The Pomp Podcast - Zac Prince, Co-Founder of BlockFi: The Details Behind a $30 Million Fundraise

Episode Date: February 13, 2020

Zac Prince is the Co-Founder of BlockFi, a company building wealth management services for cryptocurrency investors. They announced a $30 million Series B funding round today, so Zac stopped by for a livestream to discuss how the business is doing, what they are going to use the money for, and what clients can expect from BlockFi in the coming months. 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. -----If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

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. Zach Prince is the co-founder and CEO of BlockFi. They're a company that builds wealth management services for cryptocurrency investors. We've been investors for a while over at Morgan Creek, and we just participated in a $30 million Series B funding round. Zach came on the podcast and we did a live stream so he could tell us what they're going to use the money for, how the company's doing, and what clients can expect coming from BlockFi in the next few months. This conversation was fun, fast-paced, and Zach filled us in on a lot of details. I hope you enjoy it.

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. What's up, dude? I'm going to have to try not to check my phone while we're recording. The Bitcoin price is going up. Our Series B news just dropped. It's all right. All right, let's get into this.

you guys announced today a $30 million Series B. Yep. Caveat, we invested. So everyone, yes, we are investors. What's been going on at BlockFi? Why are people giving you $30 million, including us? Yeah. So, you know, a couple of things. It was definitely an opportunistic fundraise for us. And the reason we decided to do it is we raised our Series A in July of last year. Back half of last year, we set really aggressive targets for the company and we blew them out of the water in terms of a number of new clients, in terms of the amount of revenue we're generating, institutional traction, and all of this stuff kind of starts feeding on itself and generating momentum. So we were seeing great performance, great growth. And we also have a very ambitious

product pipeline for this year of new things that we want to bring to the market. And we wanted to be able to bring those new things to market with confidence, especially the Bitcoin rewards credit cards. Launching a credit card is not a small, small effort. And we want to do some really fun marketing. And so for all of these reasons, we felt like we could go to market and raise more capital. And now is the time to do it. And fortunately, when we started having that conversation, folks that are already sitting around the table, including yourself, were like, hey, you don't need to go to market too much. We can just... We don't need to go fundraise. We can all just do this right here, right now.

Yeah. And so it came together pretty quickly. And I'm excited as the CEO. The team's grown a lot. We've got just such fantastic people working at the company. And it's been amazing to see the speed at which we've developed things and the high level of client service that we've been able to maintain throughout the growth that we've experienced. And now we're just setting an awesome tone for this year, right? So right now you've got three products, right? I can put crypto in and take a US dollar loan against my crypto collateral. I can put crypto in and get paid interest on Bitcoin, Ethereum, GUSD. And then I can also buy and sell crypto as an exchange. But what can you tell us about numbers? Because in the Bloomberg article

in the announcement, revenue's up 20x since last January. That's a big fucking jump. Where's that coming from? Is that just the launch of new products? Is that kind of people using the existing products more? How do you think about that and what are you willing to say? Yeah, sure. So, I mean, it's a combination of things. So, first and foremost, it's driven by increased adoption in terms of the number of clients that we have on the platform, both retail and institutional. As a result of the client growth, we've grown assets on the platform and AUM, the number that we put out in the official series B press release was 650 million on the platform. It's actually healthily above that now because we finalized that copy a couple

weeks ago. And those things drive revenue. So the more clients you have, the more people are going to trade, the more people are going to take loans. The larger balance that you have that's earning interest. And the balances that are earning interest are what gives us the ability to lend more capital. And the majority of the revenue that we make is from lending, getting paid on lending, whether that's USD or crypto. And so we're doing well over a million dollars a month now. And it's doubled just since we decided to do the Series B in early December to when we closed the round. So we're hitting kind of a new pace in terms of that trajectory, which is great to see. So you're up 20X in revenue over the last year. In the last 45 days,

give or take, revenue has doubled. And you're now doing well over a million dollars a month in revenue. You get 650 million plus in assets on the platform. And you continue to move the interest rates to kind of serve customer needs, right? So one of the things that I think a lot of people have questions around is just how do you come up with what is the interest rate, right? And we're talking specifically around the interest product. Can you explain kind of the mechanisms there and why it changes month to month? Sure. So there's a number of different factors that go into determining the interest rate. So the first thing is just the market. And the market has a couple of different inputs to it. The futures curve and the funding rates

