The video discusses the recent resurgence of Bitcoin, highlighting its substantial increase since November and the factors contributing to this rise. It explains how Bitcoin has bounced back remarkably, influenced by pivotal events such as the upcoming halving, which will significantly affect Bitcoin miners by reducing their margins by half. While the halving might benefit Bitcoin holders through increased scarcity, it poses challenges for miners, prompting some companies to diversify their operations by turning to other technologies, such as AI.

The video also delves into the mining ecosystem, illustrating the technological race and economic challenges faced by Bitcoin miners. With the halving reducing block rewards, miners are compelled to constantly upgrade their hardware to remain competitive. Some mining companies are looking into AI, leveraging their experience with specialized machines and data centers to diversify their operations and attract investments from private equity firms that are more comfortable with AI commitments.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. pivotal [ˈpɪvətl] - (adjective) - Of crucial importance in relation to the development or success of something else. - Synonyms: (critical, essential, crucial)

This is all happening at a very pivotal time, because on the horizon is a preordained event that will change the business of bitcoin forever.

2. preordained [ˌpriːɔːrˈdeɪnd] - (adjective) - Decided or determined in advance. - Synonyms: (predetermined, predestined, foreordained)

This is all happening at a very pivotal time, because on the horizon is a preordained event that will change the business of bitcoin forever.

3. scarcity [ˈskɛərsɪti] - (noun) - The state of being scarce or in short supply; shortage. - Synonyms: (insufficiency, shortage, paucity)

The halving is the mechanism designed to create scarcity and control bitcoin's limited supply.

4. juggernauts [ˈdʒʌɡərˌnɔːts] - (noun) - A powerful, overwhelming force or institution. - Synonyms: (powerhouses, giants, titans)

But let's not forget that the first movers in the AI space are serious jobs. juggernauts like Google, Microsoft and OpenAI making a transition in especially tall order for any challengers.

5. transition [trænˈzɪʃn] - (noun / verb) - The process or a period of changing from one state or condition to another. - Synonyms: (change, shift, conversion)

But let's not forget that the first movers in the AI space are serious jobs. juggernauts like Google, Microsoft and OpenAI making a transition in especially tall order for any challengers.

6. incumbent [ɪnˈkʌmbənt] - (noun) - The holder of an office or position within an organization or field. - Synonyms: (current holder, present occupier, office bearer)

Given the level of competition in this industry, it's really hard to compete with the incumbent.

7. diversify [daɪˈvɜːrsɪfaɪ] - (verb) - To make or become more diverse or varied. - Synonyms: (expand, vary, branch out)

Some companies are either bulking up for scale or finding ways to diversify

8. uncorrelated [ʌnˈkɔːrɪˌleɪtɪd] - (adjective) - Not related to or reciprocal with something else; independent. - Synonyms: (unrelated, independent, separate)

But this AI vertical is completely uncorrelated to the price of bitcoin.

9. prospector [ˈprɒspektər] - (noun) - A person who searches for mineral deposits, especially by drilling and excavation. - Synonyms: (explorer, miner, surveyor)

There was a time when you could buy a pan and a pick and a shovel and get to San Francisco about 100% years ago and go up in the mountains and find some gold as a prospector

10. computationally [ˌkɒmpjʊˈteɪʃənəli] - (adverb) - In a manner related to the process of mathematical computation. - Synonyms: (algorithmically, automatically, logically)

Like bitcoin mining, AI is an extremely intense process. It's data intense. It's computationally intense.

The Evolution of Bitcoin Mining in the AI Era

What goes down must come up. At least that's been the case so far. Bitcoin is having a moment. Turning back to bitcoin now. Bitcoin has broadly doubled since November. A lot of eyes on the spot ETF initiatives. It's the shiny new object.

It had a long winter. It took years to get back to record highs. And so to see bitcoin really bounce back is pretty remarkable. This is all happening at a very pivotal time, because on the horizon is a preordained event that will change the business of bitcoin forever.

It's called the halving. It will become much more difficult for miners to produce new coins after the halving margins will be cut overnight by 50%. There will no doubt be casualties. So the halving might be good for the holders, but it's not necessarily good for the miners.

