#571: Dan Held on The Monetary Experiment Scam

Dan Held is currently the Director of Business Development for Kraken, one of the OG Bitcoin spot exchanges. Dan has been in the Bitcoin community for about 8 years and continues to be one of the brightest minds in the space. In this conversation, we discuss ESG bitcoin, OFAC compliant blocks, Bitcoin vs Ethereum, Taproot, Supercycle, Elon Musk, Bitcoin DeFi, and why Ethereum could be MySpace. ======================= Remote makes it easy for companies of all sizes to employ global teams. We take care of international payroll, benefits, taxes, and local compliance, so you can focus on growing your business. Sign up for Remote today and receive 50% off your first employee for the first three months. Check out remote.com/pomp and enter promo code POMP to get started. ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.com/pomp. This is a no brainer for both newcomers and crypto heavyweights - go sign up today. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dan Held is currently the Director of Business Development for Kraken, one of the OG Bitcoin spot exchanges. Dan has been in the Bitcoin community for about eight years and continues to be one of the brightest minds in the space. In this conversation, we discuss ESG Bitcoin, OFAC compliant blocks, Bitcoin versus Ethereum, Taproot, Supercycles, Elon Musk, Bitcoin DeFi, and why Ethereum could be MySpace. I really enjoyed this conversation with Dan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Remote. When you use Remote, you can employ people

• 0:45Anthony Pompliano?

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• 1:30Anthony Pompliano?

  and enter promo code Pomp to get started. Next up is our friends over at Circle. Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce, and financial applications worldwide. Circle is also a principal developer of USD Coin, USDC, which is the fastest-growing, regulated, fully-reserved dollar stablecoin in the world, now standing at more than $15 billion in market cap, and it's adding nearly $300 million of net new digital dollars in circulation every week. It's on an absolute tear. USD Coin, the free Circle account and suite Platform API services bridges the gap between traditional payments and crypto for

• 2:14Anthony Pompliano?

  trading DeFi and NFT marketplaces. You can learn more today at circle.com. Again, circle.com. Go check it out and let me know what you think about the fastest growing, regulated, stablecoin in the market. Last but not least is Exodus. Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It's supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset's price history and your portfolio's

• 2:56Anthony Pompliano?

  performance over time. And maybe the best part, Exodus is integrated with the Treasure Hardware Wallet, making advanced security easy for everyone. Visit exodus.com/pomp for your free download, or search Exodus on the App Store or the Play Store. Again, exodus.com/pomp, free download, or go to the App Store or the Play Store and search Exodus. Exodus has built the absolute most beautiful products in the entire industry. Go check it out and let me know what you think. All right, let's get into this episode with Dan. I hope that you enjoy it.

• 3:27Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:55Anthony Pompliano?

  All right, guys. Bang, bang. I've got Dan here. Thank you so much for doing this.

• 3:58Speaker 02

  Thanks for having me.

• 3:59Anthony Pompliano?

  All right, we're just gonna start right with like the juicy stuff. Uh, ESG Bitcoins and OFAC compliant blocks. What is this stuff?

• 4:09Speaker 02

  It's having fun staying poor. That's the TLDR, because if you want to mine Bitcoin using expensive electricity that's ESG compliant or ESG environmentally friendly, you might be paying more for it than you would have being a miner trying to seek out the lowest cost energy anywhere in the world. That's what a miner should rationally do. If you decide not to do that, instead pay more for electricity to virtue signal, you're gonna spend more money.

• 4:34Anthony Pompliano?

  So give me an example.

• 4:35Speaker 02

  For example, let's say you're a miner and you could source electricity from a source that is considered more pollutant, like coal or something like that. And let's say you're paying one, uh, two cents per kilowatt hour there, and it's four cents per kilowatt hour coming from solar. Well, that costs you twice as much, which will make the Bitcoin that you mine more expensive. So people who choose the renewable energy methods may or may not have higher cost energy. Now, that's not necessarily the case, because there's a lot of examples where renewable energy is actually cheaper than coal or other type of energy, because it's been, it's locked and you can't distribute that electricity down a line, or there's certain cycles where you have more solar than demand, is it, than there's demand.

• 5:17Speaker 02

  So this isn't necessarily a, a linear comparison to say like, okay, you know, ESG or environmentally friendly energy sources are expensive and non-energy friendly or non-environmental friendly sources are cheap. It's not necessarily that. But if you try to 100% get all of your sources from renewable, and that comes at an extra cost, then you would be incurring extra cost just to kind of virtue signal, rather than like, just being efficient and focusing on what's the minimum cost for my electricity.

• 5:47Anthony Pompliano?

  So the key for a miner is just, what is the lowest cost energy that I can possibly generate or consume?

• 5:52Speaker 02

  Yeah, that's right. So we can think about Bitcoin mining, like you buy a machine that prints money, and it prints money, it prints Bitcoin if you throw, uh, take electricity and flow it through that machine. And so your objective is to buy the machines at lowest cost possible, and buy the lowest cost electricity, and then you get your highest ROI on the Bitcoin, the money that comes out of the machine.

• 6:11Anthony Pompliano?

  And the renewable power is, in many cases, cheaper or more expensive?

• 6:16Speaker 02

  Well, that's the tricky thing. Sometimes it's cheaper because there's excess capacity. But if you're trying to do this with 100% of your capacity for your miners or sources from places that are in the US and environmentally friendly just to virtue signal, if you're trying to do that and you're not trying to optimize for lowest cost energy, it's likely that they're probably paying a little bit more.

• 6:35Anthony Pompliano?

  Got it. And how important in the energy consumption debate, should we be paying attention to total energy consumption versus what the source of the energy is?

• 6:45Speaker 02

  Well, Bitcoin's not responsible for the energy mix. Bitcoin energy consumption isn't driving nuclear, wind, solar energy creation. Bitcoin is simply taking the excess capacity of the electricity grid and using that to mine Bitcoin. So it's not Bitcoin's fault that the mixture is coal plus solar plus something else. It's more around the energy usage total in aggregate that people are, I think, more concerned about than is the core root of the energy argument.

• 7:11Anthony Pompliano?

  And when you think about the total consumption, one of the things that people don't understand, I literally saw a New York Times journalist talk about this, is wait, Bitcoin's energy consumption is, I don't know, 30% of what the traditional banking system's energy consumption is, and it only serves a fraction of the people or a fraction of the transactions. But explain how you can actually do more transactions or serve more people without the energy consumption going up?

• 7:40Speaker 02

  Yeah. So let's define, so when miners mine Bitcoin, what they're doing is they're mining a Bitcoin block. A Bitcoin block is comprised of newly minted Bitcoin plus transactions that occurred. That's one, the first assumption that most journalists make incorrectly, which is that Bitcoin mining only supports Bitcoin transactions. No, it's a production of new coins plus transactions. Now, with each transaction, each transaction can include many, many more transactions inside of it. What I mean by that is like, for example, Lightning. With Lightning, we can open up a Lightning channel and transact millions of times and then settle on that base layer that would only show up as two transactions total. So that is a lot of energy economic density, as Nick Carter would put it, where millions and millions of transactions have occurred, but then settle net on the

• 8:24Speaker 02

  Bitcoin layer one via one transaction or maybe two transactions.

• 8:28Anthony Pompliano?

  And how many transactions fit into a block?

• 8:31Speaker 02

  That's a good question. I forget. It depends on the transaction size in bytes. And transaction size in bytes depends on what type of signature it is. So if it's like a multi-sig versus a single signature. And then there's other types of.

• 8:43Anthony Pompliano?

  Just ballpark, if you had to guess.

• 8:45Speaker 02

  Ballpark, it's, what is it? Seven transactions a second? And you've got 10 minute blocks. So it's seven times 60 times 60. So seven times 60 times 10.

• 8:53Anthony Pompliano?

  Yeah, thousands. But really, you could be servicing every 10 minute block, millions of transactions. But whether you're doing thousands of transactions or millions, it still takes the same energy consumption because it's just one block.

