We Study Billionaires - The Investor’s Podcast Network - BTC031: Investments in Bitcoin Tech w/ Alyse Killeen (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone, welcome to our Wednesday release of the podcast where we're talking about Bitcoin. On today's show, I have the founding managing partner of Stillmark Venture Capital firm, Elise Colleen. Elise has been in the Bitcoin space since 2013, and she's a board member for numerous companies that have a prominent brand in the space. One of the things that I personally enjoy learning from Elise is her focus on the core principles of what might work long term and what will potentially commoditize other technologies into the protocols with the best network effects and capacity to expand capabilities at various

Starting point is 00:00:33 layers. During her conversation, we cover a lot of ground to include how she initially got in the Bitcoin, how she views the various opportunities in the space as a venture capitalist, what the boardroom conversations are sounding like, and her thoughts on defy, smart contracts, and much, much more. So without further delay, here's my chat with Elise Colleen. You're listening to Bitcoin Fundamentals by The Investors Podcast. Network. Now for your host, Preston Pish. All right. So like I said in the introduction, I'm here with Elise, Colleen. Elise, welcome to the show. I am really excited to talk to you because I've been a fan.

Starting point is 00:01:23 I've been following your Twitter for quite a while now. And I'm ready to ask you some really cool questions here. So welcome to the show. Thank you. Long time listener, first time guests. So I have also wanted, I've been looking forward to speaking with you for a while and to speaking with your audience, frankly. Here's the question I got for you. When did you first hear about Bitcoin in like what capacity and kind of what was your first impression? 2013.

Starting point is 00:01:51 So I don't remember this, but when I look back in my emails, I see that the first mention of Bitcoin is me pinging someone, me emailing someone on my investment team and saying, we should get the deck from that Bitcoin gaming company. It sounded interesting. That was the first record of mention that I can find. So that was my first rumination on it. And then what happened later that year was that one of the portfolio companies that we were working with was in a co-working sort of space. And I had the opportunity to be seated next to a Bitcoin founder that was mining from his desk.

Starting point is 00:02:32 And so kind of through osmosis and through lunches with him, I was able to sort of go deeper on Bitcoin. And my advantage was that in doing that, I was coming from a background of someone who had studied cloud networking, data center software, these really deep technical infrastructure, new sorts of paradigms. And so when I discovered Bitcoin, I was able to sort of diligence and dig in at the protocol level, which allowed me a bit of a head start, I think. When they were describing it to you, because I know how I, like, when I first was learning about it, it was just kind of like, you can't be serious. Like somebody that we don't even know created this and like, all that kind of stuff was just kind of fascinating.

Starting point is 00:03:19 For me, personally, I'm kind of curious. Was that a similar vantage point for you? Or was it just something that just immediately clicked for you? You know, I think that really what it was is that the design of the Bitcoin blockchain and the incentive systems. that was what was really new, right? Satoshi's introduction of an incentive scheme that allowed for diverse stakeholders to all sort of share an interest that secured the protocol. The design of that was so simple and beautiful. It was seductive, I suppose. And so it really felt like the best

Starting point is 00:03:57 possible use of time. It felt like a way to do well while also doing good work, work that had cultural impact. And what really resonated with me most was the opportunity to have an open and fair financial system that included folks across socioeconomic statuses and a system that would allow folks that were underbanked or unbanked to participate as equals with folks of greater resources. And so I thought that there was no more important work to do. And so being able to engage with founders sort of accelerating that vision was just the best use of time then and in the years since it's still true today. Oh, it is.

Starting point is 00:04:43 Yeah, you're exactly right. As I was doing a little bit of research, your background was interesting to me because you started off studying psychology and statistics out of UCLA and then you went back. You got a master's in psychology. And then it wasn't until later that you went and got a master's in entrepreneurship and valuation and more on a business side. So I'm kind of curious because people will listen to this and I'm sure many people listening to this look up to you and they see your background and kind of how you got your start and they're probably wondering how you evolved into venture capital

Starting point is 00:05:18 and kind of like what that transition was and maybe what the psychology piece was how it was meaningful to you early on and maybe how it still impacts you to the day. So what I studied in undergrad and then at the master's level was really the intersection of cognitive science and immunology. And so that fell under the Department of Psychology. But what that really means is just that I was conducting research and studying stats. So my background was really in research, math, and writing, which is sort of the background of anyone that's working in the sciences at a master's or PhD level.

Starting point is 00:05:54 I dropped out of a PhD program in that study after I got my master's because it started to feel very removed from my own core values and from really, frankly, the family, the common family set of values that I had as someone that grew up with two entrepreneurial grandfathers. And so academia started to feel really isolating, and it felt as though there was, you know, this rigorous pursuit of truth, which I really liked, but that the intention for having impact maybe didn't match the sorts of goals that I had for myself. or the sorts of, you know, I wasn't finding myself aligned with the sorts of people that I really admired. And those were folks like my grandfathers who were, you know, who I saw having a tangible

Starting point is 00:06:43 impact on the sorts of spaces around them. So as an example, one of my grandfathers did large-scale sheet metal and plumbing in San Francisco, so very blue-collar entrepreneurial work. But through that, I got to sort of see his impact and good work on the city. So I would feel like a building would go up and that we would have partially contributed to that. And that the sort of, you know, the sort of integrity he had in his work contributed to the health of the, you know, the spaces that we participated in. And so you can imagine that in academia, there was just, there was a break from that. And so I was producing work that would be, maybe read by 20 folks and that would be, you know, hopefully the goal was to have people cite that work. But then the actual application of it felt really distant. And so I dropped out after getting

