We Study Billionaires - The Investor’s Podcast Network - BTC016: Bitcoin Super-Cycle w/ Dan Held (Bitcoin Podcast)

Episode Date: March 10, 2021

IN THIS EPISODE, YOU'LL LEARN: Dan's Thoughts on the Overall Macro Landscape Bitcoin's potential Super-cycle Kraken exchange data and Bank Charter Comparing Yield opportunities in lending and Lighting Pool His opinion on non-financial use cases for blockchains Where we are at in the technology adoption curve Bitcoin's security model once the block reward diminishes BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Follow Dan Held on Twitter Checkout Dan Held's Articles and website Checkout Dan Held's Youtube channel Browse through all our episodes (complete with transcripts) here. SPONSORS Support our free podcast by supporting our sponsors: Bluehost Fintool PrizePicks Vanta Onramp SimpleMining Fundrise TurboTax Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hey, everyone. Welcome to our Wednesday release of the show where we're talking about Bitcoin. Today's guest is Dan held, and he's a Bitcoin OG and someone that was part of the original Silicon Valley Bitcoin Meetup Group back in 2013, with other people like the founders of Coinbase, Crackin, and many other influential founders in the space today. Dan has created some crypto businesses and products that have been acquired by companies like Airbnb and Crackin, and he's a major content creator to the Bitcoin ecosystem. On the show today, we talked to Dan about his thoughts on the current cycle, his opinions and metrics for a potential super cycle, exchange analytics and bank charters, Bitcoin's future security and incentive structure, lending and borrowing, and much, much more. So without further ado, here's my discussion with Dan Held. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish.

All right. So welcome to the show. I've got Dan held here. And Dan, great to have this conversation. We talk all the time over Twitter, but never in person. So I'm pretty excited to be able to do this with you. Justin, I think I actually got COVID and we've had to push this back a couple weeks. So I'm pretty thrilled to actually start recording. It's finally happening. It's happening. We're going to do it. All right. So let's start here, Dan.

So there's a lot of things happening not only with this bull cycle, but everything that's happening in the macro backdrop with just the economy, with interest rates and all that. I'm just kind of curious to hear your overall overview, you know, your 30, 40,000-foot view of what's going on? right now and kind of where you see where we're at in the cycle. And then if you have any comments on the overall economy, too, feel free to throw those in there. Yeah. So I coined this term. I don't know if I coined it. I used it about two years ago and it kind of stuck and became more popular. But I used this term called the super cycle. And I actually mentioned this back in 2019 for

the first time, which is that what happens if Bitcoin goes through its normal micro cycle of a four-year cycle that typically occurs around the halving, and it has a bull and a bear market. And what happens if that occurs simultaneously while we have a larger macro market, bear market that occurs? Because Bitcoin has largely existed in a big bull run in the macro markets. So I coined that term super cycle. And I think lately people have really gotten into the idea because some of this stuff has started to manifest. Some of this, you know, around like, for example, Tesla buying Bitcoin and Michael Saylor, company treasuries buying Bitcoin, I think, was a really huge, huge sort of validation that this time will be different or this cycle might

be different than the other ones. So for me, you know, we've got a lot of checkmarks here that people go, hey, Dan, what do you look for for a super cycle or what do you feel are checkmarks for like being bullish on Bitcoin right now? First of all, we've had the halving that occurred in 2020. This is a typical cycle that we would see play out where Bitcoin has a bull run, post-having over the next year and a half, and we're starting to see that happen. And we also have other things like you've got institutions, finally validating Bitcoin. You've got big macro trader folks, Paul Tudor Jones and others who say Bitcoin is gold 2.0. This was an investment thesis that I had when I first entered my Bitcoin position back in 2012, was that Bitcoin as gold 2.0. And to see it

being validated by the market is huge. So this, I would say that's more on, you know, seeing the mainstream world start to buy into Bitcoin. That's another big check mark. We also have very easy ways to buy Bitcoin. Cash app. You've got cash up. We've got, I believe today there was news that Charles Schwab was looking at ways to add Bitcoin to their brokerage. So you've got that.

You've got PayPal. There's going to be almost an infinity number of ways to buy Bitcoin, which increases the demand surface area. So more and more demand can flow in and there's only 21 million Bitcoin. So that's a big component of Bitcoin itself. And then the Bitcoin narrative, like we've got your podcast. and other great folks in the space like Peter McCormick and Stefan Levera, and there's so much great content now.

And we've shortened that ladder from going, I don't know anything about Bitcoin to I kind of grok Bitcoin and I want to go buy it. That ladder has been much shorter than what it was in the previous cycles. Back in 13 and 17, it took a ton of kind of self-reflection and really digging in to understand Bitcoin. And now we've made that narrative really, really simple. So we've got all that going on with Bitcoin. And then we had COVID hit.

And COVID, I think, rattled everyone's belief in the existing system. They go, okay, I'm starting to question my government's response to not only COVID, but also their financial or fiscal and monetary response to the COVID economic crisis. And so people are starting to question the nature of their reality. And this, I think, is a huge, huge moment for Bitcoin because it finally brings the lens of why Bitcoin matters. It brings it into focus. So COVID brings Bitcoin's value prop into focus.

I made an analogy that might resonate here, which is that most people don't think about buying like earthquake insurance until an earthquake happens. And that's kind of like Bitcoin, right? Like Bitcoin has made and its value prop shines when you start to lose trust in your government. And that doesn't happen on a normal basis. Most people don't want to question the nature of the reality. And COVID kind of forced that to happen. So, Dan, you're at Cracken.

And recently there was big news on. on crack and becoming, they're going to get a bank charter, which I'm assuming automatically means that they're then going to be FDIC insured for deposits. Is that assumption true? And what does this all mean as far as getting the bank charter? Yeah, good questions. I'm on the product team leading growth marketing and we stay pretty laser focused on day-to-day work. So we're building out spot futures, other financial instruments we're looking at. On the banking side, that's a little bit more out there on the roadmap. So I don't spend a ton of time digging in on that. From my understanding is that since it's a full reserve, it's a full reserve bank, you're able to circumvent some

requirements. And I think that might actually be around like, I think we would be FDIC insured, but I don't believe we have other requirements. But I'm not exactly sure. I'm speaking a little bit out of my expertise here. I do know that we can do, we can offer some services like lending and borrowing, where, you know, it is a full reserve bank, but some customers could elect to have some of their funds lent out. So I think some of that stuff is really fascinating. I think on an infrastructure level, it connects us much more deeply in the financial system where we don't have to worry about finding a bank account. Back in 2013, this was actually a big, big deal. If you were a Bitcoin company, having a bank account was like the Holy Grail.