• 9:06Speaker 02

  That's right. Yeah, that's exactly right. So the energy consumption to mine a Bitcoin block will stay the same no matter how much economic density is inside those transactions. So those transactions could represent billions of more transactions. So essentially Bitcoin's energy is, energy consumption is highly efficient. Because as more and more economic activity, economic activity comes onto the Bitcoin blockchain, the energy consumption does grow, but it doesn't grow in a linear fashion with the amount of economic activity occurring.

• 9:34Anthony Pompliano?

  So this is the argument that I made at one point. I wrote this thing about the legacy system is linear. You're basically explaining why the Bitcoin system is not linear. And linear just means if I want to serve more transactions or I want to serve more people, I need more ATMs, I need more banks, I need more data centers, I need all this stuff. And so in order to serve more people or more transactions in the legacy system, I have to increase my energy consumption. Here, that's not necessarily true because it's a nonlinear relationship between transactions and users and that energy consumption.

• 10:03Speaker 02

  Exactly. And to be fair, though, there are a layer two technologies that would require energy, right? If you open up a Lightning channel, that does require energy. But for simplicity's sake, yes, 100%.

• 10:12Anthony Pompliano?

  Okay, when we start to get into the conversation around why does the energy consumption continue to go up? Explain the relationship between the Bitcoin reward and hash rate increasing, right? Because hash rate increasing essentially is a proxy for energy consumption going up. And so there is a relationship between the more successful that Bitcoin is, the more energy consumption there is.

• 10:38Speaker 02

  Yeah.

• 10:38Anthony Pompliano?

  But it's not because it's serving more users or serving more transactions. It's actually for an economic reason. So explain that.

• 10:43Speaker 02

  Yeah, there's a lot of different moving parts here, so I'm going to try to make it as simple as I can for the audience. We can think about it like gold production. So as gold becomes more and more valuable. There's gold miners are willing to go deeper and deeper into the earth to go find it, which will cost them more and more money. Bitcoin has a similar mechanism called the difficulty adjustment. As Bitcoin grows in value, it becomes more and more difficult to mine a Bitcoin because more miners come onto the network to mine Bitcoin. And then the difficulty adjustment is an automated mechanism that the Bitcoin network has to increase the difficulty of mining Bitcoin, which makes it then competitive with the newly added miners. So newly added miners means more people are chasing or more people are deploying their hashing power to find that Bitcoin block. And so Bitcoin is like, well, I'm gonna make it harder for y'all to go find it.

• 11:27Speaker 02

  A similar function would work if, let's say, there's an alien species that comes down with a alien computer that is a thousand times more powerful than all the Bitcoin miners out there. If they start mining, Bitcoin's difficulty adjustment, every, I think it's 2016 blocks, would adjust for the newly brought on hash power. So Bitcoin's difficulty adjustment essentially adjusts for all of the miners coming onto the network who are trying to take advantage of Bitcoin's price rise, looking at Bitcoin's price rise going, it's more and more valuable to go mine a block, so I'm gonna turn on more hash power, I'm gonna build more miners. Bitcoin's network makes some equilibrium between these newly brought on miners and the difficulty it takes to mine a block of Bitcoin.

• 12:09Anthony Pompliano?

  OFAC compliant blocks is a thing that I don't think anyone had talked about previously, really, until recently. There's a miner who I always, in these situations, assign ignorance rather than malice, right? And especially when somebody is likely doing something because there's an economic advantage for them to do it, right? So there's a miner called Marathon. They basically decided that they were going to produce what they titled, as my understanding, OFAC compliant blocks.

• 12:44Anthony Pompliano?

  Before we get into why they're doing it, what exactly does that mean? An OFAC compliant block?

• 12:49Speaker 02

  Yeah, so OFAC, I forget what the acronym stands for, but essentially it's a global entity that looks at different bank accounts and individuals and puts them on a blocked list. So the list blocks them from different financial services. I think that's the most simple form of this that I can, I can kind of compress. So OFAC essentially builds out this list of individuals. They're like, we've got a scammer from Russia. His name is this, his bank accounts are here, these have been frozen. You are not permitted to do business or bank this individual. It's basically like you're blocked from the financial, existing financial system if you're on the OFAC list. So what this miner thought they should do was take transactions. So there's different Bitcoin addresses that have been put on OFAC block lists. And so they decided to block any transactions that would come from those addresses.

• 13:34Speaker 02

  Well, this sort of violates the entire principle of Bitcoin. The whole principle of Bitcoin is that there is no censorship. Everything is not censorable. It's, it's an immutable ledger and you're able to transact with anyone you like. No transactions can be censored. And also achieving this is very difficult because if they don't mine it, someone else will. So essentially this miner was willing to forego revenue to mine, mine these Bitcoin. Now, what's funky about this is like knowing which transactions are bad or good is almost impossible. I mean, there's, there's some that have been flagged as like OFAC non-compliant, but these are all mixed together and then you don't know exactly who's the owner of it. It's much more difficult to suss out than just like, oh, here's a bad guy's bank account.

• 14:17Speaker 02

  So they're willing to forego revenue. It's extremely difficult to do. And then finally, FinCEN hasn't required people to do this. I don't, I don't think it's required. Now, I haven't, I'm not on the legal side of things, so I haven't dug in as deep as I, as I should on this. But from my understanding, FinCEN doesn't regulate Bitcoin miners in that fashion. If they started to, to require them to censor transactions, I think this is similarly equivalent to requiring ISPs to start to like filter, like traffic going across the internet, like starting to censor things that are going across the internet that would be like OFAC non-compliant. And I don't think they require that now, so. Basically, this miner was going, hey, we're going to virtue signal that we're stopping the bad guys, even though we're not required to do so, and it comes at a cost to us, which

• 15:02Speaker 02

  I think was just a very bizarre mixture of things. And the Bitcoin community reacted really harshly to this, naturally, because this is antithetical to what Bitcoin represents. And they recently, I think, reversed their decision as of, was that today?

• 15:14Anthony Pompliano?

  It was today. So Fred Teal, new CEO, comes into Marathon. It's unclear kind of when these decisions were made, when he stepped in or whatever. But he stepped in and said, hey, we are not going to do this. We're going to basically act like every other miner on the network acts. We're not going to censor anything. And this whole OFAC compliant idea is essentially getting kicked to the road. Is there an issue if all of a sudden a bunch of miners came together and were like, hey, we're going to do this? And it's not, it wasn't just one that could be singled out and kind of have the pushback, but it was actually the miners, I'll put that in air quotes, is like a group of people?

• 15:53Speaker 02

  Yeah, certainly, this would be an issue in the future. I do think that the Bitcoin Network has built in defense mechanisms. One is incentive. The other miners are much more incentivized to go mine all those transactions. If they start, if the group of miners start to censor X percentage of transactions, well, they're foregoing a lot of that revenue. And over time, the Bitcoin block, which is comprised of newly minted Bitcoins, plus those transactions, the Bitcoin transaction fees are starting to slowly replace the block subsidy, which are the newly minted coins, which means that that reward that they receive is more and more becoming transaction fees. So if they started to heavily censor, they would be very much penalizing themselves. And that also means that other miners would

• 16:35Speaker 02

  be willing to accept the transaction and mine it, which then gives that faction of miners who are non-censor, non-censoring, or they're not censoring at all, would give them much more revenue potential. And I think that would just is a natural incentive that would push more and more miners over to that faction.

• 16:51Anthony Pompliano?

  If you had more than 51% of the hash rate decide to do this, is that fatal?

• 16:56Speaker 02

  It's not fatal. This gets into some game theory I haven't explored as much. But essentially, there are some game theoretic attack vectors here where this isn't a fatal thing for Bitcoin. It's just a, it's more of like, it starts to be, because there's also ways you can off-escape transactions like with coin joins and other mechanisms that make this much more difficult. Same with like lightning channels that are opened up. But yeah, I haven't fully explored all of the in-depth game theoretic attack vectors here.

• 17:20Anthony Pompliano?

