Preston Pysh (01:01): Hey everyone, welcome back to the show. I’m
here with Austin Mitchell. Austin, I’m excited to have this conversation because you’re doing
some pretty neat things. Welcome to the show. Austin Mitchell (01:11): Thank you, Preston. It’s a
real pleasure to be here. Preston Pysh (01:13): Boy, you’re working on some crazy stuff. First, tell everybody about your background because
your background is… You have to this feeling, how in the world am I sitting at this intersection
of all these things in my past to be at this exact moment in time to be building out what
you’re going to tell us about during this interview? It has to be a little, pinch me,
I can’t believe everything has led to this.
Austin Mitchell (01:39): Yeah, thank you. There was definitely a moment
in my career where I actually sort of realized that there was some intentionality behind
how I was stepping through different roles in different companies. I think that probably
happened somewhere after I finished my PhD at Carnegie Mellon back in 2013, where I
sort of faced an opportunity to say, “Hey, do I want to continue down one path or do I
really want to flip and go from academia over to the business side?” So my career in energy
really started at the University of Dayton when I was a mechanical engineering student.
And one of the things that was really neat is I had an opportunity to participate in some
applied research on energy efficiency.
And what we were doing is we were looking at people’s
energy consumption, both electricity and gas, and we were trying to figure out, “Hey, why
are people using more energy than others?” (02:24): And it was sort of in that moment that energy
became this thing that was in a textbook, just talking about the ability to do work, and now
it became something real. And just as a funniest aside and something that at each step in my
career that I’ve had the opportunity to see, was the fact that when we put together all
the information, you divide how much energy a house uses by the size of the house.
And one
of the first things that I noticed was there was this kind of a cluster of homes in the very far
right of the distribution. And what my professor told me, he is like, “Well, those are the people
that either have five hot tubs or they are growing some marijuana.” And so it was of in that moment
where you just really pick up on, okay, this is what energy really is, this is how it affects
people’s lives. And I had the opportunity to get into people’s homes, help them save money, help
them find areas to be more efficient. So really- Preston Pysh (03:13): Well, I’m curious, Austin, so the 80/20
principle, what is something that people can do that saves them a lot on electricity?
What’s the one thing that really stands out that’s an easy win that you can do to
cut your energy costs? Let’s hear it.
Austin Mitchell (03:31): There’s usually a handful
of things that most homes, especially homes that were built back in
the day, have. So my home for example, built in the fifties does not have come with
any insulation, came with single-pane windows, drafty things, stuff like that… Those things
take some money, but oftentimes there’s actually incentives or programs to help offset some of the
costs. It’s also surprising to me when it’s just little things like closing windows in the
daytime, like southern-facing windows. So there are a ton of ways to conserve energy to
use less, and most people aren’t really aware of that. So I think that experience there
helped me get in touch with how energy is really essential in people’s lives. And it was
more than just what I observed in the textbook. Preston Pysh (04:19): So talk to us about your doctorate at
Carnegie Mellon because you were studying, you did a postdoc on methane emissions, and I know
that for Bitcoiners, this is a really hot topic, explain why and then get into some of the
stuff that you were doing in that research.
Austin Mitchell (04:37): Yeah, so right after graduating from the
University of Dayton, I went into Carnegie Mellon and started a PhD program in engineering
and public policy. And so that really kind of fit who I am, which was, I’m an engineer, I like
the technical side, but I also like to understand what does this mean, bigger picture. How do we
take science and technology and apply it to the real world? And so that was really the focus of
the program. And as I was starting school there, Marcellus Shale, so this is the big shale
formation that underlies Pennsylvania, Ohio, and West Virginia primarily.
And that
was just starting to get going. So had the opportunity to really focus my time there,
just really understanding shale gas development, what it meant for the area. And in my
approach to my thesis was actually picking three different hot topics and just trying
to provide objectivity to the understanding. (05:26): And so I ended with this interesting thesis where
there was one paper that was very supportive of what the natural gas industry was doing at the
time. Another paper that was sort of painted a different picture, talking about ways that they
can do better.
And then a third that was saying, “Hey, it’s the regulators that are
screwing this up.” And so it was in that experience where I think I saw there’s
credibility into being this neutral person, somebody who’s being a scientist, not with
a bias but just saying, let’s let the data do the talking and let’s figure out how we can
structure policy or make regulations to keep everybody happy and protect the environment but
also enable economic development to occur. And it was from that experience that I was given
that an opportunity to join what was this sort of nationwide study of methane emissions, where
we were basically trying to understand at that time throughout the value chain for the natural
gas industry, where was the methane coming from? (06:21): How can we address some of the things, what
were going to be the quick wins? So leading this nationwide study with Environmental Defense
Fund, five natural gas companies, Carnegie Mellon, Colorado State. I basically spent a year on
the road with the team.
