The Pomp Podcast - #452: Alex Gladstein on Funding Bitcoin Development

Episode Date: December 15, 2020

Alex Gladstein is the Chief Strategy Officer at the Human Rights Foundation and the Vice President of Strategy for the Oslo Freedom Forum since its inception in 2009. In this conversation, we discuss the Bitcoin Development Fund, how recipients are selected, who is supporting this effort, why it is important for non-profits to play a role, and where Bitcoin regulation is going. ======================= The Rodman Law Group is dedicated to helping entrepreneurs realize their vision by helping them operate defensibly in sectors where laws and regulations haven’t caught up to the realities of the industry. The Rodman Law Group’s legal expertise combined with its understanding of blockchain technology makes it the ideal legal service provider for the industry. http://www.therodmanlawgroup.com/pomp ======================= Harvested Financial makes options incredibly simple. They’re the first options robo advisor, where you can build and customize a personalized trading plan that gets automatically executed. Options help you speculate in capital efficient ways, diversify your holdings with market neutral strategies, and generate passive income by selling premium. https://www.harvestedfinancial.com/pomp ======================= Did you know only 1% of day traders actually turn a profit? So why are so many of us mistaking picking stocks for serious investing? You can’t control the markets, but you can control your risks. So how do billionaire investors control their risk? They invest in blue-chip art. If that sounds unusual to you, you’re not alone. But the ultra-wealthy have been investing in art for centuries. And since 2000, art has outperformed the S&P by an incredible 180%. Just a few years ago, a single work sold for $450 million! Imagine...Being able to invest in the very same paintings as millionaires and billionaires, at a fraction of the cost. Masterworks.io is an exclusive platform that makes it as easy as trading stocks online. And the best part is: you don’t need to know anything about art. Their experts will create a custom portfolio to meet your investment needs. With Masterworks.io you don’t have to choose between big risks and big returns. Sign up today, select PODCAST and you can skip the 70,000 waitlist to get first dibs. Just go to www.masterworks.io and select PODCAST.

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Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. Alex is back. I think this is the third time we're doing this. Thank you so much for doing this, sir. It's an honor and a privilege to be on. Absolutely. All right. For those that haven't listened to the earlier episodes,

just give us a quick kind of two minutes, your background and what you guys are doing at the Human Rights Foundation. Yeah. So I've been at HRF, as we like to call it, since 2007. And we are a nonprofit that focuses on helping people who live under authoritarian countries around the world. By our latest research, that's about 4.3 billion people in 95 countries, ranging from Cuba to Saudi Arabia, to China, to Turkey, to Russia, to Zimbabwe, who don't have the same rights and freedoms as we do in open societies, like we do more or less here in the United States or the EU or Japan. So the world's kind of split into these two different kinds of societies. And at HRF, we figure out how to help the dissidents and journalists and troublemakers who live in those

societies. And in the first two shows that I came on, I got, you know, I remember we talked about my work at Ahrefs more generally. And then, you know, we also talked about the rise of increasing restrictions on civil liberties in the time of sort of the pandemic times, right? Absolutely. And so since then, it seems like, one, people have woken up to like, hey, there's a lot of bad stuff going on around the world. And there's some things that we need to focus on from a privacy standpoint. But also too, is there's been financial resources, both donated to Human Rights Foundation, and then you guys have started to hand out some of these grants, if you want to call them that. And so let's just start with kind of like, how do you guys think about managing

resources and where you can use your time and energy versus when you can use capital and kind of how that framework or that decision gets made? Sure. Well, we are a, again, a nonprofit, it, 501c3 in the eyes of the law here in the United States, based in New York, incorporated there in 2005. And we have roughly a, it ranges, but let's just say this year we're going to raise about $14 million. So we have a significant budget. We have programs all around the world, events all around the world. We have a special relationship with Bitcoin because we started receiving Bitcoin donations in 2014. And I remember distinctly, one of our donors at that time was like, hey, can I pay for one of my conference tickets to go to one of your events

in Bitcoin? And we were like, what the hell is Bitcoin? I mean, we had sort of heard about it. And some activists had tried to introduce me to it the year before. But we weren't very deep in. And we were like, fine. So we set up a wallet. It was an early Coinbase wallet at the time, right? And we started to take Bitcoin donations. And those are really great for us. And we started to think about what that could mean for the future of the organization. And Bitcoin has been very good to the Human Rights Foundation. So in the past year, as we've kind of seen the patronage model of Bitcoin grow, and what I mean by that is there's no pre-mine in Bitcoin. Like most cryptocurrencies have like a set allocated amount of tokens that get like locked up at the beginning

for use for development. Like it's like a dev fund or pre-mine or whatever you want to call it. Bitcoin doesn't have that, so it relies on the community, it relies on the world to fund its development. And over its first decade, that was largely done voluntarily. But over the last couple of years, you've seen large companies start to really get involved with funding core development, which is fantastic. But we at the Human Rights Foundation saw both A, not only our close tie to Bitcoin in terms of what it is as a tool for human rights and how it's been helpful to us and how we'd want to maybe get back to it. But also, the fact that we as a nonprofit may be able to encourage other nonprofits to get involved in helping Bitcoin, and maybe we could

