What's going on, y'all? Welcome back to Blockspace live, brought to you by CleanSpark. Charlie Spears is out today. We've got long-time Blockspace and Mining Pod co-host Matt Kimmel on, and we will be unpacking a lot of news today.
There are some pretty sizzling headlines on the docket today. We've got crypto mortgages busting out with Coinbase and Better Home & Finance for the first time ever approved by Fannie Mae. We've also got some really great interviews lined up with Ken Egan of the Bitcoin Policy Institute to unpack the recent Clarity news. We've got Asher Genoot, the CEO of Hut 8, on to talk about their AI expansion. We've also got Matt Williams on from Luxor to discuss GPU financing and energy markets within their derivatives desk. We also will close on a note about Mara selling Bitcoin to retire some of their convertible note debt and a quick market update. Little pulse check, it's looking dicey out there.
But first, I'm going to have to throw it over to the long-time difficulty weatherman, Matt Kimmel, to give us an update on what's going on with Bitcoin's hash rate. Matt, give us the lowdown. What's going on on the mempool?
Well, hash price has taken a dive alongside Bitcoin price today. What we're looking at is a potential difficulty increase in the current environment, but that might change as we're only about halfway through the epoch and the hash price environment is, as you could see on the chart here, Colin, changing quite rapidly throughout today.
It looks like we're just above the $31 per petahash per day level on the hash price, and difficulty has been pretty volatile, I would say. I think three of the last four difficulty adjustments have been 5% plus moves. The last one was a downward 7.5% or so percent. We're pricing in right now the expectation is that the next one will be about 4.5%. But as I was saying before, since it's expected to be an upward adjustment, we're having this move right now in Bitcoin price and hash price. It'll probably give a little bit of that back in the latter half of this epoch. That's where we stand, Colin. That's what I'm seeing out there.
I think volatility is the name of the game currently, like you said. Difficulty has been all over the place, as has network hash rate for reasons that we can't quite put our fingers on. You know, it looks suspicious if you're looking at the 7-day average hash rate starts to come offline as the war in Iran kicks up. It's hard for me to believe that there's enough there for us to see more than 100 exahashes come off. We talked about this last week on the show. There's been speculation thrown around that. But we've recovered since then. We've gone up from 931 exahashes up to nearly 1,000 at the time of recording currently.
And it's just hard to know what to expect from Bitcoin's hash rate and from the network at this point because everything within Bitcoin mining is getting thrown off by economics. Bitcoin continues to be thrown for a loop. And also, all these miners are pivoting to AI, so we'll leave that there for now. Not too much more to comment other than week in, week out, it's looking kind of bleak. If you're still operating and still hashing, more power to you, cowabunga. But for those of us with higher power costs, it's looking pretty tough.
We'll sunset that, though, and we will bring on Ken Egan of the Bitcoin Policy Institute to talk about potentially the biggest news so far of the quarter for the crypto industry, I would say. So, without further ado, we welcome Ken Egan to the stage. Ken, how are you doing, sir? Thank you for joining us today.
Gentlemen, very, very happy to be here. I'll tell you one thing I got from that last segment is I have to buy another Bitaxe because, you know, [laughter] because you never know. You never know. I'm an optimist.
I'm glad to hear that you are an optimist because we definitely need a little more hope here, man. [laughter] But you know, so speaking of optimism, there was a lot of optimism around this Clarity Act. I mean, when these acts were introduced or these bills were introduced over last year, the Genius and Clarity Act kind of in tandem, it was seen as a huge boon to the Bitcoin and crypto industry in terms of giving regulatory clarity. And specifically with the Clarity Act, potentially giving these stablecoin issuers and exchanges a leg up on the banking giants that tend to run things up in DC. Now, it doesn't seem like that's the case. Can you give us a quick update on what your understanding of the newest draft of the Clarity Act means?
Sure. And just for your listeners who don't track this stuff really closely, when the Genius Act passed last summer, there was a provision in that act that banned stablecoin issuers from providing yield on stablecoins. As most of you probably know, stablecoins are backed with primarily short-term treasuries that issue yield. So, the issuers are getting yield. This, of course, was the banking industry fought for that provision. They hate the idea of competition for deposits. [snorts] And we thought it had been decided.