on derivatives platforms are very important in terms of seeing where the market is for lending rates. Another big part of the market is supply and demand. How much capacity does the market have to lend dollars, to lend crypto relative to how many places there are and institutions there are that are interested in borrowing it. The rates are primarily set by the market, but then there's a few things that we do to incentivize adoption. For crypto, we have a tiered interest structure where, for example, today on your first five Bitcoin, you earn 5.15% annual yield. And for your balance above five Bitcoin, you earn 3.25% annual yield. And the reason that we did that is that we wanted to provide a high rate to as many people as we

possibly could. And also, we're always cognizant of competition in the market and take client service out of it, take UX out of it, take trustworthiness out of it. At the end of the day, with financial products, rate is really important. And so, we want our rates, whether it's how much it costs someone to get a loan, or whether it's how much someone's earning an interest, to be the best in the market for the types of products that we offer. And so, all of those things play a role in us determining the interest rates that we're able to offer, and we change them month to month based on changing dynamics. So, the most fundamental thing that changes and is starting to change pretty dramatically

right now is the market is shifting heavily bullish for Bitcoin. There's a lot of underlying trends pointing to increased adoption, both on institutional and retail. And there's a lot of excitement and anticipation of the supply reduction with the halvening. There's a lot of new kind of regular buying pressure being created through adoption of products that are substituting Bitcoin in instead of traditional rewards and enabling people that already know this is a great investment to just stack more sats, get more Bitcoin. And all of these things are coming together and they're making the market position heavily bullish. When the market is positioned heavily bullish, there is slightly less demand to borrow Bitcoin than in times where the market's

neutral or bearish. So if you look at some of the key metrics that go into determining what interest rates we're able to offer. The interest rates are moving downwards for Bitcoin right now. The trend line is moving downwards and moving dramatically upwards for dollars because people want more dollars to buy more Bitcoin. Of course. And then you guys announced that you're going to come out with this credit card, right? So you got the three products today. And when you announced the credit card, I think a lot of people, it just kind of took them by surprise, right? In the sense of. No one has really thought about, well, there's things like Lolly or FoldApp, et cetera, where I can get paid in Bitcoin cash back for my purchases. But that's really using kind of a

plug-in type technology stack. What you guys are talking about here is that you're going to issue a credit card. So I can come in, I can apply for a credit card, you approve me, give me the credit card. And when I use it for everyday purchases, I'll actually earn my cash back in air quotes. I'll earn it in Bitcoin. And it's just another way for me to get access to Bitcoin without having to go put fiat currency in and buy it through an exchange. That's exactly right. And it's important to note a few things when we're talking about the card product, because there have been a couple of different card products that have come out in the cryptocurrency space already. One fundamental difference between what we're doing and what's existed in the past is that it's a credit card,

not a debit card. So debit cards, you're spending money that you've already funded into an account. Credit cards, you're spending money that is credit and that if you pay back at the end of every month, you don't pay an interest rate on whatsoever. Credit cards also come, the way these payment networks work in the US at least, credit card networks have a higher interchange capture rate, which is basically how the card companies make money from the merchants when credit card transactions are processed. And as a result, credit cards offer higher cash back rates to consumers than debit cards do. So we think of the BlockFi Bitcoin rewards card as something that's competing more with Chase Sapphire Reserve or your airline mile card. It's for a prime consumer.

It's going to have a high cash back rate. It's a credit card where you don't have to pre-fund it to be able to spend money. Just instead of earning airline miles or normal cash back, you're going to earn Bitcoin. And we're huge fans of Lolly and Fold and all of these apps. I think one of the big trends of this year is going to be all of these things working together to create a lot of regular buying demand. And you can use the BlockFi Bitcoin rewards card with Lolly at the same time. So if you're really crazy about this and fanatical, what you could literally do- Which I am, by the way. I'm going to do it. So am I. Of course, so am I. You can use the BlockFi credit card through a Lolli or Fold app

to then buy, let's say, a flight for work, but that ends up being reimbursed. And so you end up earning the free Bitcoin and you're double dipping almost, right? You're using the credit card rewards back, but also the Lolli or Fold app rewards as well. Yeah. And you're going to get, for example, three to 5% back by using the Lolli link and one and a half to 3% back on the BlockFi a Bitcoin rewards card. One and a half to 3% is where you think it'll end up. Yeah. We're still finalizing the exact numbers with our partners. And there's some questions there about how much you want to incentivize certain types of spending. There's basically two models you can go with. You can either go with a high flat cash back rate on