We were driving around a van that said Carnegie Mellon on the side,
but it really didn’t look like much. And what most people didn’t realize when we pulled
up to rural hotels in western Oklahoma, et cetera, was that in the back of that band
was a half a million dollars of measurement equipment. So we got to go to all these different
sites, really see parts of America that folks don’t typically see energy production in ways
that folks don’t see.
And that study was really interesting because one of the key findings
was not that there was sort of widespread, pervasive issues with methane emissions, it’s
that there’s a few sites that on a given day a valve gets stuck open or one particular
site that maybe was poorly maintained. (07:18): Those are really what we identified to be
the issues. My view coming out of that wasn’t necessarily that we have to change things in
some giant way. It was, back to the 80/20, we can solve 80% of the problem with just going
after 20% of the issues.
And one of the other interesting things that happened there, and this
actually led to me really wanting to pivot into the industry itself, was the fact that almost on
one of our last sites, we pull up to it and it was like 10% of the methane was just spewing into
the atmosphere. So much so that you could actually see it just pulling up. We didn’t even need the
equipment to measure it. And for me it was sort of simple talking to the site’s operator, “Hey, this
is something that we should want to fix, right?” (08:06): And the feedback was, “Well, no, it’s not.” And
the operator at the time actually took the time, we went and we dug into the actual ROI of fixing
things. And for that next dollar that the company had, it actually provided a better return to put
it into drilling a new well. And the lesson that I learned there was, okay, well there are problems
there, but there’s things about the business that I need to understand to really change the
business.
I’ve always wanted to be somebody who’s creating positive change, working to
accomplish whole things, protect the environment, but also grow the economy. I’ve always tried to
strike that balance. And so when I heard that, I realized there’s something I’m missing here,
time to go really dive into business. And the very next thing I did is go work for an
upstream oil and gas company and laying pipelines and drilling wells was probably
one of the most fun jobs that I’ve had.
Preston Pysh (09:01): In that previous example, now a company
would an incentive to plug that up and do a capital investment with Bitcoin
miners in order to harvest that, correct? Austin Mitchell (09:12): Yeah, I mean I think what’s great is that
the incentive structure is changing and it’s partly top-down, but also it sort
bottoms up, companies wanting to change the way that they operate.
And absolutely,
I think that’s one of the things that really drew me into Bitcoin mining in this whole space
was seeing an industry that had a wholly different view of what energy means. And whereas ways
to trade energy was something that companies, people don’t really want to talk about. The
Bitcoin-mining industry wanted to talk about it. They wanted to find those sources of energy
so they could use them to mine Bitcoin. And for me that was just sort that mind-blowing event where I
was like, “Hey, this is different. This represents something. This is an innovation that I had
never come across before in my entire 15 years.” Preston Pysh (09:57): When you said ROI for them, to drill in another
spot was a far better ROI for them. If you compare that to Bitcoin mining, would the Bitcoin
mining now kind of present a better ROI for them? Austin Mitchell (10:11): I think so.
It’s been a while since I’ve
sort of had the spreadsheet open looking at Bitcoin mining in the economics.
I know it’s a challenge right now, but I think that anytime you provide more
options. It’s an option that didn’t exist. And so at the very least, when you think about
how can we keep more methane in the pipeline, prevent it from leaking into the atmosphere
and now you have another option to do that and it doesn’t have to just simply be send
it to a market where it’s unprofitable. Preston Pysh (10:40): Frame up for us the problem as you see it today and talk to us about your company and explain
to us what it is you’re trying to solve. Austin Mitchell (10:50): So what’s really interesting, Preston, is that
in my career I’ve had the opportunity to really experience the full value chain of energy.
And so after I worked in upstream oil and gas, I then worked for an energy retailer. So
that’s where it’s electric and gas and it’s trading and it’s basically selling
in deregulated competitive markets directly to consumer.
And then I moved over to
utility where now it’s sort of soup to nuts, you’re seeing how the infrastructure gets put in
place, that whole centralized mindset in terms of how energy is procured and distributed to
homes and businesses. And in that experience, I think the thing that really stuck out to me was
we’re really good at moving energy. Energy moves very efficiently through the system, whether
it’s natural gas or whether it’s electricity, it’s efficient. And you can have multiple
companies in that value chain each touching that energy from the point of production to the point
of distribution and consumption in your home. (11:47): But what I saw was that as I progressed in
my career, there were instances where we’re managing risks of things that had to do more
with the financial side, had to do with the fact that it was actually very inefficient to move
money from the consumer back up through that same value chain. And so I think that’s really
kind of where the light bulb went off on, hey, here’s this problem of financial inefficiency.
There’s actually a lot of costs associated with just the financial side that doesn’t add
any value to the energy itself.
