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Visiting Hut 8’s bitcoin mining operations in Medicine Hat with my son Scott

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I just came back from a short trip to Medicine Hat in Alberta, where Hut 8 Mining has its largest Bitcoin mining data center operations. I went on the trip with a Chinese investor, and my son Scott (now 11 years old) decided to join us as well. Scott had never seen Bitcoin mining data centers, despite already giving presentations at school about Bitcoin when he was 7 years old, so it was a great opportunity for him.

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Hut 8 Mining operates Bitfury chips inside so called BlockBoxes and the facility in Medicine Hat is our biggest one. BlockBoxes are basically mobile shipping containers full of chips that can be deployed anywhere, which means that in theory you can move them to areas with cheaper power. In reality we invest heavily in the locations where we build our data centers and we negotiate long term power contracts, so in practice BlockBoxes will never be moved.

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Scott really liked seeing it and he loved the ‘sound of money’, the loud buzzing of all the computers running at full speed. If you go inside a BlockBox it is so loud that you need to wear ear protection. He also liked the fact that inside the BlockBox it’s quite cold, but when you stand outside it the heat gets blown out so it’s much warmer.

In Medicine Hat Hut 8 currently operates 56 BlockBoxes that have a total capacity of over 62 MW (as a comparison, a city like Oakland, California, uses about 10MW) and they can perform 515 PH/s (515 quadrillion calculations per second). Just our operation in Medicine Hat currently mines about 20 Bitcoin per day, so at current prices we create over $200,000 in revenue per day. In North America we also have operations in Drumheller, AB, and we are always looking for other strategic locations to deploy our BlockBoxes.

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Hut 8 is doing extremely well, today the company announced its 2019 Q2 results and they were very good. In Q2 the company mined a record 2816 Bitcoins at an average cost of just $2757 per coin, so based on today’s Bitcoin price of $10,800 the company makes about $8000 per coin for the coins it mines (or about $240,000 in profit per day in Q2). I am very impressed with what Hut 8 achieved so far, despite going through a very deep bear market last year in which many of its competitors went bankrupt.

Hut 8 is outperforming all other publicly listed crypto mining companies, simply by focusing on efficient, low cost operations and by only mining Bitcoin. I believe the stock price is very much undervalued: earnings per share were $0.43 in Q2, with the stock price closing at $2.56 today (basically valuing the company at 1.5 times earnings). Of course I am biased as a founder and as a strong believer in Bitcoin, but I believe Hut 8 is a hidden gem and the best pure play exposure to Bitcoin via a public stock.

Note: As mentioned, I am a co-founder of Hut 8 and am a shareholder, so keep that in mind when you make investment decisions. This is not a recommendation to buy or sell securities.

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Another Satoshi wannabe

Nobody knows who the mysterious creator of Bitcoin is. His pseudonym is Satoshi Nakamoto, but despite people trying to find him for years, nobody ever managed to do so. Some names have resurfaced several times (Nick Szabo for example) and others have suggested that Satoshi was a group of several people working together. I don’t think the real Satoshi will ever surface, he or she or they has/have too much to lose. But some people still try to pretend that they are Satoshi.

One of them is Craig Wright, an Australian who not only managed to fool the BBC and The Economist to believe he was Satoshi (by reusing a signature from an old Bitcoin translation signed by Satoshi Nakamoto), but who is now even suing people (using UK libel laws) who call him a fraud. The thing is that nobody who knows a thing or two about Bitcoin will believe you unless you sign a Genesis address or move some of Satoshi’s coins.

But that does not stop others from giving it a try. Today a most-likely-fake Satoshi Nakamoto started a chain of 3 daily blog posts in which he promises to reveal who he is. In ‘The Reveal’ he writes:

Please join me as I end my anonymity in a three-part daily series “My Reveal” that begins today, Aug. 18 – the 11th anniversary of my registration of the domain name bitcoin.org. In “My Reveal,” I will divulge such previously unknown facts as the origin of my iconic pseudonym, the status of my 980,000 bitcoins, and my real-life identity. I’ll also introduce Tabula Rasa, my clean-slate vision for the future of Bitcoin.

