We Study Billionaires - The Investor’s Podcast Network - BTC141: Can Bitcoin Lightning Scale Globally w/ Alexander Leishman (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have Mr. Alexander Leashman, who's the founder, CEO of River Financial. During the show, we talk about whether the Lightning Network has the scaling capacity to take on global transactions without centralizing forces compromising the Bitcoin mission. We talk about the impact of AI and how Bitcoin's immediately settling network with near-zero of fees is potentially one of the ways for its growth to take place. Alex is a software engineer with a master's from Stanford University and is one of the leading experts on Bitcoin's code

Starting point is 00:00:37 and improvement proposals. So we get into the tech. We talk about his entrepreneurial adventures, building such a successful company in such a short amount of time and much, much more. So with that, here's my interview with Mr. Alexander Leishman. You're listening to Bitcoin Fundamentals by The Investors podcast network. Now for your host, Preston Pish. Hey, everyone. Welcome to the show. I'm here with Alex. And we're going to cover some interesting things today, Alex. So welcome to the show. Thanks for having me on. I want to start this off. I'm going to do this a little bit out of order. We're going to talk

Starting point is 00:01:26 about you and the company that you created and all these amazing things you guys are doing kind of in the second half because there's a bunch of topics like current event topics that I just want to pick your brain with personally. And so that's where we're going to start. So everybody's talking about this ETF, right? And to the point where maybe it's gotten a little out of control, but I'm curious from your point of view. And there's a reason I want to start here, because we're going to get into really kind of layer two on this topic in particular. But I'm curious, just your general overview of a Bitcoin ETF, what it means to the space, what it means to Bitcoin, like all that. What's your thoughts?

Starting point is 00:02:03 The way I've always viewed an ETF is it fits the interface that the big money is used to. It just plugs into the existing financial infrastructure for investing, which most capital has access to that's already set up. So what it will do is it will make it a lot easier for the big money to make allocations to Bitcoin. That's the upside, you could say. The downside is the risk that comes with that, which is this becoming. the default way for people to buy Bitcoin, which I don't actually think will happen. I think it will attract a lot of investment, but I think that people will start to realize that their Bitcoin is really trapped in this instrument.

Starting point is 00:02:48 And by buying Bitcoin through this, you're missing out on a lot of the benefits of having the self-sovereign liquid asset immediately at your disposal. I think we'll see people sort of weigh the pros and cons of this. But I think overall, it's going to bring a lot of positive attention to the space. I mean, just from a proportion standpoint, what are we at? 19 million have already been mined and are out there and are not in an ETF, right? So with the remaining amount and how much of that 19 million will get sucked into an ETF, I think it's going to be a pretty small proportion, relatively speaking to the amount

Starting point is 00:03:23 that's actually in circulation that are out there. Any thoughts, additional thoughts on that and like how I think it supports your argument that it's not going to be a driving factor. Yeah, I tend to agree. I don't think it's going to be a massive amounts proportional to the amount of Bitcoin that's already been mined. I mean, I think the sort of the thought of experiment is,

Starting point is 00:03:45 okay, all of the Bitcoin that's been mine is either owned by somebody or lost. What percentage of those people are willing to sell that Bitcoin to BlackRock? Not many. That I know, at least. I'm going to hold through this. You know, maybe long term, we'll see something there.

Starting point is 00:04:01 I think, you know, one risk is potentially like regulatory capture. Black Rock pushes for this as being the only way to buy Bitcoin, making it really, really hard to actually buy Bitcoin yourself and take control of it. So if we start to see moves like that, and then I think we'll know something's afoot. You know, we've seen the regulatory approval come through over in Europe, and I guess they're getting ready to launch an ETF over there. I'm curious, and I know there's really no way to say. one way or the other, but it almost seems like here in the U.S. that there's this competitive piece

Starting point is 00:04:37 that that's why it's being pushed so hard on the SEC, like, hey, come on. Like, we're losing the race here on the global scale of having these products in the market. I wonder if some of that might be also impacting the recent push that you're seeing with BlackRock and whatnot. Have you heard any rumors on that side? It's certainly possible. I don't, you know, it's funny. I think for most people in this industry, the SEC still feels like a black box. And I really don't know. You know, I think that a lot of people there mean well,

Starting point is 00:05:10 they want American capital markets to be the safest in the world. But I do think there's something else in the psyche over there. I think there's like sort of political machinations and how big of a driver is it to try and compete with Europe there? Unclear. I really don't know the answer. So this is where I really want to go with this. So let's say that we get, you know, I don't know how much Bitcoin could flow into one of these

