are still here are probably need to move on with better things in their life. Perhaps. But we love the coins and Trump did say that, like, enjoy playing with your coins. So, yeah, I largely agree. I do think that there's some existential questions that will force some sort of community to come back, and what that looks like, I'm not sure. So quantum is the obvious one. And maybe crypto Twitter is dead for three or four years and then the quantum issue becomes bigger and we have an organic uprising again of crypto Twitter as people debate solutions for that. But that seems to be the reason for community. Right, because you're really interested in ideas, you want to talk to other people about it, or there's a conflict and there's not really interesting ideas in crypto right now writ large like hyper liquids there. But that's almost.

[B]

I can't disagree with that. I mean, there was a Wall Street Journal piece on Hyper Liquid just yesterday, lauding its virtues. And I mean, my bag is already packed. I think everyone who's been like, had their eyes open could see this coming for a while. That's certainly a major trend, but at what level is that actually really structurally different than a more permissive Trad5 venue? You've got to wonder. It does really seem to me that you can ascribe many reasons for crypto being down. Joe says number seven, crypto's Epstein adjacent. That's not why crypto's down. That just happens to be another punch in the face. It Just really seems to me that AI sucked all of the money out of the room. Remember, like, crypto's been the hot flashy thing, it's been the promising thing, the thing all the kids get into. And that is no longer the case. Crypto's relied on marginal buyers for these runs. And because the marginal buyers, you know, follow the, the swan song to, to AI for good reason, we are just not seeing those dollars and capital come into crypto and specifically bitcoin. It seems everybody who's been around this a bunch, you know, probably says, oh, now is a good time to buy some bitcoin. When are they going to step up? When are they actually going to start buying that bitcoin? We'll have to see. Remains to be seen. Maybe the groundhog sees his shadow and will have six more months to winter, who knows.

[A]

And one point that Joe had in there was around zcash. Right. That's like one of the only coins that has like kind of something interesting or maybe this is another tweet he had. It's like the vision of peer to peer cash sort of played out with bitcoin a little bit. But zcash is one of those that's like, it is kind of cash esque. There's things with bitcoin you can obviously do to make it more private. But zcash can kind of capture that meme at the very least of peer to peer cash. And so if that's the only thing that is going to long term be a promise that's kept, that can pump hyper liquid with 24,7 markets. That's a thing. And then maybe there's a few other tokens out there that capture the excitement. But yeah, it's AI now and then for us increasingly obviously the data center game and powered land.

[B]

Yeah. Which if you've been in bitcoin mining, this is a fun time to look at data centers. Empowered land. Speaking of power, will we have our last topic of the day? ERCOT's 4CP mechanism. Living on borrowed time is a headline. Explain this.

[A]

So this is a platform that we've used a little bit for, for data aggregation, for block space. And I'll just use it for now. People can't see it quite as well, but that's okay. And it's just kind of looking at some of the different locations where there's like bitcoin mines, things like that. So I'll just pop a few up on here and you can kind of see them really quickly. What you see is that there's A huge concentration of bitcoin mines, AI data centers in this location and then a nice one up, you know, this kind of Appalachia area. And then lastly British Columbia, Texas, Appalachia, Pacific Northwest, which is focus on Texas. I haven't even clicked on all of them, so here's a few more just to add all the Texas ones. So a lot of little chips on there, which is pretty great. So when we look at the Texas area, all this demand on grid is having implications for how the grid structure has been built historically. Historically we've had ERCOT and then a few other quasi government institutions and then the Texas government sort of like set the ground rules recently and I'd say recently in the last three to four years because this is government and large businesses and that's pretty recent for groups like that. There's been a lot of discussion around like how do we fix these large loads, as they're called on grid, that are causing problems in terms of excess demand. There's so much demand from these different players that there's maybe not enough room on the grid for them. And that can have spill down effects into catastrophic scenarios like winter storm Uri in 2021, all the way up to just brownouts rolling during the summer when people want their AC online. So I'll pop up this other article here and just kind of share the top. And this is from RTO Insider. We're really big fans of what they do. We can't share everything because they're kind of like a private publication. So if you want to go read this, go over to them. You get like a 15 day free trial. Shout out to RTO and Tom Kleckner, who's also been on the podcast before. Over the last few months, I'd say a year plus now, ERCOT has been going through the process of changing how they're going to do interconnection additions for large loads and then also the rules for being a large load on the grid. It looks like bitcoin miners in particular could be sort of the losers in this. Nothing's completely fleshed out yet, but there have been some concerns about bitcoin miners, quote, unquote, gaming the grid. We actually had Haley Thompson from Luxor on last week to talk about this, how bitcoin miners often turn off during the most expensive hours during the summer for powering their data centers because they say they want to give the energy back to the grid. In reality, it's an economic question, right? They don't want to spend on energy during Those really hot periods because it's more expensive and you don't make money. So they turn off. This causes some problems for other providers on the grid because they have to pick up those costs during those periods. And so a lot of these could large data centers want to amend the rules and change the rules. So there's a different system than 4cp, probably something called 12cp, which we won't go into on this. The reason I want to bring this one up is not only because we're doing a little more data center coverage, but also just because I think that it has larger implications for how companies that are in bitcoin mining and then also larger AI HPC loads are going to plug into the grid going forward. Should this pass. Not only is there like this batch review process which is pretty big for data centers, not only is there way more solar coming to the energy grid in Texas, believe it's like getting closer to like 50 plus gigawatts at this point. There's also this question around like how we're going to price you during the year and that's going to change. And I think as we have more data centers in Texas and more bitcoin miners becoming AI data centers or edge data centers or full NEO clouds, you're going to see more complexity around this. And I think a lot of the bankers, the financiers are going to need more and better information around this. So I thought it was an interesting piece to bring up. I think the end result has yet to be seen. What this means for Texas probably means the end of 4cp pretty soon here in the beginning of a new rollout and we'll have to do some content coverage around what that means on block space. And then for those who are in bitcoin mining in Texas, you could see a different cost for operating 100 megawatt plus mine on the Texas grid. It could be a little more expensive

[B]

if you're in Texas. Pivot to Oklahoma.

[A]

Yeah, I mean I think the Oklahoma grid too. Right. There's huge data campuses coming there and I'm curious how that's going to work. All the grids are definitely under stress and changing. PJM is probably the one that gets the most national attention. ERCOT seems to be in the best place even though it's going through like a lot of bureaucracy to kind of get to the right spot. I, I would love to learn more about the California grid because that one's historically also been pretty tricky. And then probably do some stuff on the middle belt. I think it's like the miso or something like that would be. Would be interesting, but we'll have to get some Oklahomans on soon.

[B]

Yeah, if, if, if anybody knows any Oklahomans, let me know. That is it for the show today. If you are still listening and you're listening on Coindesk Pause, hit the pause button and go to the Blockspace feed. We're leaving Coindesk very soon, so make sure to get your Blockspace fix. Search Blockspace on whichever podcast platform you're listening on and subscribe there, because the Coindesk feed will be ending soon again. Blockspace Live is brought to you by by CleanSpark. I'm Charlie. I'm Will. And we'll see you tomorrow.