The first part today was not too impressive, there was nothing in there that others could not have written. But it is clear the author put some real effort in putting this together. For that reason it will be interesting to read part 2 and 3 that will come out on Monday and Tuesday. I don’t expect anything new to come to light. The real Satoshi would have never used this method and he would know that nobody would believe him just on writing blog posts.

Maybe it’s just a marketing trick from a new company? For sure these posts will get a ton of attention and millions of views over the next 3 days. Whatever it is, I look forward to reading the next 2 posts. You can read them here: https://satoshinrh.com/

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Refugees and Bitcoin

IMG_9329On the plane this morning I was reading the latest National Geographic. The magazine was one of the first to acknowledge how dangerous the climate crisis is and to point out the consequences for humanity and our planet. The current issue mainly focuses on migration, from our ancestors’ move out of Africa to the current migration caused by climate change. Quite eye opening how many people have fled their home countries already and how many more will do so. Hundreds of millions of people will be forced to flee and try to find a new home over the next 3-4 decades. If you think climate refugees are a problem now already you’ll be in a for a surprise a few years from now.

One thing with migrants is that they can’t bring much with them on their dangerous journey. Most travel by foot and they are only able to bring things they can carry. Most have just a mobile phone, some clothes and maybe a few pictures, but that’s about it. Even carrying jewelry (if they have any to begin with) is dangerous because it might be stolen. Many had to leave everything they owned behind. Don’t make the common mistake to think that these people were all dirt poor: many of the Syrian refugees are university educated and lived at least middle class lives before fleeing their country.

Gold bugs often argue with me that in times of crisis owning gold will save you. Their argument is that if the Internet fails during a global crisis Bitcoin can’t be used anymore. My counter argument is often something like: the global Internet will never fail (it’s even more decentralized than Bitcoin) and even if parts fail they will come back online eventually. Next to that copies of the blockchain are even stored in outer space, so you can always get access to your coins in the future as long as you have your private keys. And if the global Internet would indeed ever fail we will have much bigger problems to worry about, then gold won’t save you either.

But if I look at the pictures of the migrants I realize that gold fanatics are missing an important point. Refugees can’t bring physical gold with them, not only is it too heavy (gold bars are much more heavy than most people think), but they are also at risk of losing it. Bitcoin would be much better: they could store it in the cloud while traveling and only take it out through their mobile phones once they are in a safe location. Nothing to worry about, you can even memorize your passphrase instead of carrying your private keys with you.

I do believe that once climate migration will really start, more people will begin storing their wealth on the blockchain. Especially once first world country citizens get hit by the effects of the climate crisis and become refugees themselves. Gold is nice if you live in one place and can safely store it in a bank vault, but not if you are forced to migrate. Nobody knows what will happen in 20 years from now, but I believe we all underestimate the combined effects of the climate crisis. Bitcoin can at least help you to safely store part of your wealth if sh*t hits the fan. Keep that in mind if you need to make a decision about investing in either gold or Bitcoin once the financial crisis hits.

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Back to regular blogging

Next month it is 15 years ago since I started blogging, only a few weeks before we started Tudou.com on October 15, 2004. Originally I used Radio Userland for my blog, but after a year I bought marc.cn and started posting there. The first post on marc.cn is this one in which I thanked Amy Gu to help set it up for me. She was a journalist at the South China Morning Post at the time, but went on to have an impressive career (she got her Stanford MBA, then among others ran Evernote in China, and is now a managing partner at a VC firm in Silicon Valley).

For years I blogged several times per week, but after moving to Canada blogging became more infrequent, partially because of more family obligations (no more nannies, drivers and ayis) and partially because I started to focus more on social media like Facebook and Twitter. Around 2017 my blogging frequency went down to about 1 post per month. I even stopped tracking my readers: I used to have about 50,000 unique readers on my blog, but I have no idea how many are currently reading it (I just installed Google Analytics again to see how many hits the domain still gets).

