As we mentioned last week, this is part two of our two-part series of “Blockchain meet ESG,” an exploration of the challenges and opportunities that confront the crypto and blockchain communities as investors and businesses increasingly demand compliance with environmental, sustainability and governance objectives. This episode was recorded live Tuesday, May 25 2021 at Consensus 2021.
This episode is sponsored by Unique One Network, Mimo and Quantstamp.
In this second episode, our guests address subtleties and niches within environmental, sustainability and governance (ESG). Increasingly, blockchain technologies are employed in a variety of forms across the world to combat specific areas within ESG. These range from indigenous resource allocation and tracking to building sustainable supply chains from the ground up and applying big data to consumer water conservation. And that’s just a taste of what’s underway. At the same time, the blockchain back end’s impact on ESG is being refined, with initiatives angling to avoid worst-case scenarios of innovation, accurately quantify bitcoin energy consumption and reinforce incentives for using clean energy sources.
This time we’ll hear from a diverse array of fascinating guests:
Julius Akinyemi, founder and CEO of UWINCorp, and Lucía Gallardo, founder and CEO of Emerge, discuss blockchain solutions for free and fair trade. The two companies both focus on resource assessment. UWINCorp encodes the data and location of indigenous plants onto the blockchain, while Emerge is building an agricultural resource database.
Tanya Stephens, senior innovation leader at Procter & Gamble, addresses ways to track sustainability through supply chains and a consumer-focused water conservation coalition. The “50L Home” initiative believes that if consumers have the right data at the right time, they will be able to reduce their water consumption to only 50 liters a day.
Austin Hill, founder of Brudder Adventures and the first CEO of Blockstream, explains the “Vulnerable World Hypothesis,” which investigates how current innovations could be abused or misused in the future. Though “Vulnerable World” predicts a dim future, Hill outlines several strategies to avoid the worst-case scenarios.
Meltem Demirors, chief strategy officer of Coinshares, and Anton Dek, research associate at the Cambridge Centre for Alternative Finance, outline methods for quantifying bitcoin’s energy consumption and interpret recent figures. A trend of co-locating mining facilities and renewable energy plants is placing decentralized, smaller-scale facilities on the grid.
Mike Colyer, CEO of Foundry (Foundry is owned by Digital Currency Group, the parent company of CoinDesk), and Jesse Morris, chief commercial officer of the Energy Web Foundation, present the miner’s perspective on the incentives of clean energy sources.
Image credit: donfiore /iStock/Getty Images Plus, modified by Coindesk
Transcript
Michael Casey
Hello, everyone and welcome back to "Money Reimagined," the ESG edition. I'm Michael Casey, and I'm joined by my regular podcast co-host Sheila Warren. This is the second episode of two. In this one, we unpack ethical supply chains and ask the question on everyone's minds, can Bitcoin go green? Earlier today CoinDesk TV spoke to Fred Thiel, CEO of Marathon Digital Holdings, about a renewable energy agreement that his company and other mining companies reached with Elon Musk and Michael Saylor. It's a hot topic in crypto land. We'll let you know what he said later in the show. Sheila?
Sheila Warren
Well, I should note Michael, this two day ESG program on CoinDesk TV is the beginning of something bigger, a project will be launching in the fall spearheaded by the World Economic Forum in partnership with CoinDesk. We're setting up what we're calling the Crypto Impact and Sustainability Accelerator or CISA, which will be housed at the Forum and bring together stakeholders from a variety of sectors like finance, tech, accounting, along with governments, civil society and academics who support open source market driven approaches to ESG, all within a common commitment to interoperability and compliance international targets. And I should also note that our guests today and yesterday aren't necessarily here because they've made any formal commitment to the CISA project, they're really here as experts to help us get this vital conversation going.
Michael Casey
We kick off with a look at the S part of ESG in particular at blockchain solutions for the poorest on the planet. As the founder and CEO of UWINCorp, the mobile commodity exchange, Julius Akinyemi is committed to promoting free and fair trade to create wealth and reduce poverty. Also joining us is Lucía Gallardo, founder and CEO of Emerge, a tech development lab working to address pressing global problems. Welcome, Julius and Lucía. So Julius, your company, UWIN, is developing a universal registry for indigenous plants from biodiverse places like Mauritius and Amazonia. Can you explain the problem you are trying to solve?
