WBD675 Audio Transcription
Powering Africa with Bitcoin Mining with Erik Hersman & Marshall Long
Release date: Friday 23rd June
Note: the following is a transcription of my interview with Erik Hersman & Marshall Long. 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.
Erik Hersman is the co-founder of Gridless, & Marshall Long is the Head of Architecture for Rhodium Enterprises. In this interview, we discuss Bitcoin in Africa: the need, the use and the support the wider community can give. We also talk about energy poverty in Africa, Bitcoin’s role in supporting mini-grids, and how Gridless’s business model & Marshall’s financing plan accelerate this process.
“There’s a new way to think about this as a new paradigm for energy in Africa, you bundle the mini-grids and the Bitcoin mining together, and you get your return on investment in seven years instead of 20, or, if ever because they weren’t sustainable.”
— Erik Hersman
Interview Transcription
Peter McCormack: Got the mining boys in town. Erik, how are you?
Erik Hersman: Good, how are you?
Peter McCormack: Good to meet you in person. I'm good.
Erik Hersman: Yeah, likewise.
Peter McCormack: It's good to not do it over some ropey internet.
Erik Hersman: Some bad internet connection from some village in Africa.
Peter McCormack: Yeah. And, Marshall, thank you for coming on my film.
Marshall Long: I appreciate you.
Peter McCormack: Appreciate you, man, thank you for coming in. Lots to talk about, always, especially mining, because I know a lot more about it now. Thank you. Also, I want to talk about all the work you've been doing in Africa. Marshall spoke to me about that as well when I saw him recently. I am conscious we've got four white guys here going to talk about Africa!
Erik Hersman: With a guy whose Twitter handle is white African!
Peter McCormack: Yeah, but I am conscious about that. We're going to head out to Africa at some point. We've got to cover Bitcoin there, but I'm aware there's some criticism from people in Africa who are discussing that the Bitcoin approach to Africa seems to be a little bit poverty porn, and there's actually good things happening in Africa as well as difficult things, so I'm conscious of that. But Erik, I'm going to ask you just to set the scene for Bitcoin in Africa.
Erik Hersman: Okay, not a small -- jeez! So, yeah, broadly speaking Bitcoin in Africa, there's a deep need for it, right, I think that's the biggest response to it. How that need is answered, it varies. So right now, we're seeing that there's a lot of people who are buying it, and what you don't know is who they are, nor should you. But it seems to be it's a lot of middle-upper-class and upper-class people who are buying it as a way to hedge against their local currencies. I think what most of the Bitcoin community in Africa is looking at though is, how does this Bitcoin used by ordinary people in everyday life? There's a bunch of things to unpack in that, one of which is on-ramps and off-ramps, which are a big problem right now. The use of is something that's a little bit easier to get your head around, and there's some really great opportunities in that space and people executing on it, like Machankura.
I can talk a little bit more about this, but the Kenyan Bitcoin community got together and did a bunch of research on every on- and off-ramp to buy Bitcoin, and I'm putting all that research together right now. It was against, I think, eight or nine different levels of everything from UX to how long it takes to liquidity, all these different things, how technical you have to be to use it. And it's a major barrier. So, a lot of interesting things happening. I think more will be happening, but it's also very nascent, it's early days.
Peter McCormack: And what are the primary needs for Bitcoin in Africa? You talked about people hedging risk with currency; is it generally the same use cases that I would have, or are there actually different ones I wouldn't be aware of?
Erik Hersman: They'd be similar to what other bitcoiners are facing around the world, which is like how do you bypass the banks that make transactions too slow for businesses, or if I even am receiving into my bank in Kenya $1,000, I have to send them a letter signed with ink to state why it's coming in and who it's coming from.
Peter McCormack: Even at $1,000?
Erik Hersman: Even at $1,000.
Peter McCormack: Every $1,000?
Erik Hersman: Every time, otherwise it'll come in and they might refuse it. Most of the times, they will refuse it. And that's not even withdrawing it, that's receiving it.
Peter McCormack: Okay, so that's actually worse than what we face here.
Erik Hersman: So, it varies. So, it depends on your bank, depends on your country. We're talking about a continent with 54 countries and it varies significantly between all these countries as well. You're dealing with that kind of level, which is a business trying to use it. Then you're also dealing with ordinary people. How do you transact to send money if you come from Uganda but you live in Kenya? It's actually quite difficult. You have to use some type of MoneyGram option for that, and that's fairly expensive. So there's banks, borders; those are the two biggest use cases.
I think the real long-term story is, what's your hedge against your local currency where you have massive devaluation happening, or you could have, depending on the way the government has acted in the past two, five, or ten years? We're starting to see that. You see, just last year, Ghana had a major devaluation of its currency, you have that happening in Kenya. We've lost 20% of value in our currency over the last year. Those kind of things happening do have an effect on you. Now, most people, and I'm talking about in every country, most of the people in Africa do not have enough for savings. What they'll be doing is they're putting their money into something. Traditionally, that's been put into land or something like that, that will hold its value or perceived hold its value. In Kenya, that's why land prices are so high. But what else is there to put it into? What happens if land isn't the only option anymore?
Anyway, there's a whole area there that's really interesting to unpack and see what real people do in their real lives when savings either (a) isn't an option, or (b) the options for the savings being a traditional bank are not good.
Peter McCormack: Okay, and can you just talk to me a little bit more general about the economic situation in the various countries you're aware of in Africa, and what specifically I want to know is what is the good stuff, what is the bad stuff? We tend to hear the bad stuff more. News and media does tend to report on corruption or political strife or famines, civil wars, etc. But I'm also fully aware there are parts of Africa that are thriving, the economy is thriving in some parts of Africa. What are we not seeing?
Erik Hersman: Yeah, I think what we what we're used to in the West is the media narrative that we've had for, I don't know, 30, 40 years.
Peter McCormack: Since Ethiopia, basically.
Erik Hersman: Right, yeah, you're right. But there's a really famous saying, which is, "The Africa that's of the 1980s and 1990s is not the Africa of today", and yet we have that Africa in our head. And so, there's other good things that are also in the media narrative, which is like Kenyan or Ethiopian runners, right? Or safaris and all the tourism that comes with that, the wildlife. And those are also generalities and can be cliché also, just as all the negative things, all the negative stereotypes can be as well.
So what's going on that's good there? Well, you do have a massive amount of people who are just really entrepreneurs, mostly born of necessity, because they have to. There's not as many ordinary big company or medium-sized company jobs, so they're out there as entrepreneurs hustling, making things happen. People work hard, they are smart, there's guys who are just really working their butts off to try and make their way in the world and making it to great universities all over the globe. And then they're coming back and they're building businesses, or they get in government, which sometimes goes sideways. So, you have this population base that's young. Africa does have, I think, the youngest demographic in the world, as far as continents go, with I think the average age being around 16 or 18, somewhere in that range.
So, it's a young continent that has a lot of growth, a lot of raw materials and resources. And it's about the government and the people then figuring out, "How can we align what we actually have that's really strong about us, and do something with it instead of being used by other countries around the world?" which is what's happened for the last 50 or 100 years.
Peter McCormack: It goes back to that Gladstein economic imperialism stuff. I don't know if you've read his latest book or listened to the show we did --
Erik Hersman: Yeah, that's where he's talking about the IMF giving loans to the shrimpers and all that kind of stuff. Crazy.