While sailing 2 weeks ago I started thinking more deeply about social media, centralization and the importance of owning your own data. Then it dawned on me that moving away from my own blog to social media had actually been the wrong move. Simply because you don’t own your data, and companies like Twitter or Facebook can shut your account down without any repercussions. My Facebook account was hacked once and it was shut down at least once because of impersonators (who managed to convince Facebook that I was impersonating myself). My Twitter account has been semi-blocked for almost 2 years, to the point where I even had to switch to another Twitter handle.

So a week ago I decided to get back to regular blogging. For the past week I put a blog post online every day, just to get back into the habit. I liked it because I enjoy writing and it does not feel like a chore at all. However, I feel that doing it daily might be too much of a time investment. It takes me between 30 minutes and an hour to write and edit a post. My time is valuable, but in theory I can make the time for that if I feel it is worth it (I’ll evaluate that in a few months). Or I can write shorter posts like other people who write daily posts like Fred Wilson (daily posts for 16 years) or Seth Godin (11 years), and only post longer essays every now and then. Not sure yet.

I do have enough topics to write about, that is not a problem. I have at least 7 topics in my head right now that I could write a post about. I am also not sure if I should mainly focus on my personal passions such as Bitcoin and the Climate Crisis, or if I should write more about my private life as well (like I did a lot in the early days of this blog). After being badly hacked early last year I learned my lesson that there can be a serious downside to oversharing. But a personal touch is important as well of course. I guess I need to find the style that I like best, I have not figured it out yet. I plan to start with posts a few times per week, but it could be that I will increase the frequency.

My email subscription still works, so if you want to read my posts regularly feel free to sign up (there is a sign up box on the left of this post). Although RSS is not so popular anymore after Google shut down Google Reader, you can still get all my new posts on other feedreaders such as Feedly.com as well (create a new feed and just input marc.cn in the content field). Thanks for reading!

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Suicide watch

This morning I woke up to the news that Jeffrey Epstein managed to kill himself in his jail cell in Manhattan. In a way it did not surprise me, he had tried to kill himself less than 3 weeks ago as well and in his situation he did not have much to lose anymore. However, what struck me is that he was on suicide watch. How is that possible?

When you are on suicide watch you should not have the possibility to commit suicide because you don’t have the means to do so. At the same time you should be under constant surveillance, so that whatever you try can be stopped on time. Wikipedia describes it as follows:

People under suicide watch are put into an environment where it would be difficult for them to hurt themselves. In many cases, any dangerous items will be removed from the area, such as sharp objects and some furniture, or they may be placed in a special padded cell, which has nothing outcropping from the walls (e.g., a clothes hook or door closing bracket) to provide a place for a ligature to be attached, and with only a drain-grill on the floor. They may be stripped of anything with which they might hurt themselves or use as a noose, including shoelaces, belts, neckties, bras, shoes, socks, suspenders and bed sheets. In extreme cases the inmate may be undressed entirely.

Suicide watch generally involves the subject’s being under continuous or very frequent watch of a guard who will intervene if the subject attempts to harm themselves.

To me something seems not right here. A super high profile offender who already tried to kill himself 18 days ago manages to commit suicide while on suicide watch? Like I said on this blog before, I am not a big believer in conspiracy theories, but even for me this is a bit too much. Maybe other news will come out that will ‘explain’ how this was possible, but let’s just say that this is very convenient for many other high level people (including Donald Trump -who called Epstein a ‘terrific guy’- and Prince Andrew, but also Bill Clinton) that were directly and indirectly implicated in the case against Jeffrey Epstein.

The criminal case will now be dismissed, although civil cases against his estate will still continue. We will likely never know how he made his money  and I wonder if we will ever hear what was on the compact discs with videos and pictures (allegedly labeled with the names of young girls and older men) that were found in his safe.

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Twitter messing around with my new account?

Not sure what is going on, but a day after I wrote a blog post about the Twitter issues with my old Twitter account, my new Twitter account started having issues. I posted a tweet about Bitcoin dominance with a picture of how Bitcoin dominance changed over the past years. Shortly after that someone replied that Twitter had marked the tweet as ‘potential sensitive content’.