And in fact, when you think about the inefficiency, it distorts
the price of energy, distorts the cost of it, and it leads to things like aggregated
costs and socializing of costs to sort a broad swath of people. And what we don’t see
is really the granularity that exists. Energy, the price of energy, is going
to vary across space and time. (12:37): One part of Ohio is going to be different than…
North Ohio is going to be different from southern Ohio. I live in Ohio, that’s why I say Ohio. But
there’s so much of a disconnect today between physically and financially, that that’s really
sort of where I was like, “Hey, there’s something here that I want to dig into.” And it was Bitcoin
mining specifically, when you think about the fact that, going back to Bitcoin miners moving to the
energy itself, you see them eliminating so many pieces of the puzzle in doing that. So much of any
inefficiency, they’re cutting it out by cutting out all of those middlemen and saying, Let’s go
directly to the source, let’s reduce that waste.” (13:16): And what sort of struck me was that even
in those situations, and these are the conversations that I had with the team in the
very early days of forming Synota, was that everything was changing, but the one thing
that was staying the same was how they were transacting with their counterparties.
So
how the Bitcoin miners were still paying the energy producers wasn’t changing, even though
everything else about the equation was changing. Preston Pysh (13:38): So let me say back to you what I think I
heard. So really the working capital for people that maybe own a small business or
whatever and maybe they have a net 60 or a net 90 settlement with their vendors, there’s
frictional cost in that working capital to settle. What you’re going after and what you’re trying
to solve is you got all these different energy producers that maybe 60% of my house is being
provided energy from this one producer. Then later in the day, maybe it’s 50% and it’s
constantly in flux and changing depending on which region that energy’s coming from. And
what you’re saying is that the settlement, you’re trying to accelerate that
settlement time. Am I reading that right? Austin Mitchell (14:20): Yeah, that’s exactly right. So when you go to
pay your energy bill today, what you’re going to see is that you’re paying for energy that you
consumed in a previous month.
So it’s often the case that we’re paying for a bill weeks if not
months later. And by the time that the money then moves to the other counterparties upstream, it can
be months to, in some cases we’ve heard 120 days. Preston Pysh (14:39): Wow. Austin Mitchell (14:40): So it’s that cash lag, which is really sort
of, I think, the starting point of the issues. It’s sort of one side of the problem that we’re
working to solve. And it’s significant because… So when you think about that, what’s happening
is the energy producers and the utilities, they’re providing that energy to you
as a consumer. They had to buy that. They had to produce that. So that was
cash out the door to bring that to you. Preston Pysh (15:03): Yeah. Austin Mitchell (15:04): Cash isn’t coming back in the door until you
pay them two months later. So there’s that lag that is not free. So initially, when we started
talking with folks about the problem you were trying to solve, they would say, “Well, hey, I
like the float.” And our response was always, “Well, the float isn’t free, you’re getting a
loan every month, but you’re paying for it.” And it turns out that it’s actually quite costly.
So the last couple of companies I worked for, there was sort of a seasonal dynamic to
the cash flow where during the winter time, consumers are consuming a lot, especially here
in northern states in their natural gas.
But the bills don’t come in until the spring, so
you have this cash-negative to cash-positive situation and when your cash-negative, you have
to turn to the banks and to your credit line, you have to turn to the commercial paper markets,
wherever, to get the cash to run your operations. (15:54): So that sort of setup is pervasive in the
industry where folks are constantly dealing with cash imbalances, constantly having to
deal with the question of credit worthiness of their counterparties. And what’s the
one way that you can solve that? Well, post collateral, post a bond. Again, things that
are inefficient tie-up capital. So you have this whole edifice of structures established in
the industry that’s affecting cash flow, creating this credit risk. And then on top of
that, it just is the pure financial inefficiency of the daisy chain of payments where you pay your
bill and then the utility then pays the supplier, the supplier then pays the producer. And so
it’s just these big chunks of money that are sort of piecemealing in large chunks their
way through the energy economy.
And it’s just really inefficient when you really
sort step back and look at it, it’s huge. Preston Pysh (16:43): How much of the expense, if you would go from
the top line of a hundred and maybe the bottom line for one of an energy company, what are
their margins, 8%, 6%, something like that? So how much of that expense
structure that’s eating away, we’ll just use the really easy numbers,
let’s say they have 5% margins. How much of that $95 of expense is attributed to what
you’re describing here with the settlement? Austin Mitchell (17:07): Yeah, I think that our
conservative estimate is 10%. Preston Pysh (17:11): Wow. Austin Mitchell (17:11): Of the cost of energy. So your bill, 10% of that
is likely to be just financial inefficiency. Preston Pysh (17:18): Wow. Austin Mitchell (17:19): Back office overhead, fees from intermediaries.
It’s really sort of a poster child for inefficiency. So the other thing too that,
when you go back to the fact that… Preston, I’m sure you always pay your bill, but there’s
a lot of people that don’t and there’s a lot of businesses that go out of business, especially
in tough economic times.
So one of the things, we just published an article in Bitcoin Magazine
and we talk about, is a perfect quote from MacKenzie where they say, “Hey, 5 to 7% of people
don’t pay their bills.” And so that cost doesn’t get eaten by utilities and energy companies. That
cost gets passed on to you and me. So not only are we paying for the inefficiency, but we’re
also paying for the people who don’t pay their bills. And it’s not the case that this is one
of the things that we can certainly talk about. It’s not the case that folks not paying their
bills is… There are solutions to that available, but they’re inaccessible today again because
of the financial inefficiency that’s out there.
