TFTC: A Bitcoin Podcast - Rabbit Hole Recap: Week of 2018.09.10

Episode Date: September 12, 2018

In this week's episode Marty and Matt discuss: Gemini & Paxos fiat backed 'stablecoins' - https://twitter.com/matt_odell/status/1039233025303879683?s=19 Robinhood fueled Doge pump - https://twitter.com/matt_odell/status/1035384169357033473?s=19 Unraveling of the ICO bubble - https://www.wsj.com/articles/olaf-carlson-wee-rode-the-bitcoin-boom-to-silicon-valley-riches-can-he-survive-the-crash-1536681364?mod=e2tw & https://twitter.com/matt_odell/status/1025102286396243970?s=19 Laurent's new post in PoW series - https://medium.com/@laurentmt/cliffhangers-cb87ed47124e SEC ETN Suspensions https://www.sec.gov/litigation/suspensions/2018/34-84063.pdf & Bittrex, Malta, and Regulatory Arbitrage - https://support.bittrex.com/hc/en-us/articles/360001354486. & https://www.bloomberg.com/news/features/2018-09-11/why-the-eu-is-furious-with-

whammy welcome back to rabbit hole recap this is matt odell i'm here with marty bent what's up freaks what's the bitcoin price bitcoin price right now that's a great question let me open up the tab it is six thousand two hundred ninety eight dollars and fifty four cents on coinbase pro okay so last time we recorded you guys dumped on us while we're recording yeah price went down like 600 bucks while we're recording yeah let's not do that this time we weren't paying attention and uh the date is september 11th about uh 6 45 at night here on the east coast in brooklyn got a lot to talk about this week matt uh a lot of news a lot of shady shit going on today was a big day in particular but first you wanted to talk about

this i'm very interested to jump into it because i think uh it is a problem that a lot of newcomers have uh the problem is unit bias and we're gonna explain you know doge to the moon as it pertains to dogecoin so dogecoin has it's up like 100 last few weeks 185 i think i was off in the last month yeah fucking insane yeah it's a little over a half a cent um and this is just a meme coin right it hasn't why do you why do you think this is happening when when was it created what 2015 i think earlier than that i think that'd be 20 jackson palmer 14 you might know him he's on twitter he's a he's a socialist a known crypto analyst i said with quotations um he created we gotta speak right to the mic i'm giving him he's giving me miming over there he created dogecoin

it as a as a as a as a joke as a joke coin to deride bitcoiners it was he thought bitcoin was was silly and so he created dogecoin it was a fork of light coin i believe uh and he created it so that the supply would be a really high number an insane number i think it's like 21 billion exactly so i'm not sure exactly how many there are you want to you want to look it up while i continue to talk into this microphone um so basically by having a high number of supply bitcoin has 21 million as its base unit by having a high number of supply it looks like each coin is really cheap um he thought that would i don't i don't know exactly what he thought but most alt coin developers do it because it tricks people into thinking the coin is cheaper uh he would

say it's out of better intentions than that the year 2050 supply according to on-chain fx is 280 million it's a lot of comments 53 000 yeah 280 milli not even a billion not 100 that's 280 billion billion i thought that last comment was a period 280 billion the The current market cap is, what, like $500 million? $730 almost. $730 million. So it's not cheap. It looks like it's half a cent, but it's not cheap.

Just because you split the pizza pie into more slices doesn't make the pizza any cheaper. Exactly. So this is where we're getting into unit bias here. This is a problem with a lot of people in the space and a problem with, I would say, the way Coinbase and other exchanges have when they roll out these coins. They don't really have any educational tools to make retail investors abreast to these type of facts. And specifically in this case, it was Robinhood, which is they have, out of all the retail avenues, they probably have the least educated people since it's a traditional equities platform. It's a traditional stock platform. it's not for for for bitcoin traders or crypto traders on a robin hood side note here they

actually just got called out today in a publication i forget which one it is by uh giving high frequency traders data to trade against their uh users against that's a nice monetization strategy it really is uh so basically so you have all these uneducated retail they see the price per coin is under you know under a cent per coin and they think that's cheap because they don't understand that it's they split the pie into more pieces and and they have this awesome troll box on robin hood i didn't know robin hood had a troll box where they're inciting everyone they're like oh doge to five dollars doge to ten dollars we're going to the moon and you got all the memes and stuff and meanwhile you have jackson palmer here who's trying to make fun of bitcoin doesn't

own any doge presumably you know and and and he can't do anything to stop it he's like created this little virus that he can't do anything and he's one of the more uh patronizing members of the community or community we don't say community he's one of the more patronizing uh cryptocurrency enthusiast out there meanwhile his creation is going to cost retail shit ton of money yeah and he's got some socialist views which i don't really uh i don't really find that acceptable in today's day and age but that's a conversation for another time so but anyway these altcoins right you never seen altcoin you very rarely see an altcoin with less than 21 million supply it's it's a it's a common technique litecoin used it you know a lesser so they have what they have like an 84 million

dollar 84 million four times supply quarter the block time ethereum did it they have 101 million supply right so that's that's over five times bitcoins um they they all do ripple does it to a huge extent and the main reason is they it's it's easier to pump their bags to retail if each coin looks looks cheaper so just keep that in mind yeah and there was there was something coupled with the robin hood news as well didn't they have like a doge theorem doge theorem yeah that's just a bullshit pump and dump kind of thing yeah be careful of uh if you guys are newer to this space be careful of the the big announcements that come out they created they created a token on ethereum anyone can create a token on ethereum that's one of the main things dragging down this

