We Study Billionaires - The Investor’s Podcast Network - BTC102: Bitcoin Lightning Network Changing the Energy Sector w/ Austin Mitchell (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, we're talking about Bitcoin energy and how the lightning network is being used to revamp the way that working capital is being used between energy providers that will make the entire system more efficient and optimized. This is a fascinating discussion with my guest, Dr. Austin Mitchell, who's got a doctorate and energy and environmental policy, and his postdoc was research in methane emissions. He has spent his entire career in the energy space, and this is a chat that just demonstrates how fast this entire space is moving out.

Starting point is 00:00:37 So with that, here's my chat with Austin. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey, everyone, welcome back to the show. Like I said in the introduction, I'm here with Austin Mitchell. Austin, I'm excited to have this conversation because you're doing some pretty neat. things. Welcome to the show. Thank you, Preston. It's a real pleasure to be here.

Starting point is 00:01:13 Boy, you're working on some crazy stuff. First, tell everybody about your background, because your background is, you have to have to have this feeling like, how in the world am I sitting at this intersection of all these things in my past to be at this exact moment in time to be building out what you're going to tell us about during this interview. It has to be a little like, pinch me. I can't believe everything has led to this. Yeah, thank you. You know, there was definitely a moment in my career where I actually sort of realized that there was some intentionality behind how I was sort of stepping through, you know, different roles in different companies. I think that probably happened, you know, somewhere after I finished my PhD at Carnegie Mellon back in 2013, where, you know, I sort of faced an opportunity to say, hey, do I want to continue down one path or do I really want to sort of flip and go from academia over to the business side? So my career and energy really started at the University of Dayton when I was a mechanical engineering student. and one of the things that, you know, was really neat is I had an opportunity to participate in some applied research on energy efficiency.

Starting point is 00:02:15 And what we were doing is we were looking at people's energy consumption, both electricity and gas. And we were trying to figure out, hey, why are people using more energy than others? And it was sort of in that moment that energy became this thing that was in a textbook, you know, just talking about the ability to do work. And now it became something real. And, you know, just as a funniest side and something that, you know, at each step in my career that I've had, the opportunity to see was the fact that, you know, when we put together with all the information, you divide how much energy a house use is by the size of the house. And one of the first things that I noticed was, hey, there was this kind of a cluster of homes in the very

Starting point is 00:02:51 far right of the distribution. And what my professor told me is like, well, you know, those are the people that either have five hot tubs or they are growing some marijuana. And so it was sort of in that, in that moment where you just really kind of pick up on, okay, this is what energy really is. This is how it affects people's lives. And I had the opportunity to get into people's homes, help them save money, help them find areas to be more efficient. Well, I'm curious. I'm curious, Austin. So like, you know, the 80-20 principle, what is something that people can do that, you know, saves them a lot on electricity? Like, what's the one thing that really stands out? That's an easy win, right, that you can do to cut

Starting point is 00:03:28 your energy costs. Let's hear it. Usually, there's usually a handful of things that most homes, especially homes that were built, you know, back in the day, you know, have. So my home at first, example, built in the 50s, does not have, did not come with any insulation, you know, came with single-paint windows, you know, drafty things. It's stuff like that that you, you know, can, those things take some money, but oftentimes there's actually incentives or programs to help, you know, offset some of the costs. It's also surprising to be when it's just little things like, you know, closing windows in the daytime, like southern facing windows. So there are a ton of ways to conserve energy to use less. And most people aren't really aware of that. So I think, you know,

Starting point is 00:04:06 that experience there helped me, you know, get in touch with how energy is, you know, really essential in people's lives. And it was, it was more than just what I observe in textbook. Talk to talk to us about your doctorate at Carnegie Mellon because you were studying, you did a postdoc on methane emissions. And I know that for Bitcoiners, this is a really hot topic. Explain why and then kind of get into some of the stuff that you were doing in that research. Yeah, so right after a graduate from the University of Dayton, I went to Carnegie Mellon and started a PhD program in engineering and public policy.

Starting point is 00:04:45 And so that really kind of fit who I am, which was, you know, I'm an engineer. I like the technical side, but I will also like to understand what does this mean bigger picture. How do we take science and technology and apply it to the real world? And so that was really the focus of the program. And as I was starting school there, you know, Marcelus Shale, so this is the big Shale formation that underlies Pennsylvania, Ohio, and West Virginia primarily. And that was just starting to get going. So I had the opportunity to really focus my time there, just really understanding

Starting point is 00:05:14 shale gas development, what it meant for the area. And kind of my approach to my thesis was actually picking three different hot topics and just sort of trying to provide objectivity to the understanding. And so I kind of ended with this interesting thesis where sort of there was like one paper that was sort of very, you know, supportive of what the natural gas industry was doing at the time. Another paper that was, you know, sort of, you know, painted a different picture talking about ways that they can get better. And the third that was saying, hey, it's the regulators that are screwing this up. And so it was sort of in that experience where I think I saw, hey, there's kind of ability into sort of being this neutral person, somebody who's being a scientist,

Starting point is 00:05:52 not with a bias, but just saying, let's let the data do the talking. And let's figure out how we can, you know, structure policy or make regulations to, you know, keep everybody happy and protect the environment, but also enable economic development to occur. And it was from that experience that, you know, I was given in an opportunity to join what was this sort of nationwide study of methane emissions where, you know, we were basically trying to understand at that time throughout the value chain to the natural gas industry, where was the methane coming from, how can we address some of the things, what were going to be the quick wins.

