Grid Congestion Is Energy’s L1 Problem. This Crypto Company Has a Solution - Bits + Bips

Transcript

Welcome to another episode of Bits and Bips the Interview. My name is Steve Erlick, head of research at Sharplink and also your host. Uh we've got a terrific show for you today, but before we dive in, let's take a very brief break to hear from some of the sponsors who make the show possible. >> Multi-chain Advisors is an emerging technology growth firm that has helped create 50 plus billion dollars in enterprise value for 80 plus clients over the past four years. They're the partner to help navigate markets. Build real traction today at multi-chainadv.com.

Quick note before we get into today's episode. Bits and Bits now [music] has its dedicated feed. We're spinning up from the Unchained feed and moving to a new podcast and [music] YouTube channel. So, if you want to keep up with our weekly live streams and macro meets crypto breakdown, make sure to subscribe to Bits andB directly. We won't publish there until March, [music] but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at unchainedcrypto.com/bitsandips. >> All right, welcome back. So, like I said, we've got a a really uh interesting and and timely episode today. I have with me Shawn Murray, the head of special projects and crypto lead at Fuse Energy, a $5 billion uh UKbased energy company, full stack energy

company that really sits at I guess the convergence of um decentralized infrastructure, crypto and energy. And uh we've been speaking for for weeks now about how crypto and macro are colliding. That's what we do on the show. uh in particular uh in relation to the volatility and energy prices and uh Sean's business is being directly impacted by by all of this and they've come up with a really uh ingenious way to try to I guess mute out some of that volatility and and grow a sustainable business that's largely based on renew renewable energy something that we can all get behind. Uh so welcome Sean.

>> Thanks for having me on Steve great to be here. So I I want to just level set here and I want to make sure that uh we're going to get into all those issues but but Fuse it's a bit of a complicated company and unlike many show unlike many projects that I highlight on the show um your origins did not start in crypto. Uh the the firm actually was created by a few early employees of Revolute the uh Europe's I believe largest or most valuable intex startup. So they know how to grow a business and and you've already built a pretty successful company before you even got into crypto.

So just very briefly, can you please uh uh explain what Fuse does? >> Yeah, sure, Steve, and thanks. Um and understandable, we're building probably about 10 different businesses at once right now. So um there's a lot going on, but in in summary, we're a verticalized energy company. So it means we operate across the energy stack. Everything from generating energy from our own generation plants like solar and wind farms that we acquire and manage to a big in-house kind of trading operation on wholesale power markets to then ultimately supplying you know homes and soon businesses with energy and billing them every month for it. And that's kind of on top of kind of an installation and an R&D unit as well that we do for kind of distributed energy devices that ultimately you know we'll be looking to

uh launch our kind of cryptonative product into. So that's broadly what we're doing. We're doing about half a billion in revenue right now annually. Um, mostly based in Europe and the UK, but looking to kind of expand over the next year or two to uh, you know, North America and a bunch of other countries. >> Yeah. And I I know one I guess big feather in your cap is a no action letter you got from the SEC, I I believe last year, and we'll get into that and and and what it means for your business. U, but but first, I I really want to talk about what's happening in energy markets today. I I don't have to tell anyone listening or watching that they're volatile. Oil is still about above $100. uh and given I think some of the the seessawing statements from President Trump and the US and and um

responses from the Iranians uh it's very unclear what's going to happen next. Uh how is this impacting the energy markets in Europe versus versus the US which I believe is a little more um self um reliant and what like what are some of the big changes or or how's this impacting your business? Yeah, a great very obviously topical question and the kind of differences between the UK and Europe and the US are pretty pretty stark which you know you can kind of see manifest itself on the charts right now. Um I think one of the big things that you know we look at broadly is if you think about kind of oil and gas prices obviously they're they're incredibly you know um the the price of oil and gas on markets

incredibly related to the supply and you know most most of that comes through the Gulf um for for Europe especially um in the US naturally you know with the kind of recent shale revolution the US is is somewhat self-sufficient especially when it comes to to to gas but I think you know one of the big things that we look at is when we're looking that and how it's kind of affecting our business is that the price of oil actually doesn't really affect, you know, the price that ultimately people pay for their energy that homes, businesses, data centers, etc. pay for their energy. Um, you know, obviously it affects what people pay at the pump, but um it's it's more through secondary effects that oil has these knock-on effects on on the kind of energy economy. Um and you know it's loosely correlated with gas and that's

typically due to you know it's kind of a replacement in some industrial applications. Um and obviously oil and gas are sourced near one another but the main effect of oil on kind of power markets and energy markets in general is secondary due to you know inflationary effects on on logistics. Um and obviously that's been you know hugely impacted with the the recent developments in in the Middle East. Um the kind of more kind of pertinent thing around energy markets, you know, for us in our business is is the price of gas. And it's a totally different story because gas directly influences the price of electricity that people pay.

