TFTC: A Bitcoin Podcast - Tales from the Crypt #37: Dhruv Bansal

Episode Date: August 7, 2018

Join Marty as he sits down with Dhruv Bansal, co-founder of Unchained Capital, to discuss HODL waves, using bitcoin as collateral for loans, how the story of Merlin and Arthur in "The Once & Future King" may apply to Bitcoin, and how we may take Bitcoin to space as an intergalactic money. Follow Dhruv: @dhruvbansal Follow Marty: @MartyBent Check out Unchained: https://www.unchained-capital.com/

what is up freaks welcome back to tales from the crypt it's another hot new york city night humidity is not persist is persisting it's not letting up uh we're drinking bourbon we moved on from the rosé i had a nice uh thirst quenching rosé with john newberry last night and also a good conversation. But tonight, I feel like we're going to get a little drunker. We're going to have a little bit more fun and less alert. We had fun with John last night. It's going to be less technical than the last episode. I'd like to introduce you freaks to Dhruv Bansal. Hi, everybody. Thanks for having me on, Marty. Thanks for coming on. For you freaks that don't know, Dhruv is an ex-physicist, serial

entrepreneur, and currently the co-founder at Unchained Capital. That's right. um i discovered you earlier this year with your your medium post on hodl waves right that's right we'll uh we'll get to that uh in due time first as always let's hear your tale how'd you find bitcoin from what i can tell it's a pretty interesting story right and we were we're joking about this even on the way up here that i really enjoy telling the story because there's a person i'm looking for from this story that i've yet to reconnect with so i first heard about bitcoin in 2011 i was with um i was working at the last company that i had founded it was a big

data and technology company it was called info chimps like information and monkeys um it was awesome we had we were we were a young company it was my first entrepreneurial thing i'd ever done i was at a conference in portland i've been talking about my product i was really excited and one of the people who attended like this little event that we were having who you know was, I guess, somewhat interested in our technology or what we were selling. Turned out to just be this fascinating character. He was a mathematician.

He was wiry. He was wearing a kilt. He had just so much unbounded energy. Was he Scottish? No, I can't imagine in any way that he was Scottish. I wish I could remember the man's name because then I could stereotype and decide where he might have been from.

But no, he was from Portland, as far as I know. He taught math at, I think, Portland State or something. um really interesting guy really smart like clearly the kind of person that has his marches to his own drummer so to speak the um the event ends and um you know i i was there with a friend from from work and she and i are just like well what do you want to go next and this math guy's kind of hanging out with us we've really enjoyed chatting with him so far and so we proposed going to dinner he says i know this strip club that has like the best food it's right next door so fine when in portland i heard that there are a lot of strip clubs fine we'll go there

and my friend she was awesome she's very cool person she did not mind at all to go to a strip club where women were on display turned out not to matter because as soon as we got to the strip club he started talking about bitcoin and it was like it wouldn't have mattered what else was happening we were just like so explain it again how this works like so who has invented this thing like why what does it do and what was this guy's pitch it wasn't really pitching so much as he was honest he was educating he was in that evangelist phase like here's this thing i just learned about which is amazing i want to i want you to learn about it i feel like you could appreciate this i want to tell you about it he was in that enthusiast stage um and god bless him he was

a mathematician so he could speak to it at a high level he could talk about you know cryptography and asymmetric functions and and i'm kind of a math and physics guy and so i could i could like throw i could catch what he was throwing and i thought it was so cool i thought it was like what a remarkably in particular the the the solution to the double spend problem right proof of work as a solution to the digital double spend problem what a cool thing to have thought of that also solves no actual problem that anyone has and i can't believe like it's so cool that people work on this but this is also useless but i mean mathematicians right so it's sort of par for the course with mathematicians that they work on cool things that are completely useless

and are proud of that, in fact, I think. If you've ever read The Mathematician's Apology, it's very much the way a mathematician likes to live their lives. Is it a form of masochism? I think it's a form of virtue signaling. I'm so smart that I can choose to work on the most esoteric and useless things and I'll still have a career, I guess. Or maybe just the esoteric is what's interesting.

And so certainly I was interested in the idea. I was like, this is really cool that you've come up with this scheme that I accept solves this problem. but I just I couldn't see why that mattered like why are you working on this who cares you know like I didn't have any money at that time I knew nothing about how money worked I didn't I mean I guess 2008 had just happened but like a few years before but hadn't really affected me I was I was a young entrepreneur and before that I was a physicist I was sort of outside of the realms that were most directly impacted by by what let's say the government bailout of the banks or other

things that if you were more aware perhaps or if I if I thought perhaps the way that I do now I would have been way more clued in and i would have maybe found bitcoin myself but i didn't know anything about that stuff and so i i heard his tale as like this is this is just esoteric i'm just absorbing this as like you could be telling me about a cool math theorem like the banach tarski paradox it's so cool that one sphere can turn into two but like it has no utility in the world like i'm glad it exists but doesn't matter and then i ignored it i never did anything when i certainly didn't buy any bitcoin in 2011 because i guess i didn't have any money but it wouldn't have mattered because any what i that i would have bought i you know would have been an amazing

decision but i didn't do it i completely just forgot about that conversation went back to my startup and years later years later 2013 um i wound up selling my startup that same one that i've been working on and i made a little cash and i heard about bitcoin and the price was in 2011 when i was when he was telling me about it the price was less than a dollar you know it had almost no price to speak of which is part of why i dismissed it i was like this is not a real thing and then in 2013 it was already up to like a couple hundred bucks and it's like whoa how is that possible like how did that happen in intervening two years like i found myself because i understood what bitcoin was trying to do i did not necessarily from the monetary policy or

i didn't really get it as a tool of economics but i understood like from a technology perspective what this thing does the problem that it solves and i was like there's no way that it's worth 200 a coin now because other people also find that cool and compelling like there's some i'm sure that are into bitcoin because of how novel of a solution it is to this problem but it's got to be doing something for people that's the only reason it could be worth so much right so much being a measly a billion bucks or whatever relatively at the time at the time right like a couple hundred dollars of bitcoin that's a lot of money for just a thing that you made up that i could fork right like like i understood that how much social consensus was part of the value of

bitcoin even then and it was remarkable to me that like who are these people that have given it this value who are these you know now you might use the phrase hodlers of last resort right or who are these people that are creating that that foundation um and then i started to dig and i was like why like like okay then you figure out that there's this whole group of people that believes you know let's say austrian economics or finite money supply or various other things i'm like maybe i'm a little older and i have some money now so i'm starting to invest it so i'm starting to get concerned with like how much how where's money come from how does one grow it like Like, I've gotten a little bit of a win here at age, like, 30.

How do I turn this win into a happy life at age 65? You know, like, I'm starting to finally think about long-term growth of money, and I'm looking at, wow, inflation, that's crazy. Like, all these things that, you know, fancy guys at Goldman will try to sell me because that's what happens if you never had this experience. If you sell a company, you will just get tons of mail from everybody trying to get to manage your money, regardless of how much or how little you have actually made. And so I would get these letters, and I would maybe entertain some of them

because they would be like, oh, I'm Goldman Sachs. Oh, you're Goldman. I should listen to Goldman. You're famous, right? And it's like, you send an extremely attractive woman who doesn't know anything about how to actually manage money. And she's very attractive, but it's not what I was looking for. It's not going to make me feel like you're doing the best job

for my money long term. But during that phase of learning about how to grow money and how to invest, I just decided to buy Bitcoin. And thank God that I did because it was a great move. I held on to it for a long time. It's obviously grown so much. But more than that, it kicked off the real phase of my own interest, like a sports team or anything else. Once you get emotionally attached to it by buying some, I think you start to notice it everywhere.

You start to want to learn about it more. You start to obsessively think about, what is this thing that I bought a piece of? So that's how it got started. And I want to just close that little segment by requesting again, weird Portland math kilt guy, if you are out there listening, man, please get in touch. i'm drew that on chain capital i really want to hang out with you um and talk more about what happened to you i was just so curious i want to know too if you're out there did you become a hot drew if he comes if he reaches out to you uh tell him to reach out to me because i'd love to have him on on the show yeah to figure out who knows how many people he radicalized back in 2011

right i wonder if he's a buck coiner now maybe he's on our buck coin maybe it's better that he's just a legend i don't know anything about him right you don't want to meet uh you don't want to meet this mystified legend that you've built up in your mind mind over the years right so how did you get from 2013 buying to becoming the co-founder of right of unchained so my the business that i had sold in 2013 info chimps was uh very much like a cloud computing big data um distributed systems so i had with my kind of educational background i had a good grasp for like the fundamentals around cryptography and computing and then this company helped me learn a lot about distributed systems i'm so so primed to like enter bitcoin i i was just feeling like almost

wow i was i was made to like be in this field you know what i mean like i'm a nerd for about all the things that you need to be good at to be good at bitcoin and cryptocurrencies but i was so reticent i think um i'd been through a cycle of you know raising money building up a company going through customers like the rich periods the lean periods eventually selling that company like having a great success at it i saw how much of that was luck i saw how much of that was things i couldn't control like the market suddenly deciding in 2013 that you know they desperately needed to buy companies like mine and then my company getting bought it was a great outcome but two years earlier it could never have happened two years later there have been so

many companies like mine that perhaps i wouldn't have stuck out as much um timing was a huge part of it um we sort of joked at the time joe my co-founder and i uh he was also my co-founder at info chimps we joked like the best thing we did with that whole company is we started a bitcoin company excuse me we started a big data company in 2008 and it almost doesn't matter what that company does if you can survive the 2013 and you've been this big data company and you've been creating value and you've been accruing acknowledge in your team like you just you just have so much value and so it's 20 we worked for our choir for about a year 20 end of 20 early 2015 now we both quit we're both just like out there like you know bought condos got engaged like living life

doing a lot of stuff we maybe could have done when we were building the first company but we didn't and it became like well what do you want to do next because we knew we wanted to work together we knew we wanted to build another company and and now we were we were somebody's now to a certain extent right we sort of we've been blessed that we had a company we sold the companies now we can get meetings um we're data guys right that's what everyone thinks of us we did one thing so now we're that thing we're data guys so we should become data guys let's go start a data company let's look at the data around the food industry or construction or various other kinds of things and um it just that's what we felt we should do but the reality was every night we would be

learning about bitcoin we'd be like reading more about bitcoin like yo ether is coming out like there's all the other stuff happening um and we just it was clear that's where our obsession and our interest lay. And so it kind of became like, I have no discipline or willpower. So if I can be in love with what I'm working on, I'll work on it all day long and I'll do a great job. And if I'm not, I'm going to put it off. I'm going to procrastinate. And so I was in love with this. I could do this all day long. I feel in my bones, I could spend years learning about this field and getting good at it. I knew that. But then the question was like, is it a good call? And I think in 2011 i mean i would have had to be a little bit more courageous of a person

to have decided to build a bitcoin or crypto company but by the time 2015 was happening it felt like so much had already occurred that like there was a certain amount of de-risking i there was so much risk all coinbase was three years in blockchain bitstamp there were hardware wallets now there were there were secondary services people were starting to build and think about like bitcoin had collapsed from a thousand bucks but it hadn't died like that was amazing that it didn't it didn't die like stayed alive lord astrick was short and uh all the way on the way back up to 800 from 250 indeed indeed and it's just like you know at some point we're talking well what is it in 2020 that is going to be big data again like in 2022 that companies are going

