Austin Mitchell of Synota joins me to chat about how bitcoin and the lightning network could be integrated with energy markets and the energy life cycle.
- Financial inefficiencies in energy markets
- How Bitcoin and Lightning fix this
- Automation and integration possible
- Walking through the energy lifecycle
- Bitcoin miners paying for their energy with bitcoin
- Swan Bitcoin
- Unchained Capital (code LIVERA)
- CoinKite.com(code LIVERA)
Stephan Livera links:
Stephan – 00:00:08:
Hi. Welcome to Stephan livera podcast, a show about bitcoin and Austrian economics brought to you by Swan Bitcoin. Today, my episode is with Austin Mitchell. He’s over at Synota. Synota doing something really interesting. They are trying to integrate bitcoin and energy markets together, along with the Lightning Network. Now, as part of bitcoin ventures, which is an investment syndicate available for people who want to invest in bitcoin companies. Alongside myself, Corey Clipsden, Yan Pritzker and Louis Liu, and us, as the partners, we take zero fees to us. Basically, this is for accredited investors who want to invest alongside us into companies. And one of those companies that we recently invested into is Synota so just wanted to make that clear. But I think this is quite an exciting and interesting use for bitcoin. And it’s something that people have been talking about for a while, this idea that bitcoin miners could eventually be paying for their energy with bitcoin. Now, before we begin, a message from the sponsors of the show. Coinkite.com are making bitcoin hardware, security products and accessories that we can use to secure our coins. So with hardware, you can use a device that holds your private key and signs the transactions that allow you to participate in bitcoin. So most notably is the cold card. They’ve got the MK4, which is the latest edition. It’s got two secure elements, it has NFC support, and it’s a very reliable performer to secure your coins. And you can start this device without plugging it into a computer. You can plug it to the wall. So that’s a really cool feature. Another really cool feature I enjoy is the address explorer. So think about this. When you receive coins, are you verifying the address that you receive them to? Cold card makes it easy for you to do this. So if you’re interested to get your cold card, go to coinkite.com, go buy your cold card there with a discount using the code LIVERA. The lead sponsor of this show is Swan Bitcoin. And Swan is organizing a conference. It’s called Pacific Bitcoin. So if you’re listening to this before November 10th and 11th, come on down. It’s in LA, California. There’s an awesome lineup of bitcoin is coming and speaking people like Michael Saylor, Lynn Alden, Pierre Rashard, Alex Epstein, Preston Pich, Jeff Booth, and so many more. There’ll be two tracks in terms of stages going. There will be VIP events for premium ticket holders. Michael Saylor has said he thinks it will be the event of the year. So this is a great opportunity to come along, network, meet some bitcoiners, or if you’re new, learn a bit about bitcoin by coming to this event. You can get your tickets over at pacificbitcoin.com, use the code LIVERA for a discount. Are you still using a plain old block explorer? Bitcoin is now a multi layer ecosystem, and Mempool space is showing you that ecosystem. It’s a comprehensive bitcoin and blockchain explorer. You can see the Mempool and the projected blocks so that when you send that transaction, you can see roughly when it’s projected to land into the blockchain, you can see the blockchain, you can see blockchain history, you can see second layer networks like the Lightning Network. You can see Lightning nodes, you can see the channels, you can even see the channel point. There’s all kinds of information that you can understand by using mempool.space, and you can host it yourself. Now, if you’re with an enterprise, mempool.space offers customized Mempool instances with your company’s branding, increased API limits and more. Go and find out more at mempool.space enterprise. And now on to the show with Austin.
Stephan – 00:03:31:
Austin, welcome to the show.
Austin – 00:03:33:
Hi, thanks for having me. It’s great to see you.
Stephan – 00:03:35:
Yeah. So, Austin, I was interested to chat with you and hear a little bit about what you’re working on and a bit of your background. Obviously, just for listeners to understand, we invest as part of Bitcoin Ventures, and so Synota was one of the companies that we chose to invest in, just so listeners are aware. But Austin, do you want to just tell us a little bit about yourself, a bit of your background, and particularly how you got into Bitcoin?
Austin – 00:03:59:
Yeah, absolutely. Well, first, thank you, Stephan, for your support through Bitcoin Ventures. I’m super excited to be sort of entering the community and having gone through sort of this whole entrepreneurial process, you guys were just excellent to work with and encourage anybody to check you out as an incredible syndicate with incredible leadership. So thank you.
Stephan – 00:04:20:
Thank you. Yeah.
Austin – 00:04:21:
Absolutely. So, okay, so a little bit about me and my background. So I’ve been in the energy industry my whole life, and what’s sort of interesting about my background is that I guess I can kind of break it up into two pieces. First is sort of beginning in academia, doing a lot of research, covering different environmental and economic and sort of technical things in the energy space. And sort of reached a moment about six, seven years into my career where I realized that there was sort of the business side that I needed to understand to really, I think, kind of round out my career and figure out where I wanted to go. Since that time, I’ve worked for three different energy companies. So I’ve worked in upstream oil and gas. Then I went and worked in energy retail, so a lot of wholesale trading, retail selling, and then most recently was working for an electric and gas utility that serves customers in six states.
