The Pomp Podcast - REPLAY - Charlie Lee, Founder of Litecoin: Crypto's Decade Long Evolution

Episode Date: December 30, 2019

Charlie Lee is the founder of Litecoin. In this live conversation, Charlie and Anthony Pompliano discuss the early days of Coinbase, why Charlie originally built Litecoin, how crypto has evolved over the last decade, what the current challenges in the industry are, and where Charlie sees Bitcoin and Litecoin going in the future. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO.COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

Whoa, before we get started, I want to go over the four sponsors for this episode who make all this possible. They're fantastic, so go show them some love. The first is the best URL in the industry, Crypto.com. They're a crypto platform with one goal, driving mass adoption. That's why we're all here, right? To get every human on earth a digital wallet and to get them using digital currencies. Crypto.com is helping people do that through buying, earning, lending, and a new card payment.

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Again, that is etoro.com, where the entire team's ready to get you started in just a few clicks. And don't forget, go subscribe to the Off The Chain daily newsletter. You can go to offthechain.substack.com. I write a letter of news, analysis, and opinion every morning that goes out to more than 40,000 investors. See you there. 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. Charlie Lee is the founder of Litecoin. In this conversation, we discuss the early days of Coinbase, why Charlie originally built Litecoin, how crypto has evolved over the last decade, what the current challenges in the industry are, and where Charlie sees Bitcoin and Litecoin going in the future. I really enjoyed this live conversation. I found Charlie to be both intelligent and entertaining, and I hope you enjoy it nearly as much as I did. 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. uh we are live at cis uh thank you for doing this yeah what um what's been going on how are things going um well the price is up people are excited about prices being up yeah i'm gonna take full credit for the price going up all right we'll get into that why why that happened well i get blamed every time the price goes down so might as well get something out of it before we get into

what's going on uh today let's talk about your background so a lot of people know you as charlie lee founder of litecoin and uh crypto bull if you will but you had a life before crypto um maybe let's talk about kind of growing up and then how you got to google sure yeah what do you want to know where'd you grow up um i grew up in ivory coast okay so west africa got it and came to the us when when i was 13 13 came out to uh new jersey uh for boarding school and then went to mit for college got it what was the uh the experience going from west africa to new jersey we could have sent you a lot better places than new jersey pretty drastic i mean every coast is really hot and yours is really cold so um and then also like boarding school so living just by myself

and so it's pretty drastic move here yeah and uh you did this for high school yeah okay got it and uh before you came to the u.s how technologically savvy were you were you into computers not into computers i was um my dad got us a apple 2gs um way back when when i was like 10 or something yeah so started doing some basic programming but really got into computing got it so you're into computers and obviously not smart because you ended up at mit so what what uh what'd you study there uh computer science sure figure yeah and uh and then while you were going to school what did you think you were going to end up doing um plan i planned to create the currency that i created all right so while you were in mit um well i mean i was really i love computer science

and i guess from an early age i really love programming so um going to mit study computer science electrical engineering and yeah didn't actually know what i was going to do afterwards yep and you go to google right out of mit no i went to um well i went to southern valley out of mit um worked for a couple startups before google got it and why leave startups and then go to at the time what was another startup right yeah uh why go to you joined when google um let's see 2007 i think okay 2007 got it um and so why leave kind of the early stage startup stuff to go to google um well i mean google is such a big name right it's a great company um great benefits just heard lots of great things about it so got it and what were you doing there um i worked on

a few products uh youtube mobile um chrome os and also google play games got it and in if i remember correctly in 2011 is when you first discovered bitcoin and crypto or was that first time you came across it um i think it was like a a wired article about silk road and how it was um explicitly using bitcoin um after reading that i just had to figure out what what the heck's bitcoin right what did you do then in 2011 right you you hear about this digital currency that's being used to basically buy drugs and you know stuff how do you go learn about it right it's not like there's a bunch of media coverage there's not a bunch of you know blog posts and twitter accounts what do you do yeah so i mean obviously read the white paper right and then um back then

the community was extremely small um it was basically just the bitcoin talk forum so everyone in the bitcoin space was reading and writing on that forum bitcointalk.org um yeah i also remember in 2011 we had the first bitcoin conference in new york and pretty much like the whole community went and met each other in new york and back then it was really small community i mean no everyone's really um really into and excited about bitcoin but no one had any idea what it will become just very excited about what what what the possibilities are yep you're doing all this while you're at google are you talking about it internally with people is it kind of a taboo to talk about this decentralized digital currency or what was the relationship between the two wasn't really

talking to anyone about it i mean it's still still like fairly new like you don't expect anything of it yeah and then uh you start litecoin in what 2013 no uh october 2011 oh you did in 2011 okay what was the genesis for why to start it and what were you trying to to build um so back then i traded like bitcoin um locally with people like meeting up at meeting a random person at the starbucks or mcdonald's i don't know if anyone's you guys have done that but it's pretty interesting experience um especially when especially in 2011 in 2000 especially when um they send me a Bitcoin, right? And it takes like an hour to confirm.

So every now and then takes like that long, right? So you're sitting across this other person that you just met and you're not sure if they're trying to scam you or not waiting for Bitcoin transaction to confirm. So at that point, I realized like it's slow, right? At least for this experience. So before Litecoin came out,

there were a few other altcoins and one of them uh called solid coin had a like a three minute block time and if you actually use like solid coin back then compared to bitcoin it just feels a lot faster so i know that when satoshi um picked the 10 minute block times it's a it's kind of just a guess right there's no it's hard to say what's the optimal time um so for litecoin i decided to to make it faster um got it And so for those that don't know, explain the main differences between Bitcoin and Litecoin. I mean, the main difference is that it's four times faster. So it's two and a half minute for block confirmations.

