The Pomp Podcast - #705 The Bitcoin Only Exchange w/ Alexander Leishman

Episode Date: October 29, 2021

Alexander Leishman is a Chief Executive Officer and Co-Founder of River Financial. Prior to that, he was the Engineer and Investor at Polychain Capital and the Security Software Engineer at Airbnb. In this conversation, we discuss bitcoin, brokerage, custody, mining, River Financial, personal principles, and lessons learned as CEO.  ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. =======================

what's up everyone this is anthony pompliano most of you know me as pomp you're listening to the pomp podcast simply the best podcast out there now let's kick this thing off alexander leishman is the chief executive officer and co-founder of river financial prior to that he was the engineer and investor at polychain capital and the security software engineer at airbnb in this conversation we discuss bitcoin brokerage services custody services mining services, river financial, personal principles, and lessons learned as CEO. I really enjoyed this conversation and I hope you do as well. Before we get into this episode though, I want to quickly talk about our sponsor. Gemini is a leading regulated cryptocurrency exchange wallet and

custodian that makes it simple and secure to buy, sell, store, and earn Bitcoin and over 40 other cryptocurrencies. They offer industry-leading security, insurance, and uptime. Gemini is the go-to trusted platform for beginner and sophisticated investors like. Open a free account in under three minutes at Gemini.com slash Pomp and get $20 of Bitcoin after you trade $100 or more within 30 days. Again, Gemini.com slash Pomp and get $20 of Bitcoin after you trade $100 or more within 30 days. Gemini.com slash Pomp. They continue to be a heavily regulated above board exchange. Gemini.com slash Pomp, 20 bucks of Bitcoin after you trade your first hundred or more within the first 30 days. Go check out Gemini. All right, let's get in this episode with Alexander. I hope you guys

enjoyed this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. How are you, man? Doing well. Good to be on the show. Absolutely. Thank you so much for doing this. So I got a whole bunch of questions,

but maybe first we could start with what is River and just kind of help people understand in terms of what the mission is and the original idea for what you guys started to build. Sure. So yeah, River is a Bitcoin-focused financial institution. We started with Bitcoin brokerage and custody, trying to make it easy for a new segment of clients. We launched in 2019, focused on the higher end of the retail market, so call it mass affluent up through high net worth, ultra high net worth individuals, trying to make buying and selling Bitcoin really easy for that demographic, building a product that people would be comfortable sending their parents to, unlike a Coinbase or somewhere else that's much more confusing. Now we're expanding and going deeper down the Bitcoin rabbit hole and offering new novel Bitcoin financial services that people haven't been able to get anywhere else before. So we're now focused on building the next generation of Bitcoin financial products to help accelerate the adoption of Bitcoin. That's our mission.

Awesome. So let's start maybe with when you think about why Bitcoin only. I think people hear that and they're like, oh, but there's 10,000 other coins that you could participate in. We've seen everyone from some of the publicly traded fintech firms that have come out and showed that a lot of the trading, a lot of the revenue is coming from non-Bitcoin assets. Why focus only on Bitcoin? Focusing only on Bitcoin allows us to differentiate and it allows us to build the new financial products around Bitcoin that haven't been built before.

The reason that we're focused on Bitcoin isn't because we don't like money. It's because there are a million apps where you can buy every cryptocurrency under the sun. We deeply believe that only Bitcoin is on a trajectory to truly become this reserve currency of the world, the money of the Internet. And we think that we've only the industry has only scratched the surface and the types of financial products that are offered that are that are Bitcoin native help help you grow your Bitcoin wealth directly. And that's what we're doing with this new product. We launched this river mining product, which I'm happy to talk more about. But we think that there's a whole world of Bitcoin-specific financial products left to build.

And that's what we want to do. And we think that there's going to be huge demand for that. And by focusing on a bunch of other cryptocurrencies would distract from our ability to execute on that vision. So what's fascinating to me is, one, avoiding distractions. It's more important to know what you don't do than it is what you do do, right, which I think is pretty compelling. The second is that you've talked in the past about a lot of people going to certain platforms and being confused or overwhelmed or even having almost like what I call like sticker shock, right?

