Thomas Shewchuck - Insurance for Digital Assets

JohnPaul: [00:00:00] Hey everyone, welcome to the podcast. I’m your host JohnPaul and this is Digital Gold. Known to many as the Bitcoin Kid, I started my own cryptocurrency out of my parents’ basement back in 2013. The goal of this show is to simplify the crypto world and explore how it changes the way the world thinks about money through conversations with thought leaders [00:00:16] in this space.

[00:00:17] JohnPaul is the founder and CEO of Orm Capital Ventures. All opinions expressed by JP and podcast guests are solely their own and do not reflect the opinions of Orm Capital Ventures. This podcast is intended for informational purposes only and should not be relied upon for investment decisions.

JohnPaul: [00:00:42] Hey guys, welcome back to the show. Today our guest is Thomas Schuchuck, Thomas Krup watching and learning from his parents as they tirelessly grew Schuchuck Insurance into the successful and client centric business it is today. After earning his degree in business marketing from the University of Daytona, he tested the insurance water as an insurance [00:00:57] broker where he found his professional passion. Now Thomas is combining his love for insurance and crypto to helping miners ensure their hardware and helping high net worth families and individuals strategically protect their digital assets. Thomas, welcome to the show. How are you doing today?

Thomas: [00:01:11] I’m excellent JP. Thanks for having me. Happy to be here. Of course, I’m glad that you can make it on. So Thomas, the question I like to start off with when I’m bringing people on the show is what do you do slash how do you spend most of your time currently and what are you most excited about over the next three months? [00:01:30] Well professionally, I’m an insurance broker and agent at my family’s business just north Chicago. I was a broker for five years and the wholesale markets specialize in professional liability. So it’s like anything between emerging markets, directors and officers, tech, security and cyber privacy liability as well as bonds and all that kind of stuff. So I’m pretty familiar

Thomas: [00:01:50] with kind of the nascent asset classes as well as hard to place risks and kind of brought that to my parents business and my brother and I are transitioning them out and kind of bringing in not sharing in the new era. And right now I’m spending most of my time helping now our successful individuals and families, you know, high net worth clients kind of protect [00:02:11] their personal assets from an asset sense like homes, autos, properties, that kind of stuff and then their valuables as well. And kind of a new emerging exposure has been kind of the crypto assets, right? So we have a few clients that have seven figures of, you know, whatever digital asset mostly Bitcoin obviously, but you know, there’s some other items in

Thomas: [00:02:29] there as well. And I have been involved in this space crypto specifically kind of as a passive enthusiast for, you know, starting in 2015, then I got kind of financially vested around 2016 and then kind of jumped in with both feet early 2017. And it’s kind of interesting to see the my two passions one being insurance, which most people find out and the other one [00:02:52] being crypto and kind of merging right now given where the thing is in terms of maturation in the space as well as different things that are that are culminating at the moment in both in both areas. So I pretty much work one on one with individual high net worth individuals and families and clients. And then a lot of them have their businesses. And so I help them with

Thomas: [00:03:10] that as well. And then I’m carving out a niche for myself in a manner of multiple facets in the crypto space, whether it’s mining software development, you know, ICO is white paper, that kind of stuff. I talk to a ton of different individuals and businesses every week. And it just seems like the space is growing faster than any market can hold capacity for it. It’s really interesting and [00:03:34] really cool to see where everything has gone over the last five years, especially when I look at it, the prison of risk management. So when you’re looking at the blockchain space in risk management, are you focused on like the mining side more or is it on the holding of assets and ensuring those

JohnPaul: [00:03:51] crypto assets were meant maybe the software and the token contracts? Can you talk a little bit further

Thomas: [00:03:56] on that? Yeah, I don’t think I’m keenly focused on one area or another. It just so happens that the easier risks to ensure are the real property aspect of things. So if you think about a miner, they have a basic miners or crypto miners essentially in the steel corrugated box somewhere. That’s not an intangible object. And it’s from a tech perspective and an underlying risk perspective. It’s really [00:04:21] just a computer, right? It’s running 24 seven. So insurance companies, there aren’t many people or players in that space that are willing to write it. But those that are willing to listen, they have an open mind about it typically. And there is a market for that. And so that’s probably the of all the risks in digital assets. That’s probably the easiest risk to place the real property of ensuring the

Thomas: [00:04:41] machines, the miners themselves, and the facilities that house them. So that’s probably been my area of most success only because it’s the path of least resistance. And then really what I’ve been seen in the market right now is there’s a ton of companies looking for directors and officers insurance for one reason or another. Most of them have to do with cap raises. They’re looking to raise capital and [00:05:05] any new investors that are coming on, they want to make sure that there’s a decent amount of mitigation of risk when you think of the decisions directors and officers are going to be making it in a nascent market and asset class, where when things are evolving, that are at a speed of light essentially, there’s a lot of missteps and misused people can make. It’s kind of the wild west of

Thomas: [00:05:26] finance. So a lot of companies are searching for directors and officers protection for their board. But it’s really just it’s not something that’s readily available. The other component that I see a lot of or I get to request a lot of is clients on an individual basis that have six or seven figures of worth it in terms of dollar amounts of digital assets. And they want to make sure that [00:05:47] those assets are protected from theft or loss private keys and all that kind of stuff. And unfortunately, there’s really not a commercially viable product in the market right now. There’s a couple things that are on the horizon that are going to launch in the next few months that are going to be direct to consumer solutions. But unless you have tens of millions of assets essentially,

Thomas: [00:06:09] there are bespoke products out there available that will be A pretty expensive and B really difficult to place. You have to find the right underwriting facility typically at Lloyd’s of London or facilities out of Bermuda. But it’s just not a viable risk management tool given the cost if you don’t have enough assets to justify it. So I would say the area where I would say clients most [00:06:33] want to protect, which is theft and loss of privacy keys of their digital assets, it’s just it’s not there. And that’s probably some low hanging fruit that some companies are going to be able to do and come in. And once they figure out a solution, I’m sure they’ll sell a lot of that product. But yeah, it’s mostly kind of what I see as the directors and officers, the real property

Thomas: [00:06:55] from a mining perspective and then the theft component of digital assets. You know, beyond that, there’s a few people that are looking for technology, or as an emissions or network security and privacy liability, specifically from a theft perspective. And that’s really what you see people that are custodians of these assets for their clients, whether institutional grade or accredited investor [00:07:15] grade products, as well as wallet developers. Now, those guys usually typically don’t custody those wallets, they just provide the back end services and software. But there’s always an error omission that can occur on the back end when you’re transferring funds or assets in and out of wallets from an exchange or something like that. So there’s a concern there, albeit small. But again,