to be like falling over themselves that we got what's our this strategy right and and eventually we just we realize it's going to be blockchain like maybe like ai maybe like drone maybe some other things i don't know but nothing had the intersection of like the growth potential um our suspicion that a few years from now people will be like death clamoring to be in it as well as it's interesting and like we'd be good at it and so 2015 i think we decided joe and i all right we're doing this like no more data companies like screw it if the world thinks we're data guys that's fine we're not anything guys where we can be the kind of guys we want to be we can be bitcoin guys we want to be let's let's figure out how to be that um yeah why why pigeonhole yourself right

a little bit yeah i don't like it um and then it became about what to build right okay so we've decided we're going to be bitcoin guys but like what exactly and um and we didn't know initially i think we had this thesis like exchanges existed wallets existed like that stuff was there we probably don't want to do that we want to do something that's just one step away from that right something that people aren't quite thinking about yet but in retrospect would obviously have to exist in order for the ecosystem to grow and so we identified a bunch of things like loans lend or actually let's even pause before we got to that because we're data guys we looked at data we're like let's dump the entire blockchain let's look at the utxos like how often do they move like

can we is there something in there that helps us and those hodl waves graphs that we made and we published this year like we made the first version of that chart way back in 2015 oh really and we looked at it and we're like because i kind of knew that like people don't really spend their bitcoin like i didn't really spend mine i made a couple joke transactions you know like uh just to just to try it but had no intention of spending it because it's going to go up in value right that was it's a speculative investment after all um so when we looked at the data and at that time i think some 60 of all utxos were just like or 60 of bitcoin by volume was older than 12 months right we were in the middle of bitcoin winter um and that was shocking because like i knew it would

be a lot but i didn't expect to be that much 60 60 i think we're down to some 40 now if bitcoin is older than 12 months we've had a lot of motion in the last uh last year yeah and for you freaks out there that don't know the way you can measure uh how old a utxo is the status called a bitcoin day days destroyed correct yeah that's a good summary statistic of it i think with our hodl waves data which you can just google it you'll find our the unchained capital blog but those graphs in particular are really nice because they give you like more fine grain they're the fine green version of days destroyed instead of getting one number you'll get you know 10 or 15 numbers based on each age band that we chose to define yeah so let's jump into the huddle waves like

how do you guys like it's a it's an incredible phenomenon to sort of observe in retrospect because it is cool you can see i mean we're looking at it now on my laptop but it's crazy how like the price dictates a lot of like how how strong or weak hands are at a certain point like everybody has a price level where it's like all right i'm going to cash out a little bit and you can clearly see that with these these graphs that you guys put together i think there's some there's some cyclicness there too that like you know i want to come back to like a little bit more like what's in this graph but get we made the first version of this in 2015 and it was clear at 2015 that a lot of bitcoin isn't used for anything it just sits around and so that became like oh my

god that's so tragic because bitcoin is this programmable like futuristic cool thing like why is it just sitting around as though it's mattress money and like the answer is because there's nothing to do with it you can buy it you can sell it or you can hodl it those are your choices and so it struck us that we should endeavor to create new choices that we should build new options for those who have decided that they want to be in the in the currency for a long time lending vaulting buying protection derivatives like there's fixed income there's a lot of things you might want that aren't selling or but are unavailable and so like sort of 2015 it's 2015 we've made this data set we've seen the truth that a lot of bitcoin isn't spent um we started

to interview we started to interview customers or potential customers like what what do you want you know bitcoin there's a lot of bitcoin whales in austin and in new york and in california we have good networks there and so we just started asking like say we were going to build something what would you want it to be? And what emerged was that loans and lending was something everybody was interested in. I loved the ability to get cash from my Bitcoin without having to sell my Bitcoin. Prices are super low right now, like so on. And that was actually a really nice intersection with regulations too. So it turns out regulations around the lending industry are much less than let's say around, let's say selling derivatives or other kinds of more

complicated products. Like you don't have to deal with the SEC. You don't have to deal with the CFTC. asset-based lending, which is the category of product we would fall under, is chiefly regulated by the states. And in many states, like Texas, you can just do it. You don't need a license. There are some rules you have to follow. There are some disclaimers. But you can get started right away. In other states, like California, you do need a license if there's a little bit of work. Some places are intermediary. But just the combination of the data tells us that people aren't spending it they say they want loans and loans are regulations wise easier to deliver and they're financially easy to model it was very

clear like let's start with loans so I want to come we can come back to the loans but maybe it would be a good thing to dig into the the huddle wave chart a little bit since that's ultimately what led to this kind of you know yes this hypothesis cool right so at the end of day this is this is drew this is me being a physicist and being like I don't understand this phenomenon like I need data i need to see things i need to like solve like that visual part of my brain before i can feel i even understand what the hell is happening here um so what did you do spin up your own node and pull data from that or were you pulling from yeah other sources i mean i started by trying to

get just look at the price trying to look at average volumes but very quickly you realize that like it's too slow to go through apis and i'm a good programmer and i can get all the data for free by just running a node right which i was like i kind of want to do anyway so yeah that's what we did we just started running nodes and each node the first thing it does when it boots up is it goes downloads all the historical data for you um and so we did that and then we started looking at various code bases that existed um there was a really good one that rusty russell put out called bitcoin iterate rusty russell's a core dev and a lightning rusty russell's got some great tutorials out there yeah dude actually my favorite one that i share often is is one on cold storage uh it's a

very thorough front-to-back sort of explainer on different levels of cold storage. If you haven't read that yet, look it up. It's on GitHub somewhere. No, and he's done actually so much that's cool. He wrote that article about, like, expect them to change 21 million, which really helped define my thinking on that issue.

I think, like many, I had taken that idea of 21 million bitcoins as, like, a sacrosanct limit. Like, of course that could never change. i would argue i would argue i'm in that sacrosanct uh camp well i think i would like for it to be that way but rusty's article that the one i'm referring to makes a really good point that like no people will act to change it like there will be politics around it people will want to fork to double the limit or whatever like and it gives these great reasons like why it will happen and you can exactly see like as someone that i mean this article is being written in the middle of

like the block size debate and it's just like i remember this i remember this vaguely it's just short-term and long-term desire that's it and so what he says basically and this won't happen for what like 50 100 years we don't saturate the actual limit until 2100 something but we get really close within the next five or ten years 21 yeah yeah i mean by 20 28 or 20 32 i believe it's almost i believe yeah 20 20 million 998 000 or something like that some crazy amount yeah almost all of them are mined within the first 30 years of bitcoin's history um which is remarkable that's a that's a decision that satoshi made without a lot of evidence presumably just chose that they wanted it to be that way but um whatever um so rusty's awesome rusty wrote a bit of code

called bitcoin iterate which i suspect by reading it it's the kind of thing that rusty wrote he I've never met him, but I imagine he wrote it while drinking on a Saturday afternoon. And it represents a tiny amount of work for him. And he never really came back to it. I mean, he did. He came back to it occasionally and patched it up a little bit. Eventually, he got it to work with Segwit. Someone contributed a patch.

But I think for Rusty, it's very much a side project. For us, it became very much a main thing that we spent a lot of time working with this tool so we could extract the data we wanted from the Bitcoin blockchain and make plots like this one as well as others. There's better tooling out there, I think, these days now. There's a really cool project called BlockSci. A friend of mine, Arvind, in Princeton, he has a really great research group that puts out amazing content. You should definitely have him on the show.

He's a stupendous speaker and an awesome guy. He's got a new piece of code that his team has been putting out called BlockSci, S-C-I, which is, I think, the next evolution for if you're really trying to do data science on blockchains. You should probably use that tool. but yeah so we started with rusty's tool and we just started pushing out everything we could about this and it was very much like i had a couple interns at this point and i think they'll laugh that like i didn't know what i was looking for i'm just like i said no i don't understand bitcoin well enough and i know it has tons of data that other people aren't talking about show me all of

it like show me all these slices i want to see it bend like this i want to see utxos and utxos in particular because they're not a thing that's sitting in a block like they are the result of having parsed a sequence of blocks and then you know something about the UTXOs therefore it's a little bit harder to go to like you know blockchain.info and just see the UTXOs at a block right like you see transactions in the block you see all this other stuff that's written into the blockchain but UTXOs are calculated not not written down and so in particular I felt that analyzing the UTXO set of bitcoin would be like really valuable there's stuff there that we don't we're not talking about yet and some of that stuff is like you know the the huddle waves and

i think i didn't really see this wave-like phenomenon until 2017 right that if you think about this chart i made it in 2015 so this entire last third is just missing the first time i looked at it and it and the the cyclical nature of of the rallies that occur in bitcoin was just it was sort of implicitly there like i know that bitcoin has had rallies but i didn't see how those rallies then manifest themselves in the underlying like holding patterns within the actual protocol and that eventually you can see that pattern get terminated as the price rises to some critical threshold and what might have been further hodling gets replaced with just massive selling because people are like gains gains gains right um and that's uh so how much from this can you glean

like can you tell i mean it's probably impossible to tell but like how distributed how much more distributed bitcoin is after all these huddle waves you know i think that's definitely one lesson it's not it's not data that's obvious in the blockchain itself because i think bitcoin by design does a good job to de-anonymize who's got it it doesn't do a perfect job as we all know but it does an okay job and we just know that each of these waves has been so much larger right each of the cohorts that has bought in in 2011 versus 2013 versus 2017 each cohort has been larger by a factor of 10 than the one before it right and the amount of bitcoin actually i was just looking at this in detail for um a separate thing but roughly like in rough terms in each of those waves it's

been about 20 to 25 percent of the then supply that moved okay like and that's been somewhat consistent that like yeah in 2013 about 20 to 25 percent of bitcoin was quickly sold like during the big run-up right to a thousand and indeed to 19k in 2017 it was also coincidentally around 20 to 25 percent of bitcoin at that time which was presumably sold again it's hard to know exactly what happened to it but it was definitely moved for the first time in many years if you actually go look you will see that today like i think this chart is is already updated for the latest moment in time but like right now there's 20 to 25 percent of bitcoin which is sitting in the category that we define as six to 12 months old and it's no surprise because if that's all the coin that was

moved around december january that is now then gracefully aging because people aren't moving it anymore right it's just sitting there it's not continuously trading because that rally is over and people are like i don't know what's going on anymore right they're just they're they're sitting on it and the same pattern is like it's so clear that that same pattern of a new cohort of people that's vastly larger that bought it at a vastly higher price point has acquired this stuff the weak hands got flushed right away as the price collapsed from 19k to whatever 6k right you can see that you can see like you can see that in the in the data and then what's left is like a new large group of people who are like what the hell did i just buy and they don't need

to like sell it they're not necessarily eager to have gains if they were they would have already sold that's already happened so now we're left with the hodlers it's the same pattern like i was a hodler from a generation prior like there are new ones that are being minted right now or that were minted i should say this last year and then how many of the old hodlers do you think stick around like a good portion of them and they're just do you imagine they're just selling a portion of their bitcoin at local highs i think there's a good amount because like a good fraction of the bitcoin which was sold in 2017 was from 2011 right yeah like there is coin that was more than five years old that was moved for the first time ever um during 2017 it's crazy to think it's

crazy that we can track that it's cool right you can't track it for anything else there's no other asset class in the universe that has this level of detail around it and that's what like do you think this is like a healthy adoption pattern like a healthy cyclical pattern for distribution healthy adoption healthy is i don't know i don't know what's healthy um it's it's interesting like like so there maybe there's an analogy right like i keep approaching this as a physicist right like i know this is ultimately squishy human data and behavior but like there's so many of us in aggregate that we become hard somewhere like in the numbers right and it feels like what i see is the happening has got to be part of this story

somewhere right like we have these rallies and obviously price drives action but action also It drives price. The rallies are related to the halvenings in some way. What's remarkable to me, though, is that Satoshi chose this extremely discreet shelf-like structure for how to reduce the block subsidy over time. That it's 50 for a solid thousands and thousands of blocks, right? Whatever, 200,000 blocks or something crazy. And then it drops to 25 immediately.

