Episode Details

My apologies for all the background noise, but it was recorded live on location at 8th Wonder Brewery in Houston where the event was held.

The intersection of crypto, bitcoin, and Web 3.0 with energy markets, both traditional and low-carbon, is a general topic area I am in the process of ramping up on. Toward that end, I attended the Digital Wildcatter's EMPOWER: Energizing Bitcoin conference at Houston's 8th Wonder Brewery on March 30-31. Casual dress, a brewery, a "Beetles" stage, bitcoin mining demonstration projects, and free bottled water helped create an excellent learning environment (for the record, I did not drink any beer during this Houston visit).

Takeaways

* Signal vs noise. I will use my ESG views as an analogy to bitcoin/crypto. With ESG, I have differentiated between the “virtue signaling” variety that we could all do without and I think causes far more harm than good and “substantive” ESG that is indeed needed. The equivalent for bitcoin/crypto, in my view, are what I believe are called the Bitcoin maximalists that believe the US dollar is doomed and Bitcoin is its inevitable replacement. While I reserve the right to change my mind in the future, I do not share the view that Bitcoin will be an excellent reserve currency replacement for the US dollar. The part of the crypto-verse I do find highly intriguing is the potential for distributed blockchain ledger technology to allow for digital privacy, asset ownership, contracts, decentralization, reduced dependency on Big Tech and Big Banks, and related themes.

* Future currency? Not so fast. While I agree that fiat currency debasement is a fact of life, I am unaware of hard currency alternatives that lead to better societal outcomes. I also have not heard any Bitcoin maximalist accurately (in my view) describe the Federal Reserve's quantitative easing policies and what it means or doesn't mean for money creation. To that end, I would encourage everyone to listen to Jeff Snider and Emil Kalinowsky on their excellent Eurodollar University podcast (Spotify or Apple Podcasts) for a real education on the Federal Reserve, monetary policy, and the plumbing of our global financial system. The US dollar, like democracy and capitalism, is far from perfect. But it is better than every alternative humankind has come up with thus far.

* Web 3! Crypto via so-called "proof of work" is the fuel that allows blockchain verification in a "trustless" environment. Proof of work is compute power intensive; hence the link between Web 3 and energy markets. It is early days for Web 3. My initial take is that we are in the "Amazon starts selling books online" stage of it. The long-term upside potential is meaningful for energy markets to the extent proof of work remains the enabling mechanism to secure the blockchain.

* Methane/gas management. Currently, the relationship between traditional energy companies and bitcoin miners comes via stranded gas arrangements. Or perhaps more accurately, areas where an E&P company wants to grow oil production but there is inadequate natural gas takeaway capacity. Bitcoin miners have struck deals to capture natural gas that would otherwise have been flared/vented (which is terrible, by the way) in order to generate power via a natural gas generator, which is then used to power the massive ASIC computers used to mine bitcoin. The oil company benefits by receiving value for otherwise worthless natural gas, while also benefitting the environment via reduced flaring/venting. A private Bakken E&P and its bitcoin mining partner at the conference indicated the E&P was receiving a price for its gas that was greater than zero but