The Pomp Podcast - Juthica Chou: Crypto Derivatives 101

Episode Date: November 19, 2018

Juthica Chou is the founder of LedgerX. In this conversation, Anthony Pompliano and Juthica discuss working at Goldman Sachs, what options are and why they are important, how LedgerX became the only federally regulated crypto derivative platform, and what drove the company from 15 to 100 institutional customers in a year.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Juthika Chow is the founder of LedgerX. This conversation covered a lot, including working at Goldman Sachs, what options are, why they are important, how LedgerX became the only federally regulated crypto derivative platform? And what drove the company's growth from 15 to 160 institutional customers in a year? This conversation was a lot of fun, and I hope you enjoy it nearly as much as I did. This podcast is presented by BlockWorks Group, the only blockchain event and media production company I trust. If you're an investor, lawyer, accountant,

or entrepreneur, and want to attend exclusive events and dinners, visit them at blockworksgroup.io. I promise you won't be disappointed. Anthony Pompliano is a partner at Morgan Creek Digital all opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management you should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of his opinion this podcast is for informational purposes only before we get into this episode i want to give a quick shout out to one of our sponsors

saluna is a blockchain computing company powered by its own renewable energy the team is planning to build a 900 megawatt facility on top of a 37 000 acre location more of the best wind sites in the world in southern morocco you'll hear more from them later in this episode but i'd love if you could go check out their website you can find them at saluna.io all right guys i'm here with Juthika, I'm super excited about this because you guys are doing a bunch of stuff at LedgerX that I think most people don't understand, which is options. And so a lot of people hear options, oh yeah, I know what that is and have no clue. So you are here to demystify this entire world for us.

So thank you for coming. Thank you for having me. Absolutely. All right, so let's start with just your background, kind of what you did before LedgerX, and then we can get into how you got into crypto and things like that. Sure. Um, so my training was math and computer science, um, you know, from an education point of view. And then I worked at Goldman Sachs for seven years. Um, I spent five years doing high frequency

options market making, and then two years doing, uh, institutional franchise trading. I'm still in the option space. So, uh, always in the option space actually. Um, and then about, you know, halfway through my tenure at Goldman, um, my husband, who's the CEO of LedgerX, uh, was on the West Coast Y Combinator doing a startup. He had actually left Goldman to go do this startup. And this was in 2011 when Bitcoin first kind of had its mini price spikes that seemed kind of crazy at the time. And so he is he got exposed to it on the West Coast. And we found it really fascinating from both a technical and a financial point of view, you know, is both an asset class and obviously the distributed and decentralized nature of it.

So we decided to sort of play around with it a little bit, try to acquire some. And I remember, because I was at Goldman, we had to go through the compliance department, that we had to move our funds through the wallet to eventually get them to Docs. And I think it took us a good three to four weeks to actually get our hands on a Bitcoin.

But as soon as we did, we could just send it to each other across coasts all the time, seamlessly. And we started playing around with it almost like kids. And so that's when we first got exposed to it. It was still I mean, one could argue it's still the Wild West today, but it was really the Wild West back then. So we really just more followed it. And, you know, we're very interested in it. And then only a few years later, when it seemed a little bit more mature and the timing was right, was when we decided to start LedgerX. Got it. Back then, it was really a test of your will. How bad do you want this Bitcoin? Yep, exactly.

And then, you know, I mean, and then at least now there are best practices for storage and stuff. I mean, at the time, you just have it on your laptop and you just kind of hope, you know. Absolutely. All right. So let's talk about what you guys are doing at LedgerX first, and then we can get into kind of options one-on-one, if you will. Yeah, absolutely. So we are an institutional platform. We are federally regulated.

The two kind of go hand in hand in that we always knew in order to attract U.S. institutions and larger players, we'd have to have a license that they were comfortable with. And so the CFTC is one of the two federal regulators for derivatives, and they're the ones that oversee us. Our licenses are for an exchange and a clearinghouse. An exchange is what I think most people are generally familiar with, which is what allows you to match trades. So two people come in to trade. The exchange is the platform sitting in the middle. The clearinghouse is more of the plumbing and infrastructure that is actually more important. And I think, you know, a little bit removed from, you know, from an individual's experience. But the clearinghouse is what allows you the license that allows you to custody on behalf of customers, fiat like U.S. dollars and digital currencies like Bitcoin.

