Incentivizing New Solar

Transcript

Uh, perfect. All right. Um, yeah, thank you for the introduction, Jake. It's nice to be in Boston. Um, so one of the things that fascinated me about crypto is the ability to take something that to many people seems to exist in the ether and then tie it to something physical and tangible in the real world. And the way that we generally do this is by engineering or thinking about incentives in a way that amasses not only capital interest but actual productive activity. Um so the the the the general I guess meta framework for how we how this has kind of happened was probably prototyped by Bitcoin um in the simplest manner which

is you have some amount of token emissions or inflation um which dilutes existing holders but then is directed towards making the entire network more valuable um by bootstrapping the productive use or the amsation of some resource. So, it's this constant loop of new emissions generating something that is valuable, which then reinforces the value of what you're now emitting. In Bitcoin, the game is relatively simple. Uh, it is you're paying for security via hash power and computational effort. So, the Bitcoin network is more secure when you've amassed a you've amassed a larger amount of computation that is validating transactions. um two computers

validating Bitcoin versus the large amount of AS6 that we now have securing this this network and in some sense this industry is a very different story and a lot of it happened via bootstrapped kind of emissions and inflation. So that's one aspect. The second aspect is making it making it competitive. It's not sufficient to just inflate or emit a token in order to get people to do something. You also need to introduce some form of competition or adversarial uh some some form of an adversarial playing field in which participants have an incentive to either to grow and out compete in a way that makes the entire network more valuable in Bitcoin. We see this in the hash rate

graph which I think is one of the most amazing graphs that exists in this entire industry. uh because it clearly it just draws a very clear precise line between emissions and competition coming together to amass a significant amount of energy and resource being and and and a and a network that that um has in some sense surpassed what would have been possible to bootstrap centrally over the same time period. It is the ability of a bunch of independent actors and parties to go out, get funding and deploy on a network uh that allows you to to bootstrap at scale. Um so the superpower to decentralization at least in the

deepen context is this idea that no single entity has to go out there and kind of uh fundra or or do any any any like specific activity to to bootstrap something. You can get a bunch of individual parties who are competing with one another to do the same thing. So that kind of framing for crypto is kind of the founding insight for for glow. A lot of people say Bitcoin mining uh while it is a great case study in emissions, incentives and competition is wasteful. Um that is a separate discussion and one that I'm not going to get into now. But the idea is can you take that same framework or that same structure and then put it towards something that is energy generating rather than energy consumptive. uh and more specifically can you take it and

use it towards something that is not just en energy generating uh from like a nominal perspective but is targeted and generates something that what Glow cares about which is car uh climate impact carbon credits. So we are taking energy that is produced and we are putting it we would like to put it on grids uh in which you're displacing the most amount of carbon. That's kind of like the objective. If Bitcoin's goal was to just amass as much computation to secure a network, Glow's goal is to amass solar farms both commercially and residentially uh to displace the most amount of carbon. So it's like we're we're trying to take that that same emissions and value structure but just instead of the KPI being security, the

KPI is now energy produced. Um, so the kind of like naive approach to doing this or the the simplest approach would just be, oh, we in we create a network, we magically poof out a token and then we just distribute it to solar farms based on how much energy they produce. Um, and that while that like at first glance might seem to recreate the Bitcoin game or recreate those same competitive dynamics, it doesn't. And there's a crucial difference between Bitcoin miners and and solar farms. And that is that Bitcoin miners are only economically viable through their interaction with the Bitcoin protocol.

There's no use for an ASIC generally commercially uh other than to mine that cryptocurrency. But the same thing is not true for solar farms. Solar farms can and are economically viable without the use of any new token incentive to bootstrap them. If you just give out token emissions to farms, what you would essentially be doing is diluting the power of your token to bootstrap new solar and just giving incentives or tokens to people who would who would have already done the activity anyway. In other like said differently, you just have you have no counterfactual like impact. you haven't done anything other than potentially enrich a group of people that would have already done the same activity um and diluted the power

of your token to actually bootstrap a productive network. So this introduces that you know fundamental design challenge for glow. How do you recreate the same emissions and ruthless competitive structure that exists in Bitcoin mining or other mining networks in crypto, but direct it in a way where you've created a demonstrable new impact or you've introduced a larger amount of solar into the world that would have not existed already? And the um short answer, which we'll dive into, is you have all farms give up their revenues. Um, and that's a little scary because it is, but it's not that scary when we think about how we do this in

