On The Brink with Castle Island - Weekly Roundup 11/13/20 (Cred insolvency, Zelleification in Venezuela, Can Bitcoin be 6102'ed?) (Ep.147)

Episode Date: November 13, 2020

Nic and Matt return for news and deals of the week. In this episode:  Cred files for bankruptcy Why Bitcoin banking is uniquely robust Why we should not be discouraged by the occasional failure of Bitcoin banks The ECB looks to create a CBDC within 2-4 years Gary Gensler's influence on the Biden administration XRP's fate hangs in the balance Stephen Lynch's letter to Brian Brooks criticizing his stance on crypto Zelle's influence in Venezuela and the reality of crypto-dollarization Why crypto-dollarization is more sustainable than physical dollarization Our response to Ray Dalio's critiques of Bitcoin Why Bitcoin can't be 'Order 6102'ed' today Valid and less valid critiques of Bitcoin Content mentioned in this episode:  Nic Carter in Coindesk, The Case for Bitcoin Banking (Despite Cred's Bankruptcy) Coindesk, US Representatives Rip OCC, Brooks for 'Excessive Focus' on Crypto Coindesk, Canada Tax Collector Seeks to Force Crypto Exchange Coinsquare to Fork Over Client Records Bloomberg, Zelle Has Turned Dollar-Starved Venezuela Into a Cashless Test Lab

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentuteeasing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something. called a Bitcoin, Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. That was a 39 minutes of technical difficulties at the start of this podcast. 39. Yeah, we had some issues. Audition decided to not work, so I can't, currently can't open audition. I don't know why, actually.

So who knows if you'll ever hear this, but, you know, we're battling through. Yeah, if this audio actually makes it to the last. listeners, it's going to be a miracle. It's been a weird week. Oh, yeah. Well, I mean, the coin's doing great. The coins doing great. Alex Trebek died this week.

So did Tommy Hineson. I was very sad about that. Rip and peace. Yeah. Tommy Hineson, do you know that he won, he played nine years in the NBA, and he won eight titles for the Celtics? How insane is that?

And in the ninth year, he made it to the championship. They just lost. So he played nine years, went to the NBA championships all nine years. I didn't know who that was until you brought them up just now. It's just famous announcer who's also the coach of the Celtics. And, you know, people talk about Boston being Title Town, and that just shows it really is Title Town.

It's cool how at Boston Logan, they just have all the banners hanging up to remind everyone that, yeah, Boston wins in sports. Yeah, Boston's just dominant in sports. So, yeah, so that happened this week. A lot to get into. We had a good podcast week. I did a run with Alan Lane, the CEO of Silvergate Bank.

Got a lot of good feedback on that episode. Yeah, banking is similar to accounting. It's one of these topics that we really think is very important, and we spend a lot of time on it. We're the Bitcoin banking podcast, undeniably. We have some more lined up as well. So if that's what you're into, you're in for a treat. If you love the picks and shovels infrastructure play, just keep on listening to the podcast.

We're going to be pumping out more and more of these. Oh, yeah. I also wrote an article on Bitcoin banking. I wrote some Bitcoin banking Apologia. Yeah, a lot of news, I guess, this week around CRED, which is a Bitcoin lending startup that declared bankruptcy. So I don't think we know much about that what actually happened there, but you sort of wrote a CoinDesk article that said don't discount the whole category on account of this one inside. Yeah.

I mean, it wasn't really about cred. Cred was just sort of the catalyst. But I've been pro-Bitcoin banking for a long time. Regardless, I think that's one way that we scale is by having Bitcoin being the base collateral of a banking system. And I think it's a better collateral. And it potentially leads to better emergent outcomes. That was really the point I was trying to make.

It's easy to take delivery as an industrial. individual, you can withdraw your coins to your account. You can't really do that with gold. There's not even an analogous concept when it comes to fiat. You can't really, I mean, maybe cash is the sort of equivalent of the ultimate, you know, base money in the system. But a lot of banks probably wouldn't give you cash if you has to close your account and withdraw it all in cash. And the other thing that I pointed out was that a Bitcoin-based system is more auditable. It's more transparent. In theory, you could have banks operating at various levels of reserve, and they could be pretty transparent in terms of their reserves

and cryptographically prove what their liquidity ratios are. So, you know, there's definitely going to be a lot more, you know, flashy high-profile failures. That's to be expected. We're in the wildcat era of Bitcoin banks. But the fact that failure is possible should actually be celebrated because it means it's not a socialized system. that means it's a truly capitalistic free market system, which is great.