And that's four times as many coins. And it uses a different proof of work. So the key things I wanted to do when I created Litecoin was to just make it faster. And also make it so that it uses a different proof of work algorithm. So it's not competing with Bitcoin for miners. because i realized you don't it's it's hard to survive if you're competing with bitcoin for miners um and i created litecoin um mainly just for fun right just to background with the bitcoin gold base and just launched something that i thought was better than all the other altcoins

out there at that time and the reason why you were buying bitcoin in starbucks and mcdonald's was basically because there was no infrastructure at that time yeah there was um mount gox right never heard of it never what's that never heard of that one never heard of it um awesome exchange but you had to wire uh money to uh a bank in japan or use a money trans like a payment processor service that takes a fee it's kind of really hard to get money into mount cox um so it's easy to just uh use local bitcoins and meet someone in person and chat about bitcoin and buy bitcoins there there weren't really any scammers back then yeah well any like ridiculous experiences when you were meeting up with people or anything that like you're really scared or you

now laugh at um i mean i laugh at it because it's just a funny experience like meeting a random person and like trading real money for fake money right well is it fake money or is it just digital money digital money who knows right yeah and so from like 2011 see they're warming up they're waking up uh from 2011 until let's say kind of 16 pre this last bull market what are some of the things that really stood out to you as uh milestones along the way that helped us get to we are today um as milestones um or just like the big moments that you're like you know what i really remember when this happened you know it felt like hey this was going to become more real than we previously thought it was funny thing is i remember all the bad moments like china

banning bitcoin or actually just getting hacked um but i mean just slowly over time bitcoin became just more and more for sure right when i first found out about it in 2011 it was just like a fun little thing no one knew where it's going to go um chances of it succeeding was like close to zero percent right so um yeah but today it's like so different so if when you first learned about in 2011 let's say it was single digit percentage probability it was going to be successful where would you put that percentage today um well it's already successful right depends on what you consider success right will it become i think like when i first found about bitcoin i really thought it would it's like the best form of money that even civilization has

ever seen and so i think it will i believe that it will eventually become like a world reserve currency do you think that as bitcoin kind of marches towards that global reserve status um it needs to displace the existing global reserves or can it just be another option kind of they can coexist as global reserve status i think it will coexist i don't think the accuracy is going anywhere um definitely not in my lifetime um it's my belief got it it's yeah it'll coexist fine and how do you know if you take bitcoin as this is the blue chip currency that that is most likely to succeed um in doing that how do you view all of these other uh kind of uh cryptocurrencies right so not the utility tokens not the other stuff but the actual um digital assets that are trying to

serve as a currency what's there i think there will be like a handful of currencies that actually have real value right so i never thought bitcoin would be the the one and only um and as far as how many will actually have real value it's i don't know but i just think there will be a few it won't be like a thousand currencies all have value there'll be bitcoin will will be the major one and there'll be a few other ones yep and then most of the ones that i think you and i would say have the high probability of being successful today are not backed by governments but uh more more i think central banks are starting to look at should they participate should they issue their own kind of tokenized fiat currencies how do you think that plays out does that actually impact

anything that's happening in the decentralized digital world or or is that kind of separate and just again it coexists i think it'll be good i mean it'll be different right so if it's backed by a government it's not decentralized it's not it's not really sound money so it's um it'll be useful it'll be useful if you have a government-backed digital currency that you can easily swap between that and bitcoin and you can store your um as store value you would put your money in decentralized cryptocurrency but um for usage maybe a government-backed stable coin would work just fine and it feels to me like uh for the use cases there's a need for different currencies But what we see today is the things that, let's say, go to any country in the world,

you want to walk across a border with a currency, Bitcoin may not be the best thing, right? Just given the price volatility. If all you want to do is preserve the wealth that you have for a short duration period of time, probably not the best. Well, but this is just the current situation, right? I believe over time, Bitcoin will become more stable, be less volatile. So I agree with you on that. I guess my question is, because it's going to take time to get there, there's kind of a maturation of the technology, the adoption in the technology. Does that leave

the window open for large corporations or governments to step in with alternative options? And if they kind of wake up and realize that there's value here, and they go ahead and they issue that stuff, can it take some of the wind out of the sails of Bitcoin? Or do you think that this is you know so inevitable and so unstoppable that uh that no matter what those guys do it's not going to matter i think it's pretty unstoppable yeah i do i do believe that it's um it's it's you can't easily like government backgrounds you can't compete with bitcoin yep yeah got it um all right so let's switch uh before we uh got up here i asked everyone what they wanted to talk about they want to talk about trading um so uh charlie lee may be the greatest trader in all

crypto is uh a constant thing that was uh in the responses talk about um 2017 the bull market kind of what you were thinking and then uh obviously uh when you sold all the litecoin uh i think everyone uh just looks at that as like the sentinel moment of um you know at or near the top yeah so i've i've been in the space for like eight years now um i've seen like many bulls in bear market right like three or four so i've seen when i first got in the bitcoin price was 30 dollars um it's cheap but then when i bought it it crashed to like two within the next year right so that's like an over 90 90 drop in price um and a lot of people thought bitcoin was dead right dropped from 30 to two dollars so it must be dead two is much closer to zero by the way than