Turns out that 2025 was kind of a bad year for the banking industry in Washington, D.C. The crypto industry did a really good job getting legislation advanced at least most of the way through. But they regrouped at the end of the year. They launched a new lobbying arm called the American Growth Alliance. And they got together, and they managed to sort of bring this issue of stablecoin yield back. But not yield per se, but rewards. Some of you probably have listeners who have Coinbase accounts. If you hold USDC in your Coinbase account, you get yield. I think it's somewhere around 3.4, 3.3%. And the banking industry hates that.
So, they got this provision back into the market structure discussion that we are going to ban rewards, what they thought was the back door for yields. Of course, Coinbase hated that. It's an important part of their business model. I think generally speaking, the larger crypto industry didn't like that. And, sorry about that. And fought the banks on this. It kind of brought market structure discussions to a standstill.
Part of the problem on the hill now is there was a lot of battle fatigue amongst staffers. They've been doing crypto legislation since last January. They're tired of it. You know, it's just been a long slog on Capitol Hill. And this was just an issue that was very sort of industry focused. Most crypto users were kind of ambivalent about it. But yeah, you had Coinbase primarily on one side of it, and then the banking industry on the other side.
It went back and forth. Patrick McHenry, who runs the White House Council for Digital Assets, has been playing the... I give him a lot of credit. He's burned a lot of shoe leather walking the halls of Congress back and forth in the White House trying to build bridges. Finally last week, Senator Tillis from North Carolina, retired Republican, and Senator [Ossoff] Brooks, a Democrat from Maryland, a freshman senator, came up with what I think was a bridge deal that will at least get this bill advanced. Of course, because it's a bridge deal, it's sort of a compromise, nobody really likes it, on the industry side, I should say.
So, what it does is it essentially bans rewards. It bans what are considered bank deposit-like activities. So, just leaving your USDC on Coinbase, you won't get your 3.7% anymore. However, it leaves space for rewards for activity. And that remains to be seen what that looks like because it leaves a lot of space for rulemaking and regulators to figure out what that looks like. There's talk of sort of economic equivalence. Whatever an exchange like Coinbase were to offer cannot be the economic equivalent of a bank deposit. So, it remains to be seen.
Nobody really likes it. The draft text is not out yet. There have been sort of typical Capitol Hill style, you can go in with pen and paper, take notes. No pictures, no recording. You can't walk out with the text. So, we'll see. I think the goal is, though, everybody in the political establishment, Congress, the White House, wants to get both sides to a yes because they want to get this bill done. And it's a win for nobody except maybe the banking industry if this bill doesn't actually pass.
It'd be really interesting. I'm curious to see what the rewards piece even looks like. I commented on the last live stream. It almost sounds like the only way to make that work is to have incentives that we've seen like with exchange tokens in the past. So, Binance has their own exchange tokens. So, maybe if you're using USDC to do trades on Coinbase, you get a discounted trading fee. That's the only clear thing I can see other than maybe if you're making payments within the Coinbase app. But let's be real, who's really using USDC to make payments in their day-to-day life, right?
And you mentioned that no one's really happy with this right now, and I want to pull up this reporting from a Punchbowl News reporter, Brendan Peterson, that says Coinbase is not sold on the stablecoin compromise. I don't know if this means that they're walking away from the negotiation table on this. Two-part question. First part, have you corroborated this with your own sources and people that you know involved in this process? Is Coinbase so upset with this that they are going to walk away? Number two, how does Coinbase have so much sway in this process? I get that they're the largest exchange in the US, but how is it that if they walk away from this, it can basically tank the deal?
So, Coinbase has not said publicly what they think about this. I think whoever, you know, always beware of anonymous sources. And Brendan Peterson's a very good reporter on this space, so he knows his stuff. So he's talking to people who are involved in negotiations. And that statement, Coinbase is not happy, could just be a staffer saying, 'I met with a Coinbase lobbyist and they don't like it.' Doesn't necessarily mean they're going to back out.
