Key Takeaways

Mark Artymko of Ocean Mining warns that while Bitcoin’s hash rate is globally distributed, block construction has become dangerously centralized, with most miners outsourcing template creation to just a few pools. This leaves the network “one phone call away” from censorship, since pool operators, not miners, decide what goes into blocks. Ocean’s DATUM protocol restores sovereignty by letting miners build their own block templates while still pooling rewards, and its Tides payout system maximizes revenue without the hidden costs of FPPS. Combined with Bitcoin mining’s unique ability to stabilize power grids and unlock stranded energy, Artymko argues that decentralization at the pool level is essential for Bitcoin’s long-term survival.

Best Quotes

“Bitcoin mining I see as God’s gift to utility operators, it’s another tool in their toolkit that actually works.”

“Bitcoin isn’t censorship-resistant; it just happens not to be censored right now.”

“We are one phone call away from censorship on the network.”

“51% isn’t the threshold to attack, it’s the guarantee of success. You can start causing damage at 20–30% hash rate.”

“Hash rate is spread globally, but everyone’s getting their blueprints from the same two CEOs, that’s not a decentralized Bitcoin.”

“If I mine empty blocks and you don’t, our revenues look different. DATUM ensures miners aren’t subsidizing each other’s choices.”

“Our goal is to push pools as far from authority as possible so miners are the true decision-makers.”

“If 51% of miners were building their own blocks, Bitcoin would be uncensorable.”

Conclusion

Bitcoin mining’s future hinges on who controls block templates. If miners continue relying on a handful of centralized pools, the network remains vulnerable to censorship and coercion. Ocean’s approach shows how variance can be shared without sacrificing sovereignty, turning pools into coordinators rather than gatekeepers. Artymko stresses that at least half of miners must run their own templates to secure Bitcoin’s neutrality, especially as demand for block space intensifies in a hyperbitcoinized world. The takeaway is clear: miners must move closer to the “wellhead” of Bitcoin issuance, reclaim control, and decentralize before it’s too late.

Timestamps

0:00 - Mark's Power Grid Engineering Background
7:00 - Bitcoin Mining as Grid Load Management Solution
18:06 - Mining Enables Stranded Power Generation
20:08 - Why Ocean Was Founded: Pool Centralization Crisis
28:24 - Modern Pools Beyond Variance Reduction
33:37 - Two Phone Calls Away from Bitcoin Censorship
38:20 - Ocean's Non-Custodial Mining Model
46:22 - Datum Protocol: Miner Sovereignty Mechanics
50:05 - Why Datum Over Stratum v2
58:30 - FPPS vs PPLNS: Revenue vs Cash Flow
1:15:55 - Miner Incentive Alignment and Transaction Filtering
1:29:45 - Five-Year Vision: Collaborative Decentralization

