Pod Insights The Pomp Podcast Zac Prince, Co-Founder of BlockFi: The Details Behind a $30 Million Fundraise About this episode Zac Prince is the Co-Founder of BlockFi, a company building wealth management services for cryptocurrency investors. They announced a $30 million Series B funding round today, so Zac stopped by for a livestream to discuss how the business is doing, what they are going to use the money for, and what clients can expect from BlockFi in the coming months. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. -----If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Anthony Pompliano? What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off. Zach Prince is the co-founder and CEO of BlockFi. They're a company that builds wealth management services for cryptocurrency investors. We've been investors for a while over at Morgan Creek and we just participated in a $30 million Series B funding round. Zach came on the podcast and we did a live stream so he could tell us what they're going to use the money for, how the company's doing, and what clients can expect coming from BlockFi in the next few months. This conversation was fun, fast-paced, and Zach filled us in on a lot of details. I hope you enjoy it.
0:43 Speaker 01 Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.
1:09 Speaker 02 What's up dude? How are you? I'm gonna have to try not to check my phone while we're recording. The Bitcoin price is going up. Our Series B news just dropped.
1:18 Anthony Pompliano? It's alright. Alright, let's get into this. You guys announced today $30 million Series B.
1:23 Speaker 02 Yep.
1:24 Anthony Pompliano? Caveat, we invested. So everyone, yes, we are investors. What's been going on at BlockFi? Why are people giving you $30 million, including us?
1:33 Speaker 02 Yeah, so, you know, a couple things. It was definitely an opportunistic fundraise for us, and the reason we decided to do it is, we raised our Series A in July of last year. Back half of last year, we set really aggressive targets for the company and we blew them out of the water in terms of number of new clients, in terms of the amount of revenue we're generating,
1:58 Speaker 02 institutional traction, and all this stuff kind of starts feeding on itself and generating momentum. So, we were seeing great performance, great growth, and we also have a very, you know, Product pipeline for this year of new things that we want to bring to the market. And we wanted to be able to bring those new things to market with confidence, especially the Bitcoin Rewards credit cards. You know, launching a credit card is not a, it's not a small, small effort. And we want to do some really fun marketing. And so, you know, for all these reasons, we felt like we could go to market and raise more capital. And now is the time to, to do it. And fortunately, when we started having that conversation, you know, folks that are already sitting around the table, including yourself,
2:44 Speaker 02 were like, hey, you don't, you don't need to go to market too much, you know, we can just.
2:47 Anthony Pompliano? We don't need to go fundraise. We could all just do this right here, right now.
2:50 Speaker 02 Yeah. And so it, you know, it came together pretty quickly and I'm excited as, as the CEO, you know, the team's grown a lot. We've got just such fantastic people working at the company and it's been amazing to see the speed at which we've developed things and the high level of client service that we've been able to maintain throughout the growth that we've experienced. And now we're just setting an awesome tone for this year, right?
3:14 Anthony Pompliano? So right now you've got three products, right? I can put crypto in and take a US dollar loan against my crypto collateral. I can put crypto in and get paid interest on Bitcoin Ethereum GUSD. And then I can also buy and sell crypto as an exchange. But what can you tell us about numbers? Because in the Bloomberg article in the announcement, revenue is up 20x since last January. That's a big fucking jump. Where's that coming from? Is that just the launch of new products? Is that kind of people using the existing products more? How do you think about that? And what are you willing to say?
3:53 Speaker 02 Yeah, sure. So, I mean, it's a, it's a combination of things. So, you know, first and foremost, it's driven by increased adoption in terms of the number of clients that, that we have on the platform, both retail and institutional. As a result of the client growth, we've grown, you know, assets on the platform and AUM. The number that we put out in the official Series B press release was 650 million on the platform. It's actually healthily above that now because we finalized that copy. Couple of weeks ago, and those things drive revenue. So the more clients you have, the more people are going to trade, the more people are going to take loans. The larger balance that you have that's earning interest and the balances that are earning interest are what gives us the ability to lend more capital.
4:36 Speaker 02 And the majority of the revenue that we make is from lending, getting paid on lending, whether that's USD or crypto. And so, you know, we're doing well over a million dollars a month now. And it's doubled just since we decided to do the series B in early December. To when we closed the round. So we're hitting kind of a new pace in terms of that trajectory, which is great to see.
5:03 Anthony Pompliano? So you're up 20X in revenue over the last year. In the last 45 days, give or take, revenue has doubled. And you're now doing well over a million dollars a month in revenue. You get 650 billion plus in assets on the platform. And you continue to move the interest rates to kind of serve customer needs, right? So one of the things that I think a lot of people have questions around is just how do you come up with? What is the interest rate, right? And we're still talking specifically around the interest product. Can you explain kind of the mechanisms there and why it changes month to month?
5:42 Speaker 02 Sure, so there's a number of different factors that go into determining the interest rate. So the first thing is just the market. And the market has a couple of different inputs to it. The futures curve and the funding rates on derivatives platforms are very important in terms of seeing where the market is for lending rates. Another big part of the market is supply and demand. How much capacity does the market have to lend dollars, to lend crypto, relative to how many places there are that, you know, and institutions there are that are interested in borrowing it? And so the rates are, you know, primarily set by the market. But then there's a few things that we do to.
