WBD526 Audio Transcription
Turning Garbage into Bitcoin with Adam Wright
Release date: Wednesday 13th July
Note: the following is a transcription of my interview with Adam Wright. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
Adam Wright is a Co-Founder and CEO of Vespene Energy. In this interview, we discuss using landfill methane to power Bitcoin mining, turning waste into an asset, reducing greenhouse emissions, building decentralised baseload energy facilities, and orange pilling local government.
“You could either mine Bitcoin on one small landfill for a year, or you could plant 5 million trees and let them grow for 10 years - both of those are going to have the same environmental impact.”
— Adam Wright
Interview Transcription
Peter McCormack: Adam, hi, how are you?
Adam Wright: Peter, how are you?
Peter McCormack: I'm good, man. Thank you for coming in.
Adam Wright: My pleasure, thanks for having me.
Peter McCormack: So, Danny, I think this is the show he's been most excited about us making on this trip.
Adam Wright: Great, well I'm excited to be here.
Peter McCormack: Yeah, he keeps bringing this one up. Every time we talk about an interview, he goes, "I can't wait for the Adam one"! You're going to really love this, you're going to love Adam.
Okay, I normally, if I don't think the audience maybe know the person, I normally ask them to give their background, but I think we should outline what it is we're going to talk about today, and then we'll do your background so people understand. So, just tell the audience what we're going to be talking about with regards to mining today.
Adam Wright: Okay, great. So, my name is Adam Wright, I'm the Founder and CEO of Vespene Energy. Vespene Energy is a methane mitigation company that uses Bitcoin mining to mitigate landfill methane emissions. So, we partner with municipal landfills, we install power generation equipment on the landfill and use the energy to mine Bitcoin.
Peter McCormack: Okay, there's a lot to get into there.
Adam Wright: Lot to unpack.
Peter McCormack: What's your Bitcoin story?
Adam Wright: So, I got into Bitcoin back in 2017, so I was born and raised in the Bay area, I've been in Silicon Valley companies my entire career, so I've always understood the social implications of Bitcoin. I read the whitepaper, and really interested in the technology; but as an environmentalist, I've been a little bit disappointed in the FUD that is in the mainstream media. So, one of the reasons for founding Vespene was to change the narrative behind the negative mainstream media in Bitcoin mining.
Peter McCormack: So you want to kind of help people understand, or also be doing things which contribute to reducing the impact of climate change.
Adam Wright: Exactly. I mean, there's a lot of talk in the Bitcoin community about how Bitcoin can be used to incentivise construction of renewables and how it can be used to mitigate methane emissions. So, Vespene Energy is doing both and doing both at scale.
Peter McCormack: Okay, but being an environmentalist within the Bitcoin community itself is not the most popular term to use.
Adam Wright: Totally.
Peter McCormack: We have a mixture of people who do believe that we have an issue with climate change, that humans are causing it; we do have people that think it's all bullshit and the climate's always changing, etc. I'm on your side with this, I fall on that side. We had Andrew Dessler on this week from Texas M&A? What is it?
Adam Wright: Texas A&M.
Peter McCormack: A&M, that's right, yeah. I'm a foreigner! Texas A&M. He's a climate scientist and there to discuss it. We've had Alex Epstein on, interesting to talk to him. Are you prepared that you're going to be challenged by some people that there is no environmental issue to be considered?
Adam Wright: Yeah, I mean very much so. I think our main mission is to not necessarily change the narrative from within Bitcoin itself, but rather to change the narrative outside of Bitcoin. And so, we're doing that by partnering on a grassroots level with individual communities and municipalities, because as we'll get into, the ultimate beneficiaries of a landfill are a municipality or a city. And so, by showing what Bitcoin mining can do to solve an actual problem, that helps to bolster acceptance and ultimate adoption of Bitcoin at a grassroots level.
Peter McCormack: And like Troy would say, even if you don't believe there are issues with climate change, you don't have to have any issues with this, because it's just a mining company, mining Bitcoin and choosing to get its energy source where it gets its energy source from.
Adam Wright: Yeah, and Troy's a good friend, and he's actually an advisor to our company. I think our missions are very much in alignment. But we're really excited, and part of the reason for coming here today is to use this as kind of a long-form press release. This is our "Hello, world" moment. We've been working on this company for the past year, developing the relationships in the landfill community, and other partners within government and regulators, to put this solution together, and we're really excited that our pilot site is under construction currently at a municipal landfill in central California.
We chose California specifically because of its regulatory environment. California has some of the strictest air quality regulations in the country. So, by starting in California and then scaling out to other states, we can basically go anywhere. It's like learning how to scuba dive in the coldest water. If you do that, then you can go pretty much anywhere.
Peter McCormack: What were you doing before this?
Adam Wright: Well, my career takes a lot of circuitous paths. I guess my main background is in mechanical engineering. I have a bachelor's from UC Berkeley, and my premier career was actually in submarines; so my background is in personal submarines, recreation and tourism. I was a Founder and CEO of a company called DeepFlight, which does highly advanced personal submarines for private ownership, and also for tourism. So, I'm used to tackling big problems and solving big engineering issues.
Peter McCormack: You didn't sell one to James Cameron, did you?
Adam Wright: We do know James Cameron well, but we had some clients like Richard Branson.
Peter McCormack: Kind of know him!
Adam Wright: Yeah. But the addressable market of that is small, but again, being a bitcoiner since 2017, we wanted to start a company that really addresses some of these climate issues that we think are preventing the further adoption of Bitcoin. So, that's the basis from which Vespene was founded.
Peter McCormack: So, how did you connect the dots for this?
