The State of Washington is a clear leader in technology innovation and carbon-free energy, so it is fitting the Nori chose Seattle for its headquarters. To learn more about the state’s leadership in the climate change space and cryptocurrency regulations, we are speaking with Joseph Williams and Brian Young with the Washington State Department of Commerce. Joseph serves as Governor Inslee’s ICT Industry Sector Lead, while Brian works as the Sector Lead on clean energy technology.
Full Transcript
Alexsandra Guerra: You’re listening to the Reversing Climate Change podcast by Nori, the world’s first carbon removal marketplace. Here are your hosts, Ross Kenyon and Christophe Jospe.
Ross Kenyon: Hello and welcome to the Reversing Climate Change podcast with Nori. I’m Ross Kenyon here with Christophe Jospe and Paul Gamble, or I should say Christorf. We went into a high rise here for this podcast recording and your ID tag says Christorf. So we’ve all been calling you that this morning. I’m going to keep this ID tag for a really long time.
Christophe Jospe: Giuseppe too. There’s an extra E in your last name. Well, sitting across from us, we have two very distinguished guests. Normally it’s one, but we get the best of both worlds. We’ve got Joseph Williams as well as Brian Young. Joseph Williams is the lead for ICT, which is Information Communication Technologies Sector at the Department of Commerce in Inslee’s group. Hopefully I got the governor, right? Governor, Governor Jay Inslee.
Unknown speaker: Mm-hmm.
Christophe Jospe: And Brian Young is the clean tech lead. And we like to start off with people’s story. And I guess we’ll flip a coin as to who goes first.
Unknown speaker: I was thinking arm wrestling.
Christophe Jospe: Arm wrestling, right. And it’s a question of, so this is the Reversing Climate Change podcast. We’re talking about building a voluntary carbon removal marketplace using blockchain. So we thought, well, it would be useful to get both the clean tech perspective as well as the emerging blockchain technologies perspective. So we’ve got both of them. I think we should start with Joseph. So Joseph, for our audience, who are you? How did you get to where you are today sitting across the table on a podcast on this fine morning?
Joseph Williams: It is a fine morning. Thanks, Christophe. And I’ve had a long career in academia in the tech industry. I was a Microsoft executive. Then I went Back to academia to become a dean of Seattle Pacific University. And then this job opened up and been with the governor now for about two years. And the role that I have, very similar to Brian’s role, is we provide policy guidance to the elected officials of the state and the state agencies. And we also are conveners. So we bring people together to talk about interesting opportunities.
And we promote the state of Washington like there’s no tomorrow.
Ross Kenyon: That’s a good place to be. You don’t have to sell us too much. We’re already up here. And we like that.
Unknown speaker: Thank you for being up here.
Ross Kenyon: You don’t know me that well.
Joseph Williams: But it’s way better than Phoenix, which is where I heard you came from.
Christophe Jospe: And I’m a New Yorker. I moved here in October. We were deciding, would we do business in New York or Seattle? And Seattle was the obvious choice, obviously, for the weather.
Brian Young: Yeah, so I’ll introduce myself. My name is Brian Young. I am the clean tech sector lead. And adding on a little bit what Joseph said, clearing up what exactly I think about on a normal day-to-day basis is I look at a lot of the clean tech sector as an industrial sector approach. I tell people I’m not out there banging the drums trying to get big solar farms built and wind farms built and whatnot, the energy generation. There’s a lot to be done there and we’re doing a lot of interesting work there.
Ross Kenyon: Well, people always talk about California having leadership in these kinds of issues. So is Washington trying to nip at the heels of California and claim some of that leadership for its own?
Brian Young: Quite frankly, Jay Inslee would very much say that he has been a leader. And I think he has been a leader as much as California in many ways has been. Getting into the technical aspects of things, they’re just very different places. I would say California has problems that we don’t have. I look at our state as having opportunities. I mean, especially when we talk about the electricity grid, we don’t have a lot of the problems they’ve got with nuclear plants going offline, big problems with their transmission systems, bottlenecks, duct curves, all these things.
We’ve got this big, beautiful, hydro-stable system up here with a lot of different characteristics and a lot of different opportunities. So, I mean, if you want to talk about carbon emissions, I would say we already win on our electricity grid.
Unknown speaker: So, It started so diplomatic too. And then you just came out.
Brian Young: And a lot of it is just getting that word out, talking about Washington. We know ourselves up here in Seattle, Washington. We get out, you get over to Europe, you get over even to the East Coast and whatnot. And Washington, Seattle is not as known of a place. What’s going on out here? We have to be realistic about what people think about Washington and Seattle and what they know and what they don’t know about what’s going on out here.
Christophe Jospe: Just to pick up a little of what you said, mentioned a duck curve, which is when energy is coming onto the grid at certain times. And so when you add new intermittent renewables, oftentimes that will happen when the energy is being consumed at certain times the day. So people... People wake up, they turn the lights on, they watch the television, they push their toast in, and you have huge energy spikes in the morning and the afternoon, and it sort of goes down in the middle of the day. And that’s a big question for grid stability because you need to figure out how are you going to get the energy where it’s needed at what time?
