Latest / TFTC: A Bitcoin Podcast / #693: The War for the World's Reserve Asset with Ryan Gentry

Transcript

#693: The War for the World's Reserve Asset with Ryan Gentry · TFTC: A Bitcoin Podcast

• 0:00
  You've had a dynamic where money has become freer than free.
• 0:10
  You talk about a Fed just gone nuts.
• 0:13
  All the central banks going nuts.
• 0:16
  So it's all acting like safe haven.
• 0:18
  I believe that in a world where central bankers are tripping over themselves to devalue their
• 0:23
  currency, Bitcoin wins.
• 0:25
  In the world of fiat currencies, Bitcoin is the victor.
• 0:28
  I mean, that's part of the bull case for Bitcoin.
• 0:31
  If you're not paying attention, you probably should be.
• 0:36
  Ryan Gentry.
• 0:38
  I would say it's been a while, but it hasn't been a while.
• 0:40
  We catch up behind the scenes quite frequently, but it's been a while since you've been on the show.
• 0:44
  Five years. Five years.
• 0:46
  Five years depriving your audience of me, Marty.
• 0:51
  I mean, but in serious, five years, that's a long time.
• 0:55
  Especially a long time in Bitcoin, isn't it?
• 0:58
  It's basically a third of Bitcoin's life we've gone without catching up on this show.
• 1:05
  That's a wild way to think about it.
• 1:07
  Yeah, I mean, five years ago, November 2020, Bitcoin was at what?
• 1:12
  Like mid-teens?
• 1:14
  Let me check.
• 1:14
  15K?
• 1:16
  November.
• 1:16
  I just started buying.
• 1:18
  I go on the five-year chart.
• 1:20
  It's been six.
• 1:21
  It doesn't even come up on the five-year chart to all.
• 1:25
  What was it?
• 1:26
  November 2020?
• 1:28
  I think so.
• 1:29
  Yeah.
• 1:30
  Yeah, we were climbing.
• 1:31
  We were climbing.
• 1:31
  We were at a 17K.
• 1:35
  17K.
• 1:37
  Ran all the way up to 65, back down to 16.
• 1:42
  Here we are sitting at $89,332 and everybody thinks our pet's heads are falling off.
• 1:50
  They don't know how good they have it.
• 1:52
  They don't know how good they have it.
• 1:55
  They really don't.
• 1:56
  in honor of our first catch-up on air in over five years.
• 2:03
  I'm going to have a beer for you OG freaks over there.
• 2:08
  Cheers.
• 2:08
  For the original Ryan Dentry appearance on this show.
• 2:12
  We drank a lot of whiskey.
• 2:15
  Talked a lot about the Lightning Network.
• 2:16
  Talked a lot about Texas.
• 2:19
  Things were much different at that point,
• 2:22
  and we will probably do a retrospective on what happened between now and then
• 2:28
  and look at what we were saying back then, what actually happened,
• 2:34
  and where we may have been wrong, where we were right.
• 2:37
  But first, you've got some big news, personal news.
• 2:41
  Launched the Bitcoin Infrastructure Acquisition Corp.
• 2:45
  Looking for Bitcoin operating businesses.
• 2:47
  another
• 2:49
  SPAC, equity SPAC
• 2:51
  hitting the space
• 2:52
  a lot of attention
• 2:55
  on this part of the market over the last
• 2:58
  six months
• 2:59
  what are you trying to do here? What are you doing?
• 3:03
  I'm really
• 3:03
  excited. I think
• 3:05
  in the five years
• 3:07
  since we've talked
• 3:08
  the whole ecosystem
• 3:10
  Bitcoin and most importantly
• 3:13
  the companies building
• 3:15
  Bitcoin products and
• 3:17
  building products around Bitcoin, the asset and the network, we've all grown up.
• 3:22
  We've all grown up significantly.
• 3:24
  And I think public markets as seen by the ETFs, as seen by micro strategy, as seen by
• 3:34
  kind of the wave of, you know, digital asset treasure companies last year or this year,
• 3:39
  rather, public markets have a huge appetite for Bitcoin.
• 3:43
  And so I was approached earlier this summer with an opportunity to raise a SPAC, a special
• 3:51
  purpose acquisition corporation that's charged with taking an operating Bitcoin company public.
• 3:59
  And so we just completed that IPO this week, raised $220 million.
• 4:05
  Very excited to note that the deal was five times oversubscribed.
• 4:10
  Again, there's a really big appetite amongst public markets investors for Bitcoin company exposure.
• 4:17
  They're excited about the possibilities and the prospects of Bitcoin native companies and what they can do from a cash flows and growth perspective.
• 4:29
  And I want to be really clear here that this is not a debt.
• 4:33
  This is not a treasury company.
• 4:35
  I'm not interested in competing with Michael Saylor, with Jack Mahlers, with Adam Back, etc.
• 4:40
  Um, you know, my, my five years at Lighting Labs, you know, was all focused on building,
• 4:47
  you know, real products and services and, and working with Bitcoin focused entrepreneurs,
• 4:52
  um, that have customers and, and, you know, again, cash flows. Um, and so that's where
• 4:58
  I'm specializing. That's where I'm focused is the companies who've been building Bitcoin products
• 5:03
  for the last, you know, 7, 10, 12, 15 years, right?
• 5:09
  Those are the companies that I'm focused on
• 5:11
  and I'm focused on wanting to take them
• 5:14
  into public markets in a manner
• 5:17
  that materially benefits their companies, right?
• 5:20
  I think one thing that we've learned,
• 5:22
  that I've learned at least,
• 5:24
  is, you know, being a public company,
• 5:26
  there are specific advantages,
• 5:29
  specific things that you can do as a public company
• 5:31
  that you just can't.
• 5:33
  as a private company. And I think there is a subset of the Bitcoin space that is ready
• 5:41
  to take advantage of those. And I think in order to take the next leap in their businesses and
• 5:46
  to provide kind of the next amount of value to their customers, to us, right, as Bitcoiners,
• 5:54
  they need a vehicle to take them public. And I'm really excited to have the opportunity to
• 6:00
  provide that opportunity to you know one or a couple of our favorite companies well maybe
• 6:08
  since you framed it in that way maybe it is a good time to do a retrospective on our conversation
• 6:14
  for five years ago when i understand you re-listened to it recently and we're laughing
• 6:21
  not only at uh our mental state but the conversation we had and i think maybe the retrospective we
• 6:28
  jump into it right away it's just a really highlight where we thought the market was
• 6:33
  five years ago where we thought it was going and how it's actually progressed since then and why
• 6:39
  you think now is a good time to be launching this particular SPAC looking for operating businesses
• 6:44
  in the bitcoin space serving bitcoiners
• 6:47
  yeah i think that the the core part of our discussion that as i was listening back to it
• 6:57
  I was like, you know, we really, we were onto something here and are onto something here
• 7:01
  was, you know, we talked about how, like, what the Bitcoin revolution is really is,
• 7:10
  you know, a war for the world's capital, a peaceful, you know, economic war.
• 7:15
  But it's, you know, there's, as you're growing a brand new store value from scratch,
• 7:21
  necessarily the value that is coming into Bitcoin is leaving other assets, right? And is leaving
• 7:29
  US treasuries, is leaving German bonds, is leaving, you name it, right? All the other assets in the
• 7:37
  world and coming to store itself in Bitcoin. And I think we talked a lot about the order of
• 7:45
  operations of kind of how that, you know, again, kind of war quote unquote, progresses.
• 7:52
  And one thing that we bonded a lot over when we first met was how enthusiastic we were over
• 7:58
  how like kind of the first cohort of big companies that really got Bitcoin or were interested in
• 8:04
  Bitcoin was the energy industry through poor work mining, you know, from, you know, we talked a lot
• 8:10
  about oil and gas back in the day, but like, look how that has panned out, right? Like,
• 8:15
  All of these companies that went public, a lot of them actually VSVACs, right?
• 8:22
  There were mining companies in 2021, 2022, have since become hugely important in kind of the AI build-out space, right?
• 8:33
  Where they first kind of got started just focusing on Bitcoin mining.
• 8:38
  They build great relationships with energy producers and utilities and all the folks
• 8:45
  in the energy industry generally. And then now have these hyperscalers just paying them outrageous
• 8:53
  amounts of money to leverage the skills that they built in the Bitcoin industry to build out this
• 8:59
  next great thing in the AI space. So I think that's where things started and where we've seen,
• 9:04
  again, public companies, companies that took the leap and became public,
• 9:08
  really benefit from being public companies and from having their name out there and being able to
• 9:16
  raise the capital like in Iris. Iron just raised like a billion dollars at the 0% coupon
• 9:25
  convertible note, right? That's they don't have to pay back for five years or something like that.
• 9:31
  like is just, it's absurd what's been happening.
• 9:35
  And I think those are all companies operated by Bitcoiners, right?
• 9:42
  That are out making a difference in the world,
• 9:47
  building with Bitcoin treasuries,
• 9:48
  operating a company on Bitcoin principles.
• 9:50
  And I think that's super important.
• 9:55
  Yeah, I'm looking it up.
