TFTC: A Bitcoin Podcast - #242: Ledn.io, Proof of Reserves, risk management, hyperinflation, and the Petro with Mauricio Di Bartolomeo

Episode Date: March 29, 2021

Join Marty as he sits down with Mauricio Di Bartolomeo to discuss: - Ledn's recent raise - Proof of Reserves - Risk Management - Duration matching - Hyperinflation - Good people succeeding - Bitcoin scaling in layers - Ledn users sending within the platform - The Petro - much more Follow Mauricio on Twitter Check out Ledn Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app. Lend at Hodl Hodl is a new non-custodial bitcoin backed lending platform, that allows peer to peer lending and borrowing between users, globally, anonymously & on your own terms. Create you offers & set your own terms on lend.hodlhodl.com Compass Mining. Compass wants to democratize bitcoins hashrate and give everyone the ability to strengthen the network while mining bitcoin profitably. Thanks to Compass, it’s never been easier to mine bitcoin. Check them out at compassmining.io Braiins. Braiins are leaders in the mining industry; running Slush Pool, creating firmware to make miners more profitable (Braiins OS+), and building out Stratum V2 to help further decentralize mining and make Bitcoin more robust. Check out their mining profitability calculator.

What's up freaks, it's your boy Marty Bent here to introduce this episode of Tales from the Crypt. Sat back down with our good friend Mauricio de Bartolomeo from Ledin.io. Talk about a bunch of stuff. Ledin's recent raise, how they're growing the team, how they're working remotely, how they're doing their proof of reserves, how they're de-risking their interest rate products, the type of users they're seeing, how they're seeing transactions within Ledin increase what's going on in venezuela inflation how inflation works whether or not people realize that that's a bunch of stuff a bunch of stuff you guys are going to enjoy it this episode is

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miner and you want to see how profitable you are brains is creating really cool calculators to help you visualize and illustrate the opportunity depending on what mining model power cost you have etc etc check them out shout out to all of our sponsors shout out to you freaks thank you for coming back if you're liking the podcast please give us a like a rate a review a subscription share with your friends we're looking to get this into as many ears as possible uh just trying to get quality bitcoin information out there i think there's some quality bitcoin information in this episode love all y'all enjoy you've had a dynamic where money's become freer than free

if you talk about a fed just gone nuts all all the central banks going nuts so it's all acting like safe haven i believe that in a world where central bankers are tripping over themselves to devalue their currency bitcoin wins in the world of fiat currencies bitcoin is the victor i mean that's part of the bull case for bitcoin if you're not paying attention you probably should be probably should be Mauricio how the hell are you doing great man doing great how about yourself doing well very excited rip three third time back a lot has happened since the last time we spoke since the last time we met in person with Adam was that the last time we went yeah Adam was with us in Brooklyn yeah drinking some uh drinking some Venezuelan rum sure yeah I didn't get a chance

to send you over a bottle this time it's okay it's it's wednesday afternoon as you know it's uh it's probably not not uh great to be drinking on a wednesday afternoon when you have a young child i am very familiar with that welcome to fatherhood yeah it's uh you got to change a lot right you can't just be getting drunk all the time recording podcasts people frown upon that you can't be the drunk dad but it comes with a lot of great benefits uh the the benefits far outweigh uh not being able to drink at random hours of the day to record podcasts what's going on dude like uh like i said a lot has happened between last time we spoke and today you guys are crushing it at leaden uh recently uh raised some money expanding the team expanding

your your product suite introducing proof of reserves or it's been around for a while but really driving home like how you guys are doing it explaining it and then um doing some interesting stuff on on the interest bearings side as well um based off the conversation we had a couple weeks ago yeah definitely there's been a lot lots has changed as we last spoke i believe the last time we chatted was uh september 2019 or something like that um so that was you know i think we were We were probably just over a year old or even just turning a year old at that time for Lennon. And I think now we underwrote Canada's first Bitcoin-backed loan in late 2018. And since then, we've been really preaching to people the benefits of Bitcoin-backed loans

and why they could be useful. From there, we set up our Bitcoin savings account. And following that, we set up B2X, which is a loan to buy more Bitcoin, which is a product that really resonated with our clients. And then after that, we launched our USDC savings account. And I guess most recently, yeah, we closed that financing round earlier this year, which brought in some really great investors. you know, the likes of White Star Capital, Coinbase Ventures, an affiliate of Susquehanna, CMT Digital, Kingsway, Global Founders Capital. So that really brought a lot of expertise, both on the product side and the strategic side. You know, some of these people are involved in

the lending space, like CMT and Susquehanna's of the world. And some others have great geographic expertise, like in the case of Kingsway, they're very big in Africa and other frontier markets. and Coinbase of course you know they have great you know great pulse of the space and they really understand it so you know we thought that was a great mix of groups to bring together you know we announced that round like I said I believe it was mid-January and since then we've been really hard at work building out the team essentially growing our team I have some exciting news to share on that front too somebody will be joining us we're going to share that maybe in a little bit um but the other piece that we're incredibly proud of is our proof of reserves

uh you know structure uh we did the first proof of reserve attestation ever for a lending company uh with armonino llp which they're pretty uh they're great by the way uh you know i really love working with them and uh and yeah so i think that that has resonated with our clients um you know they we like to build things that people ask for uh that's really the only way we grow and get better uh but that that's really what we've been uh and we've grown a lot um you know our clients are growing at about 25 percent month over month um and uh and then on on the you know as far as like assets in the platform goes uh you know we're pretty much um i want to say almost 20x where we were uh you know a few months ago uh so the the growth has been pretty uh pretty phenomenal uh

And people really seem to be waking up to, you know, borrowing against your Bitcoin, like, you know, popularized, I guess, in a way by Michael Saylor and earning interest on your Bitcoin. That's also become a sort of activity that more people are seeking out to do. So, you know, we've been also, you know, we've been in a way kind of paddling ahead of that wave for a few years now. And now that it's formed, you know, we're just standing up and surfing it, you know? Oh, yeah. And that's, I mean, a huge topic in the space, obviously, right now is like the risk management around all of this. And that's why I wanted to bring you on specifically to talk about like a proof of reserve attestation. And there's obviously a bunch of competitors in this particular space, and each has a different way of articulating the risk management of their products and providing different ways of basically de-risking these products and making customers uh comfortable with engaging with them so like let's start with like proof of proof of reserves like how are you guys making this possible and like what uh peace of mind is bringing to your customers specifically

yeah great question so the proof of reserve at the station that we did with our main llp the the the the intent of this act of this exercise is to essentially have armenino as an independent third-party accounting company uh and uh and an auditor etc but they're you know they're they're coming into let in they are assisted by management because obviously we have to uh facilitate their access to some information all of this is done by the way in an anonymized way in a private way um all of the all of the essentially the client data is anonymized so So just for privacy's sake, we're very big on that. We don't want any data that people don't need access to to be getting out there.

So when they come in, essentially, we facilitate their access to this anonymized data so that they can basically confirm the balances that clients have on the lending platform. And we also essentially get to show them or they get to see our lending agreements with our lending counterparties. They get to see our custody agreements and our custody balances. and they get to see your trading balances as well so the the point of this whole exercise is to tally up all the assets that Lennon has on behalf of clients on the platform and to look at all the assets that Lennon has either on its lending relationships or on its trading or on its custody

and make sure that Lennon in in fact has more assets in custody lending trading than they do that they owe essentially back to clients. And for how a lead-in client can verify that is that an anonymized ID or an anonymized hash for that particular proof of reserves attestation is provided to lead-in clients on the platform. So they can essentially take that ID, go to the Armonino Trust Explorer website,

which is owned and managed by Armonino LLP. They input their hashed ID and they can confirm that their balance as of the day of the attestation, matched exactly with what they have on the platform. And any client with a balance or an active loan can do this. And so that gives a client the peace of mind of knowing that their assets are properly accounted for internally at Letit. And how often are you guys doing these attestations? Every six months. Oh, nice. Awesome. And so what's it been like building that

particular, I mean, you mentioned that you had to come in management, had to help out your your third party auditor what's that process like was it was it teaching them a lot about bitcoin were they sort of up to snuff with how everything works or uh how much hand-holding was there no it's a great question so we were the first lender to ever do this so they they didn't you know there was a bit of learning there was a little educating essentially on you know how to assess the assets the client have a platform how to assess the balances that ledin has on Either it's lending counterparty or it's training counterparty or it's custody counterparty. And so there was a bit of us educating them about how our business works on the back end and where they need to essentially go look and making that information available to them.

