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bitcoin-mining

Luxor Technologies Releases New Hosted Bitcoin Mining Marketplace

28/06/2022 by Idelto Editor

Luxor’s new marketplace allows those looking to mine bitcoin to find hosting facilities and ASICs by delivering industry knowledge about each provider.

  • Luxor Technologies has launched a new hosting marketplace for bitcoin mining.
  • The trading desk will give users access to pertinent information about providers including energy sources and fees.
  • Luxor customers can utilize the marketplace upon purchasing mining equipment or as a separate transaction.

Luxor Technologies, a Bitcoin mining infrastructure provider, has announced a new marketplace for hosted bitcoin mining allowing customers to shop for hosting providers, per a press release sent to Bitcoin Magazine.

Luxor’s ASIC Trading Desk will connect customers with hosting providers as soon as they purchase an ASIC from Luxor, or as a completely separate service, meaning you don’t have to purchase the ASIC from them to use the hosting marketplace.

Additionally, customers using the marketplace will find all the relevant information they need to make an informed decision for their provider including: region, energy sources, power costs and hosting fees, immersion versus air cooled capabilities, rack space, and future capacity.

“Luxor’s Hosting marketplace enables miners to choose hosting providers that meet their unique operational and geographical requirements,” said Luxor Director of Business Development, Aaron Foster. “Rather than a one size fits all approach Luxor aims to provide a white glove service that removes the uncertainty around hosting decisions.”

Hosting facilities offer a larger variety of environmental circumstances for otherwise limited miners. For instance, a high electricity cost in a particular municipality may dissuade an individual from purchasing mining equipment if they have no other place to operate it. Hosted mining allows these individuals to utilize outside facilities, opening up mining opportunities to the broader public.

“We’re building a full suite of products and services for miners at Luxor, and the hosting marketplace is a crucial piece of the full-stack we are building,” Foster said. “Now miners can buy, host, and mine all in one place with Luxor’s services.”

Filed Under: ASIC, Bitcoin Magazine, bitcoin-mining, business, English, luxor, Marketplace, News

Report: $4B in Bitcoin Mining Loans Are in Distress — JPMorgan Analyst Says Price Pressure Stems From Miner Sales

27/06/2022 by Idelto Editor

Cryptocurrency-related lending has become a black smudge for the industry these days and according to a recent report, bitcoin’s low price has put billions in mining loans under stress. The report, which quotes the co-founder of mining company Luxor Technologies, Ethan Vera, says that roughly $4 billion in loans backed by crypto mining rigs are extremely close to running a risk of default.

Analyst Says Miners ‘Are Nervous About Their Loan Books’


The price of bitcoin (BTC) is 21% lower than it was two weeks ago and the price drop has hurt BTC miners a great deal. According to a report from Bloomberg, analysts say that a number of loans backed by mining machines are underwater.

Luxor’s Ethan Vera estimates that around $4 billion in loans backed by mining rigs are under stress. “They are nervous about their loan books, especially those with high collateral ratios,” Vera explained to Bloomberg’s David Pan.

Using current BTC exchange rates, only 14 SHA256-based mining rigs are profiting with an electrical cost of around $0.05 per kilowatt-hour (kWh), according to asicminervalue.com statistics. The top mining machines manufactured by Bitmain and Microbt, gather between $2 to around $4.50 per day with an electrical cost of around $0.05 per kWh.

The report notes that miners are selling BTC to bolster operational costs and it highlighted that in May, Core Scientific Inc. sold over 2,000 BTC for operational expenses.

“Bitcoin miners, broadly speaking, are feeling pain,” Luka Jankovic, head of lending at Galaxy Digital detailed in the report. “A lot of operations have become net IRR negative at these levels. Machine values have plummeted and are still in price discovery mode, which is compounded by volatile energy prices and limited supply for rack space,” Jankovic added.

JPMorgan Analyst Says Bitcoin Miners Continue to Put Pressure on the Price


Traditionally, during bear markets, bitcoin miners are forced to sell off holdings which puts even more pressure on the price. Another report, quoting JPMorgan analyst Nikolaos Panigirtzoglou explained that bitcoin miners that need to sell will keep weight on the current downward pressure affecting BTC markets in recent times.

Panigirtzoglou and his group of strategists at JPMorgan believe that privately-held miners may have sold a large share of block subsidies to help operational costs. A number of reports had shown that miners have been selling large quantities of BTC since February 2022.

“Bitcoin miners have been net distributors since the recent sell-off,” the team of onchain analysts at Glassnode detailed on June 2. “Miners balances have recently declined at a peak rate of 5k to 8k BTC per month ($150M to $240M at $30k BTC).”

During the past few weeks, a handful of crypto lenders have also been under severe stress and some are dealing with liquidations. The crypto lender Celsius has been under the crypto community’s scrutiny for alleged liquidations and rumors about restructuring and insolvency.

Loans tied to the BTC mining industry may force miners to sell even more BTC if prices go lower than today’s current exchange rates.

What do you think about the pressure bitcoin miners are feeling from the lower bitcoin price? Let us know what you think about this subject in the comments section below.

Filed Under: Bitcoin Miners, Bitcoin Price, bitcoin-mining, BTC Mining, BTC Price, Celsius, Crypto Lenders, English, Ethan Vera, Galaxy Digital, glassnode, jpmorgan, JPMorgan analyst, loan stress, loan underwater, loans, Luka Jankovic, Luxor Mining, Luxor Technologies, Mining, mining bitcoin, Mining BTC, Mining Operations, News, News Bitcoin, Nikolaos Panigirtzoglou

Why My Energy Company Pays Me For Running A Bitcoin Miner At Home

26/06/2022 by Idelto Editor

Cycling home bitcoin miners with peak energy consumption times and capturing their excess heat help make the case for small-scale mining.

Decentralization is a core ethos of Bitcoin. In this article, I will discuss the importance of keeping Bitcoin mining decentralized with widespread, small-scale mines.

The future is competitive.

Large Bitcoin mines have economies-of-scale advantages and are able to be set up in jurisdictions with the lowest power costs. While large-scale mines do play an important role in the scaling of hash power, it is important to have large- and small-scale mines. Currently, the incentive structure favors relative centralization of mining to large mines.

If mining becomes too centralized, there are several risk vectors that come into play.

  • 51% attack: It is easier to coerce 100 large mines to cooperate or shut down, than it is to coerce 1 million small mines to cooperate or shut down.
  • State/government compliance: Large mines become beholden to government policies or political pressure.
  • Anti-fragility: The higher the centralization, the less robust the network. If Bitcoin is to become the base layer of the global monetary system it needs to be able to withstand any potential threat coming in the foreseeable future. Events such as widespread power outages, world war, global economic collapse, coordinated EMP or nuclear attacks could cause denial-of-service or 51% attack opportunities.
  • Non-democratized: Bitcoin is for the people. Miners and nodes work together to protect the blockchain and “vote” on changes to core functionality. Individual control of miners and nodes ensures more people are in control of “voting” for Bitcoin’s future.