market right now is that you had all these tokens with ridiculous valuations right that that were just anyone could create them they have complete control of the supply so someone created doge therium and everyone who owns dogecoin gets one of these worthless tokens and they're going to create some kind of centralized bridge between them but it's all bullshit it's just to induce the pump and yeah so doge pumped don't buy it don't short it just yeah definitely not feel free to meme it i kind of like the memes the tamut memes they're fun they have a little one with the dog we got a nice doge dog looking at us right now there is a doge dog in here that's completely unrelated to us completely unrelated to us um yeah so be careful out there be careful

of unit bias when you're when you're uh dissecting this stuff and you should really only care about bitcoin uh in my opinion but on to the next topic which is uh the sec was a 10 or 20 day suspension of this the etn uh that the swedish exchange offers the exchange exchange traded note there's a swedish exchange i forget the name off the top of my head uh most recently fidelity uh gave their clients access to this uh to this vehicle um but it's the stockholm nasdaq yeah it's a stockholm nasdaq it's on the stockholm and there's two coin shares yeah it's coin shares and there's two i think there's an ethereum product product too that got suspended as well i don't think there was no i think it was all right it was two different bitcoin products then yeah i don't

think there was any ethereum products yeah yeah they get suspended for 20 days i believe or 10 days maybe even but uh the reason for the suspension was the inability of the people selling the note uh the broker dealers the broker dealers to correctly categorize uh the note uh they there was they were um they were labeling it under uh different types of uh commodities categories yeah they weren't they weren't filing their paperwork correctly yeah and the sec didn't want them to have an excuse for that yeah so it's basically non-news none but it's just funny that doge is pumping on robin hood while while this is going oh the broker dealers can't figure it out okay um so that's that's a short one we're going to the third one uh big story in the wall street

journal today i think it really highlighted the incompetence of some of these uh ico funds in particular uh that we're seeing out of silicon valley was a expose on polychain in particular and matt i don't know if you read the whole thing but there's some pretty incriminating lines like these guys are are shooting from the hip and the best part of the article is the pictures the pictures are incredible there's a make sure you make sure you look at the wardrobe um i yeah they it's about olaf carson we's fund who's become you know he's become pretty pretty famous over this last year at least because his his fund has been reporting ridiculously good returns right what is it the article says like two thousand two thousand percent plus yeah that's

crazy um but uh i mean they basically created the bubble right like they it was a self-fulfilling prophecy they got in early into all these different things and they pumped it to all their friends and they pumped a bunch of money into it and olaf pulled a bunch of money out yeah and here's uh and now it's all crashing and there was a lot of uh there's a lot of incriminating lines in this art like polychain basically admitted that they're skirting sec rules by having a fake address in their filing so here's the quote mr crabe one of the friends who's first invested with polychain was among those having second thoughts he had invented his own coin dubbed the Numerar.

Numerare? Yeah, you remember that one. Yeah. It was like the prediction betting, the prediction stock thing. This briefly made him wealthy on paper as investors, including Polychain, bid it up. But Polychain subsequently sold some Numerare, depressing the value in Mr. Crabe's holdings. Mr. Crabe shortly after redeemed his investment in Polychain funds. What he says were unrelated reasons.

Yeah, so this guy invested in the fund, the fund invested in his token, the token pumps. They sell some of the token, the token dumps, guy gets angry, guy pulls out of the fund, right? Yeah, and it precipitates it. And the whole time, Olaf's collecting fees. Exactly. And Jumerare's a horrible name for anything. I couldn't even pronounce it. I still can't pronounce it.

But that's not even the quote I meant to bring up. This is the one I meant to bring up. Yeah, because that was unrelated. He moved, in reference to Olaf, he moved the firm to new offices and converted warehouses. The San Francisco address listed on Polychain's public filings is a fake designed to fool would-be hackers and kidnappers who have targeted other crypto traders. This is going to be such an epic adventure either way,

Mr. Carlson Weiss said, smiling. Like, if this whole thing collapsed, that would be crazy, you know? This is the man who has hundreds of millions of dollars. First employee at Coinbase. First employee at Coinbase. And he pulled out 60 mil. I think they said he pulled out 60 mil this year. i would imagine i would hope so for his sake um but yeah he basically just blasé talking to a

wall street journal uh journalist basically admits that yeah is that not allowed i would imagine if you're an sec right like out of all the things like i'm not gonna give that's the thing i wouldn't give him shit about but that's a good reason right like he shouldn't have like having your real address out there well this is my whole goddamn point though like the i mean but when you have structured products like this like right he has a billion dollar fund exactly like the fact that you don't have the have armed guards instead exactly right but it just shows the lack of attention to detail there's no there was no the the smart money doesn't exist this is what the smart money i would like to think is in bitcoin but the smart money that everyone thinks exists

the guys running the billion dollar funds are really you know they're just as clueless as everyone else and they're and they're just moving cups around yeah on table yeah it's uh and not get caught with the bag is the is the plan yeah so be careful people there's scammers everywhere michael goldstein's been warning us since 2014 i believe uh there was a great article that came out in august that was about fbg which is a different fund that's in yeah that's in china and their whole strategy they gave like a tell-all interview to forbes and their whole strategy was that they were literally pumping dumping these tokens and they talked about how they would pay for blog posts articles social media stuff then they would get it listed on one of the big exchanges

dump it all on retail make bank and then just rinse and repeat and in that article there was a quote from olaf where he said i view fbg as just one of the most talented investor teams in this space so you know that's the type of guy you're dealing with and this is really analogous like pink slips back in the day would you say or maybe even worse because they're just overtly uh taking advantage of what i would call loopholes in the system and the way these markets are structured especially the ico markets where you get in on a pre-sale if you're if you have enough money and if you're in the the upper echelon of the vc community or the the fund community they're 50 discounts 60 discounts and just automatically dump it on retail when it came

out that's what was going on last year oh automatically they have a fiduciary responsibility to dump it on exactly so it's a law breaking securities violation yeah i would say it's uh it's a it's a pretty big moral hazard that's going on right now um and probably needs to be corrected at some point but i think the market is correcting itself right now the price of ether is tanking drop below 180 today for a little bit sweet sweet blood um people are panicking people are there bitcoin is you know has been a trooper it has it really You know, I keep, I think you say it a lot, you know, I keep thinking, is this bear market less severe or is it just because we've been through it before? It's probably a mixture of both and it's probably not over yet.

