285: Dan Held on Bitcoin and The Halving

Dan Held is currently the Director of Business Development for Kraken, one of the OG Bitcoin spot exchanges. Dan has been in the Bitcoin community for about 8 years and continues to be one of the brightest minds in the space. In this conversation, we discussed the early days of Bitcoin, his current portfolio allocation, the financialization of Bitcoin, how greed is built into the protocol, and what would make him change his mind about Bitcoin. =============================== Pomp writes a daily letter to over 45,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com =============================== You can watch each of these podcast episodes on YouTube, where Pomp and the guest are recorded on video. Click here to visit Pomp's YouTube page and get each episode daily: https://www.youtube.com/c/anthonypompliano

• 0:00Speaker 00

  This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off.

• 0:11Speaker 00

  Dan Held is currently the Director of Business Development for Kraken, one of the OG Bitcoin spot exchanges. Dan has been in the Bitcoin community for about eight years and continues to be one of the brightest minds in the space. In this conversation, we discuss the early days of Bitcoin, his current portfolio allocation, the financialization of Bitcoin, how greed is built into the protocol, and what would make him change his mind about Bitcoin. I really enjoyed this conversation, and Dan didn't disappoint. Before we get into the episode, though, I want to remind you, I write a daily letter to over 45,000 investors about business, technology, and finance. It's called the Pomp Letter. I break down complex topics into

• 0:54Speaker 00

  easy-to-understand language while sharing opinions on various aspects of the industries. You can subscribe at pomp.substack.com or go to the description and click the link there. You can also watch each of these podcast episodes on YouTube, where I and the guest are recorded on video. Click in the link in the description to visit the YouTube page and get each episode daily. Alright, let's get into this episode with Dan. I hope you enjoy it.

• 1:21Speaker 00

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 1:48Speaker 00

  Alright guys, bang, bang. I have the one and only Dan Held here. Let's do this, man. Thanks for doing it.

• 1:56Speaker 01

  Hey, thanks for having me on, Pomp.

• 1:58Speaker 00

  For sure. Those that don't know you, who the hell is Dan Held? What's your background?

• 2:04Speaker 01

  Yeah, so I got into the crypto space around 2012. In early 2013, I moved out to San Francisco. Got involved in the Bitcoin meetup space. Back in that day, there's only like a dozen people that went to the Bitcoin meetups in San Francisco, which was like Brian and Fred from Coinbase, Charlie Lee, Jed McCalhoun. You had Jared Kena from Trade Hill. And, you know, got involved in this community really, you know, I understood Bitcoin back in 12, started to play around with it. 13 kind of went full, you know, dived, dived in really deep as to how it worked, understanding a little bit more about it. And then in the March 2013 bubble, a lot of people forget that there was two bubbles in 2013. The March 2013 bubble, when the, when the price spiked,

• 2:49Speaker 01

  I saw that happen and realized that there was no mobile app that provided real-time market, that provided real-time market data. So I co-founded that with a buddy and that became one of the most popular crypto apps in 2013. We got acquired by Blockchain.com. I came on board there as Director of Product. Worked there for about a year, then went to Changetip. Changetip did micropayments over social media, so those tipping bots that you see on Reddit and Twitter. After that, went to Uber where I worked on writer growth in the intelligence team. Left Uber, went to Interchange, a startup that did post-trade reconciliation for crypto hedge funds. We got acquired by Kraken and now I'm Director of Business Development over at Kraken.

• 3:29Speaker 00

  All right, let's go back to 2012. You're sitting in these meetups in San Francisco. What are, what are people talking about then? Are they like, hey, this is gonna be the next global reserve currency? Or are they saying, wow, we're weird as shit and I hope this thing actually works?

• 3:45Speaker 01

  It was more weird. You know, it's a, I think we had a cooler of PBRs. Trade Hill at the time was sponsoring the meetup. And I think Trade Hill had raised like a few million dollars. That was like the biggest round in crypto at the time, so. And I think Coinbase is like four million dollar seed a little bit later was like the next biggest deal in crypto for that time. So yeah, it was a cooler of PBRs, a bunch of kind of, we felt like we were weirdos hanging out and talking about how Bitcoin might, might be the next world reserve currency. But it's a little hard to put, say that with a straight face when there's only a dozen of you in the room.

