Bitcoin

We had to do it. After 12 years and 3,000,000x appreciation, we kick off Season 8 with the best investment of all-time and our biggest episode ever: Bitcoin. From the first bitcoin transaction of 10k for two Papa John's pizzas (worth about $350m today!!) to $40k+ BTC and maybe the moon beyond, we cover the whole crazy, improbable journey of how a single 8-page PDF document changed the world of money — and perhaps the world itself — forever. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC The Bitcoin Playbook is available on our website at https://www.acquired.fm/episodes/bitcoin Links: Satoshi's Whitepaper: https://www.bitcoin.com/bitcoin.pdfMatt Huang's "Bitcoin for the Open-Minded Skeptic": https://www.paradigm.xyz/Bitcoin_For_The_Open_Minded_Skeptic.pdfNellie Bowles's "Everyone Is Getting Hilariously Rich and You’re Not": https://www.nytimes.com/2018/01/13/style/bitcoin-millionaires.htmlSquare’s $50m investment in BTC: https://images.ctfassets.net/2d5q1td6cyxq/5sXNrlEh2mEnTvvhgtYOm2/737bcfdc15e2a1c3cbd9b9451710ce54/Square_Inc._Bitcoin_Investment_Whitepaper.pdfEpisode Sources: Full list of episode sources available here: https://docs.google.com/document/d/16QCDNm2qzG3Bn5h1j1KXisxL_JGT7egDx7czX9ThHLY/edit?usp=sharing

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

• 0:01David Rosenthal?

  This is the key line. This is a quote from Coin Daddy. "Right now, all our entertainers come from outside crypto culture, not inside crypto. We've got to change that," he said.

• 0:13Ben Gilbert?

  Oh, my God. What a mission to be on.

• 0:17David Rosenthal?

  What a mission.

• 0:30Ben Gilbert?

  Welcome to season eight, episode one of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture capital firm in Seattle.

• 0:45David Rosenthal?

  And I'm David Rosenthal, and I am an angel investor and advisor to startups based in San Francisco.

• 0:51Ben Gilbert?

  And we are your hosts. After close to 150 episodes over the last five and a half years, this will be the first one covering something that is not a company. And while today's topic is nowhere near a corporation and is often thought of as quite the opposite, it has had a better investment return over the last decade than any company in the world, including Amazon, including Apple, including Domino's Pizza, and even including Tesla.

• 1:22David Rosenthal?

  Ah, so great. We're gonna have to talk about a little bit of pizza as we get along here.

• 1:28Ben Gilbert?

  We are, but not from Domino's.

• 1:30David Rosenthal?

  No.

• 1:30Ben Gilbert?

  Today, we are talking about the single greatest 10-year investment return in human history: Bitcoin. And in just over a decade, it has gone from less than one cent per Bitcoin to over $30,000, a 3 million X investment return.

• 1:49David Rosenthal?

  That's just mind blowing.

• 1:52Ben Gilbert?

  I was gonna say, David, I don't know totally for sure that it's the single greatest, you know, decade investment return in human history, but it kinda has to be.

• 1:59David Rosenthal?

  It has to be. I just can't. I was looking at, so there's the Nasdaq's investment in Tencent and the SoftBank and Yahoo investment in Alibaba. Both of those were like between 20 to 30 million that turned into like 100 to 200 billion. So even that's like, what a thousand X-ish. Like it just doesn't even come close.

• 2:22Ben Gilbert?

  Yep. Yep. Pretty crazy. I have not computed the IRR, but I bet that's pretty good, too.

• 2:26David Rosenthal?

  Yeah.

• 2:27Ben Gilbert?

  So whether you are hoddling on for dear life and riding it to the moon, or whether you think this whole thing is a crazy bubble that's about to pop, there is no denying the unbelievable cleverness of invention of all the math and mechanisms behind the Bitcoin protocol itself. It is truly a beautiful and ingenious system. But by who? We don't even really know who invented it. Today, David and I will dive into the complete history behind the creation of Bitcoin by the pseudonymous Satoshi Nakamoto, the different factions that pushed it to evolve through its several chapters since 2009 into the mainstream today. And we'll evaluate its position today with the same strategic lens we use on every episode

• 3:08Ben Gilbert?

  here at Acquired. Is Bitcoin a new form of money, an investment opportunity, the start of a new global economy, or just completely a scam? Today, we dive in. Well, if you love Acquired and you want to be a deeper part of what David and I do here, you should become an Acquired Limited Partner. You'll get access to our library of over 50 interviews and deep dives on company building topics, our monthly Zoom calls, and this is new, live access to listen in while we record big events like emergency pods, like the Slack one we did last month, a couple of months ago.

• 3:43David Rosenthal?

  Yeah, so great.

• 3:44Ben Gilbert?

  And also-

• 3:45David Rosenthal?

  It feels like 10 years ago. That was back when Bitcoin was under 20,000.

• 3:50Ben Gilbert?

  Yes. And also, listen live into our book club discussions with the authors. Most importantly, though, and this is what's so cool about what the show has become, you'll be a part of the acquired community. We've been amazed at the caliber of people and insights that have showed up to our LP calls. It is so clear to David and I that we truly do have the greatest audience in the world, from young people just starting out their careers to CEOs and top executives, some of which are running $100 billion companies and general partners at venture and investment firms of every size around the world. People have made friendships, gotten jobs, raised capital, launched new careers, and even met their co-founders through the acquired community. So if you aren't already an LP, click the

• 4:34Ben Gilbert?

  link in the show notes or go to acquired.fm/lp and we can't wait to see you there. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 4:59David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 5:20Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 5:42David Rosenthal?

  In half?

• 5:43David Rosenthal?

  Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 6:00Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Well, David, I think it is time to dive in and listeners do know that at various points in our lives, past and present, David and I have bought Bitcoin, sold Bitcoin, hold Bitcoin.

• 6:40David Rosenthal?

  Hot old Bitcoin.

• 6:42Ben Gilbert?

  None of this, hot old Bitcoin. None of this, as usual, is investment advice. Don't take this as a recommendation to buy or not buy. In fact, I have learned way more researching in the last two weeks and really preparing for this episode than I ever knew when I held more Bitcoin than I currently hold now. So certainly not investment advice, but definitely a fascinating deep dive and hopefully we'll both turn up some new stones that you didn't know, even if you're a Bitcoin enthusiast and also help see the forest through the trees a little bit if you are someone that's deep on all this stuff.

• 7:12David Rosenthal?

  When we were planning this season and thinking about the stories we wanted to tell, like, there was no better story that I could think of to start this season than this.

• 7:22Ben Gilbert?

  In fact, I fought you on it. So I'm glad you pushed it through.

• 7:26David Rosenthal?

  All right. We are going to set a new record on where we start on History and Facts today, but it's not going to be a record in the direction you think. We're going to start two days ago. On Monday, January 11th, 2021, when I paid my taxes to the US government, you know, I never really thought about it. It's, you know, it's what I do. I go on the IRS website. I go on the California Franchise Tax Board website and enter my bank account info and, you know, pay the taxes. But this time, I found it very, very concerning. Like, I was, I was, I mean, I'm dramatizing for effect here, but like, I actually woke up in the middle of the night, Monday night, thinking about this. And I was like, I'm really worried about what I just did.

• 8:11Ben Gilbert?

  Why is that?

• 8:12David Rosenthal?

  Why is that? Well, I'm not worried that I paid my taxes. I certainly believe in paying taxes. It's important. You should do it. I'm concerned how I paid my taxes. So when I logged on to these websites, the IRS website, the California Franchise Tax Board website, they kind of feel like they were designed in 1995, and they probably were. And I, you know, went on, I was going through the flow. I entered my bank routing number, and I entered my account number. And I told them to, you know, take out many thousand dollars from my account. And they just kind of did. They just sort of reached into my account, and they took the money, which, you know, I wanted them to. I wanted to pay my taxes. But like,

• 8:57David Rosenthal?

  that's insane. I didn't log on to my bank, and tell them this was gonna happen. I just gave out my account number, and they came and they took the money. Now, like, I trust the government, and I think that's okay. But like, I started thinking about all the times I do this.

• 9:14Ben Gilbert?

  Right. Like, if, if they could do that, I mean, the routing number is just the branch. So like, you and I could foreseeably have the same routing number. So all I need to do is either find or guess your account number, which is not very secret.

• 9:27David Rosenthal?

  No. Like, I actually give it to a lot of people. And the more time we spend on the internet and transact, and we build acquired, like, we have our bank account at acquired, we have vendors, we have people who pay us, we're giving out our account number all the time. There's really nothing to stop anybody, once they have the number, from sharing it, using it, taking money, doing kind of whatever they want with it. That's kind of frightening, isn't it?

• 9:52Ben Gilbert?

  Totally. Like, once you start pulling on that thread, it's almost scary to see where it goes and what the layers of our financial system are. I imagine that's where you're going with this.

• 10:01David Rosenthal?

  Yeah, that's exactly, well, yeah. So then I was like, well, How else could I transfer money? I mean, I could write a check, but you write a check, then that's a piece of paper that has the routing number.

• 10:10Ben Gilbert?

  You're just making the problem worse.

• 10:12David Rosenthal?

  It has your, it has your name on it. It has your address on it. So literally everything you need to steal somebody's identity and their money is just right there printed on a piece of paper. What do we also use? We use debit cards and credit cards to pay for anything. How many times have you had your credit card stolen, Ben? Cause I've had my credit card stolen like probably three or four times over the past 10 years.

• 10:33Ben Gilbert?

  Yeah, something like that.

• 10:34David Rosenthal?

  Some of that. I'm sure everybody listening is probably in the same bucket. Like once, if somebody knows your credit card number and you don't even have to, like even if you're really careful with it, you could be paying at a gas station, there could be a skimmer installed, an e-commerce website you use could get hacked. It's out there. There's no way to stop anybody then from putting fraudulent charges on your account.

• 10:56Ben Gilbert?

  But David, fortunately, these systems account for this. Like take a credit card company, for example, we did the Venmo episode, we talked about the credit system. Those companies make a ton of money building in transaction fees to account for all the fraud that they have to deal with because these systems are silly, you know, much like our social security number where everybody's secure identity is a, what is it, a nine-digit integer. Like, yep, call it good. No one will guess that.

• 11:19David Rosenthal?

  No one will guess that. Well, they are hard to guess. And of course, you know, we're, we're dramatizing here and there are these financial institutions that are banks, are credit card companies, et cetera, that are in the middle of all this and they're monitoring our accounts and they're looking for fraudulent transactions that show up and they're canceling them. They're not allowing them through. But like, this is a huge tax on the system. So there was, in 2018, there was $28 billion of credit card fraud in the US. Plus there are estimates, there are another 50 to 60 billion dollars in financial bank fraud, wire fraud, kind of generally, more broadly, not to mention chargebacks, which, you know, when merchants try and put a charge through on a credit card and the credit card

• 12:03David Rosenthal?

  company denies them, there are charge offs, there's everything. There's all the work that all of these institutions are doing to prevent fraud, all the technology they're buying, all the people they employ. This is kind of a lot, right? Like, it's kind of crazy. So, so like, why does this happen? It happens because the account number is everything. There's only one address. It would be like, once that address is out there, you can access the account. It'd be like with our email. If I knew your email address and I email your email address, well, I could also just send email as you, right? Like, it doesn't kind of make any sense for the internet. Okay, so what if I told you there was another system out there? Something that was natively designed for the internet? That works just like email? You can give me your address.

• 12:48David Rosenthal?

  I can send you money, but not take yours. Nobody can charge back their transaction or invalidate it or claim that there's any fraud, any of that. Does that sound interesting? Does it sound like it might be valuable?

• 13:00Ben Gilbert?

  Tell me more, David.

• 13:03David Rosenthal?

  Indeed, we will. All right, well, that was fun. We're gonna get, we're getting ahead of ourselves for sure. Of course, we're talking about Bitcoin and of course, we're talking about the limitations of the traditional financial system, which to be clear, is amazing and is one of the most incredible developments of human history, but it wasn't built for the internet. It was built for an age when, you know, the way that most people live their financial lives is, once a week or more, maybe even once a day, they went to a building with somebody who called a bank, with somebody who knew them there, that they took out money out of their accounts and that person was like, yes, I know who you are. I can verify your identity. Yeah, I'll give you the money. That building, those people were processing checks that you were sending.

• 13:47David Rosenthal?

  They knew what was happening. It wasn't built for the internet.

• 13:51Ben Gilbert?

  Right. And the most important thing for this system, the number one goal, is that it keeps working. So you can see why it just keeps happening this way because it works. It is the foundational underpinning of our economy, democracy, you know, the system must keep working. And sure, we've layered on all kinds of crazy hacks over the years to make it work the way it does, but I'm a fan of it continuing to operate the way that it does without breaking. So I see why it just keeps on keeping on.

• 14:23David Rosenthal?

  Yeah, exactly. So, so how do we get here? So, modern banks started, now we'll go back to the history, started back in the 14th century during the Italian Renaissance.

• 14:32Ben Gilbert?

  Here we go.

• 14:32David Rosenthal?

  Many great things happened. Here we go. I think it was the Renaissance when double entry bookkeeping was created. I don't know for sure, but I think that was, I think that was one of the main innovations of the financial system.

• 14:46Ben Gilbert?

  Here I am shocked that you're not taking us to seashells for currency. But all right, let's, let's just start with banks. That feels a reasonable enough place to start in this story.

• 14:54David Rosenthal?

  So that was when banks started and they would take deposits, they would put out loans. They would do other services like money changing between regional currencies, transferring large sums of money, et cetera. Then in England, in the sort of late 1600s, that's when banks started issuing paper bank notes, bank notes, so that people didn't have to carry around, you know, whatever metal the currency was denominated in, silver, gold, or seashells, or whatever. Turned out that was a pretty good idea.

• 15:28Ben Gilbert?

  And when you say, so that they don't have to carry around the gold or silver or whatever, that the bank notes basically just say like, I, I have this much gold, but it's at the bank. And here I'm just giving you a piece of paper that lets you know that I've got, I'm good for this gold. You can use this piece of paper. Now you're good for that gold.

• 15:43David Rosenthal?

  Yep, at the bank. And then, and pretty quickly governments got involved and they were like, oh, well, why don't we just keep the gold at our central bank? And then all these other banks in our jurisdiction, they can put out paper bank notes, but it'll ultimately come back to us. Then we don't have all this metal going around. Great. By the way, that also allowed them to then inject money into the system and help finance their own spending as governments. But we'll get to all that later. So then from bank notes, it wasn't a big leap to checks, which the banks would create on special tamper-proof templates and paper that would then come back to the banks for verification.

• 16:19Ben Gilbert?

  Tamper-resistant paper.

• 16:20David Rosenthal?

  Yeah, tamper-resistant. And of course there was fraud throughout all this, but, but again, like this is like, you know, a local town, a local city. Everybody knows each other. All these pieces of paper are coming back to the bank. They're verifying the system works pretty well. And then that grew up into clearing departments. It was clearing departments of banks that would clear these checks. And that got aggregated up into sort of local geographies and then ultimately countries of clearing houses. And then with the advent of computing in the 20th century, in 1959, in America, the automated clearing house or ACH system gets implemented.

• 17:02David Rosenthal?

  And that was a national system, is a national system that all of these payment wires and checks come to, and they take batches of them every couple of days. They process them automatically using computers.

• 17:13Ben Gilbert?

  Also, imagine what a crazy cool system that would have been in 1959, that just because I have your bank information, I can send you money via the automated clearing house, and it will just show up three to five days later in your account, like magic. I mean, that three to five days without me doing, you know, writing a check. Like, that's freaking awesome.

• 17:33David Rosenthal?

  It's amazing. It leads to things like direct deposit for employees from their employers, transferring money between business-to-business enterprise applications. This is all great, but as you say, Ben, it still takes three to five days. This is a batch processing system that's grabbing a lot of transaction data and pieces of paper and pushing it out every few days.

• 17:57Ben Gilbert?

  25 years before the Macintosh, I will take it. 35 years after the Macintosh, maybe it's weird that it's still the system.

• 18:05David Rosenthal?

  Yeah, indeed. Well, so then, you know, for consumer use cases like that, like, that's not going to work. You want to go out and eat at a restaurant. You're probably still carrying around your banknotes, your green bucks in America or other paper currency in other countries. Well, so then people come up with the idea of like, well, how can we make that faster? Credit cards. Credit cards started with, uh, Diners Club was one of the first.

• 18:28Ben Gilbert?

  Yeah.

• 18:28David Rosenthal?

  And then I didn't realize this till, till doing the research. Do you know where Visa started? So Visa was the first big credit card network.

• 18:36Ben Gilbert?

  Is this the one? There was a department store one. Was it Macy's or Sears?

• 18:42David Rosenthal?

  No, no. Maybe that was Discover. So Visa was actually Bank of America.

• 18:47Ben Gilbert?

  Oh.

• 18:48David Rosenthal?

  They started it in Fresno, California. They picked one town and they just mailed all of their Bank of America customers in Fresno, California, these credit cards.

• 18:58Ben Gilbert?

  Whoa.

• 18:59David Rosenthal?

  And people liked them. It started to work. And then other banks wanted to get in on this action. They ultimately started a consortium of other banks with, they called it Master Charge, that became Mastercard and that's yeah, Visa and Mastercard. But credit cards, as we all know, have a couple problems with them. One, it's debt. So the way that you can make payments happen really fast out in the wild is not actually do the payment. It's just on credit. So that leads to consumers that start using them. Many of them start racking up a lot of consumer debt.

• 19:37Ben Gilbert?

  Also, an enormous consumer like CFPB problem in our country today, the Consumer Financial Protection Bureau, that this has been wildly abused and many, many, many Americans are in credit card debt because frankly, the system has taken advantage of them. I do think, as you're pointing out, David, it is very counterintuitive to me, but it's crazy that it evolved this way that credit cards came before debit cards because we had ACH to literally move money around. But when we wanted instant payment, basically these stores or banks would just extend you the credit and then they didn't have to move the money around right away. They could sort of do it later, which sort of explains before the debit rails were laid, which I'm sure you're about to get to, like how you could have these instant payments even before we had a debit system.

• 20:21David Rosenthal?

  Yep. Well, there was, there's one other problem though, with the credit system, which is for merchants, you know, it's good in that they get to accept easy payments from lots of, lots of customers. They can probably do higher dollar value transactions without checks. They can, they can get more volume coming through, whatever they're doing, whether they're a restaurant or a retailer or whatever. But the problem is they don't get the money right away. So like if you're a merchant, you're taking credit cards. Not only do you have to pay a fee to the credit card company.

• 20:54Ben Gilbert?

  2.9% plus 30 cents.

• 20:56David Rosenthal?

  Plus 30 cents, right. But also you just don't get the money right away because it's all on on credit. You got to wait a month. So that's not great for your cash flows. If you're a struggling restaurant or retailer or the like.

• 21:08Ben Gilbert?

  In fact, it's it's a little bit of a hostage situation. Like if if the consumers weren't demanding, I must be able to pay in this way because every other store is letting me. If you came to me, David, and you're the credit card company and I've never heard of you before. And you're saying, by the way, you should start accepting the payments through me. I'll get it to you a month later and I'll take a nice spiff along the way. I'd be like, uh, get the hell out of here.

• 21:29David Rosenthal?

  Yeah. And that's why, I mean, that's, I think, one of the reasons why it took 50 plus years to build up the network of credit card merchants and consumers in America, whether that's Visa or Mastercard or American Express and the like. Because, yeah, there's some good things here, but they're like, there's some really bad things to this system, too. So then you mentioned debit. Once the rails started getting laid for credit card transactions and the early ones, I think, were super kluge. I think merchants like had to call up the issuing banks of the cards. Like there wasn't the automatic, you know, swipe and automatic phone system that checked everything.

• 22:10Ben Gilbert?

  Right.

• 22:10David Rosenthal?

  But as that started to get built up, then the debit rails got laid and banks said, oh, okay, we can create check cards that they were called initially. They came out in 1969, I think, in America. And use some of these same technology rails, but have it be a debit system. So that's a little better, but I think it's still is pretty slow. I think it's basically auto. I could be wrong on this, but I think it's basically just an automated version of, or a card version of of ACH and the check system. Okay, so all of this works. Fine for a long time, but then the internet really starts taking off. And as we chronicle so much on this show, and once the internet starts taking off,

• 22:54David Rosenthal?

  people start spending and doing, having financial relationships and financial transactions in so many more places than they used to. It's just, there's a lot more volume in the system than there used to be. And famously, you know, Paul Graham even put out a request for startups. Was this in 2008, maybe 2007, 2008 about, hey, accepting payments online is really hard. Somebody should do that. And of course, two brothers from MIT, the Stripe kids, found that and they started Stripe and made it easy for businesses to take payments online.

• 23:32Ben Gilbert?

  Which of course is our modern infrastructure companies, Stripe and companies like Stripe. You just have, as a merchant, you just have a token, which is the notion of that customer's card, where if you pass that token to Stripe, Stripe says, yeah, I've got their card stored. So you never have to take on that risk of getting hacked or knowing the person's number. And the consumers are better off because only Stripe actually knows your credit card number. But that certainly was not the case in the first 15 years of the internet.