Peter McCormack: Yeah. And in terms of major cities, how well developed is the infrastructure? Like, if I go to a major city in Africa, is it great Wi-Fi, great transport; is it pretty much like any major city?
Erik Hersman: Yeah, if you go to your Cape Towns and Jo'burgs, they're probably the furthest along. Nigeria has Lagos and Kenya has Nairobi, you've got Cairo. Those are big cities that are big, global cities, and they're going to have everything you would expect, sometimes more traffic than you would expect too. You can get standstill traffic sometimes. But yeah, you can get pretty much anything you would find in the West or even in Asia, you can find there. It's going to have its own way about it. Africa is Africa, the same way Europe is Europe. And so it has its own --
Peter McCormack: Intricacies, yeah, but you get that here.
Erik Hersman: Yeah, you totally get it. But it's got its own flavour. People are very open and friendly across most of the continent. It's hard to speak in generalities about the whole continent, but across most of the continent, people are very open and generous and friendly. And I think that generosity actually surprises a lot of westerners.
Marshall Long: When I got there, I was thinking this is going to be similar to Puerto Rico, everybody thinks you're a coloniser imperialist. It was awesome. Everybody's just like, "Oh, you're another dude what's up? It was really cool.
Peter McCormack: Which parts did you go to?
Marshall Long: So, I've only been once to see these guys and I went just to Kenya.
Peter McCormack: Which parts? You went to Nairobi and out into the village?
Marshall Long: We went into Nairobi, we went to --
Erik Hersman: You went up country to the mines and then we went off to safari for a couple days.
Peter McCormack: Okay, so talk me through your experience just arriving. I always quick judge by the airport, I think you get a lot from the airport.
Erik Hersman: You had a great taxi driver.
Peter McCormack: Did you?
Marshall Long: Yeah! He pulls up in a 1970s Land Rover.
Peter McCormack: Love it.
Erik Hersman: Not a Land Rover. I don't do Land Rovers, I do Land Cruisers, that's important. This is like Coke or Pepsi, okay?
Marshall Long: That's a hotly contested thing!
Peter McCormack: Right, okay!
Marshall Long: Yeah, so I was expecting the Africa of the 1990s, 100%. And after my trip, I told people, "I was lied to about Africa". It's like we were talking about earlier, it's a land where everything grows, in my limited experience. The people were super-hospitable, the food was great, internet was fast, at least in Nairobi, it was very not what I was expecting. I was expecting to get off the plane and people immediately tell you to go back home, and it was not like that at all. It was very welcoming and very different than what I thought.
Peter McCormack: Felt safe?
Marshall Long: Oh yeah.
Peter McCormack: And in terms of the Bitcoin world, the external Bitcoin world outside of Africa, I'm really conscious to not be exploitative of Africa and talk about it as this great opportunity, where in the back of my mind I'm just trying to grow Bitcoin and not really having the right empathy for what the needs and the pressing needs are there. But if you were to speak to the kind of general Bitcoin community, what would you be saying we should be doing to support Africa? And I don't say that like as some kind of charity; we should be supporting South America, which we've done, we've been out to South America. What are the specific needs?
Erik Hersman: So I think it's just like any other thing. I've been in the tech industry in Africa for decades now. And it's just like, you have entrepreneurs who are trying to build things in the Bitcoin space. Where they get their investment from doesn't matter. It's capital that gets put to work for something that grows the pie. And so, I think that's one area. Look for the entrepreneurs who are actual builders and support them. There's some really good education efforts going on, community growth efforts that I'm not involved in because I'm a builder, I'm not a community person in that way, and I think those are fantastic, though, I hope that they get more support too, from the Ekasi guys down in South Africa to Bitcoin DADA, which is the women's training in Kenya.
There's some really cool stuff that's happening. How do they get support, too? I think some of that support has to be local. I don't think it should all come from outside, either. I think local investors and local people who just like this thing or need to get behind it and help it become a bigger thing, that's where you get the organic growth and that's really what you want. You don't want a manufactured growth around it. But yeah, I think be involved, include them. Sure, I can be here in Miami at the Bitcoin Conference because as our company, we can just pay for me to buy a plane ticket and go. It's harder for some of these other guys who are building great stuff. They might not have all the same resources and they definitely have a harder time getting the visa. And that's a major hurdle to overcome.
But I've seen this, where you have guys like KG from Machankura, you have I think Marcel from Bitcoin Dada, different people are going to other places now. And I think one of the best things you can have is a mixing of the blood, where you get to meet people like yourself from other parts of the world and they get to meet you. It helps you understand each other and you actually realise you're not that different from each, other even though you're doing it in a place that I've never been and you're doing another place that I never will go to. And once you have that shared mind about what's going on, and you understand each other, you actually get empathy automatically.
When that happens, good things happen to everybody, right? It's like, we had this saying in our tech space, "You put enough good, smart people together in a room and good things happen. You don't have to manufacture it, it just happens. So how do you get these people from these communities who are trying to push, or build in Bitcoin in Africa, with those from the rest of the world. I think Africa Bitcoin Conference is a good first step in that direction but I also think it's important to get the Africans out of Africa just as much as it is to get non-Africans to Africa.
Peter McCormack: Yeah, okay. Well, we're going to go, yeah, we're going to head out there, we'll come and see you. I think we're going to try and do Kenya, Nigeria and I think it's Malawi people recommend that we go to. I mean, I'd go under your recommendation.
Erik Hersman: Yeah. You should also take a look at -- I mean, the big three are always South Africa, Nigeria, and Kenya, right? Yeah. Now, those are the big economies of Africa, sub-Saharan Africa, and they have a lot of stuff going on in Bitcoin, just like you would expect. But if you get off the beaten track into Malawi --
Peter McCormack: Yes, please.
Erik Hersman: You get to even a more raw version, which feels like when I was growing up, that's the Africa I grew up in and it's very different than it is when you're in the big economies.
Peter McCormack: Have you lived your whole life there?
Erik Hersman: Yeah, I grew up in Sudan and Kenya. When I was six years old, we moved from Sudan, because the war got so bad.
Peter McCormack: Yeah, so I mean my boy will tell you this, I like going to the weirdest, strangest -- my favourite two places I've been to are Venezuela and India, just because it's so wild and different. And so, when you say Sudan, I'm like, "Can we go?"
Erik Hersman: South Sudan is the Wild West.
Peter McCormack: Yeah, can we go?
Erik Hersman: Yeah, absolutely. And we have the contacts in South Sudan to make it as safe as you can be in South Sudan.
Peter McCormack: Yeah. Is there government in South Sudan?
Erik Hersman: Yeah. Well, it depends where in South Sudan you go, who's in charge.
Danny Knowles: I've got no context for this. What's happening in South Sudan?
Erik Hersman: So, South Sudan got independence from Sudan about just over a decade ago. And as they did, they have, just like any new country, had their internal fights over who's in charge, how the resources are spent. And so, it always feels like there's currently some type of stress on the system because of that.
Danny Knowles: Right.
Erik Hersman: It's not as bad as Sudan proper right now, though. Sudan proper is in a mess.
Danny Knowles: Is that in civil war?
