CVA Podcast: Ibrahim Alkurd, New Mine

Transcript

[Music] hello hello this is your host tras ahmed ready to kick off another bite-size episode of the crypto valley association podcast now let's discover together the growing trends of this fast-moving space and try to shed some light on the mysteries it contains today we are joined by ibrahim al-kurd ceo of numin who focus on deploying enterprise level mining operations to the use of sophisticated hardware infrastructure and software so let's dive straight into the hidden world of mining ibrahim happy to have you with us today how are you doing good thank you thank you for having me ah my pleasure so maybe let's let's dive straight into this and you can tell us a

little bit more about your first blockchain related experience sure so i got into the crypto world back in 2015 and had a friend tell me about it i was super interested in the industry and started really reading up on it and then i noticed that there was a huge opportunity in arbitrage trading between different exchanges you know the opportunity nowadays is not what it used to be but that's how i got into the space and then through that and through the people i met i ended up launching new mine in 2016 and that's then i got into the world of cryptocurrency mining particularly bitcoin mining started mining uh through our data centers in north america and then we provided a service for for miners and now we've been around for four and a half five years doing this

and uh what we love to do all right great great uh great picture here and maybe before we go go deeper into that maybe you can explain to our audience in the simplest of terms possible what what cryptocurrency mining is sure so if we if we focus on bitcoin when you send a bitcoin transaction from one wallet to another wallet you attach a fee to it okay and essentially what the miners do is the miners take that fee transaction fee and they verify the transaction to make sure that everything is legitimate and looks right so actually the miners are super important because they secure the network and if they they're one of the fundamental pillars of this space in fact without the miners proof of work blockchain protocols

cannot run so it's something it's quite a hidden area of the the crypto world and it's kind of in the background but it's super important uh for the uh long term success of it okay okay so you're not actually going into mines in manchester with your pickaxe to like find digital currencies well no absolutely not but actually that's uh that's the analogy we give gold if you want to mine gold you need the machinery to go into the ground and get it out and it's the same if you want to mine bitcoin you need the computers to be able to mine it so that's actually a pretty good analogy okay quick this is quite interesting actually and so so tell us more about about new mining sure so uh we uh the two kind of main pillars of the company one

is that we manufacture and source cryptocurrency mining machines and then we host them in places with cheap cheap power so particularly we're focused on hosting in north america places that we have sites to host that include washington state uh north carolina labrador city and canada you know poland all over north america essentially and we like north america because the regulatory framework there is very friendly so the machines are very secure there in comparison to other parts of the world and uh you can get some really good power rates that are you know competitive on an international scale so we've we've found that north america is a great jurisdiction for us to work there and work there with our clients okay well great great to hear and so from what i know china is is quite a big

powerhouse for for the mining industry is that true yeah so actually it's estimated that around two thirds of the the world bitcoin hash rate comes out of china um the reason that i'm focusing on bitcoin mining is because majority of large-scale cryptocurrency mines in the world are mining bitcoin so if we delve into the details there there's essentially two classes of machines in the crypto mining world one is asics so an asic machine can only mine one coin uh and nothing else for example bitcoin machine can only mine bitcoin a bitcoin asic machine sorry i literally machine can only mine litecoin and then the second class are gpu rigs graphics processing units and these they can mine

a versatile number of coins uh so ethereum or any of the other alt coins that are not asic resistant okay and so what about cloud mining then so cloud mining so the difference between us in cloud mining is that in cloud mining you're buying a contract that gives you a particular amount of hash rate when with us you actually own the underlying asset you actually own the machines so i i am not aware of any cloud mining contract that's been profitable long term so any serious miners they buy their own machines and they host them uh what i always say is if it was more profitable for these cloud mining companies to mine themselves they would be mining themselves right they wouldn't be selling you a mining contract so my advice to people that want to get into crypto mining or thinking about it

is to actually own the machines and own the underlying asset because that will bring you up on top in the long run okay but so then what would be the the fixed cost to get into uh the mining space right because i mean owning a large rig would cost in the millions i'm sure so how could a small player get get into the space yeah so owning a large data center can be in the millions but what we usually do to make it the the bar entry lower for our clients is that all they need is a minimum of one machine to get started so we actually host this their machines with other clients what it means is that they can then capitalize on the low electricity rates and the facility whilst not needing to buy hundreds or thousands of machines so it depends on which machine you want to