Starting point is 00:05:34 ETF products. At the same time, you have this demand for Bitcoin as an immediately settling, just like currency is, but Bitcoin's different because it's actually money, but this immediate settlement mechanism. As the demand for this immediate settlement mechanism keeps picking up and becomes higher and higher. You're also having an incentive for Bitcoin to be loaded into these channels through the Lightning Network in order for the Bitcoin to actually be used in this manner. I heard you speak in Nashville. And you were talking about the capacity in the channels, not necessarily

Starting point is 00:06:14 being a correlation to what people are accustomed to. And maybe the need for all these coins to be loaded in these channels isn't as high as what some people might suspect it. So there's a lot wrapped into this question. So I'm just curious your thoughts at large. But with all these ETFs now sitting on large swaths of coins and I guess we're warping ourselves five, 10 years into the future, is there going to be a drive for them to load them into channels to collect fees on behalf of these people further making the custodial piece of this even more complex and complicated for the people that are just allocating into an ETF because they just want to turn key solution? So I personally think it's unlikely that large amounts of Bitcoin in the near future will be

Starting point is 00:07:03 able to be efficiently allocated on the Lightning Network to generate yield. The reason for this is because you don't need that much Bitcoin on the Lightning Network to process lots of volume. and if you were to draw the curve of sort of, you know, the theoretical yields you could earn by opening channels in a Lightning Network and facilitating payment routing and the sort of like maybe Y axis is sort of yield in percentage and per month per se and X axis is amount of Bitcoin. You see that drop off pretty quickly. And there's just not like there's just a point where adding more Bitcoin gets you quickly diminishing returns from a percentage. yield perspective and you just quickly drive to zero after putting, I think, a couple hundred to coin on the Lightning Network. And I'm not so sure that that drop off moves substantially over the next five to ten years. But we'll see. It's going to be a very competitive

Starting point is 00:08:01 market. And I don't know that funds will find that risk-adjusted return worth it. So is it the network architecture itself? And when I say that, the connection between various nodes and servicing nodes that are kind of outliers on the network, that's way more important than the amount of coins that are loaded into the channels of the network. Is that what you're saying? Well, what really matters is how much, so if your goal is to earn returns by running a lighty node

Starting point is 00:08:34 and facilitating payment routing, there's a lot of variables here, but at the end of the day, what you actually want is payment flow coming through you times your average fee rate. So you're trying to optimize that number. So opening more channels doesn't necessarily get you more payment flows. You know, the way I like to think about it is almost sort of like running a lightning

Starting point is 00:08:53 note is almost kind of like being Citadel. Like they're trying to get order flow, right? Something to market make. And a lightning note, you're trying to get payment flow. And so there is a number of ways to get payment flow. And obviously to do that, you have to open channels with peers so that, you know, payments were out through you. But you have to be positioned in a network in an optimist.

Starting point is 00:09:13 way, you know, just opening a node, starting a node and opening channels doesn't necessarily mean anyone, why would they route through you and not someone else, right? There has to be a reason. And so I think what we'll see is you'll see a sort of like a paraded distribution of, you know, some really big nodes getting most of the payment flows. And then you get these longer tail nodes. At a company like River, right, we are running a, we have a number of different business lines. One of them is this Lightning Network infrastructure business, which actually gives us proprietary payment flow. Like, we're getting people kind of like, Stripe does for credit cards, right? We're getting people making lightning payments through us.

Starting point is 00:09:47 So that flow is sort of like we have, that's proprietary coming through us. We decide sort of how that gets routed out. So that's another way to get payment flow, sort of playing a higher level game if you think about it that way. So this is through the API that you guys offer through the Lightning Service. Is that what you're referring to, Alex? Yes. Yeah, we have an API that makes it easy for apps to add Lightning payments. And so, you know, Chevo, the app and Salvador uses us and so do a growing number of exchanges and others. I guess when we're thinking about this whole network, this layer two network and the immediate settlement, it's almost like the net producers at the edge of the network, the edge nodes,

Starting point is 00:10:32 are the ones that all these sats are being moved to and people use an abacus to talk about the Lightning Network. And if I'm just trying to intuitively understand where the payment, nodes that are going to collect the highest fees, it's going to be correlated to where most of the buying power is ending up. So let me give you an example. If I'm Apple and I'm a huge net producer and you can see it in their bottom line, and again, for folks listening, we're like five, 10, 15 years into the future trying to understand what this looks like. All those payments are being routed to these types of businesses that are net producers that are actually creating

Starting point is 00:11:11 value in the marketplace because those sats on those abacuses are just all flowing to this entity that's providing value to the marketplace. And then what you're describing is the turnkey services that are providing the route structure or another high level playing or a high level individual that's playing in this space that's collecting fees because they're making that accessible for the smaller entities. You're doing it right now for large entities, but in the few future, if I'm a mom-and-paw business, I'm profitable, like I'm going to go to an entity like you and your API that's turnkey that I don't have to set up any of this infrastructure. Is that really kind of the two entities that are going to benefit the most from this in five or ten years from now?