You may recall when Coinbase removed, when Brian Armstrong came out and said, 'No, we do not support the bill last time around.' He took a lot of heat both politically and I think from the White House and from some members of Congress saying, 'All right, you just blew up the negotiations. What are we going to do here?' So, we'll see what happens. I think Coinbase is probably trying to figure out exactly what this means to their business model before they come out and definitively, because like you said, it's unclear what that means. So, I think they're probably trying to figure out what this means, what the workarounds are, how they can respond to this from a business perspective before they come out and say, 'We support it.'
My gut says they do not want to oppose it just because there is a lot of momentum from the White House and from the Republicans in Congress to get this bill done. So, nobody wants to be the ultimate sort of party pooper. That's just not a great way to be. And if they can live with this, I think they'll try. Remember, this is not the first bite of the apple. They can go back and do this again. I think one day there'll be stablecoin yields. It's just a question of what happens in markets for that to eventually happen.
And why they're so powerful, I mean, there's one reason that Brian Armstrong is the only senior executive that's actually the one to go to the hill and talk about this. So, he put himself out there, which in itself makes you sort of an industry leader. But they're the biggest exchange in the United States. They have a lot of customers. They are a publicly traded company.
And they are a major force behind the crypto lobby, right? A lot of the funding comes from Coinbase and affiliated groups. So, upsetting Coinbase, there is a potential political price to pay in your re-election campaign. It's giving crypto a fair shake, and Coinbase is a major player in that sector. So, it makes sense that to the extent possible that members of Congress are going to want to make Coinbase happy. And again, because of their size, they do sort of lead. I speak about the crypto industry, right? And this all of us has different implications for Bitcoiners. But the crypto industry, they all kind of operate in Coinbase's shadows. And I think the fact that Brian Armstrong has taken that leadership role is why he gets an outside vote because he's actually stepped up.
Yeah, and before kicking it to Matt for the next question, as I asked that question myself, I had to remind myself I believe the crypto lobby spent the most out of any lobby in the 2024 election cycle, right? So, we're moving with massive amounts of cash right now and we may be a smaller industry compared to the larger pie in the US economy, but we punch above our weight.
And very loud. [laughter]
Ken, you are just a wealth of knowledge on this. It is great to talk to you. It seems like so, you know, this passed the House, right, last summer. It seems like the scope of this has just blown up, right? And that like stablecoins have been, stablecoin rewards, I should say, the key sticking point grabbing the headlines, but are there any other kind of pain points that you could see there being kind of jockeying over that could postpone anything? And correct me if I'm wrong, but this is kind of the key hurdle to get through markup and then from there, it would go to the Senate floor for a vote. So, kind of two questions there, but I'll toss it over to you.
Yeah, just one more point on the opposition. A lot of this is driven by community banks. This is how you've gotten a lot of Republican senators to be skeptical because the community banks are big in the Midwest and out West. But the point I've made to some of these staffers is that the biggest enemy of community banks are big banks. Right? In the mid-1980s, there were 14,000 community banks in the United States, and now there's like 4,000. And that's a long time before the first Bitcoin transaction was effected in January 2009.
So, I think it's just industry protectionism. Yes, for Bitcoiners, the stablecoin issue is important in the sense that we want industry to be able to function and for the country to benefit from it. So, it is important to all of us in that regard. But for Bitcoiners in particular, there's a piece of market structure that's getting less attention that we really are, that I certainly am paying close attention to. And that is the Blockchain Regulatory Certainty Act provisions.
As part of those provisions, these are the provisions that guarantee the rights of software developers to build their software without risk of being charged. We're looking to front-run and avoid future Tornado Cashes and Samurai Wallets. We're getting a lot of resistance from law enforcement lobbying groups about how this dilutes the ability of prosecutors to prosecute illegal money transmitters and the like.
So this is a concern to us because without those basic guarantees, this industry is never going to flourish in the United States. And again, we believe strongly that these protections are guaranteed by the Constitution, by the First Amendment. So this is the next fight. So even if we get through stablecoin yield this week, which I think we probably will, when this bill goes to markup on the Banking Committee come April, there's a whole other discussion that Bitcoiners need to be paying attention to. And that is the BRCA and those software development provisions. Critically important for us.
Yeah, it's definitely been top of mind for me throughout this. So, I appreciate that. One more thing, and this is just me trying to piece together all like Congress and the regulatory puzzle at the same time. [snorts] That blob that is Washington. Yeah, you know, it's like this political drama. Like they've, I hope they make some kind of show about this again. But the SEC came out with their own kind of classification. Right? Does that, you think, what does that mean, I guess, in context of this? And how close is that to kind of what's going on in the Clarity Act as far as like classifying some of these different types of crypto assets and what they mean in the broader sense?