buy if you want to buy an s9 which is the older generation of bitcoin miners that can cost a few hundred dollars and then if you want the latest most efficient machinery the s19 the s19 pros you're looking at you know well into the thousands so five six thousand for a machine and the other important thing to note is that the the price of the machinery in the space is dependent upon the price of bitcoin right so bitcoin's price goes up 2x generally the price of the machine doubles because then the machines are twice as profitable to run so um this uh it's an important consideration we're getting into mining what people usually do is that they order several months in advance so they can capitalize on better rates of the machines because if you were to buy machines and you want them asap you're not going to

get the best rates in the market okay okay great and so can you tell us a little bit about how your business was impacted uh by covet yeah so uh curve is unfortunately lasted a lot longer than any of us expected actually we planned to go to the world economic forum this year right but it's been cancelled unfortunately look cryptocurrency industry is one of the rare industries that's actually benefited i believe from the the pandemic so i think there's two things that really caused this this bull market in 2020 it was the pandemic because of all all the quantitative easing that all governments all over the world did and it was also the the d5 decentralized finance hype that came about and these this all you know accelerated the adoption of

cryptocurrency so at first we were impacted in that it was harder to transport machines you know we get up we transport our machines from china to the us so it was hard to get flights and everything but once things stabilized by by summer you know i think overall we actually benefited from it okay wow that's interesting and so do you believe uh the current rise that we've been seeing within the markets uh has been due to to cover it or due to the harboring them so partially more due to cover that i believe than due to the to the harvening uh so speaking of the hardening it's uh essentially where that the block size halves every four years so before it happened earlier this year every 10 minutes 12.5 bitcoins were circulated between the miners in the

space now 6.25 bitcoins uh circulating the miners in four years time it's gonna be half of 6.25 so it's definitely had an impact you know it's very this this market moves on uh supply and demand right so because now the supply is lower the demand is going up it's going to impact the price i think it's multifactorial all of these things have played a key a key role in the all-time high bitcoins price that we're seeing right now pretty sure i know you know we've all been blown away by how much it's it's uh shot through the roof recently yes that's it's quite it's quite crazy at the recording now i think bitcoin is around 38 000 which is which is honestly uh quite uh quite insane now okay so that there's often this this fallacy

that is said that mining uh takes a lot of energy and power how do you defend yourself when people people say that it's just not sustainable yeah it's actually something i've heard you know several times that our cryptocurrency mining is so bad for the environment you know it does it does need a lot of energy there's no doubt but the majority of the majority of uh cryptocurrency mines outside of china at least run on renewable energy usually hydropower i know that all the sites that we've uh deployed mining approaches at north america have utilized hydropower so you know it's environmentally friendly it's good for the local economies because a lot of these mines that are built in places that are can be quite remote so you're actually

stimulating the economy creating jobs uh so actually overall it ends up benefiting the community and not damaging the environment we've uh we've never actually you know run a mining operation that's powered by coal today okay wow that's that's that's quite a nice a little factoid there there as well okay and and so you mentioned a little bit about proof of work earlier on can can you tell us maybe a little bit more about what proof-of-work is and then the other protocols that are out there like like mistake and and why there are some uh firms that are moving uh towards the proof of stake sure so uh ethereum as a lot of people know is working towards moving to a proof of stake protocol and you know one of the reasons for that is due to scale scalability right

and that you can only get so many transactions with the current block size of bitcoin for example right the current block size of bitcoin is one megabyte which is i believe only can fit a few thousand transactions right but once you move to a proof of stake protocol then you can increase that and be able to have more transactions per second now uh the way the proof of stake works essentially is that you have a minimum number of coins so with ethereum if you want to stake your ethereum i think it's something like 32 coins and then you stake them and essentially generate more ethereum as a result of that so it's essentially swapping out the miners for using your crypto to verify transactions and thereby get