Transcript

(00:05) Mark, hey, welcome to back to Bitcoin Park. You were here at uh the Texas Energy Mining Summit. Yep, I was the first one. Uh you were also last week at the the proto launch. How was that? Oh, the that was wild. Yeah. Yeah, it was it was incredible. Um, lots of amazing things happening on the hardware side and I think it's I think it's going to be a step change for how manufacturers approach mining. Well, that was some big news.
(00:36) Square's launch of the the proto rig and software to helping decentralized mining. You guys have been hard at work at Ocean decentralizing mining. So joined today by Mark Artimco who's the co-founder and president of Ocean Mining which is a mining pool.
(00:57) But before we get into the specifics of of the pool business and what you guys are doing at Ocean, you have a long background in engineering and specifically grid systems and engineering systems to to interconnect large loads. Yeah. do power grids completely prior to any of your work on on Bitcoin, Bitcoin mining.
(01:20) Just talk a little bit about your your background and how you think about Bitcoin as a power consumer within the broader energy system. Yeah. Um, so my my pre- Bitcoin life dates back to 2004ish. So I spent about two decades pre- Bitcoin working in the utility industry in Canada and and then in the United States up in Michigan. But I'm I'm an electrical power power systems engineer by training.
(01:47) And I basically cut my teeth um you know in the design and engineering aspect of the the power system doing everything from single line diagrams and electrical arrangement essentially building the blueprints for what a substation and a transmission line look like at the utility level.
(02:10) Um mainly high voltage networks so anything higher than 115 kilovolts which is what most Bitcoin miners would tap into. basically worked different capacities, you know, rose the ranks in those utilities to senior leadership roles and uh did everything from designing the designing the the grid, the substations, uh building them, uh multiple hundred million projects as well, and then finally operating them.
(02:38) And and I actually one of my probably favorite positions in that whole two decade period was spending a couple of years on on shift at the 247 uh control room where we manage the power system for all of Ontario. So about uh 20,000 megawatts worth of energy flowing in and out and through various interconnections with the United States and different provinces in Canada and uh serving load and and just being part of that the machine which most people don't realize but the electrical system is literally one big machine that spans all the way from you know across in different interconnections but um the
(03:17) continent essentially is is one huge huge machine and everything's interconnected. So, um through that through that time I I really got a very deep level of familiarity and experience building and operating the systems. But then finally um really realizing how it how it ultimately impacts the end user which which in the utility system the end users are called loads.
(03:44) So it's not very customer friendly but loads are you know any any Bitcoin miner listening if you know in the halls of the utility they you know you're referred to as a load 100 megawatt load 50 megawatt load but just knowing being part of the connection process from the utility side is is uh it's it's just so it's so involved and there's so many studies and um to essentially make the entire grid work and continue working without error for for every additional load that joins and for every additional generator that joins. So it's it's kind of like operating a uh or operating on or
(04:20) maintaining an air maintaining an air airplane mid-flight and never landing. So that's what the utilities do and um either by adding new elements onto the grid or maintaining old ones. And um and so when uh I've always had I've always you know two the majority of my professional career has been in the utility space. So I I'm always looking at things from that angle.
(04:46) And I spent about 20 years serving loads like Bitcoin miners. And now I'm on the other side of the fence. And now I get to not not necessarily I'm not involved with the connection aspects running a mining pool, but I know the kinds of uh challenges that miners are facing when they're connecting to the grid and looking for capacity and dealing with outages.
(05:10) So um I like to think it gives me a a good perspective. Yeah, for sure. What what time period was that that you were working the power industry? Yeah. So that was like early 2000. So pre pri Satoshi 2004 to you know about about 5 years ago. So um so just a few years prior to um co-founding Ocean. Yeah.
(05:36) Yeah. So after after going through the utility stint on at a couple of different companies, I I jumped into a Bitcoin mining startup based out of Michigan. And I did that for a couple of years. Uh rode the price down all the way to $16,000. An actual minor, like a prop a proprietary miner. Um yeah, it was it was a small outfit doing Bitcoin mining and um this is like this is the the truth podcast.
(06:02) So this I did other things as well. I was involved in uh some other cryptocurrency mining and and different things. And uh um as this was part of my exploration into Bitcoin and and through through that through that process I I became a Bitcoin maxi. But my door into bit Bitcoin maximalism was through through different colors.
(06:23) You know people people call us purists but uh you know people take their own journey. It just matters where you end on the from a destination perspective. Yeah. Yeah. My mine was more I don't know if you guys listen to Jackamo, but my I I was drawn I was drawn into that blockchain technology thing first and u I dabbled in number of different consensus protocols.
(06:45) Um mining was one of them and and there was some other stuff as well, but that didn't last long. Um and that kind of like that's sort of where Luke enters the picture because he was he was instrumental in sort of my conversion over into Bitcoin maxiland. Before we get into to that, one of the things that I've come to appreciate about particularly the the grid and and power systems, but also, you know, more broadly in that energy systems of, you know, the upstream complexities, is that not until I really got into Bitcoin and
(07:20) understanding the power aspects of it did I really understand the the complexities of power that everyone takes for granted and everyone who has worked working money generally takes it for granted because it's always just worked. And the same is true of of power, but it's a highly complex system. from the perspective now that you have as it relates to to Bitcoin mining and looking back on the power industry and saying you worked in that 247 control room where loads and generation are constantly being balanced and and either loads are coming on or coming off. How
(08:00) do you see Bitcoin solving a problem specifically the the flexibility of its load? Well, the the thing I think most people take for granted is 60 Hz. Like the lights aren't flickering right now. Everything's running. You plug something into the wall, it just works. And that means that the electricity, the voltage specifically, is oscillating 60 times a second up and down and up and down, up and down.
(08:36) And if you add a large load, um, they get slower. it's less than 60 Hz. If you add a generator or you triple load, it gets you it gets higher. It gets it's above 60 Hz. And if you change the frequency, you're going to damage machines. And there like behind the curtain, behind the scenes, there are thousands of operators looking at like predictive tools and um signals like ACE area control error where um ACE is a measurement.
(09:06) It's like a leading indicator to frequency and if ACE is going in a certain direction that triggers the system operators to to do something, take some type of corrective action. Um, and so the the complexity behind the scenes is just it's mindboggling how how how much is actually happening right now as we sit here today. It's it's happening and it's it's a system that never shuts off.
(09:34) Traditionally system operators have had um usually only generators at their disposal to manage the load and frequency can change to due to load coming off on during the day when everybody's waking up and plugging in their coffee machines um or um and and the different uh patterns that happen throughout the day.
(09:58) And so there's there's response to that and then there's response to outages if a generator trips offline. Um, and traditionally system operators have only had generators at their disposal to uh incre increase the output of the generator to help respond to to frequency. And so you'll have some generators on spinning reserve and responding to signals from the market.
(10:22) And then you have more drastic measures like if um if there's an outage you know every region is responsible to maintain its own frequency and if it can it has to procure it from neighboring regions. So a lot of a lot of region or all the regions will have some um like peaker plants and stuff that will can be fired up within a few minutes of an outage.
(10:51) And so you have you regions have responsibility to get back to where they need to be. And um and then in extreme scenarios you don't have enough generation. You got to start you you do things like voltage reduction for example. You know reducing everybody's voltage by 5% or 3%. Um low power is voltage times current. So you reduce the voltage, you reduce the power, you reduce the energy. So that's one way of dealing with shortfalls.
(11:17) Nobody wants that because you see you see brownouts and you see your light stem. Um and then the the the worst scenario is and nobody ever wants to go there but all system operators train for it is rotational load shedding where you take a substation that has low voltage feeders and you just pop the breakers one by one by one either manually or you do it in an automated sequence.
(11:41) Everybody shares a bit of the downtime and that's like there's not enough electricity to go around. Um, the golden rule is frequency can never go below, you know, we're talking like 59.5 hertz would is devastating. And we're not like, this is not 55 Hz territory. We're talking like fractions of a hertz can totally lead to cascading blackouts. So, what do you do? Last worst case scenario, you you trip the load.
(12:08) So, um, for the first time ever, you now have a load that says, "Hey, you can trip me off. I don't care." Um, I'll do it if I'll save some money. And um, I' I tell everybody I meet that utilities have been searching the world for a load profile that doesn't care if it has dual supply. It doesn't care um, really about anything. It's rugged. It's durable. It's resilient.
(12:35) And um, and utilities are like they're they're always looking for technologies to help ride through those bumps. whether it's battery storage or pump storage or or solar. Um so having a load looking kind of like flipping the problem on its head and instead of looking at generation as a solution, look at shutting load off as a solution. Right? So this this is a paradigm shift in the utility industry.
(13:03) it was like unfathomable to suggest um actively taking load off the grid um as as like a a first level response is just a new way of thinking and so a lot of utilities out there I I'm friends with a lot of my uh well I'm still friends with my old co-workers who are now you know gone on to various highle positions at utilities and the knowledge of Bitcoin is is growing but it's not there and the knowledge of what Bitcoin mining can do and can be as a as an asset to the grid is still I think we still have a huge opportunity to to do some education. But I see it as God's
(13:40) gift. Bitcoin mining I see as God's gift to utility operators cuz it's it's another tool in their toolkit that actually works much better and um and it's very economical. Yeah. From my vantage point the there's the question for operators. It's like, hey, if all of these things are true, that would be amazing.