I doubt it's over yet. But Ethereum seems to be taking, really taking the brunt of it. Yeah. And dragging down the market with it. i you don't really hear that many bear theses about bitcoin right now uh as much as as you hear yeah i think the biggest panic in ethereum i think the biggest bear thesis on bitcoin right now is just pure exhaustion from the retail market there's just not that many of them though you know well we have a couple friends that are talking about like four thousand dollar bottoms

stuff like that yeah um i think that's still possible um but you know maybe some of this ethereum money moves over into bitcoin it seems like that has been the case yeah i mean relatively speaking uh again i tweeted this the other day with i mean and we talked about this last week with the the volatility that's rising in the emerging markets and then as this capitulation is happening in crypto in particular maybe we'll see a clean decoupling in the next 12 to 18 months maybe even sooner as uh bitcoin that's actually fulfilling the use case it set out to fulfill to uh to a good extent i would argue um like these people in emerging markets are not going to be able to deal with these shit coins they're gonna be like all right i want to think that is

dependable i mean the big wild card is is that ethereum you know bitcoin has a small float ethereum has an even smaller float so if if the powers that be decide that you know they that they're going to double down here and and you know continue to try and corner the market then then the price a bottom and then that decouple won't happen right yeah but the the value prop of bitcoin is clear and that's not the case for anything else really uh you know i mean i i i'm not one to i don't think that all coins are just gonna disappear but i think most most tokens will be negligible value they'll be like basically worthless and then and then most alt coins will get completely fucked and some will survive new ones will be born and the whole cycle will just

continue you know for a long time it's uh it's a vicious cycle it's uh it's a cycle though and it probably will happen yeah but ethereum man i mean i mean we had the article about vinny today calling the bitcoin oracle even though he called the top at like nine hundred dollars thousand dollars last spring you know like you can call me the ethereum oracle because because i i called that Ethereum is a bad investment at like 30 cents during the ICO and it crashed so you know

I'm clearly the Oracle no that's bullshit I'm not the Oracle because that's ridiculous it went to 1500 in the meantime you know and that's when it's sitting 6x over where you called the top you're not the fucking Oracle that's true I still think Ethereum is going down

to negligible value I think it will drop below 100 I can see that um but it's not a prediction it's just a thought there's a lot a lot of panic in the the ico sheets today yeah i mean well this is another topic we can get to there was a lot of panic in just like the ico realm in general i guess the was it the sec or the department of justice came out with a statement um yeah re coin and uh diamond coin there was a case right yeah it was a case but then i think there was another overarching comment just like hey that securities laws

apply why and i think didn't we all know that like obviously yes but if you look into the nitty-gritty it's not as uh bearish as initially thought like i think the comment actually when you read into the fine print said we are going to let uh juries decide if securities law applies but juries yes i thought you said juries for a second i was like what's the juries juries jerry yeah i got a classic philly yeah yeah yeah we're going to get so they're gonna let it was a case-by-case basis i would think so which is what but that's kind of what we thought yeah i mean look all these tokens were basically security tokens and they were afraid they were going to fall under securities rules which obviously they would so they pretended they were utility tokens like a lot of them

weren't actually ever conceived as utility tokens they were literally just a way to extract money from retail but they pretended you know like something like civic talking about vinnie right is like that was a clear case for a security token uh the token is completely useless in the system it's unnecessary it shouldn't have any value and but he he pretended it was a utility token he he gave the argument of a utility token to sanction the sale basically right it was a loophole-ish way of yeah then he came out a year later came out a year later and said a token's worthless i've been looking for that have you found that i haven't found it i saw it it was on twitter right yeah he probably took it off for good reason okay if you if you know if you know

the point where vinnie said that that civic was unneeded because we're pretty sure he said it somewhere just send that in to us you know either dm or just blast it out there and tag us in there so we see it that'd be great that would be awesome um but yeah speaking of uh but there's just panic in icos basically yeah sum it up the capitulation is and they have huge treasuries and they want to dump them and yeah uh didn't dire come out and say the the ico treasuries have probably 3.5 percent of total e-supply well the the thing i would say is i think that ethereum supply is extremely concentrated to begin with right so you know all the arguments that bitcoin supply is concentrated i think ethereum is even more so if you do have even if it's only three and a half percent like

that's a it's a large amount especially if it's of the scraps that have gone it's like a mexican standoff kind of situation right because they all see each other's balances yeah so they're like don't move are you gonna move and they all know each other because they all like fucking fleeced retail together they've been all the same conferences and everything yeah i don't know i think we're i think capitulation is in the air could be wrong could be wrong but like you were saying uh like with the with the workarounds that a lot of these funds and a lot of these token projects used to sort of uh to basically try to define their tokens as utility tokens and not securities there's something going on in the exchanges this is a trend you've been following

