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

Welcome to another episode of Bits and Bips, The Interview.

My name is Steve Ehrlich, head of research at Sharplink, and also your host.

Uh, we've got a terrific show for you today, but before we dive in, let's take a very brief break to hear from some of the sponsors who make the show possible.

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All right.

Welcome back.

So, like I said, we've got a, a really uh interesting and, and timely episode today.

I have with me Sean Murray, the head of special projects and crypto lead at Fuse Energy, a $5 billion UK based energy company, full stack energy company that really sits at, I guess, the convergence of, um, decentralized infrastructure, crypto, and energy, and Uh, we've been speaking for, for weeks now about how crypto and macro are colliding.

That's what we do on the show, uh, in particular, uh, in relation to the volatility in energy prices, and, uh, Sean's business is being directly impacted by, by all of this, and they've come up with a really, uh, ingenious way to try to, I guess, mute out some of that volatility and, and grow a sustainable business that's largely based on renew renewable energy, something that we can all get behind.

Uh, so welcome, Sean.

Thanks for having me on, Steve.

Great to be here.

So I, I wanna just level set here, and I wanna make sure that uh We're gonna get into all those issues, but, but Fuse, it's a bit of a complicated company and unlike many shows, unlike many projects that I highlight on the show, um, your origins did not start in crypto.

Uh, the, the firm actually was created by a few early employees of Revolut, uh, uh, Europe's, uh, I believe largest or most valuable in tech startup, so they know how to grow a business and, and you've already built a, a pretty successful company before you even got into crypto.

So just very briefly, can you please, uh, Uh, explain what Fuse does.

Yeah, sure, Steve.

And thanks, um, and understandable.

We're building probably about 10 different businesses at once right now.

So, um, there's a lot going on.

But in, in summary, we're a verticalized energy company.

So it means we operate across the energy stack.

Everything from generating energy from our own generation plants like solar and wind farms that we acquire and manage, to a big in-house kind of trading operation on wholesale power markets, to then ultimately supplying, you know, homes and soon businesses with energy and billing them every month for it.

And that's kind of on top of kind of an installation and an R&D unit as well that we do for kind of distributed energy devices that ultimately, you know, we'll be looking to.

Uh, launch our kind of, you know, crypto native product into.

So that's broadly what we're doing.

We're doing about half a billion in revenue right now annually, um, mostly based in Europe and the UK, but looking to kind of expand over the next year or two to, you know, North America and a bunch of other countries.

Yeah, and I, I know one, I guess big feather in your cap is a no action letter you got from the SEC I, I believe last year, and we'll get into that and, and, and what it means for your business.

Uh, but, but first, I, I really wanna talk about what's happening in energy markets today.

I, I, I don't have to tell anyone listening or watching that they're volatile oil is still about, above $100 and given I think some of the, the seesawing statements from President Trump and the US and, and, um, responses from the Iranians, uh, it's very unclear what's gonna happen next.

Uh, how is this impacting the energy markets in Europe versus versus the US which I believe is a little more, uh, self, um, reliant, and, uh, what, like, what are some of the big changes or, or how is this impacting your business?

Yeah, a great, very obviously topical question.

And the kind of differences between the UK and Europe and the US are pretty, pretty stark, which, you know, you can kind of see it manifest itself on the charts right now.

Um, I think one of the big things that, you know, we look at broadly is, if you think about kind of oil and gas prices, obviously they're, they're incredibly, you know, um, the, the price of oil and gas on the markets incredibly related to the supply.

And, you know, most, most of that comes through the Gulf, um, for, for Europe, especially.

Um, in the US, naturally, you know, with the kind of recent shale revolution, the US is, is somewhat self-sufficient, especially when it comes to, to, to gas.

But I think, you know, one of the big things that we look at is, when we're looking at, and how it's kind of affecting our business, is that The price of oil actually doesn't really affect, you know, the price that ultimately people pay for their energy, that homes, businesses, data centers, etc. pay for their energy.

Um, you know, obviously it, it affects what people pay at the pump, but, um, it's, it's more through secondary effects that oil has these knock-on effects on, on the kind of energy economy.

Um, and, you know, it's loosely correlated with gas, and that's typically due to You know, it's kind of a replacement in some industrial applications.

Um, and obviously, oil and gas are sourced near one another.

But the main effect of oil on kind of power markets and energy markets in general is secondary due to, you know, inflationary effects on, on logistics.

Um, and obviously that's been, you know, hugely impacted with the, the recent developments in, in the Middle East.