And they're actually really up to speed on what Bitcoin is, what an ERC-20 token is. So they're very knowledgeable about that. what we have to do a little more uh i guess educating on was like essentially the inner workers of our business like you know how do we earn that yield it gets lent out to counterparties like genesis okay where you know what are those balances can we see them how do we verify that those balances are actually true so they there was a bit of educating on what the key pieces that they had to essentially focus on were but once they got it and once the structure is set it makes the ongoing attestations much easier to manage right the first one was obviously

the hardest because there you know there was no set structure for it but now that we've worked out a model it becomes much easier and that's why we wanted to do this very early on because the more the business grows the more uh you know counterparties you add the more activities you start adding it becomes more and more work to you know verify all these uh balances and to basically come back to a holistic view that you know gives the client you know a very precise uh response right yeah yeah i guess that's like naturally leads to the next question is like how do you manage the risk of bringing on new counterparties and interacting with them and distributing bitcoin on the other side of the book yeah so one of the things that we did as part of this phrase is we

started building out our lending desk essentially so one of the people that started today was actually John Glover. So John has a wealth of experience setting up the FX markets, sorry, the FX desk for Barclays most recently in Canada. He'd also set up the FX desks and derivatives desks for TV, actually, both in Canada and in London. And so he's been in this space for, you know a really really long time he's seen the he's basically he's incredible at risk analysis and risk management so he's he joined us as our chief risk officer and he will be leading the build out of that desk as we you know until until very recently and even just now Janice has been essentially our primary counterparty on the lending size but just given the sheer size that

we're getting to now, you know, we are exploring, essentially diversifying that risk to other high quality and amazing counterparties. You know, some of them are actually already in our cap table, like, you know, the Susquehannas of the world, and essentially getting to a place where we can offer the exact same quality or even better, always continually try to improve the quality of our counterparties. But doing that in a way that is sustainable, and that manages risks in in an optimal way yeah yeah like i wonder what john thinks about the i mean you can't speak for john directly but like that's just going through my head like coming from like an fx desk desk to a bitcoin desk like the nature of the assets bitcoin being the super collateral

and fx currencies being being a bit different like um obviously in nature like how does he view the difference in in approaching that like risk management in your mind or how do you how would you view it it's probably a better question because you can't speak for him um having to deal with all these these risks yeah so i think the fx market has a lot of similarities to the bitcoin market perhaps more so than even the stock market and that's for a few reasons obviously they trade 24 7 um there um there's definitely there's different venues at which these currencies trade so there's not really a one source of truth for a particular pair of exchange currencies so in that sense i think there's a lot of similarities um there's obviously

an added uh element of volatility when it comes to bitcoin um but that is volatility is is really a problem as much as there's a liquidity problem right because you know as long as the asset as long as the asset has deep liquidity like as long as you can still book trades for very meaningful amounts so you know back when we had March 12th last year there were trades getting booked at the worst hour that Bitcoin has seen and they were getting filled like no problem so I think for for many lenders last March presented really a testifier for all the risk systems. But coming out of that, I think a very interesting thing to see was that Bitcoin liquidity held up like a champ. At all times, you were able to essentially,

even if you were in a position where you had to execute on some sales to protect the risk, which many lenders were in the position of having to do back in that time, you were able to do that. Right. It really became a matter of managing that client relationship. Right. Because the move happened so drastically that, you know, inevitably there were a few clients that couldn't respond in time or didn't have the additional Bitcoin to cover. So they were you know, they did suffer. So it's really it wasn't really so much a matter of, oh, my God, are we going to be able to, you know, place these sales so that we can protect the business in the book? it was more about once this happened you know how do you go to your client and explain why you had to do this and that this is you know this is what had to happen uh so it was really there were a lot of learning lessons from from that experience but uh but yeah i think you know i would i would say

that above anything else bitcoin liquidity is is there is there a way in a way a bit of an antidote against its volatility right so that's what i was doing while you're explaining that like obviously literally a year and a week ago today or around so you had that event and market cap starting monday march 16 2020 of bitcoin was 103.9 billion and today it stands at 1 trillion 680 billion or excuse me 68 billion we've literally added a trillion dollars in market cap in one year which is pretty insane to think about um like so what does that do for liquidity i guess it's a good question like yeah so the dollar amounts gone up by 100 trillion with the free flow to bitcoin has arguably significantly fallen as people lock them up and put them in treasuries

how does the free float liquidity and the dollar amount liquidity sort of play together in your mind yeah i think you know as as more sophisticated investors with very big balance sheets start participating in the bitcoin markets i think that only helps liquidity because do you point about even even liquidity that gets you know put in a treasury uh you know locked up and put in treasury and stuff that you know even even those companies right like they're doing they're doing they're taking these positions to protect the the reserves they already have right and to optimize the reserves that they already have um i i don't think that there is a scenario where you know what i'm saying is that these the these companies are these entities that are participating in this

market, I view them as very sophisticated participants. So if there's ever an opportunity for them to either participate in or provide some of that Bitcoin to help out with liquidity and make a little bit extra doing that, that's great. But the other piece of that is as you get more sophisticated people join the market, you get evolution on settlement times. So whereas before, you might need to have assets on platform to settle. When you have X billion Bitcoin on your treasury and you want to place a sell order, a lot of brokers are going to say, okay, we'll take T plus one, T plus two from you guys. And in a way, even though those Bitcoin are locked up somewhere, it doesn't mean that they're taken away from the liquidity pool. Those Bitcoin could

still transact with the right brokerage relationships. And so I think all in all, it just improves liquidity all around. Yeah. And again, adding a trillion dollars market cap in a year is pretty insane right like literally a trillion dollars and everybody's going crazy when you hit the trillion dollar market cap earlier this year but it's like maybe we hit 1.1 trillion and we've been floating like below and above that a little bit for the last few weeks and it added a trillion dollars in a year well how much has the fed added that's a good good point right surely owns yes now we got two more coming for infrastructure right that and that but that that's why i love speaking to you particularly because you have very good insights not only

i mean we were talking about before we hit record you guys have been putting out a weekly newsletter and some youtube content for let in and you've been jumping into fed policy and being very uh on top of that but you also have insight in the international markets as well um being up in canada obviously and then lat am just having some personal and and professional exposure to that market like how how is all this fed money printing and like affecting like what's going on uh in lat am up in canada i mean canada's printed an insane amount of money as well yeah canada is pretty an insane amount of money um not so much latin yeah right and and but i guess the point i was trying to make like are the the customers down there reacting to what's going on here

they they are i mean there's a couple of dynamics at play right so to speak to canada just briefly right like we have the usual signs of of um you know call it financial symptoms uh in the economy when you print a lot of money right like real estate markets through the roof um you know they're tightening up mortgage rates try to cool down the market uh rentals are hitting rock bottom so like what you're really just seeing the explosion of the wealth gap right like the second you say you know rentals are going lower because people can't support to live in these places but at the same time property prices are skyrocketing because those guys that have assets are just doubling down like taking another HELOC buying another house um that just fuels the wealth

gap right and and in Canada it's kind of it's kind of a good um not experiment but it's a good subject to study uh to see the the type of side uh the consequences I guess of of printing money like they're you're helping some but you're helping people in one way but you're also hurting them in another way right like there's always a trade-off and i think people focus a lot on you know can you get me this free money now but they don't necessarily think what that money is going to cost me in the future right um that that is interesting to watch uh you know to say the least here in canada um in latin america one thing that i frankly i found surprising was that it doesn't typically happen that the u.s is the top printer right like uh typically as the u.s

is printing other places are printing more because they have bigger problems right what i what i think is is kind of you know in a way been a bit like more of a paradigm shift for for people that are you know used to looking at inflation and studying inflation elsewhere and comparing it to the u.s is that the u.s has has essentially stimulated its economy so much that it's poised to even outgrow china this year like think about that for a second um that's insane yeah yeah and so typically when you have these like inflationary waves they are they tend to be a bit of a global phenomenon um because you know places like typically if somebody like the u.s is having to print then somebody like Mexico who like exports to the U.S. or somebody like you know

