Alex Busarov - 00:00:00:
So Heatbit is essentially an at-home electric heater that mines you bitcoin. You can think of a nice Dyson heater, for example. So Heatbit is very similar with the only difference is the heating element is the bitcoin mining chips. The economics of the whole thing was was great last year. Now bitcoin is down and then mining difficulties up. So last year Heatbit would be earning three, four dollars a day. Now it's about a dollar a day, maybe even slightly less. One big thing that we worked on was the noise, and there's a lot that went into it. The cost of power for the mining for Heatbit is essentially zero. So when like like I mentioned, if bitcoin price goes down, while other miners will have to turn off, Heatbits will keep working, not for us, but for our users. Right? So I think that's a pretty strong advantage.
Kevin Rooke - 00:00:53:
Alex Busarov is the founder of Heatbit. The company building an electric heater that mines bitcoin. In our conversation, Alex explained exactly how Heatbit's product works. We discussed whether home heating could be a potential avenue to introduce millions more people to bitcoin and bitcoin mining. We discussed whether Heatbit plans to integrate Lightning Network payouts. And then we got into the vision and the roadmap for the company. Alex is asked to have his sheriff today's show splits sent to the Human Rights Foundation. So if you enjoy this episode and if you learn something new from it, the best way you can show your support for the show and the human rights foundation is by sending in sats over the Lightning Network. You get to decide how much. You get to use whatever Podcasting 2.0 app you want. There are dozens of them, but my favorite is Fountain. Before we get into the show, just a quick message from our sponsors. Today's show is sponsored by Voltage and Voltage is building the Lightning Network infrastructure toolkit built for engineers. Today's show is also sponsored by Stakwork. Stakwork is a Lightning powered transcription tool, takes the best of AI and humans to create better, faster and less expensive transcripts. We'll have more from Voltage and Stakwork later in the show. Alex, welcome to the show. I am so excited to talk about Heatbit and all the work you're doing there. I saw this product on Twitter and it was making the rounds on bitcoin Twitter a couple of weeks ago and I had to bring you on to ask all the questions that I had about it. But before we get into the details of the product and exactly what you're building, why don't we step back and give listeners an introduction to you? And you can start maybe by telling listeners about how you first discovered bitcoin.
Alex Busarov - 00:02:42:
Well, first of all, thanks for having me, for inviting me, Kevin. I actually first invited bitcoin when I just started working, which was in 2008. Funny enough, I was born on the same day as the white paper was published, as in, we have the same birthday. Okay, I'm not that young. I remember it was the financial crisis and people it was kind of tough, and I just started working. So it was kind of like I already had a job, and I remember hearing about it in the news and reading about it, and first it had this kind of negative publicity right. With negativity around how people used it or presumed negativity around it, and that's how I first learned about it. I didn't have any at that time. And then fast forward, I came fully into crypto in 2017. It was actually my dad who started talking to me about crypto. And my first reaction was as I think it's probably a reaction of many people, it was pretty negative. My first reaction was like, come on, dad, it sounds like a scam. Why are you talking to me about this? But then as we kept discussing it, I started learning more and more, and now I'm working in crypto, and I'm full on crypto and on bitcoin, especially running the Heatbit.
Kevin Rooke - 00:04:23:
Yeah, you've been full time for the last five or so years, and your first interaction with it, though, was a few years prior.
Alex Busarov - 00:04:34:
The first time I actually used bitcoin was 2017, but first time I learned about bitcoin, kind of heard of it and kind of read a little bit about it was 2008.
Kevin Rooke - 00:04:43:
Wow, okay. So this was back when just when the white paper was released.
Alex Busarov - 00:04:48:
Yeah, I remember seeing it on some news. Strangely enough, it kind of got caught by some report. I don't even remember what the new source was, but interesting.
Kevin Rooke - 00:05:00:
Talk me through why you decided to build Heatbit.
Alex Busarov - 00:05:05:
Well, it's kind of a life story. I actually have a lot of background in energy. My first job was in a consulting firm, and as the consulting job, I did a lot of projects in energy. So can I kind of understand how energy works? Production, generation, transmission. And back in 2020, that's when Heatbit started. I was in China, and the COVID started here, and I was under lockdown. We were the first ones to be under a lockdown, and kind of the rest of the world followed. It was kind of getting boring, and I was thinking, so I bought myself a toy, and that was an ant miner S9K, just to play with. I kind of like this hardware digital stuff, and I remember turning it on in my bedroom and thinking, wow, this is so loud. I have few cats that just ran away. I was so scared of it. And it got really hot very quickly, and then the idea came pretty quickly, well, if we solve the noise problem, it could actually be a very nice heater. And then I started speaking to friends, and then I saw people kind of getting excited about the idea. And yeah, I think the idea was born sometime in March and really started working on this just a few weeks later.
Kevin Rooke - 00:06:40:
Right. And so maybe for listeners who aren't familiar or who have not seen your guys stuff on Twitter or on your website, can you share a high level overview of how the Heatbit works and some of the technical specifications?