And so that's what enables us to be able to offer and provide physically settled products is that we can custody the physical and the U.S. dollars and be that bridge. Let's walk through the licensing process, right? What did you have to do to apply and then why did you guys get the license, do you think, over others? Well, it was a process. It always is. Yeah, so we first applied in September 2014. And we, you know, we took, we actually, I mean, it was a very big bet on the business, we took the big bet that we believed the CFTC would be the appropriate regulator for, you know, for digital currency derivatives. And that was not obvious at the time. But we saw a lot of analogies to other commodities that they regulate. And so we submitted the applications and then we spent about a good nine months really just working with the CFTC on, you know, on the jurisdiction of Bitcoin and how we believe it's a commodity. And about a year later, in September 2015, they gave us one of the licenses, the exchange license.

And they also, more importantly for us, they asserted jurisdiction over Bitcoin derivatives as a commodity and they shut down unregistered derivatives exchanges that were in the space. And then it was more of a process to get them comfortable with the custody of the physical. So it took a while for us to finally get the official licenses, which we got in July of 2017. But, you know, really, we started the process so early that, you know, arguably maybe too early that the reason we are the only ones and the reason we were first is just because we were, you know, really far ahead of what we thought was going to be the appropriate path to be licensed. Okay. The most popular thing that people know you for and they're using today is options trading, right? What is an option? An option is the right, not the obligation, to buy or sell a product, let's say Bitcoin, at a certain price at a certain time.

In the future. In the future. And so, you know, you can contrast it to, let's say, you just take Bitcoin, which people sometimes call like spot. But for Bitcoin, you really, you can either buy it or sell it. Those are the only two dimensions. Right now in real time. Yeah. In real time, you know, just for Bitcoin itself, you know, you can just buy it and you can sell it. And those are the only two dimensions.

You know, if you buy it, then you just kind of hold it indefinitely. And if you sell it, you know, if you're selling it, if you have it, then you're out of the position. And so just because I want to make sure that we're really clear with people, because I actually think this is the number one thing that people don't understand in the industry that they pretend they do. Right. Is let's say that Bitcoin right now is fifty five hundred dollar price point. right and when i go to buy it i go on to an exchange and i'm the buyer you're the seller we both agree you're going to sell me the bitcoin at 5500 i own the bitcoin and if i do nothing forever i will hold that one bitcoin at a 5500 um kind of cost and if it goes up or down in value it's just worth what it's worth whenever i go to eventually sell it to somebody else exactly okay

Okay. In that same scenario where today Bitcoin is at $5,500, the option does what? So the options provide two additional dimensions. They provide a time dimension. So you can have an option that expires a month from now, a year from now. We have options out to June 2020. And then they provide a price dimension. So you can, they call it the strike price, but it's the price at which you agree to buy or sell Bitcoin. So we can enter into a call option, which is a right. If I buy it, it's a right for me to purchase Bitcoin

at a certain price on a certain date in the future. So an example would be, we're sitting here in November 2018 and Bitcoin's at 5,500. You could buy a call option that says, June 1st, 2019, I get the right to buy Bitcoin at $6,000. and in that scenario why would you do that why would you buy the call option rather than just

buy bitcoin yep so the the call option the way that uh the if you think about how your payoff on a call option works if a call option is if the if bitcoin is below six thousand dollars then you don't make or lose any money so all you you paid some price for the option and that's it So if it's below $6,000, you don't lose any more than what you paid for the option. Using those numbers, $5,500 and the call options for $6,000, let's call it six, seven months, what would be the normal ballpark price I would pay for this call option? Oh man, I'm a little out of my trading days, but let's call it $1,000. Okay, so I basically pay $1,000 for the potential to buy this in the future at that price.

Exactly. And because the payoff is asymmetric in that if it goes up a lot, if Bitcoin goes to $10,000, now you're up $4,000. But if it goes down to $2,000, you're not out more than the $1,000 you paid. And so because of that profile, people might, from a risk point of view, they might prefer to have an option rather than buying Bitcoin itself. And in a way, it provides a little bit of leverage to them. Okay. That's a call option. That's a call option.

Is you're betting on the price to increase by a certain amount at a future date, right? A put option is what? A put option is the right, again, not the obligation, to sell Bitcoin at a certain price on a certain date in the future. Okay. So $5,500 today, I could buy a put option that says June 1st, 2019, $3,000 Bitcoin. And why would I do that? So you might most people buy put options as what they would call like protection or insurance. So let's say you have a whole bunch of Bitcoin and, you know, you might want to be you want to be in Bitcoin for the long term.