Remember, Chokepoint 2.0 under Biden, there was never any legislation that harmed industry that got through Congress. It was all rulemaking. And I think that the SEC and the CFTC are trying to set the precedent because you can never predict. I think market structure will pass, roughly probably reflecting the stablecoin agreement that was announced a couple days ago. I think it'll pass, but you never know.
And I think the SEC and the CFTC are trying to get ahead of that rulemaking as much as they can within their authority. Because again, all of the heartache and the headaches, I should say, that the industry experienced under Biden was all regulatory in nature. Elizabeth Warren tried to get a bill passed, she couldn't do it because people knew it was a bad bill. But Washington's fickle. Parties change, majorities change, leadership changes.
The crypto industry is doing really well now and Bitcoiners as well in Washington on the right on the policy side. That could change and I think the SEC is trying to set precedents that at a certain point will be just too difficult to undo if legislation just completely fails and we had to deal with a different regulatory environment maybe three years from now.
Let's hope that we're not a BarrenCoin or a World Liberty Financial 2.0 away from the pendulum swinging against crypto in the next cycle, you know.
I will say this, certainly on the Bitcoin side, there is what I would call a bipartisan consensus that Bitcoin's a real thing. I mean, you've got your Senator Lummises, right, and your Bernie Morenos who are great, who really believe it. People get skeptical of politicians. I can tell you these are members of Congress that really believe in this. Nick Begich in the House, for example, I really believe in the importance of this protocol.
And I think there are a lot of Democrats who maybe aren't like Nick Begich or Cynthia Lummis, but still fundamentally believe that Bitcoin has a role to play. So, I think there is a bipartisan consensus. Now, the rest of the crypto industry, who knows? As Bitcoiners, from a policy perspective, we think people should be able to do business for legitimate businesses. We still believe that 90% of crypto is scams.
But people will find a role for Ethereum and Solana. And I don't doubt that. And stablecoin, whatever it is, maybe there'll be durable use cases. But I am pretty comfortable saying that there is a durable bipartisan consensus on Bitcoin that at least it should be able to exist in the United States. People should be able to trade it, use it, and benefit from its properties. So, we'll see.
But yeah, a lot driven by sort of politics and who's in the White House and whatnot. But I should say this now because three years from now, I'm going to get this thrown back in my face. But I am comfortable saying that there is a genuine general bipartisan consensus. It's not everybody, but if you had a vote yes or no should Bitcoin live or die in Congress, I think you would overwhelmingly get no, Bitcoin should live.
You get the thumbs up. So, Ken, last question for you and then we'll get you out of here and you can be quick on this one if you need to. You're confident or optimistic that we will end up reaching a resolution on Clarity and it'll be pushed through at this point?
I'm confident. I think both parties want it. I think the White House is doing everything they can. Remember, this is not just, there's Democratic opposition, but there's also been some Republican holdouts. I think the White House is pushing really hard. Again, Patrick McHenry deserves a lot of credit for just taking the burden of all these negotiations. He's done a great job.
So I do. I think that a markup when this hits Banking later next month in mid-April, I think the working text will come out that will have a... I think it gets 60 votes ultimately. I do. Remember also, this is April, the midterms are coming up. If you're a holdout senator or member of Congress in the House who votes to block this, six months out from the election, you better hope your banking friends step up for you because the industry is coming. The industry is coming.
Yeah, the single-issue crypto voter is going to put your head on the chopping block.
There's lots of pro-crypto voters. I've never met an anti-crypto voter. You know what I mean? I just don't think they're out there.
I hope not. Well, thank you, Ken, for all the work you do and all the work the Bitcoin Policy Institute does. It's really nice to see some adults in the room, you know, championing our industry to make sure that we get what we need. So, appreciate your time and hope you have a good weekend.
Always love a good rip with the Bitcoin Policy Institute folks. I love hearing what's happening on the hill. It's great.
