Mike Colyer, CEO of Foundry, began his deep dive into Bitcoin in 2017, ultimately founding Foundry as its first employee in 2019 with a mission to build out the North American mining ecosystem and balance China's hash rate dominance. Foundry now operates a full-stack hash infrastructure platform, with its USA pool capturing nearly one-third of global block production and processing 280 Exahash, while Colyer deeply admires the Bitcoin network's "un-gameable" and self-regulating nature. He foresees Bitcoin mining becoming an integral part of the electrical grid, and Foundry has strategically adapted by spinning off Yuma for decentralized AI and Fortitude for venture mining (including other Proof-of-Work tokens).
In this episode of Digital Gold, Mike Colyer provides an insider's readout on post-halving economics, supply chain arbitrage, and policy vectors steering Bitcoin's next-generation compute grid.
Here are the key discussion points from the episode:
00:00:00 Introduction to Mike Colyer and Foundry
00:01:00 Mike Colyer's Bitcoin Journey and Motivation
00:12:00 Foundry's Genesis and Mission
00:19:00 Foundry's Operations and Services.
00:23:00 Insights on Bitcoin Mining and Network
00:30:00 AI's Impact on Mining and Grid Integration
00:37:00 Energy Costs and Future Outlook for Mining
00:43:00 Foundry's Spin-offs
00:49:00 Industry Maturity and Bitcoin's Security Budget
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JP: [00:00:00] Today our guest is Mike Colyer, CEO of Foundry, whose foundry USA pool now captures nearly one third of global block production and anchors institutional liquidity for digital currency group's ecosystem. Since taking the helm in October of 2019, Colyer has architected a full stack hash infrastructure platform, encompassing pool services, minor management software.
Aftermarket firmware and mining site operations with scaling headcount beyond 150 people. In today's dialogue, he delivers an insider's readout on post having economics, supply chain arbitrage, and policy vectors steering bitcoin's next generation compute grid. Mike, welcome to Digital Gold.
Yeah, jp great to be here.
Jp: So how did you find out about Bitcoin mining? Let's start there.
Mike: Oh, wow. My gosh, it is been about eight years in other industries for most of my career. It was June of 2017, I went down the Bitcoin rabbit hole and, discovered, I'd [00:01:00] say, I guess I rediscovered Bitcoin 'cause I knew Bitcoin had existed, but never really.
I knew much about it and we went on vacation. I read a book and it was talking about the future of mankind and technology. And, I came back from vacation and literally, read an article about Bitcoin and I was like, wow, this is still here. At the time it was trading at like, I don't know, $2,800 or $3,000 or something like that.
And I was just like, I can't believe this is what they were talking about in the book. It's this exists today, right? and I'm like, I gotta learn more. So, I went down the bitcoin rabbit hole, and I read the white paper, didn't understand it. So, I started googling a whole bunch of things, trying to learn.
And, one thing led to another. I live in Rochester, New York, which is Western New York. I found a blockchain meetup group in Buffalo and for an entire year, every Tuesday I would drive to Buffalo for an 8:00 AM meeting with a bunch of just random people who are interested in the [00:02:00] ecosystem.
And I was kind of the old person in the room. And I'd take a notepad and I would listen to everything they're saying, and I'd go home and I'd Google it all. So , one of those sessions we were talking about mining so then I went down the mining rabbit hole and learned all about mining, and it became well, you know how it is with this industry like once you start, it's hard to stop.
And, I've shared the story before, but my wife had at that point in time. been working for like 20 years and she literally said, hey, just take the summer off and like, let's just enjoy the summer. And I literally sat at my computer for like 15 hours a day trying to find out anything and everything I could about this industry.
And at the time it was like the ICO craze and there were all kinds, you know was blowing up so I spent a little time trading like I was like day trading, you know? Which is not, it's like, it's not who I am. I could, I'm like this, I hate this. I wanna build something, like, I wanna contribute. I really had this like, deep desire to wanna [00:03:00] contribute to, this ecosystem, and it's been eight years and I can't imagine doing anything else.
Jp: So, I would say a few things on that. The first one is if you haven't been to a meetup, you need to go to one. They're a great way to meet your community. That's how I also learned, Mike. I was in high school in 2013 and 14 back then, and just going to meetups every single Thursday night. At a bar wasn't even able to drink yet.
Just sneaking into the meetup and for a year just talking to people, learning from all these different types of people, from, people that are into the technology, people that are into the economics, people that are into the software side of things. So, if you're a listener and you haven't been to a local meetup, do it. It'll change your life forever and help you understand Bitcoin farther.
Mike: A JPD, like this group of people and I'm still friends, with many of 'em. Just some of the smartest people I've ever run into. They were on the bleeding edge and they came from all walks of life and it made it so interesting. 'cause some people were like hardcore technologists.
Other people were like [00:04:00] investors. People were like. Just speculators like they were just and you get this mix of people in the room and it, it really led to some amazing conversations. And it's been fun. It's part of my story, I was like, I would say I was, like when I was in college.
Right. You were talking about you discovered Bitcoin when you were in high school. So, when I was in college, the internet came out. Like the first browser showed up in college? Not when I was in high school. Literally when I'm in, college. And, when I distinctly remember the first time I used like mosaic, browser, and it was just one of these of like, wow, this changes everything.
As I forget, I was 19 or 20 or something like that. It just fundamentally changed the way I started thinking about the world of what the possibilities were. And I was too chicken to move to Silicon Valley. You had to move to Silicon Valley to be, part of that internet revolution really at the time.
And I didn't wanna move to California. [00:05:00] So, I went to GE instead. I went through their leadership program and it was great. It was an amazing experience and I met a amazing people and lifelong friends, and it was probably the right thing for me. But, when I learned about the idea of Bitcoin and this decentralization and this idea that anyone anywhere in the world can participate, you don't need permission and you can do it from any place was like instantly drawn to it, and I'm like I'm not gonna miss this technology wave.