But you might be worried about in the short term, you know, whether it's news related or, you know, any anything that's out of your control. You might be worried about the price going down in the short term. So you can buy some protection so that if Bitcoin does go down to, you know, $1,000, well, now you can sell it at $3,000. And so you, you know, you essentially what people say is like hedged your position. Okay. And what type of people are normally buying and selling these options? So it's a really wide range. If I look at LedgerX's customers, our institutional base is everything from miners to Bitcoin companies that are either doing merchant or consumer services or building other businesses that rely on digital currency to funds, whether they're crypto funds that popped up specifically for crypto or even just traditional family offices and hedge funds, and then to trading shops. So if you look on the, let's start with call options.

If you look at the folks who are buying call options, sometimes they're volatility traders. And so, you know, with options, you can make a lot of different types of bets and put on a lot of different types of positions. And so they might buy an option for the volatility because they think Bitcoin is going to move. Some funds will buy call options because, you know, in the same way that we were talking about how you get some leverage and not as much downside, they might not want to put a whole bunch of money into bitcoin right now but if bitcoin does go up a lot over the next six months then they want to be able to perform they want the fund to perform well and not underperform so they might put you know have a lower stake in bitcoin but buy some some call options i think the you know the sellers of call options are by far people who either people

high net worth individuals or companies or miners who have Bitcoin on their balance sheet and they're not really earning any yield or interest off of it. Sometimes they want to monetize Bitcoin. Maybe they would sell a little bit of Bitcoin at $5,500 to pay their bills. And what a call option allows them to do is they can sell maybe a $10,000 strike call option and pledge their Bitcoin against it. And right now, you know, today, maybe they'll collect $500 for that. So that $1,000 that we talked about earlier, it costs to buy the call option, right? So I want to buy that call option. I spent $1,000 to, you know, June 1st, 2019, $10,000 call option. It's at $5,500 today. Who gets the $1,000? So that goes to the seller. So the seller of the call option,

on day one, the seller receives that $1,000. And so they can use that. They can withdraw it from LedgerX, they can use it to, you know, for their purchases, use it for whatever they need. And they get that today, you know, on the day that they sell the option. And then, you know, on the date that the option expires, if Bitcoin is above 10,000, then they'll sell Bitcoin at 10,000 and receive $10,000. And if it's below 10,000, then they'll just get their Bitcoin back. And so, you know, a lot of our, a lot of the customers who do these types of trades, they prefer that to just selling Bitcoin at $5,500 today. Yeah, speculation.

Yep, and because Bitcoin is, even though volatility has been lower now, it's still much more volatile than other products out there with options because options have the asymmetric downside versus upside. When volatility is higher, it makes options prices higher. And so the sellers can collect more US dollars today. Got it.

And so how does LedgerX make money? So currently we just charge a transaction fee. on all trades that are matched on the platform. Okay. You've got a range of both call and put options across the platform, right? So some are short-term, highly volatile type, right? Some are long-term, low volatility, and everything in between. What are the most popular ones right now?

The call options in general, the call options at higher strikes than Bitcoin price. So I'll call them upside call options. Those are by far the most popular. Give us an example of one. Yep. So the like a December. So even a December 2018 7000 strike call option. And then he said, again, a December 2018 7000 call option. So people are betting on today's fifty five hundred dollar price is going to increase to more than 7000 before the end of the year. Yeah. And the way you know, one way to think about that bet also is it's not necessarily just that they say they're thinking about it.

like it's just going to be more than 7,000, part of it could be that, you know, let's say that that option costs like $50. If, you know, you might say, well, if it is above 7,000, I think it's going to be a lot more than 7,000. It's going to be more than what I pay for the option, for sure. Yeah, exactly. You're going to make much more. So they'll say, you know, okay, maybe I see some potential catalyst coming in December and I don't know if they're going to move Bitcoin, but if they do move it up, then, you know, I think Bitcoin would go to 10,000 so that option would be worth $3,000. Got it. Okay. And then you guys have a really unique derivative in that you've got this June 2020 option, right? And so describe what it is and kind of what the