more crypto and i think that i do not foresee bitcoin ever moving to a proof of stake protocol it's completely different to something like ethereum but i actually think it could be really beneficial for for something like ethereum you know bitcoin and ethereum have different purposes what i like to say is the bitcoin is a digital gold ethereum is oil because it has so many use cases right just like the oil you can make plastic or fuel your car there's a lot of use cases ethereum and then something like litecoin is a digital silver and you know these are by far my favorite three cryptos in the market there's a reason they've been around for so long and they're most popular because they you know stood the test of time okay that's very very interesting do you think we we may see at one point in time kind

of a hybrid between uh proof of work and proof of stake come into play i'd be interested to see it it would be very difficult to execute in my opinion i'm not sure what kind of would be the benefit of that have you had anything no i i think it's just about you speaking about the scalability right of bitcoin and the reason for ethereum moving to uh to proof of stake being being due to the fact that it's not so scalable within proof of work but potentially having some confirmations being approved by a proof of work and then having proof of stake working in some sort of a hybrid to get both the pros of both in tandem but uh yeah just just interesting to to see if you'd had any thoughts about that

yeah i think look it's either one of the other i don't think this is the sort of thing you can mix and match you know uh yeah either have to choose uh proof of work protocol or proof of state okay great very very interesting uh to hear and so maybe you can tell us a little bit more about you have operations uh internationally more northern america how would it work if somebody is is mining abroad but they're based in a certain uh certain residence do you have these kind of questions that come up with regards to uh taxation revenue and these type of things yeah we for sure do so let's say that someone is living in the netherlands for example and they're mining in america because they're if they're living in the

netherlands their tax residence is there so the tax implications are as as a resident there right there's nothing that's taxed by the us government for you mining there right because all you're doing is essentially using the hosting companies there to put your machines and you know that tax is always a very important consideration for people wanting to deploy large-scale mines but usually it's the jurisdiction that you live in or that the company is based in registered in the you know that that that's where your implications will be okay great how did you hear about that and so when we're talking a little bit about mining in terms of uh collectives right so this is common word called pooling right so so people pull together

and so they're able to mine and they share uh they they share the the profits among them can you tell us a little bit more about how the concept of pooling came into play within the mining space and maybe a little bit more about what it is sure so what happened was as mining got more competitive uh what people did was they started working together so a pool is essentially a group of people that are trying to solve the block as fast as possible right so the person that solves the block the fastest is rewarded with the bitcoins or whatever cryptocurrency that they're mining so what happens then is that the that pool of people then distributes distributes the cryptocurrency between them so what it does is that it can increase the amount of profit you generate because

when you're working with other people you are more likely to mine the blocks and you know get the cryptocurrency you know similarly going back to the gold mining analogy it's kind of having like a team of people you and your friends mining together people that you know and then the gold that you find distributed between you guys but the ways distributed is dependent upon how much work you've done right so if you in the pool you're contributing 20 of the hash rate you're going to get 20 of the rewards for that so it's a very fair way of doing it it's every single client we set up that's mining uh users you know joins a pool there's a lot of pools if you go into google you type in uh bitcoin uh mining pool ranking it'll give you a list of

all the pools and also tell you what percentage of the network cash rate is coming out of that pool so uh there's there's a lot of kind of uh big ones actually most of them are out of china china really does run the monopoly in the mining space and the reason for that is because it's two things that china has that that you know is in its favor it has very cheap power it's got cheap labor actually three things and the third thing is obviously it's a massive manufacturer electronic uh computers right so all the machinery for cryptocurrency mining is out of china right now is produced there so you know those three things combined together to make china super house for mining but we're definitely seeing you know some people shifting

towards north america towards europe from china because they're worried about the regulatory problems that may arise in the coming years you know we've seen that governments now for example the sec is cracking down on cryptocurrency and they want to regulate it and we still don't know kind of what might come out of out of china in the coming years okay interesting so are you not a little bit fearful with regards to this kind of monopoly oligopoly that you're talking about with regards to uh china having a lot of the control uh over the of the mining hub you know i think it's unfortunately something that is in this space as a whole right a very small minority of people control the raj percentage of the wealth and it's the same with with mining you know people that started mining earlier have a massive upper hand but you know people that