Stephan – 00:05:08:
Great. And so there’s probably all these different elements to energy markets, and I’m sure even in different countries, it varies, right? And there’s different entities involved here, right? Because I think most people just think. Oh, I just get a bill from my power company and I just pay that, and that’s all right. So could you just outline for us, for people who maybe aren’t as aware, could you talk to us a little bit about what is that lifecycle?
Austin – 00:05:31:
Yeah, absolutely. So I think what you’re hitting on is the fact that there’s a whole value chain for energy. And what we as consumers generally experience is we get that bill from our utility and we think, hey, that’s it. But there’s its own story in the energy space of kind of like how a bill becomes a law. If you’ve ever seen that sort of that video from a long time ago to kind of talk about the process, you can kind of create just or talk about as much of a complicated process in terms of paying your actual energy bill, where you’re basically paying upward through an entire value chain. So let’s talk about what that value chain is. So you have the energy that’s actually being produced. So whether you’re talking about coal coming from a mine or natural gas coming from a well, there’s only so many areas where energy is being produced. And then it needs to be shipped, it needs to be transported, move into a pipeline, and as it’s doing so, it’s usually moving through other companies. So a company that does the exploration in production may or may not be the company that does then actually gathers the gas, conditions it, and puts it into a transmission pipeline. And just as the transmission company is probably not the same one that did the gas gathering, all of them have different business models. They have to work with different sets of regulations federal, state, local. And so you tend to find sort of specialization in different pieces of the value chain. And so by the time energy actually makes it to your utility and then ultimately to your home, it may have touched five upwards of ten different companies. And that’s true for both gas and electric today. And so I think it’s important for people to understand that it’s actually very complex, but it’s also sort of a miracle of technology and coordination to know how many companies can be involved. The existence of sort of the physical energy systems and the platforms to enable its operation, they work really well. Right?
Stephan – 00:07:24:
And I think the analogy would be thinking that the beef is made at the supermarket. It’s like, no, that’s where you buy it. That may be where you buy it. Or of course, maybe some beans would be like, no, you got to shake your farmers hand and it’s cut out the middleman, and things like this. But I mean, the high level ideas products are not necessarily made where you’re buying them, and I think that’s going to probably be a theme in what we’re talking about as well. So, do you want to also tell us a little bit about how you found out about Bitcoin and what is appealing to you about Bitcoin?
Austin – 00:07:52:
Yeah, so I found out about Bitcoin, heard the term for the first time in 2018. So I was pretty late, late up and coming. But it was sort of during the bowl run and I was working at an energy company at the time, energy retail company, sitting alongside the traders and Bitcoin being sort of viewed as a commodity in their eyes. It was sort of interesting to just kind of hear them talk about, hey, here’s this new asset that people are trading, and it just sort of piqued my interest. So I set up my weekly DCA, very small at first, but I really wasn’t it made sense to me. I liked what it was I was hearing, but I wasn’t sort of uber passionate or anything like that. I was mainly just sort of sticking in my energy lane and doing that for a time. It was really at the beginning of 2021 when I started to really get gained appreciation for bitcoin mining. And I was gaining that appreciation really just again through the lens of someone working for an energy utility at the time. And I saw, hey, here’s bitcoin mining taking place. It’s this big energy consumer coming to America in a big way, and so I really wanted to understand the risks and opportunities associated with it. And so I was able to go down, be a representative of my utility at bitcoin Miami 2021, and was there to understand the risk of opportunities. But I also sort of experienced the transformation, and that transformation was aided by folks like Greg Foss and the IBEX team and Jimmy Song. I just had sort of this experience that I can’t even really fully describe in all the ways that I was touched, because I think for the first time experienced the community and it understood it more than just what I saw in my Robin hood account every day. And it was sort of from that point forward that I was changed in terms of, okay, this is way bigger than everything I had previously thought, and really spent the time from that point forward not only to educate myself, but to educate my family and ultimately to really kind of dive into understand. What does this mean for the energy industry itself? And one of the things that bitcoin miners just were it was so interesting to me just to see how bitcoin mining was moving to places where they were moving to the energy, they were consuming the energy when it was available. And that was just a paradigm shift in terms of how I’ve been sort of gone through my career thinking about energy. It was always sort of generation needs to follow, load, gas needs to be there when people want it. And here was an industry saying, oh, we’ll take it when it’s available. And that for me, just said, okay, there’s something innovative here. And having seen solar wind and those technologies, even hydraulic fracturing, sort of mature through my career, this to me felt more innovative than any of those things.
Stephan – 00:10:36:
Fantastic. And so I’m curious, from your perspective, coming from the energy world, do you have colleagues in the energy world who don’t get bitcoin? Or is that a common thing or would you say that they’re kind of slowly coming around to it? Where would you if you just had to talk to the average person working from, let’s say, the people you spoke to as part of your prior careers in the energy world?
Austin – 00:10:58:
Yeah, I’d still say it’s a pretty small percentage of people that sort of get it at a more fundamental level of what this means. I think that there’s probably multiple categories you can put people into all generalizations, of course, but I think in terms of people in the energy space who see bitcoin for what it is, it’s still, I think, a really small number. And that’s why when I look at the team that we built, it’s node, it’s sort of a hallmark of who we are. Because as I started my own journey in 2021, carrying through this year, I went to people that I interacted with over the previous 15 years and said people that I knew were very open minded, sort of had views of energy that were thinking more along the lines of abundance and innovation. And for those people, the message immediately resonated. And even one of my very good friends, when I saw him for the first time in a while, told him he was like, I’ve been thinking the same things. And it’s just cool when you get to sort of meet people that you’ve met along the way that you just knew this is going to resonate with and you find out that, yeah, they’re already thinking that really is who compromises Synota, today, the company that I’m the CEO of is people in the energy industry who see the opportunity and really want to bring this forward.