  Yeah. One of the things that we have seen that's happened recently is this whole idea of a miner council. Now, I'll caveat this with folks who participated in this meeting. It seems like Michael Saylor, Elon Musk, and a few others all got together. There's a number of really large miners there. I know many of the people who participated in this or helped set it up, etc. And again, this is my personal opinion and my personal experience, but like, these people love Bitcoin. They couldn't agree more with the ethos of Bitcoin. And in no way do I think that they were ever intending to attack Bitcoin, be negative, adversarial, any of this stuff. It was really in a, hey, we want to help Bitcoin. We want this to be a positive thing.

• 18:03Anthony Pompliano?

  With all that said, there's been in the past, meetings. That's just a touchy subject in Bitcoin, because there have been meetings that turned into kind of adversarial type decisions of groups of people to kind of go after Bitcoin or try to change Bitcoin. And so, part of the people who participated in this recent meeting, one person, I forget who it was, came out and said, hey, listen, council's probably too strong of a word that insinuates like, you come to us, Dan, and we tell you as the council, like what to do, right? Maybe we should have used the word association or something else. But this idea of the miners coming together, I think now has become top of mind. People are like, well, what are they doing?

• 18:45Anthony Pompliano?

  What are they talking about? Right? And so like, what's your whole read on miner council, coordination, transparency that they're trying to achieve? Like, just what was your read to that situation?

• 18:54Speaker 02

  Yeah, there's a couple of different thoughts here. One is that Bitcoiners naturally have an allergic reaction to centralization. So if you have a committee or group, there's a couple of different events that occurred in the past that make Bitcoiners cautious of these sort of coalitions or groups. One would be the Bitcoin Foundation. Bitcoin Foundation, over time, was this thing that was an idea like, let's have this Bitcoin centralized team that can help promote Bitcoin and do X, Y, or Z. That was corrupted over time. Same with the New York Agreement. The New York Agreement was a group of businesses and miners who came together to try to implement SegWit2X. And so, that was a, and then the users of the community of Bitcoin fought back against this big business interest in trying to change the Bitcoin protocol. So naturally, Bitcoiners have this allergic reaction whenever

• 19:38Speaker 02

  they hear the word "coalition." I don't think it was done maliciously. I agree. I do think that Saylor probably could have read up on his history a little bit to understand that the Bitcoin can, or have to hire a comms person here. I think a product marketer or a comms person would have been required for this to have been like a little bit smoother. They could have gone through, looked at the language, looked at how they positioned this, understood the community, and probably phrased it a little bit differently. Their goals, I think, were a little bit strange. It was the ECG goal. So more of like the, "We are a coalition of miners that are going to source electricity from environmentally friendly sources." I think that, because I believe at the time that they were trying to, and what was this, a week and a half ago? They were trying to counteract the narrative that

• 20:20Speaker 02

  Bitcoin mining is wasteful, that Bitcoin mining uses coal or bad energy. I think that it was a good attempt to, so they're fighting FUD. They're narrative fighting. And they're fighting this narrative that Bitcoin's bad for the environment. I don't think, I personally don't think their strategy will work. I hope that it does. I wish them the best. But I don't think that that narrative will fight that other narrative very well. So the FUD narrative, Bitcoin is wasteful, it uses bad energy. They're trying to fight it by, "Oh, no, Bitcoin uses good energy." But I think at the core root of this argument, it's about that Bitcoin energy usage isn't wasteful. It's doing something very useful. And Bitcoin detractors use Bitcoin's dirty energy as a way to fight it, but at the core root of their argument, they just don't think Bitcoin's doing something valuable. That's why they don't like it. So if Bitcoin used 100% clean energy, I still think we would

• 21:05Speaker 02

  see Bitcoin energy FUD. So ultimately, I don't think that narrative battle will be won by this group. But I do applaud them for their efforts to at least try.

• 21:12Anthony Pompliano?

  Yeah. It also feels like a lot of the ESG stuff is...

• 21:18Anthony Pompliano?

  Complete nonsense, right? Not, not in the Bitcoin sense, but just like overall is people get on private planes, waste a bunch of energy, destroy the planet to go somewhere to yell and scream about, hey, we should stop destroying the planet. And then they go back to their offices where they're the, on the executive team of a business that's destroying the planet. Like it's all ridiculous. And, uh, you know, my favorite statistic out of all of this is, um, the Christmas light usage of electricity in the United States is more than some countries.

• 21:48Speaker 02

  Yeah, it's totally absurd.

• 21:50Anthony Pompliano?

  I mean, what we should cancel Christmas.

• 21:51Speaker 02

  Right. And Xbox isn't, I play Xbox for fun with me and my buddies. I mean, I don't worry about Xbox being wasteful. Some people would find that wasteful because they don't like to play Xbox. They don't like the game. But how about watching the Kardashians or washing your clothes or you've got an SUV and I've got a Toyota Prius, right? Like, it doesn't matter. Like, it doesn't matter about like virtue signaling, individual energy consumption. And if we applied the principles in which they're evaluating Bitcoin with, where they go, well, what is Bitcoin's energy mix? How efficient is Bitcoin being? If they're really honest about it, if they actually care about the environment, which they don't, they would first look at the energy consumption of the fiat banking system. But they never look at that and then look at Bitcoin and go, oh yeah, yeah. Okay. Well, Bitcoin use, you know, they're both bad.

• 22:34Speaker 02

  No, they say Bitcoin's bad. And then they never look at everything else. Like let's stack rank all the energy consumption in the world based on biggest energy consumers and go look at those first to go, to go tackle the problem. That's how someone in product or growth would go focus on it. Stack ranking based on ROI. They don't do that. They're just like, I don't like this industry, so it's wasteful. And no one would ever ask you what the energy mix of your washer is. I mean, how much energy is your washer like taking from coal versus solar? No one cares. No one ever asks you. That'd be very impolite if they did. But for some reason they hate Bitcoin and that's why they focus on it so much.

• 23:08Anthony Pompliano?

  This brings up a really interesting point, which is, uh, the way that the asset is treated throughout the media is, uh, I believe unethical. Right? And here's, uh, an imperfect example is we have people who are told, if you are a journalist at a mainstream media organization and you write about an asset and you hold that asset, you need to disclose it.

• 23:32Anthony Pompliano?

  I have never seen a single article where somebody writes and says, I hold dollars. But there's a whole hell of a lot of defending of the dollar and attacking of a competitor in the marketplace.

• 23:45Speaker 02

  It is the most absurd, absurd journalistic integrity, like level that they have is like, I will remove myself from bias by not holding this asset, but I will hold another asset. Like they hold real estate, stocks, bonds, fiat currency. They'll hold that and not consider that in a conflict of interest, which is just so absurd.

• 24:03Anthony Pompliano?

  To be fair, stocks and bonds in many cases are somewhat insulated. So for example, there are some journalists who say, hey, I won't hold individual securities. I'll buy an index fund or whatever, right? But to your point, I don't see people writing saying, I hold, I hold a home.

• 24:19Speaker 02

  Right.

• 24:20Anthony Pompliano?

  Or I hold dollars. Dollars is to me, that's the most egregious one, right?

• 24:23Speaker 02

  Of course.

• 24:24Anthony Pompliano?

  How do you write, you're writing about currencies and you're saying the US dollar is great. Bitcoin is bad. The central bank is great and this decentralized system is bad. But you don't disclose that a hundred percent of your net worth is in the dollar based system.

• 24:40Speaker 02

  It's a, it's a faux bullshit level of integrity. I mean, their, their integrity should be in how factually accurate they are. That is integrity in their function, but they don't care about that. What they care about is clicks and what they care about is this bullshit integrity that they all have amongst each other of, oh, I don't hold the asset. I'm pure. And I'm like, well, how about the accuracy of the article you just published, which had numerous objectively false information? Like that was objectively false, what you wrote and they won't admit that. So I think it's just kind of this weird virtue signaling thing amongst other journalists that I'm pure. But it means nothing to everyone else in the world. When we all will look at these journalists and we hope that they would write something that is accurate.

• 25:16Anthony Pompliano?

  I think that the financial media is exponentially worse than any other vertical of media in the United States. Because what they have done is they have cheered on the actions of government administrations and central banks. That has destroyed the bottom 50% of citizens' wealth.

• 25:39Speaker 02

  Yeah.

• 25:40Anthony Pompliano?