6:28 Speaker 02 Incentivize adoption. So we have a, for crypto, we have a tiered interest structure where, you know, for example, today on your first five Bitcoin, you earn 5.15% annual yield. And for your balance above five Bitcoin, you earn 3.25% annual yield. And the reason that we, that we did that is that we wanted to
6:52 Speaker 02 provide a high rate to as many people as we possibly could. And also, we're always cognizant of competition in the market and take client service out of it, you know, take UX out of it, take trustworthiness out of it. At the end of the day, with financial products, rate is really important. And so we want our rates, whether it's how much it costs someone to get a loan, or whether it's how much someone's earning in interest, to be the best in the market for the types of products that we offer. And so all of those things, you know, play a role in us determining the interest rates that we're able to offer. And we change them month to month based on changing dynamics. So, you know, the most fundamental thing that, that changes and is starting to change
7:37 Speaker 02 pretty dramatically right now is the market is shifting heavily bullish for Bitcoin. You know, there's a lot of underlying trends pointing to increased adoption, both on institutional and retail. And there's a lot of excitement and, you know, anticipation of the supply reduction with the halving. There's a lot of new kind of regular buying pressure being created through adoption of products that are substituting Bitcoin in, instead of traditional rewards and enabling people that already know this is a great investment to just, you know, stack more SATs, get more Bitcoin. And all of these things are coming together and they're, they're making the market position
8:19 Speaker 02 heavily bullish. When the market is positioned heavily bullish, there is slightly less demand to borrow Bitcoin than in times where the market's neutral or bearish. So if you look at, you know, some of the key metrics that go into determining what interest rates we're able to offer, the Interest rates are moving downwards for Bitcoin right now. The trend line is moving downwards and moving dramatically upwards for dollars. Because people want more dollars to buy more Bitcoin.
8:48 Anthony Pompliano? Of course, and then you guys announced that you're going to come out with this credit card, right? So you got the three products today. And when you announced the credit card, I think a lot of people, they just kind of took them by surprise, right? In the sense of no one's really thought about, well, there's things like Lolly or Foldnap, etc. Where I can get paid in Bitcoin, cash back for my purchases. But that's really using kind of a plugin type technology stack. What you guys are talking about here is that you're going to issue a credit card. So I can come in, I can apply for a credit card, you approve me, give me the credit card. And when I use it for everyday purchases, I'll actually earn my cash back, in air quotes. I'll earn it in Bitcoin.
9:28 Anthony Pompliano? And it's just another way for me to get access to Bitcoin without having to go put fiat currency in and buy it through an exchange.
9:36 Speaker 02 That's exactly right. And it's important to note a few things when we're talking about the card product. Because there have been a couple of different card products that have come out in the cryptocurrency space already. One fundamental difference between what we're doing and what's existed in the past is that it's a credit card, not a debit card. So debit cards, you're spending money that you've already funded into an account. Credit cards, you're spending money that is credit. And that, you know, if you pay back at the end of every month, you don't pay an interest rate on whatsoever. Credit cards also come, you know, the way these payment networks work in the US at least, credit card networks have a higher interchange capture rate,
10:19 Speaker 02 which is basically how the card companies make money from the merchants when credit card transactions are processed. And as a result, credit cards offer higher cash back rates to consumers than debit cards do.
10:34 Speaker 02 We think of the BlockFi Bitcoin Rewards Card as something that's competing more with, you know, Chase Sapphire Reserve or your airline mile card. It's for a prime consumer. It's going to have a high cash back rate. It's a credit card where you don't have to pre-fund it to be able to spend money. Just instead of earning airline miles or normal cash back, you're going to earn Bitcoin. And we're huge fans of Lolly and Fold and all of these apps. I think, I think one of the big trends of this year is going to be all of these things working together to create a lot of regular buying demand. And you can use the BlockFi Bitcoin Rewards Card with Lolly at the same time.
11:10 Anthony Pompliano? So like, if you're really crazy about this and fanatical, what you could literally do-
11:16 Speaker 02 Which I am, by the way. I'm gonna do it.
11:18 Anthony Pompliano? So am I, of course, so am I. Is you can use the BlockFi credit card through a Lolly or Fold app to then buy, let's say, a flight for work, but that ends up being reimbursed. And so you end up earning the free Bitcoin and you're double dipping almost, right? Using the credit card rewards back, but also the Lolly or Fold app rewards as well.
11:39 Speaker 02 Yeah, and you're going to get, for example, you know, 3% to 5% back by using the Lolly link and 1.5% to 3% back on the BlockFi Bitcoin Rewards Card.
11:49 Anthony Pompliano? 1.5% to 3% is where you think it'll end up?
11:52 Speaker 02 Yeah, we're still, we're still finalizing the exact numbers with our partners. And there's some, you know, questions there about how much you want to incentivize certain types of spending. There's basically two models you can go with. You can either go with a high, flat cash back rate on every transaction, just a high base rate, or you can do something where you have like a 1% cash back rate on every transaction. And then for certain types of purchases, you offer higher rates, you know, 2%, 3%, 4%, 5%. So we haven't made a final decision on which one of those options we're going to go with, but it'll be a cash back rate that's, you know, competitive with, yeah, competitive with prime cards that are in the market today.