Stephan – 00:12:07:
Awesome. So tell us a little bit about, Synota, what it is, why you’re setting this up.
Austin – 00:12:11:
Yeah, so Synota, when you think about Synota, I think I’ll talk first and say, hey, what we’re building is a decentralized settlement platform for the energy industry. The idea is to really sort of disrupt revolutionize energy finance in a big way. And when we talk about energy finance, what we’re saying is really everything that’s sort of inherent in the transaction today. Everything from reading the meter, sending the bill, collecting payment, doing reconciliations, and then that’s really sort of step one in a daisy chain. Because going back to your question around, let’s talk about that value chain. Well, within the value chain, there’s a daisy chain of payments that then gets kicked off every time you pay your bill, where company one, your utility then pays the transmission company, that then pays the producer, then that pays the broker, et cetera, et cetera. And it’s all very inefficient. So when you think about the systems that exist in energy finance today. A lot of them were built around the days of analog, were built when systems were centralized and aren’t really sort of built to handle. I think what we is now possible with Bitcoin and the Lightning Network. And so I think that’s a big transformation that we’re talking about is we have a platform now that is creating a programmatic link between the Lightning Network on one hand and the energy system on the other hand. And so creating that intelligent bridge between the two is what’s allowing us to do things like when energy moves in one direction, that’s going to automatically trigger a payment in the other direction. And so the innovation is on how do you interact with the Lightning Network to do this in this way, to do it in a decentralized way, to protect information of customers, to allow companies to have more transactional flexibility. One of the biggest inefficiencies today is that within broad service areas that utilities provide energy to, everybody pays the same price. Every residential customer pays the same price for energy. But we know energy is not, that’s not actually the cost of energy. The cost changes both in time and across geography. So how can we enable companies to actually reflect the true cost of energy in the price that people are paying for it? So that’s one of the ways that by decentralizing we can remove the bottlenecks, the constraints that centralized systems of days gone by really create. And now we can start to actually sort of get much more granular and much more flexible, much more real time. Real time energy pricing is good for everybody. It provides a price signal for consumers to say, should I be consuming energy now or should I wait till later? And as the grid gets smarter, as our appliances get smarter, that’s really the other side of the equation we need is that price signal to tell all of that stuff when to consume and when not. Bitcoin miners get this perfectly. That’s exactly the business model. Consume when it makes sense to consume, don’t consume when it doesn’t. So imagine that happening at a greater scale with a lot of the appliances that we use today.
Stephan – 00:15:06:
And so who would the main customers be? Who would be using the platform? Could you just outline, let’s say, some of the typical customer types here?
Austin – 00:15:15:
Yeah. So I think the main message that I have is this is the entire energy economy. And when I say energy economy intentionally because it’s not just paying your utility bill, it’s not just an industrial customer or a bitcoin miner paying for their energy, but you can start to think about what are the other pieces of that transaction or that are sort of secondary or tertiary to that transaction that now can also gain efficiencies from that that are just those money flows, value flows that exist because energy was flowing, because energy really is at the base layer of our economy. And so when you’re paying for energy, you’re also maybe paying for a service associated with that energy. So think of a mining hosting company as an example. It’s both the energy part, but also the, hey, thanks for here’s the service fee for letting me host my minors on your site. Then you can think of brokers that are part of the equation. You can think of even insurance. So it sort of extends outward as you start to say, okay, what all is directly tied to the energy economy. So that is the market that we talk about as a company where we focused initially, it’s going to be within the bitcoin mining space. And the reason for that is that bitcoin miners, number one, understand and we’ll be able to fully realize the benefits of what we’re bringing, which is the ultimate flexibility and the ability to pay for energy in real time and use bitcoin to pay for energy. So for a bitcoin miner, the case is, hey, here’s a way to have a frictionless transaction, paying bitcoin and pay more frequently, which then sort of changes their profile for the energy suppliers themselves. There has been a lot of issues making news lately on in terms of default credit issues with bitcoin mining companies. Here’s a way to sort of change that narrative and say, no, we have a way to automatically pay you every hour and it’s going to actually save you money, save you time, reduce the credit risk, or reduce the amount of credit that you’re extending to us. And so that’s why we’re starting there. And one thing that’s really cool about the way the software works is it’s pay in bitcoin. But we’re integrated with an off frame today that allows the energy supplier to receive USD. So going back to your question of, well, how hip our energy companies to what we’re doing, very few. And even within it, even no matter how hip the energy company is, as I said, the energy finance part of that company is probably still not very hip. Here’s a way just to sort of meet them where they are, which is they want to receive USD. And so our use case or our message to energy suppliers has been, can you just get comfortable receiving payments more frequently? And so far we haven’t heard no to that answer. But it really is, you know, everybody likes better cash flow. So that’s really the kind of the pitch that we make. And so we’re just excited to, I guess, take this product now to commercialize it within the bitcoin mining space. But sort of where we go from there. I think it’s going to be really interesting because there’s a lot of energy transactions that happen outside of the traditional regulated model. One of the biggest questions that we got along the way as well, come on, utilities aren’t going to adopt something like this and we’re like, yeah, we agree with you, that’s not going to happen right away. Utilities are notorious and for the right reasons, that they will not be the first to adopt a lot of things. It’s part of their business models as being risk averse, but there’s a whole host of transactions that exist outside of that, and that’s where we’re going to be starting.
