TFTC: A Bitcoin Podcast - Tales from the Crypt #120: Matt Ahlborg

Episode Date: December 3, 2019

Join Marty as he sits down with Matt Ahlborg, Data Scientist and Founder of Usefultulips.org, to discuss: - Why Matt is interested in P2P trading specifically - How Bitcoin is being used around the world - Developing the Usage Per Economic (Online) Person metric - What it's like cold calling a P2P trader - Why are people using Bitcoin? - What Matt plans to do in the future - much more Follow Matt on Twitter: https://twitter.com/MattAhlborg Shoutout to this week's sponsors. Cash App. Head over to the App Store or Google Play Store, download cash.app and start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse you download the app. Casa. Use promo code “TFTC” to get up to $250 off your Casa membership … or hit their team up [e-mail] for a free demo, or to put them to the test with your hardest OpSec questions! Subscribe to our YouTube channel: tftc.tv Contribute to the show: https://tftc.io/contribute/

Well, hey there, freaks. It's your boy Marty Bent here to introduce this week's episode of Tales from the Crypt. I had the pleasure of sitting down with Matt Allborg, the creator of UsefulToolips.org, a data scientist and somebody who's been doing some incredible work diving into P2P exchange data across the world. Matt's got some incredible stories in this episode of how people are using Bitcoin around the world. There's some very unique use cases going on. People are actually using this. People are skirting sanctions or getting around expensive remittance systems and actually using Bitcoin, as you'll find out. It is not the only rail being used or the main rail, but it is a rail and it is being used creatively around the world by people who need to move money and may not even need to save it. This week's episode of Tales from the Crypt is brought to you by the Cash App. As you know now, Cash App is the simplest way to try to grow your money.

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that code tftc to get up to 250 off freaks i really enjoyed sitting down with matt again he's been working on some things that i've been fascinated about this year in particular he hit the scene in february uh came out of nowhere dropped some incredible details about how people are using Bitcoin in the developing world. And in October, he grew on that, added Paxful data to his data set and came out with a website. And then last week, he made the world aware

of how people are using Bitcoin as a remittance system with gift cards in Nigeria. Fascinating conversation, a fascinating man working on fascinating stuff to make Bitcoin better. All right, so hope you freaks enjoy. Love y'all. Okay. what is up freaks welcome back to tales from the crypt it's your boy marty bent here sitting down

on a snowy night with somebody i'm very very excited to talk about this gentleman has been putting together uh some incredible incredible data sets and stories with how bitcoin is actually being used in the third world specifically dissecting uh peer-to-peer bitcoin exchange data being local bitcoins and paxful my first he first hopped onto my scene in february uh when he wrote about a usage per online economic person metric that he created and how bitcoin was actually being adopted in places like venezuela and has since come out with a bunch more stuff that we're going to dive in tonight i want to introduce you freaks to matt Al Borg, founder of UsefulToolips.org and data scientist. What's up, dude?

Hey, great to be here. Thanks. Dude, thank you for all you've been doing. We're going to dive into a lot here. We've been doing a lot of talking pre-interview, but I think it's important to start as is always the case here at Tales from the Crypt. How did you get into Bitcoin? How did you get into data science? What's a little bit of your background story here? sure um yeah i i got into bitcoin in late 2013 i uh saw it in the headlines as the price was going up i bought my first bitcoin i think for right around a thousand bucks and two days later uh it lost 50 of its value uh so that was my baptism i think it's important to preface how

you got into bitcoin what you were doing at the time yeah yeah so uh at that time i was um in the navy i was a trained cryptologic linguist i uh the navy taught me how to speak chinese and read chinese and so while i was going through school there um yeah like i said i happened to catch wind of bitcoin and it kind of fit a lot of my personality traits um you know i have kind of a libertarian lean uh i love technology i love the efficiency of programmable money and so i also like gambling and i think a lot of people uh if they admit to themselves a lot of the reason they're in bitcoin is uh they love the roller coaster ride so i think that's a part of me as well that's certainly fun roller coaster ride if you've been through a uh a little bit of

a lull here a little bit of turbulence a little bit um so how did you come to so again it's about the uh data that you've brought to light and we'll start with your first piece that was written in february um why did you or before we even jump into that piece in particular why did you want to attack these data projects um and what what drove you towards diving into local bitcoins and paxful yeah so i think um local bitcoins and paxful show uh a lot of how bitcoin is actually being used in the real world um in the west it's very easy to get caught up in um a lot of the uh retail investment and all the hype and things of that nature.

But I found that the type of data that LocalBitcoins and Paxful provides is that they show volumes in different currencies around the world. And the first time that it caught my interest was I noticed that in 2014 and 15, where there was really not much to talk about in terms of the price or developments,

There was definitely an uptick in LocalBitcoin's volume during that time, and I found that very interesting. And I thought that a lot of the promises that Bitcoin people put forward, they relate to banking the unbanked and things of that nature. And I think that the data on these peer-to-peer exchanges definitely can start to tell you some of that story and whether or not it's actually being useful to people. yeah and so that's what i was fascinated was by how much you could glean from this data and particularly with the uh the first metric that you created so what uh how did you attack this from a data project perspective what were you looking at uh for the uh so you're taking all this exchange data into consideration of volume data you're you're converting it into us dollar volume and then on top of that you're taking the uh access to internet within each given country

into into consideration as well correct yeah so uh the way that coin dance lays out the volumes is it it breaks it down by fiat value and and various currencies and i knew that wasn't the best way to look at it because there's a lot of countries that have very small populations there's uh different standards of living in those countries like you said different levels of internet penetration and so um if venezuela for example has like a million dollar week um what does that really mean in the context of those other variables and so coming up with that metric it was kind of like a piece by piece thing I thought well first we should we should take it and look at it look at the population of these given

countries and then I thought well a dollar in a dollar in the United States is worth a different amount than a dollar in Venezuela so we should take that into account and then uh also you know many of these countries where we're seeing this massive uptick in in usage uh they have like a smaller proportion of people online and so um yeah i it was kind of just a one thing at a time i thought would would make a better metric and that's kind of what i ended up at and it was really amazing when i first i plugged it all in and i and i saw uh in my article in february there's a map where it's kind of this heat map where certain countries are like really red and first time i saw that it just it really validated a lot of the things that

