TFTC: A Bitcoin Podcast - Bitcoin Alpha E005: Why Quantum Computing Can't Kill Bitcoin with Matt Corallo

Episode Date: December 20, 2024

The Ten31 crew sit down with Matt Corallo to talk about Google's Willow quantum chip. 0:00 - Disclaimer 0:24 - Matt Corallo addresses the quantum chip scare 34:19 - Expected value calculation in quantum scenario 45:34 - Bitcoin MENA and nation state adoption 56:45 - Bitcoinization of finance 1:02:18 - MSTR 1:11:00 - Yield is a scary word in bitcoin 1:17:35 - 100k milestone

The following is for informational and entertainment purposes only and should not be construed as financial advice. This discussion is a presentation by 1031, the leading institutional investor focused on the Bitcoin ecosystem. 1031 has over 10 years of experience in Bitcoin and has deployed nearly $150 million into the leading opportunities in the space. To learn more, visit 1031.vc. I saw it in my feed. And I ended up missing my next meeting because I had to figure out how long will it take for us to crack the encryption standards that we use for Bitcoin. Nick, here's the answer, because I was so tilted by this idea.

So if you think of Willow as essentially like one stable logical qubit equivalent in a chip, We need about 4,000 to break RSA 2048, and we need about 8,000 to break SHA-256, which is the underlying encryption framework for Bitcoin. So I think you're right. I think we're in the sort of like- The endgame? Two to five year shot clock. No, I mean, I think what will have to happen is some of these chains will need to obviously

re-implement something at a pretty foundational level. the weird thing as freebrook says is like the willow chips error correction gets better the more of these things you start to use together now there's some really big problems and see inside these chips like logical interconnects are very complicated if you put two chips on a board like the c2c communication is called this all this stuff that we haven't figured out how to do but this is a big deal and i was i was really like my god what's going on here oh quantum computing coming to break bitcoin welcome back to bitcoin alpha uh john grant and myself are not well equipped enough to comment on this so we brought in prolific bitcoin developer

matt corallo currently working on ldk at spiral btc he wrote a an email to the mailing list of bitcoin dev mailing list which is now on google groups which i'm not a big fan of but we found it anyway uh about this everybody's up in arms matt uh about chamath saying bitcoin's going to be broken in two years what's going on here um yeah there are a lot of things wrong with that clip uh yes a lot of things wrong with that clip um so google announced so google's had a fairly large investment in quantum uh building up quantum computing for quite some time uh one of the most advanced teams if not the most advanced team doing quantum computing research and trying to build quantum computers um and they had they they came out with a new paper uh the other day i guess last

week that was interesting kind of a continuation of research that they had been doing that they have been doing for a long time and continuation of results that they have been getting on their quantum computing research platform for uh the last you know a few years the last two three years um and prior to so there are a number of issues with scaling up quantum computing right to get from where we are today or where we were two decades ago to a quantum computer that can actually pose a threat to cryptographic algorithms that we have today and unlike what chamath said it's not shot 256 we're worried about but really ecdsa but we can get into that in a minute um and to scale up a quantum computer to that scale has a lot of challenges but one of them for a

long time it was the case that as you add more qubits as you add more more things in your quantum computer more resource power more memory in your quantum computer the suddenly the quantum computer becomes less stable and so you have to add more qubits on top to get error correction to add error correction in so that the resulting computation you can correct for that stability and you can actually get useful results out. Up until a year or two ago, it was the case that for every new qubit you added, you needed more than one qubit for error correction, which obviously doesn't allow you to scale up because you add a qubit and you need more than one qubit to compensate for the extra noise you just added, and suddenly you obviously can't scale a quantum

computer. Google's results over the last few years, they've been claiming, and it seems like They're now continuing to show that they're actually below that threshold now, so they can add more qubits and get less noise on a per qubit basis, allowing them to scale up the quantum computer. But this doesn't mean that they're anywhere remotely close to being able to add. I mean, Shamath quoted a few thousand of their Willow chips to be able to build a chip that has that many qubits and then can also perform computation on it. So it's important to recognize that not only do you need several orders of magnitude more qubits than they're able to build, but on top of that, you then have to actually keep it stable for a long time and do a bunch of computation on it. So Willow, Google's, again, one of probably the most advanced quantum research lab in the world, is able to keep their computer running for, you know, few microseconds, few milliseconds, few seconds. But you need a lot more potentially, you know, an order of magnitude more than they're able to keep it going in order to actually do useful computation at the scale we're talking about to break Bitcoin. So we have a long time, this two to three year time horizon. I don't think anyone serious in the quantum computer world has ever claimed that, not even close.

Certainly, I've never seen a quantum computer researcher claiming anything on that scale. More like a decade or two decades is more realistic. If you just look at the qubit count and you don't look at how long we're able to keep it stable or how much computation we're able to do on the qubit, just looking at the scale, the slow rate of additional qubits they've been adding over the last decade or two of research, we're still talking about, you know, seven, eight years before this is realistic. But then you have to add on top how long you can keep it stable and your ability to do computation on it. And it's just it's not it's not a soon thing. Not even remotely. We have some time. But so the so what do we do in in 10 years? Maybe we should start thinking about how to get ready. I think we should probably a good opportunity to take those. This isn't fundamentally new research, but it's a good chance to take it as an opportunity to say, like, we should we should think about how to get ready for a decade from now or whenever. And there's two classes of things we're worried about in Bitcoin.

So we're worried about the signature algorithm. So that would be ECDSA and more generally any elliptic curve operations. So that short signature is really just any cryptographic signatures that people use today. Also applies to RSA and other things that Bitcoin doesn't use. And then the other thing we're worried about is proof of work. So we'll get into that in a minute, maybe. But first, we'll talk about signatures. So signatures, fundamentally, with the standard signatures that people use today,

so that would be elliptic curve operations, RSA, whatever, a quantum computer can generally figure out your private key. So it is tractable, still takes a non-trivial amount of computation, a bunch of time, but it is tractable for a quantum computer to calculate your private key just given your public key. So they can look at the blockchain, they can calculate a bunch of private keys, and they can steal your money. There are various post-quantum cryptography schemes, so cryptographic signature algorithms that we believe are secure against quantum computers. And they can be broken down into a few different categories.

One is hash-based, so they use things like SHA-256, which, contrary to Chamath's claim, is in fact not broken by quantum computers, not at all broken by quantum computers. And they use that to build up signatures, so it's a fairly easy-to-prove, secure scheme, but they're very inefficient. They require very large public keys, very large signatures. You know, we'd be talking about using a tenth of the block just to get a transaction in, or maybe a fiftieth of the block, but they're pretty big.

It's doable, but it's pretty big. Then there are a bunch of more speculative schemes, so based on different cryptographic assumptions, so different assumptions that we make that certain problems are hard. You know, we take some math problem and we say, like, well, we don't know how to solve it. And so we assume that no one else is going to figure out how to solve it. And then we're just going to build cryptographic things on this problem being hard.