12:31 Anthony Pompliano? Got it. And then do you have any idea in terms of- Who will be eligible for the credit card? I think that's another question I've seen a lot online of just like, is this a credit score based thing? Is there other things that'll go into who gets approved and who doesn't?
12:45 Speaker 02 Yeah, it's gonna be, it's gonna be traditional credit underwriting. So if your FICO score is not in a good spot, definitely, you know, work on it now in advance of, in advance of the card coming out. So nothing specific to say there, but you know, generally the cutoff for, for prime, which is the part of the market that we'll be operating in, is in between 650 and 710, you know, on the lower end in terms of what your credit score needs to be to receive the card. And there's other variables that will go into the underwriting model, including your self-reported annual income, age, credit history, et cetera. But it'll be underwritten the same way that traditional credit cards are, are underwritten.
13:27 Anthony Pompliano? I'm laughing because I'm getting tweets right now of people saying, "Good morning, guys. How about some money for AMA participants?"
13:34 Speaker 02 How about some money for AMA participants?
13:36 Anthony Pompliano? When the, when the credit card comes out, you'll get all the money back that you could ever dream of. Last time that I think we did a podcast episode, I asked you, what do you believe in that other people would disagree with you? Or kind of what's your most controversial thought? And you said that people essentially were underestimating the importance of stable coins.
13:55 Speaker 02 Yeah, this was a while ago too, like two years ago.
13:57 Anthony Pompliano? Yeah. Stable coins end up being pretty important. And, and both stable coins in the general sense of, you know, USDC, GUSD, Tether, TrueUSD, all of kind of what I'll call the crypto and private corporation, Libra as well. And then now we're seeing like the digital dollar, the digital yen, and all of the government issued digitized currencies that I'll put in the stable coin category. I don't want to say you were quote unquote right, but you were probably more right than wrong in terms of direction, kind of how this is playing out. What are your thoughts today on stable coins and kind of their importance?
14:34 Speaker 02 I'm still incredibly bullish. I think that.
14:38 Speaker 02 I think that if you survey, you know, name your emerging or frontier market, and if you survey people in that market, 100 people, and you say, how many of you want to hold dollars and how many of you want to hold Bitcoin? Pretty close to 100 would say they want to hold dollars and depending on, you know, where you're asking that question, they might not be able to. The only way they might be able to hold dollars right now is by getting $100 bills on the black market and shoving it under their mattress. And probably between, you know, one and 15 of the people would say they also want to hold Bitcoin or other cryptocurrencies.
15:16 Speaker 02 And so these markets for dollars outside the US and outside of regions where dollars are the base currency are massive for institutions and multinational corporations. Dollar-denominated debt borrowed by folks outside the US is an $11 trillion market that's growing at a 7%, 8% clip every year and showing no signs of slowing down. That market has never been open to retail. So this, you know, credit market, access to credit, access to debt, ability to save in something that's relatively stable and earns an interest rate, isn't something that
15:59 Speaker 02 most people around the world have had access to, and that's what the dollar provides. And so my view continues to be that stablecoin adoption is going to grow. It's going to grow dramatically. Dollars on the blockchain will probably be bigger than Bitcoin at some point over the next two to five years. In market cap size? In market cap size. And all that trend happening is awesome for Bitcoin. Why? Because if you have people holding digital dollars, whether it's in stablecoin form or another form, with fintech companies or cryptocurrency companies, the money gets that much closer to Bitcoin.
16:43 Speaker 02 And so your opportunity to convert folks into owning cryptocurrency is just that much easier. And so. I think that for companies like us, we think of BlockFi as potentially
17:00 Speaker 02 one, two, three years from now entering another phase in our business. We're still very much focused on just delivering really awesome products for cryptocurrency investors right now. But we think we might, in a couple of years, be in a position to have products for folks that aren't interested in Bitcoin yet. They're actually just interested in earning an interest rate on dollars and they're coming from a place where that wasn't possible before. And that's where they start.
17:25 Anthony Pompliano? Yep. Well, so a lot of people don't know this, and I've gone around the country, literally, and talked to institution after institution about
17:36 Anthony Pompliano? right now, I can take money and I can put it into GUSD. I can then turn around and I can hand that to BlockFi in an interest-bearing account and I can earn 8.5%.
17:46 Speaker 02 Yeah, 8.6.
17:47 Anthony Pompliano? 8.6% APY on that.
17:49 Speaker 02 And USDC as well now.
17:51 Anthony Pompliano? And USDC. Okay. So that's a really, really high interest rate compared to the fiat traditional banking system, right? Money market accounts, maybe you're squeaking out 100, 150 basis points on the high end. You're talking about an 860 basis point APY on a digital dollar, right? Does that come down over time? Like where does that interest rate kind of evolve? And the reason I'm asking that is, do we eventually enter a world where people are financially incentivized to move from the fiat currencies in the traditional banking system into this digital dollar world?
18:28 Speaker 02 Yeah, absolutely. I mean, we're, people are incentivized to do that now. But the rates will absolutely trend towards the rates that you see in traditional markets. But I think that's going to take quite a while.
18:42 Anthony Pompliano? Okay, why?
18:42 Speaker 02 Fundamentally, the cryptocurrency, digital asset, blockchain sector does not have access to the same types of capital that traditional markets do. It's a little bit like the marijuana industry or other new industries where it's still emerging. People don't understand it. It's a new technology. And banks move at the speed of slugs, right? And they're afraid of everything and they're not that interested in it.
