BBW25 - Day 2 - Energy & Sustainability – Bringing Power, Renewables & Carbon On-Chain

All right, team. One more panel today, but it's an exciting one. It's about energy. Okay, we're going to talk about how blockchain is affecting the energy landscape. So, on stage joining me today will be Steven Lehey, who is the CEO of newly founded Power Finance.

We have Mark Smith, the CEO and co-founder of Carbon Country. And this panel will be led by John Sarsson, the CEO of Sarsson Funds. Please join me in welcoming them to the stage. [Music]

Hello and good afternoon.

Last panel of the day. Let's light it up. Reception. No low energy. Come on.

We're We're the last thing holding you back from having fun tonight. Let's make this interesting.

We're almost at drinks.

That's right.

We almost made it.

Power, renewables, carbon. This is a website for a new AI robot girlfriend, I think, that we put her on chain. Document, you know, all of the way that you treat her. Everyone needs to be careful. Keep that in mind.

It's an immutable permanent record. Uh, but let's talk about power. Let's talk about renewables. carbon. Uh I'm with Mark Smith and Stephen Ley.

I've known these gentlemen for a while. Two true two true leaders in our industry and in the space. Um I'd like to let them give a short introduction of uh where they've been over the last five years that have brought them to these companies and then we're going to do a deeper dive into their companies and how they're going to leave the world a better place than they found it. uh using blockchain technology and uh worrying about the environment and sustainability. So Steve, you want to start us off?

I guess I'm first. So hi everyone. I'm Steve Ley. Uh been Boston born, bred and based for a heck of a long time. Let's go.

Boston Blockchain Week, Boston Blockchain Association, everything about Boston. Um so uh been in the industry since about 2017 or so. Um consistently working on projects that bring financial products on chain. uh worked on a very early proofofstake protocol in the Cosmos ecosystem. Spent three and a half years heading um circle's capital markets bisdev function and currently uh about four and a half

I'm sorry about that. That was a failure.

Seems like it's going pretty well if you look at the public markets. Um and then recently about four and a half five months ago I co-founded Power Finance. Um and for us over at Power Finance we believe that power and electricity is probably the most valuable resource to capital markets valuation out there. every company out there that's doing well in the world, whether it's AI, data, um, social, whatever it is, power and electricity is the core resource that all of them need. Yet, there's nothing about electricity and power that's on chain at this point in time.

And so, our thesis is that there's a massive opportunity to bring this most valuable resource on chain in all sorts of different forms, whether it's synthetic dollar, some asset management products, and that's what we focus on at Power Finance. We are bringing electricity onchain. Uh thank you. That that sounds interesting. We'll dive into that some more.

Uh Mark, can you give us some background, please?

Yeah, sure. So, the company I founded uh together with my co-founder is called Carbon Country. And uh we're trying to do something uh quite important I think for for our country and the world, which is basically create a new a new economic model for small holder farms. So today 3% of farms generate 97% of farm income. So if you let that sink in um and you realize that the other 97% of those farms are dying um their uh owner operator is average of 58 years old making $36,000.

It's no wonder that the kids want nothing to do with that as that transition is made. And you know the danger for our country is those those farms become residential housing and we lose the ability to feed ourselves. So what we're doing is we're adding agrovtaics which is solar above in our pro in our case regenerative agricultural practices. So we're doing rotational grazing of sheep under our panels and carbon removal. So, we're building the first large-scale biochar facility in the in uh the state where we operate, Maryland, as well as pioneering some practices uh one called wood vaultting and storage.

Where this connects with uh blockchain and why we're here is because um Bitcoin mining and we believe that you know agotics is the future of agriculture.

Say that word again for us.