Adam Wright: That's a good question. So, my co-founders and I, so there's three of us in the company: myself, Joshua Glovin and Aaron Lavee; and so, we were on a walk one day in a local park in Berkeley, that actually used to be a landfill, and they've covered it with grass and it's a nice place to play with dogs, and there's this big industrial-looking smokestack right in the middle of the landfill, and we never really noticed it before. We got a little bit closer, and we realised that they were actually burning off the methane in the landfill, and this landfill was closed in the 1970s, and it's still producing methane today.
So, here is this old landfill that has a $1 million piece of capital equipment sitting on it with several hundred thousand dollars' worth of maintenance per year, just for the purpose of burning off methane. So we realised that, putting two and two together, being involved with Bitcoin, understanding Bitcoin mining -- so, we also founded a small Bitcoin mining company that does syndication, so we bring retail investors together and pool resources and put them into co-location facilities.
So, we were familiar with Bitcoin mining, we had a lot of partners in the space. And so, putting two and two together, landfill methane was this cheap and wasted energy source that we could capitalise with Bitcoin mining.
Peter McCormack: Can you explain to me the business of landfills themselves, outside Bitcoin mining; how do they work; how do they choose a site; how long do they last for; how do they cover them?
Adam Wright: That's a great question. So, landfills are, I guess, the full name would be a municipal solid waste landfill, and so in the United States, there's about 2,600 landfills. Of those landfills, about 30% of them have active projects on them. And when I say projects, I mean that there's a powerplant that's burning the methane and selling the power to the grid, or they are refining the methane into natural gas, and then piping it into the pipeline.
So, these two project types are very capital-intensive, and are not scalable. So, they only really pencil out for larger landfills that are located close in to cities. So, that leaves about 2,000 landfills that are not doing anything with the methane that they produce. And a landfill, by definition, produces methane, because as garbage goes into the landfill, that garbage is decomposing and part of the decomposition process produces methane.
So, 2,000 landfills aren't doing anything with the methane; 30% of that 2,000 are flaring it, because they're required to by the EPA; and the remaining 70% of them are just freely emitting into the atmosphere. Both of these cohorts of landfills, these are our customers. So, these are landfills that are remote and decentralised and generally speaking, farther away from city centres such that a traditional project doesn't make sense.
When you're running a traditional project, let's look at the powerplant example. With a powerplant, you have to produce electrons on the site, and then transfer those electrons off to where they're being used, so that requires infrastructure. Power transmission infrastructure can cost anywhere from $1 million to $3 million a mile. So, the second one would be refining to natural gas and sending it to your stove, or where else was using natural gas, and that also requires transfer of a physical thing. So, in the power transmission case, you're transmitting electrons; in the gas refining case, you're transmitting molecules.
Whereas, in our case, by virtue of Bitcoin mining, we're transmitting data, and data can be transmitted anywhere in the world using a satellite uplink.
Peter McCormack: Okay, so of those, was it 3,200 or 2,600?
Adam Wright: So, 2,600 landfills. Of those, about 600 of them have an active project, so at least 2,000 landfills with nothing happening on them.
Peter McCormack: Okay. And those active projects tend to be ones with, what, just well-funded cities, they can afford to do it?
Adam Wright: Well, they would be things like, let's take Los Angeles, for example: large city, big population centre. So, they produce enough trash to build a 30 MW powerplant. So, the economics work because selling power is a very low-margin business, you need a lot of power to actually make it pencil out. And not only that; when you're hooking up powerplants, there's a two- to four-year window that you have to work with the utility to get permits and get set up. So, it's a very long and arduous process. So again, for these smaller- and medium-sized landfills, it just doesn't pencil out. So, there's no way for these landfills to monetise their methane assets essentially.
Peter McCormack: And those ones with powerplants, they're generating all the power from the landfill?
Adam Wright: That's correct.
Peter McCormack: And just from the methane; they didn't burn off any of the trash or anything?
Adam Wright: No, just from the methane.
Peter McCormack: Wow.
Adam Wright: It's called a landfill, because trash gets filled in, it's essentially buried underground. And when it's buried underground, it's in essentially an anaerobic environment. In an anaerobic environment, that's where the methane gets produced.
Peter McCormack: Do they line these massive pits?
Adam Wright: They do. They line them with liners. So, a landfill is split up into different cells, and after they finish a cell, they'll cover it over with a liner, move onto the next cell. And then when landfills are constructed, they're generally constructed with a series of piping underneath that's called a GCCS, or a Gas Collection and Control System, and that's what actually allows the methane to flow up into a pipe and then either get flared, or in our case, put into a generator.
Peter McCormack: Okay, so the ones that are flaring, they're flaring because of specific rules? Explain why they flare it.
Adam Wright: So, the EPA --
Peter McCormack: Explain the EPA again for people not from the US.
Adam Wright: Of course. EPA is the US Environment Protection Agency.
Peter McCormack: Okay.
Adam Wright: So, they have basically a set of standard guidelines for landfills to mitigate their methane emissions. So, the EPA, they regulate how much methane can get produced from a landfill. So historically, the EPA has relied on states to self-police their methane emissions. And so, as a result, a lot of states take a more lax stance as to how much methane is flared, or how much methane is released.
At the end of 2021, the EPA released a new set of standards called the NSPS, the New Source Performance Standards. These standards say that now, the states are no longer in charge of their landfills, and the EPA, the federal EPA, now has jurisdiction over all state landfills. And so as a result, essentially all landfills by 2025 are going to have to instal this gas capture and flaring system and start flaring their methane. This constitutes more than 1,000 landfills that are going to have to expend actual resources, at taxpayer expense, to capture and flare their methane, because of environmental regulations.
Peter McCormack: What kind of cost would that be?
Adam Wright: That would be on the order of several million dollars per landfill.
Peter McCormack: Wow! Okay.