You do? I do, too, even if it makes me a little sad. You know what I mean? Like, you got to crawl through the swamp, fight off the moccasins, you know. Even if I don't agree with it all, it's just a compelling story. Like, just to follow up the characters in play, the jockeying for position. It's just like a real-life drama. I like...
Yeah, it's like all the king's men, but with autistic software developers and greedy politicians at this point.
Your words, not mine. [laughter]
And on that note, we will go ahead and hop into our first story of the day. Depending on who you're talking to, one of the biggest stories of the quarter, and that is Fannie Mae to accept crypto-backed mortgages. This is coming from the Wall Street Journal. There's also a press release on it that we'll get up.
And what is essentially happening here? I'm going to try to demystify this because I think this is one of those headlines where you'll read the headline and you think that means that Fannie Mae is accepting Bitcoin for mortgages when Fannie Mae doesn't even originate mortgages, right? They buy mortgages and package them into mortgage-backed securities from lenders.
But what's happening with this is Coinbase and Better Home & Finance have partnered to introduce the first Fannie Mae-approved crypto-backed mortgage. And what's happening here is through this partnership, you can go through Coinbase to take a crypto-backed loan that you can then use as a down payment on a home for a mortgage through Better Home & Finance. And Fannie Mae is giving this their rubber stamp of approval and saying, 'We like this structure and we will actually purchase these mortgages from Better Home & Finance and we won't just turn our nose up on it.'
Because there are some other companies that provide crypto-backed mortgage services, I believe. I don't know their names off the top of my head. When I was doing research earlier in the week, those popped up. I would imagine the interest rates are pretty high. They're also not really institutionally approved. And for those who don't know what Fannie Mae does in the mortgage realm, like I said earlier, they will buy mortgages off the balance sheet of some of these lenders, free up their ability to lend more capital, and then those mortgages get packaged in mortgage-backed securities and all of that wonderful financial engineering.
But this to me really does strike me as a pretty big deal. Before I toss it over to you, Matt, for second takes on this, just want to go over the fact sheet for this. Because there are a few things that I want to get out of the way.
What's interesting about this is the crypto part of this where you're taking on a crypto-backed loan to pay the down payment on these mortgages, there will not be margin calls. So that's what the press release said. I'm kind of struggling to understand how that would work. Like basically, you won't get liquidated from your position, but you will be over-collateralized even more so than you normally would be, I would imagine. But I think that's a pretty notable part of this.
The other thing, as you would also expect, the rates for these mortgages will be higher than the standard 30-year or what you're getting in the traditional lending market. We're looking at a half a percentage point to 1.5 percentage points depending on the consumer's credit profile. And also, you can use Bitcoin or USDC for this. They might roll out Ethereum and Solana in the future, but currently right now it's USDC.
The other thing that I thought was really interesting about this is for users interested in pledging USDC, the USDC could earn rewards that can help offset the mortgage payment, which enables borrowers to reduce their net interest rate, etc. And I thought that was super interesting given the segment we just had with Ken because I almost can't help but look at this in conversation with Clarity. Was this designed with Clarity in mind for that reward portion? Could Coinbase do this already without Clarity? I assume they probably could. It seems within the bounds of the law. Maybe Clarity just solidifies it so they know they're not going to get in trouble later. I thought that portion was interesting.
But yeah, just to reiterate this, this is from the press release. No margin calls, no top-offs. If Bitcoin drops in value, the mortgage terms remain unchanged and no additional collateral is required. Market movements alone never trigger liquidation. So that part seems pretty incredible to me. What are your takes on this, Matt?
My initial take is that I am generally just pro Bitcoin being more integrated and useful in financial services. And like this is evidence of that. Practically useful, you could use Bitcoin as part of collateral in a mortgage. That's a big deal in my opinion. I think the ETFs have helped with making Bitcoin more useful in financial services, the options market surrounding IBIT, right?
Something that this kind of calls out to in my head that it reminded me of was Battery Finance. And I'm remiss of the guy's name, but I remember him as the guy who came up with the Bitcoin-backed bond and that was a way for us to deal with our national debt. But they put together a commercial real estate loan where Bitcoin was a part of the collateral mix, right? And the idea here is that on these long-duration loans, right? And as Bitcoin has this appreciable asset, right? Which we know it has attractive collateral properties and that it's very liquid, right? And that you can move it very quickly.