• 4:21Speaker 00

  For sure. And I guess like, obviously, many of the people you just described that were at that meetup have gone on to be kind of luminaries in crypto in general and Bitcoin, and also built a number of pretty large companies. What do you think was kind of like in the water there? Was it just, hey, these people had a vision and they saw it early? And naturally, they were kind of pre-selected, you know, to end up being the people who built those companies? Or what do you think was kind of the commonality?

• 4:50Speaker 01

  Yeah, that's a great question. So I think that early cohort of Bitcoin adopters, a lot of the products and services that we see here today, like wallets, trading infrastructure, hadn't really been developed. So these individuals loved Bitcoin so much that they wanted to go build that infrastructure. You know, TradeHill, the first US exchange, was co-founded in 2011. And that was based on like different pain points that people had with COX. And you look at these different things that were built and a lot of it, or like Satoshi, or, sorry, Satoshi Light being, you know, Charlie Lee. He, you know, created Litecoin. A lot of these people were tinkerers or builders. They wanted to go build that infrastructure. They wanted to tinker with Bitcoin.

• 5:32Speaker 01

  It was a very kind of roll up your sleeves and try out something new sort of vibe going on.

• 5:39Speaker 00

  And so obviously, you have been through multiple boom and bust cycles at this point. Kind of talk through just like the very first one where you saw Bitcoin, you know, explode in value, and then turn around and crash over a period of time. Like, what was the general emotions? Were people like, "Hey, it's over"? Kind of just talk through a little bit about that very first one that you experienced.

• 6:04Speaker 01

  Yeah, so I actually started to dig through some of my old emails to look for the first time I mentioned the word Bitcoin. And I actually found that I'd been through four cycles. I thought I'd just been through three, early 13, late 13, and 17. But in 2012, I found an email and the first time I say the word Bitcoin, I say Bitcoins. I'm so embarrassed. You know, back in that day, some of the language and nuance was still being developed for me. So, you know, I think when I first looked at it, it seemed like this kind of weird digital internet money, right? It's not backed by anything. There's no reserve. There's no central bank sort of propping it up.

• 6:49Speaker 01

  So it seemed like the Wild West. I think 13 was the one I remembered the most, though, because I was out here in San Francisco. I was plugged into the space. You know, you could feel the energy and vibe when you went into the meetup. You know, while there was only a dozen people at the beginning of the year, by the time March came around, when the price spiked to 260 from $10, there was over 100. You had like late-speed venture partners slanging out business cards. And, you know, I think it was a pretty wild experience to see, you know, an investment 26X. I mean, that doesn't really happen. And so that was pretty wild.

• 7:29Speaker 01

  And then to see the wave of new adopters and see all the people interested was a validation that I wasn't crazy. I mean, back in 2012, when you believed in Bitcoin, you felt a little nuts. Like, you believed in this weird internet money? That was super weird. I mean, it had barely been covered by mainstream press. You got to remember, this is pre-CoinDesk days. Wasn't even CoinDesk around. So the main areas, the main places that I learned about Bitcoin were Bitcoin Talk or the R Bitcoin subreddit. And so I think that kind of earlier vibe was, it was pretty wild to see like it become, start to become mainstream, a little spark that this might be something bigger than just a group of nerves in a small room in San Francisco.

• 8:13Speaker 00

  Yeah, and obviously the halvings, you know, are kind of top of mind right now, given that we've got one about 10 days away or so. But let's go back to kind of the first one that you really went through as part of the community. Like, what was the conversation at that point? Kind of how were people thinking about it? Was it well understood? Did it catch people by surprise? Just kind of, you know, help us understand like what the general vibe was around that first halving.

• 8:41Speaker 01

  Yeah, 2016 was the first one I like really remember and paid attention to. And I went to the BitGo halving party down in, I think they were down in Palo Alto at the time. It was pretty boring, to be honest. I mean, the content in this space was basically non-existent, even though CoinDesk, you know, different crypto publications existed, and there were great thought leaders like James Sidlaff had a good blog at the time. Wasn't nearly the plethora of podcasts, YouTube channels, great content writers, you know, I think that it was still very kind of geeky back then. And 2016 was pretty freaking bearish. I mean,

• 9:20Speaker 01

  I think it was at late 15 or 16 where Bitcoin hit $180. That was, that was pretty demoralizing. So it was a very low-energy sort of moment back in 2016. A lot of us were hodling and just kind of waiting for kind of a brighter future. So I'd say that's very much in stark contrast to where we are now, where there's a lot of enthusiasm, you know, Kraken's hosting the VR halving event. Kraken's at, you know, has hundreds of employees and back then it had dozens. So just a huge, I think, distinct difference in terms of size of the community and enthusiasm and, and support. You know, that content helps us all reinforce that narrative

• 10:03Speaker 01

  with each other that we're in, you know, we're into Bitcoin for XYZ reason. And without that narrative support, it feels very lonely. But I feel very, very much connected and, and, you know, I think that's an incredible feeling for hodlers to have going into this next 2020 halving.

