The Breakdown - The Breakdown Weekly Recap | Feb 6 2020

Episode Date: February 8, 2020

The week's full episode run in one long-run, long-drive ready podcast. Monday | Deplatforming, Ethereum Marketing and Whether Brexit Matters for Crypto feat. Ledger CEO Pascal Gauthier Tuesday | Are Uncensorable Web Domains Blockchain's Next Killer App? Feat Namebase CEO Tieshun Roquerre Wednesday | What All This VC and M&A Activity Tells Us About The State Of The Crypto Markets Thursday | The Federal Reserve Has Its 'Come to Satoshi' Moment Friday | Kraken's Dan Held on What's Different About Bitcoin At $10k This Time 

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Saturday, February 8th, and as usual, we are doing our end-of-week recap where I string together all the episodes from the previous week for your long runs, your errands, whatever it is. and we discussed really quickly to kick it off just what the idea or tenor themes of the week were. The week actually kind of started off a little slow. My first episode this week was about things that had happened over the weekend. We had this issue around deep platforming with zero hedge, and we had this conversation from Ethereum about whether marketing mattered,

and we had Brexit on Friday finally coming to fruition, and we asked whether it actually was a thing that was worthy of note in the crypto community. That episode is interesting, I think, because Pascal, the CEO of Ledger actually joins for some comments, and he's based in Paris. So I think it's worth listening to, even though it seemed like the week was starting off slow. The week got a little bit more interesting with the launch of Handshake. Handshake is a censorship-resistant domain name service platform, basically. It's a protocol that's trying to make websites uncensurable. And so we had the CEO of NameBase, which is basically the first domain registrar for Handshake.

handshake, excuse me, on to talk about why that matters. Now, for a little bit of context, I first came across Handshake when Eric Meltzer called it the second interesting application of blockchains after Bitcoin after money. Then the week started to go in a little different of a direction. First, we had a huge amount of M&A activity and VC activity that was announced. We had backed announcing that they had acquired a consumer loyalty app and the CEO of ICE talking about, how consumerization was so important and why BACT was poised for this huge, huge trillion-dollar market. We saw Lightning Labs raise $10 million to expand the way that they were building out Lightning, and many, many other companies announced funding as well. So clearly there's more and more happening

in the market. What's more in the background, Bitcoin is just slowly creeping up, and Ethereum was creeping up even faster, right? We had, you know, the 9,000s in Bitcoin hitting 9,500, and then 9,600, and then 9,700, creeping up all the way to 9800 where we've been. Then it kept getting more and more interesting. One of the governors of the Federal Reserve came out and said that they were actually researching a digital dollar, which is effectively a way of saying that they're finally actually acknowledging that all of this stuff happening with central bank digital currencies is relevant for the U.S., which frankly is something that the Federal Government,

or the Federal Reserve rather, has not been willing to do yet. Meltem DeMirr has called this the Federal Reserve having its come to Satoshi moment. I think this is the most important underlying narrative of everything happening in our space. So the fact that the Fed has now entered the game in a more official way strikes me as particularly important. Then we had defy hit this major milestone of 10 billion locked in defy, which of course everyone has just been debating. The bitcoins are saying it's not really interesting. Ethereum folks are obviously saying that it shows that Defi is on the map. That's a huge, huge deal, whether you think it's kind of BS or not. It's something that is unignorable, and that's

the important part of the conversation. On Friday, as a way to kind of wrap up the week and all of this excitement and all of this just being jazzed about the approaching milestone or potential milestone of Bitcoin at 10K. I had Dan Held, who is Bitcoin OG. He's started multiple Bitcoin businesses. He sold his most recent business to Cracken and is now at Cracken. We did a conversation about what has changed since the last time we were at this 10K level, how the narrative has shifted and why the emergence of speculation around the Safe Haven narrative and the Bitcoin happening are so important this year. We talked about the new infrastructure and just what people can do with their Bitcoin and how it's not limited to the same old

just buy-in hoddle. You can put it to work in different ways now. Finally, we talked about the new entrance to the market, the new audiences who are here. In particular, the fact that we're coming up on a happening where institutions are actually in the game, they're not just lurking on the sidelines, and that could have serious impact. So it was a really fun way to end what ended up being a pretty dynamic and exciting week. With that, I'm going to kick it over to the actual episodes. I hope you enjoy it. As always, I hope that wherever you are this weekend, you're having a great time hanging out with friends, family, doing whatever you want to do to regroup. and we will be back with your regularly scheduled breakdown on Monday.

Cheers, guys. Welcome back to the breakdown. An everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Monday, February 3rd. And today we are going to kick off by talking about social media censorship and

platforming. It's a conversation that while not technically about crypto is something that crypto folks feel very passionate about. Second, we're going to be talking about Ethereum marketing. There's been a conversation happening for the last week or so around whether Ethereum needs more marketing. So I wanted to introduce it and then give my two cents. And then finally, we're going to look at whether Brexit, which went through last week, actually has any relevance for the crypto community, either actually or philosophically. Let's dive in, though, around social media censorship. Towards the end of last week, Zero Hedge published an article about a Chinese scientist

that effectively claimed that this person might be the root of the coronavirus, and it linked to publicly available information around their phone number, their email address, their actual lab address, etc. Twitter did not like this. Twitter saw it as a violation of their rules around targeted harassment and kicked Zero Hedge off the platform. Now, Zero Hedge is a much larger publication than just Twitter. Twitter accounts for something like 7 to 10% of Zero Hedges traffic, but it did have close to 700,000 followers and was a very prominent, well-known account. And this created a huge amount of debate and discussion as it always does whenever an account becomes de-platformed. There were

a few different lines of the conversation. The first was whether this particular offense actually merited banning. And there were lots and lots of different takes on that. Joe Wisenthal from Bloomberg, for example, said that he thought that having a ban for something that happened off the platform seemed perhaps a little bit egregious in terms of the actual tenor of the punishment. So there were a bunch of different takes. The second part of the debate, I think, had to do with Zero Hedge itself and whether it was a worthwhile inclusion in the public space. And there was a lot of different takes on that. Arjun Bilaghi, who's an investor at Paradigm, wrote, Zero Hedge once hosted well-reasoned heterodox views, but eventually devolved into conspiratorial blog spam. The rabid defense from

readers is incredible dissonance. You have to wonder how many missed the rally of a lifetime after DDoSing their brain with apocalypse porn. But then, of course, there was the opinion that, yeah, as Zero Hedge may suck, but that doesn't really matter, and that's not really what the conversation is about. So Nick Carter embodied this point of view. He said, real talk. ZH was drivel most of the time, but I'd much rather stomach the occasional nonsense than allow Twitter to install BuzzFeed as the gatekeeper of discourse. And this, I think, gets closer to where I feel. This conversation really shouldn't be about any one particular deplatforming. It's about the idea of de-platforming in general, and it certainly shouldn't be about just a single publication or not. The interesting question and why this is so intense is that

all of our conversations about deplatforming tend to treat these private companies and the digital spaces they have created as public spaces, right, as places for public speech, when that's not what they are. They are businesses designed around the social exchange of information, and they reward extreme points of views in the algorithm that drives engagement. They push people to more and more extremes and they highlight and amplify more and more extreme and less and less nuanced points of view until at some point they get to this arbitrary line, this icarus line where the extremists have flown too close to the sun and they have to be punished. The problem is that this debate is never ending, right? If we just keep talking about a particular

infraction or if we just talk about the merits of a particular publication, we don't ever actually get to the real tension, which is the tension between feelings. like these platforms are significant enough and meaningful enough and important enough to the public discourse that they need to be treated like public spaces where free speech is protected versus the fact that they are ultimately privately owned spaces that we are just renting time in effectively. There is a very uncomfortable conversation, especially for those who are the most kind of libertarian-oriented and free speech-oriented where the

The conclusion, I think, or at least one logical conclusion, is that these platforms have become so significant to the political discourse and the public discourse that they do need to be protected as public spaces. That means more, not less regulation. And I don't necessarily think that that's what the average person who's rooting for zero hedge to come back wants, but I think that it's coherent, right? So that's going to be an interesting conversation. I believe that we're going to see some credible arguments over the next few years that the Twitters of the world, the Facebooks, need to be regulated as public spaces, as basically as public utilities. And that's going to create a lot of tension. Now, just briefly for a frame of reference for how big a conversation

this was in the Bitcoin and crypto Twitter world, I, as you know, tweet all the time. I do a Twitter newsletter called Long Read Sunday, and I've been doing so for years and years. And I had this weekend my most viral tweet ever, and it was a single line. On Saturday night, I wrote Breaking News. Twitter introduces the Bitcoin emoji tag to get holders to STFU about zero hedge. That thing has now been liked 2,000 times, retweeted 250 times, and it's just a stupid throwaway line. And there's two things going on here. One, people were very excited to see this emoji that Jack had implemented on Twitter that has the Bitcoin B. And I think that probably is the biggest part of it, but people were responding to just how much conversation there was going on

about Zero Hedge and this idea, although it was very much a joke, that Twitter and Jack were trying to buy us off and get us to shut up and focus on something else by adding this emoji. This is a big conversation, and it's a big conversation because it feels like it has implications that go much beyond Zero Hedge. So let's look at where de-platforming and this question of social media censorship is happening outside of just Zero Hedge. This morning, Balaji Shrinvasan had a tweet thread that started, Digital Quarantine is here. It appears that folks who fled Wuhan have been digitally quarantined, likely via WeChat.

Their apps don't work outside the quarantine zone. Now that's happened to 240 Uber users in Mexico exposed to the infected. Complex issue, a thread. Balaji goes on to talk about why municipality would need to impose a quarantine and the importance of it and why we wouldn't necessarily. want that sort of quarantine to be porous. However, he also talks about the fact that once that sort of power is implemented, it is almost never relinquished. Now, there are, of course, many points of view on China and social media censorship. Last night, Dovi Wan wrote about this as well. She wrote,

many folks consider Chinese social media a tool of suppression. In fact, that's not the case. It's kind of impossible to completely shut down over 800 million local netizens online. During this, this coronavirus outbreak, various cases emerged as how public opinion supervision actually works. So she's basically getting into how much more complex it is than, hey, China is just shutting down accounts, willy-nilly. There was also state-level social media intrigue this weekend from Canada. A new report came out making recommendations to the Trudeau government about a variety of internet issues, and one of those recommendations is that all websites that share information with the public need to be licensed with the Canadian government.