• 23:57David Rosenthal?

  Totally. So what happens is like always, you've got these entrepreneurial attempts to make the system better and build on top of it. Stripe being a great example, Square being another great example, Venmo being another one. As the internet is proliferating, people are building out essentially new layers of infrastructure on top of this old, you know, traditional financial and banking system. At the same time, you also had over the first 20 years or so of the internet, a couple attempts to start to design some new protocols from scratch for digital money. So these were companies and projects like, that you've probably never heard of, like

• 24:38David Rosenthal?

  Digicash, which was a company, I think started in like 1996. Eagle was one of them. Bitgold was one, which got pretty close. And then actually in China, this, this is really interesting. Tencent had QQ coins, which were Part of the QQ network, the pre WeChat part of Tencent. And they became so valuable that people started transacting lots of things in QQ coins in China. The CCP didn't really like that, so they started regulating that pretty heavily because it was becoming too popular. But of course, the other big attempt to solve all of this, this financial and money problem on the internet, of course, was PayPal. And PayPal was really interesting and they kind of almost did it.

• 25:23David Rosenthal?

  So with the whole vision of PayPal, you know, Elon's vision, Peter Thiel's vision, going back to the beginning, was to create internet and native digital money. And they did, and they found the killer use case on eBay with Beanie Babies and other things happening. But the problem with PayPal was they did it as a centralized system, so they-

• 25:47Ben Gilbert?

  And of course, it's still denominated in US dollars. Like, sure, I can pay through it. And that really is the problem you're describing here that you're trying to solve. How do you take payments on the internet? But certainly, you know, when we compare to something like Bitcoin, that is a completely different, complete monetary system. What PayPal was doing was a much thinner slice.

• 26:08David Rosenthal?

  Yeah, much thinner slice. Well, and also, they ran into the problem of they were like a bank taking care of all of these transactions happening. There was so much fraud. Like, one of the biggest challenges for PayPal was managing the fraud. And actually, Palantir, as lots of listeners may know, grew out of the fraud prevention technologies that they developed-

• 26:32Ben Gilbert?

  Oh, I didn't realize that.

• 26:32David Rosenthal?

  At PayPal. But it was up to them, you know, whenever there were the equivalent of chargebacks or accusations of fraud, they had to mediate all of these transactions and decide what was what and reverse some of them and make sure everything was operating okay. So like, it was, the rails were better for the internet, but they still had this problem that it wasn't very efficient.

• 26:55Ben Gilbert?

  Because it's built on all the previous layers of this monetary system, where fraud can exist because our current means of securing accounts and transmitting money and, you know, even the money itself. Like, it's not, it doesn't lend itself to security. It lends itself to vulnerability. And then we've built up all these ways that it can be secured, which of course are expensive to maintain.

• 27:19David Rosenthal?

  Yep, totally. And it was, it was the, ultimately, it was just a digital version of the same model of the traditional finance and banking system. Okay, so then we get to 2008, and for so many reasons that we talk about on so many episodes on this show, that was the seminal year. And, and really, in this case, I think it's two things. It is, of course, the financial crisis. It's Lehman going bankrupt and massive, not only loss of trust in traditional banking systems, but also just financial hardship and ruin for so many people that caused them to go want to seek other opportunities,

• 27:59David Rosenthal?

  in addition to just this massive exponentially growing complexity of payments on the internet that is like a whack a mole that people are trying to stay ahead of.

• 28:09Ben Gilbert?

  It's so funny. When you say payments on the internet, it's like two completely different archaic stacks that now need to interact. Like, for all the credit we give the modernity of the internet, it's an insane system. The protocols that are used to underpin the internet, they've evolved a lot over the years, and especially the fact that a couple of years ago, we sort of wholesale switched to HTTPS from HTTP. But like, you've got UDP, and you've got SMTP to send email, and you've got all these protocols that like, people have sort of stitched together. And then, of course, you have a browser that sits on top of it all. And there's the World Wide Web that sits on top of HTTP. So there's like, all these different kind of klugey, kind of archaic technologies, now including

• 28:50Ben Gilbert?

  JavaScript, which for some reason runs everything, that by some miracle, duct taped together, correctly created the internet, which is amazing. And that's this entire separate other stack on top of the problematic monetary stack that we've already talked about. So, like, when you say payments on the internet, it's like, I hear, like, complex ball of yarn with a different complex ball of yarn that need to somehow fit together. And obviously, we're making it work, but boy, is it nasty on either side.

• 29:20David Rosenthal?

  Totally. And this is why something like Stripe, you know, people didn't think it could be done. Like, it was so hard to make all of this work. Okay, so 2008, on August 18th, 2008, a domain name is registered under the name Satoshi Nakamoto for bitcoin.org. Okay, nobody really notices this happening. Then on September 15th, 2008, of course Lehman Brothers goes bankrupt. Remember that day well, I will never forget that day, working on Wall Street at the time. And then on October 31st, on Halloween, so like six weeks after Lehman going bankrupt,

• 30:03David Rosenthal?

  a account with the name of Satoshi Nakamoto publishes a paper on the cryptography mailing list, metsdow.org, describing a new digital cryptocurrency titled Bitcoin, a peer-to-peer electronic cash system. And this is why I started where I did with history and facts. I think so many people, when they start explaining Bitcoin or trying to understand Bitcoin, they immediately talk about like, well, this is an alternative currency and the Federal Reserve system and fractional reserve system is broken and inflation and this is better. And yeah, that may be true, we'll get into all of that. But the actual original intent of this was to design a native payment and currency

• 30:48David Rosenthal?

  system for the internet that didn't have all of these problems.

• 30:51Ben Gilbert?

  Yeah, it's so interesting, like literally a couple hours before we record, to put the icing on the cake of my research, I reread the Satoshi paper. And it is amazing how in the several introductory paragraphs, which by the way, the whole paper is crazy succinct, nine pages, including its references and sources cited, it's mostly talking about, hey, because the system for transmitting money is relatively insecure and requires central authorities to verify everything, you know, either the Federal Reserve Bank or banks in general or whatever it is, we basically have this big tax on the system that you could have fraud, that you could need to reverse charges because they, you know, were made by someone who didn't actually have the money or they weren't

• 31:36Ben Gilbert?

  who they said they were. So the whole system carries this big tax. And what I'm proposing here is a way to pay for things that basically is a system that exists completely outside that system and is fundamentally better because it doesn't require those taxes. Everything is verifiable and authentic.

• 31:55David Rosenthal?

  So here's how the white paper starts. Commerce on the internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model. Completely non-reversible transactions are not really possible. Think about chargebacks on credit cards all the time. Like, this is a huge issue that so many internet companies deal with. Completely non-reversible transactions are not really possible since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers,

• 32:39David Rosenthal?

  hassling them for more information than they would otherwise need, and a certain percentage of fraud is accepted as unavoidable. This is what they're talking about.

• 32:47Ben Gilbert?

  Right.

• 32:48David Rosenthal?

  Okay, so hopefully you can see why an alternative system would be really interesting and important.

• 32:54Ben Gilbert?

  Yeah, and it's so interesting that it's not, this paper isn't about we need a different asset class that is immune from inflation, or at least more resilient to inflation, or we need decentralization because governments, putting too much faith in governments. Like, none of that is actually in the paper. All of that is sort of derivative byproduct and lore that has sort of developed around this initial problem of a peer-to-peer, no-centralized, third-party, trustless system for transactions at low cost.

• 33:27David Rosenthal?

  Yep, and to be clear, whoever Satoshi Nakamoto was is, people think it probably isn't just one person. It was a group of people. And the early people who start getting involved in Bitcoin, they believe everything you just said. They tend to be pretty libertarian-minded folks. But that wasn't the purpose of why they came together. So I mentioned DigiCash, eGold, BitGold, previous kind of attempts at this. Kind of half of the problem was solved. So this idea, the crazy underpinning of the traditional financial system, that like, there's one account number, and if you know that account number, which you have to give out to people to transact, you're compromised. That had been fixed through email and other technologies on the internet.

• 34:10David Rosenthal?

  Encryption was a thing, like username, password combinations. The idea that you could have a public address, like an email address, that anyone can transact with, but you retain a private... Key effectively to access that that was already baked. That was trivial by the time Nakamoto came along and published the Bitcoin white paper.

• 34:31Ben Gilbert?

  Totally, totally. And, and this notion of public key encryption that you're talking about, David, absolutely one of the greatest inventions in human history. I mean, if you think about like ciphers from, you know, pre-World War I era in war, like you would have the same key to encrypt and decrypt. And, you know, that, that notion is great if you can securely transmit that key to another person and trust that they're going to keep it secret. But the brilliant idea behind, I have a key that only I can use to send email as me, but there's a way that you can send email to me or applied in another context. You can send me money or you can encrypt a message that only my private key can decrypt.

• 35:14Ben Gilbert?

  So you can sort of publish it in the whole world and say, here's an encrypted message that anyone could read if they had the private key. It means that only the person who the message is really intended for, even if the message is intercepted, is the person who can read it.

• 35:28David Rosenthal?

  Yep. So, okay, so what's the problem? Well, the problem is, think back to email. If I send you an email, you can copy that email, you can forward that email. I can copy other people on that email. Great for email, bad for money. I don't want to be, I don't want you to be able to send me $100, but then also copy someone else on that $100 and essentially double spend the money or triple spend or a thousand times spend. And this was the problem that nobody had a good way to solve. And this is what was just so revolutionary about Bitcoin and Nakamoto's solution.

• 36:08Ben Gilbert?

  Yeah, I mean, zooming out for a second, the big idea in software, you know, think back Windows 95 was creating infinite replication, creating abundance. You know, Microsoft prints a copy of Windows 95 for basically zero marginal costs. They put it in the box. There's of course, distribution costs, but you know, cloning the bits over and over and over again, made this incredible business model. The internet rolls around and then suddenly you've got zero cost distribution, which compounds the abundance from the zero cost replication of software. So now you have, it doesn't cost you anything to make a copy and it doesn't cost you anything to deliver it. So think about that, like everything that we sort of know to be true up to this point is that if something's digital,

• 36:51Ben Gilbert?

  it can basically be copied and everywhere quickly. And the big idea, which is completely genius and previously thought to be impossible before Bitcoin, is creating scarcity with software on the internet. Absent the fact that now we know Bitcoin is a thing, it would have sounded ludicrous if not then elegantly laid out in this nine-page paper of here's how we're going to do it.

• 37:14David Rosenthal?

  Yep. Okay. So how do you do that? Well, the solution that Satoshi proposes is a quote, "peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions." Well, why is chronological order important? Go back to the, "I'm emailing you $100 and I'm copying somebody else on that transaction." Example, whoever gets the $100 first, then it's spent. The next transaction is void. Like if I were trying to give somebody a paper $100 bill, well, the first person who gets it, they've got it.

• 37:52Ben Gilbert?

  Yep. And of course, the way that this actually works, we talked about public key encryption is when I'm sending it to you, I sign it with my private key. Like I take that Bitcoin, which is a hash that has, you know, all the other signatures that came before it sort of in there. And I know that's not technically exactly right, but that's the reasonable way to think about it. And I sign it with my private key. I send it and so anybody else out there, you know, if they wanted to sign something from my wallet or that I sort of owned, they couldn't. They only have my public key. I'm the only one who can sign it and send it to someone else. Now, of course, that someone else can verify that I sent it to them because, you know, they have my public key. So they can quickly do some work and see and sort of check the work and say, "Yep, that did come from you and now it's..." But they don't need to know my private key in order to do that check.

• 38:37David Rosenthal?

  Yep. Okay. So if this system were to exist, all these transactions, thousands of them, millions of them, billions of them, would be going out into the network. How do you keep track of which ones are the valid, correct, unique, scarce ones? The way that Satoshi proposes you do this is you have a distributed system of the ledger. So everybody can see the entire chain of transactions of every transaction that has ever happened within the system.

• 39:09Ben Gilbert?

  Yeah, David, I think that's a really interesting concept and a little counterintuitive, where he's basically saying, well, in a third-party system, like where you kind of have a Mint, or the Federal Reserve, like, you send that information to them and they keep track of it. Like, that's the only way to make sure that the money's not getting double-spent. And he's saying, well, what if we flip that on his head, he, they, she, whoever it is, and saying, well, what if everybody has a copy of the ledger? And everybody just has the complete transaction history of every single Bitcoin right there on their computer? That's my proposed solution.

• 39:40David Rosenthal?

  Yep. And so if you're doing that, then he proposes that people who would choose to, who are part of the network, they could grab these transactions that are being broadcast out, and they could generate computational proof of which ones came first, which ones were the right ones. If somebody's trying to send a Bitcoin multiple times, which ones of those happened first and are the correct transactions that should be added to this ledger?

• 40:10Ben Gilbert?

  Right. He's basically saying, there's a whole set of people out there who have decided they want to host on their computer the entire transaction history, and they're going to do some work to verify. They're going to go back through and they're going to say, I'm going to do some math to do some checks, and basically say, hey, are all these transactions valid? And they're going to run their computers to kind of do that and make sure, basically verify the integrity of all these transactions. And if they verify and say, yep, this is good, they're going to propagate it out to more computers and more people who are on the network, so that essentially there's like one canonical version around there that everybody's sort of copying off of that has a bunch of thumbs Up on it saying, yep, I've checked this. It's good.

• 40:49David Rosenthal?

  Yep. Okay. So how do you design this system? So it's not just total chaos of everyone doing this. You make it computationally actually pretty hard to prove that you have the correct order of transactions. Okay, cool. That means that once one of these super users, one of these nodes broadcasts out a set of transactions, everybody can be pretty reasonably assured that it's correct. Two, though, because you chain these transactions together into one ledger that goes all the way back to the beginning. If you make it hard to compute each block, you make it impossible for anybody else to then change that ledger.

• 41:32David Rosenthal?

  Because the block is cryptographically changed to the previous block. That's hard to do. It takes, and the system adapts so that it always takes on average about 10 minutes. For everybody, all the miners out there that are working on these transactions, which is more computing power than you can imagine right now. It still takes 10 minutes to create one of these blocks. Now, to go back and change and fake some of the previous transactions, you would have to recompute the entire chain all the way back to the beginning.

• 42:04Ben Gilbert?

  It becomes an exponential problem. Not only, if you could do this, not only would you have to broadcast it out to a material part of the network and like not just have it on your own machine, but tell it to your friends and have them tell their friends and all that. It's exponentially difficult to take the hard thing to do in the first place, which is go through a block and, you know, basically find the new block. But then it's also exponentially hard to go and rewrite every block that then is stacked on top of that one.

• 42:32David Rosenthal?

  Right. So when you set up the system, say for the first week or month, or depending on how many people are using it, even a year or two, it's not so hard. Like if somebody wanted to come in with a lot more computing power than other miners on the system, they could recreate all the transaction hashes back to the beginning, insert their own fake transactions, give themselves, you know, 100,000 Bitcoin and then pass it off as the new one.

• 42:59Ben Gilbert?

  If you had an M1 MacBook Pro and the only other

• 43:02David Rosenthal?

  You could go back to 2012.

• 43:04Ben Gilbert?

  Right. And there was like only a handful of other crappy laptops doing this, you know, in the early days, then sure, your compute power would outmuscle a lot of these early ones, but that's not going to happen as soon as it reaches sufficient scale.

• 43:18David Rosenthal?

  Well, this is what's so cool. It becomes a network effect economy because the more transactions that are happening and the more blocks that get created and the more computing power that's working on that block, the harder and harder and harder it becomes to forge it till you get to a point, you know, where we are now, where like the total, you would need the total amount of computing power that has gone into Bitcoin since the beginning, plus some more to break it. And that's just not possible. Like, there's no way at this point, because it's been operating for so long with so many nodes on the network, so many transactions happening, so many miners mining, it's impossible. And so now you can

• 44:00David Rosenthal?

  guarantee, this is what Satoshi saw, if you could get to this kind of network with this density and scale and operating history, it would be impossible to crack it. And then all of the fraud, all of the double counting, all of the costs on the system that we just talked about with the traditional financial system, wouldn't apply anymore.

• 44:22Ben Gilbert?

  Yeah, it's interesting. So what we're kind of talking about here is laying the groundwork for basically a system of accounts where you can be super sure that if you're sent money, that it's legit, that there's not a risk that they didn't actually have that money and you're going to have to do some kind of chargeback. And you know it's legit because, you know, you've got all this, everything we just described going into saying that, hey, if I, if I receive, you know, this Bitcoin to my address, it's not going to get undone, or it's at least extremely unlikely that it's going to get undone because of all this work that's going into it. We did, we jumped to use the word miner, and I want to explain how that fits into the context of what we were talking about about five minutes ago.

• 45:02Ben Gilbert?

  So we were saying that there's these people who have a whole copy of the blockchain of Basically, the entire transaction ledger leading up to now is sitting on their computer. And they're doing work. They're going through and running cryptographic algorithms to basically ensure the authenticity of all those transactions and check and make sure that, yep, these are all correct. Well, of course, they need to be compensated for that because they're taking electricity, they're, you know, running their machines, the fans are on real high. In all likelihood, they're GPUs and now even more specialized mining hardware that exists in a data center somewhere close to a river so they can have easy access to cheap renewable energy.

• 45:41David Rosenthal?

  Yeah, maybe back in 2009, researchers like Nakamoto and the people that he shared this with originally would have done this out of the goodness of their hearts because it's cool, but that's not going to scale.

• 45:52Ben Gilbert?

  Yeah. So what was initially sort of a byproduct and is now sort of the incentive of mining one of these blocks is the first coin on the block gets given to you as a thank you for doing the work to verify the integrity here. And without getting too far into the specifics of how that actually works, what it basically means is you're getting paid for your labor, or you're getting paid at least for the energy that you're putting into helping the system remain verifiable and authentic.

• 46:18David Rosenthal?

  And it's not just the first coin, it's the first several coins on a block. So it started with 50. So if you mined a block, which again happened every 10 minutes, you got 50 Bitcoins in the beginning. Now I think it's down to six and a quarter.

• 46:31Ben Gilbert?

  Six and a quarter, yeah, because it halves every time, which of course, we will talk about how Bitcoin is not an inflationary currency, but it has a finite number. Slightly under 21 million will ever get mined. And it uses sort of a halving function so that every four years, I think the reward gets cut in half. So there is only a certain amount of Bitcoin that will ever be mined. So you can count on the sort of system not getting watered down by injecting more and more Bitcoin into it above this very predictable, regular declining schedule that we have sort of observed.

• 47:06David Rosenthal?

  What you were saying, Ben, is so important. Like, we just described the super cool system. It'd be awesome. It'd make money on the internet. Work much better. It's going to require so much compute power. Why would anybody do that? Why would these coins have any value? They're not dollars. They're not backed by a government. The reason is what you were just saying. The coins get created by doing the work to make the system what it is, which is really, really good. So the value is in the work itself. It's a recursive system.

• 47:37Ben Gilbert?

  Right. What you have from the work being done is a system of integrity. And the network effect may be small to start, but you can count on the fact that you can be very certain that all of those transactions have been combed through. And while technically there's no chart of accounts, you sort of figure out everyone who has what in every account by running through the whole transaction history and figuring out where all the chips fall down when you sort of run through line by line by line by line. But effectively, what you have is a big chart of accounts where you know for damn sure that those are right. Those accounts actually contain those Bitcoin.

• 48:09David Rosenthal?

  So if you own a Bitcoin, and the first people who own that Bitcoin are when it's created, are the people who mined it. And then it gets transacted and you own some, I own some, you know, people who buy and invest. What you actually own is you own a piece of the computing power that has gone into making this system robust and secure and viable and good for everyone.

• 48:33Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 48:47David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 49:01Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 49:10David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 49:28Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 49:44David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 50:01Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 50:10David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 50:21Ben Gilbert?

  Well, before we move on the story here, I think there's a couple of little rabbit holes I want to go down. So we've talked about this cryptographic work a few times. I want to talk a little bit about the idea of one-way functions in computer science. There are certain types of math that are very easy to do in one direction, but very difficult to undo in the other direction. And a classic example of this is the product of two prime numbers. So if you multiply prime number A by prime number B, it's fairly easy to do that math. You could imagine literally doing it on paper. You could imagine writing a computer program to do it, bringing those numbers into the registers and in assembly code, multiplying them together. But if you're given the product of those two numbers, especially when all the

• 51:04Ben Gilbert?

  numbers you were dealing with are very large, you can imagine that it gets extremely difficult and would be very inefficient to try and figure out what the initial two prime numbers were that created that product. So the magic that makes this one-way

• 51:20Ben Gilbert?

  Function work is the fact that it's easy to multiply two prime numbers together, but very difficult to factor large primes. And of course, it's gotten much more complex since this initial insight. But I do want to sort of pause on that for a minute and say, the implication here is that it's very easy to check someone's work. When they tell you they have the answer, this product, and they provide you one of the factors or one of those initial prime numbers, you can very quickly do that math and say, yep, checks out. But it's super hard for you to stumble on to the exact two initial numbers without knowing any other piece of information. So this system, totally ingenious. I want to, David Rosenthal style here, rewind back to 1874.