3 000 right just just for everyone keeping track well it's all relative right of course so we currently we felt like 80 or whatever yep numbers so um but the thing i saw was that the fundamentals of bitcoin didn't change right if anything got better over that one year period and the same thing for what happened last year right the price of all cryptocurrency dropped 80 to 90 but for i would say just like the strong ones right the fundamentals didn't change anything we're getting better um we have like back coming out we have potentially etfs getting approved um it's just getting more and more mainstream so the price does what the price does right it gets pumped up to a really high and then it will drop back down it'll just it's trying to

figure out the reason why it's so volatile is because no one really knows the future right and for a company that the future is within a certain range so the price doesn't fluctuate that much but for like bitcoin the future of bitcoin it could become the world reserve currency or it can be dead in a few years right so the future the the difference is so high so that's why it's so volatile yeah like an exchange gets hacked bitcoin price like takes a dump because people think that you can't secure the coins well it's not going to succeed it's going to go to zero um and it also feels to me like the emotions that you're describing with positive and negative news play out a lot more in crypto than they would in other markets because uh it's mostly retail driven

and humans right there's not tons of algorithms kind of running this stuff yet yeah and so price is very uh you know is correlated very highly to human sentiment yeah you think that's correct definitely like um for example this current recent rise like it's hard to say what happened right we thought that you bought the bottom too no um like there was the april fool's like article about bitcoin etfs getting approved i think that like sparked something right it got i also saw like a chinese tweet saying that um believing that that was true so really potentially there was some something lost in translation and if people started buying because of that fake news um it could potentially cause some stop orders to trigger and then a lot of people got in because

seeing the price going up so it could potentially be just triggered by by fake news yeah don't tell people that fake news made the money that'll really mess up american politics yeah the so let's talk about kind of how you see the future unfolding right so we talked a little about the currencies but um you know i think that in 2017 we saw this new funding mechanism for early stage technology and projects with the icos uh that's drastically been reduced in terms of both the regulatory environment and i think investors appetite for a lot of that stuff uh do we see that come back at some point in the future maybe does it come back but it looks a little different how do you think this plays out i mean we do see a push for like stls right so securities tokens

um i think it's icos are a neat idea but what happened was just um was kind of unfortunate it because a lot of people lost a lot of money. I mean, there's a reason why VC fundings and securities require like accredited investors, right? You need a certain level of expertise in investing or enough money to invest before the ICOs. And it's to protect people, right? You don't want to get scammed by the company promising some stuff and everyone, mom and spending money into it and get scammed so we saw that with icos and there's a reason why um they're not uh legal right so i think there will be more regulations to kind of make this space safer and also allow the um the benefits of of tokens right of icos it feels to me like a lot of the

protections that are in place today are the best that we've had previously but really education right having some kind of education bar where you can't invest unless you take a test or you've got some base level of knowledge um would be better served protecting people than you know hey charlie you're rich and so if you're rich you must be smart go do whatever you want yeah right um it's I always joke and say that I know a lot of really rich, dumb people. So we'll see. All right. And then how does that play into the IEOs that we're seeing now?

It feels like we're talking about the alphabet, right? Like there's all these different combinational letters, but that initial exchange offerings that we're now starting to see, what's your take on that? Honestly, I don't know too much about it. It seems just like an ICO to me. I mean, is it any different than other ICOs, except that the exchange has vetted the company and said that this is not a scam.

I guess it's just that, right? It's like an exchange-sanctioned ICO, right, essentially. Yeah, I got it. Okay, and then going to the STOs, lots of hype, right? Lots of people talking about this, this idea that, hey, we're going to take real assets, whether they're actually true securities or traditional assets, and we're going to tokenize or digitize them. um it sounds like you believe that will happen short term long term how does it play out

um it depends on the government regulations okay right i guess certain countries are more open to it and um yeah it really depends on the on the government how they start are there things you're worried about with the regulations or you think it's just they haven't really given clear guidance um they haven't given clear guidance to be honest i'm not really into this space so i'm kind of focused on the the crypto the currency aspect of it and do you feel like the sto's will interact with the cryptocurrency so like bitcoin litecoin other cryptocurrencies will be the currency of choice for that that world or do you feel like people are trying to just digitize assets and then still use the fiat currencies like how much overlap do we see between

cryptocurrencies utility tokens security tokens versus their more siloed aspects of the industry um well i mean the thing i see is that the tokens would be easily like exchangeable or swappable with um the cryptocurrencies we have right now right so that's the benefit of same for like um government-backed cryptocurrencies right once you're in this um digital space then it makes a very uh efficient to move things around got it um what what are you worried about moving forward like if you had to pick one or two things that keep you up at night in terms of the industry growing um i can talk about like what i think like what we need to solve right okay so so these aren't things that you're necessarily worried about they're things that you believe are

important problems that need to be solved for us to keep moving forward yeah um so we need to make it easier for people to store their own their own currencies right their own cryptos so instead of like right now like 90 probably people store their cryptocurrencies on exchanges or or hosted wallet just because it's so hard to do it themselves so the exchanges or hosted wallets actually do a better job than individuals who store their own coins. We're seeing a lot of sales of the Ledger and Trezor and Harvard wallets, but they're still not easy to use. So I think we really need to make that easy to use.