This is phenomenally crazy to think about coming certainly from a U.S. perspective, just from a pure implementation standpoint, doesn't seem at all feasible. But it all comes back to these similar issues and questions of the importance of these new web platforms in public spaces and just how they're supposed to be regulated and whether it's supposed to be more like a public utility or a public space than a traditional private company. This is the beginning, not the end of this conversation. It's going to continue to come up. And while the decentralized social network idea may be kind of out of fashion right now, simply on the basis of the fact that we're not hot on utility tokens and we have real

questions around whether tokens can actually help networks bootstrap as was the theory at the beginning of the Web 3 idea and around the time of ICOs, you're going to see, I think, inevitably, more and more people in the Bitcoin community, more and more people in the crypto community more broadly who want to opt out looking for alternatives to these what I think are inevitably going to be more regulated public private space hybrids. They're going to want spaces that reflect basically how the internet has been up until now, which is free and open. So even though it's not technically a cryptocurrency issue now, I do believe it is closely related

and I think it's going to overlap and I think it's going to have implications for us. All right, now something very different. Ethereum marketing. So over the last week or two, there have been a huge number of conversations on Ethereum Twitter around this question of whether Ethereum needs better marketing. And certainly this is not just a Twitter conversation given that the marketing Dow, an Ethereum project, started a couple months ago as well. So we have Eric Connor saying,

Ethereum has a marketing and awareness problem. I find it annoying how everyone wants to pass it down the line and not realize this. EF shouldn't market, the tech will speak for itself. DeFi protocols shouldn't market. We aren't ready. No, it's time to be aggressive. Then you have Anthony Sasano who says, there seems to be a lot of confusion about what the term marketing actually means in an Ethereum context. Ethereum marketing is multifaceted. It's education, outreach, advertising. It's not just pumping ETH with hype posts, shilling, or selfies with CEOs. and then he goes on to write a whole thread. Brian Flynn writes, 2018, Ethereum has a tech problem. 2019, Ethereum has a Ux problem.

2020, Ethereum has a marketing problem with a crying laugh face. And then MyCrypto did a poll. They said, do you think Ethereum needs marketing? 59.1% said yes. 25.1% said no. 6.6% were unsure, and about 10%, 9.2% just wanted to see the results.

This is out of more than 1,000 votes. And then finally, Stephen from the block wrote, Ethereum people, we need more marketing. Also Ethereum people. Debate the definition of marketing over 16 tweets, joking about Anthony's thread from before. So here's my take. And I won't take too long on this. Obviously, I'm not deep in the Ethereum community. I'm an outside observer. But I am an interested party, and I'm particularly interested in the future of Defi. That's where actually my perspective comes from. You might think that because I run effectively a crypto content marketing consulting firm, my answer would be yes, of course. Ethereum should be marketing more. It should be pushing the story.

It should be pushing the narrative. It should be recruiting new users. And I actually don't necessarily think that's the case. Where I do think marketing matters right now is that I think that it's right for projects within the Ethereum community to be spending time thinking about the values that they stand for, what their goals are and how they tell that story. Right. I think that it's a good idea. to start spending resources on content that helps people who are interested to learn more and join this community of early adopters get the information they need to actually figure it out. I think basically it's the right idea to think about the type of content that can be invitational for people who want to go down the rabbit hole as it is now.

What I also think, though, is that Defi, which I believe is pretty much the core focus, or at least the single biggest focus among Ethereum projects right now is one of the most simultaneously high potential and high risk things that anyone's doing in crypto. This is huge. What these projects are trying to do is fundamentally reorganize the rules of finance in terms of how people interact with their money and what sort of intermediaries or not they need to be doing that. They are playing with long-standing legal regulatory issues and really pushing the boundaries and pushing the lines of them.

And that is amazing and it's cool and it's interesting. However, one of the things that I think makes it so good right now is that it's being live incubated by a group of early adopters who, on the one hand, are absolutely playing with live ammunition, real, real money, real resources. but they also fundamentally understand the risks, right? This is not the ICO boom where people are going out to recruit pensioners to come get in these things, which are even riskier than traditional startups because they don't have any diligence and they don't have any management, they don't have any oversight, and they don't have any rights for investors. Defi doesn't have that. Defi is growing up with people who get how early it is and who get what the risks are

and who get that this is high potential and high risk at the same time. And I think that that's a good thing for Defi. that it would be a detriment to Defi if there were a huge push to get an influx of users in. So much that I think actually I am hopeful in some ways that the growth continues to be a steady, linear growth of people who are interested, who want to go down the rabbit hole, who are comfortable with the risks, rather than some big influx because people get all excited about making 8% or something on CDPs. I think that Defi is in the right place for what it's trying to do right now.

And I think it's hard because the Ethereum community, I mean everyone in crypto, but particularly the Ethereum community are the sort of hacker, entrepreneurial folks that want to just build, build, build, build, build, iterate, iterate, push, push, push, push. And it's very hard to simultaneously have that mindset and a conservative mindset that says, hey, we don't need to go get the whole world just yet. However, I would say, again, as an outside observer and recognizing that I'm speaking from the outside looking in, I think that the game that is being played is a pretty fundamental generational transition. And doing it right, which is kind of happening right now, is better than doing it fast. And the risks, the new risks that that brings in. So my little two cents, my little rant about whether Ethereum should be thinking about marketing now. Obviously, it's more complicated than a simple yes or no. But I think that defy is in a really good place. and I want these projects to be able to continue to experiment in the right context.

That's my take on that. All right. And speaking of takes, one last little thing to round out the show. Last week was Brexit Day. The UK has actually left the EU, and there will be, of course, many, many more negotiations months and months and years and years of trying to now negotiate a new type of relationship. And because of that, knowing exactly what the impact is likely to be in the short term is a little bit difficult. I even asked on Twitter on Friday, and the opinions that I got back were things like Peter McCormick saying, I doubt anything will change. Jamie Burke from Outlier Ventures saying, for crypto at this stage, not much, will depend on general alignment with European financial services regulations, which is still up in the air.

Doesn't seem to be much interest at the top for this right now, sadly. And there are a few other folks who reiterated this same point. However, it seems to me that when you have this sort of major economic shift, there are almost inevitably going to be some implications. And so I asked Pascal Gauthier, the CEO of Ledger, to actually dig into this question for us. The company is based in Europe. Pescal is based in Paris. This is a conversation that they've been having frequently enough that, in fact, they did a campaign about taking back control at Canary Wharf in London on Brexit Day itself. And so I asked him basically two questions. First, I asked what the implications are likely to be

for crypto companies in the UK or in Europe, if any. And second, is there a larger philosophical connection point between crypto or Bitcoin and what's happening with Brexit? So let's listen to what he had to say. Hey, this is Pascal Gautier, CEO at Ledger. So I'm being asked like a few questions recently about Brexit and what it means for European entrepreneurs and crypto entrepreneurs or crypto communities and how the British and European crypto communities looking at Brexit and the implications. So number one, I would say that probably it's a little early to tell because there are big negotiations that will take place between now and the end of December. So we will be waiting for these to happen before like knowing exactly what it means for crypto communities. business in general. But what can be said, though, is since the UK is no longer part of the EU, there will be two potential regulations in Europe competing against each other, which gives

probably in the long run a choice for European entrepreneurs to set up either in the UK or in continental Europe. Some of the European observers are worried that the UK will become what they call Singapore on Thames, Singapore on the Thames River. So, probably very liberal economy, tax-friendly and business-friendly. So let's see what it means in the long run for businesses, but typically you go from one single market with one rule, and especially on finance and crypto, the European community has a tendency to do a lot of regulation. And so maybe the UK will take a more liberal approach and less regulation going forward. Maybe that's an option. We'll see what happened in the future.

The second question I'm being asked a lot recently is if there is a larger philosophical connection between the debates around Brexit and crypto as a social, political or economic force. You know, actually recently at Leisure, we've done like an advertising stunt or a peer stunt the day of the Brexit where we bought some advertising in London right in the middle of Canary Wharf using the sentence, take control for real. That is something, that is a quote that has been used during the Brexit campaign to say that the UK people will take back control living the EU. And so we use that in our advertising stunts. But actually, we believe that philosophically the two events are dramatically opposed because we believe that Bitcoin is about being global. It's the promise of one currency for the planet. It's the promise of financial equality or equal access to a financial system wherever you are on the planet. and regardless of how rich or how poor you are,

where Brexit is probably more of getting back into my country with my border, so it's less inclusive, it's less of a global approach. So we believe that even if the same sentence can be used, taking back control, we believe that it means absolutely two different things. And so philosophically, I think the two events are quite opposed. if you want to take back control as a country and sovereignty and, you know, having the strong grasp on your economy, taxation, currency, it looks like it's opposite values from Bitcoin, which is, you know, again, global and much more inclusive.

Really interesting answers here. I think that ultimately it's going to be a wait and see when it comes to the real practical. And I think that there's going to be a lot of different takes, given this big, diverse community of opinions and opinionated people that makes up Bitcoin and crypto around just whether Brexit is somehow connected or inversely connected to the larger crypto movement. But I appreciate Pascal's thoughts and hope you found them interesting as well. All right, guys, kind of a long one for a Monday, but so much interesting stuff happened this weekend. I thought it was worth digging in a little bit more. Welcome back to the breakdown for this week. I will catch you again tomorrow. Cheers, guys.

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Tuesday, February 4th, and we have an interesting one today. We're going to be speaking with Tie Agen-Rogier of Namebase, which is building on Handshake, the just-launch decentralized DNS that is basically trying to make top-level domains, i.e. website links that are censorship-resistant, that can't be taken down by government censors. And today, I think, is a particularly interesting day to have that conversation for two reasons. The first is that Handshake has just gone live

on Mainnet yesterday, and this is one of the more anticipated launches of the year. In fact, my first exposure introduction to Handshake came when an investor who's a opinion I tend to agree with, said that it was the second use case of blockchain after money that actually got him excited, this idea of uncensurable web domains. So I think that's part one of why this is interesting is that it's happening now, right? A handshake is here after much anticipation. Part two is we have this interesting, weird little context of the debacle that was the Iowa caucuses last night. So for those of you who aren't in the U.S. or who simply don't pay attention to U.S. politics.

Last night, the U.S. primary season kicked off with the Iowa caucuses. Now, a caucus is not a blind vote or a secret hidden ballot like the vast majority of voting in the world. It's this weird, archaic community process of raising your hand in public and debating and having people come back and forth to you. It's a very, very strange format that seems to go against the idea of a secret ballot in so many ways. What's more, people have critiqued Iowa and the caucus system for a very long time for having a disproportionate amount of power because it kicks off the whole U.S. primary season.