i was uh trying to go for or trying to show and it was like a big eureka moment for me yeah and so the data outside of local bitcoins and packs what were we getting that from like the internet penetration and the okay so the internet penetration um i got that from oh i i honestly can't remember anymore it is some standardized uh i think maybe by the un or something like that um and they do these surveys like once every five years so it's not perfectly accurate um which a lot of the time causes a problem but um and then in terms of the uh i also used um, GDP per capita. I think that was from the CIA fact book, world fact book. Um, and then another index I used, uh, was measures of economic freedom. And that was done by the heritage

foundation, which is like a libertarian think tank here in the U S or Canada. I can't, I don't know which. Yeah. And so you're, you described the heat map, but what does this heat map show? Like, uh, you were surprised by the colors, but what do these colors represent on the ground? Yeah, it showed that at least in terms of local bitcoins over the last progression of the last five years, usage on this platform, it started in the more developed Western economies and it transitioned to these less developed economies. and uh as of this year or as of the end of last year when i published a report the top countries are venezuela nigeria kenya russia and these countries all have particular sets of issues that they have in common that they're facing yeah and on top of that uh coincidentally last year around this time when uh bitcoin was argued at the low point about 3 500 bucks yeah the the 23

countries on local Bitcoins or 23 of like the smaller countries on local Bitcoins had their best quarter ever. Right. And that, again, it shows that in the West, a lot of people don't know what people are using this for. They even question whether or not it has a use. And this fact, the fact that, you know, a couple dozen countries in one of Bitcoin's worst quarter in many years, a couple dozen countries had their best volume quarters ever. And that shows that there's something more going on than just speculation yes and well where do we go from here so which so i'm right now my mind i'm thinking about just going chronologically through your pieces uh the second one being when you announced the the launch of the usable

tulips.org and the addition of paxful data but speaking of how people are using bitcoin i think we have to skip to your most recent which was launched last week and you described uh sort of the remittance flow that exists between Nigerian expats living here in America using gift cards that they buy in local bodegas or 7-Elevens that they then send back to their family in Nigeria who then exchanges it for Bitcoin or other. They eventually end up with local Nigerian currency. Yes.

That's the end result. Yes. I'm not here to explain this. You wrote the piece. You've done all the research. So explain the workflow. What's going on here? Yeah.

So basically, I went into Paxful, the Paxful data set with an open mind, but with the idea that I had heard through the grapevine of the people that I interview, I do reach out to a lot of these traders on these platforms as well. They publish their phone number oftentimes in their advertisement. They'll say, hey, these are the terms of my trade. And if you have any other questions, call my phone number here and we'll sort it out. And so I kind of use that to reach out to these people and figure out what's going on there. What's it like cold calling a Paxful trader?

It's very interesting because these guys have their scam radar up when they're trading on these peer-to-peer exchanges. It's Paxful, LocalBitcoins, all of them. The way that the model of these peer-to-peer exchanges, there is an increased amount of risk. you are there are a lot of scammers or things like that that kind of float on these platforms because it's less regulated um and so their radar is up their guard is up and and then this random guy says hey um i want to ask you some what are you doing with that bitcoin or what are your what are your customers doing with bitcoin and um so yeah it was tough especially to start with um but once i published my first article i had something to refer to i said hey this is me go read my

article you'll understand you'll get context as to what i'm doing um some of the they're really interesting characters some of them are understand the ideology of bitcoin um which is beautiful in a sense because they are kind of sovereign individuals so how many different uh traders from different countries have you talked to i would say at this point at least three to four dozen um now that's i would say maybe half of those were directly from the phone numbers and then the other half are kind of once i meet one they refer me to another or once i write these articles they reach out to me and they say hey you got these things right in your article and you got these things wrong in your article and so yeah that's pretty sweet so 13 or one to two

dozen countries represented i would say so yeah yeah the countries that i really care about are probably a dozen of them that are the most interesting to me and so that's kind of the ones that i really go after yeah okay so let's hone in on nigeria's use case okay what is they're using it as remittance tool uh pairing it with gift cards bought here in america yeah so even even now it is a bit of an enigma to me there's a lot that's hard to understand um and it really comes from my very narrow perspective growing up here in the states i have full documentation i have uh i have i'm fully banked um where a lot of these people who are using paxful they are less banked or they don't have the required documents um and so it's really hard

to wrap your mind around why they would go through this complicated effort to remit back home so yeah it's it's uh tough yeah and so how does bitcoin fit into their their solution to this problem yeah so what i discovered um is that uh as i wrote in my article um a lot of these gift cards a lot of the advertisements uh so on paxful you have people bringing cards to paxful to sell and then you also have another class of trader, that is the people who are buying the cards. When you go on to Paxful, you'll see that these people who are offering to buy these cards, and they buy a lot of cards, we can get to that later, but they require that the cards are of a certain type.

If it's an Amazon card, oftentimes they'll want a physical gift card versus a digital e-code. They'll want the card paired with a receipt. they'll want the card purchased in the last 24 hours etc etc and so basically I came to the conclusion that a lot of the cards being sold on Paxful are coming in at a substantial discount and that really intrigued me and and when I opened up an account on Paxful and I started trading myself I found out that a lot of these people who were possessing these cards a lot of the people who are selling them to me I was purchasing the cards they their IPs were

from Nigeria and West Africa and they were coming to Paxful with pictures of gift cards like the back of a gift card and the receipt said that that card was purchased in the U.S. like you know five six hours ago which I thought was crazy. What I ended up finding was that immigrants in the United States they will purchase gift cards at their local convenience store. They will then take a picture of those gift cards. They'll send them to their counterparties back in Nigeria. It could be friend or family or somebody who is actually kind of an informal money broker type person. And then those people in Nigeria are the ones who are uploading the pictures to Paxful. Once they sell the gift card to a person like me, you know, I could use