Along with pressure from large-scale mines, small mines also have to compete with the simple economics of reducing bitcoin rewards over time. As the network hash power increases and the block reward decreases, staying competitive in the long run is not a simple task.

Small-scale mines will have to find areas where they can compete among the much larger, industrial-scale mining farms operated by large entities. And there are two key advantages that small-scale mines can employ to maintain competitiveness relative to large-scale mines.

The first is establishing grid stabilization with dynamic power curtailment. Power plants are large, expensive operations. They have to be sized to accommodate peak demand of the jurisdiction they serve, otherwise blackouts would occur. Peaks happen in only small periods of any given timeframe, i.e., in a few hours of a day, or during extreme weather events. The rest of the time, much energy is lost because the plants cannot scale up and down fast enough. Since miners can power up and down quickly, Bitcoin mining is positioned perfectly to scale up in the low demand times and scale down during the peaks.

Some large mines are doing this now, but how can a small-scale miner do this? Here is how I am doing it.

Scaling Home Bitcoin Miners With Energy Peaks

Here in Southern Nevada, peak energy use is in the summer afternoons when 100-plus degree fahrenheit heat forces heavy usage of air conditioning in homes and businesses.

To incentivize off-peak usage, an opt-in power plan is offered by the local utility. These rate plans are often referred to as time of service (TOS) or time of use (TOU). Instead of paying $0.11 per kilowatt hour (kWh) at all times all year, the rate becomes $0.06 per kwh at all times except for 1:00 p.m. to 7:00 p.m. on weekdays from June to September, where the rate is $0.36 per kWh. This infographic shows this rate breakdown more clearly:

Source

Prior to having solar panels with battery backup, I would optimize my energy usage by doing the following:

  • Automatically shutting down Bitcoin miners during peak time with use of home automation
  • Pre-cooling my house by a couple of degrees prior to peak energy consumption time, then raising the air-conditioning setpoint during the peak to minimize air conditioning usage during the peak. Essentially, the house acts as an energy battery of cooled air. In the figure below, you can see how the air conditioning barely runs during the peak events:
Source: Author screenshot

The addition of a Tesla solar with Powerwall battery backups allows for further optimization with net metering billing (net metering takes into account the power used from the grid, minus the power supplied to the grid). Utility companies will credit the customer for excess solar power delivered to the grid above and beyond what they use for the home (the credit rate also varies based on TOU).

In my case, the utility company will pay me $0.28 per kWh for power I deliver to the grid during peak time. So, in the Tesla app, I can configure these settings and it will automatically push/pull from sources to optimize power savings.

Source: Author screenshot

Essentially, I consume as much power as needed during off-peak times, then during peak times, batteries supply the house with all power needs (up to 10 continuous kilowatts with two Powerwall batteries), while all solar energy produced goes back into the grid.

View the 2 images of this gallery on the original article

As you can see from the screenshots of my Tesla app for June 7, 2022 above, power is consumed from the grid during off-peak times, while solar energy charges my batteries. Then, during the peak event, the batteries power my home energy load while all solar power is redirected into the grid and sold for the highest-possible rate.

View the 2 images of this gallery on the original article

Effectively, my house acts as a small power plant during peak times and an energy consumer during off-peak times.

This has the effect of giving the utility provider what they want: more power supply during peak consumption times, and more power consumption during off-peak times. It also works out for my benefit as I am able to consume only low cost power, while getting credited for all power supplied during peak events at the higher rate of $0.28 per kWh.

In the example of this one day, we can break it down as follows (assuming only net usage for comparison):

  • Non TOU rate: 98.4 kWh at $0.11 per kwh = $10.82
  • TOU Net Metering: 111.3 kWh at $0.06 per kWh – 12.9 kWh at $0.28/kwh = $6.68 – $3.61 = $3.07
  • Effective rate: $3.07 / 98.4 kWh = $0.03 per kWh

As we can see, a significant cost advantage to me as a consumer. Instead of $0.11 per kWh, I am effectively paying $0.06 or $0.03 per kWh depending on the season.

Although utility TOU options may not be available in all jurisdictions, it is likely that many utility providers have a need to level out peak demand. Once power companies have the ability to dynamically interface with miners to instantly scale back demand, new rate structures can be implemented to take advantage of this scenario.

Even without a solar and battery backup system installed, a small-scale miner could use dynamic power scaling to scale back mining during peak events, and scale up mining during off-peak events. This could be accomplished through the use of micro controllers and home automation controllers subscribing to live power grid events, which then in turn increase or decrease miner hash rate accordingly.

Heating Your Home With Bitcoin Miners

The cost savings of this technique become even more apparent when coupled with the second key advantage that home miners can use: mining for heat.

All devices that consume electricity put out 100% of that energy in the form of heat, along with their primary purposes (producing light, hashing, etc). A 3,400-watt Bitcoin miner essentially puts out the equivalent wattage in the form of heat. With some innovation and engineering, this heat can be redirected and integrated into heating homes, pools, water heaters, green houses and more.

Double-spending energy already being spent on heating drastically improves ROI as well as improves the perception of mining to the public, though deeper and simpler integration into heating devices is needed and currently in development (check out this list of home Bitcoin miners building systems to repurpose heat for more information).

Dynamic power scaling to meet energy grid demand along with mining for heat are musts for keeping the Bitcoin blockchain protected with highly decentralized, small-scale mining.

Dynamic power scaling based on grid demand is possible on a small scale. And by coupling this with mining for heat, small-scale mining operations can be profitable for the foreseeable future.

I am working to modularize and simplify these control systems for more miners. If you are a home miner employing any of the techniques that I mention here, or are a miner interested in learning more, follow along and join the conversation on Twitter @TechEngineer21.

This is a guest post by TechEngineer21. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Filed Under: At-home Mining, Bitcoin Magazine, bitcoin-mining, business, Energy Consumption, English, Feature

MEV Is Coming To Bitcoin And It Will Change Mining Profitability

24/06/2022 by Idelto Editor

Mainstream financial audiences are now paying attention to miner extractable value (MEV), and bitcoin investors should too.

Bitcoin mining revenue streams are historically very boring. Miners earn money from two sources: subsidies built into the protocol and fees for processing transactions. Sometimes a company will pay miners to put a special message in a block header. Sometimes cryptocurrency exchanges will negotiate fees with pools to reserve block space during times of high network congestion. But these payments are exceptional and infrequent occurrences. Mining expenses are paid with fee and subsidy revenues.

The future of bitcoin mining revenue, however, is likely to be the extreme opposite of boring. And more bitcoin investors should start paying attention — even ones who aren’t mining.

The Basics Of Miner Extractable Value

Miner extractable value (MEV) measures the revenue taken from block production activities that goes beyond typical subsidy and fee revenue through controlling the inclusion, exclusion and ordering of transactions within any given block. Miners control all of these things — transaction inclusion, exclusion and ordering — but they aren’t the only ones who earn MEV.

Searchers are network participants who monitor on-chain transaction activity for MEV opportunities. These opportunities are typically submitted automatically to miners by a searcher’s bots with higher-than-normal fees associated with the MEV transactions to ensure their inclusion in a new block by financially incentivizing miners to do so, which allows the value to be successfully extracted. Thus, miners and searchers generally share revenue from any given MEV opportunity.