Yeah, well, well put. All right, so let's get into some deals of the week. First one up is Blocknative. This is a company that is focused on analyzing blockchain mempool data. So these are the yet-to-be-processed transactions that are happening on blockchains and definitely very relevant in light of all of the things being built on Ethereum and some of the attack vectors there. So they raised $5 million from blockchain capital,

IDO, Coinbase Ventures, Industry Ventures, and Foundry Group. And it looks like Spencer Bogart will be joining the board of directors. So congrats to Block Native. Really fascinating opportunity. And I think the first or one of many startups that's going to appear around managing one's relationship with the underlying blockchain, I think there's going to be a dawning realization that it's maybe more complicated than you might think as a service provider, you know, dealing with the blockchain on behalf of clients,

you're going to need some additional tools, analytics, and understanding of what's happening in the MMPL. The next one up is Union, which is a decentralized protocol building risk management tools. They raised $3.9 million from Alameda, solidity, three commas, black edge capital, and a few others. And last we have API 3, which is a decentralized API network, they raised $3 million from placeholder, Pantera,

accomplice coin fund DCG and hashed so those were the deals of the week let's move over to the news first one up is CRED so this is a lending company we referenced at the outset here they filed for bankruptcy it's it's really not clear from some of the public information here what exactly happened but let's just set this up a little bit so CRED is was a company that powers interest bearing accounts for other brokerage platforms so for instance they I believe the Lightcoin Foundation, I believe uphold were clients. And so they're sort of, you know, B2B company powering these interest-bearing accounts. There's a Bloomberg piece, which I guess if, you know, if you believe this Bloomberg piece that came out about them, it looks like some of the

risk management controls and how they were generating that yield looks to be lacking. So there's some fraud allegations in terms of folks that they were engaging with as counterparties. It's not exactly clear how they were deploying the capital. So I don't know if we have much to say about this other than, you know, we'll see what happens and we'll see what details emerge. But obviously in a lending business like this, the biggest question is around just risk management and managing some of those counterparties and making sure that, you know, those counterparties are good for the, for the exposure and that they don't have sort of a daisy chain exposure to other counterparties that could go out of business. So it's a very complicated business. And it's one that you kind of have

to get right on the risk management front. And if nothing else, I think what we can say is that that risk management process looks to have been lacking. Yeah. And this is a reminder that, you know, crypto is an industry where you can find structurally high interest rates, whether it's on defy through yield farming or something like compound, you know, these interest rate swaps, the centralized money markets, or on these centralized lenders, you can find structurally high interest rates. And that's been a black hole that's

been pulling in liquidity from the fiat system. That's part of the reason stable coins have increased so much in capitalization. But that should be understood as compensation for taking risk. And, you know, I've never really believed in this concept of a risk-free rate. That never made sense to me. To me, if there's an interest rate that's compensation for some amount of risk, some amount of insolvency or failure. And if you're looking at a 10 plus percent interest rate, there's embedded risk there. Whether it's defy and we're talking about smart contract risk or CFI lending, we're talking about potentially insolvent counterparties.

And the other thing I'll say on that note is while a lot of these lenders look homogenous on the surface from a cosmetic level, because fundamentally the service they're offering, is similar, the innards are very heterogeneous, depending on the lender. And so you have to, you really should be conducting an analysis of the credibility of each of these intermediaries and what the background is of the people running the business. And whether they have the skill and ability to perform that sort of high quality underwriting and vet the counterparties, because at the end of the day, you know, the market's going to sort of equilibrate where they're all sort of roughly offering similar rates. But the inside, the interds, the risk management is really what matters.

The size of the balance sheet, the ability to protect depositors. That's what matters. So there's a lot of heterogeneity in lenders. Yeah, that's well put. All right. So we'll come back to that story, I'm sure, in the weeks to come. I think there'll be a lot to see here. This is a, there haven't been a lot of bankruptcy filings in this industry.

