The Pomp Podcast - #939 Understanding The Current State Of Bitcoin w/ Darius Dale, Perianne Boring, & Brian Estes

Episode Date: April 29, 2022

This is a special episode of the Pomp Podcast. I was unable to record this episode, so my friend Darius Dale from 42 Macro helped to fill in. In this episode, Darius interviews Perianne Boring, the Founder & President Of The Chamber Of Digital Commerce and Brian Estes, the Off The Chain Capital CEO & CIO. In this conversation, they discuss the latest legislation out of New York State to ban Bitcoin mining and what Perianne and her team are doing to prevent this legislation from passing. They also discuss the current macro economic state get a deeper understanding as to why Bitcoin is so important right now. ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone.  Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin.  Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account.  You came, you invested — now conquer. ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U.S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at http://defi.tech  =======================

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. This is a special episode of The Pomp Podcast. I unfortunately wasn't able to make it. So we had Darius Dale, the founder and CEO of 42Macro, sit down and have a conversation with Brian Estes, the off-the-chain capital CEO and CIO, and Perri-Ann Boren, the founder and president of the Chamber of Digital Commerce. In this conversation, they talk about everything from macro data to the crypto markets. I really think that you guys will enjoy this conversation between three people that I have a ton of respect for. I hope that you guys enjoy this one. And

before we get started, of course, I first want to talk about our sponsors. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful user-friendly blockchain products that sync across all of your devices, making it easier to send, receive, and exchange over 150 or more crypto assets in one place. And with world-class customer service available to you 24-7, Exodus always has your back. But the fun doesn't stop with staking and trading. They recently launched a new NFT marketplace where you can buy and sell your favorite NFTs on the Solana network. By partnering with the popular NFT platform Magic Eden, they're offering the full Monty on verified collections,

with more added every single day. Ready to check it out for yourself? Run, don't walk, over to Exodus.com slash Pomp for your free download today. Again, if you want the world's leading desktop, mobile, and hardware crypto wallet, go to Exodus.com slash Pomp today. Today's episode is sponsored by Abra.

They're based in California and they're backed by top VC firms. Abra is an all-in-one, simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral, and earn interest with up to 13% APY on stablecoins and 7.15% APY on Bitcoin. You can join nearly 2 million users by downloading Abra from the Google Play or Apple App Store. If you download the app today, you will get $15 in free crypto once you fund your account.

You came, you invested, now conquer. Abra, conquer crypto. Go check it out today. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy. They're providing simplified, trusted access to crypto, decentralized finance, and Web3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single-stock purchase on a regulated exchange. DeFi Technologies is currently listed on the U.S. Exchange at DEFTF Stock Ticker and the

Canadian NEO Exchange at DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at DeFi.Tech. I'm really excited about what these guys are doing. I've become an advisor to the business, and I highly suggest you go check them out. Go to their website at DeFi.Tech today. 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. What's up, guys? You got your host Darius Dell here. I'm founder and CEO of 42 Macro. We have Perianne Boring of the Chamber of Digital Commerce. I'm also joined with Brian Estes. You guys all knew who Brian Estes is, CIO of Off The Chain Capital, one of the best-performing Bitcoin and actual hedge fund in the continental United States. Really proud of you, what you accomplished, Brian. But let's turn it over to you, Perri-Ann.

You have obviously a lot going on with this sort of ban, this bill that's going through the New York legislature. Can you talk to us about that? Because that's a very big deal as it relates to Bitcoin mining. Yeah, New York is truly failing us. New York's still failing us? Still failing us, yes. The legislature is planning to ban proof-of-work mining in the state. Technically, they're calling it a two-year moratorium, but effectively, it's a ban.

This bill has already passed the Assembly, and it will come up for consideration in the Senate any day now. Our team at the Chamber of Digital Commerce, we have a team of lobbyists on the ground in Albany. They're working full time on this. And now is the time for anyone who cares about the future of this industry to make your opposition to this bill known. So I'll tell you, our efforts in the House were definitely heard. I'll give you just some play by play on what happened because it was fascinating. Take me back. So what's the who's spearheading it? Why are they spearheading it? What's the implications of this bill passing or potentially not passing?

Yeah, so this bill is being pushed by environmentalists. The head sponsor of the bill, Anna Keels, she promotes herself on Twitter as a climate activist and had to pass through a committee before it could go to the assembly for a vote. um we had worked really really hard to get as much opposition to this as possible they brought it up late at night for consideration in that committee and they basically started the session saying hey surprise we have changed the composition of the committee there's now a new member on it and that new member was someone they had recruited who was a supporter of the bill and that was the only way they were able to get it out of committee so they were pulling tricks out of their bags

i mean it was politics at its truly its best and its worst but it really showed that people calling and voicing their opposition had a huge impact because they had to go that low just to get it through and then it passed through the the full assembly after that so are is this is this bill popular like if it made it to the the floor of the assembly would it actually pass or it passed the assembly so it now has to pass the senate it has to pass the senate um and we have a fighting chance we have a fighting chance based on our whip count we think we need to flip about 12 democrats in order for it to fail so we are focusing efforts on senate democrats today um so uh for anybody who would like to be a part of us we're calling on literally everybody around the country even if

you're not located in new york if you are located in new york contact your state senator and let them know your opposition to this bill. If you're not in New York, call the Senate leadership and help educate them on why this is bad. We have a campaign. All of the resources we're posting on our Twitter account, it's at Digital Chamber. We have talking points. We have resources so you can find your senator. But now is the fighting chance. I feel like I represent the sort of collective curiosity, if you will, of the traditional finance community as someone who's very curious about Bitcoin, believes it has a place in your asset allocation, depending on kind of where you are in your investment time horizon, on your investment journey. As that person, as the person who doesn't