  Like, like they, they literally cheered on. If you go and you look.

• 25:44Anthony Pompliano?

  Who's asking the hard questions anymore? Who's holding the people in power accountable in the financial media? It's a joke.

• 25:51Speaker 02

  Well, the, the whole thing with quantitative easing and stimulus packages are that these are all connected with the population. So these are free, these are bailouts of both corporations and the population. And when everyone's getting handouts, no one wants to be negative, right? So no one's questioning like, will anything blow up here? And the only people I ever see commenting on that are opinion pieces based on like old, like old economists like Larry Summers. He came out and he's like, this is crazy. He's like, what the hell are we doing? He's like, the, the Fed's job is to take away the punch bowl when things get nuts. Instead they're getting everyone at the party drunk. And that's what's happening and all the journalists are just going along with it.

• 26:27Anthony Pompliano?

  Stanley Druckenmiller, one of the best investors over the last 30 years, came out and said, the Federal Reserve is responsible, is the most responsible group for the wealth inequality over the last decade.

• 26:40Speaker 02

  Absolutely. Yeah.

• 26:42Anthony Pompliano?

  You're talking about somebody who, if you or I say that, people are like, oh, they're crazy.

• 26:44Speaker 02

  Sure, we're Bitcoiners.

• 26:45Anthony Pompliano?

  If he says it, how do you not start to say, wait a second, what's he, what's he saying?

• 26:51Speaker 02

  We'll see him with Larry Summers. Larry Summers was Treasury Secretary for Clinton, I believe, and was considered for the Chairman of the Fed. So Larry Summers coming out and saying, this is also pretty wild too. I mean, he was under a Democratic, he was under a Democratic president.

• 27:06Speaker 02

  A Democrat as a president, and just to see him come out and be like, talk about like people being drunk off the punch bowl and asleep at the wheel. This is very strong language. This isn't, yeah, we're, we're a little bit more rebellious. But these are people who are steeped in sort of the institutional side of, of, of all this institutional pedigree and, and all of the inter workings of the government, they're much more, they're typically much more polite, what they're wording. And to see them come out like this, I think is a big sign of how far we've come.

• 27:32Anthony Pompliano?

  Last year, we were told inflation wasn't going to happen. Now that it's happened, we're being told it's transitory.

• 27:38Speaker 02

  Right.

• 27:39Anthony Pompliano?

  I don't know what happens moving forward. I don't think anyone actually knows with 100% certainty. I have opinions, you have opinions, other people have opinions, but we don't actually know. But what we do know with 100% certainty is last year we were told it wasn't going to happen. And now we're being fed a different story with no apology, no correction, no anything to the fact that we were told inflation was not going to happen. I, you, others said it was going to happen. They were wrong. We were right. And now inflation is here and now all of a sudden, and not just inflation and drastic increase in inflation that we were told was not going to happen. And now we're being, oh, don't worry about it's transitory.

• 28:17Speaker 02

  Well, they're also moving the goalposts. The Fed is recalculating how they calculate inflation. And they're recalculating their targeting as well. I believe the targeting before was like a, it was like a 2% inflation over a certain duration. And now they're looking at like average 2% inflation a year. So they're changing how they measure it in order to give themselves more flexibility. I mean, being an economist is one of the most intellectually dishonest sort of positions to ever be in. Because one, you're, you're running experiments that you can't recreate. You have no idea if it's actually working. And then when it doesn't work, you change your definition of what actually works. Like what does success look like? It's, it's completely ridiculous. And, and what's so disturbing is how huge this is. This isn't just.

• 28:59Anthony Pompliano?

  Is it the greatest scam? Is, is the entire monetary manipulation of the economy over the last 50 years? Is it the greatest scam that we will live through?

• 29:09Speaker 02

  Absolutely. I, I think that, you know, money is a representation of energy and time. Like you and I spent lots of time and energy to go make money and same with everyone else out in the world. The government changing, you know, printing more and just moving it as they see fit to the tune of tens of trillions. You know, this isn't, this isn't just like a minor thing, minor corruption or something where like a local mayor does something kind of shady, or there's a weird business contract between a state and a, and a company. This is the manipulation of all money in the world at a scale that didn't really exist before. So yeah, I would say this is one of the greatest scams of all time.

• 29:44Anthony Pompliano?

  When you think about what the solution is, is it Bitcoin? Just it literally the beautifully designed Bitcoin system? Or is it some sort of complex solution that involves other things that are social or political? Or is it just a pure economic technological invention like this?

• 30:01Speaker 02

  Well, ultimately Bitcoin is about humans believing in them. At the end of the day, it requires human behavior to reorient around a protocol. You know, Bitcoin is just pure raw code. If no one believed in that code, it would be worth nothing. So it requires that humans start to believe in it and start to work with it and want to become part of that community and also become and start to believe in the ideals that this code or protocol or community represents. I do think that Bitcoin will be the inception point for a more libertarian ideology to permeate the world. Whereas now we're seeing the world kind of shift more socialist. I think Bitcoin kind of forces the conversation back to being having free markets and people willingly choose to engage in certain sort of business endeavors. Starting with business first then leads you to believe, leads you to think, well, why

• 30:44Speaker 02

  is it, if the government controlled my money and now they don't, then why do they control my body? And then why do they control these other things about my life? Money is the most important thing in the world. It dictates everything around us. It dictates individual freedom. How free and flexible are you to move out of bad situations or dangerous situations or feel safe or insecure? And so, once people start to feel liberty and freedom with their money, then they go, well, why are drugs legal? Why, why are you taxing me this much? Why are X, Y, or Z? I mean, the automatic withholding from W2s is incredible. I mean, it's the, that is one of the greatest user experience things that the IRS came up with ever, because then you don't even notice the taxes coming out of your paycheck

• 31:28Speaker 02

  versus you cutting the check and sending it to them. They just automatically withhold that, those taxes that you owe with your employer. And you don't even notice how bad it is because you're just like, oh, here's my net paycheck or it gets in my bank account and that can pay my bills. But you don't look at the gross value where you're like, whoa, I'm losing like half my money because I live in California. I mean, I lose like almost half my money to taxes and I'm like, what did I get for that? So I think that Bitcoin is the inception point where Bitcoin starts to challenge people's beliefs over what government should control in your life, starts with money, then it permeates to everything else.

• 32:01Anthony Pompliano?

  When you think in the crypto community, there's a whole bunch of narratives that are shared by other people outside of the Bitcoin community. And I just want to throw some of those out there and you kind of run through them. Bitcoin, Ethereum, while some people may think that they're competitive, others say they're not competitive in terms of what they're trying to accomplish, but there is a belief that the market caps will flip, the flipping. Yes, no, does it matter if it happens or if it doesn't happen?

• 32:32Speaker 02

  Yeah, good question. So I think they're trying to accomplish two different things. Bitcoin is trying to go after store of value, gold 2.0 thesis, be this rock solid, stable, trustworthy collateral that people can believe in. And Bitcoin has largely accomplished that. It's been around for, what is it, 13 years, 12 years now? 12 years. Proof of work has demonstrated its resiliency. Institutions are buying into it. Its volumes are approaching higher and higher levels. Bitcoin is definitely being viewed as a credible gold 2.0 alternative, like an alternative to gold. And it's been globally recognized as that. Ethereum is trying to do kind of like smart contracts, more of, more of like, you know, the common

• 33:13Speaker 02

  term is DeFi for this. But Ethereum is trying to do something where they take the concepts that Bitcoin had, using that blockchain technology, and then leveraging that to go build out smart contract platforms, DeFi, kind of have this whole ecosystem of different financial services. Blockchains inherently have some limitations, though. So I don't think that like you can take Bitcoin's blockchain and just copy paste that to X, Y, or Z industry, and that work out super well. I do think some of what the Ethereum folks are working on is really interesting. I don't think that like the Ethereum community is credible, Ethereum is not a credible store of value asset. You can't change your monetary policy every year, multiple times, and then expect people to believe that it won't change again

• 33:55Speaker 02

  in the future. I do think like, and then also Ethereum having a low inflation rate wasn't even a narrative until a year ago. Now, these are, these are very new narratives for Ethereum. And so I don't think that they understand the core principle of that trust is built over time. And there's nothing that can replicate that. It doesn't matter what code you make. What matters is that humans over time believed in it. And as that time increases, there's more and more trust and belief built in. Yes, so Ethereum shifts to, let's say they have a, this recent monetary policy change, let's say that has, gives it a lower inflation rate than Bitcoin. That's cool, but the US dollar has a low inflation rate. That doesn't make it sound money. It's the credible monetary policy. It's the belief in the monetary policy that gives its value.