Colombia or Venezuela that are in the same or a similar boat they you know theory would say they have to do the same or more to kind of keep it up right what's been happening now is that the U.S. has just been relentlessly printing and relentlessly stimulating their economy and you have places like mexico who are not and what that's done and more so i'm not i'm not sure how much of it is because of mexico and i'm not sure how much how much of it is because the fed wants it to be this way but when you look at the foreign exchange rates for the peso it's gotten stronger over the last year um like the mexico peso the colombian peso so to me like i have to check back but i think the brazilian real is probably not not in the same boat because

they've had you know a little bit more issues to deal with but that's one thing that i that i've found fascinating which is that inflation fears seem to be higher in the u.s than they are in other places right now and by sheer virtue of the u.s being such a powerful and wealthy market their fears of inflation have driven up assets like bitcoin and have driven up assets like the stock markets right and it's when when people see that and there's fear of inflation on the dollar well that trumps fear of inflation pretty much in any other currency right and so people start running to hide or to protect themselves from inflation um many have found bitcoin many have found uh you know stocks and and equities but uh but i think this is a trend that will probably

continue so long as the fed continues to print yeah i think i'm looking at it right now mexican peso at one point was like 25 stronger against the dollar like entry year like from march to december it's pretty crazy no i mean that's the weird thing about it too like again i've said it many times on this podcast like what like the fed and the treasury now with the the the overt stimulus they just did 1.9 now they want to do 3.9 trillion right after it for infrastructure and more more airdrops at what point socially i think and that's and then like another question i've had proposed on this podcast particularly with an oil oil guy and us ohaji like at what point do other countries start looking at what's going on here and being like

this is not good uh and like particularly like oil markets like at what point are some countries going to denominate their oil sales and dollars but settle in a different currency like bitcoin or something else um i'm just rambling here but it is this is really weird interesting period we find ourselves in like a lot of people say the u.s dollars reserve currency you'll never lose that status um and the point to like just the amount of money printing and how little it showed up in official inflation but i think anybody's actually gone to the grocery store talks to anybody building things you know that inflation is is rampant right now and at what point does like the social aspect of all this kick in and people just begin to openly question

like what the fuck is going on like should we be depending on the dollar like we have in the past i i have a bit of a polemic answer to that one uh and if you look at my my twitter profile it's actually a post-it tweet that i've had for over two years and it's bad money never dies it just resets um people when when people and this is something i guess that i took away from the venezuela experience people don't associate their problems with their currency um they associated with the government, they associated with their boss, they associated with their landlord, but rarely do they make the connection that I'm being held back from wealth because of this currency. And that happens for a few reasons, and perhaps that may change, but I'll tell you

one of the big reasons that I thought that was happening in Venezuela is because governments, particularly authoritarian governments they the first thing they do and a sign of concern is they go after censorship on the media like or in the media right and they do this in a way where after a certain point of time they control the narrative across most media right because they can even sanction what twitter went to where twitter is available i remember back in my days in 2013 2014 the chavismo you know i don't know how to call it cartel um was essentially in deep in twitter like if you logged into venezuela on any given day and you opened up twitter that the trending hashtags would be chavez i love you or i swear to god and and it got to a

point where i actually have to stop using twitter because i found it so repulsive uh to see how and think about that for a second like you're a person in Venezuela you're you're trying to show the rest of the community or your country that the the fiscal decisions and the governmental decisions that are being made are going to take you down a path of destruction and you have Chavez literally nationalizing companies on national television like pointing a finger being expropiase and on the next day you had the trending topics on Twitter I love Chavismo you know Maduro Chavez me president like these outrageous quotes on this and they did it almost to like spite you like you know you would log on and it was so disheartening it was just it was like a blow

to your stomach right to like to see these things happening and then because you know you could i was sitting there being like these are bots like these are bots these there's no way the people that are out there they don't even have a phone they don't even have a computer like how are they and so it was just so blatant and um and it was it was so hard because everywhere you looked it's like you turn on the tv and it was like chavez smiling it's like yeah we're gonna expropriate that building we're gonna expropriate that farm that's gonna go to you maria that's gonna go to you miguel and you're gonna have your farm and and then you're saying okay no that you can't just like fabricate things like these people have to know how to run the farms

like what happened in pereza or what happened in many many cases that something got expropriated in Venezuela was Chavez came you know the the union was mad at the bosses and Chavez came like okay we're gonna take this over union is now the owner of this factory right go ahead union you know go get them and the union would go at it you know and they would try to do their best but eventually they were like guys the money this business don't make any money it's like Chavez it's like we need your help here bro because you know this business doesn't really make money and charles was like you know like sorry guys like you know it's like what do we do now right yeah and that happened on and on and what ended up happening is that we destroyed

the productive apparatus entirely like you know the example that i gave you were you know a couple of high-profile farms a couple of high-profile like dairy companies uh because food became it started with food food was food became the first sort of uh national security issue and on that premise they started nationalizing food companies um then uh i'm not sure if that was before or after oil i think the first one was oil because oil was like the first national security strategic thing that they did and he basically wiped out all of the pdv staff so pdv was petrolios de venezuela and one of the first things he did is he fired everybody at pdv because pdv essentially once he took office pereza went on a strike they said okay you know these policies are

a little bit crazy you know we are the engine the economic engine of the country and we're taking a stand to basically let you know that we don't agree with some of these things that you're doing right instead of going to talk to them and figuring out how to keep the top professionals there he went and said oh you really you don't like what i'm doing no problem go somewhere else you're fired and and that's how we ended up and they did and if you look at calgary today you know you're in the oil gas space ask around how many oil companies have hired venezuela probably one in each company more many more because it was they were great professionals they were running one of the top oil companies in the world and all of a sudden they were left without a job because of

political beliefs yeah and uh many companies happily scooped them up right and then i don't want to laugh about it but it's just like you kick all the engineers all the smart people out and you you find that you're gonna have problems with that energy infrastructure and rolling blackouts inability to actually keep wells up and running all that stuff our oil exports are down to i have to check the numbers but i think they're sub a million barrels per day when uh when we were producing i think when he took office we were producing somewhere around the order of like four million barrels per day uh so it's it's been decimated um and yeah so i guess going back to this the original point i was trying to make was that bad money never dies like most people will

always be thinking about how they can get more free money right and they they don't really understand or they don't because it's really hard it's really hard to make the connection of government's printing money therefore i'm going to be made poor if i don't have assets like it's that's a connection that is very very hard to make it took me a long time to make i mean especially as you have politicians and the ministry of truth as you've just described uh sort of sending people in the wrong direction right and framing the narrative or framing the boundaries from which conversations around these topics can happen in areas where the problem doesn't fall within those boundaries right like here in america red team versus blue team left

first right um and trump's trump's the problem biden's the problem and nobody's ever really given the opportunity to debate whether or not the money's the problem yeah 100 like i think If I had to bet, I would say that, you know, it's more likely that if real estate prices start getting off the chart in the United States, it's more likely that the messaging is, you know, you got to stop speculating on houses, guys. like you know third three four houses like let's put a cap on these investment properties because these investor these speculating impresarios are driving up the home prices for all of our main street america people it's not hey guys we printed more money so it's natural that you're protecting your wealth by purchasing hard assets like homes they'll never say that they'll say that these actors are going against the best interest of their average american

so that's kind of where i'm going at it's like it's this ability to shift narratives that is is for example like if bitcoin continues to grind higher they'll never say oh it's because we printed a lot more money they'll say it's because it's a crazy group of speculators that are out there driving the price of this thing higher and uh but at the end of the day like you you're creating this the sickness and you're lying to people about the the medicine for the disease and the causes of that disease too right like it's happening here mauricio like in the philadelphia area i know my cousin's a real estate agent you tell me it's crazy like before even houses hit the market they're selling like 50 above what they would be listed for because people

are just trying to scoop them up so you want to hear a crazy stat that we were on this letter so one of the things you keep we keep track of in our newsletter is and it went away these kind inflation signals right if i told you that home prices in the hamptons more than doubled over the year 2020 would you believe me uh yeah because people got driven out of the city right like well that and wealthy people are looking to protect their assets right their cash is melting and because everybody's sitting out in the pandemic in new york saying oh where am i going to spend the next year oh wouldn't it be great if I could go to a beautiful place and also protect my wealth hey why not and and so what I was trying to look where I was trying to look for