• 10:20Speaker 00

  For sure. And I guess, like, was there an understanding of like,

• 10:26Speaker 00

  It's actually going to happen. This is how it works. Here's what the impact should be. And kind of what I consider more of the kind of second and third order effects of the halving? Or was it just, hey, there's this event that's occurring and I'm literally going to a party? And people were just kind of looking at the price and didn't kind of think about, I think, what a lot now as more kind of finance-related people and stuff have come in, the understanding of the supply shocks and things like that.

• 10:52Speaker 01

  Yeah, I mean, it was very much like this is an event, but it wasn't like, oh, this is going to guarantee a you know, speculative bubble to occur after this. I think a lot of people have theorized it. You've got to remember that 2012, the space was so tiny that not a lot of people felt that that was a validated point. So 2016 really validated that the reduction in supply could potentially increase the sensitivity of demand. As you know, so the total supply, like we've got, you know, the flow of newly minted coins and the block subsidy being inside the block reward, as that happens through the halving, the amount of newly minted coins hitting the circulating supply decreases.

• 11:35Speaker 01

  So a lot of people look at the total amount of Bitcoins produced and the newly minted coins relative to that. I think the more appropriate measure is to look at the newly minted coins relative to the circulating supply. As in like the, you know, we look at UTXOs and we can look at, a lot of coins haven't moved four, five, six years, two, three years. I mean, I'm talking about active supply. So, you know, I think that no one, there wasn't stock to flow models back then. There wasn't a lot of like intellectual rigor. I mean, Turd Abista was basically the only Bitcoin economist.

• 12:07Speaker 01

  A lot of people, you know, we've got so many great thought leaders in the space now. But Tur was like, I remember, I remember seeing Tur, I remember emailing Tur in 2015, 2016 and asking him because he had just put together, why Bitcoin is a good gold-like investment and I wanted to give that to my father. So Tur had like the only, I would consider in-depth research at that time. And there just hadn't been a lot of, you know, the halving inducing a speculative bubble really hadn't been validated past that first 2012 event. So I would say we've got so much more intellectual and technical rigor as to like why we hypothesize a supply cut may make demand a little bit more sensitive.

• 12:52Speaker 01

  But you know, that really didn't exist back in that day.

• 12:56Speaker 00

  For sure. And I guess, is that the biggest difference you see between then and now? Was just like that more kind of rigor and scrutiny and analysis? Or the other things that you kind of can pinpoint and say, hey, look, this is a big difference today? Going into the third having than than the second one?

• 13:14Speaker 01

  Yeah, I think a lot of people look at like the tweets that I put out and I'm very bullish on Bitcoin, obviously. And kind of short and quippy and a lot of people go, oh, you're just like a permable, a permable. Like you've never really, you're not really being intellectually honest about, you know, your, the risks and concerns about Bitcoin. And I'm like, dude, coming from back then, like we have a thousand X deeper liquidity. Uh, we have, we don't just have Mt. Gox, like we didn't know if Bitcoin was going to come back after Mt. Gox collapsed. Um, you know, we've got dozens of venues, you know, Kraken being like a super strong one. Um, we've got dozens of venues, we have all these institutional pipes plugged in.

• 13:57Speaker 01

  And I know you've talked a lot about that, all this stuff. We've gotten tens of millions of hodlers, we've got great content to reinforce that shared belief and faith in Bitcoin. Bitcoin survived a global pandemic where we saw markets just have a huge sell off in a series of cascaded margin calls. You know, Bitcoin survived that and now we basically retraced from that bottom. That's incredible. I mean, Bitcoin has no university that endorses it, no government that endorses it and no, no investment banks that endorse it. So the fact that the aggregate shared belief of hodlers kept Bitcoin from going to zero in a moment of like pure fear, and this isn't just financial fear, this is like fear for your life.