Thomas: [00:07:37] that’s really a difficult place to find anybody to write that business. Because there’s basically a technology knowledge barrier. And also there’s just a there’s a capacity issue in terms of companies aren’t looking to jump into the digital asset space with two feet at this point. But hopefully that’s going to change in the next 12 months. So Thomas, talking about the ones that have jumped [00:08:00] into this space with two feet, the insurance companies, and going back to the actual physical miners. One of the questions I have for you today is how do how are insurance companies going about valuing the miners when you have these claims? Because the price of that unit does fluctuate based on the US dollar per terra hash, which is how much money you’re going to make on one terra hash

Thomas: [00:08:21] on a daily basis. So what do you see or what type of models or how are these companies approaching valuing the inventory as it rises and falls with Bitcoin’s price? Yeah, that’s a great question. I was just talking about this with someone yesterday. And the real the truthful answer here is, no one really knows how they’re valuing these things. I mean, [00:08:40] if you look at an insurance contract, just the verbiage, if you have a few miners out there, I mean, the vast majority of these contracts, if not all, and I haven’t seen one that doesn’t do this, but they’re ensuring these mining rigs specifically on an actual cash value basis. That’s just basically market value. Now, the problem with that is, as you said, these machines fluctuate

Thomas: [00:09:00] with the market and the price of digital assets, roughly Bitcoin, right? It’s very heavily correlated. So if you’ve got, let’s say, 100 machines in, I don’t know, I-O or something, and there’s a tornado that comes through and wipes them all out. Number one, how are you going to be valued or how those machines value on a lost settlement basis when you have actual cash value? [00:09:21] Well, if the price of Bitcoin’s at 40k, it’s pretty easy to see that, oh, well, maybe the price of these machines is rather inflated. Now, actual cash value from a lost settlement perspective also factors in depreciation. So the other problem here in this equation is while the market value or the actual cash value based on market conditions could be inflated, there’s really no rubric or

Thomas: [00:09:43] blueprint for these insurance companies to depreciate these machines. Manufacturers like Bitmain may say, oh, well, average life expectancy is three years. And if you’ve got these machines for two years, they could say, all right, well, one S17 plus when Bitcoin’s trading at 40k might cost you, I don’t know, I’ll just throw out a number 5k to replace on the secondary market. [00:10:04] And the insurance company might say, well, it’s two years old. So really, we’re going to depreciate that by 66%. So really, what are you getting? You’re getting 33% of the 5,000. I can’t do the math and I have that quickly. But you can see, obviously, that the lost settlement isn’t as advantageous. Now, that may be a good thing or a bad thing, depending on whether or not you’ve got a line on

Thomas: [00:10:24] how to replace these items at a lower cost than what the market is yielding, or maybe you just you take all that cash settlement and then you rolled over to Bitmain and say, hey, I’ve got an economy of scale here. I’m going to buy 100 machines. What can you do on the price? There’s different things you can do. But the reality is that I’ve never seen a loss in this space and [00:10:43] these products are so new that I’m not aware of any loss in regards to Bitcoin miners themselves. So when the first one inevitably does occur, the first loss that is, it’ll be really interesting to see how insurers are able to settle these losses and value these machines. I’m not exactly sure how they’re going to do it, but I’m certainly going to help advocate for my clients when they

Thomas: [00:11:06] do because I think there’s a lot of variables and factors and insurers have not anticipated or considered. And it’s just going to be a learning curve for everybody. But that always happens in any new product class or any new market. And that’s why there’s not as many players in the space because there’s so many variables that the people that are willing to play, they’re willing to take [00:11:24] the risk to say, well, this seems like an asymmetrical risk and we’ll probably get a decent return on this stuff and our loss ratio will be fairly low. And we’ll take a gambit, right? And we may charge a little more and we’ll make it worth our while in case our estimates conservatively are off. And then the vast majority of the market just says, yeah, we know nothing about this. We’re not

Thomas: [00:11:44] willing to learn at this point. And we really don’t want to take a bath on something that may or may not pan out. So for that reason, we’re done and we’ll let the first movers kind of walk through the door and get bloodied first and then we’ll step over their corpse and figure out exactly what to do and pick up the pieces. And so that’s generally what happens in pretty much any new marketplace [00:12:00] when it comes to insurance. But yeah, it’s a great question. And again, the truth of the answer is, I’m not exactly sure. I know how the contracts react. And I know how they’re litigated and and I know others settled in other property loss situations. But in this particular one, we can only extrapolate what we know and apply to the scenario. And it’ll certainly be interesting

Thomas: [00:12:23] to see when and if that does occur. No, I definitely agree with you on that. And I think that it is interesting just to understand not only insurance, but when it comes to lawsuits, how that’s going to work and in doing machines, there is plenty of people that we know in the space and even ourselves as a company that are suing because of never delivered hardware or hardware that was too hard [00:12:44] to get up. So that’s one of the things that I think this space really needs was the insurance

JohnPaul: [00:12:49] component. And I appreciate you guys jumping into this space to go to offer this Thomas.

Thomas: [00:12:54] And you mentioned a little bit of products, products that you’re excited about in this space. And I wanted to touch a little bit farther on that to understand why, what products are you excited about maybe in the insurance world that you want to talk about that are kind of merging the crypto, blockchain being able to authenticate transactions or being able to authenticate things immediately [00:13:14] versus the normal insurance base, how those two are merging in either the mining space or in the traditional custody of crypto. Yeah, I think by end of quarter one 2021, there should be some really viable products from one player in particular that’s basically trying to get set up as their own insurance company. Their name is Evertas, they’re seeking to be the only insurance company

Thomas: [00:13:38] out of that’s solely focused on blockchain and digital assets and the players in that space and the businesses that are cultivating solutions and commercially viable options in that space as well. So when you think about just broader opportunities for low hanging fruit like miners, because again, property exposures are really easy for insurers to wrap their head around. Evertas doesn’t have [00:13:58] those hurdles, they don’t need to wrap their head around them. They’re founded by a couple guys that are very bright and they’ve come up with some proprietary solutions to evaluate risks, whether you’re a wallet developer and you’re developing your own blockchain and you’re looking to issue tokens on it, whether you’re a private company and you’ve got some sort of blockchain

Thomas: [00:14:19] solution, you want to go through a saft to raise money, all those kinds of things that they have tons and tons and tons of data as well as their own little funnel to drill down the pain points of each risk and identify the real exposures that would cause an issue. And they’re really the only people in the space right now that have done it and the details of that I’m not allowed to disclose [00:14:46] due to an NDA, but I will say that in the next hopefully six to eight months, there’ll be much broader product offerings specifically from Evertas and maybe some other players that want to compete with them for the market as a whole. I mean, the biggest pain points I have is really finding anybody to write public risks that are public companies in crypto or getting anybody to really