• 9:55
  It was iron just did 2 billion, 1 billion at 25 basis points, one at one and clean spark
• 10:02
  did 1.15 billion earlier this year or last month, less than a month ago as well.
• 10:12
  Yeah.
• 10:12
  So they're raising a ton of capital.
• 10:14
  Is that the only advantage to being public in your mind?
• 10:16
  That's a lot of what we hear.
• 10:19
  And I mean, I'm, I think there's, when I think about it from first principles, I think there's
• 10:25
  three.
• 10:25
  there's three main categories that I would end it down to. I think number one for sure is
• 10:32
  being able to raise, like having a public trust from a kind of debt and equity capital perspective.
• 10:39
  And I think there's kind of two ways that you can raise the money. So first is like,
• 10:43
  being able to raise debt capital through these convertibles or through preferreds,
• 10:47
  like MicroStrategy is doing. You can't do that as a private company because you don't have the
• 10:52
  public equity to pair with the debt capital. You can only really do that as a public company,
• 10:58
  being able to issue securities. The other thing is, I had the great pleasure
• 11:06
  of talking with MicroStrategy CEO Fong Li yesterday. And also, he's doing a little roadshow.
• 11:14
  And he was talking about this new USD reserve that they built, the dividends.
• 11:20
  and he was like, look, we did this mostly to combat the FUD. It helps me sleep a little bit
• 11:28
  better at night, but it wasn't really necessary. But we raised $1.44 billion in eight days
• 11:34
  just by selling equity on the public markets through the ATM. That's absurd. Think about it.
• 11:43
  I mean, you're, you know, vaunted venture capitalist now, Marty.
• 11:48
  Like, how hard is it for a company to raise 1.4,
• 11:52
  a private company to raise $1.44 billion?
• 11:54
  And on, like, what timeline, even $100 million?
• 11:58
  Like, on what time long does that take?
• 12:00
  It depends if you're an AI right now.
• 12:03
  Maybe not as long as others, but it's not as easy.
• 12:07
  It's definitely not as easy.
• 12:09
  Right.
• 12:09
  And so that's, and not, of course, not every company is micro strategy.
• 12:12
  So that's, you know, not every company can do that, but it's, it's materially easier as a public company to be able to do that type of stuff.
• 12:20
  And that's not the only benefit.
• 12:21
  I think that's the most obvious one.
• 12:23
  The second one that I think is very important is public trust from a, like, business development perspective.
• 12:31
  Having the audits, having the kind of rigor around your financials, having the just trust that you're a public company.
• 12:42
  It just makes it easier to do deals, especially with kind of banks and the more conservative entities in public markets.
• 12:54
  It's just easier to do that type of stuff to get those doors opened if you're already a public company versus a private company.
• 12:59
  And so I think, you know, especially for the kind of Bitcoin companies that are financially minded, financial services minded.
• 13:09
  that will materially improve their ability to gain new enterprise customers.
• 13:18
  And also having a public equity letting your customers share in the upside of your business That was always the argument for in the shitcoin crowd right but you don need a token you just need a public equity to um
• 13:35
  hey maybe it'll be tokenized maybe that public equity will be tokenized at some point in the
• 13:39
  future you know and at some point maybe um we'll see i'm i know there's you know i'm following the
• 13:46
  clarity act with interest i'm not super optimistic but maybe they'll figure out something that that
• 13:51
  works there. It's possible. But so two is I think that public trust from a BD perspective and
• 13:58
  institutional customers will... You have more substance as a public company than you do as
• 14:06
  a private company. And retail customers like getting to share and your upside is a big deal.
• 14:12
  And then third is just hiring and retention. As we were talking about before the call,
• 14:17
  like not all potential employees like being paid in the liquid stock options, right?
• 14:28
  Being able to pay your employees instead in RSUs, restricted stock units and like public equity that
• 14:35
  they can sell whenever they like, that makes a big difference for a certain class of employee,
• 14:41
  right? Employees that have families or different situations and aren't really willing to take the
• 14:47
  startup risk. Being a public company allows you to just hire and retain a certain class of employee
• 14:53
  that you just can't get otherwise. And so I think those three are real material benefits.
• 14:58
  It helped offset the downside of being a public company. You have to spend a couple million
• 15:03
  dollars in compliance costs and audit costs every year just to be public. And so there has to be
• 15:10
  some benefit for that additional cost. And I think for a certain class of companies, those benefits
• 15:15
  very materially outweigh those costs.
• 15:20
  Yeah.
• 15:20
  And I mean,
• 15:21
  and all these benefits can only be gained too
• 15:23
  if you have something legitimate to bring public.
• 15:27
  So I think that's,
• 15:28
  again, going back to the retrospective
• 15:30
  and really leaning into the timing of this
• 15:33
  and why it's right now is,
• 15:38
  I mean, when we met five years ago,
• 15:40
  outside of industrial scale miners,
• 15:42
  how many companies were in the right spot from a product market fit revenue cash flow ebita
• 15:51
  perspective for this to even be viable outside of maybe coinbase and a few others and why that's
• 15:59
  what i think is that's exactly what i think is so interesting about thinking about this time and in
• 16:05
  terms of the order of operations that we talked about because the way we talked about it it's like
• 16:09
  look, if you wanted to, as a Bitcoin community, march forward and grow Bitcoin's total market cap
• 16:22
  as a measurement of world domination of reserve asset, first you'd want to start with the energy
• 16:28
  industry. You'd want to make sure that energy executives, energy companies were aligned and
• 16:36
  bought in on Bitcoin, understood the value prop and were hobblers and incentivized to,
• 16:40
  you know, protect 21 million. And then kind of the next area you want to verge into is
• 16:46
  financial industry is, you know, TradFi. And you'd want to make sure that, you know,
• 16:54
  companies were holding Bitcoin on their balance sheet. You want to make sure that
• 16:57
  the finance years were, you know, comfortable with Bitcoin as collateral.
• 17:06
  And we're starting to adopt Bitcoin as a collateral for people to borrow against.
• 17:10
  And I think we're right smack dab in the middle of that right now.
• 17:18
  And I think there's a lot more work to be done there.
• 17:24
  But it's interesting that this current cohort of Bitcoin companies, crypto companies, if you'll excuse the term, that are going public, right, are companies like BitGo.
• 17:34
  companies like Kraken, companies like Circle. But this kind of next wave after Coinbase
• 17:42
  are the kind of fintechs built on Bitcoin and crypto rails. And that makes sense, right? That's
• 17:50
  kind of the next wave of companies that got started in Bitcoin, that started making a lot
• 17:55
  of money in Bitcoin and are at the scale where they can be public and bear the cost of being a
• 18:03
  public company, but also tap the upside. They're everything, all the new things you can do as a
• 18:08
  public company. So Freaks, this rip of TFTC was brought to you by our good friends at BitKey.
• 18:13
  BitKey makes Bitcoin easy to use and hard to lose. It is a hardware wallet that natively
• 18:19
  embeds into a two or three multi-sig. You have one key on the hardware wallet, one key on your
• 18:23
  mobile device and block stores a key in the cloud for you. This is an incredible hardware device for
• 18:30
  your friends and family, or maybe yourself who have Bitcoin on exchanges and have for a long time,
• 18:35
  but haven't taken a step to self-custody because they're worried about the complications of setting
• 18:40
  up a private public key pair, securing that seed phrase, setting up a pin, setting up a passphrase.
• 18:44
  Again, BitKey makes it easy to use, hard to lose. It's the easiest zero to one step,
• 18:49
  your first step to self-custody. If you have friends and family on the exchanges who haven't
• 18:53
  moved it off, tell them to pick up a BitKey. Go to bitkey.world, use the key TFTC20 at checkout
• 18:59
  for 20% off your order.
• 19:01
  That's bitkey.world, code TFTC20.
• 19:04
  What's up, freaks?
• 19:04
  This rep was brought to you by good friends at Silent.
• 19:06
  Silent creates everyday,
• 19:08
  Faraday gear that protects your hardware.
• 19:09
  We're in Bitcoin.
• 19:10
  We have a lot of hardware that we need to secure.
• 19:12
  Your wallet emits signals that can leave you vulnerable.
• 19:15
  You want to pick up Silent's gear,
• 19:17
  put your hardware in that.
• 19:18
  I have a tap signer right here.
• 19:20
  I got the Silent card holder.
• 19:21
  Replace my wallet.
• 19:22
  I was using Ridge Wallet
• 19:22
  because it secured against RFID signal jacking.
• 19:26
  Silent, the card holder, does the same thing.
• 19:28
  It's much sleeker.
• 19:28
  fits in my pocket much easier. I also have the Faraday phone sleeve, which you can put a hardware
• 19:33
  wallet in. We're actually using it for our keys at the house too. There's been a lot of robberies.