Silicon Valley Bank only banked Coinbase. They didn't bank any other crypto startup. Coinbase had this incredible unfair advantage, likely due to their investor base of A16Z, hugely unfair advantage in the United States in 2013 and 2012 with a relationship with SVB. So Cracken, I think, has seen, you know, Jesse has been around for a long, long time. We want to build the most stable infrastructure for Cracken to survive and exist with the most minimal amount of third parties that we have to rely upon and the most minimal amount of regulatory checkmarks that we have to check off. So for my understanding, that's what Wyoming. mean gives us with the SPDI license. And then on the customer front, in terms of what value we offer,

that's where I'm not 100% certain around FDIC or not. But for my understanding, we're creating a full reserve bank. So I'm not sure if FDIC would even be something that we would need to get. I think that's what's been brought up before, the kind of the cool value prop of Cracken is that with the Cracken bank, we wouldn't necessarily need to have FDIC insurance since it's full reserve. You don't need insurance if all the assets are there. As I think through the evolution of not just Cracken, but any bank for that matter, and I find it really fascinating that Jack Dorsey had the big announcement with Square and that they're going to become a chartered bank as well. And so if I was going to warp myself a year into the future,

I don't think it's far off that people can change whoever their employer is, whoever they're getting their paycheck from and doing their banking today. They could start routing those paychecks to a Cracken or to a square to wherever. And then those deposits could be tokenized. And then these interest rates that we're seeing call it, especially on U.S. dollars as like anywhere from seven to 10 percent, do people start to get those types of interest rates for their deposits into these types of banks? Is this happening soon? Yeah. So, I mean, those rates that we're seeing, you're kind of referencing like USDC and USTT stable coin interest rates, these aren't exactly like the same sort of risk profile that a savings account has. You know, I think these

are a little bit different. But certainly this new crypto world, especially with like USDC, USDT, for my understanding, a lot of the borrow for USDC and USDT is coming from collateralized borrowing using Bitcoin as collateral. So let's say you want to borrow dollars against your Bitcoin as collateral. My understanding is that a lot of these services offer like actual USD or USDT or USTC. And that's where the demand for borrowing USTT and USDC is coming from is the demand to take a margin position with your Bitcoin. So borrowing against your Bitcoin as collateral. And so from my understanding, there's a dollar shortage with that trade or with that sort

of setup. Currently, I pay 10 to 11 percent with my unchained capital loan, which is in dollars. But I noticed like on BlockFi, if you borrow against your Bitcoin as collateral, that I think you can borrow USC. So that's where that really high interest rate is coming from is there's a dollar. dollar shortage when it comes to borrowing, you know, borrowing dollars against your Bitcoin as collateral, which I'm not exactly sure why that exists. Bitcoin is a pristine piece of collateral. It's a phenomenal piece of collateral that if we look at other collateralized loans, like if we

look at interactive brokers and how much a cost to borrow against your securities, if you borrow, I think, like a quarter million, like in USD, against your securities as collateral, your borrow rate is 75 bibs, so like less than 1%. I would expect Bitcoin's being able to borrow against Bitcoin as collateral, like that borrow rate should drop down to something equivalent to that. Bitcoin is a pristine piece of collateral that I can take. And if I'm the lender, I can take that collateral and go sell it at a bunch of different venues instantaneously. And it's fungible. So I can sell it at any venue. I'd like one Bitcoin equals one Bitcoin. It's not like a piece of property where, for example, like my home isn't one home doesn't equal another home and

there's maintenance costs and everything else. So I think that's where the higher rate of yield is coming from for those stable coin dollars. That's what I've heard is like that plus other borrowing for other types of trading activity. I'm not sure if we can equivalently call that like a savings account. So when it comes to these new banks of like Cracken and Square, I'm not sure if we could call that like a savings account, but it might be more of like people are going to be attracted to that yield and that's definitely going to going to attract depositors regardless of not being an equivalent risk. Yeah, it's an interesting point that you raise on the risk because if the deposit is being

over collateralized and you're in a 24-7 market, like the risk is really just the management of the keys at that point. Yeah, well, it depends on how the coins are being like what if you're lending out, let's say you're a lender of USDC or USDT depends on what those coins or what those stable coin dollars are being used for. Yeah. But yeah, certainly a very low risk operation would be lending to over collateralized positions. I mean, that's phenomenal risk.

That's why I think that rate's going to go down over time. You know, I think that's just a phenomenal risk profile. I was talking more of like if you're lending USDC or USC for folks taking advantage of like arbitrage trading opportunities or other activities, which blockifying Genesis Capital and these other big lending shops, we don't know exactly what that counterparty mix is. Some of that counterparty mix are folks who they've got over-collateralized Bitcoin positions and they're borrowing dollars, which that's a pretty low-risk endeavor, but then there's also much higher-risk ones, which are different types of trades that they're facilitating.

That aren't necessarily over-collateralized. Correct. Yeah, it could be partial collateralization. I mean, some of these desks, they accept 70% collateralization, so some of these aren't fully collateralized. So this is one that I really wanted to talk to you about. And I think it's important for you to kind of describe this first to my audience because I don't think a lot of them fully understand this idea of using lightning pool to capture yield in the future. So describe this whole layer two to them and kind of get into this lightning pool.

And then after we kind of get into a lot of that, then let's compare it back to this borrowing and lending markets that we were just talking about as far as what kind of yields you kind of expect in the future and what this might all mean? Yeah, so I'll try my best to cover some of these yield generation activities with directly with the Bitcoin network, which I would consider Lightning Pool to be one of those in Coin joins as well with Join Market. So I'll speak to the best of my ability. I have not done a Lightning Pool trade myself.

I have not lent any coins to Lightning channels. So I have not actually done this myself. I just talked IDMs Ryan Gentry a few days ago. He's with Lightning Labs. He told me there's a GUI now. I didn't realize that. I've been so busy with work. I haven't popped my head up, and I didn't realize that there's actually gooey now

because I'm not technical. I'm not an engineer. So I plan on playing around that very soon. So I'll cover some of the basics, but I'm speaking from kind of a very high level here. So with Lightning Pool, from my understanding is that you are providing liquidity for lightning channels to be opened and closed in a certain fashion, and you're being compensated for providing liquidity for others to be able to facilitate the routing and moving. and movement of coins through different lightning channels.