the gift cards on amazon personally or whatever once they sell that gift card to me i give them bitcoin for the gift card and then they turn around and they enter into a second trade immediately where they sell that bitcoin that they just earned from me and they trade that bitcoin for their local currency nigerian naras yeah so it's fascinating right because they're in it's just easier for them to do it in this way than to go through the traditional banking system why is that so it is easier in some ways and it's not not easier in other ways and and um so what i found is that i looked at the on my website i have this metric for nigerian nara's percentage from spot price that is what how much do bitcoins trade against the u.s dollar in that particular market

compared to the global spot spot price um you know on on regulated exchanges like coinbase bitstamp etc i found that in a lot of 2017 and early 18 um nigerian nara to bitcoin trades Bitcoin was trading at like 30, 40% premium during a lot of that time. And so people were able to sell gift cards at a substantial discount and still achieve more NARAs delivered to their family than any other remittance method possible at that time. Yeah, so it sort of ebbs and flows. And you go into this in the paper where it may make sense

to use uh this remittance flow with gift cards and bitcoin as opposed to something like western union right um for for smaller transactions right and the thing about it is is is with western union because it's a brick and mortar establishment it has to abide by the laws and regulations of the countries that it operates in and so if you're western union in nigeria the exchange rate that you have to honor is the exchange rate that the government forces you to honor. And so back during that time, 2016, 17, 18, the Nigerian Central Bank forced Western Union to honor basically a fake exchange rate. And it was not competitive at all with the black market rate there. And so if you're using Western Union, you have to go through the official exchange rate. But if you're using gift

cards in bitcoin you can go through and redeem your bitcoin for the black market rate which is much more favorable yeah and so i think this is a good point to dive into the gift cards like what gift cards are they using why are they being used as currency and like they're trading at a discount because of risk right custodian risk and stuff like that uh counterparty risk counterparty risk yes um yeah i'm sorry could you repeat the question just one more time so what like what are the range of types of gift cards that are being used why would someone use one gift card over another um and um uh how are they being used as money yes so the types of cards that demand the best price on the platform it's it's governed by the people who are buying the cards um and uh

The people who are buying the cards more generally or majorly fall into a class of people known as like drop shippers, which is these are professional trade, professional traders who run like small e-commerce websites, either in the US or abroad. and they will sell a product on their website and they will ship directly from a particular company directly to the customer. And so whatever products are, whatever items you can buy with the card that definitely determines what the price of card you can, how much money you can get for a particular card.

um and so uh according to the the data as i laid it out like some of the top cards are like amazon gift cards uh google play gift cards steam wallet gift cards but also some really interesting ones like sephora gift cards i saw that that was like it blew my mind the makeup company yeah it's like a makeup company but when you learn about these drop shippers and like how they operate their business sephora is like this branded item that a lot of people around the world they love the status of having a sephora cosmetics they're small items uh you can buy like you know small pieces of makeup for 20 30 dollars and you can ship them they're there you can ship them across the world and um it doesn't cost that much so once you kind of learn about the other side of

the trade, you realize that, okay, that actually makes total sense. Yeah. Yeah. And these drop shippers are essentially trying to create supply chains and other parts of the world. Yeah. So they will, um, they will set up these like really complicated logistics networks. And oftentimes this more or less, um, runs potentially in violation of the terms of service of the, the gift cards that they're working with like for example Amazon gift cards I think Amazon probably has like a love-hate relationship with these dropshippers because on the one hand they're increasing sales but on the other there are a lot of kind of problems related with dropshipping that can affect the returnability of the item and and the quality assurance and

things can go wrong if it if the if a particular item is changing hands like three or four times in the course of its transit to the final customer so um yeah and that's beautiful how this sort of natural economy of people needing remit money from america to nigeria people looking to create e-commerce sites global e-commerce sites and then people are going to acquire bitcoin yeah it it is amazing i was trying to write a sentence at the end of the article which kind of beautifully said that but it's it's a it's a bunch of people who are coming to this market they really have no idea what the other guy or girl wants what what what's the other person trading for i don't know i don't care all i know is that they're buying and i'm selling or they're

selling and i'm buying and somehow it all works yeah and what i said in the newsletter that i wrote about the piece that you wrote last week was bitcoin in this use case really shines as something that allows us to extend our creativity. It's not the main rail. It is a rail within this process, but it does help immensely, correct? Yeah. Yeah. And every time I interview somebody new or somebody from a different country and how their customers use Bitcoins, I find out crazy new use cases that I never thought of before. So let's dive into them. What are you seeing out there okay so um one person i know um he's venezuelan he lives in argentina now uh really cool guy he's he's worked for uh quite an established bitcoin company for a few years now

i won't say which one um but um he lives in argentina and he lives in kind of one of the more affluent neighborhoods of Buenos Aires and he pays his rent traditionally he pays it with U.S. dollars because when you live in kind of an affluent neighborhood as I've learned they don't want pesos for rent because pesos lose value quickly they would rather you just give them U.S. dollars also an added benefit is when you pay somebody with U.S. dollars there it's a lot a little bit easier to get around the taxes and things like that and so he traditionally was he gets paid in Bitcoin. He takes that Bitcoin to local Bitcoins. He sells it for Argentine pesos into his bank. It's through a bank transfer. So he finds somebody in Argentina who has