• 14:39Speaker 01

  That's incredible. I, I think Bitcoin has demonstrated its resiliency far beyond what I thought it was capable of doing in its short lifespan. So I think the, the compare and contrast here from back in the day compared to now is that, you know, Bitcoin has demonstrated its resiliency and has become so large that, you know, my original investment thesis when I purchased it in 2012 was that it is a gold 2.0. It has largely demonstrated that over the last eight years I've been in this space.

• 15:07Speaker 00

  Yeah, the most important question around the having is, is it having or havinging? Which one do you go with?

• 15:14Speaker 01

  I used to say having, but I think having is more popular. And so I'm trying to wean myself off of having. So it's a slow process. So if you noticed, I think I've said both during the chat.

• 15:25Speaker 00

  I keep joking to people. I don't think that either one is right or wrong. I think that it's a split decision. I hear people saying both of them.

• 15:34Speaker 01

  I guess having is shorter and sweeter. And I saw some Twitter polls where people like that one a little bit more. But having is my old go to. And so it's a little hard to wean off of that.

• 15:44Speaker 00

  For sure. Now, one of the things that is kind of a double edged sword, if you will, is the financialization of Bitcoin. Right? So back in 2012 up till, let's call it 2017, 2018. It was pretty much if you were into Bitcoin, it was, I don't want to say anti Wall Street, but definitely had a different vibe, different ethos, a different community than a lot of what you see in Wall Street and traditional financial, legacy finance. There's been a blurring of that line over the last few years. Some of that is seen as a positive development, right? Getting more liquidity into the market, kind of more sophisticated players. A lot of the more significant analysis you get kind of into mainstream press more, all that kind of stuff.

• 16:29Speaker 00

  There's also a concern though around the financialization of Bitcoin leading to a dampened upside potential. Because it kind of gets incorporated into some of those more legacy markets and asset classes and funds. How do you think about this, right? Like, what are the positives and negatives? And kind of where do you think that we come out on a net basis?

• 16:49Speaker 01

  That's a great question. I think there's a lot of anxiety in this space around what happens when the institutions do come. You know, in late 17, we hypothesized that they would come a little bit earlier. And I do think they will come. As I see it as some sort of an inevitable thing that will occur. It's nothing to be afraid of. I think a lot of people look at this and there's this anxiety around, okay, what happens when Wall Street comes? It's big evil Wall Street coming in, gonna mess with Bitcoin, my little cypherpunk, you know, dream. And I don't think it's a bad thing. So. You know, first and foremost, different financial instruments like futures, options, and lending and borrowing are all normal market activities.

• 17:32Speaker 01

  They enhance price discovery, they enhance liquidity, and they allow different operators in the crypto space or in Bitcoin specifically to hedge their risk. So this means that, you know, potentially, options have the ability to dampen, you know, the downside risk for miners, which is a good thing. So maybe we have more continuous hash rate rather than difficulty adjustments that are lower difficulty adjustments. So, you know, I don't think it's a bad or good thing. I think it's basically a market neutral thing. It's how markets work. They essentially allow the efficient price discovery, they allow market participants to hedge certain types of risk. All of the different financial instruments that I've seen come out, I think, are great for different operators.

• 18:15Speaker 01

  Like I said before, I think a big one that a lot of people have a sticking point with is lending and borrowing, because people go, "Oh, fractional reserve lending is bad." And I say, "Well, how much is bad?" So, yes, fractional reserve banking has led to what we've seen, you know, bank, different bank issues over many, many times over the last 400, 500 years. In terms of all financial recorded data, we do see that after a decade or two, we typically have like bank runs, people go to their bank, the bank has done fractional reserve banking, and their money may or may not be there. Fractional reserve banking in and of itself is not a bad thing.

• 18:57Speaker 01

  The bank compensates you for that risk by offering you an interest rate. You should be evaluating the different risks at the banks in which you deposit your coins at or deposit your money at. You should be evaluating the risks in which you're being compensated for with that interest rate. Banks serve a good function in the economy, which is to lend money to individuals who don't have that money now, whether that be your personal home, personal car, or business. These aren't bad things. Loans and lending and borrowing is not a bad function. When we do too much of it, it becomes a bad thing. And so I think Bitcoin at that base layer, having only 21 million Bitcoins, that immutable monetary policy where it cannot be changed,

• 19:40Speaker 01

  the settlement and custodial guarantee that you have when you hold Bitcoin yourself, that's phenomenal. I think that alone is a huge breakthrough in the world economy. And so, yes, if you choose to take on more risk and give your coins to different lending companies out there, you're being compensated for that risk. Now, is 3%, 5%, 6% enough? I don't know. That's a subjective thing, but I don't think it's inherently a bad thing.