really understand the full implications, the full scope of maybe the energy, like, why does this bill even exist? That's what I don't understand. Like, who is actively out there trying to prevent Bitcoin mining? You know, give me some stats, give me some facts, give me some figures. What what are the issues? Well, from my position, we should not be passing such a draconian measure into law if we don't understand it. And clearly, New York does not understand this because there's a lot of misconceptions about why they're pushing this through. They're trying to curb energy use and carbon emissions. Well, Bitcoin uses a negligible amount of energy. It's not going to accomplish any of those goals. Further, there is an alternative piece of legislation that has

already passed the assembly that would conduct a task force to put forward a study to understand this better. So, I mean, if logic just prevailed, which of course, logic and reason don't always prevail in politics. Logic does not prevail. Money prevails in politics. We would first understand it and then take action. They're doing it completely backwards. Fair. Brian, do you think this will have any implications? Like what's, play this forward. Like let's say the bill passes, you see copycat bills across the nation maybe it makes its way to dc is there a real implication here as it relates to bitcoin supply i don't think it's a pass i mean if you look at the truth the truth is that if you take all the world's energy electricity bitcoin consumes 0.1 percent

of the world's electricity so even if you turn it off it has like perry andrew said it has no meaningful effect and 60 of the electricity that's used to buy mine bitcoin comes from green or renewable energy sources so in the united states 20 of our energy use electrical use is from green energy or renewable so the bitcoin mining industry is three times more greener than the average u.s consumer wow so it's it's you know this is just it's it's it's fake information out there getting people riled up and it's like i said even if you turn it off it doesn't make a difference gotcha gotcha so this is the kind of so i thank you for sharing that because i've not heard those stats all i've heard and seen is really greta thornburg saying that bitcoin's gonna you know

sink the planet right like i just heard from you if we turned off all bitcoin mining globally the planet will be underwater in, you know, 51 instead of 2050, right? Here's the other part of that. So building off what Brian's talking about in terms of Bitcoin mining being a huge user and consumer of renewables, the Bitcoin mining industry is one of the largest investors in sustainable energy operations. And we believe Bitcoin mining has the opportunity to lead the transition to green and sustainable power operations around the country and potentially around the world. So by just saying anything proof of work is going to be banned in this state, all of those lines are just going to go elsewhere. There is plenty of more friendly states like Texas that are opening them with welcome arms who are partnered with renewable plants and helping fund the build out of more renewable sources around the country.

So it will have the complete opposite effect. It's so interesting, like, and this maybe is a little bit off topic, but there's a real bifurcation in regulatory policy. Like, we've always had a bifurcation in regulatory policy across the United States of America. But in this particular time right now, this moment that we're in, it seems like it's getting wider. It's so partisan. States like Florida and Texas are really driving innovation forward. We have states like Illinois, New York, California, really kind of clinging on to how the world used to be.

And I think that's going to cause a lot of problems. It's going to cause a lot of migration. It's going to create a lot of opportunities, like any sort of opportunities you guys are seeing as a function of this. I mean, we're in Florida now, and you talk to any real estate agent around here, where are people moving from? They're moving from Illinois and New York to Florida. I mean, it's, you know, the rules that, you know, that they put in a place that it just drives people out of their communities.

And this is an example of that. And these are the best and brightest too, by the way. You know, these are new jobs that could be in New York and they're going to drive them down to Texas. Totally. Totally, 100%. And yeah, it's not like this, you're not getting rid of the worst, you're getting rid of the best and brightest and arguably some of the most productive people who are creating jobs and innovating. And obviously, you know, there's that old age old, you know, capital versus labor discussion. You know, we don't need to get into that. I don't think we have enough time to unpack that onion.

But certainly I do believe there's there's a lot going on. Can we talk about something shifting gears a little bit? Educating me, the TradFi guy. What's the difference between proof of stake and proof of work? I get it conceptually, but is there something deeper to understand or is it just as obvious as it sounds? Typically, the way that I try to explain this to policymakers is that proof of stake is not an alternative to proof of work because that's one of the arguments. They're like, oh, well, even if we ban proof of work, there's other things like proof of stake and that'll be fine. But they're mistakenly believing that the operations of proof of stake and what that provides is an alternative to proof of work. So proof of work creates digital property.

proof of stake does not these are largely smart contracts applications these are places to build decentralized applications that is a completely different application that's a completely different use case than a store of value or a digital gold they're just not the same gotcha gotcha so i'll give an example um so when you go out and mine gold you go buy you know land you or lease land you buy equipment you spend time you know cultivating that land to find like gold nuggets right so the gold nugget is your proof of work you know you you had an outlay of capital you had an outlay of time and the result was a gold nugget that's your proof of work like a proof of stake is like microsoft operating system or ios on your iphone that it's an operating system

There's no, you know, there's no tangible item at the end of your, you know, so proof of stake is there are contracts on the Internet using blockchain technology to allow decentralized finance, to allow prediction markets, to allow exchanges to occur. Whereas, like Perri-Ann said, proof of stake is, you know, there's property, there's digital property, which is like a Bitcoin or proof of work. It's the creation of digital property, a digital bear instrument, which is what Bitcoin is. Gotcha. And so Bitcoin seems like it stands apart from a lot of the other sort of tokens, crypto tokens. Absolutely. Yeah, relatively.

Are there any other proof of work? Yeah, so the proof of work blockchains that are out there, there's Bitcoin, there's all the hard forks off Bitcoin, like Bitcoin Cash, Bitcoin SV, there's Dogecoin, Monero, Zcash. If you add all those up, all those proof-of-work blockchains up, Bitcoin constitutes 92% of the value of all the proof-of-work blockchains. So the world has already decided that Bitcoin's the winner for proof-of-work. People talk about Dogecoin and Bitcoin Cash, and they don't have the network that Bitcoin has. And so they're going to fail. They're in the process of failing.

You'll have one proof-of-work blockchain, and that's going to be Bitcoin. and the world's already decided that you know the bitcoin wars occurred about four years ago with all the hard forks off of bitcoin like bitcoin cash is actually better technology than bitcoin the original bitcoin is but people don't use it so it doesn't have the network effect that bitcoin does and so you know so eventually all those other proof of work blockchains become worthless and bitcoin is 99.9 percent of the proof of work blockchains that are out there You said this war sort of took place around four years ago? Yeah, the Bitcoin wars.