Jp: Well, you weren't instantly drawn to it. You were thought about it, and then you said I'm gonna go back and research which most people do that's like normal. I feel like for a lot of
Mike: You're exactly right. It's a journey, right? Like I love when I talk to people about, crypto. And I probably, most of the time I avoid the subject, right, because I just don't want to get into all of it. But sometimes I lean in and I find it amazing how hard it is for somebody to buy.
Like today, buy Bitcoin. It's pretty easy. Back in the day it was really hard. Like you were signing up on [00:06:00] these like, weird exchanges and you're like, I don't know if I wanna put money on it. But. Today, you can just open up Cash app and literally you can buy Bitcoin. It's easier to buy Bitcoin than it is to buy go to Starbucks and buy coffee.
Yet, trying to get somebody to spend $20 to buy $20 worth of Bitcoin is a, I mean, the conversation, it's hilarious because you're like, oh. They're like, oh, I gotta really think about this., I may need to ask permission. This is like a family decision. I think it's $20 worth of Bitcoin. is mind blowing, but the fascinating thing is everybody who's actually made that, like, it's like stepping over the chasm, right? Like once they buy $20 worth of Bitcoin, they start researching it, they start reading about it, they start going down their own personal journey and eventually. I don't know if I've met anybody, who's gone down that journey and not arrived at the conclusion of, I don't own enough Bitcoin, [00:07:00]
Jp: And it's amazing how everyone has the same journey, but I feel like there's that always that blocker like, ah, I talked about it. I saw it, and then I was like, whoa, my eyes opened up 14 hours on the computer. So, let's jump into GE a little bit. What skills leadership training. Did you get from GE that you took to the Bitcoin mining space? 'cause you guys as Foundry, I mean you're one of the largest private mining companies out here providing services to the space in, in a multitude of way, and it's a lot of that's from your leadership.
Mike: Part of it's from my leadership. I think a bigger part is we have an amazing team at Foundry, right? So, we were really
Jp: culture starts with you, Mike.
Mike: So but the culture lives on with the team, right? And it really like, I love coming to work every day, because of the people I work with and there's, everyone is like incredibly passionate about securing the Bitcoin network and that makes it fun. In terms of ge, like I talk about missing the Silicon Valley. Kind of experience. And I went to ge and [00:08:00] quite frankly, it was probably the best thing that could have ever happened to me. So, I worked at GE during the Jack Welch years, so I don't know, your audience probably has to look up who Jack Welch is, but GE at the time was the most profitable, most admired, like it was the company of the nineties, really, the eighties and nineties.
And Jack Welch was like a really innovative leader. So, I came in, we built locomotive. I went to the transportation business. So, we built locomotives and I had to move to Erie, Pennsylvania, right? There's not a lot of people, that want to move to Erie, Pennsylvania. I didn't wanna move there, but I had to, if I wanted to take this job.
, And GE brought in, like every year they'd bring in 50 kids from college into their different divisions. And we were all thrown in and we had to compete against each other. And we were on a six-month rotational program where every six months we changed jobs. And it was very aggressive.You had to work really hard.
Like for me, I came in, I'm like, oh my God, these people [00:09:00] are way smarter than me. I shouldn't be here. They have better credentials, whatever. And, for me it was like, I'm gonna just have to outwork 'em. Like that was my only option, was like, I gotta get here before they get here and I gotta stay late.
And I did, I put in the energy and effort and learned it. Just a tremendous number of skills. , I even carry the GE value card in my wallet to this day. I mean, it was, that was 30 years ago. I still carry it with me cause it was really
Jp: And do some of those values show up in Foundry
Mike: Absolutely. Yeah, absolutely. Like,
Jp: are they? For people who might
Mike: I used to always go back to now you were gonna put me on the spot. I should get a, I should get the card out. I should show you the
Jp: Go for it. Go for it.
Mike: like, who carries a wallet anymore? Right.
Jp: It's a big crypto wall
Mike: Even have pictures of my kids when they were little in my wallet. But, you know, like there's the GE card, right? You probably look it up online. But the four, like E's were, like you gotta come to work with energy, personal energy 'cause you gotta be able to deal [00:10:00] with the pace of change of what's happening in the world. And then you have to be able to energize others, right?
So if you want to be a leader, you have to be able to get people. Excited about what you're trying to go accomplish and create this atmosphere that's invigorating. You gotta have edge where you've gotta be able to make the tough calls, make the tough decisions, and then you have to execute. At the end of the day, it's all about execution.
And like those four Es kinds of always stuck with me. And I don't use those four Es at Foundry, but we’ve. Kind of let that like bleed into kind of who we are. It is who I am. Like I found the company that matched who I was just naturally. And that, I guess that's why GE was, it resonated.
So met some amazing people, did some incredible things. It was a lot of fun. And from a Bitcoin mining perspective, and it's different today than what it was eight years ago, like. There weren't a lot of, I would call like people with a lot of professional experience coming into the Bitcoin mining world.
[00:11:00] Right. It was a lot of speculators, it was a younger crowd speculating, just like the gold rush or the wildcatters in West Texas. Like, it's like, oh there's gold there in them hills. I'm gonna run out there and start digging. Right? And that's what Bitcoin mining is or was. It was like, ah, I found cheap energy. Ah, run, like how do we set up a mining facility?
Jp: No permits, nothing.
Mike: nothing like just, ah, we'll be fine. We'll be fine. It's changed like today, now there's, you know, 20 plus publicly traded mining companies. They're worth literally billions of dollars. And we're bringing it like just a lot of like amazing people are coming into the industry, which is fantastic. It's wonderful.
Jp: No, and I love that. I guess, and let's talk through Foundry. So, you joined them and then what pivotal milestones occurred and how did you, I guess what did you come into, the foundry you came into, and then what was the foundry you are at today?