• 19:36
  They have essential Faraday slings, Faraday backpacks. It's a Bitcoin company. They're
• 19:41
  running on a Bitcoin standard. They have a Bitcoin treasury. They accept Bitcoin via strike. So go to
• 19:45
  slnt.com slash TFTC to get 15% off anything or simply just use the code TFTC when shopping at
• 19:52
  slnt.com. Patented technology, special operations approved. It has free shipping as well. So go
• 19:57
  check it out. Well, let's lean into the upside, particularly in the context of these Bitcoin
• 20:01
  financial services firms. I mean, you talked about the relative difficulty of raising
• 20:09
  just capital compared to a company like MicroStrategy, Iron, CleanSpark, you can just tap
• 20:15
  ATM and pull in 1.44 billion in eight days. But the financial services, particularly those
• 20:23
  building around the use case of bitcoin is collateral um or bitcoin as an asset you can
• 20:29
  put in an ira or whatever it may be how important do you think access to the public markets is for
• 20:36
  them to flourish i think a very like you know simple left curve model of it which you know
• 20:47
  which we also talked about five years ago i think the bell curve meme was like new
• 20:53
  And so we talked about that a lot, but it still remains, I think, the best model of the world.
• 20:59
  And I try and be as left curve as possible, as much as possible.
• 21:04
  Think about like a Bitcoin lending business that's lending against, you know, dollars against BTC.
• 21:09
  And that I think is, you know, although, of course, we would all love to be just 100% Bitcoin only spending Bitcoin through, you know, all the square terminals and support lightning now, which is a fantastic development.
• 21:23
  Um, there just necessarily is a need for dollars.
• 21:27
  Um, if you're operating in the modern world.
• 21:30
  Um, and I think if you're lending against Bitcoin, your main challenge right now is
• 21:38
  the interest rates are high, right?
• 21:40
  Like I think, you know, unless you're borrowing, I think like Leanspark borrowed, um, a hundred
• 21:46
  million dollars against Bitcoin from two prime.
• 21:49
  and they paid like 7% to 8%, 7.75% or something like that, which is, you know, that's probably
• 21:58
  the best rate against Bitcoin that I've seen because they borrowed $100 billion.
• 22:03
  If you're retail and you're borrowing 50 grand, 100 grand, something like that, I mean, you're
• 22:08
  paying like 10%, 12% something that's steep, right? So you think about these businesses that
• 22:16
  lending, their cost of capital, what they're doing is they're borrowing dollars from somebody
• 22:22
  else and then they're lending those dollars back out to the end user.
• 22:25
  So their kind of ability to make money is 100% dependent on how can they lower that cost
• 22:31
  of capital?
• 22:32
  How can they lower that cost to borrow?
• 22:35
  And that's something that's really only unlocked by accessing bigger pools of capital.
• 22:41
  and the way to access those bigger pools of capital is to do what MicroStrategy is doing
• 22:47
  in terms of getting credit ratings, which necessarily involves to get the best possible
• 22:53
  credit rating, being a public company, selling debt for lower and lower costs, and just kind of
• 23:03
  through growth, through selling securities, through working with the credit agencies,
• 23:11
  you know, getting that cost to borrow down closer to, you know, whatever a bank has to pay,
• 23:16
  which is closer to four or five percent. So there's like a big delta between
• 23:20
  this current cost of capital for these private Bitcoin lenders and what kind of like the terminal
• 23:25
  cost of capital should be. And I think that's only unlocked by being a private company or being a
• 23:31
  public company. Sorry. And I think it's very important to dive into the details of this too,
• 23:36
  because I think a lot of people will look at the rates
• 23:39
  attached to the Bitcoin collateralized lending desks
• 23:43
  that are currently private across the industry,
• 23:47
  and they see 10%, 12%, 14%, depending on where you go,
• 23:50
  and they say, oh, these guys are ripping us off,
• 23:52
  not understanding that the company itself would love
• 23:56
  to give you a lower cost of capital,
• 23:58
  but they have liquidity providers to that desk
• 24:01
  that are demanding a higher cost,
• 24:02
  and they simply take a little rip on top of that.
• 24:04
  there's a delta between the cost at which their lending provider gives them the cash and the cost
• 24:10
  at which ultimately you take the loan at and the company issuing the loan or your counterpart
• 24:18
  whether any of the companies offering collateralized loans just takes a little
• 24:22
  a little rip on top of that to your point to like make more money in this product you need to
• 24:28
  basically get more volume or more liquidity on that desk and so the new only way to attract that
• 24:36
  more and more liquidity is to get those rates down the cost of capital down to the end user and then
• 24:41
  the the margins on top of that cost of capital will be similar but you'll just have so much more
• 24:46
  volume that you're able to make more money and i think that's an unfortunate reality of the
• 24:52
  currency of the bitcoin lending market is a lot of people think the company's offering new services
• 24:57
  are ripping off the end customer but it's really beholden to the risk takers on the other side who
• 25:03
  are offering private credit dollars exactly and i think that's that was a really interesting thing
• 25:10
  that um you know falling from microstrategy said yesterday was uh you know this is public
• 25:18
  information um when microstrategy got their credit rating right they got a b minus credit rating
• 25:23
  the ratings agency didn't value their $59 billion worth of Bitcoin at all.
• 25:31
  It didn't count for their credit worthiness, despite the fact that it's $59 billion.
• 25:37
  And that's obviously a mistake and obviously an oversight.
• 25:41
  But one thing that is just, again, if what's really happening here is Bitcoin is competing
• 25:49
  to store all the world's capital and just kind of needs to be convincing bigger and bigger
• 25:55
  institutions of its credit worthiness and of its safety as a store of value.
• 26:02
  As he talked about how, you know, next year, the big banks are going to start releasing
• 26:07
  custody products for Bitcoin, right?
• 26:09
  Morgan Stanley is going to not just offer IBIT, but is going to offer, you know, being
• 26:14
  able to buy Bitcoin that they custody or BNY Mellon or somebody custodies.
• 26:19
  And the next step beyond that is like just logical for them to be able to count your Bitcoin as collateral in a mortgage or something like that.
• 26:28
  But before these big banks can do that, they're going to have to go to the credit agencies and say, hey, I want to lend against my customers Bitcoin.
• 26:40
  I want to give them some dollars for it.
• 26:42
  Like, how should I score this?
• 26:45
  Can I lend it at 40% loan value?
• 26:50
  Can I lend it at 70 What the right number You got to give me some of my guidance So although of course we all got into this or to disrupt the banks or to allow people to be their own banks
• 27:04
  ironically, just due to the power of Bitcoin and the incentivization that it takes hold in all
• 27:15
  institutions that touch it, where all of a sudden like they start acting in its best interest,
• 27:19
  the big banks are ironically going to be, you know, kind of acting on our behalf
• 27:24
  to help Bitcoin on its next leg in its journey. Right. And I think that's one of the things that,
• 27:31
  you know, to me, running the SPAC, I see that and I say, oh, man, Bitcoin native lenders,
• 27:39
  Bitcoin companies that we all know and love, you have like a year to start getting big,
• 27:47
  or else these banks are going to come in and it's going to be really tough to compete with
• 27:52
  Morgan Stanley rates if they're accustomed to Bitcoin. It's going to be really tough to compete
• 27:58
  with the entities that have the lowest cost of capital in the world,
• 28:03
  unless you really start raising money and getting big now. And so I think there's a sense of urgency
• 28:08
  for these companies if they want to maintain their business. And I don't just want to sell out
• 28:16
  to the banks to like take the leap now yeah how do we uh how do we square this round hole is
• 28:24
  bitcoin being co-opted is this good is this what we want it's inevitable it's a great question
• 28:29
  bitcoin is for enemies right um bitcoin is for enemies and i think a co-option question
• 28:41
  my Bitcoin is not being co-opted because I hold my own keys and I run my own note.
• 28:51
  Right. And I think as long as a plurality of Bitcoiners have that attitude and maintain their
• 29:01
  social sovereignty, and as long as protocol development is focused on making that barrier
• 29:08
  to entry as low as possible, then it doesn't really matter what the big institutions do
• 29:16
  with their Bitcoin.
• 29:17
  Like MicroStrategy has done all of this work and bought all this Bitcoin.
• 29:21
  They only own 3% of the network, right?
• 29:26
  And they've been at it for five years.
• 29:28
  And they had to scale.
• 29:29
  They've been at it for five years.
• 29:30
  And like, who is going to come out and buy 650,000 Bitcoin to eclipse that, right?
• 29:38
  um like i totally understand and get that the focus on trad fi adoption appears antithetical
• 29:47
  to bitcoin principles but again it's like if the goal is to become the global reserve asset
• 29:55
  and the global reserve currency like at some point these big boys are going to have to buy it
• 30:01
  right? And if you really believe in what Bitcoin's about, and you really believe in
• 30:09
  you know, Bitcoin's principles, and you focus on the fundamentals of like,
• 30:13
  what does actually decentralization mean? One big entity buying a hundred thousand Bitcoin
• 30:18
  does not affect Bitcoin's decentralization at all. Bitcoin's decentralization is up to all of us to
• 30:23
  to hold our own keys and run our own nodes.
• 30:27
  Right?
• 30:28
  Yeah.
• 30:30
  And I think as long as, you know,
• 30:32
  the protocol development focus isn't focused on
• 30:39
  how do we make it easier for MicroStrategy
• 30:43
  to buy more Bitcoin,
• 30:44
  which is, you know,
• 30:46
  I don't think any of that has come up
• 30:48
  in the knots versus core debate.