Like one block to the next, it drops to 25 immediately. It's half as much. and then that sticks around for thousands of blocks and then it immediately drops to 12.5. It's not gradual. It's not that block one is 50 and then block two is 49.999999 and then we just sort of,

you could have worked it out so that the integral, if you want, of all the Bitcoin produced would be roughly the same today. We'd still have roughly 17, 18 million coins today as we would, but you could have set it up to be very smooth. And I've been thinking a lot recently

about why wasn't that done that way? Like, why was it chosen to be like these discrete phases that create these moments of spectacular change and profitability for the network? Some people argue it was to reward the early adopters for the risk they took when people thought they were crazy for even thinking about Bitcoin. Are you under that? I mean, like, yeah, you could argue that, like, having it start out high and then become low is a way of rewarding it. But then why still not do it gradually? right like you guys it could have been 50 all the way down to 25 really smoothly or something like that or you could or you could have picked some not at least not as sudden as a step function

change right and for me it almost feels like it reminds me of things like you know diffraction patterns with light or or a way or a breaker at the beach right where you have these continuous waves that are coming in and they hit this very discrete structure and like the tip of that structure now starts emanating its own reaction patterns it's like it's like it's this it's this physical discrete thing that's like messing up this continuous world and i kind of feel like there's something like that right where there's this there's just this phenomenon that's happening there's this continual growing interest growing and waning right as just people's attention shifts to all sorts of stuff in the world and then periodically there's just this hard edge suddenly

there's half as many bitcoins being made and it just and then it creates its own waves right it creates these reverberations throughout the entire ecosystem and it's weird because like you know what's happening you know it's going to happen like but from that perspective like the wave coming in from the ocean knows the breaker on some level is there it's just you won't see the reaction until it actually hits and so i think similarly like we all know that the happening is coming in 2020 but like some weird shit is going to go down as that happens regardless of the fact that we know about it because it just the discreteness of that event like causes an echo somehow in like all our behavior collectively and there's always narratives around it too

like confusing her like in the last one was the the the block the block uh block size wars right and stuff like that um but you find like the liquidity crunch is so strong that that that basically creates a fomo which is like all right you need to get some now and maybe that would never happen if it were continuous that like maybe humans need that ice shock of like a sudden change to like fix their shit you know like oh my god i really should buy bitcoin exactly i really should start mining well you know whatever maybe that is the that is the catalyst is mining in particular where it's like all right we've entered phase two exactly yeah where it's gonna be in phase three it's gonna get harder and harder you're gonna make less and less money if you're thinking about

quitting your job and starting you should do it now so that maybe that would be that actually sounds like a good argument like maybe it's a lockstep like that or how do you describe it uh step function functions step function like that is to create mining FOMO where it's like it's clear that i've got it was a master of human psychology right some ways at least right like gotta create yeah gotta turn my machines on now i can get 12 and a half bitcoin before it gets down to 6.25 uh and by doing that you just so happen to secure the network so thank you miners um i mean and like we are seeing fees increase which is also remarkable like fees are like some 10 20 percent of what miners are earning these days and it was used to be zero as recently as

just a year or two ago well this is gonna be it's been like bothering me in my head now this is why don't think we're going to need inflation at the end of the day i mean like yeah in theory like the fees keep going up and we're able to but like so you have that's a continuous thing right like there's no there's no forced discrete structure or step functions in the fee market it's just the fee market is what it is but there will be a sufficient there will be a equilibrium right at some point like the market's gonna have to find it uh at least the way bitcoin is designed now and so the argument is do you add overt inflation or do you add or do you keep the overt inflate or not overt inflation but overt costs which is subsidizing the network via fees or sort of

hidden costs which is via inflation yeah i mean it like the fees thing is is so i've heard the arguments in the opposite direction that like users don't like fees it's easier to charge for things when they're hidden but like on some level i like how plain this is like right bitcoin is just it's extremely plain you know what you're getting yeah it's written in the code it's you can literally track when the halving is going to happen right now it's scheduled the way the uh the way the the pace that blocks are being produced at the moment i think may 25th 2020 is the next halving um but no that's what that's what drew me to it it's like and that's what i of get annoyed with all the shit coins out there is like the keep it simple stupid mindset just

makes the most sense like people can't see the novelty in its simplicity where it's like you know what you're getting and that sense of certainty and security is all you need to plan for the future like you have this stable uh basically town center ledger that you know is not going to change or be changed and you have that certainty and from there you can go take risk outside of that and it turns out of course that certainty has nothing to do with code and everything to do with the humans that yes exactly and bitcoin and bitcoin maximalists i suppose and bitcoin supporters have for better or worse really aligned themselves with no we are like conservative and we are simple and we want like a really predictable like value robustness and anti

censorship and safety of our money supply above almost every other thing that you could think of right like yeah um i find myself agreeing more and more and more with that approach um i think it's the sanest approach because if you consider how ambitious the problem that is trying to be solved here is which is the wholesale replacement of all human money it's like don't make it more complicated than it needs to be exactly um if it ain't broke don't fix it like i would argue that bitcoin does need a few more upgrades before it's what i would consider successful when it comes to like fungibility and stuff like that like this is something i've been thinking about recently which kind of like it makes me a little bit sad on some level it's i've really enjoyed all the

data science work i've been doing and like i love making these plots it's amazing to me that i guess we've discussed like this is the only asset class that will give you this level of transparency into how it internally operates across the entire market it's amazing um but we also know that bitcoin doesn't scale like there's no way we actually replace sound like we become sound money with the transaction volume that we can currently support um it's completely impossible like the tiniest number of people in the world today know and use bitcoin it's and it's barely able to keep up with that so we need like second layers we need off-chain scaling we need the lightning network we need systems that we can decide to use and like put a little bit of trust

in put a little bit of decentralization into um they're a little bit less quote-unquote principled in that way if you want than bitcoin but they're going to give us and deliver so much scalability and usability that's worth it it's a good trade-off but one thing that um i wouldn't say galls me it um i expect it and i'm eager for it to happen i want the lighting network to succeed and grow but um i feel i suppose melancholy about the idea that one of the outcomes of that if that's really successful is that this what we've been talking about this era in which everything we do is written to the blockchain that ends yeah we enter this new era where like yeah okay large settlement transactions wind up on the chain if you're a big wig and you're doing a big transaction

that's on the chain maybe if you bought a house and you had to move 100k that might be your one or two times in your life that you use the chain directly but most of your things that you buy will be on a lighting network yeah and that means they're not written down they're not network and they're sort of written down in the sense that they're like they're logs in various private servers but they're not on a blockchain people have to share it yeah they're not public they're not waiting for druve to go later on and analyze years later and so i kind of feel like let's get another physics guy analogy but like like the big bang starts out with this period of like history that's like we can't see it because there's too much in the universe and like light couldn't

like pass through it and we're blind um in a certain way and then there's this error like suddenly everything transitions and the universe becomes transparent and like now we can see through it we can see really really far but the further back we look eventually we'll reach that place where light can penetrate and that's the beginning of the universe's history and we're sort of blind again and um i think that i i forgot what the the astronomer's word for this it's provocative name they give to this period where suddenly the universe becomes transparent it's like the opposite thing is happening in bitcoin but we're starting out because everything is written to chain we're in this incredible era of transparency i can go right back to the genesis

block i can look at the timings and this is one of my favorite articles out there talks about how like how much bitcoin does satoshi have ultimately goes back to looking at the timings and the rate of mining in the first six months of bitcoin based on like nonce data which is embedded in winning blocks of the original like first thousand blocks in the chain that's incredible that's like that's like it's like it reminds me of physicists going back and looking at early stars to determine nucleosynthesis or something crazy right it's that era is ending like we're about to in the next five years transition into a layer two dominated transaction universe where not a lot of stuff is written to chain my ability to make claims around what's happening macroscopically by just

writing code and running it over one copy of the blockchain that i've got um it's not sufficient anymore well maybe that's another beautiful part of satoshi's design he sort of uh i'll take a a quote from bitcoin sign guy here he was able to hold hold back fire on bitcoin by making it seem transparent and uh very easy to track for authorities and stuff like that where you can sort of lull them into a false sense of security knowing because it's well known in bitcointalk.org like him and hal finney were talking about second layer settlement layers like bitcoin banks on a second layer and stuff like that um maybe it was necessary to lull this the authorities that may have shut down bitcoin into that false sense of security so

it can get to a point like i was talking about this with john newberry last night like it's 42x a hash a second now it was 6x a hash a second this time last year literally year to date it's gone 7x so this the network is 7x more secure and 7x that much harder to attack and now you're seeing things like lightning and if snore signatures and tab root can get get merged in like privacy and fungibility is going to be a thing that nobody can can i'm glad that you guys see that and talk about it because i don't think enough people think of lighting network as a privacy gain oh it is it's always talked about as a scalability thing and it is but it's absolutely a privacy gain like um i i wish i just i wish i sometimes didn't have a company to worry about

so i could spend all my time like poking around code and like and analyzing things would be so cool but like i'm really really curious about like how topology and routing will happen in lightning network right because yeah that's like the big question right it's the only question in my mind i mean the lightning network it's two two words right lightning network the lightning part is easy like it's just bi-directional payment easy i'm gonna get it's hard guys but it's the easier of the two parts um we could have done bi-directional payment channels via email years ago right it's like that's not the mysterious part like it's well crafted and like the code that i've read recently like it seems to work like we've got a good like i like some of the

suggestions like like peter wool and stuff been making recently to make it even stronger but like already it works but then that's the lightning part the network part of the lightning network that's the hard part that's the that's the mysterious that's the magic part like how are you going to create a network that has is just is is just centralized enough to give you the throughput you want but remains decentralized enough so it's not just everyone's routing through paypal servers yeah and the hardest obstacle is keeping nodes running right and you don't get to control how people join your network you're not in charge of it like you have to create distributed incentives which cause it to balance exactly rightly across these two

different ways of failing well and going back to perfect incentive systems like you didn't stay for the bitblock boom conference you went back to awesome yeah yeah i had to run out but uh nick batia explaining i saw lightning network reference rates like that will maybe incentivize i'm extremely excited about that people to to make it so it's easy to set up nodes and stuff like that so that people can x get access to interest rates and stuff like or gain interest on their bitcoin and i think i i love that idea i i've for a long time been waiting for the lightning network to become real so that companies like my own can't thank you companies like my own can participate in that because i think you're right like