every transaction, just a high base rate, or you can do something where you have like a 1% cashback rate on every transaction. And then for certain types of purchases, you offer higher rates, two, three, four, 5%. So we haven't made a final decision on which one of those options we're going to go with, but it'll be a cashback rate that's competitive with prime cards that are in the market today. Got it. And then do you have any idea in terms of who will be eligible for the credit card? I think that's another question I've seen a lot online of just like, is this a credit score based thing? Is there other things that'll go into who gets approved and who doesn't? Yeah, it's going to be traditional

credit underwriting. So if your FICO score is not in a good spot, definitely work on it now in advance of the card coming out. So nothing specific to say there, but generally the cutoff for Prime, which is the part of the market that we'll be operating in, is in between $650 and $710. on the lower end in terms of what your credit score needs to be to receive the card. And there's other variables that will go into the underwriting model, including your self-reported annual income, age, credit history, et cetera. But it'll be underwritten the same way that traditional credit cards are underwritten. I'm laughing because I'm getting tweets right now of people saying, good morning, guys. How about some money for AMA participants?

How about some money for AMA participants? When the credit card comes out, you'll get all the money back you could ever dream of. Last time that I think we did a podcast episode, I asked you, what do you believe in that other people would disagree with you? What's your most controversial thought? And you said that people essentially were underestimating the importance of stable coins. Yeah, this was a while ago, too, like two years ago. Yeah. Stable coins end up being pretty important and uh and both stable coins in the general sense of uh you know usdc g usd tether uh true usd all of kind of what i'll call the crypto and private corporation uh libra as well um and then now we're seeing like the digital dollar the digital yen and all

of the uh government issued um digitized currencies that i'll put in the stable coin category uh i don't want to say you're quote unquote right but you're probably more right than wrong in terms of direction, kind of how this is playing out. What are your thoughts today on stable coins and kind of their importance? I'm still incredibly bullish. I think that if you survey, name your emerging or frontier market. And if you survey people in that market, a hundred people, and you say, how many of you want to hold dollars and how many of you want to hold Bitcoin? Pretty close to a hundred would say they want to hold dollars. And depending on where you're asking that question, they might not be able to. The only way they might be able to hold dollars right now is by

getting $100 bills on the black market and shoving it under their mattress. And probably between one and 15 of the people would say they also want to hold Bitcoin or other cryptocurrencies. And so these markets for dollars outside the US and outside of regions where dollars are the base currency are massive for institutions and multinational corporations. Dollar-denominated debt borrowed by folks outside the U.S. is an $11 trillion market that's growing at a 7%, 8% clip every year and showing no signs of slowing down. That market has never been open to retail. So this credit market, access to credit, access to debt, ability to save in something that's relatively stable and earns an interest rate isn't something

that most people around the world have had access to. And that's what the dollar provides. And so my view continues to be that stable coin adoption is going to grow. It's going to grow dramatically. Dollars on the blockchain will probably be bigger than Bitcoin at some point over the next two to five years. In market cap size? In market cap size. And all that trend happening is awesome for Bitcoin. Why? Because if you have people holding digital dollars, whether it's in stable coin form or another form with fintech companies or cryptocurrency companies, the money gets that much closer to Bitcoin. And so your opportunity to convert folks into owning cryptocurrency is just that much easier. And so I think that for companies like us, we think of BlockFi as

potentially one, two, three years from now entering another phase in our business. We're still very much focused on just delivering really awesome products for cryptocurrency investors right now. But we think we might, in a couple of years, be in a position to have products for folks that aren't interested in Bitcoin yet. They're actually just interested in earning an interest rate on dollars, and they're coming from a place where that wasn't possible before. And that's where they start. Yep. Well, so a lot of people don't know this, and I've gone around the country literally and talked to institution after institution about, Right now, I can take money and I can put it into GUSD. I can then turn around and I can hand that

to BlockFi in an interest-bearing account and I can earn 8.5%. Yeah, 8.6%. 8.6% APY on that deposit. And USDC as well now. And USDC. Okay. So that's a really, really high interest rate compared to the fiat traditional banking system, right? Money market accounts, maybe you're squeaking out 100, 150 basis points on the high end. You're talking about an 860 basis point APY on a digital dollar, right? Does that come down over time? Where does that interest rate kind of evolve? And the reason I'm asking that is, do we eventually enter a world where people are financially incentivized to move from the fiat currencies and the traditional banking system into this digital dollar world? Yeah, absolutely. I mean, people are incentivized to do that now.