19:14 Anthony Pompliano? They're very risk averse.
19:15 Speaker 02 They're very risk averse. So. I actually think that our rates that we're paying on stable coins might go up before they go down. So we might have an announcement there in the next, in the next week or two, about a rate increase on, on stable coins. And over time, as it scales, they will definitely trend downwards. And one analogy that we look at is, I'm forgetting the name of it. I think it's YayBao.
19:44 Anthony Pompliano? Okay, what's that?
19:45 Speaker 02 It's, it was the money market, it's the money market type fund from either Alibaba or-
19:52 Anthony Pompliano? Oh, yeah. Alibaba. It's like the largest money market fund in the world.
19:54 Speaker 02 Largest money market fund in the world. When that thing came out, it was offering an interest rate of like 9%. And now, the interest rate that it offers is below the risk-free rate-
20:05 Anthony Pompliano? Yep.
20:05 Speaker 02 -for bank deposits in the market that it operates in. But that transition took a long time. And during that transition, so many things got added on to that platform in terms of functionality that you can also do with the dollars, that people are happy to, or the RMB, that people are happy to, you know, keep their, keep their capital there because it's a better option than what was available from the traditional banking system. And what makes it a better option can shift over time. On day one, it can just be the interest rate. And the interest rate is dramatically better. But, you know, in year three, four, five, six, it might be that there's this suite of additional services
20:46 Speaker 02 in addition to a better, you know, user experience, client service experience versus the traditional banking system that keeps people on the platform.
20:55 Anthony Pompliano? So YayBao, I think is the right way to pronounce it. I just looked and it definitely was the world's largest money market fund. At one point, they had $245 billion-
21:04 Speaker 02 Yep.
21:05 Anthony Pompliano? -in there. So a quarter of a trillion dollars. And the rates were incredibly high. Mark Usco tells a story that I believe at one point, they were growing so rapidly that there was actually a cash crunch at the Chinese banks. And so the government stepped in and said, whoa, timeout. Right? And, and I don't know, I don't think they- Completely stopped people from depositing, but there was like a rate limiting. And it simply is, people are searching for yield, right? And if you can show them a lower risk way to get the same or higher yield, of course, they're going to be interested, right? And I think that's what you see there. And obviously, we haven't yet seen it at scale in the digital world,
21:50 Anthony Pompliano? but it's definitely something that is likely to occur at some point if rates can stay up higher than we're seeing in the traditional banking system.
21:56 Speaker 02 It's coming. I mean, people don't, you know, the people holding stable coins with us right now are still, you know, a subset of cryptocurrency market investors for the most part. A big theme for BlockFi this year in general is taking our marketing and messaging and capabilities on that, on the platform to a more mainstream audience. And as that starts to happen, I think we'll start to enter, you know, an even faster trajectory of growth because the value proposition is great.
22:29 Anthony Pompliano? Yeah.
22:30 Speaker 02 You're earning 1.75%, 1.5% in traditional savings accounts or at Marcus or whatever. This is 8.6. It's not that hard to do the math.
22:39 Anthony Pompliano? Yeah. What are you going to use the money for? So you just raised $30 million.
22:44 Anthony Pompliano? Where's money go?
22:45 Speaker 02 So, you know, the primary expense for us has been and will continue to be people. So, you know, we grew the team from 15 to 75 last year. We'll go from 75 to around between 125 and 150 this year. And that's growth across the board, our engineering team, our client service team, our institutional service team, finance team, compliance team. So, you know, growing, growing the team is the number one use of proceeds. After that, it's marketing and product development. So, you know, we're launching a mobile app and fiat on and off ramps. When you have fiat on and off ramps, banks require you to keep reserves with them
23:30 Speaker 02 based on how much ACH transaction volume you're doing. So there can be a little bit of a cash drag there and. Launching a credit card is not a small feat, both in terms of the lift you need to put in to bring it to market and get it live. And we also want to do a ton of fun marketing. So our marketing budget is going up by a factor of 30x versus last year. I think we spent like half a million dollars on marketing last year. Spending way more than that on marketing this year.
23:58 Anthony Pompliano? There was competitors in the marketplace that spent a lot more than half a million bucks.
24:05 Anthony Pompliano? So when you do this, how do you guys think about the $30 million number? And this is really for entrepreneurs that are out there in crypto. There haven't been that many 20, 30 plus million dollar fundraises in the industry in general. Right? There's kind of a wave of companies that were around pre 2016 that were able to successfully have large fundraises like that. Then you had a lot of what I'll call the ICOs, right? So that was not really in exchange for equity for a private for-profit centralized company with all the tokens. Since then, we've seen a couple, but not a ton of these very large fundraises. Like, how do you think about when's the right time to go fundraise?
24:51 Anthony Pompliano? How much to raise, right? How do you derive the valuation off of that? And just talk me through from the entrepreneur see that fundraise framework that you use on making the decision to actually go and do it.
25:04 Speaker 02 Sure. So I think there's a couple of key inputs to making the decision to go do it. One is, is there something we could do with the money? And generally for startups, the answer to that is yes. But if it's no, then you probably don't need to raise money. And the second thing is, do we have the metrics to raise money at a valuation that is higher than the previous round that we raised money at? And would support us raising the amount of money that we want to raise to do the things that we need to raise money for.