And then you come into all these considerations like energy storage. And then the other thing you were saying is, well, the ecosystem that you want to enable for clean tech is not so much as deploying clean tech, but it’s building the things and the infrastructure that are needed to scale clean tech and manufacturing. Manufacturing is something that Seattle’s obviously really good at. And I want to kind of stick on this word ecosystem and would love both of your perspectives on it because there’s something that this state is trying to do to lead and we believe that it is leading and we commend Inslee for the things that he’s doing to exhibit leadership.
And you guys are like the sentinels that are saying, okay, we have these large priorities and we need to build something that makes it attractive to make these changes happen. Let’s punt it over to you, Joseph, and then back to you, Brian. But from the technology perspective, what are the things that the state of Washington can do to build a solid infrastructure for an ecosystem to really flourish and lead in this beautiful country?
Joseph Williams: Yeah, so our tech industry is really more of a talent economy than an infrastructure economy. So we have per capita more software engineers than any place else in the country. Part of our core values is the environment. Part of our core value is philanthropy. And so this is a good place to incubate ideas around, for example, how blockchain might optimize energy grid efficiencies. We also have alliances. So you were saying earlier, California versus us. Actually, the Calbee states, California, Oregon, Washington, and British Columbia, we’re more of an alliance. We work together.
There’s the Cascadia Innovation Corridor, which is a formal relationship between Oregon, Washington, and British Columbia. California is sort of the ground zero for capital, so we got to give them their due. But there’s an enormous amount of talent up here, and I think we outclass them for artificial intelligence and things like that, where this is going to end up being important for energy optimization and energy security. We also have the Pacific Northwest National Lab that California doesn’t have. And so that’s an amazing resource for us. And we have with Avista, Brian can talk more about that.
But with Avista, we have one of the utilities that’s the most forward thinking about how to do right for energy, both at the consumption level and at the distribution level.
Ross Kenyon: Steve McLaughlin Some serious boosterism going on here.
Unknown speaker: Well, you know, it’s what we do, right?
Ross Kenyon: I’m getting that impression. Yeah. What exactly are you doing for blockchain? You mentioned before we started recording that there’s excitement about the possibilities of blockchain, but there’s also some concern. I know there’s like people, if they want to use Shapeshift, one of the exchanges, they can’t use it in Washington. There’s some sort of restrictions that exist up here. What is the attitude? Is it changing now? Where are you guys coming from?
Unknown speaker: Sorry, Ross, what’s Shapeshift?
Ross Kenyon: ShapeShift is an exchange that’s rather unique, actually, where it isn’t custodial and like it holds the cryptocurrency. It just passes through their hands through some sort of smart contracting layer. I’m not exactly sure how it all works. I know that you can’t use it in Washington or you’re not supposed to. I’m sure some people do. We should differentiate.
Joseph Williams: Between crypto and blockchain. So the state started getting involved in crypto around 2014. We do have money transfer rules, which are designed to minimize money laundering and try to protect investors and consumers. We hosted our first blockchain summit in 2016. Department of Commerce has been actively promoting blockchain in the state. It’s pretty early. I mean, it was pretty early last year. Yeah, we’re on the forefront of trying to attract blockchain companies. And we’ve been very successful pulling companies in from Utah. We’re working on a New York company. New York’s not a great place right now.
With a bit license. With a bit license. And the whole attitude, the state’s not very supportive of the technology. We’re also working on bringing a Washington, D. C. firm here. And the idea is with the talent that we have, what can we offer them that they’re not able to get in their home states? And that’s tempered by the fact that our town is some of the most expensive in the country. So the value that they get by relocating here is pretty high. The other side of that is the state. Shapeshifter is not here because they’re avoiding Washington, but they could register as a transfer agent.
They just have chosen not to.
Ross Kenyon: The money transmission laws in Washington are just more strict than other states, perhaps? Is that why it’s singled out?
Joseph Williams: There are some monetary requirements in order to license here. We just ran a crypto summit with DFI, which is Department of Financial Institutions, which was trying to myth bust the fact that Washington is a bad location. GeekWire ran a story on the conference. We’re really not comparatively difficult. Now... Compared to Wyoming, we’re a little bit more difficult because we haven’t institutionalized what a utility token is and those sorts of things. But we’re a lot easier than Hawaii or New Jersey or Maryland or those states.
Ross Kenyon: You guys have such a competitive kind of attitude with these other states. You’re like, yeah, some of these other ones.
Joseph Williams: We don’t like their approach. Ross, you’re kind of goading too. I’m curious. I could be teasing Kristoff about the Mariners versus the Yankees. It’s not that hard. We are a competitive state and that’s part of our DNA.
Ross Kenyon: Well, we chose to be here too. We could have chosen anywhere. Of course, Paul has been living up here and loves it. But if it was a terrible place to be, he’d probably be willing to move. Yeah, of course. So we think it’s worth it.
Christophe Jospe: One of the interesting sort of nexuses between the energy side of things and the cryptocurrency side of things is what’s happening in eastern Washington. And I’d love both of your perspectives on this. So we’re talking about people setting up mining operations. And that’s not what we’re doing. But mining is today using something called proof of work. So you’ve got lots of computer servers solving algorithms and then Downloading the blockchain and then getting validated that they solved that algorithms by other computers and it’s kind of a race and if you figure it out first you get awarded a Bitcoin or other cryptocurrency that’s using a similar sort of code base and that matters for...