Preston Pysh (18:19): So basically you’re saying they
don’t pay the bills for 90 days or a hundred days and so then that’s being
passed onto the customer. So how do you solve this? Because you’re solving this
with Bitcoin and Lightning and nodes and explain to us how you are solving this
problem, because this is fascinating. Austin Mitchell (18:36): And we’ve talked a lot about the problem
and I think it’s because it’s so big. So how do we solve it? I think the very
first thing that we would really focus on is just the instant settlement aspect
of it. So if you go back to somebody, you’re paying your bill two months later. So not
only are you consuming energy that entire time, so you’re waiting to… Here we are in October and
you’re paying your bill let’s say from August or September.
So by the time you pay that, now
you have two additional months of consumption, et cetera. And so that whole thing, what we want
to do is sort of realign the cash flows and how we’re using doing that is instant settlements over
the Lightning Network and in what the Lightning Network gives us the opportunity to do. So I
mean I think everybody understands the benefits of the Lightning Network, the features,
so low cost, instant payments, finality- Preston Pysh (19:27): Streaming money, I think is the best
way, if people don’t understand it.
Austin Mitchell (19:33): So what we have to do from there is we just have
to figure out, how do we use those properties? How do we use the features of the Lightning Network
in Bitcoin peer-to-peer payments and apply them to energy? And so what we’ve done is we’ve
created a programmatic link between energy meters, IOT devices, et cetera, anything that is part of
the energy system, hardware that’s associated with the energy system, creating that programmatic
link between that hardware and the Lightning Network itself. And so what our software
does is it’s really that intelligent bridge, that programmatic link, so that as energy is
moving, now we can be using that as a trigger to then send payments going in the opposite
direction. So what we like to say is it’s money moving at the speed of energy. And that’s
really sort the view that we want to create. Preston Pysh (20:20): So the energy’s flowing in and the sats
are flowing back to the source instantly. Austin Mitchell (20:26): And in that programmability, what it does is not
only is it sort of create that secure intelligent linkage, that programmatic connection, but
what it also does is it opens up the world of possibility in terms of how energy is priced and
structured, so much of the system that we exists today.
So part of what I would say in terms
of the background for where we got to today is the fact that everything was built at a time
in the fifties, sixties and seventies. A lot of the infrastructure and the energy space was built
then, and it was all centralized and it depended on somebody reading your meter once a month. So
the whole energy system has changed over the last 20 years to be digital. Now most people, their
utility knows how much energy they’re consuming the moment they’re consuming it. Because we
have smart meters on most homes in the US. (21:15): So that’s changed, there’s no more meter readers,
but the financial back office systems, those are still stuck in that era. And so what that does
is it makes it very difficult to now deal with the richness, the abundance of the data that’s
out there and still try to push that through those centralized systems.
Because if you think,
went from one data point per customer per month, to now thousands of data points per customer per
month, that becomes a big data problem. It becomes an issue with processing that. And so what we can
solve by decentralizing the whole system is now we can actually handle the data in its entirety, and
we can process in a decentralized way and really open the door up to now more flexibility in terms
of how we transact. So you press and could choose to pay your bill… You could choose to do streaming
payments, maybe you want to pay every 10 minutes for your energy and you like to open up your
phone and see money come out every 10 minutes, but maybe your neighbor says, “No, I’d
actually like to pay once a month still.” (22:17): Now we can of solve the differences. And
that’s sort of an easy example. I think the biggest opportunities are going to exist in
terms of how we actually reflect the true cost of energy.
Because most people today, they’re
just assigned a specific rate and that rate is, “I’m a residential customer in southern
Ohio, so I pay this price for this month.” Well, we all know, and in the Bitcoin community
knows better than I think most industries, that is not the true cost of energy. It’s not
one price over a broad service area that’s fixed for a month, it actually goes up and down.
So
now we actually have the processing capability through the decentralized, through how we
built the software, to say, “No, we can do real-time pricing at a very granular level, and
Preston can pay differently than his neighbor.” Preston Pysh (23:11): Austin, how do you think about the exchange
rate? So most people want to still denominate their expenses in fiat because they see that as
less volatile than Bitcoin. But there’s also, I know when you look at Jack Mallers and he’s
streaming US dollars from one account to another, but he’s using Bitcoin lightning as the rail
to do it instantaneously. And so there’s nothing… That exchange converting it from
dollars to Bitcoin back to dollars again, is that how you guys see happening for
the user? And talk to us a little bit about the user interface that
you see this happening under. Austin Mitchell (23:47): Yeah, that’s it. So number one, Jack Mallers
and what Strike has done has absolutely been an inspiration for us. I think that was one of
those light bulb moments through the progression of Synota and in how we got to where we are
today was Jack Mallers talking at Bitcoin 2021, Jack Mallers being on CNBC, telling
the world how we can really change, use the Lighting Network for payments, but in
a way that sort of meets people where they are, meets them where they’re comfortable.