Julius Akinyemi
Absolutely. Thank you for having me. As you already know, we are all surrounded with a lot of indigenous resources, what we call the genetic assets. In developing countries, most of these assets are indigenous plants, to be specific, that they use for food for medicine, for cosmetics in the past. What we are trying to solve is the fact that there is a protocol by the UN to solve this problem, which is called the Nagoya Protocol. The Nagoya Protocol does not actually solve the problem. It gives you access to the indigenous plants, but it is supposed to also control the equitable sharing of benefits. This is where the problem lies. So, when you think about the equitable sharing of benefits, most companies or enterprises go into different countries, they have their own under-the-desk negotiation with people, they take the indigenous plants and as we all know now, those plants are used in multibillion dollar cosmetics and pharmaceutical research and so on and so forth. So, what we are trying to do is, there are two pieces. One, we want to ensure equitable sharing of that benefit. And two, we want to ensure sustainability. So the way we try to solve the equitable path is to make sure that when people go in, we have your registry and then we have identification of people. We also have identification of products that they identify which we registered in a pilot on the blockchain. And at the same time, we also geotag that particular asset, you know, the indigenous plant, that way in case of destruction, like we seen the Amazonia, natural destruction that we saw in Australia a couple of years back, and as a matter of fact, a good friend of mine, Dr. Ron Quinn out of Australia, we were discussing a few months back, that if we had a registry like this where we geotag indigenous plants, when we replant, we know exactly what we want to replant. So, this is what we are trying to solve. So, equitability, making sure that we have what we call the genomics of data, and geolocation of all these resources, so we can replant them when they are utterly destroyed.
Michael Casey
Emerge has various impact projects in Latin America and Africa. The one I want you to tell me about now is this farmland initiative in Uganda. Tell us about that.
Lucía Gallardo
Really exciting project for us. The assessment resource database is a collaborative effort between Emerge, Penta Network, and it's done in partnership with the Ministry of Agriculture in Uganda. And, you know, from what we understand, this is a first-of-its-kind effort, an information resource that is using decentralized information infrastructure for the agricultural sector, in order to provide an alternative from keeping paper-based records or from uncoordinated data sharing and data management. And it's allowing, you know, the shaping of agricultural policy, it's looking at farmer needs, it's tracking production, it's tracking financial transactions, in order for us to de-risk a lot of the farmers that are looking for alternative sources of credit to grow their operations or formalize their operations, the data has been exceedingly useful in understanding, you know, what the needs are of rural populations and rural farms across Uganda, specifically, within the Kasese region. It started, obviously, with understanding what kind of data we wanted to collect, and what kind of data wanted to understand. So that was obviously related to, you know, land and land claiming, it was related to what people are even growing on this land, what kind of pesticides are they using, and what kind of techniques are they using that we can then use to help them you know, sell their product in a in a much more effective way, we're looking at things that relate to how they accept payment, and how we can prepare them in terms of compliance for reaching new markets, we're looking at, you know, all sorts of data on parishes, and the way that they organize themselves, how they're impacted by middlemen, and whether there's a possibility of not removing people from the supply chain, because we do not believe in displacing you know, employment opportunities. But we do believe in reshaping and realigning incentives in order to make sure that the supply chain is as transparent and a fair place as possible. And, you know, we launched this project within the middle of a pandemic. And we had to do a lot of the data collection in a sub optimal way. But I think the reality is that even as we take on these, like frontier technologies, we have to land with reality, right? We have to understand how data collection can take place in places with limited technological infrastructure with, you know, low rates of adoption, electricity, even, we have been to neighborhoods and parishes that don't have computers, or smartphones or anything. And yet, today, they are on our database, which is, you know, a blockchain based database. And we're really proud to have offered that. But the reality is, you know, this project, it's 10 steps in the right direction, obviously, there's a lot of work to be done in this first phase of data collection, but what we are doing is really looking at how we can build this data resource, you know, in order for us to then take it to these next levels of, you know, support for farmers, alternative credit programs, credit histories, looking at traceability of the product at joining different farms that might be doing very similar work and can then, you know, increase the volume of production and reach new export markets, and so on, and so forth. So that's what we've been doing in Uganda and what we're hoping to replicate in Latin America as well.
Sheila Warren
This is such a powerful example of how blockchain can actually support the poor. I know there are some who say problems are more social than technological but I think you're giving an example of how this technology can actually help address some of those social gaps and problems. I know that you also developed a COVID related project in Honduras. Could you tell us a bit about that?
Lucía Gallardo
A lot of our work operates at the hybrid of both frontier technology and international development, but also within the worlds of public and private sector. And so ,one of the things that we've noticed about COVID response has been the need to triage health services, public health services, specifically, a lot better. And so, the system works by tapping into emergency response services. And then it allows us to help triage and divide patients between either you know, COVID related incidents or non COVID related incidents, and then it allows us to effectively help manage these public resources.
Michael Casey
Julius, just quickly, because people often wonder like, how does the blockchain fit into all this sort of stuff? Can you just tell us why you think a blockchain model is valuable for a registry of the kind that you're building?
Julius Akinyemi
Absolutely. The blockchain is so critical. When I first started the project, I was thinking about building a mesh network. In order to be able to do so, the blockchain with the distributed ledger system makes it far more transparent. And transparency is very critical. If we don't have transparency, it doesn't matter how much laws and protocols we put in place. This will not work. It has never worked. The protocol from the wipe has always been there that did never work. And what we hope and what I've been living is, with the transparency from the blockchain, the ability to timestamp, the ability to not be able to change things at will, that actually is what is your grid bargo from the blockchain technology point of view. Secondly, I also believe that by extending, you know, the applications on the blockchain, into what people can feel. This is something that impacts people's lives directly.