Mike: Well, the foundry didn't really exist, right? So, I'm employee number [00:12:00] one. So as the story goes, I, decided if I was gonna, I wanted to go all in on the space, I talked to my wife and she's like, go for it. Which was super important for me to have that kind of support 'cause I was, I literally was pivoting my 20 plus year career to go pursue this weird thing called Bitcoin and Bitcoin mining. Like, what is that? And so, I worked with a small company here locally 'cause I really thought Western New York should be like the mining capital of the world we have.
A colder climate, right? We have tons of cheap, electric hydropower, really the Buffalo Niagara region. And to this day, I still am convinced it should be the mining capital of the world. Not West Texas, but here, like this is a very stable environment. Never did I imagine that New York state would do everything they possibly can to.
Kill an industry, which still doesn't make any sense to me but anyways, [00:13:00] I digress. So I'm in an organization called YPO, young Presidents Organization if you're running a company, it can be very lonely as the CEO of a business. So, I think it's really important to build a network of people that are.
In a similar situation that you can trust and you can share, and there's organizations out there that, kind of promote that. So YPO is one of 'em. EO is another one. Like I highly recommend people joining eo that's for like smaller businesses kind of getting off the ground so I reached out to the YPO network and I'm like, who else is crazy enough to be in Bitcoin mining and found a few people? Turns out, like the people that started Core, and today, like I'd argue almost all, not, maybe not all, but the majority of the leaders of Bitcoin mining companies are actually YPO members, which is fascinating to me.
Jp: It's an interesting stat. I didn't know that.
Mike: And then I got a phone call that said there was a company. Was interested in getting into Bitcoin mining, and I was at Core and things were going really well. We were [00:14:00] growing that business. They had the big, they really wanted to go public at some point. And then I was like, yeah, I'm not that interested. But then they said it was DCG and at the time.
I was like, wow, DCG wants to get into Bitcoin mining like that really changes the game. So I flew down to New York, met with Barry. We hit it off and Barry was basically like, here's a white sheet of paper. Figure out what we can do to help build the mining ecosystem in North America.
So he was seeing large inflows of capital from institutional investors into Bitcoin. China really dominated the Bitcoin mining ecosystem, right? They made the machines. They had most of the hash rate, they had the pools. So there was this worry that this would become a Chinese dominated token or people wouldn't invest in Bitcoin because it was run by the Chinese.
And Barry's like, look it, we have to get hash rate into North America. We have to balance this. And I wanna [00:15:00] figure out how we can help. Gold leverage the DCG balance sheet. It's brand, it's network, it's connections. Here's a white sheet of paper. Tell me what we can do. And, he said, we're gonna call the company Foundry. So that was, I was like, all right. That's the beginning of it.
Jp: you have the name you have the white sheet of paper. What's on the paper? What did you put? What? What? How does this, do you still have the original paper today? You wanna pull it outta your wallet?
Mike: No, it is still blank. No. So we spent a couple months like brainstorming what to do and for me, I was like, look at the North American miners have built out the ecosystem, like, sorry, the infrastructure, this is October of 2019, so there were. It was bear market and it's a bear market. We didn't really experience the same bear market this time around. I think mostly because the public miners were able to like print money from their ATMs but back then, and, well, you remember you were around like October of 2019. We weren't sure we were gonna, anyone was gonna make it like, it was brutal. It was ugly.[00:16:00]
Jp: long bear market. I remember that.
Mike: And the having was right around the corner and it was just like this is not gonna end well. So, everyone was cash poor, but they had Rackspace. So, we built an equipment financing business. I said, hey, we could use the equipment as collateral. Nobody had done it yet and Barry, to his credit, he was like, I love that idea. Let's go all in on that. And then COVID hit and again to Barry's credit, he said, Hey, Mike, if you're gonna do equipment financing, you probably should buy some machines. And I'm like, oh, that, yeah, yeah, good idea. I said, well, how many you want me to buy?
And he goes, I'd buy all you can buy. And I'm like. Okay. That's different than what I'm used to in the mining space where no one has any money. So we bought, we started placing orders and what we didn't know was there was a chip shortage at that point in time. And this was, we were placing orders for the new M 30 s and the new S nineteens that weren't gonna ship until post.
[00:17:00] Having so COVID, like market collapses and Bitcoin's back to like 3,500 bucks or something, and we're wiring tens of millions of dollars to China to jump to the front of the line to get machines. And we had equipment financing and I went, I called everybody saying I got machines, I got equipment financing.
And the majority of people told me your rates are too high. Mining economics stink. These are new machines and having is right around the corner. No thank you. What was tough was Barry said, the only thing I don't wanna be was a Bitcoin miner. remember I flew back down to New York, I sat in his office and I was like, hey, this, actually I didn't fly back down to New York because it was COVID, so I had to, we got on, teams call and he said, I'm like, no one took me up on my offer and I got a lot of machines coming. And he goes, well, I guess we'll be a Bitcoin miner. so that was the beginning of it. so, we were the biggest Bitcoin miner in 2021. We didn't want to be
Jp: Are you, were bigger than [00:18:00] Genesis at that time.
Mike: bigger than Genesis.
Jp: Genesis Digital, the, with Marco?
Mike: sorry. Were we bigger than them? Yeah, I think we were, I think we were definitely the biggest one in North America for sure. I don't, we weren't the biggest globally 'cause there were still really big Chinese miners at the time, even Bitmain.
Jp: But to your point, you had a lot of hash power. You're packing it. You guys are expanding.
Mike: We put it everywhere I called everyone back up. They had Rackspace and we plugged in machines everywhere. And then of course. Economics flipped in the back half of 2020. Everybody wanted to become a Bitcoin miner. We did not purposefully, we did not wanna be the biggest, we wanted to build the ecosystem.
And that was, that's like the heart I think of Foundry, is we continue to want to build out the ecosystem, make the ecosystem stronger. And Barry was very much like, think in terms of decades. He didn't care what happened month to month, quarter to quarter. He is like, [00:19:00] we're, this is gonna be here for a long time.