Alex Busarov - 00:06:54:
Sure. So Heatbit is essentially an at home electric heater that mines your bitcoin. You can think of a nice Dyson heater, for example. So Heatbit is very similar with the only difference is the heating element is the bitcoin mining chips. So in terms of the overall kind of feel of the device, it's less of a Linux and more of an Apple. So there's one button that you press to make it work. Right. So it's more for the mass market and more specifically on the specs, it's 1.4 kilowatt of power. So same as any regular heater that you'd have at home, it gives you 14 terahash of mining power and some people get confused with it, but it actually doesn't use any extra energy for the mining. So if you take a normal heater, normal electric heater, it would be transforming 1.4 kilowatt of electric power into the same amount of energy just in the form of heat. So Heatbit does the same. It's just the way of transferring from electric power to heat is through mining bitcoin. So it kind of does two things at the same time.
Kevin Rooke - 00:08:21:
Yeah. And so are there any efficiency changes when you think about the two ways of transforming electricity into heat, those two you just mentioned, what is efficiency look like for both approaches?
Alex Busarov - 00:08:37:
So if you talk about efficiency is a very broad term, right? If you talk about efficiency in terms of converting electric energy into heat energy, it's close to 100%. It's close to 100% for usual heater. It's close to 100% for Heatbits.
Kevin Rooke - 00:08:56:
So the same amount of electricity is generating the same amount of heat at the end of the day, roughly.
Alex Busarov - 00:09:01:
Okay. It's the laws of physics, right? The energy doesn't really go anywhere. So that's basically how it works. If you take a broader view of efficiency, if you look at the efficiency of bitcoin mining, this is where bitcoin mining doesn't really have to be consuming any extra energy. And this is, I think, the beauty of the device that we've built is if you take just Europe, North America and a small part of Asia, just the residential electric heating takes over 600 terawatt hours of electric energy, whereas bitcoin, now people talk about 200 terawatt hours. So if you think of these numbers, you quickly realize that most, if not all of bitcoin mining could be done with just heating and then we wouldn't have any of this negativity from the environmental viewpoints. And, you know, and the stuff that we've been hearing a lot recently, right?
Kevin Rooke - 00:10:11:
And then when you mentioned the specs, the device inside of the Heatbit is generating, is it 14 terahashes, I believe?
Alex Busarov - 00:10:19:
Yes.
Kevin Rooke - 00:10:20:
And so how does that compare to the existing ASIC miners that would be on the market for a bitcoin miner today?
Alex Busarov - 00:10:27:
So it's the same as an ASIC miner that you would have four and a half years ago on the market. So as a minor Heatbit would be an outdated minor. So as a miner heat beat is not great. So currently the miners can pull 120, some 140 tara hashes at twice the power consumption, though. But that's kind of important for us to distinguish here whether it's really a heat or a miner. So let me describe it this way. When people ask us, oh, can I use your Heatbit, can I use it in summer? The answer is normally, well, you can, but it's a heater, you shouldn't use it in summer. Right. So the difference that we make here is that for our users, because they need heat anyway, effectively the cost of energy used just for mining becomes zero because they would spend the same electricity to get the same heat anyway. So they get this bitcoin at effectively zero cost of power. I understand it's a bit conceptual, what I'm describing, but it's, I think, very important to frame the thinking this way. Whereas when you do mining just for mining, of course, you have to pay that extra electricity and deduct that from whatever mine earnings that you've got. At the same time. For us, with Heatbit, it doesn't really make sense to use, really the latest chips because those chips are expensive. So if you have a very high cost of capital, if you have very high investment into those chips, you really need to be utilizing them the whole year and you don't do that with a miner. So for us, it really makes sense to not use the latest generation of chips, but use the chips that are slightly outdated so that the cost of capital would be cheaper and we could make the device a little cheaper as well.
Kevin Rooke - 00:12:42:
Right, so how does the price of the device compare to a standalone heater that is not mining bitcoin?
Alex Busarov - 00:12:51:
Depends what kind of heater you take. There are heaters that are kind of $50, $60, but those are not really good quality heaters. I think we are a lot more comparable to high quality Dyson. So in terms of the features, in terms of the WiFi connectivity and things like that, and those Dyson's go for $500, $600 a piece and Heatbit is just over $1,000. So effectively, you get all this mining capability for about $400 extra.
Kevin Rooke - 00:13:29:
Makes sense. Now, I want to hear more about this distinction between building a mining machine and building a heater. Like, it seems like those are two different things and that this product, by combining the two, I wonder if there's any worry that you don't build the best miner, you don't build the best heater and you're building this kind of product that's in between. Is that something that people are looking for? Because I know there's a group of people who want the best miner. I know there's a group of people that want the best heaters. Is there a group, I guess, of people that want a miner that is also a heater?