Usability is very important. It's something that we've been working on for many years, but it's just something we need to solve or make it a lot better. Do you think that is a technical problem? It's a user experience problem. where do you think the like the big obstacle there lies right because if you've been working on it for years and we don't have something that you and i can say with confidence is a like a perfect solution what's holding us back there the problem is it's a security and usability i feel like it's

always a compromise um something that's really secure it's just hard to use so like for example you can the best one of the best ways to secure coins is like put in a paper wallet and put in a bank safe or split it using some kind of shamir secret something like that where you split it and make it safe but that's just really hard to use right you can't use it every day if your money is locked away in the bank safe um the easiest way to use cryptocurrency is having a mobile wallet um where the money is um it's like hosted right like for example the coinbase mobile wallet is extremely easy to use but then you're trusting coinbase right so it's it's definitely a challenge to find the right balance between security and ease of use gotcha you mentioned coinbase and

you were there in the very early days tell us a little bit about what that experience was like and you know why did you join coinbase out of everything you could have done coming out of google why that company yeah so um in 2013 i joined coinbase i at that time i wasn't really looking uh for another company i mean google is such a great company good benefits good pay good food good food um and i went to coinbase they paid me half as much i had to travel like an hour commute to san francisco um and work like twice as hard this doesn't sound like a good deal well um it is it was a good deal i mean i decided to do that because i was passionate about bitcoin so what i the reason why i joined coinbase is i realized

that in order for uh for cryptocurrencies to succeed um it has to be easy to use right so and easy to kind of get in to the system to get into the ecosystem so buying bitcoin at that even at that time was just hard right especially for for u.s uh people in the u.s um you have to like in 2011 you had to wire money to japan but in 2013 there's still some exchanges but it's still like out of the country and it's not connected to your bank account so coinbase started doing um letting people buy bitcoins with their bank account you connect your bank account they do an ach pool of the money and then they give you bitcoins a few days later when they got the money so it just makes buying bitcoin getting into it very easy and i wanted to i feel like that was very important

so i joined coinbase to kind of make that happen got it you got tired of uh meeting people in starbucks so you decided to build a solution for it something like that yeah um okay and so uh how long were you there for uh four years almost four years yeah where like what was the vision early in terms of can coinbase solve all the problems was it just we want to help people buy bitcoin was there a belief that eventually you could add other assets kind of what were those conversations like then compared to what the company's doing today um the belief was always that um like with an open finance uh we can kind of revolutionize uh finance right with cryptocurrencies or bitcoin specifically um and the first step was just to let people buy get into bitcoin

um easily and i mean that's also the the other belief was that we wanted to do it uh kind of the right way like work within the system so getting all the money transfer licenses work with regulations with regulators um and support it and push for um regular regulations supporting bitcoin um and just make it easy for people to get in got it um yeah i've been really impressed I think, with the company's ability to not only add more assets in terms of going through a bear market, but also pushing to other geographies. But I don't think they operate today in Japan, Korea, or China. And so it's pretty shocking to see the size of how big it's gone from when you first started to today without operating in what many would argue are three of the most important

jurisdictions in the world. I wouldn't be surprised if they move into those jurisdictions. we've had investments from from japan from japanese companies uh or funds so i wouldn't be surprised they move into japan china and korea don't hold me to it but i think that they've applied for the licensing in japan i just don't think they've received it yet yeah i guess they would need the licenses before they can they can open up for sure and then coming from that experience seeing the rise of the binances of the world who um said hey look we're gonna start outside the united states we're going to take a different regulatory approach pros cons of each one do you think that again there's kind of coexistence or do you think that one model

eventually trumps all the others i think they'll coexist i think the there is um there's room for buying companies like by exchanges like binance's to do it um their way right there's also a space for companies like coinbase doing it the more like following the regulation and thinking by of book away i think both for both will succeed and coexist for sure um all right before i finish up and we'll let everyone ask all their questions uh ask a couple of rapid fire questions you don't have to answer quickly but what do you think is the most important company in crypto can't say litecoin either like my foundation most important company in crypto um i still think coinbase coinbase okay explain uh why the most important um just the fact that

they're able to be able to bring in so many people into the space just make it very easy for people to buy sell and use cryptocurrencies yeah i think it's yeah they've done a lot of good for for crypto i i think it would be hard for people to argue that they haven't definitely helped on board you know millions of people for sure it's kind of unfortunate they get they get hated on by all the core bitcoin maximalist people it's not it's not black and white right they've definitely made mistakes um i think their recent like neutrino acquisition was pretty dumb do you think the acquisition was dumb or do you think the way that it was handled i think like in terms of the i think so they they decided to acquire neutrino um i don't know if

They did enough due diligence on them. But then when the news hit that the people were upset, they doubled down on it and said that we did our due diligence and we decided it's still the right thing to do. That was just pretty dumb. And they had to backtrack on that. So they didn't handle it well. Yeah. Yeah. And I think part of it too is, you know, I spend most of my days talking to founders all day long and they have to make so many high risk and important decisions on a daily basis that

they're going to mess some of them up. Right. For sure. Yeah. That one just happens to be one that was made in public. Right. And so, you know, people will argue whether they were right or not, but I think that the blowback was probably more painful than it needed to be. Yeah. I mean, companies definitely make mistakes a lot of time. And any mistakes that you think that you made in building Litecoin or with the Litecoin Foundation? Anything that sticks out to you as, oh, we wish we hadn't done X? Want to know who has the best URL? Crypto.com. That's right. Crypto.com. They're a crypto platform with one goal. Motherf***ing mass adoption.