Starting point is 00:07:39 my master's and thought that I was dropping out to be an entrepreneur like my grandfathers. And so went into an MBA program to sort of acquire the financial tools. So I had the math background, but not, or the stats background, but not a background in finance. And so that was the intent. of doing an MBA program. And in the course of that, I started doing meat and greet sorts of coffees with VCs off campus. And I thought, you know, I need to build my network to be able to raise money. And very early into that process, one of those folks just said, you know, hey, at least with your math, with your background in math and writing, it makes sense for you to try the other side of the table. And so I did. And that 10-week internship that I agreed to, you know,

Starting point is 00:08:24 I'm 10 years past that now. So, I'd 10-week internship turned into what's now almost a decade in venture capital. Wow. That's awesome. But I'm curious what some of your thoughts are just on the macro landscape. As far as from a financial standpoint, we've got interest rates and we have inflation happening that is looking like it's getting out of control. So how are you kind of tying some of that into the way that you're also viewing Bitcoin,

Starting point is 00:08:54 kind of tying it into Bitcoin? Talk to us about some of those ideas. That's a good question. So I suppose that the impact we see of that is on the opportunities for growth with the consumer tech companies that we back. So as an example, one of the companies that Stilmark is invested in is Kaza, which is a company that provides easy, simple security for folks that are holding Bitcoin, Bitcoin Hodlars. And we will see through Kaza that as the matter.

Starting point is 00:09:27 macro environment creates sort of an unfriendly space for folks, or that as monetary policy becomes overly complex or kind of muddled, or as Paul Tudor Jones said recently, crazy, that folks will escape into Bitcoin and they'll then be thinking about their security, for example, and Kasa will see that first. One of the things that Casa saw is an example of that in the, in like this sort of recent money printing episodes, is that folks would come to Casa and say, listen, I want to enter Bitcoin, but I want to do it in a safe and secure way. I want to set up Casa first. And so that's the sort of thing that we'll see as a result of the macro environment. But, you know, I suppose that my work is less driven by the traditional macro environment and more really driven by what's possible in Bitcoin. as it relates to Bitcoin's maturation as a store of value, and then Bitcoin's growth or advancement

Starting point is 00:10:28 as a technology. So let's plow into that. So first, the store of value piece. I heard your comments down in Miami, and it seems like you're of the opinion that it's kind of unmatched in the store of value space. Bitcoin is amongst cryptocurrencies singularly established as a store of value. And there's multiple reasons for that, but really I think that the primary credit for that goes to the soundness of the tech that underlies Bitcoin, the digital currency. And so, you know, I think that the opportunity for companies in the space and then for folks deploying capital in the space like myself is that there'll be an ecosystem of tools, services, applications that are built around what it means for a first true.

Starting point is 00:11:18 digital currency to exist, a first true digital store of value to exist. We're quite heads down on that and making sure that we're supporting the founders that have a vision for the world post this new framework. So I'm sure I have new listeners that are listening to the show for the first or second or third time or whatever, and they're just getting their feet wet in Bitcoin and they're immediately looking at, well, there's all these other coins like Ethereum, whatnot. Why can't those other coins become the store of value that Bitcoin is? So the first necessary piece for a digital currency to be established as a store of value is that the network should be decentralized and secure. At the very least, it should be secure, and it should be

Starting point is 00:12:05 historically secure. So the security model of the blockchain should be long established. There should be a record of there being a lack of hack or breach at the core protocol level and in any sort of intermediary pieces that are relevant to folks' engagement at the core protocol level. And so Bitcoin is kind of uniquely that. We know that since 2009, Bitcoin has had 99.9 plus percent uptime. There's been zero hacks or breaches at the core protocol. The security model has been stable. So we have proof of work as a security model. That creates a sort of known incentive system for the stakeholders that contribute to Bitcoin and to the security of the network. And it's proven. We have, you know, over a decade, well over a decade behind us with this security

Starting point is 00:13:02 model. That's different, right, from Ethereum that for the past, I'm not sure five, six years has been planning and plotting a switch from proof of work to proof of stake. My understanding is that some point over the next 18 months, there should be a switch from proof of work to proof of stake. And at that point, once there is a switch, then Ethereum will start accumulating years, right? Years of historical proof, that proof of stake is a valid security model for their network. But until that point, we're in sort of this kind of like halfway way place where we understand what the roadmap promises, actually not how effective proof of stake will be at securing a multi-billion dollar network. And so I think that to even guess at

Starting point is 00:13:52 Ethereum's ability to establish ether as a store of value, to even guess at that ahead of proof of stake being instituted and having a couple of years of historical performance behind it is challenging. So here's something that I think you have access to that pretty much everyone in our audience probably doesn't. And that's kind of the conversations that are happening in boardrooms across America. What are they saying? Is this something that's being taken seriously in a majority of tech boardrooms? And the other thing I would ask is, I know Michael Saylor had his Bitcoin conference for the corporate boards back. I think it was in January of this year in 2021. And I'm kind of curious if you think that that had much of an impact.