Yeah, so what was the catalyst? What sort of happened there? Were the cyberpunks, I guess, in disagreement? So we had Bitcoin, the original code, and then there were developers and miners and exchanges that wanted to upgrade the system because the problem with Bitcoin is that it's slow and each block can only have one megabyte of information on it.

And so when those blocks get full, when you try to do a lot of transactions, then the blocks get full and it backs up. Instead of a block clearing every 10 minutes, it could take two or three hours to print a new block to the blockchain. And so what they wanted to do was increase the block size and that would allow more transactions to go through. And if you do that, then what happens is that there are fewer and fewer people that could actually mine or clear the transactions on the Bitcoin network. So it concentrates the power with fewer people if you start increasing the block size. And so there was a big argument. Do we increase the block size?

Do we not? And half the people wanted to, half the people didn't. And so what someone finally did was said, we're going to create a new Bitcoin called bitcoin cash and will increase the block size and then they did that and and just people don't use it you said something just now that really caught my attention and you said it twice actually the people who was the people it's consensus it's the it's the community community so it's a combination of users you know bitcoin owners right uh the exchanges that custody bitcoin the developers that change the code to make it better.

It's the people that make the hardware that mine Bitcoin or clear the transactions. So everyone has to come together to a consensus to decide, is this the best change for Bitcoin? And if you don't want to change it, you can stick with your original code or you can create a hard fork, which is all the history of the original blockchain

and you have a new one called Bitcoin Cash or Bitcoin SV which has the new technology in it and then you just wait and see if people want to start using that. So there's all sorts of versions of Bitcoin out there. Like I said, Bitcoin Cash, Bitcoin Cash SV, Bitcoin Diamond, Bitcoin Gold. What's the one we all quote and cite?

That's just Bitcoin. That's just the original Bitcoin code. Yeah, that makes sense. The core. The core. The coin core. But going back to kind of your original question, so you have proof-of-work blockchains, and Brian just outlined why Bitcoin is the winner.

It has dominated in terms of market cap of all the other proof-of-work blockchains. And proof-of-stake, we're still in too early of days to know who the winner is going to be. So there's a lot of competition. It's hyper-competitive right now against different proof-of-stake networks. um and strikes me that it's odd that there would be a winner for that it seems like that's so much

more specialized like certain uh proof of stake tokens there may be a use for you know xyz transactions there may be a couple but there's not going to be thousands yeah it's true so there'll be a handful yeah so there's obviously been a ton of capital pouring into the space in the last couple of years i mean there's been a ton of capital slosh around global financial markets last couple years to begin with so obviously crypto is being the innovative kind of um opportunity set that it that it provides we've seen a lot of a lot of capital where are we in that in the broader capital market cycle for the crypto space or at least within your estimation yeah so i've been involved since 2014 yeah you know back then bitcoin had a market cap of around

three billion dollars um today it's you know 850 billion so you know it hit a trillion a few months ago um but you still don't see a lot of big institutional investors allocating to the space shut um so it's mainly you know libertarian in nature family offices you know we did see an insurance company come in about a year and a half ago mass mutual yeah they bought a hundred million dollars worth of bitcoin um you know you have a couple public corporations who own bitcoin now on their balance sheet microstrategy and tesla um and so you know the but the big institutional money, the brokers, the, you know, I think you come from traditional finance, you know, like Goldman Sachs, you know, Wells Fargo advisors, Edward Jones, you know, they're

just, you know, they're still not ready to allow their clients to invest in that space shot. Yeah. It's interesting. I saw that Fidelity, I know the guys that are over there pretty well, they allowed, they had some rule change that allows investors to start allocating to Bitcoin in their 401 case. That's a pretty significant step.

I mean, they're sitting on a couple of trillion dollars of people's money. Yeah, like you said, Fidelity Retirement is about $3 trillion. But they also have $8 trillion of brokerage assets, too. So you would think eventually, if they allow it in their retirement plans, they'll allow it in their brokerage accounts, too. So Abby Johnson runs Fidelity. She got involved with Bitcoin about seven years ago. And Fidelity started mining Bitcoin internally.

And then they were figuring out, what's the use case for this? and they came up with the use cases as an investment tool which is the same thing the federal reserve said four years ago the federal reserve bank of st louis came out with a white paper in 2018 and in their white paper they said basically bitcoin's best use case is as an investment tool and diversification tool for portfolios and the reason they said that is because it's a non-correlated asset and when you add a small amount of non-correlated assets to an investment portfolio, it increases what's called the Sharpe ratio. Oh, yeah.

So your risk-adjusted returns go up when you add Bitcoin to a portfolio. And so if you're a fiduciary, you're an asset manager, your whole job is to increase your risk-adjusted returns. And so as more professional asset managers understand this, then they add Bitcoin to their portfolio. So I'll take it a step further. You know the inner workings of finance as well as I do. I don't think the main job of investment managers is to increase the risk-adjusted return.

The main job is to have money to manage, right? You know, you get the joke. The main job is not to get sued. Yeah, exactly. It's to maintain your assets under management and hopefully grow them over time. But that tends to be the case. So clearly there's this sort of – it strikes me that the demand for Bitcoin, and I wouldn't necessarily say crypto, I'd say Bitcoin specifically because it is a store of value type asset,

far sort of exceeds the regulatory ability for investors to get their hands on it. I mean, I can't tell you if I've had one investment manager say, oh, if only I could do this, or an investor say, oh, if only they had an ETF instead of a trust or, you know, like Grayscale, things of that nature. I could do this. I can do that. Where are we in that sort of continuum of development and kind of regulatory change? Like when will we see, you know, Bitcoin ETF, Bitcoin widely offered in 401ks, et cetera? I think Perianne's best to answer that. Well, specifically on a Bitcoin ETF or a spot Bitcoin.