as a hodler myself like one of the things i'm looking forward to the most is when the coins i already hold can spin off some like income for me that would be so wonderful like it would make a meaningful difference in my life if that were the case i know that there are ways to get income from bitcoin today or cryptocurrency more generally one can engage in leverage day trading there's a variety of somewhat risky functions to this but like there's no equivalent of quote-unquote the risk-free rate of return which i think really what nick is targeting when he talks about this kind of stuff and that's such a crucial aspect of evaluation because if there's no risk-free rate of return there's no natural um null hypothesis right for when you consider investment

this year seems right like should i invest in this thing well like if i don't i'll keep my money in the savings account it's going to hit me two percent a year or whatever it is like so i got to be like it's sort of you know you have this basis that you understand in fiat for what you have to get past and in bitcoin it's zero the answer is zero can you do almost anything because you can't make money from bitcoin today we can't make should we say you can't make more bitcoins from owning bitcoin today no um and you can with the lightning network and when that becomes a thing quote unquote like in theory there does arise a very natural in protocol like in ecosystem fairly riskless way of getting back a return and it's important and it's a completely emergent rate

it's not like it's dictated to the market no one chooses it that's right and that's that's the most fascinating part to me like so i came from like a managed futures background you freaks have heard this too many times to bring us up too many times but part of my job was following uh central bank announcements and how they manipulate interest rates how to follow library every day and all that stuff and it's like it's wild to me that the announcement that library rates were manipulated was not like a bigger deal right well it was a pretty big deal like in the finance sector but people people outside like people don't know what money is like people don't understand what these rates do and how it affects their pension funds how it affects everything that they're tangentially

invested in i just remember hearing those stories on like npr and i was still in the quote-unquote the data world i didn't really have a lot of cash but i was thinking i was like this seems fundamentally like a bad thing right like yeah this is like uh you know this is discovering your election was rigged or this is discovering that the police are corrupt this is like an institution that we all rely on is manipulating us this should be like the number one story and maybe it was a big deal in the finance world i don't remember hearing about it a lot after that like it happened no matt taibbi probably wrote an article i don't even know what yeah exactly what were the consequences who went to jail what changed i don't even know you know because there's

no accountability and like yes i'm an ignorant person but like oh i know about so many other less important things that have happened because i've been inundated with them in the news this was a thing that happened that then disappeared and it's just like oh man no and lightning that's the beauty of lightning is it's a completely emergent the data is emergent from the activity on the network it's not me and drew we're not going to collude to set a lightning network rate ever i guess not possible i don't think so i think some sec i think there will be some aspects of that in the sense that like consider you may want to pay vastly more than quote-unquote the market rate so that you can be guaranteed to not be tracked in various ways right would you pay more oh yeah

it's a sort of confidence that like your legal shit that you're about to do is not going to get tracked and forwarded onto authorities yeah you would pay more you're the only one beholden to that rate though when it comes to like the fed fund rate and library everybody's choosing to do that but i kind of view there as like there will emerge within the lightning network sub networks of colluding operators that are trying to build criminal networks or trying to build other sort of sub networks that like by design like you know are not meant to be like part of the main part of the network i think that's one of the cool things that like in a blockchain by definition you want to be part of the blockchain like if you're doing your own thing over here you've forked like you're

you're not actually part of the blockchain anymore whereas in lightning networks or in general in layer two things there's no requirement that you must be part of the main body of everyone else in fact there are definite advantages to running your own little side you know layer two over here that like the normals are not part of and you have to get like a secret invitation or something like correct you're right and like and and that is collusion and that is you know mafiosos and like and it'll exist and the fact that it's possible is beautiful and you can't prevent it anyway so don't try um but man it's interesting right yeah how much is this going to change our world this is where we get cosmic let's drink some more i don't know i don't know man it feels it's something

i honestly it's on a personal philosophical level struggle with greatly like what are the odds that old drew stumbled into some good shit like this you know what i mean like most of the stuff i've done has been pretty damn mediocre i'm gonna have a great life don't get me long it's amazing but like that i would happen to pick like the world's sound money and it would grow and then like the company i start grow it's such a fantastically awesome story that i almost don't want to believe it yet every year it seems to be coming true more and more that indeed this random thing that i got into years ago has grown yet again and like even more people are into it and it's it's even bigger and i seem to have made the right call and it's extremely it's extremely difficult for me to fall

into that and just believe it all the way and be like oh yeah this is good like i don't need to worry about anything in 20 years i'll be retired off my bitcoins and whatever else like it could be true it could happen it sounds too good to be true though i don't want to believe it i can't it's it's a it's absurd that that could be true um yet here we are yet here we are and it's i think it's so fascinating because the gravity of money as a concept in particular like the whole thought that oh my god we may be reinventing money for one of the few times that money's ever been reinvented throughout human history it's like to be born at that inflection point it's like what and it bought it right at the beginning right like it's it's still the beginning like right

we're not even a decade in right indeed and this is this is something i say like we are the first arbiters of this network that we i would hope uh envision being around for centuries to millennia right and you know and i saw a good tweet today that i forgot i'm totally gonna reference it without crediting it because i forgot who said it but it was like you need those bitcoin maximalists out there because they're what prevent the criticism that everyone would have de-leveled against cryptocurrencies of like this shit is fake you can just make more they're the ones that prevent that from happening right because yeah everyone it's true you can go make more that's what a group of people that's obsessively rabidly about i don't care if you make more these are the

ones that i want like and it is sort of arbitrary and it is sort of irrational but we have to break the symmetry somehow and i've chosen to break it like this and follow me that's this you need someone like that right like that first follower and that most dedicated follower is i think too often under emphasized as what causes power to really coalesce yeah the um the philly fed uh the federal reserve office in philadelphia put out a paper on bitcoin this week uh shout out paul hopson for sending that to me um and i read through it and that was basically their articles that Bitcoin and cryptocurrencies in general never become valuable because you can fork

them and you basically they said you have hyperinflation of cryptocurrencies in general but that's what they don't see is the network effect around Bitcoin is so it goes so much beyond code and development. It's psychological. It's

political technology. Yeah exactly. Like nobody's making a podcast about Dogecoin talking about it like that. like those doge sequels i feel like the best people are at those doge readers man they're tripping at they're always they're like hiding there and like you can discover them there but this is actually i'm happy you brought that not doge up but this conversation this line of thinking because you tweeted out the other day um about a book the once and the future king one of my

favorites yeah and you were analogizing that to bitcoin and and maybe bitcoin has solved the problem that was in that book yeah that's like a big drew of personality book is like like i want to believe i'm a good man i want to believe that like with charged with a lot of power i would do good in the world you know like i could be like a philosopher king like if i were to be picked i would be moral and just and believe all those things about myself and i always have always had a high opinion of myself i guess but growing up in i guess in high school is when you first start to learn about this kind of stuff right or like that they're like what is the nature of government what is a good government like what could it be and i will agree i will admit that for a while

there i was very much enamored of this philosopher king idea that like you know the problem is with politics man let's clap 16 year old rich kid in long island saying these things while he drives the car his parents bought him to go to the diner you know the problem is man um is that the wrong people are in charge man if i were the one in charge it would be so much better and then Reading that book was like a big eye-opener to me because it doesn't matter that you're a good man. It's irrelevant. The fact that you centralize power creates a target.

It creates an entity to be disrupted. Enemies have a thing to lock their tenterhooks into to disrupt and break. That's why The Once and Future King is a tragedy. This person that was Arthur skipped over the entire plot. Yeah, I was going to say, let's summarize the book. Merlin, who's awesome because he lives backwards through time, um so he's like benjamin benjamin he's benjamin button or whatever it's like he tries to make a

philosopher king right he's read all the philosophy he's he's from the future he knows about nuclear war and hitler and all these horrible things and he decides he's you know he's gonna make i don't know like leibniz or like something right like like this voltarian like or panglossian that's really the best word this panglossian character of like a philosopher king that's just from youth inculcated with the right beliefs the right way of thinking like to be fair to be just um and the kingdom that that arthur this this young man creates when he grows up and he nights the round and this whole thing and it's very fair it's very just and then what happens it crumbles right it crumbles due to internal conflict arthur is set up he's emotionally

manipulated by people who are are are less principled than he people who are willing to grasp power if it means behaving poorly they don't care um and because they know he's manipulable because they know he's honest they know that he cares it gives them a surface area it gives them an attack surface so i was gonna say right to take him out um and reading this book it left me so depressed because it was just like so even if you're just the best dude and you give him given the power and you meant so well like everything can just turn to shit around you um and i think by this point it also become old enough to like had experiences where like things i worked really hard at that i cared about deeply that i thought were good broke because of indifference or apathy

or or jealousy or things that other people i'm talking about dumb things that kids care about you know bands and clubs and friendships and things like this so i think it the whole experience left me feeling pretty cynical that don't build things humans are dumb you know uh just hang out with your friends and and don't let things get too big because once they get too big they'll get infiltrated by jerks and just you know stay small and stay private and stay friendly right like that was give up i.e give up like don't actually don't go to politics for god's sakes don't don't try to be a leader don't try to change the world because you'll expose yourself as one man and and the more successful you you are the harder you will fall almost right um that's a

depressing um attitude it's a great it's a great attitude for a person who wants to ignore the problems of the world and just focus on themselves which is what i did for most of my 20s um so it worked out for me it was great it was a great outcome but what i've loved about bitcoin is in thinking about that problem of how does one change the world for the better without propping up one person as a leader or like one viewpoint as the correct one to follow and then exposing yourselves and creating that attack surface don't have leaders like encode protocols encode beliefs encode movements that no one is in charge of historically there have been so few of those you know like and can you can you uh expand on the few that have been around i don't know that

i could even name one like i think about like some of the more successful movements for justice that have happened in history and there's always charismatic leaders and i even think about like gandhi which was always try to in my family as an example of someone like oh he's a real good guy you know great great indian guy why'd ben kingsley have to play him in that movie you know but gandhi's controversial gandhi did a lot of great things but he's also controversial like there's a lot of ways to attack gandhi there's an entire group of people who like hate him who are indian who are like oh he screwed us over in all these various ways there's conflict there's there's always that like putting someone on a pedestal and then bringing them back down again

there's this conflict about them as a person which is sort of irrelevant really at the end of the day to what they were trying to accomplish it doesn't matter what gandhi's sexual habits were if gandhi was trying to do this same thing with mlk doesn't matter that mlk cheated on his wife like listen to his words like it almost doesn't right but but it does because he's a human and and it'll affect your opinion of him and every politician today that's running it always matters what weird shit they did in college right oh well the uh zero has posted this stat the other day like last last year and i'm not trying to shit on the mainstream media but i'm gonna do it last year msnbc talked about uh what's her name stormy daniels right 444 times didn't talk about

like what's going on in yemen once right i saw that yeah so like people are enamored like they're trying to take down this one guy using these these flaws and i'm not trying to say that trump's an upstanding citizen right but like this is the people get attacked this way and like maybe kanye said it best no one man should have all that power because maybe it i mean it's a it's a trope throughout all the the superhero books and comic books and stories and legends of past like you batman in particular like you you die a legend or live long enough to see yourself become exactly exactly and i think i think one of the ways out of that is to never have that one person or entity and that's like it's it's i'm so i can't think of things that really worked that way i'm not a big