Oh, one Bitcoin is $60,000. This other thing is less than that. So maybe I should just buy that thing. Talk through a little bit as to how you see maybe the negative sides of some of the platforms that offer a bunch of stuff. And then what is the negative sides of only focusing on Bitcoin, right? There's trade-offs to this stuff. So like, what do you think as the downsides to both of the strategies?

Yeah, there are certainly trade-offs. So on the pros side, being Bitcoin-only allows us to have the most simple experience possible. People like our app because they get exactly what they want and what they need. They want to buy Bitcoin and hold Bitcoin. That's what they get. They don't get other confusing features, widgets, random coin launches, scammy-looking things going on. They feel very comfortable, especially sending novices, new Bitcoiners over to our platform because they know that they're not going to get distracted by and get confused between the difference between Bitcoin and Bitcoin Cash or Bitcoin SV or Bitcoin Gold or, you know, Ethereum and Solana and Shiba and Doge. They know they're just going to be on a safe path

and they're going to get exactly what they need. On the downside, people do want to speculate on these long tail coins. People do want to, a lot of people do want to buy Ethereum. A lot of people do want to buy Solana. Um, and you know, being like any app, uh, you have to decide, you know, do you do try to do it all or do you focus on what you can do better than anybody else? And, um, if you look at sort of the best apps in the world, the best companies in the world, they focus on what they can do better than anyone else. And, um, that's how we think about it. When you start to look at the various products, you guys started with brokerage and custody, uh, explain kind of the progress of that business. Cause I don't think people realize how quickly

you guys, uh, have grown. Yeah. So, uh, our, our brokerage and custody business kind of really blew up this year in a good way. Um, you know, our, our assets under custody and volumes have been up year over year dramatically. Um, it's been a good, healthy business for us. Uh, but in our mindset, you know, brokerage is actually really just the first stepping stone on a much longer journey. Brokerage is really just getting us from zero to, I would say, 0.5. Getting all the way to one for us is building this suite of financial services that are Bitcoin native that nobody's ever had before. And so while brokerage has been successful and fun to build, and I think we've done a great job building the best Bitcoin brokerage out there, especially for the higher

end of the market, it's really just the start of our journey. And then talk to me about this mining product that you have in terms of allowing people in a very seamless, frictionless way to get exposure to mining and to start mining? Yeah. So this new mining product we just launched, River Mining, is the next big financial product that we're offering after brokerage. The way we think about this product is making Bitcoin mining as easy as we've made buying Bitcoin. To date, mining Bitcoin has been pretty confusing. And pretty much the only people who mine Bitcoin are industrial Bitcoin miners or hobbyists who really deeply get into the weeds. They have to understand what pools are. Even if somebody else is hosting their miners for them,

there's a lot of complexity and nuance and things they really need to understand and that nobody's abstracted that complexity away before. We're making Bitcoin mining as easy as clicking a button, as easy as almost consumerizing spinning up an AWS instance, right? You click a button, you'll get a miner, and you don't have to worry about anything else. And the Bitcoin from that miner shows up in your river account. The miners you actually own.

So not only do you have the Bitcoin income stream from this miner, but you own the underlying asset as well. And so when you think about what this does, how do you expect people to come into the product? Are they coming in for the brokerage and custody and then they kind of graduate to mining? Do they come for the mining and get the other stuff? Is it two separate customer bases? How do you think about those products sitting next to each other? It comes both ways, actually. So a lot of our brokerage clients who bought Bitcoin with us are very interested in mining. They see mining as a different way to get into a Bitcoin position, sort of optimizing for potentially different things. Right now,

mining is actually quite lucrative because of the difficulty adjustment down from China banning miners. But there's actually this whole other class of customer that has been fascinating to see, which is people who actually aren't that interested in buying Bitcoin, but they're very interested in mining Bitcoin. And so I think we've actually sort of also opened the door for another class of clients here. And when you start to look at this Bitcoin-only thesis, it's obvious custody, brokerage, mining. What are other things that you could see yourselves doing? Whatever you're allowed to share publicly. Yeah. So we're not sharing the exact details of all the new products that we're thinking about, but here's what I would say.