We had this vision that long-term energy companies and nation states would be the biggest miners and they needed trusted partners. So we wanted to be that trusted partner, which is why we launched, the pool. 'cause it was like we; the only option was really Chinese pools. So we launched the foundry, USA pool and then we, strategically sold the machines back into the miners so that they could get off the ground and get going and go public and raise more money.
And like we wanted to fuel that machine, for it to get going. So yeah it's been a wild ride, like we never anticipated being the biggest pool in the world. But here we are So now we're like, what else can we do to help the miners? Right? So we've leaned very heavily into enterprise software solutions.
, Running like people don't, I'm not sure everyone really understands the technical lift to run a pool this [00:20:00] size. It's massive. I mean, we're literally doing something that nobody else in the world has ever done, ever When we
Jp: that to me. 'cause I think most people have no idea.
Mike: when we launched the pool, there was a hundred XA hash in the entire ecosystem today. Well, so when we started growing, the network grew. When we became the biggest pool in the world, we captured about 30% of the market. , We hit about 60 XA hash at that point in time At 60 XA hash, nobody had ever put 60 XA hash through the pool technology. So stratum servers, your relay networks, your infrastructure, right. Today we run 280 XA hash through our infrastructure.
Jp: Wow.
Mike: And that's, you know, it's 280 billion, billion guesses a second, is what is basically being pumped through our [00:21:00] pipes. So it's a lot, it's a lot to take care of. It's a lot to maintain. There's a lot of, you know, responsibility there. And it's a key part of making the Bitcoin network work, right. So anyways, we're leaning into the expertise. We built around that from a software development perspective to provide minor management software that can scale that and we really focused on institutional customers. We're now leaning into firmware 'cause we feel like there needs to be a really strong, stable aftermarket firmware product. And then the other part of our business was site services where we said, Hey, these miners, as they get bigger, they're gonna wanna outsource more of their back office. They're not gonna wanna have to deal with all the headaches of running facilities. And we said, hey we think we can build that capability and do it better and do it at scale. And so we've been building that business for the last couple years. So, it's been fun
Jp: I love it. I mean, you've really highlighted some of the core businesses of [00:22:00] Foundry and I think one of the things I want to talk more about Mike is the pool, because it is such a core. Aspect of every miner's revenue stream. And you guys are someone who, who've done it differently to your point by building it from the ground up. Walk me through , that development process. , What type of hurdles came up and what Any memorable moments you want to share that might be some behind the scenes that don't usually come out
Mike: Memorable moments.
Jp: Like breaking a hundred hash. Do you have a party?
Mike: I remember the first block we mind, November 3rd, 2020. I. I think we were like three days in. At that point in time, I think we had like 1%, we were 1% of the whole network ourselves as a minor. Right. We were a pretty big minor, relatively speaking at that time, and we threw all of it at trying to get the pool off the ground. And I wanna say we went three days without mining a block. At that point in time, and those three days, [00:23:00] you're like, does the tech work? Does it not work? How much can we burn? Right? Like, how much money can you burn? That's a lot. We were burning 1% of alla hash every day for three straight days. And , I remember mining the first block and it was like, holy shit, we did it. It worked like we can mine a block. That's exciting. And then the variability is just, and that's the part that most miners really do not understand or comprehend the variability around many blocks and it, which is also what makes the Bitcoin network so special. Since we've launched the pool, like I have such a deeper. Understanding and admiration for the Bitcoin White paper. Like I really, it literally will go down as I think the greatest invention of our lifetime. And it'll probably take another 20 years for us to really appreciate what Satoshi was able to put together.
Like it really [00:24:00] is incredible. In terms of the, just even at the you like, people talk about like, oh, it's hard money and there's a 21 million cap. And, but the way mining works is just fascinating. And this idea of proof of work and connecting it to like reality, I think, is so cool.
The fact that it's driven purely by the software and it self regulates the fact that it can't be gamed. Like, you can't game it. Like there's no, you can't get an edge, which is mind blowing to me anytime that like the new coming in or the new big monies coming in, like BlackRock coming in.
And I listen to these guys talk about the Bitcoin network and I'm like, they don't realize yet that they can't game the system. Like they still think that somehow, some way they're gonna get an edge. And it's like, no, everyone, it's a fair playing field. And they're not used to that. [00:25:00] They're not
Jp: where's my edge? I paid for one.
Mike: Exactly like, I'm big enough, I'm sure. No, I'm look at, I mine 30% of all the blocks every day. There's no edge and it's really hard to live with, but it's true and it's amazing. Or the fact that it self regulates like the difficulty adjustment I think is just this magical, it's so powerful.
You talk about any other commodity out there. Like oil. I mean, literally you have a bunch of guys sitting around a table deciding what the price of oil's gonna be and how much they're gonna pump out of the ground, and they've gotta come to some agreement. Now in the Bitcoin network, every 2016 blocks, the software decides whether it's gonna get easier or harder based on how many people are participating.
Jp: Yeah, based on everyone's agreement on how many people are running their power bills.
Mike: it's a wild concept. So, yeah, so I definitely think the journey, the journey's always more, more important than the actual [00:26:00] destination, right? So building the team, working with everybody in terms of like their passion for securing the network is really cool.
Like we take it very seriously. Like it's a very important. We play a very important role in the ecosystem, and we try to continue to help our customers make the most money they can. , . How do we make their lives easier, right? And I've been lucky and I like, I, I kind of know most of the people in the space. I always give 'em a hard time because I'm like, you guys, I said, you go to bed every night. You don't worry about whether you mind a block or not, or whether you're gonna get paid in the morning. I am the one who has to like, make sure that we've got enough Bitcoin to pay you guys day in and day out. And I don't think they really appreciate the variability and the probabilistic nature of mining a block 'cause
Jp: I guess so what made you choose the payment strategy you choose and which, what is the strategy for the foundry pool when it comes to, is it pay per share? Can you talk more about that and kind of why you guys chose.