Readers should also know that there is some disagreement on what MEV means. Traditionally, the term represents miner extractable value, but some developers have recently started referring to MEV as maximal extractable value to include non-mining-specific forms of on-chain value extraction. (The purposes of this article are met by referring to mining-specific value extraction.)

Most readers are unlikely to have even heard of MEV, much less understand many of the common strategies for this source of miner revenue. But mainstream financial audiences are paying attention to it and bitcoin investors should too.

MEV Is Gaining Traction

This month, the Bank for International Settlements (BIS) published an eight-page bulletin on cryptocurrency miners and MEV. The report was notable for the surprising depth in its analysis of the mining industry and specifically MEV, including mentions of various MEV strategies (i.e., sandwich and replay attacks) and the mechanics of block organization and production. BIS is a global financial organization that was created in 1930 to provide banking services to central banks and other international financial entities.

“Since when does the BIS know what a ‘replay attack’ is,” tweeted Robert Miller, product lead at FlashBots, the industry’s leading MEV research and development organization.

But BIS isn’t the only mainstream entity aware of MEV. During a cryptocurrency-focused hearing held by the U.S. Senate’s Banking Committee last year, for example, one individual made extensive comments about MEV in their written testimony and their answers to questions from the Senate. The acting chief of the Office of the Comptroller of the Currency, Michael Hsu, also referred to MEV last year as one of several topics that raised “difficult and inconvenient questions” for the industry.

So why should bitcoin investors care?

The Bitcoin MEV Landscape

Trigger warning: This section mentions the name of Vitalik Buterin’s blockchain. But don’t stop reading.

When miners and mining analysts discuss MEV today, the Ethereum economy is their primary focus simply because of the number of “decentralized finance” applications and projects that currently run on that blockchain. Merits and fundamental value of those projects aside, the more applications built on a blockchain and the more on-chain activity generated by them, the more opportunities for MEV exist.

So — back to Bitcoin — the more bullish someone is on a Bitcoin-based decentralized finance (DeFi) ecosystem, the more they should consider the opportunities and threats created by a robust MEV market that will follow. “DeFi needs Bitcoin,” wrote one advocate. MicroStrategy CEO Michael Saylor also thinks the Bitcoin protocol will play an integral role in “the next generation of DeFi.” One recent report altered (or iterated on) the naming convention for Bitcoin-based DeFi, calling it “LiFi” (Lightning Finance), a reference to the Lightning Network. Whatever it’s called, Bitcoin’s DeFi ecosystem will cause its MEV market to grow.

On a live stream about MEV, searcher Nathan Worsley commented on the current and future state of Bitcoin’s MEV, saying, “Bitcoin often philosophically takes a very conservative approach to a lot of [DeFi] issues, so they’ve pushed off a little bit of the DeFi development down the road.” But as Bitcoin’s DeFi ecosystem grows, Worsley said its “[MEV] problems will become more pertinent.”

MEV Exists On Bitcoin

The Bitcoin network today is not a total MEV wasteland.

“There’s more MEV on Bitcoin than Bitcoiners like to acknowledge,” Miller said on the live stream with Worsley. “And there’s some MEV in Bitcoin that just isn’t really being exercised by miners right now,” he added.

Lisa Neigut, a Lightning Network engineer at Blockstream, spearheaded recent conversations around Bitcoin MEV with an article about Lightning Network MEV. In it, she theorizes MEV opportunities from Lightning Network use and (more importantly) considers how MEV searchers in Bitcoin may impact on-chain transactions for Lightning Network channels. Talking about MEV and the Lightning Network, Miller also added, “There’s a lot of griefing vectors where you can make money if you assume you are a counterparty in a channel and a miner.”

More Bitcoin MEV Is Coming

For now, most MEV searching and earning is not happening on Bitcoin. But a robust decentralized finance ecosystem running on Bitcoin will change that. MEV is a complex and not universally good or necessarily well-liked aspect of on-chain activity. But bitcoin investors should pay attention to this area of their own ecosystem and recognize its growth potential. Learning from the challenges and mistakes of MEV in other cryptocurrency ecosystems (e.g., Ethereum) can prevent much headache and heartache in the Bitcoin economy.

This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Filed Under: Bitcoin Magazine, Bitcoin Mining Profitability, bitcoin-mining, business, English, Feature, Mev

Discussing How Bitcoin Can Unlock Thermal Energy From The Ocean

24/06/2022 by Idelto Editor

A conversation about Level39’s recent article about using thermal energy from the ocean to generate electricity and mine bitcoin with the excess.

This is a recording of a recent Twitter Spaces conversation about Level39’s “How Bitcoin Can Unlock The Energy Of The Ocean For 1 Billion People.”

Listen To This Twitter Spaces:

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Transcript

[00:06] CK: … Industrial Revolution and specifically in the context of unlocking trapped energy resources that are in the ocean and potentially a lot of other resources. I don’t know how much we’re going to get into that, but I’m really excited for this talk. We got a lot of great people in the audience already. If you feel like you need to be on stage, shoot me a DM, request to be up. We’re going to try to keep it as a tight panel at the beginning. If there’s time in the end to open it up for questions, happy to do that as well.But really the impetus for this space is an article that Level39 wrote based off of a conversation that Troy Cross had with Nate, who’s down here in the work that Nate is doing. I know that’s a little bit of a tongue twister so I guess I’m just going to pass it over to Level39.

[00:58] Level39: As CK mentioned, this was a really amazing conversation that Troy had with Nathaniel. And when I heard it, I was really just blown away. I had to write an article about it. That’s really where it came from. So I really have to applaud Troy for findingNathaniel. I feel like Nathaniel has been flying under the radar in Hawaii for a long time on this project. And to me, that was just really inspiring and just an amazing story. I encourage everyone to read the article if they get a chance and listen to it on “Bitcoin Audible.” CK, you can throw it up in the show notes. There we go. Thank you so much.Yeah, that’s it.One of the things that really struck me… Brandon has just joined the stage as well,Brandon Quittem … was that when I heard this story, it reminded me so much of his essay and Brandon Quittem’s essay on the pioneer species, Bitcoin Is a pioneer species. In that essay, he really talks about how there is a symbiosis between these pioneer species and the energy that they unlock, and the systems that form from that unlocking of those raw elements in the environment. And it immediately reminds me of this. This is one of those situations where we have a technology that’s nearly 150 years old, that really has just been discarded to time just due to the economics. What is being done with Bitcoin mining and incorporating that symbiosis into the project really got me just inspired to write about it and that’s where it stems from.

[02:43] Nathaniel Harmon: Yeah, let’s join Michael. Michael likes to join in as well.

[02:48] CK: Hey, Michael, I sent you an invite. Again we have some awesome experts in the mining field in the audience. So if you feel inspired to add to the conversation, shoot a request as well. But Mike, you surely have an invite. If you’re not on a mobile phone, you can’t talk. So that may explain why you’re not joining. But I guess, Level, I don’t know where you want to kick this off. Happy to pass it over to Nate, but the ball’s in your court here.