And
so we’ve really embraced that concept of our vision is that people will interact with their
energy payments and will have the opportunity to interact it in just the same way they are today.
It’s the outgoing leaving their bank account, but it’s really leveraging the Lightning Network
as the payment rails and then having decentralized processing connected into that network to
really make it be more complex and dynamic. Preston Pysh (24:40): And they don’t even need to understand that. Austin Mitchell (24:42): They don’t even need to understand it.
And ultimately what we want to see is, just as Jack says, a better user experience.
Because it creates a whole different… The landscape will completely change in terms of
the products and services that people can be offered related to energy, because there’s
going to be no limits in how they transact.
Preston Pysh (25:04): And so the pitch to the end user, so here I am
at my house, the energy company contacts me, they say, “Hey, would you like to save 5%
every month on your energy bill? If so, load $300 into this account via whatever
app” and then it’s basically streaming that money through the Lightning
Network, which would be all on the back end that user wouldn’t have to
deal with, correct? Is that kind of the- Austin Mitchell (25:32): Exactly the idea. And what’s interesting is
there are actually a number of companies that have sprung up with that same approach of
pay-as-you-go, but it’s still tethered to the way things were. The only difference is just
that it’s really it… They’re called pay-as-you-go, but really it’s just a prepaid.
So
I think with Bitcoin and Lightning, you can actually have a true pay-as-you-go option
where it’s your money until you’re using it to pay. And so I think that’s really what the big
change is and cutting out all of that financial inefficiency. And one of the other really big
opportunities, Preston, is that back to that sort of daisy chain of payments that’s out there
today, what we can do now is think about split payments. So I know many of your listeners are
probably familiar with the value-for-value model that’s out there where you know can have multiple
people receiving instant payments the same time. (26:22): Well, energy has this property where it doesn’t
change value for the last bit of the value chain quite a bit, and there’s usually a number of
parties involved in the transaction. So now instead of the utility paying the supplier,
supplier paying the transmission company, et cetera, et cetera, now everybody can pay
to once.
And so that’s where you start to see enormous savings come to bear. And that’s what we
get really excited about because now everybody in the equation’s happier, and it’s everybody from
the energy broker who can say, “Hey, I had a part in this supply deal.” They’re the last people
that get paid in a lot of transactions, now they can get paid right at front with everybody
else. And so it just really changes the dynamic. Preston Pysh (27:08): Do you see any role at the main hubs, the
main energy hubs between the various energy companies using a similar model? Or is it
kind of handled in the business maybe on a tighter timeline like net 30 or something
between the various energy companies? Austin Mitchell (27:28): So I’ll tell you that part of our vision is that
really the entire energy economy is going to… I mean, that is our vision is the entire energy
economy is going to settle on the Lightning Network.
So every energy transaction, your bill,
B2B, when you think about one of… There’s a number of platforms out there where wholesale energy
trading occurs. Those platforms will be a perfect use case for, “Hey everybody, on everybody
who’s trading energy, let’s be linked into Lightning Network and let’s do the financial
settlement right away.” And it’s all of those platforms where to be a participant in them,
you have to post exorbitant amounts of credit or collateral to be a participant. So now we can
expand access to those types of trading platforms, if you don’t have those barriers in place.
Preston Pysh (28:17): If we had an executive for a major energy
company listening to the show right now, what would be your one to five-liner to them? Austin Mitchell (28:28): So I think that what we need to talk, when
we talk with executives and things like that, what we really are talking about is cash lag,
credit risk and the barriers, the inefficiency and just the inflexibility of the system. It’s
not easy to change the billing system today. Preston Pysh (28:45): Yeah. Austin Mitchell (28:45): So now you can. So those things resonate, top
to bottom with everybody we talk to. Usually the feedback that we get when we talk to the
energy executives is it is more of just like a skepticism around Bitcoin still at this stage,
but “Hey, you’re solving some of our biggest pain points.” And I know it because I’ve been on
that side of the equation.
I’ve had to manage the credit risk, I’ve had to track the cash
flow. So I understand what all this is about, and that’s why I know that the solution is
perfect. It’s just making it so that way adoption is easy. And I think that’s where, going
back to Strike, energy companies today do not want to receive Bitcoin, but a company like Strike
has opened the door to say they can receive USD in that transaction.
And everything can still be
the same, but just as Jack says, right before it gets to their bank account, it flips to USD and
everybody’s content with how the transaction went. Preston Pysh (29:40): I think so few people understand that
right now, that you can do these atomic swaps between fiat and Bitcoin, back to
fiat. Huge news with Cash App this week, fully integrating Lightning. So here you are
talking about immediate streaming money via Lightning and you have arguably one of the
biggest payment platforms on the planet with Cash App fully integrating the Lightning Network
into their app. And I don’t know about vendors, restaurants and whatever that are also using their
platform, but I would imagine it’s available there as well. What are your thoughts on that? And
I’m assuming you’re very bullish on this idea. Austin Mitchell (30:22): Yeah, absolutely. So I think the big thing for
us, a part of all how we view our company in the progression that we’re going to make in the
development is we’re leveraging third parties. We’re integrated with some of the leading
companies in the space and we expect them to continue to advance just as we will.