And basically what happens now is an endless sprint from state to state to state, trying to win enough electoral votes to be the official nominee to go on to contest the actual general election. And the problem, according to some, with the idea of Iowa starting it, is that it really sets the tone and the momentum for the rest of the event. It gives this tiny little state a disproportionate amount of power. Well, Iowa may have driven the stake through its own heart last night because there was basically no ability to actually report results. There was widespread accusations of tampering. There was a new app that they implemented, willy-nilly without a lot of testing, that has links to a company that had been used by three of the campaigns, Biden, Amy Kolobuchar,

Pete Buttigieg. So the whole thing was an absolute catastrophe. Across the board, even CNN's headline says that Iowa delivers the first victory of the electoral season to Trump, right? It looked and seemed and is basically an example of just gross incompetence. But the relevant context, I think, and why it's worth bringing up is that all of this comes back to, in some ways, accusations of tampering and censorship and just people having less trust than ever in authority and in the governments that surround them, right? You have so many different camps right now accusing each other of things and people are just left in the middle to basically identity politic affiliate with whoever they think is least likely to be lying,

which is a terrible way to comport a democracy. This is not about a blockchain voting idea or anything like that. I think this is not simply put a software problem. However, I think it highlights the broader issues we have of trust in institutions and the need for truly censorship-resistant alternatives. I'm not talking about decentralized alternatives. I'm talking about the point of decentralization, which is censorship resistance. So the idea, the hope for something like Handshake is that it will provide a censorship-resistant alternative to top-level domains, such that governments with any agenda can't actually shut down websites in the same way, that people will be able to go get the information they want or need,

or that is relevant to them, outside of the ability of governments to control it. That's the goal. That's the hope. I asked Tie Aishon to join us because he has been invested in this space for a while. He was a Thiel Fellow. He dropped out of school to come work on this project, and has a really interesting take on why it's so important. His company namebase is basically a domain registrar for this new uncensurable top-level domain ecosystem that is Handshake. So I'm going to turn it over now to the interview

so you can just hear from him exactly why this is an interesting project and kind of come up with your judgments for yourself. All right, everyone, I am here with Tashun. Hey, man, thank you so much for taking some time. I know today is a really busy day. Yeah, no problem. It's happy to be on this podcast. I've been following you guys building name base for a little while now,

and I've been following Handshake as well. I think I took note, actually, in particular, when Eric Meltzer Weepand, he tweeted something to the effect of Handshake will be the second highly meaningful blockchain application, which is obviously a pretty big word. So, you know, for those folks who haven't spent as much time with Handshake, Maybe you could just give a little bit of a background around what it is and why it's so interesting or exciting. Yeah, totally.

I'll give you the quick explainer and then I'll give you some context on why I think that statement will stand true. You know, you can think of Handshake. It's a protocol that functionally is actually very similar to Bitcoin, except instead of using the coins as money, you use the coin to register names on the Handshake blockchain. And these names are actually domain names. They're specifically top-level domain names. So you know like a top-level domain name, a tlde.com.a.o. dot net.org. These are all different TLDs.

And what Handshake does is it lets you register new TLDs directly on the Handshake blockchain. And the benefit of these TLDs being on the Handshake blockchain is it makes these domains very difficult to censor or seize or camper with. It lets you truly own your domain name, which is not something that's possible today. And it also makes it so that no governments or. or jurisdictions can block access to that domain name. So basically just provides like a set function improvement in terms of the user experience to the existing domain names of today.

The censorship resistance piece is the part that I think has people really fired up. And I guess, you know, for people who are keen on this idea of censorship resistance, but haven't thought about it in the context of domain names, why does it matter, for example, that domains would be censorship resistant? Yeah, that's a great question. And I think, you know, the easiest way to think about it is if you look at what's happening in the world today, you know, a few years ago, this wasn't, it didn't seem like as much of a problem, at least in the U.S., but basically over the past, you know, two, three years, it's been happening more and more. We're basically you see instances of censorship and control, information control from governments happening every day in every country. You know, some are doing it faster than others, but for example, you know, China, blocks Reddit,

at BBC, the New York Times, dot-dot, go, and hundreds of other websites. You see Iran, they have repeatedly prevented access to websites like Facebook and Twitter. They even shut down their internet completely in 2019. In India, they're right now censoring dozens of regions because people are protesting the Citizenship Amendment Act, which basically marginalizes Muslims. So you're basically seeing that across the entire world, there's a great graphic by the Freedom on the Internet.org Foundation. they basically are tracking freedom on the internet across the world.

And across the board, it's just getting worse. And what we're seeing is the trend is that in 10 years' time, the internet that we know and love today, it's not going to be this global internet that you can access from anywhere and use any website. It's starting to be siloed depending on which country you're in. And so they're putting up pretty much like physical barriers around each internet. The reason why that is is because China is basically exporting

their version of the internet, which is very authoritarian. to the rest of the world. They're holding seminars with leaders of 36 different countries and helping them basically set up their own information control centers. That's basically what we're seeing throughout now today, and that's the trend. And the reason why Handshake is meaningful is because it basically can counter that. When you're using Handshake, it makes it very difficult to censor DNS, which is one of the basically first tricks that governments will use. And so Handshake directly prevents that. So what will it look like for a user who's actually using a handshake? top-level domain, will it be any different from them? Is it like, basically, is it just another part of

this balkanized siloed internet or does it function just in the same way that a website now would? Yeah, totally. So there's two different users, right? There's people who are actually setting on the domains, registering them, and then there's, you know, the end users of those domains. So as an end user, you basically will use Handshake. That's what's called an alternative route. But basically, you don't really even need to understand that. Basically, all you need to know is that to use Handshake, you just point your DNS resolver to Handshake, just like you point your DNS Resolver to a Resolver like CloudFlare's 1.1.1.1.1.1.1. Or Google's 8.8.8. So basically, it just takes like two steps. It literally takes 10 seconds on your computer. And then you're pointing to Handshick,

and then you can resolve the Handshake names. Got it. So it is different than just typing something into the browser line exactly as they had, but a minimally significant change that once you've learned can become just as fast effectively. Is that a fair character? Exactly. You make the change once on your device and then you're done. And then we'll provide tooling that makes it very easy. We have confidence that this is, even though it is some friction, it's friction that people will put up with because they're already doing it for the existing DNS resolvers that have, you know, tens of millions of users.

How different is this then just like trying to use like a VPN or something when you're trying to skirt one of these kind of like, Balkanized internet regimes. Yeah, that's a great question. So VPNs are also a really good tactic for getting around some of these censorship issues. The challenge with VPNs is one, you're trusting the VPN provider to, you know, do good by you effectively, right? They're getting a lot of data. They're getting all of your traffic effectively and routing it through their servers.

And then the other thing is a lot of VPNs get blocked by governments. Because they're centralized entities, they're real companies. And so usually what ends up happening is the really popular ones that are known, they end up getting blocked. And so it's a constant game of cat and mouse. And that's really what you see on the internet today is, you know, for any of these sites, you know, if you work hard enough, you can usually get access to it somehow. But the barrier to entry is really, really high. And the governments are just getting smarter and smarter about it. So, you know, tricks that worked 10 years ago really easily are now a little bit harder or now a little bit less reliable.

And then with Handshake, what it is, it's saying that you don't need to have a cat and mouse game anymore. You just point your DNS to Handshake and then you're done. Your DNS won't be censored anymore. And the reason why that's the case is because Handshake is a distributed network, the entire Handshake blockchain effectively needs to be censored in order for it to be taken down. And that's just prohibitively the expensive. It's pretty difficult to do. And so that's why Handshake is providing a better alternative.

Got it. Okay. So now tell me about NameBase because obviously, that's the project that you're leading right now. Maybe tell us a little bit about Namebase, but also just what the ecosystem around Handshake looks like, right? So today, obviously, we were yesterday marked a big moment. But it would be interesting to hear just kind of like who all is in the space, what types of projects are in there, and then, of course, what you're specifically working on.

Namebase, the easy way to think about it is we're a domain registrar and on ramp for the Handshake blockchain. So we sit on top of Handshake and just make it really easy to use. If you want to buy Handshake coins, you can do that on Namebase with dollars or Bitcoin. And then if you want to use those coins to register the names, we have a GUI interface that basically just registers the names for you and the GoDaddy like experience. And then you can manage your DNS settings just like you would, you know, in those registrars. So basically we're just infrastructure for making Handshake easy to use. In terms of the Handshake ecosystem overall, basically you have Namebase, which is a domain registrar,

and on-ramp for Handshake. There are a few wallets out there. There's also miners. There's Six Block and Six Miner, which is actually a mining pool that we've partnered with to actually provide liquidity early on. And I'll talk more about that in a second. There's also Handy Miner, H&S pool.

There's a wallet, Kjokin, that's been created as well. And in terms of the investors, Handshake has really phenomenal investors. Pretty much like every top Silicon Valley firm has invested in them. A16Z, Sequoia, Founders Fund, Greylock, they're all investors in Handshake. And so these are the people who backed Facebook, Google, Slack, you know, WhatsApp, pretty much every company that you use today. And so there's a lot of excitement behind it. How are you thinking about it?

Maybe this is getting a little too in the weeds, but it's interesting to me. Like, how do you as a new registrar for this think about pricing? The interesting thing about Handshake is it's not a flat fee for the domains. The reason why that you don't want that is because it basically allows, you know, whales to come on and just buy up all the good names really quickly. And that just destroys the equity value of the names. Instead, handshake names are registered through a auction system. Basically, whoever wins the auction pays the second highest bidding price. So let's say you were trying to get Dot Whitmore and you paid, you know, 1,000 H&S and I bid, you know, 500 H&S.

you would win and you'd be paying 500 H&S. And importantly, that's not going to any centralized entity or any company. That's just burned directly on the network. So it's basically saying you want that name the most, so you get it. And there's a cost, obviously, because otherwise if it was free, it wouldn't be worth anything. But then you get it. In terms of the costs on namebase, we basically just offer that registration service for free. Our position is that anything you can do on the handshake blockchain for free outside of

name base, you should be able to do it for free within name base. And we just make it even easier to use. There's just some nuance around like submitting transactions and submitting them at certain times over a period of a few weeks. And so we just abstract all that away. So you just kind of click on a button and then you're done. One last question that's a little bit more kind of on a personal level. Like what made you decide to focus on this versus anything else in the crypto space,

just anything else you could be building? Yeah, totally. That's a great question. And I think what's helpful is I can probably share a little bit of context on myself as well. So I'm a 2019 Teele Fellow, especially this fellowship that funds people to leave school to start their own companies by Peter Thiel. Previously, I was starting math and computer science at MIT. And before MIT, I actually started another company called Straw Entro, which was funded by a white combinator. So I was in MIT, you know, exploring different ideas.