Adam Wright: So, it's a major expenditure. And, when you're looking at some of these communities, these are places that don't have a lot of income coming in from other sources. So now, if you're asking somebody to come up with another $3 million and another several hundred thousand dollars a year just to upkeep the facility, that's a major expense that is generally going to be passed down to taxpayers unfortunately. That represents a cohort of landfills that has a very clear value proposition from the way that we would partner with them.
Peter McCormack: And a municipality is, what, a collection of towns?
Adam Wright: Yeah, a municipality would be generally a county.
Peter McCormack: A county, okay.
Adam Wright: Yeah. So our first pilot site in California is going to be a county-run site in central California.
Peter McCormack: But do some counties share?
Adam Wright: Generally speaking, a county would have its own landfills under its jurisdiction. So, they're very, again, decentralised. That's why, if they were centralised and all the trash went into one place, then you could more easily and economically build a powerplant or gas processing; but because there's 2,600 landfills scattered across the US into this remote and decentralised grid, it only makes sense from a traditional perspective to do the large ones.
Peter McCormack: And flaring is because…?
Adam Wright: Yeah, flaring is because some methane is a terrible greenhouse gas. So methane, when compared to carbon dioxide, is about 84 times more powerful than carbon dioxide. So, there's a massive environmental reason, or impetus, for burning that methane.
Peter McCormack: Because, if you burn it off, you just create carbon dioxide?
Adam Wright: Correct. So, burning it off is essentially 84 times better than letting it emit. So, the EPA, or the United States, is taking a stance that they're going to try to regulate their way out of methane emissions. So, we often say that the EPA takes a stick approach to methane mitigation, whereas we provide a carrot approach.
The United States has one of the strongest environmental regulatory agencies of any country on the planet. So, even if the US does manage to regulate its way out of methane emissions, it doesn't really set a very good model for the rest of the world. So, our mission is to set up a model that not only works in the United States, but we can scale out to any landfill across the globe.
Peter McCormack: This is a global issue.
Adam Wright: This is definitely a global issue. I mean, methane in general, and mitigating methane, is the strongest lever that we have, as humanity, to curb climate change.
Peter McCormack: Do we know what percentage of emissions, accounting for the fact that it's 84 times worse, how big an issue methane is? The majority of the conversation is centred on carbon dioxide, it's not on methane.
Adam Wright: Correct.
Peter McCormack: You occasionally hear about it, but how big -- do we know what percentage it is?
Adam Wright: I mean, methane is a huge, huge issue in that, if we were able -- so again, and this is actually -- the UN put out a big report at the end of last year. There was a big conference in Glasgow about curbing methane emissions. So, if we manage to curb methane emissions, all methane emissions globally today, we would have a very good chance of meeting the 1.5°C climate goals. So, it represents the fastest and easiest way to make a significant impact on climate change.
Peter McCormack: And the methane comes from landfill sites around the world, but do we know where else?
Adam Wright: Yeah, so there's three major sources of human-caused methane. One is oil and gas exploration, and there's a number of really great companies that are working in that space to address that issue. The second one is in agriculture and animal husbandry; so this includes things like dairies and pig farming and things like this, and also other agricultural uses, like rum distilleries, or in palm-oil processing. Then landfills, at least globally, is the third biggest emitter. However, that's based on self-reported data. And there's recently been a NASA survey of US landfills that said that the reported data is actually underreported by a factor of 2X to 3X.
Peter McCormack: Just in the US?
Adam Wright: Just in the US. So, landfills represent a much bigger problem than is currently talked about.
Peter McCormack: And I imagine other countries in the world, maybe South American, Brazil perhaps, India, Indonesia, some of these countries who don't have the same regulatory bodies and the same economic position as the US, their landfill sites aren't built in the same way, constructed in the same way, aren't perhaps even flaring; it's a bigger problem in developing countries, I could imagine?
Adam Wright: You're absolutely right, and our mission is to -- so, the United States is obviously the leader in a lot of aspects, but our main goal is to set up shop in the United States, yet under a stable, regulatory regime, help to change the narrative surrounding Bitcoin mining, and we do that by again partnering with local municipalities and changing that viewpoint on a grassroots level, and then creating a model that we can then roll out to other jurisdictions internationally and worldwide, that not only encompasses landfills, but also other sources of methane, like dairy use and palm-oil processing.
Peter McCormack: So, can you bypass the New York Moratorium?
Adam Wright: Yes, absolutely. So our solution is not only -- so, my understanding of the New York Moratorium is it only focuses on new Bitcoin mining using coal or other fossil fuels.
Peter McCormack: Which is a weird question, because if you're buying off the grid, how do you know? Can you say to the grid, "I only want your energy from renewables"?
Adam Wright: That's a great question. But from our perspective, not only is our energy renewable, it's actually carbon-negative, and you can very scalably and measurably show how exactly how much carbon is removed, or is mitigated, by -- they call it carbon dioxide equivalent. So essentially by building one Vespene module, and we call modules -- basically a small landfill can fit one module, which is about 1.5 MW.
Peter McCormack: What is a module; is it a container?
Adam Wright: Yes, it would be a container full of miners and a generator.
Peter McCormack: And how many ASICs in that?
Adam Wright: There would be about 400 ASICs.
Peter McCormack: 400 ASICs in one module with a generator?
Adam Wright: Yeah, so that module can mitigate -- so, there's various calculators that can show you carbon dioxide equivalencies and how much, say, cars can off the roads, or how many houses' emissions are dealt with. But the one that we like is how many trees can you plant.
Peter McCormack: Why, because it's a bigger number?!
Adam Wright: Well, so you could either mine Bitcoin on one small landfill for a year, or you could plant 5 million trees and let them grow for 10 years. Both of those are going to have the same environmental impact.