So as an
example, we’re not focused on building that off ramp, we’re leveraging a third party to help us
do that. And so we only expect that also Cash App, strike, et cetera, are going to continue
to progress as they have. And we’ll be able to continue to tap into what they’re
building to really provide good on-ramps, good off-ramps to really sort round off the full
user experience. So yeah, part of everything that we’re doing is anticipating the growth and
key areas that today are not as mature as they need to be to get of mass adoption, but we
think in a short period of time they will be. Preston Pysh (31:13): So I don’t know that if I’m just reiterating
something that you previously said, but you wrote an article just recently
the other day called Towards a Future of Energy Abundance.
One of the quotes
in there that I really liked, you said, “The future energy economy will be settled on
the Lightning Network. Every home business, substation, solar farm, whatever energy
is produced, distributed or consumed will be programmatically linked to a node on the
Lightning Network. Instant settlement on the Lightning Network reduces or eliminates financial
inefficiencies, cash lag and credit risk.” (31:46): I just found that to be a very profound quote.
I got one more here, “This industry sees value in stranded or wasted energy, when many are
trying to cover it up. Where the legacy industry mindset seeks to curtail demand to meet supply,
a miner sees an innovative and inclusive future driven by increased demand.” That quote there
at the end is… I think it’s a slap in the face to all these people running around saying we
need to consume less, right? You’re saying the exact opposite with what the promise of what
a lot of this delivers.
Tell us your thoughts. Austin Mitchell (32:27): Well, I’ll tell you, I’ll own the fact
that two years ago I was one of those people who thought we needed to consume
less. So through the past years I’ve- Preston Pysh (32:35): Walk us through that, walk
us through the transition. Austin Mitchell (32:38): Yeah, so for me it was actually attending
Bitcoin Miami 2021. So I attended that as a representative of the utility I worked for at the
time. I saw Bitcoin mining… I knew about Bitcoin, I was buying Bitcoin on Robinhood through my
weekly DCA, forgive me for using a non-custodial solution. But that was what I knew, I knew enough
about it to like it. And I was really intrigued by Bitcoin mining, the growth in the US, and since
I worked for an energy company, I said, “There’s certainly maybe some risk here, some opportunity.
I was in charge of risk for that utility, so I really wanted to go understand this.” And being
down there, a couple things happened.
Number one, I got a math lesson from Greg Foss and that sort
of pushed me really close to the rabbit hole and then I spent a dinner with the IDEX team, and
I can just tell you I just instantly saw the mindset shift.It just started, just kicked off.
That plane ride home, I can’t even describe how I felt jotting down everything that I had learned
in all of my preconceived notions of energy and things and how they could be changed. Because what
I saw was, not only was this, as the quote says, people who are seeking ways to trade energy, but I
thought about how much more efficient… So you talk about efficiency as reducing consumption, but
I thought there is an even greater efficiency that’s possible if we have just a flexible grid
where supply and demand can be constantly tugging and pulling at each other, with price going up and
down to reflect the true dynamics of the market. And I was like, that’s the efficiency we should
be seeking is that.
And the financial system that we have today in energy finance prevents
that, and it is an absolute barrier to that. (34:26): But if we can get to a point where energy
is freely traded at a granular level and the true cost and the economic value are
known, that transparency is going to do wonders for not only the efficiency of the
market but just wonders for how people use energy. And I think it’s just going to open up,
really unleash innovation, unleash investment, not only locally but globally because as we
know, you can send Bitcoin anywhere in the world instantly. So I think that’s really sort
the transformation. One of the other things that happened shortly after that was I started to talk
to people that I also knew in the energy space and people that I knew had open minds and
would be willing to say, “Okay, well how does this change things?” And it was incredible and a
lot of the folks are on the team today I either added as advisors or full-time members of
Synota, and they all saw it the same way.
(35:20): They saw this is transformative. You can really,
truly reimagine the energy system when you aren’t sort of tethered to a one sort of viewpoint on
how it should exist. And one of those people is my friend Dan Schnitzer because he is the CEO of
a company called SparkMeter. And basically, one of the things that they do is hardware and
software and mini-grids in emerging markets. Now they do a whole lot of other things and
it’s really neat, but that’s really kind of what got them started. And we talked about how
the very first few years of a mini-grid in let’s say rural Africa, it’s actually quite risky and
very unprofitable. People there are spending 30, 50 cents a kilowatt for electricity and there’s
not a lot of sort natural demand. I mean, you put a mini grit in where there was previously
no electricity, the people there don’t have all the appliances that we’re
accustomed to that consume energy.