• 30:51
  Let's touch that.
• 30:52
  I think we're fine.
• 30:54
  I think we're okay.
• 30:55
  I really do.
• 30:57
  No, I do too.
• 30:58
  And it's been tough this year because you've seen, obviously,
• 31:02
  the digital asset, token, companies, SPACs.
• 31:07
  Hitting the market this year really forced people to be like,
• 31:11
  what's going on here?
• 31:13
  And if you're not pragmatic and nuanced, it's easy to –
• 31:18
  And again, I'm not trying to speak from a high horse or I'm off his pompous, but I've thought long and hard about this and I've had to grapple with it myself.
• 31:27
  And it's like, yeah, to your point, what did you expect to happen to see for Wall Street and all these institutions to see us plebs riding the monetization wave and not participate eventually?
• 31:42
  this is part of the process and to your point it's incumbent upon us to make sure that we're
• 31:47
  holding on our our own keys running our own nodes supporting payments infrastructure to make bitcoin
• 31:52
  everyday money which you dedicated the last five years of your life to um or many more
• 31:57
  six or seven you still are um it's just like yeah we're we're playing in this ocean with
• 32:06
  with bigger fish now and we just got to hold hold our own and that's like at 1031 like we have the
• 32:13
  uh the bitcoin development co SPAC out there right now and we're looking to acquire just an operating
• 32:20
  business that wants to bitcoinize right and like that's like like if wall street's getting in we
• 32:28
  want quote-unquote mainstream to get in as well so you want businesses that have nothing to do
• 32:34
  with Bitcoin, but would benefit from incorporating Bitcoin, whether that's if they're an energy
• 32:40
  company into their systems, if they're a large retailer into their payment systems, and then
• 32:44
  obviously any company, no matter what industry you're in, I think it's incredibly advantageous
• 32:50
  to use Bitcoin as a treasury asset.
• 32:53
  And this makes people uncomfortable, but this is what growing up is like.
• 32:58
  Look at us.
• 32:58
  Five years ago, I had a beard, COVID lockdowns, I was drinking whiskey, like a sailor.
• 33:04
  and now I got a nice sweater on
• 33:07
  enjoying a nice pint of Guinness on a Friday afternoon
• 33:09
  were you a dad yet
• 33:13
  five years ago?
• 33:14
  I was, I was, yeah
• 33:15
  you were, okay, so that's been a big change
• 33:18
  I guess that wasn't a change for you, that's obviously been a big change for me
• 33:20
  that changes your whole perspective
• 33:22
  on what's important
• 33:24
  and where priorities lie
• 33:26
  and yeah, I have a little one now
• 33:28
  and another one on the way
• 33:30
  yeah, growing up
• 33:32
  it happens
• 33:33
  I was a father of one at the time.
• 33:35
  And two more have been added since the last time we talked on air.
• 33:40
  And the more children you add, the more chaotic in a good way.
• 33:47
  And it gets.
• 33:48
  It's all wonderful, for sure.
• 33:52
  But it is, I think, going back to what we're doing here is we're helping Bitcoin progress
• 34:01
  and like soak up more and more of the world's capital as it becomes to global reserve asset.
• 34:07
  You know, one thing that I think a lot of us just didn't understand was, you know, what that actually requires in order.
• 34:16
  Like, you know, the cypherpunk looks at kind of institutional mandates and, you know, investment agreements and all this stuff is like, that's just nerd lawyer talk, right?
• 34:28
  Like you should just buy the Bitcoin.
• 34:30
  But these pension plans, these insurance companies that legally, they have to hold 40% of their money in bonds or in public securities.
• 34:45
  That's the brilliance of what MicroStrategy is doing, is they're meeting these investors where they are who want Bitcoin exposure.
• 34:54
  and they're saying, okay, well, here, we've created this little funnel where you buy our
• 35:01
  preferred because you can. We'll give you what you want, which is this cash flow so you can pay
• 35:08
  off your pensioners and all that different stuff. And we'll go and buy Bitcoin with the proceeds
• 35:13
  because you can't. And I think that's the state that we're at where
• 35:21
  needing to do these kind of clever financial engineering in order to allow these big pools
• 35:31
  of capital to get the Bitcoin exposure that they desperately want and need is just the work that's
• 35:38
  required for this next step. And I think, again, what we were talking about before we got on the
• 35:42
  call or before we started recording is the thing that we didn't understand five years ago
• 35:49
  was that rather than Bitcoin out competing with all the world's capital and being adversarial
• 36:01
  against all the nation states of the world, what we found out is like, oh no, the US dollar system
• 36:07
  desperately needs Bitcoin. It desperately needs more high quality collateral to support the system.
• 36:16
  Right. All of these different fiat institutions are struggling just as much as individuals in the face of inflation and rampant money printing.
• 36:27
  Right. And they need a lifeboat just like we do.
• 36:31
  But they're not able to just buy Bitcoin with the dollars.
• 36:35
  Right. They need different sort of structures and products to be able to do so.
• 36:40
  What's up, Freaks? Have you noticed that governments have become more despotic? They want to surveil more, they want to take more of your data, they want to follow you around the internet as much as possible so they can control your speech, control what you do.
• 36:51
  It's imperative in times like this to make sure that you're running a VPN as you're surfing the web, as we used to say back in the 90s. And it's more imperative that you use the right VPN, a VPN that cannot log because of the way that it's designed.
• 37:05
  And that's why we have partnered with Obscura. That is our official VPN here at TFTC built by a Bitcoiner, Carl Dung, for Bitcoiners focused on privacy.
• 37:14
  You can pay in Bitcoin over the lightning. So not only are you private while you're perusing the web with Obscura, but when you actually set up an account, you can acquire that account privately by paying in Bitcoin over the lightning network.
• 37:27
  Do not be complacent when it comes to protecting your privacy on the internet.
• 37:31
  Go to Obscura.net, set up an Obscura account, use the code TFTC for 25% off.
• 37:39
  When I say account, you just get a token.
• 37:41
  It's a string of token.
• 37:42
  It's not connected to your identity at all.
• 37:45
  Token sign up, pay with Bitcoin, completely private.
• 37:48
  Turn on Obscura, surf the web privately.
• 37:50
  Obscura.net, use the code TFTC for 25% off.
• 37:53
  Sup freaks, 2025 left many wondering,
• 37:55
  Was this an underwhelming year for Bitcoin?
• 37:57
  Were the quiet set up for an extended bull run?
• 37:59
  On December 17th at 1 p.m. Central, join Preston Pysh, Connor Brown, and Unchained for Bitcoin in 2025, a year in review.
• 38:06
  A concise breakdown of the macro trends and policy developments that truly shaped the year.
• 38:11
  You'll hear what mattered most, where the market stands now, and what these inflection points reveal about Bitcoin's long-term direction.
• 38:16
  If you want clarity on where Bitcoin has been and where it's headed next, don't miss this event.
• 38:20
  So go register now at unchained.com slash tftc.
• 38:23
  That's unchained.com slash TFTC.
• 38:26
  It's almost like it's too good to be true.
• 38:28
  Like, wait a second, what's happening?
• 38:29
  And I would attribute this reality to the very understandable apprehension.
• 38:38
  Like, are we being co-opted right now?
• 38:40
  It's like, maybe.
• 38:42
  Maybe some people are.
• 38:44
  Maybe some institutions are.
• 38:45
  But I think the stronger force is this external recognition of, oh, crap.
• 38:49
  a big problem here and
• 38:51
  Bitcoin is a tool that can help us
• 38:54
  begin to solve that problem.
• 38:56
  And I think
• 38:58
  maybe taking a slightly
• 39:00
  different direction too, I mean, bring it back to
• 39:02
  the Bitcoin industry
• 39:04
  specifically and the companies within it
• 39:06
  and why
• 39:10
  they should go public
• 39:12
  now, get access to public markets
• 39:14
  and then putting it
• 39:16
  in the broader context
• 39:17
  of SPACs, which
• 39:19
  particularly post 2020 had a uh negative connotation associated with them a lot of
• 39:26
  spec offerings were simply in retrospect proved to be uh sort of exit liquidity mechanisms but i
• 39:36
  think you and i we've talked about this at length over the last um last few months like the timing
• 39:42
  for these bitcoin companies again if you're mature you're you've got revenue product market fit your
• 39:47
  cash flow and you got material ebita and if you basically take what we've been discussing today
• 39:55
  particularly with the institutional foray into bitcoin if that's happening in earnest like the
• 40:00
  upside potential growth potential for these companies is is massive as well as we're looking
• 40:07
  at a 1.8 trillion dollar market cap right now there's vanguard open up the floodgates bank of
• 40:14
  America, one to four percent square, rolling out the four million merchants.
