How Hive Digital is Disrupting the Bitcoin Mining Industry with Frank Holmes

facilitated over four billion dollars in transactions. They're putting titles and deeds on chain. They use Coinbase for their crypto escro service. So this is a great platform and once again they are ahead of the curve when it comes to putting real estate on chain. And they just launch a great campaign where you can earn some of the propy tokens, and it's simply by doing tasks such as sharing their vision video, signing up and inviting a friend, and much more so. If you'd like to learn more

about Propy, visit the link in the description. Welcome into the Thinking Crypto Podcast. I'm your host, Tony Edward, and my guest today is Frank Holmes, who's the co founder of Hive Blockchain Technologies and also the CEO and CIO of US Global Investors. Frank, great to have you.

manufacturers globally gold mining? And you start to realize it takes you down other paths, and the gold space led me down to bitcoin, and in two thousand and fifteen, I launched the first thematic what they call smart baita two point zero it's jets etfrom the New York Stock Exchange to capture the global airline industry. Because I was traveling all over the world. I want something to so how do I get my money back? And all this money I'm spending traveling And so I recognized that something

was happening in the bitcoin ecosystem. I went to Consensus in twenty seventeen and I remember vividly Abigail Johnson, the CEO of Fidelity, was speaking at the conference and was talking about bitcoin mining and blockchain why was so important for the backbone? So I'd done work prior to that and said, okay, well, let's see we can launch a bitcoin etf Because I launched the jets well, I realized quickly, at one thousand dollars an hour legal bill, it wasn't

going to go anywhere. And I went to Canada and the same thing. They were basically anti bitcoin ETF, and fortunately it didn't really occurred last year that it finally got launched a bitcoin ETF. So I launched the first crypto mining company called Hive Blockchain Technology, and then subsequently changed the name to High Digital Technologies because you realize

you're really in the data center business. And I'll give you more color on that, but it was the first crypto mining company, and when we went public, we had some basic value vision statements that we made and that mission was to be green only. So we launched in Iceland and then we went into Sweden, and then after the first halving, we came into Canada in Montreal, and then we built a big campus using eighty megawats on the border of Maine and New Brunswick, so we're only

using hydro electricity. And now we've grown to Paraguay where we're going to increase our production profile from six exa hash to twenty five over the next nine months. So we function in nine time zones, five languages, and I'm so proud of the team, Tony. We keep showing up in anthipower as the most efficient bitcoin minor.

has some better properties around it than gold itself. And was you know, maybe when you heard Abigail Johnson or what was your first encounter with bitcoin and when did it click for you? What was your aha moment?

There's another metaverse and and exploring and discovering the metaverse of crypto was so shocking to me, Like I feel like I was kept in a cave of how it was evolving and learning that there's thirty million kids around mining ethereum with their GPU chips and when they went to bed, so you had this incredible ecosystem before they went from proof of work to proof of steak, which was the disaster which but back then it was interested to see these kids were gamers go to bed mining ethereum.

I had a paper route. I slept papers in the snow in Canada in the seventies earning money. And these kids are all of a sudden mining ethereum and they found a way at the age of twelve years old to get cash for it to upgrade them by a

new computer system. So they had the exchanges have been created outside of the normal regulative world and methodologies to crystallize in transform this transformation of something digital into cash to be able to upgrade a computer that was an odd to me, and I became so accelerated in learning what was going on.

That's going to happen with gold. I know that I was a fun and was an early investor in the creation of where you make that attachment like an NFT, but you actually have a piece of art that's transferable into one gram of gold that can digitally be sent around and you can make a claim on it somewhere else. So that technology will evolve, and I think probably they're going to become where there's one on one is eleven.