Starting point is 00:06:24 So leading this nationwide study with Environmental Defense Fund, five natural gas companies, Carnegie Mellon, Colorado State. You know, I basically spent a year on the road with the team. We were driving around a band that, you know, said Carnegie Mellon on the side, but it really didn't look like much. And what most people didn't realize when we pulled up to rural hotels in western Oklahoma, et cetera, was that in the back of that ban was a half a million dollars of measurement equipment.

Starting point is 00:06:48 So we got to go to all these different sites, you know, really see parts of America that folks didn't, you know, folks don't typically see, see energy production in ways that folks don't see. and that study was really interesting because one of the key findings was was not that there was sort of widespread pervasive issues with methane emissions. It's that, hey, there's a few sites that on a given day, a valve gets stuck open or one particular site that maybe was poorly maintained, you know, those are really what we identified to be the issues.

Starting point is 00:07:20 And so it wasn't, you know, my view coming out of that wasn't necessarily that, hey, we have to, you know, change things in, you know, some, giant way it was, hey, there's a, we can, you know, back to the 80, 20, you know, we can, we can solve 80% of the problem, you know, with just going after 20% of the issues. Yeah. And one of the other interesting things that happened there, and this, this actually led to, to me really wanting to pivot into the industry itself was the fact that almost on one

Starting point is 00:07:47 of our last sites, we pull up to it and it was like 10% of the methane was just, you know, spewing into the atmosphere. You know, so much so that you could actually see it from just pulling up. you need the equipment to measure it. And, you know, for me, it was, it was sort of simple talking to the site's operator, hey, you know, this is something that we should want to fix, right? And the feedback was, well, no, it's not, you know. And the operator at the time actually took the time we went, we dug into the actual

Starting point is 00:08:14 ROI of fixing things. And for, you know, for that next dollar that the company had, it actually provided a better return to put it into drilling a new well. And sort of the lesson that I learned there was, okay, well, there are problems. there, but there's things about the business that I need to understand to really change the business. I've always wanted to be somebody who's, you know, creating positive change, you know, working to sort of accomplishful things, protect the environment, but also, you know, grow the economy. I've always sort of tried to strike that balance. And so when I sort of heard that, I realized,

Starting point is 00:08:47 hey, there's something I'm missing here. The time to go, you know, really dive into the business, and the very next thing I did is to work for an upstream oil and gas company. And laying pipelines and drilling wells was probably one of the most fun jobs that I've had. In that previous example, now a company would have an incentive to plug that up and do a capital investment with Bitcoin miners in order to harvest that, correct? Yeah. I mean, I think what's great is that the incentive structure is changing. It's partly top down but also sort of bottoms up, you know, companies wanting to change the

Starting point is 00:09:21 way that they operate. And absolutely, I think that's one of the things that really drew me into, Bitcoin mining in this whole space was seeing an industry that had a wholly different view of what energy means. And, you know, where I sort of waste and change energy was something that companies, you know, people don't really want to talk about. The Bitcoin mining industry wanted to talk about it. They wanted to find those sources of energies. They could use them to mine Bitcoin. And for me, that was just, you know, sort of that mind-blowing event where I was like, hey, this is different. This represents something, this is an innovation that I had never come across before in my entire

Starting point is 00:09:55 15 years. When you said ROI for them to go, you know, do another, to drill in another spot was a far better ROI for them. If you compare that to Bitcoin mining, would the Bitcoin mining now kind of present a better ROI for them? I think so. I mean, you know, I'm not, it's been a while since I've sort of had this spreadsheet open looking at Bitcoin mining and in the economics. I know it's challenged right now. But I think that anytime you provide more options, it's an option that didn't exist. And so, you know, at the very least, you know, when you think about how can we keep more methane in the pipeline, prevent it from, you know, leaking into the atmosphere, and now you have another option to do that. And it doesn't have to just simply

Starting point is 00:10:36 be sent it to a market where it's unprofitable. Yeah. Frame up for us, the problem as you see it today, and talk to us about your company and explain to us what it is you're trying to solve. Yeah, so what's really interesting, Preston, is that in my career, I've had the opportunity to really experience the full value chain of energy. And so after I worked in upstream oil and gas, I then worked for energy retailers. So that's where, you know, it's electric and gas and it's trading and it's, you know, basically selling in deregulated competitive markets to revenue. And then I moved over to utility where, you know, now it's sort of soup to nuts. You're seeing how, you know, the infrastructure gets put in place sort of that whole centralized mindset. in terms of how energy is, you know, procured and distributed, you know, to homes and businesses.