thought process was, and then we can get into how people are applying it. Yeah. So we have a number of, you know, expirations that we list and we have flexibility in terms of where we can, how far out we can go or, you know, even how near dated. We do see a lot of people, especially with short term news, they trade, you know, one month, two month, three month options. And we have a lot of demand further out. And I think one of the things that's been really nice for us since we've been operational for a year is we can, you know, we can kind of observe and listen to customers and see what they want. And a lot of our customers started asking for June 2020 options because of the halving that's expected in May 2020. And so these options allow a wide range of customers

from miners to just speculators to individuals and to companies to put on positions based on how either a hedge that they might want or how they believe the halving would affect Bitcoin prices. So people are identifying this moment in time, the halving, that there's historical precedent in terms of how the market has reacted and it can be interpreted a bunch of different ways and so what people are now saying is the next halving is going to have an event that can make the market go up down sideways whatever what you're basically allowing them to do is to make bets or speculate on what is going to happen so if i believe it's going to increase in price i'm going to make a certain investment in options uh on that june 2020 uh expiration date and vice versa if i think it's

going to go down, et cetera. Can I go onto the platform and arbitrarily pick a date? Or do I only have to use the dates that you guys select? So LedgerX selects the dates and the strike prices. And we do that usually in response to and in conjunction with where we think customer demand is. So for the 2020s, the two strike prices that there was most demand for actually the $25,000 strike and the $50,000 strike. Interesting. So those are the only two that we have listed there. In general, you know, part of the reason we do that is when you have options, there's so many different ones that you can list. We want to concentrate the liquidity so that everybody is trading a lot of the same ones. But we're usually very, you know, we usually rely on customer feedback and where participants want to trade to drive what we inevitably list.

What does it currently look like in terms of how people are playing that June 2020 option? Is it the 25, 50,000 calls, puts? What's more popular? The calls. And, you know, I think in general, there's more buying demand for sure. Got it. So more people are buying calls on a June 2020 option than anything else. Yeah. And the 25,000 strike is the one that's more popular. Got it. What does it look like today through this bear market? Right. So we've had 70, 80 percent drawdown in the market. It's now gone on for almost 11 months from kind of the all time highs.

have options become more popular or less popular? And then what, can you give us some data maybe around, you know, monthly volume or something like that, that you guys are seeing? Yeah. Our, uh, so overall our volumes have grown approximately 20 to 25% month over month, year to date. Um, and so it's been, you know, in a variety of different market environments. And I think you see that with options in general, um, the, what people usually talk about and, you know, when they think about derivatives and options is, OK, if the market goes down a lot or goes up a lot, you know, options are very active. And that's absolutely true. And we've seen it recently on our platform in the last week as well. But I think one of the unintuitive elements is

even if the market is kind of trading range bound or not moving that much, we're seeing a lot of customers come into options because they want to either, you know, earn some yield off their Bitcoin if they think, OK, we're going to see another, you know, 2014, 2015, where we're kind of flat for a while. They want to, you know, monetize the position a little bit more. And, you know, for speculators, too, or for traders and for funds, it provides more types of positions that they can put on if they may not have conviction about, you know, buying or selling Bitcoin itself right now. Got it. What do you think most institutional investors right now believe to be precluding them from participating in the options market, right?

So what's the thing that's holding it all back? Well, I think institutions is such a broad term, you know, can apply to such a wide range of financial institutions. So LedgerX is an institutional platform, which, again, it can apply to Bitcoin companies, actually high net worth individuals can qualify. And then obviously your traditional trading shops and funds. So we, you know, we launched with 15 institutions October of last year. And now we're up to 160 institutional participants.

Wow. So you've gone from 15 to 160 in about 13 months. Yeah. And, you know, we continue to see really steady growth there. So we're seeing institutional involvement. But, you know, at the same time, I mean, there are, again, such a wide range of institutions that if you are a fund that's managing, you know, 20, 30 billion dollars, then there might not be enough opportunity necessarily for you to get into the space. But for the institutions that are, you know, up to 500 million dollars, there's easily enough opportunity and liquidity that makes sense for them now. So I think as you know, it'll just continue to grow where the market will be interesting to different sets of institutional participants until it really gets up to what I think people are considering, considering like very large institutions. Got it. And then from like a monthly volume or what does that look like?

So it's growing, but are we talking tens of millions, hundreds of millions, billions of dollars a month? What do you see from the volume side? Probably between $50 and $75 million a month. That's pretty quick. Yeah. And again, primarily in options. We do have a next day Bitcoin product, which allows people to buy and sell Bitcoin, which many of our customers use out of convenience because the fees are very low. But obviously, options are where it's a particularly unique offering.

