Therese Byars: The next question, I am a retail shareholder of FRMO Corp, in regard to the latest financial report, can you tell in which bucket under assets in the balance sheet are the crypto digital currency assets reported. I think it’s crypto/digital currency reported. I did not find them directly mentioned, hence the question. And then there is a second part of the question, but I’ll let you answer the first. No, wait, it’s related, I’m sorry, Murray. And in regard to the holdings of Winland and Consensus Mining, are they under investments in limited partnerships and other equity investments at fair value?
Murray Stahl: Yes. So all that stuff is in investments, limited partnerships and other equity investments, they all lump it in there. It’s all in there, public, private tool in there. For the most part, it’s all there. And digital mining assets are the digital mining assets. There the machines and the real estate. The reason the real estate is under digital mining assets because it’s just real estate because the property is used for mining. And that’s why it counts as digital mining assets.
Therese Byars: In the next – in the first quarter 2024 conference call, Murray Stahl stated Bitcoin Cash was the most undervalued asset with the most upside on the balance sheet. With regard to FRMO accumulation of Bitcoin Cash, is it more cost-effective to purchase the coin versus mine them? In addition, what is the ideal amount of Bitcoin Cash on the balance sheet in relation to bitcoin?
Murray Stahl: Okay. With the second part, I don’t know what the ideal amount is. I’ve never really thought about it that way. So I don’t know if I can answer it. I still stand behind the idea that it’s really undervalued because it’s got the same monetary policy. It just doesn’t have a use case. And by the way, bitcoin itself doesn’t really have a use case, it has ETFs, but doesn’t really have a use case. So one of the issues between bitcoin and Bitcoin Cash, it really hasn’t been an issue yet, but it might be one day, only material difference between bitcoin and Bitcoin Cash is, Bitcoin Cash has a bigger block size. Ordinarily, that wouldn’t be an issue. Nobody who mine bitcoin really care that much about the block size. And a lot of people were against making a bigger block size.
That’s why at the time when Bitcoin Cash is about seven years ago, Bitcoin Cash forked and got existence amongst people, including ourselves, we’re not really enamored of Bitcoin Cash. And the reason was we don’t want a bigger block size. We don’t want a bigger block size. The theory was that if you made the block size too big, some big multinational company would come in and do one transaction of another high-speed transactions, and we ride back to centralization. So the block size in bitcoin is by design. Everyone likes it that way. It’s small, really can’t put a lot of the stuff in. Now enter ETFs. Of course, years ago, people talked about ETFs, we just couldn’t visualize, one day, we have an ETF. Now we got an ETF. So why is that relevant?
Well, if you’re creating units of an ETF, the unit is usually 25,000 shares. So some ETFs, it will be 50,000 shares. So the difference between ETF and a mutual fund is you can only add money to an ETF in certain increments of shares. So in other words, you can’t add $2,500 to an ETF. If you want to add money, you can buy 2,500 shares, you can buy $2,500 worth in the open market, but you can’t deposit $2,500. You have to deposit it in set share amounts, which knows units, the standard unit is 25,000 shares. However, there are other ETFs that have 50,000 shares, and I’ve yet what the unit amounts are and all the ETFs SEC approved the other day, you could look it up. So anyway, if you’re creating units and you have to instantiate your ETF and one must instantaneously by bitcoin, one would think that you want to post that transaction to a block and have it on the blockchain.
Just for accounting purposes. So now if the block isn’t big enough to accommodate that because there are many smaller transactions that preceded. It’s a solution within the context of bitcoin, and that solution is to pay a transaction fee. So bitcoin mining when it happens, gets a little more profitable than otherwise would be because people want priority for their particular transaction, whoever it may be, in terms of posting the blockchain, voluntarily pay a transaction fee. You don’t have to pay a transaction fee you if you don’t want to, voluntarily pay a transaction fee and that transaction fee gives you priority in posting it. So one would think that miners to the degree they wish to earn the transaction fees over and above the block fees might then find a use case for a bigger block size, which is the Bitcoin Cash currency as opposed to bitcoin currency, the same thing.
Or put another way, what if, for whatever reason, there’s no plan to do this, by the way. What if, for whatever reason, someone decided to make a Bitcoin Cash ETF. Would that attract more mining activity? And if you attracted more mining activity, the hash rate will bigger and the market value would be bigger by virtue of what we know as network effect or Metcalfe’s law. So there’s a lot of upside there. So the same equipment that you mined bitcoin with, you mine Bitcoin Cash. So to change your equipment from mining bitcoin and Bitcoin Cash, it’s a switch. It takes at most 30 seconds, if it even takes 30 seconds to switch one way, and another 30 seconds to switch the other way. Generally speaking, the profitability measured in the fiat realm is basically identical.
So what we’ve done over time, in our mining and Consensus Mining, mining to the extent we do mining in FRMO, we’ve devoted some machines to mining Bitcoin Cash. Now because there are many, many fewer people that are mining Bitcoin Cash, many, many or few people. Now the price of Bitcoin Cash is much lower than the price of bitcoin, but there are many fewer people, mining it. So number of coins that you’re getting per block of your minor is much greater. So if we had a handful of the machines set to mine Bitcoin Cash relative to machines that we have set to mine bitcoin, we’re going to accumulate Bitcoin Cash faster than we accumulate bitcoin. So come a point in time when we will have, let’s say, Consensus Mining as many, if not more, Bitcoin Cash as we have bitcoins.
And then it gets kind of interesting because if the theory is valid. And by the way, I should tell you, I’m the only person who even believes it. So I’m more or less minority of one. If you ask anybody else in the crypto realm, they are not a believer investment thesis. So I’m basically by myself. But I think it’s going to have a use case one day. And it may be a very different use case than bitcoin. Matter of fact, I believe there are a lot of different cryptocurrency that’s going to have use cases. It’s just hard to imagine what they might be right now, but it’s going to happen. We could speculate, but I’m not going to do it because of just speculation, but I can dream up lots of use cases. I’ve written about some over the years, but they are only ideas.