Mike: I think one of the things that our customers appreciate is [00:27:00] kind of the approach we took in terms of being, trusted, transparent, SOC compliant. Like we kind of put in all of the things that we knew enterprise customers, publicly traded companies were gonna need, including, like, look, we had a lot of debate early on. We kyc a ML, everyone into the pool. So it's not open for everybody. You have to pass through our screen and lemme tell you, that goes against everything Bitcoin stands for, right? It goes against all the ethos of Bitcoin. But we just said, hey, if you're in, we didn't think. US traded companies could mine alongside North Koreans and Iranians and, whoever else the US says is not acceptable.
Whether you agree with that or not, it doesn't matter. It's like that's the law. So if you want to tap the capital markets, you've gotta follow the law. So, we chose to put a product in place that helped them do that. And it's worked. Yeah, what was your question?
Jp: , you answered it is like how miners are paid and why you chose the payment
Mike: Oh, so then [00:28:00] the, yeah, sorry. With the FPS it was, that was kind of the standard at the time in the industry, and everyone expected it. We had to, like, the Chinese dominated the market, so we had to match what they were doing for people to. Start to move over and then today we just went through a big exercise, over the last six plus months of really looking at the FPPS payment model and repricing it basically, where we're like, geez, we're literally like we gotta pay the bills. I gotta pay all these engineers. I gotta be able to maintain the infrastructure and the way it was priced, especially post having it just. Didn't make any sense. So we had to go back and reprice it., So that's
Jp: can you dive into that at all of like what you're priced at today now, and maybe what you were before? Because I know for a while you guys had no fees on your
Mike: yeah, like when we had got off the ground, when we started, we had to do the no fee model because Bitmain was basically subsidizing that through amp pool. Right. So, that's the difficult part when you got someone like Bitmain. [00:29:00] Who is just this massive gorilla in the market that makes the machines is the biggest miner, has the biggest pool.
Like they can pull all kinds of levers to make money from the customer base. And so they chose to have the pool be like a lost leader for right. So the first kind of two years we're like, all right, we kind of have to do that. And then we got to a point where we're like, okay, this business model is no longer, it's not sustainable.
Like it literally, we can't do this for you. So, we can either like turn it off and everyone's like, no, turn it off. Oh my God, don't turn it off. And we're like, all right, then we gotta. Everyone's like, okay, you're right. We gotta pay. And that's kind of where we're at. So, which is good. I mean, I, it is a super valuable service to the miners and, I think we do a really good job at it. So.
Jp: I agree with you, I have not been able to use the pool yet. It's never went through the KYC process, but I think that overall, I've heard amazing things from Foundry.
Mike: can't clear the KYC.
Jp: We [00:30:00] could, but it's just, I, don't know. I guess I got caught up in the co-branded Bitmain Pools, I would say for a while. And now I'm like, okay, what's the next move? But it, there's a lot of, software development infrastructure that you know, that you build on top of a pool and it's reporting techniques and it's shares and worker management that it's really hard to move is the reality of it.
Mike: Yeah. I would
Jp: It's not impossible.
Mike: most people are very pleased when they move to
Jp: Well, I'm open to being convinced, so we'll have to talk more about that offline. But Mike, I guess one of the things you mentioned, there's like earlier in the episode there's these big shifts that happen and the first shift for you was your web browser. The second shift is Bitcoin and Bitcoin mining and the pool.
And where I'm going with the third shift is ai. how is AI going to change? Running a mining facility, so not oh HPC, running HPC servers, but using Opti Fleet and your firmware and your site operations business that you guys have at Foundry, where do you see [00:31:00] AI really bringing an insane amount of value to the end customer who's running tens of thousands of servers, which we know is a very, can be very labor intensive, both on the physical side, but also on the management side and the RMA process and the after sales and.
Mike: I was gonna say that where AI's bringing the most value seems to be in the stock price of Bitcoin miners who are in quotes, pivoting. Which different topic than what you're asking but the AI revolution is here, right? And most of my life people have talked about AI machine learning and it was gonna change the world and blah, blah, blah.
And it never did. And it never did. It never did. It never did. And then, like really when Che GBT went live. For people to use like in my mind it will be more significant than the first browser that came out. And it'll be more significant than the first like PC that was ever like built, [00:32:00] like the speed at which the change is coming at us is gonna be breathtaking. And it's hard to even imagine the full impact of AI on everything we do. And I'm a, I think I'm just an optimist where I really fundamentally believe that like the human species, we will figure out how to use this for the better. There'll be plenty of bad that comes with it, like any technology but, net it will be way better for everybody and it's exciting. So will it impact the mining space? A hundred percent. Right. and it will impact the mining space. I think, in the first phase will be like, how do you run the facilities more efficiently? How do you tune the chips more efficiently to the environment that you're in?
Like, how do you integrate into the electrical grid in a more sophisticated way? Like, that's all of what's ahead of us. And look at the one thing that's [00:33:00] very true about Bitcoin, about the Bitcoin algorithm is that it's, it's a drive to the lowest cost.It's a continuous grind to the lowest cost.
And if you are not on that path of trying to figure out how to get to the lowest cost, you're gonna get left behind. Whether it's new machines, whether it's, lower electricity prices, whether it's optimizing your operations, like it's a constant grind to get more efficient there's no like stopping it.
So AI will, I think, will be a really important component in, like helping us figure out how to make that whole piece more efficient. And I like integrating with electrical grid, I think is a really, is probably one of the biggest, next frontiers for us. Like, I've got a fundamental belief that Bitcoin mining. We're gonna leave the kind of the spec we've left, actually the speculative phase of Bitcoin mining. It's becoming [00:34:00] very institutionalized. I think it's gonna become part of, it's actually gonna become part of the electrical grid and Bitcoin miners will be treated more like a utility where the utilities recognize this large.