(14:08) But the question of is it true of like, hey, will these miners actually respond this way? And then needing to have some grounding in in the actual source of demand to know that it's reliable and sustainable such that it will actually be there on the grid if they build a strategy around it to to come off, you know.
(14:33) And I don't, you know, one of the things I'll do as part of this podcast is learn more about other regions, but in Texas, we have real-time pricing and a deregulated energy market. And so the price signals are, you know, particularly in those those periods that you described. If um if there's scarcity events, it's when power is most expensive and Bitcoin miners are this perfectly economic consumer of power that they're not refining it further down the line and they have every incentive to to shut off in those periods. And so I agree there's a lot of education um to go but that it's kind of you know understanding why
(15:07) it exists in the way that it's flexible but also that it will be there but that if if you start to to to gro that then it's like well hey the more of this that's on the more impactful you know it can be as a lever. The last question I'll ask about the power side before we shift to to ocean.
(15:27) Do you have a perspective on given the nature of Bitcoin mining whether it will you know at least what's on the grid whether it will gravitate to being colllocated with generation like not necessarily saying like are the power companies going to be Bitcoin miners but just in terms of physical location is there a benefit in terms of cost as well as the operation of the grid system to be um colllocated next to a generator I think that yeah there's a huge benefit like the Um, a lot of the a lot of the power that's generated, well, a lot of times generation is done at where the
(16:00) source of the energy is. If it's hydroelectric, for example, or you have like a big wind farm in the middle of the planes. and transmission was it's a really um prominent part of the grid and it costs money to move the electricity from the generation to the load centers because it's not common for to have like a subdivision next to a nuclear power plant.
(16:27) So it's very expensive to move the power and there's also you lose some of the energy due to line losses and um so being able to completely collapse that distance and put the load next to the generator it saves all that capital expense and um uh and and you and it's more efficient cuz you you lower the line losses or you reduce you eliminate them so you're behind the meter kind of the same way or the inverse way that um deers transformed the renewable space distributed energy resources.
(17:05) So rooftop solar um you know micro grids that like any kind of like localized generation um it changed the traditional model where generation was happening over here consumption was here and then you had to step up the voltage send it 500 miles and then use it with with deers you generated it locally and it became more efficient and so that spawned a whole a whole area of of development and uh and research in like micro grids for example. Bitcoin mining is like it it enables the opposite to occur. You just pick up the load and put it where the
(17:45) generation is and so that has a lot of cost savings but I think um utilities can use it strategically um as a as a way to enable projects and and generators can use it strategically to enable the deployment of sites. If I think uh if I'm not mistaken, the probably the biggest limiting factor in bringing on a large generator is not building the generator.
(18:16) It's building the transmission line to accept the load because transmission lines are going through like your backyard and my backyard and and it takes a long time to get those those environmental permits and approvals. And so you have the potential to generate but no lines to generate it onto. And so you don't and then now you have this stren this opportunity cost somebody sunk $100 million into a generator that's doing nothing.
(18:43) So Bitcoin mining can actually enable whoever owns that to liven it up quicker start making money and until the lines are there and ready to accept the power. So I see mining as kind of like an enabler of uh of that and it's kind of what Gridless is doing in in Africa by building out mining to enable the the the the buildout of the local community distribution networks.
(19:11) And I was in I was in Tokyo last year with Luke and we visited Agile Energy X. It's a it's a subsidiary of TCO uh Tokyo Power and uh they're doing that they they have like pockets of Bitcoin mining all around the their region because because they have they either have uh too much energy and no lines to to put it on.
(19:38) So they just well let's mine Bitcoin with it or or the Bitcoin mining was was actually solving a congestion issue that they had. Interesting. Yeah. or or a generator in Tokyo. It's in Japan. Yeah. No. Yeah. So, it's a subsidiary of Tokyo Electric Power Corp. TCO. Um their subshar is called Agile Energy X. Uh Kenji Tataywa, if you're listening, shout out. But he's doing great. You need to get that guy in here. You need Oh my good.
(20:03) He's got a degree in like nuclear engineering, so it's going to be a deep discussion. Yeah. You're going to have to make that introduction. Yeah. Okay. All right. Well, we can we could do a whole episode on power and we might have to do one.
(20:21) Um, but one of the things that that's another key theme of the podcast, which is what you know really what you guys are um, you know, is a principal foundation of of Ocean's project I'd say is mining centralization and decentralizing mining. And on past episodes, we've we've talked at a high level about kind of centralization and hardware and centralization in pools.
(20:48) And at the top, we talked about the release last week from Square on the hardware side. You guys um or Ocean had a predecessor, but Ocean, you co-founded it with Luke Dash Jr. in 2023. Mhm. Just talk about like why you're you're building ocean, like how you see the landscape of mining, how you see the effort that you're working on through ocean helping to decentralize it, but really that initial inspiration for why work on this, why spend your time working on Ocean? Yeah.
(21:23) Um, like Luke has always he's always worked his whole like life's work is about protecting Bitcoin and making it better and more resilient and able to to be here for the next thousand years. And so there's always there's always um threats to this to a new system and Bitcoin is no different.
(21:45) And when Luke and I were going into business together, the the um like the foremost issue that was a concern to both of us was centralization of mining at the pool level and um and and that it was not like it wasn't like a a highly talked about topic and the general consensus at the time around Bitcoin circles was that Bitcoin mining was decentralized. because you had hash rate all over the world and there was no problem.
(22:17) But um if if you look at it from the anatomy of of mining and like what mining actually entails um it actually looked a lot scarier and it um if you kind of unpacked mining is not just the not running the ASIC is one component of mining and it's the last component of mining but right from the early days of of Bitcoin mining was was built to be creative. It has creative components and brute force components.
(22:49) And the creative component of mining was entailed um building a local mem uh running a full node first and foremost. running a full node, build building a local mempool, um building a block of transactions from your local mempool and then uh turning that into a block template and giving that block template to your AS6.
(23:17) And you could see in that if you look at it from the functional perspective, the the Bitcoin miner had complete sovereign control over their node and complete sovereign control over went into their what went into their block and what they eventually mined. And um and this is what it was like in the early days of of mining.
(23:42) I I wasn't around back then, but for whoever was, you ran you ran the Bitcoin client and there was a button and it said get bitcoins. And with that feature turned on, you would actually be making a block template unique to you, complete a complete diversity from anybody else's block template, providing your own hash power.
(24:04) And so the whole concept of of decentralized mining in those early days was thousands of miners all around the world. Thousands at the time miners and node runners were synonymous. And um censorship was impossible. It was a joke. Like you you can't you couldn't censor. But we've since since mining pools came onto the scene to essentially solve for cash flow, right? Difficulty was increasing. miners needed to get paid.
(24:31) Uh volatility variance was was a real thing. So miners grouped the hash rate together to solve for this cash flow need. But in the process um outsourced the intelligent parts of mining to the pool operator. And that happened pretty quickly in the beginning and it's only gotten worse.
(24:53) And we sit here today and the majority of of blocks found on the network are found essentially by two different entities. They operate under different names on the surface, but behind the scenes it's really just two entities. So, um, hash rate is spread across many countries around the world, but everybody's getting their blueprints from the same two CEOs. Like that's that's not a decentralized Bitcoin.
(25:17) And Luke believed that Bitcoin survival requires that we uh we change that. And so we set out essentially launching Ocean to build the tools to allow miners to take to take back control of that very important intelligent part of mining by building their own block templates. And um but pre- Ocean pre-datam um the tools just you know weren't readily accessible and the the knowhow on the minor side wasn't there also.
(25:50) So um it's as much an educational thing as it is a a product. Yeah for sure. I talked to a lot of miners and just the energy side and the facility side requires so much time and energy that then thinking about things that exist outside of that is uh I think you know again one of the important parts of education about why it's important you know to the to the people that are out there hashing but if I understand it correctly then were you and Luke discussing different business ideas and and talking about like where was most important to work within Bitcoin and then gravitating to pools and pool centralization. Is that
(26:33) kind of Yeah, we Yeah, we we became friends through um through a a pretty cool turn of events and um not turn of events but just introductions. And um yeah, we we we wanted to we know we wanted to work uh together and and go into business. And essentially it was all right like we found the right people and we started looking into Bitcoin and where where our our respective talents could be best used and and put to good use and and what areas of Bitcoin needed the most attention at the time. So, it didn't
(27:10) take long to look at the mining space and and I had a a very brief background in mining, but a huge energy background before then and and Luke practically wrote most of the code in the mining ecosystem from the early days. Um, so, uh, it kind of quickly emerged as the obvious choice and part of that was the fact that Luke had operated, uh, the Allegious mining pool from 2011 until 2017.
(27:40) And um I think he's he kept that sort of on the back burner ready to go in case Bitcoin ever needed it again. But back in those days he ran it as as a hobby pool, zero fees with one other guy, Jason Hughes, who's on our team now. Um miners familiar with him back then. He he went by Whisk WKO57. But no, that that emerged as like the obvious choice and the thing we needed to do and it didn't take us long to come to that conclusion.
(28:11) And then we we basically set up a company real quick and we put together a team of people that we felt could get the job done and um we've been slowly growing on the personnel side but rapidly growing on the on the um the products and the hash rate side ever since. So before we get into the specifics of ocean, how do you think about the pool function today or in general within the Bitcoin mining supply chain in terms of the important parts of specialization that have naturally caused, you know, setting variance and you know payout structures aside, the the core functions that that pools provide two miners. Well, the looking at the most simplest