Um, the kind of more kind of pertinent thing around energy markets, you know, for us in our business is, is the price of gas.

And it's a totally different story because gas directly influences the price of electricity that people pay.

It's the kind of primary fuel that goes into your combined gas turbines, which makes up a third of the fuel mix in both the UK and the US, and the way that energy markets are structured, uh, and the, the kind of price discovery mechanism on energy markets is very heavily indexed towards the gas price.

So what that means is when there's supply disruptions to, um, the, the LNG around the world.

What you see is a direct impact immediately almost on uh the the prices on power markets.

And in terms of the kind of US versus Europe UK comparison, the Europe is very is a heavy importer of of gas, and, and typically what happens is that you have seasons where there's injections into gas storage facilities that typically happens over the summer, and then you've got seasons of withdrawal from those storage facilities.

And obviously naturally, you know, during the injection season, which is now coming up, the, the, the price kind of, you know, worldwide of gas and heavily influences, you know, ultimately the costs that Europe is paying.

On the flip side, US is, with the recent shale revolution, fairly insulated, as we've kind of seen a little bit, um, on the, on the gas side of things, and that is going to be something to watch over the next few years though.

And the reason for that is, when you look at there, there's a certain decoupling between the Henry Hub price, which is the price, the, the kind of standard price of gas in the in the US and the kind of the, the price of GTF, which is the kind of European UK index.

Those are somewhat decoupled because, um, The US, because it's such a recent market, is slowly still ramping up its export capacity.

Which means that right now there's this decoupling, but we do expect that decoupling to actually decrease over time.

Um, and the kind of consequence of that is right now, there's quite a, quite a lot of insulation for the US market, um, but Not at all for the for the UK market, but that decoupling, you know, as I kind of said, we'll look to to converge over time.

But um, yeah, ultimately when it comes down to our business, it's, it's the price of gas and the flows and the kind of status of the storage facilities around Europe, because that's where we're operating right now, is what really influences what we're paying and then ultimately what customers are paying the other one.

Gotcha.

And, and maybe just to sort of, again, um, frame a picture for everyone watching and listening, uh. $100 a barrel for oil sounds moderately scary. $150 is very worrisome. $200 is, is downright terrifying and, and that could lead us into stagflation territory.

Um, could you, um, sort of put natural gas prices in, in, in those terms, and, and I know, I mean, just, I'm, I'm not an energy expert, but, uh, it's easy to remember, especially during the Russian invasion of Ukraine from 2022 on, um, sanctions put on, on Russian energy exports and And nowadays people are talking about the, the closure of the Strait of Hormuz and, and while some um like oil processing plants have been shut down, and it might take months for them to start up if and when this conflict ends, um, the strait could reopen immediately, theoretically, whereas, uh, Iran's attack on, on uh Qatar is like big processing and export facility.

Believe knocked off 20% of its total capacity and Qatar is a huge um LNG exporter, uh, that could have much more permanent effects from, from what I could tell.

So how does that like, again, put a kind of a long question, but like what are the prices right now and how is that actually directly impacting customers and, and then again, like.

Because of this like big attack on the infrastructure, um, what challenges will that present moving into the future?

Yeah, so, I mean, right now, the, the price of gas is basically about um 50% above 50 to 70% above the kind of usual um price that was kind of we would expect um around this, this kind of year.

And, you know, ultimately that is down to, you know, the obviously the disruption to the Strait of Hormuz.

And, you know, when we kind of look at it, like, beyond just crude and LNG, you've got like disruption further to, um, you know, not just Gas prices, but a bunch of other prices as well, right?

So, for instance, 30%, 34% of global fertilizers come through the strait, right?

There's also effects, so that's how it ultimately affects food, um, and then also, you know, kerosene is mostly sourced out of Qatar and strait as well.

So that obviously influences the price we pay for jet fuel.

And further effects on that is like there's about 25% of the world's uh sulfuric acid comes through the Gulf.

That is needed for things like explosives, which is obviously very, uh, hot and topical right now.

And also, you know, we're finding things like copper, which is the central input to many things, including a lot of inputs in the energy industry.

So, as a consequence, essentially right now, what we're looking at is gas prices are, you know, quite like, like, fairly elevated, probably not as aggressively elevated as as what we've seen with, with, with oil, um, and not quite as aggressively elevated as what we've seen through the Russian Ukraine crisis.