• 20:07Speaker 00

  Yeah, and I guess this kind of leads into another aspect of the financialization is you get more sophisticated players that come into the market. They have that experience from various asset classes. And there's a lot of people who say, look, these markets are incredibly manipulated, right? There's whales out there. These people know what they're doing, and they're able to increase and decrease price through manipulation. How do you think about that? And do you think it's a fair kind of accusation to say that those are the sophisticated, non-Bitcoin-type audience doing that? Or do you think it's maybe kind of everyone in the market?

• 20:50Speaker 01

  Yeah, so the concern over whales, because we're all minnows and dolphins, as some people put it. You know, we're worried about these whales splashing around and causing us to, you know, causing these really intense price gyrations. Whales have been a concern since 2012. I remember a lot of the Bitcoin talk there. I think there's a wall observer is one of the oldest threads on Bitcoin Talk, where people talk about giant, bitter-ass walls, where a whale will go put a giant wall in to kind of scare the market. The most famous one is called the bear whale. So from 2015, I think an individual put in a $30 million sell wall that was eaten by Bitcoiners. And it's a famous day where we slayed the bear whale. So if you Google "the slaying of the bear whale,"

• 21:34Speaker 01

  That's when the Bitcoiners all came together to slay that air whale.

• 21:40Speaker 01

  As Bitcoin has increased in adoption in terms of number of hodlers, liquidity, and liquidity, I mean, what I mean by that is the bid-ask spread, the depth of the order book and volume. As is of all increased, so you have more market participants and greater liquidity, the ability for a whale to influence the market is diminished because there are more market participants that they have to fight against, which would be, I guess, what you could call maybe like a true price, a price minus the influence of one single participant. Every market has large participants. You have tech companies where founders hold 20, 30, 40% of the company.

• 22:20Speaker 01

  You have different types of commodities where a certain investment bank or hedge fund might own a large percentage. We cannot control who owns X percentage of Bitcoin. As the markets become more liquid, those large hodlers of Bitcoin will be able to influence the price less and less.

• 22:38Speaker 00

  Got it. And so obviously, one of the big questions is when you've got somebody who's incredibly bullish, I get this all the time, there's a bunch of people asking, what percent of your assets do you have in Bitcoin? And then what other assets do you have? And how do you think about kind of portfolio construction in general?

• 22:57Speaker 01

  Yeah, so I take an incredibly risky and I would not advise this sort of portfolio construction, but I am, over 90% of my net worth is in Bitcoin.

• 23:08Speaker 01

  Now, this isn't something to where, you know, I bought a lot of Bitcoin back in the day. I sold Zero Block for Bitcoin to blockchain.com.

• 23:18Speaker 01

  A lot of people go, oh, wow, that was, that's really cool. You know, that's really cool that you sold your company for Bitcoin. And I'm like, well, I sold my company for Bitcoin when Bitcoin was worth $1,200 at the peak of 2013. It didn't feel so good when Bitcoin was $180 at the bottom of the bear. You know, you really have to believe in Bitcoin to make it through these cycles. The volatility is so intense that I think after this asset class. If I ever were to invest in anything else, it's kind of a, it's an incredibly easy walk through the park of going, oh, I lost 10% of my money today. Sure, it's real estate. It's not going to just disappear. It's like a physical item. So I think I've taken an incredibly risky maneuver.

• 24:00Speaker 01

  I'm younger, so I'm in my early 30s, so I can take this sort of risk. I don't have a wife or kids. I don't have a mortgage. So for me, I've very much gone risk on. I do not recommend that for others. I think a healthy percentage of your portfolio would be to take a look at what other assets you hold. If Bitcoin were to 10x, you know, would that be something meaningful to you? You know, so I think a 1% allocation is is sort of a really easy decision. I think 1% if you lose 1%, sure, you can tweet at me and be like, hey, Dan, I lost 1%. I'm super mad. But I think losing 1%, most people can stomach that risk. But if that 10x is now, that's 10% of your

• 24:45Speaker 01

  portfolio, which is super meaningful. And Bitcoin, as you've probably mentioned on on this podcast before, is uncorrelated. It's an asset that when you add it to your portfolio, improves your sharp ratio. So it improves your return per unit of risk. So Bitcoin as an asset is, I think, a necessity for any portfolio. As to what percentage, I think a lower one for most people due to how volatile it is. I mean, let's put it this way, I've lost a lot of sleep, and I'm surprised I don't have like a beard full of gray hair by now.