• 34:41Anthony Pompliano?

  This is going to be something that a lot of people are going to be not so happy with, but something I believe. And I've been pushing myself to say things that I believe regardless of people's reaction.

• 34:53Anthony Pompliano?

  Bitcoin or Ethereum? If you told me right now, pick which one is the quote unquote MySpace. Ethereum 110% is more likely to be disrupted by new technology, by a new kind of more innovative solution than Bitcoin for one simple reason. The technology of Bitcoin has been created, there's something that's created faster, cheaper, all this stuff. But you can't change the one thing that matters, which is the decentralization, right? That is ultimately what is the value is decentralization and Bitcoin is far the most decentralized version. And because it has that massive head start, unless there was some catastrophic event.

• 35:39Anthony Pompliano?

  It's just, you're not going to catch up to it. You're not going to be able to beat it because decentralization comes from time, from trust, all the stuff we just talked about.

• 35:45Speaker 02

  Totally.

• 35:46Anthony Pompliano?

  With Ethereum, what the entire premise of this was, hey, we like the idea of decentralization, but we want to do more with it, right? Actually, a pretty rational thought process. And we can't do it here because there's not smart contracts, not composability, all stuff. So we're going to go build our new blockchain. Again, like pretty rational, right? In terms of you want to optimize for something else, okay. We're going to go build this layer one blockchain and it's going to be scalable. It's going to be composable, all stuff. I think most people in that community, I don't want to say everybody, but most people in that community now would conclude and come to consensus on the fact that you're not going to scale on a layer one on a blockchain. You got to scale on layer two.

• 36:27Anthony Pompliano?

  Bitcoin has been standing for a long time, so I don't think there's disagreement in that. The scalability is going to come from these layer twos. But what I think people are drastically underestimating is that already today, there have been blockchains that have been created that are faster and cheaper than Ethereum. And they're not being ignored. They're actually, in some cases, already seeing more transactions happening on them. And so do I think that they're going to win or not? I don't know. I actually don't spend enough time to have an opinion as like, is Ethereum the winner? Or is one of these new players like a Binance Smart Chain, et cetera, a winner? I don't know. But what I do know is that the threat that other smart contract platforms have to Ethereum

• 37:12Anthony Pompliano?

  is much, much higher from a probability standpoint than anything else coming along saying, we're going to create a decentralized kind of payment system. Agree or disagree with that?

• 37:22Speaker 02

  Agreed. I think that no one else, no other cryptocurrency has the credibility that Bitcoin has in terms of a store of value. I think decentralization, trust, those are all intertwined together. The decentralization leads to more trust. Bitcoin's community feeds back into the decentralization and therefore it kind of completes this like virtuous cycle. With Ethereum, they're trying to be a world computer using smart contracts, DeFi, trying to re-envision different parts of the economy. And with some of those decentralization doesn't matter as much. And that's where the narrative that decentralization isn't a binary thing, it's this gradient, that narrative started to kick in in 2017. And so with Ethereum, they kind of push the envelope of like, we can, we can decrease our decentralization and increase throughput, increase X, Y, or Z functionality.

• 38:07Speaker 02

  But then there's always going to be a protocol that decreases their decentralization even more. So they lessen up on decentralization and allow more throughput.

• 38:14Anthony Pompliano?

  And this would be Binance Smart Chain would be...

• 38:16Speaker 02

  Binance Smart Chain, Solana.

• 38:18Anthony Pompliano?

  The Ethereum community would argue, Binance Smart Chain, literally they scoff at it, right? They thumb their nose and they say, that's stupid. It has no decentralization, it's centralized.

• 38:27Speaker 02

  Right.

• 38:28Anthony Pompliano?

  And I think this is Bitcoin saying like, yes, because there's an evolution of less and less decentralization.

• 38:33Speaker 02

  Precisely. If the value prop you're competing on is like low cost, like contracts, like the Ethereum community brags about how costly these smart contracts are to execute. I don't think a lot of financial players want costly transactions, like they want low cost transactions. And so with, with certain types of transactions, the affinity to go pay that higher fee is much higher. But you know, they talk about DeFi being this revolution. Well, if it costs you $120 to swap it between two assets. I don't know if that's better or worse than the existing financial system.

• 39:00Anthony Pompliano?

  And we've seen some of the large players in some of these use cases like NFTs, for example, with NBA Top Shot, Dapper Labs, they actually moved off of Ethereum and went and built their own blockchain specifically for their use case. And so it begs the question of, in a smart contract platform, do you get fractionalization where people say, no, I'm going to take the idea of the smart contract platform and I'm going to customize it to my specific use case versus in the Bitcoin world, there's nobody who's saying like, okay, I'm going to take Bitcoin and then I'm going to create a special customized version of Bitcoin that I'm then going to go do something on because it doesn't work because nobody buys into the idea because it's not a technology argument, it's a belief system argument. Whereas over here on the Ethereum

• 39:43Anthony Pompliano?

  side, it's absolutely technical efficiency and technical superiority, which up until recently, Ethereum was the winner from a technical superiority standpoint for smart contract platform. I think now that's coming into question as to who is going to be the long-term winner. They still have the lead, still the dominant smart contract platform, but there all of a sudden last 12 months became a lot of competition very, very quickly and it's very credible competition as well.

• 40:09Speaker 02

  Totally. I mean, we're talking like, there's also a network effect to this, network effect of buyers, believers and developers working on those protocols. Now we're seeing this start to shift over to like Binance, Solana, many others. And I think that that's definitely a big challenge for Ethereum is how do you preserve decentralization, but then also, you know, trade off all these things that these developers want to go build out smart contracts and these more advanced systems. Another thing that earlier this week that came to light was really interesting, Maker. So Maker-

• 40:40Anthony Pompliano?

  Explain what Maker is.

• 40:42Speaker 02

  Maker Dow. Maker Dow is essentially a algorithmic stablecoin. What that means is that the stablecoin tries to preserve the value of a Maker dollar equivalent to a US dollar. So it's, you could call it a fiat coin, a fiat coin, stablecoin is a little bit of a misnomer considering that fiat declines like at least a couple of percent a year. So they use certain types of collateral in order to create this peg, not really a peg, but our stabilization mechanism. So this collateral is being more and more of this collateral, and I think now it's like 30 or 40% is USDC, which means that Maker Dow collateral is simply- A centralized stablecoin.

• 41:20Anthony Pompliano?

  So a decentralized system is relying on a centralized asset in order to keep the peg.

• 41:25Speaker 02

  Yeah, because USDC, USDT are completely centralized. Transactions can be censored, coins can be moved. How these work at USDC, USDC, they have a real US dollar bank account and then they issue you a token to represent that dollar. And so what MakerDAO is now having as their collateral are these USDC reserves, which essentially means that it's, they're using completely centralized collateral, which in a second could be gone.

• 41:49Anthony Pompliano?

  So you can't be a decentralized system if you use centralized assets? Or do you think there's a world where a decentralized system could use centralized assets?

• 41:56Speaker 02

  I don't think so. I think that you need to have decentralized assets because that's the whole core root of it. Is having like, the ownership of the assets needs to remain in the digital world rather than be tied to something in the physical one or tied to the existing financial system. That's why I really believe, you know, I'm really a strong believer in like native assets. Whenever you introduce like a legacy financial asset into a blockchain ecosystem, you introduce a lot of risk. So let's say you introduce a stablecoin and now your smart contract uses that stablecoin in some sort of fashion. Well, we have to trust that that stablecoin won't be seized or reversed. And then same with other collateral, like you take a piece of real estate, tokenize that, put it on the blockchain. If that's on the blockchain and it's being used for smart contracts, it's still rooted in the existing financial system, which can be censored at a moment's notice.