there are very few ways to put your bitcoin to work today and there are lots of ways that you could put your bitcoin to work if someone builds out the infrastructure and technology to do that and we see ourselves uh as a not only a financial institution but a technology company and we want to build out the the bitcoin infrastructure that allows people to put their Bitcoin to work in ways that support the Bitcoin network, help, you know, for example, you know, help support the lightning network, and, and other novel things like that. So that's the direction we're thinking. And talk to me about this kind of principled view. I think one of the most fascinating things about your business is in the face of everything, there's so much going on

in the market, there's so many people showing up saying, Oh, look at this shiny thing, look at this shiny thing. You all say, this is our box. We stand in this box. It's the most important box. And we believe that Bitcoin is the most important thing to focus on. And that's where we're going to spend our time. How do you ignore everything else? How do you know to not go there? Like, talk to me about taking that principled view and then being kind of the high conviction person to double and triple down on it. Yeah. So, you know, I think a lot of people think that, you know, this view is maybe driven by dogma or a sense of charity or something like that. But, you know, I'm a businessman at the end of the day. I want our company to be the most valuable company we

can build. And I want to make a lot of money. And I actually genuinely believe focusing and building the financial services for the biggest cryptocurrency in the world, Bitcoin, is such an obvious thing. And nobody else is really focused on that. And it's, you know, that's not to say that there's no um there's no future for uh you know any other cryptocurrency um but you know it's it's staring us in the face the biggest cryptocurrency in the world worth a trillion dollars people are just largely ignoring and uh in terms of like uh building new things for it and that's because it's it takes hard work right very few people are willing to do the hard work it's easy to fund a new coin right and and and then get it listed on coinbase and make a gajillion

dollars. It's very hard to build the infrastructure over years, um, that allow you to do the hard things on Bitcoin that nobody, that you couldn't have done before. And so I think what it comes down to is it's, I think the, the, the return on that investment is going to be much higher long-term, but the short-term high returns aren't in Bitcoin. So I think that's what, why, why this dynamic exists. So I want to switch gears and talk a little bit about Bitcoin in the market, one of the best places to start is with the legacy system. We've seen incredible undisciplined monetary and fiscal policy. We've seen all kinds of craziness. And we're now feeling that with high levels of inflation. We're seeing it with high levels of unemployment. We're seeing

it with the ability for people at the bottom part of society not to be able to build a life of financial security. You had this tweet recently that said the Federal Reserve is the institutionalization of an elite banking cabal looting our country. Describe a little bit more in terms of how you look at what that legacy system kind of represents and how it operates compared to the Bitcoin system. Yeah, absolutely. You know, when I first started River, I actually wrote this manifesto and I kind of kept it secret. I put it, I open timestamped it on the Bitcoin blockchain. And in that, in that manifesto, I laid out sort of why we were doing this. And part of that was because, you know, we have this this elite cabal sort of with the Fed at the center of banks that

have been, you know, frankly, very harmful to our country. And I think all all of the people at this point that are wealthy, that have been involved in the system didn't create the system. Right. We're like two or three generations removed from the original sort of creators of the Federal Reserve and the current banking system that we have. So so I don't think there's anything like that's been constructed by the current group of people that they're overtly trying to do bad things. What I think we have is just a system that has just emerged and has a lot of very negative effects on this country. And so specifically, the inflation that we're seeing is just detrimental to the working class of this country, but to really everyone at the end of the

day. The forced financialization of everything, you know, every single saver in this country is forced to keep their money with these financial institutions and invest in speculative assets just to keep up. It's a very perverse system and it's snowballing. The federal government debt is increasing. We have to keep printing more money to bail ourselves out. And it seems to be there's no end in sight here. Um, prices are going to, it's looking like prices are going to keep accelerating and rising, and it's going to cause significant social issues. And I'm very concerned about it. When you look at Bitcoin, what's your general take on where we are now? We went through the, uh, all time highs. We came back down a little bit. Uh, how do you feel about where we