• 25:17Speaker 00

  I think there's a lot of folks who came in 2017 and 18, and they got a taste of the true volatility, right? Because when you have exposure to Bitcoin and you see, you know, 5% or 10% movements, that's okay. And then you even see things like, you know, an 85% drawdown, but that happens over an entire year. Okay, that, you know, obviously sucks, but like, it's a little bit each day. And so there's not one moment where you're like, holy shit. And then the really big volatile moment that happened since

• 25:52Speaker 00

  2017 or 18 was actually a 40% increase in one day. I think it was, you know, kind of mid last year. And so, you know, generally, most people had seen some volatility relative on the Bitcoin side, but not true, true volatility until in March, when there was a 50% drawdown in a single day. And I, you know, literally, there were people like, hey, man, like, is it going to zero? Right?

• 26:14Speaker 01

  I mean, let's put it this way, it didn't feel good. I'm not sitting there with 90% 90 plus percent of my net worth in Bitcoin, looking at it hitting 3800 and feeling very joyful that day. It was a, it was tough. I mean, it does become easier, but you really have to be convicted in the trade. You have to really believe in the trade. And that's where I think the word hodl actually means something a bit more than just Bitcoin. I think hodl represents being committed to an idea, whether that be a relationship or an investment. It's looking at it objectively and going, what do I find out of this? What do I really believe in? What are the traits about this opportunity? Do I find that I want to hold? And so hodl, I think, represents conviction. It represents, in this world of being able to,

• 27:00Speaker 01

  being able to easily switch between different options, it shows, it shows belief and conviction in something. And so, you know, to hodl Bitcoin requires immense amount of belief. What's funny is a lot of people, a lot of people got in late 17 and they, so they survived the bear market. And you earned your badge of, your badge of honor. You've, you've survived the bear market. You know, it's, it's kind of funny as you earn these stripes, you go through these moments where you encounter this like intense emotional struggle. But we're about to incur another one. Bull markets similarly, a lot of people don't think about it, but bull markets can have their own set of emotional issues.

• 27:43Speaker 01

  For example, what happens when an altcoin pumps and you're holding Bitcoin and you're tempted, because that altcoin just 3xed, you're tempted to go put your money into that. You hear the sirens call. Come, come join this new narrative, this new narrative around. EOS or whatever, it's a shiny new thing. And so you're tempted to take your Bitcoins and put them into something else. And that's its own unique challenge, different even so than I'd say like the bear market. It's a distinctly different challenge to hodl. So I think that hodl is that rallying cry for a Bitcoiner. And a lot of you guys survived your seventeen, seventeen through now. But now it's time to survive a bull run, and that's a little bit different.

• 28:23Speaker 00

  Yeah, and the other piece of the bull runs that people forget is, you know, I think it was in 2017. All of the gains pretty much came in nine separate days, right? So if you take out those nine biggest gained days, you pretty much would have been flat if not lost money in seventeen. And then I like to remind people, like, there's plenty of people who lost money in 2017 in Bitcoin, right? They're just trading around, being, you know, basically stupid. And rather than just holding the asset, trying to time the market. And as we know, humans are really good at selling when the price goes down and buying after it's ran up.

• 28:54Speaker 01

  Right, not a lot of people are incredible traders where they've got, they're plugged into different data feeds. They're able to fight that FOMO and fear. You know, really to be a good trader, you have to fight the opposite feeling of what you have. So if you're feeling greedy, then you sell. If you're feeling bullish, then you, or if you're feeling embarrassed, then you buy. And so not a lot of people have that. I think hodl is a great investment strategy as well. Like, these, these market swings will be incredibly intense. And unless you've got some sort of exit price or exit time in mind, then you're going to be shaken out through these intense cycles. You're right, in 2017, you've got very few days that were actually, you know, represented a large portion of the gains. And if you're day trading, like, you can't predict when that day will be.