where a lot more exchanges are accepting uh proof of stake coins to stake on behalf of their customers. And this might bleed into some gray area where this action may drive a good case that these coins are actually securities offerings. Right. So, I mean, I think a lot of us have theorized for a while. I mean, we still, to this day, don't really have established proof of stake chains. It's still very much a theoretical exercise. We do have things like Tezos and Cardano, they run a decent amount of value and they're like semi-case studies. But for instance, Ethereum hasn't switched over. None of the real major chains that conduct a lot of transactions, a lot of volume, are

using proof of stake yet. So a lot of the arguments for and against proof of stake have been theoretical. and one of the arguments that a lot of us have theorized is that the incentives with proof of stake will lead to more centralization in the system and that's because you have advantages when you control a larger pool of of stakeable coins right like not only do you get the benefits of cornering the supply that you normally get by by holding a lot of coins you also get that benefit of of being the the main main point of securing the network right you're it's like you're not only not only are you one of the major coin holders but you're also one of the major miners

and it goes hand in hand right and a lot of times the major coin holders are exchanges right because all the users are most users aren't taking their coins off right they're keeping on exchanges we saw that with coinbase when they used to keep when they were they were way more lax with their utxos we saw we knew how much they were holding they were holding tons and tons of bitcoin tons of ethereum and users are just very comfortable keeping them on exchanges so the next conceivable step is that those exchanges then uh stake the user user funds so any any funds you keep on exchange then they go and they secure the network and get paid the reward for it um coinbase has talked about it they haven't released it yet as part of their rebranding

with the whole Coinbase Pro thing was that in Coinbase Pro, they want to do stakeable deposits. Binance is already doing it with NEO. They allegedly, it seems they're doing it with Strat too, but with NEO, at least they're paying their users

the proportional amount. With Strat, they're not. And then Gate.io, which I would never advise you ever use, it's a horrible exchange, is is now allowing tezos users who hold tezos to to stake their coins tezos even launch yeah it's it's in beta net right now okay um i think that's part of the reason why ethereum people are panicking i mean all these people like once you make it known that all you care about is

like the latest and greatest bleeding edge you know shiny thing then there's all these other ones that you're competing with right they're competing with all the ethereum they're not ethereum's not competing with bitcoin ethereum's competing with all the so-called ethereum 2.0 projects right and i mean ethereum ethereum was was pitched and sold as a as bitcoin 2.0 but it can barely compete with bitcoin v.16 you know so right so so they're actually competing with like all those ethereum 2.0 projects but i i think that eventually what you'll see is these exchanges are going to offer you better rewards than if you than if you stake separately right because they get all that extra influence and they get you you're more likely to trade on their platform

and use their services and all this stuff so i could i i think the incentives of pos are set up in a way that you know users will be inclined to go to exchanges because exchanges will pay them more money to keep their coins on those exchanges yeah it's uh it's a pretty big incentive dilemma uh people that are arguing for proof of stake find themselves in it just makes the most sense like this is what's going to happen i mean the other thing that's interesting about that is that like the legit exchange like the so-called legit exchanges like the ones that are regulated and stuff like coinbase and everything they're not going to be able to compete with like the the bucket shops of the world like the binances and the bitfinexes and stuff because they don't

have to deal with all the regulations so they can give you way more leverage and interest and this and that and all these different things so then all of a sudden you have a network that you know is controlled by even fewer exchanges than you would imagine before and and questionable exchanges right you have you you have a network secured by by exchanges that that a lot of people that support these like the status branch of crypto would would disavow you know they'd be like oh my god i can't believe binance is securing 40 of ethereum or something you know that's crazy yeah what is the argument against this let's steel man this what uh but the argument against this is that there will be decentralized ways for people who have less than a thousand eth to to pool and

stake their coins so they won't use exchanges but i i think it's easier to use an exchange and it'll make you more money so like most people will do that okay yeah i would agree with that yeah like you're like most retail investors again probably aren't going to be able to do the step-by-step technical guidelines to yeah finance says like put your money in the account and then like you'll get more money than if you don't put your money in the account like people are gonna do it right yeah so we'll wait to we'll wait to see how that plays out i am still skeptical that they will ever transition to proof of stake i don't think it's ever gonna happen oh i mean i don't i mean if they do it'll be way messier than people think and i think it'll be a death knell for them

they're kind of stuck if they don't it's the same thing though they don't they're fucked because all the ethereum 2.0 projects are coming out of the gate with proof of stake uh but either way like proof of stake currencies aren't probably going to go anywhere aren't going to have negligible value anytime soon until one of these big ones gets like thoroughly fucked like you need like uh you need a real like oh shit moment where where one of them just gets wrecked so this is a good history lesson uh back in 2014 uh when mint pal was still around that's why so vericoin is a is a lesser-known proof of state coin and it just so happened that mint pal at the time uh in 2014 i believe it was may 2014 got hacked and they were holding uh like i think

40 to 50 percent of all vericoin and vericoin like that hacker took a lot of the vericoin um so that was an instance where an exchange was holding most supply of this coin and they had a hard fork uh because the the hacker could have destroyed the network um just because one exchange got hacked but that was like one of the main arguments for the dow rollback was that oh we're gonna move to proof of stake and like oh we can't have like one bad person having 15 of the coin supply yeah and then like the the argument against that is are you fucking kidding me like why does your security threat model like involve like a person having 15 of the of the currency being able to compromise the whole thing seems you know flawed yeah um does anyone have 15 you know

that's a good question that's a good question i don't know someone does but um yeah so that's an interesting thing uh interesting development uh that matt wanted to expound upon so be something to be cautious of in the future especially if you're bullish on proof of stake um i'm not but i don't i don't think any of our listeners really are i just think it's something interesting to watch especially since the exchanges tend to have a lot of power in this space and this this will amplify their power you know we saw like a lot of the things that that jihan was playing and bitmain was playing during segwit 2x and and and segwit in general where oh are they going to activate on litecoin or are they going to