Dan, first get into what lightning even is, because there's a lot of people that are probably listening to my show that don't even know what that is when we're talking about the second layer on top of Bitcoin. That's a great point. So Bitcoin's community and developers have decided to approach scaling via a sort of stacked architecture. And so what we refer to as layer one would be Bitcoin's like a transaction on layer one. And that would be a Bitcoin transaction on the Bitcoin block.

chain. We call layer two and layer three are these stacked layers on top of Bitcoin. What these represent are scaling layers where a lot of times what happens in what happens like a lightning transaction, a lightning channel is open between two participants. And the channel is originally opened with an on-chain transaction on layer one and closed with an on-chain transaction on-lane transaction on layer one. So two transactions to open and close a lightning channel. And the way that it works is that the person A and person B can transact very rapidly and very cheaply on layer two, which requires less settlement assurances because the values are smaller and it's going back and forth very, very quickly. So while the Bitcoin base layer can only handle X amount of transactions,

like a very small amount of transactions, on layer two, we're talking like X to the 10th power, 20th power. You know, we're talking like a huge magnitude, more number of transactions can occur on these layers above Bitcoin. And Lightning is one of those. So Lightning requires only two on-chain transactions, the opening and the closing of a Lightning Channel. It gets more complicated than that, but I'm just boiling it down to as simple as I possibly can here without leading to a bunch of nuance. So, for example, we could have millions of transactions that happen between counterparty A and party B, and that net value. So let's say we each have $10 and we just shop, shuffle that back and forth, million times. And then the net value is, I have $2 and the other party

has $8. That net value is then closed out with that second on-chain transaction. So Nick Carter calls that as economic density. So what Lightning provides is for Bitcoin to be able to support many, many, many more transactions on the second layer. And it's very economically dense because all those transactions are essentially the net value is then printed on the base player one. So to facilitate that, you know, the routing of a lightning transaction between different parties, it gets much more complicated than between party A and party B. There's party C and party D, and they have lightning channels that they've opened up as well between each other. And then things can get really complex with that, where it's sort of, you can think about it like

different, like a canal, like those locks that you see for boats when they're going between two different bodies of water that are at different altitude or different levels. These locks allow for that water and that boat to proceed from one body of water to another. You can kind of think about a lightning transaction occurring as many of these different locks between many different pools of liquidity. And you can imagine that to get between these different pools of liquidity, you have to find the right route and you have to have the appropriate amount of water in the locks. And so that's what lightning pool helps with is it helps these channels balance and make sure that they have enough liquidity to facilitate the proper routing of a transaction

through these different locks. That's the most simple way that I think I can describe it. And the big advantage that we're really getting by stepping into this layer two of lightning, in layer one, it takes 10 minutes for these blocks to occur. So like you might, let's say you were trying to go to Starbucks, pay for your coffee on layer one, you'd have to stand there for 30 minutes to get three blocks to clear in order to pay for your $5 coffee. But if you have a lightning channel that you've opened up, now the payment of $5 can immediately go through.

They can immediately see that the transaction is complete. And it solves this whole speed and immediate clearance, the second one. So we're talking about when you're talking about lightning pool, taking your bitcoins, putting them into a pool on this second layer and then receiving an interest rate on top of it. What are some of the numbers that you're hearing this might evolve into? Because right now today, it's really almost meaningless. But in the future, when we all expect this to be used, what are some of the numbers that you're hearing, Dan? It's pretty hard to nail down what a long-term interest rate might be that you would earn on lending your coins to the lightning pool.

I mean, if I were to guess, lightning pool is trust minimized, which means, like I don't have as high counterparty risk when I'm providing liquidity to these channels versus the counterparty risk that I might have lending coins on Genesis, BlockFi, leaden, those are facilitating certain types of arbitrage trades and whatnot, which incurs, I would say, a much higher counterparty risk. So I would expect that a lot of supply would be willing to lend to these lightning pools. I'm guessing demand to pay this interest rate to borrow these coins to facilitate these channels, I would guess the demand is probably lower than supply, and demand and supply dictate everything

in this world. So I would imagine that there's a lot of supply chasing much less demand due to how low risk this would be. So my assumption is probably under 1% long term, like a 1% annualized yield is probably what I would expect from this. We see a similar level with coin joins. So with coin joins, coin joins are a way to obfuscate your Bitcoin. transactions on layer one. Essentially, you are mixing your, I don't want to get too complicated,

using terminologies like UTXO, but you're mixing, essentially mixing your coins in a function to obfuscate the history of them with other people's coins. And with join market, join market is a software that doesn't have any centralized counterparty, and you coordinate peer to peer. And with that, you are able to, there are folks who want to mix the coins right now and are willing to pay for that convenience, and there are individuals who have coins readily available to mix, and you pay them for that convenience of mixing your coins at this moment. For example, let's say you wanted to mix half a million dollars of your coins to obfuscate the transaction history. You need to find a counterparty who wants to mix that amount right now. And so you pay them

for that convenience. And so annualized yield on coin joins, which coin joins have been in operation for five years. It's a pretty robust software. There have been, from my best of understanding, there hasn't been a zero-day founder any sort of flaws or exploits. And it uses the Bitcoin base layer. So it's a pretty trust-minimized way to earn yield. From my understanding, now, it's really difficult because if people are getting paid to mix their coins, they're not exactly talkative how much yield they're earning because you're being paid to mix coins with other folks. So, you know, for my understanding, like, we're talking like between like 20 and 80 bibs. So less than a percent as well there due to very low risk.

But the coin join markets, you're also being paid to mixer coins. So you're obfuscating your own transaction history. So it's kind of an added benefit of earning yield there. So I would expect that lightning pool probably is a similar function where there's a lot of supply, willing to provide liquidity to these channels, to provide liquiding to lightning pool. And there's probably not as much demand for it. So rates I would probably expect like long term to be under 1%. Let's take a quick break and hear from today's sponsors.

All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight, incredible food, floating saunas on the Oslo Fjord. And every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum, is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history.

This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary. individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening in Oslo in June.

If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedom Forum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference, it's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move.

With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the Netsuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business.

And whether your company does millions or even hundreds of millions, Netsuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, demystifying AI at Nessuite.com slash study. The guide is free to you at Nessuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely.

That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world, and 10% of all e-commerce in the U.S. from brands just get to the company. getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions, and even enhance your product photography.

Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing. Sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. Talk to us about some of your thoughts on non-financial uses of blockchains.

Are there any insurance identity? And do you see that being built on top of Bitcoin? Do you see other platforms? How do you see a lot of this moving forward beyond just Bitcoin as a token of decentralized currency? That's a great question. So I always think about it from a kind of more product mindset of Satoshi built blockchain tech to build Bitcoin. Blockchain technology has a pretty minimal surface area of what it is useful. for. Similar to how a shovel is useful for very few things in a tank, for example, isn't useful

for ride sharing or picking up groceries or dropping off the kids at school. Everything in this world is special purpose built for a certain function. Blockchain is the same thing. So with blockchain technology, I think that if we look at how it functions, there's a lot of things we can eliminate that it could potentially do. For example, having real world assets on a blockchain, I don't think makes a lot sense and here is why. Let's say I tokenize my house and I take my house and I take the deed to my house and it's now been digitized. Okay, well, let's say that that deed that I own on the blockchain is, is transferred to someone else because they hacked my account and moved it. So in the real world, the U.S. government, which enforces the title and the title, other

counterparties as well, like, I think there's like different, I don't own a home. So I, I don't know that there are title folks who there's like title insurance and there's title transfers and whatnot. They don't recognize the legitimacy of that transaction on a blockchain. In the real world, they're the legitimate recognized party that deems who owns what. And the government enforces that physically in the real world so that any tokenized asset on a chain may or may not be recognized by authorities as a legitimate transaction. Furthermore, enforcement of that, again, falls on to, not only the recognition, but the enforcement

