BTC Buying VS Mining VS MicroStrategy | Bitcoin Education | Hashpower Academy

Video Transcript:

hello there and welcome to the hash power Academy my name is Jake scandin I’m the lead educator here at the Academy and this is a place to learn anything about Bitcoin and everything about Bitcoin starting with the fundamentals here at the Academy we go to the energy side of things first then the compute Bitcoin mining aspects which consumes that electricity to produce hash rate and that hash rate is seeking to find that next block in the chain and capture some of that 450 Bitcoin that right now is distributed to the entire network and as more energy and more compute expands under that amount of Bitcoin is issued per day it reprices Bitcoin not just against dollars but also energy and compute so these are the sorts of things you can learn at hash power Academy today’s topic is buying versus mining versus micro strategy three different paths to the same destination and that is to say that one Bitcoin right now is a Tim form of monetary unit stored on a blockchain defended by energy and compute and so all of this expansiveness of these sectors of the Bitcoin industry so to speak uh are continually increasing your purchasing power what do I mean by that well one Bitcoin does not equal one Bitcoin why because that is a self circular argument which doesn’t make sense if the network average production cost for Bitcoin that is the exchange rate from electricity into Bitcoin through Bitcoin mining is $50,000 uh of energy per Bitcoin at a 5cent electrical rate divide one by the other that is 1 million kilowatt hours per Bitcoin isn’t that a different way to S to see it that is a pricing system of energy on a Bitcoin unit of account these are the sorts of things that we discuss here at the Academy but but on today’s topic of buying Mining and micro strategy so we have x-axis time over time and the y- axis one Bitcoin now there’s about 2 million Bitcoin on exchanges so buying right now is well a lot of that Bitcoin will be in collateral in custody some people trading it and uh that is quite low now because of the full 21 million Supply to million of it being on the exchanges that’s that has continually dropped over time and with more people seeking to cold storage and protect their Bitcoin from any potential uh risks that is the one comparison we can make to begin with that with buying it’s completely economically Sovereign but with mining if you don’t have the access to cheap electricity that computer you’re probably going to be sending to a host so there is a trust element there and micro strategy they are holding the Bitcoin on your behalf another trust strategy so the first comparison is uh the lowest lowest risk in the context of losing it all so to speak is if you buy and hold your own Bitcoin you have that security mechanism there but Mining and micro strategy those can have different risk and so in terms of Timeless reward we have the direct unit of account of of The Benchmark so to speak to compare to Mining and micro strategy so the question here if you were mining Bitcoin and you purchased one bitcoin’s worth of mining machines well you would start with zero Bitcoin meaning that you haven’t mined any yet and so at the start here you’ve purchased your machines with your one Bitcoin what is your goal you’re trying to mine more than a whole Bitcoin the objective goal of mining is to accumulate more Bitcoin over time than what you could have purchased in the first place so if I spent a Bitcoin on buying Hardware I want to produce consider this the Bitcoin yield I want to produce inevitably more Bitcoin than what I could have purchased in the first place and that’s why people mind you buy machines to produce Bitcoin at a lower rate priced Against the Machines and the depreciation there and so there’s a few things there when it comes to mining you’ve got the depreciation of the machine uh the tax deductible nature of that and potentially the electricity as well and you’re producing Bitcoin as a yield so you’re not depending on accumulating Bitcoin from an exchange because you are the producer of the Bitcoin and the second part to that is um mining has the benefit of electrical bills allowing you to buy Bitcoin without fees this is to say that you either pay the electrical bill with dollars which essentially is keeping the Bitcoin you’ve mind or you’re selling some of that Bitcoin to pay the electricity and so you your your dual option is there is pay with extra dollars to effectively buy the Bitcoin you’ve already mined or sell Bitcoin which is you’re trying to accumulate Bitcoin so you wouldn’t want to sell it so you would use additional dollars and so you essentially have this opportunity with mining to buy Bitcoin without fee so that’s an interesting comparison there and when it comes to micro strategy uh you’re buying dollarized shares that have a certain amount of Bitcoin per share so let’s just chart that here in Orange so let’s just show it as a bar um let’s just show it here with M so you’ve got one bitcoin’s worth of micr strategy shares how much Bitcoin per share is that backed by now the the share price to the nav the underlying Bitcoin amount is about one two 3 four five it’s about 50% so there’s about 50% of your micr Strat shares is is a quantity of Bitcoin now what they do is they have options and converts and equity and all these different weird and wonderful things that micro strategy are doing so you have the dollarized amount but that’s continually fluctuating so you have the potential for the shares to increase relative to their underlying Bitcoin reserves or decrease who knows and slowly and incrementally over time the amount of Bitcoin per share is increasing in which raises let’s just say it does we don’t know how much Bitcoin they’re going to be able to accumulate remember there’s 2 million on exchanges maybe they have Partnerships with large scale Bitcoin miners or huge OTC Deals Deals with sellers at certain prices um but large institutional buyers and sellers they want to do everything off of the order book of exchanges uh in private shall we say but the same sort of risk approach here is this if you buy a Bitcoin over time you’ve got a Bitcoin if you put it in a platform and Loan against it you could lose it if you put it in some form of yield producing thing you could lose it there’s there’s it’s it’s all risk and reward but the overall approach here is this that