Michael Casey
It's an inspiring way to think about how this technology can be valuable. So thank you so much for your time, really appreciate it. That's Julius Akinyemi, a CEO of UWINCorp. Thank you to Lucía Gallardo, you have quite a bit of fascinating stuff from her as well, CEO of Emerge, thank you to you both. Coming up after the break, could ethical supply chains be the answer to climate concerns?
Meltem Demirors
Welcome back to "Money Reimagined," the ESG edition. Today we are exploring ethical supply chains and looking at the size of bitcoin's carbon footprint.
Sheila Warren
To discuss how to make supply chains better address many of these goals, we're joined by senior innovation leader at Procter & Gamble, Tanya Stephens. Welcome, Tanya. It's great to have you. Now, Tanya, the full array of P&G supply chain relationships is really complicated. So give us a sense of what we're dealing with in terms of putting activity with all of these organizations. Can you describe that ecosystem of it?
Tanya Stephens
So we actually, of course, have a very large global reach. So we're in 153 countries. And within that, I mean, there's thousands of partners and suppliers that support every aspect of our supply chain, be it from the raw material, purchasing and transportation all the way through packaging, finished goods, then delivery to consumers. And so, if you think about it, the way the supply chain is structured, really, is we'll have like tier one suppliers who we have direct connection and direct information from, tier two suppliers, which is like a two hop, so they supply our tier one suppliers, we still have pretty good visibility of that, then, as you go into tier three and tier four, I mean, the supply chain really ripples out, right? So you could think about that in terms of the ability to have that transparency all across kind of degrades as we get to, you know, four plus. And so a lot could get lost in translation. Not that the suppliers don't have all of the information but sometimes what we're asking for, we need to make sure that what we're asking for and what we need at key points in time are available. So with that, as we think about how we really operate at scale, I was really encouraged to hear from your first set of guests, because that's exactly what we do. The supply chain is so complex and there's so many different challenges that you're dealing with. So really what you need are twofold types of partners, you need partners who are going to go in and solve a specific problem that you could then integrate into the supply chain. And then you need to have visibility across, which is where blockchain and blockchain based solutions come in, and really help us deliver that level of transparency.
Michael Casey
So not only Tanya, are you dealing with this incredibly complex array of partners, you're also grappling with a huge problem, I mean, a number of problems, but one of the ones that you're trying to address is water conservation. Can you tell us a little bit about that project, what its objectives are and how you're implementing across that ecosystem? And to your point, how does blockchain fit into it?
Tanya Stephens
Yeah, absolutely. In this space in general, these goals, these problems that we're trying to solve are massive goals, right? So it's clear that it's not something that can be done by any one entity. And it really needs to be done by, you know, a coalition of people. And so really, P&G is co-chairing a water reinvention coalition. So reinventing water's use in urban settings. And we call this program the "50L Home Coalition." And this is actually in partnership with the World Economic Forum with Kohler, with SUEZ, the Water Resource Group and many other partner companies are working together on this initiative. And this coalition was really inspired by Day Zero in Cape Town, South Africa that happened in 2018, where for the first time there was a major city that was about to go dry. And what happened is, as a protection mechanism, they said every person would be rationed to 50 liters of water per day. Compare that to the use of water in developed nations, where it's well over 500 liters per day, per household. So, really thinking about the behavior changes that needed to happen in a very, very short space of time for all of those residents in Cape Town. That's actually what inspired this coalition. And we said, like, if we needed to fix this problem, it can't just be about one company, it needs to be about what the community surrounding it looks like. It needs to be about what the municipality needs, it needs to be about how the utility companies are coming together and what the appliance companies look like in the home. So really, it's about taking this imperative, and using all of the innovation from these different groups of stakeholders, and really trying to make 50 liters feel like 500 by using understanding of chemistry, using different forms of technical innovation, but really looking at how we're doing sensors, and capturing all of that data, but really starting to transform what the usage could look like in a home for consumer.
Sheila Warren
So Tanya, buy-in to coalitions like this is not easy, and there's kind of an art to it and a science to it. And in this case, is it carrots, or sticks or appeal to common humanity and altruism? Like what sort of methods did you use?