as well, falls onto the local physically present individuals. If someone stole the title to my house on the blockchain, I'm still going to live in it. Good luck getting me out. So, you know, I think these real world assets have a, it's a big problem bringing them on chain because one, you've got the physical-based authorities who don't recognize it as a legitimate way to transfer assets that exist in the real world. You also have the problem of validating that the asset is on chain. So if you tokenize something like you tokenize an apple and put it on chain, you still

have to rely on some trusted party to verify the physical nature of it that it exists in a certain location and whatnot. So all you've really done is added a wrapper, like a digital wrapper around a real world asset, put that on chain, but you still have all the problems that you would with any centralized system of validation that this real world asset exists. I think that only digitally native assets like Bitcoin itself, the token that's digitally native to the chain is the only asset you can truly, truly own and utilize blockchain technology for.

So that's my opinion on blockchain tech in terms of the assets that you can have on chain. I'm also a, I would say a Bitcoin realist. So when it comes to Bitcoin versus other types of cryptocurrencies or crypto assets, I'm primarily just a fan of Bitcoin. I think Bitcoin's blockchain was created to solve a problem of storing value to be in Gold 2.0. And there are other hypothesized use cases of blockchain technology or other hypothesized assets that could be alternative stores of value. But I find it very unlikely that Bitcoin will be taken out of its number one seat as a globally recognized store of value. I think that, you know,

for example, light coin or doge coin would never replace the trust that people have in Bitcoin, in Bitcoin's origin and Bitcoin's governance in other issues that it's gone through that demonstrate the resiliency of the agreed upon social, the social contract that we have with the Bitcoin blockchain, for example, like the enforcement of the 21 million hard cap. And for the Bitcoin cash hard fork, you know, these demonstrated Bitcoin's resiliency and demonstrated why it deserves the title of digital gold. Whereas these other assets, I don't think deserve that. And I think long-term investors will likely realize that. And so I think Bitcoin being challenged in that store value asset category is very unlikely. So, you know, some people go, oh, is Bitcoin MySpace

or Facebook? And in this case, when Bitcoin is being a new digital gold and new store value, its unchanging nature leads to confidence being built in its longevity over time. This is called the Lindy effect. And so I think that Bitcoin is basically unchallenged in the store value category. So you were talking a little bit about physical items being terribly difficult to, really kind of put onto a blockchain. And one of the things that's a really big thing in the space right now are NFTs or non-fundable tokens. First explain what these are to the audience and then give us your thoughts on NFTs. And non-fungible tokens, fungible, by the way, would be one Bitcoin equals one Bitcoin. So the item I have is interchangeable with any other

exactly similar item. A non-fungible token would mean that the item is uniquely different than any other item. That's why we call it non-fungible tokens. You can definitely tell an engineer came up with that term versus a marketer because it's a bit technical for a normal person to crock. You know, it's fungible isn't a word people use very often. So NFTs have risen in popularity recently. NFTs are not a new idea, by the way.

NFTs have been around since around 2015 with, I think, rare pepés on the, oh, what was that called a counterparty blockchain? So NFTs have been around for a long time. And what they represent, they represent a certificate or a certificate of ownership over a graphic asset, typically a graphic asset, as people like to, you can kind of think about it like you don't own the Mona Lisa. You own the certificate that validates the Mona Lisa, essentially. And that's what an NFT is. The graphic asset typically is not stored on chain due to how much data, you know, due to the bloat that would occur if you were storing all these graphic assets on chain.

These don't have to be graphic assets. They're just, it just makes it easier, I think, for the listeners to kind of conceptualize what we're talking about here. So most of the time, those, what you really own is essentially like a hash, a hash, which represents a certificate essentially of ownership over this digital asset. So different types of assets here that we're talking about, like to use real life examples. There's the NBA, I think Hot Shot is what it's called. So like different NBA clips, so from basketball, different.

different video clips of different moments, you can technically own that moment. Now, again, you just own the certificate that validates that that's the moment. You know, anyone else can download that moment and own it in their own form on a computer or anything else. It's just recognized that it's subjectively recognized on its other participants on a certain blockchain that you have the certificate. This would be for licensing the clip to prove that you have the certificate of ownership so that you could license it.

I don't, I'm not even sure if you have licensing rights. I'm pretty sure it's probably very limited. I assume that the MBA would not give out licensing rights to this, to these different NFTs. That's just one example. That's just one example, that's just one example, there's an artist called Three Lao, and Three Lao is a musician, and he created some pieces of art that you can own as well. Three Laos sold $11 million worth of this art in the form of NFTs that individuals can own.

It's really interesting dynamic. If you're not licensing it, Dan, like, why would you want to own the certificate or why would you pay these outrageous prices? Look, I mean, I'm personally not buying this. I'm more describing, I think, I'm describing how they work. And I'll get into a little bit of what I think is going on psychologically with the ownership of these. So what happened during 2017, I'm going to take a step back and then we'll go back to NFTs here real quick. Yeah. What happened in 2017 with ICOs was demand in the market. so individuals who wanted to hold ICOs, demand became so large that supply printed as much

as demand wanted. So with ICOs, you can think of them as a black shoals model of every possible narrative you could append to an investment. You want Uber on the blockchain? We got that for you. You got a disruptor of Amazon AWS. We got an ICO for you. And so these ICOs produced as much supply as demand wanted.

Because demand kept buying it. And so people were like, sure, I'll come. with an ICO to solve cancer or whatever bullshit. And so to the tune of tens of billions of dollars of supply. And demand kept eating it up until it didn't, until demand eventually started to evaporate. And the only reason why demand existed for these assets, 95% of the time people didn't give it about the narrative. They're like, okay, cool, I don't care what this coin does.