And that is in part because, you know, especially in Europe, there's been a lot of measures taken since the 2021 crisis to kind of, you know, obviously mitigate the, uh, the serious effects that that crisis had and causing, um, you know, kind of the, the disruption to the energy markets, um, back, back in 2021.

And, so that said, like, essentially what we're seeing is right now we've seen an increase, um, but not as aggressive as what we've seen in the past.

But, however, one of the big issues that, you know, Uh, that probably a lot of our listeners have seen is that, um, you know, this, this disruption and this attack on the facilities themselves, these are multi-billion dollar facilities that take decades to build and a very long time to repair.

So, the, the, the, the long term disruption is something that I feel like What isn't fully being factored in right now.

And people, you know, view that, OK, look, this is a short term thing, we'll see a taco, and then, you know, prices will return to normal.

But in fact, you know, what we, what we're not really recognizing when I kind of think that, you know, a lot of markets aren't really recognizing.

Is that there are these really severe long term effects on global caught, you know, that that they're going to percolate and last for quite a few years.

Got you.

And I think that probably leads me into my next big question, which is, again, you guys are, I think like, I think you described yourselves as a full stack uh power plant or a full stack power company.

Uh, you do, um, help generate, um, for your customers renewables, but you're also, from what I can tell, a wholesale energy, um, purchaser and, and supplier.

Um, so you, you, you sell, uh, LNG and that type of fuel or you sell electricity generated from like those types of sources to your, to your customers as well.

Uh, how are you, yeah, how are you hedging, uh, prices in this particular environment, especially given what you just said that you think Uh, you think people are sort of underestimating the longer term impact, uh, and, uh, I'm also This is also happening right in the middle of an explosion in in prediction markets, where, I mean, um, oil derivative contracts on places like hyperliquid are, are seeing massive volume to the extent that the second biggest markets outside of Bitcoin.

So, uh, like, what are you seeing?

How are, are, are you hedging, especially in a world where, well, maybe it's ideal at some point to generate almost all of your energy from renewables, that's not really practical at this point.

Yeah, of course, yeah, a couple of things there.

So, I guess first, um, maybe just to give like a quick little bit of background on like the, the, the structure and the price discovery mechanism in, in, in power markets.

So, and even if you're Even if your fuel mix or what you use to generate your power in a given region or country is like let's say predominantly renewables, in most competitive markets, actually the price of gas ends upsetting the the the price that everybody pays for for energy.

And the reason is essentially demand is fairly fixed.

And so let's say, Steve, you and I are buying power for an hour tomorrow, starting at noon.

The, the, the demand for power in that hour is fairly inelastic, which is actually a big issue that we're looking to solve.

Um, and what happens is you, you have your generators will bid in, and, and those bids will be price ranked, and essentially, the, the most expensive, um, bid that meets what the demand requirement is, sets the price across the market.

So even if renewables make up 90% of your kind of generation mix.

Often it is the price of gas, that the gas that fills the gaps, and it is the price of gas that then Sets the market-wide price.

So often when we're thinking about hedging and looking forward, we are looking at, you know, actually, OK, there's gonna be, there's actually extreme sensitivity in power markets to the price of gas.

Even when you look at a cost basis, gas actually doesn't make up a large cost to produce the energy in the first place, which is, you know, you can have a separate debate on like if that's the right market structure or not.

But so when we're thinking about this, We're thinking about our kind of trading operations, and generally we, we operate a very neutral long or like slightly long desk, and our kind of trading operation is, is has a modus operandi of de-risking.

So how it works essentially is we have For a given day in the future, you have a certain amount of demand, um, and, you know, our delivery obligation is actually, you know, unknown, I suppose, or forecasted, unlike, you know, maybe.

And that's kind of a difference to energy markets and maybe traditional.

You're, you're a growing company as opposed to a mature like utility that like, yeah, exactly.

And then also you don't actually know how much people are going to use, um, when you're looking at, you know, like if you ask me how much energy, you know, my customer base is going to use in 3 months' time, I can only give you an estimate of that because it's highly dependent mostly on temperature, um, which you can't, you know, you cannot forecast that far in advance.

So what happens is we essentially buy these kind of fairly like flat blocks.

And we kind of DCA into those over a couple of months, and we slowly build out the box to essentially what we think the kind of customer demand profile is going to be.

It's generally bimodal.

You've got a peak in the morning and a peak in the evening when people are home.

Yeah, I'm sorry, just to interrupt, uh, when you're buying these blocks, you, you're buying these from energy producers.

You're buying them from head, yeah, generally on, uh, power exchanges.

Power exchanges, OK, yeah.