Peter McCormack: How many cars does it take off the road?
Adam Wright: Good question. It's in the hundreds of thousands per site.
Peter McCormack: Okay, so I mean there's a lot of benefit here.
Adam Wright: There's a huge amount of benefit, and I think there's three different ways you can look at Vespene. The first way is that we are a methane mitigation company that just happens to use Bitcoin mining as the most readily available and best way to put value to methane anywhere in the world. The second way is to look at us as a Bitcoin miner; so, we're a Bitcoin mining company that has access to some of the cheapest power available. The third way to look at us is actually a long-term energy producer. So, by virtue of having agreements with landfills -- so, taking a step back.
A landfill is going to produce methane for decades, even hundreds of years, and so this is a long-term play. It also provides us with a hedge against Bitcoin mining and a potential other revenue source, which over time, as that landfill grows and develops and population shifts and potentially grows out towards the landfill, because we have access to that gas, we can then pivot into not just being a Bitcoin miner, but also being a power provider.
So, we can utilise this network, again this decentralised network of baseload, carbon-negative, power-producing facilities, and supply that to the grid. And, we've used Bitcoin mining over the first five or ten years to amortise all the costs associated with building up that plant such that, if and when we do pivot into becoming a power provider, that even if it's a low-margin business, we're still making good money.
Peter McCormack: So, when you go onto a site and you've explained that these landfills are built in cells, I'm going to make an assumption that the amount of methane a site produces fluctuates.
Adam Wright: Yes.
Peter McCormack: One, to do with how many of the cells are filled, so there's more rubbish there; but also, does a new cell instantly produce methane, or as it decomposes more and more does it increase? There must be some fluctuations.
Adam Wright: So in general, as long as that landfill is open -- and open landfills are ones that are still receiving trash, and closed landfills are ones like the one I was talking about in Berkeley where it's covered. So, if a landfill is open, on average that landfill is going to be producing 3.6% more methane year over year. So, that landfill is growing, so all the old garbage is still producing methane, in addition to all the new garbage that you've stacked in. So all in average, if you look at it over all the landfills in the US, in general they're growing by 3.6%.
Once you close a landfill, then over time that methane production is going to drop off, but it drops off very, very slowly. So, after you close a landfill, you're going to have potentially 40 or 50 years of methane that you're still going to have to deal with.
Peter McCormack: Right, so when you go and knock on the door of whoever's running this landfill and you say, "Hey, by the way, we want to buy all your methane off you, and we're going to solve your regulatory issues with regard to this, and we're going to pay you for it, and we're just going to put this container on the site, and you're going to make money from it, and we're going to do it with this Bitcoin thing", are they like, "Are you mad?"
Adam Wright: Yeah. There's certainly an educational aspect to it. Everybody sees there's a very clear value proposition that we bring to people. So for example, our pilot site, they're on the hook for a $1 million upgrade to their flare, and the whole purpose of this flare is this fucking massive thing, it's the size of a four-storey building sticking out of the ground, and the whole purpose of that is to burn off the methane; there's no other purpose to it.
So, they go from having to be $1 million in the red, plus another $100,000 a year to maintain the thing, so they go from that situation to us knocking on the door and saying, "Hey, how about you don't have to use your flare anymore? We're going to come in and we're going to buy your gas from you", they're sort of like, "Why not?" The value proposition is so clear. The main thing is the education, and so in conversations -- again, landfills are very traditional businesses. They don't have much exposure to technology, let alone Bitcoin.
One of the conversations that always comes up is, "How do you know there's Bitcoin in the landfill?" so you have to really explain it to them from square one: what is Bitcoin mining, how does it work. You're basically setting up a data centre, you're processing. Bitcoin mining is essentially, you're a decentralised auditor of the Bitcoin Network, and you're getting paid for your services in Bitcoin. So, when you explain it to them on that level, that tends to make sense to people a little bit more.
Peter McCormack: And are you buying the methane off them on a fixed price, or is it per cubic metre; I don't know how they do it?
Adam Wright: Yeah, that's a great question, and this kind of leads into our mission, or one of our missions, of fostering increased adoption of Bitcoin. We actually set up a profit share, so we basically make the landfills essentially a stakeholder in the Bitcoin mining operation. So, that protects us on the downside, and we set a range for it. So basically, on the downside, when Bitcoin mining metrics are rather low, we're paying the equivalent of anywhere from 0.5 cent to 1 cent per kWh.
Peter McCormack: That's pretty good.
Adam Wright: That's on the low end, and that's when it's the most important to have protection in competition with other miners. When metrics are higher, because of the way that we've structured the profit share agreement, they can make as much as 4 cents per kWh, but the payment is capped on the high end and capped on the low end, so they can still participate in some of the upside of Bitcoin mining, but it protects both parties on the upside and the downside.
Peter McCormack: What is the risk and the trickiness with regards to Bitcoin price? When Bitcoin's $60,000, it's super-profitable. If we suddenly double to $120,000, it might not be. How do you guys protect yourself against that?
Adam Wright: That's why we put together this type of profit share agreement. So, this protects us in the times when Bitcoin's low. This protects us by having a very low cost to power. When Bitcoin is high, $60,000, $100,000, whatever it ends up being, the maximum power costs we're going to be paying is 4 cents, and that's when it matters less, because the margins are so high.
Peter McCormack: There is still a risk that Bitcoin's at a certain price that you could be under water; that is a risk you're taking?
Adam Wright: Well, I think based on our power cost in comparison to other miners, and then because of the dynamics of Bitcoin mining, other miners are going to be going offline much sooner than we will be, and so therefore we're going to be essentially getting their share of the pie when they're going offline. So, we have protection for the very long term because of that.