Of course, we have futures Bitcoin ETFs. So the first, so since 2013, companies have been trying to get a spot Bitcoin ETF through the SEC process. So the Winklevoss twins were the first one to do that in 2013. We at the chamber, we represent close to a dozen companies who have tried to get a spot Bitcoin ETF through the SEC process. We're currently interviewing each one of those companies to really understand what that process was like. And we're learning a lot of very interesting information about how the SEC has handled this. We will be issuing a report on this shortly, and we will be delivering that report to Congress, who oversees and provides oversight of the SEC. And just without kind of spoiling too much, based on our early findings of these interviews, we believe the SEC is not following their own mandates.

and is acting arbitrary and capricious. Hear that, Gary? And I think there absolutely could be some very strong pieces there for litigation if someone wanted to move forward with that. But we don't have even rules to the road. Accredited investors and non-accredited investors today have access to very different crypto products. and they're holding this industry inconsistent to other commodity markets.

Yeah, I was going to say, it strikes me that the treatment of Bitcoin and cryptocurrency and digital assets in and of itself is very different than how we treat equities, commodities, fixed income. And that's not the SEC's job. That is not the SEC's job. Whose job is it? Well, it's not their job to pick winners and losers and that's what they're doing because they're saying

it's okay for all these asset classes to move forward. But for Bitcoin, for crypto, we're going to hold it to a completely different standard. And even the commissioners at the SEC do not agree on the process. So some have been a part of holding up getting any spot crypto Bitcoin ETFs through the process. But then you have SEC Commissioner Hester Peirce, whose nickname is Crypto Mom on Twitter, who has dissented against a number of these actions. And she has written at length about, uh, that she does not agree with the process. We're holding this industry to a different standard and we are not operating, operating in accordance with our mandates. And is the reason for that, are they protecting the barbarians at the gate, so to

speak? Well, that's certainly one, you know, one reason people are speculating effectively. Oh, cause there's a real threat, right? Like the decentralized finance is a major threat to how we're currently operating from a financial services perspective. Yeah, I mean, we definitely have a lot of pretty significant questions about what the motives are, because at this point, they are not following their mandates, and they're not holding this industry to the same standards of other commodity markets.

So it's time for Congress to step in and provide oversight on that. I mean, finance and money will become decentralized. Yeah, of course. So there's no question. It's just a matter of when. And so what the government's doing is trying to slow it down, slow down the pace. So, you know, it's going to be very disruptive over the next 10 to 20 years

as this happens but all new technologies are disruptive totally yeah it's just how disruptive was the internet to travel agents all right exactly or any other thing that used to go somewhere to do yeah but with the internet it was a lot different right so that the inner you know the beginning architecture of the internet that was created by the u.s government through a program at darpa with ben surf and bob con they created all of that original code and they built that for a defense project and then they saw that there could be a lot of commercial value to this and so at the time the clinton and gore administration they passed a series of executive orders stating that this is going to be a revolutionary technology and we

want to incentivize united states businesses to commercialize this and it set a whole process in place to do that and we did exactly that and that led to one of the greatest economic booms this nation has ever seen. The greatest. And we still dominate, the United States still dominates the internet today. And that has created so many benefits for the United States. Blockchain technology is just as important technology as the internet. Wow. That's, that's a, that's a bold statement. I want you to unpack that. Mark Andreessen also said that too. Yeah. I mean, there's a quote by Mark Andreessen that sometimes we quote where he said, this is just as important as the internet itself. And if I've, I've, so Bob Kahn, who was one of the co-inventors

of the internet he lives right outside of dc and i've had him come in several times to talk to our members just like what was that like and um how do you compare that to what you see with blockchain technology and he has stated several times to us that the initial architecture of the internet was broken because they did not have a way to send things of value in a peer-to-peer way like it was supposed to be a peer-to-peer communications network and that's what it is but that does not work when you implement anything of money or anything of value digital objects is the term that he uses we say digital assets and there's been a lot of people over the last 30 years of trying to figure out how to how do we send value through the internet peer-to-peer so elon musk

and peter teal they started a company called paypal back in 1998 so their original goal back in 1998 was to create bitcoin they wanted to create the software that allowed this peer-to-peer transfer of value through the internet and they couldn't figure out how to do it but you know it's it's been a it's been a problem for a long time and then you know a person named satoshi nakamoto or a group of people called satoshi nakamoto finally figured out how to create this software and they just gave it to the world for free what was the eureka moment what was this what was the it's the double spend problem ultimately is that problem that the the issue that had to be fixed which is how do you send something of value in a digital way

without going through an intermediary and without being able to copy and paste it and send it to someone else so if i send you a dollar i shouldn't be able to be able to copy and paste that same dollar and send it to perry ann or think of it if like if you take a photo on your cell phone and you you text it to me so what what really happens is i have a copy of that that photo on my phone and you have a copy of that photo on your phone great awesome that does not work if money so if you want to send me a dollar it's really important that when you send it it leaves your device and it's only on my device they didn't figure out how to do that until bitcoin gotcha and do we i mean this is again i'm pardon my dumb questions i'm hoping the listeners get a lot out

of this have they sort of i mean obviously they figured that out but do we know what that is like What was the solution? The solution is it's properly decentralized. And it's proof of work. Yeah, gotcha. Go ahead. It's the way that Bitcoin works. I mean, it allows for that to happen.