be that catalyst. Because at the end of the day, if corporations are the only ones supporting Bitcoin development, that's not ideal. It's not a huge threat, because ultimately, the core developers are going to do whatever they want, right? I mean, if BitMEX or if one of these other exchanges decides to give a grant to a developer, there's no strings attached. That developer is pretty much going to do whatever they want. But it's a little scary to think about a world in the future where it's only the corporations giving the funding because, hey, maybe the developer says, screw you. I don't want to do what you're telling me to do on Bitcoin. But if all the corporations are aligned with a particular agenda and all of them want something and the developers

are like, no, and that funding gets pulled, that could put us in a tricky situation. And we've seen that before in Bitcoin, where pretty much all the corporations in Bitcoin wanted to do something that the users didn't want to do. This was, of course, back in 2017. And if you look at the New York agreement, which is still on the DCG website, they've got basically every corporation in Bitcoin wanted to do Segwit2x and make the block size much larger through a hard fork. And that was rejected by the users that summer, right, through the user-activated software. So a lot of great stuff in there. But the big lesson essentially is that the users decided to say that corporations don't control Bitcoin. Now, fast forward to today, again, I think it's great that all these

corporations are supporting Bitcoin developers. It's fabulous. But it would be ideal if there are more than just corporations supporting it. So MIT has a particular, you know, they have an outfit called the DCF, I believe. Sorry, the DCI, Digital Currency Initiative, which is great, but they're like the only major university that has that. So what we want to see is a world where there's like tons of universities funding Bitcoin work, as well as nonprofits, maybe the ACLU in the future, the EFF, etc. Got it. And so basically, what you guys have done is you've gone out and you found people who are working on Bitcoin core development, and talk through maybe the process of like, how do you find these individuals? How do you vet them? How do you actually make the

decision as to who you're going to give a grant to and who you're not? Sure. Well, we with the Bitcoin Development Fund, we are both supporting core development, meaning developers who are literally working on a core project, as well as people who are building tools to make Bitcoin more private, uh, more resilient and more usable. So it's a little bit more of a wide range than maybe some other projects that are like really focusing on core development. Um, we have a fabulous network of, uh, Bitcoiners that care deeply about privacy and freedom. And when we, we basically have it set up. So people email us all the time with ideas that they want to get funded. We also have people we trust that we call up and we ask, Hey, you know, got any good

ideas lately of people we can fund. So we basically create shortlists out of both public application and private consulting with experts in the space, right? And then, you know, we kind of take a look at like, are these people already being funded? And, you know, would funding them make a difference, right? Would it really say something? Would it be emblematic in some way? And the five gifts we've given so far in the first six months of the fund, I think all match that. The first gift we gave was to Chris Belcher, who's working on something called CoinSwap, which is going to basically allow people to like swap their Bitcoin in a way that chain analysis can't understand. Right. And we thought that was a very fitting thing to try to support, because if Bitcoin can be a privacy tool, then it's going to be a much better tool for human rights activists. Right. So that's what we came out with with our first gift. We also supported a couple other people who are working to make your phone a better tool for interacting with both the Lightning Network and a Bitcoin node if you run one at home.

right so we created grants for a couple projects working on uh basically your ability to to use your full node or use a lightning network from your phone um we also gave a gift out to someone working on something called join market which is a coin join implementation which is really freaking hard to use so the guy's trying to make it more like usable for people and then finally our latest gift was to gloria zhao who's a graduating senior at berkeley computer science core developer who's going to be working on basically what we call in Bitcoin, the mempool. She's going to be working on upgrading the processing power of Bitcoin so that it can do more and so that complicated transactions like, for example, when you come into or out of Lightning

onto the main chain, so that that's cheaper and more efficient to do. That's how we've set it up so far. We have a lot of desire to fund projects also out in the developing world. So we've gotten some interesting proposals so far there. So I think you can expect our attention to shift in that direction. But generally speaking, we are excited to be funding people who are making Bitcoin more private and a better human rights tool. And that's why it matters to us. And what are the sizes of these grants? Are we talking $10,000, $100,000? like what exactly is the ballpark? Right. Well, it's interesting because, uh, most of the gifts have been given out in Bitcoin. So it depends on how they've been spent, but you know, uh, in June,

when we made our first gift, it was denominated, you know, it's always denominated in us. It was denominated in USD at first. Right. So we gave a $50,000 gift to Chris Belcher. Well, um, that gift is now worth, uh, you know, probably close to $120,000. You know what I mean? So, you know, look, giving gifts out to core developers is wonderful for that particular reason. And a lot of them want Bitcoin. Right. And a lot of the people who donate to the Bitcoin Development Fund do it in Bitcoin. So it's just an easy thing for us to handle. Other gifts we've given are in the one Bitcoin range. And they were supposed to be like kind of like small but meaningful gifts of encouragement. Right. And mainly acknowledgement, because whenever Ahrefs funds somebody, they get some attention