So essentially you're kind of like slowly, essentially hedging out your exposure to that that demand profile that you've forecasted.

And then what happens is when you get, and essentially what we do is we, we look to kind of close with a flat, a fairly flat block book every day.

And that's, you know, more so especially in the current environment.

And then what happens is, you know, kind of day ahead when you have a lot more information about, you know, the, the, the particular shape of what your customers kind of demand profile is going to be and the energy that you need to provide them, you buy more refined blocks then.

So you buy the kind of arrow blocks that you use to kind of shape out the demand, which is very temperature dependent.

That's interesting.

So you're, so you're buying these on almost like an hourly or daily time horizon.

You're, you're not daily time horizon or like a farmer who's, who's, who's selling a futures contract 6 months out so that you can kind of guarantee a price for your harvest that this is much more short term duration.

How, how much, how much more expensive is it to, um, to, I, I guess, hedge exposure to engage in this type of, um, engage in these activities given the heightened volatility for you?

So it is, yeah, right now it's much more expensive.

Um, and typically what happens is that what, if you're like hedging on under a kind of, you know, fairly market standard approach, typically any of the kind of customer, you know, price and protections and stuff will reflect that by the time you actually get to delivery, so you're not kind of breaking regulations around, you know, um, pricing your, your energy too high.

But, you know, one of the other things we kind of love to do then is, um, We look to kind of buy essentially, you know, a couple of other products that, you know, hedge our exposure to further increases in generally volume and price.

And so that's kind of like, our exposure kind of varies quite nonlinearly with both, you know, temperature, um, which affects both price and demand, right?

And so typically, you know, you, you build out these kind of hedging blocks, and then you shape them as you get closer to delivery.

And then for, you know, specific, you know, either macro events, or, you know, cold snaps or that kind of thing, and we'll buy kind of more sophisticated kind of options or temperature dependence options, um, that essentially allow us to ramp up or ramp down exposure depending on the conditions at the time.

Um, and I guess to your point around like energy, uh, uh prediction markets, obviously becoming a huge, hugely relevant right now.

Um, and You know, one of the things that we're kind of interested in, you know, long term is seeing, you know, does this have, you know, institutional viability.

Right now, the markets aren't liquid really enough, um, and also the kind of products that we would be looking to buy as a kind of institution. are quite complex.

So, like I kind of said, like I kind of mentioned, um, with the kind of nonlinear effects, especially on temperature, on your exposure, um, because it affects both the price of energy and the demand that your customers are, are, are going to use, um.

We typically like buy these quite complex bespoke products, and that that essentially scale up or scale down with uh the the the temperature, and then there's also, you know, kind of things like to to consider like basis risk between what the measured temperature is and the temperature that your customers are actually using, which is ultimately what actually affects things.

And so, These are the kind of issues that we're thinking about solving or would love for somebody to solve, um, as we think about, you know, OK, how do we, you know, potentially bring more energy products on chain.

Yeah, it's interesting, um, I mean, the, um, like the derivative contracts on some like hyperliquid, I mean, they're, they're cash settled.

I mean, people are really just betting on the price.

I, I would imagine you're actually taking physically delivered, uh, products if that's, if that's what you're You're buying, yeah, typically you, you've got financial or physical products that you can trade, and so generally like the, the products that you would see being like traded propriettarily, um, would be financial products.

You're not actually expecting delivery of the, of the commodity itself, yeah, but, but, but you are, we are, yeah, you, yeah, you are versus hyper liquid, you're not, you're literally trying to leverage the volatility to put on a market position or, or, or, or something like that, and And, and in that case, temperature and those types of things don't, don't really matter, whereas for you, I mean, you have to be able to deliver this, so, um, you have to make sure the goods that are that arrive are sellable.

I mean it's, it's very akin to almost like a refrigerate a refrigerated container for produce that gets sent to a supermarket or something where like you have to make sure that the products don't spoil on the way that the transport.

That's, I think that's kind of how I'm trying to interpret it.

Yeah, that's good nausea, OK.

All right, so, um, we're gonna talk a lot more.

We're gonna get into, um, sort of your movement into the deepen economy and, um, the launch of a, of a token-based network.

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OK.

Um, so we're back, uh, actually, before we continue, um, I, I need to, um, uh, do a bit of quick homework I've, I forgot to do in the beginning.

Um, this episode, as all episodes are, um, is strictly for informational and educational purposes.

Nothing that you hear is financial or investment advice.

For full disclosures, please see unseen crypto.com/bits and bits.