Alex Busarov - 00:14:12:
Well, there is. People buy, right? People were buying last year. The economics of the whole thing was great last year. Now Bitcoin is down and then mining difficulties up. So last year he bid would be earning $3.04 a day. Now it's about one dollars a day, maybe even slightly less. So he asked people, do you like it? But they don't just buy it for the earnings from the discussions with a lot of our customers. Many of them buy because they want to be involved in the community, they want to support the network. There is the economic effect that I was talking about that essentially this kind of mining doesn't consume any extra energy. So with all the positive environmental energy impact, but at the same time it makes it a lot more distributed. We may have gone the wrong way with this huge warehouses hosting thousands of miners. Of course it comes together from the economies of scale. The price of electricity is low and that's why it went that way. But with using heating for mining, the cost of power goes to zero, like I was describing. And not only that, but it also becomes a lot more distributed because everyone is just mining a little bit. And it kind of comes back to the vision of really having the distributed mining that's supposed to network, right? That's why people buy. So it's a bit of a long answer. So people do want to buy. And we've established that. We actually established that back in 2021. In February, we ran an indiegogo campaign that ran for a week. This is kind of a bit of a clash with the standard financial world. We kind of started the campaign. We're asking to go if it's okay to go ahead. They're like, yeah, sure, that's fine. One week into the campaign, that was actually going very successfully. They shut us down. We asked them what happened. They said, oh, it's crypto, it's get rich quick scheme and stuff like that. So our Indiegogo campaign will shout out. But at the same time we got to prove that people actually want it. So it was good news for us. Now, coming back to whether we're building the best miner. Miner is a very different product. Miner is an industrial device. For a miner, you want something that is small, so it doesn't take too much space. You don't care if it's loud, so you get ASIC miners extremely loud. At 80 decibels. They can actually damage your hearing. Permanently damage your hearing. You want something that consumes as little power as possible and gives you as much terra hash as possible. And you kind of balance all of that out with a heater. You want something which is safe. Heater consumes a lot of power and there's always a risk of fire, et cetera. So we actually did all the tests according to the UL and CSA standards for US and Canada and plan to do it for the CE, for the European standards as well. So you want something that is safe, you want something which is convenient to use, so quiet. And that's what we actually worked on a lot. And only then you want something which has all this positive economics between the power consumption and the amount of mining that it does. Right. So the priorities are slightly different between building a heater that is also a miner and a pure industrial miner.
Kevin Rooke - 00:18:17:
I hear the argument that there's this like altruistic component where some users may want to decentralize the network and kind of make mining more decentralized. And I hear that and I value that. I think that's an important feature as well. But for those who don't feel that way or those who are purely looking for a heater, is the right way to think about the trade off here. How much am I spending extra beyond what I would typically spend for the Dyson comparable you mentioned? And how much could I earn per day and hope that how much I could earn per day is higher than how much extra am I spending up front? Is that the idea?
Alex Busarov - 00:19:07:
Yeah. If you want to think in purely economic terms, that's actually a good way to think about this. We sometimes get compared on Twitter, you might have seen it as well. Some people say, well, it's just an old miner at much higher price. Well, not quite right. You still need to make it look nice, you still need to make it quiet. There's a lot of things that you still need to do to make it a good heater. But if you want to think of the internet in purely economic terms, I think what you describe this is a good way of thinking about it.
Kevin Rooke - 00:19:48:
Right, okay. And so right now, I believe you mentioned that the Heatbit last year was earning up to three or $4 a day. Now it's about a dollar a day. So if your delta there for the upfront cost is $400, the expectation would be that if you can earn back $400 days at today's prices, you break even on the purchase price. Is that right?
Alex Busarov - 00:20:13:
Yeah, that'll be good.
Kevin Rooke - 00:20:17:
Now, one thing that bitcoin mining has in its favor, and I guess it works against Heatbit, is that the hash rate is always going up almost relentlessly. It just tends to go up, up, up, up. How sustainable do you think it is for someone to to use a Heatbit today? Expect a dollar a day. A year from now, maybe that's only $0.50 or thirty cents. How do you think about making it economically viable for someone to use a Heatbit when they have a set piece of hardware that is becoming a smaller fraction of the overall mining capability of bitcoin?
Alex Busarov - 00:21:06:
Well, there's two parts to the answer here. One is we do plan to make the heating unit replaceable and upgradable so that one time comes when we are ready, we can let the users have more efficient chips inside the same device. So that's going to, helps you to keep up the economic benefits of the heater. So that's the first part. Second part is Heatbit does have an interesting benefit when price of bitcoin goes down. So with general mining, the industrial mining, that has to pay the electricity price. If the price of bitcoin goes down, they have to turn off mining because it becomes uneconomical. And every miner knows, every industrial miner would know the price of bitcoin at which they break even if it goes lower, they start losing money. For Heatbits, once you have the device, there is no such price. If bitcoin goes down to a dollar a bitcoin, you can still keep on mind because you still need it for heat. Right? You still need the heat, you'd still pay that electricity anyway. And whatever bitcoin or sats that you get on top, you get on top. So in that sense, during the downturns there is this additional benefit that you get that actually relative to other miners, you're doing slightly better off.
Kevin Rooke - 00:22:57:
I see, that makes sense. Now is the device so if someone's listening to this, thinking about purchasing one, is this device available for purchase today?
Alex Busarov - 00:23:05:
Yeah at heatbit.com, website. We focus on North America, so United States and Canada, but we delivered to Europe as well.
Kevin Rooke - 00:23:18:
And how long has it been shipping the device?
Alex Busarov - 00:23:22:
Right now the shipping takes about ten days, but the container is actually on the way to ship nationally from the US. And then it's going to be taking two to three days only.