Peter McCormack: Right, okay. And so, when you're building out this facility, how do you ensure you use every bit of methane you burn off, or will there be some waste in there?
Adam Wright: Yeah, so we always do keep a flare in line with the generator. So, in the times where the generator needs to go down for maintenance, or there's some other problem, that's basically a backup solution for maintaining compliance with regulations. So, there is always a backup flare that can burn off excess if needed.
Peter McCormack: You know what's going to happen? It's going to be so successful, they're going to go, "We need more trash"! They could though, they could take trash from other municipalities, because they can make more from it.
Adam Wright: Yeah, well it's a way of looking at trash as an asset essentially. So, it goes from being a net expense to the municipality and to the landfill, to a value-producing commodity essentially.
Peter McCormack: It's unreal!
Adam Wright: I think there's three things that happen simultaneously. Number one, we have access to some of the lowest cost energy of any bitcoiner on the market, because of the nature of the gas that we use. Second, we are solving a very clear and present issue with the climate and related to methane, and it's very scalable and measurable. And then, three, there's a social implication, because the ultimate beneficiary of a landfill is a city or municipality. So, any revenues that come in as a result of our partnership go right back into the community. I mean, if you talk about Bitcoin being ESG, I mean we've pretty much ticked all the boxes.
Peter McCormack: It's alchemy, it's actual alchemy!
Danny Knowles: In the times where you might be running a profit share, will that be paid to the municipality in dollars or Bitcoin?
Adam Wright: That's a great question, great question.
Danny Knowles: You could be making California hold Bitcoin?
Adam Wright: Well, that's actually our plan.
Peter McCormack: You should insist they receive it in Bitcoin; they can deal with it.
Adam Wright: I'm really glad you brought that up because again, we are committed to Bitcoin and fostering increased adoption of Bitcoin. And so, one of the things that we plan to do is offer a slightly larger percentage of the profit share if they agree to hold Bitcoin on their balance sheet for the long term. We have a number of partners that we're in line with that would be basically solutions for that, custodial solutions for that.
Peter McCormack: Okay. So, you're working on a pilot right now; what's the status of the pilot; where are you at?
Adam Wright: Yeah, so the pilot is currently under construction, and I think the key to success here, and really with any Bitcoin mining operation, is access to capital.
Peter McCormack: And ASICs.
Adam Wright: Right, well ASICs as a result of capital.
Peter McCormack: Yeah, but sometimes even with the capital, you can't get the ASICs.
Adam Wright: Yeah, well we're fortunate enough to have really great partnerships, so we have a partnership with Frontier Mining, who are a major co-location provider, as well as ASIC reseller. So, we have really good access to hardware. But then on top of that, we've recently closed a major fundraising round with some pretty big name venture capital firms, which I can't name quite yet, but it will be out soon. So, our access to capital is really going to ensure our ability to scale. And I think the faster that we can get on the market and deal with this problem, the better it is, both from a climate perspective and from a social perspective.
Peter McCormack: What is the cost to build out just one module?
Adam Wright: The cost does vary to some extent. The big driver of the cost is ASICs. So, depending on what vintage or what model of ASIC you choose, in general it's about $4 million to build out one module. So, that includes the gen set, that includes associated ancillary equipment, the container, and then the ASICs.
Peter McCormack: Is that car going off again and again? Sorry about that, anyone listening. So, 400 ASICs, I don't know, what are they, $10,000 each, $15,000?
Adam Wright: Well, the prices have gone down substantially, and so this is actually one of the reasons --
Peter McCormack: Good time to do it.
Adam Wright: This is a fantastic time to be building Vespene. We'll be able to have access to ASICs that are below historical lows, basically.
Peter McCormack: And what's the kind of return on investment on one module; is it one year, two years, three years?
Adam Wright: I mean, a lot of that depends on the future projections of Bitcoin mining and the price of Bitcoin, and we're not necessarily one to make predictions of that, because our profitability is protected because of our low cost of power. If one site pays itself off in two years, in three years, it doesn't really matter at the end of the day, because we know we're going to be profitable in the long term.
Peter McCormack: Okay. So, I'm thinking in terms of what moat you have round this, and your moat really is understanding of this market, having built out a pilot scheme that's successful, but your moat really is time, I think. Because if somebody else sees this, they're going to go, "Why can't we do this?" and they're going to have to go through all the stages that you haven't done, so pilot, they're going to need to raise $1 billion for every site in the US!
Adam Wright: Yeah, I mean the moat, that's a great point. The moat is primarily -- we are the first company to mine Bitcoin on a municipal landfill in the United States, and that is a major milestone that is going to give us first-mover advantage in the market. And landfills are very connected in the sense that everybody knows each other in the industry. So, if we come out as the leader in converting landfill methane to Bitcoin, we're going to be the choice provider, essentially.
So not only that, we're leveraging the first-mover advantage, as well as our access to capital, and our team; so we're building out a world-class team of people, so bitcoiners, Bitcoin miners, environmentalists, ex-government officials and landfill operators, putting all those people together, all those best minds in their specific industries, putting them together and ensuring our success in the market.
Peter McCormack: Is there a landfill conference or awards evening, or something?
Adam Wright: I was just there in Las Vegas last week.
Peter McCormack: What's it called?
Adam Wright: Well, there's two actually. The one I was at, it was called the American Biogas Conference.
Peter McCormack: They've named that well, yeah!
Adam Wright: But yeah, I mean it is a relatively small market in the sense that there's a few key players that if and when we get aligned with those players, that's going to enable our expansion nationwide.