when I was putting this together was as I was mentioning to you earlier what's happening in the United States is a bit fascinating because the inflation if inflation hurts different people in different ways right what's happening in the U.S. what I think is fascinating about it is that it's hurting the richest people the most because they are the ones that have the largest cash balances and they have these um you know they have to keep this money they have to preserve the value of all this wealth that they have created right so they don't want to have it on something that's giving them a negative real return like cash right um if you're looking at like so desirable assets is something michael saylor talks about like inflation on desirable assets which i

think is a very great way to describe it so what I wanted to do to look at that was say okay what are the most desirable assets well let's look at the desirable assets from the wealthiest group of the wealthiest country right like New Yorkers in the United States where would they like to buy a house well based on what I know I'm not a New Yorker but based on what I've read around and I know seemingly the Hamptons is kind of like the place to go if you're a wealthy New Yorker right so I said that's the place we need to look for first a real estate crisis and of course they were vertical and uh and okay great what about fixed income what about the cost to have a cash flow of 120 000 per year for retirement well at the beginning of the pandemic you would have had

to have i think it was something in the order of like three million dollars invested in triple a bonds to get 120k a year by the end of the pandemic that was four and a half million dollars to get the same cash flow so all these assets are getting priced out a lot it's stock market like i say this jokingly but you know just now we're getting all this like waves of stimulus getting pumped and pumped and pumped and pumped right some of it's not even out there yet most stocks if you look at the major indices they are trading higher than they were pre-pandemic right what that says if nothing had changed if there was no stimulus pumped out that could never be because there are more yeah i mean i don't need to tell you yeah we disconnect like you shut everything down yet

the stock prices of the underlying companies skyrockets it makes no sense it's all that's like how fast can this deteriorate particularly here in the united states a lot of people say It'll take time, it'll take time, it'll take time. I don't want to be like a doomer or anything. And I'm not a doomer, I'm a Bitcoiner. I'm very optimistic about the future. I think Bitcoin helps us get away from this disconnection. But I do worry about people not grasping

how quickly things can unravel. And again, we just mentioned earlier, 1.9, 3.9, that's $5.8 trillion that are about to be thrust into the economy potentially this year just by the fiscal side alone. so and and again like my parents own a coffee shop my dad sent me email after email of their suppliers raising prices between five and eight percent which is nothing nothing to scoff at it's higher than cpi and these are like rains prices like bread and and uh pastries like things that

should be included in the cpi basket um great american mining the copper wiring that we use to to build out some of the electrical infrastructure in our in our containers up 35 in the last four months alone i think had the real estate developer on kelly landon a couple weeks ago the price of lumber is up like 400 500 i think people are stopping construction on homes because prices are too high for the raw material my wife came home from the grocery store yesterday like she hasn't been tracking it like writing it down but she's like I'm pretty sure toilet paper and paper towel prices are up significantly. They seem a lot more expensive than they should be.

It's like these little things. And then the Fed and their patsies in the financial media be like, oh, it's not real inflation. It's not real inflation. I had a Fed official from the St. Louis Fed hop into one of my threads the other day being like, you don't understand inflation. I was like, what? Like, they're like gaslighting you.

it's uh it's very disconcerting is is the only word i can think of because you have this disconnect and this inability to actually confront what seems to be the truth that's the other thing like the ministry of truth like they confuse you they gaslight you with what the truth actually is and the cpi is a tool of the ministry of truth i would i would argue i i couldn't agree more i think the cpi is is almost a laughable joke uh these days on what it excludes and what it includes and how they just do whatever they want with the components so they can show the number they want to show right like um you know if it's you know change triple a steak for you know ground beef and all of a sudden your cost of beef is in line but it's it's really about you know they're they're

swapping apples for oranges for strawberries you know and they're presenting it to us like this uniform smoothie and it's it's it's really not um so you really need to look under the hood and i i guess why and i don't mean to be like a like a doomsday or on this like oh people are never going to wake up like the collective masses will never understand inflation i hope they do i really wish they do but for the most part even in venezuela i still think today you go down to venezuelan you pull 10 random venezuelans about what inflation is they'll they'll give you a completely wrong answer like nine of them nine of them will give you a completely wrong answer because it's a hard problem to understand right like most people understand inflation is rising

prices but nobody gets why they rise right or or it's making them rise right um one of the things i remember going back to the venezuela experience as hyperinflation was starting to get kind of off rocker property has been generally priced out of the average venezuelan for a while so property is not necessarily something that venezuelans keep an eye on or like what's the average what's the price per foot of property in caracas like most people have just kind of come to terms that they'll never be able to own a home so to them their their day-to-day is more oh can i get some sort of government subsidy rental and uh and some government subsidized food uh and i have a government subsidized job but typically the first kind of flare-ups socially happen because of food

um right because you're you know as you print this money and you start doing all these programs well the supply chains start adjusting right like to your point the first things that adjust are the supply chains right and then that slowly makes its way out to the end consumer um in Venezuela the first kind of issues were happening around people's ability to purchase protein right the first issues came about through it was because of price of chicken and the price of beef uh and i distinctly remember what happened back in those days because i was i was very much there and kind of i was you know we we i and a bunch of other venezuelans were like the old men yelling at the sky because people were coming out complaining about the prices of chicken

and saying oh no chavez you know these guys it wasn't the rage from people never came from the the rage of people was never directed at chavez or the free money that he was pumping essentially when when chicken prices started going up the question became and also because chavez was a very like communist person and socialist person um essentially what happened when prices of chicken started going up was that the narrative became these uh capitalists you know the greed of these capitalists is starving the people right so you need to go fix those capitalists right and so challenge and that's when we started seeing the oh union you want the farm it's like here you take the farm and then the union came back and

said hey you know we can't really import the chicken feed uh because we can't access dollars we actually need a lot more bolívares to buy the same chicken feed that we were buying three months ago so it's it'll be really hard for us to sell that chicken at the same price like we can't drop the price of the chicken some of our inputs are foreign and the dollars through the roof and then Chavez what Chavez did back when he had a lot of oil money was he said don't worry I'll sell you the dollars at cheaper than before and of course that made things work like that was a band-aid because they had all this oil money and it was just basically subsidizing everything right um and that made it work for a little bit um but governments are always in the business of staying

in power they're not in the business of solving the issue right so that's something that is very interesting because we're also dealing with very long-term problems and we expect short-term governments to fix them so i i think there's a big disconnect there uh because you know the decisions that the fed is making today are going to affect this administration and the next administration and the administration after that and the administration after that right that's like the point i was trying to drive it earlier like everybody wants to blame biden blame trump i felt i fall prey to that that framing sometimes too when i get a little too emotional but george bush started tarp handed it off to obama like things leveled off for a little bit but

towards the end of obama's reign and um you started tapering and then when trump took took over that tapering sort of led to some spasms in the market and you had to turn the money printers back on and yet covid and trump did his uh his covid relief plan and now just handing the baton a bit biden is taking it to another level it's all meet the new boss same as the old boss red blue purple yellow whatever uh the incentives of the system particularly the political system and the politicians just don't want to be the last one holding the bag so they'll do whatever is politically tenable at the time which is just print more money and then the whole time the common thread throughout it all is the fed behind all this just basically exacerbating it and

allowing it to happen and accommodating this type of misallocation of capital on a mass scale. Well, I thought, you know, what's his name? Russ Stevens made a great point. When you're talking about central bankers and how they behave, right? Because when you listen to central bankers and you talk to these guys, they were really smart guys, most of them, like really smart guys and they get it they they get what they're doing and there have been some voices within the central banks that have essentially tried tried david fisher david fisher one of them i think yeah so there's voices that do try to jolt some sense into what's happening but the problem is that these voices whether it's one guy two guys five guys

they're up against a political giant which is the masses right and they have to back down eventually um because the other piece of that question or the other piece of that argument is that although it creates a lot of inequality it may prevent a revolution um because um i'll i'll be i'll be i'll say it you know i'm not sure if it's been said before i'm sure it has but if we hadn't been able to send these stimulus checks or the u.s hadn't sent these stimulus checks and canada hadn't done things like serb i i do think that there would be a lot of social unrest um we actually started seeing glimpses of it uh at the beginning right like it was there was a bunch of things at play right like there was a polarization between the