[03:17] Level39: Thanks so much, CK. I think what I’d like to do is actually… becauseI’ve done everything I can in terms of communicating the story to the audience. I’d like to really get some thoughts perhaps from Tomer, Brandon, and Troy first as to what they thought about the history of this, and it coming together, and what they think for the future. So let me just start it off with Tomer, and then we can go to Troy and then Brandon.

[03:43] Tomer Strolight: Wow, you’re really putting me on the spot, but that’s alright. I tried to study a number of these different types of alternative energies. I know some people who have geothermal energy located in their homes. That’s how they heat their homes. I remember when they had it put in, the explanations are often with the whole thing. There’s obviously a similarity between this and that where you’re finding different temperatures and different locations and connecting them. And then you get this convection cycle going, and that extracts energy. What’s so fascinating about this? Of course, geothermal… If you have a house located in the right place, you can put it in your house and it’s fine, but this needs to be in the ocean. So it’s this trapped energy.And from reading your article, that’s been the limitation, the energy is stranded. There’s so much of it because most of the Earth is covered in water and it is covered in oceans.So this obviously exists… the potential for existing in a lot of places. But getting the technology advanced and developed is not something that anyone could generate are turn on investment against for the initial build-out because it requires so much scale.And now when we have something like Bitcoin mining that can use energy on the spot, the energy doesn’t have to process anything else. We can take pure electricity and bring the miners to the electricity rather than bring the electricity to the miners. So now, we can make use of the electricity and can prove out whether the concept works or not. So it is very exciting and it is just like you described.As Brandon’s article points out in theory, this is the first significant practical application of Bitcoin allowing us to pioneer a new type of actual build-out of a new form of… Well, not a new form I suppose but of a practical form of energy that’s very abundant. And if it does work out, it’ll pay for itself in Bitcoin. And then we can scale it up and use it to bring that energy, build it at twice the scale and build the transmission wires, so that it can provide power to a billion people as you said in your article.So it’s a really fascinating practice and, as you point out, impractical if we didn’t have something like Bitcoin mining because there’s no other technology in the world where you can just bring the energy to it or bring the factory to the energy, especially at sea, and then expect to be able to produce something and have it be valuable at the spot without any further shipping or transmission charges. So I mean that’s really the incredible thing about it.

[06:29] Level39: Yeah. I think what struck me also was that in Brandon’s article you talked about that symbiosis that you just described. But what really struck me about this particular technology is how the technology actually cools the miners in a really symbiotic way that other technologies might not be able to do quite as much. So it was really this sort of unique combination I thought where you get this 5° Celsius, cold water.That almost makes the miners want to go to that place, where that water is. And so I thought that was really interesting. Brandon, do you want to speak to that real quick as to your thoughts on the symbiosis that you saw?

[07:06] Brandon Quittem: Yeah, absolutely. I think the best way for me to frame this is actually just to explain what a pioneer species is, just like a quick ecology lesson, thenI’ll tie it back to OTEC and other examples here. The famous example is an island off the coast of Iceland, a volcanic island that erupted, and it wiped out all life on this island.And then the question becomes is this just going to be a dead rock island forever or will new life eventually colonize the island? Enter the pioneer species which is a unique category of species that its role in the ecology is to bootstrap life on a barren rock and start the process of converting that into a more complex ecosystem. Famous examples would be a lichen, which is a symbiosis between a fungus and a plant. They work together to convert the rock into soil, which then attracts more complex, more fragile plants, which then convert the soil even more, that eventually becomes sort of a peak ecosystem with lots of complexity. And at that point, the pioneer species who did their job early on would actually be out-competed by the more complex species. So that fungus-lichen-algae combo would leave and go somewhere else. Obviously, the analogy here is Bitcoin miners or that pioneer species. They go seek out places that have little to no energy, and then they colonize that area by making the energy investment a better ROI to attract capital or reduce risk or reduce the time of ROI. There are many different ways it can look but it essentially leads to more energy at a lower cost in that location. And what that does is, it allows the people that live near that new energy source to have a better quality of life, more jobs. It might attract industry because there’s cheap energy. Industry attracts jobs, jobs attract people, housing, and services. And all of a sudden you have one little catalyst, a new energy source, and that leads to all these positive externalities for humans. So that’s sort of the thesis of the pioneer species. I think OTEC’s amazing for tons of reasons. One, specific to Hawaii. Hawaii has a unique energy grid that is sort of siloed. So if you look at Oahu, which Level39 listed very well in the article, most of the people at Oahu are there. However, you can’t really use wind, solar, or nuclear in order to achieve the energy goals there. So, OTEC is uniquely suitable there.Another thing that stood out is that Hawaii imports about 85% of its food and 95% of its energy resources. So that is a huge limiting factor for that location where they’re going to be dependent on imports, which is really expensive. And thus, food in Hawaii is really expensive. So its energy is the most expensive for both out of all the states in the US.Assuming you can decrease costs of energy and widely distribute that in the state ofHawaii, food costs will go down, energy costs obviously will go down which leads to everything downstream of energy being decreased heating cost, which just increases their quality of life for them. So, if we look at OTEC in the future, where else might we find this oasis of human flourishing? And it looks like High Delta T, which is the variable used in the article, which is found at the Equator. So the surface temperature is divided by the deep water temperature. You want a very wide temperature range, which means essentially the equator is the most suitable and there are over a billion people that live in this range.So, that’s a lot of people that could improve their relationship to energy. A lot of developing countries are also there, and all the positive externalities that will come from that. And then one other interesting thing is sea steading. So you could have a giant floating boat island nation or something like that, and you could live anywhere in the world, near the equator, preferably, with High Delta T, cheap energy. You can experiment with politics, etc. with your own native energy source. So that’s a whole lot. That’s my initial thoughts.

[11:14] CK: Brandon, you kind of dug into a lot of things. That was a great explanation.We have some folks in the audience that are asking for a little bit more of a primer onOTEC in general. So I guess before we go over to Troy, Nate, do you kind of just want to give a 101 on OTEC and specifically, what kind of energy source we are going to be discussing throughout this conversation?

[11:39] Nathaniel: Hey, sorry. I just got a call and missed the first part of that. But I think I could put the question together is, let’s described OTEC. Yeah?

[11:50] CK: Yes, sir.

[11:51] Nathaniel: So OTEC is just a Rankine cycle which is a pretty basic form of a heat engine. You have a condenser, you have an evaporator, you have a turbine, and you have a pump. So there are four major components, and then you have a working fluid.So the idea is that you can, with the working fluid, evaporate and then condense it. And during the evaporation, you run it through a turbine, and that turbine will generate energy. Now, the way that OTEC works and with the Rankine cycle is, at the surface of the ocean and the tropics, you have warm water. The sun heats the water and the ocean retains that heat overnight. If it’s cloudy the next day, the heat’s still there. So water is essentially a solar plus system, right? It’s solar and battery altogether. And then, of course, the thermohaline circulation brings cold water back to the tropics but at a depth. So somewhere between 700 and 1,000 meters, you can find really cold water. Five, four degrees C. And what you can do is you can use that difference in temperature to generate energy. The working fluid we use is ammonia. There are others that you can use but ammonia just happens to have the right economics. Yeah, that’s essentially how it works. I mean it’s really easy energy and that’s really one of the interesting things about it, is it doesn’t have the same tech risk that say the thorium reactors have, where you still have to solve a bunch of problems. OTEC has been around for so long that you just… It’s just a basic heat engine.