And with that, um, we're, we're back with, with Sean and really excited to talk to you because uh you're launching a, a, a, a kind of a token-based deepen network, Deen for anyone who doesn't know stands for uh decentralized physical infrastructure.

It has been a buzzword, uh, throughout crypto for, for years, uh, but to be perfectly frank, I'm yet to really find a project that has successfully kind of gotten that escape velocity.

You guys might be a little different because you've built from, uh, as we discussed before, um, a very promising and lucrative business before even getting into Deep end.

So talk to me a little bit about sort of the thought process behind, um, behind launching this network and kind of, yeah, I mean, how, why do you think you're going to succeed when a lot of other deepen projects have, have failed to sort of get off the launchpad?

Yeah, very fair.

And so I think historically, There's a lot of deep in projects, um, that Or somewhat of a solution looking in in search of a problem.

And are often demand constrained.

And What we've seen is, you know, we've been wanting to to build something on chain since day one, since, you know, 34 years ago that we started this.

And we've identified one problem that is really, you know, not talked about enough, that persists across the energy stack no matter which layer you're building on, and that's grid capacity.

So Right now, we've got these burgeoning.

Like production facilities, generation facilities, and then a lot more consumption, you know, data centers, robotics, manufacturing facilities.

Then we really ever envisioned, um, on the, on our kind of grid networks.

You know, our grid networks were built 150 years ago.

Um, Edison era, never envisioned to support the, the loads that we're putting on it in the 21st century.

And that is manifest itself in quite a few issues.

You're trying to build anything on the grid, you know, be it a, a new generation plant, like a new wind farm or solar farm, or, you know, a data center.

Um You can have the permitting, you can have the planning, you can be ready for kind of engineering and procurement construction.

But when you ask the grid, can I plug in here, and either put power in or take power out.

The response from the grid is often, you can't do that because we haven't got capacity for you.

And often what we're seeing now is decade-long delays for grid reinforcements in order to be able to plug in where you want to.

And that's obviously got huge downstream effects on, you know, economic progress and development, and also just lowering energy prices for the economy in general.

Then you're looking at energy markets.

You've got constrained grid capacity, which often means that sometimes you've got A lot of, let's say, renewable power in a certain region, when it's particularly sunny or windy, for instance, in that region, you've got demand centers separated from that.

And you know, this fine capacity line that often results in not being able to move that power from where we have it to where we need it.

So when you're looking at kind of like the statistics from that, like, we kind of estimate that over 70 billion um in the last kind of 5 years or so, worth of, you know, renewable, clean, low-cost power has essentially been shedded, because we can't move it across the grid to where it's needed.

Obviously, that's got huge downstream effects on the costs of energy.

And finally, obviously, you know, ultimately who who foots the bill for this, it's ultimately consumers, people who pay energy every month.

So, The analogy I actually like to use is that grid networks are suffering from congestion issues very similar to how Legacy L1s um suffered from congestion issues.

You've got limited network capacity, peak demand, and as a consequence, you know.

Network congestion, high gas prices, and during during those times.

And ultimately it's a scalability problem.

So what we're looking to fix as part of this is essentially use these demand centers.

And coordinate essentially making demand more elastic to to grid conditions.

And what that actually means, you know, in in practice is we want to connect to devices that are in homes already.

So these are like smart devices like smart thermostats, EVs, chargers, batteries, solar, that kind of thing.

And then programmatically have them respond in when they're using energy.

To the conditions of network congestion on the grid.

And effectively what that means is if we can leverage all of these millions of devices that are already just sitting in homes, like unused right now, there's gigawatts of capacity there.

If we can use those to actually respond to the grid conditions in real time, we can significantly reduce congestion on the grid.

Which has tons of knock-on effects into the kind of, you know, both the energy system and the global and the kind of economy as well, in terms of being able to build stuff on the grid faster, being able to build manufacturing facilities faster, having less volatility on the energy markets, so it means we need less provisions for reliability, which ultimately means lower costs of energy for everyone, so we can do things faster.

So that's basically essentially the core of what the kind of energy network, which is the kind of deepened project that we're looking to, to, to release is, is going to do.

I'm happy to talk about, you know, kind of our kind of further reservations about being, you know, put in the deep end category, but, uh, yeah, I'll be there, uh, yeah, and then we're gonna get into that, but I just wanna ask a couple of, I guess, clarifying questions.

I one, I, I believe you mentioned something like these devices are holding energy that that's going unused.