Tanya Stephens
The first thing is that consumers are actually asking for this. So, a number of consumers have raised their hands and said: "Hey, I want to do more for sustainability. I want to do more for the climate. I just don't know how, can you explain to me how, can you give me some mechanisms to be able to to help?" Ultimately, what we're doing here is creating new chains of value within homes. So what we found is that if consumers have the right information at the right time, that has the potential to change behavior, and if you think about how homes are constructed today, they're very complex digital ecosystems. They're ecosystems that need to interoperate, there's a whole host of different data that needs to speak to each other. So the companies we've chosen to partner with and the ones that we continue to pursue are things like utility companies, you know, telecoms, appliance manufacturers, fixtures, if we think about that, all of those companies are looking at operating on a smart grid. So effectively, what you don't want to do is you don't want to overwhelm a consumer, you want the messaging to be fairly succinct. And so what we've really been able to do is to change over this ecosystem into a consumer-first initiative. And that's really been the carrot and I think it's the carrot that everybody is going after in any case, so we've taken time to make sure we have common goals in that area.
Sheila Warren
Thank you, Tanya for that insight. That was Tanya Stephens, senior innovation leader of Procter & Gamble.
Michael Casey
This is the part of the programming that starts off a little scary, but hopefully we can end it in a more positive place. Here to explain is Austin Hill, the founder of Brudder Ventures, the first CEO of Blockstream and a longtime entrepreneur in crypto and other disruptive technologies. Welcome, Austin. So, you've been giving thought to Oxford Professor Nick Bostrom's "Vulnerable World Hypothesis," which takes the idea of global sustainability to a somewhat dark place, can you break it down for us?
Austin Hill
I can't do justice. But the "Vulnerable World Hypothesis" essentially talks about the idea that every time we reach into the invention yearn, if you will, reach out and discover something new, very advanced technology, nuclear power, CRISPR, genetic modification, synthetic biology, we run the risk of accelerating our own demise, because we don't know how to use these technologies responsibly or deploy them, or there's not equal access to these technologies. The "Vulnerable World" thesis goes through and says, okay, in the world that we live in, let's reimagine or think if some of these technologies come online or were very available, very democratized and accessible, and could be abused or misused, what do we need to think about in terms of a governance structure or society that's able to withstand some of the negative impacts of these technologies. So you know, we've all benefited from the fact that the bar to enter the nuclear arms race, it's actually quite high, thankfully, plutonium, uranium enriched nuclear material, it takes a nation state infrastructure, it's very observable. After the Manhattan Project, a lot of the scientists got together and thought about how do we develop governance structures, and for the most part, with the exception of some rogue states that we continue to deal with, we've been able to have a mutually assured destruction, governance monitoring system around nuclear waste and material. The other one is biological, synthetic, biological warfare. But aside from those two technologies, there haven't been a lot of other technologies that have the disruptive power that could wipe out humanity. But, as we get further and further and more advanced into the singularity, more technologies exist that could have that potential.
Sheila Warren
So it sounds like barriers to entry, whether those are through materials are kind of natural means or maybe even artificial means like regulating, or whatever it might be, are one way that we can avoid winding up with the Bostrom kind of worst case dystopian scenario, what are other things that we can do to avoid going down that path?
Austin Hill
One of the situations he talks about is investment in a surveillance state, unfortunately, and for cypherpunks, and people who came at cryptography or crypto, or digital money from a privacy point of view, that's a kind of scary world where there's kind of a, you know, Minority Report, you're always being watched, and if you misuse a technology, some governance structure comes in and takes care of you. That's not a future I want to build. That's not a future I'm excited about. So, one of the biggest parts that's not addressed and I think needs more attention, and this is where I think Bitcoin and crypto offers so much opportunity, is addressing some of the gaps in income, wealth inequality, access to financial, trust in governance, trust in governments, and if you look at the trends of transparency, auditability, verifiability, that blockchain and crypto can provide at some of the economic empowerment, you start to kind of posit some world futures where you can see that the role that Bitcoin could play, in actually allowing a population that's being forced to migrate through economic or climate related migration, access to opportunity, access to jobs, access to income, all of a sudden start to reduce the threat model, because, you know, if you have a society of the "haves" and the "have-nots," Jeff Booth describes this very well by saying: "Name one point in history when the 'haves' could build walls big enough to keep the 'have-nots' outside." In a world of advanced technology with microscopic drones, and, you know, a whole bunch of opportunities to, you know, attack the other side, we have to address something that raises everyone's income inequality, income level, and I think crypto offers that opportunity.
Michael Casey
Have more "haves" and less "have-nots" is one of the solutions here. We spoke about this a couple of days ago, Austin, and I was talking to you about the project at the WEF that we're looking to develop here. And it struck me when I spoke to you that what you're talking about is a classic cryptographer's approach to these problems. That is like, it's threat modeling, and you just use those words, you start with this possible threat, and you work backwards from that. And that got me thinking about how, you know, sort of some umbrella group for dealing with ESGs, could take this approach. Describe for us, in this case, how that would work. This idea of you know, almost reverse engineering the threat to find the solutions.