It's the kind of primary fuel that goes into your combine gas turbines which makes up a third of the fuel mix in both the UK and the US. and the way that energy markets are structured uh and the the kind of price discovery mechanism on uh energy markets is very heavily indexed towards the gas price. So what that means is when there's supply disruptions to um the LNG around the world, what you see is a direct impact immediately almost on uh the the price of on power markets. And in terms of the kind of US versus Europe UK comparison, the Europe is very is a heavy importer of of gas. And and typically what

happens is that you have seasons where there's injections into gas storage facilities. That typically happens over the summer. And then you've got seasons of withdrawal from those storage facilities. And obviously naturally you know during the injection season which is now coming up the the the price kind of you know worldwide of gas um heavily influences you know ultimately the costs that Europe is paying. On the flip side, US is with the recent shale revolution fairly insulated as we've kind of seen a little bit um on on the gas side of things and that is going to be something to watch over the next few years though.

And the reason for that is when you look at there there's a certain decoupling between the Henry hub price which is the price the the kind of standard price of gas in the in the US and the kind of the the price of GTF which is the kind of European UK index those are somewhat decoupled because um you the US because it's such a recent market is slowly still ramping up its export capacity which means that right now there's this decoupling but we do expect that decoupling to actually decrease. increase over time. Um, and the kind of consequence of that is right now there's quite a quite a lot of insulation for the US market. Um, but not at all for the for the UK market. But that

decoupling, you know, as I kind of said, we'll look to to converge over time. But um yeah, ultimately when it comes down to our business, it's it's the price of gas and the flows and the kind of status of the storage facilities around Europe because that's where we're operating right now is what really influences what we're paying and then ultimately what customers are paying down. >> Gotcha. And and maybe just to sort of again um frame a picture for everyone watching and listening, uh $100 a barrel for oil sounds moderately scary. 50 um is very worrisome. $200 is is downright terrifying and and that could lead us into stagflation territory. um could you um sort of put natural gas prices in in in those terms and and I know I mean

just I'm not an energy expert but uh it's easy to remember especially during the Russian invasion of Ukraine from 2022 on um sanctions put on on Russian energy exports and and nowadays people are talking about the closure of the straight of Hormuz and and while some um like oil processing plants have been shut down and it might take months for them to start up if and when this conflict ends um the straight could reopen immediately theoretically. ically whereas uh Iran's attack on on Qatar's like big processing and export facility I believe knocked off 20% of its total capacity and Qatar is a huge um LG exporter uh that could have much more permanent effects from what I could tell. So how does that like again put a p kind of a long question but like what

are the prices right now and how is that actually directly impacting customers and and then again like because of this like big attack on the infrastructure um what challenges will that present moving into the future. >> Yeah. So I mean right now the the price of gas are basically about um 50% above 50 to 70% above the kind of usual um price that was kind of we would expect um around this this kind of year and you know ultimately that is down to you know the obviously the disruption to the straight core moves and you know when we kind of look at it like beyond just crude and LG you've got like disruption further to um you know not just gas prices but a bunch of other prices as

well, right? So for instance, 30% 34% of global fertilizers come through the straight, right? There's also effects. So that's that ultimately affects food. Um and then also, you know, kerosene is mostly sourced out of Qar and straight as well. So that obviously influences the price we pay for jet fuel. um further effects on that is like there's about a quarter of the world's sulfuric acid comes through the Gulf that is needed for things like explosives which is obviously very uh hot and topical right now and also you know we're finding things like copper which is the central input to many things including a lot of inputs in the energy industry.