student of history by any means but it feels like just by the nature of the way humans work like we need leaders we need like direction we need hierarchy we need communication like things like blockchains are so radical because they deny a lot of that like satoshi left right like whoever they were they left and just straight up left just like didn't give up people morning he said i'm working on other things and then i'm working on what other things what else you got going on what's bigger than this for you you know it's like oh i'm getting into gardening like that's not good enough satoshi um but uh but it is remarkable like whoever they were they created this thing that no one is in charge of anymore like people have tried to become in charge of

it and they've been unable to um and yet it's growing and it has a certain set of rules and those rules are verifiable and we can assert and verify that we're all playing by the rules and we all hold each other in check a little bit we do because the power has been split up really remarkably cleverly between miners and users and developers and and and we've literally fought we've had the fights and no one's won yet like except for arguably users which is like a good that's a good team to win so you want that's who you want to win at the end of the day you don't want developers or miners to be in charge yeah i think i think if segway 2x was successful last year i think i would have left bitcoin i feel bad that i didn't do more i just sat there reading on

twitter like i hope this shit does not go down like i don't know what to do like that was a weird year for me because like i mean whatever i bought some eth i bought a few other weird things but like i really i was like i just bitcoin is the thing i actually care about like i feel like all these other things are opportunities for me to make money at this point i've like emotionally invested myself in bitcoin i really want this project to succeed um not even just bitcoin i want a proof of work based finite money supply coin with conservative development culture that's not touring complete that's what i want to succeed so that is bitcoin right now so i want therefore i want bitcoin to succeed i hate getting labeled with like maximalist and like whatever else like

i'm not at anything maximalist but like but those four things i want those four things and right now bitcoin is that so i agree with you it's remarkable to me that like in contrast to the once and future king like maybe maybe and i love the title of that book too right because it's the once he was king arthur was once the king his whole thing collapsed because even though he was a good man he was one man and he built camelot around him and by taking him out you took out comic you took out camelot but he's the future king too right and at the time i was like well one day someone will figure out how to really put a really good person in charge of the world and like everything will be fine and that's naive thinking that's that's

hierarchical thinking that's authoritarian thinking um and now i'm just like well the future version of that was we deny the kinghood right we denied it the idea of there being a king and that's been so difficult look at every ico has suffers fundamentally from this problem every altcoin ico has a king it has someone that fundamentally has benefited from launching the project and is a significant holder of the resources of the project and wield significant an influence um and they're building camelot around them and i've already read the book i know what happens it's tragedy right some dumb shit vitalik will do will cause ethereum to fail like i have so much respect for italic too but like i i see it i see like you're so closely

coupled like every time there's a vitalik death scare this time last year i think drops like a few percentages like that shouldn't be happening there's no person in bitcoin who's death means anything no at this point um excuse me that's why like i i don't think there is a true competitor to bitcoin i think the immaculate conception and satoshi leaving extremely hard to replicate right yeah extremely hard to replicate it i think it might be impossible like that's what i think that's what i think uh we're going to come to find as the first generation arbiters of these blockchains of this blockchain in particular is that like people are going to try and replicate it it's just going to be impossible this is a struggle with this too like because there's a

little bit this concept of but why did it go that way right like if it was arbitrary but why like you always want there to be a why especially especially as scientists we always want there to be like a deep why that couldn't have been any other way but this way but one of the things we i think we're coming to accept even as scientists is that the world has hysteresis it has path dependence it has well it could have been other ways but that it became this way now it is this way we are stuck with this way basically forever and this applies in things like evolution like you know why are we fundamentally two-limbed and not i don't know four-limbed like the avatar creatures or whatever or why is our cellular metabolism use these these chirality molecules

as compared to literally the identical molecules just shaped the other way like well it's just hysteresis it's how we are why do we pick bitcoin and not litecoin because it would have worked just as well frankly i really feel right well because it came later and we'd already picked this and the symmetry was already broken and not everything needs an explanation i guess except for the fact that it happened to be there and it happened to be first and it didn't cannibalize itself which truth truthfully has been my big like for all my bullishness around bitcoin why didn't i take all my dollars and turn them into bitcoins way way long ago because i should have because it would have been a great decision but i didn't i i probably i was just a pussy but a big part of

it is also you because you don't know like you don't know that the symmetry's really been broken like this is this is bitcoin friend store is it facebook right like like whatever you don't really know but kind of like the lindy effect right the longer it goes on being the thing like the more you sort of have to admit to yourself that like this is probably going to be it like it's imperfect but it doesn't matter it's too big already no one's in charge and that immaculate conception is so hard to re-engineer um probably impossible do you think they will talk of satoshi the way they like let's say king george once talked of george washington like i think the greatest ruler on earth because i think they'll talk about satoshi like jesus i swear to god the religion

oh yeah the gospel of the genesis block like the fact that he like put a message in it disappeared like immaculate conception like it has so many religious undertones that i found some good like weird internet copy pasta about how satoshi is like a time traveler right and like eventually trying to slow down pop out in the future of the day we mine the 21 millionth bitcoin and like i don't know he'll be like a multi-trillionaire i don't know and then he'll become a philosopher king of course right and change the world for the better well the the other uh satoshi is a future uh time traveler theory is that he's trying to slow down the propagation of quantum computing by making it so everybody's forced to buy gpus and use that on

bitcoin mining instead of instead what a remarkably good science fiction story that i turned into right right um wow i need to create an economic incentive to prevent this technology from showing up right that's good stuff no but it's it's crazy to see how far it's gotten and and where we are now so like what where we are like we're in a new bear market probably fourth or fifth fourth or fifth like parabolic move and then down we're at a trough but you're seeing it time and time again like a lot of people like the pre-mine all coins that were in 2013 2014 i would argue are the icos of today right and back then and now today you're seeing like people coming to the light if you will like all right maybe bitcoin is the only one so

that lindy effect gets stronger and then the network effect around it and the hodler base gets stronger as well uh and it seems and i don't say inevitable but i think two or three more two to three more of these cycles as hash rate rises and you get more more believers i think it might be inevitable within like the next so at the same time like we're entering i think new new regimes of what we compete against as as bitcoiners like i think during the first few years let's say 2009 to 2011 2013 almost you're really the only competition is the is ignorance like you have to explain what even is this thing like why would you want it like etc um but at some point it turns into you compete within your category so it's like altcoins are a thing now

ethereum and then icos are a thing and then there's like oh ethereum is going to flip bitcoin and like that becomes the discussion right like what bitcoin is competing against is other cryptocurrencies but i feel like that phase to your point eventually ends and then what happens next it's not it's not a smooth run all the way to the summit for bitcoin at that point it is it is a grinding battle against everything else that is out there i feel honestly bitcoin's about almost 10 years old god there's gonna be so many puff pieces that come out next year about i'm not gonna read any of them um but bitcoin is about to be 10 years old this first 10 years it's been like jv sports you know or like featherweight boxing it's like who you're

really fighting against like who's who's what powerful person's power are you diminishing bitcoin so far no one it's the nerds fighting against each other it's it's meaningless right it's 100 billion 200 billion dollar market cap it's tiny compared to the things in the world but like say we stop fighting with other cryptocurrencies and bitcoin becomes the cryptocurrency that matters it's going after sound money it's trying to become a global reserve over the next 10 years like the fights are way more real yeah we're we would be displacing individuals and entities and groups that have real power yeah and the ability to defend that power and i don't view um i don't view that as meme-based warfare really anymore like that's

that starts to get pretty real starts to get physical and talked about this with john last night but we saw i believe last month i think it's for four to six weeks ago a natural disaster take out a mining farm in china and materially affect hash rate like imagine if nation states started showing up and unplugging or god forbid bombing mining facilities like one of the cool things i heard about um from a friend of mine um brian from factum and austin we were talking a little bit about this and he was talking about how you know attacking another nation's hash power is a totally reasonable thing to do in a time of war that like it's it's privateers taking out merchant marines like on the open seas it's the same thing you're attacking their means of production yeah

right um and i've sort of started to get to the point now where i've i believe um that the the whole proof of work is wasteful thing is i think it's foolish like i think yes proof of work is it is using energy it's not wasting energy it's using it there's a certain optimal ratio of the world's energy we would use to secure the money supply i think it's a relatively large ratio today we spend 0.001 like so tenth of a percent of the world's energy on securing the money supply securing a subset of the population's money supply via proof of work i feel like the real number there is like one to ten percent yeah it's like there's a room for a ten to a hundred to a thousand x growth in bitcoin before we before it tops out like obviously bitcoin can never use or

proof of work can never use a hundred percent of earth's energy that's foolish we have to we've got to build and we got to do stuff true yeah you have it in your uh bio that you want to go to space have you ever heard of dyson spheres all right we might move to dyson spheres we may and i gave a talk on this where i was like if you think bitcoin's energy usage today is bad just wait wait until humans have spread through our local neighborhood of the galaxy and we are straight up using 30 of a sun to hash because why not um it's not like energy is really a thing to be reserved it's not it's almost infinite it's out there everywhere the shitty part is just getting there dirty energy sucks and right now all we have is dirty energy so when we burn it yeah it's bad

i get bad but then bitcoin's incentivizing people to find cleaner energies and that's what that's what people don't realize it's incentivizing people to find cheaper and more efficient energy and what they're finding is some of the cleanest energy is also the cheapest yeah which is partly political and that's fair like we should reward and make cheaper energy which is more sustainable like totally makes sense to me but at the same time this is incredibly healthy to me like i view this as this is such a smart move that humans have collectively made is we know we've always been fundamentally limited by energy like energy is the currency of the universe and we're just coupling our actual currency to that very directly and it's it's so smart like i it prevents our

ability to um think our way out of the physical constraints that we're actually always under always under those constraints and this might be like a a dumb correlation to it but like i honestly think not dumb correlation but like a rationalization like i think you need the proof of what like bitcoin is worth something because people had to work for it like people had to expend energy and energy is the only thing that we can turn into digital representations without loss right no other thing like that that we know of and the only reason we know how to do that is because of proof of work and and it's just a matter of time before people recognize that novelty like the percentage of people that recognize that novelty is so minuscule right now uh that's why

i think if you you have any amount of bitcoin you are above and beyond and you hold it for the next 10 to 20 years you're you're you're going to be well off to an extent or better off i should say better off than most um if you can hodl it if you can hodl it it's it's a mental battle it is it is i don't know how you do yours but i do mine it it helps that i don't have at the end of the day that much bitcoin i have way more than i ever thought i would have but when i bought my bitcoin to begin with i said this money is gone if you lose it it's okay you don't have to feel bad about it don't beat yourself up that you lost this cash but the flip side is if it grows you don't have it pretend it's not there and it's been a great way to just be calm like because

bitcoin's fucking volatile it hurts to feel like i just lost a hundred thousand dollars today that's a painful feeling to feel but if you're like well i never really had that money in the first place because i was never going to spend it because it's not really real because like i told myself like this is a 15-year experiment and i'm just gonna run it and i've got other things going on day to day like it's such a healthier for your psychology way to feel like that's also my personality i'm not an active trader i'm not like a buy in and out of positions kind of guy i'm not that way either and i like you know and that's like i was lucky to get i'm not gonna disclose that but to a point where you get to a point where it's like all right like that same same