For energy consumption, because if your energy is too expensive, then it’s not going to be viable for you to do it. So we talk about having a very clean electricity grid and very cheap, but suddenly you’re putting all of this new sources of things which are consuming a lot of energy. And it just so happens that Eastern Washington is a great place to set up shop. That’s where gigawatt was. I think they got in trouble though, right?
Joseph Williams: Gigawatts in Douglas County.
Christophe Jospe: Oh, okay. Yeah. So your perspectives, Brian.
Joseph Williams: That’s a tough one. And he’s going to get it wrong. So I’ll correct what Brian says.
Brian Young: I mean, yeah, looking at it from a grid perspective. So we have a lot of inexpensive carbon free energy in eastern Washington. It’s not quite as inexpensive as some of the daydreamers have in mind because infrastructure needs to be built and whatnot. But relatively, it’s cheap. It is definitely very carbon free. I personally want that energy to be used in this state to provide jobs or provide economic resources. But how much of it do we send to California? Right. And that’s the thing. I mean, we’re already sending a lot of that down to California and those dams.
There’s ownership structures and some of it goes to BPA. Some of it goes into those certain PUDs that can sell it on the open market.
Christophe Jospe: Sorry, BPA, PUD?
Brian Young: BPA, Bonneville Power Administration, the main grid operator in our region. What was the other? PUD. Public Utility District, one of the many types of utilities we have in Washington State. The technology, supporting the advancement in technology, we are talking about through things like deep decarbonization and other things that we’ll talk about on this podcast, I’m sure, about electrification of our economy, of our state, and things that require more electricity to do work that’s valued in the world. I’m all for. That’s what I want to attract to the state. Bitcoins are tough because a lot of power consumption requires long-term commitment, and that’s where I get a little nervous.
But I’ll let the person actually know who he’s talking about and talk about it.
Joseph Williams: We don’t have a state policy relative to Bitcoin mining. So because of the structure of the state and the fact that the public utility districts are locally managed, it’s a local decision. So the grant PUD has decided to supercharge the rates that they are charging crypto miners. So it’s not economical, Christophe, to your point. It doesn’t make any sense to go there if it’s going to cost you 11 cents a kilowatt hour in Grant County. Douglas County is very welcoming for new investment. Chelan County is holding hearings, I think it’s next week, on whether they’re going to superprice their electricity.
They already have a capital charge that’s quite large. Crypto mining is effectively an MBA problem. You have your certain cost of inputs and you get rewarded so many bitcoins as they’re all part of mining pools, right? Nobody actually is competing on their own.
Ross Kenyon: I don’t think there’s any independence left. There’s probably a couple weirdos with basements full.
Joseph Williams: Yeah, but most of it, you’re joining a mining pool with 10,000 other miners and you’re competing. I have a different view than Brian does. Would I rather see crypto miners in Chelan than sending the electricity down to California if the PUD is kept whole? Yes, I would. Does it create a lot of jobs? Crypto miners are leaving Washington, going to Idaho and Oregon and New York and Quebec. And you’ve got to ask ourselves, are we doing the right thing by chasing them out? My argument would be we’re not doing the right thing.
Brian Young: And I’ll throw in one other thing. They should stay here because the other thing we’ve been amazing at in the state since the late 70s is energy efficiency. And that’s what that industry really needs. I mean, they need it through algorithms or the machinery or whatever. They need to drastically reduce the amount of energy it takes for them to mine Bitcoin. So we’re a good place to do that. I do like it. I also want to see a real long-term play, like a fully integrated, we could do a good Eastern Washington solar farm with battery storage and big Bitcoin mining, like long-term play.
I think that would be an awesome idea. Someone should do it.
Joseph Williams: And there is some innovative ideas being kicked around right now. Douglas County would be the leader on this. Do we do solar during the day and hydro at night? You know, is there a way to come up with a hybrid solution that doesn’t put the kind of stress on the system and is more energy renewable friendly? The other side of this is crypto is attracting an enormous amount of investment. And so do we want to see that investment capital bypass the state? And the answer is probably not.
Ross Kenyon: You’d like us paying you revenue, right?
Joseph Williams: Well, yeah, there’s nothing wrong with revenue, right? Yeah. And wealth creation is a good thing. Every time crypto miners cash out their 10 bitcoins, that creates some money, which we slap a B&O tax on, which is good for the state. And they go out and spend it in the economy, which is good for the local economy.
Ross Kenyon: You mentioned, too, that there’s some parts that you’re concerned with or Washington’s concerned with regulating either blockchain or crypto. We actually are big sticklers for differentiating the two. But where is Washington concerned and what types of policies might we see coming out this next year or so?
Joseph Williams: So our legislature is done for the year. We start a new session in January of 2019. We have no idea what’s coming down the pike in terms of legislation. I’ve got a couple of elected officials statewide who are very interested in Lieutenant Governor Habib has already done a briefing to state legislators about blockchain. I expect to see some blockchain-friendly legislation, maybe around smart contracts.
Ross Kenyon: Recognizing them in the court.
Joseph Williams: Correct, correct. Because you have rules of evidence. How do we introduce these instruments in court?
Ross Kenyon: Oh, we’re quite concerned about that, too. And like, do you hybridize them and have paper contracts that recognize it so they can use like common law procedure to just go to the written contracts?
Joseph Williams: Exactly.
Christophe Jospe: And what is a smart contract exactly?