• 42:41Speaker 02

  So a blockchain doesn't really add that much more value. So yeah, I don't believe it's called decentralization when you have an asset that's completely controllable and centralized in a DeFi or, you know, a DeFi or blockchain ecosystem. Because at that point, it's basically just, you know, traditional finance on the blockchain, which doesn't give you much more value than what the blockchain was supposed to bring you, which is decentralization, permissionless innovation, uncensorable transactions.

• 43:07Anthony Pompliano?

  If you were in charge of or a major voice in one of these smart contract platforms or communities, what would your fights to them be? Would it be to say, hey, listen, we're not optimizing for decentralization. Decentralization actually really doesn't matter that much. And so we're just purely going to be the most effective technical platform for people to come and build on. Would it be, no, don't ever say that. You should try to make it as decentralized as possible? Like, like? Almost like flipped to the other side of the table and like, what would your advice be in terms of achieving success if you're a part of the smart contract platforms?

• 43:41Speaker 02

  Yeah, if I was a marketer for these smart contract platforms, you're not really competing on decentralization. It's clear that those community members don't care as much as Bitcoiners care about decentralization. I think they do care to a degree, but as we're seeing with Binance Smart Chain, like, people don't care as much. Traders don't care as much. So you really have to compete more on the aspects of flexibility, composability, all these different things that make smart contract technology very useful for engineers who want to build cool, fun things. And so that's your marketing pitch is the flexibility of it. What can it do for you? As a developer, what can you build with it? And as a consumer, what problem will it solve for you? And decentralization isn't necessarily, you're not capable of maintaining

• 44:24Speaker 02

  decentralization on that gradient of Bitcoin being the max decentralization. You can have and hold that decentralization all the way through through the smart contract functionality. To some degree, you can, but you lose some of that over time. And so if they're trying to market and they're trying to compete against Ethereum, I would say their narrative should probably be more around flexibility. And that's the narrative that these developers and these consumers care about. These consumers doesn't seem care about as much around decentralization as the hardcore Bitcoin community would.

• 44:55Anthony Pompliano?

  Bitcoin DeFi or DeFi on Bitcoin. Have you spent any time on this? What are your thoughts? What's exciting, not exciting?

• 45:03Speaker 02

  Yeah, so I'm just about to explore this myself.

• 45:05Anthony Pompliano?

  Okay.

• 45:06Speaker 02

  What I like to do is when I learn about a new topic, I start to write about it. That helps me kind of switch the the role around to a teacher mode. I'm able to think about it from, I have to teach it. And the best way to understand something is to try to teach it. So I'm undergoing the process right now of learning more about stacks, sovereign, sovereign is like sovereign RSK, atomic finance, which is using DLCs, and I think a few more, but that this, those are the three top ones.

• 45:33Anthony Pompliano?

  I mean, that's two of those. Perfect.

• 45:37Speaker 02

  Well.

• 45:37Anthony Pompliano?

  Atomic and sovereign.

• 45:39Speaker 02

  Yeah, well, I think they're both super interesting. The atomic guys.

• 45:41Anthony Pompliano?

  And a very big fan of Muneeb and the stacks team and.

• 45:44Speaker 02

  I've known a lot of these people for a long, long time on all three teams.

• 45:47Anthony Pompliano?

  You want to hear a crazy stat?

• 45:48Speaker 02

  Sure.

• 45:50Anthony Pompliano?

  I believe this to be true. It was told to me by somebody who I trust, believe. I actually don't even know how I would go figure this out. But stacks went from $0 in total value locked to $1 billion, the second fastest in history. Wow. Now, price has come down a lot. And so I don't think that they're still at $1 billion of total value locked. I think that's true of a lot of these platforms is prices come down, kind of the total value lock contracts. But they went from zero to a billion. I think only Sushi Swap was faster. And maybe it's not the second fastest, maybe they're the fifth fastest or something, right? Whatever.

• 46:27Speaker 02

  Still very fast.

• 46:28Anthony Pompliano?

  But still, very, very quickly. Another great stat for you. DeFi Pulse does not list them in the top rankings of total value locked.

• 46:40Speaker 02

  Why don't they list them?

• 46:42Anthony Pompliano?

  Well, I don't know, is a short answer.

• 46:45Speaker 02

  Okay.

• 46:46Anthony Pompliano?

  I can guess. My guess is that there would be a lot of blowback if something that is very focused on the Ethereum smart contract platform, DeFi, would then all of a sudden put in the top five or 10 or whatever products, DeFi on Bitcoin product.

• 47:05Speaker 02

  It'd be a little bit controversial, but I think from what we've seen, that I could see them intentionally leaving that out. So it's a convenient narrative. I think that Bitcoin DeFi, so I'm just starting my exploration now, which is I find really fun, just kind of exploring something new. And Bitcoin by itself is all that we need. Bitcoin is a supreme gold 2.0 asset. And everything that Bitcoin has today enables it to be that. Bitcoin has found protocol market fit. Whereas I think Ethereum is just finding some of that now, and other smart contract, much more contract chains are trying to find that. Bitcoin has found product market fit and has found it for a very long time. So that is the need to have Bitcoin's parameters as a sound money.

• 47:49Speaker 02

  It needs to have built into its community and its protocol on layer one, and it has all of that. Bitcoin DeFi, I think, is a nice to have. It's a nice to have that unlocks some additional functionality to Bitcoin, but Bitcoin would still be successful without it. But I do think it's really, really exciting to see what Bitcoin can do when you have that rock solid, trustworthy, decentralized foundation and then building on top of that versus other systems which aren't as decentralized and then build skyscrapers on skyscrapers, which could lead to riskier and riskier situations where the core base of it isn't stable. Whereas Bitcoin's core base is extremely stable and Bitcoin's engineers and community have pushed innovation to layer two, which is some of those Bitcoin DeFi, these Bitcoin DeFi projects are essentially like layer two technologies.

• 48:31Anthony Pompliano?

  And for those that don't know, what we're talking about here from a kind of DeFi on Bitcoin is essentially, as we described earlier, Bitcoin was created. People wanted to do things like smart contracts, composability, et cetera, on top of it. They then went and built Ethereum, now many other smart contract platforms. Those don't scale out layer one for the most part, so they're building on layer two. But you get decentralized lending, decentralized exchanges, knock yourself out, name your financial product. There's a decentralized version of it, decentralized derivatives, all this stuff. Varying degrees of success, something like a Uniswap, I think now is doing like a third of all trading volume of a Coinbase, right? So like, if you just look at pure stats, you have to say that one is super impressive, two, it quote unquote, works, right?

• 49:16Anthony Pompliano?

  Three, people want to use it and they are using it, right? What the logic of DeFi on Bitcoin is, okay, but let's go build decentralized exchanges, lending, et cetera, on top of Bitcoin. Historically, that wasn't truly possible. Now, could you do some stuff around smart contracts for a long time? Yes, but this is now with RSK and a lot of this stuff. The first thing that really any developer in the world can come and use smart contracts, Stax has done this as well with Clarity and all stuff. And so. Now you start to say, wait a second, there's two different ways to do DeFi on Bitcoin. One is vertically integrated Bitcoin only, we're going to create non custodial lending exchanges, all that stuff. Two is something more akin to like a sovereign where they're saying, wait a second, no, what happens if you could take your Ethereum and move it over here?

• 50:01Speaker 02

  Yeah.

• 50:01Anthony Pompliano?

  Right? What happens when there's interoperability between this stuff? But it's all rooted and secured by the Bitcoin blockchain. And they recently opened that bridge and actually a lot of people decided to move their Ethereum over.

• 50:13Speaker 02

  Right? Totally.

• 50:14Anthony Pompliano?

  And so in that world, that's not a Bitcoin versus Ethereum, like those things are working together now.

• 50:19Speaker 02

  Right?

• 50:20Anthony Pompliano?

  Right? And you get composability, you get a lot of smart contract capabilities, but you also get security and it becomes interesting.