mentality like i got yeah my quote-unquote war chest like if i can hold on to it all the better off but truly honestly like do not invest more than you can afford to lose like i think it would make you crazy yeah yeah i guess it would like i sleep i sleep fine at night yeah i have talked about it like what if you took all that money you made when you sold your company and you bought bitcoin with all of it i would have been like that would be so cool like i for sure would have freaked out at some point because it would have been like oh it keeps going down all my money's gonna be gone you fool you had one win you burned your whole win on these stupid magic beans from the internet like what's wrong with you like i don't know that i'm confident enough to have

withstood all that internal self berating for all those years and it's not healthy it's not yeah and again this is like the theme of this podcast like if you do treat it as like an investment or you dollar cost average and we're like hey every paycheck i'm gonna throw 50 bucks like if it becomes what we think it will become like you will be better off even if you're just throwing that little amount of money in and and you'll be able to sleep fine like skip a night of drinking and buy some bitcoin with what you would have spent on the bourbon yeah um no but it's that's another thing i like to talk about is like it bitcoin is changing us more than we're going to change it like it's changing our tendencies i mean syph talks about that a lot right in this book or i

haven't read it yet i'm actually about to go on a beach vacation i've got it with me i'm gonna like totally just like advertise it's an easy got the bitcoin book who's this guy um you're gonna get You're going to get a lot of likes on that. I think so. But exactly, I think that is what it does. It forces us to consider the things we buy a little bit more carefully because we'd be giving up our Bitcoin position. It's like that Warren Buffett line about how you live in the same shitty house

that you've lived in for 40 years and have the same old car. And he's like, well, you know, a new car would cost me $20,000. But really, if you think about the net present value of that money, like 30 years from now, that's a million-dollar car. i'm not in a position to buy a million dollar car today right like that's a weird way to think about buying things like you are you're not thinking about consumption the way that i think about consumption um but you're also that's how you became so wealthy and that's the reason i can never keep money i have is because i always buy things with it because i'm a consumer um and yet

i've avoided that with my bitcoin i don't sell my bitcoins i don't either and i think i buy a lot of dumb shit but i don't sell my bitcoins for it no and you also it helps you find like uh pleasure in the simple things you know like just going to the beach and hanging out like not having like i don't go to the clubs i don't go out that that hard on the weekends like i'm in my mid-20s i could be good for old guys right it's good i'm not old drew all right i'm still in my mid-20s but i do find myself like not going as hard as some people my age you know and just like it's not worth it to me i'd rather read and maybe buy more bitcoin you know actually that was pretentious i wouldn't i don't read i'd probably stay in smoke pot and watch netflix

buy a little bitcoin by the way this is something like a secret thing that i've been working on um with my girlfriend she's a writer and i've got her convinced like we talked about brainwashing people that we love into into loving bitcoin as well so i don't know that i've brainwashed her she's very stubborn it's very hard to brainwash very smart that's good but i've tried and i recently got her to want to write about bitcoin like and try to make i think i think what would help bitcoin a lot is an incredibly good television show that like they're so you've interviewed some of them there's so many good characters in our crazy world john mack come on dude great what like there's he's literally he's he's a character from silicon valley like it's amazing um there's

so many more and the story of what is happening here is so compelling and it's the kind of thing that i think if you gave normals a window into it um you'd help them appreciate what's happening you'd help them appreciate you know the asset class itself there's like a smart way to do it i kind of feel like that's one of the things that bitcoin people are the worst at is because so many of us are nerds like self-satisfied yeah um wealthy um otherwise successful um uh dismissive of of uh wanting to go out there and plead your case because we're the kind of folks i think a lot of times that feel look the evidence should speak for itself like it's like satoshi's quote But if you don't understand it, I don't have time to help you catch up.

A little bit, yeah. But I wonder, on some level, we were like, maybe what we've unleashed is such a behemoth and it's so inevitable that it doesn't matter. We can be arrogant and not explain ourselves and it'll just happen anyway. But I doubt it. So I take the opposite. So that's why I do the newsletter. That's why I do this podcast.

To extend the olive branch and be like, all right, more people want to learn about this. Let's break it down. This is important. You should be thinking about this. those are vital functions i mean i feel like my own business in in allowing bitcoin and ethereum and other cryptocurrency holders to to get liquidity without having to sell their tokens it allows me to preserve hodlers like if you were in danger of losing your position because you had a life expense like i can help you and that feels holy on some level like i i've seen what our

customers are doing and i've seen that i've helped people like preserve their bitcoin wealth and that's awesome let's go into the mechanics of unchained like so how does this work yeah uh the loans yeah well okay right so going back to what we're saying like one thing i've heard over and over again is i had all this bitcoin but then i sold it for this i sold it for that i like because life gets in the way man like i hear i feel it as well like whenever my bitcoin pumps in value i suddenly look at how much worse oh man i could buy that with this if i were to cash out right now like i would have that thing that i've been wanting right and i think i love how syph talks about long time preference all these things because like i've learned to not have that

conversation myself that thing that i want doesn't matter like i don't need that thing and so it's been or i can sell stock to buy that thing that's a better way to do it so like i get that but it feels like too many people like don't have the luxury of having wealth outside of their bitcoin they they're pressed for it like they really need to do this um and so they do and so they sell it and then the price goes up by 10x and what might have been a life-changing amount of wealth for them is now this regret they hold on to and it can turn a man bitter and in general one of the best parts of wealth is the ability to preserve wealth and to create it again and one of the core aspects of that is leverage and so at the end of the day like i've really enjoyed being able

to offer bitcoin holders like some degree of self-management some degree of degrees of freedom around how they choose to manage their funds it's not just buy and sell and hold anymore like you can borrow um and there's firms like mine there are other competitors uh there are other behaviors you can buy um derivatives contracts now that help you the ecosystem is so much richer in 2018 than it was in 2013 or 2011. And so I'm really happy to be part of this. It feels like something like this had to happen, that I'm doing it makes me happy

because I see that I'm fixing problems for people. There's so many companies in our space right now that don't actually do anything. They don't really have a product. They're not solving a pain. They may have a product, but they're not solving a pain point. Their customers are speculative investors at best,

not really customers who are paying to alleviate pain. Whereas I feel like the niche of I've got Bitcoin, I have expenses, I would like to pay for the expenses without selling the Bitcoin, that's such a pain point that's clear that our business does very well. And so our customers are really happy. We're solving a real problem for them. And as we were talking about in terms of endurance and surviving, this is the business that survives, it feels to me,

because our customers love us and we have real revenues. and I don't need the price to be up in order to be doing well. I just need my customers to keep borrowing and keep paying their interest payments and they're doing it. So how does it work with Unchained? I've really tried to build the kind of product

that I would use, right? Like if you need liquidity, you come to us, we talk to you, we have human beings, like you can call our phone number, we'll chat, we'll make you feel comfortable. We do all the normal things around KYC, AML, we've got to get your social, we've got to get your identity having collected that we'll give you some terms you deposit your

tokens and it can be ethereum or bitcoin those two currencies we work with you put them into a dedicated address those addresses are on the blockchain we don't like co-mingle things you know just it's not like coinbase or an exchange where you're shooting it into like some account and you don't know what happens like you see it it's on the blockchain you get a dedicated address for your bitcoin for your loan you can look at it you can put a watch on it using any block explorer tool you care to use um and it sits there and it's collateral and the really the remarkable thing that we do that's new in the financial world is we just say hey bitcoin is good collateral like it's kind of obvious to me like it is worth something right you can clear

it really quickly you can program in your rights to access it it's digital you don't have to worry about the weather it's not like a home equity line of credit like it's it's so perfect as a form of collateral yet so few people understand it like i had this issue when i signed the lease for my latest apartment like i wanted to use my bitcoin as collateral and they like completely couldn't understand the concept and i was just like it's there it's yeah it's liquid within 20 minutes like if i just move it from my wallet to an exchange like it is liquid and so if there anything like our business is on some level like one of the it's like the oldest business in the world it's money lending right like um and it's so well regulated it's so simple but at the end

of the day the radical thing that we do is we say let's just believe in bitcoin let's just say that it's a real thing and treat it like real wealth and that opens so many doors because that's the first step like we're not called unchained lending we're called unchained capital lending for us is a first product category we're doing really well we've given more than 10 million dollars in loans we have more than 50 customers we're solving problems for people in a variety of states and increasingly internationally like it's growing it's really great it's a good product but um beyond that there's so much more that we've realized through this product that people need they need fixed income like they need a way to earn a return from holding their crypto assets

they need protection they need recovery things like when you die like how do you get your bitcoin to your mom to your daughter to your wife to your loved ones right like um how do you protect yourself against an illegal seizure it feels like custody and liquidity and protection and advice these are all things that are connected and that makes sense because if you think about being a quote-unquote normal rich person you have family office you have family offices you have um high net worth like sort of you have um private wealth management you have these sorts of functions which are designed for look i know that like there's checking accounts and like there's there's just there's the normal mass of people in the world who like are living paycheck to paycheck but then

there's this special group of people who for god bless them are incredibly wealthy and they have unique circumstances and so truthfully i wish that my company were like on some level totally democratic and working with every single possible crypto user in the world but it's too early that's not where we're at we are working with those people who have a large amount of bitcoin or ether who have a strong pain point around not being able to be lent to against it like you mentioned can i i would have loved to buy a house using my bitcoin as collateral very few people are frankly in the position to buy a house using bitcoin as collateral right like you're you're lucky for being in that group um but now that you're in that group you probably recognize i

have a lot of options this is screwed up like if i was sitting on the equivalent amount of apple stock like i would have no shortage of people who are willing to like extend me leverage or loans or liquidity based on this wealth that i hold but suddenly it's bitcoin and it's like it doesn't even exist right like or it's almost worse right you just said bitcoin i have to i have to mark you know what i mean it's like almost literally like worse than not having any bitcoin um and so for all those reasons i've really liked um starting a business like this because it's we're solving real problems for people uh we give loans very quickly like our in particular what i'm really excited about is our custodial solution so i think a lot of the lending space i mean it's

one that we've been targeting for a long time we've been operating we've been giving loans since june 2016 which makes us i think one of the earliest crypto lenders in existence which is awesome but a lot of the folks we compete against a lot of the other crypto lenders that are out there they really approach lending like it's their only reason to exist that they don't think about custody they don't worry about the other kinds of products you're going to need they don't recognize that as a high net worth crypto holder you have all these other needs they treat you a little bit like an anonymous just source of bitcoin like you just show up it's online we'll get it done in two minutes throw us the coins we're going to throw them in a single sig you know you have no idea

where these coins are actually living anymore and you will get some money and it'll all work out and i think that's i appreciate that i get that i get why that's a good idea if you want to have millions of customers who are shooting you crypto to give you loans it's a great way to build a business but it's not what we do like we are we're very automated but we're very human driven at the end of the day that we really need humans to make decisions we don't like automating the there's no way in our platform for bitcoin to automatically move from anywhere because it's not possible it's all on hardware wallets human beings have to get together they have to reason with each other they have to agree that really yes we should move these coins everything is sharded and isolated by