So, as a consequence, essentially right now what we're looking at is gas prices are, you know, quite like like fairly elevated, probably not as aggressively elevated as as what we've seen with with with oil. Um, and not quite as aggressively elevated as what we've seen through the Russia Ukraine crisis. And that is in part because you know especially in Europe there's been a lot of measures taken since the 2021 crisis to kind of you know obviously mitigate the uh the serious effects that that crisis had and causing um you know kind of the the disruption to the energy markets um back back in 2021.

Um so that said like essentially what we're seeing is right now we've seen an increase um but not as aggressive what we've seen in the past. But however, one of the big issues that you know uh that probably a lot of our listeners have seen is that um you know this this disruption and this attack on the facilities themselves. These are multi-billion dollar facilities that take decades to build and a very long time to repair. So the the the long-term disruption is something that I feel like isn't fully being factored in right now.

And people, you know, view that, okay, look, this is a short-term thing. We'll see a taco and then, you know, prices will return to normal. But in fact, you know, what we what we're not really recognizing, what I kind of think that, you know, a lot of markets aren't really recognizing is that there's really severe long-term effects on global supply that that they're going to percolate and last for quite a few years. Gotcha. And I think that probably leads me into my next good question, which is again you guys are I think like I think you described yourselves as a full stack uh power plant or full stack power company. Um you do um help generate um for your customers renewables, but you're also from what I can tell a wholesale energy um purchaser

and and supplier. Um so you you you sell LG and that type of fuel or you sell electricity generated from like those types of sources to your to your customers as well. Uh how are yeah how are you hedging uh prices in this particular environment especially given what you just said that you think uh you think people are sort of underestimating the longer term impact. Uh and uh I'm also this is all also happening right in the middle of an explosion in in prediction markets where I mean um oil derivative contracts on places like hyperlquid are are seeing massive volume to the extent that they're the second biggest markets outside of Bitcoin. So,

uh, like what are you seeing? How are are are you hedging, especially in a world where while maybe it's ideal at some point to generate almost all of your energy from renewables, that's not really practical at this point. >> Yeah, of course. Yeah, a couple of things there. So, I guess first maybe just to give like a quick little bit of background on like the the structure and the price discovery mechanism in in power markets. So, and even if your even if your fuel mix or what you use to generate your power in a given region or country is like let's say predominantly renewables in most competitive markets actually the price of gas ends up setting the the the price that everybody pays for for energy and the reason is essentially demand is fairly fixed. Um

so let's say Steve you and I are buying power for an hour tomorrow starting at noon. the the the demand for power in that era is fairly inelastic, which is actually a big issue that we're looking to solve. Um, and what happens is you you have your generators will bid in and and those bids will be price ranked and essentially the the most expensive um bid that meets what the demand requirement is, sets the price across the market. So even if renewables make up 90% of your kind of generation mix, often it is the price of gas that the gas that fills the gaps and it is the price of gas that then sets the marketwide price. So often when we're

thinking about hedging and looking forward, we are looking at you know actually okay there's going to be there's actually extreme sensitivity in power markets to the price of gas. Even when you look at a cost basis, gas actually doesn't make up a large cost to produce the energy in the first place, which is, you know, can have a separate debate on like if that's the right market structure or not. But so when we're thinking about this, we're thinking about our kind of trading operations. Um, generally we we operate a very neutral long or like slightly long desk and our kind of trading operation is is B has a modus operandi of d-risking. So how it works essentially is we have for a given day in the future you have a certain amount

of demand um and you know our delivery obligation is actually you know unknown I suppose or forecasted unlike you know maybe and that's kind of a difference to energy markets and maybe traditional >> you're you're a growing company as opposed to a mature like utility that like had >> Yeah. Exactly. And then also you don't actually know how much people are going to use um when you're looking at you know like if you ask me how much energy you know my customer base is going to use in 3 months time I can only give you an estimate of that because it's highly dependent mostly on temperature um which you can't you cannot work off that far in advance. So what happens is we essentially buy these kind of fairly like flat blocks and we kind of DCA into those over a couple of months and we