um Bitcoin is the unit of account your benchmark for this you hold one Bitcoin over time it doesn’t change mining as I said is this you you convert your Bitcoin into buying machines or even half of it it and keep the other half of paying electrical bills that’s another approach and so you got this Benchmark of starting at zero Bitcoin Min uh you’ll produce the most amount of Bitcoin in the first few months because uh continually the Network’s expanding the compute is expanding and the amount of Bitcoin uh in blocks stays relatively the same when the majority of Bitcoin that people are mining is subsidy so if there’s a constrained amount of network revenue and network hash rate and network energy are continually expanding underneath uh then miners with the difficulty adjustment are continually getting less Bitcoin per terahash or ex aash per day so diminishing returns basically so the the slope of how much Bitcoin per per day you’re going to mine the quantity decreases but the price may go up because this is all in a Bitcoin unit of account not in dollars I’ve shown a fluctuation of the potential for micro strategy shares because their dollar and their dollar converting uh Fiat yield into more Bitcoin per share and so how much how steep this climb is we don’t know and how how much this outperforms Bitcoin who knows but the overall understanding here is you’ve got this timelessness of Bitcoin in of itself which we recommend and um mining is that approach that if you want a tax deduction to buy some Bitcoin without fees and produce Bitcoin at production cost as a yield you also get a free transaction in a sense because when you uh plug into a mining pool you mine up to a certain amount and then they’ll let you Auto withdraw it without a fee typically so if you just want the the the mining rewards to just Auto deposit to your cold storage um you’re getting essentially a a free transaction ATT deduction and buy Bitcoin without fees I’m a biased thing about mining I’ve got some bias when it comes to mining but uh those are some really good benefits um but you got to understand the efficiency in the mining economics things um but buying buying is good um but it’s going to get more and more scarce on exchanges as more people pull Bitcoin off exchanges I do see a point where the amount on exchanges drops below the amount that’s remaining to mine uh on the micro strategy side of things they’ve got a lot of Bitcoin they’ve got over half a million approximately of the full 21 million Supply so on the on the on the side of things that we explained here with the energy sector expanding compute and all the other different pieces when you own bit a quantity of Bitcoin you have a uh a comp you have a stake in the growth of the entire network because Bitcoin is the the units on the database defended by a compute defended by energy and all the different aspects of say the heating side of things which has the potential to uh I’ve been thinking this recently actually that if uh a lot of people uh adopt or adopt a lot of people purchase Bitcoin mining electric heaters um they are not strictly economic miners that they’re not trying to buy $50,000 electricity to produce an $80,000 Bitcoin they are just mining to produce heat and subsidize some of that cost so the amount they can produce is less than uh than the amount of Bitcoin they earn is less than their energy bill and so they’re not mining uh economically it’s just it’s for a secondary use of that heat but subsidized energy costs because you’re producing Bitcoin in the process and if enough people did that it would demonetize uh the entire mining industry that’s on the profit side of things the public Miners and uh they they a lot of them are diluting their shareholders continually which is not what we like but on the buying side of things if if balance on exchanges was to decline to something really really low um you’ve got exchangers taking risks at that point because they are constantly managing an inflow of Bitcoin from different sources that might be a problem and they’re constantly managing an outflow of Bitcoin uh customer withdrawals people wanting to store their Bitcoin there is a lot of people that just deposit in some dollars or or stable coin and immediately withdraw Bitcoin and that is their exchange experience and exchanges continually in decline of Bitcoin reserves uh they might take more risk or or more other alternative coins taking uh taking risks in that department as well and the risks on the micro strategy side of things are well how much how much longer can they do how much can they conate this uh conversion of high volatility into different um products markets and services relative to bitcoin and that’s this is they’re going to have a lot of competition in this space in terms of all different Financial firms namely Black Rock as well and they’re all going to try and offer anything and everything for you to give them your Bitcoin and and give some form of benefits and loaning against Bitcoin all those sorts of things are going to be available but uh the volatility uh is going to shake out a lot of people and the risks that that they are customing the Bitcoin for you so that is a significant risk in of itself I think I’ll leave it there um but yes there’s potential with these two to create more reward than just buying Bitcoin but with different sorts of risks from both sides I think with mining side of things um you get the education if you if you you start with getting a little bitx mini Miner that’s like stage one um if you want to go further than that get a hosted mining machine that would be like stage two and if you want to mine yourself because you got a decent enough electrical rate uh that would be stage three and and you can learn all those things at the hash power Academy on the buying side of things yeah the the the ability to buy Bitcoin has always been there uh here at the Academy we can teach you about the exchange rate between electricity and Bitcoin which is going to come in the future uh it’ll be the second unit of account economics Dynamic that Bitcoin has the first one is with uh block space and uh with micro strategy it’s really going to be interesting to see the different products Market services that they they bring out right I think I’ll leave it there so 3 in the morning it’s where I get my best work done and uh I will see you in the next video like subscribe all that fun stuff and I will see you goodbye