But because it has these appreciable properties that you would think over long time horizons, the loan-to-value, right? Would actually look better in the future, right? Because the value of what you're putting up against it is going up. And so that I thought was really interesting on the commercial side of things. And this is almost like me as a residential consumer, general citizen of the United States could now keep my Bitcoin, right? Essentially take out a loan against it in the way of a mortgage, and then at the end of the term get my collateral back and keep my coins.
That is pretty fascinating. And so this non-marginable type leverage with Bitcoin is I think quite attractive. I'm sure as the details come out around this, the thresholds that you have to meet, right? Maybe the down payment you have to put alongside it, right? There's probably different intricacies. Maybe like as you already said, the interest rate may not be as attractive. But it's an option, right? For Bitcoin holders to use the asset in financial services, and I just think that trend is increasing and that's good for all long-time Bitcoin investors.
Yeah, it reminds me of when we had Gworth on for the Wednesday show, Charlie had this question for him where he asked, 'Is crypto eating finance or is finance eating crypto?' And he said, 'Does it really matter? It's just congealing into one.' And I generally do like this and I was wondering as I read it, what would it take to actually have Bitcoin or stablecoins as the collateral for the whole house outside of just for the down payment? But now that I'm saying it out loud, I don't know if that even really matters. Like is anyone putting their stock portfolio up as... can you even do that for a house? I don't think we'll ever see that. The fact that you can basically do this for the down payment portion instead of actually selling your crypto like you said, Matt, it's pretty big.
Yeah, I mean ultra-high net worths, right, use their assets to take out loans and basically use that financing to live their lives and kind of sidestep actually selling assets and paying taxes. That's like a tried and true thing over time. So this is somewhat of a... you can draw an analogy to that.
Yeah. And just going back to our segment with Ken, you know, it's pretty incredible to see that we've come this far and that we actually are getting these kinds of financial tooling rollouts now versus could you... I mean if you went back like two or three years ago, could you imagine telling yourself this? You'd be like, 'Nah, it's not going to happen, dude.' You know, or going back to 2017 even when Bitcoin was still laughed at, you know, by most people in serious rooms, you know.
I still don't think it was given enough attention that a couple weeks ago the Ledn Bitcoin-backed loans were tranched together and given an investment grade. Like Bitcoin's just like little edging into the framework of structured financial products and the traditional financial services is just incredibly promising long-term.
Agreed. All righty. Now we have Asher Genoot, CEO of Hut 8, backstage. I know a lot of folks are interested in this one. Hut 8 has been in the headlines over the last year with one of the more exciting AI expansions of a public Bitcoin miner. We will go ahead and get him on the stage. Asher, Mr. Genoot, welcome back to the Blockspace Pod. How you doing?
I'm doing great. How are you guys doing?
Doing good, man. An interesting week in the news. Some good, some bad. Mostly good today except for when we close on the market segment, getting a little dicey out there. But for our intents and purposes for this interview, we're really interested in getting some updates on y'all's AI expansion. To recap for those who have not been paying attention or might have forgotten, Hut 8 came out with a really a banner deal back in December with FluidStack and Anthropic for their Riverbend campus.
I believe the contract terms were just over 200 megawatts for this first phase with an option to expand up to 2 gigawatts over the options that y'all have in the contract. Asher, can you give us some updates on how that Riverbend campus is going, how the buildout is going, and what the timeline is for this buildout?
Of course, the overall deal was about a $7 deal. It was 245 megawatts IT, about 330 megawatts utility. And we're planning to deliver the first data hall towards the end of Q1, early Q2 next year, and then we're rolling out data halls throughout the year. And so construction is progressing well. The switchyard from Entergy Louisiana has been building at record speed. Substations coming online and all of the equipment is moving forward. So we're very excited. We've obviously delved in a lot deeper with FluidStack, Anthropic, and the team to go and really design the remainder of the final data center. And so very, very excited overall, things are progressing as planned.
Y'all also have this proposed site in Illinois in Logan County. And the last headline I saw on it that there was a delay in the vote on the permitting and zoning for this. Is there anything that you can say about this? I know that these things are typically sensitive, so I understand if you want to duck this one, but I just wanted to ask the question. Are there any updates you can give us on this site because it seems like one of the more interesting sites in any portfolio for these miners expanding into traditional and AI data centers.