Starting point is 00:14:35 Well, my understanding, my second hand understanding is that Michael Saylor's been very effective at communicating with other folks, other corporate leaders that have an appetite to learn about something new. You at least have to have somebody that is open-minded enough to consider Frontier Tech and the introduction of a new store of value. And for those folks, my understanding is that Michael Saylor has been very effective. I think separate from his ability to teach is his ability to be an example. And I think that's effective not only for folks that are open and curious, but for folks that have kind of taken a pessimistic view of the space. So the example that Hill said, even without saying much about it, will carry as much weight if not more as what he's doing to educate other sorts of corporate executives.

Starting point is 00:15:33 How about just the conversations? Is this a topic that's brought up in most boardrooms today? Or would you say it's still on the fringes? So I think that folks are certainly keen to understand what's happening with Bitcoin. Here's what has been most surprising to me in this market cycle is that those folks, even folks that haven't been public about their interest in Bitcoin, have learned almost through osmosis. how to really start listening to signal rather than noise. So an example of that is that when we've seen some of the loud energy fud around Bitcoin mining, that's been something that actually hasn't been as distracting to corporate executives as I would have otherwise expected it to be or as it was four years ago. And so there's been sort of this ability to filter messaging that's taken place in folks, even though they haven't been actively engaged in the Bitcoin community.

Starting point is 00:16:39 And it's been surprising to me. But every year, I've been surprised at how quickly folks have ramped up. So as an example, in 2014 and 2015, I was a mentor in a Bitcoin accelerator program that had many corporate participants. and there was sort of broad participation from financial institutions. And that was surprising that. And folks were leaning in on sort of first test cases with companies that were very early and that were really still an R&D stage.

Starting point is 00:17:13 Folks had an appetite for that then. And each progressive year, that's continued to mature. And so I think the conversations you're seeing now are around how to engage with Bitcoin, is a store of value and how to engage in the opportunity that Bitcoin blockchain, the protocol itself, can offer. And I'm not sure that I think in 2013, it would have been hard to imagine that eight years later that Bitcoin would be on the balance sheet of an SMP 500 company. But I expect that by the end of the cycle, that that won't just be one company, but it could be multiple. Let's take a quick break and hear from today's sponsors.

Starting point is 00:17:53 All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've 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.

Starting point is 00:18:39 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 main stage 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 Freedomforum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just

Starting point is 00:19:25 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.

Starting point is 00:19:59 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.

Starting point is 00:20:27 If your revenues are at least in the seven figures, get their free business guide, Dismifying AI at netsuite.com slash study. The guide is free to you at netsuite.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 point is 00:20:50 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 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.

Starting point is 00:21:30 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. This was the most common question that people wanted me to ask you whenever I put it out on

Starting point is 00:22:07 Twitter that we were going to be talking. And it really revolves around smart contracts and decentralized finance or defy. And because people know that you really don't put up with the whole quote unquote shit coin or alt coin. being in the space or all the narratives that are around it. And as a VC, I think that that's given you a lot of credence in the space. But when we look at defy and we look at smart contracts, it almost seems like every single entity that is trying to do something in this space is issuing some type of token. And you have root stock that is happening in coordination with Bitcoin. You have sovereign

Starting point is 00:22:45 that's happening in coordination with Bitcoin. You have stacks that's happening in coordination with Bitcoin, but they all have an inherent token that's associated with them. So what are your thoughts on, is this something that has to take place in order for smart contracts to be a thing on top of Bitcoin? Or is there going to be something else that's a little bit different than that that you think kind of wins out in the end? Well, they certainly don't all have association with a token, right? because you know that I'm on the board of directors at Blockstream, and Blockstream has Liquid Network, which is a side chain to Bitcoin. And Liquid Network, of course, doesn't have a token. I'm not sure that a token is necessary, but you're right that some of the most exciting

Starting point is 00:23:31 activity in the Bitcoin space right now is certainly around smart contracting. And I would say multiplex smart contracting, so greater capabilities of smart contracts. Of course, that's related to DFI. So maybe you'll give me the opportunity to elaborate on some ideas that I would have wanted to discuss earlier at Bitcoin Miami on my panel. We sort of ran out of time. But I think that the Bitcoin space right now is kind of so dynamic that it's hard to fit it all into a 20-minute panel, especially hard if the moderator's not trying to fit it into a 20-minute panel. But frankly, it's just as shiny and sexy as any of the activity happening in other spaces. And so it's fortunate to have the opportunity to talk about that today.

Starting point is 00:24:19 So maybe if I could just mention a few. But I don't want to get ahead of myself. So I want to start by saying that I'm focused on Bitcoin versus Altcoin spaces, really because Bitcoin is where there's sound tech. And because Bitcoin is where there's a stable and secure protocol that can be built upon. And so, of course, as a VC, my job is to deploy capital into companies that are building in sort of a sound tech state. We don't have control over open source development in a decentralized blockchain system.

Starting point is 00:24:56 And so because of that, we have to acknowledge the state of the system without thinking that we will have influence on it, undue influence on it. And given those dynamics, the options are pretty limited, right? It's Bitcoin. So now I'll talk a little bit about smart contracting opportunities that exist in the Bitcoin space. And please feel free to cut me off. I'd be happy to dig in anywhere. Something that I've been looking at since really 2014 is the concept of automated rev share. And so in 2014, 2015, something like this, there was a company called STEM out of Los Angeles. The company is still in existence today, but in 2015 or 2014, they were focused on automating rev share through programmable Bitcoin, basically. And what that

Starting point is 00:25:45 meant to them was that collaborative contributors in the music space specifically could sort of establish a smart contract that they would agree to in advance and that would automate the sharing of payments that happened on platforms like a Spotify. And so, of course, this company was just sort of ahead of their time, really, right? So the capability for that was rough then, but it exists now. And so that's a space that I'm quite interested in. So that's the automated revenue share space, which can today be done on Liquid. But we see that with a company like Ellen Bits, for example, and their split payment extension.