They just wanted to flip it. They just wanted to buy it and flip it to the next purchaser. So it was essentially, and I'm hoping to pump and dump. That drove most of the demand in the ICO space was purely driven on the idea that I can flip this to someone else at a higher price. Because almost none of these had anything resembling a real product or anything resembling something real that was solving a problem. Now, when we look at NFTs, they're a little bit different because they're collectibles and more art-based, which is highly subjective. But it feels a little bit of the same vibe. And Charlie Lee had a tweetstone today where he had a couple great points of record.

recommend everyone, check that out. He had some great points around how some other resemblance that he sees between ICOs and NFTs. The way that I see it resemble ICOs, the artist will produce as much NFTs as many NFTs as you want, as long as you keep buying them. If an artist can make $11 million, which makes this artist like one of the most highly paid artists in the world, an artist as a musician artist. This makes three LOW one of the highest paid musicians in the world. Every other musician will print as much supply as demand will be willing to pay. These pieces of art are extremely cheap to create relative to the value that's being generated for the artist selling it. So I think what we're going to see is, is a lot of folks, and I think a lot of the folks buying NFTs,

I think a lot of them aren't buying it because they love Three LOW. A lot of them are probably buying it because they think they can flip it. I'm not personally a fan of Three Lowe. I don't listen to his music. I've got some of my own favorite artists that I'm, of course, early into. I'm not going to go pay a million dollars to have the NFT for a song. And by the way, you don't actually own the song. You just own like the certificate of the song. So I think what we're seeing here in the NFT market is another frothy market where folks think that they can buy the scarce asset in expectation that they can flip it to someone else at a higher value later. And there will be an infinite number of NFTs created. There will be sports NFTs.

which is what we've seen already. There will be maybe porn NFTs, right? The list goes on. It becomes near infinite of the number of certificates you can sell someone. You could have NFTs for literally everything. And so that's what I think we'll see here is a black shoals model of pretty much an infinite number of NFTs, as long as demand is there. And NFTs will be printed until demand is fully satisfied.

And then I think there'll be a turning point where people go, okay, wait a second. Why am I paying a million? for this NFT, and then that sorts of spiral out, just like we saw with ICOs where people are like, wait, okay, no one's going to buy this from you at a higher value. I'm going to stop buying NFTs or I'm going to stop buying ICOs, and then demand starts to really dry up. So I think we're going to see the same sort of function happen with NFTs as well, where, yes, it's a novel, it's a cool idea. I find it very unrealistic that the output,

graphic output from a musician is worth $11 million. This is totally crazy to me because my understanding of the certificate was, or at least my assumption, when I saw some of this taking place, is that then you become the owner of whatever. If it's a song and you buy the song, you get the certificate digitally over a blockchain or however they're managing these NFTs. And then you could then be the owner of all the income that that song could then generate if it's played. bit, it doesn't seem like that's, you're saying that's not the case. I believe that most of these do not have a royalty component. I'm sure some might try to configure it, but I'm pretty sure most don't. Wow.

Crazy. All right. You wrote an article. It's called Bitcoin Security is Fine. And this is a really interesting article because what you're getting at is this idea that right now people, I think, are really familiar with how there's a block reward for every 10-minute block that is mine, the miner that solves the puzzle gets their block reward, but they also get some transaction fees that people are competitively bidding to get their

transaction put into the next block. So as time goes on and we march much further into the future, these rewards start to actually be larger than the block reward that the protocol automatically supplies to the person that finds the next block. You talk about this crossover. You talk about what this is going to lead to. And there's a lot of people that try to make the argument that there's not going to be enough miners that are going to want to capture just the transaction fees as their reward, and it could lead to a blockchain that's not nearly as secure as we see it today or our expectations. Talk to us through how you lay out this argument and kind of where you think that this is going with respect to the security of the blockchain in the long term. All right.

Well, if you're listening, you might either want to grab a cup of coffee or grab a drink because it's going to get a little technical here. Go for it. I'm real curious on this. This is really a fascinating subject. Yeah. So this is where, you know, as I've, you know, I wasn't as familiar with this until a couple of years ago when I started to spend more time researching it. This is where, you know, once you come to realize how intricate proof of work is, how intricate Bitcoin security model is, you understand how very narrow use case for a blockchain can be.

So it's in these moments when I've continually fallen down the rabbit hole of Bitcoin and fell more and more in love with the architecture and also a little bit more negative around other use cases for blockchain technology. So the way that Bitcoin secures itself is Bitcoin issues something. called a block reward to Bitcoin miners. Bitcoin miners through the proof of work function, expend energy and work. They expend energy in the form of proving that they did the work, and they are compensated with the network through this block reward. Now, why is this important? Why do they do this? So miners purchase the equipment. They pipe in energy through the equipment,

and then they are given a validation that they've done the proof of work and they interact with the Bitcoin protocol. And Bitcoin then gives them a certain percentage of the block reward. Now, per block, it's randomized. So you can think about it more like a lottery. So if I'm a miner and I represent 20% of all the hash rate, on average, I will win one out of five blocks. So it's not a percentage per block.

It's on average of I keep mining in my percentage of the hash rate or my percentage of my proof of work relative to the rest of the network is the probabilistic percentage of all the block awards during the time period that I operated within that I'll receive. What the miners are doing when they when they find a new block, the new block consists, so each block consists of newly minted Bitcoin's called the block subsidy and transaction fees. So the miners are performing a couple functions here when they're when they're finding a new Bitcoin block. They're not only issuing new units, so the block subsidy, they're also validating and including transactions in that 10-minute block. So that's a function of protecting the ledger, if you will. We can think about it in the way

of that these miners are receiving this block reward, which is comprised of the newly minted Bitcoin's that the block subsidy, plus transaction fees that people attach their transactions to be included. It's what they pay the miners to be included in that block. And that total some value called the block reward is what incentivizes miners to behave properly. Miners have spent all this money buying these specialized computers that are only useful for mining Bitcoin. They've piped electricity through it. And they are ordering these blocks in a sequential fashion. And they're being compensated with the block reward because they're doing it properly. That is what secures Bitcoin's linear time, if you will, of the series of transactions that occur.

We know definitively that the ownership of this coin is owned by this UTXO because it occurred a certain time, and that is recorded in this ledger, this chain of blocks, this blockchain. We know that, okay, the ownership of these coins exist to party A instead of party B because that newer transaction occurred later. So these miners are compensated with the blocker order to behave properly, get all these transactions ordered in the right sequence. And they could, you know, a 51% attack could occur if miners are willing to behave improperly. Now, the miners have already bought the equipment and piped electricity through it, which costs a lot. And so the miners would have

to be willing to sacrifice the block reward in order to mess with the ordering of transactions. Because what would happen is then people would become less confident in Bitcoin if miners started to behave improperly, which means that the value of the block reward would drop. And so the miners would be shooting themselves in the foot, essentially. And they've already expended all their money buying these specialized equipment that can't be used for anything else. So that's the fundamental game theory that protects, that not only issues new Bitcoin, but also protects the ledger, is that these miners are financially incentivized to behave properly and do their job of ordering transactions in the right direction. The total cost, the total like annualized,

block reward value, I think right now, is around $8 billion to $10 billion. So you can find a pretty raw aggregate metric here to quantify how much money it would cost for someone to attack Bitcoin because someone has to not care about the money. They have to be willing to burn the money because the only way to perform this attack is to buy the equipment, run electricity through it, and then start to misbehave, which makes the value that you receive in the form of a block reward be worth a lot less. So you have to be essentially willing to burn the money. The concern is that over time, the subsidy inside the block order, the subsidy being the newly minted Bitcoins, through Bitcoin's issuance schedule every four years, the number of newly minted Bitcoin's being produced