activated on bitcoin is they were playing all the chains against each other you know and you'll probably you know we'll probably start seeing that with with the proof of stake coins on the exchanges yeah so speaking of exchange power another news item this week gemini and paxos uh it was i think the news was way overblown than it actually is uh so they came out with announcements that they have uh approved stable coins us dollar back stable coins uh gemini is using the erc20 token i'm not positive how paxos is doing it yeah i'm not sure how they're doing it yeah i don't think they are using it probably just because yeah because the ethereum people haven't been talking about it as much yeah so not sure but uh anyway just either way they're

both bullshit uh yeah so let's describe what what what happened well so first of all you have two different types of stable coins right you have the algorithmic stable coins that take a basket of goods and try to they they use cryptographic goods right tokens but but like whether they're tokens or bitcoin or ethereum they have like some like something cryptocurrency backing it that that at least you can prove it in a blockchain right and then you have uh then you have the actual asset backed ones which are basically us dollars in a bank account which is what tether uses which is the number one stable coin and and basically in that situation you have a central party that controls the whole system and and you're trusting them to hold it in the bank account for you right

yeah so that's just like all basically all security tokens are that same model whether it's u.s dollars in a bank account or the empire state building split you know five billion ways um there it's no matter what you have a trusted third party or gold the big ones there's a lot of gold ones like bullshit gold tokens and and you're trusting a third party to to back that asset yeah to collateralize that right in this case is gemini and and paxos i think paxos is working with a bit um so so these entities are regulated entities and one of the reasons people are excited about is because oh we have a regulated alternative to tether right uh the main value prop of tether is that it's not regulated right so so gemini needs to follow all kyc aml laws they can

freeze your funds at will they can buy like you're using paypal like you're using paypal that is more expensive because it's on a fucking blockchain and and it's it could get blocked and seized and all this it doesn't compete with bitcoin it doesn't compete with tether i'm it competes with like storing fiat on coinbase or using cash app to send money to someone right yeah like it's i mean theoretically you can use it in like an ethereum smart contract which is what people are excited about you can have but i think that any of these systems that that and designs that have to enforce kyc aml and and and you're providing identification and your funds can be blocked it will like destroys that whole main value prop and you'll have competitors like tether

or whatever the next tether that comes after it that are going to compete with you and they're always going to do better yeah but it's interesting how crazy people went over this news it was like oh my god this is uh the biggest news for there in a while was because people love the tether fud and they think this could compete with tether uh you know the main risk of tether well you have two main risks you have to trust them i like i i don't use tether i would never use tether as a bitcoiner it like goes against everything i believe in the biggest value prop for these stable coins is trading right like just being able to have some of those i mean the biggest value prop for tether specifically is that traders who don't who are afraid that like bitcoin or

ethereum are going to go down but don't want to expose their identity or pay taxes or stuff like that they go into tether uh it's like we had all the all these exchanges remember in in 2014 2015 it was so hard to to have a usd access point um for your shit coin exchange right yeah it was like impossible like very few that's one of the reasons mount cox was so big and when it fell it was so bad was that there were so few exchanges could get us dollar bank accounts right so like basically the tether philosophy is if you have a bunch of rich people have dollars in their regular bank account like not a business bank account that takes deposits every day right and the tether only gets bought for bitcoin and sold for bitcoin so it never touches the actual real financial

system then you have like this house of cards way of getting fiat into all the different shitcoin exchanges and yeah there's a single point of failure but like it'll last long enough or whatever you know and i think it got too big and eventually they're going to get fucked but and the biggest risk is is the government coming down but that's the value prop right is to end around basically worldwide financial regulation so uh two neutered tethers got yeah so how does that compete how do you have something that's regulated ever compete with something that literally is only thriving because it's a unregulated fiat gateway exit both maybe it's uh maybe it'll be used by like institutional investors like trading desk but then why not just like keep

us dollars on gemini right like if you want to sell bitcoin for us dollars and you want to trust gemini then you send bitcoin to their exchange and you transfer you know you just sell it for dollars and still then you're trusting them anyway right yeah why why add another layer for the main thing is what they're saying is for smart contracts right so like if you had like auger you know you could make a bet and you could and you and you could lock denominated in u.s dollars through the gemini usd but like that's bullshit right because the government's not going to let you bet on things that are illegal through auger using this regulated product like they might in the beginning and then everyone gets fucked i don't know like i they might but that's the same

theory it's like the same ethereum project theory which is break all the laws now take no precautions and then just beg the regulators please please fucking spare me don't you know it's worked up to this point i don't know it's worked up to this point i mean today that's what we're talking about right like that this is this is the it's the house of cards that is is built without any real protections and this is what happens is like they the u.s's big dick just comes down hard yeah u.s filled with big dicks but now it'll be interesting to see how it plays out when does it launch do we know i don't fucking know i don't know soon two weeks two weeks you heard it here first the long time bitcoiners will know we're still waiting

litecoin's supposed to get added to mount cox in two weeks that was the big that was the big one uh that's another thing like stellar's been big in the news this week too a lot of partnerships why doesn't jed mccaleb get more shit so jeb was uh he was the original owner of mount cox and one one of the ripple co-founders oh yes yeah yeah original co-founder of mount cox uh he sold it to carpolos yeah so we'll get back to that original owner mount cox uh founder ripple moved from ripple to stellar founder of stellar dudes made a ton of money out the space back to mount gox like i think people should be shitting on jed more because he handed mark capellas a pretty shitty product it was already broken right and i'm pretty sure