I think the whole idea that when people don't realize and all these people buying the bitcoin ETFs Ria is recommending them, they do not know often that one bitcoin is worth one hundred million satoshi's and if they go and buy a penny stock, they might as well just go and spend one thousand dollars and buy one thousand dollars of total h ODL, which is van x bitcoin ETF on Robinhood, and they've got a million satoshi's and when that satoshi hits a penny, that bitcoin is worth

a million dollars. Well will that happen? We found from our bitcoin inventory that some of us A tootions were very valuable because of their number sequence at the time that they were mine, and they were worth ten dollars. So when someone said to me that bitcoin go to a million dollars, is it easy? Because it just has to be at a penny, it's worth a million dollars. So the math behind that is Metcalf's law, which basically says that if you have supply limited and demand grows,

the price will grow exponentially. I know this from my resource expertise in the diamond world. Did you know that after World War Two only three percent of Americas used a diamond to validate a commitment for marriage. Only three percent is now eighty Because the beers influence, but they control the supply. It wasn't capped the twenty one million coins until the Russians that are flooding the world with diamonds. The de beers had such a monopoly that they grew

eighty percent adoption. Then in the sixty five they went to Japan and did it all over again. So what happens is that scenarios shows up in the world of art. If you have one of Picasso's original prints of one hundred, or you had any warholse thousand prints of Mao that came out of one thousand dollars, they went up to fifty thousand dollars because the supply was limited. The adoption and the growth of China and the adoption of any

who art it grew exponentially. Well, this makes it very easy and understandable why bitcoin using Metcalf's law will grow exponentially. What other important laws are there are like Moore's law that says the engineering and the cost of a chip is going to drop every couple of years, and therefore it's more affordable for more people and that's driving the

technological evolution. Well, you have these laws that are very important, but never forget Murphy's law, because you just don't know when you would think that this year of bitcoins should be on a terran has gone through a correction, So Murphy always shows up.

a big benefit for Riot coming into Texas. We were doing this in Sweden and first to recycle electron of energy from a data center into a manufacturer building and save that building as one hundred and seventy workers, saving them three hundred thousand dollars a year on their electrical bill. So with that what we found because we have hydro, Intel reached out to us to create the first AS chip with them and it became the buzz Minor. Then

they got out of the business. They had other problems of our enough R and D to compete with Nvidia, but were they approached us and inn Vidia allowed us to buy GPU chips that were also used for AI other bitcoin miners that were only miners bought in Vidia chips.

They could onwly mine ethereum. We had the ability and the skill set of mining ethereum, and when Ethereum went away from proof of work to proof of steak, we were able to repurpose and start using our GPA chips for AI adoption, and that business is growing slowly and nicely. We see many people coming out and raising a lot of money in the bitcoin mining get into the HPC realm. The million people that we see successfully have done it has been Core Scientific and that's part only because core

Weave is funding it. It's very expensive for your listeners to understand one megawater of electricity for bitcoin mining is going to cost you about a million dollars of infrastructure spending. If you're going to go to high performance computing what they call Tier three, it's a minimum ten million dollars

of infrastructure spending excluding the chips. So last week when I was at at the Blockchain Summit in Washington, Cambridge Analytics at the University of Cambridge had a study and they said the cost of transport going through the transformation of bitcoin mind to high performance computing for AI is thirty three to one, it's a much bigger spend. So what did we do that was unique. We put our chips on bare metals platforms and where coders could all

of a sudden rent them by the hour. They don't have to be locked up and long like on demand supply, and that's what we've been able to provide, and we continue to buy more Nvidia chips and we're now we're going to start building our own data centers that are only high performance computing. But to get the same revenue for one hundred megawat bitcoin mining facility, you need only ten minute megawatts for high performance computing, So this ten to one ratio is important to recognize. But the chips

are much more expensive. You're spending thirty five thousand dollars for an Nvidia chip, not three thousand, five hundred dollars, So it's for investors to recognize there are big differences. And then when you're tech technician mining bitcoin, the skill set is very different than GPU chips. It's like driving a Bronco truck versus driving a Ferrari. The engineering, the skills, the temperance like the Ferraris always have to be brought in for updates and checks et cetera. Are Broncos rugged