[14:13] Tomer: It’s important to say that there’s no emission.

[14:15] Nathaniel: Yeah, it’s a closed cycle. So even the ammonia that’s contained in there isn’t released. And because the working fluid isn’t in a carbon fossil fuel system, you’re burning the hydrocarbons and it releases CO2, water, and energy. And that CO2 has to go somewhere. The working fluid here, the heat source, and heat sink is just water. And that water is essentially benign.

[14:54] CK: Level39, anything you want to add?

[14:57] Level39: No. Actually, I wanted to get Troy real quick to give us thoughts on everything that’s sort of stemmed from this conversation since.

[15:04] Troy Cross: Sure. Well, first of all, Level39 wrote a beautiful article. It’s in the nest. You should definitely start there because everything that we talked about pretty much is written up beautifully. And I also want to say thanks to CK Bitcoin Magazine for hosting this space. I was lucky enough to find Nathaniel and not even really because of this idea, but because he knew Camilo Mora, who wrote that infamous paper aboutBitcoin mining alone being on a trajectory to put us over two degrees of warming apart from all other human activity. If you want to listen to the conversation, I think it’s linked in in Level39’s piece. Nathaniel saw the origins of that paper, which was actually a bunch of undergrads writing it. That’s what Nathaniel reached out to me about. And then he just drops these unbelievable bombs about OTEC which I had no idea about but he just kept blowing my mind again and again in the conversation on so many levels. Yes, I saw Brandon Quittem’s idea of a pioneer species here, beautifully illustrated but there was so much more. This is Nate’s words. “The ocean is one giant solar panel that just this temperature differential between the surface of the ocean and the depths of the ocean.That difference in temperature, that Delta T is energy.” And all OTEC does is harvest that energy or turn it into a different form of energy, I should say. Turns it into electrical energy. But the idea that the entire ocean is a solar panel basically with these two different layers and can create electricity, totally blew my mind. And the idea that there’s a source of energy or a kind of energy production that I’d never even heard of in my life is something like geothermal but available in the tropics, in the ocean around the world, could potentially serve a billion people with basically emission-free, pretty cheap power.That blew my mind. And then the idea that the only reason we haven’t really studied thisTech is that it’s expensive to build that scale. And in the medium scale, it still doesn’t really pay out and it makes no sense at all at the small scale, which is where we actually have it. And then Nate’s genius ideas are about how to achieve medium-scale testing of this technology by cutting costs that are normally associated with OTEC. It’s normally located off the coast. It needs to be moored and it needs hurricane protection and it doesn’t necessarily hit the deepest water. But Nate’s idea is like you cut the tie to shore, you give it the ability to navigate, you just put it on a barge and you give it the ability to navigate around storms. So you can go out to the deepest water or the coldest water, and you can cut down costs in infrastructure and then mine with it. And then as Nate points out and as Tomer said, you can cool the miners with this supercooled water. All of this monetizes the experiment in a way that makes it affordable, so we can see whether it works and what challenges it will pose at a very large scale.So Bitcoin mining could be that monetization that bridges us across an R&D Gap, basically. Given how small it is, honestly, we shouldn’t have needed Bitcoin to do it.Some governments or large companies should already have stepped up and done it.But it possibly allows us to bridge to a kind of future where we test it at the medium scale and then can figure out how to make it more efficient or whether it works or what the environmental effects are at the large scale, and potentially bring cheap and clean power to a billion people in the world, not to mention, bring some competition to Bitcoin miners. This came up in our conversation. It really drives home the location agnostic quality of Bitcoin mining, when you realize like, hey, if you could mine at scale withOTEC for let’s say 4 cents a kilowatt-hour, then there’s no reason that anybody should be mining with anything more than four cents per kilowatt-hour anywhere else in the world. You just keep scaling up OTEC. Of course, there’s a limit to how much you can scale it but there’s a lot of ocean. Nathaniel and I went through this on the show. It just drives home a point of how strange Bitcoin mining is as a commodity, as an economic activity, that it does not care where it is, given that their satellite access and energy access. It will monetize energy.So really it just shows you that imagination is all that stands in our way of trying to unlock sources of energy that exist. Energy is abundant. And when you realize that the ocean is a solar panel, you really see its abundance. Energy is abundant and this is another Brandon Quittem theme. We have to figure out how to harness it efficiently and put it to use for human purposes.Bitcoin mining is a major tool in that pioneer species kind of way, helping us figure out make, technological advances, which, once they’re made, we can use them ubiquitously across the human economy to improve human life.Yeah, I was really honored to have that conversation with Nate. I’m nothing but just a guy who answered one of Nate’s messages and was amazed that he wasn’t already on the scene before now. He’s this like a larger-than-life personality and a totally out of the box creative mind. And what I like too is a kind of true environmentalist in the best sense of the word. He’s thinking about the entire system of life and humanity. Yeah, I think it’s a wonderful thing. I hope it not only gets lots of attention but gets some funding. And I want to see whether this technology actually can work at scale. Thanks for having me on. Level39, thank you for writing such a beautiful piece.

[21:50] Level 39: Thank you so much, Troy. The honor was mine. It was really great to tell the story. I really wrote most of it actually by listening to that conversation and then doing some research.One of the things I wanted to bring up that really struck me … When Nate then mentioned that it’s actually quite old technology. So I went researching that and I dug into some old magazines and pulled out some really interesting ideas and things like that. One of the things that struck me when I was doing that research was that in the science magazines from a hundred years ago… If you really want a trip, go look at some old scientific American magazines and a lot of these magazines that were published back in the day from these companies or Publishers that are no longer in business. They were filled with these ingenious Tomorrowland-like ideas of what the future would be like. Some people were imagining these amazing OTEC plans. And then when nuclear fission was discovered, they were imagining that the whole world would have this clean energy and it would be really amazing, really easy and all these things. But so many of those ideas didn’t come true. It really makes me think about how many ideas are there out there like this, that can take some of these really simple ideas and actually monetize them and bring them to market. That’s something I think we’ll see over the next couple of decades that I think will amaze us potentially. One of the things that really stuck out to me also was that in order to get OTEC to work a hundred years ago, people were trying to think of ways to monetize the stranded energy. So really this idea of monetizing stranded energy is not a new thing that people have been trying to figure out. It’s really quite an old conundrum. So one of the things that they had done by that time, was trying ideas like filtering gold from seawater, stranding the OTEC on a barge, on a [inaudible] and trying to make ice with it because you could do all the benefits that Nate talked about. And we talked about the article about stranding OTEC in the middle of the ocean. The idea in the 1930s was, “Well, we’ll make ice with it and then we’ll sell it to Rio De Janeiro.” More recently, Microsoft has been experimenting with, I think, running data servers, if I’m not mistaken, in order to monetize OTEC at sea. All these ideas are kind of really crazy and they don’t really work a lot of these ideas. But Bitcoin is really the first one that truly actually makes sense. It’s amazing to me how much pushback Nate experienced when he was trying to sort of tell this idea to people. And maybe Nathaniel if you want to talk to us about what that experience was. Did you feel like you were crazy? And just nobody would believe you? What was it like getting that kind of pushback?