in the media, et cetera, et cetera. But hey, a one Bitcoin gift is becoming pretty serious. And then the most recent one, again, was a $50,000 USD-denominated grant in Bitcoin. Now, the latest gift, we get a lot of different kinds of donations. For anyone who knows about running a nonprofit, when you report to the government your list of donors, which you have to do. You have to disclose them if they're over a certain amount, but if they're little small ones, you don't. We get all kinds of lightning donations on our website at href.org. We get a lot of interesting small donations. We don't know anything about

these people. It's great to see them coming in. The larger ones, usually those people are seeking a tax write-off because if you donate to HRF, we can furnish you with a tax deduction because we're a 501c3 charity. So the latest gift coming in is going to be from Gemini, from Cameron and Tyler and team over at Gemini. And they're going to be giving $50,000 denominated in Bitcoin, actually, which is exciting. And we're going to be giving those gifts out in Q1. Again, probably the projects that are kind of working out in the developing world is an idea we have. Got it. And so like, what is that conversation like in terms of Cameron and Tyler deciding to do that? Actually, interesting story. So good friend, Peter McCormick, friend of yours.

Horrible guy. Worst guy ever. Peter, if you listen to this, you're horrible. Constant debate between the two about who's better, right? He's better. He's always better. It's good for us to have both of you guys, but let's put it that way. But Peter had the twins on okay and he was talking to them about bitcoin he was kind of pushing them on hey why why haven't you guys made any public announcements yet on funding bitcoin development and he did the same with brian armstrong and peter's been very effective well i think we could we can really give uh peter a round of applause here because after doing the show with peter brian and coinbase

announced that they were going to be doing some of this support right and after doing the show with Peter Cameron and Tyler came out and said they were going to do two things. First, they created what they're calling an opportunity fund, which is fabulous. They announced they're going to give $200,000, denominated in Bitcoin, $200,000 USD, but in Bitcoin, $150,000 to fund a fellowship at something called Brink, which is what John Newberry is starting, which is basically like a grad school for Bitcoiners. You can think of like you go to undergrad, you get good enough, and then you can go to Brink and you can spend a year

under the tutelage of like world-class Bitcoin experts and you can like do your work in a way that's very guided and HRF thinks that's very valuable. So we're like a founding partner at Brink. But basically the Gemini folks have said, we're gonna give 150 to Brink

to establish a fellowship and we give 50 to HRF, okay? So I think that's a great way to go. It's gonna accomplish a couple different things and it's gonna put the decision-making power of who gets the gift in someone else's hands, which I think is a really classy thing to do for a corporation.

So I think that's a wonderful kind of way forward. And we're going to see more and more people get involved in this. And the crazy part is they're doing it out of self-interest. Like it's an altruistic thing to give a gift, of course, right? We're in philanthropy, right? However, the cool part about Bitcoin

is it's got a lot of game theory in it. And it's good for these companies to give to core developers because it's great PR for them. But it's something that the community, regardless of what we think about Coinbase, we are going to universally applaud them supporting core developers. So even if there's a lot of Bitcoiners who are like, say this thing about Coinbase or another, or people, others that are like angry, you know, with Coinbase about something else, like you may have seen in the New York Times recently, it doesn't really matter. But if they fund core development, that's really putting their money where their mouth is. So what's interesting is that it is kind of like this almost unilaterally, you know, or unanimously considered a good thing. And it's something they can do with self-interest. It's not just an altruistic gift. It's something they're going to want to do. But what's funny is nobody's forcing them. No one has a gun to these companies' heads saying, hey, you should fund Bitcoin Core development. They realize on

their own that they should and they need to, which is, again, one of these really interesting things about Bitcoin's game theory that I love to follow. And so when we think about corporations in supporting Bitcoin, obviously they have a financial interest. If Bitcoin succeeds, many of their businesses will succeed as well. There is kind of what I'll call the marketing support, talking about Bitcoin, going on the media, doing all that kind of stuff. There is the infrastructure support, which they're providing that literally they're in the for-profit business of building infrastructure around it. But really what you're talking about is like the direct financial support of those building the protocols and other pieces of infrastructure around it.

Is that pretty much the totality of how a corporation can support Bitcoin, or are there other ideas as well as things that they can be doing in order to kind of push forward progress and innovation here? Well, by their very nature, these organizations are onboarding users and are growing Bitcoin in many ways, but the most important way to support Bitcoin is by supporting core developers. At the end of the day, the corporations and the Silicon Valley companies and the Wall Street investors and the Chinese miners, none of these people control Bitcoin. They can compete to process transactions. They can get a bunch of money together, buy a bunch of mining equipment and try to mine. That doesn't give them control over the network. They can build impressive large companies out in Silicon Valley or in New York City

or whatever to try and allow users to invest in Bitcoin, to allow users to buy and trade Bitcoin, also wonderful, does not give them the power to control Bitcoin. The way that Bitcoin is controlled is through this sort of like social consensus. And once the consensus goes in a certain direction, the people who have to implement those changes are the core developers, right? So again, these are people who traditionally have done this like work in a thankless way. It's like Yeoman's work, you know? It was not glamorous for a long time.