• 52:05Ben Gilbert?

  William Stanley Jevons wrote in The Principles of Science, keep in mind, this is a little under 100 years before the personal computer was created. "Can the reader say what two numbers multiplied together will produce the number 8,616,467,99? I think it will be quite unlikely that anyone but myself will ever know." So he sort of came on to this, the very first idea of the one-way function. And obviously now a computer can very quickly, through brute force, sort of figure out what the two, you know, guess and check, guess and check, guess and check, figure out what the two factors of that number are. But you can imagine if that number were extremely large, then it would take modern computers a very long time. Or frankly, if you make them large enough,

• 52:51Ben Gilbert?

  it makes it impossible to our knowledge for computers today to undo that problem. It requires just way, way, way too much work. And if you make them even bigger than that, then you can say, assuming computers get better at a certain rate, like this problem is never undoable. There's a scary thing that exists here, which is at some point, like we have not proven for sure that one-way functions exist. We've tried to undo them a bunch of different ways. And mathematicians everywhere have tried to sort of prove this problem. It's this kind of scary thing where like, we rely on this for public-private key encryption, encryption of all kinds, hashing, everything in Bitcoin is based on it, anything with any password that you log into anywhere is based on this, your email is based on it. And we're like, pretty sure.

• 53:37Ben Gilbert?

  That you can't do it in the other direction in a computationally efficient way. But like, we're not provably sure.

• 53:43David Rosenthal?

  Yeah, right. When we were saying a minute ago that you would have to put all the computing power that's gone into Bitcoin, back into Bitcoin, back into trying to forge it. That would not be the case if you had a way to break this encryption.

• 53:56Ben Gilbert?

  If you stumbled onto, yeah, like a different, if you basically invented a novel algorithm that mathematically could undo that work just as efficiently as it was done, instead of the horribly inefficient way that we know how to do it now, which is basically brute force.

• 54:13David Rosenthal?

  But the point is like, yeah, that would break Bitcoin. That would also break all security. You could log into any account anywhere. So it would break the traditional system too.

• 54:21Ben Gilbert?

  Absolutely, absolutely. One other little aside, which I think is a fun place to put it here, is this notion of public key encryption, which is advancing further on this idea of using one-way functions, which is the thing we were talking about earlier, where I can broadcast my public key. So anybody can send something to me, but only I have the private key. So I am the only person who can either decrypt the message or send it to someone else, or however you decide to sort of leverage that. This concept is actually born out of that 1874 discovery of prime factorization. Pretty amazingly, two different groups of people took this idea and turned it into this public-private key discovery right around the same time, 1973 in Britain.

• 55:06Ben Gilbert?

  But they kept it a secret because they wanted to use it for defense because it's fricking brilliant that you have, you know, the notion of transmitting messages in a more secure way on the battlefield. The very same idea was discovered kind of within the same time and ultimately was publicly announced in 1977, now known as RSA encryption. And it's crazy to me that like, it's kind of like physics or calculus where private-public-key encryption was sort of dual-discovered in the same decade by different people who had no notion of each other. And in fact, the first set of people was desperately trying to keep it a national security secret. And it's like, the world was just ready for the discovery. You know, technology and modern math had advanced to the point where

• 55:50Ben Gilbert?

  Based on the same foundation, two different groups could independently make the same invention simultaneously, which is really interesting.

• 55:57David Rosenthal?

  Totally. Okay. So now we're, we've got our math lessons done. We know how encryption works. We know private and public key. We know why that's better than the traditional financial system. Now we also know with blockchain, why and how mining creates this scarcity and makes sure that transactions that are the legitimate transactions are the only ones that can happen. What's cool here is this basically turns into a regular acquired episode now because remember how I was saying that as the system of mining grows, the more mining power that goes in and the more transactions that happen, it becomes a network economy and then the overall value grows. It's just like Facebook.

• 56:41David Rosenthal?

  So, you know, the think back to the social network, which is going to come up in a second. You know, that line of like, if you created Facebook, you'd have created Facebook. Anybody can create Facebook. Anybody can create Twitter. Look at Parler, right? Like the question isn't creating it. It's getting critical mass.

• 56:58Ben Gilbert?

  Value of the network.

• 56:59David Rosenthal?

  And then the value, it's valued based on network economies. We know how to value them. Metcalfe's law, which is the value of the economy is the square of the participating nodes within it. So now it becomes a race because anybody could take the white paper and start their own coins, their own cryptocurrencies, their own blockchains. JP Morgan could just go take this and implement it for all of their.

• 57:25Ben Gilbert?

  In fact, many people tried, right? Like all these altcoins were, you know, forks of the Bitcoin source code. My favorite little tweak on this and Dogecoin and, you know, thousands and thousands of people have tried to create alternate cryptocurrencies with varying levels of success.

• 57:41David Rosenthal?

  Yep, totally. And some of them are quite valuable. But having that early lead and then growing the network and getting use cases for it, just like Facebook on college campuses, that's what starts the snowball rolling. And then the bigger it gets, the less and less likely it is that anybody's going to catch up. So in January 2009, Satoshi boots up the system, essentially. He codes it up. He creates version 0.1.

• 58:09Ben Gilbert?

  Which is amazing, by the way. You've got not only this like researchy looking white paper that was published, which several other people published competing ideas up to this point. I think Hash Cash was one of them that weren't maybe quite as elegant, but had some of the same component parts. But Satoshi Nakamoto, pseudonymous or not, not only publishes the paper, but then of course writes the first actual working implementation in code.

• 58:33David Rosenthal?

  Hash Cash is interesting. This is an aside, but it was, it's probably the thing that was closest to Bitcoin before Bitcoin, but it wasn't designed as money. It was designed as an anti spam system for email.

• 58:48Ben Gilbert?

  This is fricking brilliant. So this proof of work concept that we talked about earlier, where it's extremely difficult to do the math in one direction, but very easy to check that the math was done, was basically applied as a spam filter. You said, hey, you kind of have to do this much computing work in order to be able to email me. I can quickly check if you did that work, but it's going to be real expensive if you want to DDoS my email and spam the crap out of me because I'll just kind of reject it if the math is wrong on the check.

• 59:16David Rosenthal?

  Okay. So beginning in January 2009, Satoshi boots up the system, literally bootstraps it. He mines the first block, the genesis block. He gets his reward. He, they, she gets their reward of 50 Bitcoins. And then he starts recruiting an open source community of researchers to work on the product, work on the code, build the system, create mining nodes. This all starts happening a couple of days later. Nakamoto sends the first Bitcoin transaction to Hal Finney, who was a researcher who he had recruited, a crypto researcher into working on.

• 59:52Ben Gilbert?

  And is this on that Cypher Funk's email list?

• 59:56David Rosenthal?

  Yes. So Hal was a Cypher Funk. Tragically, I think he died of Lou Gehrig's disease a few years ago. I think it was all on the same email list that he sent the white paper out to. So he sends the first actual transaction. Out there, it gets mined on Satoshi's mining rig. And for the next year, that's kind of how things go until May 22nd, 2010, the infamous pizza day, when one of the researchers working on the project, a Florida programmer named Lazlo Heinjich, I think that's how you pronounce it. Not sure if that's 100% right. He offers up an idea to see if these transactions can actually have value in the real world.

• 1:00:41David Rosenthal?

  He says he will transfer 10,000 Bitcoins in exchange for anybody out there on the mailing list who wants to buy him a pizza.

• 1:00:50Ben Gilbert?

  I love this. So programmery.

• 1:00:52David Rosenthal?

  So great. So somebody in England, of all places, all the way across the Atlantic Ocean sees this and is like, I'll do that. I'll take 10,000 Bitcoins. So this person couldn't get their name. They call up the local Papa John's near Lazlo. They ordered two pizzas using a credit card, have them sent and delivered to Lazlo, and Lazlo then sends 10,000 Bitcoins over in exchange for this. And this is the first real world transaction.

• 1:01:21Ben Gilbert?

  I think this approximately values Bitcoin at 0.25 cents per Bitcoin.

• 1:01:28David Rosenthal?

  Yeah, I think that's if you assume like 20 bucks for the pizza.

• 1:01:31Ben Gilbert?

  25, yeah. It's also funny to think about like, sure, yeah, I'll order you a pizza. That saves me 20 blocks that I don't have to mine. Like, yeah, yeah, this is valuable. It's taking me forever to mine these blocks. Great.

• 1:01:45David Rosenthal?

  Yeah, amazing. I just also like Papa John's. That's the first, Shaq is on their board of directors. He should be proud.

• 1:01:52Ben Gilbert?

  There you go.

• 1:01:53David Rosenthal?

  Shortly after that is when Nakamoto disappears off the internet, stops contributing to the projects. He transfers control of the open source repositories to some of the other developers on the project. He basically washes his hands and says, I'm done. Except at this point, he has somewhere between 600,000 and a million Bitcoins that he's mined as the first miner on the system.

• 1:02:21Ben Gilbert?

  Like, he has a million of the, you know, whatever, four or five million that existed at that point, 21 million that will exist total. Like, this is a huge amount of the Bitcoin in the world.

• 1:02:32David Rosenthal?

  Yeah, which nobody thinks twice about at the moment. They're like, oh, okay, I guess he like moved on. He actually communicates with, somebody asks him what's going on and he says in an email message, I think, I've moved on to other projects. But there was never any personally identifiable information out there about this guy or group or girl or people.

• 1:02:51Ben Gilbert?

  And what Satoshi did is quite remarkable in being untraceable. Like, most of the time, these people slip up in some capacity. Like, their personal account is the first one to follow their account. Or they, if, you know, their emails are ever leaked, like, they made a communication with, or their backup email is their personal email, or they did a two-factor auth from their phone number, or, you know, there's all kinds of ways that like, you sort of discover later, yep, turns out this really was this person. Oh, the, the first time they registered the domain name, they did it with their email address. Like Satoshi did none of these things. And to this day, it could be one of 10 people who people think it is, or it could be none of those people. We have no idea.

• 1:03:30David Rosenthal?

  Well, and I think this is also one of the reasons why people really believe it was a group of people. Because then, if it's a group of people, then there's obviously no way that they would slip up and identify.

• 1:03:41Ben Gilbert?

  Right.

• 1:03:42David Rosenthal?

  Expose personal information.

• 1:03:44Ben Gilbert?

  The paper is also written "we." Whether that's the royal "we," I don't know, but they keep saying, "we proposed this following solution."

• 1:03:51David Rosenthal?

  So, he disappears. Interest keeps growing, though, and some transactions happen, mostly between the people that are mining the currency. In early 2010, a forum user on BitcoinTalk.org named SmokeTooMuch, that's S-M-O-K-E-T-O-O-M-U-C-H, offers to auction 10,000 Bitcoins for $50. So it's like $25 for the Papa John's, he wants, you know, sort of twice the amount of money, wants a 2X return. Nobody takes him up on it, though. So, in April, he declares the auction over. He keeps the 10,000 Bitcoins, I guess. Nobody, nobody gets them. Probably pretty

• 1:04:33David Rosenthal?

  good for him. Interest does keep growing, though. People do start tracking roughly the exchange rate between the US dollar and Bitcoin. It rises up by the beginning of 2011 to 30 cents per Bitcoin by whatever metrics people are sort of using to estimate

• 1:04:52Ben Gilbert?

  Which is already a 120x return on the Papa John's deal.

• 1:05:00David Rosenthal?

  Uh, no, even more than that because the Papa John's was a fraction of a cent, right?

• 1:05:04Ben Gilbert?

  And, and this is what now? 30 cents?

• 1:05:06David Rosenthal?

  30 cents.

• 1:05:07Ben Gilbert?

  Yeah. So 120x, like, it's kind of crazy to think about, when I said earlier, there was, this was a 3,000x, it's crazy to think about what a gigantic multiple of that was so early. It's kind of like if you buy a penny stock that actually makes it into dollar territory, you had this unbelievable return. It's that.

• 1:05:23David Rosenthal?

  Yep, it's that. And then it keeps going. So by the end of 2011, there's a pretty robust market for exchanging dollars into Bitcoin, which we're going to talk about in one sec, and Bitcoins are going for $5.27 per Bitcoin, which is crazy. Like, who out there is going to be, who's going to be using, who wants to be exchanging dollars in Bitcoin all the time?

• 1:05:50Ben Gilbert?

  That's a $52,000 pizza at that point.

• 1:05:52David Rosenthal?

  Yeah, that's a lot, that's a lot of dough. So it turns out that in February of this year in 2011, a little service calling itself The Silk Road launched, and this was the first killer app for Bitcoin.

• 1:06:09Ben Gilbert?

  Yeah, it's worth pointing out here that if one of the primary value propositions of your product is, it's like money, but you don't have to put your name on the account. You're going to attract some people who are using it, who don't want to put their name on an account and otherwise would have to in any other system.

• 1:06:26David Rosenthal?

  Yeah. So this is just amazing, the story. And this is actually when I first started hearing about Bitcoin was I started reading the headlines about, about the Silk Road and what was going on. And I was like, whoa, that's like crazy. But this Bitcoin thing is kind of interesting underneath it. So in February 2011, somebody calling themselves the Dread Pirate Roberts, named after the character in the Princess Bride movie, which is just amazing, launches an online black market and the first modern darknet market on Tor, which is encrypted internet that you need an encrypted browser to browse. And this thing is basically eBay for illegal stuff. Well, it's eBay for anything. The biggest

• 1:07:08David Rosenthal?

  items that are transacted on it are not Beanie Babies, it's drugs.

• 1:07:13Ben Gilbert?

  Right. It's, I mean, you're using a browser where the web history is not saved, where it bounces through a bunch of proxy servers, all the traffic is encrypted. And now finally, you have a way that you can pay for stuff that doesn't ever get linked back to a financial institution that is associated with your name. Like, it couldn't be the more perfect cocktail for selling drugs on the internet.

• 1:07:34David Rosenthal?

  Totally. And what's kind of amazing is like, it's, it's exactly like eBay. So the way this worked was people would pay for the goods, the drugs that they were buying with Bitcoin, just like PayPal. And then the sellers would put the drugs in the mail, like the US Post Office, because you can't search mail. It's illegal. It would, it's mail fraud. And, and so it's literally just like eBay. This is exactly how this is working. It's eBay for drugs.

• 1:08:05Ben Gilbert?

  I guess I always assumed they had to, I just never really thought about like, how would you get it mailed to you? Or how would you get the goods?

• 1:08:12David Rosenthal?

  Yeah. Most of these people aren't in the same city. It's happening all over the world.

• 1:08:16Ben Gilbert?

  Right.

• 1:08:17David Rosenthal?

  And, um, yeah, so it was actually kind of crazy. So this, this character Dread Pirate Roberts, he wrote that he wanted Silk Road, quote, "grow into a force to be reckoned with that can challenge the powers that be, and at last give people the option to choose freedom over tyranny."

• 1:08:36David Rosenthal?

  It's kind of amazing. There was a book club section on the website. The book club still exists. It's like part of a message board now.

• 1:08:45Ben Gilbert?

  No way.

• 1:08:45David Rosenthal?

  So the business model that they had, I think eventually they did shift to an eBay style business model, like a traditional marketplace, taking a cut of every transaction. But at the beginning, I think they didn't want to get involved in the transactions themselves. So.

• 1:09:00Ben Gilbert?

  Oh, yeah, that'll legally protect you as long as you're not taking a vid.

• 1:09:04David Rosenthal?

  Yeah, yeah, for sure. For sure. It's all good. We're just the platform. Like, we don't, we don't know what happens on the platform. We're just a platform. So the first business model was you actually had to pay to create a seller account. So you paid in Bitcoin to create an account that you could then sell whatever it is you wanted to sell on Silk Road. Amazing. So this operates for two and a half years, starting in February 2011.

• 1:09:30Ben Gilbert?

  And by the way, there was a federal case opened almost immediately. Like, like, I think, I know that the feds were following for two years, putting the case together. So like observing everything that's going on.

• 1:09:41David Rosenthal?

  Well, and there was, I think it was Chuck Schumer. There's a great story that like, he was shown this on a computer. It was like totally flipped out. It was like the government needs to like, we need the FBI to crack down. Like, of course. And so during this time, this is amazing, over 1.2 million transactions happen on Silk Road. So if you're trying to bootstrap up the Bitcoin network of the killer use case, like this is like looking at, you know, attractive freshmen of the opposite sex on campus for, for Facebook. Like, this is the way to get people.

• 1:10:16Ben Gilbert?

  Right. It's like the, the pseudo nefarious catnip. Here's an amazing use case that appeals to people's vices for this new medium that has been invented.

• 1:10:26David Rosenthal?

  Yep. Just like any new medium technology, there's no regulation yet. So over a million transactions, almost 150,000 unique buyers and almost 4,000 unique sellers use the platform over this period of time. They transact almost 10 million Bitcoins, which I don't know how many Bitcoins were in circulation at that time, but let's estimate like, I don't know, two to three, four million, maybe. So like several times over.

• 1:11:00David Rosenthal?

  The total number of Bitcoins in circulation get transacted in the Silk Road.

• 1:11:06Ben Gilbert?

  Knowing what we now know about how the Bitcoin network works, like the Silk Road can be largely credited with getting it over the hump to the level of transactions and the level of participants in the network where it's now a self fulfilling prophecy of integrity and certainty of the network.

• 1:11:25David Rosenthal?

  A hundred percent. This is what's so ironic.

• 1:11:28Ben Gilbert?

  It's funny that I use the word integrity. It's like the, the acts of the potentially the least, depending on who, what moral authority you want to claim, the acts of least integrity guaranteed the future integrity of this financial system.

• 1:11:41David Rosenthal?

  Incredible. Like you can't make this stuff up. So finally, in October 2013, FBI agents, this is amazing, conduct a sting raid. They arrest a man named Ross Ulbricht at the Glen Park Library in San Francisco. This is like half a mile from my house. It's like right down the street. I've go, I drive by it all the time. It's this little, like Glen Park is this beautiful little neighborhood in San Francisco, total hidden gem. Nobody knows about it. It's very sleepy, very like neighborhood-y feel. And the library is this like small little branch right next to the grocery store there. So Ross is hanging out, working out of the

• 1:12:23David Rosenthal?

  library in Glen Park, and three FBI agents conduct a sting raid. Two of them pretend to be a couple, a romantic couple, that are having an argument and they have like a loud argument to distract him in the library. And then, so that he looks up away from his computer.

• 1:12:39Ben Gilbert?

  No way.

• 1:12:39David Rosenthal?

  And then the other one comes and grabs the computer so that he can't lock it while they're arguing. Of course, it was suspected and then proved to be true that Ross was Dread Pirate Roberts.

• 1:12:51Ben Gilbert?

  Wow. And when he was convicted, like he, he tried to have someone killed, right?

• 1:12:56David Rosenthal?

  Yeah. So that's the allegation. He was never convicted of this, but part of the allegations that the government brought against him were that, you know, he, he's a, an interesting character. He was, he grew up in Austin, Texas, and this dude was an Eagle Scout.

• 1:13:13Ben Gilbert?

  No way.

• 1:13:14David Rosenthal?

  High school. Yeah. So quite the reversal from Eagle Scout to, I don't want to say drug lord, because, you know, he was just operating the platform, but he had quite the journey, let's say. So he had kinda.

• 1:13:30David Rosenthal?

  Supposedly, and he wasn't convicted on attempted murder charges, but gotten more and more paranoid as he was operating this site with the pseudonym and thought that people were out to get him, which obviously they were, the FBI agents at least. And so the accusation was that he had tried to pay, I don't know if it was through Silk Road or through other dark net sites, he tried to pay to have people killed who he thought were were after him. Nobody was actually killed. None of this actually happened and he wasn't convicted, but he was convicted of seven charges related to money laundering, computer hacking, conspiracy to traffic narcotics, et cetera, et cetera.

• 1:14:14Ben Gilbert?

  And he's in jail for life, right?

• 1:14:15David Rosenthal?

  Yep. He was sentenced by the federal court, US federal court in Manhattan to life in prison without the possibility of parole. I think maybe like multiple life sentences. Kind of crazy. There was actually there's talk of like Trump wanted to pardon him or like, God, that's some crazy shit, but like, he's, uh, he's in jail.

• 1:14:33Ben Gilbert?

  He's in there. Yeah. I know. He doesn't give interviews either. He's, he's very tight lipped. Like a lot of journalists, obviously have tried to sort of reach out and get his side of the story, but it's not happening.

• 1:14:43David Rosenthal?

  Yeah. So this is where like, again, this is all just, you know, Silk Road itself was creating more interest in Bitcoin. This crazy media story is creating more interest in Bitcoin. The FBI as part of this raid, remember they got his computer? They seized all of his Bitcoins. So the US government now has 144,000 Bitcoins that they've seized from Ross and from the Silk Road, which at the time wasn't worth that much money.

• 1:15:17Ben Gilbert?

  No, but now it's 4.3 billion.

• 1:15:19David Rosenthal?

  It's a lot of money. So the next year, I had forgotten about this till doing the research. This is amazing. They hold an auction, an online auction, like this, you know, US Marshals, they do a raid, they, they hold, you know, they get drug dealers like, you know, Lamborghinis and stuff and they auction them off. They do the same thing with the Bitcoin. Online.