(28:58) simplistic role of a pool, it's to solve for cash flow. It's to provide a a mechanism for miners to come together, group their hash rate, and and essentially share the variance. That that was that's why pools existed. That's that's why Luke created Allegius and and all the early pools started was a collective effort to to help everybody mine and and get paid and not wait around for 80 years to hit a block.
(29:29) And um over the years I the pools have turned the the modern pool the FPS pool prototypical pool is become like a Swiss Army knife of products and it ranges from variance reduction to insurance guaranteeing payouts and you know financial products and derivatives and um financing for for miners and pools of kind of like the FP the typical FPS pool has I think grown in scope far beyond what what a pool really should be and um and I'm not sure really what caused that and whether it was a demand like you know this the I I when you mentioned before the complexity of running a
(30:13) modern mining operation I I get it like I spent boots on the ground years building sites and um and miners are are sitting there worrying about you know equipment fans ASIC fans breaking in transformers overheating and rising power prices and so the complexity of oh let's let's build a node and like they have the capacity but it's it hasn't there are so many other worries to do and um and so uh kind of outsourcing all that to the pool I think it just kind of like happened very naturally but the pendulum has swung so far to the other
(30:51) degree where where pools are in a position of power right now they they are the they are the power players in the mining space. They dictate what goes in the chain and what doesn't go in the chain. Um and it's a far far away from where we started. Yeah. I think that you know one of the things that I talked about on the last episode with Phil Guyger is that over time as Bitcoin grows over long time horizons Bitcoin scales everything should naturally decentralize.
(31:27) And if I were to have gone back five years ago or seven years ago and I've only been um paying attention to Bitcoin for 9 years that there's probably a natural limiting factor in terms of the number of pools, but that you'd ex you I would have expected increasingly increasing decentralization versus what has actually happened from the pools.
(31:54) landscape of essentially consolidation and centralization and I and again there's a saying that's everything's good for Bitcoin and there are economic incentives and people will follow those economic incentives and so I'm confident over the long time horizon that that will be true but it will only be because of people like yourself building the competitive solutions that deliver a differentiated value.
(32:27) But in the current state, if minor centralization at the pool side were to be a risk in terms of materializing, how do you see that happening? Like in terms of like is it the 51% attack? Is it the censorship? Is it changes to Bitcoin? like what like just your own your own perspective on it's like hey centralization is a problem but if it materialized to actually harm the network or harm the incentives or harm the interest of the individual miners that were pointing to these large pools of hash rate you know how do you see like where do
(33:06) you see the most material risk? M well it's we're we're sitting here and like it you your question reminded me of one of Luke's one of my favorite sayings from Luke which is Bitcoin isn't censorship resistant. It just happens to not be censored right now because we we we have two entities that at the push of a button could censor transactions.
(33:30) And I guess you could, you know, there's there's lots of you could think your way around that in terms of mining minor switching pools, but the fact that it can happen means that we're in a really bad state. But I think I think censorship is um is a big one.
(33:53) Is is Bitcoin when when not if but when Bitcoin becomes like when every when the world is on a Bitcoin standard like you think access to block space is is going to be non-competitive it's going to be extremely competitive and um acquiring um acquiring the the design rights for the majority of the network like to be able to to rewrite the chain do a 51% attack or or sensor I think it it could be like a huge huge um tool. So I I don't really know.
(34:25) It's hard to it's hard to sort of pinpoint what it's going to look like, but the fact that it can happen right now today we're sitting here. We're one phone call away from censorship on the network like Yeah. And that when you say that one one phone call away, you're talking about like a phone call from President Trump.
(34:44) Phone call from President Trump to the CEO of of Foundry, for example. they could do some major damage. And and the um the phrase 51% attack um a misunder common misunderstanding is that you need 51% of the hash rate to carry it out. But that's not true. 51% is is the point at which you are guaranteed to get away with the attack. But you can actually start the attack at 20 to 30% hash rate.
(35:16) So, we're already sitting in in this state where um we're just in a vulnerable position. So, well, one question I would say there just to clarify, it's like if you had 51% there's still the probability that you could have bad luck over a period of time and expend resources and and fall behind, right? But I see your I see your point. Like on the other side, you don't have to have 51% to potentially you could like you could do major damage to to the blockchain. Yeah. With 20%.
(35:46) And so yeah, so one phone call away when you have one entity that designs the block templates for thousands of miners, it's essentially the same block template. It's one it's it's as if every every minor on that on those pools is literally one big minor in that relationship. The pool is the minor and what we call the minor is just providing the hash power right for that single minor.
(36:13) One of the points at least the way I see it is that there's there's two the the I see the risk of censorship and the risk of changes to Bitcoin being greater than the 51% attack. Okay. Um, but I agree that those are like the three primary surface areas that there's the idea that hey, if you got these two massive pools and maybe Marathon or maybe you don't even need Marathon to censor transactions.
(36:42) Then, you know, when I posed the question to to Phil in the last episode, it was like, well, you you might go offline for a period, but you you start solo mining. But the perspective is if mining is centralized and it's not this massive game of whack-a-ole, then it's not like the pools are just doing it on their own valition. They're doing it because there's some regulatory pressure, some jurisdictional pressure.
(37:09) And to think that if you start from a centralized world and you want to peel off and that you're not going to be easy to be a a mole that's whacked um is unrealistic I think in my perspective and that if you you know if you wait to that point to to solve that most critical risk of thinking of an individual minor being like hey the value of your asset the asset value like the energy infrastructure is the integrity of the system that you can't wait to for that call to be made to by that point it would be too late. Yeah. Is what you're saying. Yeah. Yeah. Um and so I think that there's
(37:42) there's all you know there's the question of well I could just switch and but if right but if they're all getting the same phone call then it's like okay well I'll go start a new pool but you're like well what does the circumstance looks like and is that realistic? And maybe there's some other geopolitical interest that's a state actor that has an interest not to to respond to similar requests, but it's not a good state to be in. And if you're thinking about the individual minor incentives, everyone has to act in their
(38:12) own self-interest, but with the the integrity of the the system as a whole in mind because their their assets are tied to that system. Um, now when it comes to what you're actually working on at Ocean and how you guys are helping to solve a problem, one is providing another pool. So more pools, less centralization, but what would you say most differentiates ocean as a pool other than just being another pool? Yeah.
(38:48) Well, we're what differentiates us is we um if you think of a pool is in the traditional sense like the other pools, we're we're not really like a pool. We're more of a payment coordinator between miners. So we've we've created a a mechanism through datam for miners to take back control of the intelligent parts of mining and um become solo miners in a sense but way before so datam is decentralized alternative if you get it right I'll give you a shirt. No you give it to me. Wait.
(39:29) Uh you already gave me a hat. decentralized alternative templates for universal mining. Okay. Yeah. So, um, think of it if you can picture a traditional centralized pool as you have Bitcoin and then you have the pool running who runs the full node peers with the network. Pool builds a local me pool builds block template turns that into work SV1 stratum work and then gives it to the minor. minor does the work but goes straight up through the pool back to Bitcoin.
(40:03) But all decisions are made by the pool and when the money is when the block is hit and the money is the bitcoin is um created into existence it goes to the pool and flows down to the miners. So like they control the upstream work and the downstream payment. ocean through datam.
(40:25) We've completely taken ourselves to the to the most practical extent possible out of the equation and we let miners interface directly with Bitcoin. So the miner has the hash power, the miner runs a full node, the minor builds their own block template and they peer with Bitcoin directly and they all do that. And in a sense, they're all solo miners cuz solo mining is being sovereign and choosing your block templates. The role of ocean is really a payment coordinator.
(40:56) We come along and say, Parker, you were 10% of you're 10% of the pool. Um, I'm 10% nachos, what are you 80%. So Parker, if you find this next block, you need to pay 80% to Nacho. whatever 80% of the block subsidy reward is and pay 10% to yourself and 10% to me. And we essentially give we give the miners the payout slip that says if you find a block, this is who you have to pay and this is how much you have to pay them.
(41:25) And we come up with that by looking at the work done over a period of time. And we just we just maintain a spreadsheet essentially of who did what work and how much of a payout that would translate into if you know it and it's updated in real time essentially.
(41:45) We don't make the block template and when a block is found the money goes directly into the the miner's wallets. It doesn't come into ours like we're non-custodial. So does the does the and I don't know this answer but the payout structure does it go to the individual minor that actually solves the block and then from there after 100 blocks does it get distributed or is it paying out to all the it's paying out um to to the miners directly in the generation transaction.
(42:18) So in the the generation transaction is is the first um transaction when a block is found and the list of outputs in in every other pool. The list the output UTXO is uh is the pool's bitcoin address. For an ocean block the output address is 60 addresses belonging to the top 60 miners on ocean. So if you're 10% of our hash rate, you get paid.
(42:44) 3 bitcoin immediately um directly from the network without going to the pool first. And then how do how are the smaller miners? Good good question. So um that is a function. Bitcoin has the capacity to pay many many miners at once but firmware is generally the limiting factor. So in the early days of um of Allegius when Luke ran it he would pay hundreds of miners and and again the subsidy at that time was 50 bitcoins.