Thomas: [00:15:08] listen to the value proposition and the asymmetrical risk as I see it with a lot of players in these spaces. And so one product I’m really excited about is probably it’s not through Evertas is through another company. The name is escaping me at the moment, but they’re going to be launching in about six months. And they’re going to offer a individual investor product where if you have [00:15:32] coins on a certain exchange and they’ve, I believe they’re contracted with three, it’s Gemini, I think, Kraken and Coinbase. And if you have, let’s say, funds or digital assets on the exchange that you’re trading back and forth or just holding there because you don’t have your own private wallet, you’ll be able to purchase insurance on those assets while on the exchange. And the reason it’s

Thomas: [00:15:53] particular to the exchange is because they’re able to track in real time because they plug in, I believe with an API to the exchange and figure out exactly who has what and which wallet addresses and how many assets you have and they’ll be able to track also against fraud. So like people who have nefarious intent, they won’t be able to transfer the funds off of their platform on the exchange [00:16:16] to a private wallet that the exchange is unaware of or the insurance policy is unaware of and then claim that, oh, this was stolen, so I need to be compensated for that. So that should be pretty great in kind of game changing. I think from a retail investor standpoint, I think probably provides more legitimacy, especially when you think of all the negative press that crypto receives,

Thomas: [00:16:36] based on exchange thefts and different terrible use cases that most people assign to crypto. I think the big one that’s really yet to fall is anybody that’s got a private wallet that needs to ensure their assets. And I have clients that have millions upon millions of digital assets, just in a private, you know, cold storage wallet and a save or something. And they’re just unable [00:17:00] to ensure those things. And even a standard property policy where you can specifically schedule gold coins, silver, you know, collectibles, all that kind of stuff, they’re, you know, admitted carriers and standard markets are just unwilling to ensure those items because they’re so fungible and they can be stolen so easily by their own perception. But yeah, those are kind

Thomas: [00:17:20] of the ones that I’m pretty excited about over the next year or so. No, those all seem like great offerings that you mentioned, the space really needs a private holding your private keys and ensuring that is interesting. You know, it’s an interesting concept because like you mentioned, so fungible Bitcoin, you don’t know necessarily who the next address was. You don’t know if someone’s [00:17:41] trying to be an nefarious actor, you know, and then have a claim on their on their coins that they was really them, you know, they sent it to someone else. It’s very, very difficult for an insurance perspective, especially with this persuadio anonymous style of Bitcoin, not having every address tied to a ID. So I understand their, I guess their concerns there. I’m glad to see that

JohnPaul: [00:18:02] there’s a least improvements in the space. One of my other questions for you was how do you see

Thomas: [00:18:06] software and insurance working together, especially the concept of blockchains being able to verify data immediately? If that’s physical insurance for the miners, you know, being able to run these miners that are supposed to be running 24 seven and then connecting to a potential insurance database or database where they can the insurer knows that this machine is running and that, [00:18:27] you know, they’re ensuring it and it’s actively doing the job that, you know, the client is looking to have it do. And then when it falls off, they’re able to get alerted. Have you thought any farther on maybe how software can help make this gap easier for some of these things like risk and claims when the insurance industry specifically for Bitcoin miners? Oh, yeah. I mean, that was one of

Thomas: [00:18:48] the first things in terms of a commercial application that I thought of when I started learning about blockchain and in crypto as a whole. I mean, there are, so just to give you an example, roughly 10% and that’s on the low end that’s conservative. It’s more like 12 or 15 depending, roughly 10% of all insurance claims in the property and casualty market are fraudulent. So if you think, [00:19:14] now let’s just take a round number of, you know, $10 billion are paid out every year on average for property and casualty claims, whether it’s personal home and auto or commercial, a billion of that is fraud. I mean, that’s that’s ridiculous. And there are certain things you’re never going to alleviate like, you know, a mob, this is a terrible example, but you know, like you see in

Thomas: [00:19:33] the movies, like a mob owns a restaurant and they’ve burned the kitchen down and it destroys the property because the restaurant’s not viable and they’re looking to cash out, right? I don’t necessarily think you’re ever going to be able to alleviate that, but there’s tons of applications from the network screening privacy liability where if you were to build an insurance database on a [00:19:51] blockchain, you were able to verify material risk variables that are germane to the underwriting process and you’re able to encrypt them and then verifiably say yes or no to certain aspects of them when underwriting or when processing a claim or when going through the discovery period to analyze whether or not coverage would apply. I mean, they’re a plethora of situations where

Thomas: [00:20:14] that would be viable and applicable. And that was again, one of the first things I thought of when thinking to blockchain because right now, I mean, you just have, I mean, let’s say you got a burst pipe in your home. I mean, typically, the one thing I always sell clients that you’ll never get back is your time. I mean, all my clients are going to be very well covered from a financial loss [00:20:36] perspective. But at the same time, you’re going to have to donate and set aside some time to kind of make sure that you’re processing all this stuff and getting all the proper documentation in place, especially with COVID because companies are so risk-averse insurance companies out of it that they don’t want to come out and do it themselves because they’re fearful that they’re going to give you some sort

Thomas: [00:20:54] of illness or ailment, whether it’s covered or something else. So we’ve become more decentralized, but we’ve also become more disjointed. And that has caused a ton of headaches on behalf of my clients because they’re not used to processing all this information and compiling it all and then sending it off to a central location, which is the underwriter. It’d be much easier if you had some [00:21:16] some sort of database where A, you could extrapolate statistics of the likelihood and occurrence of a certain situation if there’s a lot of correlation between that situation and the loss situation versus what just happened to the client and then you’ve easily ascertained, okay, we’re in line with 13 of the 14 factors that typically occur in this scenario. And so clearly, we believe coverage will

Thomas: [00:21:38] be enforced here. And so that’s kind of streamlining the determination phase. And then beyond that, if you can have the client upload certain photos or just kind of streamline the claims process for them, I mean, that would be advantageous as well into some sort of clearing house or database for that. And then beyond that, really, the biggest disjointment, I believe, [00:22:03] is the payment and settlement of the claim because a lot of times the clients are shelling out money to the individual contractors or to different contractors in and out of the house, especially if you’ve got like kind of a nuanced situation where you require, you know, a different plumber than what your GC is offering. Getting reimbursement for all those things requires a

Thomas: [00:22:24] client to basically compile a bunch of invoices and then, you know, upload them to, you know, an email to the adjuster. And it’s just that whole process of compiling the data and then getting it to where it needs to go is extremely disjointed and tedious. And it’s a complaint I hear, you know, fairly regularly. And so especially when you think of payments, [00:22:47] because that’s, I think, the low hanging fruit where this occurs. I mean, I’m sure you don’t know this, but many independent agencies, they have what’s called premium fund trust accounts. Okay. So what that means is if the agency like mine is collecting money from a client, I basically hold, I take the funds, the premium that the client pays, I hold the net of my commission.