Some companies are either bulking up for scale or finding ways to diversify. Some companies that in the past were bitcoin mining, they've shifted over to training these ever bigger AI models. A lot can go wrong. But at the same time, this is kind of a moment for bitcoin that is arguably one of its biggest ever.

There was a time when you could buy a pan and a pick and a shovel and get to San Francisco about 100% years ago and go up in the mountains and find some gold as a prospector. And if you flash forward to today, the gold mining industry is very different. And over time, gold has become harder to find. Bitcoin is designed in the same way.

Bitcoin comes with its own monetary theory. It has a fixed amount of tokens that will ever be in circulation. 21 million. That is the total number of bitcoins that can ever exist. And over 19 million of those have already been awarded.

The halving is the mechanism designed to create scarcity and control bitcoin's limited supply. It happens every four years. And when it does, all future block rewards are cut in half. The halving is a natural phenomenon in bitcoin that disciplines the entire market and forces it to become more efficient.

Some of the miners, they would just go out of business entirely, just because their machines are too old to operate under this current prices. But so far, after every halving, the price of bitcoin has eventually surged to all time highs, making it irresistible to keep mining for it.

And in order to keep mining profitable, the price must continue to go up. Otherwise, it's simply too expensive. These bitcoin miners have to upgrade their hardware and make sure that they have the machines and software that can mint that bitcoin faster than anybody else. The technology runs like a hamster wheel.

You constantly have to update your fleet every few months. If you don't have the latest equipment, it's not worth using that equipment. So that leads to this arms race among bitcoin miners. They have to constantly purchase new machines, more powerful machines, to mine the bitcoin to increase their computing power.

Now, I know what you're thinking. Where do all those old machines go? This is our warehouse where we store our older units that are no longer deployed. You can sell them for pennies on the pound to a scrapyard, which is probably what's going to happen in the long run.

You can hold on to them and see maybe if there comes a time where the market does what it does and it makes sense to deploy them again. There was a time where these were the state of the art. Today they're not. So it all comes down to the economics of the power cost.

And the more people mine, the less you get. It's that simple. With such high stakes and even higher volatility, it's no wonder that mining firms are holding their bitcoin, but not their breath. We're in a very remote part of Iceland.

To show our shareholders and analysts how we are providing computational power for AI applications, we created this new business line in AI as an expansion using our skillset. We still are in bitcoin mining. We're doubling the size of our fleet by the end of the year.

But this AI vertical is completely uncorrelated to the price of bitcoin. The reason why we chose Iceland is because it is a naturally cold and very clean place. And these specialized machines that we use thrive optimally in cold and clean places.

We're definitely starting to see some companies that in the past had worked on bitcoin mining stuff moving into AI stuff, especially as there's so much attention on AI, on large language models. Our client is building something similar to a chat GPT, and for it to do that, it needs to build something called a large language model.

We bought the machines that are made by Nvidia, and we're renting that computational power to the client. These two skill sets of procuring specialized machines and identifying the right data centers translates really well into AI. Like bitcoin mining, AI is an extremely intense process.

It's data intense. It's computationally intense. And so it does make sense that some people might say, hey, there's an opportunity here for me to shift over from bitcoin mining to AI. If you're using your capacity to also service other businesses.

It diversifies you, and it also could bring in more capital from other players. For example, some of the big private equity firms in the world, they may or may not be comfortable with bitcoin mining, but they may be more comfortable with AI.

But let's not forget that the first movers in the AI space are serious jobs. juggernauts like Google, Microsoft and OpenAI making a transition in especially tall order for any challengers. Given the level of competition in this industry, it's really hard to compete with the incumbent.

Not to mention the fact that AI computing and bitcoin mining are not the same field. The machines the bitcoin miners are using are very different from those used for AI companies. So you need expertise and you need to have more, like fresh talent to develop that kind of business.

Yes, the machines are different, yes, the data centers are different. But the process of acquiring those machines, the process of identifying the correct data centers, that has been the same for bitcoin miners. As a newcomer to this space, I think it will be interesting to see, you know, how they can adapt.

It's not something that everybody's going to be able to do, but it looks like it is something that some companies are able to do successfully. We're just at the early inning stages of crypto. We're at the very early inning stages of AI. We don't know where this is going to go, but it's going to be a pretty remarkable ride over the next decade.

Bitcoin, Economics, Technology, Blockchain, Cryptocurrency, Mining