25:42 Speaker 02 So you know, those are your inputs. And if you've, if you've got the metrics and you know what you want to spend the money on, how you derive that valuation is kind of a function of how good of a job you do marketing it. It's really a sales effort at the end of the day. You've got to make a great presentation. You have to have a compelling narrative around what the company's doing, why it's working and why it's going to keep growing in addition to just the underlying quantitative metrics. And you have to go talk to people. You have to sell it, just like anything else. Y'all are raising, you know, when you're raising money for your fund, it's the same concept, right?
26:23 Speaker 02 You've got to meet people, present, grab their attention, make them believe. And fortunately, you know, we've, we've been successful at doing that. I come from a sales background, so I actually love that part of the job. You know, like I could, I could talk to people all day and tell them what we're doing because I'm just like so excited about it anyways. So I really enjoy it. And I think one of the things that's noteworthy about how we've raised capital at BlockFi, which is also true for a lot of things in the cryptocurrency, cryptocurrency industry is that the speed that it moves at is so fast. Like not only have we reached this kind of new tier in terms of the amount of capital
27:08 Speaker 02 that we've raised, but we raised our Series A six months ago. It's not often that companies go from Series A to Series B in under a year, much less six months. So.
27:19 Anthony Pompliano? But I can say this, you probably can't. And this is more the investor mentality of like, when you see something working, at least for us, like we want to double and triple down on that, right? It's working and now is the exact time in which we want to pour gasoline on the fire, right? And take what is already an inflection point and make that curve steeper, right? When I was at, at Facebook, there was a point in time in 2014 where the ads revenue was growing so quickly that we used to say. Ads is going bananas. And the reason why we said bananas is because if you think of the shape of a banana, right, it'll literally kind of like bend backwards almost. Yeah.
28:00 Anthony Pompliano? And so that's what you want from every company, right, is you see this growth and when you see it's starting to hit that inflection point, what you actually want to be able to do is that gasoline can literally put it vertical in terms of growth.
28:13 Speaker 02 Yeah, push your, put your foot further down on the pedal.
28:15 Anthony Pompliano? Yeah. And I think that's what you guys are doing, right? Is it's really, hey, let's keep doing what we're doing. Let's do it on a bigger scale. And also, let's launch tangentially related products that we know our customers want.
28:26 Speaker 02 That's exactly right. And I think that last point is, is really important. None of this works. You don't hit that, you know, that breakout point in growth if you're not adding value for your clients. That's true for, for any company. And so, one of the things I've been really proud about that we've done at BlockFi is, you know, one of our core values at the company is clients, not customers. Every decision that we make, we ask ourselves, how does this impact the client? Is this good for the client? Are they gonna like it? We solicit product feedback from our clients. And that's a lot of what goes into our product development roadmap is just what people are, you know, telling us what our clients are telling us that they want. And so it's this,
29:09 Speaker 02 you know, it's a great incentive alignment mechanism that capitalism has where.
29:14 Anthony Pompliano? Do you use the terminology clients, not customers because customers insinuate it's like a transactional relationship?
29:19 Speaker 02 Customers are a number in a database, right? Customers are a number in a database that, you know, no one knows their name, just happens. And I think a lot of, I think a lot of fintech,
29:33 Speaker 02 it does great things in terms of having an awesome UX and in terms of delivering automation and, and products that are powered by technology. And, and we want to do that at BlockFi, but what we also want to do is introduce people to the experience that maybe comes from like an older time when you could walk into a bank branch and there's a banker there who knows your name or someone that you've worked with. And we want to see if we can deliver that digitally. So I think we're the only place in crypto where there's a number on our website. You can call that phone number.
30:07 Anthony Pompliano? Who answers?
30:08 Speaker 02 Someone from our client service.
30:09 Anthony Pompliano? Do you answer?
30:10 Speaker 02 I used to. I actually like it. Every, every once in a while, I'm one of the first people in the office every morning. I'm like you, I'm an early riser. So. Every once in a while, the phone rings and no one else is there yet. And it's awesome. I'm like, hey, thanks for calling BlockFi. This is Zach. And the person on the other end will be like- Sometimes, most of the time, they don't know who I am.
30:29 Anthony Pompliano? Yeah, yeah, yeah.
30:29 Speaker 02 They're like, oh, okay. Hey, Zach, you know, here's what I need.
30:34 Speaker 02 But other times, people are like, Zach Prince? And I'm like, yeah. They're like, aren't you the CEO? And they're like, why are you answering the phone? I'm like, I just get in early. Technically, the phone line isn't open yet, but I heard it ring. Like, how you doing? What's up?
30:48 Anthony Pompliano? I love that. All right, we gotta talk about this photo. So, he doesn't know I'm gonna do this, but for those that can't see it, this is the photo that is on the Bloomberg article that Vildana wrote, announcing the fundraiser.
31:03 Speaker 02 Yeah, shout out to Vildana from Bloomberg. Great article.
31:05 Anthony Pompliano? You guys look like you're about to come out with a rap album.
31:08 Speaker 02 Really? You think so?
31:10 Anthony Pompliano? Yes, you and Flori look like you guys are about to come out with a rap album.