slowly build out the box to essentially what we think the kind of customer demand profile is going to be. It's generally biodal. You've got a peak in the morning and a peak in the evening when people are home. >> Yeah. I'm sorry, just to interrupt. When you're buying these blocks, you're buying these from energy producers. >> You're buying them from head. Yeah. Generally on uh power exchanges. >> Power exchanges. Okay. >> Yeah. So, essentially, you're kind of like slowly essentially hedging out your exposure to that that demand profile that you've forecasted. And then what happens is when you get and essentially what we do is we we look to kind of close with a flat a fairly flat block buck every day and that's you know more so especially in the current environment. And then what happens is you know kind of day ahead when you have

a lot more information about you know the the particular shape of what your customer's kind of demand profile is going to be and the energy that you need to provide them. You buy more refined blocks then. So you buy the kind of arrow box that you use to kind of shape out the demand which is very temperature dependent. >> That's interesting. So you're So you're buying these on almost like an hourly or daily time horizon. You're not >> daily time horizon. >> You're not like a farmer who's who's who's selling a futures contract six months out so that you can kind of guarantee a price for your harvest. This is much more short-term duration. How how much how much more expensive is it to um to I guess hedge exposure to engage in this type of um engage in

these activities given the heightened volatility for you. >> So it is yeah right now it's much more expensive and typically what happens is that what if you're like hedging on under a kind of you know fairly market standard approach typically any of the kind of customer you know price um protections and stuff will reflect that by the time you actually get to delivery. So you're not kind of breaking regulations around, you know, um pricing your your energy too high. But you know, one of the other things we kind of love to do then is um we look to kind of buy essentially, you know, a couple of other products that, you know, hedge our exposure to further increases in generally volume and price.

And so that's kind of like our exposure kind of varies quite nonlinearly with both, you know, temperature um which affects both price and demand, right? And so typically, you know, you you build out these kind of hedging blocks and then you shape them as you get closer to delivery. And then for, you know, specific, you know, either macro events or, you know, cold snaps or that kind of thing, um, we'll buy kind of more sophisticated kind of options or temperature dependence options um that essentially allow us to ramp up or ramp down exposure depending on the conditions at the time. Um and I guess to your point around like energy uh prediction markets obviously becoming

huge hugely relevant right now. Um and you know one of the things that we're kind of interested in you know long term is seeing you know does this have you know institutional viability. Right now the markets aren't liquid really enough. Um and also the kind of products that we would be looking to buy as a kind of institution are quite complex. So, like I kind of said, like I kind of mentioned um with the kind of nonlinear effects especially on temperature on your exposure and because it affects both the price of energy and the demand that your customers are are going to use. Um we typically like buy these quite complex bespoke products um that that essentially scale up or scale down with

uh the the the temperature. And then there's also, you know, kind of things like to to consider like basis risk between what the measured temperature is and the temperature that your customers are actually using, which is ultimately what actually affects things. And so these are the kind of issues that we're thinking about solving or would love for somebody to solve um as we think about, you know, okay, how do we, you know, potentially bring more energy products on chain? >> Yeah, it's interesting. Um, I mean the um like the derivative contracts on somewhere like Hyperlquid, I mean they're they're cash settled. I mean people are really just betting on the price. I would imagine you're actually taking physically delivered uh products if that if that's what you're you're buying.

>> Yeah. Cly you've got financial or physical products that you can trade and so generally like the the products that you would see being like traded proprietarily um would be financial products. You're not actually expecting delivery of the of the commodity itself. >> Yeah. But but but you are we are >> Yeah, you Yeah, you are. versus hyperlquid, you're not. You're literally trying to leverage the volatility to put on a market position or or or or something like that. And and and in that case, temperature and those types of things don't don't really matter.

Whereas for you, I mean, you have to be able to deliver this. So, um you have to make sure the goods that are that arrive are sellable. I mean, it's it's very akin to almost like a refri a refrigerated container for produce that gets sent to a supermarket or something where like you have to make sure that the products don't spoil on the way to transport. That's I think that's kind of how I'm >> inter. Yeah, it's good analogy. Yeah. >> Okay. All right. So, um we're going to talk a lot more. We're going to get into um sort of your movement into the deepin economy and um the launch of a of a tokenbased network. But before we do, let's take one more quick break to hear from some of the sponsors who make the show possible.

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To learn more and start building real traction today, visit multi-chainadv.com. Quick note before we continue with today's episode. Bits and Bips now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed, macro, AI, and how it all collides with crypto. If you want to keep up with our weekly live streams and [music] macro meets crypto breakdowns, make sure you're following bits and bips directly. [music] We won't start publishing until March, but getting set up now means you'll be ready on day one. You can [music] find the new Bits andB channels at unchaincrypto.com/bitsandbbits.