Base load, that's an interruptible or intermittent ba load that they can fine tune. and it's happening, like we're seeing it, we're seeing it on a grand scale in like West Texas right now. Right? Like, I literally can watch, I'm like, oh, must be hot in West Texas because the hash rate went boop.
Jp: How big of a drop is that? I mean, is that like 50 XA hash, a hundred XA hash? Now See it on
Mike: Yeah, I was just looking. Yeah, I mean, it can drop 80 to a hundred XA hash.
Jp: and that's in 10 minutes now? Five minutes still, or is it like over an hour? Because I mean, people don't understand. How many megawatts that is. So try to put that into perspective. Maybe for the normal viewer.
Mike: do the math. You put, how many megawatts is
Jp: I don't know. I mean, that could be [00:35:00] 3000 megawatts maybe, depending on your machines.
A thousand to 3000, So is that too much power?
Mike: Yeah, it's probably close to a gigawatt worth of power, right?
Jp: I mean, because most people aren't running hydros, most people are running s nineteens.
Mike: yeah. So, but yes, I mean, literally there's close to a gigawatt worth of power that shuts off in West Texas to balance the Texas grid. It's wild like the amount of batteries that it would require to do the same thing. They don't even exist, right?
Jp: , They don't exist, but they're also not as good because they can't do as like, as long as ramped down for or ramp up. 'cause they have a limited amount of duration. There are also tons of frequency control. You can do that batteries can do as well, but there, they only have one revenue stream.
And that's what I talked a lot about on my other episode with Lucas was like , the multiple revenue streams that Bitcoin miners have from energy and Bitcoin. If you're a battery and you have low energy prices and you don't have volatility, you know you're not making money. Do utilities in New York, are [00:36:00] they knocking on your door saying, Mike, we see the future Bitcoin miners are resources and what's gonna take 'em to get that? Get there?
Mike: You said New York, it's not happening in New York. Right. New York will be the last, well maybe California, New York and California will race to see who's the last one to adopt new technology. I will say gosh, last summer I was at the Bitcoin Park in Nashville, which is just an amazing organization, amazing spot.
And we met with the CEO of TVA and the CEO of TVA one year ago spent the first 15 minutes telling me and some other CEOs of mining companies how important bitcoin mining is to the TVA grid. As this stabilizer, as this enabler, they run new transmission lines. They see how they could drop Bitcoin mining at the end of the transmission lines to [00:37:00] monetize that deployment until the factories come in and somebody else wants to use that power and you can then move the Bitcoin mining to like the next development.
And it was one of those moments, jp, where I'm like, oh my God, we've been preaching this for eight years. Now they're starting to talk back. Now, they're preaching it to us like we're they, we're getting there. Right. And look at utilities are the slowest, changing organizations on the planet.
So it'll probably be another five years. But it's happening. And every case study we have, it just continues to drive home. The point that this is super important and looking at some point, I think I. Bitcoin mining will penetrate the electrical grid to the point where you can't shut down Bitcoin mining.
And I think that's, or the grid will collapse, but we need it. Like they gotta work together. Right. Like, and I think that'll usher in kind of a whole new world.
Jp: To your point, we're always searching for the lowest cost power. And so do [00:38:00] what happens if these miners at higher cost energy sites start to have to turn off? Do the utilities have to rethink their energy rates because. It is such a large impact or has become such a large impact, or do you, do we think that it'll just be a smaller kind of turning off and over time or the upgrade cycle will always continue and 4 cent energy with Bitcoin price going through the roof will always be adequate to mine.
Or do you truly believe, Mike, that four and a half cent, 5 cent energy will at some point be too expensive in the near future to run a profitable mine?
Mike: So I think we're a long way away from kind of that next step down in energy price. Because we drop especially in the United States, well really globally, we've completely dropped the ball in terms of energy production. , And I think we're gonna see a resurgence of new energy production coming online.
And I think some of that will be fueled by Bitcoin miners wanting to buy more energy. Some of it will be the ai, [00:39:00] some of it'll be just manufacturing coming back to the us like. Or just new technology like, you know, nuclear power and such. So I think we need a whole lot of additional generation before electricity pricing can come back, can come down, right?
,But it will and if you're not at the forefront of that, when it happens, you'll get left behind. So I think. Four between three and a half and four and a half cent power is kind of what you're gonna get in the United States. And I think anybody that says otherwise, as you've been around a long time, there's a catch.
Right. It sounds too good to be true. It is. It literally is too good to be true. 'cause there's some catch like sure you can get two and a half cent power, but you have to curtail every 20 minutes.
Jp: It’s your machines won't last a year.
Mike: Your machines won't like run the numbers. That's okay. But the problem is every time you curtail your, you lose, you know, 1% of [00:40:00] your machines or something.
And
Jp: , And ta talking about like curtailments, and reliability of systems. Are you guys running hydro machines yet? Have you, mo you've moved to immersion. I mean, let's talk through that iteration and do you still see air cooling being around? Do you think, it'll fall off? How are you viewing the landscape knowing that you have a very deep insight into everyone using all this hash rate?
Mike: Yeah, so, we've personally, we've experimented with a lot of different. Parts of it, like trying to figure out what's gonna be the right solution. The bigger miners, I think, are way more advanced than we are in terms of the stuff we're doing around that. So it's, you know I look to whether it's Clean Spark or Riot or, , like how they're thinking about it, how they're deploying.
I think naturally, you know, immersion or direct to chip cooling. It seems like that is where the ultimate solution ends up. It's just way easier, way cleaner. It's simpler. I think it opens up all kinds of new [00:41:00] opportunities for mining. , If you're running a direct to chip operation, you can drop that into neighborhoods and cities and places, and it's not disruptive. As much as we'd like to believe you could, you can't put a 40 foot container of air cooled machines anywhere near where somebody lives. Right. It's just too freaking loud.