They still aren't being paid a lot compared to what you'd make as an engineer. These are scientists. These are engineers, right? So you have to think about the life decision you make. And Gloria, who we supported, has a great appearance on Steven Lavera's podcast where she talks about this. Her traditional life arc would have put her at Google or something, where she'd be making huge amounts of money doing software engineering.

So to work in Bitcoin, you're kind of taking a hit there on your salary. You're not making the same as you'd make building some AI surveillance system. at Google or at Alipay or whatever, right? But you are like doing something really good for the world by working on this decentralized money project. So at the end of the day, I think these businesses are by their very nature contributing to Bitcoin by growing the user base, sure. But the most important thing they can do to help Bitcoin long term, like we're talking decades from now, and the best signal they can send to the Bitcoin community that they care about bitcoin is by supporting the developers yeah and what about non-profits you know obviously you guys

are kind of leading the charge in terms of uh kind of showing people that there is a way to do philanthropic work but have it focused on privacy technology um and kind of this monetary freedom uh movement is the hope that you can pull other non-profits in to kind of um you know do the same work uh or do you think this is something where you guys will be at it alone for a while Well, obviously, the major contributor on this front so far has been DCI at MIT under a university sort of umbrella. But they're sort of very tied to the MIT name. And contributions made to them have to go through this certain route. And it's a wonderful way for Bitcoin development to start. But again, it's too limited. So we were looking at that and saying,

wow, that's really one of the only ways people could support Bitcoin through a nonprofit. Beyond that, before we started our fund, there was not an organization you could donate to in the United States that was a 501c3, where you could get a tax write-off and support Bitcoin. It just didn't exist. When we started that, what we were doing, again, was hoping to encourage more people. Now, with great news, there's numerous new Bitcoin nonprofits coming into existence. Brink, which I mentioned, will be doing fellowships for core development. They are also seeking 501c3 support, which is great. There's another initiative that's kind of under wraps, but they have a Twitter account

and there's been some talk about it called OpenSats, which will be hopefully also a way that you can make like a nonprofit where you can make donations directly to developers working on stuff. But if you think about how early we are, I mean, think about human rights or you know, taxes and financial freedom or whatever. Think about how many nonprofits and lobby groups are active in those spaces. We're talking, if not dozens, hundreds, and you know, if not hundreds, at least dozens and dozens in both of these spaces. You know, with Bitcoin, you're talking like less than what you can count on one hand, right? So we're so, so early and we hope to

encourage and inspire like many, many more actors to get involved in this space. It really needs to be like a diverse space um so that when the time comes when there is like the next big like war over bitcoin soul right um which which we saw in 2017 where all these miners and corporations wanted to do one thing and the users wanted to do the other you know we want it to be set up in such a way that if there is another war maybe it's the u.s government says hey all you companies in the crypto space you got to do x you know and that would be bad for bitcoin well if they all decide to pull their funding for developers or for our force to, we need to make sure that the funding can continue to flow, right? So we want a globally diverse, not just US, but a globally diverse

support network for Bitcoin developers. That should be like a goal of the next decade for everybody in this community. Absolutely. And when you think about kind of the ways that people can help core developers, obviously there's the financial means. Are there other things people can do if they're listening to this and they say, hey, I want to pitch in, but either I don't have a lot of money, I don't want to donate. What else can people do? Or is it just the best path forward is to kind of use financial means in order to support these folks? Yeah, I mean, obviously, the most important thing is to fund them so that they can do the work they want to do.

We're finally getting to the point where a lot of them can spend full time, are employed full time, which is wonderful. But there are certainly other ways. Look, If you're a fintech company or you're in payments and employees, perhaps your technical employees, to learn more about how Bitcoin works, just from an educational curiosity point of view, why don't you pull a Bitcoin core developer in for a Q&A with your company? And he or she can tell you about what they do. And it's really interesting. I mean, again, these are scientists, these are computer scientists, these are engineers working on hard math to figure out how to make Bitcoin more efficient, more private, more scalable, more robust. I mean, these are some really epic engineering challenges that they're solving. And if we can give them the spotlight, it'll encourage other people to want to get involved.

I think one issue with Bitcoin development is that it's just not very diverse and it's not very big in terms of the people working on it. And that's largely because most people just don't know how exciting or cool it is. So if we talk about recruitment, HR, et cetera, if more and more people, you know, out there on LinkedIn and, you know, in corporate programming environments and people listening to this show, you know, if you want to shine a light on what makes Bitcoin tick, you should bring in some of these developers and have them explain it to your employees, you know, from their perspective. You all may not agree with them. You may not agree with Bitcoin's monetary policy or its privacy enhancements or the way that it really seems to be disturbingly sovereign. Maybe you're a little off-put by some of these things, but I'm telling you, it's really fun to talk to these developers and learn about why they decided to commit their lives to this project. It's fascinating. And that would be a big non-monetary way you could help. I love that idea. There's been a lot of talk recently about kind of the privacy features versus corporate support, right? Kind of a breakdown of, hey, if corporations want to use it, then they're going to need to have a reduction in the privacy features of Bitcoin. There's a lot of people who think that's a great idea. There's even more people who think that's a horrible idea. And there's this whole group of people who are very privacy focused, and that's part