You can also find us by searching Bits and Bips [music] on YouTube, Apple Podcasts, Spotify, or wherever you listen. >> Um, so we're back. Actually, before we continue, um, I I need to um uh do a a bit of quick homework I I forgot to do in the beginning. Um, this episode, as all episodes are, um, is strictly forformational and educational purposes. Nothing that you hear is financial or investment advice. For full disclosures, please see uncheen crypto.combitsands andbits. And with that, um, we're back with with Sean and really excited to talk to you because, uh, you're launching a a kind of a token-based DPIN network. Deep for anyone who doesn't

know stands for, uh, decentralized physical infrastructure. It has been a buzzword, uh, throughout crypto for for years. Uh, but to be perfectly frank, I'm yet to really find a project that has successfully kind of gotten that escape velocity. You guys might be a little different because you've built from, as we discussed before, um, a very promising and lucrative business before even getting into deepen. So talk to me a little bit about sort of the thought process behind um behind launching this network and kind of Yeah. I mean how why do you think you're going to succeed when a lot of other deepen projects have have failed to sort of get off the launch pad?

>> Yeah, very fair. Um so I think historically there's a lot of deep in projects um that are somewhat of a solution looking in in search of a problem and are often demand constrained. And what we've seen is, you know, we've been wanting to to build something on chain since day one, since, you know, 3 four years ago that we started this. And we've identified one problem that is really, you know, not talked about enough that persists across the energy stack, no matter which layer you're building on, and that's grid capacity.

So right now we've got these burging like production facilities, generation facilities and then a lot more consumption you know data centers, robotics, manufacturing facilities than we really ever envisioned um on the on our kind of grid networks. You know our grid networks were built 150 years ago. um Edison era never envisioned to support the the loads that we're putting on it in the 21st century and that has manifest itself in quite a few issues.

You're trying to build anything on the grid, you know, be it a a new generation plant like a new wind farm or solar farm or you know a data center. Um, you can have the permitting, you can have the planning, you can be ready for kind of engineering and procurement, construction, but when you ask the grid, can I plug in here and either put power in or take power out, the the response from the grid is often, you can't do that because we haven't got capacity for you. And often what we're seeing now is decadel long delays for grid reinforcements in order to be able to plug in where you want to. And that's obviously got huge downstream effects on, you know, economic progress and development and also just lowering energy prices for the economy in

general. Then when you're looking at energy markets, you've got constrained grid capacity, which often means that sometimes you've got a lot of, let's say, renewable power in a certain region when it's particularly sunny or windy, for instance, in that region. And you've got demand centers separated from that. and you know this fine capacity line that often results in not being able to move that power from where we have it to where we need it. So when you're looking at kind of like the statistics from that like we kind of estimate that over 70 billion um in the last kind of 5 years or so worth of you know renewable clean lowcost power has essentially been shedded because we can't move it across the grid to where it's needed. Obviously

that's got huge downstream effects on the costs of energy. Then finally, obviously, you know, ultimately who who fs the bill for this? It's ultimately consumers, the people who pay energy every month. So, the analogy I actually like to use is that grid networks are suffering from congestion issues very similar to how legacy L1's um suffered from congestion issues. you've got limited network capacity, peak demand, and as a consequence, you know, network congestion, high gas prices um during during those times. And ultimately, it's a scalability problem.

>> So, what we're looking to fix as part of this is essentially use these demand centers and coordinate essentially making demand more elastic to to grid conditions. And what that actually means, you know, in practice is we want to connect to devices that are in homes already. So these are like smart devices like smart thermostats, EVs chargers batteries solar that kind of thing. And then programmatically have them respond in when they're using energy to the conditions of network congestion on the grid. And effectively what that means is if we can leverage all of these millions of devices that are already just sitting in homes like

unused right now there's gigawatts of capacity there. If we can use those to actually respond to the grid conditions in real time, we can significantly reduce congestion on the grid, which has tons of knock-on effects into the kind of, you know, both the energy system and the global and the kind of economy as well in terms of being able to build stuff on the grid faster, being able to build manufacturing facilities faster, having less volatility on the energy markets. So it means we need less provisions for reliability which ultimately means lower costs of energy for everyone so we can do things faster.