And so even things like the treatment under the uniform commercial code of these assets, that will be interesting to see. There'll be a lot to follow up on, I think, in this story. So why don't we move on to the next story? It's a tax-related story actually out of Canada. So the Canadian Revenue Agency, which is their version of the IRS, is asking a judge to compel the release of client records from Coin Square, which is one of the largest cryptocurrency exchanges.

in the country. Kind of reminds you of the Coinbase John Doe summons the last year from the IRS, which Coinbase, to their great credit, pushed back on. CoinSquare has said a tough year. They had a scandal with wash trading as well. I think they were penalized for it. So all around, tough year for Canadian exchanges. Hopefully they can push back on this. Did you see this article that Christine Lagarde, the ECB president, said that that institution could be issuing a digital currency within the next two to four years. Doesn't surprise me in the slightest. Every central banker in the world would love to have granular control over a currency.

And a CBDC gives you that, you know, negative interest rates. You can't opt out. Cash is bounded. Cash has a zero interest rate. But with the CBDC, you could, in theory, impose effectively tax on everyone's accounts to induce them to spend with a negative interest rate. So it doesn't surprise me at all that they're pushing for this. Yeah, it just seems irresistible for sure. Actually, a bunch of regulatory news this week,

not surprisingly, since we're kind of on the heels of an election here, we have a lot of musical chairs with the bureaucrats here. Gary Gensler has been named to lead president-elect Joe Biden's financial policy transition team. Gensler, of course, is a former Goldman executive, who's the chairman of the CFTC, and he's been over at the MIT Digital Currency Initiative teaching about crypto assets for the past couple of years. And so certainly someone that knows an awful lot about this industry. And I think a lot of people are thinking that this would be a good thing for the crypto industry. Maybe not if you're your ripple, but he's had some high profile comments around Ripple potentially being a security.

But he's had generally very positive things to say about blockchain technology and Bitcoin and things like that. Yeah, Gary is a friend of the cause for sure. It's encouraging to see him involved. If I had to guess, though, I would say that Ripple's efforts in terms of lobbying in D.C. will likely pay off as the new administration takes shape. Why do you say that? They've just invested so much effort and energy in D.C., specifically,

with current policymakers and potentially members of the new administration. And they are stepping up their PR campaign right now, which unfortunately is like negative advertising, in terms of trashing Bitcoin and saying it's a China-controlled coin, which we've addressed, saying it's bad for the climate and unfortunately some of that seems to be resonating

as far as I can tell so if I were a betting man which I guess I am I would bet that XRP is actually managed to find some friends in the administration so TBD I suppose wow that's a hot take

I was not expecting that out of you that's a hot take what I want to happen what I think will happen are very different Wow. All right. Well, I guess we'll see. So speaking of regulation, we got to talk about this one. So several members of Congress, including Stephen Lynch, Democrat from Massachusetts, who is our state rep, wrote a letter to Brian Brooks of the Office of the Controller of the Currency, really criticizing him on a number of issues, including the FinTech Charter, including his recent stance on crypto custody. and stable coins and really just kind of a nasty letter, kind of not a good letter. And I was a little bit disappointed about this. I was a lot bit disappointed about this, actually.

Yeah, I mean, Stephen is our local rep. And he's not a fan of the coins. I have met Stephen Lynch before several times. He shops at the same grocery store as I do. he's told me he likes the Castle Island name as a name of our fund. He said that he runs around Castle Island, but doesn't like the startups in the blockchain space, it seems, because this kind of posture against the National FinTech Charter

is really just a posture against, it's really if you're against this, I think you're kind of against making it easier for startups to get regulated in this industry. You're basically saying startups should have to go to all 50 states to get licensed, then they should have to spend that money. And that's, you know, if you're a startup, you can't do that.