Um, but, uh, the, the rates will, will absolutely trend towards the rates that you see in traditional markets, but I think that's going to take quite a while. Okay. Why? Fundamentally, the, uh, cryptocurrency, digital asset, blockchain sector does not have access to the same types of capital that traditional markets do. It's a little bit like, uh, you know, the marijuana industry or, um, you know, other new industries where it's still emerging. People don't understand it. It's a new technology and

banks move at the speed of slugs, right? And they're afraid of everything and they're not that interested in it. They're very risk averse. They're very risk averse. So I actually think that our rates that we're paying on stable coins might go up before they go down. So we might have an announcement there in the next, in the next week or two, about a rate increase on, on stable coins. Um, and, uh, over time as it scales, uh, they, they will definitely trend downwards. And one analogy that we look at is, uh, I'm forgetting the name of it. I think it's a yay bow. It's, it's, uh, it was the money market. It's the money market type fund from, uh, either Alibaba or Alibaba. It's like the largest money market fund, largest money market fund in the world. When that

thing came out, it was offering an interest rate of like 9%. And now the interest rate that it offers is below the risk-free rate for bank deposits in the market that it operates in. But that transition took a long time. And during that transition, so many things got added onto that platform in terms of functionality that you can also do with the dollars that people are happy or the RMB, that people are happy to keep their capital there because it's a better option than what was available from the traditional banking system. And what makes it a better option can shift over time. On day one, it can just be the interest rate, and the interest rate is dramatically better. But in year three, four, five, six, it might be that there's this suite of

additional services in addition to a better user experience, client service experience versus the traditional banking system that keeps people on the platform. So Yebao, I think is the right way to pronounce it. I just looked and it definitely was the world's largest money market fund. At one point they had $245 billion in there. So a quarter of a trillion dollars and the rates were incredibly high. Mark Yusko tells a story that I believe at one point they were growing so rapidly that there was actually a cash crunch at the Chinese banks. And so the government stepped in and said, time out. And I don't think they completely stopped people from depositing, but there was like a rate limiting. And it simply is people are searching for yield. And if you can show them

a lower risk way to get the same or higher yield, of course, they're going to be interested, right? And I think that's what you see there. And obviously, we haven't yet seen it at scale in the digital world, but it's definitely something that is likely to occur at some point if rates can stay up higher than we're seeing in the traditional banking system. It's coming. I mean, people don't, you know, the people holding stable coins with us right now are still, you know, a subset of cryptocurrency market investors for the most part. A big theme for BlockFi this year in general is taking our marketing and messaging and capabilities on the platform to a more mainstream audience.

And as that starts to happen, I think we'll start to enter an even faster trajectory of growth because the value proposition is great. Yeah. We're earning 1.75%, 1.5% in traditional savings accounts or at Marcus or whatever. this is 8.6. It's not that hard to do the math. Yeah. What are you going to use the money for? So you just raised $30 million. Um, where's money go? So, uh, you know, the primary expense, uh, for us has been, and will continue to be, um, people. So, you know, we grew the team from 15 to 75 last year. We'll go from 75 to around between 125 and 150 this year. And, uh, that's

growth across the board, our engineering team, our client service team, our institutional service team, finance team, compliance team. So, you know, growing the team is the number one use of proceeds. After that, it's marketing and product development. So, you know, we're launching a mobile app and fiat on and off ramps. When you have fiat on and off ramps, banks require you to keep reserves with them based on how much ACH transaction volume you're doing. So there can be a little bit of a cash drag there and launching a credit card is not a small feat, both in terms of the lift you need to put in to bring it to market and get it live. And we also want to do a ton of fun marketing. So our marketing budget is going up by a factor of 30X versus last year.