Erik Hersman: Yeah, it's being contested now between generals.
Danny Knowles: Okay.
Peter McCormack: We can't go there?
Erik Hersman: I wouldn't go there!
Peter McCormack: All right, we won't go there.
Erik Hersman: If I wouldn't go there, you probably shouldn't go there!
Marshall Long: If a guy that's from there wouldn't go there, probably shouldn't!
Erik Hersman: I'm pretty okay with travel in Africa and to risky situations, and I'm not going to Khartoum right now.
Peter McCormack: Okay. Definitely?
Erik Hersman: Definitely.
Peter McCormack: Okay, right, we'll see if we can change your mind! Okay, so one of the things I've found also with traveling with this is that the hardest place to explain Bitcoin to is my friends in Bedford. They just don't get it and because they don't have a need for it, really. They don't realise they have a need for it. I think they have a need for it, they don't realise it. If I went through my eight best friends, I think one of them might have a bit of Bitcoin, definitely got some shitcoins, but they don't really have it. And so I've just given up. I don't even talk to them about Bitcoin when I'm home. It's not a conversation that comes up any more because I bore them.
When I went to Argentina or when I was in El Salvador or Venezuela and you talk to people and you talk about what Bitcoin is, they get it. The more fucked their currency is, the more they get it. Is that a similar thing in Africa, people understand it a bit more?
Erik Hersman: The concept of what Bitcoin can do for you is something that is appreciated. What's interesting about what you just said is that Kenya is probably the least likely to adopt Bitcoin as day-to-day use, because we have M-Pesa. M-Pesa was one of the first mobile money systems in the world and it's massive. I think it moves about 20% of the GDP daily. It's incredibly big. And so everybody has something in their pocket that they can just send money around quite easily. Now, it's expensive, there's a fairly large size tax on it, and so the transaction costs are expensive.
Peter McCormack: Is that a percentage or fixed or mixed?
Erik Hersman: It depends on how much you're moving.
Marshall Long: It's like a tiered fee structure.
Peter McCormack: Yeah, okay, so I'm sending you the equivalent of £10, what do you think I would be paying?
Erik Hersman: About 1,500 or so... So, you would probably spend about 20 shillings on that to move it, 30.
Peter McCormack: What's that as a percent, do you think?
Marshall Long: It's about 1%.
Erik Hersman: Yeah, 1% to 3%.
Peter McCormack: Right, okay.
Erik Hersman: Yeah, but why that's important, again, I come across this in Bitcoin circles all the time, like, "Why don't you just use Lightning, why don't you just do this?" You think that's a small transaction fee, right, because of its relative size to you and your money. When you're talking about an ordinary Kenyan moving that much money, they'd actually rather do it in cash. That 1% to 3%, those 20, 30 shillings actually mean something. And so for you and I, we're like, "Yeah, whatever". We kind of forget about that value because the speed by which we can do the transaction is more important, the ease of use. But for ordinary people, they would much rather use cash.
So when they use M-Pesa it's for a reason, it's because somebody's across town or they're sending money to their grandmother upcountry or they're doing a business transaction but they just have to do it this way anyway. And yeah, it's useful but it's also constraining. However, the main point is in Kenya, we actually really understand it. So, when you show somebody Bitcoin and how you can move money on the Lightning Network, everybody automatically gets it, no problem. You go to some other countries and they don't have the same mobile money systems in place. So, if you go into the DR Congo, the DRC, you'll find people sitting on the side of the road with stacks of different types of currencies, and people will come and pay them and that person will send money to somebody else. There's a lot more friction to how their mobile money works.
Now, Kenya, we have a monopoly with one of our mobile carriers, and that's why it works so well, because everybody's on the same network, has the same SIM cards, and so can do that. This is why it's really important to understand how balkanised Africa is in its use of technology and its economies. Not everything is the same. You can't paint it with one broad brush. You actually have to think of them as different places and have their own rules, have their own uses of technology, have their own... The way that the society works in one country is very different than the one across the border, or it can be.
Peter McCormack: Do people outside of Kenya, or can people outside of Kenya use M-Pesa? Has it leaked into other countries?
Erik Hersman: So, M-Pesa has moved into a couple other countries. It has not had the same success, has some success, but not the same success. So, you can use it in Tanzania, you can use it in South Africa. I think Ethiopia just gave a license for it, which that's crazy, because Ethiopia has never allowed that kind of stuff before. But they don't necessarily -- that M-Pesa in Tanzania won't necessarily transact to South Africa, so you can't necessarily do it across borders.
Peter McCormack: Does each country have its own currency or can you use some currencies --
Erik Hersman: Every country has its own currency.
Peter McCormack: But can you go into one country and use the other currency; will people take it?
Erik Hersman: Right around the borders, yes, because they're used to being able to do the transfer between the two, but most of the time, no.
Peter McCormack: Alright, okay, listen, let's talk about Gridless again. I know we've covered this before, it's a very cool project. By the way, did he get his miners that I saw?
Marshall Long: Yeah, they arrive on 23 May.
Peter McCormack: I saw some of your miners.
Erik Hersman: Oh, yeah. Yeah, we have a big load coming in in a couple weeks' time. We're very excited about it.
Marshall Long: Those ones you saw are on a container now.
Peter McCormack: Nice. So, let's remind everyone, because not everyone would have listened to the last show, although they should. Let's talk about Gridless, talk about what you're doing, what the project is, and how the progress is. So, just start by explaining what Gridless is, what you're trying to do with this.
Erik Hersman: So, Gridless uses renewable energy at small mini-grid sites across Africa to mine Bitcoin. And the reason we do that is it pushes the edges of electrification out further, so it makes sense for many grids to operate. And number two, it's because there is very little, if any, interconnects between grids, so those energy partners don't have anybody else to sell to. So, we can come in as a buyer of last resort and help them have a fully functioning site as well as make money ourselves or make Bitcoin ourselves. And the second part of what we do is really because there's not a lot of hash power on the continent. And so pushing more hash power into the continent helps decentralise the network, and we think that's good for Bitcoin.
Peter McCormack: Have you seen one of these mines operationally?
Marshall Long: Yeah, multiple.
Peter McCormack: And they're essentially the same as the ones I saw when I went out and made my film?
Marshall Long: No!
Peter McCormack: They're different; what's different?
Marshall Long: It is the best chicken-shack mine you've ever seen. It's how every good miner starts, ragtag, you know, scrappy. They co-locate right on top of the turbine that's providing power.
Peter McCormack: Wow.
Marshall Long: Literally in the same little shack that the turbine's in.
Peter McCormack: Right, so explain these mini-grids then.
Erik Hersman: So, mini-grids are typically under 1 MW. What they're doing is you have a power development company that say, "We think there's enough density in a community out here for us to build power and sell it to them". So, they come and they look, and we typically go to hydro, but most of the mini-grids in Africa are actually solar, which don't make as much sense for Bitcoin mining, so we just work with the hydro ones right now. So, you go to a hydro site and they've already built something that's maybe 50 kW or 500 kW.
Marshall Long: And it's a private company, it's not a nationalised thing.
Peter McCormack: Right, okay.