Starting point is 00:26:28 And I think that that will be a space that continues to develop in 2021 and 2022. So maybe let me stop there to see if what I just said made sense. It sounds a little bit like the buzzword NFTs where you've got these non-fungible tokens. Let's say you have a song that you create. And then it's generating revenue because it's being streamed on whatever platform. And then some of that revenue is coming back to the owner of that non-fungible token that's associated with the song. Is that what you're getting at?

Starting point is 00:26:59 And I think you're suggesting that like on Liquid, which doesn't have its own innate token, that something like this could take place without there having to be some type of gas fee, most people equate to Ethereum. So for automated RefShare, the protocol that I'm particularly excited about seeing that develop on is actually Lightning Network. And it's possible today through PTLCs. And so that is point time lock contracts. And I believe that's what LMBits is using for their split payments extension.

Starting point is 00:27:35 My job as a VC is just to acknowledge the tech that exists and be open to the capabilities that that unlocks. And then to help founders quickly actualize the vision they have. have to provide consumer enterprise value given the state of the tech. And then at the same time, my job is to also kind of acknowledge the flip side of that. So given the state of the tech at the protocol level, at Bitcoin Core, Lightning Network Protocol, Liquid Protocol, et cetera, is to acknowledge the state of the tech and what can't be done so that founders don't get in a position of raising a financing based on metrics that

Starting point is 00:28:16 aren't achievable, simply given the state of the open source technology that they depend on. An example of that going wrong, you might be familiar with, is the investment that went into Bitcoin payment processors in 2014, 2015-ish. So you knew if you had studied Satoshi's dialogue in the cipher punk forums. You knew if you had studied that space, his conversations with Hal and others, that in order to get sort of MasterCard or Visa-scale transaction volume, you would need a second-layer protocol like a Lightning Network. However, if you didn't have that context in 2014, it might have made sense to back a Bitcoin payments processing company, even though the open-source protocol that facilitated that sort of application wasn't ready for it. And so my primary

Starting point is 00:29:11 job is to know the protocols well enough so I understand what's possible and what's not possible. And one of the things that's possible today through smart contracts is something like an automated rev share. Another possibility that we're just beginning to explore is escrow contracts. So of course, that can happen on Bitcoin core protocol, but it can also happen on the Lightning Network and on side chains. We're also looking at things like DLCs, which can be used for option contracts or other forms of escrowed trades. Yeah, and for anybody that's interested on the DLCs, we did an entire episode with Pierre O'Shard and Ben.

Starting point is 00:29:51 So if people interested in that, I'll have a link to that episode in our show notes if people are wanting to learn more about discrete log contracts. And this also enables a form of smart contracting that takes place right on the base layer of Bitcoin, which is something, correct me if I'm wrong, I believe this has just been kind of uncovered in the past like 12 to 24 months that people, encryption experts have discovered that we can do these types of things. So it's just getting to the maturation level as this discovery is kind of taking place. Exactly.

Starting point is 00:30:23 And that's one of the exciting things that taproot unlocks as well as the ability to have DLCs in a lightning network environment so that they can be quickly traded peer to peer. And so it's not just a taproot that needs to exist for that, but my understanding is that one of the exciting things about taproot is that it enables DLCs in a lightning network environment so that they can be traded peer-to-peer and quickly. So it's not just taproot that's necessary for that to happen in a lightning environment, but also for barrier escrow to exist in a lightning implementation. And so we're maybe a couple steps away, but yet much closer than we were.

Starting point is 00:31:05 prior to taproot locking in. You know what's interesting about how I'm understanding your thesis is that you're starting off with we have to have sound money at the base layer. It's non-negotiable and we have to have something that's proven like you're building a house, right? The foundation on the house has to be rock solid. And then we can go on and do all these other things. And the technology can get there.

Starting point is 00:31:31 It's not nearly as mature as maybe trying to do it on the base layer. but call it like Ethereum or whatever else. But when we look at trying to do it on the base layer like they've done to date, it's not scalable, which means they have to transition and pivot into these other changing and morphing proof of stake, which is like the engine of the entire protocol. They're having to do these like open heart surgeries on the protocol in order to potentially allow them to scale. Am I characterizing that correctly is like your overall kind of thesis for how this is going to move forward?

Starting point is 00:32:07 Well, I think that's exactly right. So if you don't start with a decentralized and sound base layer, then you sort of have to try to hack it together in other ways. And I think the other thing, though, that you have to do is sort of obfuscate the fact that you don't have a sound and stable base layer by meaning, you know, a different truth into existence. And I think we see that a lot in other spaces. So Bitcoin, to me, feels really like folks that are heads down on the science and the technology

Starting point is 00:32:40 and then promote what they've achieved, what they have proved they can do in current day. Other spaces market what they expect to be able to do in the future. And so that can feel more exciting. But what I think the mission of Bitcoiners really should be in 2021 and maybe going forward is to be maybe more publicly excited about how active the space actually is and less hesitant to talk about what's on the roadmap and what that enables. So, Elise, talk to us a little bit more about the Lightning Network and maybe some of the things that maybe you're excited about most in that space right now.