of what drove them to be interested in Bitcoin. How do you think about that kind of balance or face off, if you will, between privacy and corporations? Yeah, I mean, in a lot of ways, I think where in Bitcoin, we had the last big standoff between corporations and kind of users, cypherpunks, we'll say, again, was in 2017. And it was over this idea of scaling, right? And the corporations wanted to scale in this very straightforward way that would make the blocks bigger. And therefore, they could process more transactions and make more money and unload more people to Bitcoin really fast, right? That was like their idea. And the

users were like, whoa, whoa, whoa, if you do that, we're going to ruin the decentralization proposition of Bitcoin. It won't be sovereign anymore. And it won't be that remarkable freedom tool. Ultimately, the users won in that conflict, which is something to be grateful for almost every day here. The next big one, I think, is going to be around KYC or know your customer information, as well as the general idea of privacy. My perspective, of course, comes from the work I do at the Human Rights Foundation. What's very important to understand, there's two bubbles of conversation. The big bubble that you and I are often exposed to, or that we live rather, and that all of our interactions mostly on whether it's LinkedIn or Facebook or conferences

or emailers or what we see on TV or whatever, we're all part of this like Western bubble, like the Krugman bubble, right? Like New York, London, Tokyo, like our financial systems pretty much work. I mean, as you and I both know, a lot of people in the Bitcoin community think not very highly of these Western financial systems and we can poke a lot of holes in them, But more or less, they have produced currencies that are valuable, like the dollar, the euro, the yen. People want these things. They tend to be much more valuable and stable than the rest, right?

And it's very easy to open a line of credit in the West. It's very easy to take out a loan. There's FDIC insurance. The government is not going to be so brazen about just stealing your money. Generally speaking, we live under this luxurious system where things are pretty good here, right, out in the West. but that's not the case for like most people in this world. And that's kind of something I've learned through my work at the Human Rights Foundation. Like the average person doesn't

live in the EU or the US. That's like less than a billion people, right? So we have the lucky billion who live in the US, EU and Japan who enjoy a lot of financial privileges and freedoms. I mean, look, they're not perfect and they're getting restricted every day. I mean, we have things like the Bank Secrecy Act and the travel rule coming here in the United States and things are a lot worse than you might imagine. But still, they're so much better than what they're like in Saudi Arabia or Russia or Turkey or China, where most humans live out there who aren't in the lucky billion. And I think what I'm getting at is that there are uses for Bitcoin, or rather people use Bitcoin in different ways around the world. And the main way that we've been exposed

in the bubble here in the lucky billion to Bitcoin is as a speculative store of value. as an investment that can make you rich. Okay. And you know what? It's done a pretty good job of that, of course, for a lot of people. And that's what's leading Paul Tudor Jones and Michael Saylor and all these different corporate boards and corporate treasuries to pop up and start adding Bitcoin, right? They think it's going to be a good savings mechanism in a time of turbulence and in a time of monetary expansion. And that's completely legitimate and accurate. It will be, okay? However, that's just like one of the many things people use Bitcoin for. right? Globally, you have to remember people use Bitcoin for remittances, for getting around

sanctions. And before you make judgments about the sanctions thing, put yourself in the shoes of like a 23-year-old Iranian. OK, he or she, they didn't vote for their government. They don't control the dictatorship that runs Iran, who's doing all these evil things. And because of the decisions of a bunch of thugs that they didn't elect, they can no longer buy Apple stuff or connect to international payment services. So it's unfair for them. And Bitcoin allows them to connect to the international economy. That's amazing, right? It allows them to save, not in the rial. The rial is a currency in Iran that has been completely destroyed by the government there. Despite the fact that they have all this oil, they've destroyed the local currency by

spending on wars and propping up Syria and God knows what else, right? Not helping the people. But Bitcoin allows Iranians to escape into another currency. They can't get dollars. Dollars are really hard to get there. And we're not talking about some little slice of the earth, 70 million people. OK, you can say the same thing about Venezuela. OK, another 30 million people. You can say the same thing about Nigeria in many ways. That's another several hundred million people.

So it starts to add up. And again, hyperinflation and being cut off from the international financial system and even just really generally really high inflation, like maybe not hyper at 50% per month, but 10%, 20% like you see in Turkey, Argentina. Again, this is much more normal for an average human on this planet than people think. Again, we live in the lucky billion. We live in our little bubble. We think the only possible use case for Bitcoin in many ways is as this savings mechanism or as an investment class. Again, a lot of people around the world use it for a lot of other things, whether it's remittances or getting around sanctions or even just preserving their

wealth against like a thuggish government. So I think we need to open our eyes a little bit and think globally about what Bitcoin means. And at the end of the day, it needs privacy. Because again, for all of our friends who live out there outside the lucky billion, they need financial privacy. It's not good enough that they can save their money. They need to make sure the government doesn't know they have it. Okay. And that's a moral thing. We're talking people who live in countries like Sudan or like China, where there's like literally communists and dictators who run their country, you know, they need a way to save privately. Okay. So I understand that companies want to make regulators safe when they talk to them. They want them to feel comfortable. Oh,