Austin Hill
Well, if you imagine a future society or state, at some point in the future, 10-15 years in the future, many Bitcoiners and people in the crypto community believe that currency wars, hyperinflation, some sort of reset is going to be necessary, there's going to be impoverished, economically deprived people who are living in regimes or under regimes that we see currently happening in Venezuela and other parts of the world, where they don't have access to good government, they don't have access to economic empowerment. And so economic migration, and combined with climate migration is a forcing function that you have to accept is going to be occurring. So, you say, "Okay, if all these people are going to be moving through society moving through our land, moving through our borders, and they show up, and we don't have a fixable integration system, we don't have a place to put or integrate these people, then you kind of end up with a threat that you can't win, because, you know, assuming that these people are just going to be happy in that state and have no response, is not a workable answer. So you've gotta backtrack and say, "Okay, what can we actually do to create or reduce the amount of impoverishment that exists there," you know, the same way that America invested in Radio Free America and published the idea of the shiny city and the hill, you know, on the hill and democracy and public free media in communities that were behind the Berlin Wall, and imagine the idea of a free government. I think we need to be starting to talk about sustainable energy, renewable grids, technological empowerment around green energy, and monetary freedom. Unfortunately, that's not a popular idea. Because you know, a lot of our foreign efforts lie on debt, rely on extending the fiat regime that is petrodollar-backed based. But, there is a world where you go in and you actually say, We want you to show up at our borders, coming in and saying, "Hey, I just bought a house, I'm moving in, I have an online job, I've been working remotely, I would like to immigrate, please, I would like to be part of your society." And with you know, satellite internet, and with all the technologies that exist, that then becomes a very easy integration or more manageable migration. Because it's not about "haves" and "have-nots," it's about someone who had opportunity and access to opportunity was not denied that because their entire wealth and all their monetary savings were robbed by some desperate leader who you know, devalued their currency and lost a currency war with the United States.
Michael Casey
Well, this has taken us, I think, from this scary scenario to one that I think personally is a much more optimistic vision. So thank you for doing that for us, Austin. That was Austin Hill, founder of Brudder Ventures.
Sheila Warren
Bitcoin's energy consumption has become a very hot topic with the latest source of debate being yesterday's founding of an organization of North American miners dedicated to green mining. But here too, we face a huge measurement problem, how much energy is consumed and how do we know when miners are using renewables versus fossil fuel sources? Coinshares' chief strategy officer Meltem Demirors has a few ideas on where to start. She joins us now with Anton Dek, who is an associate at the Cambridge Centre for Alternative Finance, which produces the Cambridge Bitcoin Electricity Consumption Index. Welcome to you both. Anton, let's cut right to the chase. What are the current estimates for total bitcoin electricity consumption and why is this expressed as a range?
Anton Dek
So, current estimate says 112 terawatt hours annualized. And that's best guesstimate, of course, because we provide the lower bound, upper bound and best estimate. If you check lower and upper bounds, they are from anywhere between 37.6 kilowatt-hours to 293.
Michael Casey
So we often hear these numbers compared to countries Anton, that bitcoin is equivalent to say, Sweden, which sounds really big. But is that a reasonable comparison? You know, how does Bitcoin compare to say other types of energy uses or almost, say, misuses of energy?
Anton Dek
Yeah, so we have not only calculated electricity consumption, but we also tried to put these figures into perspective because it doesn't mean anything, unless you put it into perspective. And country comparison was just one of these comparisons, by far the most popular of course, because that's the easiest one to understand. But, if we compare it to countries, it indeed looks bleak, but if we compare it to all countries, like for example, looking at the United States and Chinese consumption, you will hardly see Bitcoin in this chart. So it depends on what to compare it to. On the other hand, if you compare it to wasted energy or energy used for recreational purposes, you can also have a different angle. And another important thing to consider here, how much does the traditional financial system consume? We don't have a reliable estimate for this part but it is definitely the same order of magnitude.