Starting point is 00:11:58 Yeah, exactly. It's sort of the analogy I would say is it's kind of like Visa, right? theoretically, if you really wanted to, when you were a mom and pop shop, you could build your own credit card payment infrastructure, or you could just use square or strike, right? And that's sort of the analogy here is there's all this complexity behind the scenes and how the lightning network works, how these channels work, blah, blah, blah, blah, blah, blah. But 99% of people are never going to need to know any of this stuff. And they're going to use people who've abstracted away that complexity and made it really, really easy. So, Al, it's a person who's hearing this and they're in their thinking to themselves. Okay, so this sounds like centralization.

Starting point is 00:12:37 Like centralization is bad. This is Bitcoin. And your opinion is the centralization piece just for layer one. And I'm sure that's not your opinion. But it almost seems like market forces are driving these solutions where people are just going to go to a turnkey for layer two. Is that okay that that would be what happens? I think it's inevitable. I think it's just a law of nature, right? Specialization of skills. Everybody can't be an expert in everything. And the people who are experts in building Bitcoin infrastructure will do that better than people who aren't. You know, then they'll do it better than people who are experts at running an Italian restaurant. And people just naturally specialize. I think it's just a fundamental law of economics and

Starting point is 00:13:23 it's just going to play out that way. But the big difference between Bitcoin and the existing system is that you can opt out. You can choose to do it yourselves. you can choose to not trust or rely on anyone else. So the centralization is more just, it's really a layer above the Lightning Network. The Lightning Network itself isn't centralizing. People are building or plugging in to the Lightning Network with big centralized entities, but anyone can plug into the Lightning Network, unlike Visa. So, Alex, there's been a lot of chatter since the Miami Conference because there was an announcement

Starting point is 00:13:55 made down there about ARC, which is another layer two solution. I believe it requires multiple soft forks back to layer one. What I really want to get at is the argument for this arc was proposed that it solves this inbound liquidity issue that you have with lightning. What are your thoughts? Is there actually an issue here with inbound liquidity that prevents it from scaling? And I think that's really kind of the bigger question is, are there scaling concerns or issues with lightning as it is right now?

Starting point is 00:14:31 There are always scaling challenges in building any new system or new protocol. And end down liquidity is certainly one of them. I love the opinion that the Lightning Network killer app in the short term is connecting exchanges, connecting centralized institutions and making moving Bitcoin between these institutions instant, frictionless, and 10xing the user experience for any customers of those services. The reason for that is partly because, of sort of this, if you want to, for consumers who want to run their own nodes, they need someone to open a channel with them so that they can receive payment. Well, that's really challenging

Starting point is 00:15:11 economically because I mean someone else has to lock up capital, Bitcoin, and put that sort of on the Lightning Network to facilitate a future payment to you. Now, with centralized institutions, you have so much volume, so much Bitcoin moving between them that that's justified. It's easy to justify that. There's lots of transaction activity happening there. You get a lot out of putting up little bit of capital. But with these sort of lower volume destinations, consumers, small merchants, etc., how much would someone have to charge to lock up Bitcoin in a channel to you? And so that's sort of this question of, so I think this inbound capital question in Lightning, it really is a fundamental question for these small nodes. Is running a small node in Lightning or having a small node

Starting point is 00:15:53 ever going to be economically viable? And that's, I think that's a question is TBD. I think there will be, it won't be cheap and some people will be willing to pay that price and many won't. And so the question that Arc tries to tackle or the challenge that Arc tries to tackle is, well, how can we avoid having to lock up this capital to one destination? And it makes a number of tradeoffs to accomplish that. And I want to be clear, you know, there's a big difference between a protocol that is running live in production that has been hardened over many years, such as, which Lightning has, to what is still sort of a back of the envelope idea, right?

Starting point is 00:16:32 There's still not an ARC implementation. So it is in a very different category of protocols, I would say. It's still very, very theoretical. And you don't start, you don't really have any confidence in a protocol until you've actually built a system for it, but put it in production. Arc is still really just an idea. And some of the downsides around ARC are that it requires the capital, large capital lockups by these sort of hubs that are sort of, right?

Starting point is 00:16:58 running and facilitating all these payments and the new structure it proposes. You kind of attach yourself to a hub, and it's facilitating payments for everyone in that. And it's also making an on-chain Bitcoin transaction every, I think it's every five to 10 seconds. I think the jury's out. I'm sort of skeptical. It's certainly not a silver bullet. I can already tell you that. I think my guess is that there's going to be innovations and breakthroughs and making lightning more capital efficient that will help move the needle.