Trump and Biden like Trump ended up being a very polarizing guy for American politics and you had like friction on that side but there was also a lot of imagine if you had done all of this but people defaulting on their homes defaulting on their credit card getting their cars repossessed and then you had all this happening on top of that it creates this it can basically could potentially overthrow a government right and no government wants to see that happen so it's always about picking the lesser of two evils and one of the things that i think is you know perhaps somewhat brilliant about the system and how the fiat system and how it's been structured today right is that anytime there's a big sort of external event that happens

that brings the economy to like a halt or a screeching thing or just injects the economy with a great amount of uncertainty right you you need to have a way of jolted back into form right and that is palatable to the majority of your constituents right one of the interesting things about something like finance like fiscal stimulus right is that the people receiving the money they're going to be great like they're going to be very happy because these were people that could otherwise have received nothing right the people that would have a concern about this which is the people that hold the cash right well they have ample notifications from the government that this is going to happen like this is going to be taken to congress and then it's going to

be taken to here look good chances it's going to go through guys so like position your portfolios accordingly and so the wealthy guys are like okay this is coming let's get out let's get out of cash let's get into equity into property into bitcoin into this let's let inflation do its thing and then we'll just get richer right it's this it's this ability to perpetuate the people that have the assets and appease the people that have no income both in one go right so i i think that's that's probably why this system has lasted for as long as it has uh because it finds a way of catering to the haves and the have nots in a way no i completely agree and i was wrong it was not david fisher richard fisher the former dallas fed chair but i completely agree and this is weird

right because i said this last year like why bail out the corporations when you should be airdropping if you're going to make people stay home from work like give them more money like you can't like that's what is causing a lot of the social unrest behind the scenes and then And that's another thing that makes me extremely bullish for Bitcoin, because a lot of people are like, oh, the government's going to ban it. You certainly have unelected bodies like the Financial Action Task Force trying to do their best to prevent Bitcoin from getting into the hands of individuals and being used in a P2P fashion. However, Bitcoin does provide these governments, these politicians, these central bankers that find themselves in a very precarious situation. because yes they they can appease both sides for quite a while but eventually it will lead to social incohesion like you can only print and and try to appease the the rich and the poor in the same

at the same time with this exact policy for so long and the the chickens or the hens do come home to roost right at some point and they will and history has shown this time and time again thousands of years of human history has shown this like it'd be hubristic to think we're not going to follow that and again bringing bitcoin back into it like i think bitcoin actually provides an opportunity like an escape hatch a political reputational escape hatch for these politicians and these central bankers where they don't necessarily have to come out and say oh you guys should go adopt bitcoin because that would incite like a mad exit from the weaker currency to Bitcoin, but just stepping back and letting states like Kentucky welcome miners in with

tax breaks on sales tax for electricity, letting cities like Miami push to bring more Bitcoin businesses into their domicile, letting Wyoming know what it's doing, and just not necessarily tip the hat and be like, yeah, citizens go adopt Bitcoin, but just letting the Bitcoin economy flourish and naturally letting it like a little bit of bitcoin get into the hands of a lot of americans probably won't reach every american but i mean i would imagine it's tens of millions now and likely to grow moving forward and you can keep those policies going on the fiat side and when the hens do come home to roost at least a significant part of the population has some nest egg uh accumulated to to help revan things it's not as desperate as it otherwise would be

this is just a theory i i think you're bang on i mean i i i i interpret it in a similar way i think there's obviously huge um consequences for a government to come and say oh bitcoin we accept bitcoin as money because that eventually puts it in the same 11 playing field as their weaker money and so it just creates they can't do this openly they have to find a way of tacitly you know encouraging you to do this right um while protecting the sort of repetition or their brand of their own local currency and going back to the point about bitcoin as an escape hatch i could not agree with you more um why i say that is is true in the states but even more so true in latin america why because if you think about the if you think about hard assets that hold

their value and preserve their value well over time what are those stocks equity in companies perhaps property real estate perhaps gold you could argue perhaps over like for a while now outside of those to be which one would you include um maybe energy i can't even know like bitcoin well yeah or maybe a strong currency but like let's just say that it's either stocks property or gold right all those three have and by the way it's not just any stock it's u.s capital market stock it's not stock in like the bovespa or like the caracas stock exchange is as good as having cash so um if you if you say these three assets are the ones that could protect your value who has access to these three assets the common person in

latin america certainly does not yeah you're gonna have access to property you don't have access to gold you certainly don't have access to u.s equity so for those people for the for the majority of the world in fact affording a hard asset was impossible like they could they would have to save up their entire lives and even then they likely couldn't buy a house or likely couldn't buy a gold bar or something that they need at the minimum minimum quantity that they needed to kind of get their foot in the door today you can buy a dollar worth of bitcoin 10 cents worth of bitcoin you know any amount worth of bitcoin and you can start saving that bitcoin over time and then get the tailwind of inflation right and then have that bitcoin value go up one of the things that

i love about my job and about what we are building at lenin the most is we have seen clients in countries like colombia like venezuela that start sending bitcoin to their savings accounts ten dollars by ten dollars twenty five dollars by twenty five dollars like every week they send a little bit and a little bit and a little bit and one case in particular who's now he's become relatively close to me because i've seen him from so early on basically saving up he is a guy that mines he lives in venezuela and uh once he hit the minimum collateral amount to access a loan which we issue loans at 500 so when he hit when his bitcoin and his savings account hit thousand dollars worth of value he was able to apply for his first loan and he used the 500

to buy another minor or like parts to fix another minor to keep it going again and he he reached out to me personally to say i can't thank you enough for what you guys are doing you guys are the first loan i've been approved for and uh to us that's like that's like everything you know to obviously we love high net worth clients like they're great but like to be able to to enable someone bootstrap a small business right yeah and remaining wealthy right or like at least preserving the little bit of wealth that you have right like how frustrating is it to accumulate you know i don't know a million bolivars over a year only to wake up one day and and because of the decision that the central bank made then your life's work is halved yeah um and so you know to

us like bitcoin does provide this escape little vault for small people more so than big people of course big people get into it quick and they figure it out right like and then you got michael saylor you know raising billion dollars to buy more bitcoin on their for their company and you know guys like elon musk buying you know bitcoin for their for their for the tesla balance sheet and like of course the really smart guys will get into it but it doesn't price out the little guys right and so i think that's very key because it's about access almost then no right and it's like bitcoin you can accumulate it with your time too this is like paul talking with paul toy

last week and we've been talking a lot since we've recorded that podcast on sphinx chat and what he's describing what they're doing at stack work by just getting preloaded android phones to people in the philippines and argentina specifically uh and basically having them do mechanical turk-like tasks to earn bitcoin he he's becoming or i don't know if he's becoming but like he's articulated um in in public sphinx chats and in our tribe so i feel comfortable saying this like a lot of people focus on the the path to monetization being store value medium exchange unit of account or like just seeing what he's seeing at stack work like the the opposite is also true and will probably be the way it happens in countries

where where people don't have access to other hard assets and so it'll be unit of account first they'll work for sats and then they'll they'll get those sats and they'll get onto platforms like sphinx or or lead in or bit refill whatever it may be where they can use their sats as a medium exchange and then they'll basically bootstrap a quality of life that that makes them able to get up and work and and fulfill the lower part of maslow's hierarchy of needs and then they'll they'll begin to see it increasing in value and then they'll as keeps increasing in value they'll they'll siphon in a way as a savings account um and that's like the beauty of being able to do work anywhere in the world and receive bitcoin for it is another aspect that

really gives the little guy like a chance to get in and actually build themselves up slowly over time that's that's a fascinating model i would love to learn more about that because i think that's a almost like it's it's it's uh it can provide a profit but it's also like almost humanitarian work you know so it's uh it's it's not often um it's not often actually we we had a an investor say this to this say this to us recently which i thought was probably one of the nicest compliments that we've gotten in a while and and his conclusion was after hearing our story and kind of what we were doing is like it's not often that you see companies that get to fulfill a great mission and also get a financial reward out of it um i think that case in particular