No idea why that’s the case, there is nothing sensitive about it. Is someone at Twitter messing with me or is this just a simple glitch? A good thing is that none of my other posts so far show the same message, on my old account none of my pictures or with or links to other sites were visible anymore. So my assumption is that it is just a piece of artificial intelligence software playing up. If it happens again I’ll post it here.

See below for pictures of the Twitter post, first the way the post looks now for people whose settings do not allow to see sensitive content (=anybody who does not specifically allow it) and below the post as I posted it, with a in my opinion not very sensitive screenshot.

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Interest free mortgages

You know a financial crisis is around the corner when interest rates on all government bonds are negative. This happened in the Netherlands this week, when the coupon rate on every duration of government bonds turned negative. It means that if you buy a Euro worth of 30-years government bonds you will get less than one Euro back in 30 years. That’s not good news for investors, but they still buy these bonds simply because they think it’s less risky than buying other investment instruments. They prefer to get a small negative return, but one where they know they will get their money back (assuming governments never default on debts, in my opinion a big IF in the high debt world we live in), to investing in other assets that may give even lower returns.

But what does this mean for consumers who take out loans? Well, if you are in Denmark and you are looking to get a 20-year fixed rate mortgage, you can now get one where you pay 0% interest. So you borrow $100,000, you pay no interest and after 30 years you pay back $100,000. Crazy? Yes, but it gets even better. For a 10-year mortgage you can actually get a -0.5% rate, meaning that you borrow say $100,000 but after ten years you only have to pay back $95,111. In reality it is a bit more complicated of course, with some additional costs and monthly payments, but you get the gist.

The only reason this is possible is that investors (who underwrite these mortgages) are willing to accept negative returns, because they see no better investment opportunities. Investors are scared of the current situation in the financial markets and think it might take a very long time to improve.

If I would live in Denmark I would not hesitate to apply for a mortgage at these rates: you get free money and because of negative rates it is likely that the demand for homes will go up, leading to future higher housing prices at the same time. This has not happened before, it is the new economic reality. Central banks now have even less tools to play with, so to me it is clear how this will end.

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A new Twitter account (@marcvanderchijs) because of Twitter’s censorship

About 2 years ago my Twitter account suddenly started behaving strangely. If you searched on Twitter for my name the account did not show up and when I posted links to other sites my followers got the message that the tweet contained potentially sensitive information. My number of followers suddenly stopped growing and even went down a bit.

I did not understand what was going on, but after doing some research I realized that my account was flagged by Twitter for containing sensitive content (there is a setting that was marked by Twitter and I could not turn it off). My assumption was that it was likely related to me writing about Bitcoin and other crypto-related topics or because of my criticism of Trump. I also assumed this would be a temporary thing, so although I found it annoying I did not think about it too much. However, after a couple of weeks nothing had changed, so I decided to get in touch with Twitter.

Well, I won’t go into too many details, but it’s impossible to get in touch with anybody at Twitter. The company does not reply to emails, it does not reply to tweets and there is no phone number or chat option available. There is an online tool to report a problem, but it only has limited selections and I was not able to report my problem there (I tried, but also never got a reply). Eventually I got in touch with the former country manager of Twitter in the Netherlands who I happened to know. He put me in touch with some people in Paris, but also there I never got a reply. Very disappointing, and it says something about the culture at Twitter: users are not important.

At the same time I started digging deeper into why my account could have been censored. I don’t know for sure, but a short while before the semi-ban started I remember having an online discussion with a Republican state senator who was (obviously) very much pro-Trump. I have no patience for supposedly smart people who still support the con man in the White House (I can’t blame the average Joe for voting for Trump, simply because most people just don’t realize they get conned – but that’s a different story). I don’t think the discussion was out of line and I remember blocking the senator after our Twitter exchange, but maybe he used his political connections to silence me? I don’t know, but I would not be surprised. Twitter never told me why it happened, I still have not heard anything from them.