So when the internet was commercialized because of this issue, they had to retrofit the financial services industry on top. Yeah, okay. So now, and the internet revolutionized all sorts of industries, media being one of the first and one of the most important. but financial services the rails of financial services never really changed oh no we're still doing t plus two so now we are just starting to see that evolution and that revolution and that software upgrade for financial services and that's why this is such an impactful technology because

that the internet evolution didn't stop it's now taking a whole new another form with the introduction of blockchains gotcha so if you go back to like the early 90s like perry and mentioned um you know back in 1992 it was against the law to do a commercial transaction or advertise on the internet it was actually against the law to do that and so al gore and you know the clinton administration you know passed laws to commercialize the internet that allowed us to do commercial transactions and advertise and but the problem back then is we couldn't figure out that software to transfer value through the internet and so we built the internet on top of the current banking system yeah so in the credit card system that we have today and but it was built wrong we all know

it was built wrong 30 years ago but that was the only solution so what we're doing today now that we have a solution like the software that allows us to transfer value through the internet today. Now, once we have that software, we're rebuilding the entire internet and we're putting it on blockchain technology. So that's what's going to happen over the next 10 to 20 years. The entire internet is being rebuilt on blockchain technology. So give me, that is a big statement and I definitely agree with you. I don't know why I agree with you, but I can feel it. So it's magical power. So when you do that, you're taking power away from the banking system, right?

The banks, the credit card companies. Well, I think... Because they're not efficient as blockchain. It might actually be bigger than banks. I mean, think about the power that a Google has over the internet or Facebook or, I mean, they own every social media platform or Twitter. You know, what do those, you know, let's leave banking aside because I think it's pretty clear that finance is going to be disintermediated and it's just going to have to change to deal

this new this new world how will the everyday human being interact with this new blockchain enabled internet well they a lot of people do it today you have venmo do you use venmo venmo is a blockchain based application owned by paypal oh they they bought it five years ago yeah so paypal offers bitcoin today so in the state of new york the application that was built for your vaccine passports the id i don't know the name of it but the id system on your phone this This is me holding up a phone. That's a blockchain application that was built by IBM. I'm a millennial on earth without a phone.

I just came out of the room with one in my hand. That was a blockchain application built by IBM. Yeah, you really don't want to know you're using blockchain. You don't need to. Yeah, you don't need to. The user doesn't need to know. Yeah, so it's just the technology powering. For example, when you make a phone call today,

most phone calls are through voiceover and a protocol. They're not going through like a cable line somewhere. but you don't know if you're you know using voip or cable or copper or what you just know your phone call goes through right so that's what blockchain will enable in the futures you'll be using it you just won't know you're using blockchain technology just like when you use venmo today you don't know you're using blockchain gotcha gotcha and so how does vin i mean sorry about these dumb questions i love learning about stuff uh how does venmo work like is venmo proof of work as well like i don't how does that work is there some sort of intermediary so when when paypal bought venmo

it's centralized now yeah venmo is a central i'm sorry a centralized application so it's not so bitcoin is a public blockchain so anyone could use it it's not discriminatory like it's you know anyone in the world could just use bitcoin with them oh you need permission you use it you have to apply you have to put your personal information in and get a venmo account so it's a private blockchain is it truly blockchain though because it's still linking to my to my checking account it's using the blockchain technology gotcha transfer value gotcha gotcha gotcha and so it's it's it's so that you just said something that i think is important to hear as well if you're in a tradify space it can very much enable traditional finance it doesn't have to

disintermediate or you know put no it's gonna make it better business so make a hundred times better makes it better right yeah i mean jim bianco uh this guy really good investor he talks about sort of how and jim bianco and um and eric townsend over macro voices they talk about how the entire bond market the whole concept of the bond market doesn't make any sense in the blockchain era this concept that i'm going to give you money i hope that you pay it back give me a little interest in five years from now or 10 years from now 30 years from now you get my way back it just doesn't make any sense there's a better way to transfer value to store to you know to to capitalize economies and businesses okay it strikes me that there we're on to something here

yeah that goes back 700 years so back in the 1400s um we started using ledger technology yeah so you have you know debits and credits right you have a ledger and if you move money from one side ledger to the other side that transfers the value that's all bitcoin is it's ledger technology except that this ledger, we're taking it and we're distributing it around the world every 10 minutes and updating it. So everybody's using the same ledger. And so now you don't have to have the reconciliation

between two banks. If I move money, if you have a JP Morgan account and have a Bank of America account and I move money to you, JP Morgan and Bank of America have to reconcile their two ledgers that move that money. But if I send you Bitcoin or value through a Bitcoin or a blockchain network, that network, it's just one network. There's no reconciliation required.

It just moves it from one side of the ledger to the other side of the ledger. And that's what transfers the value. So you don't have to wait a day for that process to batch. It just batches whenever it updates, like in 10 minutes for Bitcoin or every millisecond for Solana or Cardano or some of the other blockchains that are out there. Wow, that's really powerful. And so talk to me about why are there more sort of fails then? Because obviously there's all kinds of shenanigans going on from a counterparty risk perspective and traditional finance. I mean, that was sort of the trigger for the financial crisis

was everyone realizing that Lehman was not good money and they're a counterparty for all these big derivative contracts. Why is that not a risk with blockchain technology? It strikes me that that would be a core bug, if you will, of the system, is it not? So there are risks with owning Bitcoin, like your wallet could get hacked or where you keep your Bitcoin, that custodian could get hacked. But the Bitcoin network itself, the Bitcoin blockchain, has never been hacked. It uses cryptography.

It uses military-grade SHA-256 cryptography that has never been hacked. So it's unhackable. There's almost a trillion dollars of value in the Bitcoin blockchain. If someone could hack it, they're going to take the trillion dollars. There's a trillion-dollar bounty to go hack it. So go hack it. I'm sure Pooh's been trying. Yeah, people have been trying to hack it.

You can't hack it. You can't break the SHA-256 cryptography. Gotcha. And then people say, the next question is, well, what about quantum computers? And so quantum computers, if they ever got close enough to be able to break that cryptography, that SHA-256, the developers would just turn up the next step to SHA-512, and then to SHA-1028, and then SHA-2040. You know, they just keep turning up their cryptography.