Starting point is 00:11:25 And in that experience, I think the thing that really stuck out to me was, hey, we're really good at moving energy. Energy moves very efficiently through the system, whether it's natural gas or whether it's electricity, it's efficient. And you can have multiple companies sort of in that value chain, each touching that energy, you know, from the point of production to the point of distribution and consumption in your home. But what I saw is that as I progressed in my career. There were instances where, you know, we're managing risks of things that had to do more with the financial side, had to do with the fact that it was actually very inefficient to move money from the consumer back up through that same value chain. And so I think that's really kind of

Starting point is 00:12:04 where the light bulb went off on, hey, here's this problem of financial inefficiency. You know, there's actually a lot of costs associated with just the financial side that doesn't add any value to the energy itself. And in fact, when you think about the inefficiency, it distorting. It's stores the price of energy, it stores the cost of it. And it leads to things like, you know, aggregated costs and, you know, socializing costs to sort of a broad swath of people. And what we don't see is, as really the granularity that exists. You know, energy, the price of energy is going to vary across space and time. You know, one part of Ohio is going to be different than, you know, North Ohio is going to be, you know, different from Southern Ohio. I live in Ohio.

Starting point is 00:12:42 That's why I say Ohio. But, you know, it's, it's, there's so much of a disconnect today between physically and financially, that that's really sort of where I was like, hey, there's something here that we need to, that I wanted to dig into. And it was Bitcoin mining specifically when you think about the fact that, you know, going back to Bitcoin miners moving to the energy itself, you see them eliminating so many pieces of the puzzle in doing that. You know, so much of the, any inefficiency, they're cutting it out by cutting out all of those middlemen saying, let's go directly to the source. Let's reduce that waste. And what sort of struck me was that, even in those situations, and these are the conversations that I had with the team in the very early

Starting point is 00:13:21 days of forming Sonoda, was that everything was changing, but the one thing that was staying the same was how they were transacting with their counterparties. So how the Bitcoin Myers were still paying the energy producers wasn't changing, even though everything else about the equation was changing. So let me say back to you what I think I heard. So really the working capital, for people that maybe own a small business or whatever, and maybe they have a net 60 or a net 90, settlement with their vendors, there's frictional cost in that working capital to settle. What you're going after and what you're trying to solve is you got all these different energy producers that maybe 60% of my house is being provided energy from this one producer, then

Starting point is 00:14:06 later in the day maybe it's 50% and it's constantly in flux and changing depending on which region that energy is coming from. And what you're saying is that the settlement, you're trying to accelerate that settlement time? Am I reading that right? Yeah, that's exactly right. So when you go to pay your energy bill today, what you're going to see is that you're paying for energy that you consumed, you know,

Starting point is 00:14:27 in a previous month. Yeah. So it's often the case that we're paying for a bill weeks, if not months later. And by the time that the money then moves to the other counterparties upstream, it can be months to, in some cases, we've heard 120 days.

Starting point is 00:14:39 Wow. So it's that cash lag, which is really sort of, I think the starting point of the issues, it's sort of one side of the problem. of the problem that we're working to solve. And it's significant because, so when you think about that, what's happening is the energy producers in the utilities,

Starting point is 00:14:54 they're providing that energy to you as a consumer. They had to buy that. They had to produce that. So that was cash out the door to bring that to you. Cash isn't coming back in the door until you pay them two months later. So there's that, there's that lag that is not free. So initially when we started talk with folks about the problem

Starting point is 00:15:14 we were trying to solve, it would say, well, hey, I like the flow. And in our response, it's always, well, the float isn't free. It's a, you're getting a loan every month, but you're paying for it. And it turns out that it's actually quite costly. So the last couple of companies I worked for, you know, there was sort of a seasonal dynamic to the cash flow where during the wintertime, you know, consumers are consuming a lot, you know, especially here in northern states, you know, in their natural gas.

Starting point is 00:15:38 But they're not, the bills don't come in until the spring. So you have this cash negative to cash positive situation. and when your cash negative, you have to turn to the banks into your credit line, you have to turn to the commercial paper markets, wherever, to get the cash to fund your operations. So that sort of setup is pervasive in the industry where, you know, folks are constantly dealing with cash imbalances, constantly having to deal with the question of creditworthiness of their counterparties. And, you know, what's the one way that you can solve that?

Starting point is 00:16:08 Well, post collateral, post a bond. Again, things that are inefficient tie-up capital. So you have this whole edifice or structures established in the industry that's affecting cash flow, creating this credit risk. And then on top of that, it just is the pure financial inefficiency of the daisy chain of payments where you pay your bill. And then the utility then pays the supplier. The supplier then pays the producer. And so it's just these big chunks of money that are sort of piecemealing and large chunks their way through the energy economy. And it's just really inefficient.

Starting point is 00:16:39 You know, when you really sort of set back to get, it's huge. How much of the expense, if you would go from the top line of 100 and maybe the bottom line for one of an energy company, what are their margins, 8%, 6%, something like that? So how much of that expense structure that's eating away, we'll just use that really easy numbers. Let's say they have 5% margins. How much of that $95 of expense is attributed to what you're describing here with the settlement? Yeah, I think that we're, we are, our conservative.

Starting point is 00:17:09 investment is 10% of the cost of energy. So your bill, 10% of that is, is likely to be just financial inefficiency. Wow. Back office overhead, fees from intermediaries. You know, it's really sort of, you know, a poster child for inefficiency. And so the other thing to that, you know, when you go back to the fact that, you know, Preston, I'm sure you always pay your bill, but there's a lot of people that don't. And there's a lot of businesses that go out of business, especially in tough economic times. And so one of the things that, you know, we just published an article in Bitcoin Magazine and we talk about is a perfect quote from McKinsey where, you know, they say, hey, five to seven percent of, you know, people don't pay their bills. And so that cost doesn't get

Starting point is 00:17:54 eaten by utilities and energy companies. That cost gets passed on to you and me. So not only are we paying for the inefficiency, but we're also paying for the people who don't pay their bills. And it's not the case that, you know, this is one of the things that we can certainly talk about. It's not the case that folks not paying their bills is, you know, there are solutions to that available, but they're inaccessible today, again, because of the financial inefficiency that's out there. Yeah, so basically you're saying they don't pay the bills for 90 days or 100 days, so then that's being passed on to the customer.