practice. So, the way it works for Glow is that any new solo farm that comes onto Glow is required to post as collateral or deposit the amount of electricity revenues that they would receive from operating. So if you let's say you have like a a universe of farms, each farms posts their revenue into the pot and they compete with one another to earn that revenue back. So what that means is that on in general if you are a highly competitive farm or a more competitive farm you will not only earn your own revenues back but you will earn the revenues that are forfeited

from underperformers. Essentially you take the universal farms stack stack rank them have them all you know commit their revenues to a pot and then redistribute accordingly based on impact. The sec the question then is also what does it mean to be competitive and in the glo world world what it means to be competitive is to be really efficient at producing carbon credits. So the most efficient producers of carbon credits or the people that are producing carbon credits with the smallest amount of electricity revenue received will now be receiving the outshared the the line share of rewards from forefeertures from those who underperform. In this way you've created the same kind of mining dynamics and and remember the the the initial problem before was that solar farms are already

viable. This now makes viability of a direct function of of how competitive you are and not a function of how expensive or cheap electricity is on your local grid. Um the question now is why does anyone play this game? Like why would I even enter though? Like this is a zero sum game. All participants submit all of their revenues and then that revenue is like reshuffled or redistributed. But if I'm if I'm looking at this game, the the if I'm a really efficient farm, obviously I'd want to play. But the only way the reason I want to play is because less efficient farms also want to play. So how do you get people to play? And that's the token. So the token reward is the kind of like

it's not the token reward is not the entirety of what a farm receives. It is just the thing that tips this game from a zero sum revenue reshuffle to a positive sum uh uh distribution to all players. So the reason I would play is generally if my expected revenues um are uh the profitability conditions for a farm is just if your expected revenues exceed your expected costs in the zero sum games on balance uh they would roughly be be be equally balanced. So um that that is not sufficient to get more people to play but if you get more

people to play then you now have a competitive arena where you can produce something that is valuable which in the glow case is is carbon credits. So this is something that we call the uh competitive recursive protocol. Uh the reason we do this uh the reason we call it like it's we we think it's recursive in nature is similarly to in Bitcoin where you have this kind of ruthless cycle of people who out compete are kind of crush out and push underperformers. These people who out compete are able to now reinvest and then continue to expand while underperformers are kind of weeded out. you have this feedback loop where the bar for being competitive continuously uh is is kind of is is upped um as each

round tends to strengthen the position of of outperformers. They they continue to you know receive revenues from underperformers and underperformers who you know do not reach their or don't meet the profitability conditions are just generally weeded out. So the the the framework is not just it's not something that can can be applied to something more than just solar. Um it is still the fundamental mining framework that we understand in these competitive physical infrastructure networks. But the the idea is you just have some skin in the game, some stake. Um whether that's purely financial or also um actual physical infrastructure, your performance is ranked and measured. uh and how much you recover or your rewards are directly related to your relative

competition uh in whatever game you've set up and then you earn rewards based on that as well. Um so this kind of structure is the the there there are a lot of nuances to to the way that the glow works and is deployed across regions and across grids. But this core uh uh recursive competitive framework is the one that we kind of instantiate in is the instance that allows us to replicate mining frameworks in a slightly different environment which is solar. Um I'm happy to take questions um uh if if there if there are any. But I hope that was kind of a nice little introduction to to how we think about solar at Glow.

Thanks. Hi Yeah, >> I don't know if you me I don't know if you mentioned this, but what blockchain are you using? Is this a Bitcoin side chain or >> uh we're built on top of Ethereum mainet? >> Okay. With Ethereum moving from GPU to um mod how did you do that? >> So what secure state on Ethereum is stake instead of work. But you can create you can just instantiate your protocol on top of Ethereum which is what what Glow does. So the Glow token its smart contracts are built on top of Ethereum. Um and this is you know kind

of just the the architectural underpinninging for the protocol itself. Not like so oh to answer your question solar solar mining or solar farms the amount of solar doesn't determine how much consensus weight you have. It's determines your reward. if if if that's where your question was going. >> Hello. >> How's it going, Vic? >> Good to see you, sir. >> Uh great to see you, too. Um how do you deal with the problem of the the efficiency of the farm, you know, being really a function of geography where, you know, if you set yourself up in New England, >> y >> you're not getting as much sun as Southern California. Yeah, that is that is the core problem or insight for glow