Uh, I, I just wanna make sure I'm understanding that versus sort of maybe devices that Uh, when I was reading about your company before to prepare for the interview, uh, it's more like trying to figure out a way to, um, increase demand during times like perhaps in the middle of the night when like you cooking obviously has to be done in a certain period of time, but there might be times when other things can be done but there's less demand versus like these devices having energy that they could perhaps return to the grid.

I just want to clarify that, and then 2, Just to kind of frame reference for for readers, I mean we hear about insatiable data demands for these new AI centers.

I mean anyone in crypto, and we've covered like the conversion of Bitcoin miners into like AI HBC centers and and kind of how it was a gold rush for these because they have all this infrastructure and they're already plugged into the power grid, um, like they take gargantuan sums of energy.

Uh, you serve, I, I forget how many, I guess hundreds of thousands or, or 250,000, yeah, so I mean, I know growing company, but Like, is, at what size do you have enough to really perhaps be able to offset the demand um from these insatiable data centers that are continuing to, to build.

Yeah, great question.

So, I guess you maybe you disambiguate the, the kind of the wasting energy versus the kind of devices and scaling, um, when you have limited grid capacity, and you have Wind farms or solar farms, these are big, you know, utility scale sites that are overproducing.

Often they're actually told to turn off because the grid can't move the energy where it's needed.

That's a huge waste, it's a huge opportunity cost on the system, right?

And that's a consequence of, you know, grid capacity.

On the other side of things, and what the solution we're looking to do is, when the grid is congested.

Let's say there's a lot of demand on the grid right now, it's super congested, we're shedding, let's say, renewable loads.

If we can get devices and and coordinate them to turn down, we can essentially reduce the load on the system to allow it to flow more efficiently.

So that's kind of the, it's it's called demand response, and we're making essentially we're coordinating the the consumer demand base to be more reactive and intelligent in responding to the conditions, the real-time conditions on the grid.

So that's kind of essentially what we're looking to do with the kind of energy network and the coordination system that's kind of all incentivized with the kind of energy dollar token that we'll be releasing.

And then.

In terms of, like, what, how much is actually needed.

So right now, you know, you can look at like a smart thermostat, which is, you know, probably got like a 1 kilowatt or two, depends on like the house and the heating system.

And that's kind of got a kilowatt or two of, you know, like flexibility that you can ramp up or ramp down on demand.

Similarly with batteries, you can go up to like kind of standard is around 10 kilowatts, you can kind of ramp up or run down.

And then, you know, similarly with EVs and and and solar panels.

So, if you can like, it's actually the the threshold of devices that you need to kind of make a difference and start, you know, kind of.

Playing in things like power flexibility markets and kind of actually starting to kind of earn for load shifting.

It's actually quite low.

It's only about 0.1 megawatts.

So it's, we're talking about, you know, 100 homes with, with um Uh, we're talking about 100 homes with smart thermostats, or, you know, you know, 1020 with, with batteries that, you know, can we can start participating in power markets.

Then when you're talking about like data centers themselves, you know, they go into the, you know, tens, hundreds of megawatts generally.

So what we're talking about is, you know, tens of thousands of homes to kind of offset a typical, uh, data center.

And yeah, so I think like in terms of like the economics, it's actually, it actually kind of makes sense because A lot of these devices are actually already there in homes already, they're just unused.

So you could be, you know, you, you, you could have a smart thermostat at home that you're just using for your, for your temperature when you could actually be contributing to the grid, providing services to the grid and earning for that as well.

OK, interesting.

So let's get a little bit more into the specifics of, of your token and the energy network, uh.

Uh, I, I believe it's either, I, I guess Q1 is just about over.

Um, so I'm, I'm guessing you're going to try to, to launch in, in Q2.

Um, can you give us an update on that?

And, uh, uh, I believe there's gonna be a 10 billion token supply and you have some, um, Uh, there's different distributions for, for, um, users versus investors versus, uh, the company and, uh, planned burns, etc.

So just briefly kind of walk us through the setup, um, the tokenomics, how this is, how this is going to work, and, um, what is the utility of these tokens because you, because you, um, you got a new action letter from the SEC, um, which really only comes when they believe that the token is going to actually have utility and not just be a tool for speculation.

Exactly, and that's something we've emphasized from the very start, you know, we're regulated in two different industries, heavily so, you know, energy and crypto, so everything we've done has been with, within, with a gear, an ear towards compliance and ensuring that we, you know, release something that's actually useful and not just a, you know, an investment vehicle or a speculation vehicle, basically.