is resonates tremendously with that for me um and i think you know what we do in a certain way as well right like we let people all over the world save and earn interest and and access loans at rates that they otherwise never have access at home so it does in a way kind of take more than just one box right because it does work that you can feel great about and at the same time it can make you some money right so uh it's not often that you you have that setup yeah i mean not to blow myself either here but these flares behind me like we're able to make a profit by helping reduce methane like it's like well dude i i i'm so i'm such a fan of that model um i i just have nothing but great things to say and the kudos um to you guys for essentially because you know i

guess when you're having to go and talk to like the oil and gas world to convince them that bitcoin is the future and i think you know a lot of people say oh like some industries are set in their ways and they're old school you know i would argue that oil is probably one of those oh they are they're uh they're stubborn bunch but we're dragging them along don't worry yeah no but it's like crazy the the the the fact that this is all global right like just focusing on what you're doing and like people like paul at stack work right like so i'm looking at their site now it's nothing crazy but it's material for some people they've paid out uh 269 000 sets that's like 120 bucks but to people working in areas where they want to have the opportunity

to have a job in their local spot and so they're getting paid in sets then they're getting this phone with preloaded software and they slowly pay off the phone over time and then they get to keep it and but like they're so they're getting these phones and they're getting access to the internet which presents other opportunities where then you'll get other jobs maybe they are earning sats and stack work but then they use that phone to to do some other online work for bitcoin um and yeah i really like that idea that it can help bootstrap people in precarious situations and you just got to get them access to to a phone and a digital job and then getting them access giving them the ability to leverage their capital and reinvest in themselves um there's another

massive thing too like the the products that you guys are providing and potentially earn interest on their bitcoin if they if they want to um and sort of grow that if they have a stack that they have set aside that feels like it's all happening and people hate on bitcoin why are these people hating on bitcoin it's providing so many opportunities you know i think some of the hate may come from um just the fact that you know no matter no matter how fair you try to be when you're distributing a new asset there's it's just never going to be equal right and it's just never going to be you know there's always going to be people that manage to get you know learn about it earlier or get into it earlier or were exposed to it earlier and i think some of the resentment

comes from a little bit of that place right like you know oh here you guys are you know just making money because of the decision you made 10 years ago like they they try to kind of blanket everybody and it's more of a i think sometimes again i don't want to speak for everyone i don't even know what a no-coiner mind feels like very foreign concept so long ago but to me you know and i remember when i first got into this and i first started reading about bitcoin i said oh man i wish i got this into this earlier you know what was i doing in 2012 you know or 2013 like um but but once you get over that you you you understand how many more people it can help and and how much how much of an impact you can have by joining this like this movement right and trying to drive it i think

the people that look at it and go oh you know um you guys are just lucky this is just a bubble like there's an element of you don't understand inflation really you don't you don't really understand the problem that bitcoin is trying to solve um and the second one is you know you haven't benefited from it in any way like if anything you've had to deal with like some annoying guy in your class or that you know or some young kid that you know was a rebel and all of a sudden is a millionaire uh and you know it just goes against certain parts of people's character or certain people's characters and it just becomes a hard pill to swallow to say yes you know i'll i'm okay with you know these guys i got in a while back doing great because

is going to help a bunch more people it takes a lot of maturity to get there right and and yeah that's kind of what i would what i would pin it to i think it's just the lack of understanding for the most part yeah yeah don't let pride get in the way freaks if you're no quinn or listening just curious about what's going on you peeked into this episode for some odd reason or a good reason could have been a good reason don't let pride get in the way it's still early it's still very early there's so much there's so much to do there's so much going on we're literally potentially building like a new internet on top of bitcoin with like what's going on with lightning and stuff like i guess that's another topic to to roll into for like lead and you guys

have you guys been following lightning the development of any second layer solution whether it be liquid lightning i know you guys are in stable coins and that's been providing a ton of value to your users as well um how are you looking at the stack being built on top of bitcoin right now and looking to incorporate that to what you guys are doing yeah it's a great question so um we have a lot of clients like we have clients that are large and small right like we have clients that that have small balances with us we have clients that have hundreds of bitcoin with us um obviously i think we we try to view this as people that are going to love our products they're people that can benefit from our products right and people that can find value in

products right i think like layer one bitcoin is still pricing out a lot of people uh from transacting particularly in the small end of the spectrum right like if you're somebody that has you literally and a lot of people just have a couple hundred bucks worth of bitcoin right and if you're being asked to pay 20 25 to transact that thing um it becomes it prices you out frankly right like it prices you out of this unit of account settlement type of of desire right um so i think what i'm most excited about for lightning is this ability to seamlessly basically bring the same experience of a person that has a full bitcoin or a half a bitcoin that can really can handle the friction of transacting because of the price because you're buying

something that's much more expensive or investing in somebody has much more upside so bringing that same level of comfort and control to somebody that has 0.001 bitcoin right like i think that is something that makes me very very excited so one thing actually that that not a lot of people know and we're going to be making uh more of an effort to essentially make this more widely known is that transfers within letting accounts are free so um because in a way we operate as a bit of a type of a side chain um you don't have to go through layer one settlement to essentially send from my Latin account to yours, Marty, like we wouldn't have to go on chain to do that, right?

Like we could just make a sidechain entry and so that you don't have to pay those $20. And we are starting to see a lot more people use that option, especially during congestion times, right? Because it's a pretty interesting value proposition to say to somebody, hey, I'm going to send you some Bitcoin.

Oh, by the way, I'm going to send it to my Latin account anyway, where it's earning interest. Can you just send it to me here? And by the way, it's going to be free. We're starting to see a lot more people do intra-Latin transactions. And the really cool thing about that is that because we've built a large contingent of clients in the US and a large contingent of clients in Latin America, we're starting to see that flow basically across the two poles. and it's fascinating to us because it's you know people are smart right like they they see how they can basically get what they want done and they'll if they find a way to do it in a way that they're comfortable and it's cheaper for them they'll do it and so that's that's something that we're

really excited about now imagine if you know sending bitcoin onto lead and cost you fractions of a dollar and then withdrawing your bitcoin from lead and if you're somebody in columbia were to cost you 25 cents versus 25 dollars like that unlocks a brand new demographic so that's something i'm really excited about for lightning yeah it's powerful like yeah like it's getting linked into the podcasting 2.0 platform and having freaks stream a sats like it's just you can probably check my phone right now like yeah it's kind of like i turn i'm on airplane mode so i'm gonna get notifications but like if you go down here you can see like boom 17 sets 16 sets 17 sets like every minute and that's what like five cents if that like

six cents just being streamed directly that's incredible even less than that but not it's just like it's possible right like we can and like it's here it's five five cents at scale man like one million people paying five cents and that's up really quick right right and like even that if we i do want to touch on like the interest bearing accounts because that's something we were talking about a few weeks ago like the duration matchup you guys are working on on the risk management side i thought that was really fascinating and like hypothetically that's something you can do somebody just puts um collateral up or locks up bitcoin in a savings account and they're getting small amounts could you hypothetically like pay out and lightning

like automatically like right like something like that yeah i mean we so it's like the streaming element would be more so if you're getting the the um the interest payout i guess somewhere off platform you know because we can we can stream it in platforms as long as you're not pulling it out on chain then you wouldn't really you wouldn't really feel the difference but i agree with you that no lightning unlocks a lot of use cases a lot of use cases and particularly it makes the use case for remittances all that more attractive because it really drops the cost of transacting down to like pretty much zero um and uh but but no i mean that that's kind of i envision our first sort of implementation of lightning to be this option to allow people to send and receive

bitcoin with much less friction you know i think before we moved into anything else that would be the first place we were going to go uh essentially to adopt this and to and to make or make the platform even friendlier for a lot of people that that have you know smaller balances but i'd love to get that you know if you want to get into the interest rate accounts i'm more than happy to to get into those because that you know we love we love talking about those i mean yeah i can hear the freaks screaming in the background rehypothecation like too much risk is it worth the interest rate um markets demanding these products people are bringing on the market i'm here to talk to somebody that is about how they're doing and how they're managing risk and again like