Joseph Williams: I’m not really sure because it’s actually it’s defined legally by the statutes that enable it.
Ross Kenyon: So, yeah, I’m not sure how it would be defined by law or recognized. Did you read the Arizona bill by chance, Paul, when they recognized smart contracts being legally binding?
Paul Gambill: No, I don’t really remember the details of it.
Ross Kenyon: Yeah, I don’t know the details of it either. But if you’re talking about automating agreements, when certain conditions are met, contract will release funds to a certain party. If you’re asking for a general definition.
Christophe Jospe: Yeah, that. Okay. I like to play dumb sometimes, but I want to back up. Just a little bit because we’re talking about Bitcoin mining and energy consumption and generation. And when I think about Bitcoin mining and the total amount of energy consumed in the world to do that, my jaw drops. It’s astronomical. I’ve heard Denmark, it surpasses the energy use of Denmark. Surpasses the energy use.
Joseph Williams: It’s not a very large country. No, no.
Christophe Jospe: It was like 0. 5% of all energy consumed is going to cryptographically securing Bitcoin, which is horrible from a climate perspective when you think about how that energy is generated. So if we’re talking four cents a kilowatt hour and that’s carbon free energy, good. If we’re talking four cents a kilowatt hour and it’s China building more coal-fired power plants, bad. And from Nori’s perspective, the climate change problem is actually really simple. There are too many greenhouse gases in the atmosphere. We need to draw them down and we need to not put them there in the first place.
And so there’s a word you brought up earlier, which is utility token. And so when we think about, well, what’s the utility of what we can build here? The basic idea that we came up with is, well, we need to tokenize carbon removal and we can get going with a voluntary marketplace that can do that and can build the market infrastructure that helps activities that can measure and monetize that to generate a certificate. That can be sold and paid for with a Nuri token. Is this the time where we should talk about Nuri?
Unknown speaker: Sounds like you’re going for it.
Christophe Jospe: We don’t need to talk about NOOR yet, but I want to talk about decarbonization goals, Brian, and the ambition to say climate change is real, 408 parts per million or whatever is insufficient. We need to shoot for 350 or even 300 because goals are important and let’s get there and governors like to get around and say like, hey, we’re still in, we’re doing more. So how do you see things like blockchain and removing carbon and not putting carbon in the atmosphere and reducing carbon and tracking all this stuff in an efficient way working?
Just solve climate change first. We’re going to solve it like the next five minutes. No problem.
Brian Young: How do I see it all working? I have no clue how it is all going to work. Well, I mean, getting back to, I think, some things that Joseph started bringing up. A, regionally, we could talk about Washington State is doing and we will. Regionally, there’s a lot of cooperation around here and your listeners. There’s an active group that they move. I don’t know. I mean, in this state, we have 100%. 100% everything we do is because we believe that climate change is real, climate change is a real threat to humanity, and we’re going to do everything we can to meet those internationally agreed upon Paris goals.
We are developing right now pathways on how to get there as a There’s something called deep decarbonization, which is it’s got its own UN little thinking body on it as an idea of how you get pathways to get yourself to truly a deeply decarbonized society by the 2050 guidelines. So we’ve engaged in studies and conclusions. We’re going to continue to engage in studies to develop pathways for how the state can get there. And we’re going to go down those pathways. And it’s a lot about electrification of our economy. It’s a lot about transportation, especially electrification of transportation because of our unique situation in Washington state.
And so I think there’s an open playing field for how that technology can be deployed throughout technology. That whole global need to decarbonize, I don’t know how it’s going to work out a whole lot. And to that point, something going on in the state that people should know about that could be one of these things is we talked about PNNL, Pacific Northwest National Laboratories. We also have University of Washington and Washington State University. Those three are a powerhouse and very well aligned, not on everything, in the energy and kind of the clean energy fields.
They’re very much aligned and very much working on So grid modernization, the idea of modernizing the grid in many different ways, what we used to call smart grid. The main national federal research focus goes to PNNL. So PNNL is the thinker for the feds on grid modernization. Big hunk of that is cybersecurity, which Joseph can talk more about, but like the Presidential briefing for presidents that get briefings in the morning includes PNNL’s cyber grid security dashboard. I mean, that’s the level that it’s at. So we are doing that. And out of all this research, I don’t have as much time to explain all of it.
There’s some concept called transactive energy that could underlie a lot of this. It’s getting national recognition now. But it’s that idea of we move and sell electricity in large timescales now from days down to maybe 15-minute blocks. Yeah. Of saying, okay, here, I need to turn on a new motor here in Wenatchee. To balance that out, I need to take some loads somewhere else. Put out a bid system. I’ll pay this much for your energy, da-da-da. It’s happening in real time. You get enough. You get a motor. You get a wastewater.
Water treatment plant turns off a pump. You turn a motor down. Somebody turns off some AC in some building. And then all of a sudden, and this all happens very quickly. And everybody agrees to a price. What is that energy worth? That energy comes off the grid. That motor starts up and you’ve got a balance grid. This is a very simple way of describing a very complex process. But transactive energy is that it not only is keeping a ledger and moving the energy of where it goes, but it’s putting a price with that in almost real time.
Ross Kenyon: That’s got to be AI, right? He was able to do that sort of like high frequency energy trading plus managing this crazy grid.