And so, how, how the kind of token works is very simple for the user, um, you know, user kind of logs on to our kind of use app, and they kind of have to be, you know, provided being provided energy by us.

And they can connect their devices.

So things like, you know, I wanna, let's say, let's say I connect my Tesla EV charger.

So I sign into my Tesla and I grant permission to the app.

I say, I want my Tesla to be charged 20% or 70% by 8:00 a.m. every morning, and then outside of that, I don't care what you do with it.

You can kind of use that to provide grid services and optimize grid and reduce grid congestion in the background.

And for that, I provide direct value, and I'm generating direct value and contributing to actually the energy system.

And for that, I'm getting rewards in, in our kind of native token built on savannah, which is uh the energy dollar.

And for those rewards, essentially, then what happens is, I can, I unlock discounts um on goods and services within the fuse ecosystem.

So let's say later when I want to install a new solar array on my roof, let's say that solar array costs, you know, 15 15,000.

Um, I can actually take the tokens that I've earned, burn them, which reduces the, the supply of the tokens, um, and access, let's say, you know, let's say I burn $1000 worth of tokens, and I can access a, you know, 2000 to $3000 discount on my solar array.

So that's the kind of idea of essentially how, you know, tokens are, are omitted, um, to users, um, for providing real utility and real value to the energy system.

And then how they're essentially then burned and taken out of supply for, um for actually like real utility in terms of, you know, value for the user.

More broadly, yeah, so essentially the kind of emissions are kind of aligned with energy transition schedules.

So, we, we, we think very long term, um, we think that's the only way to build a kind of generational company.

So, the kind of emission schedules out to 2050, um, and The idea is that we're slowly emitting to users over time as the kind of user base the network grows, but then also as the network is growing and more people are redeeming, we're we're burning more and reducing supply, want to burn about 50% of supply through these customer kind of, uh, redemptions, uh, between now and kind of the, the end of the emission schedule.

That's probably kind of how the, uh, the kind of token supply works and, um, yeah.

I, I am curious and, and, uh, I mean, I understand sometimes talking about the SEC there may be limits to what you can, um, share, but, uh, the token is gonna be listed on exchanges.

I know Coinbase has already, um, mentioned that it's on the roadmap, and, uh, I'm, I'm sure that it's going to, to show up on, on various dexes as well.

Uh, so there is an opportunity to, to, to get liquidity for the token, the only options beyond just, uh, redeeming it for discounts and then burning it.

Uh, did the SEC have any concerns about like the types of exchanges it would list on or how many, or was it really focused just as long as there actually is concrete utility and it's not being marketed as a security that that was sufficient to to get the no action status?

Yeah, I think like the that like the, the SEC letter was huge for us.

Um, so it was, and it was the product of months of like very constructive engagement with the uh with the commission.

So, essentially their, their main focus was, yeah, around the utility and the fundamental mechanics of the token, as opposed to like where it would be listed.

The idea is, yeah, um, essentially, like, they're, they, what they cared about was, you know, is there really Like a consumptive utility to the token in the sense that like people actually, you know, use the token and and burn it and extinguish it for like actual, you know, consumptive value, which is like, you know, buying something.

Um, that, that, that they're looking to, to, to acquire, and that was, that was the main kind of focus for them, um, and ultimately there was a lot of back and forth, um, but for on the secondary market side of things, like the, the idea for the secondary markets is to, you know, to facilitate, um, Facilitate exchange between, you know, net buyers and net sellers of the token.

And that was ultimately, like, exactly how we do that, you know, is, as long as it's, you know, compliant in the And in line with the kind of details presented in the SEC letter, there wasn't much further kind of, yeah, discussion around around exchanges where we less or you know the particular venues, and I, I saw, I believe I read somewhere that you're not going to be uh having any sort of airdrop, which uh is is interesting and from my opinion, I believe uh if that's true, it's a good choice because it kind of could limit the chances of just a big surge in usage from airdrop farmers that could then lead to a massive withdrawal whenever the airdrops end.

And for a business, uh, and an industry that's already highly volatile, that's probably something that you're looking to, to avoid.

So, um, uh, but like, do you have any expectations for how this is going to change the, the usage, um, the growth of your network?

Do you have any sense of like what would be an ideal burn rate to get to, to the 5 billion?

Anything you could share along those lines?

Yeah, sure.

And I think this is, again, what kind of distinguishes us from like a typical deepen category project.