in a block drops in half. And the worry is that over time, transaction fees will not rise to compensate for the drop in the block subsidy. So essentially what's happening is the rate, the issuance of newly minted Bitcoin is slowing down. And the worry is that people won't pay more and more money and transaction fees in order to continue the same level of security spend or the same level of the blockbord spend as there was historically. So there's a couple ways to think about this. One is that we don't know what an appropriate level of blockchain security spend should be. We don't know if that's $1 billion, $5 billion, $10 billion or $100 billion. The way that we phrase that, the way that Nick Carter phrased it is that is a threshold security model. There's some

sort of a threshold in which there's a level of $10 billion, $100 billion. And once we get over that, Bitcoin is super secure even against state level attacks. There's the stock and flow models, which are more around security spend as a percentage of Bitcoin's market cap. And then there's also the flow valuation method of looking at what's our security spend per amount of money flowing on chain, how much value flowing on chain and how much security spend every spending. I think that no one knows because Bitcoin, And so here's the weird thing is that Bitcoin's security spend, so the amount of money paid to miners in the form of a block reward over time has increased exponentially. Bitcoin's total annualized. I use annualized because it's an easier sum to come up with, just to think about, you know, we're talking back in 2013.

We're talking tens of millions or hundreds of millions of dollars annualized would be the amount in the security, the security spend. And now we're in the tens of billions. So Bitcoin has, while the subsidy has been. and decreasing through halvings, the total value of the block reward has increased exponentially due to the appreciation of the price of Bitcoin and the rise of transaction fees being paid per Bitcoin transaction. So over time, we've seen the total block reward value go up a whole bunch. And Bitcoin hadn't been attacked before when the total value was worth much less. And so it's really hard to know, are we secure or not?

And so it's a very subjective thing. I do think a $10 billion annualized security spend is high. There's only a few attackers who'd be willing to spend that sort of capital. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer.

VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC to or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with Vantta. That's not just faster compliance, it's more time for growth.

If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at vanta.com slash billionaires. That's vanta.com slash billionaires. Ever wanted to explore the world of online trading but haven't dared try? The futures market is more active now than ever before and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, Forex, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone.

Deposit with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for. See a trading opportunity. You'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytics. tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit Plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion

dollar investors don't typically park their cash in high-yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise Income Fund, which has more than $600 million invested and a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise Income Fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%.

Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund's perspective. at fundrise.com slash income. This is a paid advertisement. All right, back to the show. I think another important point to kind of add to that is just the production of hardware and the consolidation of hardware and the time that would be required to do something like that without anybody in the market noticing or raising a red flag saying, hey, I think there's some issues here. Why are mining rigs getting so expensive all the sudden? And why is there such a

substantial delay in delivery because somebody or some entity is acquiring all this hardware? So I think that there would be a lot of signaling that would occur in the marketplace just for hardware well in advance of something like that just coming online out of nowhere. Yeah. I mean, this topic is really nuanced. I was surprised you brought it up because there's a lot of different rabbit holes to this. Yeah, what you're talking about is, for example, there's only so many number of foundries or chip manufacturing facilities that can produce these A6, A6 being this specific machinery that's used to mine Bitcoin. And yeah, we would be able to see this activity occurring far in advance because we'd see the price of these A6 start to skyrocket. Yeah. And we would go,

oh, okay, well, who's buying all these? Which is funny because then that actually might send a signal to the market that maybe everyone starts to buy the ASICs and then maybe more foundries are created. So, you know, the game theory behind Bitcoin is really interesting. You know, I wanted to cover the basics of the block reward function and the circumstance that was happening with the decline of the subsidy because that's where people are worried that transaction fees won't compensate. But yeah, there's even deeper game theory that plays out here of like what happens if someone actually attempts to do this.

So, you know, this raw number of currently around like $10 billion worth of annualized. spend in the block reward. You know, this is, again, like I mentioned earlier, we don't know what an appropriate level of security spend is. There's a lot of other ways to counter an attack like this. So it isn't a guaranteed successful attack. This is just a way to disrupt the tip of the blockchain. And remember, there are other good miners here, too.

So there's all sorts of games that can be played that get really, really technical. So what I did is I looked at, I'm a product guy. So my background's in growth, both on product management and growth marketing. And I've worked at companies like Uber on writer growth and the growth marketing team and at crypto startups. Currently what I do over at Cracken, I lead growth marketing and a little bit of a little touch of growth product. So the way that we look at how to build products is we develop KPIs, key performance indicators,

to calibrate all of our actions. Why am I building this new feature? Well, this new feature will get us more users or the users will become more engaged with the product and ultimately both of those drive more revenue. We use KPI's as the alignment mechanism to align our efforts. When we look at a KPI or a way to monitor performance for Bitcoin's security model, a good way to look at it would be transaction fees over the block subsidy. So what that metric gives us in Glass Node, by the way, has this metric, which is really

awesome. And so what this metric shows us is our transaction fees replacing the subsidy over time. And what we're seeing is that they roughly are. Now, Bitcoin has many, many, many havings ahead of it and a lot of price appreciation, which we all hypothesize. With that, you know, we've got a lot of time for this to be figured out. This doesn't have to be figured out immediately. We've got like 10 to 15 years before we'd see signs that there might be an issue.

And what we're seeing is over a very long period of time, transaction fees indeed are replacing the block subsidy, which, you know, that worrisome moment that transaction fees won't be large enough in value to properly incentivize these miners. I don't think we're seeing that. First and foremost, we don't even know what that value would be. So when people go, oh, we, this Bitcoin's long-term security could be poor. I'm like, cool, what value is that? Because that's totally subjective.

Number two, if we look at the primary KPI that would indicate if this is trending in the right direction, things look fine. I think Bitcoin as of this moment. All right, Preston. So I just pulled up last no data and the percentage minor revenue from fees for Bitcoin is around between 10 and 15%. So, and if we look at it on a log chart over time, again, anyone can look up this data on their own on GlassNode. It's very much trending in the right direction. Now, I'll go ahead and preemptively address some of the concerns that people throw up because

I've debated dozens of people on this topic. What they claim is that the price elasticity, that the transactors affinity to go pay a higher fee or how price inelastic they are, there's concerns that people will choose not to pay higher and higher transaction fees on Bitcoin's blockchain. So that's where they go, oh, cool, well, you're seeing transaction fees as a percentage of minor revenue go up, but it's going to get capped out because people at a certain amount will stop paying that. I think we're pretty far away from that. And what I used was real-world comps to calibrate how much people might be willing to spend on a layer one transaction. So we have a couple of different ways to think through this. One, we've got

US dollar wires. Those are between $20 and $40 round trip. And people pay those every day. People are very willing to pay those as a way to settle large amounts of value. And so Bitcoin transaction fees could hit a median. So not just like, you know, not just like a peak, but like the average transaction or the median transaction could be around $20 to $40. And I don't think anyone would bat an eye. But I think we can go much higher than that as well. Bitcoin isn't just a wire.