Argentine pesos in their bank account and they want Bitcoin. He will give them Bitcoin. They will transfer Argentine pesos to his account. And then what he normally does is he exchanges that those argentine pesos for u.s dollars and then he pays his landlord with u.s dollars but more recently argentina really strengthened their capital controls and they previously had a limit of ten thousand dollars per month that you can exchange in pesos to u.s dollars that's been that's been cut drastically right yeah so now it's down to two hundred dollars so he can no longer convert his pesos to enough us dollars to cover his rent so here's the really cool part his landlord um she's like half argentine half french or something has like dual citizenship and uh so she has a

european bank account and so he will take his bitcoin that he's earned from his job he will then uh sell it for sell it to somebody who has a european bank account that person with the european bank account will then transfer euros into her french bank account to his landlord's bank account yeah and so she's getting paid in euros uh this venezuelan guy who lives in argentina is paying for his apartment rent um with euros to a french bank account that's pretty crazy and that's just one of like there's there's a lot of other crazy let's get we have plenty of time here what else are you seeing so another one uh i was really interested in zimbabwe um they also have serious inflation problems um so this is one where i used the phone numbers on local bitcoins i called

up a couple traders there and and i asked them like hey why are people buying bitcoin in your country like um there's a lot there's a big premium to it it's crazy just fucking cold call the traders who would have thought yeah and yeah one of them was kind of tough to crack but um yeah so i heard from two different people and and there's a lot of this is kind of soft data It's just like I heard that this happened or I heard that that happened so it's not hard data But I heard from two separate independent Zimbabwe traders that people acquire Bitcoin in Zimbabwe because Again, it's another story of capital controls in Zimbabwe. You're not allowed to exchange your

Zimbabwe dollars, they're called RTG s dollars real-time gross settlement. It's like Zimbabwe Central Bank's fake peg to the US dollar I think right now like it takes like 40 or 50 RTGS to get one real US dollar when originally it was supposed to be a one-to-one but so they're not allowed to exchange their RTGS US dollars for actual real dollars and so they cannot purchase goods on the foreign market because US dollars are usually what is Accepted on the foreign market. You can't take your rtgs dollars and buy stuff all around the world. Nobody accepts them. So what they're doing Is they will trade their rtgs dollars on local bitcoins for Bitcoin and then they will take those It's used car dealers is is is the use case here. So so they will

Acquire Bitcoin they will take the Bitcoin to this random Japanese used car website and it was interesting coming across that website because uh you know in 2017 there were all sorts of companies who kind of jumped on the we accept bitcoin bandwagon but like it's kind of strange for this like random used car company in japan to accept bitcoin it's like it um it's like what is this gimmick about well um it turns out that it was not a gimmick uh people were acquiring Bitcoin in Zimbabwe, they buy these used cars from this Japanese website. These cars are like 500 to 1,000 bucks a lot of the time. You know, like 1997 Mercedes or something like that. You know, 200,000 miles on it. They'll buy these cars. They'll put them on a ship. They'll ship

them to Durban, South Africa, where the person in Zimbabwe will go down to South Africa and pick up their cars if they're car salesmen they're probably buying a few cars at a time and then they'll roll them back up to zimbabwe through the border and uh they will be able to now sell their cars in zimbabwe so whoa so they wouldn't so they wouldn't have been able to use the zgts the rtg rgt test yeah those dollars to uh buy from an outside country import it exactly because The central bank of Zimbabwe does not allow people inside of Zimbabwe to send their money abroad because that hurts the Zimbabwe economy. And this Japanese provider was probably providing for a while, needed a solution with them. It was like, all right, I'll accept Bitcoin.

Yeah. Wow. So like I said, I heard this from two people. I don't know the full scale of this. I reached out to the company about it. I never got anything back. i feel like this um this type of gray area activity a lot of people don't really want to talk about it as much um but this type of stuff is happening everywhere what what would

you say is your like gnarliest or most creative use case have you talked about already or is there so um here's another one i found um this is a paxful trader he's bought his volume is one to two thousand bitcoins of volume on paxful so i i would imagine that's like over 10 million dollars pretty substantial yeah and it's mostly steam steam gift cards he's buying a shit ton of steam gift cards over the years for you freaks out there don't know what steam is it's a gaming site correct yeah it's like a piece of software where you can um they have like a bunch of games and you can buy the video games using these steam credits and uh you can also buy skins to items in these games uh like cs counter-strike it's like a shoot it shoot them up game you can buy like

cool skins on your guns make them look cooler etc etc so this guy buys discounted uh discounted gift cards on Paxful. He will then use those gift cards to purchase items like these in-game items. He'll use the Steam wallet credits to purchase these in-game items, and then he will turn around and he'll flip those. He'll resell them again for Bitcoin because a lot of these item trading websites, these skin trading websites, they have Bitcoin as a deposit and withdrawal option. so he'll he'll flip those he uses his his bot on Paxful uses IBM Watson natural language processing so like it's all automated from the Paxful side where he's doing his he basically has a robot trading with people on Paxful and then he'll he's running machine learning algorithms on these skin

trading websites so he'll be buying buying these items for low selling them a little higher but he's still making money even if he's selling them for a slight loss because he's getting these discounted gift cards for like 30 or 40% off. And he's, I think he's like 25, 26 years old. So, um, you know, just found a loop in the system. Yeah, yeah, exactly. Um, so yeah, that was another really cool one that I found out about. Um, but you know, there's also, there's also some, uh, use cases that might not be approved by a lot of people in the world. And so let's dive into those. Yeah. So, I mean, I just, when I wrote the article, I mentioned it a few times throughout. And, you know, we just have, I want to have a disclaimer here that I don't know the proportion of noble utility use to potential nefarious use. So, some potential nefarious use cases. One, which was actually documented, was that if you've ever heard of like a romance scam, you know what that is? I do not.

so you heard of catfishing yes okay so in Nigeria because uh most Nigerians speak English um they it is like their cyber crime is a very big thing in Nigeria and um they will uh catfish people in the United States and then if they do a good enough job they can convince those people in the U.S. to uh buy it buy them gift cards and say hey baby please uh send me an Amazon gift card or whatever um and so they will have their victims buy the gift cards for them and then send those pictures to them um and then you know it has been documented and i'm not too mad about that if you're getting catfished you deserve it yeah don't get catfished people meet the person in real life before you send them in a gift card yeah it's you know it is kind of um

It is interesting. And when you go down this road from somebody in my shoes where you actually, you know, I am, like I said, a good libertarian and I believe that everybody should should have privacy in their behavior and everything like that. But when you come face to face with some of these use cases, you start to understand some people in law enforcement because, you know, Bitcoin can enable some bad things sometimes, for sure. All right, what else? Let's just go down the list. I mean, there's a couple others that are pure speculation of mine, and so I don't want to throw shade on anybody. Lay it out there. Lay it out there. No, maybe, like I said, a lot of the things I have are just pure speculation,

and I don't want to throw shade on. Um, if I, if I draw negative attention to these, uh, to these companies or to these user sets, um, I could be destroying a lot of good activity because maybe I would be falsely labeling it. Uh, that's a very good point. All right. If I don't have hard evidence, then I'm not going to, you know, go on and point fingers and things like that.