31:13 Speaker 02 See, I look at that, and I think that I look like a goofball, and Flori just looks like a stone-cold badass.
31:20 Anthony Pompliano? Flori looks like she's about to fuck people up.
31:25 Speaker 02 She's an operator, man.
31:27 Anthony Pompliano? She's not here, but what is she thinking about all this? She excited?
31:31 Speaker 02 Oh, man, you know, we're pinching ourselves, right? Like, we, you know, we started this thing in Q3 of 2017. You know, bright-eyed and bushy-tailed, trying to raise money, telling people that we thought ICOs were stupid, and they're saying, we think you're stupid.
31:51 Speaker 02 And, you know, it's just seeing it all, seeing it all come together. There were so many things. We were actually on a train together from Boston. We were up at Fidelity's office. We're on a train back together. We actually got to spend like three hours together, which doesn't happen that much anymore, because we're very busy. And like, you know, if you just, if you just say like, build things that people want and fintech flywheel, if you just say it enough, I guess eventually it comes true. I mean, we were saying all this stuff for so long. We had these strategies that we wanted to, you know, bring to the market. And it was a ton of effort, but you know, the feeling that we have now is that the snowball is rolling. And we just have to, you know, we just have to keep going.
32:32 Anthony Pompliano? Yeah, that's the secret, man. Just build things that people want and magically you build a company.
32:38 Speaker 02 And keep going. I mean, look, it's, uh, from the outside looking in, you always hear about the good stuff, but, um, there were moments, right? Like we, we made our first crypto backed loan in January of 2018. Price of Bitcoin was around 17,000. It ended the year at 3,000.
32:54 Anthony Pompliano? How did that feel?
32:55 Speaker 02 Awful.
32:58 Speaker 02 Right? Like that doesn't, that's, that's brutal.
33:02 Anthony Pompliano? No loss of capital?
33:03 Speaker 02 No, we've never lost a penny in any of the, in any of the lending that we do.
33:08 Speaker 02 But you know, it's, we were fundamentally in the cryptocurrency market. We're fundamentally bullish on what's going to happen in the cryptocurrency market. And it is fundamentally better for our business when the cryptocurrency market cap is larger. So, uh, you know, there's, uh, there's a lot more excitement when the prices are going up than when they're going down. And, uh, where are we at now? Are you checking?
33:32 Anthony Pompliano? No, I'm looking, I'm texting Joe, Joe sitting over in the corner. I was trying not to interrupt. I was trying to see if we could see the, uh, the live stream questions. But, uh, at the same time, somebody asked about lightning functionality. They said, that should be enough money to add lightning functionality. What's going on there? Is that something that you guys are going to eventually do?
33:49 Speaker 02 Yeah, I mean, we, um, you know, we, we don't, we decided really early on that custoding private keys and, and, you know, building, uh, wallet software was, um, not the...
34:03 Speaker 02 Not the area where we were going to add value to the market. And so, you know, we work with Gemini as our primary custodian. We leverage their wallet infrastructure. We also work with BitGo now specifically for USDC, which we added to the platform recently. And so, you know, we'll see which way they go. And that's kind of the direction that BlockFi will go in for the time being. But we are huge, huge fans of Lightning and would love to support it however we can. But it's, it's not something that's immediately on our roadmap. What we want to do is build products that connect cryptocurrency with the traditional financial services market. So, you know, if we're making a decision of, you know,
34:46 Speaker 02 do we, do we take our engineering team and have them focused on building a credit card or a mobile app versus, you know, new wallet infrastructure? We're going to pick the credit card, mobile app type, type product advancements every day.
35:02 Anthony Pompliano? Makes sense. What is the one thing that you believe now, other than stablecoins, that you think everyone else is missing or disagree with you on?
35:14 Speaker 02 Ooh, that's a, that's a tough one. The stablecoin, so, so I'll put another one out there. So I'll say that I'm a, I'm a seller of the notion that things like derivatives are a net negative on, you know, asset prices for things like Bitcoin.
35:37 Anthony Pompliano? Why?
35:39 Speaker 02 Because I think that fundamentally what we're, what we're trying to do is integrate and compete with things in the traditional financial market. So whether it's, you know, gold or stocks, right? Like, at the end of the day, there's an amount of money sloshing around, around the world. And if you're an asset class, you're, you're trying to grab as much of that as, as you can.
36:04 Speaker 02 And if you don't, if you don't build the same things around your new asset class that's trying to grab market share, it's going to be really hard to generate legitimacy in the eyes of the people that control the purse strings for some of those allocations of capital. And so, you know, I think the industry would be well-served to lean in to things like, you know, the markets on the CME, to things like the grayscale trust that you can access, you know, GBTC through your brokerage account. These are all great, great things. And one thing I worry about a lot, as we go into this next wave of, you
36:49 Speaker 02 know, building products that are more relevant for mainstream adoption at BlockFi and marketing to, you know, consumers that are maybe not in the space at all right now, is that we're going to convert people and they're going to go to crypto Twitter and they're going to see a bunch of people like, you know, yelling at each other and telling them that the only option they have to keep their Bitcoin safe is in a, is in a hardware wallet in the, in the bunker. And having options is great, but we should, we should try and, you know, highlight the positives in our, in our communication because there's going to be another wave. New people are going to come in and they're going to try and learn things. They're going to try and ask questions. And it's on all of us to, to give them a great experience where they come out going, okay, yeah, I learned more and I'm not scared
37:34 Speaker 02 and this does make sense. And so, yeah, that's, that's my new.