Got it. What do you think in terms of other derivative products, right? So you guys are in options, you're kind of the first federally regulated options here in this market. Are there other things that are interesting on the derivative side? Kind of where do you guys see the business going over time? Yeah, I think there's two, I see two different areas. So, you know, what we're doing right now with options, I think it's an important product. It's important for the ecosystem.

But, you know, in some ways we're not really, you know, we're kind of taking things that have worked from other markets, very traditional vanilla products and bringing them to Bitcoin because they make sense. And so we'll continue to do that. And you see that happening in other areas of the ecosystem with people working on ETFs and stuff like that. But at the same time, you know, further down the line as the markets mature, I do see opportunity for derivatives products that really are unique to Bitcoin and cryptocurrency. And so we'll definitely explore those as well. Got it. And right now the options are just Bitcoin or you have options across other digital assets? Currently, ours just Bitcoin. Was there a strategic reason, a kind of, you know, fundamental belief as to only

to do that? Or what was the logic behind just Bitcoin? Well, so part of it is a regulatory question. So the, you know, things that would fall into like ICOs and things that would fall into the SEC's domain, you know, that's not our area or the license. So we're specifically in the cftc um you know area of focus and so within that we have um we have bitcoin you know we have again built out i want to say this carefully we've built out the functionality for ethereum but it's really um that's up to the determination of if that you know eventually ends up being a commodity under the cftc so it's really um it's really regulatory but at the same time i think overall you know where we kind of see this playing out is having really a handful of digital currencies with

different trade-offs and probably not like hundreds of them. Um, and so, you know, focusing on that handful. Got it. How do you compete with the Fidelity's, the backs of the world, right? These people who are coming from the legacy financial world, right? So, you know, you and your husband obviously come from that world, but you start a new company, right? So you kind of start from scratch, not from knowledge, but, but from resources and headcount and all of that. How do you compete with the big guys who come in? Right. Do you think that there's a, you know, I'm assuming there's advantages and disadvantages, right? But how do you think about that?

You know, we really see ourselves as kind of straddling both coasts. You know, and Paul spent a lot of time on the West Coast. And I think there's a lot of benefits to both sides, and we want to bring those both in. Our model is, you know, we control the entire process. So everything is vertically integrated, which allows both a seamless customer experience, but it also gives us ultimate control over how quickly we can incorporate feedback and incorporate what we see. Whereas in the traditional world, usually you have to go through intermediaries that either control the interface or route the orders or, you know, that you have to integrate with legacy technology. And so for us, that allows us to provide a really seamless experience that we can iterate on really quickly and that we can observe and follow exactly how people are using the platform.

And I think one of the biggest advantages that we have right now is that we have been operational for a year. And so we've had a lot of time and a lot of data and a lot of feedback to work off of that is informing a lot of our ultimate product decisions that will come out that other folks just don't have because you can only get that by really having a product in front of customers. Got it. What keeps you up at night? Right. And I'm sure there's a whole bunch of things, but but building a business in the crypto space that's heavily regulated, right, given what you guys are doing, dealing with institutional customers. and then there's this element of like time sensitivity just by the nature of the product you sell right because there's options with an expiration date what what's like the number one thing that you know you just sit there and you're like oh this is what i'm worried about or or uh

working on well i mean i'd say one of the biggest uh just the things that are outside of our control that ultimately affect our business and affect what we have to you know do so you know we are because we are so highly regulated and we value our relationship with regulators, even if there's headline risk or if there's something that happens in some area of the world that may not directly affect LedgerX, but, you know, affects the Bitcoin space, those usually become problems that then we have to, you know, we have to deal with. And so there's obviously a lot of stuff out there that we can't control, a lot of ways that a lot of things that are being done that we may not necessarily agree with the approach, but they ultimately end up being things that we have to

uh, we have to face in, in all areas of the business, whether it's, you know, with, uh, with customers, investors, regulators. Um, and there's, I think there's going to be that for a while that, you know, headline risk until things are really, uh, institutionalized. Absolutely. You come from wall street, right. And working at Goldman, do you have any sense for how your former colleagues, whether they still work at Goldman or not, how they look at this? Are they interested in it? Are they, you know, rushing to the door and they want to jump into the industry are they you know you guys are crazy for going and building a business in this space kind of where do they shake out um i mean i