Agravtaics which is basically solar above farming. So, we're not taking land out of production, but we're adding another critical income stream that basically bolsters the whole farming operation and generates quite frankly a lot more cash. So, um we're adding aggravaics and if you if you believe that aggravaics are the future of farming, I believe that the future of renewable energy is both battery storage and Bitcoin mining coupled. So you basically create an ecosystem where you're able to arbitrage peak power prices, non- peak power price, Bitcoin price, and electricity prices to maximize the IRRa of your uh renewable energy assets. And I think what's truly revolutionary about all of this is that the farming sector can actually generate their own collateral and break free from the cycle of boom and bust where the bank comes in, takes the family farm, etc.

We're mining in our barn, creating our own Bitcoin, which we're using as collateral to borrow in stables and generate working capital for um our farm. And if you think about that applied to rural economies at large in the farming sector, it really is truly transformational. So, we're really excited about to talk about that to hear today.

I would be remiss, sorry, John, I know I'm not the moderator, but I can't help it with a microphone in my hand. John, tell us a little bit about Sarsson Funds if you would.

Thank you, Steve. Uh, Sarsson Funds is an asset manager. We've been in business for eight years. Uh, we build niche crypto hedge funds focused on a segment of the market. Uh, I see our our web 3 PM here, our decentralized AIPM is here.

Uh, so we try to help investors get uh that early stage targeted crypto exposure that, you know, that gives us that really good upside during a bull market. uh which everyone in the room knows we're on the precipice of. I know I know I don't have to say that. So it's a great time to start moving down market cap. Uh that's what we're doing at Sarsson Funds.

Uh the disruptors in some of these categories, especially decentralized AI, decentralized compute, power on the grid, carbon credits on the grid, you know, these are going to come in and they're going to be uh big companies by the end of the cycle. So we we like looking at them early. Thank you for that, Steve. I appreciate that. So, let's go back to you, Steve.

With, you know, trading futures on energy is a big business. So, are you maintaining that the big players are not interested in blockchain or what's going to create a niche for a blockchainbased energy trader? Yeah. So I'll reiterate that um to us we firmly believe that um again power which is also equated to electricity is the most valuable resource and that is a core component to any of the capital markets growth cases out there. But electricity as all of us know we all pay for electricity every single day both in our businesses and at our home.

And very few of us have the ability or capabilities to hedge any of those costs or to make any sort of profit off of the incredible volatility of electricity markets or the incredible increases in prices of of electricity in the last year couple of years or so. And so for us um the key the key kind of I guess I would say um a part of the framework of the career that I've had whether it was an equities FX or crypto is every single market benefits from digitization and decimalization meaning make the transaction sizes smaller make there be more number of transactions out there and at this point in time in the power and electricity markets it's only traded on um some of the larger um commodity exchanges intercontinental exchange as the primary a company called nal exchange as the here in the US. These are large contract sizes. They require a lot of margin to be traded. They are traded effectively via appointment, meaning that they actually have while while the markets are technically open 23 hours and 50 minutes per day.

They take a nice little 10-minute nap at a certain point in time. Um, it's effectively a trade by appointment. You just, you and I as individuals have a really hard time accessing anything about electricity. We can't hedge, we can't speculate, we can't do anything. So the overriding thesis of what we're doing is bringing electricity on chain.

Our first two products are actually essentially an index for electricity which again surprisingly a electricity index does not exist at this point in time. You can't buy through your broker. You can't buy through an FCM. You can't buy it on chain. So we're building a electricity index with the backing of essentially what's an ETF though it's offered on chain.

The second product that we're bringing to bear is a um synthetic dollar. This ties into my background having having spent time at Circle for about three and a half years or so. Stable coins clearly the big winner when it comes to um product market fit for all things digital assets. Um 90 plus percent of all stables out there are backed by US treasuries. Even less percent of that are actually um yield bearing.