Thomas: [00:23:10] Okay. So I keep my commission and then I pass on the additional funds over to the insurance company. But typically what happens is I deposit everything into a fund, a premium fund trust account that I have with each one of my companies for commercial insurance. And then that company goes in and will be able to directly deposit and withdraw funds from my account and then leaving my commission [00:23:33] essentially. So there’s tons of regulation around that. And the problem with it is, is that that is a huge pain point for the industry as well, from a theft perspective. Because you get a lot of agents that, you know, maybe they, they found hard times and look into kind of cover their shortfalls and maintain their quality of life. There’s, I read articles every single week about

Thomas: [00:23:52] someone else getting arrested and, you know, having their license taken away because they were, you know, they were committing fraud from premium fund trust account that they had for a certain company. And so if you could, if you could put that all on the blockchain where it’s verifiable and easily maintained as well as easily processing payments, because we have the technology to do, [00:24:12] I mean, the throughput for a lot of these blockchains is, you know, on par with Visa. But yeah, hey, there’s, there’s a ton of viability and different solutions that can be applied. It’s just how to execute that would be kind of the biggest difficulty because every company wants to have their hand and they want control over certain aspects of that. And I think probably

Thomas: [00:24:31] the place to start is to apply this to some aggregate claims database where every company ties into it’s called Clue. And everybody shares claims data with everybody else. And so that’s probably the easiest place to start because it’s kind of an aggregate pool of information that everyone can pull at any, any given notice. It’s probably the best place to start. [00:24:52] So if anyone out there is listening and is looking to start an insurance product on the blockchain space, Clue is your spot to jump into Thomas. So Thomas, you mentioned, you know, both COVID-19 and I want to talk a little bit farther on that because we’ve had some conversations previously about before COVID-19 insurance companies were writing policies for Bitcoin

Thomas: [00:25:12] miners providing that with insurance on their hardware and even potentially insurance on their loss of income insurance. So now today, insurance companies, you know, do not have, at least in my understanding the time and bandwidth to underwrite any really policy that touches Bitcoin or Bitcoin mining, you know, partly due to the lack of understanding of this industry that you’ve mentioned [00:25:30] previously. And in addition, these insurance companies are now caught up with millions of dollars, if not billions of dollars of lawsuits regarding the commercial liability policies that were originally denied and now potentially are being overturned due to the government mandated shutdowns with COVID-19. We’ll be able to touch a little bit farther on that and you want to hear

Thomas: [00:25:47] your opinion on where you see this going and maybe how this is going to slow down the regular insurance industry and how maybe crypto might be able to get a leap ahead or the crypto insurance products might be able to step in and, you know, take some of this grunt work out. Yeah, and I’ll touch on a lot of that that you just explained. But I think the biggest issue [00:26:05] really is right now, the property and cash insurance industry and the reinsurers that back a lot of these companies and mitigate their risk, they’re looking at the horizon, they’re seeing a giant shortfall of funds that they’re going to have to pay out due to looming court decisions from class action lawsuits, as you said. And so until we weather that storm and until those companies have paid

Thomas: [00:26:27] out and we know exactly and we’re able to quantify how much of those liabilities those insurers are going to pay out, I don’t anticipate anybody new or even mainstays in insurance as a whole getting involved in crypto as a whole in any capacity. And that’s probably the biggest frustrating part is because, you know, I’ll just highlight this quickly, the, you know, [00:26:50] every property policy for the most part has what’s called a business income and eruption component to the policy. And sometimes you can, you can hear that out of the coverage if you want, but most people have it. So if you’re running a restaurant and, you know, the virus comes and the government says, Hey, you know, you got to shut down for two months, every restaurant owner,

Thomas: [00:27:09] I’m aware of turn around and file a claim that they’re insured for business income and eruption. And those claims were immediately denied because on the basis of the virus. And so there’s a viral exclusion on most, if not all commercial property policies in all capacities. So I think the insurance companies that they were probably justified in doing that. However, the class action lawsuits, [00:27:34] and I think rightfully so are alleging that those were bad faith claims and they were wrongfully denied because the virus was not the cat, while it was the catalyst for the shutdowns, it was not the reason the businesses had to shut down. The reason they had to shut down was because of the government mandated shutdowns. So that’s kind of a gray area on the, you know, on the property policy.

Thomas: [00:27:54] There’s some intent and language in there that could probably, you know, you could argue in court that, Oh, yeah, well, you know, the intent of the insurance companies was not to cover that, but it’s still a fairly ambiguous situation because this sort of things never occurred before. And so because of that, anytime there’s class action lawsuits that arise out of, you know, bad faith [00:28:12] claims due to ambiguous language and situations that are not addressed in a contract, generally speaking courts rule in the favor of the insured with the plaintiff in the situation. And so that’s really what all these, these standard insurance companies are looking at and saying, Oh, my gosh, if you’re writing, you know, restaurants or anything in the, in the food and beverage industry or

Thomas: [00:28:34] service industry, I mean, you that was like bread and butter. I mean, that’s simple. That’s been around for decades, if not centuries, right? You know how to underwrite that. And you know, the pitfalls and the exposures of those risks. Well, this whole event, COVID-19 comes around, and then the governments are doing what they’re doing. And this is an unprecedented situation [00:28:51] from a risky situation for the insurance companies. And so they did everything they could because if they, if they didn’t deny those claims, you know, you’d see a lot of bankruptcies, I’m assuming. But at the same time, now you’re passing the book out of the client themselves and everybody’s just in a bad situation due to, I would say, an overreaction in many cases of governments.

Thomas: [00:29:13] And you know, it’s really, it’s really sad to see, but you know, for us selfishly, we’re, you know, it’s really hindering innovation for new product offerings in crypto as a whole. And we’re just, we’re not going to see anything on a large scale until, you know, insurance companies are able to wrap their arms around the current problem. And presently they can’t even quantify that because [00:29:37] there’s really no giant rulings that have given precedent to what these companies are going to be on the hook for these, for these other companies that were their insurers that had to shut down. And it’s a really, it’s a really difficult and sad situation. No, I mean, it’s definitely, you know, hit all these groups. You know, it’s for everyone,

Thomas: [00:29:54] the insurance companies, as you mentioned, they’ll unfund the liabilities, more importantly, in my opinion, the small business owners and the loss of business. And then, you know, they’re putting out the premiums and paying those premiums for years on end to be able to be covered, you know, in their eyes from some sort of shutdown or vaccine or even shut down or virus like this, [00:30:10] like with COVID. And so it’s a very interesting phenomenon. As you mentioned, how it’s both people are arguing the side of, you know, we wish to be able to be fine in business because the virus was moving on going on. But no, we got shut down by the government. I find that just insane to see how many claims there will be because it was a worldwide shutdown of not