But if this problem turns out to not be hard, then people could, again, steal your money, steal your private keys, whatever. And the post-quantum cryptography schemes that exist are a little more sketched there, you know, just newer assumptions that haven't been as well tested, that are a little more complicated, that are a little more likely to potentially be broken in the future. And in fact, we have seen this. We've seen cryptographic, post-quantum cryptographic algorithms

that people are fairly confident in be suddenly broken by a breakthrough where someone's like, oh, actually, that problem is easy. I know how to fix that. I know how to address that problem or solve that problem. So we probably don't want to rely on that for Bitcoin. So that leaves us with just hash-based signatures, which are big. They have this problem that they're big, but at least they're easy to build. And we can be fairly confident that they're secure.

So to finally get to Marty's point from originally, where he mentioned that I had posted this mailing list post. This wasn't really my idea. It's, in fact, an old idea. I hadn't seen it. I don't think it was on the mailing list. I don't think it had been discussed publicly. But there's kind of a few schemes rotating around

where people are proposing basically the same high-level concept, right, where you somehow build your address on chain or your public key or whatever such that you have a post-quantum hash-based signature public key in there, but you don't use it. So you don't have to use it today. You can just ignore it. It's just hidden there. It doesn't have any cost.

And then in the future, if we get to the point where, oh, quantum computers are starting to be a real threat, they're starting to get these things up to the number of qubits they need, they're starting to be able to actually do the amount of computation they need, and they're getting them, like, to be stable for minutes and not small fractions of a second, then we can say, all right, we're going to soft work out the existing signature scheme.

So we're just going to say, like, you can't use that anymore, and you better have been building your public keys in these other ways, and then you can just start signing with the new algorithms. And hopefully by the time we get there, again, we're talking about what is most likely a decade or two away, When we get there, hopefully we'll have better post-quantum signature schemes. We can soft-work those in, but even wallets that exist today would still be secure. So even wallets that exist today, no quantum computer adversary would be able to just steal all that Bitcoin.

You would just have to build really large transactions that are maybe expensive to claim your money back. And then we could use more advanced algorithms that are built over the next decade. So I think these things are not a big worry. But it's something that we might want to start working on. Sadly, this is a harder problem than in more traditional schemes. So things like Signal, iMessage, TLS have started deploying post-quantum cryptography schemes.

But they've been using schemes that are pretty sketchy, where it's not unlikely that they might be broken in the next handful of years. And they use them layered in combination with traditional schemes. So as long as the traditional scheme is secure, they're fine. But if someone suddenly builds a quantum computer, they're also fine, assuming this quantum scheme is secure, which is maybe a dubious assumption, but maybe. We can't really do that in Bitcoin because we'd be like putting it in the part of consensus, and then we have to maintain this thing, and then it turns out it's broken. It's just not really a great option for us.

So we're stuck with hash-based, but I think we have a pretty good answer there. So then there's the other question. So then there's proof-of-work. We can solve the signature schemes. We should start doing stuff. Well, let's just start deploying that stuff, but we've got some time. But what do we do with proof-of-work? So I mentioned that Chamath is wrong.

The SHA-256 is not broken by quantum computers. The quantum computer cannot reverse a SHA-256 hash and come up with the preimage, but they do get a speedup. So they are able to calculate a probable preimage with the square root of the amount of work as a classical computer. So it's 256 bits, square rooted is 128 bits. 128 bits is still more security than you would ever need. Quantum computers still can't feasibly do anything about that, but that doesn't apply for mining, right? Because mining, we're talking about 70 bits, square root that, and, well, suddenly a quantum computer can calculate a block that meets the difficulty fairly easily. There's not a clear answer here, but I think there's a lot of room to maneuver. it's not something that we should be worried about because it depends a lot, a lot, a lot on

exactly what the quantum computers end up looking like that people are able to build. So in, you know, seven years, as this field progresses, we'll presumably learn a lot more about what types of quantum computers are stable, what the performance characteristics of quantum computers look like. And it is likely to be the case, you know, quantum computers are instant. You don't just like snap your fingers and all the computation is done. They still require some amount of time for each gate. And so it might well be the case that quantum computers have some latency. And if we just take the Bitcoin proof of work functions, Bitcoin proof of work function today is SHA-256 hash twice.

So we run SHA-256 twice. If we just run it a million times, then it might be the case that it takes a quantum computer, or even the theoretically most efficient possible quantum computer, two hours to calculate a block. Well, okay, who cares? The block's already done, it's been 10 minutes. The traditional miners will still be able to out-compete it. Or maybe if we can scale it so it takes the quantum computer a day or a week,

then, yeah, okay, you know, reorgs get more complicated, but we solved this problem. we just miners more traditional miners are still able to operate normally it's just not an issue it could be a little different you know it might be that quantum computers are faster than we think we can't get this kind of a slow down on quantum computers we have to change to a different algorithm entirely not SHA-256 but something different but it seems fairly likely that we'll be able to come up with something um and again we we don't really know enough because these quantum computers are still so early and i know they've been being worked on for two and a half

decades now but they are still very early in terms of what they can actually build and what they can actually do uh they're so limited today that we just don't really have a good sense for what they're going to end up looking like by the time and if they ever end up being able to do the kinds of operations we're talking about we just don't know what the performance characteristics are going to look like so it's hard to speculate but it's not really something that we need to worry too much about because they can't fundamentally break the protocol uh we just have to change the proof of work in some way that that is even harder for a quantum computer to do uh in a way that's not necessarily as hard for a traditional computer all right so brief rehash here pun intended

two parts of bitcoin that would be affected by this private public key pair creation and hashing from the mining industry that creates the hash that allows them to add a block of transactions get reward in bitcoin as a result and the ability of these quantum computers is nowhere near where it would be a legitimate threat to bitcoin and most importantly And I think there's individuals like Matt out there already thinking about this problem and maybe not an exactly clear path on what the solutions are, but a clear enough path where it's like, OK, we can maneuver to to prepare for this. There is time to prepare. I guess that gets into the other question, which is it's hilarious when quantum quantum leaps are made in the quantum computer landscape and everybody points to Bitcoin first. But I think Bitcoin unfairly gets signaled out where if these threats were to materialize the way they're being marketed, Bitcoin would not be the only network that is vulnerable to a quantum attack.

Yeah, and I mean, the NSA has been beating the drum of things should start transitioning for a while. but it's only really finally standardizing uh cryptographic algorithms to allow people to do that you know now and over the last two or three years and over the coming year or two you know the NSA is setting a timeline of like people have a decade right so the NSA is recommending that all of these other things you're right there are a lot of cryptographic schemes out there there's a lot of TLS and bank security and whatever that uses various cryptographic schemes and you know even the NSA is saying, you've got 10 years to do it. You're all right.