currently sit? And then how do you think about it through the end of the year? Do you have any sort of like end of year price prediction? You know, I, I have no idea what the Bitcoin price is going to do in the short term. I honestly have no idea. It would not shock me to see $100K by the end of the year. In my gut, I feel like that it feels right. It feels like it should happen. But I do believe really only that in the long term, the Bitcoin price will almost certainly keep appreciating. But in the short term, I mean, Pomp, you know as well as I do, Bitcoin is going to do what it wants to do regardless of what we think yeah what is the long-term view is this a thing where it's like you know we had greg foss on the other day and he literally was like oh it's going to 20

million dollars here's how it gets there all this uh kind of negative yielding debt comes into the market uh over a long period of time and it's you know 100 plus trillion dollar asset and he had like all this math to it do you have a vision like that or kind of an understanding of it or is it more so like hey this thing goes absolutely kind of hyper bitcoinization and eventually the dollar value doesn't matter and things are priced in Bitcoin? I do believe long term that this hyper-Bitcoinization is the future. I don't want that to be something that happens overnight. I don't want chaos and social discord and massive pain in our country. I'd like for that transition to be sort of, uh, you know, healthy and comfortable. Um, but you know, I'm no macro

economist. I'm not, you know, I'm not as sophisticated as probably some of the people in this show, but I genuinely generally do believe, I mean, they just, they're printing trillions of dollars out of thin air here. Um, I don't see how the Bitcoin price isn't going to keep going up over the years to come, uh, with the state of affairs. It just seems inevitable. Joe and John, two of my brothers are here with me. Alex, what questions do you guys have? I have two questions. First one, I'll start with the demand for the cloud mining services, river mining that you guys are offering. I'm assuming this was born out of demand from clients. Can you just talk a little bit about kind of what demand you're seeing and how you

think that'll trend over time? Yeah. So we launched, we announced this product yesterday. It's been, our clients have given a great reception. They're all very excited about it. You know, I wouldn't call this cloud mining. So historically, cloud mining has been kind of a scammy thing. The reason is because you're actually with cloud mining, you're paying a price for hash rate for a fixed amount of time and you often don't come out ahead. With this, actually, you actually own the underlying miner. You own the equipment and you get to keep everything that it generates for you. But but our clients are very excited about this because it's a new way to accumulate Bitcoin. And a lot of them are doing the math and realizing that they're probably going to come out ahead of buying miners instead of buying Bitcoin.

Yeah, and thanks. That's helpful. My second question would be around, we've seen some exchanges, one of them last quarter, two quarters ago, had a majority of their volume in Dogecoin. And when that volume came down, their revenue plummeted a good amount. And then we've seen another one that has skyrocketed in the App Store due to people going to download the app for the ability to purchase other crypto. As someone who specifically focuses on Bitcoin, what are your general thoughts around like, are you guys upset a little bit that you miss out on some of that kind of stuff? Or is it just like, let's just focus on exactly what we know that we can do really well and not worry about some ancillary revenue that might come from trends? Yeah, no, we're not. I'm never upset about it because I've been in this industry for most of my career. I've been through the 2013 alt bubbles.

I've been through the 2017 alt bubbles. I've been through it before. And I just know that, you know, I'm upset about another app kind of making a bunch of money from ShibaCoin as I am about a successful restaurant down the street making a lot of money. Like, it's just a completely different business. And it's not something that bothers me. It's just not what we're focused on. And, you know, we're very calm about that. John, what questions do you have?