and that's what ACE chips are like. They're rugged, and that's the big difference that you see. But for us, we're so excited about what we're doing, in particular in Paraguay, which I want to come back to, because we are balancing the grid in a different way Tony. In Sweden we are able to hedge and give back the energy whenever there's a spike in the energy, go from thirty

megawats to three and fifteen seconds and back up. But in Paraguay they built the biggest dam with Brazil in the western hemisphere, and half of the electricity goes to Paraguay and the other goes to Brazil. If Paraguay doesn't use the energy, it all goes to Brazil. And so they were taking this energy and they were selling it to for a slight markup to Argentina, and Argentina was a disaster till Malay came in and it was no paid, so it had a huge fiscal strain on the government

running their business. And so now we've seen Malay give back some of the money. So they went from no pay to slow pay. But bitcoin miners that get paid every month, so it allows them to get US dollars every month, and it's an embedded currency hedge that no bank has the capital base to do except for bitcoin miners. And when we come in we help build their infrastructure. We take this raw high voltage power which would blow out any normal hair dryer and toaster, down to low

voltage that we need for these data centers. And that that's fifteen million dollars spend. You know, that's a big spend, but we help the economy, we help the country. We have now employing three hundred some odd people building our data centers out. We're already starting on turning on some of the machines and we'll have a material number next week.

That's what we're hoping for as machines come in and the wires come in, but they're is sort of the exciting part is that we'll become the biggest user of electricity for the end. It's called a utility owned by the government, so we'll become an important balancing of the grid for them in a different way than we're balancing the grid in Sweden. Wow.

They're decentralized, so no one government, no one country, no one central United Nations controls the price of gold, and so central banks use gold as a medium the same thing as with bitcoin. The big attraction with bitcoin is that there's one hundred and ninety five countries, one hundred and ninety five central banks, but there are now over

twenty thousand notes around the world. And you've got to think of it like the old imagery from watching Star Trek or Star Wars where they have a force shield around them and missiles come in and the force shield sort of bends and then comes right back. It bens, it comes right back. That's the big point force shield around the world. And so China blows everything out and it bens. The prices come down and difficulty comes down,

and that comes right back stronger than ever. And who it made it stronger was America, in particular the state of Texas. And so when you start going down the path of what is gold, what is paper money, when you start realizing it all started with the Magna cart in twelve fifteen of where private property rights led to human human humanitarian rights, and whenever in the past thirty years they've taken away private property rights like Venezuela, they've

taken away human rights. So really they're connected. Private property and human rights are really so cemented together. And the evolution of private property rights really grew with common law, not with civil law. It grew with common law. Patent law was important. It came from common law and civil law copies which takes place in common law China built their stock exchanges based on common law rules. They the only way to attract capital if you go in downtown Dubai,

which is civil law, sharia law all around it. They create a square mile which is common law, and that is the best property rights. So the idea of bitcoin really comes out of the concept of private property rights like gold. So I have cash in my wall, in my pocket here and this is my I have had property, this is mine. It's in my pocket. When I put it in the bank, all of a sudden, I don't

have total control. I've lost my private property rights. If they want to shut down or make it difficult for me to get my ATM working, the card doesn't work. So recognizing what is private property in a lot of parts of the world, it's the gold Bengals. The women that got out of Syria the first just took off their twenty four carroc gold and they got out. That was their portable wealth. The same thing with Vietnase people,

the boat people in the seventies ago. First they call it a gold tail, a grammar gold got them out. That new ticket out of an oppressed country will be bitcoin because you're able to protect it's more portable than gold. It's but it's not as pretty as gold unless you make the bitcoin design and logo. But gold can be made into so many beautiful jewelry and images, especially when you go throughout India. Every state in India has its