(43:19) So but 900 and something was the top like you would 900 individual miners were getting paid directly in the generation transaction. Um but over time the firmware um from Bitmain essentially was just non not maintained and so there's a limit to how much data um you can Ocean's giving miners the the payout information in the Coinbase and so you can only you can only put so much data um before the firmware just kind of chokes up.
(43:49) So depending on what minor found the block, you um you have you can have more or fewer uh output addresses. The worst case scenario in in a in an ant minor it's like 16 addresses. In a in a what's minor it's closer to 60 and hopefully as firmware gets better then uh we'll be able to push that number.
(44:08) Um and all of those miners are getting paid um UTXOs directly from the network. So zero hops. you you can you can touch the Bitcoin from it basically and everybody who's below the threshold um they get paid out in a secondary transaction that that Ocean sends but so temporary control but never custody of that funds and um we have we have a minimum payment threshold of about a million sats but we also have lightning bolt 12 integration so a lot of our a lot of our miners are are already um configured on lightning and they're essentially they're getting paid out um daily uh every time we have blocks via
(44:48) lightning. Okay, that was that was for my own education, but hopefully we probably have the same questions. But in a in a worst case scenario, it's effectively like say the 15 large if it's an ant minor, the 15 largest miners, it all goes out direct and then the percentage that's remaining gets dealt with.
(45:11) Um and that and that that's like 99% of the block reward goes out in those top 15. Yeah. Yeah. And because it the majority of hash rate is aggregated to a few large miners, right? Versus it all going to one, right? And then and then being distributed. So you mentioned DATIM and that one of the key distinction is that every minor is like every minor is actually running their own node that's part of Ocean.
(45:47) Is that correct? Um if you're running not every minor but I would say the majority are. So we Okay. So so so you enable them to but they don't have to. Yeah. We're we're really big believers in your your hash rate, your choice. If you want to if you want to run our node, you're more than happy to um send the hash rate, just send it to mine.xyz. And if you uh we encourage you to run your own node and if you do, there's more work involved and it in it entails running a node and and a datam gateway. Um but I would say right now I think about 90% of our hash rate is on datam
(46:19) and um there's a few miners who who don't want to do it and that's fine but um most of them are and we're making it super easy as well. that's available through number of different uh clients and platforms like like start 9 and umbrell and so the other thing that you mentioned was when you were drawing the comparisons between how ocean is structured allowing Bitcoin miners to peer directly with the Bitcoin network versus doing all the work and then pointing back up to the pool where ultimately the the funds get
(46:54) paid out to in the the context of a foundry or an amp pool. Just talk a little bit about the the differences between the DATM protocol which ocean runs and that that piece this is open source and stratum but also the differences between um datam and stratum v2. Mhm. So in in um DATAM is is just another protocol that that we wrote to kind of enable this decentralized mining to happen today.
(47:33) Um but communication with the with the with the AS6 servers are still done in Stratum Stratum v1. So essentially the flow is um if you were running datam on site you would have a box you'd have like you know a mini PC or Intel knuck or something larger but it's something that's large enough to run a Bitcoin node full node and sync and but datam on and then you have a full node you install the datam software on top of it and the flow essentially is your node peers with the network um it uh the datam gate gateway turns the block templates into stratum work. So essentially it's a stratum server and
(48:12) then it communicates with the with the AS6 servers over stratum v1 and um datam on site communicates with oceanceans's datam which we call datam prime over the datam protocol layer. So, it's an encrypted protocol and we built it from scratch in order to solve a very particular problem which is miners don't have the tools to make their block templates today and we need them to make their own block templates in order for Bitcoin to be censorship resistant.
(48:44) So, when we um when we launched the company and if you go back to some of our earliest pitch decks and PowerPoint presentations, there was no datam in there anywhere. Uh we were actually intending to use Stratam V2 because it was the predominant um protocol and project in the space and um we uh our engineers um primarily Jason Hughes um I would say we launched in November of 23 and we we launched as a centralized pool so we didn't have datam yet. Everybody was using our templates and we got to work really quickly about building
(49:22) building out the next phase which is let's let's build the tools and push it off to the miners outsource the control back to the miners and um yeah Jason dug into the code and um and the inner workings of Stratam V2 and just kind of came to the conclusion that it wasn't the best tool for the job right now at this time.
(49:50) Um, uh, I'm not a developer myself, so but from from his perspective, he he needed something that was lightweight, um, that was purpose-built for decentralization in mind, and it was easy, uh, easy enough to deploy in a variety of hardware configurations and rapidly scale. And those those things just weren't possible with Stratum V2. And um and so Jason, it was also written in a language that he he's you know he's a C guy. He's a C maxi.
(50:23) So he uh he basically said look this we need to we need to decentralize mining in in a jify and this this protocol while the intent is great and like I think we're all fighting for the same thing in terms of decentralization. It was um it was originally a protocol that was um that wasn't designed it was it it wasn't intended to be a decentralizing protocol.
(50:46) It was proposed early on after Stratam v1 to fix the lack of encryption. And over the years different features were added security privacy. Yeah. Privacy and and and eventually efficiency too. Eventually the the concept of decentralization was sort of bolted on after the fact.
(51:04) Well, if you know, if we have a job negotiator, then we can let miners um participate in that. But it was it was a it's a centralized protocol that has ways to allow miners to participate, but from the ground up, from the from the core, the the design was was never a decentralized protocol. So centralized in the sense that the pool is running it. Yeah.
(51:27) Yeah. it the pool runs the the main Stratum V2 server and has various interfaces with the miners and I'm not sure if the design has changed since we first looked at it. It may may have but at that time it was it was it wasn't kind of like consistent with the ethos of giving control to the miners cuz in that system the the pool still retained the authoritative decision-m power to say yay or nay.
(51:52) miners had a say, but it was ultimately the pool's call at the end and and that wasn't good enough for us. Yeah. My my understanding from a interaction with Matt Carlo online is that there there's no concept of a negotiation. And there was some term of a negotiator, but that um the the pool may set the template and then the the miner would construct, you know, you know, select their own transactions if it fit the pool's template, you know, and so it's like, hey, well, if they're mining off the template, it's not like a negotiation on a per transaction basis, but it still seems to
(52:33) me that there's an input side which is they can preset what transactions would be in you know allowable or not and that being set at the pool level and so one of the one of the key things that I'm trying to understand is it seems to me that the the miners themselves being in absolute control of the templates is critical to u to decentralization if the pools you know if working with a pool is that is that fair to say and is is there an aspect of datim that allows that that wasn't in stratum v2 like like what is that mechanism because there's there's the importance of the payout going
(53:22) straight from the coinbase um but theoretically you know if um I mean they would have to design a system that um one of the pools, Ant pool or or foundry could could do something like that in theory from a payout perspective, but from an actual construction of the block and being in absolute control of that and then knowing, you know, having some assurance because the payout is direct from the miners.
(53:55) the combination of those two things. It seems like that is like those two things together is critical to actually putting more control in the miners. Is that fair? And and what is the mechanism in in DATM that maybe allows that or what's the difference between DATM and stratum v2 that allows that? So using your explanation kind of how you framed it, the the stratum v2 setup would kind of be like pool works handinand glove with minor to come up with a template where the pool has a say and the minor has a say and there's there's a bit of a handshake and but and and that's kind of like quas decentralized. But
(54:32) if if the pool has any say at all then they're a target for um for coercion. So in in our case, we have no say what goes into the template. If you're a minor on our on Ocean and you're making your template, as long as it's a valid block, we have we can't do anything about it.
(54:56) Um the only thing we do is we tell you how much to pay Nacho and we tell you how much to pay me. But what you put in your block is entirely up to you. For better or for worse, the whole point is we want miners making the choice so that so that there's not one throat to choke. In our world, if Ocean had 100% of the hash rate theoretically, hopefully um maybe not hopefully, but it's it's proving the thought exercise proving the point.
(55:28) If we had 100% of the hash rate and every minor was running datam, then we would have thousands of individual templates being created by thousands of unique miners whose identities we don't know because we don't we don't have customers. We have Bitcoin addresses. When you mine on us, you there's no accounts. There's no sign up. You just mine with a Bitcoin address.
(55:56) And the mechanism to do that is turn each minor into a solo minor. Each minor runs a stratum server peering directly with the network total totally sovereign entity with full decision-making authority over what goes in their block. Um, and if everybody's doing that and we all collectively agree to split rewards with each other, then then two things happen.
(56:21) Bitcoin, it's become censorship resistant for real because there's not one throat to choke. If you get a call from President Trump to censor, like there are literally tens of thousands of miners making templates. We don't know who they are. This is this is kind of like where Bitcoin needs to go to to be really resilient.
(56:42) Um, but then everybody it kind of like in a co-op setting, everybody agrees to split rewards. So we're all sort of sharing in the variance. Many hands make light work. The the goal is the goal is to have enough people absorbing the variance to the point where nobody actually feels the variance. Like you you brought up um a little bit earlier how it's good to have pools and there's there's um um it's actually you can't have too many pools.
(57:14) There's a point where too many pools is a problem because for a pool to be viable, it has to solve a certain number of blocks in any uh difficulty uh adjustment period. And if over any time horizon, right? Right. Like and if you're providing an FPS guaranteed payout and and you don't have deep enough pockets and you hit bad luck, then you're going bankrupt.