What eventually happens is that there's not enough electricity in the world to break that code. And if you turn it up high enough, there's not enough electrons in the universe to break it. So it's unhackable. You know, you can't, you know, the power behind it, the computational power behind the network, you know, protects the money, protects that value. Gotcha. Folks, if you guys are listening to this, this is a master class. I really appreciate this. So let's switch gears a little bit, shift gears.

Where are we in the crypto investing cycle? I have my own thoughts about where we are in the broader macroeconomic and liquidity cycles, but I'd love to hear kind of from two people who are native to the crypto space who are very deeply intertwined in it. Where do you think we are in the investing cycle? All right. So if you look at U.S. households, 25% of U.S. households own Bitcoin today. So we're on our way.

So if you use what's called S-curve analysis, so S-curve analysis is how you measure the adoption rate of new technologies. So Bitcoin was started in 2009. By 2019, 10% of households in the U.S. own Bitcoin. In 2020, the comptroller of the U.S. currency, Brian Brooks, said it was 15%. The Biden administration, just about a month ago in their executive order, said it was 25%. And so we're on this pathway, the 90% adoption by 2029. So the time you want to own this is during that mass adoption. So between 2019 to 2029 is when you want to buy Bitcoin.

After 2029, the growth is on a level out. So it's still early. And that's just in the U.S. So if you look worldwide, it's less than 1% of people in the world own Bitcoin. So it's still very early. And the reason people don't own it is they just don't understand it. It's like me. When I first learned about Bitcoin in 2014, I thought it was a total scam.

I thought it was like, I saw Cameron and Tyler Winklevoss on CNBC talking about Bitcoin when it was $100. To trust Harvard guys. Exactly. And I just thought they were doing a pump and dump. I couldn't believe it. And it took me about six months to figure out what this really was. And all it is is ledger technology. We've been using the same ledger technology for 700 years.

And this is the advancement of ledger technology. And once you understand that, then you have to own it. And it just makes sense to put 1% to 5% of your net worth in this. as i look at it as protection as we transition from the current monetary system that we have today into the next monetary system which is going to be based on blockchain technology you need to protect your assets and and the way you do that is you just put some of it in bitcoin and hold it for the next 10 20 30 years gotcha like that what are your thoughts well i'm a monetary thinker like you and if we look at how much money has changed just in the

past hundred years we have to expect that money is going to evolve just as much or even more rapidly because now we have more advanced technologies available so the um i guess the the past couple i guess just in the past 7500 years the evolution of money we began with the gold standard so at the britain woods you know conference the agreement set a gold standard for the whole world and the world came together and they decided that gold was going to be fixed at 35 dollars an ounce the u.s dollar would be the reserve currency and then all of all other countries would peg their currency to the dollar but they could legally demand gold from the treasury that's what money was not that long ago just a couple of decades ago that system broke down very quickly

they were not able to maintain the peg and by the 1980s we fully transitioned to fiat and 80 percent of industrialized nations were using floating currencies which is what fiat currencies are today so that's a huge change massive especially considering that gold and things of scarcity is what civilizations have used for exchange for money for for thousands of years so that was a massive evolution and what money is and um since the 80s um you know we're now seeing a you know additional evolutions in what you know what is money and with the introduction of the internet and uh artificial intelligence and blockchains and cryptocurrencies we're going to see money change just as much.

So I think we're going to see a huge change in the next 10, 20 years. And I agree with Brian. I think blockchains are going to be the foundation of our financial system. Yeah, no, you said the word change at least seven or eight times. And to me, when I hear the word change, I see opportunities. Obviously, there's winners and losers. But you also hear, you think about the losers. The change is inherently scary for the legacy players, right?

Central banks, we talk to Pop and I, the boys, we riff on this whole concept of a central bank digital currency, a centralized blockchain-enabled digital currency. It strikes me that the folks with the guns down in D.C. where you've lived don't want to transition from having the exorbitant privilege that comes with being the world's reserve currency. Yeah, absolutely. How do we go from state A, which is where we are today, to state B? because I think we all agree that state B is coming, is that process deadly, bloody, terrifying, financial markets? How do we go from A to B without causing a lot of...

It's a volunteer network. So no one forces you to own Bitcoin. You volunteer into the system. So once you understand it, you buy a little bit of Bitcoin, you join the parallel financial system. And so it's not going to be bloody. it's not going to be violent it's a peaceful it's a it's going to be a peaceful protest i'll give

you two two real world examples so venezuela has seen huge amounts of economic challenges just within the past couple of years yeah and it wasn't always like that i mean venezuela used to be an absolutely beautiful and safe place to live but more recently they've hyperinflated their currency and that's caused economic ruin um there was um it was the day we the last time we hosted our dc blockchain summit that's our conference we host at the chamber there was a an article on the front page of the washington post or the new york times or some mainstream publication and it was a story about a family who had to get out of the country very fast and the only way they could do that was using bitcoin to buy a plane ticket and everything they needed to get out and it's how

they got their wealth out of the country wow so that that was one example another example more recently is in afghanistan so off the chain made a donation to the human rights foundation to help afghan women basically escape the country when taliban took over but there's a school there who has been teaching women how to code and been paying them in bitcoin since about 2013 and when these women had to escape a lot of times you can't take anything with you but they managed to be able to take their private keys. And when they got to their new location, they were able to start their life over using those resources that they had saved. So I see Bitcoin as an alternative. You never know when your financial system or your banking system is just not going

to work. I mean, I don't think people in Venezuela or Afghanistan could have ever imagined what happened. But when it does happen, it's really important that you have tools to protect your wealth. And Bitcoin is that option. It can be an option. And one of my passions is helping educate as many people as possible about what this technology is, what it can be used for, and how to safely navigate it in the extent you need it. It's basically just property that you could self custody. So it's like having to borrow gold in your house or cash. Who does it? Yeah. You know, so it's just property. And if you want to escape the country you're in, or you want to, you know, have assets that you self-custody that can't be seized.