• 40:19
  Like the need for individual consumers enterprise consumers to get access to Bitcoin infrastructure is only going to increase from here I couldn agree more And I think like obviously
• 40:32
  I think what's important too is,
• 40:36
  you know, one of the things that,
• 40:38
  you know, my chairman of my board,
• 40:41
  Parker White, who's, you know,
• 40:42
  an Austin Bitcoin guy,
• 40:44
  worked at Kraken for a number of years
• 40:46
  and is now, you know, the CIO of a public data,
• 40:50
  One of the things that he kind of convinced me on when he was pitching me on the opportunity was he was like, look, this merging of public markets and private crypto Bitcoin companies is happening now.
• 41:07
  It's a one-way merge.
• 41:10
  And these TrapFive people have no idea what they're doing.
• 41:13
  Right?
• 41:14
  Like, they have no idea what value looks like.
• 41:16
  And so if people who, if nobody who understands where like real value is in this community, in this ecosystem, don't stand up, all this stratified money is going to go into a million avalanche stats, right? Like it's just going to all get destroyed. And all of these capital markets, people are going to feel like they got scammed, just like what's happened in every single crypto boom and bust cycle we've seen so far.
• 41:44
  Right. And so I think there's, you know, there's a responsibility to try and direct some of this capital into some of the great companies that we know exist.
• 41:55
  Right. And that we know around and put it in the hands of, you know, quality, responsible entrepreneurs that can really put this capital overwork.
• 42:06
  And, you know, not only build great companies, but also be great spokespeople for Bitcoin.
• 42:11
  like are we happy that you know obviously sailor does a great job but are we happy that the other
• 42:17
  people that get to talk about crypto all the time is fucking tom lee hey we're going to do it in
• 42:23
  january of next year like is that the representative or do we want you know i don't want to put any
• 42:28
  people on the spot but just like people that come top of mind like wouldn't we love to have
• 42:33
  alex leishman talking about bitcoin on cnbc and giving that perspective um right wouldn't we love
• 42:39
  to have Elizabeth Stark? Wouldn't we love to have Joe and Drew from Unchained? You go down the list,
• 42:46
  right? There's all of these wonderful representatives of the Bitcoin community that
• 42:51
  have focused on their customers and their products and their companies. But I do think at some point
• 42:57
  there's a duty to educate the rest of the world and traditional financial markets on what real
• 43:05
  value looks like and instead of just hoping and being disappointed when the masses fall for
• 43:11
  shitcoin scams over and over and over again what about the zcash stat that's a big one
• 43:17
  just unbelievable right but i mean we've we've been in this ecosystem long enough that
• 43:24
  like i i'm not mad i'm just disappointed yeah well i mean this brings up a good point it's
• 43:31
  something like obviously i think you'd be an incredible representative but it is it is
• 43:37
  frustrating like fucking excuse my language almost 17 years in because i remember when i first got in
• 43:44
  like 2013 2014 you had was brian kelly on cnbc tom lee was around back then uh they let trace
• 43:51
  mayor on obviously he's had his downfall and like still the quality of people actually like
• 43:57
  highlighting where the value is and listen credit where credit is due to like sailor
• 44:01
  and other people now like the last six months it's been all this dat thing where it's like
• 44:06
  all right don't worry it's going up like buy the stock um i think strategy is far and away like
• 44:12
  separated and demarc demarcated from um a lot of the dat focused uh companies that have hit the
• 44:20
  market this year but like again i think really bringing the public the message of like hey this
• 44:26
  a superior savings and payments technology that is objectively better when you actually touch see
• 44:33
  and feel it i mean you saw this and you see this at lightning labs like the ability i was just
• 44:39
  talking about i was on nostril we were live streaming was live streaming walker uh three
• 44:44
  hours ago and people were sending bitcoin to his wallet it appeared as we were live streaming it's
• 44:50
  like that is a twitch competitor that nobody realizes yet but it is superior like you don't
• 44:54
  have to wait once a week once a month whatever it may be like you are getting paid immediately you
• 45:00
  have the proliferation of other second layer solutions like arc spark cashew mints or e-cash
• 45:06
  mints liquid these are all becoming interoperable obviously um the development at the protocol layer
• 45:14
  with mini scripts and what you can do to secure your collateral is getting extremely robust and
• 45:21
  of his true sci-fi tech that is better.
• 45:24
  And we need, in my opinion,
• 45:27
  and I think in your humble opinion as well,
• 45:29
  more people telling this side of the story,
• 45:32
  which I think is being very underappreciated.
• 45:34
  Obviously, we have.
• 45:36
  Luckily, I mean, I think outside of Jack Myler's,
• 45:38
  I can't think of anybody who's going on CNBC
• 45:40
  and telling a story like this.
• 45:44
  Exactly.
• 45:45
  And I mean, I think there's a...
• 45:51
  Bitcoin has always had, you know, a little bit of a, not a marketing problem, but like a-
• 45:58
  It's had a marketing problem. You can say it.
• 46:00
  Yeah, it's had a marketing problem, right? And I think Bitcoiners are
• 46:03
  not predisposed to the salesmanship and the marketing that needs to happen, but it just,
• 46:09
  it's important, right? It just is. And I do think that, you know, now that we're at this,
• 46:17
  at this point and at this level of scale, I think there's a real responsibility.
• 46:24
  There's kind of two choices that you have when you've been a Bitcoin for a long time.
• 46:29
  One, which is respectable, is to ride off into the sunset with your Bitcoins and just go enjoy
• 46:38
  your life and be financially secure and kind of do whatever you want. The other one is the other
• 46:46
  choice is to give back to the community that's given you so much and, you know, incur a little
• 46:54
  bit of self-sacrifice to help get other people into the lifeboat. Right. And I think that that's
• 47:00
  kind of a little bit where we're at, where, you know, as we've heard this year has seen a ton of
• 47:06
  OGs selling, right. We're over a hundred K. If you bought Bitcoin at 10 bucks, a hundred bucks,
• 47:11
  something like that, like, you know, congratulations, that's fantastic. You
• 47:15
  retired your bloodline. That's awesome. But I would challenge those people that like, you know,
• 47:24
  there's a, there's more going on here. We're not done. 100K is $1.8 trillion is not the terminal
• 47:31
  end of Bitcoin, right? Like we got another 100X to go to really fulfill the mission.
• 47:37
  And this next leg of the journey is just necessarily takes a little bit more than just buying and holding. Right. There's more convincing to do. There's more convincing of, you know, entities that aren't just retail people looking to make money. Right.
• 47:57
  This is like serious institutions that need to be convinced of volatility, of safety, of, you know, that the custody of the Bitcoin is with reputable entities, et cetera, et cetera.
• 48:09
  Like there's more work to be done on this next leg of the journey.
• 48:14
  And I think we need all hands on deck.
• 48:17
  And, you know, I think that's kind of the next thing that I'm really interested in, really passionate about doing.
• 48:23
  And, you know, I think I have a unique skill set to be able to do that.
• 48:29
  And so that's why I'm focused on this back and on working with, you know, the best Bitcoin founders to take this, you know, next leap of the journey with me.
• 48:42
  What is a you're going to find a founder with an operating company spinning out cash flows set up for growth.
• 48:50
  but before you find that
• 48:52
  founder, it's going to be you. You're going to be on
• 48:54
  CNBC.
• 48:56
  We've heard the pitches from
• 48:58
  Saylor and everybody. It's digital capital.
• 49:01
  It's the best asset on earth. What would
• 49:02
  your unique pitch be?
• 49:04
  Why we should lean into Bitcoin?
• 49:07
  Why Bitcoin? Why now?
• 49:09
  Is it a
• 49:10
  store value hedge? How would you
• 49:12
  paint the full picture? Because I think you are
• 49:14
  particularly suited to do a
• 49:16
  good job of it.
• 49:18
  One thing
• 49:19
  a term that's been rattling around in my head for the last several months
• 49:26
  has been like, look, I'm outside of Bitcoin. If you remember, like my background, I'm an engineer,
• 49:36
  right? Like I started my career at Intel, which was like-
• 49:39
  Talked a lot about it in the first episode.
• 49:40
  We talked a lot about it in the first episode. It's like, it was the, I think,
• 49:44
  you know, arguably the preeminent American manufacturing company, you know, for like our
• 49:50
  entire lives, right? You had kind of, you think about the, you know, GE, Boeing, Intel, right?
• 49:57
  Intel does massive, massive investments in manufacturing in the U.S. And so one thing
• 50:02
  that I'm like extremely interested in and I've been following very closely is all of the efforts
• 50:09
  to kind of reshore manufacturing in the US
• 50:11
  and like bring back, you know,
• 50:14
  those post-COVID bring back supply chains
• 50:18
  and things like that.
• 50:20
  And so this is a long-winded way of saying that like,
• 50:23
  in order to do that work,
• 50:26
  and another thing we talked about five years ago
• 50:28
  is that like Bitcoin is just as much a hardware evolution
• 50:30
  as a software one, right?
• 50:32
  But in order to do that work,
• 50:34
  we need to, without inflating everybody away,
• 50:38
  We need to re-collateralize the financial system, right?
• 50:42
  Like the financial system is dramatically under-collateralized.
• 50:46
  And without re-collateralizing this financial system, we will not be able to successfully
• 50:52
  make the capital expenditures we need to make to bring back manufacturing and like ensure
• 50:58
  American national security, right?