All right. I wouldn't want to make you do that. That was just me trying to prod a little bit further. But did you approach this with the mindset of, if I'm into Bitcoin, like I want to prove that it's working in a certain way and like i just need to know that was it like a scratch that you were just yeah absolutely i a part of my personality is i love proving people wrong and so there's there's a lot of um pompous people in the world to say that bitcoin is this worthless uh instrument and it's it is tulip mania that's kind of where i got the name for my website is

you know, uh, Bitcoin haters favorite, uh, meme is that, uh, it's just another tulip mania referring to the Dutch tulip bulb history. Yeah. Which lasted three months, which lasted three months. Like it's a terrible comparison. Exactly. But it is what it is. And so that is the, one of the favorite insults. And so I love really digging in and proving a lot of these so-called very smart people wrong. And so, um, but that also kind of exposes me to bias because when I'm doing my research in my heart of hearts, I do want to find out these noble utility uses. And I do want to find, um, all the beautiful things that are happening. And so I have to acknowledge that that's a part of my bias as well. And so how do you go about that? Trying to acknowledge and

curb your bias as much as possible? Yeah. I mean, it really, it's, um, at the end of the day, it comes down to you. You have to be honest about, um, what you're doing. I understand how in journalism, it's so easy to, to warp a story one way or another, and you can do the same thing with data. I could, I could use Paxful data to write a completely different story if I wanted to. um so really that's what it comes down to is integrity and and trying to tell a complete story and being able to sleep at night so yeah no that's what i love about your research in particular is that you've you've followed up by cold calling the traders and yeah and getting personal stories and anecdotes yes they're it's anecdotal evidence but it's better than just

looking at the numbers and, and trying to, uh, trying to, uh, basically make your own conclusions without speaking with anybody. Yeah. And, you know, still I'm, I'm learning just like everybody else. So, um, I do my best to, to, to track down the complete story, but, um, at the end of the day, this is still a really murky, murky market. And so, um, there's a lot of things we will continue to find out about how how this stuff is being used do you envision bitcoin uh sort of closing the loop at all in the future and you mean as um iterating and making not like i described earlier in the nigerian remittance gift card uh flow bitcoin never goes to fiat and it just stays in Bitcoin? Yes. I think that's going to take a long time. I think there are a lot of inefficiencies

to how Bitcoin works. And the number one inefficiency that I see and that I hear from these people that I talk to, it is the volatility of Bitcoin. These people, a lot of the people that i talked to they are really scraping by um and so they they have no patience for something that can lose or gain 10 in a day they want something reliable and that's um one thing that i i guess i'm pretty confident about now is in in i'm gonna uh kind of try to make sure that the community knows that a lot of people are using Bitcoin in developing economies. The end goal is not to get Bitcoin. The end goal is to get U.S. dollars or to get some sort of stable fiat currency. And Bitcoin is simply a conduit to get to that. And that's what I see very frequently across many

user sets on local Bitcoins and Paxful. That's what we learned when we had Adam reeds and mauricio and d bartolo no beat our tomo oh god i was fuck up his name we had mauricio and adam on from uh leaden.io i mean these people are demanding stable coins and you can't survive the volatility risk yeah and so i i think that stable coins um will will continue to get bigger and bigger i think that um i think that the united states it's in its advantage it's in the interest of the united states government to allow people from all around the world to use the u.s dollar i think they would want that because definitely it increases their competitive advantage over other countries it increases the network effect of the dollar um i don't know if they have fully

realized that yet and um i think they still they associate bitcoin with criminal activity and things like that but um once they figure out that bitcoin can be this brilliant channel to the u.s dollar they will start changing their tune um and so once that happens i do think that um stable coins will will get bigger and bigger and bigger do you have a preferred stable coin at this point i mean again i'm not the one using these stable coins it's the people that i talk to And from what I hear, I hear that there is a lot of Tether usage. I've heard of USDC usage. However, the couple of people I heard about the USDC usage, they were storing it on Coinbase and then Coinbase raised its fees.

And so basically it priced these developing country users off the platform because they couldn't afford to go from Bitcoin to USDC anymore. because they were getting gouged by coinbase um uh i've heard of that guy in argentina he actually uh he puts his money in compound so he he has uh he uses die he uses compound um he's earning i think like six percent or whatever the rate is for die now so um i think yeah that stuff will continue to be used and and um yeah yeah it's fascinating it's um yeah there's a lot of it's fascinating the uh the the different angles through which government it's either good savings technology or it's a good rail to yeah to skirt around in an efficient incumbent system right yeah and that stuff is

constantly evolving as the user interface on all these platforms increases that will make these crypto assets more and more attractive to use but at the same time you also have your kind of the what happened with Napster and LimeWire and all that stuff a lot of the record companies or the music industry or whatever they caught up in terms of technology or providing their services and so they were able to eventually provide their services in a more convenient, efficient way. And so there's all sorts of shifting phenomenon happening and so it's constantly evolving.