• 29:38Speaker 01

  So your best option is just to hodl. It's also a little bit more peaceful, you just hodl and see what happens versus waking up at 2:00 a.m. and checking the price of Bitcoin on your phone, which we've all done. I still do it once in a while when there's an incredible bull run or there's a dip. And when it dipped down to 3,800, I gotta admit, I woke up a few times in the middle of the night to check, check the price and see what was going on. I wasn't worried it was going to go to zero, but it's always present, it's always there.

• 30:04Speaker 00

  Yeah, and that leads me to one of my favorite questions to ask people is just like, what would change your mind, right? So obviously, I think you and I both have very strong conviction in Bitcoin, in the protocol, and kind of the impact it can have on the world. But what are the things that could happen that would actually change your mind? Even to the point of you just throwing your hands up and saying, "Look, it's over, right? Bitcoin's not going to be what I thought it was, and I'm going to go do something else."

• 30:31Speaker 01

  Yeah, I got some flack from this on Twitter, but I'll bring it up here. It's about Bitcoin going below a certain price threshold. Bitcoin's price is incredibly important. Bitcoin's price represents the aggregate shared belief in Bitcoin. So the biggest worry that I would have is that FUD eventually permeates a Bitcoin hodler's mind so intensely that it would destroy their conviction. I mean, that's the only way to really kill Bitcoin, is you have to kill the belief of Bitcoin in every one of our minds. And, you know, when Bitcoin hit 3,800, that was still above crush depth. But with Bitcoin, as Bitcoin survives over the years, that's, you know, as Bitcoin survives, it builds more and more belief, AKA the Lindy effect.

• 31:15Speaker 01

  But Bitcoin hasn't gone below the last previous high, right? So in the 2017 bull run, the drawdown didn't go below 1,200, which was 2013's peak. And so you establish these higher lows. If we see Bitcoin break that, it sort of breaks the Lindy effect, where, you know, let's say 3,800, let's say we went down to 1,000. That destroys Lindy, because now in all of our minds Bitcoin could go lower than that last previous high. There is no higher low, and that sort of reverses Lindy. And so I call that like crush depth. And luckily, we didn't go there. And I mentioned on Twitter, I was like, "Look, I think there's a material issue if Bitcoin goes below like 3,000."

• 31:59Speaker 01

  That was the low for the 17 bubble, like 17 drawdown through 2020, 3,000 was the low. If we go below that, we're resetting Lindy. Bitcoin won't die, but it may take a few more decades than what we had hoped. And that, to me, is such a setback that I think could be hugely negative for the space. So, because if Bitcoin goes below that value, it means the aggregate shared belief of Bitcoin has evaporated.

• 32:28Speaker 01

  So it's not, the price represents that shared belief. And so people don't realize that. People go, oh, the price doesn't matter, but no, the price does matter. It represents all of us. And if no one puts in a bid and the price keeps dropping and no one was putting, none of us put in a bid, it means no one, none of us believe in it, which AKA means Bitcoin has died. So I do think that's a scary moment when, you know, if we saw Lindy effect get reversed, if we saw Bitcoin fall below that higher low, that to me would be a very worrying sign.

• 33:00Speaker 00

  Yeah, and it's really interesting that you think of it as like the price is a signal for belief. I don't think I've ever heard anyone really talk about that before, but I think it's a pretty, pretty good point.

• 33:11Speaker 01

  Yeah, I wrote an article called "The Information Theory of Money." So a lot of people have heard about this through the efficient market hypothesis, that the price of inequity represents all of the information out there about it. And so we can kind of think about it like a one-way hash function, where the price represents a one-way hash function of all the aggregate bullish and bearish sentiment over the price. If society, if all the individuals participating in the market felt differently, the price would be something different. You know, there, no one would have been a bid or no one would have sold. The price is that one-way hash function, that, that the compression of all the information in the world and represented in that one value.

• 33:53Speaker 01

  And I think that's really cool because it, it essentially shows us what people believe in Bitcoin. What's the aggregate shared belief? What's the, the whole world, what do we think about it compressed into one?

• 34:05Speaker 01

  And that's where a lot of people will go, oh, is, is the halving priced in? And I'm like, well, was it priced in in 2012 or 2016? It's priced in for those who care and there's not many people who care about Bitcoin. We're talking tens of millions, not even hundreds of millions, but there's billions of people out there. And so Bitcoin's priced in for those who already believe and care about it and it's not priced in for the 99.9% who haven't gotten in.