You know, if you're worried about, you know, the thing that I think there is a little bit of a loss here where people get confused because there are a lot of cryptographers who are like, no, no, no, we have to transition now. And in a lot of those cases, we're not talking about things where they're worried about a quantum computer existing next year. They're worried about if you take this data that was encrypted or like, you know, your signal conversations, your iMessage conversations, and you just save the encrypted data for 10 years or whatever it takes to get a quantum computer, you could then go back and read that encrypted content. right and so if you have this kind of system where you're worried about people reading the encrypted content way down the line after the fact then you should start transitioning now you should be worried about this you know quantum computers still might in fact not happen still might not be possible we might find a number of limitations that we are still aware of or might

we might find over the course of the development but assuming they do get built then they'd be able to read your old conversations and maybe that's not great well whereas we're not worried about the same kind of thing in bitcoin you know if someone is able to go back and recover or steal your private key from five years ago that doesn't have any money on it anymore kind of who cares i mean like okay they could but like kind of who cares so it's not the same type of attack model that we're worried about um we do need to you know transition wallets because you know wallets take a while to transition people take a while to upgrade we worry about this but not we have a very different threat model in a lot of these systems that where people are kind of rushing to transition

and we have different constraints that make it a little harder to do that yeah so essentially the wallet software would update and if you were to input a public address associated with a private key that was quantum vulnerable the wallet software could say you can't send your bitcoin here because um i'm thinking more about just the way that you generate your own keys such that you have an upgrade path right it's one of the the variation that i propose is a little different but one of the simple some simplified verified schemes that other people have proposed is that you just take your private key and you make your private key a post quantum public key right so it's pretty easy to understand right so you just instead of your

private key which is just random numbers you use a post quantum public key as your private key and then you transact like normal no one needs to know that you happen to create your private key in this way but if there were to be a quantum computer we were to worry about it we could soft fork out the traditional spend or we could i guess it's a hard work but we disable the traditional spend path and now okay a quantum computer can calculate your private key but your private key is now the post quantum public key and so who cares you're just like all right well your public keys revealed. Anytime you spend it, you in fact reveal that private key, which is now just your public key. And then you do a post quantum signature and then you're safe. So there's

these simple schemes like this where wallets can start to transition how they make their private keys such that they will be secure even if a quantum computer is built in the future. They won't have to do anything. We'll just do a simple soft fork around that time and it won't be a big deal. To be to be clear on kind of the implementation path to get there. You know, I see the first kind of comment on what you wrote was from Luke Dash Jr. talking about how you might not even necessarily need a soft fork potentially to make this happen. And I think for people who are familiar with kind of the Bitcoin's upgrade process, you know, that might be to steel man kind of the concern troll side of this. It's, you know, soft forks are increasingly difficult

to get through and it's hard to settle on consensus. And they're going to be, you know, more and more kind of interests at the table wanting this thing or that thing. So are there I guess, A, would you worry about that in this case? And then B, if so, what do you how do you think about the potential to solve this kind of without something like a soft fork? Yeah, I mean, it is. I think soft forks, the whole soft forks are a hard thing. It is, to some extent, a result of people

misreading certain soft forks being more controversial and they feel like they should be. I don't think softworks are that hard. But I think, yeah, I mean, I think Luke's point was well made that if wallets were to standardize on a scheme to do this, like the scheme I just described or the scheme I described in the mailing list post, then wallets could start upgrading today, could start doing this, and wouldn't need to worry too much about consensus today.

We wouldn't need to do a softwork today. You do need to do a soft fork at the point in the future where a quantum computer becomes a real threat. But I don't buy that that would be difficult because the alternative is the system falling apart and being unusable. So at that point, there just is no alternative. It doesn't matter whether there's consensus or not. If some people start following a chain that has this rule enabled, then that chain still functions. and other people who don't are just going to have a useless coin where all the money is stolen.

Like, that's not – you by definition have consensus because the other branch is dysfunctional. So I don't think that's a concern at all. I would agree there. Just for a point of clarification, if we were – while we're to begin implementing this, I think it's – would it necessitate a move of coins from public addresses that exist today to these new addresses yeah yeah you you would have to move move your coins if you

were worried about it but of course you have a decade to do that or you have you know however long i mean i'm not i'm not a sufficient expert to give you a real number of like how long you have but it's not two to three years it's quite a while um even optimistic predictions are quite a while um so you have quite a bit of time to move your coins you don't need to like rush to move them and probably you were already going to move your coins at some point in the next five or seven years anyway um and just if you use you know hopefully wallet software adopts this and then of course if you use that new wallet software and you move your coins at any point or touch your coins at any point then then you would you would get the security for free just to i mean maybe

for people who at the 10 000 foot view or not highly technical and i think that describes all three of us on this call not named matt um if you're worried about if you're really really worried about this and i think the answer to this is is yes but curious if there are any nuances that you would throw in there if you're worried about tomorrow you wake up and ecds ecdsa is broken by a quantum computer that we never knew was in development but it exists and it's it's breaking ecdsa um at that point it i believe it's the case that um only p2pk coins and p2pk addresses so an old legacy address type or post pdpk addresses that have been reused are vulnerable like you know in that doomsday scenario where you wake up and that happens and any coins held on

unused or addresses used only once post pdpk are safe so i i think that's the case and if so or if not correct me if i'm wrong but um not exactly i also apply to taproot taproot also has the the public fees explicitly on chain um but in practice there's just so i mean at a minimum there's you know something give or take a million coins in in pay to pump key uh explicit outputs that are just very old coins um many of which attributed to satoshi but but who knows um that could be stolen and then of course dumped on the market so so i i think that that the doomsday scenario there is that it happens coins are stolen and then and then dumped on the market.

And what you would have to do then is roll it all back. So there are cryptographic schemes today. Again, they rely on a little more novel mathematical assumptions of hard problems. But that exists where we could prove the knowledge of the private key. And we could allow you to just start doing that today that are post-quantum.

So even with your existing private key with no changes on chain, no new transactions, no anything, you could just wake up today, wake up tomorrow, we could do a soft fork that requires a different signature scheme that allows you to prove knowledge of the private key without, sorry, how does that work? oh yeah you could prove knowledge of the seed that went into the private key it so it does depend a little bit on how the wallet was constructed but most wallets use some kind of seed that is hashed and then used to make a private key and you could prove knowledge of that that that seed um and then we could require that for spending which would lock up a bunch of coins but not all coins um and you would still like most wallets would still be able to function so it would be bad but it wouldn't necessarily be the end of the world um and so i think you know that in practice uh that is kind of why it's useful to to start thinking about this and start

deploying some of these schemes and wallets um but at the same time i think that is very very unlikely um it's just we're so far away from it and it's not for if we were far away from it because no one had been doing research in quantum computers then maybe tomorrow we'll wake up and someone will have a clever idea but it's not for lack of funding or trying or research to build quantum computers over the last two decades um there has been a lot of money and brain power poured into this problem um you know there are of course all kinds of tail risks to bitcoin this is one of them uh but it is very much a tail tail risk yeah all right you use my nerves chamath had me a little scared i'm not gonna lie i'm kidding i think uh uh yeah if chamath