And the thing that got me really excited about Handshake, when I was in my first semester at MIT, I had the opportunity to, to travel to Turkey. My roommate before was Turkish, and so I went with him and went there. And Turkey was phenomenal. But the thing that really struck me was when I tried to access the internet, I was trying to access the website. I forget which one. It might have been like Facebook or Twitter or YouTube or WhatsApp, but it was blocked. It was pretty shocking because that was my first experience ever with censorship. In the US, we don't really have issues with this yet. And so it wasn't something I was used to. But that experience was really eye-opening because I was like, whoa, like all these people don't have access to Wikipedia or YouTube. And I grew up learning how to program on

YouTube and learning different subjects on Twitter and Wikipedia. So that was really eye-opening. But the thing is, when I thought about it, I was like, you know, I'm a single person. There's like literally nothing I can do. So I just continued my trip and I didn't do anything about it. It felt wrong, but I just like went on my way. I went back to school. And then a few years later, I ran them by chance met the handshake team and I realized, oh, this is something that can actually solve that problem. And as I mentioned before, over the course of the next few years, I saw that the internet is getting more and more censored. It's getting more and more controlled. And you think that's not a problem. You know, this censorship issue, it's really the reason why, like,

slaves back in the day were never allowed historically to read and write. It's why internet censorship is one of the first tools that countries use when they start getting protests. Information control is one of the most effective ways for governments to control their citizens, create silos and control their opinion. And even if it doesn't affect you personally, the second order effects are catastrophic because there's just so much easier to demonize an entire population when you can't communicate with them. And governments know that. So I saw that happening. And when I came across Handshake, it basically provided a path forward for fighting against this. Basically, just by participating Handshake,

you're registering a name and sharing it with people and spreading it to the rest of the world. There's an opportunity to actually change how the internet works. So when I saw that, I personally became very excited because I was lucky enough to have that first exposure to censorship and see kind of what the rest of the world was experiencing. Pretty much every country outside the U.S. and Canada has significant censorship issues,

information control, they don't really have freedom and safety on the internet. And that's really what handshake can enable. It can bring freedom and safety to the internet. So that's why I'm working on it today. I feel like the crypto community has been talking about this all weekend, first in the context of Zero Hedge and Twitter, and then in the context of China restricting or basically taking individuals offline who had been exposed to the coronavirus, or at least there's machinations around that. And then even in Canada, there's a new report out that's making a recommendation that the Canadian and government ask websites basically that distribute information to register to actually have a license, which, I mean, holding aside the phenomenal difficulty and seeming to implement that

would be a pretty significant departure from the internet as we've known it. So I think definitely this domain of challenges and problems is something that it's good that there's a lot more focus on. And I'm excited to see what would handshake and what you guys at Namebase do. So thank you again so much for hanging out for a little while. and best of luck with the launch. Yeah, thank you. We're opening up our wait list starting today actually, so it's a good time for us to be having

this conversation. It's actually kind of backed up, so we're probably not going to get to the entire list over the course of the next few days, but yeah, people are starting to sign on and we're seeing a lot of exciting. Where can people find you? Yeah, on Twitter at Tieshan R, but really the best place is just to go to namebase. A.o and sign on to our wait list and follow us on at NamebaseHQ. I think that's a conversation that we really could have pushed even farther.

There's no doubt to me that handshake is an incredibly powerful concept. I tend to agree with Tieshan that it's hard from our context in America in particular, for those of the listeners who are in the same political context that I am, to imagine the need, the urgency of this sort of uncensurable information. I hope that we continue to be able to leave this in the category of the nearly unimaginable. However, I think for many parts of the world, the assumption of information independence is simply not one that they have, right? It's a fundamentally different context that they live in, and it is authoritarianism, not freedom, that is the norm. Living in that type of setting, and having operated in that type of setting, having unsensurable,

information is a phenomenally powerful concept. Now, of course, the questions that we could delve into have to do with execution. One of the biggest issues for many of those who are watching from the outside is the economics of the system. This is designed around a native token, and native tokens historically have been primarily good at enriching the people who create tokens versus actually providing the utility that they are supposed to have. Now, I think in many ways, the problem of utility tokens and tokenization had to do with the way that they were offered through the ICO system, more than a by definition intrinsic failure of them. In fact, I don't believe that we've actually seen a full-fledged experiment in what a tokenized network.

economy can actually do in terms of making a network like this work. So I'm willing to suspend disbelief, let's say, and see what happens. But I do believe that that is going to be perhaps the major question that Handshake will have to deal with. And any business that's built on top of Handshake will have to deal with. However, for me, the goal, the idea is powerful enough that it's something that I think we should at least be paying attention to. So I hope you enjoyed this interview and let me know what you think at NLW on Twitter, nLW.substack.com for the newsletter. And I will catch you soon. Cheers, guys.

Welcome back to The Breakdown. An everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Wednesday, February 5th, and today we are going to look at it. at the market through the lens of some fundraising and M&A activity. In traditional tech circles, most of the news that you see day in and day out is about one of these two things, right?

Look, if you go on tech crunch on any given day, it's here's a financing or here's someone acquiring some other company. That's the way that the tech market, which is, of course, a private market, not subject to public market forces in the same way as many companies, gauges progress and gauges where it's at, right? How evaluations change. Who is funding who? Crypto markets are a little bit different because they have aspects of both private and public markets at the same time, which can make them quite chaotic. But I still think that it can be useful to occasionally step back, look at funding activity and mergers and acquisitions in the space as a way to just take a barometer reading of where we are. Now, there were a lot of different takes about this story.

Consensus is a controversial company in the space in so far as it is the most associated with Ethereum and takes a lot of the flack for accusations of Ethereum centralization and so on and so forth. So in any given outlet and any given tweet, you might see this news as very different depending on who was sharing it. So let's first talk about just what was actually announced. And then we can talk about what it means and whatever slant we think is correct. So first, what was announced? Basically, consensus is effectively shifting into two different parts of the company. They are separating the operating company from its venture investment part of the company.

What's more, in the context of the operating company, they're transitioning away from the sort of venture studio model they've had where they fund projects and incubate them and then spin them out to something that's much more focused on four core parts of their. their infrastructure platform. So there are really four focuses for them moving forward, which is Infura, Pegasus, Metamask, and CodeFi. Infura being the development suite that Ethereum apps are often built on. Pegasus being their enterprise blockchain solution consulting business. CodeFi, basically their link into the traditional world of commerce and finance. and MetaMask being the wallet that allows people to use Ethereum on a variety of different DAPs. So at least on a glance conceptual level, it makes sense that they're shifting from this wide-ranging all over the place, sort of spin up and see what works focus, to these four key

business lines that really are how Ethereum is going to touch a variety of different parts of the market, the developer market, the enterprise market, the finance market, and the consumer or retail market from the standpoint of how people actually use Ethereum in the context of DAPS. Now, they also said that there will be continued consensus investments, that that is not going away, but that it's going to be its own thing. So they were kind of didn't really say that much about it. They said that there will be a focus on early stage equity, liquid digital assets, and strategic opportunities were applicable, which is another way of saying nothing at all, more of the same. Now, importantly, and this is where a lot of the headlines were,

as part of this shift, as part of this restructuring, they're shrinking headcount by something like 14%. This is the second time over the last couple years that consensus has shrunk. The last time was in December of 2018 when they announced that 13% of people would be laid off as part of the first shift to a more consolidated streamlined model. So a lot of the conversation yesterday was either shot in Freuda around 14% headcounts from people who are rooting for Ethereum to fail, or a lot of sympathy and empathy from other projects, other people in the space who were reaching out and offering whoever finds themselves terminated to actually have new opportunities. Now, two other interesting bits of the consensus story. The first is from the block, which basically is reporting

that consensus is doing this in part because they're trying to raise something like $200 million. Now, this raise ambition was first reported last August by the information, but according to the block, they've had trouble raising it. So the direct quote is, a source with knowledge of the process told the block that the split, this is consensus split, obviously, in efforts, was a result. result of difficulties in raising money for a company that was involved in both investment and software development. So that's the story, at least from one source around the block. So that was the other part of the narrative depending on who you asked was that consensus was out looking for $200 million more dollars. Now, in a completely separate announcement, Consensus announced that

they had acquired a broker-dealer heritage financial systems and that they would be looking to get into the municipal bonds game, which is a notoriously hard to disrupt archaic part of finance. But it's also a $3.8 trillion market. The market for state and local debt is absolutely huge. And so in the story, Bloomberg broke this news. Some of the folks from Consensus talk about why this is so exciting or an example of why this is so exciting. And they're talking about mini bonds, which is basically where state and local governments,

governments are able to sell these bonds to local residents rather than just big mutual funds or banks. The upside of this activity is that citizens are actually literally investing in their local community. Their community and the important projects within it aren't just owned by outside forces. They're owned by locals. The problem is that it's massively more expensive. A study from the University of Colorado at Denver a few years ago found that to focus on this type of of investor, it was actually 2.5 to 7.8% higher cost to the governments who are issuing these bonds versus just selling to those mutual funds to those banks. So Consensus is really excited about the possibility of shifting that methodology and allowing more local residents to participate

in mini-municipal bond offerings. And they're even talking about why or how in the context of blockchains where you can actually have this immutable record of who, who has engaged, there can be different benefits for those citizen investors. So the Bloomberg article gives a very simple example of a recreation center. And they say if debt is issued for a recreation center, for example, the technology could easily verify a resident as owning the bonds and allowing them free access once it's built. So that's the promise. People are slightly more open to this. So Frank Shapiro from the block says, yesterday the focus was on consensus's layoffs and restructuring, but its acquisition of a broker dealer also announced yesterday to

break into the $3.8 trillion muni bond market looks pretty promising. Okay, so now we've gone through what the actual news is. Let's take a step back and try to figure out what we should think. I think it's pretty undeniable that the fundraising market is harder out there than it was a few years ago, which is obvious, even for a company the size of consensus. And in fact, what this suggests, is that investors are less and less interested in the sort of, let's freewheelingly bet on the future and more and more interested on practical use cases, real revenue lines, proven needs. You know, within the context of those four businesses that consensus seems to be focusing on now, you have two that are core infrastructure for building a new set of technology environments, right,