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You didn't buy the bottom, then you regret that? No, I didn't buy the bottom. Well, I mean, I sold because of the... the my perceived um conflict of interest or misalignment of interest right so i'm i'm focused on adoption of litecoin and the price is just definitely distracting and i'm like i'm so public um i don't want to like have to second guess why i'm making this tweet is because i want to like pump the price and yep and make myself more money or is it because it's it's actually good for litecoin so i just wanted to kind of remove those two things how bad did it

get right when in 2017 when people were really kind of paying attention to price a lot bull markets going crazy i've been on the other side of a lot of you know kind of the good and bad of social media how bad did it get for you in terms of people you know being upset about things that you were doing or or you know the perception that you were affecting the price um it was definitely quite bad right so um yeah like i would i would post something like some good news and potentially it would affect the price and then people would be saying like like saying that i'm like you're inside trading or like bought before i release this news i'm pumping it or whatnot yeah it was it's kind of it's quite annoying um and um and if i don't say anything if i don't

posts about good things about litecoin and the price is not doing well people would like complain about why am i not saying anything good about litecoin if i say something good about bitcoin people would complain it's just it's quite annoying so i started ignoring that but also decided to kind of uh sell my litecoins um i actually personally did think that it was just going to keep going up like i didn't think that it was going to like that was a peak because everyone thought the price was going to go up um i thought i was going to hit a thousand so definitely oh you thought litecoin was gonna hit a thousand yeah wow because what it was probably 100 100 it was like 300 oh got to 300 okay yeah that's crazy well yeah yeah in hindsight right

yeah okay because i i mean look the last was like what last six weeks of 2017 when everything just went vertical yeah um i mean i i remember litecoin being a hundred dollars right it just really goes 100 to 300 in six eight weeks is pretty crazy um okay so uh what do you think is the one regulation that you would change or improve if you could like what's the one regulation that sticks out that's just doesn't make sense oh i definitely have one so i would like to see um being able to spend coins without paying capital gains taxes on them so like for purchases right if you're coffee you don't say you don't have to figure out like when you got this 0.01 bitcoin or 0.001 bitcoin how much you paid for it and how much is capital gains that just makes like spending

cryptocurrency like impossible unless of course you don't report taxes on them which i think most people probably don't because it's just impossible to figure out i mean what you're describing right throughout this entire talk is everything around adoption there's the technology there's the kind narrative or marketing and and the psychological aspect there's the regulation there's a lot that goes into getting people to use a new currency um that if you just look at it from the surface doesn't appear to be very complex but it's actually highly difficult to do yeah for sure right um okay what is uh what's the one area of crypto that you think people should be talking about but they're not like something that you're excited about that you think isn't getting enough

attention one thing i'm kind of working on i say about these days is fungibility okay making like one or cryptocurrency more fungible i think if you look at like all the good properties of sound money um fungibility is the one thing that's missing from from bitcoin and like point mm-hmm um explain to people what you mean by fungibility so every basic idea is that every coin um is equal to every other coin so for example if i with us dollar if i go into a store to buy something i have two 20 bills in my wallet it doesn't matter which one i use right they're they're essentially the same they're fungible um it's not the case with bitcoin and litecoin today right if you there's if you have two outputs to choose from the wallet chooses for you so a lot

of times you don't even know but if you have two outputs to choose from which one to spend one of them could be could be linked to some other purchases you made or if you bought something off the dark night markets or if you like gambled with it the other purchase other coin might not have that history or it could be um you bought like 10 bitcoins from the exchange and then you're sending point zero zero one to some a friend for something and then they saw that oh you have 10 bitcoins it's just revealing some history or some private information that you don't want to reveal so that makes the coins not fungible and are you interested in this because of the privacy aspects or for some other reason um i'm interested in it because i want um crypto to be like perfect

sell money right so it's something that we don't have right now uh fungibility so fungibility and privacy kind of go hand in hand right so in order for a coin to be fungible it has to be private if it's not private then you're leaking some information and that information could be used against you for some thing and which makes it not fungible got it so to get fungibility you need like privacy makes sense um what's the most important book you've ever read what's important book um that's a good question i only ask good questions come on um game of thrones i figured there'd be somebody in the audience that liked that actually a game of thrones is a really good book yeah i i'll take your word for it i haven't read

it um all right the only reason why i came up here is to talk to you about aliens so let's talk about aliens uh believer non-believer i'm a believer believer yeah what what is your logic for believing aliens if we've never seen or heard of them um you're talking about real aliens or illegal immigrants i know you're a professional alien believer if you want to immediately start the conversation we're talking about the real aliens or the other ones um i i think that um just given how big the universe or base is that i mean there's this equation right i forgot the name of the equation where somebody hit me with this on live on a podcast and i forget the name of it and i was blown away

that somebody was smart enough to figure out the math of i mean it's not it's like an estimate right given the probability like all the probabilities multiplied together the size the universe how many um solar systems there are how many planets per solar system how many planets that have potential environment that can sustain life and what are chances of that life could form and not you multiply all that together that probably is pretty high that there are there's more than one um yeah that's happening right so when i first started asking this question it was because uh i was thinking are there alien pets right we always think of aliens as a human-like creature the way that they're perceived in movies and books um do you think that there's multi