Starting point is 00:33:22 Smart contracts in the Lightning Space starts to really press the boundaries of our imagination. And so when you see an opportunity like that, you know that the world's best entrepreneurs are going to be paying attention to it. And so I am also paying attention to it. Specifically, an example that really sort of has really sort of hooked me is the ability to denominate lightning channels in a currency other than Bitcoin through the existence of smart contracts in the lightning network space. So as an example, you can have a USD denominated lightning channel.

Starting point is 00:34:00 through smart contracts on Lightning Network. And so that would be a Bitcoin collateralized USD Lightning Channel. Then we have the ability to transact peer-to-peer instantly and almost for free in USD without relying on an external stable coin. So the possibilities of that, I think, are kind of endless. And really what it looks like is the promise that Facebook's DM came to the market with. And so we start to see how we can really unlock a breadth of utility on Bitcoin in a Bitcoin native environment without needing the existence of other tokens, even including stable coins. Wow. So I was going to go with my next question about stable coins. I'm not understanding how something like that would be possible because my understanding is that with a stable coin, you get immediate clearance for if you're doing a two-way atomic swap kind of peg.

Starting point is 00:34:56 Is this not requiring something like that? Help me understand how this would be put into application, I guess. So you would have a smart contract that relied on an external oracle or a set of oracles that said when the exchange rate of Bitcoin to USD changes, so does the balance between held in this channel. And so in that way, one side of the channel would be holding the value of that channel in USD. And the other side of the channel would be essentially like a long Bitcoin position. Interesting. Now, for people that are hearing that and maybe didn't hear my conversation with Ben

Starting point is 00:35:36 and Pierre on the DLCs, the discrete log contracts, they're going to hear oracles and then they're going to immediately think, well, now you're needing a token like link or some other Oracle token in order to get the data to say what the price of the dollar is. And you're nodding your head and I can see it and I know where you're going to go with this. So explain the people why that's not true. It's hard for me to understand the argument that that is true. So of course, you don't need a token. All you really need is a variable on the contract that says this is how we define the Oracle that we will rely on. And it could look something like, for instance, what Bitmex does or what other exchanges do where there's multiple sources of the exchange rate

Starting point is 00:36:21 that are pulled in. The outliers are dropped. And then the median of the rest of the range is considered the truth on the exchange rate for purposes of that contract. And do you see for the incentive for an exchange to publish this information and this data that then would be consumed in this contract, do you find that some of these exchanges might be requiring some type of fee or payment in Bitcoin or dollars or whatever whenever the contract's being established? Or do you think that there's going to be some type of standard that stood up? Because it really kind of comes down to the fidelity of that data and then how many other sources you're pinging in order to receive it. So what are some of your thoughts on that? I think that's a great question. So, you know, frankly, to give you

Starting point is 00:37:07 transparency on my process, that's the sort of question that I would ask founders building in the space to understand their business model and the scale that they needed to achieve in order to be, you a company that grows to be a significant size with this sort of business model. But what I expect to happen, my null hypothesis would be that exchanges would ultimately be competing to be a source of truth around this data point and that the fee for provision of this data would be very small, not present. That's my null hypothesis. And we'll see how this space shapes up. But like I said, that earlier in the conversation, my job is really to understand what's possible with the tech and then to sort of identify the founders that are going to actualize the utility, the value that it

Starting point is 00:37:59 can bring to consumers and companies, and then to help them accelerate their work. I think that if you would talk to people that are tracking this space quite closely, I think many of them would be really surprised to hear your opinion, which I completely agree with, which is you don't need a token for the Oracle to ping and retrieve some of that data in order to confirm or deny what the contract value is when you're comparing these two. So I really like that point. And again, I'll have the link to the DLC conversation because I think it's really important to kind of augment what you're saying here, at least. That would be great. It's frankly, I'm confounded by why you would need a token for that. So maybe one piece of context that I can

Starting point is 00:38:42 add here is to say that I come to this, you know, sort of state of focus on Bitcoin after having been early in the what's now known as ICO space. So in fact, in 2014, we did diligence at the firm I was at the time, which was clear some venture partners. I think we were, you know, the second or third VC firm to do diligence in the token sale space. And that was for the token sale for MaidSafe. I say that just to note that it's not that I was closed to the potential for tokens to be necessary to incentivize software participation. We did explore it. We explored it very early. We looked at the first token sales. We looked at the processes behind those token sales. Frankly, they were, you know, more responsible than what we saw happen in later years. There was an opportunity for best practices to be established in those early years. 2014, 2015. And it's just the, what I found from my research and time in the space is that it just

Starting point is 00:39:50 wasn't necessary and there wasn't utility unlocked by that token incentivized software that wouldn't be possible on Bitcoin, that frankly, I expected that Bitcoin would win. And the reason why it would win is there's many reasons. But one of one reason that's relevant to me is that founders, the best founders, are looking to build on a stable and secure tech. And so as utility was unlocked in the Bitcoin environment, founders would gravitate towards Bitcoin and away from other protocols. And we're seeing that happen today with companies, for instance, like Atomic Finance, who started in the Ethereum space and came over to the Bitcoin space once DLCs allowed them to sort of provide the same value that they had imagined being able to provide