Brian Young: You know, AI is always that word that says, and then we have AI. I don’t really know what that means. It’s like saying blockchain for $30 million in extra investment on your company. I don’t know, but I’m sure what’s going on in those.
Unknown speaker: You guys are killing me. We should have just done a nori. ai.
Brian Young: But I’m sure there’s AI involved. I wouldn’t call it a focus of the kind of research probably going on at UW and PNNL.
Joseph Williams: I think one of the things that’s really interesting. Brian is involved with the state’s Clean Energy Fund, and historically that’s invested in new technologies, so fuel cell technologies, biomass, that kind of stuff. And I think with the current iteration, you guys are starting to look at potentially blockchain enabling technologies as a way to approach clean energy, right?
Brian Young: Yes, we would like to more. So thank you for the introduction to the main tool our state does have. And it’s a pretty amazing tool that we want to talk more about is something called the Clean Energy Fund that is now about $140 million, basically a grant fund that has focused on research development. And demonstration of new technologies in the cleantech sector. It’s a big sector, big tent approach. So we’ve got everything from wave energy conversion facilities to carbon fiber recycling to fuel cell technologies. We have a specific grid modernization pot of money that has done a lot of interesting things around grid storage in our state and the idea of looking at microgrids and new concepts of how you move energy.
It’s gone gangbusters in that it is a capital fund. So it covers capital projects, hard 13 year lifespan type things. And it’s been hard to get it into software use because of legislation, the way it’s written. So, yes, we are working to figure out ways to get it more so we can fund more of the R&D towards the software side of this problem, because that’s where we’re accelerating. We can talk about interesting companies in my space. But a lot of that is on the software side of integrating storage and grid modernization and whatnot.
Ross Kenyon: Yeah, it’s fascinating. There’s a lot of great stuff that I’m sure we could talk about all of those things because all of them pique my interest. Energy trading is one of those things whenever it comes up on the podcast. I always want to talk about it. I find it very interesting. I want to talk about this, though. You think this is an appropriate time to lay this one on us?
Joseph Williams: The state, through the Clean Energy Fund, isn’t investing yet in blockchain, so we’re relying on our partners in the state, PNNL being the lead partner on this particular project. This is a project which is funded by the Office of Electricity Delivery and Energy Reliability from the U. S. Department of Energy. The partners who are doing this, and I’ll tell you what it does in a second, are PNNL itself, Avista, GuardTime, which is the blockchain company that did Estonia, Rocky Mountain Institute, Siemens, and Washington State University. So a big consortium on two And the thing about blockchain that we all love is the fact that it creates trust and it’s immutable and it’s secure.
And so what they’re trying to do is use blockchain technology with super crypto for data in flight on securing the energy exchanges themselves and the edge devices which are providing data into the exchange. Are these vulnerable parts of the energy system? They absolutely are. And so this is a trial project that’s being run out of the Tri-Cities area. The initial results suggest that this is going to actually be one way to secure the grid and create the trust necessary. Because in the example Brian was given, if I have energy generating capacity and I bring it online, how do I know that it’s going to get recorded properly?
How do I know that it’s going to get compensated properly?
Ross Kenyon: It’s Michael Denby’s whole thing, right? About them not being able to track who owes who what for energy.
Joseph Williams: And blockchain could give us that, right? In an immutable and trustworthy fashion.
Brian Young: And part of that transactive energy research is directly related to blockchain, not only as the ledger for the transactions, but that smart contract. That’s why there’s a lot of interest in it. It can play both roles.
Joseph Williams: And this is the Voltron project. If you’re listening and want to check into it, just Bing or Google Voltron. Yeah. A very sci-fi name there. Isn’t that great?
Brian Young: Yeah. I’ve got to think they were older than me and didn’t understand the reference they made when they made that name. I don’t know.
Unknown speaker: What is Voltron? What is it? Is it from something?
Brian Young: Oh, really? You don’t remember Voltron the cartoon? It’s back now. I see my kids watching it. Oh, no. There’s five lions that flew around in the space-age Japanese fantasy world that became a big robot. Then it became like 40 little different bots. I can’t believe you don’t know Voltron. You saw other people moving here. Good. Waving hands at me, shaming me. This project is KISS.
Joseph Williams: Yeah, the Keyless Infrastructure Security Solution, and it’s part of the cyber resiliency of the grid that PNNL does as part of their core mission.
Ross Kenyon: A lot of the people that are looking forward to, not looking forward to, the next war, the big... What?
Christophe Jospe: It’s going to be... We’re all looking forward to the next war. I’ve got my banners.
Ross Kenyon: I can’t wait to get drafted in that. That’ll be fun. Got a bunch of military hawks in Seattle, don’t you? The cyber warfare is something that people don’t think about necessarily because we’ve seen applications of it and there are things that happen in pad hacks, but Yeah, absolutely. I think for your money, too, it’s probably much better than a military victory. Those are very expensive.
Brian Young: You could just hire a bunch of nerds.
Christophe Jospe: I know it’s not a good way to go through life, but sometimes I think ignorance is bliss because I was listening to an episode the other day of, I think it was put on by TED Radio, and it was a few engineers who basically hacked a Driverless car and figured out that they could very easily take down every component of an electricified vehicle and could do as much as stop the brakes. They could make it so that the speedometer reads the wrong amount of how fast you’re going. It’s very easy to hack these things and we’re nowhere near prepared or able to catch up.