is scaring you about things you might want to consider finding better sources of information i was kidding but um thank you for doing this um what uh can we get a brief update on ldk lightning i have one question a combination of lightning and arc is that uh is that um something that excites you at all potentially um yeah on on scaling there's this whole scaling question of you know what do we do in between lightning and custodial kind of like you know i think of scaling as like a continuum i think the end future of wallets has to be this kind of graduated automatic graduation of wallets right but you you get your wallet and your first hundred sats you receive is totally custodial and the next million sats you receive uh there you

start custodial and then your wallet automatically opens the lightning channel for you and moves you on-chain you know as you get more money it automatically improves your security model um when we see the early innings of this stuff being built it's still a little bit away but but there's early innings um there's an open question of kind of what you do between a full on-chain lightning and a custodial like an e-cash mint or whatever um and lightning on top of something like arc uh is is one candidate um there's a this also goes by the term timeout trees which was invented independently of arc but is basically the same thing as uh lightning on top of arc um it's compelling it's interesting uh it has a number of issues where the lsp could

do certain attacks that might allow it to steal more money than they should be able to um it's unclear how easy to fix these issues are um but it's it's an interesting candidate and i'm happy people are researching it more um but it certainly won't be a replacement for full on-chain lightning for everyone at least to me my um my understanding based on the conversations i've had at least for channel liquidity management combining arc and lightning to do some sort of automatic channel balancing seems like a good ux upgrade yeah i think for for automatic channel balancing like if you're a server or something if you're like a routing node you probably want to look more towards multi-party channels than moving your channels to be on top of arc i think

arc makes a little more sense for kind of the edge nodes like your your mobile wallets or whatever that want to be less custodial, have less trust, but still want some more scalability. It potentially makes a lot of sense there. Again, there's some big open questions. There's some attacks, scenarios that are very challenging to address. Basically, the most damning one is the LSP can take all the poor people and put them in a ghetto and then steal money from all the poor people and none of them can afford on-chain fees to fix the problem.

You're kind of assuming, the whole model assumes you have a mix of wallet balances, some wallets with lots of money, some with less money, where the wallets with lots of money can pay some of the on-chain fees to punish the LSP if they cheat. But they think that the LSP can put all the poor people in the ghetto and then screw them over. So there's some there's some big open questions remaining on how to build these things, but potential answers to more research needed.

Awesome. Well, John Grant, you guys have any questions? I asked for 10 to 15 minutes of your time. We're 45 minutes into you hopping on this call. So I want to be respectful of that. But thank you for agreeing to do this. John Grant, anything to add here? no i don't think so this was a slight seems like a slightly more informed um discussion than what we uh cold opened with so appreciate you coming on to give a little more information of course yeah thanks uh anybody who's listening to this and does not know matt's work throughout bitcoin he's been on tftc multiple times throughout the year i think you're

a guest too on the show back when we're drinking beers at barstool's offices um he's doing very important work and is obviously much smarter than we are on the technical aspects of what's going on with bitcoin so matt really appreciate you taking some time to join us and walk us through this yeah thanks for having me thank you to mac frollo for joining us educating us it's important to understand there's a lot of people are going to fud bitcoin that don't know they're talking about chamath being one of those people and john i knew you had one point you wanted to follow up on in terms of synopsis and the expected value calculation how that fits into all of this yeah for sure i mean just quickly to your point on the fud for those who are maybe

newer to the space and are kind of looking at bitcoin for the first time i would just note that this is far from a new concern you know we generally see this this is among you know the 10 10 or 20 most common objections that we see floated once a year, once every two years, whenever there's kind of an incremental headline on this or other things like this, you know, this becomes the topic of conversation for a week or two. So it's far from the first time that anyone has been, as Matt said, you know, thinking about this or worrying about this or considering how to deal with it. So important to remember that. But to me, like my just pulling back from an investor's perspective, and I kind of went through this when I was first coming into

Bitcoin and kind of understanding it when looking at this, this tail risk, you know, even if you just, I think you just have to assess it on kind of an expected value basis, which is the, you know, how you should probably look at kind of like a multi-node analysis of virtually any investment. But if you very simply just decompose the quantum computing bear case for Bitcoin and, you know, say like there's a reality where you have doomsday scenario and developers and wallet providers, et cetera, are not able to combat sudden, you know, shifts in the quantum landscape and Bitcoin goes to zero as a result of it kind of overnight. You could think of that as let's say that's a 50 percent probability of that happening. I think that that is probably

overstating it by multiple orders of magnitude based on everything that Matt said over the last half hour. But let's just say to be very conservative and aggressive that it's 50 percent chance and in the other kind of branch of reality there's a 50 chance that bitcoin that that doesn't happen and bitcoin generally proceeds on the adoption path that we think it's going to and the bitcoiners are directionally right and bitcoin eats 10 or 20 or 30 or 50 or something of global wealth and you have bitcoin at the end of the day over whatever investment horizon matters to you 10 20 50 years um you know at a 50 100 200 trillion dollar market cap okay in that reality bitcoin is multiple millions of dollars per per bitcoin and then apply the 50 waiting to that

and you've got you know probably multiple millions of dollars even probability adjusted so you add those two together and what you get in the expected value calculation there is multiple millions of dollars bitcoin is you know a 20th of that or a 50th of that or wherever the math would shake out for you depending on how you want to think about its ultimate potential and so from from that basis, even if you think there's a 50% chance that Bitcoin zeroes because of overnight quantum computing risk, it is still a screaming buy here on an expected value basis. So it's just important to remember always, like when these kind of FUD categories come up, the prize that Bitcoin is playing for is so massive. And it has, I think, such a good chance of capturing some

version of that prize, that even these tiny, you know, left tail risks, if you applied massively high probabilities to them that are probably not justified, you still probably come to the conclusion that you should buy Bitcoin. So I think it's just important to, to frame the whole discussion, you know, from, from that perspective for, for an investor. No, it's very, it's a very good way to put it. And I didn't even think of the expected value calculation before you put it in the show notes. And it makes a lot of sense, even if you do think it's a significant risk, which john mentioned probably isn't but if you even want to put that type of risk on it turn the dial up run the slide up to 50 chance like it's still a very good risk risk adjusted time to get into

bitcoin um yeah so that's what's great about this industry um being able to get people like matt on who's done incredible work for the Bitcoin protocol, now the Lightning Network. I feel very fortunate to call Matt a friend and be able to send him a text in the morning and have him on the show to walk us through what's going on. But there's a bunch of other stuff going on in the industry. Grant, you've been a bit quiet.