he knew it was doomed to fail and then he kept a percentage i'm pretty sure of the company too so he owned some of gox when it went down yeah um and you know he was like on the inside he knew about like when yeah when those documents leaked whether they were showing the crisis reports and stuff like you're telling me he didn't know yeah and ripple is just like a design scam so but he's one of those scammers that's flown under the radar has been pretty unscathed i would argue stellar is if you're not aware is the is the coin of of the absolute status if you're the you know ethereum's in the middle maybe a little bit more status and then and then you have stellar which is just straight up we're gonna id you it's gonna basically be like paypal 2.0 maybe

slightly better yeah all right and we're gonna control the whole supply and stripes gonna have like 15 percent yeah they invest in the seed round or so they invest in the seed round and stellar is the same bullshit as doge where they just you make your base unit a ridiculously large supply number you know and like we could split bitcoin up into 200 billion pieces you know that It's the same amount of Bitcoin. It's the same ledger, you know, and you would think it was cheaper, but there's no reason to do that. That's just dishonest.

That's just bullshit. Yeah. Unibias. It doesn't make anything cheaper. It doesn't change anything. You can buy a fraction of a Bitcoin, FYI. Yes. I'm sure you've heard that.

Yeah. Be careful of the unibias out there. It's everywhere. But yeah, Jeb McCaleb, I'm going to give you a little shit. Yeah, he wasn't in the topic. Yeah, fuck you, Jeb. I think you've been a little unscathed throughout the years. you've uh you've been part of some shitty shitty things in this industry quotes industry i think

people gave him a lot more shit and then when he like fucked over the ripple guys and was like i'm gonna dump all my funds on you we all you know all right jib he kind of was like there's like a lot of worse people that's funny that's true yeah like they like he tried to dump all of his ripple because they have a huge pre-mine and he got a huge element of the pre-mine and so when he wanted to quit ripple and create stellar which was a direct copy by the way of ripple he was like he announced he was like the ethical thing to do is i'm going to announce to everyone that holds ripple that i'm going to dump all of my ripple and the price just fucking crashed and then they locked him up they locked up his funds they froze that's when everyone really you know i mean we knew but

that's when a lot of people realized for the first time they're like oh shit ripple can just block your funds from because they they froze them they like were like bit stamped you can't sell them or whatever it was yeah crazy centralized uh all right next topic he deserves more shit you're right yeah he does back to bitcoin uh again a light reminder that uh bitcoin core version 0.17 is getting the beta release no release candidate three just came out release candidate three just came out so you can download that test that out test it out if you're a developer uh help help with the testing if you're looking to again if you're looking to get in and sort of you've been looking to contribute you don't know how maybe maybe testing can you can be your uh your jump

into the to the shallow end there's literally nothing you have if you have no bitcoin on it you just run the software you know yeah fuck around with it yeah um and then is this the last topic already no i think you skipped a couple things what do you what do you think is the last topic i was gonna say uh i was gonna talk about what eric melzer brought up today um spoke to someone tonight working on something that has a very good chance of reducing the amount of storage a bitcoin full node needs from over 100 gigabytes to a few kilobytes without a hard fork anyone who thinks bitcoin development is stagnant isn't paying attention i mean this is all hearsay at this point but uh this would be a ridiculous improvement if that's possible yeah it sounds like bullshit to

me okay matt thinks it's bullshit i mean it's just ridiculous so it seems way too good to be true if it's too good to be true it's probably bullshit apparently greg maxwell looked at it and said yeah have you seen him say it or no we just hear he said it right i mean does anybody ever other than reddit does he he's not on twitter he's he's very outspoken on reddit i haven't been on reddit in a while and on the bitcoin mailing list we'll see yeah of course on the mailing list but i mean so let's keep this hypothetical i just i don't think that it's like truly full nodes i don't think it's like really in the dust don't trust verify ethos you know like there's always there's always uh trade-offs right and usually when you see things that that

seem like this too good to be true then they probably are you know too fucking good to be true yeah uh yeah i mean yeah we'll see let's just assume that it might be true there's a lot of development going on in general yeah that's true as well um you want to talk about snore signatures real quick actually let's stay on this real quick because i am excited about snore somebody hopped in uh somebody hopped in my menchies after retweeting this he said if this is true wouldn't this be used as an argument for bigger blocks and i would actually argue it'd be an argument for smaller blocks uh make it more efficient lower the block size a lot of some people want to lower the block size i don't know if that's possible anymore but this says storage first of all okay

so this is just spinning up a full node then the most the most important thing when it comes down to the block size full node debate and everything is is bandwidth right yeah it's it's your internet connection it's not the actual hard drive that's that's that's there that's those are pretty cheap you know roger and co have made sure to tell us how cheap they are they are very fucking cheap you know and and i i i was saying with you last week that an ssd is is better than a hard drive you know ssds are more expensive but all of them are fucking cheap storage is cheap internet is really hard you know is is really hard to have these high bandwidth caps in large areas of of of the world and the larger the internet requirement is the easier it is to attack

a network right because you only have to take out certain areas you only have to degrade degrade connections in certain places that need to fuck up the propagation yeah um so i mean this this this seems like it's more i think i actually i remember eric talking about this in in one of our telegram chats is like the idea is you still verify like the new transactions that are coming through but like you have like kind of an archived history okay right so so in that case it doesn't i'm not really sure but like it doesn't really change it doesn't really change the bandwidth requirements it's simply changing you know the storage requirements right so it'll help it's like a prune it's like with it's the same idea as like something like pruning right

where i i think it might not be the same technical idea but it's the same end game as something like pruning where you're removing historical blocks but you but you still are verifying that the most recent the most recent transactions most recent blocks we'll see i'm going to keep my eye on this it was interesting if true could be cool but we have we have we definitely have one more thing to talk about at least what's that well bittrex just opened up an international office in malta oh and by now it's interesting already opened up their offices in malta bittrex is seattle based correct they're definitely american based yes i thought they were nearish boston but maybe they're seattle i don't know it could be near boston as well

so poloniex is boston right i'm not positive before circle and now they're a circle yeah anyway they're american and a lot of people thought poloniex was going to get fucked by the us gov and then instead goldman back circle bought them and part of the deal when they got bought was automatic kyca no but also free pass right it was it was okay everything from now on is going to be kosher and everything beforehand we'll just pretend was kosher right and so then once Poloniex got the free pass everyone kind of thought