(36:14): And so we talked about how can Bitcoin
mining really uplift and enable that and de-risk these projects? And so that
led to just incredible conversations, not only about the US but globally of how we
can change the narrative, change the dynamic. And so one of the cool things which we’re going
to talk a whole lot more about as a company, is just that of some partnerships that we formed
in Africa to do that, to basically say, “Hey, we’re going to help seed mini-grids there with
Bitcoin mining, as I sit here today in Columbus, we’re going to be paying for the energy that’s
being consumed in Africa.” And so we’re mining Bitcoin in two places in Africa today and paying
for it in Columbus, Ohio. And what it does is it’s created this win-win-win scenario where not only
are we able to get the Bitcoin at a good price, a good price for the energy, but now we’ve increased
revenue for zero costs to that mini-grid. (37:14): And so that mini-grid is now benefiting from more
revenue coming in, they can lower the cost to the community.
And because if you want to go back to
credit worthiness, with a credit worthy customer paying instantly, the mini-grid operator
themselves is really happy to have us as a customer as well, because they’re not worried, are
we going to pay the bill in 30 days? So everybody is better off in this equation. And it just is
another example of a productive use of energy. So there is a whole series of things that folks call
productive uses of energy. Well, mining belongs in that space, belongs in that… It fits in that
definition for me and it’s truly transformative in what it can mean. But it does go beyond that and
it goes to how do we think about just investing in energy infrastructure generally. And so what
we’ve done is we’ve run the numbers, we’ve built the models to say actually what it really now
enables us to do is build bigger mini-grids. (38:06): So now we don’t have to just think about where
the community’s going to be in five years.
We can think about where that community will be in
10 years and just continue to optimize or maybe maximize the opportunities that are there. So it’s
just one example. So we’ve talked a lot about the US but here’s where it’s not only Bitcoin mining…
Bitcoin mining is a piece of the equation, but it’s how we can transact across borders,
really open up markets and now we can really envision a whole new future for what it
means for energy equity and energy access. Preston Pysh (38:38): I can just see it on your face.
This is something you can’t unsee. Austin Mitchell (38:42): No, that’s exactly right. Once the light bulb went
off, I think I was a changed person. I remember coming home and after that same plane ride I
talked about where the thing I spent three hours with my wife just downloading everything, and just
the excitement that I have has carried with me since that moment.
And really the community then
has just further reinforced everything, because not only have I experienced people who see… I
think as Jeff Booth talked about on the podcast with you recently, it’s about abundance and hope
and just that mindset shift that you see in people in the space. But the other thing too is just
along with open-source, just people who are open. Preston Pysh (39:29): Yeah. Austin Mitchell (39:30): I’ve grown accustomed to all my years in the
energy space and even in academia where it was like, you didn’t want anybody to know what
you knew. You wanted to find the best location to drill your well, or you wanted to publish
your paper first. I feel very differently being in the Bitcoin space, and I think that’s very
freeing because then I can go into conversations, my team can go into conversations and just talk
about what we’re doing.
And for some people, it really resonates, and we’ve gotten a ton of great
feedback to help really enhance what we’re doing. Preston Pysh (40:02): So Austin, you guys are a brand
new company, you’re just starting out. How are you guys prioritizing what
you’re going to focus on at the start? Austin Mitchell (40:10): Yeah, Preston, thanks for the question. I
think where we’re going to be focused is in the Bitcoin mining space, we think that they
are the ideal energy consumers to really initiate this innovation. And the reason being is because
Bitcoin miners understand the technology. As we readily admit, there’s areas in terms of on-ramps
where we don’t have all of the solutions yet to do that seamlessly. So Bitcoin miners being able
to pay in Bitcoin really sort of streamlines, and we can build a frictionless payment flow
around that. And it’s really also what’s good for the goose is good for the gander, because
now we’re talking about bringing significant scale into the Lightning Network and really
helping us evolve and mature the technology. (40:54): So we’re definitely starting there and its
ideal because Bitcoin miners more than anybody understand the value of price-responsive
demand and price-sensitive supply, et cetera.
So here we can link those two things
up. We can provide that transactional flexibility, provide instant settlements. And what it
ultimately would do is I think it will change the narrative around Bitcoin mining
because now the energy suppliers are not going to view all Bitcoin miners as a credit
risk, because now they’re going to be able to be paid more frequently. So we think
it’s a really big opportunity to really demonstrate what’s possible in this space and at
the same time grow and scale our own technology. Preston Pysh (41:34): Austin, tell us a little bit about the team. Austin Mitchell (41:36): So the team is incredible. It’s comprised of
folks that I’ve met throughout my career and people who are open-minded in the energy
space but also bring just a wealth of knowledge. So we have folks who have been on
the front lines fighting for energy equity, we have folks who are on the front lines
fighting for deregulation. So collectively, we have over 125 years of experience in the energy
industry throughout the value chain.