which is in Frura and MetaMask. and you have two that are about integrating that new technology with very traditional markets, both the enterprise market in the context of Pegasus and the larger financial markets, the traditional financial markets and commerce in the context of CodeFi. We don't know, we're not in those conversations, we can't have any real insight into how they've gone, but it seems just based on actions that it is likely that investors are demanding a little bit more reality and real focus and tangible focus than perhaps they were a couple years ago, which isn't necessarily a bad thing. I think that, let's put it this way. There's going to continue

to be people who iterate and experiment and push the boundaries and who fly with very loose resources in order to do so. And I think that it's likely that some of those entrepreneurs who have the ability to take on massive risk and try things that are unfathomable and unimaginable today will likely create some of the most interesting things. However, once you get up to the stratosphere of wanting to raise hundreds of millions of dollars, investors aren't just going to throw that at ideas, right? They want to see something real. So to me, this is just the maturation of the market and the reality confronting companies that want to play at scale. So in a lot of ways, I like having this force of consensus in the market just as a barometer for where this new market

hits the old markets and what people are willing or not to invest in. But consensus was not the only funding news this week. In fact, just this morning, Lightning Labs announced a $10 million Series A. Lightning Labs is probably the best-known company working on Lightning. It is the company that is founded and led by Elizabeth Stark. And they just announced this morning that they had raised a $10 million series A, led by Kraft Ventures, including the participation of Ribbett Capital, RRE Ventures, Slow Ventures, M13, and a number of other individuals. So just notable in terms of the participation is that these aren't all strictly

speaking crypto investors. RRE and Slow Ventures have much broader portfolios as well, although Slow Ventures recently brought in Jill Carlson, which makes me think that they are likely having more of a focus on crypto than perhaps they did in the past. So the funding news is probably the biggest part of the Lightning Labs announcement, but they also announced that they're releasing the beta release of their first, quote, financial project Lightning Loop. Basically, they've been focused for the last little bit on actually developing the underlying Lightning network, basically the implementation software that allows Lightning to run. But this Lightning Loop software is basically a way to make the Lightning Network more usable. So the way they describe it

is a non-custodial service that allows basically for an on-and-a-a-framp between the Lightning Network, which is the Layer 2 solution, obviously, and the Bitcoin network itself. The goal of Loop is basically to make liquidity easier and to allow companies to move more Bitcoin out of Lightning to free up the channel to receive more. So this matters for companies like Fold, which is an e-commerce startup, and several others. So right now the company says that there is something like 30 companies. that have been integrating this. So the takeaway on this isn't particularly surprising. It's that there continues to be interest in Lightning and continues to be interest in making Bitcoin more usable,

not just in the context of hoddling, but in the context of commerce and digital commerce. So I think this is exciting to see. I think we want to see more investment in Lightning and Bitcoin businesses in general. And this is the type of investment that is going to have larger ramifications than just for this one company because they are building infrastructure for others. But now let's jump over to a few other smaller announcements and see if there's anything interesting there. First up, we have a new $14 million series A round for a real-time payment startup called Transparent. Transparent Financial Systems based in Seattle spun out of Vulcan, which was the Paul Allen, the late co-founder of Microsoft's Fund. and for what little information transparent has given us, it looks like it's focused on

B2B approach, right? So it stresses that it, quote, creates solutions, not currencies, and is about the way that businesses can pay each other. The most interesting thing about this announcement, I think, is who's involved, specifically that Square has invested as alongside more traditional crypto investors like Pantara Capital. So to me, this suggests that there is still appetite from investors for projects that are affiliated with crypto and affiliated with blockchain that are focused on a more kind of fintech use case. Next up, let's look at the latest from Securitize.

Securitize announced a few months ago that it had raised, or it was raising 14 million. And in some ways, the most interesting thing about that announcement was also who invested. Santander, the bank from Europe in particular, had made an investment. Today, securitizes back in the news with that same fund because Sony has joined that round as well. Sony Financial Ventures has joined that $14 million round. They haven't added any more information about exactly how big the raise is other than saying that it's, quote, more than $14 million. but Sony is basically in. So the founder of the company said the Sony investment validates, securitize as one of the most

important architects of digital capital markets while adding another marquee name to a growing list of companies who are investing in digital securities as the future of global capital markets. Okay, so what's interesting about this to me? Sony is actually mildly interesting. I think what's more interesting is just that we've had this idea of tokenized securities around for so long. It's been such a promised area for so long.

The interesting question is, is there something changing now and why? And what is that thing that's changing, right? Why are people more interested in getting more excited about the tokenization of traditional securities now versus the two years ago when we started talking about this or the three years ago or even longer? Is it just a matter of the time it takes for traditional markets to evolve? Is this just a slow linear growth exactly as it's supposed to be for traditional markets to get comfortable with the benefits of the tokenization of traditional securities. It feels to me like these are going to be questions that we are asking a lot more coming up. And so perhaps it's worth watching the financial activity around firms like Securitize,

again, just as a bellwether for where the larger markets are in this idea of tokenized securities. Now, here's one from the crypto M&A realm. Backed is set to acquire Bridge 2 Solutions, which is a loyalty reward solution for merchants and financial institutions. This will be Back's third acquisition, and it has absolutely to do with their planned forthcoming consumer app, right? So this is something that they've been talking about for a while. They say they have partners like Starbucks lined up. And at Davos this year, the president of backed Adam White said that this wallet, this application that they will be creating will support more than just cryptocurrencies. It will also host a variety of different crypto assets,

loyalty points, in-game tokens, and many other things. So this acquisition is meant to give them tools to build those loyalty and points solutions into that consumer-facing app. In fact, though, that wasn't the only bit of news that involves backed, or at least ice, the Intercontinental Exchange, which owns BACT. But with that, let's finally shift to one little bit of M&A news that is outside of crypto, but is sort of tangentially related in an interesting way. Yesterday afternoon, Pomp wrote, whoa, the owner of the New York Stock Exchange is thinking about taking over eBay at a valuation of more than $30 billion. This is the same company that realized the importance of Bitcoin enough to start backed. Would be incredible to

combine NYSE backed an eBay under one roof. All right, so let's dig into this news a little bit more. Again, from the block, basically the Wall Street Journal reported that ICE, the intercontinental exchange, has made a takeover offer for eBay that would value the company above $30 billion. That said, the WSJ is also reporting that the companies haven't held formal talks and that ICE released a statement saying that eBay has not, quote, engaged in any meaningful way. So at this point, it's very clear that this is ICE chasing eBay around this. The question is, why would they do this? And part of that has to do with what's going on in other parts of the exchange market. So recently, NASDAQ announced a deal with Airbus to create a trading venue for the airline industry.

And I think that Maya Zahavi had a really good take on this. So she, tweets, this is a big deal in my opinion. Ice is taking a swipe at a lot of Silicon Valley marketplace businesses and their deal flow, sneakers, cars, and collectibles. Mix the eBay marketplace with backed and voila, a secondary market for anything and regulated. So this is, I think, the key point in what makes it interesting for crypto, is that you're talking about effectively exchanges, the world is being eaten by exchanges, and that all of a sudden we're seeing that there is maybe not such a big difference between traditional financial market exchanges, crypto exchanges, and these secondary markets for goods, right, in the context of eBay.

So that's what's so interesting about this to me. Now, Maya goes on and talks about the Airbus deal, which for those who haven't read anything about it is really interesting. She says, the NASDAQ move, an air travel derivative market via indexes, an awesome pairing given travel points are already derivatives bought in advance by credit card companies. The perfect frequent flyer product can be found on an air travel derivative market, aka, how much are you willing to pay to ensure you always pay the lowest price for that route instead of the spot price? It's a perfect real crypto-based security, due to the fact an issuer

needs to verify both the spot price, the amount of flights, and the highest future flight price in order to price that product. The point and what makes this so interesting is we're seeing the exchangeification of everything, right? That the presence of of these marketplaces is blurring the lines between what is a traditional exchange and what is a new type of exchange and what is just a secondary market, right? It's all becoming part of one process and these big, huge financial companies are actually seeing links between them and trying to bring it together. So this to me is something that's worth watching, not just in the context of this deal, but in the context of what it represents more broadly.

Anyways, guys, a little bit of a different episode today. It was kind of a slow news day, and I thought it might be worth just looking at the markets from a different angle. As always, I appreciate you hanging out and listening. Let me know what you think about these deals. Let me know if you think that this consensus thing is going to actually be real and big and good for the company, or if it's just a death rattle. Let me know if you think this eBay thing is just nonsense and it doesn't actually have anything to do with crypto, and it's just another example of us trying to cryptoize everything to care about it.

Hit me up on Twitter at NLW. Subscribe via email, nLW.substack.com. And thanks again for listening. I will be back with another breakdown tomorrow. Peace, guys. Welcome back to The Breakdown. An everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW.

The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Thursday, February 6th. And today we are talking central bank digital currencies and in particular new comments from the U.S. Fed that suggests that finally the U.S. Federal Reserve is getting off the sidelines at least a little bit and is actively engaging in the conversation about central bank digital currencies that is taking over all over the world that was at the center of Davos a few weeks ago. And that is clearly an essential part of the economic conversation. macroeconomic conversation going forward. So we'll be looking at that. We'll be also looking at a little bit more CBDC information coming out of a new working group from the Bank of International Settlements and from the government of Japan. So it is a regulatory day with big implications. The Federal Reserve has its come to Satoshi moment. That's how Meltem DeMir's described what has just happened with the Federal

Reserve in a tweet thread today about this topic. So yesterday, February 5th, Governor Lail Brainard, who's one of the Federal Reserve governors, gave a speech at the Symposium on the Future of Payments at the Graduate School of Business at Stanford called the Digitalization of Payments and Currency Some Issues for Consideration, which has to be one of the most boring names of a speech of all time. But I digress. So in the speech, she basically goes through a huge amount of background on digital players and how technology firms and big tech are driving new potential business models and new focus on new business models as it relates to payments and other parts of the financial economy. She touches on real-time infrastructure,

but the real interesting part, and it feels like the meat of the speech is about her take on the digitalization of currencies and what it means and where the U.S. fits in all of this. So she goes through and kind of gives, I think, the party line on a few different things. So I want to give you a brief sample of the speech as she goes through the existing crypto infrastructure before. She says, a decade ago, Bitcoin was heralded as a new kind of digital money that would serve as a store of value, means of exchange, and unit of account delinked from any sovereign currencies without the need for centralized governments. Bitcoin has not achieved widespread acceptance as a means of payment or unit account because of its extreme volatility, as well as limited throughput capacity,

unpredictable transaction costs, limited or no governance, and limited transparency. So this is, of course, what we've heard over and over again as it relates to Bitcoin, which is pretty much a dismissal of it based on its decade-long history and its inability to have more of a dent in the consumer markets. I've said this before. I'll say it again. I don't think it's a bad thing that the U.S. government's leering eye is not pointed at Bitcoin, in particular when it comes to what it views as a threat to dollar dominance at this stage. But let's move on. Secondly, she talks about stablecoins, so this is back to her speech.