But a synthetic dollar though a little bit complex to operate adds more features and therefore more functions therefore more use cases. And so by essentially mimicking a project out there called Athena by using the electricity markets for generating a delta neutral yieldbearing position we can offer a synthetic dollar. Ultimately early on the use cases the world of DeFi is looking for new forms of yield and we've got something that's completely uncorrelated with treasury markets. Um so there's the opportunity to speculate there. If you are a underlying um user of electricity, all of us are now you have the opportunity to um hedge your future costs of electricity.

Ultimately, long-term we think that a synthetic dollar that is generating yield specifically from the electricity markets will be used as form of um collateral and payments within the world of electricity trading. So um big ambition, we start small, two products, an index and a synthetic dollar. That's what we're doing. Uh that sounds like the perfect place to be. There's certainly a ton of interest uh on Wall Street about alternative power for these data centers that are very power hungry to power powering AI.

Lots of concerns about the grid's inadequacy over the next 10 years. And Mark, I think that plays directly into what you're doing with farmers. Uh kind of a two-part question. one, when you lead with the environmental benefits of your product, but then you're installing solar panels and running Bitcoin miners with them. Like, how do you walk that fine line when there are so many people that look at Bitcoin mining as,

you know, expensive way to spend electricity?

Energy hog.

Yeah. Kind of an energy hog.

Yeah. So, that's I think a legitimate criticism. Um, but we're using actually the energy intensity of Bitcoin mining to allow us to sell our renewable energy for twice the price. So where we are um in Maryland, we um we have a rural electrical cooperative which is our utility effectively and they allow you to net meter up to two megawws of capacity which is a pretty decent size uh um of a decent amount of energy. But the catch is we can only net meter twice what we consume.

So hm I wonder what the best way to generate electrical consumption might be. I think Bitcoin mining is a pretty good way and we're generating some of the cleanest collateral in the world and using it through DeFi to take stables and generate working capital without giving up the upside.

I got a stable for you.

Yeah, there you go. So um so in fact uh we're kind of turning the narrative I believe on Bitcoin and energy on its head and using Bitcoin mining as an enabler of the development of renewable energy assets versus a sort of suck on the um on the overall grid. And so um by doing that I think we're we're really opening up the possibilities of digital currency and uh um and the environment and uh and then also you know the opportunity for the rural economy. If you think about um the level of land that will be necessary for um for these assets to be built and the challenges with our grid mean that having decentralized um energy uh development all over the country um means that our grid can actually make um be more effective and that uh folks can even you know provide their own power behind the grid. um basically divorce their power company and in our case, you know, we're basically creating a c a power company brick by brick.

Hang on. Interesting that you mentioned like uh decentralization of power generation. I think about that a lot. One of the challenges with power and electricity specifically is that um it is not infinitely um fungeable, meaning that if you generate electricity in California, you can't use it in Texas. Both because of regulation, but also just the physics don't don't work.

And so what we end up seeing as I'm learning more and more about this industry is that there's like small centers of decentralization opportunity for these different types of power being generated. And so specifically with the use cases you're thinking about with like farmland use cases or taking what's available to be harnessed via solar specifically maybe wind as well or other renewables via farmland. It it does seem like you can almost create smaller um decentralized pods almost of where electricity can be used, shared, funneled. That makes sense. That's something that you're

Yeah, exactly. And it's it's incredibly powerful. So, um, if you are, uh, and I think AI has really exposed this, that, you know, if you're a, um, you know, a county in the United States looking to attract, um, investment in these high-tech areas, you better have available electricity. And so, um, if you can spur the development of that in these more rural, out of the way, um, uh, places, you're basically creating the foundation for economic development, um, in that particular area. And you know all of these um different uh um you know all of these different interconnection or the transmission um they're they're basically sort of islands that operate um very independently.

And so it lends itself to um both uh producing your own power behind the meter but also um developing these decentralized assets that can contribute to these islands to make them more functional.

I'm gonna hop back in John. Sorry. Let them um Mark you mentioned like AI data centers behind the grid or behind the meter power. That's one of the things that kind of spurred um us at power finance to do what we're doing. You know, Meta recently announced that they are spending $29 billion to build the power plant to then back the data center.