Thomas: [00:30:30] only just the United States, but we’re talking every single country, I believe, had these, you know, had these shutdowns or 90% of them did 99%. Oh, yeah. So when it comes to ensuring a Bitcoin mine, you know, there’s a couple of things I guess I look at and you have the operating risks of the mine and the variance between different facilities, which I believe is decreasing [00:30:50] rapidly as the industry matures. But then you also have the network risk. So the price of Bitcoin, Bitcoin difficulty in the US dollar per terra hash value, which we mentioned, you know,

JohnPaul: [00:31:00] goes into ensuring the value of those machines. But can you talk a little bit farther on anyone,

Thomas: [00:31:05] any companies or any insurance products that you see for actually ensuring the production of Bitcoin or the income coming from those machines? And because I know that’s one of the hardest things right now, I think holding finance and groups coming back into the space is that you can only really lock in your Bitcoin mining profits for 30 to maybe 180 days maximum. And [00:31:26] there’s not really any products that give you any type of the ability to make any type of financial instruments, which would allow you to capture maybe a lower yield, but have at least to be secured more appropriately. Like, are there any, is there anyone taking out the basically ensuring the production of Bitcoin in the US dollar saying that, you know, this one

Thomas: [00:31:47] machine, we’re going to, we’re going to assume that it’s going to ensure we’re going to assume that’s going to create this many bitcoins over the lifespan or this much in US dollar over the lifespan of the unit, kind of like those loss of business income policies or similar policies there that would then allow the mining operator to, you know, work with financing partners because [00:32:04] they do have some sort of locked in guaranteed profit, even if it’s a lower profit. Right now, no, there’s no one that I’ve seen that’s willing to offer it. Now, with that being said, 12 months ago, I placed my first account that was a Bitcoin miner company with a syndicate and facility out of Lloyd’s London. And I was able to negotiate a business income component

Thomas: [00:32:33] to the property policy. And so my client is the only company that I’m aware of that I’ve even seen, and I’ve seen a lot of them that even has business income and eruption coverage on their Bitcoin mine. And while that’s really unique, you know, 12 months ago, we didn’t have COVID. And I think if things had just continued the way they were without the whole COVID interruption, I probably [00:32:57] would have been able to duplicate that contract, you know, many times. But at the moment, given the state of the market where it is, it’s just not viable. And really the biggest hurdle for underwriters when they’re looking at that is essentially the underlying volatility of the asset, right? So if you say to me, you know, Tommy, I’ve got $2 million worth of, you know, S19s,

Thomas: [00:33:21] and I need $500,000 of business income and eruption coverage, I say, okay, the biggest hurdle for the insurers to say, all right, well, if something were to occur, let’s say that tornado comes through and takes out your mind, you know, depending on where the price is Bitcoin, I mean, we can

[00:33:35] reasonably assume looking back retroactively what the production was of your mine on a month to month

Thomas: [00:33:41] month basis. I mean, we can reasonably assume on average what you would be producing in terms of Bitcoin every month. And if you’re out of business for three months until you get those new machines online and you’ve replaced them, you know, that’s three months of income. Well, you know, if you’re mining, let’s just call it, I don’t know, you know, three Bitcoin a day [00:34:00] on a monthly basis, that’s 90 Bitcoin a month. I mean, that’s if it’s trading at 40k, you could easily blow through $500,000, which you’re allotted for the year in just a month, maybe even less, I mean, depending on where the price is. So the inherent risk to the insurance company is they’re looking at and saying, Oh my God, we’re not going to offer this because their

Thomas: [00:34:21] revenues derived from this underlying asset, which is extremely volatile. But you know, there could be a parabolic move at any given moment. And they can allege reasonably so that, Oh, well, yeah, I mean, this month, we mine 90 Bitcoin, but you know, last four months, we’ve only derived, let’s just call it, I don’t know, I know it 90 times 15,000 is, but you know, if it goes to 40,000, [00:34:42] you’re exponentially more profitable and that just one month. And so you can, you can assign certain market indicators to say, all right, we’re not going to pay more than, you know, 25% of whatever your average output was in terms of US dollars over the last, you know, four months or a rolling average of three months. But for the most part, you could easily blow

Thomas: [00:35:02] out, you can blow that out because still a 25% swing is pretty big from your insurance company’s standpoint. Not to mention you’ve got other concerns with supply chain disruption due to COVID, especially if you’re, you’re entitled to replace the machines that you had. So if you’ve got bit main, I mean, you’re basically going to have to ship them from China and, you know, who knows [00:35:21] how long that’s going to take. I mean, it’s better now than it was six months ago. But still, there’s a lot of concerns that insurance companies just aren’t unwilling to factor. And so I knew that going in. And so I was able to negotiate different terms that they were compromised on both fronts, but it still allowed my client to cover their financing costs from a private lender

Thomas: [00:35:41] in the event that their mind did go down. So that I called that a win, but I haven’t seen anybody else duplicate that. And I haven’t been able to replicate it because the facility I went to said, yeah, we’re, we can’t write this again because of COVID and everything going on there. They have a lot of other exposures also that they’re trying to grasp. But yeah, it’s just, it’s not readily [00:35:58] available. But I think if you get the right company in there that understands what, what the underlying risk is and what the inherent exposure is with machines running 24 seven computers, essentially, in a climate controlled steel box that are maintained on a daily basis, to me, again, I think the risk is asymmetrical. I just, I don’t know why any insurance company wouldn’t want to do

Thomas: [00:36:22] this. I get their apprehension for the business income and eruption component. But if you look at just ensuring the property, you just get rid of the BI, just say, when I’m going to maintain it right now. I mean, it’s really not difficult to ensure just just computers. It’s very simple. It’s just battle. I think you mentioned it. It’s just computers. And Thomas, there’s one quick white [00:36:42] paper that actually ARK Invest put out about Bitcoin. And they said if Bitcoin’s network value were to appreciate roughly sevenfold from where it is today at 150 billion back in March, 2020 to $1 trillion during the next five years, we would expect the mining equipment industry to approach a $20 billion valuation. Now, today’s Bitcoin network, the miner value of miners is probably less than

Thomas: [00:37:04] $5 billion. So Bitcoin were to reach that $1 trillion network. Miners would probably generate roughly $15 billion in annual revenue from block rewards and transaction fees. And so, if let’s say, they’re given a two-year hardware replacement cycle, depreciation would consume about 50% of their revenue per year, suggesting that miners would be willing to pay at least $7.5 billion for [00:37:27] equipment annually. That’s a huge insurance premium considering we’re looking at 1% to 1.5% of the asset value to ensure, especially in these miners in particular.