Starting point is 00:17:28 faster than Ark will. Yeah, I agree with you, Alex. I think that the more interesting thing about Arc is that it's potentially proposing lightning doesn't scale or that there's issues with lightning. And it forces us to kind of think through maybe a better approach or how we could even improve lightning itself with the issues that are being raised through the arc piece. But I'm curious, generally your thoughts on the maturation of layer. one. Michael Saylor has come out and has kind of suggested that he thinks that we're getting

Starting point is 00:18:04 to a point where maybe we just stop screwing with layer one and we just kind of let it solidify and like, hey, let's start focusing on layer two and other things because we're just introducing potential issues that could corrupt the entire quote unquote experiment. What are your thoughts on that? And I guess soft forks in general from here on now. I think there's merit to the ossification argument. That said, there are known bugs in layer one that we do need to fix at some points with a soft fork. And actually, like, there's a bug where I forget what estimated year it is, but sort of like after the last block reward is produced, more Bitcoin will start being produced again. There's like a, there's like a bug there that we need to just sort of like

Starting point is 00:18:52 fix with a soft fork. The little things like that, you know, we can't totally ossify. There There likely has to be another software. And there's a chance I'm mistaken about that, but I'm pretty sure that's the case. And there are also some other little minor things that would just kind of fix a few words that are sort of known and potential risks to the protocol. There are some changes that probably should be made. And as to whether there should be new changes that unlock functionality, like Covenants, which is this concept in the abstract of being able to define.

Starting point is 00:19:27 define how coins get spent after you send it to somebody that could potentially unlock some interesting use cases for Bitcoin. I'm on the fence with that stuff. It can unlock some cool new things, but at the same time, it does have the risks of introducing a lot more complexity to the protocol, adding one more degree of freedom, one more thing to keep track of. And I think that these conversations are important to have. I do think it's important to really listen to the core devs.

Starting point is 00:19:52 I do think there's a big disconnect between core devs and sort of the Twitter sphere. The core devs, I think would be the first to agree, adding more complexity. There's just enough to do just to maintain the code base right now and improve the code base and add more tests and get people reviewing more PRs for maintenance. Adding yet another big new change is scary. So I'm on the fence. I think it should be done very, very carefully. And Bitcoin Core has always had a very conservative approach to things.

Starting point is 00:20:20 I'm sort of like a maybe soft fork once every five to 10 years kind of person. 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'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,

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Starting point is 00:24:16 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. You know, from my point of view, and I come with this really, hardcore financial vantage point or lens and not so I know you're the CTO like you're a tech guy right you're right in lines of code for me looking at it from this financial lens like the only thing we

Starting point is 00:24:54 have to do is make sure we produce some type of digital store value that can't be debased to solve what I would describe as this monster that's creating all these issues in society because When I look at the debt markets and I look at the central banks that are just debasing money and debasing the value of everything on the planet, we don't need immediate settlement. We don't need any of that stuff to at least like peg this monster to the wall with layer one, right? Now, we could get into a whole argument. Well, we need to get into the argument of immediate settlement next with AI. But we have to get layer one right. We cannot mess it up. And so like every time I'm seeing people saying, oh, we need to do CTV, we need to do drive chains. We need to do all this stuff. I'm just sitting there with my financial hat on and I'm saying, no, stop, slow down. Like, we need to make sure we don't screw up layer one at all costs, no matter what. And maybe what I'm describing is just my fear of not understanding the tech and the proposals. And I'm sure that's a huge part of. And I'm sure that's a huge part of.

Starting point is 00:26:06 it. But if I was going to argue with myself, I would say, I think a lot of these tech people that are introducing these G-Wiz things don't have an appreciation for how insanely broke credit markets are and how broke financial fractional reserve banking is in the world right now. So I guess that's my pitch for agreeing with you that at most five years, 10 years for these soft forks, because like it has to be shaken out. Like, whatever we do. do we have to make sure that we don't screw up layer one. That's all, I guess I can say. I think we're aligned. And I think where we're, what, how I would describe my take is a soft fork and adding any sort of complexity is, is only merited if it can, if there's a strong

Starting point is 00:26:56 argument that this change can make Bitcoin better money. And so, you know, I would say Bitcoin didn't need to launch being programmatic. Like, it didn't need to launch with any. scripting or anything like that. That was sort of premature complexity, Satoshi added. And a lot of it was kind of like never really used, kind of just like technical debt that probably shouldn't be there. But the subset, but he didn't know what would be used. And it turned out that that flexibility unlocked lightning. And I would say that made Bitcoin better money. That is unlocked, you know, the ability for Bitcoin to be better money. And so what are there other things like that? And I think that's sort of how I think about it.