Starting point is 00:40:38 in the Ethereum space. But in Bitcoin, we know that they can offer that an environment where the tech is stable, it's dependable, and there won't be a need for, for instance, a deep refactor of their own infrastructure once the security mechanism has changed, which is true in the Ethereum space. I think atomic finance is, a first mover and I expect and have been seeing more leading entrepreneurs switching from other protocols and into the Bitcoin space as utility is unlocked through advancements like Taproot. So one of the things that I'm personally most excited about is this idea that cost of capital

Starting point is 00:41:22 will become a free and open market once again. So when we look at interest rates today and we compare them to just the inflation rate that's actually being published, let alone the... inflation rate that I think many of us expect are real. It's a pittance. Like, I mean, you can go out and you can borrow money for next to nothing with no collateral. And then you're looking at this space where people are over collateralized, aggressively over collateralized, and something that settles immediately 24-7, 365 days a year, and you're collecting interest rates of close to 10% on the U.S. dollar. How do you think that this, when I think about what that might mean moving

Starting point is 00:42:03 forward, do you see decentralized finance peer-to-peer potentially becoming risk-free rates in the overall economy? Do you see things like BlockFi serving a purpose in the future? Do you really kind of see decentralized finance where peer-to-peer lending and borrowing is kind of the main driving factor? And I'm talking five, ten, maybe even 15 years from now. How do you see that space evolving. My preference is for decentralized finance to incur, occur in an environment that is not separated from the core values of Bitcoin. So what I mean by that specifically is that one of the core principles and opportunities of Bitcoin is the opportunity to sort of be your own bank or be your own wallet and to take responsibility for custody into your own hands.

Starting point is 00:43:00 And so when we think about opportunities like lending or other sorts of finance replication of the traditional finance system in the Bitcoin space, what's most interesting is when that capability is unlocked while not compromising on those values. So what does it look like to have lending where you have, you're not giving away control of your Bitcoin for a period? Can you do that? Those are the sorts of opportunities that we are most excited about. But frankly, I try to stay quite open. And so I'm looking to hear how founders understand the opportunity and then matching that, like I said, to the state of the tech and also to, you know, what's special about Bitcoin. Let's take a quick break and hear from today's sponsors.

Starting point is 00:43:48 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 2 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

Starting point is 00:44:19 across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with Vanta. 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?

Starting point is 00:44:51 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, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right for 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

Starting point is 00:45:27 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 analytic 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,

Starting point is 00:46:14 thanks to the Fundrise income fund, which has more than $600 million invested in 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

Starting point is 00:46:54 objectives, risks, charges, and expenses. This and other information can be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. back to the show. When you're receiving a pitch for a business, particularly in this space, in the in the Bitcoin space, what is something that really helps you get confidence or excitement in the project to just, you know, know that you think that it's going to be something special? Well, I think that there's a couple things. There's two things, really. So we're always looking for when Stillmarkbacks a company, that's because we believe that the founders at the helm of that company are the best decision makers in that space, in that category. So an example of that I've

Starting point is 00:47:42 already mentioned is CASA. So CASA sees security as not just a technology challenge, but also as a UI challenge. And the way that Nick Newman and Jameson Lopp are thinking about what it means to offer software that enables individuals to provide their own security and have that be just as robust as you would get if you were dropping dollars at Bank of America, for instance. The leadership there is what's most important. And so when evaluating a founder that's new to me, there's really two things that I look at first. And so one is the founder's vision. And of course, it's important when a VC is evaluating the opportunity to produce a return on that investment. That's what we're doing, right? So it's not an altruistic pursuit, really, although there's some of that because of the space

Starting point is 00:48:33 we work in. But we're looking for companies that can create incredible value for the folks they serve, and that can capture a fraction of that so that they're building billion-dollar businesses. So we're looking at founders that have, frankly, really massive visions. That's the first thing. Is the market significant enough and is the founder thinking aggressively enough? And then we're looking for a team that includes leadership that can really speak with protocol level developers in a toe-to-to-so sort of fashion.

Starting point is 00:49:08 So what that means is what that means practically for the company is that they can understand what's happening at the protocol level today and what the roadmap, what the near-term roadmap looks like and how that's relevant to their business. So a good example of this, a great example of this is Paul E. Toy with L&D work. And Paul, L&D work has two products. One is Sphinx Chat and the other is stack work. And so what Paul is doing is he has this sort of incredible vision for how Lightning Network is relevant to the masses. And what that means to Paul is how can a Bitcoin native financial chat app be interesting to folks even outside of, the Bitcoin space. So it's interesting to us Bitcoiners, right? I know Preston that you have a tribe on Sphinx Chat. I'm a part of that tribe. I, you know, use Bitcoin every day through financial chat and calls on Sphinx Chat. But it's not just about serving us. It's about introducing a sort of decentralized financial chat system. So can we chat be decentralized? Can you use lightning

Starting point is 00:50:15 nodes to allow folks to sort of have their own space where data is transacted so that you don't get these sort of like big data dumps or hacks where there's a central server that all of our data sits on. And if that's penetrated, then we're all sort of in trouble. So Paul's thinking like that. And then that links up with stack work, which is relevant for folks in emerging markets. And for those that don't know, what stackwork is, is it's a mechanical Turk like marketplace, where tasks are done on smartphones.