• 1:15:41Ben Gilbert?

  No way.

• 1:15:41David Rosenthal?

  So they auction about 30,000 of the 144,000 Bitcoin online and Tim Draper, the venture capitalist, you know, founder of DOJ, he buys.

• 1:15:53Ben Gilbert?

  Bitcoin Thai guy.

• 1:15:55David Rosenthal?

  Bitcoin Thai guy. He buys the Bitcoin and it's all like a publicity stunt, but he paid 17 million for 30,000 Bitcoin.

• 1:16:05Ben Gilbert?

  Wow.

• 1:16:05David Rosenthal?

  I hope he held on to those because he would be doing probably better than his entire venture career on that at this point. Amazing. So fun little coda on that. Actually in November of 2020, so like two months ago, part of, I don't think it was part of the 144,000 Bitcoin, but there was another about 70,000 Bitcoin that were known to have been associated with Silk Road, like part of Silk Road's Bitcoin that people didn't know where they were. They transacted on the blockchain. And so people saw this transaction happen. They're like, whoa, what happened? And it was about a billion dollars at the prices a couple months ago, these 70,000 Bitcoin. And it turns out what

• 1:16:49David Rosenthal?

  the transaction was, that the FBI, they haven't identified who or the circumstances, but the FBI had found, they call it individual X in when they came forward and explained what happened. This person had hacked Ross and the Silk Road before all this went down and stolen these 70,000 Bitcoins from Ross. And then the FBI tracked him down and then the transfer was they were transferring those Bitcoins to federal custody.

• 1:17:18Ben Gilbert?

  Oh, interesting. So.

• 1:17:20David Rosenthal?

  Isn't that amazing?

• 1:17:21Ben Gilbert?

  So the person committed a different crime hacking Ross and the FBI was busting the crime of hacking.

• 1:17:27David Rosenthal?

  Yes, the crime against the criminal. Yeah.

• 1:17:29Ben Gilbert?

  It's worth contextualizing a little bit, sort of what's happening here when someone gets hacked or when Bitcoin get lost? Because those are sort of two different things. There's the situation.

• 1:17:39David Rosenthal?

  It's not the fault of Bitcoin when that happens.

• 1:17:41Ben Gilbert?

  Right. Sort of. It's the fault of Bitcoin for having a wildly obscure system that makes this whole thing tick. But, you know, is it, is it the pilot's fault when? It's hard to fly in a complicated airplane. That's like the, that's the question here. So of course you can sort of hack into Ross's computer. You can get his private key and then you can use his private key to authorize sending that $2020 billion worth of Bitcoin over to your account. That is a very different thing than what has happened for something like 20% of the entire Bitcoin supply, which when you look through the ledger, through the entire blockchain, has not transacted in a really long time, presumed to be lost.

• 1:18:23Ben Gilbert?

  And what lost means is the owner of, the person who it was most recently transferred to, has lost access to the private key, which is of course, an unguessable, crazy, long, you know, number, letter combination that no one's ever going to be able to sort of guess. It's not like you can click a forgot your password button. For those people, like if you lose your private key, you're never going to be able to, I suppose you sort of still own the Bitcoin, but who cares? Because you can't ever do anything with it.

• 1:18:52David Rosenthal?

  Right. When you lose your email password or whatnot, there is a centralized provider, you know, Gmail or whoever you're using, they know your email password. So you can go through some hoops with them to get it. But there is no centralized, as we talked about.

• 1:19:07Ben Gilbert?

  Right.

• 1:19:07David Rosenthal?

  Bitcoin provider. So you better not lose your password.

• 1:19:11Ben Gilbert?

  Yeah. Decentralization is a double edged sword for sure, for sure. There's one other number that's interesting to know here. Satoshi, it is currently believed that he ended up mining about one and a half million Bitcoin, which, you know, of the eventual 21 million, so a huge amount are owned by whoever this Satoshi person or group of people are. That's about $50 billion worth of Bitcoin. So you've got 20% of Bitcoin are lost. You've got what are maybe seven, eight percent that Satoshi, whoever Satoshi is owns. There's all these Bitcoin that are sort of like in areas that aren't transacting, people holding it for the long term. So there's only like even today, like three or four million Bitcoin that are actually trading hands

• 1:19:55Ben Gilbert?

  and available in the supply, demand equation to set the price.

• 1:19:59David Rosenthal?

  I mean, even just all of these Bitcoins associated with Silk Road that we're talking about, that's like 1 to 2% of Bitcoins out there, right there.

• 1:20:08Ben Gilbert?

  Right.

• 1:20:08David Rosenthal?

  Just that were, this wasn't transactions on Silk Road. This was like Silk Road's Bitcoins.

• 1:20:13Ben Gilbert?

  Right, right. So the takeaway here is like, a lot of the big chunks of Bitcoin are owned by people who were using Bitcoin very early, when you know, you could mine huge blocks and it didn't take that much compute to do so.

• 1:20:26David Rosenthal?

  Yep. Okay, so Silk Road by 2013 is, it's the end of it. But while all this was going on from, call it 2011 to 2013, as Silk Road was growing, all these people who were using it, they, they had to find, have a way to get Bitcoin. They weren't just gonna like email the, the listservs on BitcoinTalk.org and be like, "Hey, I want to buy some Bitcoins so I can buy some drugs." There's gotta be a, an easier way for them to buy in to the system, so to speak. And the way to do that is through exchanges. And so this is how, you know, just like any kind of currency exchange, like you said, this has been part of financial institutions.

• 1:21:04Ben Gilbert?

  You need somebody to stand up the store that's gonna accept your dollars and hand you Bitcoin in exchange. That store is gonna be on the internet, but someone's gotta operate it.

• 1:21:12David Rosenthal?

  Exactly. And so for almost all of this period of time, there was really only one viable exchange on the internet. And it was an organization called Mt. Gox. That sounds right, you know, like a mountain, like, sounds like Fort Knox, you know, like Mt. Gox. It's a trustworthy, secure organization that's gonna store your Bitcoin and you're gonna be able to exchange and buy it, right? Well, had an interesting history of its own, shall we say. So what is Mt. Gox? We go all the way back to 2006, when a developer named Jeb McCalib, who was a big fan,

• 1:21:56David Rosenthal?

  no, no, no, no, in the US.

• 1:21:58Ben Gilbert?

  Okay.

• 1:21:58David Rosenthal?

  Was a big fan, as am I, as are many people, of the then-going online but physical card trading game, Magic the Gathering. He thought, you know, gosh, like these magic cards, they're super cool. Lots of people love playing. You can buy them on eBay and whatnot, but there should be like, there should be just like, you know, later there would be goat and reverb and what they should be a vertical, like specific website on the internet for going and buying and selling. Magic cards. Great. I'm just going to code that up. Why don't we call it Magic the Gathering Online Exchange? MTGox. Mount Gox.

• 1:22:37David Rosenthal?

  So this was created by Jeb in 2006. I don't know if he was not very good at distribution or whatnot. Like clearly, like there's demand for this, like this, lots of people are trying to build this now for magic cards and Pokemon cards and other cards. But for whatever reason, Mount Gox in its initial iteration didn't quite take off. He had it up for about three months. Nobody really used it. He abandoned the site. Now, we mentioned his name is Jed, Michael, he's a programmer. He's not just like any programmer. This is nuts. So do you know who he is, Ben?

• 1:23:08Ben Gilbert?

  No, I don't.

• 1:23:09David Rosenthal?

  So today, he is the co-founder and CTO of Stellar, which is a really interesting crypto project organization out there. I think it's actually a nonprofit doing cross-border remittances. It's backed by Stripe. Stripe is invested in it. Prior to Stellar, but well after Mount Gox, he founded Ripple and he was the founder and the CTO of Ripple. Obviously, of course, another cryptocurrency with its own story behind it.

• 1:23:37Ben Gilbert?

  How after the incredible tragedy that we're about to get into of Mount Gox, was he credible enough to then lead to other cryptocurrencies startups?

• 1:23:47David Rosenthal?

  Really crypto, really credible, big cryptocurrency startups. Because he wasn't actually involved in Mount Gox through everything we're about to talk about. So here's what happened. He abandoned the magic thing, but he still had the website. And then in like, super early in crypto land, remember, like, he does all these crypto projects. He, I don't know if he was on the original email list. He hears about it. And in July 2010, so like, right after pizza day, he gets involved and, and he realizes the need for For this exchange for people to come in and be able to buy Bitcoin. And he says, oh, cool. I can code that up. I know how to do this. And he's got the mount gox.com MTGOX website lying around.

• 1:24:33David Rosenthal?

  He just says, oh, great. Like, rather than, I don't know why, rather than registering a new domain name, I'm going to use that.

• 1:24:40Ben Gilbert?

  Oh, okay. In my head, I had this like notion that people were like listing Bitcoin in the same way that they should have been listing magic.

• 1:24:47David Rosenthal?

  Alongside magic.

• 1:24:48Ben Gilbert?

  He just repurposed the domain.

• 1:24:50David Rosenthal?

  Oh, it's like, oh, you could, you could buy a dual land or you could buy a, like a Satoshi, like, amazing, amazing. No, it was, it was repurposed into just a Bitcoin exchange.

• 1:25:02Ben Gilbert?

  And so help me understand at this point in history, like if you're going to be doling out Bitcoin in exchange for dollars, you got to get your Bitcoin from somewhere. So are they mining in order to create the supply that they're selling out to people?

• 1:25:13David Rosenthal?

  Who are. That's a good question. I assume so, but I don't really know. I bet that is Jeb quickly realizes like, this is going to be a major undertaking to do this, probably for that very reason, let alone operating in the exchange, making sure all these transactions happen, taking custody, doing them well. He, after just a few months, he runs it for about eight months himself. And then in March of 2011, this is where Japan comes in, he sells it. He, so he's just running it. He decides, you know what? I'm going to sell the whole thing. Uh, he has an interested buyer, a guy named Mark Karpilas, who is a French programmer who was living in Japan at the time, a super interesting character.

• 1:25:58David Rosenthal?

  And he makes an offer to buy Mount Gox from McHale, uh, which he does in March of 2011. And the statement at the time, McHale makes a statement, he says, to really make Mount Gox what it has the potential to be, which is huge, like this is Coinbase and Square Crypto and Robinhood, everything before that. To really take it to what it has the potential to be would require more time than I have right now. So I've decided to pass the torch to someone better able to take the site to the next level. Unfortunately, that was not Mark.

• 1:26:32David Rosenthal?

  So right after a couple of months afterwards in June 2011, after Mark takes over the site, the first security breach happens at Mt. Gox. Bitcoins are stolen and lost. October 2011, they send 2,500 Bitcoins to the wrong addresses. And again, to the point of like, if it ends up in the wrong place and you don't have the private keys, they're gone forever. So Spectre unfortunately have things to come here with Mt. Gox. 2,500 Bitcoins lost forever. But there's still, there's no other exchanges out there. So like, anybody who wants to come in, anybody who wants to transact on Silk Road, just be involved in any way as part of the ecosystem, they gotta go to

• 1:27:12David Rosenthal?

  Mt. Gox. And they handle for the next year and a half about 70% of all transactions in and out of Bitcoin that happened on the internet.

• 1:27:22Ben Gilbert?

  That's right. It was so dominant. I mean, that was like, I think that even held me back from buying Bitcoin in those days because I was hearing people talk about it. I had friends texting me about it. And I remember going to Mt. Gox and being like, ah, I just don't know.

• 1:27:35David Rosenthal?

  Yeah, this is like, super shady. Not to mention, you know, the Silk Road and all this out there, like, definitely held Bitcoin back from becoming mainstream for, for at least a year.

• 1:27:47Ben Gilbert?

  It's so funny, the whole like, crossing the chasm framework, like, in some ways, I am an early adopter, but I'm not like, gonna adopt something that is only being used in my perception for like, illicit drug use on the dark web, right? Like, it took until, like, Coinbase came around. I think 2014 is when I started sort of getting more interested in it. But like, it had to be at least that mainstream.

• 1:28:10David Rosenthal?

  Yep, same here. That was, I started hearing about it with Silk Road and Mt. Gox and everything going on. But yeah, Coinbase was when I did my first transactions. So by April of 2013, so a few months before Silk Road gets, the sting operation happens, and Silk Road goes down, Mt. Gox finally starts its death spiral. So they crash.

• 1:28:35David Rosenthal?

  At a certain point, because of the volume that is happening on the system in April, it's completely overwhelmed. They suspend trading. The price of Bitcoin crashes 50% just by virtue of, because you know, they're doing 70% of the market. All of a sudden, it'd be like if the New York Stock Exchange just went offline. So the price crashes, bunch of lawsuits start that they get hit with. Then in June of 2013, Mt. Gox stops the ability to withdraw in US dollars. So you can still withdraw in other currencies, but like clearly things are not well here, not looking good. And then in February of 2014, they suspend withdrawals altogether. So you can't take money out of the system

• 1:29:20David Rosenthal?

  at all from Mt. Gox and they file for bankruptcy.

• 1:29:24Ben Gilbert?

  And could you transfer to like, if you have your own like hardware wallet or something? Like if you knew an address of another Bitcoin, if you knew another Bitcoin address, could you transfer?

• 1:29:32David Rosenthal?

  I mean, I guess at various points along the way, but eventually you can't even do that. And ultimately, 750,000 client Bitcoins, like Bitcoins that people were holding in Mt. Gox get lost, like permanently lost. Private keys are lost. They're gone. I mean, almost a million. And then another 100,000 that was owned by Mt. Gox itself. So that's 7% at the time of all the Bitcoins in circulation, just blown out of the sky when Mt. Gox goes under.

• 1:30:05Ben Gilbert?

  And just in client dollars, that's 22 and a half billion dollars of Bitcoin today that are just, they exist, but assuming that those people didn't download their private keys, like, and they just trusted Mt. Gox to say, you keep my private key. And I, or maybe they couldn't even download the private keys. But basically like, if you don't have the private key, you're not sending it anywhere.

• 1:30:27David Rosenthal?

  Yep, gone. So. Fortunately, though, by the time this starts to happen and Mt. Gox enters its sort of mid 2013 to beginning of 2014 death spiral, enough other people and other business minded people had gotten turned on to Bitcoin and interested in the system that they were like, "Holy crap, we need better exchanges here. Let's go build them." So in many ways, now the most well-known one of these is, of course, Coinbase that we talked about. So in June of 2012, two co-founders, former Airbnb engineer Brian Armstrong and Goldman Sachs trader Fred Ursim, they're like, "We need to build an exchange, and not just an exchange to compete with Mt. Gox. We need to build like a legitimate exchange that people

• 1:31:11David Rosenthal?

  are going to trust to use, that we're going to work with regulators, that we're going to make sure that when people cash out of Bitcoin, they pay their taxes, do all these things to build this into a real functioning system."

• 1:31:25Ben Gilbert?

  And importantly, not just an exchange, it's an exchange and cloud wallet.

• 1:31:31David Rosenthal?

  Exactly.

• 1:31:32Ben Gilbert?

  This is the innovation that it will make some people who are sort of true believers in Bitcoin, who are sort of part of the initial movement, it makes their skin crawl because it is ruining the decentralization. But what they're basically doing with a cloud wallet is saying, "Look, you're going to buy your Bitcoin from us. You're not going to take your own custody of it." Because like, you don't want to be in the business of having Bitcoin on your hard drive, secured by your own public-private key pair that you manage, be responsible for backing up that drive somewhere, but making sure you don't make too many copies of your private key to exploit. Like, you don't want to be responsible for all that. What you should do is just, the same way you manage any other username and password, you let us maintain your public-private key pair. Effectively, it lives in our cloud,

• 1:32:17Ben Gilbert?

  on our servers, and you log in with a username and password, and you do two FA and all the stuff that you trust. But like, we have custody of your money. It's kind of like a bank.

• 1:32:28David Rosenthal?

  Or maybe more like a bank or like a brokerage firm, like Charles Schwab. Like, you don't hold your stock certificates that you have in Schwab or Vanguard or whatever. They do, but then you don't have to deal with the complexity.

• 1:32:42Ben Gilbert?

  It's a little compromise, but it makes it way more accessible to way more people.

• 1:32:46David Rosenthal?

  And obviously, just like, you know, if you're a hedge fund, you're not going to use Schwab. You're going to do all that yourself. If you're a... Big player in crypto, whether you're an institution or otherwise, you're going to have your own wallets, you're going to do it yourself, you're going to cut up your, you know, print out your private keys, you're going to cut them up and they store pieces of those keys in safe deposit boxes all over the world, you know, that kind of stuff. But the average user, you and me, we're not going to do that.

• 1:33:13Ben Gilbert?

  Not to mention, it's a bearer asset, so you don't want to keep it on you. Like if, if, you know, I don't hold a lot of Bitcoin, but I could imagine like if I did, I wouldn't want to be broadcasting like, yep, but I've got it right here on my computer with me. You know, it's a, it's something where you want, you want the asset to live kind of at an arm's length from you personally.

• 1:33:29David Rosenthal?

  This is how the feds seized all the Bitcoin from DPR when they raided Silk Road. It was just there on his computer.

• 1:33:37Ben Gilbert?

  Makes sense. It's, it's effectively like walking around with a, you know, millions of dollars in cash lining your jacket pockets. Like you want to keep that somewhere else.

• 1:33:47David Rosenthal?

  Yeah, totally. And not just under your mattress. So Coinbase does YC, summer of 2012. They raise a seed from initialized and angels right afterwards. Then they raise an A from Union Square Ventures, then they raise a B from Andreessen. They start building all of this infrastructure, making it secure. Now they're huge. This is great for the ecosystem. The other really interesting story, so Coinbase is, is basically like, you know, they have Coinbase Pro now and institutions use it too, but like it, it makes it retail accessible to, you know, like just like Schwab, just like Vanguard, et cetera, or a bank.

• 1:34:26Ben Gilbert?

  Robin Hood-ification of crypto.

• 1:34:28David Rosenthal?

  Exactly. And of course now you can do trade crypto in Robin Hood itself too, and in Square. And then like, all right, so Coinbase is sort of attacking the retail side, if you will, of people interested in crypto. There's an even bigger prize out there though, that people start to realize, which is, you know, getting the retail customers, that's great. But what if you can get institutions, as this becomes an asset class, you're going to start to have hedge funds, endowments, company balance sheets themselves, large pools of capital are going to be interested in also playing in this ecosystem. Well, what, what kind of infrastructure do we need to make that happen? And that looks actually pretty different than just retail

• 1:35:12David Rosenthal?

  infrastructure. So here is where the story takes another just incredible turn. I don't know where you're going with this. Remember I said the social network would come back Oh, yes, I do. Into play here. The Winklevoss twins. It's been so fun to like, read about this and I've gone and watched a few videos with them. My opinion has completely changed from doing this research. So of course, people probably know the story of the Winklevosses as part of the origin of Facebook and the social network and that they're two twins who were a few years ahead of Mark Zuckerberg at Harvard. And they had had the idea for what became Facebook and hired Mark to be a developer

• 1:35:54David Rosenthal?

  for them to help build it. And then allegedly Mark had said, hey, this is actually a really good idea. I'm just gonna go do it myself. There was a big lawsuit about this. They sued Mark in 2004. It was eventually settled in 2008 for $65 million settlement payment from Mark. That's a nice down payment on some Bitcoin. Well, here's where the story gets really interesting. So at the time, everybody thought, this is crazy. Like, you know, it's the line from the social network. If you'd invented Facebook, you would have invented Facebook. Ideas are cheap. Execution is everything. These guys are crazy. They don't know what they're talking about. Maybe that's true, but these guys are also really smart. So when the settlement happened, $20 million of the settlement went to legal fees. Whoa.

• 1:36:39David Rosenthal?

  So they got $45 million before taxes. And everybody's like, this is great. You're gonna be set up for life, etc. They were rowers. They actually participated in the 2012 Olympics. You guys can just go be athletes. They said, no, we don't want the money in cash. We're gonna take the money in Facebook stock. Oh, I didn't realize that. So they took all $45 million in 2008 Facebook stock. There's this great quote on this. Cameron says in a New York Times article, "The lawyers thought we were crazy for taking the money in Facebook stock. We thought they were crazy for taking their 20 million in cash."

• 1:37:17David Rosenthal?