Starting point is 00:27:40 So let's go. So after saying all that, let's talk about AI, immediate settlement, the tasking of resources, computer resourcing, processing for AI. And where this is all heading, where you really need some type of currency that acts like money in that it immediately settles. It's this instrument that is a bare instrument. that doesn't exist with Fiat and can exist with Fiat. Talk to us about that and where you think some of this maybe is going in five to ten years from now.

Starting point is 00:28:18 An analogy I like to use is when the Internet first came out, one way to view it was, oh, it's a better way to send a message to somebody else. That's a better way to transmit information to someone else. And that would have been a very myopic view of what the Internet is. Like, yes, that was true, but the second and third order implications of that were beyond what most people imagine. The instant settlement of value and open network that Lightning provides developers and people writing software applications, many of which will be AI enabled, the implications of that I think

Starting point is 00:28:52 are going to be drastic long term. And I think the jury is still out into exactly what that looks like. I wrote a paper when I was in grad school, actually, about machine-to-machine economies back in 2015 positing this idea that intelligent software agents will be economic actors and will transact with each other via Bitcoin over the internet, each sort of optimizing, each sort of like, you know, has its own sort of optimization function. Like what is it trying to accomplish? And I think we're quite a ways from seeing that. From what I can tell the AI boom we're seeing is very much around sort of LLMs that

Starting point is 00:29:32 I haven't seen sort of this paradigm of them really serving as like long running agents trying to sort of problem solve and like constantly to optimize this for any sort of economic objective. I don't know. I'm not an AI expert. I'm not deep in it. I have a sort of cursory understanding of the tech, but I haven't seen anyone build this sort of paradigm yet. I actually think this is an interesting situation where the tech for transacting value is ahead of the is ahead of the AI substantially. But it's probably only a matter of time until some developer writes a blog post

Starting point is 00:30:08 or maybe it's happening now and we just don't know. But as lightning gets bigger and bigger and as more and more commerce happens over lightning, there will be more opportunities for some smart engineer to run a autonomous system on AWS that just starts making money on the internet for him.

Starting point is 00:30:27 And would he tell anybody? I don't know. No, they wouldn't. So probably not, right? And then eventually, like, people write Twitter threads about how to make money running these things in AWS once other people figure it out. But I think the building blocks for actually transacting the value are in place, but I think more lightning commerce needs to be enabled. It's not like there's, what would that AI even be doing right now, right, is the question. What would you be doing to make money?

Starting point is 00:30:52 I don't know the answer to that. It would be interesting. So everybody talks about the Turing test, which you just described is maybe a better, form of a Turing test is some type of artificial intelligence that can create market value and not into perpetuity, but it's able to create market value and demonstrate that it's smart enough to make money on its own without any input beyond a prompt, right? I think that's better than a Turing test. It is.

Starting point is 00:31:25 Yeah, maybe we'll call it the Pitch test or the Pitch test. No, you're the one that came up with it. You're the one that came up with it, not me. Yeah, because maybe that's the definition of intelligence, right? Everybody wants to like pontificate on what they think intelligence is. Maybe that's the test, right? Interesting. You know, there's an interesting concept that I've talked about with some friends.

Starting point is 00:31:48 One of my buddies, he runs a startup and he flagged this interesting idea to me, this thought experiment of the single person unicorn. The one person, like, you have this spectrum of big company with a lot of headcount making a lot of money. on one side of the spectrum. And on the other end of the spectrum is the one person unicorn, right? One guy, a billion dollar company, at some point that's going to happen. But this is almost like the zero person unicorn. Yeah, yeah.

Starting point is 00:32:16 It's like maybe there's somebody who like got it started, but like can this, can you give this AI access to like a Google Cloud account and just say go or an AWS account and just say go, make money? Well, the thing that will make your mind run wild is, okay, so it figures out, let's say it can figure out how to do this through some product or service, what's going to stop it from doing it for a different product line or a different service line and then replicating that a hundred times over? Holy molly, man. Yeah. Well, and so when we take this back to Bitcoin, like if something like this would happen, it's going to be using the resourcing requests are going to be something that has near zero fees and that's immediately settling. Like, that has to

Starting point is 00:33:01 be it. So when we look at Bitcoin relative to everything else, nothing else is doing this in the manner that it's doing it, correct? Like at least not in a decentralized way, which is of primary importance, right? Like the most important thing. Unbelievable. So how far out do you think something like that could potentially have? I mean, that's a question nobody can answer, but it makes your mind run wild, huh? Yeah, you know, I think it's further than people think. I would be surprised to see it within 10 years personally. You don't know, I'll qualify that with saying I'm not the most, I'm not the deepest expert on these AI systems. I mean, they have come a long way.