Sheila Warren
So, you know, I think these comparisons can be productive, but they're often really apples to zucchini, and they only tell us so much and perhaps the more important measure is how much of this is coming from renewable sources? So, Meltem, is it possible to measure that? Hi, thanks
Meltem Demirors
I think that's exactly the question. I used to work in the energy industry before I started working in the Bitcoin industry and there are two conversations we need to have here. One is around the sources of energy and at the end of the day, you know, my computer's plugged into my wall right now, I don't dictate what my sources of energy are, the grid dictates that, and in most countries, the grid is not centrally planned. There are a variety of economic incentives and market incentives that predicate and dictate the type of energy production that exists on that grid. So, we really need to separate the argument into its two components. If we want to talk about the sources of energy, that is very difficult to track, unless a mining facility is directly co-located with renewable energy production, it is very challenging for any miner plugged into the grid to verify where the electrons they're using are coming from. However, this is a trend we're seeing and a trend we track at Coinshares. In 2018, we published one of the first bottoms-up industry research reports were our research team actually spent six months interviewing, talking to, calling miners to find out what machines they were running, where they were running them. And we've collaborated closely with Cambridge over the years. So, we've shared a lot of our pains on trying to gather this data. And that's how we were able to confirm that over 70% of Bitcoin mining was in fact done with renewables, in particular, hydroelectric power from the Sichuan region of China, because miners will actually physically colocate next to a hydroelectric facility and plug the miners into that renewable power source. But I think the challenge starts to become, we're talking here about sources of energy. On the topic of uses of energy, it's very difficult to have a conversation about the uses of energy that's objective, it's highly subjective. I could say Christmas lights are a terrible use of energy. And every year Christmas lights consume more energy than the Bitcoin network, I could say hair dryers are a bad use of energy. So it's very difficult. And the country comparison, I think, is fraught with some challenges. Again, the Bitcoin network today secures over a trillion dollars worth of value, proof-of-work it was what secures that trillion dollars with a value, do you put a trillion dollar economy on par with, you know, a half a trillion dollar economy? You know, probably. So I think when we start getting into these comparative discussions around uses of energy, it's very difficult to have an objective conversation. And so the challenge is always, you know, energy markets are dictated by the prices people are willing to pay. Bitcoin naturally is incentivized to seek out the lowest cost source of energy, which typically is stranded renewables, or other forms of energy that are produced in an abundant fashion. And Bitcoin is actually a great load balancer for energy grids, because it consumes peak demand generation during periods of low demand and helps offtake energy that otherwise would go wasted. So again, if I could just stress any one point with people who are watching, it's very important to separate uses of energy. That's a macro problem, policy driven, very much set at the state level. And again, let's not forget European Union every year, it gives $50 billion in direct subsidies to the oil industry. Okay. So in the U.S., it's 20 billion of direct subsidies to the oil and gas industry. So the incentives here really matter. And they're hard for the Bitcoin industry to control. And when it comes to uses of energy, it's very difficult to have an objective argument about something that's deeply subjective, and in many instances, I think is deeply personal for people.
Michael Casey
So I'm glad Meltem, that you raised the issue of incentives and the role for that matter of subsidies and governments because that's where I want to go with this. Right? So, I think that the fact that you are seeing a significant amount of bitcoin sourcing done with renewables is obviously a positive thing and that's because renewables, at the end of the day, should be the cheapest source of energy, by definition. But the problem is, of course, as prices rise and margins improve miners are incentivized to use dirty sources of power, because they can, they can make money from this. The question is simply like, how do we get those incentives in the right place? Is that a role for councils like the group that was formed just today, was just something that governments really need to be driving?
Meltem Demirors
Sure. So let's be very clear, one of the most important things about the Bitcoin network is that is decentralized in all aspects. The physical implementation of the Bitcoin network in the form of mining is a very important part of the network. And it's finally starting to get the attention it deserves, in my view, and we're starting to see a lot of financing models and investment going into the physical infrastructure that supports the Bitcoin network, all the way from semiconductor fab in the form of ASIC production through to the actual installation of these miners to now new colocation and hosting services that are emerging, similar to how the early internet peering or data center business started. In my view, every business who's serious about bitcoin should be running its own physical infrastructure that I think will be a big shift as we move forward into the future. Now, they'll use third parties who are experts in that to do it. But here's the most important thing, what we're seeing right now and one of the things I'm working on at Coinshares is investing in mining businesses, and startup miners who are directly colocating with renewable energy facilities. But, more important than that, they're actually enabling new renewable energy production to come onto the grid by using bitcoin mining as an economic incentive to make that facility economically viable. And so what's really interesting to me here is if we can use bitcoin mining as an economic tool to bring more renewables onto the grid, we've just found a really great way to use a private sector solution to solve a failure in public policy. And I think one of the big trends we will see in the energy industry and again, this is what I did for seven years before I did bitcoin for seven years, one of the big shifts we will see I think, is a shift towards more decentralized, localized smaller-scale power production. And that's something I'm really excited about, this is something that's been problematic in the U.S. where renewables cannot be contributed back into the grid, it's very difficult for people who are producing an excess of renewables to put those into the grid unless they're of a certain size. So, I think generally, as we start to see more localized, smaller-scale renewable energy production to make that economically feasible or balanced those loads with Bitcoin mining, will also start to see more resilient energy grids emerge, and in particular, energy grids that could potentially be independent of the fossil fuel industry and the fossil fuel industry complex. So, there are a lot of interesting shifts afoot, but I think the important thing here is to have calm, rational fact based discussions. But unfortunately, when talking about climate these days, it seems very difficult to do that.
Sheila Warren
Well, thank you both for that insight. That was Meltem Demirors, chief strategy officer at Coinshares and Anton Dek, research associate at the Cambridge Center for Alternative Finance.
Michael Casey
So, everyone's talking about this tweet. Elon Musk tweeted that he spoke with American bitcoin miners, who are now committed to publish current and planned renewable usage. Marathon Digital Holdings was a part of those conversations, CEO Fred Thiel joined "First Mover" on CTV this morning, here's what he had to say about the purpose of that group that was formed.