Starting point is 00:18:26 So how do you solve this? Because you're solving this with Bitcoin and lightning and nodes and explain to us how you are solving this problem, because this is fascinating. And we've talked a lot about the problem, and I think it's because it's so big. So how do we solve it? I think the very first thing that we would really focus on is just the instant settlement aspect of it. So if you go back to somebody, you're paying your bill two months later, so not only are you consuming energy that entire time. So you're waiting, you know, here we are in October, and, you know, you're paying your bill, let's say, from August or September. So by the

Starting point is 00:19:05 time you pay that, now you have two additional months of consumption, et cetera. And so that whole thing, what we want to do is sort of realign the cash flows. And how we use it doing that is instant settlements over the Lightning Network. And in what the Lightning Network gives us the opportunity to do. So I mean, I think everybody understands the benefits of the Lightning Network, the features. So low cost, instant payments, you know, finality. Streaming money, I think is the best way if people don't understand it. Yeah. So what do we have to do from there is we just have to figure out, well, how do we use those properties, how we use the features of the Lightning Network

Starting point is 00:19:39 and a Bitcoin peer to peer payments and apply them to energy. And so what we've done is we've created a programmatic link between energy meters, IOT devices, etc. Anything that is, you know, part of the energy system, hardware that's associated with the energy system, creating that programmatic link between that hardware and the Lightning Network itself.

Starting point is 00:20:00 And so what our software does is, is really that intelligent bridge, that programmatic link, so that as energy is moving, now we can be using that as a trigger to then send payments going in the opposite direction. So what we like to say is, hey, it's energy or money moving at the speed of energy. And that's really sort of the view that we want to create. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:24:24 com slash WSB. All right, back to the show. Yeah, so the energy's flowing in and the sats are flowing back to the source instantly. And in that programmability, what it does is not only is it sort of create that secure, intelligent linkage, that programmatic connection. Yeah. But what it also does is it opens up the world of possibility in terms of how energy is priced and structured.

Starting point is 00:24:50 So much of the system that we exist today. Part of what I would say in terms of the background for where we got to today is the fact that, you know, everything was built at a time in the 50s, 60s and 70s. A lot of the infrastructure and the energy space was built then, and it was all centralized. And it depended on somebody's, you know, reading your meter once a month. So the whole energy system has changed over the last 20 years to be digital. You know, now most people, their utility knows how much energy they're consuming the moment they're consuming it because we have smart meters on, on most homes in the U.S. So that's changed.

Starting point is 00:25:26 There's no more meter readers, but the financial back office systems, those are still stuck in, you know, in that era. And so what that does is it makes it very difficult to now deal with the richness, the abundance of the data that's out there and still try to push that through those centralized systems. Because if you think, you know, went from one data point, you know, per customer per month to now thousands of data points per customer per month,

Starting point is 00:25:51 that becomes a big data problem. comes an issue with processing that. And so what we can solve by decentralizing the whole system is now we can actually handle the data in its entirety. And we can process in a decentralized way and really open the door up to now more flexibility in terms of how we transact. So you Preston could choose to pay your bill.

Starting point is 00:26:13 You could choose to do streaming payments. Maybe you want to pay every 10 minutes for your energy. And you like to open up your phone and see, you know, money come out every 10 minutes. But maybe your neighbor says, no, I'd actually like to pay once a month still. You know, now we can sort of solve the differences. And that's sort of an easy example.

Starting point is 00:26:30 I think the more, the biggest opportunities are going to exist in terms of how we actually reflect the true cost of energy. Because most people today, you know, they, they're just assigned a specific rate. And that rate is, you know, I'm a residential customer in southern Ohio. So I paid this price for this month. Well, we all know, and in Bitcoin, you know, the Bitcoin community knows better than I think, you know, most industries, that energy is, is not, you know, that is not the true cost of energy. It's not one price over a broad, you know, service area, you know,

Starting point is 00:27:04 that's fixed for a month. It actually goes up and down. So now we actually have the processing capability through decentralized, you know, through the decentralized through how we built the software, then say, no, we can do real-time pricing at a very granular level. And Preston can pay differently than his neighbor. Austin, how do you think about the exchange rate? So most people want to still denominate their expenses in Fiat because they see that as less volatile than Bitcoin. But there's also, I know, when you look at like Jack Mullers and he's streaming U.S.