species life out there or do you think it's just one set of aliens i mean if you think there's more than humans then there's gonna there's gotta be more right i mean it's not gonna like we have pets so so that's what i i generally believe that if there are aliens which i think there are then there's probably alien pets as well but we just never incorporate them we're probably pets to aliens they're probably like like we don't even know it yeah just like the ants don't know that we're looking at them right well uh are you a big simulation uh guy you know about that the whole universe is a simulation yeah that we're living in the simulation no i don't think so no no you think that it's just where we could be the pets of uh some other uh it's possible

it's fair all right before uh before we take questions um i let everyone ask me one question what uh what one question do you have for me um are we out of the bear market oh come on uh because i am with you and whether you meant to or not you uh you sold the top and i'm hoping you're lying and that you actually bought the bottom uh i think it's probably more likely than not that uh you know we've kind of seen the bottom um but as a as many people in crypto learn uh trying to time this stuff is uh is a fool's game so we'll we'll see how it plays out all right who uh who has any questions oh right here just scream they'll repeat it there's a microphone over there if you want oh there's a line actually if you want to get up

in front of this microphone in the middle of the aisle Hi, my name is Tamara. Thank you so much. You guys talked a lot about how news and people's perceptions kind of drive the costs of the different coins. If you could design your own ideal news experience for reading about cryptocurrency news, what would that be like for you and why? Twitter. I mean, that's true, right? Twitter is like the great source of news for for cryptocurrency twitter has become such a good platform for um for cryptocurrencies yeah it's pretty crazy how um so much of the news is reported directly there right like people just they don't go to reporters they don't do they just have their own audience just talking directly to

people yeah um i think the aspects of twitter are really interesting of like the ability for anyone to put information out there and then i mean look part of you talking about how aggressive people got in terms of responding to things that you were tweeting about like coin etc there is an element of like the attrition of ideas on twitter right where when people say something stupid they get told very quickly um but but that can go in a positive or a negative way yeah right thank you very much hey charlie what's up my name is adam we've talked a few times so um i don't think anyone here knows this about you other than me and a few other people but you were a wrestler in high school which is the hardest sport uh in the world which probably leads you to make some

very uh risky decisions uh one uh which i like very much is you sponsored the uh recent ufc event and you brought on ben askren to the light coin team uh and ben askren uh if no one knows this he's an olympic uh wrestler represented the united states in the olympics 2008 he's also probably the pound for pound best uh mixed martial arts fighter on the planet right now and for all intents and purposes will probably be ufc champion by christmas so because you have what is probably the future ufc champion as part of the light coin foundation how do you plan on using that now we're going to the moon um it's a funny funny story like ben askren um he's really into um sound money so he was um so i got introduced to him and talked to him quite a bit

about about just his belief of sound money and he's also an amazing wrestler or mma fighter so So it's actually really, really cool that he's out there pushing cryptocurrencies and also doing well in UFC. So it'd be cool to see him become champion. Well, I'm actually pretty close friends with John and Kim, your bodyguard. I'm also an ex-MMA fighter myself. So I keep up with the sport a lot. And a lot of times I will stream events. and when I was streaming the UFC event

that you sponsored, Jones versus Gustafsson, there's a live chat and there's thousands of people in that live chat and they all talk nonsense. But for the first time ever, when they announced Litecoin as the official cryptocurrency of the UFC, the chat stopped

and everyone just started talking about Litecoin. They've never done that with any other sponsor I've ever seen sponsor a UFC event. I think that's a really, really good sign and i just can't wait to see uh see this further and see you sponsor more fighters i think that's awesome and who would win in a match between you and ben askren um probably ben askren let's tape let's tape that and find out that wasn't a that wasn't a i retired from fighting just ben yeah how you guys doing um so my question uh relates i just want your opinion so

about block size uh so bitcoin obviously i remember in 2017 the bull run the fees were just astronomical and then you have bitcoin cash and like nano it's a point of contention for uh a lot of projects saying this is a real concern how i want to know your opinion is this something that is going to be a problem hinder uh acceptance and growth in the future is it something we should be concerned with does lightning help it what are your thoughts sure so a question about block size right so um let me talk about a bit about what kind of like the the reason why this is an issue right so decentralization um is inefficient right so with for example if you're comparing like bitcoin with with visa visa let's say has one like computer running everything they

can do like they can process thousands of millions of transactions a second but bitcoin can only do like seven transactions per second why is that it's because like bitcoin everything has to be processed by 10 000 computers or ideally more right so everything is decentralized and no one has control over it so it's inefficient and the reason why we want this inefficiency is because we get decentralization which gives us censorship resistance right so with visa you can go to visa and say, reverse this transaction. If the government does that, they have to. So they have control.

With Bitcoin, you can't do that. So decentralization gives a sense that you're resistant. The reason why we have like a block size limit or why it makes sense to limit the block size is because you don't want the... If the block size was infinite, right? You can put anything in a block size, in a block. Then you have like, you can put...