And so this just makes it really difficult to promote capital formation, I think, for startups. And so I don't like this take. Furthermore, I don't think that what Brian Brooks did in terms of clarifying the position of the OCC on crypto custody or stable coins was anything crazy at all other than to say, here's our interpretation of the law. And so why criticize them? over that. I mean, he's basically just coming out and saying, here's our interpretation of what the law says. And so, you know, we've had a bunch of banks asking us about can we custody Bitcoin, can we hold U.S. dollars for stable coins? And he just said yes. I mean, our interpretation is yes. So like, really, yeah, really not thrilled with this take here from Stephen Lynch.

I think this is one front in, I don't know if Brian Brooks is going to say in office. I don't know how it works with succession at the OCC. But it seems like this is a front in a broader conflict between the states and the OCC in terms of, you know, who ultimately has discretion over bank charters. And this seems like a move in reaction to perceived overreach from the OCC. So I was curious about where Stephen Lynch's jurisdiction is because I figured that he likely had crypto companies in his district and circle headquarters are squarely in his district. Castle Island is not because we're in Cambridge.

Fidelity is right on the border. So the edge of the district is literally on Summer Street, so they're not in the district. But anyway, the point is, Boston is a teeming area of innovation in the crypto space, and he's kind of marginalizing all of those companies that are building on blockchains by, you know, being sort of overly hostile to the cause, which is a shame. We have a lot of listeners to this podcast that are in, you know, Milton, Hingham, Situate, co-acet, that work at a number of these startups. and some of them have started these startups.

And so I know that I've heard from a lot of them over the course of the past 24 hours, just really upset about this. And one person in particular said that maybe there will be a Sam Bankman-Fried response here, of course, alluding to the fact that the CEO of FTX bank rolled, I think, north of $4 million into Biden political action committees in support of Biden in the last election.

And so, So this is just a really, it's a very, I don't know if he knew it, but like this is a super, super hostile stance to take in relation to fintech startups. And so Stephen Lynch is kind of, you know, people are not a fan of this. Well, as the coin surges new all-time highs, I think it's time we as an industry start to flex our political muscle here. and if primarying intransigent representatives is the way to do it, I think that's what we have to do. Well, I have to say Stephen Lynch has not had an opponent in an awful long time. He just, I had my Stephen Lynch ballot, and there was, there was just Stephen's name.

There's no, like, he doesn't really, he's never really had a real opponent. So we'll see. I have to say I'm just like really bummed out about this. you can tell. Yeah, you seem really cut up about it. Okay, is there any other, is there any more happier regulatory news out there? Well, one thing that I kind of thought was interesting was Bloomberg came out with this article this week about how Zell has turned, as they say, dollar-starved Venezuela into a cashless test lab. And it basically just talks about the dollarization event that we see happening in Venezuela. References of a couple of

startups. And of course, in Venezuela, we're seeing blockchain infrastructure startups like Airtm and value making U.S. dollars available to citizens in these jurisdictions. So I guess that's a happier news than Stephen Lynch hates fintech startups. Yeah, I don't want to pound my chest or anything, but I scooped Bloomberg on this by at least 12 months. So, I mean, I've been talking about this forever. So I'm glad they finally got turned on to the idea. But I mean, just ask anyone in the Bitcoin space. Venezuela has been dollarizing in part through crypto financial infrastructure for a long time now. The Zell angle is really interesting. They call it Zelle. Zell is obviously a bank consortium product run by U.S. banks. Venezuelans are not explicitly barred from

using the platform, but they get de-platformed from it all the time. So they're kind of, it's always a risk, basically, whatever you transect would sell. And Wells Fargo in particular is pretty risk-averse. And so they de-risk, which is their euphemism for de-platforming Venezuelan users. The only sanctions are against members of the Maduro regime. Not regular folks, but it's a little bit like taint, you know, with chain analysis. If you were a couple hops away, you know, maybe you go to a coffee shop and it's run by an uncle of someone who's connected to the regime, then you can get de-platformed. So even though Zelt is quite popular for digital dollar transactions in Venezuela,

it's not ideal because the U.S. banks are constantly deplatforming people, which is why I think there's definitely cause for native crypto-based solutions. Obviously, there's a whole host of those, you know, active now. including RTM and value, or two examples. Yeah, this was a fascinating one. And I don't see this slowing down any time soon. I think we're going to see more and more pieces like this. Oh, yeah.