Erik Hersman: It could be a community effort, like we have in Malawi, and they've built this already and they've started running power cables to the houses and those houses pay for their electricity to this private company. And usually what happens is they have to overbuild. So, they're thinking about, "What will the usage of this energy be like in five to ten years from this community? Let's build for that", because it's expensive to do the build. And so they build for it, but then the uptake by the community is very slow. So, first you start with your LED light bulb, and then you maybe charge a telephone.
Peter McCormack: Is it because they don't own electrical devices?
Erik Hersman: Yeah, they don't own them at first. Or they might own the smartphone and they're charging that off of a car battery right now. There's people who run services in the village who just charge phones off of car batteries. But as soon as electricity comes in, you can charge your own. You maybe will buy a hot plate to start cooking on, you'll buy a TV, maybe a refrigerator to keep your produce for longer. All these things happen, but they take years. And so over the next five to ten years, they'll maybe get up to the full usage of that powerhouse that was built. So, it was 50 kW or 500 kW, now it's a full capacity.
But what do you do as a mini-grid developer, as a power developer, between those times? You've got this massive excess of energy that you're just dumping as heat, you're just dissipating, there's nothing to do with it, right? So, there's nobody else who's buying it from you, there's no businesses locally who are going to get it from you. So, we come along and say, "Hey, listen, we'll take out the rest of that. And we'll do a deal with you, it's a rev share. So, you take Bitcoin", and a lot of times we have to do some education on what Bitcoin is, and then they have to be convinced of it. The great thing is that everything's better than zero, which is what they're getting today, so they can say, "Okay, fine, we'll take Bitcoin and we'll sell it right away". We can show them how to do that, or we can hold it and hope it goes up.
Peter McCormack: Do you make them take Bitcoin, though; you don't just sell it to them, sell it and give them the money?
Erik Hersman: We have them set up wallets, whatever they need.
Peter McCormack: But you don't sell it for them and just give them the money?
Erik Hersman: No.
Peter McCormack: So, you're --
Erik Hersman: Force orange pilling.
Peter McCormack: Yeah, you're force orange pilling!
Marshall Long: Because it just takes one. They're like the best drug dealers, right? It's like, the first one's free, and then they have to do it again because they're monetising otherwise unused power.
Peter McCormack: Did you get to meet any of these people?
Marshall Long: Yeah, I did. It's a very diverse gang. The few that I met, they ranged in diversity and background. The first shop that we met, the CEO is from Belgium, the CTO learned how to generate power by taking an alternator off a car and sticking it on a bike and shoving it in a river, the financier is French. And then we met guys who are much bigger and financed by the Rockefeller Foundation. So, the breadth and scope of these people is very diverse, but they all get it.
Peter McCormack: So, there's a lot of international companies coming in to invest?
Erik Hersman: So, yeah, so I'm actually putting out, probably this week, like a primer on how does mini-grid energy and Bitcoin mining work in Africa. So, alongside the rest of the Green Africa Mining Alliance, the GAMA crew, we put together this document. And it really explains what the problem is. So, how do you get finance to build a mini-grid when that mini-grid is not financially sustainable, and everybody knows it's not going to be financially sustainable? Well, why would you do it in the first place? You have to actually go back.
Peter McCormack: It could be part altruistic.
Erik Hersman: That's right. So, where does the money come from right now? It's concessionary, right? It's generally a foundation or it's one of the large DFIs, your USAIDs or maybe an African Development Bank or some European foundation or like that. And the problem with that is that you're building businesses -- let me actually go back a step. Why are you building that powerhouse, because you know the only way to push electrification further in Africa is through mini-grids? The national grid won't go there. The density isn't enough, they're not going to get their ROI in time. So, everybody knows it doesn't make sense, right?
Why are they doing that in Africa too? Well, because of the 1.1 billion people without access to electricity, 600 million of them live in Africa. So, if you actually want to push human progress forward, we have to start with energy. And to do that, we have to put this further and further out there. So yet, everything that we've seen for the last 20 years in mini-grids is that they're not sustainable. So, who's going to fund non-sustainable stuff? Foundations and DFIs.
Marshall Long: That was the first thing. After I did the tour, I started talking with the guys and I thought a whole vertical from my family office was, why don't we just do our own financing for these projects? Because the big thing that the guys, one they're partnered with, called Hydrobox, he said they have identified 60 MW that they could build out, but the only way they can get financing is from European banks and they have to have a huge anchor tenant --
Peter McCormack: What's an anchor tenant?
Marshall Long: It's just like a big tea drying house or a coffee place that's a large user. And the interest rates on their loans are like 18%, 20%. I was like, oh my God!
Peter McCormack: That's like Terra LUNA level.
Marshall Long: It's crazy. And so I thought, well, if you're a Bitcoin miner and you understand the mining and you do lending as a side thing, you can actually ensure you get paid back, because you do a covenant in the contract that says that you get a portion of the power until it's needed by the community. So, you can self-finance your own projects for these other people. And the backlog of projects they have is -- and this is just one small company, 60 MW, that they basically already have permits for. They're just waiting for financing.
Peter McCormack: So, there's a business case for you to do this.
Marshall Long: Huge.
Erik Hersman: So this, I think, is why Bitcoin mining, which we didn't realise at the time when we were really starting the company, is this silver bullet for. It comes in and it fills this last little gap that makes mini-grids sustainable; there actually can be a financially sustainable company now. And that's why there's not a single small power development company that we've talked to that haven't said, "Oh, could you come work with us?" Everybody needs it, everybody knows they need it.
The interesting thing is the financing around this can take three to five years to get. So, even once you've found a site, like Marshall's saying, you found these 60 MW worth of sites, you can't necessarily get the funding quickly. It'll take another two, three, four years, and then you'll break ground and you'll build. There's no reason for that anymore. There's a new way to think about this, there's a new paradigm for energy in Africa, I think now, which is you bundle the mini-grids and the Bitcoin mining together, and you get your return on investment in 7 years instead of 20, or if ever, because they weren't sustainable.
Peter McCormack: Right, okay. And so, this is essentially what Gridless is doing.
Erik Hersman: Well, we're not doing that yet, right, we're just Bitcoin mining. So, we haven't financed the development of new mini grids.
Peter McCormack: Okay, yeah, sorry, but you're supporting the mini-grids, so you've got that relationship. But you can partner up with these companies to build the business case; or do you think you're eventually going to do the whole package?
Erik Hersman: I don't know yet. I think in our future right now, it's just growing our base of mini-grid operations and doing mining there. I think there's a future that does make sense, or could make sense, where we get involved with the financing and equity ownership of some of that power, because it gives us some longevity on mining. The way I'm reading the tea leaves right now is that energy companies in the future will be the ones who are mining, not independent mining operations. And so it makes sense, if you're trying to play into the future that you own some of that energy so that you can maintain your mining position.
Peter McCormack: Well, you see that though, don't you? That convergence of energy in mining companies?
Marshall Long: Absolutely. So, when we finished our first tour, I pulled the Hydrobox guys aside and I said, "Is there an interest to do that?" And I kind of pitched just a rubric of what that would look like for my family office to finance a build. And they were like, "We would sign that deal tomorrow". So, for a westerner doing business in Africa, I'm a little bit uneducated, but absolutely. On the surface, at least, it seems to be a no-brainer.
Peter McCormack: I mean, I wonder how far we're off that in UK, US. Do we know if anyone's doing that? Wasn't there a company in Australia who said they were going to start mining?