Peter McCormack: Well, I'm just thinking, it's going to spread quick. So, you're going to have whoever you're working with, they're going to be sat talking to whoever runs a landfill in, I don't know, Montana who's going to say, "Yeah, I've got to build out this new flare", and it's like, "We don't have to, we took ours down. Someone is paying us for our gas", and they're going to be like, "What the fuck?" "Yeah, with this Bitcoin thing…" They're not going to understand it, it's not going to make any sense to them. And then you're going to sit down with them and they're going to -- this is what you would call a no-brainer.
Adam Wright: It is a no-brainer. I think, if you look at it from the Bitcoin perspective, we know it's a no-brainer. But if you're a landfill industry insider, it takes a long time to get to the point where you can call it a no-brainer, because you're not aware of a technology like this.
Peter McCormack: I guess the only risk to them is, if you got something wrong and the project didn't work and you had to scale out. If there's just something that went wrong, then they'll have to deconstruct the sites and build -- but they'd have to do that anyway.
Adam Wright: Well, then they'd just go back to flaring, which they were doing anyway. But all of the technologies that we use are proven in their respective fields. So, we're taking power generation equipment that has already been proven in landfills, because landfills have powerplants and they are producing power. So, sending that methane to a powerplant or to a generator is a very straightforward process. Then, combining that and marrying that to Bitcoin mining technology, which is also proven and available, merging those two technologies together, represents a very small technological risk.
I think, again back to the moat perspective, I think that our biggest advantage is access to capital, ability to scale quickly. So, beyond the pilot site, we have ten additional sites that are waiting in the pipeline to come online after the pilot site.
Peter McCormack: Oh, right, so you're going to be able to move quick?
Adam Wright: We're going to be able to move quick. And then, it took a while to get to the pilot site, again because of the education and just finding the right site that was willing to take that leap of faith with us.
Peter McCormack: Because they thought you were crazy!
Adam Wright: Well, they loved the value proposition; but at the end of the day, who wants to be the first landfill to mine Bitcoin in the United States? It takes a little bit of a leap of faith to do that. So, once we have that operational, that is going to spread like wildfire and we're poised to scale very, very quickly.
Peter McCormack: Can I come and see the site?
Adam Wright: Yeah.
Peter McCormack: We should do that.
Danny Knowles: We should do that.
Peter McCormack: We're going to be in California later in the year, probably about October.
Adam Wright: Perfect, that will be perfect timing.
Peter McCormack: So, have you spent much time talking to regulators about this?
Adam Wright: We've spent a lot of time talking to regulators.
Peter McCormack: Okay, what do they feel?
Adam Wright: They are extremely pro. So, we've had a number of conversations with individuals at the EPA, so actual government employees at the EPA, who are very, very pro this solution. Us presenting that to them was also an educational thing. The EPA is very dedicated to getting rid of methane and they have various programmes that are trying to get people to develop landfills into revenue-producing projects.
The way the lens, through which they look at that, is through traditional projects, so powerplants or natural gas refineries. They even have a calculator that you can enter all your landfill data and, "Here's the average cost that you can sell your power to, and here's the average cost that it takes to build up a powerplant", so you can use their calculator that they have on their website, enter all the data, and you can see that no landfill every actually pencilled up! So really, Bitcoin mining is the solution to landfill flaring and landfill methane.
Peter McCormack: It's so interesting how mining has been this thing that's been attacked as being unfriendly to the environment. We don't have to get into the arguments around it, but there is a distorted opinion for how unfriendly Bitcoin mining is for the environment. And what you have done, and things that Troy is looking at, there seems to be this real move towards actually now, not only does mining not have to use fossil fuels, it can actually do things positive for the environment, it can actually be a net reducer of emissions, which is going to be crazy difficult for those people who hate Bitcoin, who are using the FUD as a reason to regulate it or get rid of it, because they're kind of fucked; Elizabeth Warren!
Adam Wright: There's literally no angle that anybody can take with Vespene and say that, "You guys are doing something negative".
Peter McCormack: They will find something!
Adam Wright: I will welcome them to try.
Peter McCormack: They will find something, they always do.
Adam Wright: If you look at it from an environmental perspective, it's very clear that finding a way to mitigate methane is of prime importance, and that you can't regulate away a problem; you have to provide a carrot instead of a stick. And then, from a social perspective, you can't say that having revenue to a community, by virtue of utilising the methane, is a bad thing. So, that's part of the messaging, is that we want to change the narrative around Bitcoin. Bitcoin miners and bitcoiners, we know what the narrative is and what it needs to be. We want to disseminate that information on a grassroots level so it's understood.
Peter McCormack: And in doing this, what you're going to be also doing is adding people to the army of Bitcoin proponents who protect it. So in scenarios where, like those 26 idiots wrote the letter to Congress about why Bitcoin's terrible and it has no utility and it's a problem trying to find a solution, those people end up looking kind of stupid, and their impact is going to be reduced; because, if people try to unilaterally cause problems for Bitcoin, they're going to be causing problems for the environment.
Adam Wright: Yeah, exactly. And then now, not only are they causing problems for the environment, but they're also causing problems for an army of municipalities scattered around the country in liberal states and in conservative states. So, it doesn't matter where that state is located and in what jurisdiction it's located, the net benefit is the same; it is very clear.
Peter McCormack: Well, we have a little bit of a bent towards red states being a bit more positive towards Bitcoin at the moment. I think there's clearly a need to push this more -- we could do with a few more Democratic senators.
Adam Wright: Well, that's part of the reason we're starting in California, to be honest. We want to set a precedent in a place where there are the highest and most stringent regulations around environmental issues, and use that as a springboard to go into other markets.
Peter McCormack: I think Shellenberger would have liked this.
Adam Wright: You asked about regulators, whether we've spoken to them. So, on our advisory board, we have an individual who was formerly with the EPA, so we have people with actual boots-on-the-ground experience in government helping to direct our mission.