Starting point is 00:27:36 dollars from one account to another, but he's using Bitcoin Lightning as the rail to do it instantaneously. And so there's nothing that exchange converting it from dollars to Bitcoin back to dollars again, is that how you guys kind of see happening for the user? And talk to us a little bit about the user interface that you see this happening under. Yeah, that's it. So number one, you know, Jack Mahler's and what strike has done has absolutely been an inspiration for us. I think that was, you know, one of those light bulb moments through the progression of Sonodan in how we got to where we are today was, you know, Jack Mahler's talking at, you know, Bitcoin 20201, Jack Malar's

Starting point is 00:28:13 being, you know, on CNBC telling the world, you know, how we can really change. use the Lightning Network for payments, but in a way that sort of meets people where they are, meets them where they're comfortable. And so we really embrace that concept of, you know, our vision is that people will sort of interact with their energy payments and we'll have the opportunity to interact in just the same way they are today. You know, it's Fiat going, leaving their bank account, but it's really leveraging the Lightning Network as the payment rails and then having decentralized processing, you know, connected into that network to really make it be more complex and dynamic.

Starting point is 00:28:50 And they don't even need to understand that. They don't even need to understand it. And ultimately, you know, what we want to see is, is just as Jack says, you know, a better user experience. Yeah. Because it creates a whole different, you know, the landscape will completely change in terms of the products and services that people can be offered related to energy. Because there's going to be no limits in how they transact.

Starting point is 00:29:15 And so the pitch to the end user. So here I am at my house. The energy company contacts me. They say, hey, would you like to save 5% every month on your energy bill? If so, load $300 into this account via whatever app. And then it's basically streaming that money through the Lightning Network, which would be all on the back end that that user wouldn't have to deal with, correct? Is that kind of the vision?

Starting point is 00:29:42 That's exactly the idea. And what's interesting is there are actually a number of companies that have sprung up with that same approach, sort of pay as you go, but it's all, it's still tethered to the way things work. The only difference is just that it's, it's really,

Starting point is 00:29:58 they're called pay as you go, but really it's just a pre-pay. So I think with Bitcoin and Lightning, you can actually have a true pay-as-you-go option where it's your money until you're using it to pay. And so I think that's really what the big change is and cutting out all of that financial inefficiency.

Starting point is 00:30:12 And one of the other really big opportunities, Preston, is that back to that sort of daisy chain of payments that's out there, today, what we can do now is think about split payments. So, you know, I know, you know, many of the value for value model that's out there where, you know, you can have multiple people receiving instant payments the same time. Well, energy has this property where it doesn't change, it doesn't change value, you know, for the last, you know, a bit of the value chain

Starting point is 00:30:41 quite a bit. And there's usually a number of parties involved in the transaction. So now instead of, you know, the utility paying the supplier, supplier, paying the transmission company, et cetera, et cetera, now everybody can pay to once. And so that's where you start to see, you know, enormous savings come to bear. And that's what we get really excited about, because now it's everybody in the equation's happier. And it's, it's everybody from the energy broker who can say, hey, you know, I had a part in, you know, this supply deal. They're the last people that get paid in a lot of transactions. Now they can get paid right at the very, you know, right at the front with everybody else.

Starting point is 00:31:16 And so it just really changes the dynamic. Do you see any role at the main hubs, the main energy hubs between the various energy companies using a similar model or is it kind of handled in the business maybe on a tighter timeline like net 30 or something between the various energy companies? Yeah, you know, so I'll tell you that, you know, part of our vision is that, you know, really the entire energy economy is going to, I mean, that is our vision is the entire energy economy

Starting point is 00:31:45 is going to settle on the Lightning Network. So every energy transaction, your bill, B to B, you know, when you think about one of the, there's a number of platforms out there where wholesale energy trading occurs.

Starting point is 00:31:58 You know, those platforms will be a perfect use case for, hey, everybody on, everybody who's trading energy, let's be linked into the Lightning Network and let's do, let's do the financial settlement right away.

Starting point is 00:32:09 Yeah. And it's all of the, those platforms where to be a participant in them, you have to post exorbitant amounts of credit to, or collateral to be a participant. So now we can expand, you know, access to those types of trading platforms, you know, if you don't have those barriers in place. If we had an executive for a major energy company listening to the show right now, what would be your one to five liner to them. Yeah, so I think that, you know, what we need to talk with, when we talk with executives

Starting point is 00:32:41 and things like that, what we really are talking about is cash lag, credit risk, and the barriers, the inefficiency, and just the inflexibility of the system. It's not easy to change the billing system today. Yeah. So now you can. So those things resonate, you know, head, you know, top to bottom with everybody we talk to. And usually the feedback that we get when we talk to the energy executives is, you know, It's more of just like a skepticism around Bitcoin still at this stage.

Starting point is 00:33:09 But hey, you're solving some of our biggest pain points. And I know it because I've been on that side of the equation. I've had to manage the credit risk. I've had to track the cash flow. So I understand what all this is about. And that's why I know that this solution is perfect. It's just making it so that way adoption is easy. And I think that's where, you know, going back to strike,

Starting point is 00:33:30 energy companies today do not want to receive Bitcoin. But a company like strike has opened the door to say, hate, but they can receive USD, you know, in that transaction. And everything can still be the same, but, you know, just as Jack says, right before it gets to their bank account, it flips the USD and everybody's, you know, content with how the transaction went. I think so few people understand that right now, that you can do these atomic swaps between Fiat and Bitcoin back to Fiat. Huge news with Cash App this week, fully integrating lightning. So here you are talking about immediate stream.

