The easiest way to de-risk bitcoin is to have governments become miners.

Government needs revenue, bitcoin needs legitimacy. It’s a match made in heaven 💍

Not convinced? Let’s break this down 👇

Unlike 3 years ago, you need serious investment to be profitable in bitcoin mining today. Mining startups have been raising capital in the hundreds of million dollars to invest in mining facilities— they see what it will take to remain competitive in this industry.

Bitcoin mining is starting to become more and more like utilities (water, gas, electricity) and traditional mineral mining. All these industries—

1/ need heavy capex investments

2/ have large economy of scale

3/ have strategic importance to a country or region

5 countries control over 80% of bitcoin hashrate. If you look at the geographical distribution of bitcoin mining, it’s looking very similar to the distribution of gold mining.



Coincidence? I think not.

Yes there’re natural constraints in mining— you’ve got to have gold underground to mine gold and cheap enough electricity to mine bitcoin. But capital is arguably the bigger constraint— you’ve got to have money to invest in these money suckers.

So you see more mining of both types in places that have access to capital.

The states control much of the mineral mining resources in the world— about 20%, according to World Bank.

This is direct control, i.e. ownership. If you count the taxes and royalties governments collect in these, the number will be much higher.

Why? Because the state owns much of the underling natural resource and land. Those are strategic assets. And many countries depend on selling natural resources / commodities for their government revenues.

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The state also controls much of the utilities industry around the world. These are essential network services everyone needs. They need to function without interruption regardless of if they’re profitable to run.

Bitcoin mining is similar to mineral mining and utilities in its large Capex and economy of scale, and you can argue that securing the digital infrastructure of a global transaction network is a public service that everyone needs.

From both revenue and public-good motives, there are strong reasons for governments to get into the game, by either increasing taxes and royalties on miners, or by owning mining facilities directly.

The bitcoin maxis won’t like this— we hate government, we censorship-resist, we are sovereign individuals, yada yada yada… But for crypto to go mainstream, state involvement is inevitable and should be welcomed.

In fact, if you live in places with cheap renewable energy, you should lobby your governments to start mining or collect higher taxes on miners. In the end it will be good for everyone.

Whether you like it or not, it’s coming.

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