• 51:02
  And I think if you adopt that frame, what asset can we use to re-collateralize the financial system?
• 51:10
  Right?
• 51:10
  Like, it's not going to be treasuries.
• 51:13
  Gold's been doing great, obviously, but like gold kind of had its time as collateral and we're not going back to it.
• 51:21
  Really, the only option that you have is Bitcoin.
• 51:24
  Right?
• 51:25
  And imagine if adopting Bitcoin as a collateral asset to lend against, to re-collateralize this dollar system as Bitcoin goes from $1.8 trillion to $100 trillion, right?
• 51:40
  Like that 50x in growth could provide, you know, I don't, depending on what multiple, like another 100x of capital expenditure of dollars issued in order to, you know, provide new productive capacities in AI and robotics and space travel and all the things that we want to invest in.
• 52:01
  But like you need that underlying collateral in order to do that lending to productive entrepreneurs.
• 52:09
  You just you have to have it. And so I think that's that's the thing that I've been really interested in is like.
• 52:16
  Thinking about Bitcoin as the tool that allows us to recollateralize the financial system and invest in all of these new productive economies that we're so excited about.
• 52:29
  Another way to say is we're we're for the Bitcoinization of finance. It's not the financialization of Bitcoin.
• 52:34
  Right. It's a thousand percent. I mean, that's and so that's, you know, Elizabeth Stark is, you know, my former CEO, boss and CEO at Lightning Labs is phenomenal at kind of all things branding in terms of phrase.
• 52:48
  And so she was about, you know, Bitcoinizing the dollar. This is that that's what we were doing with with Taproot Assets.
• 52:54
  And I think similarly to your point, Bitcoinizing the financial system, building it, allowing it to, you know, grow on a firm, solid foundation based on 21 million, based on lack of rehypothecation, based on, you know, auditing and verifiability.
• 53:16
  That's a better way to organize as we move into the future.
• 53:20
  Yeah. I'm not sure if you caught up at the national security strategy memo that went out this morning about the Trump administration. It's pretty profound. I've only read a few pages I recorded with somebody right before this about it.
• 53:39
  If you're listening to this episode and you listened to the previous episode, you heard it was Susan.
• 53:44
  But just this whole idea of leading into reshoring, we're getting away from the global wars, we're going to focus on the Western hemisphere.
• 53:53
  I think that's another great form.
• 53:54
  aim for Bitcoin is like, hey, not only does the system need to be re-collateralized,
• 53:59
  but a lot of the banking infrastructure and securities infrastructure,
• 54:04
  if we're being honest with ourselves, is running on tech that was built in the 70s,
• 54:08
  and it's not fine-tuned.
• 54:09
  So we have this incredible re-industrialization or re-engineering
• 54:15
  of the financial system potential.
• 54:17
  We can build a new banking stack, a more sovereign banking stack,
• 54:20
  obviously a modern banking stack on this protocol as well.
• 54:26
  So there's a number of different narratives.
• 54:28
  There's recollateralization,
• 54:30
  the supports of the energy infrastructure build out.
• 54:34
  And one that I don't think is getting enough tick yet,
• 54:38
  maybe it's because the timing's not right,
• 54:39
  order of operations type thing is literally,
• 54:41
  I think Ethereum probably, for being objective,
• 54:44
  does a better job of marketing it this way.
• 54:47
  But you can rebuild the financial system on top of it.
• 54:50
  And I think that, like seeing that in the minds of not only the administration, but the American people of like, hey, there's an incredible opportunity here to do something brand new.
• 55:03
  It's going to create a ton of jobs, kind of opportunity.
• 55:05
  And when it's all said and done, the monetary and financial system is going to look completely different in a better way.
• 55:12
  One thing that's really interesting about that, and I agree with you, is we talked a lot about this with, you know, Tapert Assets was at Lighting Labs.
• 55:20
  The protocol was predominantly focused on stable coins and bringing stable coins to Lightning.
• 55:26
  But there was this whole other aspect to it of, you know, doing tokenized assets.
• 55:32
  And I always kind of thought that that was like a little silly and like, you know, why would you, you know, mint a token, a tokenized asset instead of, you know, just issuing equity on a stock exchange.
• 55:43
  But one thing that was really interesting as we talked with, you know, other folks is, you know, if you grow up and you create a company in Mexico, in Guatemala, in Colombia, like there isn't a capital market.
• 56:00
  Like it, it doesn't exist, right? Like, like you can't go and raise money or do the things that
• 56:07
  you can do as a U S company in these other places. Um, and one thing I've always thought about
• 56:13
  Bitcoin, um, is like what, what the revolution really is, is it's extending like the best
• 56:19
  property rights the world has ever seen to anybody with an internet connection, right? Like if you
• 56:24
  want to have Texas level property rights, like you gotta be in Texas, right? Um, if you're born
• 56:30
  in China or, I don't know, name a worse country in terms of property rights. You can't get that
• 56:39
  level of assurances over your property unless you move to the jurisdiction of Texas with the
• 56:45
  exception of holding your own Bitcoin private keys. And I think extending that same level of
• 56:51
  property rights to people that want to issue equity, that want to raise debt, that want to do
• 56:56
  these different capital markets activities via the Bitcoin blockchain is an unqualified good.
• 57:03
  Right. And I think to your point, like, I think that will unlock a tremendous amount of prosperity
• 57:07
  by extending these property rights to because, you know, as we know well from some of the best
• 57:14
  entrepreneurs I worked with at Lightning Labs were based in Nairobi. Right. We're based in
• 57:20
  in Medellin, were based in, you know, Chiang Mao in Vietnam. Right. And, you know, thankfully,
• 57:31
  you know, they were able to get into the Bitcoin community, figure out how, you know,
• 57:36
  create a corporation, all that sort of stuff. But, you know, to take the next step to really
• 57:40
  operate at, you know, billion dollar company scale, like you kind of need U.S. capital markets
• 57:44
  access. And lowering that barrier to entry to just anybody with an internet connection,
• 57:50
  I think is an unqualified good.
• 57:52
  Yeah.
• 57:53
  It's very optimistic too.
• 57:55
  It's very motivational, if you will.
• 57:59
  There are a lot of black pills out there.
• 58:01
  You can't do it.
• 58:02
  You can't do it.
• 58:03
  You can't do it.
• 58:03
  You can't do it.
• 58:03
  You can't do it.
• 58:03
  You can't do it.
• 58:03
  It's all open source, all accessible.
• 58:07
  Not all of it, but the protocols are mainly open source
• 58:10
  and you can build.
• 58:12
  But, I mean, with that being said too,
• 58:13
  I think it would be remiss of me not to really lean into
• 58:18
  lightning network how it's developed over the last five years and again mentioned it earlier
• 58:24
  but that's something that's made me incredibly bullish i think it's incredibly i mean it's not
• 58:30
  even on the radar of the broader public but it's incredibly underappreciated within the bitcoin
• 58:35
  space which should be paying attention to it but like the emergence of the lightning network not
• 58:40
  only has this very decentralized distributed payments protocol on top of bitcoin but this
• 58:45
  connective tissue between these budding second layer protocols that many would have assumed
• 58:52
  would compete with lightning but we're finding out they're actually symbiotic
• 58:55
  many years ago um a guy zaki mannion who was like one of the main engineers and architects
• 59:07
  of the cosmos ecosystem i remember when i was at multi-coin him telling me that like
• 59:12
  look the master architecture or like a blockchain based payments network and again this is a guy who
• 59:19
  worked on cosmos like he was not interested in lightning any of that sort of stuff because he
• 59:23
  was like the master architecture is you have a single settlement blockchain um and then on the
• 59:30
  sides of that single settlement blockchain you have these you know um trustless two-way pegged
• 59:36
  liquidity pools, side chains, roll-ups, etc. And then all of those liquidity pools are connected
• 59:45
  with a payment channel network. So I've always had that vision in my head of how things were
• 59:51
  going to develop. And it's just interesting that the Bitcoin community chose to have the settlement
• 59:57
  network and then build the payment channel network next, the interoperability layer.
• 1:00:02
  And then we had all of these custodial venues like Old Walls, Toshi, the exchanges,
• 1:00:07
  those were kind of our liquidity pools, which, you know, obviously be better if those were non-custodial.
• 1:00:12
  But now we have this heterogeneous mix of liquidity pools, whether it's, you know,
• 1:00:18
  Alpen Labs style roll-ups, Botanics style spider chains, you know, Spark with state chains,
• 1:00:26
  ARK, of course, the Cashew eMints, all of which interoperate via Lightning.