37:38 Anthony Pompliano? Is there a blending eventually where right now there's legacy world and then there's the crypto world? Does this all come together?
37:44 Speaker 02 Yeah, there has to be. Yeah, there has to be.
37:46 Anthony Pompliano? That's the natural collision.
37:48 Speaker 02 And that's, and that's what we want. If that happens, it means the market's getting bigger. Cause that's not going to happen if the market cap is, you know, sub a quarter trillion. So market cap keeps getting bigger. You get a network effect there. As the market cap gets bigger, other traditional market participants become interested. They come in, market gets bigger because they came in and then bigger market participants want to get involved. And so. I absolutely think that if we fast forward a few years from now, Bitcoin will be on price quotes right next to commodities or other assets, stocks, that type of stuff.
38:30 Speaker 02 Like it was for a while in 2017, honestly, on CNBC. That's gonna happen again and it'll just,
38:36 Speaker 02 10 years from now, people think, oh yeah, of course. Of course Bitcoin's a part of your asset allocation in a well diversified investment portfolio.
38:44 Anthony Pompliano? To me, it feels like sentiment is shifting. I wrote about this earlier this week and the sentiment is shifting in a way that I don't think we've seen in a long time.
38:57 Anthony Pompliano? There was a clip on CNBC Fast Money.
38:59 Speaker 02 Loved that.
39:00 Anthony Pompliano? And
39:01 Speaker 02 retweeted that real quick.
39:02 Anthony Pompliano? Yeah, I think it's a guy, I forget his last name, I apologize. But he
39:07 Speaker 02 Guy Adami.
39:08 Anthony Pompliano? Adami, okay, yeah. So he, he basically, the quote was something to the effect of, "In a world where central bankers are tripping over each other to devalue their currencies, Bitcoin will prevail."
39:20 Speaker 02 Yeah, in a world of fiat currencies, Bitcoin wins.
39:22 Anthony Pompliano? Yeah, Bitcoin is the victor.
39:24 Speaker 02 Yeah.
39:24 Anthony Pompliano? And literally, when he said that, I honest to God rewound it, had to listen a second time and then I triple-checked that it wasn't a doctored or manipulated video, like some meme that somebody on crypto somehow did. And I just sat there for a minute and I was like, holy shit.
39:43 Speaker 02 Dude, I did like a Michael, I was on the subway watching and I did like a Michael Jackson leg kick or something. I was so excited. I was like, boom. Well, the other thing that happened in that clip is every single, every single person on the Fast Money panel
39:56 Anthony Pompliano? They're in.
39:56 Speaker 02 was bullish.
39:57 Anthony Pompliano? They're in, man.
39:57 Speaker 02 On Bitcoin.
39:58 Anthony Pompliano? Look.
39:59 Speaker 02 You don't have to be a genius, right? Like it was at 20K, it came down, now it's crossing 10K again. Over the last two years, I mean, we're just part of a bigger trend at BlockFi, right? Like smart people, you guys included, have continued building things.
40:14 Anthony Pompliano? Yeah.
40:15 Speaker 02 The space has gotten better.
40:16 Anthony Pompliano? So, huge shout out to Joe Kernan because Joe was, I think, the first person that is like a full-time employee of CNBC to
40:27 Speaker 02 Convert in front of everybody.
40:28 Anthony Pompliano? Yeah, I mean, he, he went through a two-week absolute like indoctrination, right? I mean, I still remember seeing him one day and him being skeptical, coming back like a week later and him literally looking at me and being like, "This is the future."
40:43 Speaker 02 Yeah.
40:43 Anthony Pompliano? And me being like, "Yes, dude." And it has permeated throughout.
40:49 Anthony Pompliano? The traditional financial system, right? And what I mean by that is not just the language and the sentiment that's displayed on kind of traditional financial press and media. But also, you're seeing the conversation change at the richer investment advisor level. You're seeing it change in the institutional investor world. You're seeing it change, actually, even with people who previously were not bullish, right? You're starting to see them say, wait a minute, like, there may be something here. And the one this week that really caught me off guard, but in a positive way, was the CME's chief economist came out. And now, he's not going to say, hey, look, Bitcoin's going to be the next global reserve currency or anything that's kind of on the extreme end of the view. But he very well, he articulated very well that Bitcoin is a non-correlated asset.
41:33 Anthony Pompliano? And if it continues to be non-correlated, this will be in pretty much everyone's portfolio.
41:39 Speaker 02 Yep.
41:39 Anthony Pompliano? And I thought that that was the last person in the world that, other than like a Warren Buffett coming out and flip-flopping, somebody like that was like the last person that I would expect to come out and be that kind of strong in their articulation of Bitcoin.
41:54 Speaker 02 The data supports it, right?
41:55 Anthony Pompliano? It definitely does.
41:56 Speaker 02 The data supports it. I'm actually going on CNBC for the first time later today as someone who's been on CNBC a ton. I'm going like 10:45, 11, I think. What should I do? What should I say? How do I kill it on CNBC?