We have on the list to talk about our roadshows that we've been on. I was in the Middle East. You were traveling here in the United States, talking to family offices and i i think it'd be interesting to get your perspective on the state of u.s family offices and how they're viewing bitcoin right now based off your travels sure uh i guess maybe i would start with just my my thoughts on this the last however long we were going on quantum um which would be like i think the market agrees with with john with you with what matt said uh it's sort of like the simplistic way to say what john just said um you know if

there really were a a seismic shift a catastrophic development that suggested there's a much more meaningful threat to Bitcoin, I think that would be reflected in the price. And I haven't checked the price in the last 20 seconds or so, but I'm pretty sure still moving upwards. So, yeah, I think that none of these questions or criticisms are new. We've seen them for years. But in my travels, I've been spending a decent amount of time with these types of groups. And I would say by far, you know, John, you said it's like one of the most common 20 questions or so that you get. Even before the Willow Google announcement, this was the number one question I've been

seeing. But even before that, I mean, I understand why afterwards it is, but for some reason or another, it's on top of everyone's minds who's not really paying that close attention to Bitcoin. I would say that people generally in the family office crowd are definitely getting more interested in paying attention. MicroStrategy has caused a lot of attention to the Bitcoin space, all the positive regulatory backdrop and everything that's happening in DC as well. But I would say it's still really early. There's still a lot of groups who haven't really started to dive into it. And so they're reciting a lot of the common questions that we always get.

But inclusive of this quantum computing question, I never really thought I would be spending so much time on that question. But here we are. yeah it's been around for a while and that's i think one thing i would add to this broad conversation about quantum computing is the caliber of individuals like matt corallo and others focused on the bitcoin distributed software project is unmatched at least in my my bump-ins with with other um protocol experiments that are going on out there protocols that are being worked on i think um we're in good hands and it's one thing that we should be mentioned there are a number of open source contributors cryptographers that

spend a lot of thankless hours thinking of these problems and putting uh their fingers to the keyboard to actually solve these problems to create solutions bitcoin is an open source distributed software project at the end of the day and there are an incredible amount of highly talented incredibly smart individuals focused on these problems and when it comes to the specter of quantum computing and its threat not only to bitcoin to the world like i actually feel most comfortable with my money parked in bitcoin knowing that there are some of the smartest people in the world focused on ensuring that bitcoin could survive the the emergence of a quantum computer which as matt mentioned is still in question there have certainly been um some some

checkpoints that have been reached and some progress that has been made but i think still if you talk to um many people many physicists that it is still a question whether or not it's even possible at the end of the day it also has i mean bitcoin also benefits from a pretty unique dynamic where there is a deeply embedded incentive for the developers that you're talking about marty to to get it right and to think about this stuff proactively and to move quickly to the extent that they need to to um have to come up with some kind of solution because we're talking about money here right we're talking about a monetary network and the downside path and of bitcoin having a you know catastrophic event like this is that a lot of developers, you know, lose significant value

that they've stored in the protocol. You don't really see that with a lot of, with any, almost any other open source project that's, that's kind of non-monetary in nature. And it's relying on, you know, either a benevolent dictator who just really cares about the project or a team of people that distributed people that just really, really care, but they don't necessarily have a direct monetary incentive or closed source software that's, you know, behind the walls of a for-profit company you know maybe if you're the cto with a large kind of um equity position in the company then a breaking change some some issue with the software would mobilize you to move really quickly and aggressively to figure it out but there's a lot of software in the world the point is there's

a lot of software in the world that does not kind of come equipped with this um built-in incentive to to get it right and to treat it well and figure these things out you know well ahead of time and And so I also feel comfortable that the incentives are very closely aligned between us as holders and the people who are working on the project. Yeah. Go support your local open source dev. Our partner, Matt O'Dell, co-founded OpenSats. So if you're looking for a 501c3 to donate to,

as we head to the end of the year, you want to donate your money to save on taxes and you want to contribute to the open source development of Bitcoin, OpenSats is a great use of those funds. Others like Brink exist as well. So if you want to support individuals like Matt and open source devs working on Bitcoin focused on these problems,

that's one thing you can do to contribute. Bitcoin Mena, should we talk about it? I'll switch. I'll take off the moderator hat and throw it to you, John. And you have it on the list. What do you think we should talk about as it pertains to Abu Dhabi and the week that was? Yeah, absolutely. I mean, you know, for those that don't know, Marty was over at the Bitcoin Manic Conference this week.

and among various other highlights, participated in a debate on the merits of Bitcoin versus crypto broadly with Tron's Justin Sun. And we can play a clip from that or not. I'll leave it up to you and Logan. But, you know, I guess it struck me that that this is even still, you know, a conversation that kind of needs to be to be had. It's something that is on that same list of objections to, you know, why Bitcoin? Why are we interested in Bitcoin? Like, you know, to be out competed won't there be other chains that do xyz thing better uh faster whatever the case may be um over the course of the last five years i feel like the chorus on on that argument has gotten a lot softer thanks partially to the the blow-ups that we saw from broader crypto and

d5 in the last cycle um but to hear you tell it marty they're still um you know we're still very early and there's still a lot of pools of big pools of capital um in the middle east and elsewhere that are well intentioned and trying to understand it but still you know are just kind of coming to this conversation again so you know curious to hear your takeaways on that debate and then also you know what it says about um the the broader conversations you were having at the conference off off stage yeah logan's logan's got up so listen the first minute of the debate and uh Please excuse my aggressive hand motioning. And apparently I don't know what to do with the mic in my hand on stage.

So crypto changing narratives. I mean, it went from Bitcoin's too slow. It's too dumb. It doesn't have enough transactions. We're going to create a bigger, a better one. Then it evolved to ICOs. You can launch your own token. Then it went to DeFi.

Now we have meme coins. And you're seeing this acceleration of these new narratives. And they're falling flat even quicker. I think the meme coin narrative, what we're seeing on platforms like Pumped Out Fun is an example of this stuff just speed running as the new narrative arises over time. And I think particularly as we head into this new era of nation states adopting Bitcoin, I think the opportunity cost of playing in crypto and trying to chase new narratives is simply getting too high. I think nation states are recognizing that Bitcoin as a global reserve asset being integral is a monumental change in terms of how Bitcoin is viewed in the eyes of not only governments, but everybody around the world. And if you're in crypto trying to create a new narrative and trying to say that Bitcoin is not good enough, I think we're at the point where it's objectively false. Yeah.

So it was interesting debating Justin Sun. very charming which uh was to be expected very nice and he essentially agreed with with all the points i was i was making on stage and so i think even those in the crypto space have somewhat conceded like yeah bitcoin's winning money and um crypto exists he described it as a museum for people to go do fun things with and um when it comes to allocating capital and thinking about um generational businesses and wealth that can be accrued i think it's pretty clear to us at least and should be to others that bitcoin is where you should focus your your attention and your capital um but yeah there there was i spent a week in abu dhabi first time in the middle east it was uh

really eye-opening experience um really overall great experience just getting to meet people um in the uae and that part of the world and get their perspective on bitcoin um at the bitcoin conference everybody most people not everybody but most people were full bore on bitcoin and excited about what's going on uh in terms of bitcoin as and its role in this geopolitical game theory that is playing out as trump comes into office here in the united states it was also Abu Dhabi Finance Week and so I stayed an extra day and went to an event and that was completely different the idea of DeFi and the tokenization of real world assets seems to have a lot of large swaths of capital I would argue confused they're certainly enamored by and so there's a lot of