Starting point is 00:34:05 dreaming money via lightning and you have arguably one of the biggest paying platforms on the planet with cash app fully integrating the Lightning Network into their app. And I don't know about vendors like restaurants and whatever that are also using their platform, but I would imagine it's available there as well. What are your thoughts on that? And I'm assuming you're very bullish on this idea. Yeah, absolutely. So I think the big thing for us, So part of how we view our company in the progression that we're going to make in the development is we're leveraging third parties. You know, we're integrated with some of the leading companies in the space, and we expect them

Starting point is 00:34:47 to continue to advance just as we will. So we're, you know, as an example, we're not focused on building that off ramp. We're leveraging a third party to help us do that. Yeah. And so we only expect that, I'll say cash app, strike, et cetera, are going to continue to progress as they have, and we'll be able to continue to tap into what they're building. building to really provide good on-rams, good off-rams to really sort of round off the full user experience.

Starting point is 00:35:12 So yeah, part of everything that we're doing is anticipating the growth in key areas that today are not as mature as they need to be to get sort of mass adoption, but we think in a short period of time, there will be. So I don't know that if I'm just reiterating something that you previously said, but you wrote a article just recently the other day called Towards a Future of Energy Abundance. One of the quotes in there that I really liked, you said, the future energy economy will be settled on the Lightning Network. Every home business, substation, solar farm, whatever energy is produced, distributed or consumed,

Starting point is 00:35:46 will be programmatically linked to a node on the Lightning Network. Instant settlement on the Lightning Network reduces or eliminates financial inefficiencies, cash lag, and credit risk. I just found that to be a very profound quote. I got one more here. This industry sees value in stranded or wasted energy when many are trying to cover it up, where the legacy industry mindset seeks to curtail demand to meat supply, miners see an innovative and inclusive future driven by increased demand. Wow. That quote there at the end is,

Starting point is 00:36:22 I think it's a slap in the face to the energy, to all these people running around saying, we need to consume less, right? You're saying the exact opposite with what the promise of what a lot of this delivers. Tell us your thoughts. Well, I'll tell you, let me, I'll own the fact that two years ago I was one of those people who thought we needed to consume less. So, so walk us through that. Walk us through the transition. Yeah. So it really was. So for me, it was actually attending Bitcoin Miami me 2021. So I attended that as a representative of the utility I worked for at the time. I saw Bitcoin mining. I knew about Bitcoin. I was, you know, buying Bitcoin unrobbing through my weekly DCA, you know, forgive me for, you know, using a non-custodial solution. But that's, that was what

Starting point is 00:37:09 I knew. I knew enough about it to like it. And I was really intrigued by, you know, Bitcoin mining, the growth in the U.S. And since I worked for an energy company, I said, hey, there's, there's certainly maybe some risk here, some opportunity. I was in charge of, you know, risk for that utility. So I really wanted to go understand this. And, you know, being down there, you know, a couple of things happened. Number one, you know, I got a math lesson from Greg Foss. And that sort of pushed me really close to the Ravoh. And then I spent a dinner with the IBEX team. And I can just tell you, I just instantly sort of saw the mindset shift. It just started, just kicked off. That plane ride home, I can't even describe how I felt, sort of, you know, jotting down everything that I had learned in all

Starting point is 00:37:51 of my, you know, preconceived notions of energy and things and how they could be changed. Because what I saw was, hey, not only was this, you know, as the quote says, you know, people who are seeking waste and strain of energy. But I thought about how much more efficient. So you talk about efficiency as reducing consumption. But I thought, no, there is an even greater efficiency that's possible. If we have just a flexible grid where, you know, supply and demand can be constantly, you know, tugging and pulling at each other with price, going up and down to reflect the true dynamics of the market. Yeah.

Starting point is 00:38:25 And that's the efficiency we should be seeking is that. And the financial system that we have today in energy finance prevents that. And it is an absolute barrier to that. But if we can get to a point where energy is freely traded at a granular level and the true cost and the economic value are known, that transparency is going to do wonders for not only the efficiency of the market, but just wonders for how people use energy. And I think it's just going to open up, you know, really unleash innovation, unleash investment not only, you know, locally but globally.

Starting point is 00:39:01 Because as we know, you can, you know, send Bitcoin anywhere in the world instantly. So I think that's really sort of the transformation. One of the other things that that happened shortly after that was I started to talk to people that I also knew in the energy space. And, you know, people that I knew had open minds and would be willing to say, okay, well, how does this change things? and it was incredible. And a lot of the folks are on the team today, either as advisors or, you know, full-time members of Sonoda.

Starting point is 00:39:28 And, you know, they all saw it the same way. They saw, hey, this is transformative. You can really truly reimagine the energy system when you aren't sort of tethered to a one sort of viewpoint on how it should exist. And one of those people with my friend Dan Snitzer, because he is the CEO of a company called Spark Meter. And they do, basically they're one of the first. the things that they do is hardware and software and mini grids in emerging markets. Now, they do a whole lot of other things and it's really neat. But that's really kind of what got them started. And we talked about how, you know, the very first few years of a mini grid in, let's say, rural Africa, it's actually

Starting point is 00:40:07 quite risky and very unprofitable. You know, people there are spending 30, 50 cents a kilowatt for electricity. And there's not a lot of sort of natural demand. I mean, you put a mini grid in where there was previously no electricity, you know, the people there don't have, you know, all the appliances that were accustomed to that consume energy. And so we talked about, well, hey, how can Bitcoin mining really uplift and enable that and sort of de-risk these projects? And so that led to just, you know, incredible conversations not only about the U.S., but globally of how we can sort of change the narrative, change the dynamic. And so, you know, one of the cool things which we're going to talk a whole lot more about as a company is just that.