I think we spent like half a million dollars on marketing last year, spending way more than that marketing this year so there was uh there was competitors in the marketplace that spent a lot more than half a million bucks um so when you do this how do you guys think about the 30 million dollar number and this is really for kind of entrepreneurs that are out there in crypto um there haven't been that many kind of 20 30 you know plus million dollar fundraisers in the industry in general right there's kind of a wave of companies that were around pre-2016 that uh were able to successfully uh have large fundraisers like that then you had a lot of like that what i'll call the icos right so that was not really for in exchange for equity for a private

for-profit centralized company with all tokens um since then we've seen a couple but not a ton uh of these very large fundraisers like how do you think about when's the right time to go fundraise um how much to raise right how do you uh derive the valuation off of that and kind of just talk Talk me through, like, from the entrepreneur seat, that fundraise framework that you use on making the decision to actually go and do it. Sure. So I think there's a couple of key inputs to making the decision to go do it. One is, is there something we could do with the money? And, you know, generally for startups, the answer to that is yes.

But, you know, if it's no, then you probably don't need to raise money. Uh, and the second thing is, do we have, do we have the metrics to raise money at, you know, evaluation that is higher than, uh, the previous round that we raised money at and would support, uh, us raising the amount of money that we want to raise to do the things that we need to raise money for. Um, so, you know, those are your inputs. And if you've, if you've got the metrics and you know what you want to spend the money on, how you derive at valuation is kind of a function of how good of a job you do marketing it. It's really a sales effort at the end of the day. You've got to make a great presentation. You have to have a compelling narrative around

what the company's doing, why it's working, and why it's going to keep growing in addition to just the underlying, uh, quantitative metrics and you have to go talk to people. You have to sell it. Um, just like anything else y'all are raising, you know, when you're raising money for your fund, it's the same concept, right? You've got to meet people, present, uh, grab their attention, make them believe. And, uh, fortunately, you know, we've, we've been successful at doing that. I come from a sales background, so I actually love that part of the job. You know, like I, I could, I could talk to people, uh, all day and tell them what we're doing. Cause I'm just like, so excited about it anyways. So, uh, I really enjoy it. And I think one of the things that's

noteworthy about how we've raised capital at BlockFi, which is also true for a lot of things in the cryptocurrency, cryptocurrency industry is that the speed that it moves at is so fast. Like not only have we reached this kind of new tier in terms of the amount of capital that we've raised but we raised our series a six months ago it's not often that companies go from series a to series b uh in under a year much less uh six months so um but but i i can say this you probably can't um and this is more the investor mentality of like when you see something working at least for us like we want to double and triple down on that right it's working uh and now is the exact time in which we want to pour gasoline on the fire, right? And take what is already an inflection

point and make that curve steeper, right? When I was at Facebook, there was a point in time in 2014 where the ads revenue was growing so quickly that we used to say ads is going bananas. And the reason why we said bananas is because if you think of the shape of a banana, right? It literally It kind of like bends backwards almost. And so that's what you want from every company, right? Is you see this growth and when you see it starting to hit that inflection point, what you actually want to be able to do is that gasoline can literally put it vertical in terms of growth. Put your foot further down on the pedal. Yeah.

And I think that's what you guys are doing, right? Is it's really, hey, let's keep doing what we're doing. Let's do it on a bigger scale. And also let's launch tangentially related products that we know our customers want. That's exactly right. And I think that last point is, uh, is really important. None of this works. You don't hit that, you know, that breakout point in growth. If you're not, uh, adding value for your clients, that's true for, for any company. And so, uh, one of the things I've been really proud about

that we've done at BlockFi is, you know, one of our core values at the company is, uh, clients, not customers. Every decision that we make, we ask ourselves, how does this impact the client? Is this good for the client? Are they going to like it? We solicit product feedback from our clients. And that's a lot of what goes into our product development roadmap is just what people are telling us, what our clients are telling us that they want. And so it's this, you know, it's a great incentive alignment mechanism that capitalism has. Do you use the terminology clients, not customers, because customers insinuates like a transactional relationship? Customer's a number in a database, right? Customer's a number in a database that no one knows their name, just happens. And I think a lot of FinTech, it does great things in terms of having an awesome UX and in terms of delivering automation and products that are powered by technology. And we want to do that at BlockFi. But what we also want to do is introduce people to the experience that maybe comes from like an older time when you could walk into a bank branch and there's a banker there who knows your name or someone that you've worked with. And we want to see if we can deliver that digitally. So I think we're the only place in crypto where there's a number on our website. You can call that phone number. Who answers? Someone from our client service team.