Theoretically, a blockchain infrastructure to support a lot of the data without letting hackers poke into that is something that we need like today.
Joseph Williams: I was at an AI event last night that the city hosted and one of the members of the audience had just moved here from San Francisco where he was explaining for fun, they actually jump in front of the autonomous vehicles and try to get them to... To veer course and crash and things like that. And it is the new type of chicken, but there are physical hacks. There are data hacks. There are people who literally make a profession off of ransomware and things like that. And I think I read the...
A billion dollars of ransomware was paid in crypto last year, which is a staggering number and just a start. But yeah, the vulnerability of electric cars, of electric airplanes, we’re trying to electrify the maritime fleet. But they’re not vulnerable because they’re electric.
Brian Young: No, they’re vulnerable because they have communication. I’d be more afraid of overtaking of a, like, petrochemical facility because you then have the ability to actually, yeah. I think you should also be somewhat realistic about, like, look at how we took down the electrical grid in the Gulf Wars. I mean, I won’t talk about it, but they’re not real smart bombs.
Christophe Jospe: We’ve gotten really pessimistic. I want to get us back to the field of optimism. So here’s what Nori’s going to do. We’re setting up pilot projects with farmers. And so we’ve been talking about new technologies.
Unknown speaker: With Washington farmers?
Christophe Jospe: Indeed. We’re talking about old technologies. So you, as a farmer, can switch from planting monocultures and tilling your field very intensely and using a lot of fertilizer to, instead of fertilizer, planting cover crops and always keeping the fields covered, rotating your crops and more complex crop rotations. What did I leave out? Oh, right. No-till. So putting less compaction and in general, improving the health of the soil and working with our partners at Colorado State University, something called Comet Farm funded by the U. S. Department of Agriculture. And the models are great because it allows us to estimate how much carbon dioxide is put away.
And these are models that have been funded through the U. S. Department of Agriculture. And so essentially, it allows us to do a couple things. And so It allows us to go to farmers and say, we have this first methodology. What’s a methodology? We need three things. One, a way to remove carbon dioxide, which in this case we’re talking about the regenerative practices. Two, a way to estimate how much carbon dioxide has been removed. So working with Comet Farm, we have something called a baseline generator. And then three, a way to list that project, a way to audit and verify that the things that a farmer might attest to be happening are true.
And then a way to And the quality rating is really interesting because it can get better over time. And it allows us to say, you’ve got this Nori token, which is a utility token, it’s like a gift card that pays for pulling CO2 out of the atmosphere, pays for carbon removal certificate. That immediately get retired and it goes to the farmers or whoever the supplier’s account is in two different accounts. One is like an escrow. And so it is restricted based on the quality rating. If the quality rating is better, you have less.
And the other goes into an account which is immediately tradable. What that creates is a market incentive to come up with better ways to do measurement. Better things to use like artificial intelligence to build a better model, which allow us to estimate more carbon dioxide has been removed. And a way to basically launch our platform with already more or less having working code and alpha users into the system that’s like, hey, we’re willing to try out this new thing where we’ll get paid in a cryptocurrency for putting carbon away. And yes, indeed, like we want Washington farmers to participate.
And then it kind of gets even more interesting because there’s all this data that they might be collecting. And this data is relevant for other things where you get into blockchain, like there’s food provenance or tracking of the goods. And in general, using smart technologies with like old, old ways of doing things. Like we’re saying you don’t need to till as much. You can use no till. And these are practices which have been understood like literally since biblical times. Paul and I have been working on this for quite a while here, but we’ll probably be doing a Reg D exemption under the They have a much discounted rate.
Ross Kenyon: And then Class B, after the one year, they can trade it because you need speculators. It’s an open field. And part of the thing that Washington State It could maybe help with a lot of stuff at the federal level, but clarity from the government would be nice because it isn’t always clear exactly how to be in compliance because these assets don’t easily fit into it. Different agencies consider it a commodity, property, currency, security, depending on how it is. And sometimes it can be a mixture of these things and it isn’t clear how to actually...
Christophe Jospe: And I think that’s part of the value that we hope to offer by saying we’re building a voluntary marketplace and we’re going to do our best to get it right. But hey, government, we want to be sandboxed and be a piece of innovation that helps get this right. So as these things go into more compliance markets.
Joseph Williams: So I would encourage you to talk to the Department of Financial Institutions, tell them what you’re doing and they won’t give you a legal blessing because obviously they’re not your attorneys, but they can give you guidance on where you fall within our regulations. I think you also need speculators for market liquidity, right?
Unknown speaker: Oh, big time. That’s super important.
Joseph Williams: Because you left that out.
Ross Kenyon: Yeah, yeah.
Joseph Williams: Washington hasn’t taken an official stance that I’m aware of on utility tokens in the same way that, say, Arizona or Wyoming have, but it’s under review. And so the other thing you could do is potentially talk to DFI about how they should view utility tokens. So the thing with blockchain and crypto is it’s so new. The entire concept’s 10 years old. If you go back to Satoshi’s seminal paper, it takes regulators a long time to catch up with new technologies. And we’re at the stage now where we’re kind of in iteration three of how we look at these things.