Peter McCormack: And then there's the whole education side.
Adam Wright: Yeah, I mean there's an education side. So, as I mentioned, one of the questions that obviously gets asked is, "How do you know that there's Bitcoin here on the landfill?"
Peter McCormack: Yeah, I love that; that's my favourite thing!
Adam Wright: Yeah. And so, getting through that type of education is sort of the first step, and just having people understand what Bitcoin is and why Bitcoin mining works, and how you can monetise stranded methane without needing a grid connection. So, there is a substantial education process, but we're happy to do that, and that's part of our mission, is to provide that education, at a location-by-location level.
Peter McCormack: Are there any other industries that this is transferable to?
Adam Wright: Yeah, so I think I mentioned other sources of methane, and there's been pioneers in the Bitcoin mining industry, you know, Crusoe Energy primarily, that's looking at methane produced in oil and gas. So, oil and gas, major contributor to methane, there's no doubt about it. But it's easy, as the mainstream media, it's really easy to take a negative viewpoint on that, because you think, "Well, if we weren't drilling for oil, we wouldn't be producing the methane in the first place", so it's really easy, it's sort of a low-hanging fruit for...
As bitcoiners and Bitcoin miners, we know that they're making a measurable impact on climate change by mitigating that methane, but aligning anything with an oil company can come with a negative connotation. So, we're here to help bolster that mission by adding on landfills to that narrative and saying that landfills are also a producer of methane, just having people understand that, but also to show that Bitcoin mining can have a very measurable impact.
Peter McCormack: And when you're sat at home and you're thinking about this long term, you're thinking, "Yeah, I'm onto something here", and you get the pilot site going, you've got ten more lined up, how far ahead are you thinking about this; internationally, or are you already preparing for that? I'm imagining in some of the international sites, you could probably even get the power cheaper.
Adam Wright: We are in active conversations with two different international jurisdictions, one in Southeast Asia, and the other in South America. So, these would involve not only landfills, but other sources of methane. So primarily, in Southeast Asia, I think I mentioned this earlier, but palm-oil processing creates a ton of methane biproduct. That's because all of the biomass that's used in that processing essentially just goes into a trash heap, and bio essentially degrades and decomposes, and methane is one of the gases that's produced; so, far away from city centres, no other way to capture that methane and produce value.
Bitcoin mining comes in, sets up shop at the palm oil refinery, and provides additional incentive, monetary incentive, to capture the methane, which then leads to environmental incentive.
Peter McCormack: There's so much incentive once this works to scale this fast. What are the biggest scaling challenges outside of capital?
Adam Wright: Yeah, I mean that's a great question. Capital is definitely an issue. I think that the other one is, because landfills are decentralised -- so, landfills are split up into public and private operators. So, there's two big, private landfill operators in the United States, Waste Management and Republic Services, and those two private operators represent the lion's share of the private sector. So, landfills are split up about 50/50 in terms of 50% is publicly-owned and operated, and then 50% is still publicly-owned, but privately operated.
I think one of the main challenges to scale is to have those boots-on-the-ground conversations with all of these decentralised entities, so that's something that we've done from the perspective of building up our team and adding people to our advisory board that have experience in government and in dealing with individual jurisdictions, to help us overcome that scaling barrier, because it is a grassroots effort. We do have to have conversations with every landfill that we're expanding into, and those conversations can take time.
Peter McCormack: Right, okay. And with regard to the municipalities themselves, how much are you thinking about how this spreads knowledge about Bitcoin, but via the medium of climate change? This is something that I want to tell my kids about this. I think my daughter would be fascinated by this, just because climate change is something that's brought up, and it's such a combination of things that are working together for the positive. I can't find a negative; I cannot find a hole.
Adam Wright: Yeah. I mean, I think that's right. I think that probably, somebody in the mainstream media will find a hole and try to exploit it, but we would welcome that conversation. That's part of the reason why I'm here today, is to tell the whole story. I want to tell the story of why is Bitcoin mining the best solution to landfill methane, and it does it because it's able to monetise stranded pockets of methane that would not otherwise be able to be monetised. So, just by virtue of that monetisation process, that provides a very concrete solution to an actual problem. And by virtue of that, municipalities, cities, counties will see the benefit that Bitcoin provides.
Peter McCormack: Yeah, I guess the only gaps I find, and I don't know how big the mining industry is in terms of how many ASICs there are, and companies, but there will always come a time where there's a limit to how big you can grow, because of how big Bitcoin is at that moment. So, that will be a limitation.
Adam Wright: Yeah, we are also competing; Bitcoin mining is a heavily competitive market. We believe that in the future, and I think Troy also shares in this belief, that in the future Bitcoin mining will trend towards a much lower-margin business than it is today. I think that of course, Bitcoin will grow as an asset, but Bitcoin mining will likely grow at a faster rate. Therefore, the margin that you're able to achieve as a Bitcoin miner is going to, over time, shrink.
Peter McCormack: But at the same time, if you're based on a profit share, you've de-risked?
Adam Wright: Yes, so we've de-risked that on the profit share. But the other way that we're de-risking that is by having a long-term view. So, we want to play a role in the evolution to renewables, and we believe that Bitcoin mining has a very important role to play in that evolution. So, our long term is to transition, or transition a portion of our, let's call them fleet of decentralised sites, into power production. So, as the mining margins start to shrink, it makes more sense for us to start scaling into being a power producer.
Peter McCormack: Well, there's another interesting part to that. Sorry, were you jumping in there?
Danny Knowles: I was going to say, does the fact that you have the two different business models, so you've got the profit share and just buying the methane outright; with the profit share, if you had 100% profit share on a site, could you then just use old miners on it, because you basically have no cost of energy? So, could you just put a bunch of S9s on that, rather than S19s, because you'll still be profitable, and you don't actually have to pay for the methane.