marisa we talked about two or three weeks ago like one thing one way you can manage the risk particularly interest bearing counts is matching up like durations on the back end of of how that's being lent out on the other side and how long people plan on locking that up on the on the lending side correct yeah so one of the things we have to manage is this concept of what happens if everybody shows up and wants a bitcoin back on the same day right like do you have the structure on the back end to facilitate that and that's something obviously we thought very long and hard when we were setting up the account so the answer is yes we do and the way we structure that is essentially whenever we lend bitcoin out um we have callback periods that are

within or smaller than our terms and conditions times to return that bitcoin so we've we've thought about we'd like to think as as long and as hard as you potentially could from a user standpoint from a client standpoint right like if i'm going to use this product what are the questions that i want answered right like what are you guys doing with these how long does it take to take out if if everybody showed up at the same day could you be able to do it right like how much risk are you taking to get this interest rate like is the same is this risk profile similar to other platforms they you know i think the the trickiest part of this whole thing that i just said is probably that last piece right is this idea that all yields are the same like right now

you you show up into a lot of these interest ranking pages and you see rates just stacked up on each other as if they're like apples that are you know at a grocery store and they're all the same apples and i i have to say like that's although those those pages are helpful for people to get an idea or benchmark where the industry's at there is incredible nuance between one rate and the other and what risks people are taking to get there uh and and essentially what the underlying driver for those rates are in the business right so um i think the what i would you know what i would welcome um people that are interested in these products do is try to get on the phone with us like we take calls with our clients all the time

to essentially explain to them how we're managing risk how we're making that yield like possible you know answering exactly these questions like if i showed up and wanted to withdraw my coin you know how long would it take could you do it how do you protect against this concept of everybody coming to withdraw all at once these are things that we have thought through at death and you know we've done our absolute best to structure these in a way that people are gonna know what you see and let it is what you get right and and we like being very transparent about a the potential benefits of using the account but also be the potential risks of using their account and so um we we we just think that's the best policy is to tell people exactly you know

what you're doing as best as you can and what they can get and what they should expect right and and so that's kind of how we've been approaching that but if there's any one of those areas that you'd like me to like dive deeper on i'm happy to uh no i mean the duration matching very interesting right like how do you prevent a run and make sure that all your customers are liquid it's uh yeah it's like a hot topic in the space right now i guess um without calling out anybody in particular but i'm sure people understand what i'm talking about when i ask this question but like are you guys doing any trading um in bitcoin exposed products yourself like on the back end and if so like how do you manage that like i guess people are most

worried about like rehypothecation risk like on the other side if you're lending your bitcoin to ledin um and then ledin's giving that out to somebody who's using it to margin trade and they get called like how does that domino effect affect the the end user at the end of the day yeah that's a great question so to date we have not participated in any trading uh or any kind of trade opportunities directly through ledin their activity has been basically uh aggregate bitcoin and lend them out to our institutional counterparty which to date has been primarily genesis and so that's that's and we're very transparent about that on our website and to all our clients so that's we don't have any direct exposure to things like the gbtc trade to give you

an example just to put it out there right the industry itself has some exposure to the gbtc trade because a lot of the people borrowing from genesis were trying to participate in trades like the gbtc so i i think and again we like being very very transparent right like the industry as a whole like the industry the lending industry has some exposure to that trade itself because for a long time that trade was a cash cow for many lending companies that were essentially booking a 17 premium it was it was almost free money in a way uh for for anyone that could do it for a long time right so what i think will happen ultimately from this is that there will be some rate compression because there are more and more people

wanting to earn interest under Bitcoin. So there's a lot more Bitcoin available now to be lent out and to essentially, to be lent out to do these types of operations, right? And then the other piece of that is that there is an army of sophisticated investors that used to be only in equities and used to be only in FX

that are now seeing the opportunity in Bitcoin and they are entering in to are about these inefficient markets so that's making the trades more compressed and it's basically upping the quality of the participants in these venues and in this supply has essentially uh grown tremendously so those those two dynamics eventually lead to rates getting compressed overall and i'm just wondering like where the next like arb arb opportunities now that gbtc has been compressed to a discount like mining equities that's like no like no i mean listen there's there's a there's a quite a few um you know market neutral type trades that you could do like future versus basis i think is gonna be pretty

much the benchmark from going forward uh you know i think that's uh you can still get some really rates right now uh by doing that um the volatility like the options markets are you know most option contracts have volatility north of 100 and so that's a market that is right for for competition and maturation as well so those those are two interesting uh opportunities and then there's the other piece of you know bitcoin doesn't have a central market right so there will always be opportunities for people that want to market make across different venues and are comfortable with the risk in those venues to essentially try to arm those markets out and bring bitcoin rates more to be more uniform across venues yeah yeah yeah it makes sense why do you think people get

i mean i think a lot of people throw their arms up around these products is truly out of the um the goal of helping make sure that people don't lose bitcoin which is like as a company that's the last thing you want to do right like you want to liquidate customers on the lending side you never want to divvy out bitcoin on the on the uh interest bearing side to people on the back end that you think you're going to lose it so it's and then again like this these products are being demanded by the market you're coming in and trying to provide that that utility that people are seeking out um and she's like yeah it's a much maligned part of the industry right now people get very emotional around it and i understand um it depends on your risk tolerance

right same here man i was a bitcoiner before i was a lender you know uh so i i i completely can relate to those to those concerns there are questions that i asked myself at the beginning too And I think if I could kind of bucket the two biggest fears or the two biggest sort of rebuttals from the Bitcoin community to these types of products, I would put one camp on the not your keys camp. So they're very much about custody and you just lose this whole power of custody and the transparency and the control that Bitcoin gives you by A, having custody over your node. That's something that I understand. where we um so first off we we won't ask you to ever conceive the custody of your bitcoin in exchange for nothing right like nobody will do that right and so when we do this you know the best way that we have found to provide these services in a way that is comfortable for our

clients and it satisfies the the you know the interest of regulators like canadian regulators or like fintrack and things like that like uh know know your client policies and anti-money laundering policies like the best structure that we could think of to offer these services was this custodial format um and what that allows us to do is sure you're foregoing the custody of or the self-custody of that Bitcoin, but you're doing that to get a loan, right? And then with that loan, you're going to solve another issue, or you're going to save money that you would have paid otherwise on capital gains tax if you would have sold that Bitcoin. So it's always a trade-off between the value that you're getting from using our products and the fact that you're giving up

that custody, right? We also don't sit still. We know that it's a huge responsibility to have custody of someone's bitcoin so we want to show people that we are doing what we say we do and that's why we are so gung-ho about proof of reserves is because we want people to know that we're accounting for things properly and we want people to know that what we're saying to them that we're going to do is in fact what we're going to go do right and we although there are uh although there's there's there's this hard fact that you have to give up custody to access our services we try to make that process as transparent and as upfront as we can right and and that's that's on the on the custody side um and what was the other uh what was the other bucket that i had so

it's that it's a not your keys camp i forgot who else i had mentioned i'm drawing a blank here and the risky like your counterparties on the other side camp or like the short sellers everybody's like oh they're short sellers oh man yes don't get me started on that one so a lot of people assume that you're you know any savings account is just lending bitcoin to this evil hedge fund that is just short bitcoin right that is very much not the case um you know going back to again we we lend directly to our counter their institutional primary institutional counterparty which is genesis so they um are the ones that in turn are lending out bitcoin to these prop traders or hedge funds etc that are taking these trades so i i don't necessarily have an exact pulse

on the percentage of borrows that goes to shorting but if i had to guess um at its peak it was probably around 20 25 percent of the total sort of lending activity and if you ask me what it is today you can look at the long short interest and platforms like bitfinex using trading view those things are record lows um perhaps some more people are starting to short bitcoin at these levels but as of two weeks ago they were at historic lows of short interest like nobody really wants to short bitcoin right now hypothetically they could be theoretically they could be going margin long with that too right hey yeah like you still get liquidated on that the price goes down um but yeah it's just so like do you do you

do like a a risk assessment of how much value i mean and would you even be able to so now i'm putting like my fund head on and i got a fund we were in a very i worked for a very uh conservative fund managed futures which is a conservative part of the portfolio um and just think about value at risk models so like i'm thinking about the funds that would take that bitcoin on the other end and that's what i think a lot of uh individuals who haven't been in finance don't understand this concept of value at risk and sort of the mandate at the fund level at the lp level that you're only allowed to put a certain amount of risk especially if you're for certain funds not every fund obviously some some have like high yield mandates are allowed to take riskier bets