Fred Thiel
It's really more about sharing ideas about how, as an industry, what tactics and strategies that we're using to be carbon neutral and to use renewable energy. As you I'm sure aware, bitcoin mining is a buyer of last resort for energy, especially renewable energy, which otherwise goes to waste. In this country, we consume about four terawatts as a nation of electricity. Of that, 200 gigawatts alone is wasted just in transmission lines. So, if you start looking at solar, solar has peak production in the middle of the day, wind has peak production in the afternoon, all of this renewable energy has to be consumed or it's lost and by for locating Bitcoin mining facilities, at or near points of distribution for this renewable energy, the bitcoin mining industry is able to suck up that energy, use it and effectively store energy in the form of the bitcoin that it creates, and then that value can be shared and used for other means. But essentially, you know, the bitcoin mining industry really is just a consumer of energy that otherwise would generally be lost. Most miners in the industry today have some program in place to move towards carbon neutral, or green energy.
Michael Casey
So, how green can bitcoin go? What can be done to boost renewable usage and change the narrative around crypto and climate? Mike Colyer, CEO at Foundry says this demand from developers, renewable energy projects, and bitcoin should be treated as a way to finance development, as you've heard prior guests talk about. Foundry, I should say, is a subsidiary of DCG, the parent company of CoinDesk. And Jesse Morris, chief commercial officer of the Energy Web Foundation is working on carbon offsets solutions to help investors in bitcoin stay compliant with ESG demands. Welcome to you both. So Mike, I know Foundry wasn't in the room where it happened, as we say, but what do you think that agreement with Elon Musk, Michael Saylor and those North American miners was intended to achieve?
Mike Colyer
I think it's great that this topic is coming up and I think it's great that everyone got together to talk about what could be done to help make bitcoin more green. The reality is, if you don't believe in bitcoin, you're never going to be convinced that it's a good use of power. But if you do believe in bitcoin, and you're worried about the energy usage, the bitcoin algorithm is designed to be ruthless, and to strive for the lowest cost, and the lowest cost is renewable energy. So, miners have an incentive to go find the lowest cost energy anywhere in the world and that's what we've been doing. And we're just seeing that start to accelerate faster and faster now.
Sheila Warren
Well, to that point, it sounds like they have seen rapid growth in North America. How much of that is actually renewable-faced? I think more to the point, how do you take that effort and more than just making Bitcoin greener? How can you actually be an underwriter of green infrastructure development?
Mike Colyer
Yeah, so Foundry has been busy, we've grown to over 35 employees, we've got an amazing, dedicated team to drive this mission forward. We've deployed $225 million into the North American ecosystem, we've launched the North American pool, we have an advisory services to help folks navigate the mining space. And, most of our efforts have actually been focused on renewable energy projects, because that's where the opportunity lies for the lowest cost energy. So we've committed another $50 million towards miners that want to pursue projects where we're colocating with hydro, with solar, with wind, they're focused on flare gas, or emerging technology, which opens up a lot of future opportunities for miners. So, it's exciting times. The one thing I will say is the Bitcoin industry moves faster than any other industry I've ever seen in my career. And, it's happening whether people want it to or not, it's just going to play out that way. I think sometimes the media has a hard time accepting that, like accepting the fact that it's going to go in that direction.
Michael Casey
Of course, we are the media, Mike. So just be careful there. But Jesse, your organization has an offset solution for ESG investors, who may be wary of investing bitcoin, how does it work?
Jesse Morris
Yeah, so I think just zooming out, it's much broader than this concept of traditional carbon offsets, which, generally speaking, are deeply distrusted by the energy and sustainability community. What we're really focused on not just the energy web, but also under this initiative called the Crypto Climate Accord, which we've spoken about before, the focus is really threefold to try and crack this problem. Part one, get everybody to agree on a baseline. Nobody agrees on the baseline for how much electricity the bitcoin network is using and so there's some work to do there. Part two, enabled miners, crypto holders, exchanges, wallet providers, and other crypto market participants to near term, make their crypto green. Now that might be through purchasing offsets, could also be through investing in new renewable energy facilities. It could also be through purchasing other renewable energy products. And that's probably what you're mentioning, Michael, we have built some software on the energy web stack, it's called Zero, it makes it really easy to shop for renewables anywhere in the world. And you can shop by "I want solar, I want wind, I want solar wind with very specific attributes," they're in different places of the world, and for those transactions to take place on blockchain, by the way, so we're actually using blockchain to combat blockchain's carbon intensity challenge. But the third thing that I think is most relevant because of the tweets that you were mentioning, etc, from Mr. Saylor and Mr. Musk, has to do with those bitcoin miners that were part of this council that seems to be coming together. And what I would say to them is, don't trust, verify. The opportunity we have with bitcoin mining in particular is to develop what I would call a "green hashrate" kind of solution for the planet, which is a near real time read on the actual carbon intensity of the bitcoin network. Forget survey data, forget self reporting and doing some analysis on top of that, we have the technology to surface information about bitcoin mines in a privacy preserving way in order to actually see how green or not the bitcoin network is globally. So these miners that are coming together, I hope they're going to do more than do some self reported survey data. I hope they engage with us to actually build this green hashrate solution that coincidentally, some of those miners are part of, Argo Blockchain, one of the groups that was noted in that tweet, they're actually a CCA supporter, and we're already working with them on this green hashrate solution. That's the real long term path to fully decarbonizing bitcoin.