Bittrex was going to get the free pass they've been doing some sketchy shit lately they keep adding all these you know random altcoins and tokens and stuff. Didn't Bittrex bring on somebody like an ex-Department of Justice member onto their board recently though? I mean maybe

last year. Look they're American based right so they wouldn't still not have been fucked by regulators if they're not doing their proper revolving door you know economics due diligence yeah like bringing in all these ex guys but the fact that they keep adding alt

coins they haven't been acquired by anyone big there hasn't been any kind of decision and then they decide they're going to launch a Malta office kind of makes me feel like they're playing with fire a little bit oh yeah yeah because like the whole idea of the Malta office right is that it's going to handle

all their international clients so they don't have to comply with u.s regs when they're not dealing with u.s customers presumably but how do you know you're not dealing with u.s customers it's impossible to really tell yeah it's the uh slippery slope it's like bitmex right yeah like bitmex is like we don't use we just block u.s ip addresses right like your internet address we just block u.s addresses so there's no way that u.s customers use us but u.s customers can just use vpn and access it right yeah and binmex knows that but they're like kind of playing with fire a little bit and that's what bittrex seems to be doing it's you know it's regulatory arbitrage they want to they want to get away from from the american regulations and move into malta which

is known for their pro gaming gambling regulations they pass their own cryptocurrency regulations to attract cryptocurrency businesses they're very laissez-faire in malta um yeah so keep an eye No, Bittrex. That's interesting. Bittrex sort of like died the last couple of years, but has been making a little bit of a resurgence. It's these, it's all these shit coin bucket shops. They, they thrive.

And then they get like so much customer, they get, they get so much volume and so much business that they become a target and then they get fucked or they like, or they don't necessarily get fucked. They just, they try and. They have to buckle down. They try and clamp everything in and not lose like everyone's money.

And then, like, the next one comes up, right? So, like, Bittrex blew up. And then right after Bittrex, like, Poloniex blew up. And then Binance went up, right? And, like, before then we had the Cripsies and the Mint Pals and, like, all of them, right? And, like, they don't last that long. You know, Poloniex is probably going to be one of the exceptions just because they got bought by Goldman, right? i mean goldman back circle but like circle is like six degrees of separation here so they got

like an extra they got an extra deal there um but yeah i mean look we live in a global age all these services can be served up on a website from basically anywhere in the world to billions of people and the u.s government has historically the way they've enforced these rules have been by severing financial connections and now that you have bitcoin and i hate saying it but like things like tether right um which is which uses the bitcoin blockchain but it's it's it's a trusted third party but when when you have bitcoin it makes it way more difficult for them to to curb those those currency inflows and outflows right so like they're gonna have to start doing if these if these if they want to like clamp down on malta you know they're gonna

have to do coercion stuff like that but then like what's the next country that that wants to court cryptocurrency business and then like what happens when the next country is like a south korea or a china or uh you know like a russia argentina or or well but i there needs to be like some kind of military power there right because because the u.s can theoretically you know just do it flex you have to do it yeah yeah flex exactly um but but it becomes way more expensive to enforce right and if you have like 20 different little exchanges or services that handle all these different things and they're all breaking us regs and they're all in different countries like it becomes really really expensive to enforce right this is yeah and bitcoin is like a hydra so you'll try and

shut it down in one area and it'll completely pop up somewhere else so yeah now multa is getting these tax dollars right like now whatever their tax rate is is probably like super low but even if it's 10 like that's 10 more that they're getting from bittrex or binance than china or the united states are getting right because it's actually kind of interesting that they got binance and bittrex because bittrex is the american exchange and then binance is the chinese exchange and there's like two different sides of the coin but they're both scaring away businesses so we're seeing the laffer curve play out in cryptocurrencies looking for looking for uh lenient tax tax burdens um yeah so that's interesting uh we'll follow that i didn't know that they they opened

a malta office that's a new one that yeah it's quite exciting quite exciting richie lee congratulations and then there was bloomberg released a hit piece against malta today saying how malta sold it sold to the devil of crypto um of its their main business that they've been doing is uh they sell citizenship to to like russian oligarchs and rich people so you could buy like citizenship for like 400k and be like with an investment in real estate there too and then um and they just they're like all their banking laws are really lax so they have gaming a lot of uh poker yeah and uh did you all like sports betting and stuff like that has run out of there and cryptocurrency they have it's it all kind of goes hand in hand status don't like

freedom and they're in the eu technically so they have access to the whole eu market which is that's the key right the key is that they like kind of weasel their way into the eu and then they were like fuck you how did that small of a country was a little right into the eu and because when they got added the eu was like in their like lovey phase where they were like let's add everyone you know like they added all the baltic countries yeah that's uh actually my favorite book on talking about countries getting out to the eu uh it's only a couple chapters but boomerang by michael lewis the way uh italy and uh greece got into the eu is pretty laughable apparently goldman sachs helped them cook their books to get their debt to gdp ratios uh at a at a palatable