Jp: I mean, even the dry wet coolers though, they're still very loud. Like being above those, like it's different type of fans, to your point, it's not facing directly at a house and it's venting upwards, but they're not quite yet.
Mike: and they're not as quiet, I think they're more acceptable. 'cause it's more like, of . Background noise. It's more. It's kind of acceptable. Like there's plenty of noise pollution from building air conditioners and manufacturing plants and all that, and it's just kind of acceptable.
Jp: And I think the high pitch, like minor noise.
Mike: exactly. And it's like, what is that? And so, yeah, I mean, I always think about like you get all these. These charging stations for like Teslas. And for me, I'm like, well why isn't there [00:42:00] like a little mini box right next to every charging station that is mining Bitcoin?
,So when the cars are not charging, you're monetizing that power at that spot. And when the charge, then the car's needed to charge, you're turning off your mining equipment and it's all like an integrated system.
Jp: So Foundry we've talked about everything you guys do, but do you make Rackspace, do you have your own internal development of that? The small box idea that's kind of just, that could be Foundry's business.
Mike: Yeah. So, , , last year, 2024, we spent a lot of time actually thinking about. Kind of how the business was gonna evolve. We had actually climbed to like 300 employees, and we were into a lot of stuff. We were supporting decentralized infrastructure, a lot of different protocols, so it wasn't just Bitcoin.
And we went through a big phase where we kind of split out those teams. So we're doing a lot around decentralized AI tech. We spun that out into a company called Yuma. Which is a DCG portfolio. We took our labs team that was [00:43:00] working on a lot of different protocols and we integrated that with the DCG team.
Then we took our self mining business and we spun that out into a company called Fortitude. And Andrea Childs is the CEO of fortitude. She was number two employee, or I should say the second employee at Foundry. So she's. Worked with Foundry since the very beginning. Been in the mining space for a long time and she stepped over to be the CEO of that and that self mining business fortitude is out there.
They continue to buy machines. They're actually buying sites. They're like leaning into more of that infrastructure side of the house. And then we provide services to them, right? So we try to make their life easier as a minor.
Jp: So Mike, I recently saw you spun off two mining subsidiaries or two subsidiaries from Foundry Digital. Can you talk more about the reasoning for that and the benefits that might come from those spinning out?
Mike: Yeah, so I think there's a couple of aspects of that. One [00:44:00] From a Foundry perspective, it was getting rather difficult to explain everything we were doing.
Anytime we were talking about Foundry, 'cause we were doing so many different aspects and I think part of the idea was we can get a lot more focus and attention by spinning out these companies and, giving the teams a very focused mission. And then, I also think it gives, DCG lots of optionality in terms of what they want to do with the businesses over time and then, , for us, , with Foundry and the team of Foundry, it becomes a very clear mission, very focused mission in terms of continuing to support the North American mining ecosystem , and help miners be more successful.
Jp: So with Yuma and Fortitude, what's the difference between them and why those two companies versus other industries or other things that Foundry is doing?
Mike: So fortitude is the, or was their self mining business. So they're really focused on actually mining, right? So they got equipment, they got plugged in [00:45:00] around the country and they're leaning into buying facilities and that aspect of building out the mining infrastructure. The one interesting thing with fortitude is it's they call it venture mining because It's not all Bitcoin mining. They also mine other proof of work tokens. So you kind of as they're talking to investors and, as they look at the ecosystem that there may be a different token that's a better token to mine. So they'll buy those machines and help support those other networks.
Yuma is really focused on decentralized ai, so it's a very different world where. You kind of got all these big centralized AI players like the hyperscalers, and there's this idea that, and there's technology available that says, can we build AI in a decentralized way so I don't have to live under Mark Zuckerberg's rules or under Elon Musk's rules.
We can do this in a decentralized way, kind of like the way the internet was built and [00:46:00] yuma's all about trying to figure out how to advance That mission in life, so very different on. Supporting the North American Bitcoin miners,
Jp: They're adjunct businesses, but not necessarily directly supporting the North American Bitcoin mining that foundries. Exactly. It's kind of a different purpose. What is your take on different mining of altcoins, knowing that so much capital has gone into the Bitcoin mining via pubco, and maybe those companies aren't mining as profitable as a private miner who didn't have access to public markets? Knowing that there could be saturated with the difficulty and the actual profitability of Bitcoin mining, do you see more people coming into prop mining or other types of altcoin mining, to supplement, you know, the returns of Bitcoin mining used to provide?
Mike: If you think about it just from a kind of a return perspective there's absolutely opportunity in the altcoin space, right? So there are other networks where it may not be as competitive from a mining perspective like Bitcoin. [00:47:00] And if you are paying attention and you're engaged in those markets and you understand how they work there's opportunity there.
For sure. I mean, we've proved it over the last five years that but the, they're smaller markets, you're not gonna get the massive returns that you get if you can scale Bitcoin mining, but You can get better returns on invested capital and just can't deploy as much in those markets.
I mean, when you're talking about foundries buying all these machines, working with all these manufacturers, what are some of the key learnings you have for other miners, private or public when they're working with large manufacturers? Knowing how important time to delivery and getting machines that don't have to be RA immediately. Is to a minor. I think it's one of the most challenging parts of our industry and a lot of times you have to, you have to kind of bet against, we always talk about like zig when everyone else is zagging or zag when everyone else zigs. 'cause you almost have to bet against, kind of the, what everyone's thinking that you should do, right?
So [00:48:00] there's definitely times when it's, I kind of view it like when nobody wants to buy Bitcoin mining equipment, it's probably a good time to buy Bitcoin mining equipment. And when everybody wants to buy Bitcoin mining equipment, it's probably too late to buy Bitcoin mining equipment. And it's true with altcoin world as well.
.So , I think the most important thing is you need to partner with people that you trust who've been there,, who've lived through the cycles, , that understand kind of how the industry works, right? Like jp you've been doing this a long time. I would trust working with you to procure machines or to deploy machines. 'cause you've been there, you've done it, you've learned like we all made the mistakes. But man, when you first get into Bitcoin mining, , you don't really understand what you're getting yourself into and, don't know
Jp: exactly.