Yeah, that's crazy to be a part of. And again, I'm very glad that you've taken the time to dive into this data and bring these stories to light because again it's important i feel like a lot of people are driving blind uh lee qn's actually done some great journalism around the subject as well yeah i've talked to her a few times uh yeah she she does really great work yeah like her her recent posts uh her recent articles on uh networks i think right yeah bitcoin's being used in protests and uh in how it's helping people skirt sanctions and how it's falling short in some cases. Are you optimistic in Bitcoin's long

term? For sure. In terms of people being able to use this internet money, I'm very optimistic and bullish on that. I don't know which token it will end up being, but the increase in the prevalence of the internet, I think nobody is going to argue that that's going to drop. Obviously, there are moments in particular countries where the power goes out or where they get uh they shut down the internet during protest times but um on on the whole this access to the internet is only going to increase um and so yeah i'm very bullish on on people doing that yeah do you have any uh personal leaning towards bitcoin over other assets in particular like do you think yeah i mean i i definitely, I think Bitcoin has all of the network effects. I also, since moving to New York,

I go to BitDevs meetups. And so the developer network effects that Bitcoin has are amazing. When you go to a BitDevs meeting, the, you know, over a hundred incredibly smart people voluntarily come into a crowded room every month and they talk about GitHub commits. and i think there's something really special about that um and you can't discount this amount of super smart people working on a project a lot of the times for free a lot of the times they are getting paid or they've already made their money so now they're just doing it to piss people off but uh i mean there's a lot of super smart people but that's tomorrow night you're gonna be there i'll be there yeah i think i will be too i've missed the last few months i think it's

gonna be the first one i make in like four months um no but that's incredible we are spoiled here in new york uh and and that's that's one of the reasons i came to new york is i was living in hawaii and it really is a lot about the people in the space and um even if you you don't happen to live in new york um i would encourage anybody in the space start reaching out to people um you know send those do those cold calls do those cold emails you would be surprised if you know if you know something cool or if you're onto something cool you'll be surprised how much response you get back yeah i mean i think you're a fucking perfect example of that you pretty much burst onto the scene with your piece of february i found that and knew immediately like boom i think

you had less less than 500 followers at that point right like if you're putting out good this is a meritocracy like yeah absolutely and was there um was there do you have any like apprehension to putting putting yourself out there or putting this data out there um in what way do you mean like were you nervous about putting it out yeah for sure anytime you put something out there you're you're just waiting for people to poke holes in it or things of that nature um it's just something you kind of have to get over and it also forces you to really do your homework so by the time it does get out the door you've kind of already anguished over it for a long time and so the chances are it's probably pretty decent

by then yeah no it's it's very decent uh from observation uh more than decent better than decent uh i i wanted to get to know more about you like you have a very interesting story you were describing how uh you did college on and off and you went into the navy and you lived in hawaii now you're here what what sort of drives you it seems like i think we're very similar in that we are the c students that were yeah fixated on things outside of school i was was very much that kid as well yeah i mean it it has been like a really interesting journey for me and um it yeah it it really i found something that i was passionate about and um i had the guts to kind of go for it and it was nice that you know i'm not um rich by anybody's standards but i i invested

a little bit early and so i was able to build up a little bit of padding to the point where i could kind of jump off and pursue this thing that I wanted to. And so, um, yeah, it was really cool. And so far it has paid off. Um, I'm doing what I love and, um, uh, it's been a really fun ride. I'm meeting a lot of cool people. What were some of the harder times on this journey? Yeah. Um, I guess the first few jobs that I got are the not few, I've only had two jobs since the graduating the data science program last year um my first my first job i went to mexico city i worked for a company called air tm they um they're a super cool company they also have a peer-to-peer exchange only their base currency is not bitcoin it's actually us dollars which is

a very interesting angle that they're trying cash no it's not cash so they have this thing called the air usd it's like fully it's a digital dollar fully backed inside of u.s bank accounts they do run like full kyc aml on the platform um but like i think over 90 percent of their customers are venezuela and they they really caught fire in venezuela during the crisis there and they read my piece and they said hey come to come mexico city and um it was great i i learned so much about, uh, the team and, and the challenges that they're working with and, um, things like that. But I mean, it didn't pay much. So, uh, it was, it was a struggle to, to, to, you know, try to earn that first kind of steady, steady dollar doing this crazy Bitcoin thing. So

I'm sure you can relate, you know? Yeah, it's a certainly can. Yeah. It's, uh, uh it's definitely not easy keep your daytime i mean unless you have like a padding or cushion definitely keep your daytime job rip a side hustle in this space yeah absolutely it's uh it's worthwhile though it feels like i get to meet people like you uh working on cool stuff so i guess what's uh what's the future have in store what do you want to do with useful tool ups what's uh What projects do you lay ahead? Is there anything anybody else can help you with, like outside? Yeah, for useful tulips, I do intend to continue expanding on the data sets.

I would like to bring in more peer-to-peer exchange data. I'm trying to talk to some of those exchanges. It's sometimes hard to get them to fully cooperate because when they share data, they're kind of giving up some of their business intelligence as well as if they do it in the wrong way they're giving up privacy of their users um i'm also uh i'm i'm kind of a data scientist like i said so um if anybody out there uh knows how to do front end a little bit better if you go to my website usefultoolups.org you'll i'm sure you open up the developer tab you'll see all sorts of bugs popping up. So, um, if you want to help out with the project, uh, as little as five hours every

week or two is fine with me. Um, you can fix some of those bugs. Uh, that would be really cool. Um, as far as in the future, uh, uh, I don't know, I'm finding all these crazy patterns. I would eventually like to maybe, uh, find a pattern in there that I can kind of capitalize and maybe build a business around um what do you mean by pattern well these these use cases that i'm discovering like for example gift card gift cards in nigeria or um any any one of the use cases that i that i talked about if if i find one of those and i find it's happening on a massive enough scale maybe i can build a business around it um and so yeah that that would be really cool That's one thing I said in the bent that I wrote about your most recent piece is research and data like this is very important because it helps people develop a better UX perspective.

Yeah, a better product for sure. Exactly, and build a better product for these use cases. So what are the low-hanging fruits right now? How would you build a product for this? Is this basically better market making or market matching for people selling these goods? Yeah, I mean, the companies that have been doing this for a few years, they have gotten good at it. In my opinion, I do think that stable coins could be a big thing. I think if somebody came along with a peer to peer exchange and they offered instead of the base currency being Bitcoin, it were some sort of stable coin.