JohnPaul: [00:37:38] Can you talk a little bit more about the growth of the space and the opportunity that you see

Thomas: [00:37:42] that maybe others are missing out on or missing out on even noticing? Yeah. So, first of all, ARK Invest, is that Kathy Wood? I’m not sure who it is. I just pulled it from their white paper a couple months ago. Yeah. I think it’s Kathy Wood. Because I think I read the same thing. She’s brilliant, by the way. [00:38:00] I hope I’m not wrong. But yeah, I think it’s really difficult to, number one, people’s brains and want to say people, I mean, underwriters and people in insurance. I mean, think about the people that actually know what Bitcoin is. I mean, you have, this is a broader problem, but I’ll drill it down. So, you have the best performing asset of the last 10 years. I’m sure there’s some penny sacks

Thomas: [00:38:24] that probably outpace it. But in terms of alternative investments, the best performing asset of alternative investments in the last 10 years is Bitcoin. I’m pretty sure that’s barn. I don’t think it’s as arguable. And if you were to ask your average, any wealth advisor, what is Bitcoin, they have no idea. And I do it pretty regularly because I have a lot of clients that are. And [00:38:43] they just, they don’t know. And that blows my mind. Because I’m like, I’m sitting there and I’m like, how, and if diversification is the name of the game, how do you know so little about something that is so monumentally profitable over a 10 year period? And in my opinion, you know, this is me much more profitable than the next 10 to 15 years. And it’s really interesting to see

Thomas: [00:39:08] how apprehensive people are to learn anything new. And then if you just take that from, you know, that’s the situation with wealth advisors and they would be making fees and all types of money in terms of commissions from those investment vehicles. But if you look at the insurance aspect, I mean, these underwriters, they’re just, they’re not even semivized to learn anything about [00:39:27] it. And they’re like, why would I take a risk on this when, you know, it could blow up in my face. And my bonuses and my commissions are directly tied to the loss performance of the book of business that I’m underwriting. I mean, they just, as soon as you say crypto or Bitcoin or anything, you know, they immediately shut down. It’s an automatic no. And it’s really difficult because

Thomas: [00:39:48] I do believe a lot of them are missing the boat. All of them are missing the boat. I mean, quite frankly, there is so much opportunity in the space and it’s growing rapidly. I mean, rapidly. I talk to people every single day who have investments of north of seven figures. It’s just set up their own mining operations or building out their own facilities and co-locate, [00:40:06] you know, more miners. And it’s just, it’s amazing to me. I mean, take a, take right blockchain, for instance, I mean, they had, I think, you know, I think they based on the analysis I read, they had roughly $19 million in third quarter of 2020 in terms of miners. And then, you know, over the course of the next six months, by the end of quarter one 2021, they’ll have

Thomas: [00:40:30] tripled their mining fleet, essentially, full of S-19. So even when you think about investing in certain companies, I mean, their, their efficiencies going to go through the roof and their op-ax isn’t, is going to go down on a, on a perterra hash basis because, you know, they’re getting more efficient miners. It’s just all of it just makes so much sense to me that you could easily ensure [00:40:51] this stuff. It really, it goes to the crux of the problem, which is lack of knowledge and lack of desire. That’s really the, the big issue, in my opinion. No, I think you hit it right in the head, the lack of knowledge and lack of desire. And then after that, you know, the lack of current capital to come in and want to ensure this space because of that lack of desire and knowledge.

Thomas: [00:41:11] But when it does happen, I do agree with you that, you know, one company can build out a software suite that I think, you know, will integrate into the, the mining operation directly, be able to monitor those machines on a live basis, ensure them, you know, and collect those very, very healthy premiums on, you know, this wide range of hardware that, you know, needs insured and, you know, is [00:41:33] starting to get financed and starting to get leveraged and get loaned against. So there’s tons of opportunity in this space. Thomas, well, that was so much on insurance. I want to give you the opportunity to talk about anything else that you think, you know, comes to mind using the blockchain space or in, you know, insurance or anything else that you want to discuss.

Thomas: [00:41:53] I actually have a few questions for you. I’m just curious, like, I see, based on the people I talk to and it’s new people every single week and I’m always astonished at how people find the space, you know, their genesis, if you will. What are you seeing right now in your line of work in terms of adoption and, you know, market demand? Is this ramping up? If so, is it, do you see it plateauing [00:42:18] soon? I’m assuming it probably heavily correlates to Bitcoin price because that’s what I’ve seen over the last five years anyways. But are the people that are getting involved, are they, are they more cautious or are they more cognizant of the inherent risk because of the last bull run and then, you know, imminent crash that occurred? I mean, what are you seeing and what is the sentiment in the

Thomas: [00:42:37] market from your consumers? Yeah, so I would say that we are seeing lots in launch of energy companies because of COVID, because of the oil, oil crashing, because of Bitcoin’s recent price rise. Coming into the space, not to necessarily mine Bitcoin, they’re not there yet, but they’re coming in to say, how do I sell power to miners because they buy a lot of power? But they don’t necessarily [00:42:59] understand the full economics of that space. So we see those groups coming in, we see there’s a lot of issues regarding the ability or a lot of, I would say issues slash clarity regarding funds and energy funds and their ability to invest in energy consumption products such as Bitcoin mining versus an energy production product such as windmill or solar funds. So we see these companies come

Thomas: [00:43:23] in the space, but they don’t necessarily have the right mandates to put capital into the Bitcoin mining side. We see that starting to change now that private lenders are coming into the Bitcoin mining space and are willing to lend on the value of those Bitcoin miners, assuming that the facility is run by someone who has experience, assuming that the power rate is going to be advantageous [00:43:44] for the financing partner. And as you mentioned, make those numbers work for everyone. So that’s another big component there that these financing partners are starting to ensure that your power rates are lower in the low 20s to $30 per megawatt hour range. And I think that on the mining side, we’re going to see as Bitcoin price rises, an increase of energy companies coming in the

Thomas: [00:44:04] space deploying their own facilities, potentially buying up some expensive hash rate just to get exposure to the space and really hopefully then starting to invest long term in the industry. You know, my opinion after that Bitcoin having a van about 500 days later, Bitcoin usually hits that all time high. So between the first half, between the having event, [00:44:22] which happened back in May and now where we’re building and everyone’s growing their hash rate portfolio, trying to get new machines, which are sold out till March till April, like to get these new S19 pros, you have to place an order almost four to five months in advance with the factories to get the chips from the semiconductor facility. So even if Bitcoin price goes up by 50% or 100%

Thomas: [00:44:44] like it did in October, you can’t necessarily get machines fast enough. So what happens is those machines that are currently running become valued and much higher and people don’t want to sell them off. They want to continue running them, keep on running those facilities. And they’re not necessarily looking to exit the space this early into the bull run. So that’s kind of where I see [00:45:01] the space coming from an institutional perspective and from an energy clients, we see a lot of those individuals coming in. And then we always see interest on the consumer side looking to buy $1,000 worth of machines. And so we’re working on products there to help those consumers basically come in by a miner, reduce the friction and reduce the friction it requires to maintain

Thomas: [00:45:22] and service that customer on a month to month basis. Interesting. Okay. That makes perfect sense. So the lenders that you’re seeing, are they more institutional grade like banks? Are they private lenders that you’ve noticed? They’re almost only private lenders for now at the moment. It’s interesting that we actually were able to get financing on the miners first before we [00:45:41] were able to get financing on the mining infrastructure. So I know there are some companies out there that have unlocked the infrastructure financing, but that does allow you to basically leverage your equity raise. So going from, for a site, we’re working on a local home line, $8 million equity raise leveraging that with about $30 to $40 million of debt in order to build out the miners.