That's actually not even a site that we've announced yet. And so like for example, we have a gigawatt site in Corpus Christi, in Texas, right? That's a site that we've shared and some other opportunities as well. That's a site that came into the news because we were doing some of the zoning hearings, but not one that we've shared with the world yet. I think as we're developing across the US, look, there's two major concerns. One is will energy prices rise if the data center comes? And two is how does this affect me, right? Will it take away my water and so forth?
And I think for us as we're developing is giving folks confidence that when we develop sites, we're paying for the transmission upgrades that are necessary if so, and then any supplier energy rates we're also backstopping and paying those as well. And so ultimately, that's on the power side. And then on the other environmental side, water, we use a closed-loop chiller system, and so we're not using water to cool down the data center on a continual basis.
And so from those perspectives as we're going through different zonings, I think there's a lot of FUD in the market right now where people are kind of scared of data centers and not diving deeper to kind of understand what's going on. And so I think in Illinois we're going through an educational process, and as we go through that educational process, we've gone deeper with the community. They are understanding the project more, and so we continue to move forward on that project, too.
You know, there are jitters with a lot of these, especially rural communities and some not so rural. You know, my co-host Charlie Spears mentioned recently that Tulsa had passed a moratorium on data centers. You're seeing it a lot of counties and small towns float similar things and even on the state level. I believe there's legislation out in New York right now for that.
I find it very interesting, also very frustrating because to me this seems to have been a problem that we could have avoided if we had put the right dollars into investing in the right energy infrastructure through the last few decades, but we can't cry over spilled milk. On that note of the sites that y'all have announced and you are developing actively, outside of Riverbend, Asher, which ones are you most excited about in terms of their capacity and their feasibility for AI workloads?
We're seeing a lot of demand in the market today, and we're seeing that demand at large scale and also smaller scale as well. And we see a lower need on latency not just for training, but also for inference as well. So as we are continuing to develop sites, we actually have confidence across a lot of our sites that have power. Timing to power is really the focus there. And so timing to power is the element that drives kind of the demand right now, but overall we're optimistic. We're having great conversations. Where a year and a half ago to today, we have deep relationships with the majority of the customers out there with this product at the scale. So excited to continue to grow those relationships and continue to be strong partners for them in supplying their compute needs.
Asher, another thing that we covered on the pod this week is we're starting to see some tremors within private credit. Blue Owl and BlackRock are two of the bigger ones that came out recently. They changed the terms of their payouts and withdrawals for these private credit pools. I would love your take on if you're seeing any shifts in the private credit market currently and how Hut 8 is approaching financing for these massive data centers.
Our financing conversation has been really, really strong, and we've been very excited by not only the terms we announced, but actually announcing better terms afterwards as we continue to grow. And then when you think about the overall private credit markets, the big thing to think about and to be aware of is not all deals are created equal, right? The credit who backs those counter contracts is really important. As more companies take on debt, those credit profiles change. So that's the first thing.
The second is not all contracts are created equal. Some have termination rights, some have delay penalties, some have all these other kind of mechanisms. And so when you think about the private credit markets, I think there's this kind of generalized fear of, 'Oh no, there's this noise out there.' But ultimately at the end of the day, for example, our Riverbend project with Google credit, we have very, very strong partners in execution, and we see a lot of demand for that paper, for being able to finance that.
I think that'd be very different if we had a different customer base with a different credit profile or didn't have as strong a partner program in building and executing. So it really comes down to kind of confidence in the tenants and credits' ability to pay, and also confidence in the execution. And so I think you have the credit markets who were very, very excited and wanted to finance every data center deal, and now are starting to differentiate these deals, and I think that's what you're seeing in the market rather than a pullback on private credit.
Colin, I'll pop in here with one if that's all right. Hey, Asher. You know, the FluidStack deal, basically Google writes huge. Just talked about, you know, speaking with Anthropic. I'm curious, when these companies are assessing working with you, what are they asking you? What do they want to know about you that helps get this done?
The quality of how we think about execution. We dive very, very deep into the engineering with their engineering teams, the commercial constructs. And for us at Hut 8, we're really focused on not just commercializing data centers, we're building long-term partnerships. And that's kind of the key focus of how we've been developing the relationships.