So that's not 29 billion on the data center, that's 29 billion on the power plant itself. And so what Meta is doing, they're Meta. So they can effectively say I am willing to spend $29 billion and lock in my energy production for a long period of time. For most kind of smaller but still institutional levels size entities they do what's called a PPA power purchase agreements where they're going to lock in for 10 years a cost of electricity. And this is kind of those monolithic sized transactions that I think are going to go away especially with AI and you mentioned AI right now.

So again, um, Meta is building its own power plant. There's a lot of these like 10-year locked up fixed contracts for power. Yet, as AI, um, becomes more and more efficient, as we use it more and more often, you're going to see there's there's not only a massive increase in the demand for electricity in general, the type of demand is changing. rather than being locked into a long-term contract for 24-hour day power, these AI agents that we're all going to be using more and more are going to have individual transactions where they're working for us. And these AI um these efficient seeking AI agents are going to say, I don't want to necessarily pay a certain amount of of dollars per hour of power if I'm not using it.

I want to pay on an almost transactional basis, maybe hourly, maybe daily. But this goes back to our operating thesis that the size of transactions in electricity are going to be getting smaller and smaller and these payments are going to be happening more and more. You're going to need a stable coin that makes these payments because no one's going to trust to give my AI agent access to my bank account. And so this kind of ties into the thesis that we've got whereby the power generation and or sorry the demand for power is going to start getting fractionalized and decimalized. and we're here trying to support make some of the like transaction layer that supports that.

I think that makes sense. Do you see Steve there being a renewable energy power token that trades at a premium to a dirty power token? Do you think that we're going to get multiple types of power tokens in in the distant future?

I think I think you're right, John. I think ultimately there will be value placed on cleaner energy. People are willing to pay up for it. um people will pay less for dirty energy if that's the right term. And so I think there will be multiple tokens out there.

I think you'll be able to trade them. Maybe you as an industrial user have to use coal power because you're in Kentucky and there's nothing else around. And if you so choose to somehow offset that, you'll be able to buy, invest, trade something with some renewable or cleaner energy tokens to help offset. And that ties into some of the like carbon trading that you know I feel like carbon trading to me has been around for quite some time. I know there's a viable market for it.

It's not huge. I think that there's an opportunity to help make that carbon trading or that offset market larger. Yes.

Well, I wanted to actually ask Mark about carbon

credits. You talked a lot about solar, people making money selling power, Bitcoin, people making money mining Bitcoin. When you're using carbon credits as your as your income stream, and as a follow-up on that question, when you're working with a farm, how hands-on are you getting? Are you does does your company set up Bitcoin miners and solar panels and

Yeah. Um so to answer that second question um we get our hands very dirty. Like I'm out there literally like tackling sheep to vaccinate them. So this is very it's a it's a you know um this is a full contact sport. Um we're building our own renewable energy.

We are doing our own farming. We own the land. So, um, you know, we own every step of this asset and, uh, that's really what we believe. You know, it's it's a hell of a lot easier innovating when you own the land and you can do you don't have to ask someone their permission. Um, and that's really, you know, what I think I've learned from my some of our my last endeavors that usually can take forever trying to convince a farmer this and that and the other.

if I can just buy the land and do it, um, I can move a lot faster and do a lot more important things. So, so that's the first part of the the the second part of the question. I'm sorry, what the oh the carbon markets. Um, so, so we're doing um two uh sort of enterprising things in the carbon space. So, if you look at the um the carbon market right now is is mostly a voluntary market.

there there there is a compliance market that's developing in Europe that's regulated. Um but in the United States generally the the largest buyers of CDRs and these are carbon dioxide removal certificates not certificates that you would sell for something doing something more efficiently. It's actually sequestering carbon so removing it from the environment for thousands of years. Okay. So we're we're basically taking wood chips, so a waste of the wood of the forestry process.