projects that are looking to tokenize real world assets enable people that hold those tokenized real world assets to sell them on secondary markets use them as collateral in d5 products and if you squint um you can you can see some of the epic blow-ups that happened in years past beginning to um beginning to bubble up in in a new new package um yeah i think when i said on stage that uh the opportunity cost of playing in crypto markets and not focusing on bitcoin is is getting too high if the us announces a strategic reserve and others follow suit um you're taking a big risk by putting your bets outside of bitcoin in the broader space of digital assets in my opinion yeah i love i love that point that you made um in in that clip there that it's all well and good

five to 10 years ago when Bitcoin's fairly nascent and, you know, sub $100 billion, sub $10 billion market cap. And there are people who certainly could kind of see the future coming and we're arguing for a kind of Bitcoin maximalist strategy, if you want to call it that from that point, but maybe more understandable to, you know, want to play around and dabble in all of the quote unquote innovation that was happening on other blockchains. But it's a great point that if we're now at a $2 trillion and looks like headed higher and we're targeting top five assets in the world by market cap, nation states appear to be much more interested in getting involved here. There's a strong argument that the time has passed to kind of play around and dabble and

the time is here to really focus on where 99% of the economic value long-term is going to be generated. I think it's a great point. To that point, I guess there was a meme if you were around kind of for the last Bitcoin cycle that the institutions are coming. You know, we heard a ton in 2020 and 2021 didn't really materialize until kind of last year. And then I think we can safely say with the launch of the ETFs, the institutions, you know, very much did decide to come. They just maybe waited until a more opportune, um, moment in the price. But now the meme maybe is, is the nation states are coming. So Marty, curious to hear from you, having gone over to a part of the world where there may be much more kind of progressive nation states out there kind of

thinking about the Bitcoin, uh, strategic reserve concept. All right. Are, are the nation states coming? Are they here? I didn't talk to anybody directly from the nation states, but, uh, I mean, And that was a rumor during the whole Bitcoin Mena conferences. You should be expecting. I mean, David Bailey publicly was tweeting that there's going to be a big announcement and behind the scenes at the conference at the deep stage, people are saying, who knows? It's hearsay. But the rumors were that these nation states have gotten in, in size,

um but they didn't want to announce publicly because why would you you incite um an incredible run on on bitcoin when you could accumulate more cheaper i wouldn't be surprised i don't know again hearsay rumors uh i think it's pretty safe to say that there's likely at least one nation state outside of uh bhutan el salvador uh and russia and venezuela and the united states and china that are accumulating Bitcoin, whether that be a confiscation or overt open market purchases, I wouldn't be surprised if a large oil and gas producing nation in the part of the world I was just in is buying in size.

Bhutan was, I mean, they were exposed, was it, they got mixed up in BlockFi or was it something else? BlockFi and Celsius. BlockFi and Celsius. so we already knew that they were mining bitcoin but and maybe i missed this but i heard in the discussion that david bailey had with cz during that conference that apparently they've been doing it for a long time it wasn't like they decided to get into it a couple years ago um maybe that was already old news but i'm pretty sure they had mentioned uh having been mining for something

like 10 years was that was already well known i don't know if it was 10 years i know post so what happened with the kingdom of bhutan their sovereign wealth fund which is a quasi-private entity drug holdings um it was revealed that they got they had assets on celsius and block fine when the bankruptcy proceedings came out and you had public disclosures of who got caught up as a creditor in his bankruptcies drug holdings was on the list and if i remember correctly at that time uh the king of baton essentially had to hold his hand up and say yes we've we're in bitcoin we're still in it um and if i recall correctly they said they'd been mining since early 2020 um so i believe two years before it became public that they got caught up in these bankruptcies and so they've definitely

been in it for at least a cycle yeah um and since then they've publicly leaned into it announced partnerships with bitdeer to expand their mining footprint and um i don't know if they wanted this to happen but ark arkham labs has what they believe to be um drug holdings bitcoin wallet that you can track and now they have over 13 000 bitcoin which is over 7 million sats per capita for the kingdom of bhutan which is not bad that may be hard to top by by any nation i haven't i haven't run the numbers but uh that's a pretty solid ratio to be starting out with yeah yeah that's a good kpi for sovereigns out there to target sats per capita how high can it go um yeah it was the uh it was cool it was not a fun not a fun travel experience it's 18 hours on the

way there 26 hours on the way back but um i'm really it's the abu dhabi and the uae specifically seems motivated to really lean in to bitcoin and broader crypto and that that's what i wanted to bring out the big meme of real world assets and um i think john it would be good to hear your thoughts on the what we believe like arc arc what many would deem to or what many would label as contrarian in the space is this idea of the bitcoinization of finance versus the the de-financialization or defy decentralized financialization and sort of pulling it into the crypto world instead of bitcoin eking into the financial world as it exists today yeah i mean i think um that's just

i agree and i think we all agree with kind of the the impetus behind a lot of what led to and encouraged the growth of kind of defy uh in the prior cycle and as it exists today and there are people today that you know maybe look at broader crypto and think that that's not sustainable but I want to build other types of similar decentralized finance platforms and protocols on top of Bitcoin and with Bitcoin. And it kind of move economic activity away from the existing financial infrastructure that exists traditionally and kind of just recreate it all on on Bitcoin kind of natively without having to touch traditional financial rails. And I do think if we move over time to a hyper Bitcoinized world, if you want to call it that, that's naturally how things will develop and evolve. If Bitcoin becomes store value, medium of exchange and unit of account broadly for essentially all economic activity, then they're going to be Bitcoin denominated capital markets, too. Right. That's that's inevitable.

I think that's also probably 20 plus years away, depending on how quickly adoption moves. And in the interim, we've got anywhere from, it depends how you want to define it, but $450 to $900 trillion of assets and wealth tied up in the existing traditional finance system. Some of that can rotate relatively quickly and is rotating quickly out of stocks and bonds and real estate into and out of precious metals like gold into Bitcoin. You see everyday examples of people doing that at the institutional level and at the individual level. I think everyone on this podcast has done that with their personal balance sheets. And we know people who have done that. And so that is a driver. But there are orders of magnitude more dollars locked up in structures that can't just do that, whether it's because of volatility concerns or institutional mandates or just the general, what Buffett and Munger would call the institutional imperative to just to not rock the boat.