Starting point is 00:33:39 But I haven't seen them like show real reason. And I don't know, there's a whole philosophical discussion there. But it seems like we're quite a ways away from being able to just say, go make money. So there's been such a massive leap because I've been playing around with GPT for a lot. I was playing around with GPT3 and 3.5. and then when I went to four, maybe it's just me over hyping it, but I noticed a significant difference in that capability. And where I'm using it a lot, there's really in coding and programming. So like, I run an umbral because I don't have the tech chops to log in the terminal and do all

Starting point is 00:34:18 these things. But with GPT4, I'm very comfortable just stating this. This is the hardware. This is My son and I are programming an automatic dog feeder. I have no clue what I'm doing, but I'm using GPD4 and it's helping us out. And like, I'm just blown away at how well it's helping me do what I would say are very complex tasks. That's somebody that would have to have a lot of experience in software engineering to be able to walk us so quickly and efficiently through such a process. do you think that that quantum leap was just something of the last five years and it's going to take another five or ten years till we see another jump like that? Or do you think that we're going to see continual leaps in AI like we just saw from three to four in a year and a half? Or are we going to see that again in another year and a half that GPT5 is exponentially better than four?

Starting point is 00:35:16 Or are we kind of hitting a plateau there? I mean, I think it's a better at what. It's a better at what question. I think there's things that it's already way better than Google at. Sometimes you just want an answer to a question. Google's giving you content. You don't want content. You want an answer.

Starting point is 00:35:34 For that, I would say it's already getting better. But for reasoning about new things, things that actually still require sort of a first principles understanding of the world and coming to conclusions that you haven't told it, that haven't been written somewhere, unclear. I don't know how long that takes. I don't know sort of what, I think we're still trying to figure out, like, what are the fundamental, fundamental limitations of these LLMs and how close to reason can the approach and the architecture of these GPT models get? I think it's really a question of sort of, yeah, it's TBD.

Starting point is 00:36:12 All right. So let's talk about River. So you've stood up this monster from nothing, right? Like, just from the ground up. what was the original value prop that you had for customers? Because I mean, this was, this is a pretty crowded space and you step in. And so like what was what was your value prop that you went after? Started a river almost five years ago.

Starting point is 00:36:39 And to be totally honest, the original idea, it was more of a feeling than an idea at first. and the feeling and sort of the feeling I was chasing was this void in the market that I saw, which was that Coinbase was what I thought on a trajectory to become the Bitcoin Bank of the world. And I'm using the word bank here very loosely, right? Just sort of it's the best script word. We are not a bank. I guess not a bank. But then Coinbase pivoted.

Starting point is 00:37:10 They started adding lots of different cryptocurrencies. They started taking this, they sort of took this philosophical approach that this isn't about redefining money. Purely, this is about this whole new asset class, lots of different cryptocurrencies, and we're going to build a way to trade these things and lean into making this asset class accessible to the world. I very much thought that that was a big mistake, optimizing for short-term value and short-term returns.

Starting point is 00:37:39 And I thought that they really missed sort of this big picture opportunity out in the distance, beyond the clock, like, you know, behind the fog, right? But I thought that there was, that's where the Mount Everest was. Coinbase sort of geared off to chase this local maximum. And sort of the Mount Everest was this building the Bitcoin Bank of the world, like, leaning 100% into this idea that Bitcoin and Bitcoin alone is redefining money. And entirely new financial institutions are going to be built around this concept. And so I didn't even really know at first what exactly that would look like.

Starting point is 00:38:15 some extent we're still figuring it out. We have a much better idea than we did five years ago. But the first place we decided to start was we kind of decided to take the Tesla approach, which was, okay, the obvious gap in the market at that time was Coinbase had really bad customer service. You could have a couple million dollars. Really bad. Go.

Starting point is 00:38:35 You can have a couple million dollars in Coinbase and you still couldn't get anybody on the phone. Yeah. Or get any help. And that was just like unheard of in traditional financial services. If you have a million dollars at a bank, they will be calling you checking in to see how your weekend is. So that was like the obvious first step, which is like start at the high end, build a Bitcoin brokerage where we're building our brand and reputation around serving the sort of elite clients in the United States, focus on, you know, high LTV customers and a smaller number of

Starting point is 00:39:09 them so that we could serve them really well. So that was like step one. And then since then, sort of we've expanded to more sort of like the broader consumer market, the institutional market. A lot of our early clients also run businesses and, you know, have other legal entities. So now we're serving. We provide Bitcoin brokerage, custody, wallet services and a nice, easy-to-use app for high net worth mass market and businesses in the United States. And that's growing very, very quickly.

Starting point is 00:39:39 We're actually seeing all-time high monthly transacting clients. month over month, the last five months in a row during this bearer market. So we're seeing really nice growth. People are coming to something that's focused and simpler and leading into doing Bitcoin really, really well because that's what at the end of the day, everybody wants. We're seeing a divergence and sort of crypto trading over here. Your Bitcoin bank is over here. And they're probably not going to be the same thing.