Bitcoin's like, you know, you can track it and it's totally transparent and it's going to be cool. I know that's part of their sales pitch, but that's not going to be the case. Already, there's a lot of ways to use Bitcoin in a way that's quite private. And I wanted to go into some of them at some point in our conversation, but it's not going to work to just naively assume that Bitcoin is this toy for you to invest in and that's it. The world's much bigger than that. I hope that's an okay point, Pomp. I think that's a perfect point. What are the ways that you either one, see people using Bitcoin in a private manner today, or two, you think will become kind of the prevalent ways that Bitcoin is used privately? Yeah. So I just recently wrote up

a long paper, which will be in the Cato Journal this winter, academic paper. And it looks at the social role of cash. Because again, when Satoshi invented Bitcoin, if you read the white paper, you know, it's about creating digital cash, right? Think about what digital cash does. Two main things that you and I and our parents and grandparents in the modern age have used cash for. One is savings. So outside of the bank savings, we withdraw the cash and people make fun of like, oh, you have your savings under your bed. Well, a lot of people around the world still keep their savings under their bed, especially, again, people who don't live in the lucky billion, people who live out there in different countries around the world. They save in American dollars,

they save in greenbacks hidden somewhere in their property. This is really, really common. Cash is used for savings. Cash is also used for private and small payments. In this essay, I try to break this down and show that so far, Bitcoin has actually done quite a good job on the savings aspect. It's been a good store of value for a lot of people around the world, especially over the last five years compared to the first five years. It's also better, as many of your guests have pointed out, it's better than gold in many ways. It can teleport. It's easily verifiable. It's much more secure, much more safe, all these things. In many ways, Bitcoin does make a pretty good store of value, a great one actually. However, we have to think about its future

and can it do private and small payments? The privacy piece is ongoing. The good news is Bitcoin's programmable money. It's not like ossified. It continues to evolve, right? And one of the big reasons why there was that big war in 2017 about how to scale Bitcoin, where the corporations wanted to do one thing, the users wanted to do the other, the users wanted to do it through this thing called Segwit or segregated witness. And it's very technical, but we'll just leave it at this. Segwit really allowed lightning to become a big thing in Bitcoin, right? To actually come into existence and be what it is today. And if you think about privacy and financial privacy and payments that you and I make, right? When you make a payment in cash, the merchant

doesn't know anything about you. They just know that your payment's good. They don't know your home address or what you bought last or what your payment history was, right? When you make a payment with Bitcoin, they also don't know any of that stuff. They just know that the payment was good. The thing is, as you and I both know, Bitcoin payments, they can be pricey. The fees are going to get higher and higher in the future. And there's like things that people can do to track Bitcoin transactions on the blockchain. So by activating Segwit and giving birth to Lightning and popularizing Lightning, I mean, we've now had millions of payments been made in Bitcoin, but off the chain. So in a way that like no surveillance company can like watch,

they're not stored forever in public view, right? If I send you Bitcoin today, even if no one else knows the addresses are linked to us, that payment will remain in public view forever, right? But I could also make payment enlightening to you and that's not. So that's like a major, major privacy upgrade that we've seen, right? There are a couple others that are out there. Your audience should probably be aware of an upgrade coming soon called Taproot. Again, these are very technical upgrades to Bitcoin, to the software itself. But one thing that they will be able to understand is that today in Bitcoin, different transactions are identifiable. So if you're doing, for example, a multi-signature transaction, or you're opening a lightning

channel, or you're mixing your coins with someone else to do what's called a coin join, these things are like, you can look at the chain and figure out what's what. And that helps chain analysis companies. That helps these spy companies figure out what's going on. So after Taproot, a lot of these signatures are going to look the same, right? So that's going to be really, really helpful for people who want their own privacy. Then there's going to be another upgrade probably in a couple of years. And again, a little technical, but just permit me for a moment here, which will do something called cross-input signature aggregation, which is a mouthful, but it basically allows like tons of transactions to be accumulated into one in a way

that's cost efficient. So here's the cool part. It basically makes things like CoinJoin cheaper because like, what would you rather do? Pay for 50 individual transactions or just pay for one transaction? So the funny thing is if this happens in the future, it could totally happen in two to three years, exchanges and corporations may be financially incentivized to implement privacy. Meaning if they're trying to like basically make a payment out of their treasury or, you know, batch sell or batch buy or whatever they're doing, it is actually going to be cheaper for them to do something that's similar to like a coin joint, basically mix everything together. And the fact that that's like going to be something they want to do, not out of altruism,

not out of a love for human rights, not out of a love for privacy, but simply to save money, it's freaking awesome. And this, again, this goes back to this game theory in Bitcoin, where it turns your self-interest and greed, honestly, into privacy and freedom. And you see it again and again at every different level. So basically, to sum up for your listeners, Bitcoin is programmable. It's becoming more private over time. And the wallets and apps that you use to interact with it are going in a direction where they will allow you to leave less and less of a digital footprint, which is the total opposite of our current surveillance capitalist model, where whenever we do a swipe or a tap or one day like a chip scan, as we talked about last time,