My co-founder Lisa Scott, she is a JD and a CPA and really sort
brings that back office experience. She’s seen how things look when it’s not sort of operationally
on the front line of energy, it’s sort of dealing with things as they come in paper form and across
the financial platforms in the back office. So we have that experience and what we’ve been able to
do is really combine it with Lightning expertise. (42:29): And so Max Dignan, our head of technology, he’s
previously worked at Strike, he’s an incredible developer and he’s building a great team around
him today. And one of the important things about how Max and I connected, which I think is just a
true sort of Bitcoin community story was at the meetup. And being at the Columbus meetup talking
about, “Hey, here are these problems.” And then Max says, “Hey, we can solve those and we can
use the Lighting Network to solve these and we don’t need to do a smart contract to do it.” I
still look at the technology and I think, “Hey, looks like a smart contract, right?” But he is
like, “But it’s not.
And it’s way more efficient, it’s way more secure and it’s Bitcoin.” It
does things that you can’t do with other technologies and it does it faster better and
cheaper. So it’s just really kudos to the team because I’m just one part of what Synota is and
what we will be with the talent that we have. Preston Pysh (43:24): Austin, if people wanted to learn
more about your organization, if people wanted to get involved, are you
looking to add people to your team? Talk to us about where you guys are in that timeline
and where people can learn more about you.
Austin Mitchell (43:39): So as a company right now, we are right at
the very beginning of our seed stage. And what we’re doing is really kind of focusing
on commercializing our initial product, which is going to be tailored to the Bitcoin
mining space and can talk about that certainly. But what we’re going to be doing is from there,
moving out into other industries and into other of segments of the energy space. And one
of the things that we’re looking to do is bring people on board. So we have a great team
today. Our technology’s being headed up by Max Dignan. He’s an incredible talent. And we
can see as we move from Bitcoin mining into the other areas where we want to go, we’re
going to need to find additional folks. And so obviously as a Bitcoin-only company, we are
trying to attract Bitcoiners to the mission. (44:26): And so that’s how we’re approaching this. And so
we’ve got a couple of postings on our website, we invite anybody to go check those
out. Or just any general inquiries, we’re happy to tell you what we’re doing.
And
this is really just for us a really exciting time to be getting our start and putting
ourselves out there as, here’s a really important and potentially huge use case for
Bitcoin. It’s not the case that we’re trying to solve a problem that doesn’t exist, or here’s
a really big problem of financial inefficiency and financial inflexibility and we have an
opportunity to use the things, the tools, the technologies that are being built to solve
those. And what it does is it’s better for energy companies and it’s better for energy consumers. So
it’s win-win there. I mean I think we all know who loses out in that equation, but it’s not the
consumers and it’s not the energy companies. (45:20): And so we get really excited about that and we
hope others see that as well. We also think that one of the core things in how we’re building
is we’re also doing the tech out in the open as well.
So as a new company, we’re still figuring
out exactly what that means and each facet of it. But some of our core technology is open-source
today because we think that this is not… It’s not going to be Synota that brings the whole
energy economy to the Lightning Network. It’s going to take a lot of people doing that, and
it’s going to be done through integrations and it’s going to be done through partnerships
and finding new ways to connect people, because there is really an opportunity for a
network effect here. And that’s what we want to see happen, because if you have two parties
transacting together, now let’s think about, okay, well somebody who’s then upstream says,
“Hey, I want to also get paid right away.” (46:10): So there’s sort of a very natural network effect
that we want to create, but there’s definitely some big challenges to solve and that’s what
we’re excited to do.
We tell people with what we’re doing today that we fully intend to bring
the Lightning Network along the way. Not the full network of course, but the transaction volumes
that we’re talking about, the amount of liquidity that’s going to be required, the reliability. So
one difference is we’re not paying for podcasts, we’re paying for critical service. So if people’s
energies bills don’t get paid, well then their energy gets shut off and that can be a big
issue. So we need to push reliability to 99.99%, and it needs to be that high for
very large transactions as well. So it’s things like that which haven’t been
done before that we’re going to have to do. And we know we’re going to have to break things
but then build them back up.
And so that’s sort of the mission that we’re on and why we get really
excited about the tech and where we’re at today. Preston Pysh (47:09): And what I love is you’re doing it in
developed nation states and you’re doing it in underdeveloped nations. It’s fascinating to
see the breadth of what this offers the world. And for people that aren’t intimately familiar
with the Lightning Network, when you look at the growth rate of this thing, I mean it is
moving out at a clip that’s unparalleled when you look at the amount of coins, channels
that are being set up within that.
Austin, what a pleasure talking to you. Thank you so
much for making time and coming on the show. We’ll have some links in the show notes
for people if they want to check out some of that stuff. We’ll also have a link to your
Twitter handle so people can follow you there and keep track of what you’re up to. Any final
comments or things that you want to highlight? Austin Mitchell (47:51): No, Preston, this has been a real pleasure. Thanks
for giving us the opportunity to talk about it, just really love everything that’s happening in this space and excited to now be a
part of it. So thank you very much. Preston Pysh (47:59): Absolutely. Thanks for coming on. Austin Mitchell (48:01): Thank you..