Bitcoin is like an offshore bank account. It's like a physical gold settlement. physical gold settlement is extremely expensive. In terms of a dollar value, it's so prohibitively expensive to physically settle gold that it occurs very rarely. But when they do do it, they've got like Brinks security trucks, security individuals. When Germany repatriated its gold from the U.S. and the U.K., it took like three years and like $10 million. And so we've got that. So physical gold settlement.

And then we have, we've got a couple other transaction types. We have offshore banking. And offshore banking is set up an offshore bank account is at least in the thousands of dollars. In addition to wiring money on occasion, we're paying international wire fees of 40 to 60 bucks. So people are willing to pay thousands of dollars. And there's also a management fee with a lot of these banks in offshore banking to manage your money. So people are paying thousands or tens of thousands or millions of dollars to facilitate the movement of large amounts of capital. Then we also have like a real estate transaction.

You know, you've got like title insurance for a real estate transaction. You've got broker fees. You've got all of these fees associated with it. So Bitcoin as a store value asset to pay, you know, what I would estimate like long-term transaction fees around like $50 to $100 per transaction, seems pretty reasonable to me, especially compared to these other real-world transaction types that are closely equivalent to a Bitcoin store-value transaction. I think this is why I get very annoyed with the payments narrative.

And not only is it damaging to Bitcoin's adoption because you're, you know, we sold a Bitcoin cash hard fork, which was due to a misperception that Bitcoin should be used as a cheap PayPal. You also lead to a circumstance where people become very disenfranchised with Bitcoin. Fees will rise. We have essentially a fixed amount of block space for just easy, easy math here. It's basically fixed. And we have a lot of demand that will increase for this block space. So block spaces is the space that transactions can be put into a block.

And so it's like a fixed parcel of land and we got a lot of people coming in. And so transaction fees will naturally rise. And so these payments narrative folks, I find it really disingenuous because I'm like, transaction fees for Bitcoin will rise. We can all see it. It's a supply and demand function. And this is good for Bitcoin because it means that the long-term security will be great. Well, and it also doesn't prohibit from being used as a payment mechanism,

at least on the layer two, like we were talking about earlier. So although a person might be listening to this and saying, well, that's crazy, no one's ever going to use this thing on a day-to-day basis if the transaction fees are 20 or $30. But I would tell you, if you're doing any type of meaningful amount of $10,000 or more, which those types of transactions are happening all day long, all across the globe. And so are your $10 transactions, which would be happening on the second layer for near nothing in fees and you have immediate settlement. So that's a good point around layer two facilitating those lower value transaction types. But I think it's when I talk about disingenuous with the payments folks,

it's because they promote layer one being used for that. I'm like, well, that's not going to happen. Nick Carter, again, Nick Carter is a great thought leader in this space. He's currently in a battle with a guy named Mirage to get to 100,000 Twitter followers. So if you're listening to this, follow Nick Carter on Twitter. We got to have a beat Naraj. For sure. Nick is brilliant. Yes. Nick has a great way of explaining this, which is that Bitcoin layer one transactions,

that's a cargo ship. The containers are like layer two. We put a bunch of containers on a cargo ship and move it in a layer one transaction. You don't try to move those little containers, one little container on an entire cargo ship. You put a whole bunch of them on there. Like we talked about before with lightning, there's a lot of economic density there. There's a lot of like smaller value transactions on layer two that occur and those net out on layer one. And the reason why we use layer two is it's a proper way to scale. There's a lot of different reasons why. But the TLDR is that trying to scale on layer one essentially would make Bitcoin equivalent

to a visa where you've got three servers in the world. It could facilitate a lot of transactions, but it's not very decentralized. And so Bitcoin's block space on layer one needs to remain small and compact. And that's where we push scaling solutions to layer two, where we don't need a completely trustless environment or a trust minimum. economized environment, we sacrifice a little bit of that for speed and cost. And that's what these layers upon Bitcoin provide with like layer two like lightning. When you think about the technology adoption curve, and so folks that might not be intimately familiar with this, you have the early

innovators, you have early adopters, then you start getting into early majority, late majority, and then the laggards. We're at a trillion dollars right now in market cap for Bitcoin. Where do you see where we're at in that technology adoption curve? That's a really good question. I mean, if we look at some of the raw numbers of market penetration, so percentage ownership, depends on the country, depends on, you know, a lot of like Western, like a lot of European countries, the United States have higher penetration in terms of ownership. Some countries like Korea, I think during 2017, had double digit percentage ownership of crypto.

And so I think on Bitcoin's adoption curve, you know, I'd say we're still very early stages. I think like the number of the estimated number of unique Bitcoin hoddlers is probably around 100 million. And this is a guesstimate from survey data, from people compiling unique user numbers from Coinbase and Cracken and other companies, other exchanges and brokerages. So I think 100 million is probably a reasonable, and it's just some easy math here, right? So we've got around 7.7 billion people on Earth. So we're talking a pretty low percentage on Bitcoin.

And so I would say we're still in the very early sort of adoption cycle of Bitcoin. And at a trillion dollars, so that's one way to think about it is the number of unique holders compared to the world population. And then you've got a metric which would be around like valuation. So market capitalization, the total value of all Bitcoin. So Bitcoin as an asset. One trillion dollars was a huge moment for Bitcoin. I thought that was incredible.

$1 trillion solidifies Bitcoin as a real asset, a mature real asset that can be taken seriously by institutional investors. And a trillion dollars, though, isn't that big. And if we look at other store value assets, Bitcoin, I think, has a long way to run. Gold itself is worth around $10 trillion. We've got other store value assets like real estate and the hundreds of trillions. For example, like London and I bucket real estate into that. Some people are like, why are you talking about real estate as a store of value asset?

Well, the raw utility of your home, a very low percentage of the value of your home is the raw utility of the home. A lot of the value of the home is in the owning a fixed parcel of land or a fixed amount of space that can't be easily printed. So scarcity of the land. Hence why we see you've got cities like New York City in London that are used. And some of these homes are purely, I mean, basically purely used as a store value asset where you've got wealthy Saudi Arabians or Russians who purchase a $10 million home in London

and never live there. So, you know, that's why a bucket real estate into a store value or another type of asset that Bitcoin competes with. You've also got like essentially broad money metrics around like how much fiat money is out there. You've got sovereign bonds, which are like a hundred trillion dollar market. These are a little bit rounded. I'm sure these numbers aren't exact. So don't take these verbatim as.

as exact metrics here. But these are directionally accurate in terms of size of market. So what I'm trying to say here is that Bitcoin at a trillion dollars is a very small store value asset relative to all these other store value assets out there. And I would say it has a supremely superior, like supremely better characteristics as a store of value asset. And so Bitcoin is, and then also the supply of gold is unknown. We don't know how much gold has been mined.