Marshall Long: There are a few in the States.
Peter McCormack: There are?
Marshall Long: Yeah. But the problem is they have an alternative by selling to the marketplace that is the grid.
Peter McCormack: So, we in the UK have this -- how much is it being curtailed in the UK?
Danny Knowles: There's a huge amount of wind curtailed every day.
Peter McCormack: It's unbelievable.
Marshall Long: Yeah, so in Texas specifically, there's a lot of curtailment too. However, that's a whole other -- it seems parallel, but they're different. They're only curtailing because the price is going negative, and so they're stopping the turbines because they're not making any money.
Peter McCormack: So, that's not happening in the UK. What's happening in the UK is two things: sometimes the grid can't take all the energy that's being created; secondly, sometimes they haven't got the transmission lines set up. And in my head I'm thinking it's tens of millions.
Danny Knowles: Well last year, 200 million was curtailed.
Marshall Long: 200 million MWh or pounds?
Danny Knowles: I don't know what that would be, I'll try and find --
Peter McCormack: And I guarantee you if I went to --
Marshall Long: Probably 20 GW if I had to guess.
Peter McCormack: If I went to these companies and I said, "Hey, can I buy that off you? I don't know what you're selling it at".
Marshall Long: Here's the problem --
Danny Knowles: Sorry, curtailed wind, 33 GW.
Marshall Long: So, the problem that I've faced in Texas doing these kinds of deals, and I've gotten very close to doing some deals with large wind providers, is they aren't to the point where it's an aligned business model. So they'll say, "Yes, you can take it from us, we want a floor price of, call it 0.02 cents, which is seemingly free. However, when the price goes up on the real-time marketplace, you have to pay that price". My response as a miner is, "Why would I ever do that when instead of being inside your fence to get that deal, I could just build on the outside and then I get to take advantage of negative pricing?" So, right now for a miner, it doesn't make sense because they have an alternative and I also have an alternative.
Peter McCormack: But you also have a free market for energy pricing in Texas.
Marshall Long: That's right, and in most places, there is some marketplace, whether that's exporting to a different country or whatever. But the reason it works so easily and the pitches are very -- it's five minutes -- is because there is no alternative.
Peter McCormack: I'm telling you, if I went to one of these companies in the UK and said, "That 200 million that you're curtailing, I'll buy it from you, but I'm going to buy it at a low rate, but I'll buy it from you, I'll buy all of it", I can imagine they're going to be very interested. And then they're going to turn around and go, "What are you using it for?" And I'm like, "Oh, just a data centre, but I need to put the data centre here". They're like, "Well, what is that data centre?" "I'm mining Bitcoin". They're going to go, "No". They don't know why they're saying no, but they're saying no.
Marshall Long: That's right. Well, your CapEx will be upside too. It'll be different because you will have to curtail when the grid needs it or the price is higher than what you're willing to pay.
Peter McCormack: Well, but there's a bigger issue here in the UK. The main issue is, see if you can find this, Danny, that they've got an issue with the transmission lines.
Marshall Long: Yeah, the congestion.
Peter McCormack: Yeah, so UK has got this net zero target, which we don't need to get into the net zero's bullshit thing. I don't think it entirely is, but we don't need to get into that. But the point is that they are able to build out the turbines and that part of the infrastructure. The grid cannot take it and they think they're 15 years behind, okay. Now, one, it's energy going to waste, and it's an investment thing by the way; this also could give them investment to build those transmission lines. Have you found it?
Danny Knowles: No, I've not, I don't know exactly. Like, what would be the issue there; what is the issue?
Peter McCormack: Search for --
Marshall Long: Congestion.
Peter McCormack: No, search for, "UK wind turbine transmission 15 years", or something.
Marshall Long: So, we have a similar problem in West Texas, where there's a ton of generation, but not a lot of transmission. And there's not a lot of people immediately around there to consume the energy, so you need long-term transmission and distribution. That's just really big CapEx that they're just not willing to do.
Peter McCormack: It's the same problem in the UK, and the government don't really want to pay for it, they want private companies to do it. They will subsidise them, but there just aren't enough doing it.
Marshall Long: Right.
Danny Knowles: I mean, it just says there's an issue and they're working on it, there's not a lot of detail in it.
Peter McCormack: Yeah, but I'm pretty sure I saw this, like a 15-year delay just on transmission alone.
Marshall Long: It's a good bear-market project, for sure, because the price of mining machines is lower in a bear market. So, I mean you could make a case for sure.
Erik Hersman: If you can get the deal, if they would agree to it.
Peter McCormack: I don't think I'm going to become a miner. I have so many businesses, I'll be like, "Marshall, find me these guys".
Marshall Long: That's how I found out about Gridless, actually, our common friend, Obi. He led this conference last year. He was like, "Man, I think I want to get into mining". And I'm like, "No, pretty sure you don't! He said, "No, I could set one up in Portugal and it would be a cool thing". I said, "You should come to Houston, see what it's like". He came and he saw what you saw and he was like, "Yeah, I'm not doing this". And then he said, "Maybe I'll try to find a project that we can both invest in". I was like, "Okay, good luck. Mostly everybody's a clown".
He calls me two weeks later from Norway. He's like, "Hey, I've got this guy". I'm like, "Yeah, everybody's got a guy". And then he said, "Can you jump on a Zoom?" Get on a Zoom, see this guy and Obi on a cell phone on a park bench somewhere in Norway. And they start telling me the story and I thought, "Oh, this is seemingly interesting. Have you ever mined before?" He said, "No" I said, "Okay".
Erik Hersman: Strike one!
Marshall Long: Yeah. I said, "What about the internet, because that's the thing I don't know?" He said, "Well, I helped build half the internet in Africa". It's like, "Well, okay, we're getting somewhere". And then I went down and saw that it wasn't a dog-and-pony show of any kind, it was for real. So that's what things kicked it off.
Peter McCormack: Interestingly, side point, I just found out that the Council of Bedford has one of the biggest solar farms in the UK, it's owned by our local council, and the grid can't take everything they're providing.
Marshall Long: Sounds like Gridless chapter, Bedford.
Peter McCormack: Yeah!
Erik Hersman: Hi, Gridless Bedford!
Peter McCormack: We'll get you into Bedford. Okay, so in terms of the business model, how cheap is energy in Africa? Is it relatively cheap?
Erik Hersman: It's relatively expensive.
Peter McCormack: Relative to them, I mean for people living there?
Erik Hersman: So, there's wide variance across countries, let me start there. In the countries we operate in, if you are a consumer paying consumer prices, it can get fairly expensive. You're paying 25 cents plus tax per kW.
Peter McCormack: $1.25?
Erik Hersman: Yes.
Danny Knowles: That's more than the UK.
Erik Hersman: Oh yeah, it's more than the US, almost anywhere in the US.
Marshall Long: It's more than almost anywhere I've seen.
Danny Knowles: And that's because there's not enough demand for them to build out the supply?
Erik Hersman: Well, this is the national grid, it's just expensive.
Marshall Long: It's like if you live in a big city.
Peter McCormack: But what about on these mini-grids?