Starting point is 00:40:46 of some partnerships that we formed in Africa to do that. So basically say, hey, we're going to help seed mini grids there with Bitcoin mining. As I sit here today in Columbus, we're going to be paying for the energy that's being consumed in Africa. And so we're mining Bitcoin in two places in Africa today and paying for it in Columbus, Ohio. And what it does is it's created this win-win-win scenario where not only are we able to get the Bitcoin at, at a good price, a good price for the energy. But now we've added increased revenue for zero costs to that mini-grid. And so that mini-grid is now benefiting from more revenue coming in.

Starting point is 00:41:28 They can lower the cost of the community. And because, you know, if you want to go back to credit-worthiness, where a credit-worthy customer paying in selling, the mini-grid operator themselves is really happy to have us as a customer as well because they're not worried, are we going to pay the bill in 30 days. So everybody is better off in this equation. and it just is another example of, you know, a productive use of energy. So there is a whole series of things that folks call productive uses of energy.

Starting point is 00:41:54 Coin mining, you know, belongs in that space, belongs in that, you know, it fits in that definition for me. And it's truly transformative in what it can mean, but it does go beyond that. And it goes to how do we think about just investing in energy infrastructure generally? And so what we've done is we run the numbers, we've built the models to say, actually, what it really now enables us to do is build bigger mini grids. So now we don't have to just think about where the community is going to be in five years. We can think about where that community will be in 10 years. And just continue to sort of optimize or maybe maximize really opportunities that are there.

Starting point is 00:42:30 So it's just one example. I mean, so we've talked a lot about the U.S., but here's where, you know, it's not only Bitcoin mining, but it's, you know, Bitcoin mining is a piece of the equation, but it's how we can transact or cross borders really open on markets. And now we can really envision a whole new future for what it means for energy equity and energy access. I can just see it on your face. Like this is something you can't unsee. No, that's exactly right.

Starting point is 00:42:54 Once the light ball went off, I think I was a change person. I remember coming home and after that same plane ride I talked about where, you know, I think I spent three hours, you know, with my wife just downloading everything. And it's just the excitement that I have has carried with me since that moment. and really the community then has just further reinforced everything because not only have I experienced, you know, people who see, you know, I think as, you know, Jeff, Jeff Pruth talked about in the podcast with you recently, you know, it's about, you know, abundance and hope in just that mindset shift that's that that you see in people in the space. But the other thing, too, is just, you know,

Starting point is 00:43:36 along with open source, just people who are open. Yeah. I've grown accustomed. to all my years in the energy space, and even in academia where it was like, you didn't want anybody to know what you knew. You wanted to find the best location to drill your well, or you wanted to publish your paper first. I feel very differently being in the Bitcoin space. And I think that's very freeing because then, you know, I can go into conversations. My team, you know, can go into conversations and just talk about what we're doing. And, you know, for some people, it really resonates. And we've, you know, gotten a ton of great feedback to help make what we're doing, you know, really enhance what we're doing.

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Starting point is 00:47:55 miners understand the technology. As, as we readily admit, there's areas in terms of on ramps where it's not, you know, we don't have all of the solutions yet to do that seamlessly. So Bitcoin miners being able to pay in Bitcoin really sort of streamlines, and we can build a frictionless payment flow around that. And it's really also a sort of a good for the, what's good for the goose is good for the Gander because now we're talking about bringing significant scale into the Lightning Network and really helping us sort of evolve and mature the technology.

Starting point is 00:48:27 So we're definitely starting there, and it's ideal because Bitcoin miners, more than anybody, have, you know, understand the value of sort of, you know, price response of demand and, you know, price sensitive supply, et cetera. So here we can sort of link those two things up. We can provide that transactional flexibility, provide instant settlements. And what it ultimately would do is I think it would change sort of the narrative around Bitcoin mining, because now the energy suppliers are not going to sort of view all Bitcoin miners as a credit risk, because now they're going to be able to be paid more frequently.

Starting point is 00:48:58 So we think it's a really big opportunity to really demonstrate what's possible in this space and at the same time, you know, grow and scale our own technology. Austin, tell us a little bit about the team. Yeah, Preston. So the team is incredible. It's comprised the folks that I've met throughout my career and, you know, people who are open-minded in the energy space, but also bring just a wealth of knowledge. So we have folks who have been, you know, on the front lines fighting for energy, equity. We have folks who are on the front lines fighting for deregulation. You know, so collectively,

Starting point is 00:49:31 we have over 125 years of experience in the energy industry throughout the value chain. My co-founder, Lisa Scott, she is a JD and a CPA and really sort of brings that back office experience. You know, she's seeing sort of how things look when, you know, it's not sort of operationally on the front line of energy. It's sort of dealing with things as they come in, you know, in paper form and, you know, across the financial platforms of the back office. So we have that experience, and what we've been able to do is really combine it with lightning expertise. And so Max Tignan, our head of technology,

Starting point is 00:50:04 he's previously worked at Strike. He's an incredible developer, and, you know, he's building a great team around him today. And one of the important things about, you know, how Max and I connected, which I think is just a true sort of, you know, Bitcoin community story was, you know, at the meetup. And, you know, being at the Columbus meetup,

Starting point is 00:50:21 talking about, hey, here are these problems. And then, you know, Max says, hey, we can solve those. And, you know, we can use the Lightning Network to solve these. And, you know, we don't need to do a smart contract to do it. You know, I still look at the technology and I think, hey, kind of looks like a smart contract, right? But he's like, but it's not. And it's way more efficient.