Do you answer? I used to, I actually like it every, every once in a while. I'm one of the first people in the office every morning. I'm like you, I'm an early riser. So every once in a while the phone rings and no one else is there yet. And it's awesome. I'm like, Hey, thanks for calling BlockFi. This is Zach. And person on the other end will be like, sometimes most of the time they don't know who I am. They're like, Oh, okay. Hey Zach. Uh, you know, here's what I need. Uh, but other times people were like, Zach Prince? And I'm like, yeah. They're like, aren't you the CEO? And they're like, why are you answering the phone? I'm like, oh, I just get in early. Technically the phone

line isn't open yet, but I heard it ring. Like, how are you doing? What's up? I love that. All right. We got to talk about this photo. So he doesn't know I'm going to do this, but for those that can't see it, this is the photo that is on the Bloomberg article that Vildana wrote announcing the fundraise. Yeah. Shout out to Valdana from Bloomberg. Great article. You guys look like you're about to come out with a rap album. Really? You think so? Yes. You and Flory look like you guys are about to come out with a rap album. See, I look at that and I think that I look like a goofball and Flory just looks like a stone cold badass. Flory looks like she's about to fuck people up. She's an operator, man. She's not here, but what is she thinking about all this?

She excited. Oh man. It's a, you know, we're, we're, we're pinching ourselves, right? Like we, um, we, you know, we, we started this thing in Q3 of 2017, uh, you know, bright eyed and bushy tailed, trying to raise money, telling people that we thought ICOs were stupid. And they're saying, we think you're stupid. And, uh, and, uh, you know, it's, um, just seeing it all, seeing it all come together. There were so many things. We were actually on a, uh, train together from, uh, from Boston. We were up at Fidelity's office. We're on a train back together. We actually got to spend like three hours together, which doesn't happen that much anymore. Cause we're very busy. And we're like, you know, if you just, if you just say like build things that

people want and FinTech flywheel, if you just say it enough, I guess eventually it comes true. I mean, we were saying all this stuff for so long. We had these strategies that we wanted to, you know, bring to the market. Uh, and it was, it was a ton of effort, but you know, the, the feeling that we have now is that, um, the snowball's rolling and we just have to, you know, we just have to keep going. Yeah. Uh, that's the secret, man. Just build things that people want and magically you build a company. And keep going. I mean, look, it's, uh, from the outside looking in, you always hear about the good stuff, but, um, there were moments, right? Like we, we made our first crypto backed

loan in January of 2018. Price of Bitcoin was around $17,000. It ended the year at $3,000. How did that feel? Awful. Right? That's brutal. No loss of capital? No, we've never lost a penny in any of the lending that we do. But we're fundamentally in the cryptocurrency market. We're fundamentally bullish on what's going to happen in the cryptocurrency market. And it is fundamentally better for our business when the cryptocurrency market cap is larger. So, uh, you know, there's, uh, there's a lot more excitement

when the prices are going up than when they're going down. And, uh, where are we at now? Are you checking? Uh, no, I'm looking on, I'm texting Joe, Joe sitting over in the corner. I was trying not to interrupt. I was trying to see if we could see the, uh, the live stream questions, but, uh, at the same time, somebody asked about lightning functionality. They said that should be enough money to add lightning functionality. Um, what, what's going on there? Is that something that you guys are going to eventually do? Yeah. I mean, we, um, you know, we, we don't, we decided really early on that custody and private keys and, and, you know, building, uh, wallet software was, um, not the, not the area where we were going to add value to the market. And so, you know, we work

with Gemini as our primary custodian. We leverage their wallet infrastructure. We also work with BitGo now specifically for USDC, which we added to the platform recently. And so we'll see which way they go. And that's kind of the direction that BlockFi will go in for the time being. But we are huge, huge fans of Lightning and would love to support it however we can. But it's not something that's immediately on our roadmap. What we want to do is build products that connect cryptocurrency with the traditional financial services market. So, you know, if we're making a decision of, you know, do we, do we take, uh, our engineering team and have them focused on, uh, building a credit card or a mobile app versus, uh, you know, new wallet infrastructure,

we're going to pick the credit card, mobile app type, type product advancements every day. Makes sense. What is the one thing that you believe now, other than stable coins, that you think everyone else is missing or disagree with you on? Ooh, that's a, that's a tough one. The stable coin. So, so I'll, I'll put another one out there. So I'll say that, um, I'm a, uh, I'm a seller of the notion that things like derivatives are a net negative on, uh, you know, asset prices for things like Bitcoin. Why? Because I think that fundamentally what we're trying to do is integrate and compete with things in the traditional financial market.