And if you look historically at other dollarizations, the hindrance, the impediment, has always been a lack of physical dollars. And in fact, the Venezuelan dollarization was impaired because there was a lack of small bills to make sure. change with. So you had a situation where two, five dollar bills was worth more than one $10 bill because the smaller bills were more rare. So, because nobody wanted to transact with the small bills. So everybody kind of hoarded the small bills that kept the big bills. Or they, you know,

they would, so, you know, smaller transactions became difficult. So this is why physical dollar base dollarization events are quite tricky and inefficient. It makes a lot more sense to do digital dollarization, but of course, you know, it's been difficult to import digital dollars into these places. Now, with stable coins being a thing and P2P markets against Bitcoin, you know, that liquidity exists. So that's what's different about, you know, these new dollarizations as compared to ones in sort of the early 2000s. That makes sense. So let's talk a little bit about some of the high profile people that are, talking about Bitcoin this week. There is a bunch of them. I mean, it was kind of a crazy week.

We used to do this thing in our newsletter. I don't know if you remember high profile people bashing Bitcoin, I think was the name of the section header. And it was like two or three years ago, you know, every week it was just high profile famous person saying how blockchains are not going to work and things like that. But it's kind of the opposite now. So we had Bill Miller and Stanley Drucken Miller come out very positively this week. And then we had Ray Dalio taking a, a negative approach. So just to give a quick rundown here. So Bill Miller came out and basically said that every major bank will own Bitcoin or something like it in the coming years. He's famously been on board for a long time. He was one of the first asset management types that got on board with

Bitcoin. Stanley Drucken Miller, a new convert, went on CNBC a couple days ago. And, you know, he had that coin metrics price feed in the background. And he started talking about Bitcoin and how he has a position. And so that that gained a lot of attention. And then you had Ray Dalio coming out and saying that he sees three main problems why Bitcoin's not going to work. So one is merchant adoption. Two is the fact that it's a volatile asset and not a good store of value. And three is just the risk of government banning Bitcoin. So I've got some thoughts, but let's let's hear yours first. Yeah. So Druck, I think his fund did the basis deal back in the day. And so it's interesting to see his conversion from trying to back a better Bitcoin to sort of capitulating and just buying Bitcoin itself.

He did hedge by saying that he owns a lot more gold than he does Bitcoin, but he sees Bitcoin as a high beta gold, which kind of makes sense to me. I think, you know, I guess what some people like Michael Saylor are saying is, well, not only is it gold-like, but it's also. gold with this embedded you know technology call option in terms of the fact you know given that it's constantly getting better the the the Ray Dalio piece was interesting because he's very sensible and he talks about constantly about currencies being demonetized and failing he takes this very long-term view so you'd think that he would be a great candidate for having a positive view of Bitcoin I think his critiques you may one of them

sense. I would say the volatility is a fair critique, although if you look at when gold was becoming financialized in the 1970s, it was also very volatile. So, you know, in my view, the volatility is the price you pay for the other favorable characteristics of Bitcoin. The merchant acceptance critique doesn't make any sense to me because Bitcoin is not a retail payments product and that comes later. And the risk of a ban is also something that I'm not as concerned about for a number of reasons. I don't know if you have a reaction to that third point. Yeah, I mean, I guess my kind of,

I'm not going to let the pitch go by on these three points, obviously. So I have something to say on all of them. But I think the merchant adoption, it's pretty clear that other forms of blockchain technologies are going to probably capture many of the merchant use cases. So it's probably going to be US dollars traveling on blockchains, if anything. So PayPal's new currency business unit, cryptocurrency business unit is probably the one that's worth paying attention here,

but you don't use gold to buy things at a cash register, and you probably won't be using Bitcoin either. So that's how I think about that one. Volatility, I think, is, you know, if you have a store of value asset that is this volatile, it's really not a store of value asset. So I agree with that. But I think the investment thesis is around being an aspirational store of value. So I thought Fidelity's piece from a couple of months ago talking about this kind of call option on the emergence of a store of value or even back to Fever's original paper on this back in December 2017 is probably what I'd fall back on here is that this is an early stage bet on the emergence of a store of value.