And, you know, you're serving up on a platter to like third parties and governments, like your freaking address and your email and your phone number and everything about you and your whole family, right? So here's our chance to say, like, enough of that. Let's make a different kind of payment system for the world where we can protect at least some of our rights and liberties, right? And again, the only way to make this happen is through core developers who have to just sit there and relentlessly tweak with the code and make sure it doesn't screw anything

up. Because at the end of the day, what we prize most in Bitcoin is stability. We're never going to have an upgrade come on that we're not all 100% sure is not going to mess with the monetary policy. It's not going to mess with 21 million, et cetera. So that's basically my way of saying privacy is happening. It's happening because of these great people. And you all should support it. But even if you don't want to support it, you're going to be forced to support it anyway, because it's going to align with your financial interests. Absolutely. The last thing I want to talk about is regulation.

There's been a lot of talk from all kinds of people, but mainly investors coming from the traditional world that Bitcoin will be regulated. Bitcoin's kind of original promise of this decentralized private world has no shot of being successful. But if you're here for the financial returns, then you actually want it to be adopted

in the traditional system. You want it to be regulated, et cetera. How do you kind of think through this idea of Bitcoin will be regulated versus what I'll kind of call the Bitcoin promise of a private decentralized world. Yeah, this is huge. And it's what people are debating right now as we head to the end of the year in 2020. There are two major reasons for that. One was a bill, a draft bill, a very early draft bill introduced by some folks in the modern monetary movement under one of the U.S. congressman's women's umbrella, essentially. And the bill was about stable coins and basically

about challenging Libra, which is fine. But there's part of the bill that basically leaves the door open for you maybe to be liable for any transactions that go over your node if you're running a software like Bitcoin or Ethereum, right? And that is very dangerous, right? I mean, that's nuts. That is literally nuts. It is nuts. The funny thing also is like, if you want to stop Libra

or any of these stablecoin projects, that is like the hardest and last thing to do is to like 6102 the population. You know what I mean? Like that's, and I'm referring to the act, which basically allowed the US government to go collect everybody's gold back in the 30s. Okay, 6102.

But no, that's so freaking hard and difficult and obviously violates the constitution. If you want to stop a stablecoin company, just seek a polite meeting with their investors and the team making the freaking stablecoin and ask if they can do it differently. And if not, go ask the US government to force them to. I mean, all of these stablecoins are made by a company or are ruled by like a bunch of people who are oligarchs who kind of hold these like governance coins. So you don't need to do this. This is an insane step in the wrong direction. um but it raises the point that like there will be increasing interest from the government in

regulating these things now of course they're going to be look they're going to be much more interested in regulating stable coins than bitcoin at first just because stable coins literally are like representations of the dollar so of course the u.s mint is going to want to be interested in that like of course um but uh eventually they're going to get real interested in bitcoin as well currently we have a surprisingly cordial relationship i would say between bitcoin in the U.S. government, especially given the efforts of all the good folks in Wyoming, right? I mean, they're making it possible for banks to custody Bitcoin on behalf of users. And you're at like the cutting edge of all that. And you know how surprisingly rosy it all is. And in terms of

what someone like me might say is like this crazy cypherpunk tool, you guys mainly are, and again, for good reasons, looking at it as an investment class. And you want to make sure as many people as possible can have access to it, which is wonderful and a big part of Bitcoin's narrative, but you can't really have both. You can't have one without the other is what I'm saying. I would say that we need to be concerned about these new acts as they come in, but let's also be realistic. The way that we're going to fight them is not through lobbying. We can start social movements and we can apply pressure. Sure, it works from here to there. It works at times, but generally speaking, the way that we're going to win is through open source software. We need

to take lessons from the crypto wars of the 90s, right, where the US government through various actions tried to basically ban, you know, end-to-end encryption. And they went after this guy, Phil Zimmerman, who had created, you know, pretty good privacy or PGP, which was like the first time you could do like public key encryption on a PC, right? So they went after him, but you know what, they lost. And encryption ended up becoming a core part of our commercial infrastructure, a core part of the dot-com boom, the ability to do encrypted payments on the web, a core part of everything. And now today, you and I can talk on Signal, and the US government doesn't know what we're saying, right? So that's pretty amazing. And that all happened, not because

the US government was lobbied into thinking it was a good idea, but because they literally failed to regulate what is unstoppable code, basically, right? So now we have Bitcoin. And they are also, I would say, it's unlikely you're going to sway them to think that this is going to be a great thing for them, because it's not. I think there's a lot of great organizations that are going to help protect Americans' rights, like Coin Center in this area. They do awesome work. But remember, most countries don't have a Coin Center. Coin Center would be illegal in 90 countries. So we have an extra responsibility here in countries like the United States to fund Bitcoin core development, help it become a privacy tool for everybody else. There's a good podcast

recently where Moxie Marlinspike was on Joe Rogan. Moxie, of course, created Signal. There was also a New Yorker essay on him recently. And, you know, Signal is such a wonderful tool for the world and such a, you know, wonderful thing for human rights activists, right? However, we need to remember that it was created primarily in the United States or by someone who lives in the United States. It's primarily his brainchild, right? And he's been able to develop that in a way where the U.S. government hasn't shut it down or hasn't tried to shut him down, right? So, you know, he couldn't have done that in China or Russia, et cetera, et cetera. So people in open societies, we really need to take our responsibilities and privileges seriously. And we need to double down and help make sure Bitcoin is a tool that can actually help people who live in these other countries, where they're not going to be able to lobby for better policy in the future. They're not going to be able to protest their government to protect financial privacy. It's not happening in Saudi Arabia, or in Nigeria, or in North Korea. It's just not happening.