• 1:00:33
  And the really funny thing about that choice versus the choice that the crypto people made is thanks to having a native interoperability solution all of these Bitcoin you know side systems just kind of work together naturally
• 1:00:48
  right? Like there's a, there's a native interoperability language, like going between
• 1:00:52
  rollups and Ethereum is like a fucking nightmare, right? Like they still haven't solved that and
• 1:00:57
  they have no idea how they're going to solve it. Well, let's dive into that. I mean, again,
• 1:01:00
  going back to order of operations which has been more theme of our conversations throughout
• 1:01:05
  the last 10 years or seven years however long we've known each other um this is order of operations
• 1:01:12
  by like so like ethereum other blockchains went for like all right we're going to build these
• 1:01:16
  second layers and they're going to compete with each other but some have properties that others
• 1:01:21
  want and if you're in this one you want to use that one like how do we connect on the bridge
• 1:01:25
  has become the popular nomenclature for how you connect them but then once you build these second
• 1:01:30
  layers is like how do you agree on a on a standard language for them to communicate and then you get
• 1:01:35
  into stick measuring contest and coordination issues where it's like oh you build the common
• 1:01:40
  language first built these individual second layers after that yeah i mean i don't think there
• 1:01:48
  was any intention behind that too to your point i think it just happened almost yeah once you know
• 1:01:54
  it's it's i wasn't around at the beginnings of the lightning network i don't think like i do know
• 1:02:01
  that you know in the very very early days um i think because litecoin had segwit before bitcoin
• 1:02:10
  did i think actually like like i know lnd had support for litecoin for a number of years it
• 1:02:15
  was only sunset like in the last couple years but there was like some early ideas that it could be
• 1:02:20
  used for kind of cross-chain swaps but never like you know it took way too long to figure out that
• 1:02:31
  liquid and lightning were a good combination right shout out to uh francis and the bold
• 1:02:36
  decoyed team for really and the awkward yeah i mean like that works great and like you look at
• 1:02:40
  what what breeze has done with the breeze sdk you know building on on liquid like they build like a
• 1:02:45
  really slick, nice solution. What bolts did with, with submarine swaps between liquid and lightning
• 1:02:51
  like that, you know, a great solution that, you know, really provided a good user experience. Like
• 1:02:56
  that was something that, you know, I think I was, I was waiting a long time for. And then when it,
• 1:03:04
  once people finally started building, it was like, Oh, of course. And now seeing it work with,
• 1:03:09
  you know, that was another thing that like in my, my years at lighting labs,
• 1:03:12
  I pitched a lot of things and a lot of things that were not very well received.
• 1:03:19
  The most well-received pitch I ever gave was to these Bitcoin layer twos about integrating with
• 1:03:26
  Lightning. And the pitch was very simple. It was, look, you as new side system,
• 1:03:34
  you're going to get spun up and you have two options. You can either go and do business
• 1:03:40
  development and get a direct integration with every single one of Binance,
• 1:03:44
  Coinbase, Kraken, Wallis, Satoshi, you know,
• 1:03:47
  every entity on the lightning network, which now is in the hundreds, thousands,
• 1:03:51
  you know, it's, that's a lot of people, a lot of businesses,
• 1:03:54
  all of whom who have other roadmaps and like, trust me,
• 1:03:56
  as a guy that did integrations with lightning, like it is not easy.
• 1:04:00
  You can either do all of those integrations directly,
• 1:04:03
  or you can integrate with one submarine swap provider that will bridge your
• 1:04:09
  side system to lightning and you get instant deposits and withdrawals from all of those
• 1:04:13
  customers for free right and every single bitcoin layer too was like oh i want option number two
• 1:04:18
  please like i want to integrate with the submarine swap provider and get all the whole lightning
• 1:04:22
  network for free right it's like it's the easiest pitch in the world yeah and then like the e-cash
• 1:04:29
  mints it's like you just natively build in the lightning gateway and for not on the mint and
• 1:04:34
  it makes a ton of sense and again i think it's extremely underappreciated right now like i think
• 1:04:42
  baltic honey badger was an incredible example like they just ninja launched arc and mark labs
• 1:04:48
  their their implementation on the back end on the payment processors at the conference and it was so
• 1:04:54
  cool unfortunately one of two baltic honey badger conferences i've ever missed in my life but like
• 1:05:01
  watching from afar there's people paying from e-cashments to arcs it was like e-cash to lightning
• 1:05:06
  arc happened automatically like completely interoperable if you're an end user with your
• 1:05:13
  particular preferences that's like the magic that people really have not appreciated yet that
• 1:05:21
  unless you know ball unless you know ball you don't really appreciate it uh and again that's
• 1:05:29
  When you think of the potential to re-architect the financial system from the ground up, the banking system from the ground up, and tying this into the whole conversation of people being worried that Wall Street is co-opting Bitcoin.
• 1:05:43
  It's like, no, this technology is superior. User experience is superior. The ability to build on it is superior because they're open, interoperable protocols.
• 1:05:52
  The shelling point is going to be through these systems, whether you realize it or not.
• 1:05:57
  And tying this whole conversation of companies, whether they're in the Bitcoin space or outside the Bitcoin space, going public to really accelerate this or to accelerate the Bitcoin integration into their businesses, like, and comparing it to SPACs of 2020, which people really anchor to.
• 1:06:16
  It's like they don't compare.
• 1:06:18
  The upside potential here is massive.
• 1:06:21
  It's massive.
• 1:06:22
  It's massive.
• 1:06:22
  And I think, like, again, the stat that I couldn't believe when Miles and Square first started talking about it, but it's such a staggering stat.
• 1:06:33
  It's like, no, the 28% of U.S. merchants can now accept payments over Lightning.
• 1:06:39
  We met right after we, like, we both went to, like, with the cost Miles immediately after he got off stage.
• 1:06:47
  But, like, I remember.
• 1:06:47
  Yeah, it was like a hundred crap.
• 1:06:49
  It was me and Matt Corallo being like, oh, my God, this is crazy.
• 1:06:52
  Yeah. I mean, the yield, that was nuts. Again, that was a number that I'd been waiting for,
• 1:06:57
  for like 10 years. A thing that we talked about five years ago was the lightning pool launch and
• 1:07:02
  about like earning yield as a routing node operator and how like eventually someday,
• 1:07:07
  you know, real businesses are going to be making real money running lightning nodes.
• 1:07:12
  And now, yeah, I mean, a non-custodial yield on your Bitcoin, the risk-free rate, you know,
• 1:07:16
  Nick Boddy was talking about that years before we got onto it Like it happening It happening for a public company for a lot For a lot of money Yeah like a um yeah i mean i i think that lightning has grown up so much um over the last five years and has matured so much and again it
• 1:07:37
  you know there's so much hate around it though why do people hate it i think i i honestly think
• 1:07:43
  people hate it because the mental model of what they thought it was supposed to do is not what it
• 1:07:52
  does. If you think about what Lightning does from a fundamental basis is it removes the
• 1:08:01
  transactions per second limit from the Bitcoin blockchain. What it did was it scaled the
• 1:08:08
  transactional capacity of Bitcoin, but it did not scale the number of people that can hold private
• 1:08:15
  keys. So like what, and this is, you know, again, the tie-in to what we were talking about with
• 1:08:21
  these new site systems and interoperability is like what all those systems are really good at
• 1:08:27
  is allowing more people to hold their own private keys and transact efficiently.
• 1:08:32
  What Lightning is not good at is allowing people to hold their own private keys because
• 1:08:38
  you have to manage your own channel, right? And you have to manage your own hot wallet.
• 1:08:42
  So I think the self-custodial Lightning UX was never really able to get up to par of a MetaMask
• 1:08:53
  extension or a phantom wallet or something like that. But that's not really what Lightning is for,
• 1:08:58
  right? We kind of always needed these additional systems to plug in at the end of Lightning to
• 1:09:05
  solve that problem because what lightning is phenomenal at is allowing for instant global
• 1:09:11
  bitcoin transactions that settle you know for tenths of a penny um it's just it's not good
• 1:09:18
  at the supporting self-custody that's not that's not really what it's for yeah people people get
• 1:09:25
  upset about that but hopefully this next generation of lightning wallets that are built on arc that
• 1:09:30
  that are built on Spark, that are built on these new, I call them last mile solutions in a blog
• 1:09:37
  post I wrote a year and a half ago, that are based on these new last mile solutions will kind of
• 1:09:42
  change that opinion. And I think what Lightning is really good for is saving every 28% of US
• 1:09:51
  merchants from having to pay Visa taxes, right? MasterCard taxes, credit card network taxes,
• 1:09:57
  right that's great framing just call them visa taxes not interchange fees visa taxes that's what
• 1:10:03
  they are yeah visa and escar are the like most profitable they have the highest operating profit
• 1:10:09
  of almost any company s&p 500 they make like 60 gross margins or something it's outrageous
• 1:10:15
  at incredible scale an incredible scale for like not really doing that much right they just pass
• 1:10:20
  messages between banks yeah well right for disruption i mean we could not that's why i'd
• 1:10:28
  like to nerd out about this stuff with you the other thing too is like the lightning network i
• 1:10:33
  would argue is so good at what it does um particularly from a privacy perspective that's
• 1:10:39
  really hard unless you have companies like yeah block publicly reporting their numbers to actually
• 1:10:46
  know what's going on within the network and so people see that opacity i guess and say ah there's
• 1:10:54
  probably nothing going on but i i can tell you for sure i think literally via this podcast i receive
• 1:10:59
  at least maybe not every minute of every day but like every five minutes at the very least i receive
• 1:11:07
  on average every day it just it just keeps growing and i think you know there's so much of
• 1:11:16
  The comparison too is it was always comparing Lightning to these other shitcoin systems.