and not take the career risk of liquidating some fund strategy and just putting it into Bitcoin. And so that's probably good for hundreds of trillions of dollars that are not just going to flip and become Bitcoin overnight. But what they can do and what they increasingly, it seems like they want to do is get access within their existing structure to Bitcoin price exposure in one way or another or Bitcoin linked products, whether that's Bitcoin backed lending, Bitcoin credit, certainly what Michael Saylor has done over the last year and change with his aggressive accumulation strategy that has tapped into the traditional convertible debt and markets and the equity market. All of those things, I think, are examples

of ways to get exposure to Bitcoin and touch Bitcoin and benefit from its appreciation and scarcity without actually flipping entirely into you know turning a a trillion dollar strategy taking that from you know private credit uh directly and just you know holding spot bitcoin with it i think there's going to be growing demand for that um and you know it's it's not going to be as simple as all of that just liquidating and becoming bitcoin it's going to kind of need to exist within you know existing structures um and so i think that there's a huge opportunity for uh creative entrepreneurs and founders and those that can kind of navigate the existing financial system well to design products that can um cater to that demand and i wouldn't be surprised if

increasingly there's a lot of appetite for that from overseas sovereigns as well as you know existing um pools of capital in you know london new york and tokyo etc yeah the andrew huns from battery was over in abu dhabi and i spent a lot of time with him while we were there and i he expressed this on i'm trying to pull up the this week's time stamp to find the name of the show if you haven't subscribed to 1031 time stamp go to 1031.vc click the time stamp and subscribe but andrew was it's the less signal more noise podcast yes less signal more noise with pascal or less noise more signal sorry whatever whatever it may be but search that you'll find it yeah with pascal from um murky bauman in switzerland and i think the

way andrew described bitcoin as this collateral asset is just a tool and you can think creatively about structuring um products around this tool um and there's many different flavors and many different ways in which you can implement bitcoin into these different strategies we're just scratching the surface on how this is going to materialize um and to that point i think we have it on the list as well micro strategy um is has found a way to leverage the tool of bitcoin to access some of this debt market capital and they've done it so successfully that they were officially added to the nasdaq 100 uh as of last friday afternoon um so i believe they started trading in the nasdaq 100 yesterday is that i think i think it takes effect uh next monday

the 23rd next monday okay um and one of the bloomberg guys is estimating a 0.47 percent weighting in the index what's the how big is how big is this for micro strategy as a company bitcoin more broadly and those who hold the nasdaq 100 index are passively going to get exposure to bitcoin now yeah i mean it makes them the i believe the 40th largest uh would be the 40th largest waiting on that list somewhere maybe 40 to 60 somewhere in that range um and yeah i think passive is the is the key word right there's uh 300 billion dollars roughly in a um managed by qqq um i think it's you know maybe second only to spy in terms of total aum and popularity. And so the SPY being the S&P 500 ETF and the QQQ being the ETF that tracks the Nasdaq.

And people have been trained over the last 20, 30 years to kind of immediately DCA in the same way that anyone who's listening to this, you know, has been trained to kind of DCA paychecks into Bitcoin. Those who are not on the Bitcoin standard yet or have not really gone down the Bitcoin rabbit hole have been trained to do the same thing into a few kind of broad market ETFs, particularly SPY, QQQ, and maybe a few others. And so you've got now a situation where starting on December 23rd, all of those flows every two weeks, every month, whatever the case may be, when paychecks hit and they immediately get turned into QQQ buys, all those people who are making those buys are going to be effectively subsidizing MicroStrategy's Bitcoin accumulation

strategy. And they will, you know, indirectly on like a third or fourth order kind of exposure, have exposure to the price of Bitcoin in a very real way, in a levered way. And, you know, I think that's something that the people that have been very, very bullish on the MicroStrategy story have been calling for a long time that MicroStrategy was going to just based on their accumulation of Bitcoin, Bitcoin's price, they were going to hit a market cap level that would enable this to happen. And the inevitable result of that would be just yet more capital flowing into that strategy to create demand for microstrategy equity that then MSTR can issue into to go buy more Bitcoin. So it's, you know, tough, tough to say what the flow impact is going

to be on Bitcoin. But it's certainly a new dynamic, I think, with probably the most the world's most aggressive buyer of Bitcoin that we're aware of now having passive flows kind of coming into the stock indirectly that they can issue into to just pour more gasoline on the Bitcoin purchase fire. So, you know, at the very least, I don't think it's bearish for the price of Bitcoin. I'll say that. Grant, anything else? Not really. I mean, I think that among the crowd that of these let's call them institutional investors that i've been talking to there is a pretty there's a pretty wide viewpoint or pretty common viewpoint that this trade is going to blow up for micro strategy like a lot of people there are lots of people who think what they've done

is genius and um i certainly think there's a lot i mean there's lots of capital that for whatever reason is not comfortable or not not allowed to invest in bitcoin directly and what micro strategy has done to sort of slice and slice up different ways to get exposure to it has clearly struck a nerve and there's tons of demand for it But but there is a common viewpoint that like this is going to blow up for them somehow, which I think is just interesting because they don't really know how they're just sort of saying that. So it's interesting to imagine, are there scenarios like that, that they really could come to bite them? But not obvious to me that that's a significant risk. So, yeah, I don't have anything else to add on that.

I get the instinct from pattern matching to last cycle or to prior cycles where when you combine anything that looks like leverage and Bitcoin, eventually that blows up. We've just seen it time and time again. There are good reasons for that. Bitcoin is incredibly volatile and it can have 200% pumps within a couple of months and it can also have 50 plus percent drawdowns within a couple of weeks. Traditional leverage generally just doesn't mix well with something like that as the collateral. If it's not managed well, if the LTVs aren't appropriate, and if there's constant marking to market, there are other ways where Bitcoin is fantastic collateral,

but the structure has to make sense. I would actually posit, I think microstrategy is one of those structures where it does make a lot of sense. It makes much more sense than the, you know, casinos and DGN kind of bucket shops that we saw over the last couple of cycles that were much more vulnerable to, you know, a liquidation overnight, you know, a sudden wipeout. And I think the key is that the, you know, none of the debt is secured. There's no mark to market concept. It's all convertible. And I think they're in just a much different positioned than most of the traditional levered Bitcoin plays where I think in a lot of cases, if you run the math over a multi-year period, the stock can go down a lot in bearish Bitcoin

scenarios and scenarios where the NAV multiple collapses. But I think there are a lot of cases where stock goes down a lot, but Saylor never becomes a forced seller. And so he can just survive till the next cycle, assuming another cycle exists and ride that wave. And so I think you have to believe the way that it would blow up in my view is we have an 80 plus drawdown and we stay there for like multiple years to the point that the converts are no longer in the money and you have um an event where they have to be paid back uh at par and sailor either has to issue a massive amount of equity that you know further causes a death spiral or he has to sell a bunch of bitcoin or something like that but i don't think it's a traditional levered bitcoin play

like we've seen before. What I'd worry about more is the miners trying to do the same strategy. I won't name names, but there are large public traded miners that are doing something similar, and I think they're trying to start doing something similar at scale. And I would worry that they are potentially in more of a position to become for sellers much more quickly at the the next Bitcoin bear market, which I think, you know, I know Marty believes it's a super cycle and we're never going, you know, never going down again. But if it did happen, that's where because of the razor thin economics of that, you know, that kind of business and the capital intensity and the existing, you know, debt burdens that are on some of those some of those companies,