You know, you could hold the Bitcoin private key in your head. You can memorize the private key. So I can have my money in my head. You know, how someone would take that from me? Can't. So, you know, and you look at what happened in Canada a couple months ago with the truckers. You know, they started shutting down bank accounts of people who donated $10 to the truckers. We're going to write books about that, by the way.

I think that's one of the most under-reported stories of my entire career. It's under-reported on purpose, too, because that encourages people to buy Bitcoin, right? The government doesn't want to report that. Totally. They realized pretty quickly that they were making a mistake. Oh, yeah. And so they stopped that program real fast. But if you donated money to the truckers, paid $10 and your bank account got shut down,

how are you supposed to pay your heating bill pay your you know pay your health care costs buy food totally you know the government just shut down your bank account so you need some self-sovereign money in your house to survive and so you know this you know if you're a sovereign individual you need to have some bitcoin you need to have some something that you could spend if in case the government takes you off the financial system money that's great money that you actually So let's get let's get let's get a little draconian here. So I have a firm belief that we're moving to a multipolar world. I think that's pretty clear. Eventually be a unipolar world again as China overtakes us. You know, this is the history of empires and nations. You rise, you fall and get replaced by the new guy. And very clearly, it looks like China is going to be the new guy. Obviously not tomorrow. What sort of, you know, I wonder about kind of, you know, an asset that is borderless, if you will, you know, that creates, that allows, you know, people, humans, investors, businesses, companies to sort of transfer and stir wealth sort of outside of, quote, unquote, whatever the system is. Right now, it's sort of technically speaking outside of the dollar system.

As we transition to this sort of multipolar world where there's bound to be a lot of friction, potentially conflict, obviously there's conflict in Russia, Ukraine, and that could obviously potentially get worse if we get NATO involved. it strikes me that bitcoin will become more valuable to the human but even increasingly less valuable to the state in the sense that they're not going to want they're going to want capital controls all these types of things that tend to force people into bitcoin they're actually going to put up more walls to prevent that from happening do you see any sort of clear present obstacles challenges for further adoption because it sounds like we're all on this rosy s curve and everything's great but i also understand that we're currently in a fourth turning i don't know if you guys are familiar with the concept of fourth turning but um my former colleague know

how wrote a book back in the 90s effectively talks about how human beings go in this sort of multi-generational cycle there's generational archetypes and when they align in a certain pattern you tend to create just conflict dissension destruction of institutions and i firmly believe that sort of there's a few institutions that i think we're going to destroy in this in this current foreturning that we're still in. I think the two-party system is probably on its way out in the United States of America. It doesn't seem like it's working for anyone, not even the two parties at this point. I do believe that, look, the sort of concept of dollar hegemony and this sort of US being this dominant force in the world is probably on its way out, if only because we

have enough problems internally that we have to turn and face inward to solve some of our own internal challenges it strikes me that bitcoin is a way out of that for the person for the human but it's a challenge and an obstacle for the state who does the state serve people in theory or or the state does the state serve us or does the state serve the state you know it's supposed to serve its people right so the government should be doing what's best for its citizenry And I believe that a sound monetary system is what's best. A currency that can be stolen by an unelected group of bureaucrats at a non-government agency, non-federal agency, that's not what's best for the people. By the way, you know that – no offense, obviously, as a fiancée is a white woman.

We have like 10 old white dudes sit around a room and determine what the quantity and price of money is for the whole world. Isn't that a ridiculous concept in 2022? And that has only been going – and remember, that did not exist even just a couple of decades. Until 1933, right? Well, 1913 was when the Fed was established. But the way that our current monetary system works is very, very, very new. Yeah. And it's also, in my opinion, it's unconstitutional.

What a ridiculous activity. Yeah, using gold and silver for debts and for paying debts. So I believe what's best is having sound money. And maybe that is, I mean, I think it's Bitcoin, but, you know, maybe it could be something else. I don't know what else it would be. I don't really see another kind of competitor to that today. But, you know, the idea of having this world reserve currency where you have this unique authority of implementing sanctions, like that is something very, very new. So, Darius, you said something really important.

You said you have a bunch of people sitting around an oval table deciding what the price of money is. And the supply. Yeah, so they determine what the interest rate is and, like you just said, the supply of money. So over the last two years, the U.S. government has printed 40% more dollars than were in existence two years ago. And then people today wonder, like, why are my prices going up? why are car prices up why is gas up why is my home price up totally why is my rent up you know why is my health care cost up and the reason is that there's more dollars in circulation than there were before so the dollars that you owned before are worth less than they were because

there's more dollars out there so when you have more of something it's worth less and so your home that you live in, it's probably the same three bedrooms, two baths, same lot, right? Your home didn't grow 30%. Your home doesn't provide you 30% more utility than it did, you know, two years ago, but it's worth 30% more. Well, it's not really worth 30% more. What's happened is that the dollar has lost 30% of its value. So it takes more dollars to buy the same home and to buy the same gallon of gas or the bursal of wheat or the or the car right and so so what that's called theft the government is stealing from us when they print you know when so we go out and we you know spend 40 hours a week or 60 hours a week working right we put time in we put labor in we get a paycheck

and if the government could just hit control p and print more dollars they just stole part of my paycheck so part of your life right what money is the transfer of human time which is your life and that's slavery yeah that is slavery so so so it's immoral so these people sitting around the table deciding how much money to print they're basically deciding how much slavery should i impose on people absolutely and they're stealing your time and your money and so that's not right it's immoral for that to happen and so bitcoin fixes that problem you can't create more than 21 million bitcoin finite supply capped at 21 million never be over 21 million no one's ever print 22 million bitcoin so so you're there's a cap there's a finite supply and that that theft

will stop once we're on a bitcoin standard god damn it i'm so bearish man i want to run buy more bitcoin and so so i'll give i'll give my two spiel the kind of market but you were talking earlier you're like what's the transition yeah you know it's like having a baby it's not comfortable and it's and it's a lot of risk with that but once you have the baby and then you know you have all this you know hope for the future yeah right and that's you know that's coming you know it's gonna be a hard transition but once we get on the other side of this in 10 or 20 years the future is like bright for all humanity you know we're you know the next thousand years are me great we just have to get off this government issued money system that we've been on for 51 years 1971 we were on