• 1:11:23
  But like, if you just look at Lightning's growth independently and not comparatively, it's fantastic.
• 1:11:31
  I mean, like the growth of volume, the growth of nodes, the growth of channels, the growth of companies, the growth of investment dollars into startups, like all of the everything is up and to the right.
• 1:11:44
  very steadily at, you know, like 20 to 50% CAGR or something like that. Like all of those things,
• 1:11:52
  all of the metrics that we tracked were, were, were great. Um, and especially like the most
• 1:11:58
  important one volume, you know, like, I think we were, I don't know exactly where the network will
• 1:12:03
  end this year, but you know, uh, if you look back at like the old river reports or the art arcane,
• 1:12:11
  reports when they did like the state of lightning, you know, it was like five years ago,
• 1:12:16
  lightning was doing like single digit millions in volume annually, right? Two years ago,
• 1:12:21
  maybe lightning got to, you know, hundreds of millions, if not billions. Now we're already on
• 1:12:27
  the order of, you know, potentially $10 billion in annual volume, you know, if not more, right?
• 1:12:33
  That's phenomenal growth. And there's hundreds of, you know, I think Visa and MasterCard
• 1:12:40
  combined generally for like $20 trillion in total payments volume. And about half of that is debit,
• 1:12:47
  which is the right comparison for Lightning transactional volume, right? Like getting up
• 1:12:51
  to $10 trillion in total volume. Like the way I looked at that when talking to entrepreneurs
• 1:12:56
  and businesses, it's like, look, there's a hundred X here left, right? Or a thousand X here.
• 1:13:02
  And if it keeps growing at that rate, we'll get there quicker than anybody expects.
• 1:13:05
  Exactly. And like, again, like, you know, and the way these network effects work is you just kind of like unlock greater and greater scale as each each entity comes on board and Square bringing on, you know, almost a third of all U.S. merchants access is an enormous unlock for scale.
• 1:13:29
  right and the fact that it works and it's being operated by a really quality professional company
• 1:13:34
  um like block means these people are going to have a good experience and all of a sudden like
• 1:13:40
  this stuff goes word of mouth if you're as a brick and mortar retailer saving three percent
• 1:13:44
  because you switched to lightning you're not paying the visa taxes anymore you're going to
• 1:13:51
  put a little note on your on your terminal that says please you know discount if you pay with
• 1:13:56
  Bitcoin, right?
• 1:13:57
  This, you know, here's how you pay with Bitcoin via cash app.
• 1:14:02
  That education is just going to be word of mouth which is um I remember in the in the early days of podcasting 2 with Adam Curry Adam Curry being like you lightning people don understand how big this is Every podcaster is going to be shilling lightning to his audience
• 1:14:18
  To his or her audience are all going to be saying, here's how you set up a lightning wallet.
• 1:14:21
  Here's how you start streaming sats to me.
• 1:14:24
  It's true.
• 1:14:25
  Yep.
• 1:14:26
  And then in podcasting 2.0, I've talked about this a few times, but I think we were top five.
• 1:14:31
  One of the first podcast.
• 1:14:33
  One of the first five podcasts to put a lightning.
• 1:14:35
  address in our rss feed like it is and it's like it's not obviously it's not going to replace
• 1:14:42
  advertising revenue overnight but like it is the the thing that makes me most optimistic is number
• 1:14:47
  one it's been consistent up and to the right it's not crazy parabolic growth but slowly but surely
• 1:14:53
  more people are discovering fountain and other podcasts and 2.0 apps downloading listening
• 1:14:58
  contributing um and it's happening the growth is there it has not it never like went up and then
• 1:15:05
  died and never went back up against being consistent up and to the right um and the
• 1:15:10
  other thing last thing because i know we've got families it's friday afternoon here the other i
• 1:15:17
  think it's important to touch on for anybody who's trying to compare lightning to other l2 protocols
• 1:15:23
  and looking at tvl specifically i think that's another thing they look like channel capacity
• 1:15:28
  you're like, oh, look, it's up, it's down, it's not as much as what's in wrap Bitcoin on this
• 1:15:32
  chain or whatever it may be and completely misunderstand dynamics that that is actually
• 1:15:36
  an incredibly high signal that this thing is working because you can do more with less.
• 1:15:41
  And another factor that many people don't take into consideration when they're just opining on
• 1:15:46
  this as a pundit is the fact that the Bitcoin price goes up. So you don't need as much Bitcoin
• 1:15:52
  in these channels as before if you're denominating the purchases in US dollars
• 1:15:58
  and it takes less bitcoin to complete that purchase absolutely right and and you know
• 1:16:05
  i don't pay nearly as much attention to the crypto people as i used to but it was really funny a
• 1:16:11
  couple years ago um when the uniswap founder all of a sudden started coming out and saying that
• 1:16:19
  evl was a bad metric because actually what we should be optimizing for is like capital efficiency
• 1:16:25
  volume divided by like tvr capital yeah yeah locked capital and i was like oh yeah that's what
• 1:16:32
  lightning people have been saying this whole time like yes like like we were supposed to be designing
• 1:16:38
  capital efficient systems here not just having people stick their bitcoin in hot wallets and
• 1:16:43
  put them at risk for vanity purposes like that was never that's always been dumb um and i think
• 1:16:49
  again, like the fact that Lightning can process the volumes it's processing with the... Well, actually,
• 1:16:57
  the signal of Block being able to earn 10%, that is the natural signal that shows that there's a
• 1:17:04
  capital shortage in the network, finally. That means that there is more demand for payment
• 1:17:11
  capacity than there is actual capacity allocated. And that is the market signal that should
• 1:17:18
  incentivize more entities to add more capital to the lightning network to soak up that demand.
• 1:17:24
  Right. And that's how it should work. Now, the tricky thing is like,
• 1:17:28
  how do you actually measure that? It's hard. You got to be constantly monitoring network.
• 1:17:34
  You got to look at the few rates that are being charged. You got to look at how often
• 1:17:40
  certain nodes are opening and closing more channels. You got to look at, I think most
• 1:17:45
  importantly how much volume is flowing through lightning labs's loop service which is you know
• 1:17:50
  a big sync in the network and processes a lot of um a lot of submarine swap volume and without
• 1:17:58
  running the nodes yourself like that's kind of hard to find it's it's doable to be able to suss
• 1:18:03
  out if you really know what you're doing but it's kind of hard to find and and really importantly
• 1:18:07
  the entities that are doing well they don't like to share their secrets on lightning because they're
• 1:18:12
  are making a lot of money and they don't want to invite new competition yeah no but like now
• 1:18:16
  there's people that are noticing this marketing of companies like voltage and boss like in pool
• 1:18:21
  obviously like they're building the tools to make it easier than ever to do that participate in that
• 1:18:27
  that yield yield is a dirty word in this industry but this is this is true yield you lock up your
• 1:18:35
  capital and a 202 hash time lock contracts that you have control over and you offer a service of
• 1:18:43
  facilitating transaction transactions on the lightning network and you're gonna get paid for
• 1:18:49
  it yep it's a useful service and becoming more and more useful every day yeah yeah but we're
• 1:18:56
  gonna have to wait five years for the next one i'm gonna be i might have i'm gonna have like
• 1:18:59
  two more kids my hair might be my hair might be completely gone by them who knows who knows what's
• 1:19:05
  going to be happening in five years i'll do my best to make sure it doesn't take that long this
• 1:19:09
  time all right what uh where should we send people what should what should look out for last message
• 1:19:14
  um follow me on twitter um at ryan the gentry that's kind of where everything is happening um
• 1:19:21
  i think it's going to be i'm very very very bullish on 2026 i'm always very very bullish on
• 1:19:28
  Bitcoin. But most importantly, I'm bullish on Bitcoiners. And I'm really bullish on Bitcoiners
• 1:19:35
  taking kind of this asset and this market to the next level and all kind of growing up together,
• 1:19:43
  professionalizing and winning the war for the world's global reserve asset.
• 1:19:49
  In other words, we're going to win.
• 1:19:51
  We're going to win. We're going to win, Freaks.
• 1:19:54
  Peace of love.
• 1:19:55
  Thank you for listening to this episode of TFTC.
• 1:19:59
  If you've made it this far, I imagine you got some value out of the episode.
• 1:20:03
  If so, please share it far and wide with your friends and family.
• 1:20:07
  We're looking to get the word out there.
• 1:20:09
  Also, wherever you're listening, whether that's YouTube, Apple, Spotify,
• 1:20:13
  make sure you like and subscribe to the show.
• 1:20:16
  And if you can leave a rating on the podcasting platforms, that goes a long way.
• 1:20:21
  Last but not least, if you want to get these episodes a day early,
• 1:20:25
  and ad-free, make sure you download the Fountain podcasting app and go to fountain.fm to find that.
• 1:20:32
  $5 a month, get you every episode a day early, ad-free. Helps the show, gives you incredible
• 1:20:39
  value. So please consider subscribing via Fountain as well. Thank you for your time,
• 1:20:45
  and until next time.
• 1:20:55
  Thank you.