We don't know how much gold will be mined. With Bitcoin, we have extreme mathematical precision over its supply, and it's instantly transferable to anyone in the world. So Bitcoin is definitively a superior asset relative to gold. And then when we look at real estate, as we mentioned before, one home does not equal one home. There are maintenance costs because the real estate exists in the physical world, which has weather and all sorts of other mechanisms that erode its value versus Bitcoin, which can be stored on a piece of metal and blocked away somewhere super cheap for eternity.

So Bitcoin as a store value asset is incredible in terms of its characteristics. And that's why I think Bitcoin will very much e-gobble up the gold market capitalization, fiat, sovereign bonds, and likely some of real estate, which puts it in the tens or hundreds of trillions of dollars worth of value. What are your thoughts on some of the on-chain data that you're seeing right now compared to previous cycles? That's a good question. I'm not parsing through on-chain analytics like super often.

There are some interesting ones that I've heard about in terms of like I hear about it on Twitter and through my personal network. One would be like supply of coins held on exchanges. I think this is a really interesting metric around people can look at the aggregate number of Bitcoin that are held on centralized exchanges like the company I work at Crackin, Coinbase, etc. And the total value of Bitcoin held, the total number of Bitcoin held by these exchanges is dropping over time. And people hypothesize what's occurring is that institutional investors are buying it and then either self-custaging it or moving it and custody it elsewhere. People think that this is a bullish thing because it reduces the amount of supply on exchange, which has the potential to reduce sell-side pressure. The only way people can buy Bitcoin is if someone's willing to sell it. And if there's less

and less sellers and there's more demand, number go up. That's the TLDR of that idea. I think it's pretty interesting. You know, I do think the 21 million hard cap is such a brilliant, beautiful thing of that 21. I mean, there's only 21 million. There's no supply response. So with gold, if gold becomes more valuable, we can dig deeper into the earth to find more and more gold, but we can't do that with Bitcoin. As demand increases for Bitcoin, supply doesn't do anything. Supply is like, cool. All right, 10 times a number of people want Bitcoin, tough luck. And so that's what leads to Bitcoin's a volatile. which is a good thing, leads to volatility in Bitcoin's exponential rises in price.

So I think it's a, I think the supply at exchanges definitely demonstrates less and less sell side pressure. So I think that's a bullish metric that I found particularly interesting. All right. So rumor has it you're making a documentary. I'm kind of curious how that's going. And then talk to us about the methodology of how you're going through the like the layout of how you want to present your documentary.

I'm actually participating in two. So these are other individuals' documentaries on Bitcoin in the ecosystem, and I've been asked to participate in two of them. So that's what I tweeted about the other day. Now, there is something I will bring up that I am working on. That's a video project. So I have stood up a YouTube channel, so I first got started with my personal brand on Twitter.

And I've got about 140,000 followers on Twitter. I'm at Dan Held on Twitter, by the way, for folks who want to check that out. and I recently started to spin up a couple other channels. So I spun up my newsletter. And so if you want to know some of these longer form topics, check that out as well. It's Dan Held Substack. If you Google that, you'll go find it. It's called The Held Report.

And the Held Report started to make some money because I write this weekly. It's kind of my more intimate thoughts around Bitcoin and different niche topics within the Bitcoin ecosystem. Like I go deep on price. I go deep on Bitcoin versus Ethereum. But what I really love is video. Video content is super cool, and I spun up a YouTube channel about three months ago. And so I've just started to build that up, which has been really fun.

I fly drones for fun, and I've taken that footage, and I've had to use Premiere Pro and cut it up and craft narratives. I think video is an extremely compelling medium to convey topics about Bitcoin. So what I'm doing is I'm working with my animator to try to build out a video series of very compressed ways to talk about Bitcoin and how Bitcoin works. That is me walking you through it combined with visual imagery that I handcrafted with my designer Sven. Sven knows after effects, and he knows how to animate all this. And so what we do is I sit down and I sketch it and sketch out a time series, essentially, of what this visualization will look like. And then we think through how it's going to be rendered and him and I work together on it. So I'm really excited to bring this up because

It's something where him and I are just now working on this. It takes a ton of time to not only script it. So you've got to write a script for the video. You've also got to, you know, for example, like in the video I point and in animation forms, so I have to time it very precisely. I'm very, very particular with animations that I create. So Sven and I have created a bunch before. If you've seen a black and white GIF on Twitter that has to do with Bitcoin, it's probably

one of mine. And so we've already done this with different Bitcoin topics. And so I'm trying to compress Bitcoin's narrative to the maximum compression and simplicity as possible. So I'm really excited about video content. It's really cool because you can repurpose it. So if we build it for YouTube, we can also take it and put it on LinkedIn, Instagram, Twitter. And so I'm really stoked about that. So, yeah, I'm not doing a documentary.

I'm participating in two documentaries, but I am producing a series of videos. And I don't have an exact date as to when these come out. I want to get it done in the next three months. but we'll see if that actually happens. Video content has a lot of work. It's a lot more than audio work, that's for sure. And audio is a bunch of work too. I mean, Preston probably has a couple support people that help them out on stuff.

And so, you know, even audio, you know, you got to sit down, take time to record with me. Preston did, you got a bunch of great notes and homework. And I know you asked your followers if they had questions for me too. So, yeah, video content is the maximum amount of work. It definitely is. You know, I've got a full-time job and I also have to keep my girlfriend happy and I still have friends, you know, so I, yeah, I'm going to try to get it done in the next three months, but we'll see if that actually happens. Well, Dan, we're going to have links to all the things that you mentioned in the show notes. Is there anything else that you wanted to highlight or point people towards? I think that's it.

You know, on almost all my content's free, my paid newsletter, if you want to get it first, that comes out Thursdays. A couple days later, I tweet about it because I want to bring these topics out that everyone can hear. But if you really like the way that I explain things, if you want to support me, that's the best way to do it. I think Twitter is where you're going to get kind of Twitter and the newsletter. You're going to get the Rodan held.

So on Twitter, I'm pretty unashamedly speak exactly how I feel about Bitcoin. And same with the newsletter. For example, today I wrote about Bitcoin versus Ethereum. And, you know, this was a topic that had been highly requested. I sent out a survey at the end of every newsletter I write to my readers. And this is the one that they voted for as the number one request a topic. So this one was a kind of a meatier one to begin to. But I give my kind of, you know, very raw feelings about exactly how I feel about Bitcoin and Ethereum and especially compared to each other.

So, yeah, I'd say Twitter and my newsletter are the two best places to kind of stay up to date with what I'm talking about. that's where I hang out the most. Dan, we really appreciate this. And what fun to finally be able to talk in person instead of on the keyboard like we have been for years at this point. So, Dan, thank you for making time. Preston, thanks for having me. And hopefully come back on again and we can cover more topics. You bet.

Hey, so thanks for everybody listening to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you're using. We really appreciate that. And if you have time, leave us a review. So thanks for joining us this week and we'll catch you next Wednesday. Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.