Stephan – 00:18:37:
Yeah, I think there’s a lot of reasons that I think it just makes natural, complete sense. And so from my point of view, when I first heard about this deal and stuff like that, I just thought, wow, this makes complete sense. Right? Because at one level, even just from a Bitcoin perspective, I’ve heard people talk about this idea of the circular economy, this idea that you could earn and spend Bitcoin directly. And if you are a bitcoin miner who has an electricity bill to pay, well, it’s obvious that you’re earning Bitcoin as a miner and then you’re spending for your electricity with bitcoin. So it’s perfectly aligned in that sense. And we might see interesting uses for this all around the world because we’re seeing different places. As an example, I was just recently in Lugano in Switzerland for their Plan B forum, and they’re trying to make people not that people enjoy paying taxes, but they are going to set up to allow people to pay their taxes with Bitcoin. And if you start getting all of these pieces aligned, it starts setting up this idea that you really can just live on bitcoin natively. So I think that’s a really cool thing to see.
Austin – 00:19:43:
Yeah, I agree with you. I think one of the other things that you’ve been talking with folks about recently is if you kind of break down what is Bitcoin in the transaction for us, or what can it be? It’s really sort of an atomic medium of exchange. So you can think of a system where people maybe are paying in local currency and fiat currency, either on the payment side or the receiving side, but it’s really Bitcoin that’s enabling it. And what that does is it drives adoption in really significant ways and it creates liquidity that the Lightning Network needs to really compete with the visas, the mastercards, the fed wires of the world. This is what we can do to start creating the infrastructure to ultimately replace those things, to really drive innovation and investment in the onramps the offramps, etc. So today it’s about how we make it easy to meet people where they are. But we think that this is the opportunity to really scale, to break things, to fix things, and ultimately kind of build that future. And I think the speed at which we’re talking, I mean, energy moves fast. So why is the money behind it? Not so fast. And so it’s just an acceleration, high velocity money, as Jeff Booth says, an acceleration of money in the economy. It’s going to bring incredible innovation, incredible efficiency, and we think that ultimately it’s going to benefit humanity at large.
Stephan – 00:21:04:
So let’s walk through an example just to, I guess, make it real for people or put it into perspective. So are we talking like, you’re a bitcoin miner, you’re paying the electricity bill, you get an email and it’s a Lightning invoice, or you can pay it on chain, and then on the other side, you’re helping that other company take the payout in USD? Kind of like how people talk about strike as an example. So is that kind of roughly what it’s looking like?
Austin – 00:21:32:
Yeah. And what I would say is that the product that we’re building for the bitcoin mining space is truly, actually frictionless. So it’s sort of a set it and forget it kind of approach, where we’re talking about money coming from the pool and then being used directly to pay for energy bills. And then that’s showing up as USD in the energy supply account. So there’s not going to need to be any sort of intervention or manual steps. It’s meant to be automated, frictionless and very low cost. So that’s what we’re striving for. And as part of that, it’s very rapid. So we can go from payout from pool to USD into the energy suppliers account in less than 10 seconds. And so there’s no credit risk in that. The miner didn’t have to liquidate their bitcoin to pay their bills. They were able to just pay in bitcoin themselves. So I think that’s where that’s the product that we’re building today is really just that here is the most efficient transaction the world has ever seen to pay for energy.
Stephan – 00:22:27:
Fantastic. And so can you talk us through a little bit of some of the inefficiencies? You’ve mentioned this before about credit risk and perhaps that lag. So as an example, I’m sure a lot of people today, when they buy things, they might buy things on, as an example, net 30 or net 60 days. So this idea is to invoice it, and then they’ve got 30 days from that time to pay it. So can you walk us through what that looks like today in the energy world and what we’re trying to shift towards, obviously with the Lightning network?