Stablecoins were designed specifically to overcome the volatility of first-generation cryptocurrencies by tying the digital currency to an asset or basket of assets such as commercial bank deposits or government-issued bonds. Unlike first-generation cryptocurrencies, they may be issued by a central entity and rely on third-party institutions for some aspects. But even within this broad class of digital currencies, stable coins vary widely in their underlying reference assets and associated exchange rate. The ability to redeem the stable coin claims for the underlying assets and the extent to which

a central issuer is liable for making good on redemption rights. So again, we're still in the territory of, this stuff doesn't scare us, this stuff didn't do what it said it was going to do, but then we get to the next line. And I'm just going to read the speech exactly because it says it better than I could. quote, because Facebook has an active user network of one-third of the global population, the company's Libra Global Stablecoin Project has imparted urgency to the debate over what form money can take, who or what can issue it, and how payments can be recorded and settled. So here we have the real point and why we're having this conversation now.

It's that all of these things, they may be interesting, they may be somewhat worrisome for the future, but they don't register as an actual threat, as an actual issue that Federal Reserve has to consider, until Facebook, with its one-third of the global population coming with it, starts to get in on the game. And so here we have the reason that the Federal Reserve is now engaged in the conversation about CBDCs, or at least part of the reason, right? Because ultimately, it wasn't just the introduction of Libra that has served as a starting gun for the conversation about CBDCs and central banks getting their own digital currencies. It's been the combination of Libra and China's response to Libra. China has made aggressive postures ever since Libra was announced

that they were going to be a first mover. They were going to bring their own digital currency to market faster than Libra could. They specifically called out Libra as a reason that they were accelerating their process, which had started five years earlier in 2014. And by the way, for the rest of the world, China remains a major thing. threat. So let's jump over to Japan for a second before we finish off on the Federal Reserve Governor's speech. As we discussed last week, Japan has been working, or specifically a group of around 70 lawmakers from Japan's leading party, their Liberal Democratic Party, have been working

on proposals around issuing a digital currency. They are now set to release details tomorrow, Friday, February 7th. And interestingly, they continue to be very, very clear and very, very transparent that the reason they are putting the pedal to the medal on this issue has to do with China. This is a quote from the Vice Minister for Foreign Affairs, Norahiro Nakayama, who says, We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony. Without the U.S., we cannot counter China's efforts to challenge. the existing reserve currency and international settlement system. He added, and this is the block now that I'm reading from, he added that China's digital currency has a, quote, high chance to

becoming the standard within the country's one-belt, one-road digital economy initiative. So for those who are not familiar, China's one-belt-one road is basically the way that they are expanding the Chinese economy all over the world through infrastructure projects in the region, but also as far afield as Africa. They see this as an investment in their long-term place in the global economy, but when it comes to issuing a new currency, places like Japan are seeing that network, that economic network they've built as the place where they're going to immediately put that currency to use

and get continued or growing economic dominance there. Japan, of course, is not the only government, the only central bank who is looking at a central bank digital currency. This is a major topic. This is a major focus, as we saw coming out of Davos. Another story on CoinDesk today comes from a group of six central banks that are working with the Bank of International Settlements as a working group to figure out and study the feasibility basically of CBDCs.

So this working group includes banks from the UK, Sweden, Switzerland, Canada, Japan, and the EU, and they are going to, or they're prepared to report their results in mid-April at a conference in Washington. So over here you have Japan whose lawmakers are creating proposals with the specific intent to get the Federal Reserve on board to help counter the influence of China. Over in another part of the world, you have a Bank of International Settlements Group who is studying the feasibility of central bank digital currencies and hoping to use that to help other central banks make decisions about this. and then you have governments that are even farther along. We spoke last week about Cambodia who intends to actually launch their digital currency this year, this calendar year. Well, Meltem de Mirrors wrote all about Cambodia as a central example of basically what's happening around the world as it relates to central bank digital currencies.

I thought this point was particularly salient as she looked at the Cambodian case. So in her tweet threads, she says that one of the reasons that Cambodia is focused on this is to reduce dollar dependence. 84% of transactions in Cambodia are done in dollars. Because the NBC, the National Bank of Cambodia, controls the basket backing the token, it can prioritize the local currency over USD. I would expect many, quote, dollarized economies will be excited about reducing USD usage. So this is a really, really important point.

around the world, there are so many countries where people in those countries prefer to use the U.S. dollar rather than their local currency because of stability issues, because it is just more likely to hold its value. It's not subject to the same local political changes and travails. And they potentially see in those places, the governments see the central bank digital currencies as a way to shift that power balance and shift again back towards the local currency versus the dollar itself. So where does this leave the U.S.? Let's go back to Brainerd's speech at Stanford yesterday and see how she contextualizes all of this CBDC interest that's happening and where the dollar fits. So she says, the prospect for rapid adoption of global stablecoin payment systems has

intensified calls for central banks to issue digital currencies in order to maintain the sovereign currency as the anchor of the nation's payment system. In a bank for international settlement survey, of 66 central banks, more than 80% of central banks report being engaged in some type of CBDC work. The motivations for this work range from payment safety and robustness for advancing economies to payments efficiency for emerging economies. The latest survey suggests there is greater openness to issuing a CBDC than a year ago, and a few central banks report that they are moving forward with issuing a CBDC. Building on the tremendous reach of its mobile payments platform, China, is reported to be moving ahead rapidly on plans to issue a digital currency.

And here's the real nut of it, and this is the part that was the headline for the block and for CoinDesk and for everyone else in the space. Given the dollar's important role, it is essential that we remain on the frontier of research and policy development regarding CBDCs. Like other central banks, we are conducting research and experimentation related to distributed letter technologies and their potential use cases for digital currencies, including the potential for a CBDC. We are collaborating with other central banks as we advance our understanding in central bank

digital currencies. So this is the big shift, right? It's not just that they are talking about CBDCs. It's that for the first time, the Fed has said that they are actively researching them. They are actively conducting experimentation, whatever that means. This is actually, in some ways, if you take a step back, it seems absurd that we're having a whole episode about this and there's articles on every publication about this because they're just saying, hey, we're researching and we're doing some experimentation, right? They're not committing any. they're not saying it's something that the U.S. is definitely going to do. But the reason that this is worth paying attention to and that this shift in tone is worth paying attention to has to do with

just how big an issue in the global macroeconomy this question of digital currencies is. Now, of course, there is a caveat. Towards the end of the speech, Governor Brainer seems to intimate that the reasons that other countries might be interested in a CBDC may not apply to the U.S. and that this is fundamentally the difference. between being the owner of the world's reserve currency versus everyone else. So she says, some of the motivations for a CBDC cited by other jurisdictions, such as rapidly declining cash use, weak financial institutions, and underdeveloped payment systems are not shared by the United States. Physical cash and circulation of the U.S. dollar continues to rise because of robust demand,

and the dollar plays an important role globally. We have a robust and diverse banking system that provides important services, along with a widely available and expanding variety of digital payment options. So what the U.S. is saying is that, look, we're paying attention to this. We understand that CBDCs are going to play an important role. We understand and are tracking the threats that they potentially represent to the U.S. dollar, but we are not going to commit to saying that we need to digitize a dollar, right? We're not going to go that far now.

Still, this is the first speech from a Fed governor, the first statement from a Fed governor that actually admits that the U.S. is doing research in this area and is spending any amount of attention on it. That's a big deal. I do think, however, before we wrap up, it's worth coming back to one other question, which is, what does this all mean for Bitcoin? As I mentioned before, I think it's to Bitcoin's benefit that the ire of the U.S. government is focused elsewhere at the moment. I think Bitcoin is still nascent, and I think that its ability to continue to exist and persist as a non-sovereign alternative to any of these CBDCs, to any other government money, is better served by a continued incubation period where we grow and grow and grow and grow the

audience of holders and believers and people who are invested in this ecosystem and making this thing work. So I think it's a good thing that there isn't that much focus, animosity, or antagonism from the U.S. government towards Bitcoin at the moment. However, I think that Meltem in her same thread that we mentioned before has a really interesting point about what might happen in a world of balkanized digital dollars or balkanized digital currencies. So she says, the real question is, if every central bank corporation and cult of personality decides to issue its own digital currency, what will be the neutral choice for international trade? Does the medium, i.e. blockchain-based token, change the message? The current circus that is central bank digital currencies has many

people playing out this chess game in their heads and realizing why Bitcoin is so powerful. It belongs to no state, government, or country. And that is something we can all be excited about. So the point she's making is that, again, as this whole world of digital currencies comes online and we see this massive fragmentation and every government pushing for theirs, not someone else's, it could lead people to ask, well, what is an alternative to any of these things? And the thing that is sitting there right in the middle, at least for some use cases, is the oldest, most powerful, largest example, the thing that started this whole movement, this whole space, Bitcoin.

And I do think that Meltem's point about many people playing out this chess game, in their heads in realizing why Bitcoin is so powerful, has some evidence. In the wake of many of the partners of the Libra Association, particularly Visa and MasterCard, leaving last year, David Marcus wrote, special thanks to Visa and MasterCard for sticking it out until the 11th hour. The pressure has been intense, understatement, and I respect their decision to wait until there's regulatory clarity for Libra to proceed versus the invoked threats by many on their business. Nick Sabo responded and said, you might want to ask yourself why the pressure has been so intense and read some history that Bitcoin pioneers were aware of, for example,

the failure of e-gold. Your failure to learn from history has caused you to, at great cost, recapitulate the failures from the past. Marcus responds, don't get me wrong. I already had a lot of appreciation for Bitcoin well before I started on this journey, but appreciation is growing. This is a significant moment in the evolution of digital currencies and the battle for the future of money. We're going to look back at this speech as the the first statements about the U.S. looking at a digital dollar intentionally. And that's fascinating. Of course, read the articles about it, but I'll also link the copy of the speech itself. What do you guys think? Is this whole CBDC thing overblown? Is it just the latest buzzword? Is this

like enterprise blockchains all over again? Or is it something real? Is it something bigger? Is it a macro megatrend that we should be paying attention to more? What do you think the actual role of Bitcoin in all this is? Are CBDCs the anti-B Bitcoin? Do they actually compete with Bitcoin in a way that is a threat to Bitcoin? Or does Bitcoin, as Meltem suggests, maybe benefit in the context of these CBDCs competing with each other? I think these are big unanswered questions and certainly ones that I'm going to be spending a lot of time and attention on going forward. Anyways, guys, thanks as always for listening. I hope you enjoyed the episode, and I will catch you tomorrow with the breakdown. Peace.