Thomas: [00:46:00] But the thing we can’t finance are the most traditional components, which is interesting. The transformers, the switch gear, the power distribution units, the building, stuff like that, most industries will be able to release finance or get a loan to build. We actually are having to raise equity capital because we simply touch Bitcoin and our Bitcoin miners deal directly with that. [00:46:18] And there’s always that uncertainty of what happens to Bitcoin and where is it going to be in five years, and also the lack of understanding of the business and how profits are made and how difficulty adjusts and how efficiency of machine matters and stuff like that. Right. Yeah. Where do you, oh, so just so you’re aware that individual consumer product I was

Thomas: [00:46:37] talking about for ensuring your assets on an exchange, it’s called breach. It’s at breachensure.com. And the exchanges that partner with our finance, Coinbase and Gemini. So it wasn’t cracking out. So correct. But anyways, it’s pretty fascinating. So I’d encourage anybody of your listeners that has funds on an exchange, take a look at it. They haven’t launched yet, but you can join the waiting [00:46:59] list. I already have, but it’s, I think they probably have the best viable products out there. It’s almost available. And we’ll see when it is available. What do you see, geopolitically, I’m always fascinated with kind of the fact that China holds a massive amount of hash rate on the Bitcoin network. And I would say the US is lack of urgency to put regulation on the books to kind of

Thomas: [00:47:22] treat this as more of a, I don’t know, I don’t think it’s more of a national defense issue. But certainly, I think China has outpaced the US when it comes to Bitcoin regulation and adopting the currency itself as well as issuing CVECs and integrating it into their overall economy, albeit small right now. But they’re just so much further ahead. And it really makes me upset, [00:47:46] because if you look back to the dot-com bubble, the US has always been at the forefront of new technology. And it just seems that we’re lacking in that space. What do you consider the state of affairs with the US where they are presently with lack of regulation and how that may affect the overall economy as I think digital assets become more and more adopted?

Thomas: [00:48:09] Yeah, I would say, I mean, there’s a lot to digest there in that question. I think to start off on the Bitcoin mining side, we are seeing an increase on the geopolitical scale of the importance of semiconductor factories and semiconductor chips, not only for the protection of the Bitcoin network, which is probably not even in their wheelhouse of thought, but really the protection of 5G [00:48:31] and of server communications and networking chips and all of that stuff where chip technology is super important. We’re seeing the fight over TSMC in Taiwan and with China in the US and even China, the United States trying to convince semiconductor for staff factories to come over here and build in the United States because they are billions of dollars worth of infrastructure and plants to

Thomas: [00:48:55] build out these facilities. I see that race accelerating dramatically regarding countries that are coming into the mining space. We see Kazakhstan jumping in with 100 million dollar plus investments into the mining space. We see Iran setting regulations on power usage for their miners and really promoting the use of mining and using their cheap oil and cheap energy there. [00:49:17] Because what I’m realizing is that a lot of these grids are either subsidized or have these massive plants where the grids aren’t even as powerful enough for the plants or redundant enough for the plants to sell the power to the grid 24.7. They’re looking at this like, okay, we have these massive infrastructure projects we put together, but our grid project is just we can’t get the energy out

Thomas: [00:49:37] to everyone. It’s not as effective. Let’s just mine Bitcoin or let’s just use this currency to store our wealth in another asset class. That’s as you mentioned, as asymmetric returns outside the US dollar. I think there’s a lot to be said about countries and nation states coming into this space over the next five to seven years and seeing that progress and then all the way to the [00:49:56] blockchain regulation and the security laws surrounding the United States. I believe that, in my opinion, that the regulatory framework here in the US isn’t necessary advantageous for the movement of smaller capital or smaller investors coming into the space, getting some of that exposure. The SEC is there to protect the investors and to protect people from taking uneducated risks when it comes

Thomas: [00:50:19] to investing and losing their money. But I do think that we’ve seen over the past basically four years that we had been held back compared to China and some of these other places which have some more fungible and some better contracts, especially regarding mining, the ability to buy and sell hashrate directly and actually speculate on that financial instrument or that underlying [00:50:40] instrument. That is the mining rewards. There’s a lot of improvement to be made there. Also, when it comes to the issuance of tokens and protocols, we see a lot of these foreign companies really blocking off US users. Just Binance, I believe this week said no more US users. We’re going to start actively blocking you guys with even if you’re using VPNs, stuff like that, trying to ensure that

Thomas: [00:51:01] they don’t have to mess with the regulatory bodies as we’re seeing the US has a very strong reach, especially with coming after BitNex, who tried to do a good job of not being anywhere close to the United States, not really touching the US, but failed and now they’re under criminal prosecution. It’s a lot. There are definitely being targeted. There’s groups like that, [00:51:21] which didn’t really follow the rules as well as they should have. There’s groups like Binance

JohnPaul: [00:51:26] that I think are cutting people off. My guests will start to see a separation of products that

Thomas: [00:51:31] really US-based products versus international products. I think we already are seeing that today. I would say I probably agree with all that. What’s interesting though, because I feel like, I don’t feel like I believe that mining really controls the whole tokenomics of Bitcoin. Once you understand that the supply demand, the hashrate, the network activity, difficulty, all that kind [00:51:56] of stuff that goes into the mining aspect, it’s so much more than just hooking up your ASIC miner and then the way you go. You really have to treat it like a business. That’s been a really interesting inflection point learning curve for me when I talk to all these clients

JohnPaul: [00:52:10] that mine. Where do you see mining going in the next year, two, three years before the next having?