own unique design, but it's all twenty four carat. And so I think that what we're seeing in the evolution of the digital world is that bitcoin, no doubt, is the critical element. And the blockchain with which I'm giving a speech next week in Paris on it how it was Looking back in time with ninety one is when two professors are basically Bell Labs. Bell Labs basically invented blockchain as digital timestamp. They went nowhere and along comes hashing power to try to stop spam by doctor beck As,

a cryptologist, which is really fascinating to watch. And then we have a big gold by another cryptologist by Nick Sasbol, but they really they just are stepping stones. And then we have Napster, which shows the power appear to appear. And then we have the Defense Department the US on Lisha shaw to fifty six, which is the encryption that's used on your cell phone for facial recognition. And then we get a ha moment. Bitcoin. Now what's really important

for your listeners? And I know this from my global investing five years before bitcoin was released in January of two thousand and nine. Before that came a technology called Mpessa and Impessa was the telecom wanting to find a way to bank the unbankables in Kenya and it exploded like it's more than ten percent of the GDP of Kenya today. I was with a driver in London six months ago and he was telling me how he uses

it to send money to his family. He has paid him at being a uber driver in pounds and he's able to easily convert to send it down to Nigeria. Another drivers tell me in Ghana SOPs it technology, which shows you the idea of digital timestamp. You realize the real biggest centers of money in the world are telecom companies and banks need the telecom actually to make it work. But they've been trying to stop the evolution and the

adoption of bitcoin. The bank lobbying groups in the US have had a major, significant political influence of harming the adoption of bitcoin. But I think we're going past it. We're still going to have this volatility. I agree with Abigail Johnson that blockchain, all stock settlements should be on the blockchain, all federal financial disclosure, et cetera, to be on the blockchain, that the confidentially between the two parties is there. But as all time stamped and an open ledger.

I think these are all This adoption is in full speed, and Bitcoin proved it. All the other crypto coins is all because of Bitcoin.

have these nodes everywhere in the world validating. You need to have this decentralized mechanism. And I think what's going to happen is that Paraguay will become the most dominant place in South America and robob you're going to see

in East Africa. Ethiopia is doing everything to be part of the cryptal mining ecosystem, and I think this is really important that America and Europe is going to be, Germany and Sweden and Norway are going to be part really key for this ecosystem to continue to evolve and new technology will come along with it.

I mean, that's incredible. So the value of that number goes from point zero zero zero sixth sense to all of a sudden worth ten dollars because I'm emotionally attached to that photo. Well, someone else is in Prague, and another person is in Buenos aias another person is in Singapore. They're all having these emotional moments, and those emotional moments all of a sudden can be locked in time and

digitized at a specific number sixty four digits. I think is very exciting and only makes the network more valuable, especially when you think of moving grams of gold.

We have the lowest GNA to minor bitcoin. We have the highest revenue per employee mining bitcoin, and we're very frugal of how we manage the operations, and that sort of lends itself into the bitcoin mining and putting it on your balance sheet, because there's a time when you have it. So we had in our balance sheet and

it grew. It was sixty percent year over year. Each month, it was growing, growing, growing, and we're expanding into for one hundred megawats into Paraguay, and all of a sudden bitfarms opportunity came in that not only are we going to go one hundred megawats, we're going to attack on two hundred faster. So we would use and souls for a bitcoin at one hundred and one thousand ninety some one thousand to be able to lock up and get that transaction, and it worked out well. You know, we

all of a sudden now have a growth plan. I'm not going from six to fifteen mega exa hash, We're going to twenty five and we have the strongest growth profile and it's different than these other cryptal mining companies have been doing all these convertible notes to buy bitcoint that's for me. That is the brilliance of Michael sailor for micro strategy of Michael Senter is done. But all of a sudden, all the other mining companies getting into that realm. Only've done for me is create shorting on

their stock. They do these financings and now you say, well, we did Severn fifty million dollars, so if they had to go buy back stock because people are shorting against the position, and most of these guys are offside now that they were buying the bitcoin. And so every time there's sort of been binge buying going in of a debt. And you've seen this when they're all going to Celsius to borrow and other groups at fourteen percent, it dismantled argo.