[24:32] Nathaniel: Hey. I just want to say, Troy, thank you so much, man. You’re amazing. I love your level. Your article was incredible. I mean, you did a better job of writing it than I could have. You can ask Michael. My writing tends to be more long-winded and doesn’t really get the point and I’m rambling. But you just did a really wonderful job. And thank you for Bitcoin Magazine, CK, hosting this. All the other speakers, Tomer, Brandon, you guys are awesome. I’ve been a big fan of you guys for along time.I got a lot of pushback from friends, family, and my colleagues. It really was discouraging. One of the reasons why I ended up bringing it back, back in Covid, was to feel that, hey, if we had just started working on this when I first proposed it, it would have already paid for itself four times over. I was looking at a 20-megawatt plant and using ten-year-old data. And it turns out it would have paid for itself four times over and we would already have full-scale OTEC.I went to Camilo. I went to my wife’s Committee Member. I still don’t think she’s made that connection yet, that my wife, Kristen Harmon… She just got her PhD. I don’t think she made the connection between the two Harmons. I went to Michael Roberts. I talked about this with one of my committee members who called me illiterate and told me to drop out. It was discouraging, but the inevitability of the whole thing kind of kept going.I think I mentioned this with Guy and as well with Troy that I was reading a lot of… I got into Bitcoin, so of course, you’re going to read a lot of Economics textbooks. So I started reading Thomas Piketty’s capital in the 21st century. That’s a really good book that I recommend everybody checks out. It’s a 300-year history of the movement of capital and society. And that combined with Jeremy Rifkin’s book on the Third IndustrialRevolution. Those two books just kind of clicked where Paquette says that you can have a redistribution event or a major redistribution event in two different ways. You can have a big war where all the capital is destroyed. So your world war I, GreatDepression, World War 2, all of the aristocracy. The way it was the last gasp and their entire wealth was wiped out in the course of, what, thirty years. And then that rebuilding process, redistributed that.The other way is through an industrial revolution. So it was Cady that led me to the theories of industrial revolutions. And I came across Rifkin and the idea that IndustrialRevolution is the confluence of three separate technology. One being an energy source, two being a transportation mechanism, and three being a communication mechanism.So you have to have the energy, you have to transport that energy, and the faster you transport that energy, the faster the communication method needs to be.So the first Industrial Revolution, you had coal, you had steam power, and you have the telegraph. Originally, locomotives was invented to move the coal out of the coal mine. And then you had to communicate. Now that you can move it faster, move that stored energy faster, you had to be able to communicate faster. You had to get ahead of… So the telegraph came. And then the Second Industrial Revolution you had the discovery of petroleum. And then you had the internal combustion engine, cars, truck, and finally, of course, we had television and radio. And so now, he was trying to predict that we’re in the middle of this IndustrialRevolution. We are but this was 2011 that he published the book. You can forgive him for not recognizing Bitcoin in 2011. I think everybody at the chat wishes to recognize the power of Bitcoin in 2011. Maybe a handful of people have. I remember learning about it but dismissing it. Oh, Bitcoin’s a dollar. It’s over. It’s too late. Wait for the next one. But he describes that green renewable energy is the energy source for this new IndustrialRevolution and that the internet is the communication mechanism. Those two are pretty self-evident but he described the transportation technology is drone. Zero marginal cost, autonomous transport. That was 2011. Elon Musk keeps telling us that full self-driving is a year away for the last ten years. I think just a couple of months ago, he came out and said, oh, they’re actually a lot further than he thought they would. Full self-driving isn’t really going to happen. It’s too dynamic of a system. The edge cases kill people. Highway, yeah, sure but you’re still always going to have to have somebody there in case something goes wrong. So you’re not really getting to the marginal cost and, of course, somebody’s got to own that transport. So there’s going to be the profit mechanism there. And so drone? I don’t know. His whole drone is the transport argument just never really clicked. It seemed kind of [inaudible]. And that’s when I came across Bitcoin and the idea that Bitcoin mining profitability is solely dependent on the marginal cost of the energy source rather than the capital expense. And renewable energy, by definition, cost nothing for the sun to shine or the wind to blow or the geo to therm. That’s by definition a zero marginal cost. And then once you start talking about curtailment, you start talking about negative marginal cost where it costs money to shut off the windmills on the North shore. It costs you money to do that. Someone has to be there and they’re not generating energy. So it just made sense that monetizing that curtailed energy at first was one of the key innovations of the proof of work.Well, yeah, now like we were talking about earlier, that stranded energy, any energy source anywhere, you can start designing cities around the energy rather than transportation hubs like our society was sort of built around. You find the energy, you tap the energy. When you’re building a power plant, you build for 20 years in the future or 50 years in the future, not what you need today. And what do you do in the meantime when the cost of that energy is zero? You have to find some way to monetize it, and if the load is not there, you need that load. You need someone to come in and use that load, and that was really the [cuts out].

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[35:23] Level39: Michael, I see [inaudible]

[35:25] Michael: No, I was just agreeing that I was one of the people that would have liked to be in 2011 as well. [inaudible]

[35:34] Nathaniel: Yeah, Michael is my partner on this. He’s my co-founder. I’m the crazy engineer guy, and [inaudible]. The general business plan structure for it is all well and good but I just don’t have the experience coming from the science world, doing microfluidics. I didn’t have the expertise. And Michael is the perfect co-founder. He’s a local boy. So, Michael, why don’t you introduce yourself? I don’t think anybody…

[36:04] Michael: Hey everyone. Yeah, thank you. This has been an incredibly fascinating and awesome discussion thus far. Want to second the Mahalo, which is thank you inHawaiian, to level to Troy and everyone else for the incredible pieces of work that you folks put out, and obviously the CK and the Bitcoin team in… I know you all and I’ve been a long-time supporter and follower. So we really appreciate it.I think the most important kind of background and just tying in is that I think it’s super incredible to have kind of… Nate and I have gotten to know each other over the past year and a half and so forth. I look at everything I do as just betting on extremely bright engineers and scientists who push the world forward. I think all of you saw that. I saw that really from day one but he was so crazy. It took me a little while to get on board. So my background is just kind of working in the traditional venture back, silicon valley startups and being involved in the Bitcoin space. I’ve been looking for a couple of years of moving into Bitcoin. And finally, I found really, I think, the perfect fit of a big enough bet, something that we should all get in and be behind and the perfect kind of co-founder to build this company with.I won’t dive too much into my background beyond that. But I think that is just again seconding what everyone said thus far. Grateful to Nate, grateful for all the early support that we’ve had and really, really excited to see where this takes us. Nate, feel free to prompt me if you want me to say anything else. But that was really the most important thing that I wanted to get out

[38:08] Nathaniel: Michael and I met at [inaudible] to Bitdevs. So if you guys are ever in the neighborhood, we hold Bitdevs once a month. Usually, the last Monday of the month. While most Bitdevs happen inside an auditorium or support room, we hold our outside right next to the beach. So best Bitdevs.