Kevin Rooke - 00:23:35:
Okay, I was talking about like how long has the device been in production for?
Alex Busarov - 00:23:40:
Sorry, it's been in production for the last three weeks or so. We had a main batch and then we had the first kind of small early batch just to test things out was in the beginning of October. We actually started selling last year and this is when we really saw that people really like this stuff. But we had just really bad delays in producing the device. We had the delays with certification, then the supply chain problems, then at some point the COVID and the restrictions in China were a problem. So we planned to ship the device last year, but then it kind of got delayed and delayed and delayed. Then it got to April this year and then in April we thought, well, what's the point of shipping a heater in the Northern Hemisphere in April, people not going to use it in May and over summer. So it took some time to kind of develop the device further and then started shipping.
Kevin Rooke - 00:24:37:
Makes sense. Yeah, that makes sense. Okay, so now I want to get into the idea of operating a Heatbit in a home rather than some industrial setting. Why was the choice made to because you could have built a heater for industrial settings. You could have built have a bunch of miners connected to some piping system that pipes in heat. Why do you choose the end consumer as the target audience here rather than like you could be distributing mining power throughout a bunch of different factories and industrial settings.
Alex Busarov - 00:25:25:
And a lot of people do that, actually. There's a lot of companies that do the heating and combine the heating and mining for the industrial settings, the kind of settings that you're talking about. And I think that's fine. I think they're doing a great job. I heard a lot of people do that in Norway and in a few other places. And for us, the reason we've chosen to make this device for the home, I think the initial reason is that just our imagination work this way. We're people. I bought the first miner just to play with as a toy. Right. And then you kind of start thinking of this and imagining it as your own heater. So that's what you build. We did think about building more of an industrial version, the kind that you're talking about, but what we realized is that we don't know what exactly to build in, what should be the shape, what should be the size. There's multiple different standards in different countries. And you get that wrong and it doesn't work, you make it, I don't know, one inch wider than the standards, and then that's it. It doesn't fit anywhere. So we thought, why take that risk? And why pick a segment like that? Let's just make something for people, something that they would like. And that's why we went that route. I can't say that it was easy because then you start thinking about all sorts of things like, oh, what's the temperature of the output that you can have? Can we have the air that's at 90 degrees? Well, no, because it's kind of too hot. And then if you put your hand there, or if you have a child running around and they touch it and the surface is, let's say, 100 degrees, they're going to get burnt. So you think, what's the first surface that you're going to have that not going to get too hot? And basically all those features that you start thinking about.
Kevin Rooke - 00:27:24:
Interesting. Yeah. And then also the noise. Right. How do you put in the work to make sure that this device was going to be friendly for someone in a home? Like, as you mentioned, kids not going to burn their hand on it. It's not going to be too loud to annoy everyone. What were some of the engineering challenges that you guys faced building?
Alex Busarov - 00:27:44:
That how you do that? I can tell you that's. Blood, sweat and tears. Seriously. When I was starting that, I didn't realize how much detail goes into every device that we have at home. I couldn't imagine how much that is. For us, the design was important, so we wanted to make it look good and people kind of like it. One big thing that we worked on was the noise. And there's a lot that went into it from the overall enclosure and the shape. So if you imagine a miner, you've got just a miner and you've got two fans on the sides, completely outside. So whatever noise they make, it just goes there, goes to the room. Whereas for us, the miner and the fan, that kind of inside an extra enclosure, so that kind of covers already, then the whole thing inside is actually placed on vibration dampeners. So at first it used to be a spring. Then we replaced it with rubber dampeners. So essentially the fan, when it works, generates the vibration that generates the noise. So if you have this vibration dampening, it kind of dampens the noise and the vibration. The fan itself, just the shape, the power of that fan is something we worked on a lot. Finding the right fan, finding the right supplies to make the fan very quiet, yet very powerful was another big thing. Then there are other things, like multiple layers to cover the noise and things like the sound insulation. You know how you probably seen those studio music recording rooms, right? In the studio, there's like special shape on the walls. So we have that inside Heatbit. So that also consumes some of the noise. And as a result, you get less than 42 decibels of noise at full power. Probably wouldn't tell you much if you compare it to normal AC. Heatbit is actually quieter than the AC that I got at home. It's probably quieter than a fridge, right? It's pretty quiet. And that's at full power. At night. If you don't want that much heat, you can put it at lower power and then you can sleep right next to it and it doesn't disturb it all.
Kevin Rooke - 00:30:15:
So what is 42 decibels? For someone who is not familiar with decibel metrics, what would that be comparable to?
Alex Busarov - 00:30:22:
42 decibels would be like a quiet library. You cannot hear a little bit of the noise. Most of the noise that you hear with Heatbit, it's actually the friction of the air coming out of the device. That's like a filter. And then when the air comes out, there's friction. That's creation, and that's what creates most of the noise.
Kevin Rooke - 00:30:43:
Now, I don't know if you remember this product. There was one awhile back, there was a company building, I believe it was called coin mine. I think it was a coin mine one. It was like this PlayStation kind of device and I haven't heard of it in a while. I don't think the product worked out. I believe the company is no longer operating, but I believe it was this like PlayStation style device and it was exclusively a miner. It wasn't meant to be a heater. What do you think went wrong there? And how do you guys iterate to make sure that because you're operating in a similar segment where it's like a consumer facing application. What went wrong with that? And what did you learn from kind of their missteps to design Heatbit and build the way you have?