  The stock that they get by the time Facebook goes public in 2012 is worth around $300 million. And in the interim, in the previous four years, they moved to the UK because the 2012 Olympics were in London. So they come back in 2012. Facebook's gone public. They're worth $300 million. And the story is that they're on vacation in Spain after the Olympics and they meet a guy there from the US who starts telling them about Bitcoin, still really early. Coinbase was just going through YC at this point in time. And Cameron and Tyler, as they start to learn about it and think about it, they realize like, holy crap, this is money with

• 1:38:02David Rosenthal?

  network effects. So they go all in on Bitcoin. They don't put the whole $300 million in. That would have been like the whole market cap of Bitcoin itself at the time. But they start buying Bitcoin in summer 2012 at about $10 a Bitcoin. They end up accumulating well over 100,000 Bitcoins that cost them under $10 million. And it was 1% of all Bitcoin outstanding at the time. Wow. Totally incredible. They say, what if we build an exchange specifically for institutions? Let Coinbase have retail. So they start and fund an exchange called Gemini, which still

• 1:38:44David Rosenthal?

  exists today, with the whole target of being certified by regulators for institutions. They end up getting a license from New York State regulators that allows them to be a custodian for regulated asset managers and banks that no other exchange at the time had. And then a few years later in 2017, when the Chicago Board of Exchange launched Bitcoin futures on the CBOE, which was a huge moment, a big part of the run up of Bitcoin in 2017, it was actually Gemini that was settling all the futures on the exchange. Crazy. So, super interesting. I mean, thank God that like Coinbase, Gemini, there were

• 1:39:22David Rosenthal?

  others out there as well who saw like, hey, the future is bright for Bitcoin if we can start to build some real institutions that work with regulators that people can trust and are going to be legal. Otherwise, everything's going to go down in flames with Mt. Gox. So through all this, Bitcoin as a... Asset keeps growing with an insane amount of volatility, of course, which still continues to this day.

• 1:39:52Ben Gilbert?

  Bubble after bubble after bubble and, you know, pop, pop, pop.

• 1:39:55David Rosenthal?

  Yep. But with each bubble, it keeps going higher and then the new floor price resets higher. 2012, the price started at $5.27 per Bitcoin. By the end of the year, it's at $13.30. And then 2013, this was the huge breakout year. So even despite Mt. Gox and Silk Road and everything going down the tubes, started the year at just over $13, as we said. By the end of 2013, January 1st, 2014, Bitcoin is at $770 per Bitcoin exchange rate. That is some serious appreciation in just one year.

• 1:40:34Ben Gilbert?

  Yep. And then I think even after that, then fell down to like 200 or something like that was the next.

• 1:40:39David Rosenthal?

  So then when Mt. Gox finally disappeared and those three quarters of a million plus Bitcoins disappeared, that was a huge hit to the system. Price fell down to about $300. And then 2015 mostly stayed in that sort of three, four or $500 range. By 2016, though, all this infrastructure is starting to come online. Coinbase has raised a lot of money, lots of accounts being created. They're seeing very high trading and exchange volumes. Same with Gemini, same with other exchanges. By the end of 2016, the price hits $998 per Bitcoin. So just a hair under $1,000 of Bitcoin. I mean, this is now the beginning of 2017.

• 1:41:21David Rosenthal?

  What was it, six years earlier? You could barely buy a pizza for 10,000 Bitcoin?

• 1:41:27Ben Gilbert?

  Yeah, it's totally fascinating to think about. You know, I keep referencing this 3 million X, the number that we've talked about. The initial 35,000 X was in the first five years, making it to 350 bucks in 2015. And in the five years since, it's actually only, only, only been an 85 X. So it's like, compounding math is funny that way, where if you, if you can buy in at that incredibly low cost basis where they, you know, started at one cent or sub one cent, a lot of that sort of multiple happens in those early years, well before it even hits $1,000 of Bitcoin.

• 1:42:01David Rosenthal?

  Well, what's so cool is that like, this is exactly how the venture capital markets work, right? Like, it's the early-stage investments that you can generate those huge, huge, multiple returns. But you can't put that many dollars to work in the early-stage investments. So like, you'll generate, you know, Sequoia has figured this out, and so many other of the big firms, you put dollars to work early, you get huge multiples on those dollars, but then you keep putting dollars to work in subsequent rounds as companies grow, get proven more, and the TAM expands, and the market for you to be able to put those dollars to work expands. And so like, it's not just that you want to get the 3

• 1:42:42David Rosenthal?

  million X on your first dollars, you also want to get the 85 X on a lot bigger base that you're putting in later.

• 1:42:50Ben Gilbert?

  Yeah, it's interesting. I mean, it's also, it's just especially interesting, it's a little bit of like, as we'll get into the analysis later, I think we'll, we'll see how crazy this is, but it's strange comparing all these companies, all these corporate assets to a monetary asset, because it's not apples to apples in the way that we normally think about these types of investments. Like, this is a currency. The idea is that it's eventually going to be just a way that we store and transfer value. So it's, it's just funny that like, everything we've talked about so far is about growing the value of each fraction of the Bitcoin network, a Bitcoin.

• 1:43:25David Rosenthal?

  Yep. But this is the moment where things kind of tip.

• 1:43:30Ben Gilbert?

  Bitcoin mania begins.

• 1:43:32David Rosenthal?

  In 2017. Holy crap. January 1, 2017, we're at $998 a share. People are like, $1,000 Bitcoin, there's some real money here. And what does that attract? That attracts grifters. So people had already launched other crypto projects over the previous, you know, six, seven years. Ethereum launched in 2015. There were others, there were, of course, we referenced all the altcoins and parody coins.

• 1:44:02Ben Gilbert?

  So much to say about Ethereum here, about DeFi, about a lot of the more modern takes using the blockchain, using cryptocurrency outside the scope of this episode. But, you know, obviously, those things are interesting.

• 1:44:13David Rosenthal?

  Yep. We will definitely talk about those in the future. But in 2017, people realized like, man, this is a money machine. So in May, folks may know, folks may use, it's a real company, real project, the Brave web browser, uh, which is a privacy by default, you know, non-tracking web browser. They launch, instead of raising venture capital in a normal route, they do this thing that they call an initial coin offering, which is the same thing that Ethereum did. You know, anytime you're starting a new blockchain-based project, you have a, a launch, just like Satoshi mined the first 50 Bitcoins

• 1:44:56David Rosenthal?

  to bootstrap up the Bitcoin network. Well, Brave sells the initial tokens and they market it and they have a white paper and all this stuff. And people go nuts. They raised $35 million from this ICO in 30 seconds.

• 1:45:15Ben Gilbert?

  In fully non-dilutive capital.

• 1:45:16David Rosenthal?

  Fully non-dilutive capital. People start talking about like, this is the new way to raise money. This is the new way to start companies. VCs themselves go gaga. They're like, oh, wow, we're just going to invest in ICOs from now on.

• 1:45:31Ben Gilbert?

  It's like crowdfunding. You're raising money from your users. So all the incentives are aligned because as it increases, it's going to increase with the value of the product, blah, blah, blah.

• 1:45:41David Rosenthal?

  It's totally unregulated. So everybody and their mother, literally everybody and their mother has ICO in 2017. It's like the SPAC of 2017. DJ Khalid has an ICO. Paris Hilton has an ICO. Floyd Mayweather has an ICO. Like unclear what any of these projects are.

• 1:46:03Ben Gilbert?

  I was gonna say, what's, yeah, because the rationale for creating your own coin is that I'm creating, I think it were DAPs, right? Distributed applications, um, or are DAPs. But I'm creating a distributed application and it's going to have a network effect. And there's going to be a bunch of people that use it. So like literally the value of the pseudo virtual currency that you use on the platform will increase in value with more people using the Platform like in the abstract, it makes sense in the same way that in the abstract Bitcoin made sense. The difference is largely just in what actually then happened.

• 1:46:35David Rosenthal?

  Yeah, totally. So, and who was pumping up these things? So, you know, Bitcoin starts the year at $1,000. There are a lot of people out there who made a lot of money just holding or hodling, which we should hodl H O D L.

• 1:46:50Ben Gilbert?

  Is it a misspelling of hold or is it hold on for dear life?

• 1:46:55David Rosenthal?

  People have said both, but I think the original, it was a guy on a forum who during one of the bubble crashes for Bitcoin price was encouraging everybody to hold and not sell. And so he just typed too fast and said hodl.

• 1:47:07Ben Gilbert?

  It just, just becomes an internet meme like, uh, boom goes the dynamite or any other.

• 1:47:11David Rosenthal?

  Oh, I haven't heard that in so long. So good. So like, there are a lot of people that have just made all this money seemingly overnight to themselves in Bitcoin. They're like, okay, cool. These ICOs. Great. We'll pump the money into the ICOs.

• 1:47:27David Rosenthal?

  So by May, when the brave ICO happens, price of Bitcoin is doubled to $2,000 by the prevailing exchange rates USD. By September, it's $4,000. By the next month in October, it's $6,000. By November, it's $10,000. And by December 18th, 2017, we hit what many then later over the coming two years would believe would be the all time high, $19,783.06 per Bitcoin. Unreal. $20,000 per Bitcoin.

• 1:48:06Ben Gilbert?

  Yeah.

• 1:48:06David Rosenthal?

  And so this is like.

• 1:48:09Ben Gilbert?

  For the record, I was very much in the camp at that point being at that point I was cashed out. I was like, I'm, I'm done with this mania. There's all ICOs. There's all these scammers, altcoins. Who knows what's going on?

• 1:48:20David Rosenthal?

  So many scammers.

• 1:48:21Ben Gilbert?

  And I definitely was like, this is totally inflated and the highest it will ever go. I definitively remember thinking that.

• 1:48:28David Rosenthal?

  I mean, it was, uh, I remember, I don't think. I had taken a little money off the table during the run up from, not that I had or have many Bitcoins, but from my experimentations, buying a few in the early days. So I'd taken some money off the table in the run up, but then after the crash, which happens in the beginning of 2018, I was like, eh, I don't know. I don't need the money. Whatever. It's an option. Let's see what happens. We'll just let it ride.

• 1:48:55Ben Gilbert?

  You let it ride.

• 1:48:55David Rosenthal?

  I let it ride. I huddled. I huddled.

• 1:48:59Ben Gilbert?

  All right. So catch us up. This January 2018, you know, we see this, this run up to near 20K. It falls. Clearly it has risen again. What's happened in the last couple of years?

• 1:49:09David Rosenthal?

  Okay. So over the course of 2018, it falls from 20K all the way down to under 4K. So at the end of 2018, by January 2019, Bitcoin is trading at just over $3,700, down 72% for all of 2018 and down 81% from the high in December 2017. But underneath all of that, and I think this is what as the hype, as the tide went out and the hype cycle disappeared and all of these scammers, thank God disappeared and ICOs became, thank God, a thing of the past.

• 1:49:42Ben Gilbert?

  And many of them prosecuted for fraud.

• 1:49:44David Rosenthal?

  Yeah, many of them. And the regulators got involved, of course, and VC firms regained their sanity and started investing in normal companies as well as normal companies doing things with crypto and Bitcoin and blockchain.

• 1:49:57Ben Gilbert?

  And some actually into cryptocurrencies themselves, but often a little bit more mainstream than, than into the ICOs.

• 1:50:05David Rosenthal?

  DCA coins.

• 1:50:06Ben Gilbert?

  Yeah, altcoins.

• 1:50:07David Rosenthal?

  So in the background, all of this, you know, the groundwork that Gemini and Coinbase and others started laying, that kept getting built over 2018, 2019. So in 2018, Square added the ability to buy, sell, trade and hold as a custodian crypto natively within the Square Cash app. Robinhood did the same within Robinhood in 2018 and then rolled that out, I think by 2019 to their entire user base. And so you get to the summer of 2019 and Bitcoin, which again had financed a lot of this ICO boom, but from profits that

• 1:50:48David Rosenthal?

  people had made in Bitcoin, but was totally unrelated. The prices recovered to about $13,000 per Bitcoin by summer 2019 and things continue roughly in that trajectory. And then

• 1:51:01David Rosenthal?

  We get to March 2020 and the world changes.

• 1:51:06Ben Gilbert?

  All the people who have been screaming for the last five plus years that this is an uncorrelated asset and boy, oh, boy, would it be nice to own some currency that's not fiat, that's not connected to a single government. If we head into a, you know, if we have a black swan event that happens and the world is falling apart, you don't want to be associated with any specific government and you want to have currency that is uncontroll- blah, blah, blah. Like, boy, is there an opportunity to prove you are right.

• 1:51:33David Rosenthal?

  Yes. Now, so here's what's crazy. So obviously COVID hits the broader world in, in March 2020. And when there's that initial dip in the markets and panic selling and everybody thinks the crash is happening and equity markets sell off, actually crypto and Bitcoin sells off too. So the price of Bitcoin crashes and on March 13th, 2020, remember it had been trading around 13, $14,000 per Bitcoin. It crashes down below 4,000, which is crazy. So it's the exact opposite of Ben, what you were saying, what you would think like, hey, I want to own Bitcoin when the world's falling apart.

• 1:52:10Ben Gilbert?

  Dude, I remember watching that and like, oh, looking at the S and P 500 overlaid with the price of Bitcoin. And I was like, huh, it's a pretty correlated asset class.

• 1:52:21David Rosenthal?

  And of course, now we know with hindsight, what was actually going on was there was a liquidity run and people who were holding Bitcoin were also holding other things. They had obligations and then as all the markets crashed, they needed liquidity to be able to pay off other things. And so I think that's what triggered a lot of selling at that moment. But since, just like the equity markets, it recovers quickly and just starts taking off. And then Ben, like you were saying, so the Fed and the US government in response to COVID just starts printing money like crazy, like has never been done in our country ever before, like World War II, any other time. So during 2020, literally 22% of all

• 1:53:05David Rosenthal?

  of the US dollars in circulation all around the world are created in 2020. The debt to GDP ratio of the US goes from, I think it was, I don't remember exactly, somewhere like 60, 70% to 135% over the course of 2020. And this is of course financing.

• 1:53:25David Rosenthal?

  All the stimulus packages and all the spending that the government is doing without the revenue to back it up.

• 1:53:30Ben Gilbert?

  And of course, we're meanwhile, we're in a zero interest rate environment. Yeah. So there's sort of two things that are happening in order to do the economic stimulus. One, the government is using tax dollars to pump money back into the economy, you know, paying people and implementing programs.

• 1:53:45David Rosenthal?

  Not tax dollars, they're creating dollars to do that.

• 1:53:48Ben Gilbert?

  But they're doing both. It's tax dollar allocations and the Fed is printing more money. And so they're putting more dramatically more money into circulation, which one way to think about this for, I spent a bunch of time trying to figure out like, what's the best way for me to understand this? Cause I always feel like if I can understand it, then it's a pretty good proxy for everyone listening. And my sort of notion of it, and I'm sure this is not exactly right, is if you're a shareholder in a private company and you go raise more money, well, you take a bunch of dilution, usually 15 to 30% dilution, because you're creating new shares for the shareholders. We were effectively saying, hey, everyone with dollars, you're going to go take 20% dilution in 2020.

• 1:54:28Ben Gilbert?

  Your, your dollar is going to buy you, just going to have less purchasing power because there's more dollars in circulation right now. Just so that, so that there's more dollars to go around, which of course is.

• 1:54:37David Rosenthal?

  It takes a while for that to percolate through the system that you actually see 20% higher prices, but eventually that will come home to roost.

• 1:54:44Ben Gilbert?

  Yeah. So I don't think either David or I are a smart enough macroeconomist type people to be able to interpret we're in a zero interest rate environment. The government printed a bunch of money into the money supply. We did away with the requirement that banks hold 10% of, of capital in reserve that they're, they're loaning out. Yeah. Like there's a lot of, but I don't think you or I should be here.

• 1:55:09David Rosenthal?

  No, but I think what we are maybe not smart enough, but what we're enough to feel that we feel certainly influenced my actions, actions of many investors and people all around the world, probably yours too, is. The effects of this, which is interest rates go to zero. So all the money that I was holding in my bank account, that anyone was holding in their bank account, earning interest on, it was already really low and had been since 2008. Now it's zero. Like, I was getting emails every two weeks from my bank being like,

• 1:55:37Ben Gilbert?

  Hey, we've lowered the-

• 1:55:38David Rosenthal?

  Hey, we cut your interest rate again.

• 1:55:39Ben Gilbert?

  Yep, exactly.

• 1:55:40David Rosenthal?

  And so what incentive does that create? That creates an incentive to just not hold cash. Like if you want, or and not hold bonds either. Like anything that's traditionally relatively conservative investments that as an individual or an institution, you would hold and expect to get three, four, or 5% return on. You're just, you're not getting it. You're getting zero and inflation's happening. So you're getting less than zero. Well, so what does that mean? That put, it's like a balloon. You're squeezing one end. You're just going to push people to go invest in places where they can get return. And where's that going to be? That's going to be equities and Bitcoin.

• 1:56:22Ben Gilbert?

  And specifically tech equities and specifically, specifically early-stage tech equities that people hope are going to look one day like Amazon. So that, that's like what's happening in the equity markets and of course, alternative assets like Bitcoin. And so you sort of have the coupling of people, you know, capital desperately seeking returns. So it's, it's, there's more capital ever that's looking into and taking things like cryptocurrencies seriously. And also people really buying the story of, wait, tell me about the fundamentals of how the Bitcoin system works again. Huh, that actually does seem more and more reasonable. And huh, all these other people are, are into it. Okay. Oh, and a lot of legit people have, have parked a lot of cap. Okay. And so there's

• 1:57:04Ben Gilbert?

  more and more legitimization of the asset class happening, more infrastructure being built up. And in the environment that we're in, which one could argue is starting to show the cracks of what happens in quantitative easing, what happens in zero interest rate environments, what happens in, you know, not having hard requirements about fractional reserve banking. Like you actually start to see the way that the Bitcoin system was designed to fix- All of that, like, hey, we can't increase the money supply. It is what it's going to be at 21 million. And, you know, hey, there is no Fed, like, there is no centralized, you know, place that you have to have trust in that they're going to effectively manage it.

• 1:57:45Ben Gilbert?

  A lot of these ideas just become more appealing at the same time as there's more capital seeking more returns. So it's this, like, perfect storm of the conditions created, people rushing into cryptocurrencies.

• 1:57:57David Rosenthal?

  And?

• 1:57:58Ben Gilbert?

  And specifically Bitcoin.

• 1:57:59David Rosenthal?

  Well, specifically Bitcoin, but also specifically institutions this time. So like all the bubbles in the past, it was individuals, it was retail, maybe it was some venture firms, maybe it was the Winklevii who were buying Bitcoin. But now enough infrastructure has been laid through exchange traded funds, which now exist like Grayscale, through Bitcoin futures, through custodians like Gemini and Coinbase Pro, that if you're a hedge fund, or if you're a bank, or if you're an endowment, or if you're a company treasury, you actually maybe can access Bitcoin. So in May of 2020, Paul Tudor Jones, the famous investor who runs a, I think, a $22, $23 billion hedge fund,

• 1:58:44David Rosenthal?

  he goes on CNBC and he says, hey, I actually have between 1% and 2% of my fund's assets in Bitcoin. And at a $22 billion fund, that's $200 million worth of Bitcoin that had just come into this. Investor money, yeah, not his money, it's fund money that has just come into Bitcoin. Then in August of 2020, MicroStrategy, which is a publicly traded investment firm, they reveal that they have $250 million in Bitcoin. Not just that they've invested in Bitcoin, but they're classifying it as a treasury reserve asset on their balance sheet.

• 1:59:23David Rosenthal?

  So not like an equity speculative investor, this is like, no, like, we're classifying this like a cash, yeah, like in our treasury. Then in August, Square, which of course has been part of the crypto and Bitcoin community for a long time, they put about 1% of their cash and cash equivalents on their balance sheet, on their treasury, into Bitcoin, about 50 million. So they're the first, like, operating. Company that is now saying, we're going to have part of our cash in our treasury that we're going to hold in Bitcoin.

• 1:59:57Ben Gilbert?

  Also, their rationale for why they did that and how they executed the trade is really well documented. They wrote it up. We'll link to it in our sources. It's worth reading that, that post. I think it's PDF if, if anyone's interested.

• 2:00:09David Rosenthal?

  And then the last big announcement in November, Guggenheim, which is a very large asset manager, I think they have about 200, 300 billion in total across all of their vehicles. One of their funds, which is a $5 billion fund, they register with the SEC to be able to invest up to 10% of the fund, so up to $500 million in Bitcoin via exchange traded funds by doing that. So what's the net of this? So you've got even just across those, those transactions, which we mentioned, which are ones that are public, there's plenty more I'm sure that we don't even know about where managers haven't disclosed their holdings.

• 2:00:51David Rosenthal?

  You've got close to a billion dollars of inflows flowing in to this asset class. It's not a super thickly traded asset class, right? Like the market cap for all of Bitcoin as we're running up here is in the

• 2:01:07Ben Gilbert?

  650 billion.

• 2:01:09David Rosenthal?

  Right. That's at today's prices. But as these transactions are happening, you know, it was probably ranging from 1 to 300 billion.

• 2:01:18Ben Gilbert?

  Right. And keep in mind, only, only three-ish billion of the 21 billion coins that ever will be, you know, so there's 21 million total. There's something like 16 million have been mined so far, maybe a little bit more.

• 2:01:31David Rosenthal?

  A little more, I think.

• 2:01:32Ben Gilbert?

  But only 3 million of those are actually ones that are traded. The rest are held long-term, lost, whatever.

• 2:01:39David Rosenthal?

  The Silk Road coins, the Mt. Gox coins, the Satoshi coins, you know, there's a whole swath of millions of coins that are just gone. They can't trade. Then you've got all the coins like that people don't want to trade, you know, that they're holding, like, yeah, I'm not going to sell those.

• 2:01:54Ben Gilbert?