• 50:26Speaker 02

  Yeah, I think the entire crypto community would agree that Bitcoin's network is one of the most secure and decentralized, it is the most secure decentralized out there. And building on top of that gives you the strongest foundation to build upon. I think that's what Bitcoin DeFi is so interesting. What's so interesting about it is the Bitcoin's decentralization was preserved on layer one. And then the innovation was popped to layer two. And that's why I think it's really cool to see the Bitcoin community embrace some of these new ideas. We can also look at it from the perspective of you've got, you know, you've got Bitcoin, which the value accrues to Bitcoin based on how many people store value in it. Bitcoin is a gold or a money after all. So the value that accretes to the Bitcoin protocol is based on the aggregate shared belief in Bitcoin and the amount of money flowing into it.

• 51:11Speaker 02

  Ethereum's hypothesis was that the utility or the flexibility of how many things you could do with that collateral would increase incremental value for it. I mean Ethereum's original pitch was being an oil, not being a store of value. Is it Ethereum is the oil, Ethereum is the gas? I mean, that's why they call it gas to power smart contracts. And so the value would accrue based on the utilization of it using, being able to all the flexibility. Kind of like saying that aluminum should be more valuable than gold because you could do more things with it. But with Bitcoin DeFi, I think what's so interesting is that Bitcoin, the value accrues to the protocol based on the trustworthiness and based on people storing value in it, that already happened. Then you have Bitcoin DeFi, which then lets people do more things

• 51:53Speaker 02

  on it. That's why I call it a nice to have, is it's not critical for Bitcoin to achieve its mission of store value. It just unlocks additional functionality. So I think that's, I don't know if that was too confusing, but those are two different, I would say it's a different philosophy of how value accrues to the protocol. And that's important to call out.

• 52:09Anthony Pompliano?

  So I think it's also important just to state Bitcoins going after this global store of value, Ethereum and other smart contract platforms are going after more of a technical superiority to it. I, and I don't know where you stand on this, but me personally, it's not that I'm anti any one of those smart contract platforms. I actually think that there's way more risk of disruption and lack of sustainability when you get into a technical superiority in the early days, right? There's 20 something search engines before Google came along, right?

• 52:41Speaker 02

  Exactly.

• 52:42Anthony Pompliano?

  There's been a lot of social networks, so Facebook came along, right? And so when you get that, what ends up happening is once a technical superiority conversation, disruption is actually the default, right? His history would tell us it's more likely than not. Store of value though, that's not true. And so in some weird way, the Bitcoin community is the most conservative, right? Like it is now called Boomer Coin. And I always tell institutions, I'm like, by the way, you think this is risky. The people in this industry think this is the least risky, most conservative, most antiquated thing in the world. So when you take the most, you know, I'll use the term cowboy, but in an endearing way, right?

• 53:27Anthony Pompliano?

  Or the Dgen community or whatever the latest nomenclature is, and you put them in a room with the institutional, the institutional people think the Bitcoiners are crazy and the crypto community thinks the Bitcoiners are like so out of touch with reality and like what's possible. That to me is actually really interesting because now what you get is like, that's the bridge between the two worlds, right? That's how you pull the legacy people in. And, you know, most people in the crypto community, maybe not everybody, but most people are Bitcoiners. And then some people are Bitcoiners plus whatever else, right? Is that kind of your read as well?

• 54:01Speaker 02

  Vitalik owns Bitcoin.

• 54:02Anthony Pompliano?

  Yeah.

• 54:03Speaker 02

  So, yeah.

• 54:04Anthony Pompliano?

  And I don't think that most people are anti-assets. I actually think what happens in the entire industry is people are anti-communities.

• 54:14Speaker 02

  Well, I think that it's deeper than that, too. Like, I've been around, I've been in the Bitcoin ecosystem for eight years, fucking eternity. I mean, I've got gray beers coming in my beard, and I'm 33. It's ridiculous. I've been through a lot, right? I've seen my net worth go up exponentially and drop 85% three times. I mean, it's nuts. There's been 10,000 cryptocurrencies that I've seen come and go. Bitcoiners are rightfully skeptical of certain claims, certain claims of we will have more transactions per second. Well, cool, what are you trading off for that? I think that should also, that should always be your first inclination. When a coin says we're better at this than Bitcoin, the question should be, cool, what are you sacrificing to get that? There's always trade-offs. The world typically doesn't have this perfect scenario where you don't trade off anything

• 54:56Speaker 02

  for something else. And Bitcoiners, I think, are just developed like an allergy to these claims of like, we're faster, we're more transactions per second than Bitcoin, we're more secure than Bitcoin. All of these are dubious claims. And Bitcoiners, and myself included over time, and I've played around with alts before, I traded Litecoin. I thought it was faster than Bitcoin. This is back in 2013, right? When I was first developing my, my understanding of this space. And then with Bitcoin mining, I was like, oh, that seems kind of wasteful. This was in 2014, and I mined Prime Coin. Prime Coin found prime numbers while it mined, which I felt was a better thing to do. It's silly in retrospect, but most Bitcoiners didn't start 100% Bitcoin. They tried everything else. And then they

• 55:40Speaker 02

  came back to Bitcoin because they're like, this is the reason why we're here. And so I think that, you know, with Bitcoin and institutions,

• 55:48Speaker 02

  They're wanting to buy Bitcoin. Bitcoin makes sense to them. It's a gold 2.0 narrative. I think with the DeFi products, they're certainly interesting. It's really cool to see what happens there. But Bitcoin is the gateway for that. The gateway isn't like, oh, I heard about Bitcoin and now I'm going to go buy this like really crazy new new something swap, you know, sort of like new concept. It's more of like, they'll develop trust in Bitcoin and trust develops over time. And then they'll start to develop trust in some of these other DeFi tools. And if that DeFi is built on Bitcoin, then they'll naturally kind of flow into that.

• 56:20Anthony Pompliano?

  Taproot, what is it and what is the benefit to Bitcoin?

• 56:24Speaker 02

  So Taproot is a BIP. And what a BIP is, is it's a proposal of a new implementation of the Bitcoin code. So different new Bitcoin improvements are proposed by the community, proposed by developers. It goes through a long process of review. And then it's, and there's a certain complex process of how the market signals, including miners and users, that if they want to implement this, this new code. Because ultimately what Bitcoin represents is all the code that we all run and that we call Bitcoin. That's Bitcoin's community, Bitcoin's code. Anyone can take Bitcoin, fork it and create their own version and try to get a community of people to believe in that. So ultimately Bitcoin's code and community believing that code is what Bitcoin represents. Taproot is a new improvement that will improve the efficiency of transactions. So I believe that you can,

• 57:10Speaker 02

  I forget exactly the functionality of what it does in terms of like how efficient it is. I know it's more efficient contract wise, so it makes the transactions in bytes smaller for certain types of contracts and it obfuscates certain types of

• 57:25Anthony Pompliano?

  A little bit more privacy as well.

• 57:26Speaker 02

  Precisely. That's the simple way to put it. So some, I believe that like you won't be able to tell the difference between a single signs transaction and a multi-signature transaction. So it makes more complex transaction types somewhat look the same. So it increases privacy on, on layer one. So it increases a more efficient block size wise. So it makes transactions smaller and it improves privacy is kind of the TLDR.

• 57:52Anthony Pompliano?

  As this improvement becomes a signal across the network and people are going to adopt it, what happens to the people who don't adopt it? Do they just end up on a fork? Do they end up on old software? Like, what happens to that?

• 58:04Speaker 02

  Yeah, so most Bitcoin BIPs are soft forks, which means that if you don't run that newest version, you can still interact with the Bitcoin protocol. So in this case, I believe that this is a soft fork, so it wouldn't implement. So if you don't upgrade to the newest version of Bitcoin, which would be compatible with Taproot, you would still be able to communicate with the Bitcoin network and still be able to integrate with it. And that's, I think, a much more, I think that sort of upgrade process in the Bitcoin community is somewhat unique. I know in the Ethereum community, they often embrace hard forks, which I think is a much more, I think, you're requiring consensus to be recreated around this new code, and that could eventually lead to a fracture. There could be a moment when there's a hard fork and the two groups split. Versus Bitcoin wants to preserve the network effect and community, so they make that, they

• 58:49Speaker 02

  make sure that it's all soft forks, which means that everyone using the legacy systems can still communicate going forward.