Because of this I finally decided to stop using my old account (@chijs) and go back to another Twitter account that I had not used for 10 years (@marcvanderchijs). A few weeks ago I made the change and went from almost 15,000 followers on my old account to less than 100 followers on my new one. I am over 1000 followers now on the new one, but conversations are not as interesting yet as they were on my old account. I had to manually follow most of the people that I had followed on my old account. There did not seem to be a tool for that so I semi-automated it by exporting my followers to an Excel sheet and then re-adding them with 2 clicks from there. Of course Twitter does not like you to add a lot of people quickly, so I was stopped from doing that a few times as well, but most of the people I followed I now follow on the new account as well.

What I learned from this is that centralized social media companies do not work. You can’t build a brand on a communications platform if they can all of a sudden start censoring you. Worse, you don’t even know why they do so and to top it off you have no way to get in touch with them. I am pretty disappointed in Twitter, to me it’s clear that their staff does not care about its users. Because of this I have been looking at decentralized versions of Twitter (Gab.ai is one of the companies that I like). It’s hard to disrupt Twitter, but I believe it may eventually happen when they censor too many users or just plainly refuse to communicate.

The only reason I stayed on Twitter and started all over again is because it’s still one of my main sources of news. I learn new things on Twitter every day and tweets often inspire me and give me new ideas. That’s the power of Twitter and that’s what gives it its value. But it’s also a big media company that does not care about its users, actively censors people that have different opinions, and in the end only thinks about its bottom line. I hope a new decentralized, immutable (not for profit?) initiative will emerge that might be even better than Twitter.

If you don’t follow me on my new account yet go here and click the follow button. Thanks!

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Bitcoin: older vs. younger investors

Bitcoin has steadily been going up since it was released in 2009. Of course with some serious downturns in between, but always recuperating from these downs and eventually hitting new highs. What’s interesting is that Bitcoin is going up when stock markets are going down. What happened on Monday this week was a good example of that: while global equities tanked Bitcoin was up close to 10%. Just like gold has been a safe haven for centuries, Bitcoin is slowly becoming a safe haven as well. A volatile safe haven, so one you want to keep in your portfolio for more than just a few weeks. But also one that might eventually replace gold as a store of value.

But it seems many old skool investors don’t seem to get that yet. An example is this article today on Coindesk about Shark Tank host Kevin O’Leary, who does not seem to understand that Bitcoin is becoming a safe haven. To be fair, the discussion with Morgan Creek’s Anthony Pompliano (@APompliano) was more about how much you should put in Bitcoin (Pomp has 50% of his assets in Bitcoin), and Kevin feels you should never put more than 5% in one asset. However, if you feel markets are at risk of imploding and you want to protect your investments, should you not put more than 5% in one asset class? I am sure he would feel different about cash or gold.

It’s really a generational thing in my opinion. Over the years I have preached the crypto gospel to many investors and investment managers and it’s always the younger ones that get it. The older ones often don’t even want to listen and immediately start with main-stream media remarks like “Bitcoin is not backed by anything”, “governments will block it”, or “you can easily start a new Bitcoin”. They don’t want to hear your arguments that in fact the dollar is not backed by anything (some people still think it’s backed by gold…) and that your dollars go down in value about 5% per year (real inflation is much higher than the official 1-2%), simply because they don’t see the world has changed.

The younger managers (roughly the ones below 35) have grown up with computers and digital assets. They seem to get it because they are more open to new ideas and understand digital, but they often can’t make the decisions yet. I don’t think guys like Kevin O’Leary or Warren Buffett will ever understand crypto assets nor invest in them, or possibly only once it’s worth $100,000 per coin. Just like Warren Buffett only started buying Apple last year (at prices similar to the current stock price) instead of when it was clear the iPhone was a winner 10 years ago, when the stock price was 90-95% lower than today’s price.

The good thing is that the younger generation will take over and they will buy Bitcoin for themselves or for their investors. Just this additional demand will automatically lead to a price increase (Bitcoin has a fixed supply, so more demand means higher prices). I will keep spreading the word about Bitcoin because I understand its fundamentals and how it’s changing the world, but it is frustrating to see how long it takes ’smart’ older investors to get it.

Note: this is my personal opinion and not investment advice. Diversification is a good strategy for investments, so never put all your eggs in one basket. And never invest money you are not prepared to lose.