It really hurt many of these crypto mining companies. I've never done that. Every crisis that happened from Celsius to Ethereum going away to sambankment and FTX blowing up the industry, they're that six month period. We still have operating income because we run this operation what we think, so we're being contrarian. We turned down doing a convertible note to go buy more bitcoin we said no, we believe in bitcoin.

That's why we're going to buy more machines from all the providers, and that's why I've been able to We're not going to do these convertible notes to buy more bitcoin. We would sell some to research footprint, and then we can replace it very quickly at our balance sheet. So that drives the highest cash, low returnal and investor capital model of all the crypto miners.

a torque on the upside. That's roughly what that model is, Michael Sailor being the first to do this on a scale. And then all of a sudden you see an ETF created with Tesla, a single purposed ETF with Tesla, And what does that single purpose ETF do? And just covered writing? Because Tesla is so volatile, money comes in. They merely sell twenty day calls. Twenty day calls, so the income coming back to that investor is two percent a month,

twenty four percent a year, sometimes higher. So Tesla goes down, but they're still getting this return capital and they put that in their four to one K or their IRA and they're getting this this income coming back basically tax free. Micro strategy does it too? Well, what does this really mean? Well, it means that when a market maker has to go and and go short because he's going long the calls,

he's forced to do the cover writing. It creates more trading and then they go borrow from the ETF, So a lot of these atfs will lend out their stock that money's gone into, so it's all a borrow game and it's all trading off of basis points. Well, Michael's strategy has so much more liquidity, just like Tesla has so much more liquidity. I think the only company now has been Marathon has been able to get some time of a product, whether money's going in to do the

cover writing program. All these traders are trading between various pools of capital they call the dark pool, they call the list of NASDAC pool, and they're trading for basis points in between all these markets as arbitrage that's going on, And so what investors have to realize is they're often leveraged eight to one. Well, some of these funds that are leverage eight to one, they can only handle volatility

a three to five percent and they're out. They unwind their position, so Bitcoin starts to sell off of it. They sell eight times, and so you get this greater downfall. And for me, it is frustrating because we're falling with bitcoin prices and but we're growing our revenue, we're growing our peti hash and so we're funded so I'm very happy where we're positioned for that growth. But we do see that the that we're being used as a case.

So some of these funds say, let's take ten crypto mining companies and we'll short the whole basket to buy this convertible note. That's what's going on, and it's very different than micro strategy, which has a big and dollar ETF that has much more liquidity around it for him to go do his funding.

are a precursor to change. Thus we monitor and track basically the g If you look at the G ten countries based on GDP or population, they will move markets around the world. So you have to look at either fiscal or monetary policies. When we see there's a trade war with tariffs, that's a fiscal policy. Historically, when this starts to take place globally with the G ten countries, then the global world starts to shrink in trade and it's trying to find a balancing until all of a

sudden it changes. This cycle under President Trump is driven differently than in the thirties. In the thirties it was driven by farmers. Farmers had a big say in politicians and voting, and they came when the Hootsmaal teriffs and it creates this tariff war, and everyone in the world hated America for a couple of years. Then they had to redo it all and they start getting back, but it takes long to rebuild those relationships, and so We are just in the vortices of this sort of downdraft

of people trying to figure out what will it. Trade warfs mean, is a legitimacy to it. Who's behind this in a big way are unionized manufacturers. You saw when President Trump spoke this week, he brings on the union bosses to talk about what's happening in manufacturing. So this is political, there's a rational reason behind it. How it's delivered is not for me. I think that how you treat Canada versus how you treat China as the same

blood hammer is just not good. But it is what it is, and it creates this sort of unwinding in the capital markets, which has impacted bitcoin prices. Because bitcoin has now gone mainstream with ETFs its recognizing that transition of coming into this ecosystem. So I think the adoption will continue. I think when we get stability on the teriff dilemma of where things are, that all of a sudden,