• 58:53Anthony Pompliano?

  And that's not an Ethereum-only thing, right?

• 58:56Speaker 02

  Sure.

• 58:57Anthony Pompliano?

  Obviously, there was the Ethereum, Ethereum classic, kind of hard fork, but also there's Bitcoin, Bitcoin Cash, and you kind of go through all the various forms. And so really, just a hard fork becomes a little bit more contentious, a little bit more divisive, right? I mean, literally, it's like hard fork, whereas a soft fork allows for the compatibility. When you see things like this, does it give you hope that we're just going to get to you to improve it, it's going to become more efficient, more private, and like, all of the FUD, not just put very overgeneralization of just whatever people want to say against Bitcoin, is ultimately just going to be on the wrong side of history?

• 59:31Speaker 02

  Yeah, I think all the FUD will be on the wrong side of history. Most of the FUD is unsubstantiated and/or intellectually dishonest, like the ECG FUD. Again, no one looks at their own energy mix of their radio or car or anything else, they just go use it. So a lot of the FUD is rooted in just like, people don't like Bitcoin. Some of the FUD around like, oh, Bitcoin can't upgrade fast enough, I don't think is good FUD either, because Bitcoin being a store of value asset, we don't want it changing all the time. You worked at Snapchat and Facebook, right? I worked at Uber. We have to go ship week over week and build new features to outcompete each other, especially with Snapchat and Facebook. Those are very intense with the Instagram and Snapchat side. Uber was competing with all these other ridesharing companies like Lyft, but Lyft was

• 1:00:15Speaker 02

  just one of them. There were dozens across the world. So the software building culture of Silicon Valley is always about shipping. We've got to go ship, ship, ship, and outcompete. If we're not shipping, we're falling behind. And so it's always about releasing more and more code to solve problems for our customers in an elegant fashion. With a protocol like Bitcoin, you don't want it to change constantly. The whole trust of the world is being built on top of this solid foundation. All of this trust needs to believe that this won't change very often. You don't want the foundation of a building being swapped out for a different type of concrete every couple of years. You want it to slowly dry and become harder and harder over time. And that's what Bitcoin is becoming. In a term is called ossification. So there are, there will be small changes to Bitcoin over time, but I don't believe

• 1:00:59Speaker 02

  that we'll see that many changes over time with the Bitcoin protocol. And hopefully, by the end of our lifetimes, we won't see any changes ever to become this rock solid, never changing base of the financial world. And all the innovation happens on layer two and three.

• 1:01:14Anthony Pompliano?

  What are you most excited about right now in Bitcoin? Like in terms of some of that layer two, layer three stuff, anything on layer one? Is it anything that's not technical from like a social or political standpoint? Just when you think of Bitcoin today, what are you most excited about?

• 1:01:29Speaker 02

  Yeah, that's a hard question to answer. There's a lot of things going on. I think that I've been in for a long, long time. I think, what was it, Ari Paul? He said, there's more speakers at Bitcoin 2021 than there were at conference attendees back in 2014. He's right. I was at that conference at the Roosevelt in 2014. There are more speakers than attendees back then. So seeing the Bitcoin community this big, this big is incredible. We have come so far. Bitcoin has overcome so many different obstacles to be here today and being recognized as a gold 2.0 by institutions. And when the institutions believe in it, that brings more retail. And this is like Bitcoin's big moment. You know, I think, what was it? 20 million Americans own Bitcoin? Or that was the latest? Maybe it's even higher.

• 1:02:11Speaker 02

  Maybe it's like, there's like 100 million or something. 20%, yeah, it was 20% of US adults own Bitcoin. That's incredible. I mean, when I was at it, almost no one talked about it. So I'm most proud of that. I think that's what makes me excited is seeing the Bitcoin community grow so large. You know, on a more technical side, you know, seeing Taproot get activated, I think is really cool. And I think there was some anxiety around how it would become activated. And luckily it was not contentious. So I think that's kind of a sigh of relief. And then Bitcoin DeFi, I think Bitcoin DeFi is super interesting. Bitcoin DeFi, I think, is something that unlocks more functionality for Bitcoin. Again, I think it's a nice to have, it's not necessarily a need to have for Bitcoin to win.

• 1:02:53Speaker 02

  But I'm really excited to see what happens when developers build on the rock solid foundation of Bitcoin versus, I think, a little bit more unstable or ever changing foundation of some of these other protocols.

• 1:03:03Anthony Pompliano?

  Last question for you. Elon Musk, does he matter? Does he not? What do you think about the tweets? Should he stop tweeting? Should he keep tweeting? Just what's your general sense of the entire situation?

• 1:03:13Speaker 02

  Bitcoin has no leaders. We don't matter in Bitcoin, in the grand scheme of things for Bitcoin. None of the core devs matter. Bitcoin is a protocol. It has a community that rallies around it and rallies behind the rules, rules, not rulers. And so Bitcoin doesn't need Elon Musk. Elon Musk doesn't impact Bitcoin over the long term. Elon Musk is one of many wealthy and powerful people that have tried to change Bitcoin. Do I think Elon was being serious, though? I don't think so. I mean, he's a really smart guy. He, he was talking about very, I don't know, the way that he phrased it, I just, it's hard for me to believe that he was being completely truthful there. He either has a political agenda that he needs to signal to the existing establishment.

• 1:03:54Speaker 02

  And that's what he was doing there, or he was joking. But I, it would be hard for me to believe he didn't spend more than 10 minutes doing due diligence on Bitcoin when they bought it. So Bitcoin doesn't need Elon, but I would still like Elon to, to, you know, become closer with the Bitcoin community. And either stop joking around or stop virtue signaling, whatever he's trying to do, because I think it'd be great to have him on our side. I don't think Bitcoin needs him, but I think it'd be good to have him.

• 1:04:19Anthony Pompliano?

  I think that's exactly how I feel is without Elon Musk, Bitcoin will be fine. If Elon Musk chooses to attack Bitcoin, I actually think Bitcoin gets stronger and Elon would lose that battle. But I sure as hell would love to have him on our team.

• 1:04:36Speaker 02

  Agreed. Better be on our team than on another team.

• 1:04:40Anthony Pompliano?

  Yes.

• 1:04:40Speaker 02

  Yeah, I very much hope that he digs in further, starts to understand Bitcoin a little bit more. I'm sure there's all sorts of Bitcoiners across the world trying to help clarify that with him. So I'm pretty confident, once he digs in, he'll understand it. I mean Bitcoin's proof of work mechanism is about physics, not code. And I think he'd really appreciate that if he dug in, he'd find it beautiful. Again, he builds rockets, right? Like, he's all about physics.

• 1:05:03Speaker 02

  So yeah, I really hope he comes back around and just digs in a little bit more and decides to. It's so hard to read Elon. It's really difficult. But anyways, I think it'd be better to have him than not to have him.

• 1:05:14Anthony Pompliano?

  I completely agree. Where can we send people to find you on the internet? Read some of your writing or any of your other work?

• 1:05:20Speaker 02

  Yeah, so if you're on Twitter, it's @danheld. If you like watching YouTube, Dan Held is my YouTube channel. On both, I cover a variety of topics on Bitcoin. I also have long form content that I put out every Thursday. It's called The Held Report. And in The Held Report, I write long form thoughts around Elon, inflation, and all sorts of other things.

• 1:05:37Anthony Pompliano?

  Awesome. @danheld. Multiple people asked me if you were gonna ever change your name to Hoddle, which I'm sure you hear all the time. But we will bring you back if you ever decided to officially change your name to Dan Hoddle.

• 1:05:50Speaker 02

  Sounds good. Well, you know, hopefully Bitcoin's closer to a million when that happens. But yeah, Bitcoin's closer to a million, I might get a Bitcoin tattoo and change my name.

• 1:05:58Anthony Pompliano?

  All right, man. Thank you so much for doing this. I think people really learn a lot.

• 1:06:01Speaker 02

  Thanks for having me, Paul. Cheers.