  Why would you use this thing as currency right now when it's inflating so much? Like when it's, when it's appreciating so So much. It's like you'd have to be out of your, you understand the Hodler mindset, which of course also, which we haven't talked about yet, and I think we'll get into an analysis. Like you can't really spend your Bitcoin at any retailers, but of course you can't because who is going to spend these things right now?

• 2:02:14David Rosenthal?

  Right. Because, so as, you know, what is price? It's the intersection of supply and demand. You've got these huge new chunks of demand, like blocks of demand sizes that have never been seen before in the asset class, you know, 100 million, 200 million dollars at a time that want to come in and buy. You've got not a lot of supply willing to sell. Of course, the price is going to go through the roof. So that's what happens.

• 2:02:39Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 2:02:52David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 2:03:09Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 2:03:24David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 2:03:48Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 2:04:07David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 2:04:37Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you. Well, David, as we catch up today, I want to point out, there's one institutional firm, Paradigm, that is co-founded by, I think it's Fred Ersham and Matt Huang. Matt, of course, is former Sequoia partner, Fred of Coinbase co-founder, definitely the president.

• 2:05:18David Rosenthal?

  Yeah, he was Brian's co-founder. The two of them co-founded it.

• 2:05:20Ben Gilbert?

  And so Matt had made this really great point. If I could tell you to do things to follow up, one is obviously the Bitcoin white paper remarkably cogent. The other is actually reading Matt's piece about sort of his summary of Bitcoin. It's at paradigm.xyz and sort of like why we're doing what we're doing, why we think it's interesting, what the trade-offs are, what the, where it could go wrong, where it could go right, really cogent analysis. But one of the things he points out is, of course Bitcoin has these bubbles, but as David mentioned, every time they pop, it sort of plateaus at a higher level than the previous bubble. And because Bitcoin requires this network effect to be valuable, for it is a self-fulfilling prophecy

• 2:06:02Ben Gilbert?

  in a lot of ways, it actually uses bubbles as a go-to-market strategy, where every time there's a run-up, there's more and more legitimate players and more and more institutional capital that sort of pile in, more infrastructure gets built up, and then when the bubble Pops and you sort of have a lot of the the sort of late coming speculators that of course lose money. What is left there is all that infrastructure and all that advancement that was made from the mania and the hype. And it's just really interesting to see that really is a go to market strategy.

• 2:06:35David Rosenthal?

  Well, and what's so interesting about this time and unique and we're already seeing this play out in how the price has risen, fallen, and then stabilized over the past couple of weeks is in previous bubbles, it was mostly individuals who are doing this, who are subject, of course, to individual psychological behaviors and like price crashes, like lots of people are gonna sell. Lots of people huddle, but lots of people will sell too. This time, the demand, the big chunks of demand that's driving up the price, like this is Square's balance sheet. This is a micro strategy, holding this as a treasury

• 2:07:14David Rosenthal?

  reserve. They're not gonna sell. Like, they're investing purposefully as treasury and as diversification. The price crashes 50%, 70%, like what, they're not gonna sell. They're institutions. And so, part of the thinking here is that as we now move and shift into this new phase of Bitcoin where institutions are playing within it, there's gonna be a lot more stability. So what's happened with the price over the last month or so? So, we went from, we went from 3,700 in March during the COVID liquidity crash, to by the end of

• 2:07:52David Rosenthal?

  November, Bitcoin surpasses that all time high of December 2017, hits $19,860 in November. And then by the end of December, by the end of 2020, on New Year's Eve, we're sitting at $29,000 for a Bitcoin, which is insane. Another $10,000 in a month. It doesn't stop. The first week in January, which was last week, even though it feels like last month. It hits 40, 40K, four zero. Ultimately, the price goes all the way up to $42,000 per Bitcoin before coming back down, again, several days ago, over the last weekend, even though it feels like a month ago,

• 2:08:37David Rosenthal?

  coming back down to a low of about $30,000. So the crash, quote unquote, we could have another crash, like, we don't know. But this crash is still $10,000 above the previous high.

• 2:08:51Ben Gilbert?

  And is now trading right around 35,000.

• 2:08:53David Rosenthal?

  Right, which it has for the last several days. So by, by crypto timelines, at least, by Bitcoin timelines, it's stabilized super quickly at this sort of 34, 35,000 dollar price. This is very different than the way these bubbles and crashes played out before.

• 2:09:11Ben Gilbert?

  By the time we release this episode, we could be at Bitcoin 15K, but.

• 2:09:15David Rosenthal?

  Right, could be at 3K, could be at 100K, you know, we don't know, we may look stupid. But I do think it's really interesting that you have different motivations this time of large blocks of capital that are coming in.

• 2:09:27Ben Gilbert?

  Yep, for sure. Okay, before we, we transition to, to analysis, there's like a couple of like today's stats that I think are just sort of interesting because I continue to be interested in comparing Bitcoin to a company, to a currency, to like assets under management. So this $35,000 a coin price implies a market cap of $650 billion. Well, let's contextualize that $650 billion. So the total consolidated assets of JP Morgan Chase, the largest bank in the United States, is 3 trillion.

• 2:10:07Ben Gilbert?

  So that's about five times all the Bitcoin out there is like at JP Morgan alone, from people who have, who bank with them is five times bigger. Sort of an interesting number to keep in mind. I think Bitcoin, if you were to, if you, it's actually pretty interesting. You go to the Federal Reserve's website and just look at like, what's, what are all the settled accounts? Like, not within each bank, but at each bank, how much money do? Each does each bank in the US with a bank charter have on hand or in under their custodian? Interesting. Actually, not on hand, specifically like how much do they are they a custodian for? So I think Bitcoin would be like the fifth or sixth largest institution on that list.

• 2:10:49Ben Gilbert?

  If it were a bank that was regulated by the Fed, which is kind of interesting. It's also interesting just to compare it to like the market cap of Apple is 2.2 trillion. So four ish times as as big as Bitcoin is, if you want to think about it sort of like, how valuable is it versus the most valuable company in the world? Another sort of interesting number to think about it, especially as later we will start thinking about, what is, what is the TAM for for Bitcoin? What's its total addressable opportunity? Not necessarily for a coin individually, but like for what could all of Bitcoin represent to the world at some point in total? And then because we know it caps out at 21 million, you actually can kind of do the math and be like,

• 2:11:33Ben Gilbert?

  all right, what would the coin value be at that point? So the total money supply of US dollars is about 20 trillion. David, as you mentioned, it was about 15 trillion in January of 2020, so it's it's gone up quite a bit recently. But but again, like Bitcoin about halfway to 1 trillion, compare it to the US money supply over 20 trillion. Another interesting number to know is that the total money supply of all global currency is about 70 trillion. So there's this interesting or was, I think it's gone up a little bit. So it's sort of interesting to think about like, you know, if you're someone who believes that it's going to overtake all currencies, then you can sort of look at that 70 billion number. If you think it's just going to be a sort of asset that gets held in compare like like it's a part of a portfolio.

• 2:12:18Ben Gilbert?

  You know, a lot of people are likening it to gold. It's interesting. About nine trillion. Nine trillion, about about half of it actually is in jewelry. So you're not going to replace like no one's going to have, actually, there is some Bitcoin jewelry. Tell that to Coin Daddy.

• 2:12:33Ben Gilbert?

  Yeah, but it is interesting to look at like, okay, there's about four and a half trillion dollars of gold out there not used in jewelry. It could sort of usurp that. It's kind of digital gold, which, you know, we'll get into all this as we transition to analysis here, but sort of interesting to understand the scale of it in today's world.

• 2:12:51David Rosenthal?

  Yeah, crazy. I mean, it's come a long way from the white paper. Like, this is such an improbable journey, you know, white paper to Papa John's, to Silk Road, to Magic the Gathering, to the Winklevoss Twins, to, you know, to Guggenheim investing in it, right? This is all within 12 years.

• 2:13:18Ben Gilbert?

  Yeah, I mean, it's an improbable story, but you sort of needed all these different factions and all these different vested interests and all these different true believers versus opportunists to sort of push it forward to where it is today. All right, power?

• 2:13:32David Rosenthal?

  Yeah, let's do it.

• 2:13:33Ben Gilbert?

  And listeners, for anyone new to the show, this is a section that we put in based on one of our favorite books called Seven Powers, which is a study of how businesses can achieve persistent differential returns, or put another way, to be more profitable than their closest competitor on a sustainable basis. And so what we mean by power here is what, what is the thing normally of a business, in this case of a currency or a new money system, that, that basically allows them to outcompete their closest competitors and gives the business, for lack of a better word, power?

• 2:14:06David Rosenthal?

  Yep. And this is gonna be so fun, because I think there are a bunch that Bitcoin has, like, a whole bunch. The obvious one that we've been banging the drum on through the whole episode, and is probably the most powerful, is network economies, I think.

• 2:14:20Ben Gilbert?

  In particular, versus other cryptocurrencies, like, nothing, Ethereum is the only one that stands a chance, and it just kind of has a different use case that's really more around the, the smart contracts and compute that's sort of built into it. But for, for sure, like, you can't start anything that looks like Bitcoin now and have any chance of beating it. Like, it's in the same way that Facebook just outran any other consumer social network, consumer social entertainment type app, and then was obviously very smart in acquiring those who did get scale. Like, Bitcoin just leapt ahead at the beginning of this paradigm.

• 2:14:54David Rosenthal?

  And I think what's cool is it even applies at the technical level too, with this idea of like the amount of computing power going into that has gone into maintaining and making robust the Bitcoin network over time is itself a compounding asset, right? Like, because the more power that goes in over time, the harder it is to crack.

• 2:15:18Ben Gilbert?

  To undo.

• 2:15:19David Rosenthal?

  Yeah, you can't, there is no supercomputer that could conceivably ever be created that is going to, as long as the Bitcoin economy, like a miners keep working, that is going to be able to go back and like redo everything and that lead just keeps getting wider and wider and wider.

• 2:15:37Ben Gilbert?

  Certainly not really old things in the blockchain, but you know, there's always the risk on the newer ones, things that are only two or three blocks behind. And unless there's a paradigm change, like unless quantum computing arrives and suddenly you have, you know, 10 million X more compute than we did in the past on a single core or something like that.

• 2:15:58David Rosenthal?

  Well, this is also where network economies come into play and Satoshi actually makes this point in the original white paper. Like, let's say that happens, as long though as the network is big enough and robust enough at that point, the value of legitimate, keeping the the system legitimate, like say you already own Bitcoin.

• 2:16:15Ben Gilbert?

  That's a great point.

• 2:16:16David Rosenthal?

  If you already own Bitcoin, then your incentivized interest is not to break the system. Because if you hack it, then people lose trust and then the value of the Bitcoins that you already hold, which presumably if you're a miner, you've already been mining, they go down. And so even if you could create more fake Bitcoins for yourself, you have this massive disincentive to do that.

• 2:16:41Ben Gilbert?

  Yeah.

• 2:16:42David Rosenthal?

  As more people join the system.

• 2:16:43Ben Gilbert?

  Yeah, it's a great point. And if the other thing that the system is designed to do is to provide enough incentive, and of course, they they rebalance this over time, but it provide enough incentive to the miners that if they were to make a call between being a malicious actor and mining, they should make it worth your time to to mine, to be white hat. And so if you had access to a quantum computer, they would adjust the software such that it would make more sense for you to mine than it would to attack. Of course, caveats abound here that David and I don't know jack about quantum computing, except that maybe it'll be a big leap forward in the amount of compute per square inch, or per square watt, or whatever. Square watt's not a thing, obviously, but, you know, per unit. So, network economies, absolutely. One that I wanted to bring up that I think is interesting

• 2:17:28Ben Gilbert?

  is it's counter positioned, but not against other cryptocurrencies. It's counter positioned versus the US dollar, where the definition of counter positioning, you know, of course, with my editorial here, is doing something that your, that incumbents basically can't, because they would-

• 2:17:46David Rosenthal?

  It would break, break their system.

• 2:17:47Ben Gilbert?

  Yes. And like, there is no better example than, than the US dollar. Like, if the Fed was like, Bitcoin's a really good idea, and they, they felt like, actually, that's the future. They cannot, the Fed's centralized infrastructure and the US banking system, like, the notion of the central federal bank, or the Federal Reserve, like, it is completely antithetical to everything that Bitcoin stands for. Like, our monetary supply and our entire banking system exists in a coupled, very intentionally coupled manner with our government. And so, it's not like it would ever be in the US government's interest to be like, you're right, a decentralized thing would be the way to go, because it removes so much of

• 2:18:31Ben Gilbert?

  the power of the, the US government, frankly, the US as a nation.

• 2:18:36David Rosenthal?

  Yep. Well, and, just like, network economies, I think there's another level that, that counter positioning applies at too, which isn't just the US dollar, it's at the financial system itself. Like, we started the episode with, you know, the way banks work, and the way credit card companies work, the way traditional financial institutions work, is based on this, you know, number, bank account number, credit card number, system. They can't go back and change that and make it into a public-private key thing. Like, the best that they can do-

• 2:19:11Ben Gilbert?

  I sort of, I think they could.

• 2:19:13David Rosenthal?

  Well, they could, but all those, like- ACH, like, are you gonna have, how are you gonna coordinate every bank out there in, that talks to every other bank to now all of a sudden-

• 2:19:24Ben Gilbert?

  Federal mandate, in the same way that we moved to chip and pin.

• 2:19:27David Rosenthal?

  That's true, that's true.

• 2:19:28Ben Gilbert?

  They could, they could adopt a superior and more secure technology if there was enough of an incentive to do so, but they could not change their centralization versus decentralization strategy because, like, to bring in another sort of mental model, the US government has, and all governments who have fiat currency have bundled the sort of like safety, security, and like amount of normalcy or normality of the nation with money. And like, when people say the US dollar is backed with the full faith of the US government, like, that, that is literally true. It is legal tender. Like, at some point, if you're like, conducting business on a large scale, and the government's

• 2:20:12Ben Gilbert?

  like, can you accept US dollars, please? And you're like, no, like, they do have an army. So, they're, they're, they are intertwined intentionally, and it is strategic to be able to, to make it so that our economy runs on our government's currency. And that's been a strategy that's worked really well for a long time, and I don't think an existing government, who is the, the strongest nation in the world, can, like, there, it's literally the definition of counter positioning. They would cannibalize everything they've built by switching to a-

• 2:20:44David Rosenthal?

  What I'm talking about is more like, this would be hard for the traditional banking system to do, but it's not against their interests to do it. Whereas it's actually against-

• 2:20:54Ben Gilbert?

  Totally.

• 2:20:55David Rosenthal?

  The US dollar's interest to refashion itself like this.

• 2:20:58Ben Gilbert?

  Yep. It's funny, in this vein, one thing, that dilution idea I was talking about earlier, where I was comparing adding new money to the money supply to the sort of dilution of your shares in a company, I'm pretty sure that the vast majority of US dollars are actually held by- Non but like held outside the US by people that are using it as hey, this is like, this is the way that the world denominates value. It is the, I can't remember what the phrase is,

• 2:21:25David Rosenthal?

  but like Reserve currency, I think.

• 2:21:26Ben Gilbert?

  Yeah, yeah. And it's something like 70%. I don't quote me on that, but it's, it's, it's more than half is held outside the US. And so when we do things like print more money, it actually hurts everyone else more than it hurts us. And you can kind of do that to a certain extent. Obviously, if you do it too much, you create a huge problem and then you create this sort of hyperinflationary thing and people don't trust it as the global reserve currency anymore. But like, if you're like, you know what, I'm going to basically dilute everyone by 10%, and they're going to take the hit a lot more than we are.

• 2:21:55David Rosenthal?

  Right.

• 2:21:55Ben Gilbert?

  Like, that's what we're doing.

• 2:21:57David Rosenthal?

  That's actually a really good point where, yes, you're hurting your own citizens with inflation, but you're, you're also hurting these other countries that are whole, whose central banks are holding your paper, your dollars. That's something that like your own citizens, there's, there's kind of nothing you can do short of like moving to another country if you're a citizen and you don't like this. But if you're another country's central bank, at a certain point, you're going to be like, screw it, I'm going to use a different asset as my reserve currency. Like, you can make that choice.

• 2:22:29Ben Gilbert?

  Yeah. And, and unlike what, to roll back to that early Facebook example, when Zuckerberg did the Eduardo Savarin dilution move where he issued a crap ton of new shares to everyone except for Eduardo, they don't, you can't do that where like, you, you create a whole bunch of new money. I guess actually that's sort of what we're doing with the federal stimulus. Like, we create a bunch of new money and then we only give it to US citizens.

• 2:22:53David Rosenthal?

  That actually is.

• 2:22:54Ben Gilbert?

  You can only, you can only trot that pony out.

• 2:22:56David Rosenthal?

  Again.

• 2:22:57Ben Gilbert?

  Yeah. You can only trot that pony out so many times.

• 2:22:59David Rosenthal?

  Yep. Okay. I think there's some more in here.

• 2:23:02Ben Gilbert?

  It is a thousand percent a cornered resource. Like, there's a finite number of these things available. So like, it is written into the software and that it's, you're never going to increase the money supply. So like, it is quite literally a cornered resource.

• 2:23:15David Rosenthal?

  Well, it's cornered resource for people who own it. For the system itself.

• 2:23:21Ben Gilbert?

  Oh, that's a good point. It depends who the actor is that you're considering here.

• 2:23:24David Rosenthal?

  Certainly, though, for anybody who holds Bitcoin, like, absolutely. This is, uh, the fact that there is programmed in, you know, minimal to, you know, no inflation in the long term is an incredible, uh, source of value.

• 2:23:40Ben Gilbert?

  Not to mention, it's like the most secure system to ever exist, this public-private key pair thing. Think about Satoshi. You got a million and a half of these things and it's so secure that like people can't even log in to view their own, you know, because they're losing it. Like it's, you got it super cornered. It's not fleeing anywhere.

• 2:23:57David Rosenthal?

  So I, let's talk about, I want to explore scale economies. So I think there's scale economies here, but let's talk about it.

• 2:24:04Ben Gilbert?

  Yeah.

• 2:24:04David Rosenthal?

  So scale economies, of course, being like Netflix, like because Netflix has so many subscribers that they make so much monthly revenue from, they can go pay a hundred million dollars for a piece of content and amortize over it, it over all those subscribers that a smaller service, say like Peacock or whatever, can't afford to pay the same amount for that content profitably. In this case, I think it might apply to the mining pool resources. So like, if people are gonna mine, you could mine any cryptocurrency, right?

• 2:24:36Ben Gilbert?

  Ah, but yeah.

• 2:24:39David Rosenthal?

  There's gravity to Bitcoin, right?

• 2:24:40Ben Gilbert?

  People are gonna mine yours if they think it has the most potential future upside and staying power.

• 2:24:45David Rosenthal?

  Right. And because lots and lots of other people are mining and transacting, that's creating, well, maybe this is back to just network economies instead of scale economies. Certainly there is, uh, for, let's look at the mining industry itself. Certainly that is a scale economies industry. Now that's separate from the Bitcoin system, but if you want to be a miner.

• 2:25:08Ben Gilbert?

  Right. Like the only way you're doing it at this point is with dedicated hardware and a data center in a very special location.

• 2:25:13David Rosenthal?

  Exactly. Like you're, you're not doing it with a laptop.

• 2:25:17Ben Gilbert?

  Right. And, and it's because like so many people have, like a lot of the value has gotten arbitrage out of doing it by lots of other people trying to do it. And it's a race. Once you find a block, so you have to have the lowest cost structure in order to be a miner.

• 2:25:30David Rosenthal?

  Which is exactly like Netflix and, and the like. Okay. Uh, switching costs. What do we think about switching costs? You can exchange in and out of other currencies. So I think switching costs are actually pretty low.

• 2:25:44Ben Gilbert?

  Yeah.

• 2:25:44David Rosenthal?

  Even as a miner, you can, you can probably repurpose your mining gear to other currencies.

• 2:25:49Ben Gilbert?

  There's transaction costs to switching in and out of other currencies, but like as compared to like ripping out an enterprise SaaS solution in sort of the Hamiltonian definition of it, it's pretty low switching costs.

• 2:26:00David Rosenthal?

  I don't think there's process power in any sense here.

• 2:26:04Ben Gilbert?

  No.

• 2:26:05David Rosenthal?

  I think the last question is branding. Would you rather, say you had a thousand dollars to invest, would you rather, do you put that in Bitcoin because you know and trust Bitcoin versus something else?

• 2:26:18Ben Gilbert?

  I mean, I would, but it's because it's, it's, it's, it's more because of the network economies. It's because like, I, I feel like if there's going to be a dominant cryptocurrency that is a huge part of our global economy 20 years from now, it's going to be Bitcoin. And it's not because of the brand. Like it's not because it's, yeah.

• 2:26:37David Rosenthal?

  If something else had the same properties and dynamics and this network behind its system, and it were called something else, yeah, I don't think, I don't think there's any brand power there.

• 2:26:47Ben Gilbert?

  Yeah. I think the last thing, the last thing to talk about in, in power that I should have talked about when you were talking about network economies is again, going back to this comparison to the US dollar, government backed currency has an absolutely enormous head start on their network economy's power versus anything else. Like the government mandates that you pay your taxes in USD. So automatically it means that like every single person in the country must own some amount of USD in order to pay their taxes in it, or at least they have to.