Alex Busarov - 00:31:36:
Well, I don't know what went wrong there. I can only guess. Right. I actually heard from one other person that they're no longer operating. I guess it's true. Well, from what I understand their approach, what they were selling was an easy way to mine crypto. So that was more of a kind of like a toy, right? So you buy something and then you've got this miner that's just easy to set up so you could play with similar to how I bought my first miner, I wanted to play with it. I wanted to kind of play with an IPs and play with different software, etc. Whereas they made a device that is easy so you could buy it for your gear, you could use your server. I think it was kind of cool, but that's where it ended, right? There wasn't much more to it. Whereas what we make is something that a lot of people need. A lot of people have heaters. They're a $10 billion market for home heaters. People buy heaters. And the question is, what kind of heater do you want to buy? You can buy a normal electric heater or you pay a little more and you get a heater that mines bitcoin. Even if you don't understand bitcoin or maybe you're not really interested in bitcoin, then people will start thinking of this as some sort of a cashback that they get. In fact, we might even turn it into the fractionality within the app that if people are not into bitcoin, they might just get fiat back. And depending on the price of electricity, there's just going to be a discount on the power bill, from anywhere from just a 5% discount if your tariff is very high to 58% discount if your power is a bit cheaper.
Kevin Rooke - 00:33:44:
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Alex Busarov - 00:35:07:
Definitely. Actually we had some thought about that some time ago, but I was really thinking about this quite a bit in the last few days. Just the idea somehow popped up and I thought, well, it would kind of really make a lot of sense for our users. So I think we're going to put it on our product roadmap. But right now we just have so much work to do to bring the heater to the market, deal with all the bugs that come up and I think for the next season we should have it. For this season, I don't think we'll have the Lightning Network yet.
Kevin Rooke - 00:35:47:
So before until Lightning is integrated, what does that flow look like for a user? If they're earning money, do they have a withdrawal limit? When does it settle? What's that time frame look like?
Alex Busarov - 00:36:00:
Okay, so you remember how I mentioned that what we decided to build was more of an Apple rather than Linux? Right? So we'll really try to make it easy for the users and that does mean that we take some of the steps that are not necessarily considered that Kosher within the bitcoin community. So when the bitcoin is mined, it's mined in a pool. We use nice hash right now, but we do plan to add other mining pools so the users could basically choose the pool that they're mining with. Nice hash had very good API and that's why we pick to work with them. And then the bitcoin, once it's mined and we can get it out of nice hash, it goes to BitGo, the custodian. So we don't custody any of the bitcoin ourselves, it's just not what we do. And then on the user, that's what kind of happens at the back and then on the user side they see the mind bitcoin in the mobile app and the Heatbit mobile app and then anytime they want to withdraw it, they input the wallet address, press the withdraw button and it's done.
Kevin Rooke - 00:37:23:
And that's at any amount?
Alex Busarov - 00:37:26:
There’s no limitation on the amounts and there is no KYC. KYC is not really needed for anything kind of financial here because the amounts are relatively small, right. We don't have people transferring millions. You're going to need to buy a lot of Heatbits and mine and heat into the same account to start transferring millions. So yeah, there's no issues with KYC. Plus we all didn't want to create this kind of additional barriers for the users with the KYC.
Kevin Rooke - 00:37:57:
Right. Now, when you're thinking about adding Lightning to the roadmap, what is it about Lightning that is most interesting to you? Is it the potentially lower fees? Is it the instant settlement privacy? What is the thing that you think users will most gravitate to?
Alex Busarov - 00:38:17:
I think our users so because our users are more of again, people who kind of prefer Apple rather than Linux though the people who like the convenience and the speed and the low cost are going to be the major factors for them. I think privacy will be one of them as well. But I would guess that would not be at the top of their mind.
Kevin Rooke - 00:38:48:
Makes sense.
Alex Busarov - 00:38:49:
I may be wrong. Let's see, maybe people will tell me I'm wrong.
Kevin Rooke - 00:38:53:
Yeah, that's fair. Okay. I want to dive into the heating industry overall and does it make sense for everyone to be using bitcoin mining as an input for heating? Like how far can this idea be extended? You're doing it at the home level, there's people doing it at the industrial level. Why is everyone not doing it?