Basically, you're using this extremely inefficient database you store anything you want and every transaction pays the same amount of fees no matter if it's sending um like a million dollars or if it's sending two dollars right if you're buying coffee you're paying x amount of fees you're sending like 10 million dollars between banks you're paying the same amount of fees so when that happens it's unfair to it's um if you're using it inefficiently then you're you're basically screwing everyone over so if you if you look at like a chain like bitcoin sv or even bitcoin cash if it just grows indefinitely then you have like cat photos or they're putting like high resolution photos on the blockchain right

that's just like really dumb because then you everyone has to hold that everyone has to process that it makes it so inefficient so hard then you only have a few nodes that can do that and then before you know it becomes centralized so that's why block size is so important that um we kind of have to protect it right we can't let it it's hard to say what's the optimal uh block size so a couple years ago with the segway 2x like debate i think that a few times the block size is is fine right but if not everyone agrees then we shouldn't do it so that's why we didn't um follow and do the two times increase with a hard fork um it's fine for coins like the coin cash to experiment with a higher block size of i mean litecoin even has four times the effective block size as bitcoin

right so it's to a certain point if you increase it too much or if you put too much crap into the blockchain it becomes centralized and we definitely don't want that right we don't want the value of bitcoin is the fact that it's censorship resistant and immutable we don't want to hurt that value by making it so you can put anything on a blockchain but that said i think the solution is second layer scaling solutions like lightning network and other solutions right where you the base chain is secure um and it's decentralized but you build on top of that and you can really scale pretty well on top of it thank you hi guys my name is cameron it's a pleasure to be here with you guys it's an honor actually i follow you guys on everything pretty

much. So I run a IT department for a local government in LA. My background's in geographic information science. So it's a fancy word for maps and data. So my question is, have you came across, what do you guys think about use cases for local government and bringing in this term internet of things and iot and and um and bringing in uh geo location geo blockchain um you know sensors and technology and kind of any use cases that you're aware of you know for government and like local government um so it's a difficult question to answer uh just because i think the short answer is we don't know The thing I will say is, to me, what most of this industry is about is just taking old assets, right, kind of analog or electronic world assets and turning them into truly digital assets.

So you think of Bitcoin, right? What Coinbase does essentially lets you put, you know, bad money in, right, analog or fiat currency in, and you get out sound money and you get this digital currency. I think that most of crypto, whether it's utility tokens, security tokens or other cryptocurrencies, follow that similar framework. And it's just upgrading those assets. Right. So we'll still have the stocks, bonds, currencies and commodities just in a digital format. That goes to your point about like when you get to the Internet of Things, I always joke and say, you know, Bitcoin is just money for the machines. right what i mean by that is the automation the internet of things all the stuff that i think most people buy into is going to happen uh it can't use the old assets right you know if you think of the fiat currencies before coinbase you had to wire money to a bank in japan right then

you could wire money to coinbase and it was a little bit more efficient we helped move it to this point where um you know it made it easier to buy stuff but it still wasn't good enough for let's say true automation right and so i think that when you have digital currencies stocks bonds and commodities now the machines can really like unleash their potential um and so that's like a framework to think about it how that actually plays out in reality i have no clue in a local government i definitely don't know um but but i think that's the framework i would use to kind of look at that awesome joke that um bitcoin makes it possible for skynet to happen so before bitcoin right a computer ai cannot survive in the wild because they can't make

money they can't create a bank account they can't open a bank account they can't make money they can't survive they can't pay for storage they can't pay themselves but with bitcoin they can now make money they don't need to open a bank account they make money and then they can now buy their upgrades hardware whatever right so a real true ai cannot actually happen i mean look it it It sounds on the fringe, I think, as a thought process. But really what we're talking about here is slowly but surely humans in general are beginning to trust the machines and algorithms over other humans. Right. And so Bitcoin to me, whether it's the machines just use it for themselves because they trust the algorithms, they're smart and they get it. Two, would you rather trust a currency that's backed by, you know, frankly, a bunch of old white guys who go in a room and decide the rate decision next quarter?

Or would you rather trust an algorithm that you can actually read the code? I think that 50 years ago, like people trusted the individuals. 50 years from now, it's likely that they're going to trust the software and the code. Totally. Thank you. Hey, Charlie. I can't find my Litecoin cash. Do you know where it is? Does anybody know where my Litecoin cash is?

Litecoin cash is a scam. All right. Thanks. Wow. You got dedication standing in line to ask that. Hey, Pom, this is actually more for you. I know you're a big fan of Bitcoin, but I was wondering if you could talk more about your investments thesis on things that are not bitcoin uh yeah they're ambushing me now um so uh pretty much um i think of investing uh especially from like the professional job standpoint in three ways one

bitcoin as a digital currency that's non-correlated asymmetric return uh by introducing it into the portfolios of the institutions that we work with it's likely to reduce risk and put them in a good place. The second thing is, if you think of the crypto market or the industry as a public and private side, so the public is the liquid crypto, private is equity. The public markets, I basically just give up. I'm not a great trader as this guy. And so I just say, we're not going to trade, but we will index. And was it last year, we came out with this million-dollar challenge that over the next decade, crypto will outperform the S&P 500, right? So an index that we have versus the S&P. Again, that's just as much a confidence in crypto as it is an outlook on

public equities. And then in the private markets, what a lot of people don't realize is if you had invested in the equity of, I think it's Kraken, Binance, Coinbase, Bitmain, I mean, just go down the line, right? And on the same day that you invested in the seed or series A of those companies, you had bought Bitcoin, even though Bitcoin is the best performing asset over the last decade, you actually would have made more money in the equity investment than you would have in the appreciation of Bitcoin. And so what you get is you get this high volatility, right? And, you know, we talked about it earlier, but the equity investments, not only are they easier for people to understand in the institutional world, but also I think that there's an argument

to be made for the financial performance as well. And so we really just focus Bitcoin indexed liquid market and then uh run on equity in the private markets oh thank you so much one follow-up question do you have do you have any investment thesis i guess towards like tokens or anything like that or maybe stablecoin uh no okay cool thanks hey guys i have kind of a similar question pump so apologies for the ambush you guys are supposed to be asking charlie questions not me i'm uh working with maker right now and extracting information off the ethereum blockchain And I guess as an investment process, what's the due diligence like? Because when you dive into these sort of complicated projects, you start to be skeptical about some white paper saying we're going to do all these crazy things. And then when you look at the underlying tooling, it's really, it needs a lot of work to deliver. So I'm just curious what your due diligence process is. so when you created litecoin did you write a white paper yeah the paper is all white