(57:41) Well, let's talk a little bit about that which is so we talked about datam vstratum which kind of at the core of it might be like how blocks are actually constructed and and the templates um the ability to actually peer with the network versus a system that designed to basically peer with the the the pool itself. M um but then the payout structure because that has the the and for for people that aren't as familiar FPS is fixed pay per share.
(58:09) Um and what is run through ocean is a ppler last in number of shares. The FPS pays out a, you know, based on the amount of work that you do to the pool, a fixed amount that varies over time, but is a fixed amount per per consistently. um like say every day number of shares times rate versus ocean structure which there and as pools emerged when it was slush pool and and brains used to to run ppls as well but there were different scoring systems and that's another thing that's that's unique about ocean you have your your tides in terms of how those payouts are actually calculated
(58:58) um but just talk about the difference like and and then also how you think about the I mean this is something I genuinely don't don't understand is why why the FPS piece is is what has caused centralization in pools but also just when you think about aligning incentives in terms of the pool to the miners and risk why the the more variable payout of just saying hey we're going to you know pay out as we as we solve blocks um why you know why did you settle there but also So, if you could tie that into, you know, kind of the almost necessary
(59:36) part of that being core to how, you know, if if you have if you're going to have a fixed payout system, somehow money has to be centralized. So, just just talk about the differences in terms of the fixed payout system versus what Ocean runs in PLNS and how Oceanceans's ppls might differ from say what Brains used to run.
(59:59) Yeah. Um, most min most mining pools run FPPS like you said and um to kind of like sum it up at the beginning, the the value proposition of ocean versus FPS or our our model is called tides. FPS optimizes for cash flow um at a very consistent cash flow consistent cash flow at a at a premium and sometimes and often times an invisible premium but it solves cash flow and miners are operating cash flow businesses. So that's kind of like why that became really popular.
(1:00:38) um Ocean and our through our payout system tides, we optimize for maximum revenue. Um because um because we're not um uh we're we're not a liquidity provider that has a cost of capital in the FPS. Uh in terms of maximizing revenue, in terms of maximizing pay payouts, in terms of X amount was mined. Yeah.
(1:01:05) and we are going to we're going to take our fee and distribute as much of that that was mined. It's it's it's pure Bitcoin mining. If you're 10% of the pool and we hit a block the block subsidy plus transaction fees minus O's fee, you get 10% of what's left over. Um, and you can verify that down to the share level, down to the SAT, and it's 100% transparent and verifiable.
(1:01:39) And that um you only get you're sharing the you're sharing in the luck of the pool. So if if we go unlucky, then you don't get paid. If we get really lucky, you you win the lottery. You get paid multiple times per day. On average, just like anybody mining Bitcoin, on average, luck trends to 100%. So luck on any ppls based or luck based pool goes to 100%.
(1:02:03) But it's the you're you're the closest to the source of the money. It's like being at the wellhead. You're the closest to the money and you're getting your share that's verifiable based on proof of work. FPS, it's an entirely different system where the the pool guarantees payouts based on um a bit of an arbitrary formula and uh absorbs all all the luck the variance from the miners and um over time since we launched we it's been almost 2 years since since Ocean launched the data is now coming out that that is a very expensive proposition to to be able to for for an entity, a middleman to come in and say, "Don't worry about any of
(1:02:45) the variance of this highly volatile asset called Bitcoin that and mining is is extremely volatile as well. We'll take on all of that variance and we're going to pay you a set amount um full paper share every day no matter what." And miners are running the numbers.
(1:03:06) They're running the comparisons and they're coming to us and saying, "Hey, I I ran the test. I did FPS versus Ocean and I came out ahead on Ocean. Sometimes it's single digit, sometimes it's double digit percentages, but um over the long haul, if as long as you as long as you run a test long enough where the luck is able to resolve to 100%, there's just more money in your pocket.
(1:03:32) So, it's as we grow that volatility, that variance um gets easier and easier and easier. And we're sitting here today almost I guess one and a half% of the network and we're solving almost two blocks a day on average. How many exahashes is that? We have about 12 exahash on the pool and growing and growing growing faster than growing faster than taking share than the network.
(1:03:53) Um yeah that I mean one of the things that again it doesn't make sense to me is that you know when I look at the FPS system and and I'm trying to understand this because the market has largely said based on where hash rate has gone historically. Maybe it's a lack of options. Certainly, um, brains's shift from a ppl pool, but there there was something different about how they scored in and tides. Yeah.
(1:04:23) But that effectively that fixed payout per share, it is a a hedge to variance that isn't actually quantified. Mhm. It's like, hey, there was this total amount that went to the pool. we're paying out based on shares and and you don't necessarily know how many total shares there were. Um it's not this this base, okay, here here's everything and you're having to trust the pool.
(1:04:48) Um, and it almost seems like something that should exist as like a separate financial service that here's the work, it's paid out, and if you specific participating in the pool wants to to hedge your variance, here's an actual hedge that you can pay for. And then then it's actually quantified. But, you know, I think I think part of that is just the the market going through and and needing to have other options.
(1:05:13) Um, but one of the things because this is the other refrain that's consistently said is that that pools are terrible businesses. Like I hear that consistently of like why are why why is mining on the pool side become more centralized and and people will say oh it's a terrible business and that's why it's centralized and that that's that's not logical to me because if it was a terrible business why are there these couple businesses that you know are seemingly large and doing very well and part of it capitalization but to me when
(1:05:45) I look at it it's a matter of aligning incentives and delivering good software like having having valuable software and then having the right business model and one of the things from a alignment perspective it's like I can see how hey miners running their own nodes if they want to payouts going directly um to me at least which to the market to the side being like hey you get paid out as you find blocks.
(1:06:26) But one of the things that you know in terms of miners that I've talked to and struggle with is and and one of the things we haven't talked about which in my view is a is a big pro is that you also can run your own implementation. So people can run knots on uh ocean, people can run uh core. But one of the concerns that I have is like, hey, if I'm a minor and when I'm talking about aligning incentives, it's there's aligning incentives between minor and pool and aligning incentives from minor to minor is if I'm mining and and and maximizing the amount of fees in a block and there are other miners that
(1:06:59) are optimizing for number of transactions in a block and filtering JPEGs and and other spam. and I have the perception that that's lowering my um you know maximum potential revenue. How do I how do I become aligned with those other minor like how do you think about aligning interests because it is you know a a two-way function between not just the minor and the pool and those incentives being right but the the incentive from minor to minor just how do you think about those trade-offs? Yeah. Yeah, no, that's a good question and um it's a really good point to get
(1:07:40) right and maybe looking at an extreme example, if I'm mining empty blocks and you're not, we're the value of our two blocks are going to look different and um it wouldn't be fair if we got paid out the same. So the way we've designed datam is um is to essentially pay the miner um the equivalent of what they would have earned had they had they solo mined their blocks over a period of time.
(1:08:13) So if I if I mine empty blocks with no transactions um on average I'm going to solve so many blocks and I'm going to get the subsidy over a period of the year over a year and it's going to look different from yours. and we work backwards into the into the um the calculation to essentially weight them differently.
(1:08:35) So, so it's um miners who who um miners who who bring in um different differing amounts of value basically uh aren't subsidizing each other for their individual choices. Everybody has their individual choice to do what they want, but um it doesn't affect the other miners around the pool in a negative way.
(1:09:00) And one question that I just thought of and I I'll continue here, but with a pool running stratum D2, is your knowledge that it's all the um are miners able to run their own nodes and run different ways? I mean maybe it's m if the if the pool is putting templates in and they could say well you can't include transactions that either look like this or you can't include this you know a transaction from this address but um how on the node level or implementation sorry like between the ability to run multiple different implementations of of Bitcoin do the two systems compare like between
(1:09:38) data versus or is there or is there no difference? I I honestly don't know how advanced Strata V2 is in in that and I don't know if it if it accepts different node clients. I know we do like you mentioned you can run knots you can run core it's literally your choice like this is this is the the free market like this is this you can run as long as it's a valid client and you're making valid blocks and um the the key piece here is you you can actually run datam in solo mining mode if you want it's it's free software it's open source you can toggle
(1:10:16) a a switch at the beginning to say I want mine solo. I just want to solo mine and not split rewards with anybody. And it's basically a free stratum server. Um the value and kind of the magic is is by operating in split reward mode, you get to be independent but share the rewards. So for us it um in terms of how you run your node and how you get paid out, it makes no difference.
(1:10:47) We just look at the work done, the proof of work and then tally up all the shares from minor A and minor B and add them together and develop ratios and then those ratios are multiplied against the next block. So that that I mean and also I mean what you described there is that it makes it fundamentally easier should there ever be an issue with the pool to Yeah.
(1:11:14) and and like right right now there's there's um the the shares have to be um the shares that the minor submits are are validated by ocean to to make sure that they meet the the target difficulty. So there is some degree of kind of like spot-checking that that goes on, but it's it's a pragmatic approach because it's it's des it's as decentralized as we can make it while still working cuz we we've had, you know, a couple hundred data blocks in the wild already.
(1:11:43) This software's been it's been working for 12 months um pretty much without issue and um some some of the biggest companies in the world are using datam as we sit here today actively like consciously choosing it over other implementations but we're we're never like satisfied with um where we're at.