customer by loan we've really tried to make it as safe as possible for people who have like a lot of bitcoin who care about this level of custody um it's great to see like we like what we touched on earlier like why pigeonhole yourself into one function like there this is the wild west there's so many facets through which you can engage customers if you have a full suite of product offerings like it's so raw right it's something i thought about when we first started building the company and we were like look our mission is we want to create liquidity we don't want to become a wallet we don't want to have to do custody and what i realized was i just couldn't offer this product and feel good about myself because what were my options i'll take your

bitcoin i'll throw it on coinbase i don't feel good about that nor should you like like should i use bitco so like they'll have hot keys and i'll have hot keys and everything boils down to api access and how well i guarded like the control of my api tokens like that doesn't feel good i want human beings i want like to be robbed real humans have to be like in the mix like there's no algorithm there's no bit of code that can be injected somewhere into the infrastructure and suddenly bitcoins are gone like look the bitfinex hack for me was such a lesson right like these motherfuckers 116 000 over the course of hours it took hours someone targeted a weekend when they were at like some corporate event so like they wouldn't be responding but

like somebody got their ubk or something right dude so many things if you think about that so many things had to fail like you had to you were learning that you're being robbed had to be ignored or not exist um someone had to get in and compromise your access to bitco like you had to have nothing in place to prevent repeatedly requests to just move your entire portfolio out of like that's an insane way to build a system for long-term protection and i get it if you're in exchange and you have these needs to be able to quickly move capital in minutes or seconds like i get it you need to be hot my business doesn't need to be hot i have no desire to be hot you don't need to move in minutes in my business you want safety and what i looked at i was looking for is

there a bit go that's cold is there can i build cold wallet based like hardware wallet backs like multiple person like super safe nuclear keys kind of thing like is there a product like that and there's no product like that so i had to go build that product and i'm really happy about it because i feel so much more confident in my ability to deliver like quality custodial experience around the loan product which is already live and has a bunch of customers i feel so safe about that product because i had to go engineer this and it's been great because now i can go turn around and i can say this thing that i've built which is a multi-person cold wallet hardware wallet back custodial model is now itself a product and i'm really excited about that because i'm a hardware

wallet user i'm a trezor die hard but it kills me that sometimes i'm like so you could come into my house or my place of work and if you were lucky and i had my treasure on me and you were violent and and i am not brave i'll give you whatever you want you know like that's a weird model like no one i don't worry about my brokerage account i'm like god what if someone comes in here and demands all the money in my brokerage account it's like they won't that's not how it works they know that they can't go to your house or place of work and attack you as a person and get your brokerage assets that's not possible but it is possible crypto and and it's happened like we've seen it online on twitter like a lot of people that were you and i are connected to are like experiencing

this rather scary physical violation of their safety in their personal space because people believe that they can get at these digital tokens and by the way i don't accept this honeypot thing that treasures and ledgers do i think it's very cute that you can be like oh i'm being attacked let me put in my fake pin and oh i only have 200 yeah like you're like you're the founder of this cryptocurrency exchange idiot like shut up you have 200 of bitcoin i know you're lying i know it's a honeypot it's like that's that's a cute protection it's not a real protection the real protection is choosing who to trust i think that's the remarkable thing about crypto is like it gives us the ability to be self-sovereign but at the same time it allows us to choose who we would

like to collaborate with and wow that was powerful i think and i think that's truly uh important so like what gets talked a lot in bitcoin and crypto circles is webs of trust so that's like you find people trying to develop webs of trust where they can set up multi-sig situations where it's like hey if shit ever hits the fan like i can i depend on you and multi-sig is stupidly hard man like for a variety of reasons some of which are reasonable other words are just historical it's hard and so part of what my company does is as we invest in our own internal multi-stake solutions we want we open source them we've not open sourced our bitcoin solution yet partly because it's p to s h and everyone can do p to s h we're going to but it's not happened yet

but we have already open sourced our ethereum solution so we are about 10 of our loan book is an ether we've had to develop our own smart contract to be able to custody that ether effectively that smart contract has run through a massive um what's the process of auditing that like we had a professionally audited we used a firm called hoshio they did a great job it was actually the first contract they've ever audited that had zero problems and part of that is yes we're awesome but another part of that is we designed our contract to be so dumb like it's not a smart contract it's a dumb contract it's like it's like your one job contract is keep the funds safe like something i noticed when i was looking for an ethereum smart contract that would

be a multi essentially a multi-sig um protection of funds in ethereum like like a vault right like i saw bitgos i saw a bunch of other ones and i'm always just like this is too complicated like like they have functionality that's like change the owner of this why do you want that why do you need to change the owner of this contract like by even allowing that functionality you've created all these weird holes if we all recall how did the parity hacks occur they occur via methods in the constructor that weren't sufficiently well thought about or tested that allow changing of ownership or changing of the rights of various owners don't do that that's not a thing that you want like it's an and that's not a feature that's an anti-feature like that's a bug um and so we

designed a super simple ethereum contract we had it audited by hosho it passed with flying colors we've been running a bug bounty for about six months that's 150 000 bug bounty no one has ever contributed an actual bug because the end of this contract has almost no code right it's one of the simplest contracts you could find and it works incredibly well for multi-sig access to ether but what we did alongside of releasing the smart contract which is totally open source we're the only lender by the way that actually open sources and audits their shit everyone else does not um alongside doing that we released the dap right so right now you can go to if you can go to ethereum-multisig.unchainedcapital.com you can read our blog post there's links to it you can

just use it you don't have to work with us you don't trust us in any way other than our code like you can pick a web of trust you can plug in your hardware wallets you can build a multi-sig ethereum contract you can keep your shit safe and that's incredible and i'm we're about to release the same thing for bitcoin and like part of it is this is just a good thing to do this is just a healthy thing to do like i want this i want to use this i want to work with my dad and my family and like i want us to collectively protect each other's assets because we trust each other um i want to make that easy for companies to do with their customers and in particular yes i want to sell that as a service if you would like us to be part of your web of trust and be key holders

we'll protect you we've already got a whole scheme worked out there'll be more details landing next month there'll be a whole press release etc but like the root the root idea here is everyone presents cryptocurrency like it's adversarial and it is it's extremely adversarial like it's what gives it so much strength but there's a flip side and it's cooperative yeah and too often that's ignored cooperative in the fact that like hey like i have your back you're my boy like we're we're gonna not only that but like think about how we've all learned we learn from we've learned from guys like marty we learn from listening to podcasts hey this is a great show listen to this this is a great article this is a great guy like read his stuff like we've all learned from

cooperating and like crowdsourcing the best information my friend tushar like from multi coin in austin has such a great line about this where it's like the process of understanding bitcoin and blockchains is like a blockchain and so we all check out the same genesis block the same core ideas and then we proceed with the same inductive reasoning and for a while it's the exact same like every person who's doing that okay private keys cryptography like proof of work okay i get it and then it's we have to replicate each other's reasoning like it's not about believing what you said it's about taking your fundamental axioms and hypotheses and then myself running quote unquote the algorithm to reason and arrive at the same conclusions you have

and in general it's a process that creates consensus because we all agree that certain things like strong cryptography um you know good consensus algorithms and so on are valuable but it can also be contentious that we can fork that reasonable people can disagree in their reasoning about what makes blockchains or currencies valuable and we can have a healthy heterogeneity of options but i love that idea that no one is just accepting everyone is on some level recapitulating their reasoning right it's such a cool idea and i think similarly when we talk about you know custody everyone's recapitulating a process on how to be safer right like when you start with a little bit of bitcoin it doesn't matter use an exchange the first bitcoin i ever

bought was on coinbase that shit stayed on coinbase for a long long time i didn't know how to do better than that as it should probably in it's a learning experience it is a learning experience but that's the cooperative aspect we learn from each other and to pretend that we don't to pretend that crypto is 100 adversarial we're all have to screw each other is false we've designed for that universe because that gives us strength but truthfully it's incredibly cooperative we spend so much of our time and energy learning from each other it's natural that we should extend that into picking subsets of people we truly trust and endowing them with the power to help administer our own funds and this uh this reminds me of my favorite sports analogy to make in this uh in this

arena in particular so i play lacrosse and one of the tropes that uh my high school lacrosse coach used to not physically but mentally beat into us like every practice is you're only as strong as your weakest link sure so i feel like everybody is trying to make i mean it's funny that it's we're talking about blockchains and like a link in a chain but everybody is out there trying to make every link in the chain that we have as strong as possible because at the end of the day if there is a weak link like it is going to be exploited so it is in our best interest to to bootstrap everybody's uh mental capacity to know what's going on in this space and get everybody up to speed because it'll make the network stronger at the end of the day it's something

that like you know another analogy for that is like physical security i think as city dwellers we sometimes we sometimes miss out on this because we're so centralized right so much of our security is 9-1-1 and the idea of the centralized police forces and the various other like government organizations that we don't have to collaborate with or necessarily directly trust but in some sense we're beholden to slash are beholden to us whereas if you go to rural communities that's not how it is cops are not going to show up there in two minutes like your security comes from knowing your neighbors and being friendly with them and trusting them and and and depending on them and that is almost always how life has been lived in human history that are hyper modern hyper urban

we don't know our neighbors we don't know who to trust except for what we looked up it's kind of weird in retrospect like really most of what constitutes human security for many thousands of years has been personal relationships with those who are near to you that you trust and you love i forget what comedian it was or who which comedian it was excuse me uh that made this analogy but like living in cities living in apartment buildings like you're living in an ant farm but you don't like know the other ants at all like i don't know any i'm guilty i live in a ds charge saying i don't know my neighbors in my apartment building but i go home to where my parents live in the suburbs of philadelphia and i know every neighbor who say hi if they're if

they're garbage cans at the corner and nobody's driven it back yet i'll pick it up and put it behind their house like if my parents are gone for a weekend and they need our neighbors to watch the dog they're there to take them for a walk if they need to be like and that's it's like so normal on some level of discourse to like behave that way it's a very like american thing like oh everything you said is so fucking american great perfect love it but like on another level it's like why is that so alien to us when we contemplate the internet the internet is this place where everyone is in this massive apartment building where no one trusts anybody right except for idiots who are noobs and will get hacked right but i think that's what's cool about crypto is

crypto is so anchored in reality it acknowledges that look at the end of the day we're physical creatures like things cost energy like violence is real like if you can trust people if you have people you really trust like in terms of like human to human trust you can make structures which are digitally incredibly hard to break um and yeah like so the wet like you freaks that haven't dove into like the web of trust uh research in bitcoin and like ways to secure your bitcoin with the web of trust like seriously look into it like if there are and but the hardest part is developing that trust i've not found any person who has a large amount of bitcoin or any cryptocurrency who's sophisticated who hasn't ultimately backed into the way to keep this safe

is there are real humans that love me and care about me that i will choose to trust exactly that's just it that's the only way to do it um humans or people that you pay that are incentivized the same way as you and ideally a mix of those yes right so you have some mix of people that are just normal humans and then some mix of those who are also part of your web of trust who are paid to be part of it and have a certain slas around what they can and cannot do and i think one of the future evolutions is we've gone from this very like feudal system of like literally we're like stashing gold in our goddamn chariots as we move from place to place to this to this more networked world where like yes and ious and sort of fractional banking and those kinds of