what did you do when you started you just started writing code right yeah and you eventually created a product and you launched it yeah right i think that when you look at um you know yes bitcoin has a white paper but majority of the work was done by the time the white paper ever saw, you know, the light of day. Um, I'm just not a huge believer in this thing of like, let me write down whether it's in a deck or a white paper, you know, this grand plan to take over the world. Um, and I'm much more like I have a propensity to invest in things where just they're showing that they have momentum, they've built things, they've launched products that, um, you know, and, and look, the silliest ideas are the ones that usually end up being the

most powerful right so if you think of uber was a way for travis and his friends to impress people by getting picked up by black cars like that doesn't sound like a lot of people need that service right uh airbnb they had air mattresses in their kitchen doesn't sound like that's going to really change the world right um amazon they're selling books but that was pretty much it right but then they become these big multi-billion dollar companies because they understand how to just build products that people want right and how to solve those problems i think it's just the the mania around the white papers and and the like intellectual olympics um maybe it's just because i'm not smart but i just not very interested in it thanks guys hi my name is harley

um uh i understand the fungibility uh aspect by your point i was wondering litecoin was going to solve that for bitcoin like as in people are going to use litecoin as a transaction to keep their uh fun secret of like you know so uh yeah i'm fairly new to this space so uh uh yeah can you elaborate on that yeah so the current plan we're looking into a technology called mimbo wimbo um which is a way to make things more private and also it also scales pretty well and to do it in a certain way where it's a kind of a soft fork upgrade where we can upgrade Litecoin to add this extension blocks where it's all mimble-wimble.

So we're just trying it out and see how it goes. Whether or not Bitcoin will actually go the same route, we'll see. Obviously, it's not up to me. But I think making Litecoin more fungible is the goal. My last question, do you think the bear market is over? or no he turned it on you um well people keep always asking me like what do i think the price will go up or down like if anyone tells you they know they're they're lying right no one knows if the price will go up or down so the bear market i mean i've seen a few bull and bear markets i've

seen like some of you some of you don't think the bear market's over but then it drops like further right and also sometimes it recovers and it actually doesn't come back down so it's who knows right i think if i think it's good we're seeing some recovery um but don't like go all in right i never tell people never to go all in and my last one um how can i be more uh connected with people in this space um specifically on litecoin like is there any forms you recommend or or websites where i could you know um go to like reddit right bitcoin and litecoin um slash bitcoin slash litecoin just don't go to slash btc that's not good thank you thank you all right last two questions hey charlie i'm just wondering what your thoughts were on the future of

public blockchain coins i know that uh here in the united states that some exchanges will actually comb your history to make sure you don't have any terms or conditions violations and then i um i'm a big user of the coinbase earn airdrops and they highlight a lot of the new coins that are coming out that actually do offer a good degree of privacy so wonder what your thoughts are on that um i think i talked about that right i think privacy and fungibility is very important so i think financial privacy is important so it's not it's not cool that people know like how many coins you have just because you sent them something um but yeah i think we should work on making coins more uh private and more fungible

hi so i was uh i was wondering uh do you see all these coins as mostly money or do you uh give providence to the aspect that you could sort of save data in these blockchains um i kind of see these as fancy databases that anybody who mines can insert into and i was wondering if you uh sort of preferred uh storing in the utxo set or if you'd like using just op return or if you saw any sort of value in using bitcoin as a data store and not so much as a money yeah so using it as a data store is just a very expensive data store right so um blockchains are inefficient by definition so in in order for like blockchain is not for everything right for for money i think it makes sense the inefficiency the cost of mining and everything is worth it because we're getting

something very valuable which is censorship resistant and immutability but for other things like i said this many times like for for an app like crypto kitties right it's it took the whole like pretty much took the whole ethereum blockchain down because it was so it's so inefficient right If Amazon or Google is running a CryptoKitties app on their data center, people would run it perfectly fine. No one would actually be afraid that Google or Amazon will steal their CryptoKitties or censor their transaction. So there's no reason why things like CryptoKitties need to be on a blockchain, right? It doesn't make any sense. It's just inefficient for no reason. Whereas there might be some applications that make sense, right?

I think some of the most popular applications on like Ethereum or Tron are like gambling applications or casinos. And the reason why they're popular is because you can't do that anywhere else. You can't just gamble your money away anywhere else. But you can do it on Tron or Ethereum, right? And those will be popular because there's a reason why they exist right there. it's inefficient but it's it's getting there's a reason for it so i understand how you feel about you know roger cash and beg right and all that but how do you feel about apps like memo memo cash blockchain are you familiar with those no no basically just people are tweeting and i guess

it's all on the blockchain. Is it like saving tweets on the blockchain? Yeah. I think it's, I mean, it's neat to experiment with it, but I think the inefficiency will catch up to them. Basically, the reason why it works right now is the block rewards. All these coins are creating block rewards.

They're basically using that block rewards to pay for storing stuff on the blockchain. But as the block rewards approaches zero, then no one's willing to pay for it. Then it'll all come crashing down. 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 podcast charts, please do us a favor and rate, review, and subscribe.

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