And again, RTM is kind of doing that already. I think that's potentially something. I also think that if these companies start linking in DeFi products to their platforms so that because a lot of the times, like I said, people are in and out of Bitcoin very quickly. they go from one fiat to bitcoin and then immediately they go from bitcoin to that other fiat if they can provide interest-bearing accounts in some way on these platforms i think that could also be big um yeah and then other than that just cutting down on the amount of user experience problems uh cutting down on the amount of scammers on the platforms that's very hard to do they always worm their way in no matter what but um all that stuff is is big yeah very important and now it's fascinating how how people are actually using bitcoin and other cryptocurrencies

so do you so i believe inherently that stable coins are inherently unstable right because the underlying currencies. And when I say stable coin, I'm talking about this, uh, magical fantasy stable coin that doesn't break or that doesn't, um, require ridiculous amount of, uh, bureaucracy to administer it. And that is still, um, really hard to come by. I think tether is kind of pulled that off in a certain way. The magic that Tether works is that you have to KYC when you get the tokens, and then you have to KYC when you redeem them. But you can trade them infinitely. They can jump from user to user without any KYC AML. They just have to do it at the two endpoints. And so that's kind of, I guess you could say, I don't know if you want to call it an innovation or a

loophole but they have done something there and and the other stable coins are doing that as well um but yeah it's it is tricky i don't know if it's even possible to have a stable coin based currency type thing because um there are a lot of problems with it for sure yeah like we found out with the zimbabwe um currency that was quasi stable yeah that's right it was like a yep it's fascinating what um what else are you are the people on these platforms worried about privacy at all yeah that's that's also tricky i think um the for the users who are simply trying to get access to stable currency and they're not doing any other type of potentially bad stuff which i think is there's there's a lot of legit users on these platforms

that are using bitcoin to help improve their lives sorry i forgot your question but i had a great answer i swear you're trying to improve their lives or do they care about privacy like uh privacy right particularly at a protocol level or yeah so for privacy they they um they're willing to do kyc aml with a jurisdiction that's outside of their own jurisdiction so that's if i'm a if i'm a venezuelan user i don't mind submitting my documents to local bitcoins in finland or to paxful in new york uh so long as my documents and my trading activity don't make it back to venezuela yeah because that's what was fascinating because local Bitcoins added KYC AML recently

and their activity went down, but Paxful has KYC AML too, correct? They do, but- Up to a certain, is there a threshold? Yeah, you can, I think, and I might be wrong, but I think you can trade up to $1,500 worth before you have to go do the KYC AML on Paxful. Whereas local Bitcoins, I think right out of the gate,

you have to do some level of KYC AML with them. So yeah, it is a little different. and again these things change all the time so um i don't know how that's going to play out in the future but i i also think that you know local bitcoins lost a lot of volume when they really tightened up the kyc aml but i i think that a lot of people's thought is that oh they're just all the bad people left and i don't think that's true a lot of the time i think what's happening is that and i've heard this from both paxful and local bitcoins is that um it's actually really hard to do kyc aml when you are living in one of these countries and you don't have your

documentation doesn't match the standards of the country that you're trying to do kyc aml with like one example i think paxful told me was like um i don't know which country it was but on some countries like i most popular identity document they don't have an expiration date on that document and yet in the u.s when you do kyc aml that's one of the fields that you have to fill out in order to make the regulators you know give it their blessing or whatever and so they basically like had to cut off a lot of these users who are legitimately trying to do kyc aml simply because you know their documents didn't match the standards yeah Alejandro Machado showed me his Venezuelan ID and it looked like the fake ID made my dorm room my freshman year yeah yeah

absolutely so there's there's all sorts of problems like this and yeah and it's I think that there's a lot of room for innovation in that market I think there's a lot of hard work that has to be done in terms of like creating these uniform standards and dealing with all of these different documents across all of these different countries and things like that so yeah so i actually think you're doing some of the most important work here again getting to the the most important work being done outside of like development of the bitcoin protocol within the bitcoin ecosystem because that's been the problem the first 11 years in right is uh mis-marketing bitcoin is something like something that's easy fast transactions uh private at one point people were spieling that

but now again by cold calling the traders on these p2p exchanges you're here uh really diving into how people are using this and i think we're going to be able to build better products with more research like this so outside of what you're doing like what else do you think we need to focus on. Yeah. I mean, like I said, or like you said, I do think the UI UX is, is huge. And I think if you are building a UI UX in the space, you better be talking to your potential customers and you better be learning how they are using your product. I think that is massively important. you have to make this stuff easy to use um and um in a way that people understand uh how it's working so i think that is uh very very important that's the biggest one i can think of yeah

yes because are most people holding these bitcoin off exchange or just using local bitcoins as sort of a trade so yeah local bitcoins does custody the bitcoin yeah um I think what happens a lot of the time is, is in a remittance case, like a user will buy Bitcoin off of a regulated exchange and then they will transfer it to local Bitcoins. Local Bitcoins will then custody it and then they'll offload it there. So, yeah. Yeah. And the last question I've been forgetting for the last 10 minutes, it pops in my head and pops out, is how much how much volume are we not seeing? Like how many traders are making relationships on these P2P exchanges and then just contacting each other directly outside of the website? I mean, there's no way I could answer that, but I think it's probably pretty damn big.

Like, do you think what we're shown is the tip of the iceberg and everything else? I think I really do. I don't know. Like I said, I don't want to say any numbers, but it's a 1% fee to trade on local Bitcoins. it's a one percent fee one or two percent to pay on packs full that in itself is an incentive for people to leave the exchange in addition when you leave the exchange you can gain more privacy in what you're doing and so and the people that I've talked to they they they do talk about that all the time they say yes when I build up a relationship we move off and so I talked to a guy in Mexico

city um he was a local bitcoins trader for quite a while and he said he said i think he said his best month he did um low seven figures uh volume and none of it was on local bitcoins and and he doesn't even really use local bitcoins anymore he has his network of people um that know him he's a known trader he he's been in the game for so long and so he he's he's not even really on local Bitcoins much anymore. Local Bitcoins could be just like an incubator for these huge trading, trading conglomerates. It truly is.