So whether it's gold or stocks, right? Like at the end of the day, there's an amount of money sloshing around around the world. And if you're an asset class, you're trying to grab as much of that as you can. and if you don't if you don't build the same things around your new asset class that's trying to grab market share it's going to be really hard to generate legitimacy in the eyes of the people that control the purse purse strings for some of those allocations of capital and so you know i I think the industry would be well served to, uh, lean in to things like, uh, you know, the markets on the CME, uh, to things like, uh, the grayscale trust that you can access,

you know, GBTC through your brokerage account. Um, these are all great, great things. Uh, and one thing I worry about a lot as we go into this, uh, next wave of, you know, building products that are more relevant for mainstream adoption at BlockFi and marketing to, you know, consumers that are maybe not in the space at all right now is that we're going to convert people and they're going to go to crypto Twitter and they're going to see a bunch of people like, you know, yelling at each other and telling them that the only option they have to keep their Bitcoin safe is in a, is in a hardware wallet in the, in the bunker and having options is great, but we should, uh, we should try and, you know, highlight the positives in our, in our

communication because there's going to be another wave. New people are going to come in and they're going to try and learn things. They're going to try and ask questions. Uh, and it's on all of us to, uh, to give them a great experience where they come out going, okay, yeah, I learned more and I'm not scared. And this does make sense. And, um, so yeah, that, that's, that's my new, is there a blending eventually where right now there's legacy world and then there's the crypto world. Does this all come together? Yeah, there has to be. Yeah, there has to be. That's the natural collision. And that's what we want. If that happens, it means the market's getting bigger because that's not going to happen if the market cap is sub a quarter trillion.

So market cap keeps getting bigger. You get a network effect there. As the market cap gets bigger, other traditional market participants become interested. They come in, market gets bigger because they came in, and then bigger market participants want to get involved. And so, I absolutely think that if we fast forward a few years from now, Bitcoin will be on price quotes right next to commodities or other assets, stocks, that type of stuff, like it was for a while in 2017, honestly, on CNBC. That's going to happen again. And it'll just, 10 years from now, people think, oh yeah, of course. Of course, Bitcoin's a part of your, you know, asset allocation in a well-diversified investment portfolio?

To me, it feels like sentiment is shifting. I read about this earlier this week, and the sentiment is shifting in a way that I don't think we've seen in a long time. There was a clip on CNBC Fast Money. Loved that. Retweeted that real quick. I think it's a guy, I forget his last name, I apologize. Guy Adami. Adami. Okay. Yeah. So he basically, the quote was something to the effect of, in a world where central bankers are tripping over each other to devalue their currencies,

Bitcoin will prevail. Yeah. In a world of fiat currencies, Bitcoin wins. Yeah. Bitcoin is the victor. Yeah. And literally, when he said that, I, honest to God, rewound it. I had to listen a second time. And then I triple checked that it wasn't a doctored or manipulated video like some meme that somebody on crypto somehow did and i just sat there for a minute and i was like holy shit i did like a michael i was on the subway watching it i did like a michael jackson leg kick i was so excited i was like boom well the other thing that happened in that clip is uh every single every single person on the fast money panel they're in was bullish they're in man on bitcoin look you don't have to be a genius right like it was at 20k

it came down now it's crossing 10k again over the last two years i mean we're just part of a bigger trend at block fi right like smart people you guys included um have continued building things yeah the space has gotten better so huge shout out to joe kernan because joe was i think the first person that it's like a full-time employee of cnbc to convert in front of everybody yeah i I mean, he went through a two-week absolute, like, indoctrination, right? I mean, I still remember seeing him one day and him being skeptical, coming back like a week later, and him literally looking at me and being like, this is the future. And me being like, yes, dude. And it has permeated throughout the traditional financial system, right?