it seems like you could see a much higher likelihood of that strategy eventually blowing up and leading to you know for selling of bitcoin that that then ushers in you know the next kind of liquidation cascade for people yeah that's probably what i'd worry about yeah their cash flows or their sats flows are directly correlated to uh the price of bitcoin so they could get sort of the double whammy and even though it might seem at the outset uh launching all these zero percent interest convertible notes well that seems pretty uh cost effective and very manageable on the uh the p l just from a cash cost perspective that doesn't mean that there's not refinancing risk and the refinancing risk is sort of like one of the major risk uh for those those groups

yeah i guess add my thoughts as it pertains to microstrategy specifically the only question i have is like does the strategy hit like a scaling limit particularly taking their cash flows into consideration like do they reach a point where their cash flows aren't sufficient enough to scale the convertible debt strategy um as high as they would like to which begs the question i mean sailors talked about this publicly like eventually they want term like a strategy into a bitcoin bank that does introduce new revenue streams by doing things with their bitcoin and john and i were actually talking about one of the ways in which that may manifest and um in the future and it's a topic that is frowned upon due to the blow ups that

have happened particularly with celsius block fi genesis which got um jeb and i earned customers caught up which is like bitcoin yield and it's hard it's a subject that behind the scenes we've been talking about um how to approach tactfully because people here yield on bitcoin and have a a visceral reaction and that visceral reaction is warranted based on everything that's happened historically in markets particularly participants went to get yield on your bitcoin but the maturation of bitcoin insurance products and the ability for people to put bitcoin up as pools of capital in insurance products and reap the benefits of a split of the premium

paid for those insurance policies is one of the risk-adjusted ways to get yield on your Bitcoin that makes somewhat sense to me and could be something that MicroStrategy may want to think about getting into if they need to produce more cash flows to continue the strategy. I feel like the yield being a dirty word, again, like the pattern matching makes sense.

I think the underlying issue with the last cycle's yield is that it was based on unsustainable phantom economic activity. It's not so much that there was an attempt to get yield, it's that the underlying producer of that yield, it was like a recursive perpetual motion machine that made no sense. And there are definitely going to be more of those in the future. But if you imagine a world like a fully hyper Bitcoinized world or a world where there's a ton of capital already in Bitcoin, there will still be economic activities taking place where it makes sense for me to invest in your project at some sort of fixed income type structure and receive a yield on it. And I'm putting capital at risk to do that. In that case, there will be default risks. Some of

those will blow up some of those won't work out i won't in some cases i won't get paid back at par but i think there will be a lot of um scenarios where and a lot of businesses that do generate you know uh bitcoin yield it'll be a higher hurdle than fiat yield for sure and grant's talked about that a lot with his um writing on writing and talks on sats flows which i recommend everyone should go check out but i don't necessarily think that yield as such is the problem it's that the yield that we've been able to generate in broader crypto over the last 15 years has been based on you know uh fairy dust and and you know smoke and unsustainable perpetual motion machines that we're always going to blow up yeah i spent a matt dines from build asset management was over

you know abu dhabi as well and i spent a lot of time with him and he brought up a good point we should actually have him on to to walk through this this um i mean he's the the credit guru within bitcoin and he was making some good points about the literal capital um limitations that exists within the convertible bond market specifically like there's i believe only 80 billion dollars worth of corporate convertible bonds i think that's how large the market is now so you have scaling limitations there unless that market expands because this strategy proves to be worthwhile but you'd have to imagine with um sort of risk mandates and allocation mandates from these credit funds they may just be limited to what they can actually allocate to the convertible

bond market specifically. And we had some really good conversations about the evolution of Bitcoin being incorporated with different types of corporate debt markets. And I think he has some really, really good ideas. And I think the gist of what he was getting at is that we're going to evolve from this ability to speculative attack these convertible bond markets to a more mature state where a business producing healthy cash flows and cash flows that are increasing is going to be an imperative to tap into these the other corporate bond markets that exist yeah i could i could definitely see that being the case we'll uh we'll have to get matt on to to talk about that yeah yeah it's been a long week i mean it's been a couple weeks since we've

on this i'm just thinking back the um the night before i left for abu dhabi or the night i left for abu dhabi i was in new york doing uh the unchained signature client event at pub key with andrew hones that was another thing on the subject of bitcoin and corporate debt i think that's one thing that's beginning to materialize now is this this duration curve you have something like unchained lending deaths which is short duration uh high interest rates and that's one we've been talking about internally at 1031 and publicly and all the shows is that it seems like a mispriced um credit product um considering the the way in which the bitcoin secured and that the track record of unchained's desk and other products like it specifically um and what

andrew is really getting at when i think what battery is trying to attack and matt dines and the build asset management team is trying to facilitate as well as this this materialization of a duration curve where you have different types of credit products that offer lending over different durations that lock up bitcoin across those durations and you begin to see a yield curve formed which makes it easier for capital allocators to make informed decisions when they're interacting with these types of products too so that's another thing to look out for as we head into this next cycle and the bitcoinization of credit markets continues in earnest we uh i will say last last comment from me um we should note we were not over 100k last episode

that we did so uh we we promised a new episode with every uh major new all-time high and i think we we fell down on the job a little bit but we can maybe have an excuse since uh we had a a lot of travel over the last couple weeks but uh to just to officially document it we are now over well over 100k and uh i'm not going to make a call on whether we go below again but i think the stars are aligning to feel very bullish about, you know, the next the next year. I mean, if if we're wrapping up and providing last comments, the last thing I would say is a lot of people are getting really excited about the price and rightfully so. But I find it really interesting that I don't see many people making the connection between.

all right well if the price is going up like what does that necessarily imply for adoption in the space and what does that imply for the companies building the products and services to serve you know people who are holding bitcoin that make it easier to access it and use it and hold it and do interesting things with it and borrow from it and we're seeing very positive momentum within our portfolio. Uh, we've been working on some really exciting things and that's what I'm really bullish about. Uh, you know, there's the saying like lightning in a bottle. Like I feel like we have multiple lightning bolts bottled up and, um, what we're seeing in the price is certainly interesting, but I think, um, more people will start gravitating

towards what's happening in the ecosystem from a technology infrastructure perspective. And I think there's going to be going into next year, there's going to be a lot of strategic interest, not just in Bitcoin as a strategic reserve asset, but the companies that are building on top of it. So I'm very excited about that. What do you guys think? Are we going to get another one of these in before the new year? Should we say happy new year to everybody? Or We've got one more in us. I think we can pull it off. Okay.

All right, kid. Let's do it. You know I got it, I mean, I was just wondering. Nobody's going on vacation here, are we? No. No. Another heartfelt thank you to Matt Corallo for joining us. Very busy man.

Hit him up this morning. He was gracious enough to join us for what was supposed to be 10 to 15 minutes turned into 40 minutes. I hope his explanation of quantum computing and whether or not it is a threat to Bitcoin. Help quell any fears you may have had after watching the All In podcast last week. If you want to get the Bitcoin Alpha,

you come to this podcast. You don't go to All In, okay? It's in the name after all. The Bitcoin Alpha is here. It's not on All In. All In's this nice shiny object. They like to talk a big game, but the Alpha's here.

We'll see you guys before the end of the year.