Austin – 00:22:55:
Yeah. So I think most people do know the experience. Look at your energy bill. It’s going to show that, hey, when you’re paying the bill this month, you’re actually paying for energy you consumed 30, 60, sometimes 90 days ago. And what that sort of it feels normal and natural to us because it’s always been that way. But from the perspective of an energy company, that is, it represents that they have basically loaned you energy for 30, 60, 90 days, and you’re finally paying them back 30, 60, 90 days later. And what people don’t realize is that there’s no such thing as a free loan. It actually is embedded in the cost of the energy itself. Is the fact that you’re being given energy on credit. And those costs scale as the amount of credit grows, as the size of the customer grows. And so it reaches a point where once you have a certain size, now you’re having to post collateral to the energy company in order to actually get service inefficiencies. Kind of begin to stack up from the fact that you have this cash flag the fact that you have cash, the energy companies putting cash out but not receiving cash for later. And they stack up not only within the company itself, which I’ll talk about, but also just against the debt value chain because now it’s the energy company waiting to pay their counterparties upstream of them, but within the company itself. So think about, okay, so you now have this disconnect between the physical side of the transaction and the financial side. That disconnect, it needs to be maintained in full visibility until it’s actually reconciled and settled. And so what that does is you mean you keep the books open, you have to use multiple payment processes to see who’s paying you from where are you receiving a check, you’re receiving achieve somebody paying with a credit card. You have all of this sort of complexity that it’s meant to give consumers a better experience, meant to give them options. What it’s really doing is just creating a ton of back office inefficiency in the energy industry itself. And so what’s interesting when you think about being able to settle transactions instantly, what it does is it does two things. Number one is it eliminates that cash flag. So now it’s energy has been delivered, money has come in, everything is settled right away. So the whole notion of reconciliation within accounting goes away. You don’t have to think about reconciling payments anymore. You also don’t have to worry about what are the different times that banks provide the services. All of that is just done and over with. So that’s thing number one. Thing number two has to just do with how we’re actually managing the risk side of things. So there is, as I said, there’s a lot of time and energy put into understanding the creditworthiness of counterparties to understanding, to paying, posting collateral to participate, you know, to buy from certain people. So everybody’s kind of posting credit and collateral, or talking about credit, posting collateral to everybody. And here’s a way for us to now start to kind of break that down and focus more on just value for value and getting out of that mode of everybody’s got credit, all of the different things that exist today to kind of keep that system afloat. Now we can think about, well, what does that look like without it? And really it’s remarkable in terms of the back office efficiency that’s possible.
Stephan – 00:26:07:
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Stephan – 00:27:52:
And so probably most of us or listeners are used to either just being a residential consumer or potentially they’re a bitcoin miner. So they’re used to it from that perspective. What about, as we mentioned, going further off, let’s say that energy provider who let’s say we’re paying them in this example, let’s say we’re paying over the Lightning Network to pay that bill. And then what about the next step up from there? So is it the same kind of thing? The idea is that they’re all on the platform and then they can either take that in Bitcoin potentially or in USD. Is that the way roughly we’re talking?
Austin – 00:28:23:
It is. One of the kind of visuals I like to paint for folks is if you were to walk into the control room of a utility today, you would basically see the physical energy system on display. And it’s actually a great analogy of when you think about the image system because it’s a series of pipelines and power lines all interconnected by nodes and there’s capacity in terms of how much can move through a pipeline power line. The nodes provide certain services. Some of them could be equivalent to a routing node. Others are sort of sources for funds or sources of energy. So you have this kind of perfect analogy set up where here’s that big board when you walk into the utility room. Now imagine every single one of those physical nodes now has a node in the Lightning Network. That’s really what we’re marching towards is that everybody in the energy economy can have their own node and can be transacting in this efficient way. So it really kind of sets up for a perfect network effect where when two people are now transacting this way, the person upstream is going to say, well, I’d like to get paid sooner. I’d like to save money. And when we really sort of talk about the potential savings from our estimates, it can be conservatively 10% of the cost of energy is that financial inefficiency. And then we layer in the fact that people don’t pay for their energy bills, or there’s a percentage of people that don’t. McKinsey’s number is five to 7% of people don’t pay their utility bills today. Well, those don’t just get written off, they actually get passed on to the consumers. So all of that is embedded in the cost of the energy we’re paying. And now we can imagine a system where that all goes away because now you have the physical and the financial worlds integrated as one, and all of that inefficiency is removed.
Stephan – 00:30:10:
And so, as you mentioned, there’s a bad debt expense. So there are potentially in cases where that company is floating you some energy without taking the payment, there’s a risk that they just don’t get paid. And so that’s a risk. Now some companies may deal with that by saying, okay, before I give you any energy, I need you to post up $2,000 or $1,000 or something like this to say, if you don’t pay me, I can just take it out of this. But then there’s all this admin associated with that also. So although I could understand perhaps the steelman would be well, right now it’s not like the world is going to switch over to Lightning. But I can sort of see the case which is like, well, we have to start somewhere. We have to start with it being possible to pay with Lightning before we make it the mainstream way that everyone is paying with bitcoin and Lightning. So that’s kind of how I’m seeing it. How are you seeing that?
Austin – 00:31:00:
I think you nailed it. And so what our message is, is not that everybody needs to start streaming payments right away. We can take incremental steps. I think there’s going to be opportunities, especially with bitcoin miners, that are going to welcome the opportunity to pay more frequently. And whether it’s paying every ten minutes or paying every hour or every day, it still is accelerating the frequency of settlement or increasing the frequency of settlement. The other thing to think about, though, is that it’s really about the flexibility that’s now possible with the decentralized platform. So we’re not sort of taking everybody and saying there’s only one way for you to pay your bill. Now we’re saying hey you can still be on a net 30 but you’re going to have a different energy price than your neighbor who’s willing to pay every day. So now you can embed within the cost of energy the actual cost. So if somebody is wanting to receive credit well reflected in the price and here’s a way to actually do that. And so I think everything about our story is moving in the direction of being able to see the true cost of energy reflected in the price that people pay. Not a socialized price, not an aggregated price but the actual true cost. We think in that way what we’ll be able to do is people will see that they’ll be incentivized to change behavior in a way that’s appropriate for them. So it’s not the case that hey we have to say there’s only one way and it involves the complete elimination of credit. It’s like no maybe you want credit to be there but let’s only make the people who want the credit let’s make their loan their loan. Let’s make the other thing too is sort of an immediate sort of transition or opportunity within the sort of residential small business type transactions that you and I experience. It really is also just around the immediacy of the settlement. So even if it is a net 30 payment it’s still the moment you pay it’s recognized. Whereas if you’re in the traditional model you can call up and say hey are you going to pay your bill? Oh yeah I sent a check. Did you? We don’t know. And so then what I’ve seen in my own experience is that things sort of snowball where because of that lag, because of the lack of information you get to a point where somebody is now 90 days behind on their bills. And so it’s only at that time to which utilities now can start to say okay they’re definitely not going to pay. I need to start intervening. I need to start taking measures whether it’s a shutoff notice or this or whatever the right remedies are, those remedies are delayed because of the information about somebody’s ability to pay is not known at the time that they’re supposed to be paying. And so if you bring that information up to the point at which payment wasn’t made well now you’ve empowered the energy, the utilities, the energy companies to address that situation in that moment and not let the balance continue to build.