And what I mean by that is not just the language and the sentiment that's displayed on kind of traditional financial press and media. But also, you're seeing the conversation change at the registered investment advisor level. You're seeing it change in the institutional investor world. You're seeing it change, actually, even with people who previously were not bullish. You're starting to see them say, wait a minute, there may be something here. And the one this week that really caught me off guard, but in a positive way, was the CME's chief economist came out. And now he's not going to say, hey, look, Bitcoin's going to be the next global reserve currency or anything that's kind of on the extreme end of the view. But he very well, he articulated very well that Bitcoin is a non-correlated asset.

And if it continues to be non-correlated, this will be in pretty much everyone's portfolio. And I thought that that was the last person in the world that, other than like a Warren Buffett coming out and flip-flopping, somebody like that was like the last person that I would expect to come out and be that kind of strong in their articulation of Bitcoin. The data supports it, right? It definitely does. The data supports it. I'm actually going on CNBC for the first time later today. As someone who's been on CNBC a ton, I'm going like 10, 45, 11, I think. What should I do?

What should I say? How do I kill it on CNBC? Oh, yeah. I mean, if you drop the long Bitcoin short, the bankers, you're a legend. You may not be allowed to come back. I've said it one time. I didn't go on television for a couple of months after that. um but uh no i i think the whole thing is uh the consistency of message is so important right

there's people who watch that show all day long they've heard a million different things but the more that they hear people who are building real companies in the space say the same thing over and over and over and over again yeah it becomes um uh in some weird way a confidence game for them right it's like hey i heard about this thing it's different than what i'm used to it kind of doesn't have the same um foundational structure uh the story's a little weird like there's no companies headquarters all that kind of stuff but if they hear over and over and over again like look this is working there are people who are participating in this it has the network effects it has the computing power behind it etc i think eventually uh you kind of slowly shift their mindset um and

so it's less about like you're gonna go say some like magic words and all of a sudden everyone is like hypnotized like oh my god bitcoin's the future and it's more just like the consistency of message every time somebody goes on and says it we convert you know 10 basis points of that of the viewership you know if we do that every single day right eventually trying like oh wow like actually a lot of people you know are kind of starting to realize this so yeah what are you gonna say uh i don't know you don't know i was working on it on the train up here i mean i think it's are you you're talking about my uh yeah well of course it's a it's a it's a segment to cover the fundraiser, right? So what are you going to use the money for? Explaining BlockFi at a basic

level. But I think- You'd be a legend if you said you're going to take the money and just buy Bitcoin. Don't say that, but you'd be a legend if you did. That's actually a good idea. Like, hey, what are you going to use the money for? You just raised 30 million bucks. What are you going to use the money for? We're just going to buy Bitcoin. No, I'm just kidding. Here's what we're actually going to do. Yeah. You know what? It's actually not a bad idea. Listen, you might get a couple of laughs yeah well the whole thing is like uh you just have to try and do a little something to make it memorable right yeah of course i think like you've got to be you've got to be comfortable you want to see how memes are made if you say that we'll cut up we'll cut

it up and then after you say we're just going to buy bitcoin we'll cut the video and then we'll play the music and have the glasses come down with the cigarette in your mouth right like like deal with it yeah amazing amazing um all right what uh before we uh got into the conversation i actually tweeted out um blockfi.com slash pomp and said hey everyone go check out block five do we get so many people hitting us up saying why don't i have a url like pomp does really yeah like i don't think that i don't know i have to ask our marketing team like you know why you're so special but everyone's like i want to i want like blockfi.com slash you know my thing yeah i think you're one of the only ones that has one you should make a product

where people can go and create create their own url yeah yeah and then they get uh they get paid for the referral yeah right well people refer their friends all the time we have referral links we have all the custom referrals yeah you just know people don't get the custom url that uh that you have ah who is there anybody with a really big audience that's uh that's asked i can't remember i can't remember i just know i just i just know i get uh i get the question yeah you should just make it custom i agree and then lower their reward that they get if they use the custom one like gamify it all right man listen thank you so much for coming thanks for having me www.blockfi.com slash pomp www.blockfi.com slash pomp and uh 30 million dollars in the bank as

everyone who uh thinks that this is a celebration now there's just more pressure absolutely just keep going let's get it done all right thanks so much guys I appreciate you listening and see you next time on Off The Chain. We'll be right back.