So we need to take it on ourselves to do more stuff like the Bitcoin Development Fund and what the Binkle bosses are doing with their Opportunity Fund and with what Square is doing with Square Crypto and with what companies like Blockstream are doing and what Chaincode is doing. And look, there's so many good actors in the space now, right? But we need to seek to replicate and double down on these efforts, not just for ourselves, but for everybody in this world. Yeah, it feels like we're really seeing kind of a line drawn in the sand. We either pursue policies or we can pursue technology. And history would tell us that pursuing technology will trump pursuing policies. That doesn't mean that pursuing the policies isn't important. It doesn't mean that we shouldn't push back when there is, frankly, misguided or just flat out stupid legislation that is put forward. But at the same time, the technology component of this is, one, really important, but also, two, kind of has the final say, right? Because if there is technology that is built that can't be regulated, I think that that has been a part of the world that most people have not understood, but now very quickly is starting to understand. And not only one, is it exciting, but two is it can be the great equalizer for people

around the world, whether they have a voice or not, because ultimately that code can really kind of open up opportunity and make a much more prosperous, safe world for people everywhere. Yeah. I mean, just to recap, policy reform and technology are both very important, but remember, billions of people in this world, in fact, the majority of the world population cannot do policy reform. So their only option is technology. They're not going to get a central bank digital, you know, they're going to get a CBDC that protects their privacy. I don't personally think we're going to get one either, but it's on the table. It could happen potentially. It could happen in Switzerland, it could happen in Sweden, it could happen in Canada. Again, I don't think it will, but it's not impossible. I mean, we could have CBDCs that protect privacy, maybe. But again, for the billions of people living in dictatorships, they're never going to have financial privacy through government choice. Okay, they're never going to have their government come out and make a tool that protects their financial privacy. Never. So that's why Bitcoin is so, so important as this like decentralized monetary effort that we can all contribute to and get involved with. And that's something that I hope that a lot of these people who are, you know, kind of making waves lately with comments about how, you know, Bitcoin has to adapt to the US regulatory environment. And they need to do a little more research and a little more global thinking about their philosophy, I think. And these people aren't human rights activists, and I don't expect them to be. But I think they need to have like a global context of what they're saying will mean, right?

Because, you know, I'm talking specifically about people like Raoul Pal and Michael Saylor. I mean, they're basically saying that, hey, for us to succeed, for Bitcoin to get to every corner of the earth, it has to be something that is legal in the United States and, you know, and that, you know, sort of like, you know, meets all the demands of the regulators here. But again, they have to realize most people don't live in the United States. And like, if you seek to like co-opt Bitcoin and like make it regulatable here, think about what that means for people abroad, right? This is a luxury for them. Like Bitcoin for them is

a luxury. They have beautiful homes. One guy lives in the Cayman Islands. Like what do they care? I mean, they're like hanging out. Okay, great. Okay. Bitcoin is like a luxury for them. Bitcoin is life or death for a lot of people around the world. It's like their lifeline. It's like the only way they can have money that doesn't disappear or get seized. It's the only way they can send money to their family if they're working in a different country. Sometimes it's the only way they can get money to somebody so they can buy medicine in a sanctioned country. This is some serious stuff here. No, it's not going to comply with your rules and regulations. That's just something that you have to think about and be careful because, again, you can't just come in and say

you think Bitcoin should do X so that more investors can have access to it in the United States. This is like a global, global tool for the world. And you have to think about all the perspectives of all the people who will need to use this thing. Yeah. Where can people find out more about Human Rights Foundation and if they want to either learn more about the privacy components or potentially donating as well to some of the things you guys are working on? Sure. Please visit us at href.org. Again, most of our work relates to direct support for people who live under authoritarian societies, whether in the form of legal campaigns, advocacy, conferences, tech support.

But we do have this, again, this really fun project that I'm very proud of called the Bitcoin Development Fund, where you can donate to us and we will put 95% of your donation directly in the pockets of Bitcoin developers working to make the network more private, more free, resilient, usable for people around the world. So that you can check out specifically at href.org slash dev fund. And I'm just very grateful for the opportunity to come on and talk about these things with you, Pomp, as always. You have an open invite whenever you want to come on and talk.

I'm always here and people know that I don't really talk too much about what people should go do or look at. But I think the work you guys are doing is one, just incredible in terms of the non-Bitcoin stuff. And then obviously the Bitcoin stuff kind of speaks for itself. And so I highly recommend people go check out the Human Rights Foundation and all the great work that Alex and the rest of his team are doing. Thank you so much, Pump. We'll be in touch.