obviously can't speak for you know goldman everyone at goldman but just over general over generalized people from from that industry yeah overall i think it's there's a lot of interest um but you know it's it's a little bit removed from um you know from real i would say you know operations and building businesses and really getting into the space. There's some amount of, I mean, people are always looking for interesting things to trade on the side. But that I would say is more interest in terms of a tradable asset that is new and different as opposed to real interest in the cryptocurrency space and ecosystem. It's super interesting because you basically took something that exists in the legacy financial system and you're applying it

to a new asset right and so there's a lot of crossover but you still have to find people who are excited about the asset who have long-term belief in you know this niche of finance um and then ultimately really are betting on not just to survive but actually to thrive in a really big way yeah and i think part of it is if you look in you know new york for example um the a lot of it's hard for a lot of people to um really get excited about some of the use cases like payments for example. People who have JPMorgan Chase accounts, their credit cards work just fine. So they're not sitting there. So the use cases to them are not as clear. Now, obviously, you can imagine many 2 billion bank people, many cross-border payment use cases that are interesting. We actually think

the use case that we're focused on that is uniquely possible because of Bitcoin is Bitcoin as a form of collateral. That's at the clearinghouse. We take it as collateral. And it's not just so that we can physically settle trades, but people can pledge collateral to the clearing house 24-7, 365, and just start trading. And that's something, if you look in the traditional world, that you just can't do. You're limited by banking hours, by weekends, by holidays. And so I think it's really, there has to be something more driving it than just being interested in the price. For sure. You get to go to work every day with your husband. What's the most fun part about that?

I don't get to ask many people that question, right? Because they're just not in that situation. What's the most fun part about it? Well, I mean, overall, we've actually worked together a lot in the past. Probably the best thing about it is that you have a significant other that understands everything that you're going through, whether it's good or bad. But I think also, I mean, just really being in sync. You know, it's they kind of say on the West Coast that co-founder relationships are kind of like marriage. And I think when it you know, when it works, it does really work because you have to be in this sort of space and in startups in general.

You just have to be so in sync and so on the same page, whether it's about the ultimate vision or the day to day. He and I actually the bet like the the thing that really works well is we're just we complement each other very well. He's really good at stuff I'm not good at and I'm better stuff he's not good at. So it's it's just a really good working relationship, but it's just lucky. That's awesome. All right. Before we wrap up, as much of a kind of fire round questions, if you will. What's the most important company, in your opinion,

in crypto other than Ledger X? Hmm. It's a good question. I don't want to I don't want to show any favoritism to I'm going to not answer the question, but answer it. I don't want to show any favoritism to customers, but we're really excited about Lightning Network and a lot of things that we can do with the clearinghouse, you know, once that's more mature. Got it. I forgot to ask you this. Where'd the name come from?

Paul just came up with it on, I remember we were at a Starbucks waiting for, to go to pitch a VC and he just came up with it on a napkin and the domain was available. So we went with it. Innovation is sometimes a birth out of necessity, right? We got to come up with a name. Let's go. that's awesome all right if you could wave a magic wand and change or improve any one regulation what would you change good question i mean i would say in the u.s uh just this bifurcation between uh everything that's going on with the you know in the ico token world and in the commodities world which is you know bitcoin and ethereum uh it's just it it makes it companies basically just have to choose one or the other because of the two very very different regulators what do you believe

in crypto that you think the highest majority of other people would disagree like what's your most controversial thought i actually so i still think that it's not mature enough for the very large institutions why you know i think the if you look at i mean even a lot of the if you if you're looking at people who are going to put real money into this, you know, there's not a lot of infrastructure that's actually been established. I think if you look at like spot exchanges, for example, the spot exchanges are traditionally, you know, in the crypto world, they're overseen by states, you know, state licenses. I don't think states are appropriate regulators for a financial exchange. And we haven't really, you know, and I think you see that lead to things like when you

see flash crashes and when you see things that are just not normal in the traditional space. Um, and you know, so I don't know if it's going to take time or if it's just going to be that, you know, like platforms like ours can, as we continue to evolve. Um, but I, I, yeah, I just don't think that those areas are as mature as they need to be. Interesting. Um, what's the most important book you've ever read that you think every single person could go read right now?