Sheila Warren
So Jesse, we had Kevin O'Leary on yesterday and he suggested distinguishing what some are calling it “cleanly mined” or “green bitcoin” from regular bitcoin kind of like, you know, blood diamonds. But people worry, I think, rightfully, that two classes of bitcoin could destroy its overall value. So, how do we guarantee that some of the solutions you're proposing, you know, won't lead to this situation?
Jesse Morris
Well, it's very simple to guarantee that what I'm proposing won't. What I'm describing is keeping the fungibility of bitcoin at its core, no interest in saying "that's a green bitcoin, that's not a green bitcoin." The interest isn't saying, "here's the entire bitcoin network, let's agree upon the greenness or not of the entire network." It's not about individual bitcoins. If we have that kind of transparency, it will help additional investors and other people come into the bitcoin ecosystem, because of being able to see "Oh, that's actually how green or not this thing is." And, it could also just act as an additional incentive to try and get as much mining activity as possible to be greener. I mean, imagine, would we be having this conversation right now if we could see over time the actual bitcoin network was creeping up in its actual share of power from renewables, it probably wouldn't be as intense. But, everything that we're talking about right now is the second-hand reported data. And I think we can change that while absolutely preserving the fungibility of bitcoin itself.
Michael Casey
So Mike, another factor in all this and then perhaps the transparency that Jesse's talking about it is relevant here, is that China is cracking down on mining. Do you expect that to drive business to the U.S.? And if so, are there enough green sources to fill that demand? Or will it roll over into coal fired plants? And is this an opportunity to bring more transparency to the mining process?
Mike Colyer
Yeah, so that's a great question, Michael, you know, right now, it seems like China is actually cracking down. You know, we've heard these stories many times through the years. Today, it seems like the Inner Mongolia provinces are shutting down some of the coal mining aspects, miners would colocate. So we are seeing a lot of demand from Chinese miners wanting to come to the United States. I do think there's going to be a capacity constraint in the United States, and North America really to take on all of these additional machines. So, it's gonna be interesting to see how it plays out over the next six months here. But I think this is a positive side. I mean, I think we want to continue to decentralize the Bitcoin network. I think having hashrates spread throughout the world is a really powerful aspect of bitcoin mining. And, we've been focused on producing and delivering solutions for institutional investors, and miners in North America, and one of them is a North American mining pool. So, we now have the largest pool outside of China, which has never been done before. We're in the top 10 now, we're excited to get into the top five. And we think it's a really important part of strengthening the Bitcoin network.
Sheila Warren
So Jesse, the Energy Web Foundation, you've got members that include a lot of big energy companies like Shell and Duke Energy and others. Are these firms committed to using crypto and blockchain for their own ESG promises? Are they kind of open to exploring it? How would you describe their stance on this?
Jesse Morris
So there's two things. On one side, the dollar signs light up in their eyeballs, right, which we've been talking about, as mining and other business activities come to these different geographies. That's a revenue opportunity for them and they can provide products. Imagine some of these large energy companies providing tariffs or other products, specifically for bitcoin miners where they can guarantee 100% renewables. So I think the first thing at least as it comes to cryptocurrency, it really is a revenue opportunity for them. But on the other side, Sheila, and that's more what Energy Web is really focused on, yes, we're building solutions with dozens of these utilities and other energy market participants from around the world, and they're using blockchain and other open source technologies to support their future business. The applications range, there's a number of different use cases, but at the end of the day, that's why they're using blockchain. They're using blockchain in tandem with other technologies to actually accelerate decarbonisation, and a number of different ways.
Mike Colyer
The energy companies are actually thinking about Bitcoin mining and how they can use that to colocate with their energy projects. It's actually happening today. I think the next four years are going to be super exciting and the North American mining space.
Michael Casey
So thank you, gentlemen, that was my Mike Colyer Foundry and Jesse Morris of the Energy Web Foundation. Thank you both. So, that concludes our special two part ESG edition of "Money Reimagined." Be sure to follow developments in this space as the welcoming forum and CoinDesk work to grow the WEF's Crypto Impact and Sustainability Accelerator around the ideas discussed here. Thank you, Sheila. Bye for now.