ideas will show up again because webs of trust allow you to build those things and those things aren't inherently evil they're evil when they're when they're not transparent exactly right so if you can make those things transparently and you can let us be arbiters of who we choose to put into our web of trust like what a what an exciting world to live in um and what a fair representation of how humans truly build relationships right way rather trust humans i know and love than than than a personal corporations yeah the bank of america like who charges you twelve dollars a month for maintenance fee on software that they don't and whose college savings account i'm afraid to close since it's my longest running account it would impact my credit score and like why am i

beholden to these people i hate them i don't know who they are all right ah what a beautiful conversation we've had how far are we in i don't know we're running out of booze though i think we're out of booze we're an hour and 40 minutes in wow that's so long do you uh i guess we should wrap it up do you have any parting notes like anything you want to hit on uh i'm trying to think you want to go to space like let's get cosmic like why you want to get cosmic how do you want to go to space like what part of space do you want to go to the moon do you want to go to mars you want to go to another galaxy do you want to go to space but i'm afraid of normal flights so i feel like if there were like an actual like hey you can go to space dog it would

be like be a barackas like can you knock me out before you put me on that flight i'm not gonna go um on some level i'm just a big bullshitter but i will say i've had a couple threads about this which are kind of weird on twitter which maybe if you're curious you can investigate but um i'm a huge sci-fi nerd as you can imagine i'm a former physicist like space and aliens and warp drives and and einstein's theory of gravity are like all things i spent way too much time thinking about um and for a long time i always assumed that why are we not in space why aren't we at alpha centauri something that vine gupta said which i really love is a lot like what happened in the 50s is that we took the nuclear concept and we put it at the wrong end of the rocket like we put

out a tip and on the base right which is to say we create nuclear weapons not nuclear engines to help us get to neighboring stars and other places on our own solar systems i love that idea i love that statement um had we done so had we done that in 1950 we had we just thrown nuclear engines real hard project orion right like throwing them on the back of spaceships and just blown the shit up out of those nuclear we would be at other stars like that's our other stars we would be at other stars today by now yes by now like it is within human capability to just launch a bunch of nuclear weapons and get a small payload to another star on the order of decades like we've known how to do that since 1950 really yes to another star to another star how close is the closest star to us

extremely far away my best my best the best way i hired this one recently which is i i think it's a beautiful way to visualize it if you buy like a bag of like salt like iodized salt crystals right like that bag has on the order of billions of salt crystals in it that's roughly how many stars are in our galaxy and if you sprinkle out that bag and you pretend that each star each salt crystal is like one star and you take one you put it on your counter and you say that's the sun well how far away is the next nearest salt crystal which represents alpha centauri answer seven miles away that's wild from where you drop it

on the table so you take one of those salt crystals you put it down there the next one has to be seven miles away and then that whole bag at scale

at scale that whole bag has got to be spread out over this massive volume of space in order to look like the galaxy but that's how

far away stars are but we could have got there like if we had been if we had taken all the nuclear weapons we've made and we had put them on the back of a rocket

instead of the front and we had launched that shit in 1950 we'd be there by now we'd have pictures it'd be awesome so holy shit we didn't do it because i guess we had worse to fight or whatever we had stuff going on we didn't never got it done we had bad leaders bad leaders perhaps but what i would also argue is

like like the void between the stars it's there it's a void of matter but it's like a void of incentive too there's nothing there like why why go to that star or why spend all this nuclear energy to go there it's foolish like why do it um and then further like even though you don't know why like the other question that crops up is like say you did say you had actually done that and like let's say let's even go further let's say 100 years from now 200 years there are humans out there they're humans at that other star how does it work like money you know it's like never a question i've ever asked before which is fucked up because like i watch a lot of star trek and i love space movies and i'm always like oh it's so cool corelli nail you're buying some at the

cantina that's great but like if you think about it what did you use to buy the corelli nail you know like where'd the money come from people think bitcoin's a good intergalactic money you can set up uh node propagation systems as it is i think it would need some changes but what certainly is bad money is everything else like you cannot have money that's defined by database and have it work and tell me a show with a with a greenback with lincoln on the front they're not going to accept it it's this weird issue of like information transfer right

if you leave earth and you're headed to Alpha Centauri and it takes you god I don't know 10 years to get there right whatever nuclear engines or some crazy shit what if you just spend all your money on earth before you leave and then you're headed to Alpha Centauri and you get there and you

re-spend it because they don't know that you spent it on earth yet because it takes 4 and a half years for light information to get there like the universe is so fundamentally local and one of the reasons I think the universe is fundamentally local is like God doesn't trust us. He thinks

we fuck shit up. You know what I mean? It's a great way to keep everyone safe. Just spread them out. Keep these humans way far away from those Alpha Centaurians and if these guys do some idiotic shit, it won't affect them. As a result, the universe is extremely

spread out, but what that creates is it's extremely hard to synthesize or integrate information at a cosmic scale it's so hard to know that this person hasn't just sent a signal away the hell over there because of those multi-year light separations between those places the only solution i've never pondered this before because i never ever thought this was relevant i was like the hard part is getting there i don't want to hear about the money the hard part is getting there but recently i've sort of inverted and been like we already know how to get there well we just need to strap a bunch of nuclear weapons onto this thing and and and do it we

should need to do it the hard part is the money like what is there that's valuable that we're going to want to make money from like you can't bring anything back with you that makes it extremely hard to trade like you can't like it's not going to the new world to bring back spices and tobacco and potatoes the old silk road like it's it's it's something different than that there's nothing you're going to bring back from there other than information that that you can even transfer over that distance so it's not you can trade very easily so it creates this vacuum of incentive just like there's a vacuum of matter but like whatever say that you even had a reason to be out there how do you build economic systems that bridge parts of the universe that are years

apart in terms of communication time the only solution is you invent a long-term integration layer which is to say you have this process by which there's a period in which all transactions that need to be counted are like allotted and grouped and then confirmed and that is a blockchain and so it kind of feels to me like i've spent so many years thinking about like oh how do we get better fusion engines and how we do all this stuff and like maybe wanting to think about is like how do we build a system that truly can incentivize like groups of humans to like leave like our little our little area of the universe and head out on their own and still be economically able to transact with us maybe that's what's been holding us back is like i think it's one of the

things that has been and i never appreciated it until like i could understand bitcoin and realize that it's not exactly bitcoin because of the 10 minutes and whatever else but like some tweaks like there's a version of that idea which does work and it does work to create like you know like 100 year long block times that are capable of integrating economic activity amongst the most nearby stars sounds like a good side chain in the future it's something fascinating it's a totally fascinating problem that is irrelevant and it is so in the spirit of bitcoin it reminds me of how i got is bitcoin which is like here's this problem which i think is irrelevant and it turns out i'm wrong it's totally relevant and really important and by not ranking its relevancy correctly i

missed out on two years of owning bitcoin it's a little bit i'm just like i no longer i'm no longer making those claims i think all problems are relevant all right so uh drew and i are starting an intergalactic space company after this podcast yes what if we are the smartest civilization in the universe would you be happy sad uh surprised i think about a lot i read a great i saw a great youtube video recently that was like what if most civilizations in the universe most things in the most life in the universe is like um living in these little frozen moons like we look at our solar system there's earth earth is great but like where else is there water so far we think it's on these frozen moons of saturn and jupiter right europa and solidus like it's really hard to light

fires and do metallurgy if like you have fins and like you're enmeshed in like ocean right so maybe that's what's remarkable about humans is that we live on an air-based planet we can light fires we can make um do metallurgy to create silicon circuits to build computers to create um truly relativistic financial systems that create the economic incentives to cause us to really expand across the galaxy so maybe von neumann probes don't exist not because they're impossible to make but because the economics are stupid not there until we develop this i don't know holy shit that's why you gotta enjoy life people it's precious right is that is that what we're getting to at the end here that's what i think like enjoy it like enjoy it hopefully bitcoin makes you

appreciate it more to an extent or appreciate what you have or might it gives me a viewpoint that is crazy right like what if we're are we really building a system of money that's going to last for thousands of years and thousands of years from now they're going to be able to come back to our genesis block and look at it and like ask questions about satoshi right that's wild if that's true like um gosh like what's the only comparable i can think of are like you know i don't know john and mark like the apostles who wrote the bible right or like or someone who built the pyramids or whoever meant to zero or like i'm telling like some weird shit man and again like we don't want to get too far ahead of ourselves we don't know if it will if that will

come to fruition but again like look i hate being wrong and so i'm so reticent to like i've i've for many years never told anybody that i know that they should buy bitcoin because i don't want to be responsible for any sort of pain or regret on their part i'm just not not interested in it recently i've been reconsidering that and i've been telling my dad dad you should buy some bitcoin i'm telling some folks in my family you should get into this it's a real thing i no longer feel so bad and i feel like even if the price goes down it'll come back up and i have more confidence in it um so i'm starting to believe in this thing more less ironically i'm believing in it less ironically i don't feel like every time i say it could be a big thing i've

got to hedge it with but i could be wrong like yes i could be wrong but like less and less does that seem the case um but then this starts to touch on what we were talking about previously like are we really such a lucky generation that we just happen to be the right age right time that we got into this like are we you know we're like war profiteers or like you know the folks that were in reconstruction after the civil war we just like happen to be here at the exact right time to make bank yeah but it's happened throughout history so maybe we are you know and it's maybe we'll be rewarded for being the few people on earth that recognized that while it was going on on earth or who knows well that's another series some people think satoshi is an alien

that uh that noticed the strife going on on earth and and uh bestowed upon us a perfect what a remarkably like nerdy economist version of star trek where it's like the prime directive is not we shall show up and do nothing and let them observe as primers like once they get sufficiently advanced we'll just show up and teach them about blockchains and then that'll help them hook into like the universal economic machine and we can exploit them for their resources and yes the complete opposite of what i described like maybe we're not maybe we're the dumbest civilization in the universe and this is a like a touring test to see if we can join the universal economy if we can handle these blockchains like all right that's a good question is it more depressing to

be the first or like to be alone right or to be like way the last and you're like not even interesting because everything you've done has been done by some other crappy alien before yeah i would uh i would i would say that uh the first scenario is more romantic of us being the smartest uh civilization in the universe but it's also a good thing if uh we're becoming smart enough to join the universal economy and it's a it's a good check mark to check off you know check plus all right we're almost two hours in here what else this has been this has been one of my favorite conversations i've had in months um thanks for getting me really drunk marty and let me talk about aliens on your tv show i can tell you're drunk because this isn't a tv show

you're not gonna be on tv at all what's all the cameras for then oh oh yeah we uh we took our shirts off and recorded this like uh kevin famine at chris ross but uh no i'm kidding i kid ah that was incredible do you have a parting note anything you want the freaks out there to know any tips any advice anything about unchained we've been here for almost 10 years but so early i feel like rules are just being figured out um there's already pressure to think like other people and to accept what thought leaders tell you and to accept what the powerful and those who've established themselves tell you and i i just i never accept that i feel like this whole industry is built around the idea of thinking for yourself and being independent and

yet because we're monkeys we're so eager to be told what to do so the only parting note i have is don't listen anything that marty or i have ever said just think for yourself comes to your own decisions um where the evidence decide i think that's the uh the best parting tidbit we've gotten on this uh podcast drive it's been a pleasure thank you for coming by marty off the flight in the studio very uh very admiral that your that your mind was that uh uh coherent i drank on the playing man i was prepared that's all we got for this free for this week freaks you tell them drunk uh peace and love