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Friday, February 7th, and today we're doing something a little different. So we're recording a day early, so I'm not exactly sure where the price is today as you're listening to this on Friday. but for the last month, we've seen steadily increasing Bitcoin prices, and we are now nudging up against the edge of 10,000. We got up as high today at the time of this recording as 9,800. And I think that that barrier of 10,000 is a really interesting psychological barrier.

It's a really interesting context, I think, in which to look back at the last year or so since we previously saw 10,000, and ask what has changed, what has evolved, what is different, about the crypto markets and the Bitcoin industry specifically since the last time we were here. And so I invited Dan Held to join me in that conversation. Dan has been around the block with Bitcoin. He has started multiple Bitcoin businesses, including recently Interchange, which was acquired by Cracken. He is now in BD at Cracken and thinking about Bitcoin in that context. And so we talk about a few things all in this, how Bitcoin has changed since the last time we were at 10,000 lens. We talk about first how the narratives have changed, whether Bitcoin is

a speculative store of value asset, a speculative macro asset, and what that means. We talk a little bit about the having narrative and whether it's priced in or not and what that means. We talk about the new entrance in the market since the last time that we were here and what it means to have this sort of price point and the happening coming up in the context of institutions actually being involved in the industry in a meaningful way. We talk about the infrastructure and the different things that you can do with Bitcoin, including a pretty deep conversation around options and derivatives, which is obviously a growing part of the market. Finally, we touch on briefly the biggest change, I think, in some ways in the larger part of the industry, which is that since

the last time Bitcoin was at 10K, we saw the introduction of Libra and the response of governments around the world with their own central bank digital currency efforts. So I asked Dan, if he thought that that mattered to Bitcoin at all. Either way, I think it was a really fun conversation. I love talking to Dan about these things. So I hope you enjoy it too. Please let us know. I'm at NLW on Twitter.

He is at Dan Held. And now let's dive in. All right. We are here with Dan Held, the infamous, famous Dan Held. What's going on? Dan, how are you? Doing well.

How about yourself? Things are great. Thank you so much for taking the time to be here. the Bitcoin market reflects prices in an interesting way, right? That each different price milestone going up or going down is a context to explore where things are, right? And so, you know, things have been going up consistently throughout January and now into February. And we're creeping. We're creeping on 10,000.

I was joking the other day on Twitter. I asked what the official meme of 10,000 should be because we obviously have the meme for 9,000. And so I thought what might be fun because it's Friday, and I just think it's interesting to do something a little bit different. Maybe to use this, again, creeping, and who knows, it could turn around tomorrow. Probably will now that we've jinxed it with this podcast. But to use this to almost look back at like what's changed since the last time that we were at 10K, which is roughly a year ago. What has developed, changed, iterated, and is different about the Bitcoin market now than it was the last time we're here? So that's kind of what I'm thinking.

What's really interesting about Bitcoin's price is that it largely reflects, you know, pure emotional sentiment. Bitcoin isn't a classic equity where you can go and analyze cash flows and come up with all sorts of modeling to come up with what, you know, might be an appropriate price for the asset. You know, Bitcoin being Gold 2.0, the value of it is could be, you know, immense. but the aggregate belief in what that value is currently is somewhat of a subjective thing. And so that's why we see such volatility in Bitcoin. And what we see, too, is that the fear and greed is really manifested in the price. Like, for example, when Bitcoin was $3,000 at the bottom of this last cycle, what was your feeling about buying it then?

Like a lot of people were very afraid. Like, oh, what if it goes to $1,000? What if it goes lower? But right now, if someone were to sell you a big, Bitcoin on the street for $3,000 of Bitcoin, you would take out as many loans as you could get to go buy that. So it's really interesting to see how, you know, the price dipping really pulls in that fear and people get more fearful. And then as the price moves up, people get more speculative and they like to buy Bitcoin because they, you know, perceive that it will appreciate. So more of a FOMO cycle.

And what's interesting about 10K is that, you know, we've, we've tested this before. In 2017, I actually remember when Bitcoin broke $10,000 for the first time. I was at Consensus Invest in New York. I was at a party at a club that was an after party and it was full of crypto people. And I remember looking at my phone and watching Bitcoin break 10,000. And the next day when I went out and I had a couple of meetings at Starbucks, every single person in the Starbucks was talking about Bitcoin. And these weren't Bitcoiners. These weren't crypto people. These were just everyday people. The price very much reflects the aggregate sentiment of what everyone believes in Bitcoin. Like, is it bullish or bearish? And then that price is a signal to the rest of the world of Bitcoin's legitimacy.

And that legitimacy, as the price goes higher, pulls in more and more people to take advantage of that increasing value. Bitcoin at 10,000 now is really interesting because we've got a lot of infrastructure that has been built. The bottom has already been printed. We've seen Bitcoin defend price dips down to $6,500. If we look at on-chain data, we've kind of seen an exhaustion of buyers. If you look at like how many Bitcoins have moved in the last X amount of months.

So all the on-chain data, you know, a lot of what we're seeing on the price movement, we're seeing a very, you know, very strong buyer market, you know, and we see this reflected on like OTC research reports as well. So I think, you know, Bitcoin is very much at the start of a new bull run. These bull runs can take a very long time and they're very, very choppy. I published a video about a year and a half ago. It's a time lapse of Bitcoin's price since it was listed on Gox. And, you know, a lot of people look back and they look at the journey from $1 to $10,000

of Bitcoin and they're like, oh, well, you know, it's not that hard to huddle. Well, along the way, there's a whole bunch of 40% dips. So, you know, it's a pretty wild ride. There's a lot of surges and there's a lot of dips. And so, you know, I think we're about to see that kind of the beginning of a new bull run, but that doesn't mean that there won't be big, you know, big retraces, you know, negative 20%, negative 30%. I think now Bitcoin is well-poised in the macro environment fundamentals in terms of like on-chain data,

volume and everything else looks fantastic. And then, you know, finally, like I mentioned earlier, the infrastructure is so much more robust than any other bull run we've had before. You know, now institutions can trade on various venues that are. fully legal, compliant, and have complex financial instruments like options, futures, margin trading, et cetera. Okay, so I want to get into the infrastructure actually a little bit more because that's the, frankly, of all the things that I will ask you about and we'll talk about today is the

one that's the most knowable versus totally friggin speculative, which is where a lot of the fun stuff is too. But let's actually start. You and I share a penchant for narrative analysis, right? I'll put you on the spot a little bit. what do you think the sentiment is right now in the context of this 10,000? Why do you think the market is improving right now? Is it a single knowable factor such as reaction to the macro markets, right? Is it a combination of factors? Is it speculation that people think it's reacting

to the macro markets, even if it's not actually? What do you think right now this latest kind of bump up over the last, you know, 45 days or whatever? is attributable. And if that answer is just too unknowable, where do you think people's sentiment? What do you think the narrative is around it, even if you're not sure that that narrative is correct? Yeah. So, you know, determining what a catalyst, like which catalyst move the market is very difficult. Sometimes it's very clear. We have a, you know, if we look at timestamps and we find that Bitcoin's price surged with the bombing of Iranian generals, you know, that very much reflects that Bitcoin is starting to become a safe haven asset or a risk-off trade where, you know, in that exact example,

we saw gold moving in the same function. It's a combination of things, though. I mean, that one was more clear cut, but it's harder to say, like, Bitcoin moved up because X, Y, or Z when, you know, we may not see that actually line up when we go look at the trade data. So I think it's a combination of, like, Bitcoin exhibiting a speculative store value or a speculative safe haven asset characteristics. It's that combined with the having. The having, of course, is a very, very strong part of this cycle where we have the block subsidy, which is the newly minted bitcoins, the production of those drop in half, which reduces the overall amount of supply that's hitting the market. There's quite a bit of intense debate as to whether that means very much

or very little. But needless to say, it's a net positive sort of event. We've got that going on. We also have like, you know, we printed a low. That low, we haven't retrace. and felt that again. Bitcoin has defended higher lows of like $6,500. And so I think that really reflects a floor. And that floor, you know, builds this sort of barrier in our mind where if Bitcoin goes back down to six, you know, everyone's backing up their bank accounts to go buy Bitcoin. And so I think we've set some really important psychological levels. In breaking 10,000, I think, is an important psychological level on the upside. I remember back in the, you know, 1617 bubble, I remember when we broke a thousand again.

You know, that was a big deal. Breaking a thousand again, I think, really shifted the mood. And so we're on the precipice of that happening. We have higher lows. We have a having new cycle. And there's a positive on-chain reasons why that's a good thing with the reduction of supply hitting the market. And then we have Bitcoin in the macro world exhibiting some safe haven't asset sort of characteristics. One of the things that I find most fascinating about the debates around things like whether Bitcoin is a macro asset or is just people are speculating that it's going to act like one is that I'm sitting here.