Peter McCormack: You've still got an infrastructure cost.
Danny Knowles: You'd still have infrastructure cost, but I'm thinking that as your fleet of ASICs gets old, could you move them to profit-share sites?
Adam Wright: To clarify, our intention is that all sites will be profit-share sites. We're not actually going to have a fixed rate. The profit share, the way that we've structured the profit share is that there's a minimum and a maximum. So, the minimum would be 1 cent, maximum would be 4 cents, and the profit share is going to fluctuate somewhere in between those numbers, so we're never going to be paying more than 4 cents a kilowatt, even when Bitcoin mining is high.
Peter McCormack: There's another interesting point to this as well, because again, it doesn't matter where you are on this spectrum of whether you believe in climate change or not, but if you are one of those people who was concerned, there was always that issue, if Bitcoin mining continues to grow, it's going to take up more and more energy; where's it going to take that energy from? If it comes from fossil fuels, it will lead to more carbon in the atmosphere.
You've actually created a model where there is an incentive to build out mining to reduce it; you've actually flipped it completely. You actually want mining to grow quicker, because it's better for the environment. So, we should encourage countries to move to a Bitcoin standard, because going on a Bitcoin standard would make the world a cleaner place.
Adam Wright: You're absolutely right.
Peter McCormack: I've written your tag line there!
Adam Wright: It's counterintuitive, let's be honest. Because of all the misinformation that's out there, I understand where a mainstream media can go awry of the truth. So, we're here to help to change that basically.
Peter McCormack: It's fascinating.
Adam Wright: Yeah. And I think that again, you mentioned that we're incentivised to grow Bitcoin mining as fast as possible. But I think that over time, and I know that this is one of Troy's core beliefs as well, is that Bitcoin mining is essentially a dung beetle, so they're always seeking out the cheapest source of electricity. In our case, it's very related to dung beetles, because this is literally trash that we're turning into Bitcoin.
Peter McCormack: It's amazing.
Adam Wright: But as time goes on and those margins start to shrink, then just by virtue of the price of electricity, miners are going to have to shift towards having lower-cost power. And the only places to find lower-cost power are in places where there's waste involved, and this is one of the main ones.
Peter McCormack: Well honestly, I think it's brilliant. Is there anything I've not asked you about that you wish I had?
Adam Wright: I mean, I think we've covered quite a few. I think we could certainly talk more about the adoption side on the cities and counties. I think having -- it's going to be easier for us to pay out directly in Bitcoin, because mining is creating Bitcoin and then Bitcoin flows into the wallet. So, not having to deal with fiat at all would be our preference, and just cut a share of it into the city or county, but that's going to take time.
I think to build out that infrastructure within the jurisdiction, and to have them just understand how to hold Bitcoin, like what are your private keys; what if I lose my private keys? That's why we are working with a number of custodial solutions to be that intermediary for the time being. But we do see that as being a major part of our business and our growth strategy, is by fostering the adoption and hodling of Bitcoin at a municipal level. This is government, right, so we're talking about not necessarily the federal government, but state and local governments holding Bitcoin, as a predecessor to federal governments holding it.
Peter McCormack: Honestly, I think this is brilliant. It does remind me of the conversation with Troy a lot as well.
Adam Wright: Yeah, and Troy, again, he's an advisor to the business, and he's been extremely helpful. His big thesis is to hold the same amount of clean hashrate as you hold in Bitcoin, and that essentially offsets -- if you are concerned about Bitcoin as a source of emissions, that if you hold the same amount of percentage of hashrate as you do percentage of Bitcoin, we are in that scenario if a product like that comes to light, that we would be essentially a producer of that hashrate, and that would be another market for which we could, instead of self-mining, we could use that, whether it's an ETF or some other exchange-traded product, we could use that as a hedge against our self-mining approach.
Peter McCormack: It's brilliant, man, honestly. In some ways, it's better than Troy's; sorry, Troy, I love you, man. But with Troy, he has this slight issue with, if he's encouraging people to hold or to buy green hashrate, there's a challenge where people will challenge, "What is that green hash [or] what is green hash?" and you're spreading FUD. This is just, "We're taking a waste product and we're turning it into Bitcoin". It's alchemy, I love it.
Adam Wright: It's also, if you look at it from a bitcoiner's perspective, it is kind of, again, a no-brainer.
Peter McCormack: But it's a no-brainer for everyone. It's a no-brainer for the regulators, it's a no-brainer for the sites, it's a no-brainer for bitcoiners, it's a no-brainer for investors.
Adam Wright: We have gotten a lot of traction in a very short period of time. And part of that is --
Peter McCormack: It's very clear why.
Adam Wright: Well, part of that is obviously, the founding team; but obviously, the mission and the partnerships that we've set up. And frankly, I think we're poised for great success.
Peter McCormack: I think so too. Okay, if people want to find out about this, where do they find out?
Adam Wright: So, our Twitter is @Vespene_Energy; that's the primary way. Or, you can hit us up at info@vespene.energy.
Peter McCormack: Amazing. Well, me and Danny will come and visit the site as well when we get over there, and I'll tell you, man, I want to see it.
Adam Wright: Have you ever been this excited about visiting a landfill?
Peter McCormack: No, apart from the one in Bedford, we have a nice landfill in Bedford. Maybe you can put a site there.
Adam Wright: Hook us up with some British landfills.
Peter McCormack: We'll go and see Dave, the Mayor, and see what he says. But look, good luck with this. This is very cool. I'd like to have you back on one day to talk about how the project's expanded. I think it's super-interesting and congratulations, man, and great idea, well done.
Adam Wright: I look forward to it. Thanks, Peter.