Stephan – 00:33:49:
I see. And I’m actually also curious as well I didn’t think of this before but there is this whole case that people have been talking about for example with Texas where bitcoin miners are shutting down to someone save the grid and things like this or to get paid to not use energy from the grid. I’m curious if that is also being worked into the platform. Yeah.
Austin – 00:34:09:
So the idea is that we’re going to be thinking about the flows in all directions. So today our very first product is going to be focused on the consumer paying. But where does this go next? Absolutely, you start to build in all of the other aspects that are part of the energy transaction as we move towards the whole economy. I think the key thing about how we’re building our platform today is a, we’re working towards those pieces of it are open source today. We’re going to be moving in that direction in the bigger way as possible as we can because it makes sense for the community, it makes sense to bring people on. It’s not going to be sudden. That brings the whole energy economy on. That would be a pipe dream. So what we want to do is we really want to sort of move in the way of how do we work together to bring this industry and then to bring the whole economy to the Lightning Network. So we’re moving in that direction and as part of that and just reflective in the software that we have today is we’re integrated with a number of third parties. And so you can think of in future integrations that will enable us to have the other value streams being paid instantly as well.
Stephan – 00:35:14:
Got you. And in terms of automation that you mentioned earlier, how exactly is that going to work? You mentioned it’s going to operate through, let’s say, that mining pool account or is it going to work where that minor or that customer? How are they setting up to pay and what kind of options will they have to pay using their own stack or their own Lightning node and things?
Austin – 00:35:34:
Yeah, so I think that that’s an area where we are going to be spending a whole lot more time. You know, today I’d say our approach is pretty simple. It’s just sort of leverages the existing payout functionality of the pools. But what we think is there’s an opportunity as we move forward to really make that connectivity between our platform and the Pool is much more intelligent. Because what you can see is a future where the amount that needs to be directed towards energy is going to fluctuate based on the price of bitcoin. Based on the price of energy. So we’re going to move in a direction where that integration becomes more dynamic and we’re going to work with the pools to do that. But yesterday, very simple in terms of how the money is moving off of the pools. There was a second part of your question there, so but I don’t remember it.
Stephan – 00:36:18:
Yeah, I mean you already answered it. Basically, I was just asking about like as an example, if that miner has their own Lightning node and things like this and they want to make the payment that way, that kind of thing.
Austin – 00:36:27:
Yeah. Okay, so great question. So one of the really neat things, and it’s just a testament to the team and how they are part of the bitcoin community and how they think about the future of bitcoin is today our solution is providing a managed solution on the Lightning Network. So we’re trying to make it easy for people to leverage the platform, not needing to run their own node. But very soon in the future, the idea is bring your own node. Our software is decentralized. We’re not in the position where we’re centralizing the function, we’re not in a position where we’re centralizing the information. So it really can be a place where people can bring their own node, leverage our software and interact with a broader network in that way.
Stephan – 00:37:09:
Yeah. And I presume you’re starting with USA first as well. But I understand you are aiming to go international also.
Austin – 00:37:15:
Yeah, when we think about sort of our core product and feature. So obviously anybody who wants anytime there is a consumer and an energy supplier who want to receive a bitcoin, we can go anywhere. And I’ll talk a minute about that. But today, recognizing that as a brand new company wanting to grow and really commercialize the product that we’re building in the US it’s bitcoin mining focused on being able to then have an offering up into USD and being able to enhance the user experience on both ends. Energy supply gets paid more frequently. Bitcoin miner has more flexibility in terms of how they pay and can hopefully get better terms by adopting a more efficient method of transaction with lower risk. But when we think about internationally so one of the really neat things is we’re going to be talking a whole lot more about this towards the end of the year, but we’re today working with partners on the ground in Africa to basically pay for energy from the United States that’s being consumed there. And what that’s kind of demonstrating is here’s a future scenario where we’re not constrained by borders in terms of where we are creating economic value, where we are recognizing opportunities with energy. And so that’s the really neat thing is. So here we’re going to be paying for a bill. Basically it’s two bitcoin miners in two locations in Africa. And what we’re going to be doing is paying for that bill from the United States and we’ll be paying for it every day. So selling that account every day. And the really neat thing about this, and this is really where the story comes to bear, is focusing on impact mining itself. So that’s the term that we’ve been using to describe this. But bitcoin mining in these remote communities has the benefit of actually enhancing the overall economics of rural microgrids of different energy systems there that have issues unlike the ones that we experience here in the United States but can benefit from having a consistent source of power draw that is willing to take the excess power when it exists. And so what is missing in the equation today is somebody who’s willing to pay every day for that energy and consume a lot of it. And so it’s not the case that this would be efficient if we had to set up an actual entity on the continent and we had to sort of go through all of that. It’s only efficient if we can pay for it directly and not experience any cross border fees, because the bill is not very much every day, it’s a single s nine minor. But it’s really just to kind of demonstrate, hey, here’s how we can now pay for energy across borders. And we think it’s a really neat, neat first use case that ultimately will point to an energy future where we can think about transactions, we can think about the energy economy in a global way, and we can think about investing in energy infrastructure in the energy economy globally. Because I think actually I listened to your podcast recently with Alex Epstein, and what was really interesting is one of the things that he talked about was sort of just the free trade aspect of it and how you can have issues where you may want to be making an investment into an emerging market in their energy infrastructure. But you’re going to have a lot of questions about how you’re going to get paid. Well, our platform is going to eliminate one of those questions because it’s now instant. When the energy is being consumed, it can be paid for. So it’s not only us paying for energy in an emerging market, but it can be the emerging market paying for energy to anywhere else in the world. Yeah. And so at least if we can separate the money from the state, as everybody talks about, there’s a huge opportunity one variable in that equation can be eliminated. And we think that that’s how we get to an abundant energy future.
