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DISCUSSING HOW BITCOIN CAN UNLOCK THERMAL ENERGY FROM THE OCEAN | by heidi mukhtar






 


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 finding Nathaniel. 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.



[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.

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