And input is something that we’re trying to collect. So if you have something to offer up and in the context of agriculture, for example, this is all good stuff. This is a big agriculture state. The governor has a strong commitment to agriculture as an economic platform for the state of Washington. It’s part of our export economy, and it’s part of his vision of clean energy. So ag plays an important role. We’re not trying to throw pollutants into the water. We’re not trying to be energy inefficient. We’re not trying to automate everything on the farm so that there’s no people working in it.
We’re just trying to rationalize the industry so it creates the highest value for the state, for its citizens.
Ross Kenyon: That’s good, yeah. And the attitude that we’ve seen with the SEC and other regulars has been, if you’re not sure, you can come speak with us, where the classical view from the cryptocurrency space has been like, no, no, stay away. I think the Wild West is becoming fenced now and people are realizing that it’s time for many of these projects to work within the confines of the system and hopefully be part of the leadership and making sure that the regulations are built by people who know the system well and have its best interests at heart too.
It’s maybe people from the outside who End up designing regulations that stifle it. Because everyone’s also worried about jurisdictional arbitrage, right? Where if Washington’s bad at it, why not go to Idaho? Or if the United States is bad, why not go to Liechtenstein or something like that?
Joseph Williams: Right, right. The value of regulatory certainty, though, is it helps attract capital.
Unknown speaker: Oh, big time. We would love that.
Joseph Williams: Yeah. Yeah. So you’re absolutely right. People are shopping. I hear all the time about Malta and Liechtenstein. There’s a lot of that. Isle of Man gets a lot of love. Exactly. But the reality is that if it doesn’t become mainstream, if it doesn’t land in California, Washington, New York, and Michigan, how liquid is it really?
Ross Kenyon: We thought about that too, but... You end up in these weird problems where it’s like, do you want to do business in the United States and in Washington? And what do you have to do to make sure it stays that way? And it isn’t clear if you’ll even be able to, even if you spend all the money with foreign lawyers to set something up, it could still end up falling under US jurisdiction. We live here and we are happy to be here and be happy to be regulated here as long as it was appropriate.
It isn’t even clear if a lot of those moves that people are making will work if they intend to do business in the United States. It might all be for not.
Joseph Williams: Well, suppose you have these nori tokens and they catch on and then you find out that one of your participants is perpetrating a fraud on you. How do you resolve the fraud? You’re going to go to court. If you’re extra jurisdictional and there’s no court that will take your case because you’re actually based in Liechtenstein, you’re going to go to Liechtenstein to resolve this? I don’t see that working very efficiently.
Ross Kenyon: Yeah, that does sound quite difficult to resolve. We have direct flight Sam from Amsterdam.
Brian Young: To Liechtenstein? It’s just a quick hop on train.
Ross Kenyon: Go to Zurich, jump on a train for an hour. Well, Malta’s harder to get to.
Brian Young: You could ride your bike to Liechtenstein.
Christophe Jospe: I feel like this entire episode has been like tourism for sure.
Brian Young: I’m actually interested in the Nori side because I don’t understand the crypto side of it. But you’ve got a whole nother issue. You’re pulling carbon out. You’ve got issues. I came out of a world used to work in commodities for biofuels and tracking sustainable commodities, sustainable biofuels. Ag commodities, that’s probably blockchain 1. 0, but still like transparent commodity supply chains and blockchain enabled still seems like a holy grail that we haven’t seen happening yet. There’s so many projects working on that. There’s a ton. So you got a lot of opportunity there because it is a very hot topic.
But then you get into what you’re talking about, carbon reduction. So like basing it on the models and whatnot. I used to work at a company that we tried to do what’s called reduced emissions from deforestation and degradation in the Congo of all places with a timber company. It was hard. So you’ve got all your blockchain issues and then you’ve got a whole other set of issues of how do you leakage and fraud and all these different issues that how do people trust that your coins actually remove the amount of carbon taken.
So you’ve got two powerful forces on both sides of what you guys are trying to do.
Ross Kenyon: This is the question that we’re most commonly asked by people who are in the know. The verification piece is definitely the biggest looming one. Do you want to take a stab at how that works?
Christophe Jospe: Sure, I’ll try. I mean, admittedly, we’re just a bunch of masochists. We like to work on really hard problems so that we don’t get bored. And so carbon removal, really complex. Blockchain, really complex. You need to understand both of these two things in order to really grok how our system works. At the end of the day, with the estimation, we want the models, the So there’s this feedback loop which can feed into understanding with better resolution how it all works. And that’s why we’re collaborating with Comet Farm because they’ve been doing this for 25 years and have been improving these models.
They like us because we give them verified data. Now, the way in which we verify the data in the first methodology we have set up is we have farmers going into a 10-year contract and at the end of that contract, There is a field visit and there’s a basically today what we’re talking about you would be scooping up the soil and sending it back to the lab and doing a soil organic matter reading which tells you how much carbon content but we’re also looking 10 years ahead and we Assume that the technologies to do that measurement of how much carbon is in the soil will get better 10 years from now.
And Nori is taking the risk and able to take the risk. So when we create our tokens, about half of what we generate is going into an insurance pool. So in the case where a farmer might plow the land and the carbon goes back into the atmosphere, The tokens which we’re putting into escrow or the restricted account will then go purchase new CRCs from our marketplace. And we also have Nori tokens in an insurance pool in the case that there’s leakage from that carbon. So we’re able to take the buffer, which existed in red, and that actually counted against the project operator where they wouldn’t be able to sell that.