Thomas: [00:52:18] I just feel like there’s this arms race to always find the cheapest power and then the most efficient machines. Are there other things that you or perhaps other mining companies are doing to kind of differentiate yourself among the crowd to become the viable option of choice in the space? Yeah. I would say a lot of it comes down to for us differentiation is reducing the friction [00:52:41] in selling hashrate and actually deploying that hashrate. As you know, there’s a lot to be said about waiting for months to get the hashrate delivered, get the machines delivered, getting them insured, kind of providing a turnkey solution to our end clients. We see a huge product opportunity there. Also, I think adding liquidity to not only the insurance piece of the product project, as you

Thomas: [00:53:02] mentioned, in bringing in a large partner to help that’s educated, that is willing to make some, take some risks on the space and ensure these products is a huge opportunity that we’re semi- looking at. I would say the third one that we’re looking at is really the mining liquidity. So, minor liquidity and making sure that or ensuring that individuals are able to acquire [00:53:23] miners faster, especially when the market starts to shrink up and that there actually is a price you could pay for that minor, even if it does stay on the shelf and is still running in a for hosting facility, but kind of standardizing some of those contracts and that minor liquidity. We see the sites going to bigger scales, 30, 50, 100 megawatts. We see power prices dropping

Thomas: [00:53:42] dramatically down into the teens, depending on where you are. But I think a couple of those things still need to be knocked out. As I mentioned, I expect energy companies to come into the space and start actually deploying mining facilities in the next two years because they see the value of Bitcoin and that it’s not just going to go away with Bitcoin eating $15,000. I think it [00:54:00] improved to a lot of, hopefully it proved to a lot of people. And I think we’ve kind of heard this sediment is that Bitcoin isn’t dead. You might have been, might have died and back in March with COVID when it hit $3,000, but it’s still thriving and it’s now not necessarily following the equity market directly. And it has its own kind of path it’s taken after the having event.

Thomas: [00:54:18] So I’m super bullish on the space for obvious reasons and have been since 2012, 2013,

JohnPaul: [00:54:23] but I’m excited to kind of see what this, what we can do with real capital. Because that’s been

Thomas: [00:54:28] one of the biggest struggles, I think, with everyone building the mining space particularly, is the lack of access to capital to build out these large infrastructure projects, which it’s a lot different to say put $50 million into an infrastructure project. That goes really far if you want to invest that into, let’s say, blockchain projects that are working on software. [00:54:45] Interesting. Have you, have you looked into any immersion technology? Because that seems to be the new, the new fad that I keep hearing about from different people that I speak to in the space. And that seems to be the new kind of frontier that people are trying to champion. Yes. We have looked at immersion a lot. And I think a lot of people are looking at it,

Thomas: [00:55:02] like you said, really what my opinion is with, with immersion is that, you know, as people were working on it the past two years, three years, we saw that it was all about how much power you could put into the mining machines themselves. So now the power supplies in the new S19 pros are close to 3,300 watts. And we realized that as a mining community, I think the manufacturers [00:55:22] realized that as long as the power supplies were super beefy and able to send power to the chips, it’s really about how much power can I get into the chip and then exhaust from that chip. And that’s going to allow me to get the highest hash rate possible. We found that with, even with air cooling, you’re able to maintain a very high hash rate. And with consistent airflow over the

Thomas: [00:55:40] machine, you’re able to maintain that high hash rate. So when it comes to immersion cooling, the thought processes, okay, I can remove more heat from these machines because it’s going through the liquid. It does add another level of complexity, but then you don’t have the issues where maybe you have a hundred and a day degree day, and you’re running with an air cool facility where you’re [00:55:59] going to have some performance drops if your machine, if your facility isn’t built correctly. I think it’ll be an interesting run up. I haven’t seen anyone make the numbers work yet to really say, okay, this really makes sense to do. If financing is given on the on the immersion technology, because it does increase the lifespan of the units and the uptime of them, then I think it would be

Thomas: [00:56:20] a home run out of the park. I think the first kind of group people to start unlocking financing of any type of minor infrastructure and a modular sense are going to have a huge leap in front of the competition and big step forward. Interesting. So from a modular sense, are you like exploring different solutions in that front? Because the other thing I always see is that these digital [00:56:43] shovels that come prefabbed, and you know, they’re able to put a bunch of different minor machines in them, but it’s more of like a plug and play on a larger scale because if you’ve already got them retrofitted with all the machines and it’s all climate controlled and ready to go, as long as you just drop it on a pad on your facility and then you hook it up with the power and the internet,

Thomas: [00:57:04] away it goes. Are there any viable solutions out there for people that want to buy like, you know, in mass scale a certain amount of minors where it makes more sense to just buy a container full of them that’s already retrofitted with all the climate controls that they would need? I don’t think there’s a product right now that is as turnkey as you’re mentioning, [00:57:21] because there are a lot of different components when you’re connecting a power such size of two megawatts, you know, about 4,000 homes worth of power into one area. So there’s a lot to be said about making sure you have the right transformers and switch gear connection to make sure that work. But then I do think will happen as the industry progresses

Thomas: [00:57:40] Thomas over the next say five to 10 years. I think the price tag right now of a minor is $3,000 per machine and we’re seeing that, you know, everyone follows the standard shoebox model. But my opinion is that as more capital gets invested in this space, we might end up moving to some bigger computers. Interesting to say the least, like, you know, how IBM used to build [00:57:59] computers that were full size rooms. We might end up building full size containerized solutions that are full of ASIC chips that are instead of a bunch of machines that are individuals. They might end up being larger boards that are either in immersion or that are, you know, air cooled through a container design where you actually have a massive DC power supplier,

Thomas: [00:58:21] a massive power supply that powers, you know, equivalent of 50 miners or 100 miners at once. And those those boards are instead of being small boards, they’re built out, you know, like massive boards that would be produced in almost like a Tesla factory of some sort. So I think there’s a lot to be said about as the capital comes in the space to develop infrastructure [00:58:42] and to improve the process of us actually going larger compared to the smaller units that we have today of the S19’s, you know, individual size units. And that would be in that case, you would buy a full 40-foot shish given shipping container, which might be, you know, one exohash of hashrate by the time a product like that is out. Okay. All right, cool. Well, you clearly know

Thomas: [00:59:02] your industry. That’s for certain. That’s, uh, that’s pretty much all I got unless you get

JohnPaul: [00:59:08] something else for me. No, I appreciate the time Thomas. This was an amazing opportunity to learn more about the insurance side of the business and just to talk mining. And I appreciate your

Thomas: [00:59:17] questions there at the end. Hopefully they provide some guidance and feedback to the listener. So Thomas, where’s the best place for people to connect with you after the show? Probably email. It’s just Tom, T O M at my last name, shoe truck, S H E W C H U C K dot com shoe truck like the shoe on your foot and you chuck it. But I’m always on my email. And then my Twitter handle, which I don’t [00:59:41] really use that much, but I do, I do kind of troll and through their news. I’m not a troll on online. I just, I troll through news. I’m a passive Twitter user. I’m at a cryptic risk. That’s my handle. Yeah, that’s pretty much where most people can find me. If you can’t, then I don’t want to

JohnPaul: [00:59:59] be in touch with you. Well, thanks again, Thomas for coming on the show at cryptic risk on Twitter

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