started mining later that there's there's a the threshold for the mining profitability is constantly being raised and this is kind of why not not not many people know much about mining that's what we try to do a lot of what we do is educating our clients about the space and holding the hand throughout the process because you know if you don't have a company that's experienced in the space it's very easy to get screwed screwed over but yeah as i said you know the monopoly thing it's part of the space and there's nothing that we can do about it unfortunately okay well thank you so much for that part and then so what about the future of the mining space as a whole yeah so i think that as long as proof of work cryptocurrencies are in the space then the mining is necessary

i don't foresee you know bitcoin ever moving to to a proof of stake i mentioned before so you know i do see miley been around forever for as you know as long as bitcoin is around so that's good for us you know it means that you know we've got a long-term business model we hope but um that you know as i mentioned before that you constantly it's getting more and more competitive to mine and because the block reward is constantly halving every four years people are going to have to have more efficient machinery cheaper power what we're going to see as well i believe is right now data centers where the machines are hosted are air cooled so we're going to see data centers moving towards immersion cooling that's the next technology in the space emission called mining computers essentially are put in

a dielectric fluid so the fluid circulates around the machine and what this does is it keeps the machine a lot cooler so you can run it the higher hash rate it's less likely to break down so that's the next kind of layer of technology that i see the space moving to in the next three or four years actually right now people are deploying emotion called bitcoin mining machines but um it's not very cheap right and as it gets cheaper it's going to become more popular okay great great great to hear so before we we end up closing up here there's another question actually came to my mind what are your thoughts about uh quantum computing then and and the ability of kind of moore's law whereby power is is increasing every every 18 18 months it's doubling essentially so what are your thoughts

with regards to that yeah so as as the technology becomes more advanced the industry takes advantage of that right so the machines now are many many more times more powerful than they were four years ago in terms of their hashrate and and the number of algorithms they can purchase per second so you know there is talk of like can someone build a quantum computer that can you know destroy the network it's very unlikely you know i wouldn't say impossible but it's very unlikely because that if you actually look at the power of the bitcoin network it's huge it's huge it would take it would take so much money to destroy it and if someone destroys it they're not going to benefit from it because then the price of it is going to crash like crazy so it doesn't make any sense for

anyone to do it really okay yeah that doesn't make sense okay and so so what is your future what is your vision for the future of this whole whole industry the whole blockchain industry i think 2020 has been a great great year for i think we've got some things around the corner in 2021 that are going to be great obviously the price increases has brought a lot of people's attention to the market we're seeing a lot of institutional players banks and regulations coming in so all of this is going to be really beneficial for the long-term health space you know the regulators are necessary in order to kind of bring that institutional money into the space because the more regulated it is the more the institutional money is going to come and also the the retail investors you know when you've got things like paypal

listing cryptocurrencies it makes it far more accessible to be able to buy it i think all of this is gonna help to accelerate the adoption of cryptocurrencies the other thing i think is that young people you know millennials right now they don't have a large proportion of the world's wealth but as they get older and they accumulate more wealth i feel that these people have a higher inclination towards wanting to invest in something like bitcoin or or ethereum and these other cryptocurrencies because they're very technology literate and you know often open to to new things because they've lived in a world that's constantly evolving and constantly changing so i think all of these is gonna kind of be really good for the state well well thank you thank you for this energetic conversation ibrahim it was wonderful

definitely learned a lot and i hope our audience did um as well do you have any final words you'd like to share with everyone yeah sure i mean from our end if anyone wants to kind of learn about mining at all they want to have a chat uh we're more than kind of happy to do that reach us on our website newmind.io uh as i said it's really important area it's a really important area in the crypto world and it's really important to pay attention to but yeah i'm really excited for kind of what 2021 and beyond is going to present great well if you enjoyed this conversation feel free to check out more on our website cryptovalley.swiss where we host plenty of events educational content and even provide information on how you can join our growing network so thanks again ibrahim for joining us

of course thank you for having me great stay tuned stay safe and until next time from the crypto valley in switzerland bye