Starting point is 00:40:05 And then we also have this enterprise Bitcoin Payments infrastructure business that I was talking about earlier. So it's been a very wild ride. It feels like it's been 15 years, not five years. Everything goes so fast in this industry. We've been through probably the equivalent of like two great depressions at this point. So yeah, it's been a fun journey. What are your thoughts?

Starting point is 00:40:30 Going back into the tech a little bit, Mnisccript has really taken off as a talking point in things that people are getting really excited about from a tech standpoint. Is that something that, first of all, explain Mnyscript to the audience, and then is that something that you guys are thinking about incorporating, using for your wallet or at large there at River? Mnisccript really is, it's really just a way to, it's really just a subset and easy way to use,

Starting point is 00:41:01 easier way to use the Bitcoin scripting language. The idea behind Mnisccript is to sort of create the standard way to create more complex constructs in your logic. and like wallet logic. So instead of just saying, hey, you know, you need one signature or you need two out of three signatures, you can say, you can, you can more easily sort of create a wallet that has custom logic. Like you need this signature and this signature or, you know, a two month delay with just one

Starting point is 00:41:32 signature or, you know, like things like that. I think that there's interesting use cases for this stuff. But my opinion generally as an operator is that simplicity is really key. And the complexity is the enemy of security. So while these things do have merit and benefit, I don't think most people should be using like custom scripts. I think you're much more likely to just mess up something complicated and lose your to your Bitcoin than it is.

Starting point is 00:42:00 I think that the increased risk of messing something up is not offset by any sort of increase in security, usually with that kind of stuff. TBD, you know, I think it's, I'm glad to see people sort of trying to do more there, but we don't have any plans. As far as like a use case goes, you know, let's say you have three executives at a company and you have two of three multisig, but you want to make sure that the CEO is at least one of those two signatures. You could use something like miniscript to code that in there so that no matter what the

Starting point is 00:42:32 CEO has to sign off on something leaving. And, I mean, you could take this in many different directions, but just kind of as an example for people to kind of conceptualize. In the past 12 to maybe more months, there has been the quote unquote crypto crackdown at all of these large exchanges, Coinbase crack. And it doesn't matter which one you name. They're feeling the pain of all these lawsuits that the SEC is bringing upon them. As a Bitcoin-only exchange, has this impacted you guys at all? Is it something that you've had to spend a lot of human capital to deal with? Like, what's that experience been like for you guys? It hasn't caused us any issues to just sort of send more clients our way.

Starting point is 00:43:22 Because Bitcoin is the one thing that the SEC said was in security. So we just didn't have any issues. And this is sort of another sort of one more example of why running a Bitcoin, why we run a Bitcoin only business. At first when we were starting, a lot of investors didn't really understand, like, isn't it just worse to not have more coins? Like, why would you just want Bitcoin? And it's becoming increasingly clear. Like, supporting a multi-coin operation is, you know, there's revenue benefits because people like trading this long tail of assets, but it's a huge DOS on your time. And It adds a ton of complexity, not just to your product, not just to your engineering, but also to your legal posture, your regulatory posture, which has ripple effects across the entire

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Starting point is 00:47:41 Walk us through the incentives on the mining piece. So you guys offer, and I was looking at this on your site, And is the pitch for doing the mining just to lower your vol as a user, as a person that would be paying for that, that you're kind of removing the volatility of the Bitcoin price by mining? So, yeah, there's a few ways to think about Bitcoin mining. Yeah, our hosted mining product allows you just easily buy Bitcoin miners that could host it in a co-location facility.

Starting point is 00:48:09 And then the Bitcoin gets mine to your account every day. You're the owner of that machine. A lot of the people mining Ruth River are actually optimizing for, dollar returns, that's how they're doing the math. We have, we have people mining who never even bought Bitcoin, which is interesting. But a lot of people have as well. And it's the way I would describe it is it's just at a different point on the risk return curve. You're making a different bet. There's different variables than buying spot Bitcoin. And so what I typically would tell people is if you're just optimizing for like growing your Bitcoin stack, the simplest thing to do is just buy

Starting point is 00:48:42 some Bitcoin. We're set up a dollar cost average. But if you're looking to sort of diversify, sort of on that risk return curve, you're sort of making some bets on different variables such as difficulty, maybe even geopolitical bets, right? If there's something that happens with like Taiwan and silicon manufacturing gets, you know, restricted, then there won't be more miners produced. And like there's so there's a whole sort of other world of bets you can be making with a mining investment. And it's not guaranteed to want a Bitcoin denominated return outperform buying spot.