Stephan – 00:40:48:
That’s fantastic. And that also makes me think of multinational corporations because there are times where multinationals need to move, they need to shift money around. And in the same example, you could have a multinational corporation that’s paying the energy bills out of its corporate headquarters or out of it. Maybe it’s got this multisig that and it’s paying for energy in the different countries. And it’s like this idea that people say in the same way that we used to think of long distance phone calls and you had to pay a lot of money for a long distance phone call, and that was done away with when people came out with Skype and WhatsApp and all the Zoom and everything. It’s the same kind of idea with money, right? With Bitcoin, we don’t have to think so much about, oh, it’s an international wire, you just pay this Lightning payment or you just pay that bitcoin invoice or pay that bitcoin on chain and you just do away with all of that. So I think it’s a really cool idea. And you know what else is interesting? I noticed there was an example where now I think this letter did get resolved, but as an example, Emirates, the airline, had some drama with the Nigerian government. Now, why did this happen? Is because the Nigerian government was trying to keep USD from leaving the country, right? So the Emirates airline was trying to say, look, Nigerian government, we might have to stop our flights to you guys if you don’t let us take the money back, because we need this to run our operation, right? It was such an obvious bitcoin fixes this moment. But of course, the world isn’t there yet, of course, but this kind of thing setting up so that people can just pay with bitcoin, it is helping obviate that government capital and currency controls that can exist. So it’s a really cool use case there to see. I’m also curious, I mean, maybe this is like more of a broader conversation, but do you believe bitcoin miners in the energy industry will vertically integrate?
Austin – 00:42:35:
Yeah, I think it’s actually, for me, that’s sort of an interesting thing. I can tell you my experience. The energy industry has been one I think there’s been cycles of integration and disintegration that have occurred through time. So it’s probably the case that, yeah, you’ll see some, but I guess I’m not sort of led to the belief that you’re going to see a massive integration where every energy company is going to be a bitcoin miner because every energy company is also not a pipeline company, is also not a transmission company or all those other things. So it’s sort of the current state is people have sort of nearly defined roles, or at least there’s one mother that has a lot of subsidiaries that do different roles. But it’s it’s not necessarily been my experience that, you know, that is the only way to gain efficiency. What I actually think is that with our platform, that you can achieve efficiency and specialization at the same time. And so bitcoin miners can do bitcoin mining things, energy companies can do energy production things, and the more people can do those things and then be able to actually transact efficiently, I don’t see necessarily the need for that vertical integration per se, but I’m very openminded to what that looks like. I think as I sit here today and on a number of issues, it’s just sort of really curious to know the arguments for or against. But I know that today one of the arguments for would just be the efficiency gained in terms of operationally financially. And what we want to sort of remove from that equation is, here’s a way to transact and really take that piece out of consideration, because now you can be really integrated together, right?
Stephan – 00:44:20:
And what kind of feedback have you been getting from the energy companies you talk with?
Austin – 00:44:26:
Yeah, so the energy companies have you know, I think the very first thing is they recognize the problem that we’re solving. They know it’s a big problem and it’s a pain point. So universally, that is absolutely the feedback we’re getting. But certainly where we are is bitcoin in terms of what is I think there’s obviously a lot of skepticism, I think is probably the best way to put it. So it’s going to be the case that we’re prove we’re going to have to prove what we’re saying is true because it’s so different from what people experienced today. We’re going to have to prove that you can get adoption with using bitcoin as that atomic medium exchange today especially. I think it’s just a lot of, yes, these are big problems that you’re solving, but want to really kind of see this take shape. So that’s why our go to market strategy sort of reflects, hey, where can we make that headway to really provide the use cases to show that this is how we can still kind of provide all of the assurances and all of the one thing energy companies do know is they know that, hey, they’re going to get paid. As long as people pay their bills, the money is going to come in. So the system works for them today. It meets, I guess, their basic needs. What we want to do is show them here’s a much better way. So it’s going to be very disruptive. So I think with any disruption, it’s going to take a lot of work to get companies who have done something a certain way for a long time over that, over the hurdle. It’s going to take a lot of work and effort, but that’s really why we are the team we are, which is over 125 years of experience in the industry. So we’ve had these conversations before. One of the key members of our team was on the ground when energy was first being deregulated. And so he remembers all those conversations and talking about, hey, you actually can now buy your energy directly from the producer. You don’t have to worry about, you actually have a choice. And that was mindblowing to people at the time because they had never had a choice and who they got their energy from. So I think we’re geared up for those conversations, it’s certainly not going to be easy.