balance sheet ratio um to get entrance into the eu and less than a decade later they were uh they were pretty much bringing down the rest of of the eurozone but that's another topic last topic of the day uh we didn't write this down but we should talk about it we talked about i believe two or three episodes ago uh laurent pm he's been putting out this four-part series talked about the first one um and basically how we should be mining or excuse me uh measuring the power expended by bitcoin mining in different ways we should not be uh basically coming to this number by uh the cost per transaction uh or the amount of energy needed per transaction there's a more detail to it go back a couple episodes and listen to that since that episode he's released two parts

one the yin and yang uh of bitcoin mining uh or pow which is miners and hodlers and then the third one was cliffhangers where he got into this concept of satoshi's cliff um highly recommend you guys go check those out high level i wrote about it in the newsletter today marty's bent go subscribe if you haven't already um the price performance ratio is a metric that is typically used to measure the ratio of the price of a product to its performance and performance metrics differ depending on what product you're talking about but we can apply this concept to bitcoin and mining in particular um so and it really tries to illustrate the difference between old and new products and the way laurent broke this down is that every new block is essentially

a new product and um basically what you do is you track the utxo set after each block that's mined uh measure its performance by using the number of bitcoin days secured per block uh or number of bitcoin days secured that a block has accumulated excuse me and um once you run the numbers you have an observable yin yang which is discovered uh which again is miners and hotlers and what lorenz found when he went to go make this ratio is that bitcoin uh mining and the economic activity on the network is becoming more and more efficient over time basically the idea keeps coming back to that every new block is really securing every transaction that's ever happened exactly so you you basically amortize that right yes and the concept of uh viewing every new block

as a new product is something very interesting and then the third part really raised more questions than answers and he dove into satoshi's cliff uh he's basically creating a thought experiment to attempt to measure the cumulative effect of pow and the effect of increasing hash rate on old blocks not sure what that means um but he sort of raised this question to to ask for help to sort of dive into this problem in particular it's basically like how do you value i mean my take is like how do you value that increased security on like when you do the calculation and you're trying to say that every new block increases the security of every previous block

and every previous transaction, how do you actually put a numerical value on that? How do you put a real value on it? Because the value's there. It's definitely there. It's just finding out what metrics to use. How you calculate it. So, Laurent, thank you for writing this series.

Great dude. Great dude. Very thought-provoking. Really smart. and really sort of driving legitimacy into. And I think if these metrics come to fruition and they're found to be useful, it really helps Bitcoiners and people in this space refute FUD,

especially when it comes to energy consumption and Bitcoin mining. We're 56 minutes in. Final thought of the newsletter today was I watched Logan last night. It was a great movie. Wolverines have always been one of my favorites. You watched Logan? I tried watching Jack Ryan on Amazon. it was pretty poor uh i've heard mixed reviews about jack i like john krasinski krasinski that's

who's in it right yeah he was in that quiet movie where they were really quiet more famously known for his wife and he was in it with his wife uh what's her name i don't know i'm gonna say pam i only know pam no it's not pam no it's not she's famous too it was it was a pretty good movie it was very quiet it's quiet place it's called interesting but jack ryan don't watch i don't like it or watch it don't you know don't trust verify let me know how much you liked it logan was pretty good long long movie um you didn't dump on us i appreciate that where are we at now basically even what did we say we were at in the beginning we're in six three on us six two nine eight i have sixty three hundred and twenty eight dollars we went up a little bit so thanks for not

dumping on us ethereum hasn't completely capitulated while we were recording nice uh in due time and uh any uh anything we need to end on here do you have any closing thoughts uh vinny's not the bitcoin oracle definitely not yeah i think that's i would say uh it's getting hard to write every day that's what i'll say it's i mean you're almost at a year right oh i'm way over a year if you if you don't subscribe to marty's pod uh marty's newsletter like make sure you subscribe to it It's the best newsletter there is. It's fantastic for me because I have a newsletter within the product suite of this podcast where I don't do any work. I just read it every day.

It's fantastic. Thank you. Marty's looking for a new logo. I mean, we both kind of are for Tales from the Crypt. So if any of you guys are designers, like you want to earn some extra Bitcoin, reach out to us. I got to sidebar that with you. I think I found somebody. No, he thinks he found someone.

so you know if you want to get us a nice like rabbit hole recap you know one you know you can get us get us a nice one that looks like that maybe we'll pay you some mccallan or some bitcoin yeah and uh just just know that you know the the bitcoin thesis like holds true like this is we bitcoin is is always gonna have peaks and valleys and there's always gonna be a bubble in a bus and not always but for i think there will always be the first few few to probably maybe half a dozen they'll just lessen right but like how can you ever like bitcoin will be more stable right but will it ever be yeah probably i guess like when you hit full saturation but we're like long we're a long way off yeah long so you always have these boom buzz cycles you know and

you have to think long term and i think we've both been very consistent in that is that you know just it's it's a it's a long-term play and and we remain ever ever so bullish remain steadfast no just saying writing uh i'm trying not to be repetitive so it's uh thank you laurent for putting out uh your pow pieces because it's gonna be a lot of fodder to write about all right no one was accusing you of being bear weary i just i just don't like to turn down an opportunity to tell the bears to go fuck themselves they can't have my bitcoin opportunity taken and that was this week in the rabbit hole recap cheers guys thank you freaks for joining us peace and love oh before peace and love oh shit make sure you rate subscribe make sure you rate subscribe and

share it really helps any platform that you use hit that like button hit subscribe subscribe unsubscribe whatever you need to do yeah the subscribe is a big deal yeah uh peace and love we appreciate it guys thanks deuces