Starting point is 00:49:17 But there are interesting points in that risk return curve where, for example, the Bitcoin price theoretically could stay flat and you could have an ROI mining but not buying spot. Those are the sort of dynamics that a lot of mining clients find interesting. So, Alex, this is the part of the show that I've been looking forward to most because you don't know what's coming here. So the last time I had dinner with you, I was with Andy Pitt. And after Andy and I walked out of the restaurant, I said to Andy, I said, that comes guy's a silent killer. And she goes, what's a silent killer? I said, oh, in the military,

Starting point is 00:49:52 it's like this saying that it's a person who just like crushes it, but doesn't have to go around telling everybody that they're crushing it. And so she was laughing, but you're introverted. You're an introvert. I don't know if you're comfortable with me saying that, but like, you're just, you're quiet and but you are extremely technical competence is just way out there. And so I just want to have a little fun here. And I'm just going to ask you some personal questions and stuff that really doesn't have anything to do with Bitcoin because I think it'd be fun. And I think that people need to get to know you better. Here's my first one.

Starting point is 00:50:28 What's your favorite thing to talk about when you're not talking about Bitcoin? Probably history. Okay. I love talking about history and learning about history. Anything in particular? You know, it changes. It depends on who I'm talking with it. I think one of my favorite conversations recently was with a group of Puerto Rican friends laid into.

Starting point is 00:50:47 to the night talking about Puerto Rican history and Puerto Rican independence and learning about their views on on like that that thing. And so, you know, I love other cultures. I love other groups of people. I love learning about how other people think. And yeah, I love like sort of seeing the world and learning about learning about all that stuff. What's one of the most, what's one of the most interesting or fascinating places you visited? Myanmar was a very interesting place. I visited Myanmar in 2013. I think it was. And it was like right after they just got ATMs in the country for the first time.

Starting point is 00:51:22 And it was one of the most different places I've ever been. It was extremely religious, but in a Buddhist way. I had never like seen like a sort of dogmatic Buddhist country before. It was like really fascinating and very traditional, sort of untouched by a lot of Western culture. Very fascinating history, obviously having some issues at the moment. But I really enjoyed that country. What's your favorite outdoor activity? Running.

Starting point is 00:51:50 Oh, yeah? Like, I would say running and I'm sort of just like naturally a good runner. It's for my body type. You know, my best friend is like an extremely strong like power lifter who hates running. I'm like the opposite. Like I can't lift nearly as much as him, but I can run for miles. I would say running and then just chilling in the park with friends. I love that touching grass.

Starting point is 00:52:14 Something that's really. underrated in your opinion? I think this is one of those, if you know, you know, Uruguay. Uruguay is an underrated country. It is an extremely beautiful and pleasant place to visit with a great culture. The way I would describe it is it's like Argentina, but without all of the sort of political and economic problems, it's not as sort of like lively and sort of like party friendly is Argentina, but it has a lot of that.

Starting point is 00:52:45 And it's also summer there when it's winter in the northern hemisphere. So if you're looking for a good place to just sort of get some fresh air, spend time on the beach, and be in an extremely pleasant culture with very respectful people and a family-oriented place with amazing food, Uruguay. I love it. All right. Favorite TV show of all time. Okay, that's a good one. Oh, Bada. What? I never even heard.

Starting point is 00:53:13 Fowda. It was a Netflix show. It's like, it's an elite special forces team in Israel. And it's sort of, it captures sort of like the Israeli-Palestinian conflict through this like really tight-knit team. Oh, okay. That does like special ops. And it's an extremely well-done show. All right. Favorite book? This is the last one, favorite book. This is going to be kind of weird one. There's so many books I love. But one that just I think has so many fond memories for me because my dad read it to me when I was a kid was the richest man in Babylon. It's a short book.

Starting point is 00:53:48 It's like a series of stories based in ancient Babylon teaching you the principles of saving and money. And I just have very fond memories of that book. Huh. Interesting. Alex, this has been a blast. Is there anything that you want to highlight to the Bitcoin community that you think is important. And it could be anything. I think Matt Odell says it best. Stay humble and stack sats. You have a long road ahead of us. Bitcoin is by no means guaranteed to win. You have a lot of work to do.

Starting point is 00:54:23 And we're still very, very early on this journey. And it's important to, it's important to keep that in mind. I love that. So Alex, we're going to have links in the show notes. You're active on Twitter, river.com. If people want to check out your company, anything else that you want to highlight. Right. Nope. No, that's it. All right. Well, we'll have that in the show notes. And thank you so much for your time.

Starting point is 00:54:46 It has been a pleasure to get to know you over the past six months where we've had a lot more interactions, Alex, and just really admire your contributions to the space, your intellectual thinking, and just making time to come on the show. So thank you so much. Thanks for having me on, Preston. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application. you use, just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything

Starting point is 00:55:30 you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week. 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.

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