And we say, no, we’ll take on that risk because ultimately what we want to deliver is carbon removal as a service. We’re really excited about sort of Internet of Things devices that can help improve the quality rating of how we estimate CRCs and building an open architecture to say, we’re not going to prescribe how you do this. But if you do these things, and if you give us more data, you can get better quality readings. And so looking at things like Satellite imagery or drone footage with a lot of farmers are actually gathering that data from drones, not to put more carbon in their soils, but to make more agronomic decisions.
And so we hope that what we are building is going to be a reference price that helps say, okay, I’m trying to get my sort of average production per acre. And that’s an indicator of like what I’m selling for these crop prices. But oh, also, if I’m doing things that’s putting more carbon in the soil, that’s another economic decision maker. Tool that fits into the suite of the farm management software that farmers are using. I mean, it’s really challenging. We need to work with the best of the best scientists. And the part of why we’re doing this podcast, and we’re approaching this not in a black box, but just totally in a transparent fashion, is to get the feedback and the peer review of is the metrics and accounting system that we’re building accountable?
Will that hold up? That’s why getting the alpha users to sort of go through our system and get all those costs right is really important at this stage in the business.
Brian Young: You just have to prove that you’ve got a product that helps them do what they’re trying to do on a day-to-day basis and adds value to what they’re doing. But otherwise, they’ve been, especially in this state, I came up in the biofuel world in this state. There’s always been strong cooperation, failures, and successes with the ag community, but they’ve always been open to innovation in the state. And what WSU does at places like Prosser and whatnot is really interesting on that innovation side of ag, more on the in-the-field technology. Yeah.
Ross Kenyon: I didn’t realize before working at Nori just how much innovation happens in agriculture and how much tech is involved. Soil has gotten me quite interested in the last year, you could say, and same with agriculture. Were you like that too?
Brian Young: They’ve been running autonomous combines for a long time.
Christophe Jospe: I got to give a lot of credit to one of the people we had on the podcast, and he’s also a professor at UW, Dave Montgomery. He wrote a great book called Growing a Revolution. And for anyone who’s just getting into this space to read that book and sort of listen to some of the stories of farmers who are doing things to put more carbon in their soils, it’s a great way to really get into the weeds.
Ross Kenyon: I like dirt, the erosion of civilization. Get into the weeds. Puns are much abused around here. Analogies get it the worst. Those often get tortured until they scream.
Christophe Jospe: Yeah. Well, this has been a wonderful podcast. I’d like to give both of you sort of the opportunity to give some final words about anything at all.
Joseph Williams: So we are trying to provide regulatory certainty for blockchain. That is top priority for me and for commerce. Don’t know that the legislature will go along with it, but there’s support for this on the R and the D side. So this is a good time for everybody who’s in the blockchain space to actually get involved. You know, we need to engage with the elected officials and say, here’s what we need.
Unknown speaker: We don’t have to wear a suit, do we?
Joseph Williams: Actually, do you see me in a suit? Are we wearing suits? Jeans and a college shirt.
Christophe Jospe: Yeah, you’re good. All right. And people showing up with Dodo bird heads at blockchain conferences. Can we do that?
Joseph Williams: You wouldn’t be the most unusual people. Yeah. Yeah. You should be there on, what is it, Rancher Day when they all show up with the steaks and everything. This coming session will be a really important one. I think this is where we start to set the baseline for where Washington is going to be with respect to a serious approach to blockchain, which honestly Wyoming hasn’t taken just to be competitive and frank.
Ross Kenyon: Arizona, though, you don’t like the sandbox approach that they’re all taking?
Joseph Williams: I think Arizona is a bit more measured, but I don’t think they’ve thought through what they’re actually trying to accomplish. And let’s face it, Arizona is not a major state.
Ross Kenyon: Oh, my God. That was just a little personal. That’s okay, then.
Brian Young: Well, I mean, I guess the blockchain, I agree. Talk to Joseph about the blockchain. What I want your listeners to think about is all the amazing stuff that’s going in Washington State around the way we do research, development, and demonstration of new technologies around energy. Energy efficiency, building, design, construction, management, operation, the buildout or the lack of buildout and the way we operate our grid. And between PNNL, WSU, UW, I think people know those acronyms as well. Some really progressive utilities like Avista, Snohomish PUDs, always got to be mentioned, Seattle City Light, Puget Sound Energy.
They’re all doing amazing things. And basically, all these things have the potential to be underlined, have blockchain integrated into what they’re doing. And it’s all about huge information flows on the grid and how you use that information wisely and electrification and transportation. There’s lots of opportunities. And I think people come here and they think of all the opportunities with Microsoft and Amazon. I try to get them to look at all those opportunities around the software that underlies everything that goes on in energy in this state. There’s lots of cool stuff.
Christophe Jospe: We’re in town to poach those employees. So thank you, Microsoft and Amazon, for training them very well. We’re ready for you.
Brian Young: And I say to all those geeks out there that want a new challenge, look at the energy field. I mean, it is more complex than you will ever imagine.
Ross Kenyon: That’s great. Well, thank you so much for spending time with us. That was very fun and informative. Looking forward to hanging out with you both in the future.
Unknown speaker: All right. Thanks. Thank you very much.