Well, since we're talking about startups, I mean, if you're doing a startup, you got to read the hard thing about hard things by Ben Horowitz for sure. and then you got to read it like every few months because different parts of it will resonate with you every few months he really did a fantastic job with that one especially just making it actionable and and i think uh you know when you read that especially when you're building a company a lot of people walk away and just like it'll be okay right you'll you'll figure it out um any uh any crazy stories from as you guys have been building the company that you were just like this is this is insanity that we're doing this uh i mean we only almost uh bounced payroll about a

dozen times in uh 2015 2016 when everyone was focused on uh private blockchains and permission ledgers and we were still really focused on bitcoin we're not selling derivatives on a technology and uh it's a difficult environment but you know got through it a dozen times you guys did a pretty good job but we never did we never did miss apparel but it was very close that's amazing um all right so uh i'll end every interview letting the guest ask me one question uh what one question would you ask me i didn't warn you about this see well what's the most which is the most interesting podcast that you've done so far outside of this one of course uh well yeah of course this one um so i'm going to answer this

uh i'm gonna cheat and give you two so the most interesting i think because people didn't understand anything about it uh we did one with travis cling and travis talked about you know algorithmic market making wash trading kind of all of the nuances of uh exchanges and nefarious activity and kind of how price manipulation works and just things that i think people they read a headline again yeah i kind of know what that is but i actually don't know what wash trading is and so i'll listen to the podcast then get an explanation then go tell all my friends and they'll think i'm smart type thing um but but he just has a really good command of how that stuff works and also how it is being leveraged today so he was able to talk about specific exchanges

how it works all that uh the most important podcast we've recorded is uh with marad uh and we basically laid out the ultimate case for bitcoin um and uh you know somebody asked me the other day why do i think that podcast specifically was so popular and and uh kind of got such wide distribution and you know i really think that he did a good job of not only explaining what is bitcoin why is it important you know here's kind of the things you need to know but he really expanded people's imagination of what is possible if adoption continues right and so you know he threw out a 10 million dollar bitcoin price in the future well that's much much higher than most people have heard in terms of you know as you've heard 100 250

50,000, 500,000, 10 million is almost like ridiculous in their mind. And then he walked it back and said, this is how I think we get there. And this is the impact on the world. And the interesting thing about that episode in particular is the breadth of type of person who listens. So everyone from, I have known nothing about Bitcoin. My friend sent me this. And so I started listening to highly sophisticated people that you and I would know that are

public. And, you know, most people say, you know, they're experts or they have expertise in the space. They still found it highly compelling because it's just such a, you know, it pushes the envelope so far. Right. So I think that, you know, with this episode specifically, people don't know what options are. They actually have no clue how they work. They don't know why they're important. They don't know who would use them. And so, you know, our hope with the podcast is just that, you know, while I learn, you know, other people can learn alongside us. And, you know, people haven't stopped listening yet. So we'll see what happens. Absolutely.

But awesome. Thank you so much for coming. This is super exciting. I think that what you guys are building is obviously really important. And congratulations on kind of all the growth to date. And hopefully we can keep doing this as you guys kind of periodically keep progressing. Yeah. Thanks a lot.

It's a lot of fun. All right. And we're back here with John Belizer, the CEO of Saluna. You can check them out at saluna.io. So, John, you got to tell me, why did you choose to leverage wind rather than solar power for this project? Thanks, Bob. Why wind versus solar? I get that question a lot. It's a great question. I mean, there are many benefits to consuming and

applying energy on that site, you know, from a wind versus solar perspective. But our location in Dakla made it pretty easy. We're sitting on one of the best wind sites in the world. Wind travels there at 22 to 23 miles an hour consistently. If you look at a wind almanac, it is one of the reddest parts of the world. But, you know, we did look at solar. And when we looked that difference, what was interesting was wind blows all the time. In fact, the wind blows fiercer at night in the Dakla region than it does during the day. Solar doesn't have that benefit, right? It actually, you can only benefit from solar during the day and you've got to combine that with a really large battery. And when we loaded that into

our calculations, we found that we were deploying more cost than we needed to for the amount of energy that we'd be getting out so wind proved to be a much better application of this site especially since it's a wind site than solar we also looked at blending it so wind and solar but the wind was so productive that solar was not really much really more additive than the wind on the site and so that's why we went with solar to start out versus i'm sorry that's how we went with wind versus solar very cool so in morocco we're long wind short solar if you guys want to learn more about the project you can go to saluna.io hey everyone pop here if you like this episode of off the chain and want to help us take crypto to the top of the apple spotify and other

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