[38:39] Michael: And I should bring it up. So kind of the Genesis of Nate and I linking is way back in the day and I see [inaudible] on the line from Alison Krauss. We had a plug meetup that we do on Zoom every Friday. And then when I came back from SanFrancisco Bay Area back home from Hawaii, I started to do a Friday night barbecue, what we call in, a couple of the Maxi clubs would call in, and then Robbie PC, Nate, and myself got together. I didn’t think there was anyone as hardcore as myself on the islands, and low and behold, I find the only other person in Hawaii more obsessed with Bitcoin than I am, Nate. That was really the Genesis of meeting and kind of beginning to work on the idea. So shout out to all. Shout out to the other Maxi clubs on the line.

[39:39] Level39: Tomer.

[39:40] Tomer: Oh yeah, I forgot I raised my hand. I was so inspired by the number of friends when I was listening to Nathaniel go on about his journey and his experience. Just a few things that were really coming to mind for me is, first of all, when you believe in something yourself to have the conviction to pursue it, despite all the naysayers. And of course, this is something that every single Bitcoiner in the world knows because every single Bitcoiner the world experiences this and of course Satoshi them self, whatever they were. I had to go through this and put it together. And at the same time, you can have this knowledge of something when it’s a simple enough thing. We live in this high-tech, high complex society and so everything looks like it has to be so complicated. And what we’re describing here in OTEC is really very simple technology and the innovation that’s being brought to it here.I used to work in business strategy. The key thing in innovation wasn’t always finding a more complicated way to do something, it was actually removing the complexity from things, making something simpler and therefore more cost-effective or able to target another audience and I think that’s really the innovation, obviously, that’s being layered on here, which is take things away, take away the transmission wires, take away the need to build it at a large scale. And now you can experiment with it.I won’t go on long about this point. But so much of where the heads of whether it’s politicians or Silicon Valley investors or tech investors is, is they’re looking for the most complicated things. And again, this is something that Bitcoiners understand when they look at the altcoins, and each one who was promised to be better than Bitcoin is by making itself so much more complicated, that nobody can understand, and that it doesn’t operate. Bitcoin’s beauty is it’s so simple. It’s just the hash function and elliptic curve and so peer to peer open source code. Satoshi put it all together in this unstoppable, indestructible way. So I think what all of this kind of stuff does is it allows people who are in Bitcoin to look for simple, scalable, reliable alternatives to the world that’s looking for complicated, maintenance-requiring, unworkable ideas like the self-driving car example that was cited, right? For how many years have Google and Tesla have been telling us that their self-driving car is a year away. And it’s one of these projects… It’s almost even longer than theorems have been telling us that proof of stake is a year away. So this is I think where Bitcoiners are looking to and where they’re going to solve problems that are in line with simplicity, and sustainability, both in terms of the technology working for a long time and the technology working in harmony with nature.I’ll stop there.

[42:45] Michael: Look, the only thing that I would have there is that this does not depend on future competitors and so forth. But while it is very simple and that’s one of the beauties of what we’re doing is that now getting exposed to the energy space, getting exposed to the Bitcoin mining space, all of these in their own rights are the most [inaudible] complicated kind of industries. Nate and I, as we go through and we prep for our [inaudible] we’re dealing with how do we model this shit out and [inaudible] but how do we model it Bitcoin price, the halvings, even just the price of the materials and building these plants, right? I’ve worked at a number of multinational companies down to startups that have raised hundreds of millions of dollars. This is probably the most complicated type of industry that you can be in, this intersection of Bitcoin and energy. And that’s honestly, what makes it, I think, so compelling for Nate and I as well.

[43:57] Level39: [crosstalk] [inaudible]

[43:58] Tomer: Sorry.

[43:58] Level39: No, go ahead.

[43:58] Tomer: I just want to say timing-wise, there is fitting and great strategy around being parsimonious, does sometimes mean waiting for something to come into the right price point, whether it’s the new flood of Intel mining chips, it might hit the market and drive down the price of hashes or finding a used barge or something like that. You definitely are in that state where you better build it as parsimonious and as you possibly can to demonstrate the proof. But that’s part of what makes it interesting and exciting [inaudible]. Being cheap in an expensive space is often a really cool strategy to be able to pull off and it’s hard to imitate.Toyota didn’t build the most expensive cars. They found a way to build the cheapest cars by reducing the number of options people could have on cars. And now they’re the largest carmaker in the world, maybe not by market cap because Tesla is doing that, but they managed to build super reliable cars by taking away all these options, which again, I don’t want to oversimplify the analogy. But when you look at the most innovative companies in history, their innovations were almost all … not the inventive companies, but innovative companies. Their inventions are almost always reducing the complexity that came before.

[45:22] Level39: I have a question that I want to ask the team, and then maybe CK, we can open it up unless anyone else has any more questions after that, just to the audience. But what I want to do… For those aren’t totally familiar. The plan that’s going to go forward as I understand it, is that there’s going to be a medium-scale plant that’s going to be built on the big island or reopened on the big island, is going to run Miners.And then the future plan is to strand energy in the middle of the… or to mine stranded energy in the middle of the ocean on the Equator in the middle of the Pacific.And I’m curious as to when that project goes on for, I think it’s, as I understand, two and a half years of mining on the equator in the middle of the ocean. How does one maintain the mining rigs on that barge? Is someone living out there the whole time? I’m just really curious as to how that’s going to work or is it just run on autopilot? What if there’s an issue? What happens to it? I was really curious as to if Nathaniel or Mike could answer how that would logistically work.