commodity based money because our money was backed by gold after 1971 it's based on how much money do we want to print right and so that the system is failing us we see it failing us right in front of our eyes and all we have to do is you know decide as humankind to get off the system and get on to the new system and then the transition will be complete and it just doesn't happen overnight people have to be educated i mean perry and i you know we drove down to miami this morning three and a half hours to come talk to you because we want to help educate people on what's going on you know it's important and you know it's look this has been an awesome discussion i walked in here knew i thought i knew a lot about you know digital asset space crypto i try to you know weave it

into traditional finance and in the context of portfolio construction and i think it's so much bigger than that you know i think there's a there's a real movement here and i can understand why everyone i talk to in this space is so passionate about it because it is revolutionary it's game changing now that doesn't mean you need to buy it at every price that doesn't mean that every price that tears it ticks and clears on the on the on the screen on the squiggly line on the screen is a good price to purchase it at but that doesn't necessarily mean you should not have some allocation to this this revolution so brian perry ann any parting thoughts ladies first save the world buy bitcoin that was easy i think that was like kind of the the conclusion of our

conversation but um i mean just on allocation and portfolio construction i mean as you as you may know um you know brian serves as the ceo and ceo of off the chain capital and they recently just announced their um financial performance they made that public for the first time ever just the other week um and they are the number one performing fund out of all hedge funds across all strategies yeah yeah number one out of almost 6 000 hedge funds congratulations man over the last five years that's a really big but the reason why i mean you see what a kind of a unique thinker brian is but the reason why is because he's applied this value approach to investing so i mean it would be great if you maybe just broke that down a little bit yeah

no one else is doing this and it's so unique yeah so you know i come from traditional finance and i'm a value investor and people say well how can be a value investor in blockchain i know right and so basically all we're doing is we're trying to buy a dollar's worth of blockchain assets for 50 cents so we use a traditional benjamin graham warren buffett value style and find weird ways to buy bitcoin at discounts so we buy it through bankruptcy courts we buy it through futures contracts on hash rates from bitcoin miners we find employees at blockchain companies who helped start these companies five years ago but now or they have a life event they're getting married getting divorced having a baby you know buying a house and they need liquidity they need

to sell some of their company's equity to buy the house and so we we buy their equity from them at a discount to what we think it's worth and so that's you know this it's not complicated what we're doing we're just no one else is doing it this is what hedge funds used to do all right and now they're all i joke that like all the assets under management in the hedge fund space have effectively gone into the sort of, you know, the kind of the big four, if you think of it from a pot shop perspective, the Citadel, Millennium 0.72, Baleasney, all those kinds of firms where you have really smart guys, you know, Winklevoss, Harvard, Yale type folks like myself.

We get in a room, they give us a coloring book, they give us, you know, crayons, and they give us a picture of Santa Claus and tell us the color. Well, we're all going to color the shirt red and the boots black and the beard white. And that's what we're all doing. and finance used to be like let's go find some esoteric opportunities and get an actual return and take some risk and so i'm really proud to see that someone is out there doing that and really generating returns and obviously educating the community so brian we really appreciate you appreciate that yeah and then the last word i have is so um everyone could buy bitcoin right

you can go to paypal you know schwab fidelity whatever if you buy bitcoin if you own bitcoin just do yourself a favor because what happens is that bitcoin is very volatile it's not go up a lot as you own it when it goes up a lot don't sell it you'll have this urge to sell it because you just made a lot of money but don't sell it when it goes down 70 don't sell it either because you have this urge to sell it when it goes down the best thing to do is just hold it hold it for the next 10 to 20 years never sell it and that's all you have to do don't overthink it don't think that I could out-trade Bitcoin. No one could out-trade Bitcoin.

Just buy it and hold it for the next 10 to 20 years. That's all you have to do. I'll add one thing to that, too. If you understand where you are in the market and the economic and liquidity cycles, which is something we specialize in, I certainly specialize in, there are better times to buy it than there are other times. Yeah, so we have models that help us value Bitcoin. So our models say that Bitcoin is extremely undervalued today.

yeah so bitcoin's fair on what duration today like no no i mean um when you say under value do you anticipate the the the the sort of getting back to the appropriate valuation over three weeks three months three years no one knows right that's yeah so we know that if you use um a stock to flow model yeah or you use metcalf's law or you use metcalf's law metcalf's law is how you value a network so you square the number of users and then what we do is we multiply that times the transactional volume going through the bitcoin network and you come up with a number and that number says bitcoin's fair market value today is around 50 000 and it's trading for like 38 000 okay if we use the stock to flow model which is how you value commodities like gold that model

says that bitcoin's worth a hundred thousand dollars today and so it's it's undervalued but these models tell us that in the future, Bitcoin's going to be worth like a million dollars in 2025 and $10 million in 2029. And these models are between 94 and 99% correlated to the historical price of Bitcoin over the last 13 years. So they're very accurate models. In sample or out of sample? That makes a huge difference. What do you mean in sample or out of sample? Is that correlation – has the model been trained on that data? Yeah, it's using that data.

So it's in sample. Yeah, gotcha. I'd love to see that out of sample because that would be different. But still, that's really high. Yeah, it's very high. If you go to a casino, there's a 95% chance that you're going to be – the model works and you're betting that all day long. Gotcha.

Well, this is excellent, man. I appreciate you guys stopping by and joining us. I'm not as good as Pomp at being Pomp, but I'm pretty good at being Pomp. I think you did a great job. Thank you. hope everything's all well a lot better looking than pop i don't think i don't think felina thinks that but you know well appreciate you perry and boring brian estes i'm dairy still we'll catch back here next time thank you thanks so much for listening to today's episode i really hope you

guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to palms crypto course.com we've developed a curriculum with a top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.