And as we looked, if you think about it, when we announced the Riverbend deal, we announced two deals at the same time. We announced a data center contract, but a much larger strategic partnership, right? And that was kind of key and core to how we engage in these relationships. And so for Hut 8, really the questions they're asking is, do you have an interesting site that I'm interested in? Are you a partner that I can work with long-term? Are you someone that will be able to execute and deliver on your promises? And what other ideas do you have in terms of innovation on the power stack, on the infrastructure stack that can continue to kind of grow as well?
And so overall, we're extremely excited. Our partner relationships have gotten deeper and deeper kind of year over year and month over month. And we think that overall you have a lot of volatility in the global macro markets today, but demand is as strong as ever. You see a lot of demand for compute. I think the adoption of AI with agentic AI and open source has been unreal. That has driven a lot of this additional demand, and I see that only continuing to grow.
Yeah, on that demand front, you know, we see it, too. I think I saw with the large load requests for ERCOT like 250 gigawatts. I mean, just like numbers that kind of blow your mind. What's it like, the conversations you have with the grid operators? I assume you're doing that too, and they are assessing you guys as well. What's it like working with them and getting the approvals in place?
We need to build more generation, more transmission, more everything in the US, right? And so, you have a lot of areas that are tapped, and they're thinking about, okay, how do I support this and how many years will it take me to support it? And finding kind of nice needles in the haystack of sites that are near-term availability at scale is really, really important. So, for us with utilities, with energy generations, IPPs, it's the same conversations as well, which is what is the long-term partnership here? How do we build infrastructure at scale in these communities? And how do we operate as a local partner in those regions? And so, all those are pretty critical to the discussions that we have, and I think they're going to kind of drive the success we're going to be able to build as well.
Colin, I'll toss it back over to you.
Yeah, I guess I would just as a closing question, Asher, where do you think we are in the current CAPEX cycle for these AI data centers? It seemed like it got really frothy last year. I really liked your point about some of these financiers just throwing money at anything that had AI on it, and now they're kind of pulling back a little bit and saying, hang on, not every...
Operator is the same. Where do you think we are in this current AI moment?
I see demand continuing to increase because if we think about AI, I mean, the majority of people who use AI just use a simple chat function in ChatGPT or Claude or Gemini. They're not diving into workflows, they're not diving into integrating into their suite of services. And you're seeing that adoption happening in real time right now. That's really driving this kind of wave that we're seeing in compute today. I only see the adoption of AI continuing to increase. I mean, internally at Hut 8, we're building a full-scale team on AI implementation and workflow across our whole organization. Like we don't want to just build for AI, we want to build with AI. And that is kind of key, and we're one company in the millions of companies out there. And so, I'm very bullish on where we see demand going, and that demand and that use case and that adoption is ultimately what's going to drive the underlying data center demand.
Matt, you said you had one more question for him. Sorry, Asher, last one, promise.
Last one, thanks, Asher. So, you talked about that. What, how do you think about serving, you know, you talked about inference versus training. How do you think on the infrastructure operating side about serving these two different, right, essentially, you... So, a lot of people don't think about it that way, but I'm sure you do.
So, what's interesting is actually the differences between these loads have been less and less separated as people initially would have thought two, three years ago. And so, people would have thought, hey, you can do training in the middle of nowhere in these large-scale campuses, but for inference latency matters, right? And so, you'll go to smaller kind of data centers and centralized hubs where population is. But the reality that you're seeing today is when you're on these kind of AI workforces or these products, you ask a question and it goes and does its homework for a couple minutes and comes back. And so, saving a couple of milliseconds on that latency doesn't actually make that big of a difference relative to if you're scrolling on Instagram or going through your emails or so forth. And so, that's actually been really, really interesting, which has been a change and shift in latency versus training and does, sorry, in inference versus training and the needs and the differences in latency in those two situations. And so, we're seeing actually a lot more commonality rather than differences in those workloads, and I think that was kind of a common perspective that existed about a year or two ago.
Asher, thank you so much for joining us, man. Best of luck to y'all throughout the rest of the year, and we'll be keeping an eye on that Riverbend campus.