Yeah, Alex, nice to meet you. And thanks for doing this. Is this just a preliminary question? Is this the first company that you started? It's the first sort of like company at scale I've started. Yeah. I mean, I had a long knowing business when I was a kid, but so this is the second, I guess. Well, congratulations on your success thus far. But my question is, what issues have you run into starting a company and kind of bringing it up to scale? I'm sure a lot of people want to start a company and they just they just don't know where to start or what to do when they get to those roadblocks along the way. Yeah, you know, I've learned a lot. I'd say the biggest one is transitioning from founder to CEO. Being a good founder is very different than being a good CEO. And where that transition happens is sort of you need to figure it out yourself, especially if you've never started a company before. um i know now so many things i didn't know starting this and if i had to start another company someday i could do it so much better just because of all the learnings um and so you know i i think like having a what i think would have helped a little bit is sort of like having a

mentor who's had what like had started a company and was a really successful you know ceo who could sort of just like kind of i could just talk to like every week or something like that um that's something i would recommend definitely to anyone starting a company but the the big thing for me the big theme that's defined my last year has been transitioning from founder to ceo nice congratulations and what's been the biggest thing as you've done that uh in terms of maybe been the most shocking or surprising like are there things that as you as you've gone through that transition you're like oh wow i definitely didn't expect that to be uh uh to be the the thing that caught me off guard yes um so being a founder sort of like the cliche is oh yeah you know you're writing

code you're doing everything you know and that was the reality in the early days um becoming a ceo has been a big learning experience because really it's how do you get this group of talented people to grow and work towards a common vision and um that's a very non-trivial thing and requires a learning a lot of different skill sets from management strategy to communication to to org structures, you know, all the MBA stuff that, you know, I think a lot of like engineer type founders like myself probably originally thought, oh, that's, you know, I can figure that out later, uh, becomes just incredibly important. And, um, I've had to get smart about that really fast. Yeah. There's a lot of people who are asking in the chat, uh, how they

could get started. Where do you send people? Uh, where's the best place they can, uh, find more information on whether it's the brokerage and custody product or on the mining product that you guys just launched? River.com. Uh, it's easy to spell. Uh, and, uh, the, you can go to the mining. You can learn more about the mining product by just clicking in the top nav bar. We have a link to the mining, the new mining product and, uh, have all the information there and you can join the wait list. I got to ask, how'd you get river.com? Yeah. You know, everyone always asks that. So we used to be, we used to be called, um, uh, Alto dot financial when we first launched and the domain name we were never really happy with uh it was dot financial uh and

eventually we we sort of had this moment where we really needed to rebrand and spent like two months um trying to find a domain that had that was available with a name that we really liked and we came over crossriver.com as like for sale and we're thinking oh there's like almost no way we could afford that but you know we looked into it and actually it was just actually a reasonable price. And, um, we just, it wasn't cheap by any means, but it also wasn't something that was completely out of the realm of feasibility for us to afford. And I had just known from experience that having a.com you love just sets the tone for the company. Um, that just makes you feel confident. And I had no hesitation pulling the trigger and making the purchase and it's been

completely worth it. And you guys bought it all cash and you didn't have to do like equity or any of the, uh, there's all kinds of tricks for those that don't know that people will do when they're starting a company and there's story after story where it's actually worked out really, really well for some people. And in the cases where the companies don't work, usually they just give back the domain, uh, afterwards. But, uh, it sounds like you guys use cash, which, uh, which is even better for you. Yeah, we bought it with cash. We had raised the seed, a seed financing rounds. And, um, we had, you know, we had enough cash to make that purchase. That's awesome, man. All right. And where can we send people to find you, uh, you on the internet?

Twitter is the best place. Yeah. Twitter. I'm at Leishman, uh, my last name L E I S H M A N at Leishman on Twitter. Awesome. I am putting in the chat right now. Anyone who wants to go follow him, uh, just click on that link. You can go right there and then we'll put the, uh, the river, uh, Lincoln as well. Anyone who wants to go check out the brokerage or custody product or the, uh, or the mining product. So listen, man, thank you so much. And I think that, uh, you probably don't get enough credit for, uh, for being Bitcoin only. I know, uh, sometimes it can be lonely. I know sometimes it can be a tough in terms of, uh, the onslaught of, uh, of all the people who seem to be literally just falling into into money by buying dog coins. But you seem to

have figured it out. So congrats on all the success. We're cheering for you. Thanks, guys. And thanks for having me on the show. Absolutely. All right. Talk soon.