Alex Busarov - 00:39:28:
I guess? Well, one, it takes time. We do hope that a lot more people will heat with mining bitcoin and we're kind of working towards that, right. In terms of extending it, on our side, we plan to not just have the Heatbit but build other heating products for water heating, for floor heating, maybe moving a little bit towards not the industrial scale heating, but more of the devices that you use at home, but you don't necessarily see. Right, I mentioned the floor heating. So that's kind of where we plan to go in terms of the set of products and the kind of products that we want to build. Answering your question, why is it that everyone is doing heating with mining? One, it takes time and I think it's definitely going to move in that direction. And two, it kind of depends on the infrastructure. If someone has a heat pump already installed, they might really make sense to use it. Right. Heat pump is very expensive to set up. Right. So there's a very high upfront infrastructure cost, but then once it's there, in terms of the energy used and the heat output, that coefficient is actually great for heat pumps. For electric heating, it's kind of one to one, pretty much, whereas for heat pumps you use the energy to compress the air, essentially. And it works in a similar way, like a fridge just in the reverse. Right. So it takes the heat from the atmosphere. So for units of energy spent on kind of compressing the air and doing all that process, you get several units of heat and heating efficiency is very high. So in a lot of places that solution will make a lot more sense. Then you have some areas where investing into a very efficient heating solution doesn't really make that much sense. Like we had orders from Spain and Greece, you think, well, these are southern countries and it's sunny and yeah, it is sunny, it's very hot in summer, but in winter it does get a bit cold and then you need a bit of heating. But then you don't have the full heating infrastructure that you would have in the Scandinavia. Right. So then you use electric heating and then when you use electric heating, using the distributed computing or bitcoin mining starts making a lot more sense.
Kevin Rooke - 00:42:09:
So when you talk about the heating infrastructure you might have in Scandinavia, maybe that's the same in Canada, where are you talking about like natural gas and things like that, that people might be using alternatively to heat their homes?
Alex Busarov - 00:42:21:
Yeah, people use all sorts of things. Natural gas, sometimes you have something called district heating or central heating. Very often it's used a lot. In Eastern Europe, for example, you have power generation. So when you generate power with gas, there's a lot of heat that's being created and you can reuse that heat for actually heating. So that makes a lot of economic sense. But then still the world uses a lot of electric power for heating. I think I mentioned 600 terawatt hours that's being used for it. And why not use that for mining? Mining as right now bitcoin mining is just a third of it.
Kevin Rooke - 00:43:08:
Right, okay. Is it fair to say that you see a future where all the electricity or all the energy that is used to heat someone's home or heating in general that will be used, that will first go through bitcoin and it'll be miners that generate the heat and then pass it on to the end consumer? Is that the idea?
Alex Busarov - 00:43:35:
I would say that's the direction where it's going to move. I don't think it's ever going to get to 100% because after all, a very cheap, small electric heater is still going to be much cheaper than using the silicon chips to mine. So that does have its own advantages. But I think a big part of heating is going to be done with the chips. So that's going to be bitcoin mining or maybe other distributed computing applications.
Kevin Rooke - 00:44:08:
If you can play devil's advocate and let's steel-man the other side of the argument. What is the argument for never using any bitcoin mining chip and just using your heater as it is today and not even being affiliated to bitcoin at all? What's the benefit there?
Alex Busarov - 00:44:29:
I think there's two arguments. One is just the usual miner is probably going to be cheaper just because chips have their own cost. And two, if you believe that I'm being the devil's advocate here, if you believe that bitcoin is snake oil, then, yeah, you probably don't want to support it, right? So I think that's the only second argument that you have.
Kevin Rooke - 00:44:52:
Okay, so mostly like the upfront cost that could be lower if you're just buying a regular heater and you may not want to upfront put up an extra $400 for the heater just to get it back down the road.
Alex Busarov - 00:45:12:
Yeah, so that's I mean, that's that's a model that we employ right now, right? So we essentially ask the users to put up that money upfront. What we do want to do in the following seasons is trying to find the financing solutions for it so that for the user, they could buy a Dyson heater, they could buy our heater, and then maybe it would just split the bitcoin that's being mined to cover that additional cost that the chips and sale.
Kevin Rooke - 00:45:48:
Would that ever be would a subscription plan or something be in the works for you guys where someone can offset the costs up front and just kind of like have a monthly bill like they would if they had natural gas heating?
Alex Busarov - 00:46:03:
We actually already have installment plan available. I'm not sure if it was on the website today, on all the versions of the website, but yeah, people already can pay slightly less than half of the price of Heatbit and then the rest is being paid in monthly installments. So that's something that's already there. But we want to take it a step further and essentially kind of go hand in hand with our users on mining. So essentially we could be taking part of the mining rewards to actually cover those additional costs. That's something for the future. Right now, by the way, a lot of people ask us whether we take any commission, we'll shave anything off what's being mined, and the answer is, no, we don't take anything now.
Kevin Rooke - 00:46:59:
Mining is a ruthless industry and it's famous for having low margins. And a lot of large miners are under financial stress today, and some have seen some go under in the past. It's not an industry where you find people building moats and protecting their business, and no one can compete with us, “we're Apple” or “we're Google”, right? It's cut throat. How do you foresee Heatbit building up its business and protecting itself and growing over time? Where all the pure mining businesses don't have that staying power. They don't necessarily have that competitive moat. Do you have one at heatbit?