Erik Hersman: So, on the mini grids, it's also fairly expensive. And the reason why it's been fairly expensive is because their levelized cost of electricity, which is the algorithm that's used to figure out how much it costs to build this, and then how much will it take to pay it off over the next 25 years, and so people -- we've seen some min-grids where they're charging 90 cents.
Peter McCormack: But how can people afford it?
Erik Hersman: They can't, or they can only afford very little, and so they'll just have an LED lightbulb and charge their phone. But you'll never get the uptake of all the other things that electricity can provide for you at those levels, because you're talking about people with less disposable income, because way out in the rural parts have less disposable income than the urban parts of Africa.
Danny Knowles: So, the high price on the mini-grids makes sense, but why is it so expensive at the national grid level?
Erik Hersman: Inefficiencies, mostly, and the distribution; it mostly comes from distribution. So, the utility itself, it depends on the country. In Kenya, it's separated from the power generation. Distribution is a different company, and so they deal with that. And it's not always well run. In other countries, like Malawi, the power generation and the power utility are combined, and it actually is a little bit cheaper, but it only gets a little bit cheaper because in Kenya as well as in Malawi, there's subsidisation that's happening.
Danny Knowles: Right.
Erik Hersman: It's a problem, right? It's already very expensive for energy. If you're a company running an industrial site, you'll get the energy for a little less, of course. And then what we do, though, and why we can make the numbers work is, first of all --
Peter McCormack: Yeah, that's my next question.
Erik Hersman: -- we were going into places that have their mini-grid, they're not connected to the rest of the grid, they cannot sell to anybody else. So, when we walk in, we are literally their buyer of last resort.
Peter McCormack: And it's a rev share, so you're not really paying for the energy.
Erik Hersman: We're not paying the floor price.
Peter McCormack: You're just saying, "Give us the energy and whatever we mine, will give you a percentage back".
Erik Hersman: Yes, that's correct. They get a percentage of it, they get to see that, it's very transparent, who's making how much at any given time. Our incentives are aligned now. They want to see this working. So, as soon as power goes up, and if we haven't spooled up a bunch of miners, they're like, "Hey, how come you haven't turned those miners on?" And so, that actually has made that relationship very healthy. We had this really bad drought, like a 40-year low in rainwater, and it was really tough for the first four months of this year at one of our sites in Kenya. And so, we're there saying, "Well, we know you can't turn any more energy on because there's no more water that you can use to move the turbine. So, we'll just sit here patiently and wait, because we're partners with you on this".
The rains come and it's just cranking. And they're like, "All right, can you turn those miners on now?" and we're like, "Okay". And we're saying, "But we moved some of them. We had moved some to Nigeria, some down to Malawi, some to different places". We're like, "Okay, it'll take us a few weeks before we have some more in town". They're like, "Okay". The incentives are aligned. They can be understanding of us. We can be understanding of them. But we're both looking for the same thing, which is max usage of this energy. And of course, we always play last fiddle to everybody else. So, if anybody in the community is trying to use that power, whether it's a maize mill or an individual at their home, they always get the energy first, and we auto-curtail our miners, depending on who's using it.
Marshall Long: That's the best part about being in the turbine house, you can see it slowing down in real time, and turn your machines down.
Erik Hersman: Yeah, that's where Philip, my business partner, he's a smart guy, he's written some really good code. He and Marshall have been looking at stuff together to help make that buffer even faster. It's actually one of the more interesting parts of what we do. It's fun for people who are hardware and software guys to solve that problem and see the real business case of it in real time.
Danny Knowles: So you, presumably, make these companies more profitable. They could probably pass that saving on to the consumers, but do they actually do that?
Erik Hersman: They do sometimes. So, we can't force that. But yeah, like in Kenya, that's what's happened, is there's a lower cost of power in the community because they've now been able to -- that company who runs it, they're more empathetic to their own customers in the grid.
Danny Knowles: Because they've got no other option, so they could keep it the same, presumably.
Erik Hersman: They could. Like in Malawi, what happened is they were finally then able to buy power meters, because they weren't financially sustainable, they couldn't even buy power meters to turn on more families who wanted power. And so, we came in there, they're now able to buy it for 200 more families; 200 more families are connected actually in the last three-and-a-half months. And then, the other thing that had happened is one of their turbines had gone down. They have three powerhouses, 50 kW, 50 kW and I think 100 kW each.
So, one of the 50 kW powerhouses had gone down a year ago, so they were now able to fix it, and so now they have more power for the whole community to use. There's a backlog of 800 families who want energy, 200 of them are already on and the other 600 will be on soon.
Danny Knowles: That's cool.
Erik Hersman: Yeah, so there's different community benefits that come from this. And this is my sticking point with anybody who talks about this as, "Oh yeah, well Bitcoin uses too much energy". It uses a lot of energy; too much is its own tell on your moral stance on what energy should be used for, right? But the fact that it pushes electricity out to more homes at a lower price, or possibly lower price, into these rural communities, that's a net positive, and we'll always have a disagreement. If you think that some kid in some village being able to study later at night, or who won't have respiratory illnesses because he didn't grow up on lamp smoke, is less important than your moral stance on what energy should be used for --
Danny Knowles: They're just objectively wrong.
Erik Hersman: Well, I would say that because it's about -- we can't forget that there's humans involved here and human progress is important. And when you have a moral stance sitting in your ivory tower in the West about how energy should be used, you are losing context for why energy is there at all.
Peter McCormack: It goes back to that Gladstein point of Check Your Financial Privilege, or just check your privilege. And this is why that guy, Alex de Vries, pisses me off, or this conversation we had in Houston where I was like… The central character to my film was Elizabeth Warren, because all I kept thinking about is, "I don't think you understand the second-order consequences of what you're doing when you are attacking Bitcoin. You're attacking these kinds of projects as well; you're attacking us as bitcoiners, I'm not just going to pretend I'm just care about your project, but I'm saying you're attacking all of us. But let's actually look at these amazing projects that are happening that you're causing problems for?"
Erik Hersman: Well, what we're talking about is that people are taking either political or moral stances on things for their own personal gain, their own personal benefits, and they don't have the full context or they don't care about the full context of what that technology does. And so, there's a level of intellectual dishonesty at play and it's easy to see.
Marshall Long: And I think also it's easy to say like, "Oh, miners aren't helping the grid", or whatever kind of stateside arguments we have. You've seen the curtailment stuff in Texas, but if you want to put that in practice in a place that's never had that kind of stuff, you could see the real impact it has on people.
Peter McCormack: How do they pay their bills? Do they receive a bill through the post, or is it metered and they pay in advance?
Erik Hersman: Yeah, it's metered and prepaid. So, somebody will go and they'll pay 100 shillings or 300 kwacha for this much energy. And as soon as they've used that much, their meter turns off the power.
Peter McCormack: Okay. And in terms of usage, when you see one of these mini-grids go into one of these villages, do you literally see a change to the village? Has it become a whole exciting thing; is it total game-changing, suddenly lights are on in the evening, the village doesn't close down? Help me understand.
Erik Hersman: When the sun goes down in Africa, it can get very dark very quickly and the world becomes very small. So, when you have energy and people have electricity at their homes, lights come on. People go to the shop because that shop has power and they all hang out there. They go to their local pub and it's just a completely different feel. You have more security. It's a big deal, actually, there's much more security when you have electricity. Education gets better, healthcare improves.