Starting point is 00:50:47 And most of the workforce, most of the supply side of that is in emerging markets. And folks are earning their first ever smartphones by doing work and getting paid in stats. And so we're looking for founders like that that are really thinking big. So they're thinking, folks like Paul are thinking, what does it mean for the world broadly

Starting point is 00:51:07 now that we have a trusted and secure digital currency, something where scarcity can be assured and where we understand the monetary policies and that those are fixed and that they can't be changed by five guys in a back room. Can that be powerful in emerging markets? Can that be important in chat? So we're looking for founders like that. And then I also mentioned in that example, how a financial chat can sort of be a safer environment and a lightning environment because of the architecture that exists to support it. So that shows his competency and sort of somehow native understanding of this new protocol, that sort of founder is the sort of founder

Starting point is 00:51:50 that we really want to back and be partners with. And the hope is that our network that we bring to the table for them, our understanding of venture capital and building businesses, along with hopefully our understanding of Bitcoin can be in some way meaningful to the founders like that and can help move the needle. That's the first look. What are your thoughts on the big news of El Salvador and what that might mean moving forward? Oh, so that is, that's the reason why I'm in Bitcoin, right? So the reason why I'm in Bitcoin is because I think that everyone, regardless of socioeconomic status, regardless of where you're born, what your gender is, what your race is, I think everyone deserves to be at equal level when they're participating in the financial space or in the

Starting point is 00:52:40 global economy. And so my hope is that what will happen in El Salvador is that because they are so early, they will accrue some sort of oversized advantage through Bitcoin. So I'm hoping to see things like mining introduced in a way that can be meaningful for the population. I'm hoping to see things like folks be empowered through the ability to accept remittances over the Lightning Network versus through Western Union. That's a the hope. We're still quite early. So this is really a sort of wait and see kind of thing. But what I've been really excited about, frankly, was that what I heard when I hear folks in government and El Salvador speak about the opportunity is I hear an acknowledgement of what

Starting point is 00:53:27 Bitcoin can do for the population and an openness to provide that to the population. So an example of that is that Alice Gladstein asked the question, will folks in El Salvador be able to have their own wallets or will they need to use a government provided wallet? And the answer to that was that folks can hold their own wallets. That's still a question mark in the U.S., right? Can you self-custody your own Bitcoin? And in El Salvador, the answer has been, yes, you can. And if that answer, if that remains true, then there's an opportunity for folks in the emerging market of El Salvador to really have unique access to a financial space that allows them to participate in the global economy in a way that I think wasn't possible prior.

Starting point is 00:54:15 Does this set off a chain reaction to other countries that are in a similar situation as El Salvador? That's what I'm hoping. And it seems as though folks are signaling that they want to be a fast follow, so a second mover. And that's not surprising, right? We saw that a little bit with Miami. I think Mayor Swares is doing a wonderful job in Miami. And we've seen that other sorts of city leaders are willing to learn from the lessons that have been accumulated in Miami and are ready to be a sort of second follow to what happens in Miami.

Starting point is 00:54:53 I think we'll see the same in El Salvador. And we've already seen countries sort of publicly flagged that they're willing to do that. And my hope is that in Latin America, that, you know, in South America and Central America, that we see a lot of quick follows. After that, my hope is that those will be Bitcoin follows versus folks sort of being sold a vision of a better Bitcoin. And we see, you know, we see that every alt-coin community leader has boarded a plane, has their bags packed, and is ready to pitch their vision. And the work then for Bitcoiners is to make sure that the resources, educational resources are available both to country government leadership as well as to the population so that the signal can be filtered out from the noise.

Starting point is 00:55:44 If we had elected officials listening to our conversation right now, what would be the message, the point blank message that you would have for them? That Bitcoin is not, I think Bitcoin is not political. So it's not associated. It shouldn't be a Republican, Democrat, libertarian sort of thing. It's not that. Bitcoiners are not a monolith. And, you know, my hope is that it doesn't become a sort of political us versus them thing.

Starting point is 00:56:12 Because I see Bitcoin as fintech for poor people. I understand that that's not how it's often spoken about on Bitcoin. Twitter or in social media spaces, but that's how I see it. And my hope is that the United States doesn't sort of miss the opportunity here. Or my hope is that folks don't choose to politicize this. What would you say to an elected official who's listening that as far as the speed and the way that they go about regulating Bitcoin, what would be your recommendation to them? Well, my recommendation, frankly, would be to understand that Bitcoin is sort of a separate

Starting point is 00:56:55 space than cryptocurrency. So I think to have Bitcoin forced into a bucket of cryptocurrency projects kind of confuses actually what's happening here. Bitcoin as a decentralized network, as a store of value, as a digital money that is software governed. It's quite different from other cryptocurrencies, other protocols that are governed by a few guys that are good at memes. These are different things. And so I think in recognizing and studying cryptocurrency and Bitcoin to the point of understanding that truth is what's required to have an informed decision on the space broadly. And then I think asking the questions about tradeoffs is important.