but there's others that are only literally allowed to put a certain percentage of the overall fund value at risk at any given point in time to limit down downside risk um so and that then so me explaining this is like could you as lead and sort of evaluate your counterparts and their value of risk models to make sure like they're not allowed to put all the bitcoin to give them at risk or something like that or could you yeah a hundred percent so maybe maybe i'll spend a minute to talk about some very exciting key hires that we've done to help us on pretty strategic parts of the business so somebody that we brought on that we're incredibly excited about i think i already mentioned this earlier was john glover so john uh like i mentioned he he helped us uh he's helping

us essentially build our lending desk and he is what you were describing is precisely that like the experience and the skill set that he's going to bring to the table because he's been essentially analyzing counterparty credit risk and credit risk risk itself uh for decades and and and talking to So these very seasoned, you know, funds, financial institutions, banks, mostly, right? And that is really, you know, if I put my lender hat on, my institutional lender hat on for a second, that's really the dream counterparty that you'd like to have from a risk management standpoint is a group that is incredibly well capitalized in the billions of capital and that has a small crypto component or Bitcoin component to their strategy that

makes up probably no more than 10 to 15 percent of their total um you know activity and that is in a way uh that is one way of getting yourself comfortable uh and and also if this fund is also in a in a in a strongly regulated jurisdiction where there's like strong compliance and your audited statements etc um that is a what i would call a high quality profile for a borrower of these types of assets yeah yeah right like the bitcoin part of the funds so small that if they did get liquidated they'd they'd have to pull in assets from from other parts to to fulfill that net margin yeah makes sense it's like but it's like these little nuances that a lot of people don't get um there is risk you know like we've been talking about the whole time like you guys

are up front with the risk it exists but you can mitigate it to a certain extent right so yeah to the best of your abilities right like and then the other piece that um i'm very excited because i i've been i've been needing some help on the marketing side for a while is that mario gibney is actually joining us oh hell yeah yeah so uh he's been a great friend and a long-time client so we're very very pumped to to have him join our team and uh you know he's uh yeah he's been around the space for quite some time and so yeah very very excited to have him join us he should start actually in a couple weeks hell yeah he was at blockstream for a while um been around the space been talking about bitcoin he's part of the on he's on the unhash podcast every once in a while

yeah yeah he's on the unhash podcast as well uh yeah he is he knows his shit thanks man yeah no it's really smart guy there's a bunch more people that i can't share just now but uh but we're very excited at that just the the amazing people that are saying hey guys love what you're building how can i how can i add value uh and obviously if anyone listening to us right now loves what we're doing and would love to come work for an amazing bitcoin company i welcome you to both check out our website and even email me directly Mauricio at Lennon.io send me your resume because we're growing the team quite dramatically over the next call it three to six months and we'd love nothing more but to have more

Bitcoiners join the family yeah no I'm pumped for you like I said we've had many conversations throughout the years and you've been grinding you and Adam and I remember a conversation a few weeks ago we were talking about like March of last year and how how low the low was and like how desperate it can get but if you grind and you keep on grinding keep on showing up like good things will happen especially if you're providing the market with a good product so i'm extremely pumped for you guys as well it hasn't been easy and that's the other thing it's like people like oh it's an overnight success or it's like now you've been i've been watching it from afar freaks not afar but i forget when we first met had to be like 2017 2018 um and it's

it's been a grind right yeah i think it was at arepa cafe in or there was a venezuelan party in new york is that is that where it was 2018 i think yeah consensus yeah something like that something like that yeah it's been exciting man i still remember that day um i'm i'm a huge fan of this pod for as long as i can remember uh so you know getting it having a chance to well hey you know the first time we were here i still remember um you know how excited adam and i both were to like be on this show uh and like just share our story with people and uh I remember on the way in um we were walking across the Brooklyn Bridge and uh as we were walking through the Brooklyn Bridge I got a phone call from one of our at the time one of our first clients

and uh and he basically saying well I'll have to check with him before sharing his name but he basically told me guys love this I have loved my first loan so far because at that point we were just turning about a year old and he's like I really love I know I love this service love you love you guys thank you guys your company is great I'm gonna take a much bigger loan I think at the time it was like a 75k loan that the client was taking and for us like at that time that was an important loan so we were like wow like this is a sign you know we're working we're walking into marty's pod and like people were emailing us because they love the product and just like how happy we were when we left um um and that was right around the time when we were uh i believe

having our first conversations with the guys at genesis uh so that that whole trip man was very very memorable for us and uh yeah i still remember that very well yeah it was uh i remember it well too it's uh it's beautiful again it's been that's the other thing like it's beautiful to see good people do good things and succeed and so like that's why like i'm very pumped for you guys and i'm happy that we were able to catch up and can't wait to do it again in the future we've been here for an hour and a half now i know you're a very busy man i do have one more topic i want to touch on you touch on with you while i have you and i want to touch on you i'm sorry while i have years um isn't like one of the dudes who helped launch the petro hasn't he been going

around like trying to like save face here in america recently like what's going on there i don't mean to put you on the spot but um it's just like i haven't had to hold down low on that and okay i'll give you my my two cents without naming things okay by 2017 any person of age that at face value still believed that the Venezuelan regime because at that time it wasn't even a government had the willingness or even the most remote intention of doing something to help the Venezuelan people i pardon my english but i think that's bullshit um that's absolute bullshit

um you couldn't have been a venezuelan person of age and getting called up by someone in the maduro camp and thinking you're gonna go do something good for your compatriots that will not fly by me um that will not fly by me what was most likely back in those days is that whenever you got a call for one of these guys it either meant you need to leave the country or if you agree you're going to get a big payout so i would with every fiber in my body question the intention of somebody that said i thought they were going to go and i thought i was going to help my compatriots. I do not believe that flies. I don't think that's honest. And with regards of how much or how quickly a PR campaign can clean that up, well, that's for people to

decide, right? Like, you know, I, what I would just, what I would argue is that there are many of us Venezuelans that are actually, that took a lot of risk to help other Venezuelans get into Bitcoin. Speaking for myself and my family personally, we were literally chased out of the country because we help people mine um that to me takes a lot more guts than to pick up a phone and cozy your buddy buddy up with maduro under the premise that you think you're gonna go help the venezuelan people no bro you think you were gonna get rich and it backfired and now you want to leave the country the same way everyone else does and you need to clean up your face and want to and you want to come join this rocket ship of an industry that we're in um and you and you

basically don't want to you don't want to waste your ticket you feel like you still have a ticket and you're basically doing really hard to get on the plane i feel sorry for the people that won't ever do the research to understand what that actually means but i would be very careful of any kind of organization or anything that is associated with those types of characters yeah um thank you for sharing this thought sorry for putting you on the spot but i think it's important to hear um your perspective on this because i have seen that going around and um it is pretty just somebody outside looking at it seems like a pretty shitty thing to do so i wanted to get your thoughts on it no man listen i appreciate it i i don't i don't shy away from

saying things that i feel are are genuine and that's how i feel um you might find other people that don't agree with me on this i will stand by what i have seen and my and the opinion and perception that i have formed over time um because i tell you like you know i i know that's set up quite well uh and i've seen people very close to me do things very similar i was gonna say any freaks who haven't heard mauricio on tftc in the past go back you told you told the story of your family and the situation you found yourself in around bitcoin mining um it's fucking insane shit man it's uh and that like i completely agree with what you said that is actual like helps get in the game putting your putting your neck on the line quite

literally to a certain extent um yeah well again like i said i'm very happy to see very good people uh having great success especially in this space and it seems like lead in is is is reaching escape velocity so i'm pumped for you i'm pumped to see the team that you continue building um tell adam i said what's up is there anything that we should leave the freaks with before we wrap up here um if you don't if you haven't checked us out already check us out and uh if you like what we're doing great if you if there's something you think we could be doing better let me know awesome Mauricio can't wait to do it again thank you for joining me dude thank you so much for the opportunity it's always a blast

oh you it's a wide open invite you know that peace and love freaks