So that's sort of missing the mark in my opinion, although he's right that it's volatile. And then on, yeah, the government ban, I think, you know, this is interesting. I think the closest approximation would be FDR with executive order 6102 confiscating gold. I don't think that there's support for something like that right now in this day and age. I think that that would be particularly unpopular, not to mention the fact that the SEC and the CFTC and the IRS and a bunch of other government agencies have really codified Bitcoin's role in the world as it pertains to their particular agencies. And so it's property with the IRS. CFTC is very clear about their posture on it. SEC is very clear about it.

And so, you know, if you think it's going to be banned, then you're basically going to have upwards of 20 million Americans that have their property confiscated. And I just, that seems really unpopular. I mean, can you, yeah, people would have a lot to say about that, I think. Yeah, so the order 6102 constantly hear about it, you know, what's the Somp to Bitcoin, the government's 6102 in us? First of all, I'll note that if you,

you think that we're going to get 6102 here, that implies that it's going to be an amazingly accretive environment for zero yielding assets like Bitcoin and gold, because the catalyst for 6102 was that the government wanted to reduce their debt in real times. So they cranked up inflation and they kept interest rates really low. This is a kind of a proto version of yield curve control. What that meant was the real rates were deeply negative to get rid of the World War II debt. basically. So, you know, if you ever have a situation where the government is trying to outlaw hard assets, which are yielding zero, that sort of implies that they're trying to get rid of a debt load. And a lot of people like Lin Alden have pointed out, yeah, our macroeconomic environment looks a lot

like the 40s where the government was, you know, they had to ban gold because otherwise there would have been this flood into gold as an alternative savings device as opposed to sort of government bonds. So there's definitely a lot of historical parallels. However, as you say, can the executive ban gold or Bitcoin once again, I think you have to look at politically what is the presidency, do they still have the same power as FDR did back in the day? And the answer is obviously no. FDR was the closest thing to effectively dictator, dare I say a fascist this country has ever had. He had an incredible amount of power. He consolidated power like crazy.

He had four terms. He was willing to pack the Supreme Court. He, you know, did the New Deal. Congress was incredibly acquiescent. Everything he wanted to do, he could do. The executive, the chief executive today has far, far less power. They've surrendered a lot of that. control. So it looks, you know, presidency looks nothing today like it did under FDR. So

politically, I think it's a non-starter. As you say, there are tens of millions of Americans that own Bitcoin. We have multiple senators. Kelly Loeffler, don't know if she'll be in the Senate much longer, but Cynthia Lumis, welcome to the Senate. She's an outspoken bitcoiner. We have top regulators that are favorable towards Bitcoin and the CFTC, the SEC, the OCC, probably other departments, too. Politically, I think it's a complete non-starter trying to ban Bitcoin, complete non-starter. It's continually fascinating to see people have these takes. I don't think that they're necessarily horrific takes necessarily, but they reflect kind of a lack of time and attention spent analyzing these issues, which, look, if everyone just came out and said this,

you know, blockchain technology crypto assets is the best thing since I've been in a lot different place. It wouldn't be kind of this speculative early stage thing. So I guess I'm not complaining, but I think the more and more takes you see like this and the more people that kind of hop on and say, hold on a second, like you're not thinking about this the right way. I think the more people will start to come around. It's pretty clear that the likes of Druck and Miller and Tudor Jones, they've thought through some of these issues at a really deep level. And so, you know, not surprisingly, I think they have a more nuanced opinion other than just like, hey, it's too volatile

and the government's going to ban it. That's kind of a bad take to have in 2020. There have been some takes, which I think were totally acceptable to have in 2015 about Bitcoin, or 2017 even, you know, forks constitute dilution. Altcoins are going to out-compete

or dilute Bitcoin. Both of those, you can probably retire them today. The volatility argument, well, Bitcoin's still pretty volatile. That's fair. I'll give you that one. The state banning it, I think that's the last big hurdle here. Everybody now for 12 years has been saying the state's going to ban it. Meanwhile, the government has been legitimating it. The IRS treats it like property. You know, the CFTC considers it to be a commodity.