Did you know that there's 50,000 clinics and hospitals across Africa, where people can't get there within 50 minutes, that don't have electricity? That's the kind of thing people don't know about, right, and it's big. I mean, that affects I think something like 280 million Africans, just that access to clinics with electricity. That's a crazy number. And so, having energy in your village has an incredible effect, and that's not even counting the economic effect, what does it do for businesses, which is another level, right, which I get excited about.
I grew up in Africa, so I'm not a big fan of the NGO World and the kind of grant money subsidisation that happens. I'm a fan of businesses and what happens when businesses move in and people are getting wealthier because they're doing something that has long-term economic value. And if we really want to change the economic trajectory of Africa, we have to talk about businesses and wealth generation.
Peter McCormack: How many how many grids have you got operational now?
Erik Hersman: So, we have the one in Kenya, we have the one in Malawi, we'll have another one in Zambia in two months' time I'm really excited about.
Peter McCormack: Great.
Erik Hersman: And then we have the partnership we did in Nigeria, with a miner who was mining on his own, and he had some extra power, so we sent him some miners as well that we do a rev share with him on. And we have a couple of other sites that are on the horizon for this next nine months.
Peter McCormack: And with these grid operators, do you go through a moment with them where there's an initial scepticism when they receive that first Bitcoin cheque, as such, and they're like, "Shit, we just got this!"
Erik Hersman: Yeah, this is real money. Yeah, and it's the realisation that it's real money, it's a real business customer.
Peter McCormack: And they become proper bitcoiners at that moment?
Erik Hersman: Well, they become believers in our Bitcoin data centre at the very least, that's the bare minimum.
Marshall Long: It's the foot in the door for them.
Peter McCormack: Yeah, that's their Silk Road!
Erik Hersman: Yeah, leadership on the company's like, "Oh, okay", and you can see the shift.
Peter McCormack: I know you've raised money. What's holding you guys back rolling out hundreds of these sites?
Erik Hersman: Well, we had a very wise advisor who told us, "Build slowly, make sure you really know how it's going". That's also Africa, you don't want to go big right away. You want to make sure you really understand the intricacies of what you're doing. So, we've been going slowly on purpose. And we'll probably -- I'd like to get to 10 MW by the end of the year, maybe earlier, but we're not going to grow massively right away. Make sure we understand.
Marshall Long: Because if you do it wrong, and all it takes is for you to burn one grid operator, he'll tell all his buddies, and you're out of business.
Peter McCormack: Yeah. So, for context, 10 MW, I've seen what you've got at your place...
Marshall Long: That's 2 MW.
Peter McCormack: That's 2 MW. So, it's about five times that, that's your target, okay. But you've got that in one location. Industrial miners, I've been to a variety, and I've seen the Iris facilities, I've seen a lot of these facilities now. These are big facilities that have a lot of economies of scale of it in one location. You're like a decentralised network of these. How many ASICs do you tend to have on a site? I know it'll range, but…
Erik Hersman: Yeah, I mean we'll have between 20 and 200 on a site. So, it's not big. There's something about horizontal scale versus vertical scale. You're talking about vertical scale when you have these big sites, warehouses full of miners. And it gives you a ton of efficiency, but your resiliency decreases.
Marshall Long: That's right.
Erik Hersman: So, there's something valuable in having a horizontal scale, where you might have 15 different sites. Now, you will not have the efficiency, so you have to manage those 15 sites. Takes more people or more time.
Marshall Long: But watch this summer. As the Texas curtailment season comes on, watch the network hashrate. It'll go up and down and up and down because there's so much concentration in Texas.
Peter McCormack: How much of the hashrate is in Texas now?
Marshall Long: I think the Texas Blockchain Council puts it at like 15%, 20% maybe.
Peter McCormack: Of global hashrate?
Marshall Long: Yeah, it's a lot. But it's not as resilient because it's all in one place, and it's a free market and there are opportunities elsewhere to capture upside.
Peter McCormack: What would that mean for block production?
Marshall Long: I think you'll see the difficulty chop sideways this summer. But in Africa, it doesn't matter.
Peter McCormack: Okay, yeah. So, if we talk about -- let's just shift to that for a moment. There has been a bit of criticism pushback within Texas, but it seems to be the pushback is coming from people who aren't in Texas sometimes, but I know some within. Is the story being told of Texas and Bitcoin by bitcoiners being told honestly?
Marshall Long: I think the curtailment story is an interesting one, but there's levels of curtailment. There are some miners who do it very well, some miners who do it very poorly. If you do curtailment poorly, it's a net negative.
Danny Knowles: Why is that? Actually, how would you do it poorly, first of all?
Marshall Long: If you don't have the right software to either read when the grid needs it, or be able to tell your machines to turn off in a fast enough time, or during the right time window. Those are -- if you miss it, then maybe you turn off the mine when the grid actually needs you to be on.
Peter McCormack: But surely there's an interest in miners sharing this information, and so surely the ones who are shit at it should be talking to the ones good at it.
Marshall Long: There's a lot of pride.
Peter McCormack: Really?
Marshall Long: A lot of pride, as far as the curtailment side of it. As far as operational, it used to be very secretive, like 2012, 2013, when a big site was 5 MW. You don't know where it is, you don't tell anybody how much you pay. All that's different now, and now the curtailment piece is much more guarded. Anybody can come to my mine, our big mine, right? Anybody can come check it out, just like the Iris guys, they'll have anybody out. But when you ask them, "Hey, can you show me the source code for how you control your mines?" If it's built by them, no chance, because that's the secret sauce that everybody's competing on now.
Peter McCormack: Right, okay. So, during the season, is there both a chance that there will be a good story told and potentially a bad story told?
Marshall Long: I don't think there'll be a bad story, because it's not enough of the Texas grid to have a catastrophic impact.
Peter McCormack: Right, which if it did happen, that would be disastrous PR.
Marshall Long: Oh sure, we would be shut down instantly.
Peter McCormack: But there's a chance of a very good story to be told?
Marshall Long: I can tell you that during the last winter storm, had miners not been there, we would have been blackout. And ERCOT has that data. ERCOT has the data for every single Texas miner. They talk to the miners, they say, "Hey, you guys were good at curtailing". They have a ranking, actually, of who's good at it, who's bad at it. Everybody's helping the bad people get better. But at the top, nobody's sharing. Like, if you're first and I'm second, no way you're talking to me.
Peter McCormack: So, there's a real need for what's happening there in Texas to also happen in other states and also happen in other countries, because we don't want too big a concentration.
Marshall Long: That's right.
Peter McCormack: Yeah, so a good story would be useful. We need it to happen in the UK.
Erik Hersman: How much mining happens in the UK?
Danny Knowles: Very little.
Peter McCormack: I would assume there's no industrial mining and there may be some home miners.
Marshall Long: I know there's some stuff in Northern Ireland.
Peter McCormack: Yeah, we know those, don't we?
Danny Knowles: I always get the name wrong, Scilling.
Marshall Long: Yeah.
Peter McCormack: Yeah, but it's just energy's so expensive.
Marshall Long: That's right.
Peter McCormack: It's so expensive, but there should be some mining down with the curtailment. Somebody should be doing something there.
Marshall Long: It's fairly easy. You just plop a container next to a turbine and hook it up.