other governments will start to acknowledge that. In the interim they continue to buy gold and the financial calamity, we'll continue to see central banks buying more gold and gold is far ow performed this century. The s and P five hundred and gold has been accepted since they create the GLD. The bitcoin ETFs are unprecedent how fast they grew in the acceptance of them as an asset class. But I still think it's just we're going to have to get stability on the tariff dilemma before we get

stability on bitcoin pricing mechanism. Then we'll get govern So I believe it will happen. I believe that we'll start to see other jurisdictions. You're seeing now Europe raising almost a trillion dollars to create their own military manufacturing regime because of the statements made by President Trump. What we've also seen, in a very quiet way, index owners in Europe have changed the index holdings of the Magnificent Seven because of market cap. They grew so big they automatically

signal they can't grow more than eight percent. There can't be fifteen percent of their indexes for all their pincher funds. So there's been selling. So we're now feeling that selling pressure in the stock market, and so it's just a reset button we're going to go through. I don't think it slows down the retail the coders and the big point eCos. I don't think that that gets stented. I think the use of AI, of how they can make data centers better, how they can do the nodes better.

I think we're going to see that become more granular. It's estimated the next five years that we're going to go from which opened up the concept of AI for everyone from these open generative use the Internet, so they thinking all the data just from the Internet. What's happening is they're going to do nothing but law, nothing but

medical research. There's nine hundred types of cancer. They're going to become focused and you have become a data engineer on an expert medicine for one of those cancers using AI, and you will take all the research papers, et cetera, start building that database. So we're going to see a huge growth in data engineers. Besides data scientists making a lot of money today is going to be the builders,

just like bitcoin datability these days, we're builders. And what I share with your readers, you got to think about there's no one central government, but we the people investors putting money into Hive have built these data centers for this decentralized mechanize in the world Hive has been the leader in being all over the world. We're not just

in one state or country. We will now look to go into America because the government's policy under President Trump are not vilifying anyone in this in the crypto ecosystem unless you're a bad actor. The laughter you and I think that's great, But overall they want to attract. Texas wants to attract, So we'll look for opportunities in America. But until the stability was here, which is now, we have gone all over the world and we are part of decentralized bitcoint mining and I'm proud of that.

We're already doing that right now. We're putting air conditioning in a school near our data centers ninety degrees fahrenheit and there's no air conditioning, so that's one of the first things. So that helps overall educate people, so that more people are educated, more people are having a GDP per capita that allows them to feel they can enjoy

the freedom that bitcoin provides them with. The last thing I want to share you my journey was realizing in Argentina, which is so close to Paraguay, is that Argentina in two thousand and two confiscated all your bank accounts at US dollars and they still haven't given them back. And that allowed for tether to grow in many countries. So when you went there, there's no foreign currency exchange. Banks will not they will give you paesels at a very terrible rate, but you have to go in the street

and they'll give you much more. That whole economy has stayed alive because of twenty five big dollars of cash and pillows. And it's recognizing that. And the last part in that the idea that it's going to evolve with Malay in a very positive way. But coming back to Paraguay for your listeners, Paraguayans love Americans. I'm going to repeat this. Paraguayans are not Morduro from Venezuela, They're not

Pedro from Colombia. They love America. And why is that because there was basically ninety percent of the men were wiped out in eighteen seventy when Brazil and Argentina and Uruguy were trying to take over their rich land of soil, and President Hayes in America solved that problem and Paraguay to this day celebrates as a national holiday of November twelfth, and one of the richest state in the country is Hayes. So they are there today because of America.

about his simple books. It's easy to read. I find he does a great job of making a look at the world differently. And I quote a book that's called The Wisdom of Crowds. John Sirwaki wrote, it's a wonderful book about one or crowds. Wise, I'm one or crowds foolish.