So that's basically essentially the core of what the kind of energy network which is the kind of deepen project that we're looking to to to release is is going to do. I'm happy to talk about you know kind of our kind of further reservations about being you know put in the deep end category but uh yeah I'll pause there. >> Uh yeah and we're going to get into that but I just want to ask a couple of I guess clarifying questions. one I I believe you mentioned something like these devices are holding energy that that's going unused. Uh I I just want to make sure I'm understanding that versus sort of maybe devices that uh when I was reading about your company before to prepare for the interview uh it was more like trying to figure out a way to um increase demand during times like

perhaps in the middle of the night when like cooking obviously has to be done a certain period of time but there might be times when other things can be done where there's less demand versus like these devices having energy that they could perhaps return to the grid. I just want to clarify that. And then two um just to kind of frame reference for readers that I mean we hear about insatiable data demands for these new AI centers. I mean anyone in crypto and we've covered like the conversion of Bitcoin miners into like AI HBC centers and and kind of how there's a gold rush for these because they have all this infrastructure and they're already plugged into the power grid. Um like they take gargantuan sums of energy. uh you serve I forget how many I guess hundreds of thousands or or >> 350,000.

>> Yeah. So I mean I know growing company but like is at what size do you have enough to really perhaps be able to offset the demand um from these insatiable data centers that are continuing to to build? >> Yeah, great question. So I guess maybe to disambiguate the the kind of the wasting energy versus the kind of devices and scaling. Um when you have limited grid capacity and you have wind farms or solar farms, these are big, you know, utility scale sites that are overproducing, often they're actually told to turn off because the grid can't move the energy where it's needed. That's a huge waste.

It's a huge opportunity cost on the system, right? And that's a consequence of you know grid capacity. And the other side of things and what the solution we're looking to do is when the grid is congested let's say there's a lot of demand on the grid right now it's super congested. We're shedding let's say renewable loads. If we can get devices um and coordinate them to turn down we can essentially reduce the load on the system to allow it to flow more efficiently. So that's kind of the it's called demand response and we're making essentially we're co coordinating the the consumer demand base to be more reactive and intelligent in responding to the condition the real-time conditions in the grid. So that's kind of essentially what we're

looking to do with the kind of energy network and the coordination system that's kind of all incentivized with the kind of energy dollar token that we'll be releasing. >> Okay. >> And then in terms of like what how much is actually needed. So right now you know you can look at like a smart thermostat which is you know probably got like a kilowatt or two depends on like the house and the heating system and that's kind of got a kilowatt of two of you know like flexibility that you can ramp up or ramp down on demand. Similarly with batteries you can go up to like kind of standard is around 10 kilowatts you can kind of ramp up or round down and then you know similarly with EVs and and solar panels. But if you can like it's actually the the threshold of devices that you need to

kind of make a difference and start you know kind of playing in things like power flexibility markets and kind of actually starting to kind of earn for load shifting. It's actually quite low. It's only about 0.1 megawws. So it's we're talking about you know 100 homes with with um uh we're talking about 100 homes with smart thermostats or you know you know 10 20 with with batteries that you know can we can start participating in power markets. Then when you're talking about like data centers themselves you know they go into the you know tens hundreds of megawatts generally so what we're talking about is you know tens of thousands of homes to kind of offset a typical uh data center.

>> Okay. And yeah, so I think like in terms of like the economics, it's actually actually kind of makes sense because a lot of these devices are actually already there in homes already. They're just unused. So you could be, you know, you you you could have a a smart thermostat at home that you're just using for for your temperature when you could actually be contributing to the grid, providing services to the grid and earning for that as well. >> Okay. Interesting. So let's get a little bit more into the specifics of of your token and the energy network. Uh, I believe it's either I guess Q1 is just about over. Um, so I'm I'm guessing you're going to try to to launch in in Q2. Um, can you give us an update on that? And uh uh I believe there's going

to be a 10 billion token supply and you have some um uh there's different distributions for for um users versus investors versus uh the company and uh planned burns etc. So just briefly kind of walk us through the setup um the tokconomics how this is how this is going to work and um what is the utility of these tokens because you because you um you got a new action letter from the SEC um which really only comes when they believe that the token is going to actually have utility and not just be a tool for speculation.