which is if I put a farm in Rajasthan, India for example, which has high solar irradiance and also a fairly dirty grid, I will simply blow any competitor that tries to put up solar out of the water. And that is what makes glow like at the at on face. That's why I said there's some nuances, but that that's what makes Glow on Face kind of like a singular singular game where you kind of push all the participants to one I like shelling point for lack of a better word. So that's when you have a global game. But what you can do is set up regions in which now you have the similar like let's say you set up a New England region where all the farms now compete within a similar let's say geographic or grid constraint. then you've kind of isolated these players from the global

game where they would simply have no chance um to one where now it's the same kind of competitive game just just um just just re like localized um and that is actually what's happening that in the next version of the protocol which we're releasing which is a glow v2 um I wanted to talk about that but there's simply not enough time but the idea was exactly that we noticed that you have that singular outcome how do you create the same competitive game um and expand the scope of who can play Yeah. So, with uh right here, >> hey, how's it going?

>> Hello. >> Um, with this competitive game, people would obviously be incentivized to cheat, right? And so, I'm curious of how you're handling like the Oracle problem. You have something that's being generated offchain. How do you get that onchain in a verifiable way where you know they're not changing their data of their revenue or changing the data of the amount of electricity that they're changing? >> Yep. Great question. Um, another thing that we could that could be a whole like workshop in and of itself, but the short answer is that solar farms are large static pieces of infrastructure. So, uh, what that generally means is that every farm is audited prior to the prior to being onboarded onto the protocol. And the inputs that generally determine your

carbon credits are how dirty your grid is that you're plugging into, how much energy you produce to displace carbon that would have been um uh emitted, and the general like weather patterns or radiance that you that you have, and the quality of your panels. All these inputs are generally known at build time. And so when you put up a farm, you are able to audit what they're kind of expected to produce over that lifetime. And the majority of the costs happen at build time as well. So in order to like the the the the the rational to cheat is because you can mitigate some costs while receiving the same rewards as if you had done the thing you had said you had done. But in order to do the thing at least in solar you have to go through

every like you have to you have to go through all the capital intensive processes first which means that you can audit these farms at build time um instead of like constantly you know monitoring performance but we also do constantly monitor performance as well just to verify that um our expected outputs are similar to to the realized ones. Um that's a short answer. There's a longer one that I'm happy to take offline but >> yeah. So that's like the Okay, I guess now we're uh Yeah. So that that's like the the core

thing here, right? is like the emissions framework of uh inflation creating value which then makes the whole thing you know the inflation itself more valuable. So the short answer is yes. The value from the carbon credits are what pe people who want to buy carbon credits uh or people who want to uh buy the whatever it's not just carbon credits it can be any impact credit uh whoever wants to steer tokens toward a region and and collect those impact credits are kind of the customers that are making the glow token itself. I would say um >> you don't buy token >> no there's no it's not like a buyback and burn mechanism that's not the the loop. It's more just people coming in desiring the ability to either steer the token or collect some impact credits.

>> Yep. as much as they can. >> Yeah. >> Yeah. >> Infrastructure. So we the way.

>> Yeah, good question. So, the goal isn't scarcity um scarcity of the asset. So, we emit a steady amount each week. It's fixed. About 175 185k tokens are emitted per week. Um and that happens in perpetuity. >> Any other questions? >> Great. >> Yeah. hard. Is that correct? >> Yeah. >> Yeah. So that happens when this loop

doesn't isn't is a um fails to be more than positive zero sum when it fails to be positive sum. Um, for example, Ethereum doesn't have a cap either, but the bet is that over time the value of what it secures of what it stakes secures and all the um kind of utility that it brings is continually value generating and expansive um similar to something like glow. >> Yeah. So, so burn is a way that you take value and you put it back into the protocol to make inflation uh sustainable. Um, but it's burn is not the only mechanism to do so. There are

other ways that you can continually generate value and then support the the tokconomics to be uh sustainable. Um, and and the way that Glow does that is I don't want to give the like there are two ways that it does that. one is in the current version of the protocol which we're just about to change. So I don't want to give that answer at the moment because it's a little outdated but I I'm stay tuned if you want to know more about more about Glow I should have put like a link or something here but it's just glow.org um has a bunch of the things on the tokconomics white papers other stuff that we've been writing.

What's the ticker? >> Uh GLW, but we are not listed on like Coinbase or an exchange. But you can find uh you can find again stay tuned the new version of the protocol is launching. So it will have the proper GLW ticker um on unis swap. But um glow.org for all questions for for now because I think I'm over time >> a little bit. >> Yeah. Sorry. >> Thank you, Vic. >> Yeah, appreciate it. >> Let's give it up for Vic. Appreciate it.