Peter McCormack: We know that. The problem is the scepticism from people in the UK with regards to things like Bitcoin.
Danny Knowles: I don't actually know who owns that power as well, who owns the wind power.
Marshall Long: Yeah, it is a privatised or is it --
Danny Knowles: I'm not sure.
Peter McCormack: Yeah, I mean the industry is privatised.
Marshall Long: Okay.
Peter McCormack: Yeah, there's a lot of subsidies that go into the build-out. I mean, is it like 50% of the UK's power is now wind?
Danny Knowles: I mean, it obviously fluctuates but it gets up as high as like 65% is wind. Right now, it's pretty low, but I guess it's late on now. But wind's 20% as of right this minute.
Peter McCormack: Yeah, and I can imagine the weather is pretty mild at the moment.
Danny Knowles: Yeah, and it's late in the day.
Peter McCormack: Yeah, interesting. Is there any part of this I've not asked you about yet that you wish we'd have covered?
Marshall Long: Do lions make good security guards?
Peter McCormack: Well, actually, how do you operate the security with a distributed site like this, and repairs in multiple countries; are you training someone locally to fix ASICs?
Erik Hersman: So, we are always on site with the power company, so we have their security as well. And then, yes, we do train somebody locally for first-level repairs. For larger, more complicated things, we have guys in Nairobi, who it's often us, the next time we fly down there, we'll fix something.
Peter McCormack: And this business scales well?
Erik Hersman: Yeah, it does. It does because we have advantages that a lot of the Bitcoin miners elsewhere don't have, which is we have isolated powerhouses and we have the ability to do revenue share instead of paying a floor price.
Peter McCormack: And each site, when they get up to full capacity usage, would that mean you're removing ASICs or do you still think you'll be operational just at night?
Erik Hersman: Sorry?
Peter McCormack: So, you talked about earlier, they build out for the future use and it takes some time to build up, but over that period, do you have to consider once it does get to full usage, will you be moving out of those sites?
Erik Hersman: Yeah, we have to know that there's somewhere else we can move those miners to. Now that's a couple years from now.
Marshall Long: Well, and they're nimble too, because they can tune them to use less power on the road to having to move them. So, it's not just like overnight; they can see it coming.
Erik Hersman: Yeah, this software, we only use WhatsMiners. We don't use any of the Bitmain machines, because they're hardier. Oh, by the way, well, what Marshall was just saying is we can tune them to be running on a lower-efficiency mode, which means less power usage. So, instead of 3.4, it takes 2.7 to run it. And actually, it doesn't really affect our -- it affects us, but our profitability doesn't go down that much, so we can run it that way. No, but the reason we love WhatsMiners, and it was actually Marshall was the one who told us to go this way, and thank God he did, these things can take a beating.
So, when the rains come in Africa, you get flying ants. It's the termites, they have wings, they fly around. If you have lights on, they just flock to it, and it'll block out the lights. One of our containers, we did not have a filter on one of the intakes, and somebody had left the light on at night in it. And we were like, "Why are our miners going down to like 60% efficiency of their normal 100%?" We get there, we start cleaning them out, we pull off the fans and it's full of bug guts, just completely smattered --
Peter McCormack: Suicide Termites!
Erik Hersman: -- oh, my gosh.
Marshall Long: The stuff you find inside of miners is great. I've seen birds, all kinds of stuff.
Erik Hersman: But they're still running. WhatsMiners are amazing, so we love them, and they have proved themselves already to us.
Peter McCormack: All right. Oh, is there a heat issue, because you're already in a hot place, no?
Peter McCormack: So, everybody thinks Africa's hot. It depends where you are in Africa. So, if we were in the northern desert of Kenya, yeah, we would have more issues. But in the highlands of Kenya or the mountains of Malawi, we are not having an issue.
Peter McCormack: We've got to get out of there. All right, before we finish, how was ConsenSys?
Marshall Long: ConsenSys is a very good conference run by very cool people.
Peter McCormack: I can't believe they went to Texas. It didn't make sense to me.
Marshall Long: I think it makes more sense now.
Peter McCormack: Because?
Marshall Long: Because miners are here. Look, it never was cool to be a miner, except for the past two years, and now it's the cool thing to do.
Peter McCormack: It was never cool to go to ConsenSys!
Marshall Long: ConsenSys in New York was always -- everybody used to come.
Peter McCormack: It was a good party.
Marshall Long: Yeah, but now I think Bailey's done a really good job. He is now, as I've told him many times, the conference king.
Peter McCormack: He is crushing it.
Marshall Long: He's crushing it and he deserves the success he's had. Young grinder, Bailey's the man.
Peter McCormack: I just remember that ConsenSys, I think it was 2019, with the lift doors.
Marshall Long: Oh yeah, that had Justin's face on it!
Peter McCormack: Justin's face. So, they would close it, would be just a big Justin face!
Marshall Long: What the fuck!
Peter McCormack: How Bitcoin-y was it and how shitcoin-y was it?
Marshall Long: It was very shitcoin-y, a lot of bankers, which was interesting, talking about their own, whatever the fuck a private sidechain is, I had no idea. Just shilling their own databases, I guess, not sure.
Danny Knowles: Shilling databases!
Peter McCormack: All right, man. Well, look, shill Gridless. What do you need; who do you need it from? Give it a shoutout.
Erik Hersman: Yeah, I think for Gridless going forward, we will be looking at our next round of financing, what we're going to do there. Like we talked about earlier, we're thinking about what does it take to play a part in the equity ownership of the energy side too. So, we're interested in talking to people who are on the energy side and seeing what it could look like if we went into these same mini-grids and said, "Instead of building 500 kW, why don't we build 1.5 together?"
Peter McCormack: Okay. What about the massive hydro dams that exist in Africa; have you considered even doing anything there?
Erik Hersman: We have talked to a couple of the really super ones. And maybe it's not our lowest hanging fruit, to be honest, but there's potential.
Peter McCormack: I didn't know if that would be a good revenue source to finance everything else.
Erik Hersman: Maybe. So, a lot of the large miners, not a lot, a number of the large miners have been talking to the people in Ethiopia, and they have a couple of gigawatts spare. But the government is the government, and they are trying to figure out how do they take their pound of flesh through this and they're very, very bureaucratic in Ethiopia. So, we'll see if anything moves forward there.
Uganda is interesting. There's some parts in southern Africa, like Zambia and Zimbabwe, that might be interesting. But we think it's easier to work with independent power producers, private companies instead of governments.
Peter McCormack: Of course, naturally.
Erik Hersman: And so, we tend to use more of our energy to work on those deals than the large government ones.
Peter McCormack: All right, well look, anyone listening, go check out Gridless. Love what you're doing, man. We're going to come out and see you. I don't know when it'll be, but we're going to come out this year.
Erik Hersman: You guys are welcome, and we'll show you around. Marshall, do we show people around pretty well?
Marshall Long: Boy, they do it right.
Peter McCormack: We want beer and we want meat.
Erik Hersman: Those are easy. That's the easy parts.
Peter McCormack: All right, cool. Listen, honestly, love it, Erik. Love everything you're doing, you know we appreciate it. Anything we can do for you, let us know. Marshall, good to see you always, brother. Yeah, off to a conference.
Erik Hersman: Yeah, thank you guys.