Alex Busarov - 00:47:58:
So if you compare a Heatbit to the big mining operations, then I think it's just the cost of power, right? The cost of power for the mining, for Heatbit is essentially zero. So like I mentioned, if bitcoin price goes down, while other miners will have to turn off heat, bits will keep working, not for us, but for our users. Right. So I think that's a pretty strong advantage. If you think of other competition that we might have from other firms making devices similar to Heatbit well, that's natural, right? It's great that it's going to be happening. I would be very happy to see some other people making similar devices, other devices for slightly different use cases. I think it will only grow the industry overall. We do have some patents on the device, some we already got and some are still we only applied and kind of waiting to get the patents themselves. But I don't know if it's really the biggest competitive advantage that you can have. I think the biggest competitive advantage that we're having is being first understanding our users, understanding what they like, what they don't like, engaging with the users. I'm actually thinking a lot about how to bring our users to be part of the company. How can I involve users in decision making? How can I let our users in our community drive the product development, the company strategy? And I think that's something that we can do while it's still so early on. But then if someone like Google or anyone else decides to do that, they wouldn't be able to do this kind of move. They wouldn't be able to let their users drive the product because they're big companies, whereas we can still do it. I think that's where another big advantage will come from.
Kevin Rooke - 00:50:12:
How do you think you'll be able to use users to drive product roadmap and strategy? What do you do with users? How do you talk to them to help them guide the product strategy for you?
Alex Busarov - 00:50:25:
One is just listening to the users. We have very proactive customers who ask us questions and tell us what they need and actually listening to that I think is very important. I actually sometimes play a role of support agents on our customer support and that gives me great insights into what people need, how they think about things, et cetera. That's of tremendous value, I think. And going forward, thinking of expanding, these are kind of simple, early on steps, but going forward we're thinking of creating, maybe creating a DAO where users could essentially do the voting, proposed changes and kind of really manage small and then bigger parts of the company.
Kevin Rooke - 00:51:29:
Interesting. What would the purpose of the DAO structure itself be rather than users just doing it internally? Like if you have sending out emails to users and asking for product feedback or voting on some email, what's the benefit of doing it through a DAO structure?
Alex Busarov - 00:51:53:
DAOs would allow very different kinds of interactions. So if it's just an email and then people vote, that means that things generally come from us and then we kind of see what people voted for. The value of that vote also ends up being not that high because it doesn't necessarily carry the weight. If we commit though, that it's within the DAO. It's verifiable, people can see it. That's what they actually voted for. Then we can commit to that vote carrying the weight, right? Let's say we'll say, well, we spend X on the product development and how about we spend half of X on completely user driven decisions? Of course there's going to be the pros and cons and kind of economic balances that you need to have within that. So say, well, this is the budget, this is the amount of money that we have that we can spend in developing the next version of Heatbit. How about our users decide what is it that they want and we'll be the ones to build it for them?
Kevin Rooke - 00:53:06:
That's interesting because I've gone back and forth on this issue of I hear a lot of discussion, especially in the crypto space, about giving users governance or giving users the ability to make decisions. And I've gone back and forth a lot on it and I'm not sold either way. But I think one argument just to push back and present a case for the opposite side is like if users had good ideas and if users had the answer for you, would they be your users or would they be your competitors? Why would they not go out and build the solution themselves if they have the ideas? And I wonder if DAOs in this like, decentralized governance structure where you don't really have to do anything other than be a user to contribute. I wonder if it lowers the bar for ideas. And now there's no barrier for someone to present an idea, which can be a good thing, but it can also be like can also just flood you with just like bad ideas. So I wonder, how do you think about that distinction? Like adding anyone to make decisions for the company? It could introduce a lot of people to the decision making process that never would have been able to get a seat at the table and that could be a good thing or a bad thing. But I'd love to hear your take on that.
Alex Busarov - 00:54:50:
Well, let me just play that back to you. So if, let's say we went the old school way and we said, hey, how about we have a form on the website with the suggestions on the product? That's when you start getting thousands of emails with thousands of ideas, and very few of them are actually something we didn't think about. And even smaller number of them would be good ideas. And that's kind of problematic. And on top of that, it's hard for us to really filter and judge all of those ideas, whether people really want it, or whether someone's just randomly thought about this or really been thinking about this for a year, you know? But if you put this into an open discussion and you put certain constraints on, well, how about, guys, we come up with, let's say, five product ideas, because you have to have some limit. And once you have, let's say, five product ideas that have been voted for by the broader community then what we could do is try to define those ideas further and put the price tag on implementing them. Price tag in terms of the budget that we as a company would need to spend on it. And essentially maybe we could do idea one or we could do ideas two, three, four and five at the same time right. And that we could still put to a vote which one is better. You see what I mean?
Kevin Rooke - 00:56:28:
I see what you're saying, yeah. I think where I get caught up on some of this stuff is like when the decision making process is delegated to the community. When I take the stance, I think now that the decision making should be coming from the decision makers who are the product makers and the people who have decided to get together to build the company. So I feel a bit unsure about the value still generated by a DAO. But I do hear your view that you want to open it up and give people more ability to make decisions. And I think the final step of who makes the final decision is an important one and that's maybe where my view diverges with others in the governance space.