We're heating them to 700 degrees in a pyrolysis reactor, and we're generating above 90% carbon um soil amendment, which is incredible for agricultural productivity, also for water management because of its surface area. So when it's a drought, it's maintaining water. when it um is a flood, it's soaking up water and making sure that your top soil is not running off. Um and as a result, you use up end up using a lot less uh fossil fuel-based fertilizers. So, we're selling those carbon credits.

The biggest buyer right now is Microsoft by you know order of magnitude, but Google, Shopify, Oracle, you know, those are the biggest buyers in this market. We expect that this will become um a compliance market eventually just given the way the world is is going. But right now um it is a voluntary market and you know producing credits that are verifiable that you could actually go in you know we have a a process where you know how much carbon is in that wood chip when it goes in and you can measure how much carbon is in that wood uh the biochar when it comes out. So it's um we can provide uh corporates who are looking to um basically you know the idea of getting to carbon neutral and I worked for the team at Clorox like trying to think about that like they were so far away from actually truly figuring it out and they've made some very large commitments by 2050. So how the hell do you actually do that?

You're gonna need carbon room but you can't efficiency your way to that. And so I believe that market is, you know, as we get closer and closer to the day of reckoning where people have, you know, committed to being carbon neutral, um, this market is really going to see, uh, a flourishing of of demand and we're going to be right there with some really high quality carbon credits to sell.

Uh, you know, I wanted to ask a little bit more about the farmers experience. Um, are they using the the dry heat? Are they drying tobacco or is is this a a use that you're seeing lumber?

Um so in our case um you know we are the farmer. Um and uh what we're doing on our biochar facility obviously when we heat something to 700° C there's a lot of waste heat that's generated. So on one of our pyrolysis reactors we have five megawws of waste heat. So what we're doing is we're harvesting that waste heat um through an organic raken cycle um process generating steam driving a turbine and generating base load power. So that that five megawws it's pretty inefficient but that five megawatts of waste heat is turning into a half a megawatt of base load power which is uh which is pretty significant.

So if you add you know five half a megawatt of base load power together with the five megawws of intermittent power um together with battery storage we really have a very interesting ecosystem behind the grid and the ability to sort of commercialize it um in the most profitable way. Um to me that's kind of the future of how all of this comes together. just taking each of the different byproducts of the processes that we're we're engaging it with and then trying to work synergistically such that it increases the the IRS of our investment.

On the topic of IRRs of your investment, are the uh land owners coming out of pocket typically for the installs? Are you arranging financing? Is this part of the secret sauce that gets the process going? Can you speak to that?

Yeah, so I mean we are the land owner. We are the farmer. um we are buying these properties um we're not leasing them from somebody else but we do believe that once we're able to lock in this business model um that that you know we need to give back and so the idea is that we would establish a 501c3 alongside such that we could provide um perform a business models that people could use to take a look at how they would implement this on their particular farm. We would provide them with strategies so they could localize and adopt some of the ideas that were um you know kind of guinea pigging for for people um in a way that would make sense for their um you know their situation and their their local um reality and uh and give back honestly such that we could have um others implement this uh this strategy in a way that makes sense for their um particular farm and their community.

It's almost like a franchising opportunity.

I like that. Yeah, the business model, franchising,

franchise for good.

Uh uh well that's great. And so if you're acquiring land and doing installs, you must be raising money all the time. So can you talk to the group about that and how they can participate in this?

Yeah. Positive movement.

Thank you. Um so we um we actually have a convertible note that we're offering um on a entity called Vicinity Capital. It's a REGG CF uh platform. you know, anybody with $2,500 is uh able to invest, which is really cool. You don't have to be um an accredited investor um and are part of some sort of angel syndicate and uh so so look it up.

If you find me on LinkedIn, there's a there's a link there and you know, we'd love to have you uh support our mission and uh be part of the upside that we're that we're creating. So, thank you for asking.

