What the heck are we up to with Simwood Futures?
Customers of Simwood and followers of the blog will know I recently stepped down as CEO, in part to give attention to Simwood Futures, our new venture. So what the heck is it? I’ll try to answer that here and will doubtless dive further into some of the new questions that poses in the future.
When I founded Simwood in 1996, it was based on a belief that mobile phones and the Internet would not only individually become huge, but would converge. I don’t think that was too bad a call and it has given us 25 years (and counting) of good business. As I looked to the future a few years back I noticed two new super-trends emerging and I sensed they’ll converge — the worlds of crypto and renewable energy. I don’t think either trend is controversial or particularly clever, but they’re the bets Simwood Futures is about.
Proprietary trading & investment
First and foremost the company is responsible for our Group Treasury and accordingly contains and manages a portfolio which may or may not be heavily invested in crypto assets. We look something like a hedge-fund in that we’re not restricted in what these assets are, but we’re not taking third party capital.
Whilst largely conventional investment and technical trading, we’re also leveraging our technology background and have developed a number of bots. These individually have autonomy over very small slices of the portfolio and execute their own strategy to seek alpha. This could be market-making, arbitrage, or something else.
Renewable energy
As a private venture we can afford to take a long-term view. With current energy prices, and the inevitable trend for the future as major economies shut down base-load generation in pursuit of net-zero, the case for renewables as an investment is undeniable. I’m talking generation from solar, hydro and expect in the future to include wind, but we’re also talking about battery storage. We’re currently building a small solar farm here in the UK.
Crypto Mining
We have built a crypto mining capability which is mining Bitcoin, or mining to Bitcoin, in the UK. It is only small at around 1.5 PetaHash/second (1,500 TerraHash / 1.5bn MegaHash) right now but will be over 3 PetaHash/second by the summer on the current site. The Bitcoin network is 179,000 PetaHash/second so we’re absolutely tiny!
But Bitcoin mining is dirty, coal-powered and makes the power grid unstable you’ve probably heard, so how does that relate to the above and our aims? Bear with me.
How does all this converge?
Our strategy is to stack Bitcoin sustainably. All of the above, including investments in other assets, are measured against or in order to yield Bitcoin.
In parallel renewable energy has major challenges. Look at any power network’s map and they’ll appear overloaded almost anywhere. That is only going to get worse as the world transitions more to electricity. The consequence is that new generators (wind/solar/hydro farms) need to pay to upgrade the grid before being able to connect, at least here in the UK. Aside from the massive policy face-palm, this didn’t make any sense to me technically. I figured local generation would help local consumption and reduce grid transmission load but I get it now it has been patiently explained!
Our Bitcoin mine is largely off-grid, we consume 100% renewable energy, and intend to generate as much of that ourselves as we can. The economics are undeniable: we’ll pay more for our generated power than anybody else would, whilst for mining it is the cheapest power we can find. Our mining is directly justifying investment in renewables, whilst our mining is totally clean and is economic in a part of the world otherwise suicidal to mine in. When the grid can take our generation, we’ll happily provide it; when the grid needs our load we’ll happily provide that too.
What do I mean by that? Well mining is hugely energy intensive but Bitcoin is the purest representation of the storing of energy. That’s all money is if you think about it — a store of human effort for later use. Mining can be used to help the grid, not only in justifying renewable projects like ours but also in providing load that isn’t wasteful and it can do so on demand.
There’s a phenomenon in electricity distribution known as the ‘duck curve’. Electricity load is lowest overnight, begins ramping in the morning, and peaks in the evening hours. Add in solar and you see a peak in generation during the day when demand isn’t highest, and no solar generation in the evening when demand actually is the highest. The resultant curve looks like a duck and is a sharp contrast to the more gently curve present in pre-renewable days. Add in wind which peaks when it peaks, and take away that base generation to meet carbon targets, and you have growing a problem matching demand and supply..
Battery storage is one solution, but I would argue so is Bitcoin Mining! People may be calling for a low-carbon economy but that isn’t the same as a low-energy economy, yet the two are often used interchangeably. Rather than aiming to produce just enough power in optimal circumstances and falling back to imports or legacy generation for the peaks, let's produce more than we ever need greenly, and manage demand productively. Seems obvious right? It is also far more economic!
Our mine-site consumes grid power overnight when it is plentiful, and we curtail grid consumption during the day and the evening when it isn’t. So we help, in our own small way, to flatten that line, in just the same way batteries or pumped storage would. We justify continuous generation, but can be a buyer of last resort if there’s a surplus but can equally remove our load if there’s a shortage. During the day we can run on our own solar.
Leveraging our telecoms know-how, we also manage our miners completely dynamically. We can turn the power they consume up and down by a factor of up to 2 so can effectively match load to demand over longer periods. At higher hash-rates we consume more power and generate more Bitcoin, at lower the inverse. There is a real-time equation giving the cost in electricity terms to produce Bitcoin which can be compared in real-time to the effective electricity price.
This model lends itself very well to capitalising on odd peaks and troughs during the day. Our software tracks rates and availability, on and off-grid, and buys, sells or consumes electricity as is optimal in that second.
All of this produces loads of heat and antisocial noise too… except it doesn’t. Our mining is 100% immersion (i.e. in baths of oil) so there is no noise to speak of and yes, whilst there is heat our mine is in a location where we can put that to other uses. We’re determined to complete a sustainable circle as much as possible, and thus our own little eco-system where at best every stage feeds the next, and at worst our waste is harmless and useful.
Our approach has applications in the wider economy and wider grid. Mining can help capitalise on orphaned power, making projects viable where they otherwise wouldn’t be. It can also avoid curtailment — turning your wind turbines off because there’s too much sun elsewhere must be really frustrating, not to mention costly. The technologies we’ve developed make mining truly sustainable and helpful here.
I expect this post will raise more questions than it answers but that gives plenty of material for the future. Let me know if you’re interested in what we’re doing and would like to hear more about any of it.
Meanwhile, if you have renewable generation you could do more with: let’s talk.