>> Exactly. And that's something we've emphasized from the very start. You know we're regulated in two different industries heavily so you know energy and crypto. So everything we've done has been with with an with a a gear an ear towards compliance and ensuring that we you know release something that's actually useful and not just you know an investment vehicle or a speculation vehicle basically. And so how how the kind of token works is very simple for the user um you know user kind of logs on to our kind of fuse app and they kind of have to be you know provide being provided energy by us and they can connect their devices. So things like you know I want to let's say let's say I connect my Tesla EV charger. So, I sign into my Tesla and I grant permissions in the app. I say, "I want my Tesla to be

charged 20% or 70% by 8 a.m. every morning." And then outside of that, I don't care what you do with it. You can kind of use that to provide grid services and optimize grid and reduce grid congestion in the background. And for that, I provide direct value and I'm generating direct value and contributing to actually the energy system. And for that, I'm getting rewards in in our kind of native token built on Savannah, which is the energy dollar. And for those rewards essentially then what happens is I can I unlock discounts um on goods and services within the fuse ecosystem. So, let's say later when I want to install a new solar array on my roof, let's say that solar array costs, you know, 15 15 grand, um, I can

actually take the tokens that I've earned, burn them, which reduces the the supply of the tokens, um, and access, let's say, you know, let's say I burn $1,000 worth of of tokens and I can access, you know, two $3,000 discount on my solar array. So that's the kind of idea of essentially how you know tokens are are emitted um to users um for providing real utility and real value to the energy system and then how they're essentially then burned and taken out of supply for um for actually like real utility in terms of you know value for the user more broadly. Yeah. So essentially the kind of emissions are kind of aligned with energy transition schedules. So we we think very long term. Um we think that's the only way to

build a kind of generational company. So the kind of emission schedule is out to 2050. Um and the idea is that we're slowly emitting to users over time as the kind of user base the network grows. But then also as the network is growing and more people are redeeming we're we're burning more and reducing supply. plan to burn about 50% of supply through these customer kind of uh redemptions between now and kind of the the end of the emission schedule. >> That's probably kind of how the uh the kind of token supply works. And um yeah, >> I I am curious and and I mean I understand sometimes talking about the SEC there may be limits to what you can um share, >> but the token is going to be listed on

exchanges. I know Coinbase has already um mentioned that it's on the road map and uh I'm I'm sure that it's going to to show up on on various dexes as well. Uh so there is an opportunity to to to get liquidity for the token. The only there options beyond just uh redeeming it for discounts and then burning it. Uh, did the SEC have any concerns about like the types of exchanges it would list on or how many or was it really focused just as long as there actually is concrete utility and it's not being marketed as a security that that was sufficient to get the no action status?

>> Yeah, I think like the that like the the SEC letter was huge for us. Um, so it was and it was the product of months of like very constructive engagement with the uh with the commission. So essentially their their main focus was yeah around the utility and the fundamental mechanics of the token as opposed to like where it would be listed. Okay. >> The idea is yeah um essentially like their they what they cared about was you know is there really like a consumptive utility to the token in the sense that like people actually you know use the token and and burn it and extinguish it for like actual you know consumptive value which is like you know buying something. um that that that they're looking to to to acquire

>> and that was that was the main kind of focus for them. Um and ultimately there was a lot of back and forth. Um but for on the secondary market side of things like the the idea for the secondary markets is to you know to facilitate um facilitate exchange between you know net buyers and net sellers of the token. um that was ultimately like exactly how we do that you know is as long as it's you know compliant and in the and in line with the kind of details presented in the SEC letter there wasn't much further kind of yeah discussion around around exchanges where we le the particular venues and I I saw I believe I read somewhere that you're not going to be uh having any sort of airdrop which uh is is interesting and from my opinion I

believe if that's true it's a good choice because it kind of could limit the chances of just a big surge in usage from airdrop farmers that could then lead to a massive withdrawal whenever the air drops end. And for a business and an industry that's already highly volatile, that's probably something that you're looking to to avoid. So, um, but like do you have any expectations for how this is going to change the the usage um the growth of your network? Do you have any sense of like what would be an ideal burn rate to get to to the five billion? anything you can share along those lines?