(1:12:09) So, we're we're actually working on ways to make it even more decentralized and allow allow individual miners to validate each other's proof of work. The goal is the goal is to get the pool as far from the position of authority as we can so that the miners are are the the the decision makers. So, so that that'll that'll probably come in in later um versions of of datam down the road. I'm not sure how how many quarters that's going to be, but ultimately we would like to get to a point where you submit work to the minor next to you and that minor says, "Yeah, Parker submitted valid work. He he should get paid for that proof of work." And then and then
(1:12:54) Ocean says, "Okay, we trust you guys." Parker gets credit for that proof of work as opposed to us being the ones making that decision. So, the more we can push that and and do it in a in a transparent way, I think it's we're just enabling miners to to like thrive and um the pool will need to exist in some capacity.
(1:13:21) Uh cuz somebody has to kind of keep a bit of a ledger about who did what proof of work in order to get paid. Yeah. And I have one other question about like the alignment incentives and specifically on the you know the the filtering of different transaction types. Um, one of the things that how do you ensure that if the m if the payouts are going directly from the Coinbase transaction, how I don't understand the mechanism that prevents, you know, again, like if a minor cheated once, they'd be out, but like what prevents the minor from just taking the full reward. Is that is the does ocean do something to validate that
(1:13:57) the that um that each minor is hashing a um a template that has an output that has all of those addresses. Yeah. So the the the um the kind of like supervisory role we have in that scenario is you're is you're entitled to the split of every other minor's blocks as long as you pay miners from your blocks and it's it's like a reciprocal agreement the miners have between each other with with Ocean kind of overseeing it.
(1:14:37) the moment you don't uphold your uh obligation to pay the other miners, then we we would basically um uh in in the next versions of the Coinbases basically you would get penalized through through the other miners not including you in their blocks. So, it's it's a bit of an honor system that we monitor and um it keeps everybody in check.
(1:15:01) Like if you essent essentially if you're if you're running in datam, you're getting paid from everybody else and then you just go essentially you just flip the switch and you become a solo miner, you can you can do that. But if if you're not solo mining um and you're participating in Ocean, but you like switch the payout mechanism, that that's kind of where we we would come in and and sort of adjust the rewards for everybody else's Coinbases the next go round. Yeah, it keeps it fair and balanced.
(1:15:29) Yeah. And it is it's like this often times how a stock exchange works. It's like, hey, these are the rules and if you violate the rules, you no longer get to participate in it. So if you valued the the variance reduction that comes from pulling resources um you can you could theor you could cheat in theory but you could only do it once.
(1:15:52) Um, coming back to the economic incentives, I think there there are people, you know, there there's the ideological side and I think there's ideological people on either side of this and I don't want to talk specifically about like the debate on upper turn, but speaking to minor specifically, there are people that really struggle with the idea that an economically rational actor could filter transactions that don't result in the largest amount of fees in a individual block.
(1:16:21) Not asking you to theorize on how your your customers, the miners who who do that think, but when you think about aligning the incentives between the pool and in miners, you're taking a share of that revenue for your service. So those economics impact you as well. So thinking about it from the pool perspective, how how do you see the alignment of incentives visav a minor to the pool where they might exclude certain transactions and not monetize a block as much as it could be? Like how do you think about that being in you know your collective you know when you look at everything in
(1:17:05) aggregate there being full alignment right? Well, that I think that that the economic uh incentives is pro probably the most un misunderstood part of ocean. There's there's a lot of there's a lot of discussions and online de debates about about um arbitrary data and the so-called revenue that it brings into the blockchain.
(1:17:33) Um, but that additional revenue is so minuscule compared to the money that miners are leaving on the table through FPPS that that it's like it's it's pennies on the dollar. It's, you know, um, and and it's pennies on the dollar. The challenge is they can quantify the pennies and they can't quantify the dollars. Yeah.
(1:17:58) But we are there's a lot of data that's coming out now like if you if you don't mine on FPS and you mine on Ocean you could earn 5 to 10% more revenue 5 to 10% more revenue like multiply that by your business and the razor thin margins that's a lot of money saving you know but the the and and I think the work that we're doing is sort of shone a bit of a spotlight onto that and how FPS is an an unsustainable payout scheme and how it's an insurance it's it's an insurance product wrapped up as a mining pool but it's really primarily an insurance product.
(1:18:34) Um so the fees the fee discussion is compared to that it's not even it's not even in the same ballpark. Um, so I would say to be a to be e if you want to be e economically rational and you want to maximize profits as a minor, you need to go directly to the wellhead. You need to go right to the source.
(1:18:57) And right now, ocean is the only pool that connects miners directly to the source. Whether you in include something with a couple of more, you know, sats or a couple of fewer sats, it's it's like a rounding error and it doesn't it doesn't have any material impact. Um but um but this is all part of the long like again this is a this is a your hash rate your choice thing right like we don't get in the way and miners make whatever choices they want but we're all we're all here for the long game of Bitcoin which is like as Bob Bernett likes to say we're in year 15 of the next thousand years of money and um and so we need to have like
(1:19:34) a long-term view and Bitcoin needs to survive and it needs to be adopted and and used as um as a peer-to-peer payment payment system. Yeah, I think that that, you know, um, you know, thinking about it in the context of there's the there's the fees and there are a lot of other variables that that go along with it that it's not like the alignment of interest is not just marginal fees and that at the heart of what you guys are working on doing is putting miners in a position to being directly at the wellhead, having
(1:20:24) more control, seeding more control from the function of the pool. In the broader context of Bitcoin and decentralization and the integrity of the system, how important do you think it is that the industry adopt something more like DATM and the structure of Ocean and its relationship to miners? um like is it enough for ocean to say get 5% of the hash rate or 10% of the hash rate if the other 90% is operating in a very centralized world and so yeah that's just the question do you think that for the integrity of the system and for mining to truly decentralize
(1:21:17) that um that something like data needs to be adopted as a standard So looking at the B Bitcoin ecosystem, I think 51% of the hash rate should be making their own blocks. Like that would be a really good target to have and that ensures Bitcoin is uncensorable. Um it just so happens when you don't when you don't rely on FPS, there's more money to be had.
(1:21:48) So, I think I would I would think miners who are who are seeking to maximize their revenue um it would be in their best interest to to check it out and and go directly to the wellhead. So, I do I do you know I do feel for it's a competitive industry. It's it's in many cases, you know, really hard to make ends meet.
(1:22:14) And there's, you know, Bitcoin miners aren't the favorite type of customer from a utilities perspective. And so utilities are often very demanding in terms of they should be, but they're not. They should be, but they're not. And and they they demand unreasonable utility deposits and miners have to pay their bills sometimes multiple times per month. And these kind of requirements aren't placed on any other industry.
(1:22:39) So, it's it's a difficult business and cash flow is um is definitely important and and uh all I'm all I would I want to say and kind of reiterate is that um there's there's more money to be had than what than what is being passed through the FPS system. Um and that's by going directly to the source. As we get larger, the the number of blocks that we find per day goes up.
(1:23:05) our coefficient and our coefficient of variance goes down and um at some point we're going to cross we're gonna we're gonna sort of pass a critical threshold where it's there's really no risk to mining on ocean and it's and it's all upside at that point and I think we're actually really close to that.
(1:23:24) There's most of the growth that we've seen so far has been organic growth through, you know, home miners, pleb miners, a few early adopters, but for the most part, the really large US publicly traded companies are um they're not there yet, but um we're getting close. And um at some at a very at a point in the very near near future, I think our our hash rate is going to hit that inflection point where um the the the volatility aspect is not really a concern. And then and it's just about um the money.
(1:23:54) One of the one of the things that I think is important there is it's like there the economics of the the PLNS and the FPPS and you know there's there in my mind there's no reason why if you want a fixed payout that there can't be a financial service that sits on top of a PLNS pool and basically says this is how the way the pool works but you individual miner want fixed payouts here's a cost from the pool's perspective and the integrity of you know thinking about the security of business and I think that there's there's two ways to look at this
(1:24:30) which is when I was at Unchained we looked at security of custody being people hold their own keys and we can help them but that was our our fundamental perspective on what resulted in great security. If you come from a centralized world, it's easier to do certain things.
(1:24:55) When things are centralized, you can pay out different ways and offer different services. And if that is in your culture as a company, then it's just well, why would we do it some other way? This makes other things so much easier, less cost. But the first question was on the minor side, but this is on like to the pool industry to to your peers.
(1:25:19) Do you think from a security standpoint, and I'm not talking about, you know, your Bitcoin getting hacked or your data security, but in terms of ensuring that that that phone call is not made that when people look at the landscape that it's also necessary to the pool ecosystem.
(1:25:43) I'm not just speaking of ocean, but to to you know thinking about all other pools that they put themselves in a position to not be able to be the ones creating templates. Oh, absolutely. when we um yeah like other pools and I strongly encourage other pools to either offer multiple templates to their for their miners to choose from so the miners have a choice or give the miners the ability to make their own in the datam software that we um open sourced and it's available on GitHub you read through the documentation it doesn't actually mention ocean in the document it talks about being being run with a
(1:26:21) data supporting upstream pool. And so our vision is that in the future they're the goal is the goal is to get mining decentralized at the pool level whether that happens just through Ocean or Ocean and a bunch of other miners mining pools. We got to get there cuz ultimately we have to protect our most valuable asset which is Bitcoin.