• 2:27:21David Rosenthal?

  They have to use it.

• 2:27:22Ben Gilbert?

  Or maybe they're like accepting their wages in it. So money is flowing from literally every person in, in at least one direction in that currency. So like that lights up a bunch of nodes on the network. On the other hand, the government pays its debts or its bills. In that currency. So like it's getting paid out to every other country. It's getting paid out to every contractor and like the government contractor industry is actually like it's a large part of the US economy. I don't.

• 2:27:48David Rosenthal?

  Oh, totally. Oh, my mom's gonna be so happy listening to a government contractor lawyer, government contracts lawyer.

• 2:27:54Ben Gilbert?

  Oh, nice. Yeah, like it is. I don't know if I should be nice, but yeah, it is. It is a huge segment of our economy. The government is the customer. And so you like, it's incredible. Anything can ever compete with government backed currency, given how many nodes on the network are already by default dealing in government backed currency.

• 2:28:14David Rosenthal?

  That might be a good transition out of power into our next, our next section.

• 2:28:20Ben Gilbert?

  Yeah. So listeners, what would have happened otherwise is our, our next section. A lot of times we like to look at a specific event and wonder, you know, if it had gone in a different direction, we may do that here, but we want to adapt this section to basically say, like, let's compare this, let's compare all the weird ways that Bitcoin works to the normal fiat currency system to USD and, and sort of compare and contrast some of the elements. And the, the way that I sort of want to start is like, what, what is money? Like, what is the, the purpose of money? And now we're getting a little bit, I suppose, academic, but it is three things. It's a unit of accounts. So it's the way that we

• 2:29:05Ben Gilbert?

  basically say this thing is worth that much. Like when you look at, you know, a gallon of milk and you, in your head, it sort of occurs to you how much it costs. That's the unit of account. It's the way that you account for the world. It's a store of value. So, you know, I made some money. I put it in a savings account. That's denominated in cash. I'm going to come back and use that in the future. And it's a medium of exchange. It's the way that I buy apples at the market. And of course, then currency is sort of, in some ways, a subset of that. It is literally like money in the form of however you pay for it. So in the form of paper or coins generally issued by a government, things like that. And I bring this up because I want to talk about this phrase that people throw around in Bitcoin

• 2:29:47Ben Gilbert?

  bubble and that we've talked about on this show. So if someone were to say to me Bitcoin is a bubble, I would say for sure, like no, no doubt it's a bubble. Also, so is USD. It's just a really long bubble. Like, how would you define bubble? And I, again, I'm gonna, I'm gonna quote Matt Huang here from his, his memoir, because I think it's super good. His, his comment is, "We can think of money as a bubble that never pops, or at least hasn't popped yet. And the value of fiat currency, gold, or Bitcoin, is relying on collective belief. Other factors, like a government's power, the industrial utility of gold, or the robustness of Bitcoin's codebase can help reinforce this belief, but this belief is critical."

• 2:30:29Ben Gilbert?

  And I think there's something really interesting as we think about money or currency here. It's not like a stock, where, sure, you could say, like, oh, Tesla is a bubble, because it's, you know, relative to its current positive cash flows, or any reasonable future positive cash flows that it could have. Like, you could argue, like, ah, it's trading way, way too high above the sort of utility, or intrinsic value of what you're entitled to as a shareholder of that company. You know, and you're entitled to the future profits of it. Currency, definitionally, has no intrinsic value.

• 2:31:05David Rosenthal?

  Right.

• 2:31:05Ben Gilbert?

  Like, it literally, the only thing that gives it value is the collective belief that other people will continue to value it in the future.

• 2:31:13David Rosenthal?

  Right. Well, this is, you know, where you're getting to exceed our macroeconomic, academic, and history depth here quickly. But, yeah, this is the argument, like, before 1971, there was some argument about the US dollar, that it was pegged to gold, and that you, you know, you couldn't get as much gold as you could buy for a dollar if you turned in a dollar. But you could get some gold. Like, there was some thing. But then, after 1971, when Nixon signed that away, and the US went off the gold standard, yeah, it's just, it's no different than Bitcoin. Like, it's just, there is no tangible thing underneath it all, other than your belief in the robustness

• 2:31:56David Rosenthal?

  of the US government as a system. And hopefully, I think what we've laid out on this episode is that with Bitcoin, it is the same. You are believing in the robustness of Bitcoin as a system.

• 2:32:10Ben Gilbert?

  Yeah, it's a, it's really interesting. Like, you know, currency is anything that we're comfortable sort of using as this way of, again, the three points are a unit of account, a store of value, and a medium exchange. So like, most things actually are a pretty crappy form of currency. If you can rip a dollar in half too easily, or, you know, if anybody could copy it and they didn't have serial numbers, there's a, I'm gonna, I'm gonna keep quoting Matt here, because it's just so good. But he says, "As with any monetary asset, Bitcoin must be scarce, portable, fungible, divisible, durable, and broadly accepted in order for it to be useful." Bitcoin rates strongly across most of these dimension, dimensions, except for broad acceptability, which of course, we've sort of talked about

• 2:32:55Ben Gilbert?

  with the network effect. So like, the dollar is that. If I had to sort of score it, scarce, it's like, it's reasonably scarce. The issue is monetary policy.

• 2:33:05David Rosenthal?

  Getting less scarce, though.

• 2:33:06Ben Gilbert?

  Yeah. Portable, certainly. Again, not as portable as Bitcoin, because like, if you want to carry a suitcase of a million dollars, it's kind of hard. Fungible, it certainly is that. I mean, any dollar is kind of the same thing as any other dollar. Bitcoin, I don't think Bitcoin wins at all on fungibility. Divisible, they both have a tiny little unit. There's cents, which, you know, represent the smallest amount that anything could really be worth. Or there's satoshis, which is one, is it one one-thousandth of a Bitcoin? One ten-thousandth?

• 2:33:33David Rosenthal?

  No, no, no, it's less than, it's one, I think it's 10 to the eighth, 10 to the seventh or 10 to the eighth, negative, negative seventh or negative eighth.

• 2:33:41Ben Gilbert?

  So we may have to come up with something smaller than that if Bitcoin continues to sort of rise. Durability, certainly.

• 2:33:46David Rosenthal?

  You'd have to go a long way from here.

• 2:33:49Ben Gilbert?

  Totally. Durability, I mean, the Bitcoin is like, way, way more durable than US dollars. Like, we rotate dollars out of the system every once in a while because they just get too ratty. And like, that's, your Bitcoins are not going to degrade on a hard drive or in cold storage somewhere. So there's this interesting, you know, basically, in everything except for broadly accepted, Bitcoin sort of wins. Now, again, that thing we talked about earlier with the US dollar having this overwhelming, unbelievable head start on the network effect, like TBD, if Bitcoin can actually, even though it's better in all these ways, can it actually? Fight that. And I think an open question is, does it need to? Or can it sort of exist as a complement alongside?

• 2:34:30Ben Gilbert?

  But there's, there's three more features that Bitcoin has that USD doesn't, which, and again, going back to Matt Huang here, it is digital, programmable, there's actually four, decentralized and censorship resistant, and universal. And I think that's where you start to get into this like daydreaming about finally a currency for the internet. Things like smart contracts, which you can do on a very limited basis with, with, with Bitcoin, you know, that it's digital first where you, you know, you're not, you're not saying like, I'm transferring you some money, but like wink, wink, it's on credit and I'll make good on it later. Like you're literally instantly or within 30 minutes, moving money from one place, you know, from one, one account to another. The decentralized and censorship resistant, it's very interesting.

• 2:35:15Ben Gilbert?

  I, five, 10 years ago, I would not have been a person that's like, oh, that's super important in money. But like, I think everyone's confidence has been a little bit shaken by recent events. And like, wow, it actually, maybe I do want to hedge. Like, maybe I do want some amount of hedge in case.

• 2:35:30David Rosenthal?

  And to be clear, certainly recent events in the US, like the capital happening not, but also recent events in China and all over the world. Like, it's hard to think of, maybe except New Zealand. I think New Zealand's doing on the rise, but it's hard to think of other governments where like trust isn't going down around the world right now.

• 2:35:49Ben Gilbert?

  And if you're from Argentina or Greece or anywhere that's had sort of a currency crisis in the last few decades, you're probably jumping out of your seat right now going, you stupid Americans, like get this through your head. Like this stuff happens, like just because you guys haven't had it happen yet, like it doesn't mean it's not going to happen.

• 2:36:04David Rosenthal?

  That's true. I skipped over it in history and facts, but a huge moment for Bitcoin was in 2013, when Cyprus went bankrupt and defaulted and nationalized parts of like bank accounts of citizens. So like, let's get this clear. Here's what happened in Cyprus. If you held over the equivalent of like a hundred thousand dollars in a bank account in Cyprus, when the Cyprus government defaulted.

• 2:36:30David Rosenthal?

  They reached into your bank accounts, like I was saying in my nightmare scenario when paying my taxes, and they just took all your money, over $100,000. They just nationalized it.

• 2:36:39Ben Gilbert?

  Holy crap.

• 2:36:40David Rosenthal?

  And that happens in the world. And so like a bunch of those people like, and around the world were like, holy crap, like, I see now why I want Bitcoin.

• 2:36:49Ben Gilbert?

  Yeah, that's wild. So that's sort of how I wanted to go about, you know, in this comparison that we often make and what would have happened otherwise. This is sort of my Bitcoin to USD comparison. And that might not be fair. Like, I think as we, as we move forward here, and I think David, you have a little bit more context here than I do, the right comparison may actually be to gold, not to USD. And at least in this point, at this point in Bitcoin's development, it might be less about, can I use it at retail opportunities and more about, hey, like, can I at least count on it being a good store of value?

• 2:37:20David Rosenthal?

  Yeah. I mean, that's the thing. I think, well, we'll get into this in grading and how it's performed across different dimensions. But I think most people, certainly all the institutions that are coming into Bitcoin right now, they're not thinking about it as versus USD. It's not an or, it's an and. Like, this is a good store of value. I'm worried about inflation in USD and other relatively secure assets. Now Bitcoin has tons of volatility, but it's got upside and it's not going to experience inflation. Great. Like, I'm going to view it like I view gold.

• 2:37:54Ben Gilbert?

  And by the way, did you know gold's money supply increases? I think it's like from finding new gold every year, but like it's a one and a half percent. Like, it's literally from mining, you know, they're adding to the gold money supply. Obviously, not at the whim and in such great volume as USD is. But one, one thing that Bitcoin proponents would espouse is that already, even with, you know, we're only 12 years into this, or 10, nine, 11 years into this, already, the money supply increases by less per year than gold does.

• 2:38:28David Rosenthal?

  Interesting. I didn't see that.

• 2:38:30Ben Gilbert?

  It's like one-ish percent versus 1.5 or 6%. All right. What else in what would have happened otherwise?

• 2:38:36David Rosenthal?

  I mean, we could talk about interesting things like, what if, what if Silk Road, what if DPR hadn't gotten arrested and it were still operating? You know, what if Coinbase and Gemini and the like hadn't been built and we were still all running on Mt. Gox? I don't know that those are that interesting. Like, I think those are, you know, They're kind of like any company story we tell where like, takes a lot of luck along the way. You gotta get the lucky breaks to keep going. And Bitcoin certainly had that. Why don't we move on to playbook? Because I think, I think actually a lot of those, for me, feed into one of my big playbook themes.

• 2:39:08Ben Gilbert?

  Cool. Well, my, my biggest one is definitely this notion of bubbles as a go to market strategy. My second biggest one is, again, I'm just like so entranced by the beauty and simplicity of reading the white paper. There's something rare that happened in Bitcoin that I don't think happens often, which is that just a small set of very clever, very simple inventions working together, unlocking a tremendous amount of new value. And they built on shoulders of giants past like public key encryption and one-way functions and, and certainly the proof of work from Hash Cash and other people that had come before. But I mean, the notion of a blockchain incorporating elements of, of, of the things that came

• 2:39:53Ben Gilbert?

  before in sort of a, a tight and near perfect system is, is really a marvel. Like, no matter how you feel about Bitcoin and everything that's happened because of it, it is, it is a beautiful system.

• 2:40:06David Rosenthal?

  It is. I mean, we were talking about this before we started recording. My first reaction in rereading the white paper for this was like, there's got to be more. Like, there's got, it's only nine pages. Like, I was like, oh, well, there's got to be a bunch of stuff that they're not describing that like other little like, things and hacks and stuff you need to do to make this work. And like, what about this case? What about that case? And then, but then you think about it.

• 2:40:29Ben Gilbert?

  There is with like increasing the block size and like these forks that have happened over the years.

• 2:40:35David Rosenthal?

  Yeah, all this stuff. But like, so small, like so relatively few things. Like, you can probably count on one hand, the number of like additional modifications to the system that have had to be made over the last 10 years that weren't captured in this nine-page document. It's incredible.

• 2:40:52Ben Gilbert?

  Yeah, it is. I think the biggest change that Satoshi did not foresee that is that will need to happen is the one that's going on now and the one that hasn't really been implemented yet where Bitcoin was initially kind of created to replace the payments layer on the internet and first and foremost and create a low transaction cost payment system with no fraud. And as you sort of dive deeper and deeper and deeper, you realize-

• 2:41:21David Rosenthal?

  Yeah, it's actually not great at that.

• 2:41:22Ben Gilbert?

  Right. Like what it is in its current form, because there's so many people who want to use it, it's kind of like, it's kind of existing at a different level of the stack. Like if you look at the like money stack, there's kind of like, well, like there is the US dollar and then on top of that, there's like the Federal Reserve and on top of that, there's like the central banking system and then like there's your account at the bank and then there's like, you know, credit cards and stuff. And like, it's actually not a great credit card, but it is a pretty good either bank account or like one level deeper where it's like the rails that like the the central banks all work on together. And I think like what we're seeing is that, and this is where I think there's going to be a lot of debate within the community and I've

• 2:42:06Ben Gilbert?

  only dipped my toe in to really understand this, but it's very clear that like the blockchain, the Bitcoin blockchain as it exists today is going to be for like moving large amounts of secure value around infrequently. And what needs to be built is still sort of like Bitcoin's credit card.

• 2:42:26David Rosenthal?

  Exactly. That's so funny. I was thinking the exact same thing over the past couple of weeks researching, which even though with how we started the episode, like you said, the original goal was like make native money for the internet and fix payment rails and whatnot. Like, yep, this is not, the realization to me was like, yeah, Bitcoin is like the bank.

• 2:42:48David Rosenthal?

  It's like the central bank plus like your bank. It's not going to be good as a credit card and that's okay because other internet native systems can be the credit card on top of it. Stuff based on, you know, DeFi projects based on Ether and the like. Well, then we'll cover all this on another time on acquired. But like, that's okay if the, the credit card, like the rapid transaction layer in internet native cryptocurrencies is different than the bank account layer.

• 2:43:19Ben Gilbert?

  Yeah.

• 2:43:19David Rosenthal?

  One, you don't need one ring to rule them all here.

• 2:43:22Ben Gilbert?

  Yep. That's a great point.

• 2:43:23David Rosenthal?

  As long as you can port in and out, just like, you know, when I pay my taxes, I pay them out of my bank account. But when I buy something at the, you know, at the store, I go hopefully someday again out to eat at a restaurant or I order on DoorDash, I pay with a credit card. That's totally fine. I'll do stuff with an Ethereum based, uh, you know, DeFi project for rapid transactions and I'll move money in and out of that as needed from a Bitcoin wallet.

• 2:43:47Ben Gilbert?

  One thing that I've been increasingly thinking about as we've done these episodes is, is trying to factor in more of my why now to our playbook. Like, why did this happen when it is happening? And for Bitcoin, I want to talk about this idea that Nick Zabo brought up. He and Naval were on an episode of the Tim Ferriss podcast that, that we'll include in the, the sources here. And it's, I haven't been able to shake this idea from my head. So we've been obsessed with making computing more efficient over the last several decades. And frankly, we've needed to because we could clearly come up with reasons why we needed more compute than we had. The use cases definitely outpaced what the hardware was capable of.

• 2:44:32Ben Gilbert?

  And Bitcoin is one of the first times that we deliberately want to and have done something that is computationally extremely inefficient. And when you think about it, Bitcoin requires tons of computers to do the same slow actions, to check each other's work, to propagate this blockchain all over the globe over and over and over again by like, it's the, the many computers doing the same work because they're sort of voting by doing the work, which will have environmental consequences that we're going to talk about, um, just before grading. So it's expensive from a computing resources perspective, but if it really does unlock new value for humanity, you can think of it as like a clever way to take advantage of the orders of magnitude more compute power that we have now

• 2:45:16Ben Gilbert?

  to do something that is potentially a fundamental breakthrough for humanity. And it's interesting to try and apply this lens and think, well, what else could you accomplish that was previously thought to be impossible from a system perspective by leveraging this incredible scale of computing in a very inefficient way where we're basically like, I think the way that Naval put it was like our, our brains haven't gotten, haven't become any better computers, but we've developed way better computers. So how can we like, take like, take things that our brain currently, you know, or hasn't been able to do for all these millennia and figure out a different way for the computers to take on the work, not in a super efficient way, but in a system-wide new use case way. So like, it's a little out there, but I,

• 2:46:01David Rosenthal?

  Well, I think that's a lot of like Ethereum. We'll talk about that when we do Ethereum someday.

• 2:46:07Ben Gilbert?

  Putting a pin in that.

• 2:46:08David Rosenthal?

  Put the pin in that for sure.

• 2:46:10Ben Gilbert?

  All right, David, I have one more, but you go first.

• 2:46:12David Rosenthal?

  Okay, cool. I had one big, well, I had two playbook themes that I want to highlight. One, I want to be not careful here, but specific. I think this whole story really illustrates for me, when you are pursuing a network effect, a network economy-based power business, you know, like this is, like Facebook is, like most social networks, and the like, like Airbnb, two-sided network effect. In the beginning, what matters is getting nodes and usage on the network to start. And so it matters less what they are doing and more just that people come on board

• 2:46:55David Rosenthal?

  and that your value grows, according to Metcalfe's law. And then as it grows, more sets of users and use cases will come aboard and it will evolve. And so like in Bitcoin's case, and this is why I said I want to be not careful, but specific, I am not in any way condoning what happened with Silk Road, or that that's okay, or that that should happen, or anything. But just from the perspective of value building of the network. The fact that it happened, like transactions needed to start happening, nodes needed to come on the network for users and for miners. And Silk Road provided that as the bootstrap, the first use case. And then there were, you know, more after that. And one thing led to another. And now

• 2:47:36David Rosenthal?

  here we are. Here we are is so radically different than what Silk Road was, you know? But for the underlying like network and the protocol, it doesn't really matter. What matters is increasing your velocity and growth of users and transactions. And so then when I look at Facebook, when I look at Airbnb, it's actually the same story. Like what was Facebook in the early days, as we've alluded to, it was like undergraduates at colleges, looking for attractive photos of, you know, other incoming undergraduates at their colleges, right? Like, that is so different from Instagram and WhatsApp today.

• 2:48:10Ben Gilbert?

  Right.

• 2:48:11David Rosenthal?

  But that's okay. Like, that's similarly with Airbnb. Like, what was Airbnb in the early days? It was like people sleeping on air mattresses in each other's apartments.

• 2:48:20Ben Gilbert?

  Yeah.

• 2:48:20David Rosenthal?

  What is it today? It's something wholly different. But the point is growing the network.

• 2:48:25Ben Gilbert?

  It's funny, like, on the one hand, yes, you are totally right. On the other hand, I'm like, sitting here thinking, and this is not really advice. It's just an observation. I think like many of our playbook themes, if you were starting a startup, David, and you came to me and said, I'm going to eventually do this thing. And before that, I'm just going to do a bunch of random crap. But people are totally going to use it a lot. And eventually, once they're all using it, then I'm going to make them do this other thing. I'm going to be like, no, like, that's extremely unlikely. So it's like-

• 2:48:55David Rosenthal?

  Well, I do think there's some, I think there's some applicability here of like-

• 2:49:00Ben Gilbert?

  Yeah, totally. It's not totally apples and oranges. They're that-

• 2:49:02David Rosenthal?

  You stair step up. I think, I think Ben Thompson had an old article about this with, with Snap and laddering. Like, you ladder up from like, oh, disappearing text messages to like, you know, a broader social network. And so I do think you can be very strategic about this. I think it also matters for investors, who, when you see something like this, that's a network effect, like, it's so easy to write off Bitcoin because of Silk Road. But like, if you step back for a minute, and you're like, wait a minute, is there a chance that this is just the first set of applications on this network? Is there a chance that people sleeping on air mattresses in each other's apartments is just the first set of, you know, use cases on this network? And that that'll bring in and attract the next set?

• 2:49:47Ben Gilbert?

  Yeah. Fascinating point.

• 2:49:49David Rosenthal?

  And then the second theme I wanted to highlight, which is smaller and also sort of tarnished just because of the ICO thing, but is, I think, brilliant and new about crypto and new crypto projects, is if you can reward and incentivize usage of your system by value within the system itself, like with the mining setup of like, the rewards for mining are Bitcoin. Bitcoin is the work done by mining. That's super, super powerful. Like, now there's an incentive in and of itself for people to come in and use your network. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 2:50:28Ben Gilbert?