FinC understands that, you know, it's been de-risked in terms of the government understanding this thing. Certain governments do ban it, but certain governments embrace it. You know, Iran appears to be holding Bitcoin on the central bank balance sheet. So we're getting more and more information as far as how governments are treating Bitcoin. Each marginal new piece of information derricks it from that perspective. It is interesting that so many people are still convinced

that the state is going to ban it. I think what they don't understand is that Bitcoiners have more influence than people think, and they're not just going to roll over if the state decides to, you know, expropriate ever Bitcoin or practice eminent domain on 20 million individuals. That would be completely unprecedented. And as I said, I'm a total non-starter. Yeah. And so I think the other thing just to recognize here is that with breakthrough new technologies, you very oftentimes see a

widespread divergence of opinions from really well-respected people. And sometimes they're well-respected people that are subject matter experts in particular fields that look very similar. So, So, you know, one example would be the early days of the computer. So Ken Olson, who is the founder of DEC, which is the largest computer company back in 1977. So in that year, he said that there was no reason why anyone would want to have a computer in their home. So he completely dismissed the PC. He was the largest computer manufacturer.

So obviously he kind of had an entrenched interest there. Three or four years before that, Arthur C. Clark, who's a science fiction author, basically started talking about what became the iPhone, basically. He said that these devices will make it possible to really live anywhere we like, any businessman, any executive could live anywhere on earth and do his business through a device like this. And so it was kind of the science fiction author that was more correct about the future vision of what would be living through. And you see that clearly with blockchain technology, right? I mean, you had Jamie Diamond a couple of years ago come out and say, this is worse than tulip bubbles. It won't end well. I think he,

actually said somebody's going to get killed. And then you have, of course, you know, like Abby Johnson is coming out and making bold proclamations, but in the positive and talking about fundamentally changing market structures and the architecture of the internet and no way of predicting how innovative this is going to be. So I think you have these kind of chasms between well-respected people that makes it difficult to tell from like a mainstream media perspective what's going on here. And I guess I'd expect that to continue. And I would actually argue that if you didn't see that divergence of opinions from really smart people, then it wouldn't be that disruptive.

Like think about the early days of the internet in, I think it was 1995. Newsweek had a cover story from Clifford Stoll. I believe it was a cover story talking about how the internet had like failed. So look, if people weren't having these wide ranging opinions, then this industry that we're all working in wouldn't be that exciting, I think. Yeah. The other way to put that is that, you know, the market price reflects the division of opinion among market participants. And if everyone were united and had the same view of, you know, what Bitcoin meant and what digital assets meant, then it would most likely be trading much higher. So the current opportunity we see in front of us exists because so few people see the nature of the opportunity.

and if everyone was tuned on to it and everyone became converted today, then we wouldn't have this opportunity. So we've got this enormous risk premium associated with the uncertainty that we feel every day. And it's only, you know, the lucky few listening to this podcast that, you know, see the opportunity for what it is. But of course, there's got to be that uncertainty. Otherwise, it would be a mature asset class. All right. So I think that just about does it for the week. I want to give a few podcast recommendations.

I know that you don't like it when I do that when I direct traffic to other podcasts, but I'm going to do it. I thought Laura Shin, Larchin had a really good one this week with Dan Tepiero and Kathy Wood on Unchained. I enjoyed that one.

Manetu, which did a privacy company in our portfolio, they launched a new podcast called the state of data privacy. So if you're a privacy junkie, it's not just about blockchains. They use blockchains to timestamp, but that's a really cool one. And there's been some legislation passed in some actually some elections, state level elections around privacy that are worth paying attention to.

And then Hester Pierce appeared on this weekend startups with Jason Calcanus and talked about crypto a little bit, talked about some of the ICOs. So that one was good as well. So check out some non-castle Island podcasts this weekend. We will link them in the show notes. If you want the full show notes, those are on on the brink dash podcast.com. And that's it. So hopefully we can get this audio working. I don't know if people will ever get to listen to this,

but this is kind of a janky setup. Yeah, this might have just been for our own benefit, this conversation. So we'll see. It really will be a miracle if we can actually get this one out. Somewhere Stephen Lynch is really hoping that the audio didn't work on this one. All right, everyone.

We'll see you next week.