(1:26:46) And um we're all kind of like fighting for the same thing here. So yeah, I would love to see other pools adopt datam and use it and um and because that's going to get us to where we need to go faster. But at the same time, like I said before, if everyone used ocean, if every minor used ocean and it and everybody every minor made their own block templates, there's no there's no central point of failure, especially when you factor in the um the the block validation work that we're doing that that would allow minor A to validate minor B and vice versa. there would be
(1:27:22) well what I would say is there's no way for somebody to influence what individual miners create but somebody could call up Ocean and or like seize your servers and then there would be miners being a very precarious position of not being able to to pull. That is a good point. So that is a that is an attack vector that we're not at yet, but we should definitely and I'm sure Lucas thought about this one.
(1:27:50) Yeah, cuz he's always planning like 10 steps ahead. I think the best world would be many pools all using something that takes the control of the templates out of the hands. Not necessarily many pools. I'm not saying many pools infinite pools booth. That is one thing that you know someone like Elon Musk even misunderstands when he talks about how you know we need faster block times that the that there was an intentionality in the the target of 10 minutes in terms of security of the overall network. and the rate of orphan blocks that then has this
(1:28:23) natural consequence of if there are only six blocks an hour and 144 blocks in a day and x blocks in a week and you have expenses and working capital and cash flows um that naturally to reduce variance pulling resources is something that makes sense.
(1:28:46) And then within there there's a big difference between two versus five versus 10 versus 20. And there might be some limiting factor that says there probably won't be a thousand or thousands. But I think what you're saying is that if the role of the pool is less in terms of control then to to have effective decentralization you you still need many but you don't need nearly as many. Yeah.
(1:29:22) And and there's also a a um a scenario a possible future state where where datam is is the protocol that supports pools working together with each other. So instead of the pools fighting against each other to all find that those coveted minimum num number of blocks every two weeks if every pool aggregated their hash rate together they would essentially share in the variance.
(1:29:52) If you're if you're 10% of the network, I don't know how that would work, but it's like a reinsurance of it's like, you know, there's a lot of proxy pools, white label proxy pools for AMPool and they're all getting their funding from the same source, right? Well, if those proxy pools and their templates and their templates, if those proxy pools just did what they're currently doing, but they were on ocean instead and they were running datam.
(1:30:12) So think think of datam as not a pool but a protocol. Then they could continue to be proxy pools serving their customers but they would essentially if two pools with identical size were on the pool were both using datam splitting rewards. They would find they would each find twice as many blocks at half the value.
(1:30:36) And if a third large proxy pool joined it would it would lower the burden for everybody else. So when I say 100% of the network, part of that future state could be, there are many pools, but they're all working together collaboratively as opposed to opposed to each other. And um I think that's that's an unstoppable Bitcoin in the future. All right, last question.
(1:30:59) You know, obviously I know what you're doing to help foster decentralization in Bitcoin and mining, but when you think about the incentives, not just aligning incentives, that you know, the ultimate integrity of of Bitcoin is what's most important, but everyone also because if it if it didn't have integrity, then everyone one's assets lose value, but that individual interests, it's like balancing short-term interests with long-term interests and balancing individual interests.
(1:31:40) There's not really even balancing individual interests with the the network interest, but the marrying of those two that they're one and the same. What do you like five years from now, what do you think the mining pool landscape looks like? And what do you think the the the the incentive that tips the scale away from that overcorrection and reliance on FPS? Do you think that it's just one minor figuring it out after the other or is it um a materialization of the risk? Is it a financial distress? you know, like how do you see us going from and what what's the kind of leading driving factor that says like this is what miners figured out and realize that they
(1:32:28) needed you know combination of more options as well as more control future in 5 years I think um I think it's defined by three changes I think we're going to have um proxy pools collaborating like we just talked about using datam and so pools become collaborators rather than competitors. Um we're going to have a decentralized version of FPS uh because we're building it. So maybe we can chat sometime next year. Didn't know.
(1:33:03) Um the money doesn't have there's more than two entities in the world with Bitcoin. every bitcoin that I did the math that the the whole network could like three standard deviations would like take 2,000 Bitcoin or something and there's 19.9 million Bitcoin out there. So, right.
(1:33:27) So, all the money, all the block subsidies that get paid to all the miners in the world come from two pairs of hands. We can we can spread that out a little bit. Um, but you need a transparent system and a permissionless system to do it. So, we're building that. Um, and in five years, I think, um, I think our perspective on the value of a block is going to be radically different as well.
(1:33:52) I I What do you mean by that? Well, I I I credit this way of thinking to Bob Bernett from Barefoot, but we we when we think about the value of a block today, we you look at how many transactions there are in the block and the fees and you add it to the subsidy and then that's the value of the block. And that's like a one-dimensional way of thinking.
(1:34:15) But I think in the future if we have hyper bitcoinization and you have institutions all competing for block space the the block space scarcity is going to become a real issue and then the value of a block is is shifted to who actually makes the block because right now there are two pools that make majority of blocks for every minor in the world.
(1:34:41) Um and if you have um if you have settlement on chain for large uh international deals and procurement and um and there's other external factors that are that are riding on the fact that are that are that are riding on a Bitcoin transaction getting in into the layer 1 settlement.
(1:35:07) there's like secondary effects and secondary opportunity costs that um that need to be considered. So I I think and I think the the the prominence of of running a block for the sake of getting to populate it with your own transactions is going to be very valuable to miners in the future. And it's it's something that very few people are talking about now. Um and that's something you can do today with Ocean.
(1:35:32) You can create your own block template and you can put your own transactions in there at no cost and there's not a high degree of demand for blockspace right now. So, it's not that big of a deal. But when there is an insane amount of demand of competition for Blockspace, um, and you can't get your transaction in and you need to get it in because you you have to make payment in order for a deal to close and the penalty for not paying that is X million.
(1:36:03) Now the value to you of that block is now all of those external factors. So I think I think we're going to go from uh single dimensional um assessment of of the value of a block to three-dimensional assessment with multiple factors and I think it's going to happen quickly.
(1:36:22) Yeah, I've talked to Bob about that and I want to have him on hopefully in the next few he'll do a much better job of explaining it than I just did. Like my view of that piece is that like there is going to be this if you imagine 8 billion people using Bitcoin. There's going to be fierce competition for block space there's going to have to be serious innovation in terms of you know scaling value per unit settled on chain and that there is going to be a desire to you know have still have higher value transactions that are timesensitive.
(1:36:55) I feel like there's going to inevitably have to be some financial solution to that of like because you don't know what pool or what minor is going to solve a block. So, how can you guarantee block space? But I think there's there's going to be markets that emerge that will benefit um miners. One thing that that I've thought about and I'm curious if you think that the world might go this way.
(1:37:14) Do you see large minor like miners always have like a backup to you know if something happens with their pool to to change and we talked before about why when it when it really might matter you functionally even if you could change you know the other pools might be censoring too but specifically do do you think there might be a trend of large miners not just having a backup pool but actually splitting their hash rate and saying I'm going to send 25 of my% of my hash rate to um an an F or not just an FPS pool, but like to send something like Foundry and I'm going to send 25% of my hash rate to
(1:37:54) to Ocean or or other pools because they recognize, hey, not only is it not in my best interest to just have one supplier, but rather than just a fallback, I can actually point and then through that process, they can test that. they can they can start to quantify the the differences in pools like do you see that as a trend? I do. Um it's happening.
(1:38:19) I know I know uh several miners who it's like just baked into their diversification strategy to and um to mine on multiple pools. And part of it is they're they're doing their fiduciary duty of maximizing revenue.
(1:38:41) So they have to run the test to to to have the the data to support their choice in the pool and others are doing it just for that very reason of like not letting anyone pool get too big. So, I think it's going to and it should it should um continue like that and it would be ideal if if the backup pool also gave miners the the ability to make their own templates cuz like that's and in that point like the back all the backups are great but right now you a lot of a common configuration um for ocean is is you you when you run datam you're running a local stratum server so the hardware's on on premises sometimes Some miners do it in in the cloud, but the majority do it on prem.
(1:39:22) And um uh if anything happens to your server, pool two in your ASIC interface is just our template, which is mine.xyz. And then so you have a failback and then you know if you wanted a third failback, you can pick another pool as well. But you um at least with Ocean, you have the the primary and the backup all baked into the datam and the centralized option.
(1:39:47) All right. Um, Mark, I appreciate you. Well, glad that you're in Austin. Good to see you. Yeah. Um, if a minor is interested in Ocean, do they reach out on the website, reach out direct to Nacho? Where do they go? Yeah. Uh, we have we have a few few different ways. Um, our our general mailbox is mining ocean.xyz.
(1:40:11) That's a great way to reach out to us. And you can also contact any any one of our sales team. So I'm Mark everything. We got really simple emails. So Mark at ocean.xyz, nacho at ocean.xyz, or Lily at ocean.xyz. Awesome. And and Luke and mechanic are are easy to find as well.
(1:40:35) They might filter you um if you spam them. But um no, I really do appreciate you. Um it was great to meet in in May at the Energy and Mining Summit. We're going to do another one here next year. And um yeah, appreciate what you guys are doing. Yeah, thanks for the support. Thanks for having us on. Yeah, thanks for coming.

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