Stephan – 00:46:27:
Yeah. And then I presume any bitcoin miner you’ve spoken to has been supportive of this, right?
Austin – 00:46:32:
Yeah, I think so. The message kind of top to bottom has been, this is great. And one of our stories of the bitcoin miners is just what this can mean to the whole ecosystem. Because you think about where the Lightning Network is at today, and imagine percentages over time of the mining industry now moving on to the network. It will grow and scale beyond orders of magnitude above where it is today and then it can go even further from there. And like I said, it creates this natural network effect where the other parties in the transaction are going to say, well, yeah, I want to get paid sooner, why not? And I don’t want the headache of reconciliation. So we think that we can really sort of get that scale and sort of initiate that network effect through bitcoin mining and it’s going to be hugely beneficial to the broader ecosystem.
Stephan – 00:47:19:
One other area people might be thinking, and maybe this is more like a bit of a steelman of the company and the case people could be thinking, well, why don’t these energy companies today just go to the likes of Ebay, Mercado, Open Node, etc. But why don’t they just go and do their own Lightning payment processing today rather than using your platform? Is there some kind of integration benefit across the lifecycle? How should we think about that?
Austin – 00:47:44:
Yeah, so it really is the integration. So, yeah, I mean, of course, if you’re a bitcoin miner and you wanted to sort of build the process out, that’s the beautiful thing about an open network. If you can dream it and you have the people to do it, you can do it. If people are doing stuff like that, we want to hear from them because of a how we’re building is we’re intentionally building open and we’re going to be even more open as we move forward. What I would say is sort of the piece that is really novel and how we’ve done this and it just reflects our experience, is understanding how the industry transacts today. And so being able to take that knowledge of the transaction side and reflect it into really that programmatic link between the Lightning Network and the physical energy hardware. So it’s being able to say when energy is moving, that needs to now be reflected as a payment. Anybody can send payments over the Lightning Network, but how are you actually arriving at the amount to be paid? How are you doing the offerings? How are you setting all that up? So our whole thing is to make that easy for people, so that way it really is set it, forget it and you don’t have to worry beyond that anymore. So it’s really just about the ease of doing this and then growing the network effect from there.
Stephan – 00:49:00:
Yeah, of course. And certainly there is a convenience fee that many people are willing to pay and it’s a straight fact, right, of course, with anything in life you could pretty much point to and say, oh, look, see, if you kind of want to do your own thing, maybe you could do it a little bit cheaper. But the reality of it is how much time are you willing to spend doing that versus doing your core competence? Which is if you’re an energy producer, producing energy, or if you’re a bitcoin miner, mining bitcoin, etc. So I think that’s probably how I’m seeing it, at least. That’s really cool to see. And in terms of what’s available or built right now, as we speak, what’s available right now and what’s kind of next steps.
Austin – 00:49:42:
Yeah, so right now, what we’re doing is we’re working with a few different partners on kind of our initial commercial projects, commercial pilots. And so that’s where we’re focused on us. There’s nothing that someone would call us saying, hey, we want to use the platform. We’re going to talk to you about what your needs are, what your use cases, and we’re going to give a view of, hey, when can we be available to serve your needs? And so we are absolutely in that mode of intake, understanding where the areas that the market needs us to be. But in terms of product availability, we’re really focused on commercializing through the first few that are, you know, folks that we met early through this process and have been great partners of us, of ours. So our intent is that, you know, early in 2023, we are going to have that commercial product available for the bitcoin mining space. So the idea will be that bitcoin miner will really be able to kind of pull the software off the shelf, engage with their energy suppliers. We’ll be happy to help. But the idea behind decentralized software is we don’t even have to be part of that whatsoever. And so that’s where we’re going. We want to be there, like I said, early 2023, to really provide that service, make it available onto the mining space.
Stephan – 00:50:51:
Fantastic. Well, I think that’s probably a great spot to leave it. So if you’ve got any closing thoughts for listeners and where can they find you online.
Austin – 00:50:57:
Yeah, so the name of the company is Synota. S-Y-N-O-T-A.io. And so I’d love folks to go in there. Obviously, you can enter in your contact information. We’ll be starting to reach out and engage there. And I just really want to say thanks to the bitcoin community. I think it’s interesting for me, having been somebody who kind of had my own box within the energy industry, and really kind of was fascinated by everything I was seeing, but then to undergo this transformation where, holy smokes, there is hope for an abundant future. And I just really want to give a credit to this community for being open and helping me see that and really to the whole team that I’m working with. It’s not that it’s an incredible group, and I feel very fortunate and very blessed to be here. So thank you very much for your time.
Stephan – 00:51:38:
Fantastic. Austin. Thank you. And chat again soon.
Austin – 00:51:41:
Stephan – 00:51:42:
Get the show notes at stephanlivera.com/431. I’ll see you in the Citadels.