>> Yeah, sure. And I think this is again what kind of distinguishes us from like a typical deepin category project. Like I think I would kind of describe us as energy infrastructure over deepen because historically deep pins are, you know, very supply constrained. They need people to, you know, buy their XYZ proprietary devices and often they give away a lot of supply in order to try and bootstrap that, right? We don't have that issue at all. We're device agnostic. We have a captured user base of hundreds of thousands of users already. That's only going to grow. You know, we're hoping to hit, you know, over a million users over the next over a million kind of homes over the next 12 months. Um, so we're not really under that constraint that we need to like shed a ton of supply in order to get people on board and launch the network

and using it. Um, we don't need people to buy, you know, our proprietary hardware. They can just connect stuff that they have at home already. Although we are looking to release proprietary hybrid over the next few months, which should be interesting. But I mean, I think as a consequence, you know, ultimately I think when I look at airdrops, I think they're going to be viewed, you know, historically as the most expensive marketing campaigns in history. Um, like when you look at like giving away $200 million worth of worth of tokens to often what are like, you know, can be, you know, you know, kind of mercenary farmers. Um, I think it's just net negative for the projects. And the way we're looking at it is we're going to like consist we're we're going to provide tokens and distribute tokens

for you know the the fundamental value that the network is generating and and not for spammy like kind of you know quests that kind of thing. Like no shade against that if you want to do it. It's a great way to get distribution but it's not really the way we're looking to approach things. And we think you know when we're actually looking at okay we want this to be still working and usable you know in 2050 you know after you know 50 100 years of you know fuds growing and becoming like globally dominant as an energy major the way we see and you know the lens through which we make these decisions using that it just felt like giving away a ton of supply to get like early kind of eyeballs just wasn't quite like our kind of you know skin so yeah that the

idea. >> And one more quick one before we wrap up. Um, do you have any contingency plans uh in case people don't want to trade in these tokens for discounts, but instead even if they're not airdrop farming, they're farming for tokens and they prefer to sell them on the open markets so the supply doesn't doesn't decrease. And that flywheel, I know you didn't use the word term flywheel. I I guess I I am. But if if that momentum doesn't start, um do you have any sense of what you might do if that situation occurs?

>> I mean for us um I think to be honest, well a I think many projects you can kind of ask that for almost any project like what what happens if the if people don't use the token, right? and and I have to be to be perfect [laughter] >> but like I think I mean for us the way we've built this product is incredibly native and seamless with the rest of the product as a whole. So, you know, we're using embedded wallets that, you know, essentially you get you get your tokens kind of dropped for making these activities and it feels very seamless to like the rest of the product that you're using that you're like using for your energy supply and paying your

bills every month on. And the way we're looking at it is that we we're just essentially making it as seamless for the web two or the web three user to use these tokens as possible. Um, and like essentially if I'm getting dropped these tokens and I'm looking to buy stuff within our ecosystem and these tokens are available and in my wallet and we say we can show you that this is the amount of discount you get when you burn them and extinguish these tokens and reduce the supply like that is a very seamless and integrated experience for the user. Um, and it's something that it's like it's a direct immediate value to the user that like we think is going to be like, you know, a no-brainer for them when they when they actually want to when they go to to buy these

products. So, we don't we don't view it as, you know, having contingencies in place. I think, you know, especially the kind of I think, you know, when down the line, I think the the kind of buyback and burn mechanism that is touted by a lot of projects today, which is, you know, very successful extensively. Um, I just I think from a compliance perspective, we weren't totally comfortable with that. Uh, and so we're really relying and pushing on, you know, fundamentals and creating value for the network. Um, because we think that's what is going to make this network stand up for decades as opposed to years. Gotcha. Okay. All right. Well, we're just about at time.

Is there anything I I didn't ask you? Uh, anything else that you'd like to leave our listeners and viewers with? I think mainly just you know if you want to learn about more about what fuse are building and uh the energy network and follow us on fuse energy on X and yeah stay tuned over the next couple of weeks we've got some kind of exciting announcements and you know competitions and and events planned and you know obviously we've got TG coming up so um yeah looking forward to the launch and uh hoping to bring people along the road. >> Great. All right well Sean thanks uh so much for joining. Thanks everybody for watching and listening. That'll wrap things up for for Bits and Bips the interview.