Starting point is 00:50:40 It's way more secure. And it's Bitcoin. You know, it does things that you can't do with other technologies. And it doesn't faster, better and cheaper. So, you know, it's just really a kudos. as a team because I'm, you know, just one part of what Snowda is and what we will be with the talent that we have. Austin, if people wanted to learn more about your organization, if people wanted to get

Starting point is 00:51:03 involved, are you looking to add people to your team? Talk to us about where you guys are at in that timeline and where people can learn more about you. Yeah, so as a company right now, we are, you know, right at the very beginning of our seat stage. And what we're doing is really kind of focusing on commercializing our initial product, which is going to be, you know, tailored to the Bitcoin mining space and, you know, can talk about that certainly. But what we're going to be doing is, is from there, you know, moving out into other industries and into other sort of, you know, segments of the energy, of the energy space. And one of the things that we're looking to do is, is bring people on board.

Starting point is 00:51:40 So we have a great team today. Our technology is being headed up by Max Stignan. He's an incredible talent. And, you know, we can sort of see as we move from Bitcoin mining into sort of the other areas where we want to go. We're going to need to find additional folks. And so obviously, as a Bitcoin-only company, we were trying to attract Bitcoiners to the mission. And so that's how we're approaching this. And so we've got a couple of postings on our website.

Starting point is 00:52:04 You know, we invite anybody to go check those out. Or, you know, just any general inquiries, we're happy to tell you what we're doing. This is really just for us, a really exciting time to be, you know, getting our start and, you know, putting ourselves out there as here's a really important and potentially huge use case for Bitcoin.

Starting point is 00:52:22 It's not the case that we're trying to sort of solve a problem that doesn't exist. Here's a really big problem of financial inefficiency and financial inflexibility. And we have an opportunity to use the tools and technologies that are being built to solve those. And what it does is it's better for energy companies and it's better for energy consumers. So it's a win-win there. I mean, I think we all know who loses out in that equation. but it's not the consumers and it's not the energy companies. And so we get really excited about that and we hope others see that as well.

Starting point is 00:52:58 We also think that one of the core things in how we're building is we're also doing the tech out in the open as well. So, you know, as a new company, we're still figuring out exactly what that means and, you know, each facet of it. But some of our core technology is open source today because we think that this is not, it's not going to be synodewat that brings the whole energy economy to the light network. It's going to take a lot of people doing that. And it's going to be, you know, it's going to be done through integrations. And it's going to be done through partnerships and finding new ways to sort of connect people because there is really an opportunity for a network effect here.

Starting point is 00:53:32 And that's what we want to see happen. Because if you have two parties, you know, transacting together, now let's think about, okay, well, somebody who's then upstream says, hey, I want to also get paid right away. So there's really a sort of a very natural network effect that we want to create. But there's definitely some big challenges to solve, and that's what we're excited to do. We tell people, you know, with what we're doing today that we fully intend to break the Lightning Network along the way, not the whole network, of course, but like the transactions, volumes that we're talking about, the amount of liquidity that's going to be required, the reliability. So, you know, one difference is we're not paying for podcasts, we're paying for a critical service. So if people's energy's bills don't get paid, well, then their energy gets.

Starting point is 00:54:18 it's shut off. And that can be a big issue. So we need to push, you know, reliability to 99.99% and it needs to be that high for very large transactions as well. So it's things like that, which haven't been done before that we're going to have to do. And we know we know we're going to have to break things, but then build them back back. And so that's sort of the mission that we're on and why we get really excited about the tech and where we're at today. Wow. And what I love is you're doing it in developed nation states and you're doing it in underdeveloped nations. It's just, it's fascinating to see the breadth of what this offers the world. And when you look at the, for people that aren't intimately familiar with the Lightning Network,

Starting point is 00:54:57 when you look at the growth rate of this thing, I mean, it is moving out at a clip that's unparalleled when you look at the amount of coins that are being channels that are being set up within that. Austin, what a pleasure talking to you. Thank you so much for making time and coming on the show. We'll have some links in the show notes for people if they want to check out some of that stuff. We'll also have a link to your Twitter handle so people can follow you there and keep track of what you're up to. Any final comments or things that you want to highlight?

Starting point is 00:55:24 No, this has been a real pleasure. Thanks for giving us the opportunity to talk about. Just really love everything that's happening in this space and excited to now be a part of it. So thank you very much. Absolutely. Thanks for coming on. Thank you. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener.

Starting point is 00:55:49 If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week. Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional.

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We Study Billionaires - The Investor’s Podcast Network - BTC102: Bitcoin Lightning Network Changing the Energy Sector w/ Austin Mitchell (Bitcoin Podcast)

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