Starting point is 00:57:41 So one of the disappointments in the messages that have some of the messages, that's come out from folks in the Senate recently has been around a lack of curiosity about the tradeoffs of the technology. And an example of that is the lack of curiosity about why proof of work versus proof of stake and why these sorts of choices were made. And so I think that, you know, the Bitcoin space is really comprised of folks that are, you know, that could have made a lot more money in other ways by, rolling their own token and introducing ICOs and have chosen not to do that. And so asking the

Starting point is 00:58:23 question why and understanding the story behind that, I think, can lead people to a better understanding of really what's happening and how Bitcoin's differentiated. Who is somebody in the space that you pay particular, and you can name as many people as you want or as few as you want, that you pay particular attention to because you just get so much signal out of anything that they say? Well, I was actually, this is so funny you asked me this. I was just thinking about that today. So I actually want to mention two people who have lower than they should follow

Starting point is 00:58:58 accounts on Twitter, which is A.J. Towns, who is just like incredibly brilliant, right? including at thinking through how to prioritize the next set of advancements at Bitcoin protocol level. And then there's a new guy on the engineering team at Blockstream, Sanket, who is just very lovely and very brilliant. And, you know, is not, it's all signal. So you'll get very few tweets from him, but every tweet, including every tweet, including every reply tweet is going to be just pure signal, basically. And so I met him actually in Blockstream's office when he was still an undergrad at University of Chicago. And he was whiteboarding with Peter Wolle for two days straight. And I think if you can hang with Peter at the whiteboard for two

Starting point is 00:59:54 days straight, then you're certainly someone to pay attention to, and I pay attention to him. There's folks that are better known that I'm also paying attention to. And I balance that between three different groups. All were present at Bitcoin 2021, by the way. So let me mention each. First, of course, I'm paying attention to protocol developers. So that's those developing Bitcoin core protocol, lightning protocol, and side chain protocols. I pay attention to all of those sorts of folks.

Starting point is 01:00:27 Of course, that means people like Andrew Pellestra. That means people like Peter, who are already mentioned. And then I'm paying attention to folks whose work was necessarily preceded Bitcoin. So the most important example of that is Adam Back, who is a forefather of Bitcoin, of course. He has a really clear vision of the space and foresight on how the space is going to develop. I've known him since 2014. And what he said in 2014 was like he was a time traveler because what he said in 2014 is kind of what's unfolded in the years since then. I pay attention to all those folks.

Starting point is 01:01:06 Now, the next group of folks that I need to pay attention to, of course, are the folks leading startups in the private space, right? And so those are folks like Paul, I mentioned before, Nick Newman, James and Lopp, all of these sorts of folks. Let me mention a group outside of my portfolio as an example. I pay really close attention to folks like Brock and Andrew at Satoshi Energy, who are really at the forefront of thinking about what it means if you can introduce mining to renewable energies and drop a profit center on wind and solar energy providers and what that would mean both for the energy space and for miners. So I'm paying attention to folks like that. that are category leaders within their workspace and that have established both that they

Starting point is 01:01:56 understand the tech and that then they have some sort of almost proprietary insight about how Bitcoin tech is relevant to their space of expertise like Brock and Andrew in the energy space. Then the third group that I'm paying attention to is folks that are, that their family and their work life exist outside of Bitcoin. And so that was a, the most exciting thing to me about Bitcoin 2021. I don't know if you would agree with this or not, Preston, but to be surrounded by maybe 10,000 people that their work is not Bitcoin, right? Their family life exists outside of these crazy discussions that we have. And they are just there to learn about the tech and to commune with Bitcoiners. They're there because they're excited

Starting point is 01:02:43 about the tech. I listened to those folks to understand how what we're building at the protocol level, what core developers are building at the protocol level, and then what founders are building, you know, hopefully in league with Stilmark, how that impacts their life. Yeah, I agree. The conversations that you were able to have with just everybody who was down there was just fascinating. And everybody had a unique story of how they got into the space and what it meant to them. And it was just, it was really a neat experience. A little overwhelming, but really neat for sure. Okay, last question I have for you, Elise, favorite book or books, however many you want to throw out there. And particularly if you can name at least one Bitcoin book or something that's in the space

Starting point is 01:03:35 that you think is a really valuable read for people that maybe are new. What I'm reading now on the Bitcoin side is the block size war by Johnny from Bitmex and layered money by Nick Batia. Yeah, that's really cool. That's on my desk right now. In the non-bitcoin space, my longtime favorite book is The Agony and the Ecstasy, which is a historical nonfiction, basically, about the, you know, the imagined life of Michaelangelo, and it's just a really brilliant read. So if anyone that's also an art geek like myself will appreciate this book.

Starting point is 01:04:15 Elise, I just want to thank you for coming on the show. I know your time is very valuable and your insights are just amazing. Give people a handoff where they can learn more about you or anything else that you want to highlight. Well, I'd love if founders would visit us at stillmark.com. So that's the website for the venture firm that I lead. and then I'm present and active on Twitter at Elise Colleen. All right. We'll have links to that in the show notes and many of the other things that we were talking about for the show.

Starting point is 01:04:47 And Elise, thanks for coming on. Thank you, Preston. All right, guys. So thanks for listening to the show. If you're enjoying the conversation, be sure to follow us on your favorite podcast app. And if you're interested in having a conversation with me online, you can follow me at Twitter at Preston Pish. All right. That's all I have for this week.

Starting point is 01:05:05 Thanks for joining us, and we'll catch you again next week at the same time. 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.

We Study Billionaires - The Investor’s Podcast Network - BTC031: Investments in Bitcoin Tech w/ Alyse Killeen (Bitcoin Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.