Like I think I would kind of describe this as energy infrastructure over deep end, because historically deep ends are, you know, very supply constrained.

They need people to, you know, buy their XYZ proprietary devices, and often they give away a lot of supply in order to try and bootstrap that, right?

We don't have that issue at all.

We're device agnostic.

We have a captived user base of hundreds of thousands of users already that's only going to grow, you know, we're hoping to hit, you know, over a million users over the next, over a million kind of homes over the next 12 months.

Um, so we're not really under that constraint that we need to like shed a ton of supply in order to get people on board and onto the network and using it.

And, we don't need people to buy, you know, our proprietary hardware.

They can just connect stuff that they have at home already.

Although we are looking to release proprietary hardware over the next few months, which should be interesting.

But I mean, I think as a consequence, you know, Ultimately, I think when I look at airdrops, I think they're gonna be viewed, you know, historically as the most expensive marketing campaigns in history.

Um, like, when you look at like giving away $200 million worth of, worth of tokens to often what are like, you know, can be, you know, you know, kind of mercenary farmers.

Um, I think it's just net negative for the projects.

And the way we're looking at it is, we're going to, like, Consistent, we're, we're gonna provide tokens and distribute tokens for, you know, the, the fundamental value that the network is generating, and, and not for spammy like kind of, you know, quests and that kind of thing.

Like no shade against that if you want to do it, and it's a great way to get distribution, but it's not really the way we're looking to approach things, and we think, you know, when we're actually looking at, OK, we want this to be still working and usable, you know, in 2050.

You know, after, you know, 50, 100 years of, you know, feuds growing and becoming like globally dominant as an energy major, the way we see and, you know, the lens through which we make these decisions, and using that, it just felt like giving away a ton of supply to get to like early kind of eyeballs just wasn't quite like our kind of, you know, skin.

So makes sense, and yeah, that was the idea.

And one more quick one before we wrap up, uh, do you have any contingency plans?

In case people don't want to trade in these tokens for discounts, but instead, even if they're not airdrop farming, they're farming for tokens, and they prefer to sell them on the open markets, so the supply doesn't, doesn't decrease, and that flywheel, uh, I know you didn't use the word term flywheel, I, I guess I am, but if, if that momentum doesn't start, um, do you have any sense of what you might do if that situation occurs?

I mean for us, um, I think to be honest, well, a, I think many projects you can kind of ask that for almost any project like what, what happens if the, if people don't use the token, right?

And, and I have to be, to be perfect.

But like I think, I mean, for us.

The way we've built this product. is incredibly native and seamless with the rest of the product as a whole.

So, you know, we're using embedded wallets, that, you know, essentially you get you you get your tokens kind of dropped for making these activities, and it feels very seamless to like the rest of the product that you're using your that you're like using for your energy supply and paying your bills every month on.

And The way we're looking at it is that we, we're just essentially making it as seamless for the web 2 or the web 3 user to use these tokens as possible.

Um, and, like, essentially, if I'm getting dropped these tokens, and I'm looking to buy stuff within our ecosystem, and these tokens are available and in my wallet, and we said we can show you that this is the amount of discount you get when you burn them and extinguish these tokens and reduce the supply, like, That is a very seamless and integrated experience for the user.

Um, and it's something that it's like, it's a direct immediate value to the user that like, we think is going to be like, you know, a no-brainer for them when they, when they actually want to, when they go to, to buy these products.

So, we don't, we don't view it as, you know, having contingencies in place.

I think, you know, especially the kind of I think, you know, down the line.

I think the, the kind of buyback and burn mechanism that is touted by a lot of projects today, which is, you know, very successful extensively, um, I just, I think from a compliance perspective, we weren't totally comfortable with that.

And, and so we're really relying and pushing on, you know, fundamentals and creating value for the network.

Um, because we think that's what is gonna make this network stand up for decades as opposed to years.

Got you.

OK, all right, well, we're just about at time.

Is there anything, I, I didn't ask you, uh, anything else that you'd like to leave our listeners and viewers with?

I think mainly just, you know, if you want to learn more about what Fuse are building, and uh the Energy Network, and follow us on Fuse Energy on X.

And yeah, stay tuned over the next couple of weeks.

We've got some kind of exciting announcements and, you know, competitions and, and events planned, and, you know, obviously we've got TGE coming up.

So, um, yeah, looking forward to the launch and uh hoping to bring people along the road.

Great.

All right, well, Sean, thanks so much for joining.

Thanks everybody for watching and listening.

That'll wrap things up for, for bits and bits of the interview.