Mike: Yeah. Work with trusted partners. Right? So we need more people like you, in the industry. So. And wait, we're getting 'em. It's definitely a very different, I always joke 'cause, there was [00:49:00] always, like, in the early days, there was always like this guy named Kevin. People were like buying machines from this guy named Kevin.
Well, turns out it was like Kevin Zang, he now works at Foundry, but he was like one of the people that folks trusted because he was a good guy. He was an honest guy. But it was always like in the early, like, who's Kevin? Like we gotta find Kevin.
Jp: Find the Kevin. I mean, and , that's a lot of these, like to your point, the picks and shovels the people, the cowboys of the industry.
And then now it came the suits of the industry and is it the princes now of the industry? Where are we going next as we scale mining to the energy space into the nation state? Yes.
Mike: Look, and I think the industry's gonna continue to mature and, , there'll be bigger and bigger dollars deployed. And I think energy companies and utilities and nation states will continue to lean into Bitcoin mining. But what's great about Bitcoin mining is it's still open to anyone and everyone. So if you can get your hands on the machine and you've [00:50:00] got. Inexpensive power, you can be just as profitable as the big guys. And that's really powerful. It kind of keeps everyone, Honest.
JP: , As you mentioned, you can't cheat the system. I think that's one of the biggest explanations that I do at Bitcoin is like for a nation state, for a company, for an individual, it's all the same. We all have to use energy. Yeah.There's no way around it.
Mike: Yeah. I mean, like the thought that like, oh, marathon's gonna take over the Bitcoin network. They're not. Even like, oh, Foundry's too big. We're not like, if we were a bad actor, people would leave. Yeah. , , It's a really incredibly robust system. I would go back to like, we did have a nation state attack, the Bitcoin network when China banned mining.
And I think that was 21, right? Wasn't that the summer of 21? Around there. Yeah. When it was like July of 21 I think. And you know what? The Bitcoin network didn't even blink.
Jp: Didn't even blink. Like yeah, who cares? ? Block times [00:51:00] went to like 12 minutes, that week and for a little
Mike: while, and over time it adjusted. And if you had machines plugged in, you made a bunch of money 'cause hash rate dropped considerably, but the network kept going.
Jp: Boundary did great with the pool. I mean, that was like the, probably an explosion. Oh, it was perfect timing for us.
Mike: Yeah, like that definitely helped. That definitely helped., I think they'll get back into it, by the way, the nation state themselves or just the mining and, no, I mean, I think, I think eventually
Jp: China will open up mining more and more. I mean, they're building so much energy. makes sense for 'em too. It makes perfect sense. Yeah. So where do you see Bitcoin going as we kind of end it here in the next six months? You know, end of year prediction because why not? Bull market usually is, ends in December or January, so, yeah, exactly.
Mike:I think, the price of Bitcoin is tied to the security budget. I dunno if we've ever talked about this before, but it just feels like there's this link. You'll only store so much value on a network with a certain [00:52:00] amount of security and that the security is defined by hash rate. The dollars of that hash rate is the price of the equipment, it's price of the infrastructure, and it's the energy you are consuming to create the Bitcoin that kind of creates the security budget. So the Bitcoin price can't grow without the hash rate, the security growing, and they're kind of linked. And once in a while, they get out of sync. And that becomes a huge opportunity for Bitcoin miners to either make a lot of money or lose a bunch of money. But I think , they're constantly connected. So the last time Bitcoin crossed, the last time Bitcoin peaked, which was like 69,000, I think that the hash rate was like 160 or something like that. It was 160 XA hash, securing a trillion dollars’ worth of assets. So today we have $2 trillion of assets secured. And that was a moment in time, right? [00:53:00] Like, yeah. And then the market came weighed back down because I don't think there was enough security to maintain a trillion dollar asset class.
Today you have $2 trillion stored on the network and the hash rate is like a 930 or something. Like you can start doing the math to figure out like, how much more value can this network secure or how much more value can be secured by this 900 XA hash is one, is the way I think about it. That's just my little piece of, it's almost like
Jp: this XA hash can only be tied to so much can only secure so much network value. And the reality is it's like it'll keep coming back to reality. Yeah. And x hash will shift based on profitability.
Mike: Yeah. So based on that one particular metric, I think there's a lot of room for the price to move. And it'll probably over Bitcoin and then it'll come back down and it'll normalize. But
Jp: do you have a market cap that you think it would hit then if you want to use, versus a price per Bitcoin? [00:54:00] Do you think Bitcoin hits $5 trillion in mark in value in the next year?
Mike: I think there's the potential for, yeah, for definitely to double. Yeah. And it may be just a moment in time. I don't know if it'll stay there, but look at they're continuing to print more money. It's,
Jp: yeah, because Bitcoin and pricing gold is still not at a new all time, like high when it comes to the a hundred thousand dollars price point. We had a few years ago, or a few months ago,
Mike: I used to talk about it as like. Geez, there's only a trillion dollars stored in Bitcoin and there's 12 trillion stored in gold. , And then I'm like, oh my God, today there's $22 trillion stored in gold. And I actually, I haven't looked at it in the last two months, so maybe it's even more than that, but it's like, holy shit, there's a lot of value stored in gold. Bitcoin hasn't kept up. Yeah,
Jp: I mean it's crazy when you see how much, how far their gold is from everything else. Like all the tech companies I was looking at. Bitcoin's the number six asset I think in the world right now in terms of total value. [00:55:00] Yeah. So it's still got a long way to go.Yep. Yep. So it'll be fun. Well, thank you for the time, Mike. It's great as always, and I'll have to see you another conference.
Mike: Absolutely jp thanks for the invite and I'm glad you're doing these podcasts. It's fantastic.
JP: I'm excited to have you on. And remember guys to mine on.