[46:25] Nathaniel: Sure. The plan is a sort of scaled approach. So we have a four-phase plan. Phase 1. There is a small-scale testing facility already built on the big island but sort of been mothballed for the last 3 years. It was originally designed… It was built byMakai Ocean Engineering, our engineering partner on this, and me and Michael’s neighbors. It was built to test the heat exchangers which are used in the F-35. And the piping… The cold water pipe was built to supply the entire area which is called NELHA, the Natural Energy Laboratory of Hawaii with seawater AC. So they’re using the water.The water is still there, cooling the entire area. There’s spirulina production. So we’re going to prove everything out at the testing scale, get hard numbers on this because like Michael said, a lot of the things that we’re trying to do are very hard to anticipate. And so the better the numbers, the better [inaudible]. I’d like to prove it out.It’s a hypothesis. Let’s test it.From there, we move into Phase 2. Through the testing, we can do a full integration, demonstrate full integration of Bitcoin mining and OTEC. Not just just co-located, but areal symbiotic relationship between the energy source and Bitcoin mining rather than just co-locating right next to it.So there’s going to be a little bit of engineering work there and then the result of that’s we’re going to produce in Phase 2, a 250-kilowatt containerize system where a single container contains 250 KW of energy generation and 250 KW of low Bitcoin mining.This will then be tested on at a longer scale. Once we build it, the idea is to keep it running for as long as possible. One of the major challenges with OTEC is since it’s been done at the testing scale for so long, nobody has really bothered running it for years because of the cost.That’s what we’re going to do. We’re going to run 250 KW, continuously after it’s built. And then from there, we’re going to scale that 250 KW solution into a full 10-megawatt solution. So the 250 KW and the Phase 1 testing will be done at NELHA. And then from that 250 KW containerized OTEC, Bitcoin… I think we’re calling it Go Tech. I think that’s right. We’re calling it Go Tech. I don’t know. We don’t have a good word. It’s too long.And then from there, we build out a 10 megawatt scaled-up version. And then we take that, yes, we’re going to stick those containers on a barge, tug tow it out to the middle of the Equator. The Equator offers this great sandbox area because, in the middle of the Pacific, you have to deal with hurricanes. In the middle of the ocean gyres, you have hurricanes, you have large ocean conditions. But at the equator, you’re dealing with maybe six meter ocean rather than much, much larger. Those are manageable conditions. Even though it sounds big, that’s a manageable condition for the ocean versus let’s say an offshore oil rig is dealing with.So it offers this great testing ground and of course, the Delta T, the difference in temperature between the surface and the deep will be much higher than it is in Hawaii.This particular OTEC happens to scale with the square of the Delta T. So you can essentially build a 5-megawatt plant for Hawaii. But then once you get it out to the equator where you have the highest Delta T available, you’re actually operating at a 10-megawatt scale. So there’s again better economics there. I’ve been to the sea a number of times on research cruises. I’ve lived at sea. So there will be an entire crew. We’ve been budgeting for victualling, we’ve been budgeting for crew, changing out the crew once a month. Having been to the sea, after a month, you get kind of over it. Anybody can do a month at sea. Once the leafy green vegetables go, morale decreases and you can only beat your staff so much until the morale improves.So yeah, there’s going to be people living aboard this. It’s going to be a barge like you would see just about anywhere. You have to have a crew. It’s not going to be autonomous. You’re going to have 2 Crews working 12-hour shifts, which is the norm for any sort of ocean work.And then from that 10 megawatts, after we run it for a number of years, whether it’s 2.5or a year and a half, it’s really just to prove to the investors that, yes, this can run at scale continuously because that’s never been shown because the economics of running the testing facilities for a long period of time are just really, really awful. And then from there, once we do that, we’re building a 100-megawatt plant, hooking them up to land instead of stranding them.

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[53:51] Level39: A quickly follow-up question to that is you had mentioned it’s quite noisy of a technology. Will the people who live aboard be able to get away from that noise at all, for the month that they’re there, or would they be exposed to it the whole time?

[54:04] Nathaniel: The noise that I refer to is mostly underwater.

[54:08] Level39: Okay, got it

[54:09] Nathaniel: So [inaudible] noise attenuation underwater.

[54:12] Level39: Got it. Great. CK, I don’t know… If anyone else has any questions onstage, we can open it up.

[54:19] CK: We got a few people who are requesting to come up. I kind of want to just talk a little bit about a more general topic, which is how Bitcoin kind of helps at least energy producers or new energy kind of get past this, I guess, innovation valley of death. Obviously, we’re describing how OTEC can do that, but I’m curious if it’s worthwhile to talk about it a little bit more generally. I know that Brandon brings up the concept of a pioneer species but Level39 needs to talk about this concept of innovation valley of death a little bit. So I just wanted to turn it in that direction.

[55:02] Level39: Yeah, actually the term came from Nathaniel’s… No sorry, it was like white paper that Nathaniel pointed me in the direction of. So it’s actually a term that came from the old tech industry as I understand it. I feel like the other speakers would be much better speaking at this than I would in terms of what is out there and what could potentially happen. I see Brandon’s unmuted. So maybe Brandon, you want to take it?

[55:24] Brandon: Yeah.. I think to frame this in general terms, I really like the idea of theBitcoin, the energy buyer of last resort vs energy buyer of first resort. Most people know the last resort, which is essentially we monetize excess energy that otherwise would go to waste, convert that into hashes, [inaudible] commodity to then sell. The Bitcoin miner of first resort is essentially okay, we have some energy production but there are no customers yet. And oftentimes this is because there’s a mismatch in where the customers live and where the energy is being produced. So there might be a couple of years to build out really expensive, high voltage transmission lines to move the energy to the customer or various other reasons. So the innovation valley of death would be an example of the energy buyer first resort in sort of an abstract way, right? There’s this period where we need to invest in an asset, an energy asset that we know is not going to be profitable under normal economic terms.Enter a Bitcoin as the symbiotic partner here to actually change the economics of that proof of concept in order to show a slightly better ROI, which can get us through to the large-scale. But to keep it general, separate from this innovation belly, the energy buyer of first resort would be… We can use that in many situations like stranded geothermal, stranded hydro, for example, where there are no customers nearby. But in order to build out that energy investment, you would sort of need some customers eventually to see an ROI. So instead, we can put the miners, we can locate the miners right next to the remote energy asset, and sort of bridge the gap to anticipated future demand. So first resort, last resort. That’s kind of the point I want to make.

[57:18] CK: Awesome. Unless anyone in the panel want to add to that, we can jump to some questions.

[57:24] Nathaniel: Yeah, I mean you got it right. At the small scale, get plenty of university or government or development agency funding. But as you get larger, that funding drops off. And then at the large-scale, you’ve got private sector funding that starts picking up the bigger you get because it’s an economy of scale. But right in the middle, in that middle range, nobody’s willing to fund it except for, of course, Bitcoin.The ideal… It’s the bridge of that valley of death.

[58:05] CK: All right. We got a few people on stage with questions or comments. Of course, I want to give everyone a reminder. We want to stay on topic and we want to respect everyone’s time who’s up here. So Heritage, let’s start with you.

[58:22] Heritage Falodyn: Yes. Thanks, CK. Thanks, Bitcoin Magazine for bringing me up. I’m Heritage Falodun, co-host in Bitcoin in Nigeria media, and co-founder [inaudible] to Bitcoin education and adoption platform in Nigeria and for Africa. So I’ve been listening to the conversation. What interests me most is [inaudible] especially Bitcoin mining and I’ve been able to tap in some point and make some jottings in regards to what Nathaniel has been seeing because I’m personally making research aroundBitcoin mining and having it’s an urgent being generated with renewable and green energy sources in Nigeria, judging from the fact that they are different or unexplored renewable and green energy sources in Nigeria to foster and power Bitcoin mining and also make a consistent grow.

Filed Under: Bitcoin Magazine, bitcoin-mining, Blockchain Solutions Hawaii, business, Energy, Energy Consumption, English, Oceanbit Energy, OTEC, Podcast

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