Alex Busarov - 00:57:27:
I think I've heard a lot of the discussions on crypto as well and I think what I would not do is I wouldn't go straight all the way to users just make all of the decisions. I'm a bit afraid that it's not going to work but taking it step by step, seeing kind of how it evolves, kind of moving it slowly towards maybe more and more of users playing the role in the development of the company, I think we can get somewhere. I think you can't just make a huge step and say, okay, you guys just decided that's not going to work. First the idea had to be born. The company had to be born. We had to invest our own money first. We have fully self funded bootstrap right now and we had to make those commitments to make it work first. But as the organization is developing, I think it could become more and more user driven. Generally what you see with companies is they become more and more investor driven. Right? So you would have the original founders, then you have some of the early investors, maybe some funds, et cetera, who kind of have big chunks of the company and then it goes to a stock exchange and then you have thousands of different investors who collectively make decisions about the company. But then that's where you run into a certain struggle between the investors who want to make more money and the users who want good products and they don't necessarily want the same things. But then if you have that a lot more mix if your users are also your investors, if your investors also users and then they're the ones running the company, then it kind of starts to create a collectively sound decisions and I think step by step we should be able to move there.
Kevin Rooke - 00:59:38:
Yeah, that's interesting. One final counterpoint here to the idea that the investors, for public companies, the investors are making a lot of these decisions, especially at the smaller scale. I think Google has different classes of stock. They have voting class and non voting class, and the two classes trade almost identical to each other. And I think to myself, like, what is the value of voting at Google if both versions of the stock trade at the identical price? Like, one you get governance rights, one you don't, and they're both priced the same by the market. It makes me think, like, at least some level, that the governance decisions actually don't matter for a lot of the smaller investors. Maybe this is different if you're a BlackRock or some big fund, but I…
Alex Busarov - 01:00:41:
I think you're making a very good point, though. What I would think is one, I just don't know if there was much of a culture of user driven decision making for Google. From what I know: Here's, the product, you use it, right? That's kind of how I use Google products. I never played any role in affecting how Google develops their products, or maybe I did, but I don't know about this. But that's a different story. But what I'm talking about, it's not necessarily the value for the user, right? To your point that it trades at pretty much the same price. I think that's the value for the organization. The organization should value this because this is just a lot, companies talk about the feedback loops, right? They create a product, they get feedback from the user. Here we're creating just a lot more involved, a lot more intensive feedback loop. You can think of it that way.
Kevin Rooke - 01:01:36:
I see. That makes sense. Okay, I want to wrap this up and jump into a segment I do at the end of every show. It's called The Lightning Round, and I got a few rapid fire questions for you. I hope you're enjoying the show so far. Just a quick message from our sponsor. Stackwork is a Lightning powered platform for generating high quality transcripts of all your audio or video content. They combine AI engines and hundreds of human workers all over the world who are paid over the Lightning Network to assemble these transcripts. And that's what let Stakwork create better, faster and less expensive transcripts. To see the results for yourself, I use Stakwork on my personal website, where I transcribe all of my full length podcast episodes. Check that out. And if you want to learn more about Stakwork, visit Stakwork.com. That is stakwork.com. If you could only invest in one asset for the next ten years, and it could not be bitcoin. What asset would it be?
Alex Busarov - 01:02:43:
I'd probably buy some gold. Yeah, it's old, it's slow, but seeing how much inflation we've been having recently, I think that would be a sound investment.
Kevin Rooke - 01:02:58:
Okay, second question. How many Heatbit devices will you guys sell in 2023?
Alex Busarov - 01:03:06:
We think in season, so we've got this season, which is 2022 and part of 2023, and then next season oh.
Kevin Rooke - 01:03:12:
I see, the winter season.
Alex Busarov - 01:03:13:
Got it. Well, this season I really want to sell a few thousand.
Kevin Rooke - 01:03:19:
Nice. Are there any books that have meaningfully changed your view of the world?
Alex Busarov - 01:03:29:
Yes, it's actually my favorite view. It meaningfully changed my view of life and of the world. I guess it's the book by author is German Gessa, and it's an Indian story called Sidhartha.
Kevin Rooke - 01:03:45:
Okay, interesting. And then final question for you. If you can give a shout out to one person in the bitcoin ecosystem who is doing great work, who would you like to give a shout out to?
Alex Busarov - 01:04:01:
I don't really know. I think this is much more of a collective mind. I just see so much drive and people kind of supporting each other. I wouldn't shout out to one particular person, to be honest. I would just give the applause to the community in general that's been supportive, and I see it from our users as well. All of our users are bitcoiners. Well, can't say that they’re bitcoiners maybe, but they all have some bitcoin kind of understand what it is, and I just see just this support that you get people really trying to help, and that's amazing.
Kevin Rooke - 01:04:41:
Okay, one final follow up then. What would you like to see more of from the bitcoin community in 2023?
Alex Busarov - 01:04:52:
The discussions on how bitcoin could be more than just money. I think this is where bitcoin is lagging a little bit with just being more of the financial infrastructure and not just money. With the smart contracts and all of that, I think this is the direction that we should be taking, and I hope there will be more and more discussion on it.
Kevin Rooke - 01:05:20:
Makes sense. Awesome. Well, thank you for taking the time to chat today. This has been an awesome discussion. Where can listeners go to learn more about you and Heatbit?
Alex Busarov - 01:05:30:
Well, they can go to Heatbit.com. Our website. Our Twitter is pretty active. I think you can learn bits and pieces from there. And yeah, I think these two will be good.
Kevin Rooke - 01:05:44:
Awesome. All the best with this season and hope we can chat again soon.
Alex Busarov - 01:05:49:
Thank you very much.
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