Yeah. And so the only place you can look is on the blockchain at that point. You, you can look at a number of transactions occurring across the network. You have to look at the fees. Are people willing to pay money to send Bitcoins? That's really the only other way you could measure it. If you had to guess,

I know you don't want to throw any hard numbers out there like yeah I in one of my articles I said it could be I would say the lowest it could be would maybe be 30 percent of what we're seeing on on local bitcoins and paxful so that's the lowest it could be and the highest it could be would be like a few multiples of the volume that we're seeing on local bitcoins and paxful so i think it could be pretty darn big but who knows yeah um there's all sorts of these um whatsapp groups and and telegram groups that people trade on all the time yeah what are the biggest worries of these traders just government crackdown tax man jail no i i think a lot of these users they they're in countries where things are so chaotic that they're not really worried about

um they're not even a blip on the radar of the government the government's just trying to hold things together you know um i i think their biggest worry is just getting scammed um in some way um they they go into a trade uh that they thought they were going to get something out of it and then through some trickery they they lost their money every single trader i've talked to has some sort of story about that and what's interesting is that they almost always blame themselves which is i think yeah it is really core to a lot of people in bitcoin is like they they do kind of they understand that they're playing in the wild west right now and and if they get burned that's kind of a part of the learning experience and i think there's also in like libertarian ideology there

is that kind of self-accountability and i shouldn't have done that or i should have been smarter so that's kind of interesting to see as well yeah what are your um speaking of libertarian ideology i'm just like interested to get your thoughts on america the current state of america the world politics it seems like things are in a very uh volatile and um i don't want to talk about like politics directly but it seems like the world was at a very volatile inflection point like do you do you see bitcoin as an imperative or something like it as an imperative to to curb the state and its power i think that uh yes i do think bitcoin will keep governments honest it will force governments to be more honest um i i personally think we've already seen it happen

i think bitcoin has already influenced the policy in venezuela because the venezuelan government imposes xyz policies and then people use bitcoin and get around those policies and it kind of forces the government's hand and i'm not saying that bitcoin is like you know the biggest reason for this but i think it has already played a part in changing government policy to be a little more honest yeah damn man it's uh it's great like do you it's and then the government's get involved too so like on top of that keeping them honest uh like the venezuelan government being able to tell where people are mining bitcoin and confiscate their miners and then talk about nefarious use case of bitcoin potentially i mean it's hard like i consider the mindora like mindora and the putin

like regimes terrible but like uh if you throw sanctions on these countries and they still need to buy economic goods and they're trying to feed their citizens using bitcoin to buy goods from russia and stuff like that but uh to the u.s it's a completely nefarious uh yeah so that's kind of another it depends on what your perspective is you could argue that um these rogue states using bitcoin is also it's like a way of keeping these world this world hegemon honest in a sense because um you know you definitely the u.s government i think has probably leveraged the power of its network effects of its dollar and of its military force to get other countries to do certain things and so just as those governments uh force their citizens to do certain thing america forces these

smaller countries to do these certain things and um i think on different levels bitcoin is keeping all of these uh entities a little more honest and it will make them a little more honest yeah somebody's been in the navy and served our country thank you um how is there stuff that you saw while you were uh working for the state that no i mean the navy was very very good to me they like i i told you before the interview started um yeah i didn't have a lot of direction in life before the military and they gave me a lot of direction they gave me excellent training they're still paying for my education very grateful for all that but when I was in the Navy it is a gigantic bureaucracy and there's a ton of inefficiency in government institutions and so I guess you could

say that was one thing that I learned when I was in the military is there is a lot of inefficiency when the incentives are not aligned correctly like for example if you if you're in If you work in the government for a long time, a lot of government workers, they're going for that pension check, and they're doing just good enough a job to get to that pension, and they're not doing any better job than that. And so I think that taught me a little bit of a lesson, yeah. Yeah. Nuts. what was yeah no and i mean it's uh you're talking to somebody who who worked for uh a cap and maybe a naval captain for for eight summers down the shore and you did yeah yeah

huh we talked what did you do i worked at a hot dog stand okay and the uh the owner um was a naval captain that's actually funny the uh the town in which the hot dog stand resided you're only allowed to get a permit to start a hot dog stand if you're a member of the military but i see bureaucracy right no but uh no he bubba would uh would uh echo the um the sentiment you said about like being great from a uh getting your shit in order perspective great life lessons and all that but then uh the bureaucracy as well definitely got into things like sitting in the ocean blowing up random random boats and stuff like that there's really hanging out not really doing too much but yeah it's uh it's crazy it's interesting because a lot of people like to hate

on the state and the army and they figure about the individuals who actually build up this stuff right and yeah you're all free thinkers there's a lot of red-blooded freedom loving privacy loving people in government as well and you you can't forget that yeah the fifth the fifth column if you will right do you think there's there's more than people would like to say that again explain that the fifth what the fifth column uh not understanding people people who uh so edward snowden would be like fifth column i think somebody somebody whistleblowers people oh i see people who have uh the true uh the true best interest of the people at heart within these bureaucracies that sometimes may uh uh not be working in people's best interest in some

people's mind i see yeah um debatable like snowden may not be the best example but like somebody uh the representatives uh mchenry and davidson who are pro-bitcoin would be fifth column okay to bitcoiners they're in the government and pushing for something that is yeah it's sort of for the people's rights and yeah it's a bit abrasive to the the uh the incumbent system a lot of absolutely a lot of um people recognize that uh big government can uh create problems a lot of the time yeah yeah wow where can we find out more obviously we go to useful tulips.org what you already described how uh you need help on the front end stuff like that what how would you encourage others to to help in this sort of uh research like again just picking up the

phone cold calling these yeah if you're one of those people who uses bitcoin in a really cool and novel way reach out to me um you know like i said there's nothing stopping anybody from from digging in and and uh finding out more you just follow your curiosity if you're interested in this stuff um yeah go for it so well man i can't thank you enough for the work you're doing it's truly i think uh very underrated right now very important imperative if you will again we need to figure out how people are using bitcoin and uh i'm very thankful that that you're doing what you do and that you're here with us yeah and thank you very much for uh having me on the show i appreciate it i had to uh had to knock on the door a couple times we finally got

yeah yeah all right dude um that's all we got this week freaks peace and love