Place a small container on the scale and set it to zero. Carefully measure 7 oz. of lye.
Add 2 cups of cold water to a plastic pitcher. Bring the pitcher and the lye outdoors, and slowly add the lye to the water, making sure you don't breathe the fumes. Stir well with a wooden spoon. The solution will be hot. Set the pitcher aside in a well-ventilated area until it cools to room temperature.
Measure 5 cups of olive oil into a large stainless steel cooking pot. Heat the oil over low heat to 130 degrees Fahrenheit on a cooking thermometer. Remove the pan from the heat and place on a heatproof surface.
Slowly pour the cooled lye solution into the oil and stir with the wooden spoon for two minutes. The mixture will become hot.
Mix the oil and lye mixture with a stick blender for two minutes, then switch back to the spoon and hand-stir for 1 minute. Repeat this cycle two more times over 10 minutes. Using the stick blender without stopping may thicken the mixture before it's "cooked" by the chemical reaction. When finished, the resulting mixture will be uniformly opaque and very thick.
Pour the soap into a 9-by-13-inch pan. Allow the soap to cool for 24 to 48 hours.
Remove the soap from the pan by inverting it over a clean surface. It's OK if it breaks, you're going to be shredding it anyway.
Break the soap into pieces and shred them over a bowl using a cheese grater. Keep the bowl uncovered for a few days to let the grated soap dry out. Use like powdered laundry detergent.