Uh it sounds like a wonderful cause. Um, Steve, I guess I want to ask you kind of the same question about investing in power finance.

Yeah.

Before you answer though,

yeah,

I thought we already learned once that DeFi dangerous. We got our heads handed to us in 20 2019 by regulators. Are we is this a new new type of DeFi where we're going to not be murdered?

I think that regulators have certainly come around. I was fortunate to attend the um salt symposium out in Wyoming not that long ago and the fact that we had chair SEC chair Atkins speaking, four senators, five representatives there, um I think the world is changing for the better and makes it more open for um this industry. Um and tell you what, um rather than mention anything about the fundraising that my firm is doing, we're doing a seed round. It's going pretty well. Um I actually want to take this chance to ask the audience something because this is the survey that I really need answered.

So, if you had the opportunity and availability in a permissionless way in your wallet to be able to either speculate on the price of electricity because you think a storm's coming to Texas, or if you wanted to hedge some electricity costs because you know that you're about to light up a couple of Bitcoin miners you're going to have online for the next couple years, is that something that's appealing to either hedge or speculate on via a token that's that is uh just in DeFi? There you go. I'll take a couple yeses. Awesome. That's what I need to know.

Thanks.

Uh, derivatives are moving onchain this year. It seems to be a huge movement. Power trading derivatives, I suspect, will be similar. Maybe if we're not going to be squashed by regulators, this is the year where Wall Street has to get their checkbook out and start to to buy up onchain companies. I hope that's how that goes for you.

I want to thank you guys both very much. Unless there's any other questions you wanted to get for our panelists before they get off the stage.

Here's one. Yell it out. I'll repeat it. Are there any?

Yeah. So what are the type of products? is just repeating the question if I if I can surmise. What are some of the products that could be or should be built out there such that a retail user of electricity in their home can easily and simply find a way to either hedge their known future costs or maybe speculate. Did I get that question essentially right?

Yeah. Awesome. Um so for us um I expect there'll be a whole bunch of products coming online here. I think I'm going to be the first to bring a bunch of electricity products onchain, but I'm not going to be the last. For us, we think that a there is the index if individuals want to trade and speculate and or hedge on their own.

We've got our own asset management kind of ETF- like product that's just a index. Um, so sorry, that's the first one, the index. Separately, we do have a managed pool of electricity volatility. We happen to think that issuing that not just as tokenized shares in a fund, but actually issuing that in the form of a stable coin has a lot more uses in the world of DeFi. Once you can create a synthetic dollar that maintains price stability and gets liquidity, these are lessons I learned from my time at Circle, then you can plug into the DeFi ecosystem.

And that's when things get real interesting when you're part of Pendle, when you're part of a when you're part of Compound. And so, um, you you raised a good question. Will there be more and easier use cases? There will. Do I have specific plans for them yet?

I don't. I got to stay laser focused on getting my things to market.

Yeah. Just to answer your question, I mean, one of the things that's happening and what we're tapping into is this uh movement called community solar. And like for example, in Maryland, there's legislation that allows people to um through their utility bill, basically buy completely displace all of their energy utilization and and pay through a virtual power plant for, you know, like say our power if we were to sell renewable energy through that particular utility. So in that way you can actually make sure that the energy that you're consuming is green and then you you you are in a sense an investor in that energy asset. So you are getting some of the re renewable energy credits back.

So you're you're actually gaining um income from the your piece of that particular energy asset through a community solar program. So, so that's a very tangible way that a consumer can participate in this movement. And you know, obviously as we um as we digitize all of this and we make it more accessible, it becomes, you know, even more powerful.

Uh this some great content, guys. Thank you so much. Thank you everybody for for sticking around.

Hey, thanks to Boston Blockchain Week, thanks for the text. Thank you to Ian Kane, wherever he may be. Great event. Go around. Go around.