And of course, I think about it from the perspective of narratives and self-fulfilling prophecy. And it's like, well, if enough people are acting like a thing is going to exhibit the signals of acting like a macro asset, then at what point is it just speculating that it's going to be a macro asset versus it actually is? They're interesting debates, but in practice, they kind of amount to the same thing. And this is something that Travis Kling actually did this really, really cool five-minute walk-through almost on the show last year about how exactly this happens, right? You start to see if every single time there's an interesting big kind of demand shock type event, you know, like the stuff that happened with Iran a month ago. And there's some number of portfolio managers who say, hey, you know, this thing, has occasionally in the past, or maybe more like consistently in the past,

shown some interesting countervailing properties. Maybe I'll hedge a little bit into that. Then all of a sudden, everyone else, you know, like it creates its own, again, self-fulfilling prophecy. So I always think it's interesting. We're having the same conversation now a little bit around the happening, which is like, how much is it priced in or not? Well, it's like if there's some percentage of people who are making bets that it's not,

then functionally doesn't that mean that it's not, you know? So there are important debates. and interesting debates, but I do think that net net, they amount to something pretty similar in terms of the behavior that we see. Yeah, I've got a couple thoughts there. You know, one, I think, you know, touching on your point that this is all reflexive, like it all feeds upon each other. You know, I kind of liken Bitcoin becoming a safe haven asset to how maybe life has started in the universe, where it was a random collision of different particles, and then it birthed, you know, life. And so Bitcoin can randomly move up with gold on some days where there's a

risk off a sort of event like Iran. And if that happens enough times randomly, and we then assign the narrative that it's a safe haven asset, then it becomes that. It's a more, even in a pure random function, enough randomness in the world to where Bitcoin will move up on days where the world is afraid. And if that happens enough times randomly, and then if we propagate that narrative, becomes the narrative and then people buy in anticipation of that narrative. So that, that I think is really interesting to see kind of play out. I'd very much agree with Travis in terms of how he describes this all playing out and basically share this exact same feelings with, you know, how Bitcoin will kind of mature in this space. And, you know, I've been kind of

saying the same thing back in 2019 on CNN that Bitcoin, you know, has shown a glimmer that it can become a safe haven asset. So I think that's super interesting in terms of how this all is reflexive upon each other. And then when it comes to the havinging, a lot of people will say that, you know, due to an efficient market hypothesis, that the having is priced in. And I think they're right, but I think they're also wrong as well. I think the having is priced in for those who care, which is a very few, a very small number of people in the world, approximately 30 million hoddlers in the world. And those people have factored in the reduction in supply. The other, was it 6.5? 6.9 billion people in the world have not, or 99% of the population. So, you know, I think

the Havony is priced in for those who care about it and has not at all been priced in for those who will find out about it. All right. That is a very admirably succinct position on a very contentious issue. We talked a bunch about now the narratives of Bitcoin in this time around, but now I want to talk a little bit more about this idea of infrastructure. What's different about either A, what people can do with their Bitcoin or B, who are actually seeing participate into this space, right? Like, for the last two years, we've had this conversation about institutions coming in and the institutions coming in.

Are they here? Is there a different composition of the people who are actually participating in their market? And are they doing different things with their Bitcoin now than they were, again, a year ago, or at least can they be doing different things? Yeah, that's a great question. With all the other bubbles in Bitcoin, there has never been institutional money that has flown in, and that is a huge, huge chunk of money. So this next bull run will be, you know, very different than the other ones, and I think in a very positive way. You know, these previous

bull runs were fueled by a very small amount of capital flowing into Bitcoin. Now we've got much bigger pipes connected. These bigger pipes are built for institutions. So the amount of liquidity that can flow from these institutions is huge, very, very large. So this will be a dramatically different sort of boom-bust cycle. Tens of trillions of dollars in the world can now flow into Bitcoin in a way that was not possible before. And in addition to those pipes being built, you know, there's different types of pipes, you know, different types of financial instruments that retail and institutions can use to interact with Bitcoin. Part of that is the lending and borrowing market, which, you know, I've kind of been very vocal about. I think it's super interesting. It's the start

of a new Bitcoin banking system where you can borrow against your Bitcoin $4. And you can use that to either buy more Bitcoin or buy a house or something else that you'd like to do with that. And Bitcoin as collateral is a phenomenal collateral. If you think about other asset backed lending like homes, you know, if you have a mortgage, the collateral is your home. But that home isn't fungible. You can go onto an order book and sell that home immediately.

It might take months to get ready to go sell. Real estate is a largely kind of illiquid market compared to Bitcoin, where if a lender is holding Bitcoin as collateral, they can instantly go sell that if a margin call occurs. So I think Bitcoin as collateral for borrowing is phenomenal, and that's a really exciting new type of asset back lending. On the other side, you know, you've got lending out your Bitcoin to earn a yield on that with companies like BlockFi and Genesis,

And that's super awesome as well. You know, a lot of times these crypto hedge funds or crypto businesses need working capital. They don't want to use their own working capital. So they borrow coins from these lenders and then use that to perform functions of their business. And you can earn a yield on your Bitcoin. You know, I like to joke if you hoddle long enough, you may never have to sell because you just lend out your Bitcoin and earn a yield on that. And so it's kind of the ultimate way to hoddle.

Now, of course, you're taking on risk when you do that. there is significant counter-party risk and it's somewhat unknown and opaque. But that's why this industry is kind of fun. It's a little bit of the Wild West. There's other things too that, you know, financial instruments that are critical for institutions and I think also provide opportunities for retail investors to earn a yield. You've got futures and you've got options. And options, I think, are a really exciting new space.

On the option side, you know, for Bitcoin Hoddlers, writing options or, you know, selling options can be a really exciting way to earn a yield. And I think a lot of people are a little bit afraid of doing that. When people first approach Bitcoin, they feel like it's everything they don't understand about money with everything they don't understand about computers. And I feel like options for almost 99% of the population feels like that as well.

It's like options. You're like, man, I just see, I see like calculus on a whiteboard sort of thing, right? And once you kind of boil it down, they're actually not that complex. They're pretty complex, but the fundamental principles are kind of simple. And there's a few really cool ways that, like, Bitcoiners can earn yield and institutions can hedge their bet. For example, if you own Bitcoin, there's something called a covered call. A covered call is you are selling someone the option to purchase your Bitcoin from you at a certain strike price.

So hypothetically, let's say I sell someone the option to purchase my Bitcoin from me at $50,000 a Bitcoin. I have Bitcoin under custody at the options platform to cover that. That's why it's called a covered call as you own the underlying asset. And what's really interesting is that purchaser of that option, they will pay you a premium. And so that's an immediate cash in your bank account. And so they'll pay you for the opportunity to buy that Bitcoin from you at that price at the expiration. So whatever expiration date that may be, that could be one month out, two months out, six months out, one year out, etc. And what's really cool about that is Bitcoiners, you know, while the tradeoff here is that you're

sacrificing some upside. So, you know, if Bitcoin moves past $50,000 of Bitcoin, I don't earn any more money. However, let's say you have a life event. I know, you know, you and I were just chatting before we started this podcast that you're looking at maybe purchasing a home sometime soon. You know, hoddlers can't holl forever. We do have physical things in the real world that you have to buy, right? So I think, you know, in those moments where you have to sell some coin, writing a covered call is a really interesting way to juice, you know, get a little bit of extra premium on top of that Bitcoin you already had to sell. Alternatively, you could sell really out of the money covered calls. So for example, you could sell covered calls right now with a strike price

of Bitcoin at $100,000 dollars of Bitcoin. You're not going to earn a lot of money, but the probabilistic event of that occurring is very low. So, you know, on the flip side, another really cool way to earn money is you sell puts. So selling puts essentially is a discounted limit order, discounted limit bid on the order book. So a put is you're selling someone the option to sell Bitcoin to you, which you have to purchase, if Bitcoin is below a certain strike price. You know, right now you could go on and you could write this put option where you agree to buy a Bitcoin from someone at $5,000 a Bitcoin. If Bitcoin is below that, you still have to buy it at $5,000 a Bitcoin. If it's above that, the option expires worthless and you collect your premium and get to keep that.

So that's kind of cool because that's kind of a, you know, it's kind of a hoddler of last resort mentality. You know, you're essentially placing bids on Bitcoin, you know, essentially being the hoddler of last resort, being the buyer. buyer of Bitcoin at these low prices and you're getting paid to be that buyer. You know, you're putting your hand down there at $5,000 of Bitcoin. If you're writing a put option for an extra strike price of $5,000, you're like, okay, I'll buy at that price. You know, of course, the risk there is if Bitcoin moves further down, then you would have to buy a Bitcoin from this counterparty at $5,000 at Bitcoin, regardless of how low the price went. But if you're really long-term convicted,

you know, sort of like really strong believer like I am in Bitcoin, you might not care about that. You're like, I'm a hoddler of last resort. Sure, I'll buy it at $5,000 a Bitcoin and I'll be getting paid to do that along the way. So these are really cool things, you know, both for retail to earn yield on their Bitcoin and as well institutions or retail can hedge their bet. So, you know, you could always take the other side of that where you buy the covered call, you buy the call option or you buy the put to sort of hedge your portfolio. But I think that allows for much more sophisticated participants in the market and you allow miners to smooth out their cash flows,

which I think lead to more predictable hash rate, more predictable game theory. So I think that's all really, really awesome and definitely a demonstration of the maturity of the market. Okay, so we have gone through changes in narratives, changes in infrastructure and changes in market participants. The one last question, it could be quick, and I don't even know if you actually have a strong opinion about this, but the other significant thing that has changed in the last,

call it year, whatever it is, is the explosion of interest from governments around central bank digital currencies in the wake of Libra. Do you think that that impacts Bitcoin at all, or is it right now at this stage, mostly more kind of macro level noise that is to be sorted out where Bitcoin fits in it. Yeah, central bank currencies, you know, fundamentally, these central banks cannot offer this currency. I feel like it's impossible that they could offer this to retail. Because if I'm retail, that would destroy the commercial banking industry. If I can have my counterparty be the Fed, then why would I keep my money at Bank of America? So I think it's sort of like,

kind of like your uncle doing the Macarena. It's just like a little bit funky. You know, you've got these corporate types and bureaucrats who are going, well, how do we, seem relevant, let's talk about blockchain tech, let's talk about central bank currencies. And it's like, okay, but the Fed is already all digital. Not really sure what incremental sort of performance gains or, you know, risk management that'll provide. I think it's mainly them just trying to mean that they're relevant and new, but ultimately I don't really see much efficiencies gained from it. Well, Dan, thank you so much for taking some time today. Really fun. I could definitely keep asking you questions, but it's going to be interesting. I mean, we don't know yet even if we'll

touch up over 10K this time, but inevitably we will. And I think obviously all of these changes will still be a part of that. So thanks again for hanging out. It was a pleasure. Had a great time chatting and looking forward to seeing you again in person some time. So there you have it. To me, the most interesting part of that conversation with Dan was just how much has changed since the last time we saw 10,000. You're talking about new narratives, new market participants. and a fundamentally new infrastructure for how people actually interact with Bitcoin. I think that whether or not we've hit 10K by the time this goes live and whether or not it happens in the next couple weeks, what's clear is that this market continues to evolve and

this asset is spawning just a huge amount of activity that is inevitably going to bring more and more people in with more and more creative uses. So it's an exciting moment to reflect on how much is happening and how much has happened. So thanks as always, guys, for listening. I hope that whatever your plans are, you're getting ready for an awesome weekend. As usual, I'll do a full week recap episode tomorrow. And then on Monday, we will be back for another round of the breakdown. Cheers, guys.