Last week I had the opportunity to sit down with Marco Streng, the wunderkind bitcoin visionary behind Genesis Mining. Genesis, as many of you reading this might know, is the world’s largest cloud bitcoin mining company, with over 2 million customers worldwide. It calls Iceland home, whose cool climate and affordable green energy are ideal for mining newly minted virgin cryptocurrencies. Last year, Genesis helped connect the blockchain sector and traditional capital markets by partnering with HIVE Blockchain Technologies, the first publicly traded digital currency mining firm.
This week, Marco will be one of the panelists at the Consensus 2018 blockchain technology summit in New York, which I will also be attending. Below are highlights from our conversation.
Tell us how you got started in this industry.
I’ve always had a passion for mathematics, science, physics. I wanted to understand how nature works. I used to spend days and nights in the library, and I was actually on my way to becoming a math professor.
But then blockchain and bitcoin came along, and that changed everything. At the time, the community was very small, but the ideas and visions were very big. No one fully realized then how fast it would all grow or just how revolutionary it could end up being. I watched as new marketplaces began to emerge, businesses began to bet on bitcoin and people started adopting it. More and more exchanges popped up. All of this happened within a year of me first reading about blockchain and bitcoin—it progressed that quickly.
It was clear that something big was happening. The world was changing, and I needed to be part of it.
How would you describe bitcoin to someone who knew nothing about it?
With bitcoin, you can send money anywhere in the world to anywhere else without worrying about boundaries or having the transaction controlled or stopped by a third party. It’s a completely independent, decentralized, peer-to-peer system. This is what makes it so revolutionary.
The conventional banking system really shows its limitations when we try to move money between developed and underdeveloped countries, particularly those in Africa. There are some serious inefficiencies that, frankly, many of the big banks just aren’t interested in fixing. But with bitcoin, you don’t have to worry about that. You can send money to, say, a coffee farmer in Africa, and he’ll receive it directly.
Money transfers are only one among a number of many other uses. Bitcoin is also a store of value. It’s one of the few assets that I would say are uncorrelated to the broader financial markets.
As for blockchain, it has innumerable world-changing applications across a wide range of industries. That’s why I believe it’s crucial that people have the right information about blockchain and understand it. If people don’t understand it, and it gets overhyped, I’m afraid it could start going in the wrong direction.
We recently mined the 17 millionth bitcoin, leaving only four million left. Explain why it becomes exponentially more difficult to mine coins the closer we get to that 21 million-coin ceiling.
It’s not that the mining itself becomes more difficult. To answer this, I think we have to look at two components.
One component is the daily supply of bitcoin. At the moment, only 1,800 bitcoins can be generated every day by the whole network, meaning all the miners worldwide. But it’s important to remember that after every 210,000 blocks that are mined, the rewards are halved. What this means is that after the next halving, which I believe is expected sometime in 2020, the number of bitcoins mined a day will fall from 1,800 to 900. And then after the next halving, it’ll be 450. This helps reduce the supply in a natural way.
The second component is a measure of how many miners and how much computing power is in the network. If more miners come online, then of course the competition becomes greater. Because the daily supply is already fixed, your market share shrinks.
Think of it like the California Gold Rush. Mining gold at first was relatively easy because the metal was plentiful and there were few miners. By the end, it became more difficult because the easy gold had already been claimed, and you were competing with far more miners. We’re seeing the same thing happen with bitcoin and other mineable digital currencies.
Speaking of computing power, HIVE Blockchain just announced that it expanded to 24.2 megawatts (MW), up from 2.4 MW in August. What’s next in the pipeline for HIVE?
Yes, the last expansion was a massive build-out in Sweden. It was done in three phases. I think this was a remarkable achievement for HIVE, that it could add so much computing power so quickly.
This is only the beginning. The year is still long and you can expect to see some bigger expansions on the way. In September, for example, we’re going to ramp up another bitcoin mining facility worth 20 MW, which is very exciting. And from there it goes even further.
G20 finance ministers are scheduled to share their plans for more uniform regulation of cryptocurrencies by July. What are your expectations?
I personally think that this is very good and that it will bring more professionalism into the market. The momentum and adoption has grown so much and so rapidly that there really needs to be some kind of strategy—the world’s economic leaders can’t just leave this space untouched. Anyone who believes otherwise isn’t facing reality.
Having said that, regulating this market will not be easy because it’s in a whole other dimension than anything that has come before it. As an analogy, imagine someone trying to regulate flying cars using the same measures that have been written for cars driving on the street. It wouldn’t make any sense. So there will certainly need to be some innovation to get it right. I think it’s also important that the regulators talk to the right people, the industry leaders. They have good input, and I think it could be a very fruitful dialogue.
Along those same lines, South Korea’s central bank just announced that it was looking seriously into how the Korean economy might use blockchain and cryptocurrencies. Specifically, there’s talk of the country going cashless by 2020. Do you think that’s where the global financial systems are headed?
I think there’s a natural incentive for governments to go in that direction because, of course, they want to have greater control over their economies. But as is the case with overregulation, too many controls—or going completely cashless—could be harmful to the economy. This is certainly part of a long and interesting debate, and I’m curious to see how it plays out, in South Korea and elsewhere.
Where do you see the best application of blockchain technology right now?
Blockchain’s greatest contribution is its ability to erase boundaries. It completely removes the element of trust—or distrust, I should say—and adds a stabilizing effect to nearly every industry because of decentralization.
Take the global banking industry, for example. You don’t need to look far to find some serious inefficiencies, as I mentioned earlier. We’re already seeing some very concrete instances where blockchain can be of help here. The banks recognize this and are getting together to make use of this technology to improve their services.
What’s been the greatest challenge you’ve faced so far in your journey?
For me, the greatest challenge can usually be found in the moment that you’re currently in. I always compare this industry to the beginning of the internet—no one knew where it was headed or what it would eventually look like. Most people had a general idea that it was innovative and could benefit the world, but the full implications were unclear.
Similarly, no one knows where blockchain and cryptocurrencies might take us, and having to deal with this constant uncertainty is, I’ll admit, not trivial. You must always be prepared to act quickly in response to another bitcoin fork, a hack or some other unexpected event. These are things that keep you up at night.
But it’s exciting. I think what history has shown again and again is that it’s dangerous to be ignorant and to not have an open mind. Not everything was euphoric and wonderful when the internet first emerged. Problems still occur online, but I believe most people would agree that the benefits far outweigh the drawbacks.
No industry is without its challenges, and as long as you’re willing to address them, it can be very rewarding. As for blockchain technology, I’m very happy and thrilled to be a part of it this early on.