  Yes. There is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 2:50:39David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 2:50:59Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 2:51:12David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:51:23Ben Gilbert?

  All right. Well, David, if there ever was an episode that we need to discuss the difference between value creation and value capture, it is this one. This is normally a two-part section. I'm going to ignore the one about, do they capture enough of the value that they create? Because I think we'll leave that to sort of listeners to ponder on based on everything we've already talked about in this episode. I absolutely want to talk about the comparison between how does the value created for the world, not just shareholders or potentially coin holders, compare to any value destruction that they have created by existing? And of course, we've already talked about all the sort of illicit uses of Bitcoin. Again, I'll leave that to further ponderance by the listeners. But I want to talk about the scale of the environmental impact. Because I surveyed some friends, like, what do you want to know about Bitcoin? And one friend texted me and said, well, is it

• 2:52:08Ben Gilbert?

  bad for the environment or no? And it's a good question. The answer is kind of like, well, relative to what? Because sure, does it use computing power? Absolutely. Like, how much? And what do other things use? So here's at least some estimation of an answer. In 2019, MIT tried to answer this question by commissioning a study. And they basically said that Bitcoin mining specifically accounts for about 2/10 of a percent, 0.2% of global electricity consumption. And it produces about as much CO2 into our atmosphere as Kansas City does, as just like a ballpark, so like a whole city per year. And some estimates actually put it even closer to 0.4%. So almost half a percent of the of the world's energy production.

• 2:52:53Ben Gilbert?

  So on an absolute basis, for anybody who actually knows-

• 2:52:56David Rosenthal?

  That's a lot of energy.

• 2:52:57Ben Gilbert?

  Totally. Who knows their climate? This means 23 megatons of CO2 are put out into the atmosphere per year because of Bitcoin, which that another comparison is between if Bitcoin were a country using energy, it would be right between Jordan and Sri Lanka in terms of their greenhouse gas pollution. If you include the other cryptocurrencies, mostly Ethereum, that actually doubles. It'd help you estimate how much energy is being used. So I think the answer is a lot. I think there's a there was other studies that have been done that shows that mostly their mining facilities are using renewable energy. So it's not like it's necessarily consuming coal or oil.

• 2:53:40David Rosenthal?

  They're using hydro, dam, like the central basin in Washington.

• 2:53:44Ben Gilbert?

  That doesn't change. I mean-

• 2:53:46David Rosenthal?

  It's still like, that's a lot of energy.

• 2:53:48Ben Gilbert?

  Right. Energy is fungible, not as fungible as money, but as fungible like money is. So if like, these data centers are using that renewable energy, then it means that other places are likely to look toward coal or to oil. And so, yes, it's it's making an impact in our greenhouse emissions. And that glorifying this system should not come without the discussion of is it worth it? And I think, listeners, you make the call of whether you think that all this utility that that this new monetary system- Has brought, is it worth it if we, you know, race toward raising the global temperature by, you know, one or two degrees Celsius over the next 10 or 20 years?

• 2:54:33Ben Gilbert?

  I don't know. And, and, and I think the, the jury's out. I'm not sure there's really much we can do about it. Again, it's a decentralized thing. So what are you going to do? Tell people-

• 2:54:42David Rosenthal?

  Well, there's also a question, I certainly haven't done the work to know. I don't know if you have of how much energy does and emissions does the traditional finance system produce? For sure. It's also a lot. I bet it's a lot more.

• 2:54:56Ben Gilbert?

  Yeah. So here's an interesting stat on that. A single Bitcoin transaction, now remember, we talked about these, these are really ideal for like big, secure transactions, not credit card transactions. But in some way, there's a lot of smaller transactions that are being used for today. A single Bitcoin transaction consumes more energy than 100,000 Visa transactions.

• 2:55:16David Rosenthal?

  Ah, interesting.

• 2:55:18Ben Gilbert?

  I mean, if you think about all the computers that then have to go and verify that proof of work and stack it at the next level on the blockchain and propagate it out.

• 2:55:26David Rosenthal?

  Yeah, it's a lot.

• 2:55:26Ben Gilbert?

  It makes sense. A centralized system is way more efficient from an energy consumption perspective.

• 2:55:31David Rosenthal?

  Yeah. Yeah, that's a good point. Then there's also like, I think the other dimension to this question is not that we're going to be capable of or choose to talk about a certain side here, but it's just the political side of this. Like this is, there's a probably a reason why currencies and governments have been tied together for like four or 500 years. This is separating that out. Like what's, what's, what are the consequences of that going to be? They're large.

• 2:56:00Ben Gilbert?

  It's an unbundling of one of the major components of the services that a government provides in order to ensure a stable society. And like, will societies that you currently think are stable, stay as stable if they don't also have control over being the, you know, if they don't own the fiat currency?

• 2:56:17David Rosenthal?

  Yep, totally. So that's a question. Then there's stuff like the Cypriots in residents of Cyprus. Like they, you know, if they, if those people had owned Bitcoin instead of had their deposits in a bank, wouldn't have been able to be nationalized. Or if you live in a country where certain things are illegal, that may or may not be right to be illegal. You can now have a vehicle to transact with them via Bitcoin that you couldn't otherwise. But yeah, there are also a lot of downsides too. So thorny, thorny questions.

• 2:56:48Ben Gilbert?

  I will say like-

• 2:56:48David Rosenthal?

  I think your point there was right though. Like the cat is out of the bag here. Like, yeah, these are philosophical questions. The real questions are going to be just like, what, how will history play out in the coming years?

• 2:57:00Ben Gilbert?

  Yeah. And this decoupling from government is interesting because for the average person, it is way, way, way, way better to live in a stable society versus an unstable society. Like government provides an enormous amount of value in our lives, ensuring you at least know what system you're operating within. So you generally don't have concerns about safety or about someone screwing you over in one way or another, or, you know, it just provides like reasonable guardrails so that you can do higher level functions in life. And like, if you wanted, the flip side of that is with stability comes sameness. So if you're part of a group that's been oppressed by a government, and maybe that's been the case for hundreds of years in your country, then like, you're going to keep being

• 2:57:44Ben Gilbert?

  oppressed systemically. And it would be better if you lived in a more dynamic nation where you could do more things to break the system and rise up and get power. But I think these are sort of two sides of the same coin. And if you see government owning less and less of the sort of core components of a society, the first of them being money, you will both see the destabilization, which is worse for the person who benefits from the stability, but also you will see greater opportunity for those who are oppressed to be unoppressed.

• 2:58:17David Rosenthal?

  One last thing that actually is worth calling out here on a separate topic. This is, we're gonna talk about this in grading in a minute. This is probably the best, if you were to categorize Bitcoin, look at it through the lens of like an acquired lens of like a venture investment. This is probably the best venture investment of all time, like a 3 million X, like what, there's nothing that's even close. Like this is just, just like hands down. Okay. Every other investment like that, probably in history has just solely been the realm of institutions. Really, you could found a company, you could be Mark Zuckerberg, or you could be Excel and Founders Fund that invested in the early rounds. And as an institution, like you and I couldn't do that.

• 2:58:54Ben Gilbert?

  Oh, yeah.

• 2:58:55David Rosenthal?

  Anybody can participate in this.

• 2:58:57Ben Gilbert?

  Yeah.

• 2:58:58David Rosenthal?

  And in fact, the institutions have been locked out until now because the scale wasn't big enough for them to participate.

• 2:59:04Ben Gilbert?

  Yeah. Put another way, asymmetric upside opportunities are typically only available to frankly, wealthy people. Like venture capitalists, those who invest in venture capital funds, accredited investors, people who are able to get in early on these companies that could be the next Amazon. And very rarely is there a public company that has that kind of upside left in it. Of course, Amazon is the example where there actually was that much upside left in it. You know, people are perceiving that to be the case with Tesla. So, but I think the point you're making is that like, oh my gosh, look at this. This was a retail investment available to consumers at any scale. And it proved to have this type of asymmetric upside.

• 2:59:46David Rosenthal?

  Yep.

• 2:59:46Ben Gilbert?

  And when I say asymmetric upside, I mean like, sure, you're going to invest in a stock and oh my God, if that stock 10 X's, that would be amazing. But almost never are you going to buy a stock and it's going to 1,000 X the way that Sequoia did with Airbnb. And I don't know, I have the number off the top of my head, but you know, in that sort of order of magnitude.

• 3:00:00David Rosenthal?

  Yep. So I think that's like interesting.

• 3:00:02Ben Gilbert?

  For sure. Value creative for those who, uh, who did so in the pre 2013 era.

• 3:00:08David Rosenthal?

  Yeah.

• 3:00:09Ben Gilbert?

  All right. Grading.

• 3:00:10David Rosenthal?

  All right.

• 3:00:11Ben Gilbert?

  David, how on earth are we gonna?

• 3:00:15Ben Gilbert?

  Create this one.

• 3:00:15David Rosenthal?

  Oh, boy. Okay. Well, I think we already, unless you disagree, Ben, I think we knocked out number one, which is like, how would you grade an investment in Bitcoin? Like, this is

• 3:00:26Ben Gilbert?

  It's by far the greatest investment opportunity of all time in humanity.

• 3:00:29David Rosenthal?

  Over the past 10 years, for sure. Okay, that's easy. That's not that interesting. There's, how would you grade Bitcoin in its sort of original purpose as laid out in the white paper of becoming a native internet currency medium for transaction for the internet? I think the grade is actually pretty poor here relative to the initial intentions.

• 3:00:55Ben Gilbert?

  Now that said, it could prove with the 20-year lens, let's say we're sitting here in, what would that be, 2028, from the white paper's initial, sort of initial beginning of the authoring, that it actually works really well if they can figure out this other layers of Bitcoin and how they sort of interact and how you can do much more higher velocity, lower value transactions in a cheap way. Like, it may be the case that it ends up great, but like, so far, no, it's been pretty poor for that.

• 3:01:26David Rosenthal?

  And Bitcoin itself. Now, I think very likely, no, if there's no Bitcoin, there wouldn't have been any Ethereum. And Ethereum and its derivatives probably, in my view right now, stand the best chance of like, building that layer. So maybe it's responsible, but like Bitcoin itself, no, and probably never gonna be that.

• 3:01:48Ben Gilbert?

  I can check out on overstock.com, but that's a, like, it's kind of about it.

• 3:01:53David Rosenthal?

  Yeah, interestingly, so Stripe supported Bitcoin for a while, but then, once it became clear that like this, it was too slow and too unwieldy and transaction costs were too high for high-velocity transactions, they dropped it in 2018. They stopped supporting it.

• 3:02:07Ben Gilbert?

  Interesting. Well, that's definitive. Like, it's a D or an F for its initial purpose so far, but.

• 3:02:14David Rosenthal?

  So.

• 3:02:14Ben Gilbert?

  Pointed at stimulate innovation in that area.

• 3:02:17David Rosenthal?

  Yep. Okay. Next, oh, I was gonna say, we do store of value next. That's probably related to being an investment.

• 3:02:24Ben Gilbert?

  I mean, it's been an amazing investment in a highly volatile store of value.

• 3:02:27David Rosenthal?

  Store of value, right. So it's not a. It just like anything here, like investing in value depends on your timeframe. Like if you have a multi-year timeframe, amazing. Best investment of all time. If you are need this to function as something like a US dollar, where like, hey, I need to pay my taxes next quarter. I want to make sure that I put this money away so that like, I know I'm going to have that money to pay my taxes next quarter. Not good.

• 3:02:53Ben Gilbert?

  Yeah, yeah, it's interesting. Like to me, from a store of value perspective, it's a great hedge. Like there still is the probability that it loses 80. There still is a reasonable possibility that it loses 60, 70, 80% of its value in a short period of time. So like, am I calling my parents and telling them you should put your retirement in there? Like absolutely not. Should you be building it into your portfolio? Maybe like, again, gold continues to probably be the best comp. It's like gold with a bunch of upside feels like.

• 3:03:24David Rosenthal?

  And with way higher volatility there. Right. If you put money into gold, I'm probably going to be able to pay my taxes next quarter with by converting that back out.

• 3:03:32Ben Gilbert?

  That's a fair point. Yeah, it's it's super high volatility gold. And, and, and again, has, I don't know that it's like, I don't know that there's alpha there. Like, there's just as much upside as there is downside.

• 3:03:43David Rosenthal?

  Yep, yep. But I do think, you know, over the long arc, there's a lot of upside, very likely. And especially, and as we'll get into our last greeting lens here, especially compared to cash, which and zero interest rate in a zero interest rate environment, plus an inflationary environment where you are losing money in the long term.

• 3:04:06Ben Gilbert?

  Not to mention dilutive from the money supply increasing this much.

• 3:04:10David Rosenthal?

  You will, unless something drastically, drastically changes, you will assuredly lose purchasing power by keeping money in cash over any extended period for the foreseeable future. Bitcoin knocks it out of the park relative to that.

• 3:04:25Ben Gilbert?

  Yeah, that's a great point. High volatility relative to that, that cash, but yeah.

• 3:04:32Ben Gilbert?

  Yeah, it's a really good point that like the, you know, old aphorism of like, I'm going to keep cash around in case, you know, there's a recession and I have the opportunity to buy up like that cash is just losing value faster than it ever has. Like, we're not in a hyper inflationary environment, but like relative to where we normally are, it's not, it's certainly, you certainly can't put it to work in a great way without taking meaningful risk.

• 3:04:58David Rosenthal?

  Now, I will say, we don't have the lived context of the 80s in America where, where interest rates were in the teens and like that, talk about inflation, that's insane. You're losing 15% purchasing power every year. That's crazy. So we don't have that context of lived experience, but it's just like, there's just no rational way that I can think of to look at why in like long-term holdings that I don't need this cash right now and I can afford to be long-term focused with it, I should have it in cash. That just seems like there's no way to win there.

• 3:05:37Ben Gilbert?

  Well, the last way I want to sort of analyze this is through the, through the venture investment lens of is there still enormous upside in this investment? And I was kind of thinking about this, like, so we saw a 35,000 X in the first five years. Then we saw an 85 X in the five years after that. And even to get a 20 X in the future, that means a single Bitcoin would have to be valued at over half a million dollars. But

• 3:06:02David Rosenthal?

  Which the Winklevoss twins are on record saying that that's their essentially price target for Bitcoin is 500K, which would be parity market cap with the above-ground gold. Like if Bitcoin had the same market cap as

• 3:06:16Ben Gilbert?

  Right. That's what I was gonna, yeah, that's where I was gonna go here is like, it's sort of silly to like, think about like, what could I imagine a Bitcoin being? Cause you can't, it's arbitrary. The interesting thing is if I owned the share that I would own of all the Bitcoin in the world, which you can calculate and, and Bitcoins

• 3:06:35Ben Gilbert?

  Market cap was like this is what I'm saying. I'm analyzing like a venture investment. Do I think this thing has a chance of sort of being a 20x here? And the answer is probably like if if like I probably think that or the answer is yes, I do think that because if it's got this half a half a trillion dollar market cap today and the market cap of of what people are doing with similar products like the US dollar is, you know, there's, there's 20 billion of those. There's $70 billion worth of that globally. You know, there's five ish billion dollars of gold and that's its sort of closest comp. Like, do I at least think it can get steal more of the gold market?

• 3:07:16Ben Gilbert?

  Yeah, totally. And that gold market is even without jewelry 10, 10 times bigger than its current market cap. So do I think it has a 20x in it? It could. It has the possibility of that. And in a venture return, you're never underwriting to, uh, yeah, I think this is going to happen. You're underwriting to if it happened, would it be sufficiently large enough? And and am I willing to put together a portfolio of those if it happens? And just make sure that all of them clear the the hurdle of if if if the one or two that are enormously successful are successful, will it be big enough in order to make the whole, the whole portfolio worth it? And yes, I do think this has enough running room in front of it.

• 3:07:57David Rosenthal?

  All right, let's I'm going to bring it full circle for acquired here. The pre 2011 era for Bitcoin was science project phase. The 2011 to 2013 era was like seed investment phase for Bitcoin. You invest in Bitcoin during that phase. It's like being a seed investor in Google or Facebook or whatnot. The 2013 to 2017 period was the series A, series B stage investment. You're like, You know, especially if you go later in that spectrum, you're like Greylock coming in and doing the series A of Airbnb at a $60 million post, super high at the time. That seems crazy.

• 3:08:37David Rosenthal?

  Well, yeah, they made a lot of money there. We are now in the growth round phase of Bitcoin.

• 3:08:44Ben Gilbert?

  Oh, you don't think we're in the post-public?

• 3:08:46David Rosenthal?

  No, no, no, no, no. No, because there's still all this upside. Like, will they, they're still risk, like, you're investing in a growth stage company, right? Like, you're doing a series C in...

• 3:08:56Ben Gilbert?

  Yeah, you're investing in Stripe right now. Like, that's actually the reasonable comp is like...

• 3:09:00David Rosenthal?

  Oh, no, I don't think we're there yet.

• 3:09:02Ben Gilbert?

  2020 Stripe. Well, I, so, so here's why I...

• 3:09:05David Rosenthal?

  I think you're in 2017 Stripe.

• 3:09:06Ben Gilbert?

  Here's why I think you're in 2020 Stripe. Because Bitcoin, after it, in our little playground here, would go public, it still has like, the, because the TAM is so big, it's Amazon-like in that way, where like, it still has a ton, a ton, a ton of growth potential in front of it after it's sort of like mainstream and accepted by, you know, all the people that would be interested in buying a, you know, robust IPO. And also, it's not a company. It's way bigger than that.

• 3:09:37David Rosenthal?

  Yep, yep, yep.

• 3:09:38Ben Gilbert?

  I guess that's, that's sort of where I'm, where I would take your analogy.

• 3:09:41David Rosenthal?

  This is great. This is so great. I think we're gonna, we're viewing it the same way, but we're gonna disagree on what stage. I think it's Stripe in 2017 because I think this is like a series C-ish in a company. The path that you laid out of the path to gold, high execution risk, whatnot, but like, that's the, that's the upside. Like, it accomplishes that great. I think that's the IPO.

• 3:10:05Ben Gilbert?

  It's gold with more utility, so like, it's not hard to imagine why they would be able to pull that off.

• 3:10:09David Rosenthal?

  But here's the Amazon, what, the case you, I think, in my mind, and we can disagree about where we are in this, there's still upside to gold. Like, it may be low likelihood, but it's like, Amazon went public, it was a bookseller. Amazon today is AWS and Amazon, right? Like, the upside is it becomes more than gold and starts to eat into reserve currency, you know, et cetera, et cetera. So I think that's, I think there's still another after booster stage on this.

• 3:10:42David Rosenthal?

  Whether it'll happen or not, I don't know, but I think you could view two tiers of upside left here. One is realize the gold thesis. Two is expand beyond gold.

• 3:10:52Ben Gilbert?

  Well, because realizing the gold thesis is only another 10x.

• 3:10:55David Rosenthal?

  Right. Yeah. It's like a 15x.

• 3:10:57Ben Gilbert?

  Well, I'm not counting, I'm not counting the part of gold that's dedicated to jewelry.

• 3:11:02David Rosenthal?

  Oh, got it.

• 3:11:03Ben Gilbert?

  People, people holding gold as a store of value, although jewelry is a store of value too. It's just inflated because it's prettier. All right. I really, I really like that analysis. I think, I think that's a great place to leave it. I haven't checked the time. I have to imagine this is going to be the longest acquired episode in history. So listeners, thank you for going on this journey with us. You know, David, I didn't expect frankly, us to do as much as we did looking both at the history and sort of this like strategy pull apart and some of the technical aspects. So I hope listeners, you enjoyed all three. We'd love feedback, particularly if you are an economist or in this ecosystem, or if you know about moves that have been made in this ecosystem that we don't know about

• 3:11:48Ben Gilbert?

  yet. I think we, we like to continue learning in public, so please, uh, please, please reach out. Well, for folks who don't know, we have started codifying the playbook from each episode in some written bullet points. We did that for this episode as well, and we email those out after posting each episode. So if this is something you want, you can sign up to receive the playbooks at acquired.fm. And if you join the acquired community Slack at acquired.fm/slash/Slack, you will automatically be signed up for them there as well. As always, if you love Acquired and you want to be a deeper part of what we do here, you should become a limited partner. You'll get access to our library of over 50 interviews and deep dives on company building topics, monthly Zoom calls, and the new thing we've

• 3:12:33Ben Gilbert?

  added, live access to listen in while we record big events like emergency pods and our book club discussions with authors. So if you are not already an Acquired LP, click the link in the show notes or go to acquired.fm/lp and we can't wait to see you there. If this is your first time listening to an episode and you're not subscribed, you can do that from your favorite podcast player. And if you have a friend that you think would enjoy this episode, maybe someone who's a crypto bear or crypto bull, someone you like to talk about this with, you should definitely share it with them. Feel free to share it on social media. But again, we love that one-to-one touch when you share it with someone that you think would really like it. With that, listeners, thank you and we will see you next time.

• 3:13:10David Rosenthal?

  We'll see you next time.