42:10 Anthony Pompliano? Oh, yeah, I mean, if you drop the long Bitcoin, short the bankers, you're a legend. You may not, you may not be allowed to come back.
42:17 Anthony Pompliano? I've said it one time. I didn't go on television for a couple of months after that. But, no, I think the whole thing is the consistency of message is so important, right? There's people who watch that show all day long. They've heard a million different things, but the more that they hear people who are building real companies in the space say the same thing over and over and over and over again.
42:38 Speaker 02 Yep.
42:39 Anthony Pompliano? It becomes, in some weird way, a confidence game for them, right? It's like, hey, I heard about this thing. It's different than what I'm used to. It kind of doesn't have the same foundational structure. The story's a little weird, like, there's no companies, headquarters, all that kind of stuff. But if they hear over and over and over again, like, "Look, this is working. There are people who are participating in this. It has the network effects. It has the computing power behind it, etc." I think eventually, you kind of slowly shift their mindset. And so it's less about like, you're gonna go say some like magic words and all of a sudden everyone is like hypnotized, like, "Oh my god, Bitcoin's the future."
43:18 Anthony Pompliano? And it's more just like the consistency of message. Every time somebody goes on and says it, we convert, you know, 10 basis points of the viewership. And if we do that every single day, right, eventually you're like, "Oh wow, like actually a lot of people, you know, are kind of starting to realize this."
43:32 Speaker 02 Yeah.
43:33 Anthony Pompliano? What are you gonna say?
43:34 Speaker 02 Uh, I don't know.
43:36 Anthony Pompliano? You don't know?
43:37 Speaker 02 I was working on it on the train up here. I mean, I think it's...
43:39 Anthony Pompliano? Are you, you're talking about the fundraiser?
43:40 Speaker 02 My, uh, yeah, well, of course. It's a, it's a, it's a segment to cover the fundraiser, right? So what are you gonna use the money for? Explaining BlockFi at a, at a basic level, but I think, um...
43:49 Anthony Pompliano? You'd be a legend if you said you were gonna take the money and just buy Bitcoin. Don't say that, but you'd be a legend if you did.
43:55 Speaker 02 Um, that's actually a good idea. Like, "Hey, what are you gonna use, hey, what are you gonna use the money for? You just raised 30 million bucks. What are you gonna use the money for? We're just gonna buy Bitcoin. No, I'm just kidding. Here's what we're actually gonna do."
44:06 Anthony Pompliano? Yeah, you know what?
44:07 Speaker 02 It's actually not a bad idea.
44:08 Anthony Pompliano? Listen, you might get a couple of laughs.
44:10 Speaker 02 Yeah. Well, the whole thing is like, uh, you just have to try and do a little something to make it memorable, right?
44:16 Anthony Pompliano? Yeah, of course.
44:17 Speaker 02 I think like you've gotta be, you've gotta be comfortable...
44:19 Anthony Pompliano? You wanna see how memes are made? If you say that, we'll cut up, we'll cut it up. And then after you say, "We're just gonna buy Bitcoin," we'll cut the video. And then we'll play the music and have the glasses come down with the cigarette in your mouth, right? Like, deal with it.
44:35 Anthony Pompliano? Amazing, amazing. Um, alright, what, uh, before we, uh, got into the conversation, I actually tweeted out, um, blockfi.com/pomp and said, "Hey, everyone, go check out BlockFi."
44:45 Speaker 02 We get so many people hitting us up saying, "Why don't I have a URL like Pomp does?"
44:50 Anthony Pompliano? Really?
44:51 Speaker 02 Yeah, like, I don't think, I don't know, I have to ask our marketing team, like, you know, why you're so special, but everyone's like, "I wanna, I want like blockfi.com slash, you know, my thing." Yeah, I think you're one of the only ones that has one.
45:02 Anthony Pompliano? You should make a product where people can go and create their own URL link.
45:06 Speaker 02 Yeah.
45:06 Anthony Pompliano? Yeah, and then they get, uh, they get paid for the referral.
45:08 Speaker 02 Yeah.
45:09 Anthony Pompliano? Right?
45:09 Speaker 02 Well, people refer their friends all the time. We have referral links. We have all that good stuff.
45:12 Anthony Pompliano? It's not custom referrals.
45:13 Speaker 02 Yeah, we just, people don't get the custom URL that, uh, that you have.
45:16 Anthony Pompliano? Ah, who, is there anybody with a really big audience that's, uh, that's asked?
45:21 Speaker 02 I can't remember.
45:23 Anthony Pompliano? You're protecting people.
45:23 Speaker 02 I just know, I just know, I get, I get the question.
45:26 Anthony Pompliano? Yeah, you should just make it custom.
45:28 Speaker 02 I agree.
45:29 Anthony Pompliano? And then, and then lower their reward that they get if they use the custom one. Like gamify it.
45:35 Anthony Pompliano? All right, man. Listen, thank you so much for coming.
45:37 Speaker 02 Thanks for having me, man.
45:38 Anthony Pompliano? www.blogfi.com/pomp. www.blogfi.com/pomp. And $30 million in the bank. As everyone who thinks that this is a celebration, now there's just more pressure.
45:50 Speaker 02 Absolutely. Just keep going.
45:52 Anthony Pompliano? Let's get it done. All right. Thanks so much, guys.
45:58 Anthony Pompliano? Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.
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