• 34:32Speaker 00

  Well, I wouldn't take it even a step further, right? So it's definitely not priced in for the people who don't care about it. And I would even argue back that I don't think it's priced in for everyone who cares about it, because there's a lot of people who hold Bitcoin who actually don't understand the halving, right? They don't realize how it works. They couldn't tell you how it works, and they don't have an idea of what the impact is. And even I'd go as far as to say, there's definitely people who hold Bitcoin right now who don't even know the halving's coming. Now, I don't think that's a big percentage, right? But there's some percentage of people who bought it, you know, a year ago, two years ago, three years ago, that's not paying attention to it. It's a long-term investment for them. Maybe they check the price every once in a while, but they don't even know the halving's coming.

• 35:14Speaker 00

  And so when you look at it that way, for it to be priced in, you would have to have 100% of people actually understand that this is happening, understand what that means, and then have consensus around what's going to happen afterwards. And I just always tell people, like, I don't think that you can say that with a straight face. Like, I just don't believe that, right?

• 35:35Speaker 01

  I think that's a great point. You know, you and I both get into weeds a lot, and I think we forget to zoom out and look at the average Bitcoin participant, who may not really look at any sort of technical analysis or look at any research reports. They might have just bought Bitcoin because their friend told them to buy Bitcoin and they have a Coinbase account. That's probably a very large portion of all Bitcoiners. So, yeah, I totally agree.

• 35:56Speaker 00

  So, one of the things that is top of mind now for a lot of people as they watch the Federal Reserve print trillions of dollars and other central banks around the world is this idea of a return to sound money and the fiat experiment coming to an end, right? Maybe it happens, maybe it doesn't, but one of those paths is Bitcoin as a global reserve currency. Another path could be a return to the gold standard. Maybe talk a little bit about just like, one, do you think that's feasible? And two, if we did go back to a gold standard, what would the impact on Bitcoin actually end up being?

• 36:35Speaker 01

  Yeah, so that's a really fun game theory, which is as governments across the world start to lose the faith of their citizens, the trust of their citizens, as they abuse their money, will they go, so a lot of, you know, people forget that Russia, China, and the US government all have gold reserves, and many others do as well, Germany, UK. So what happens if they return to the gold standard? What happens if they attempt to return to a period of being fiscally responsible? Well, I think we've kind of, with Corona, before Corona, I think that could have been a legitimate argument, but post Corona, with the amount of money printing that has gone on, I don't really see a lot of politicians wanting to peg themselves

• 37:17Speaker 01

  to gold, which would really limit their ability to spend, AKA provide benefits to their constituents, or perceived benefits to their constituents. I mean, when money printing occurs, we all pay for it. There's no such thing as a free lunch. It's, it's a good, I think, I think we could see central banks and governments do that if Bitcoin becomes a larger threat. So as Bitcoin grows in adoption, AKA price, it becomes a larger and larger threat. Let's say Bitcoin hits an eight trillion, 10 trillion market cap. Now it is legitimately a gold 2.0, a recognized globally as a gold 2.0. We could see banks, we could see these governments

• 37:58Speaker 01

  and central banks do that, going back to a gold standard. However, a lot of these aren't audited. We haven't audited Fort Knox in a very long time. It would severely constrain spending. And also, once you've lost that faith and belief by your, by your core constituency, they're not going to instantly believe you when you show them a bunch of shiny old rocks. They might only be convinced if you show them digital gold, something that is completely verifiable. With, with gold, we still have to have trust. And that's where, you know, Satoshi, when he first wrote about Bitcoin, said, you know, central banks and banks, they

• 38:39Speaker 01

  all require trust to work, and that's the core problem. So at the underlying, you know, belief in this gold, the belief in the central banks, the belief in the government, all resides in trust. And yes, they could go back to the gold standard, but they will probably have lost the trust of their citizens long before then, so it won't really make too much of a difference.

• 38:58Speaker 00

  Yeah, and it feels like, I think you talked about this on Peter McCormick's podcast, about this idea of greed being built into the protocol. And when you talk about Satoshi and some of the design, Bitcoin is beautiful, right? The design of Bitcoin actually works. Maybe talk a little bit and elaborate on that greed built into the protocol, what you mean by that.

• 39:22Speaker 01

  Yeah, so everyone remembers Gordon Gekko from Wall Street, where he says greed is good. What Satoshi, I think, thought was that greed is inevitable. Human beings have the innate nature to accumulate resources, AKA make more money, speculate to increase their amount of resources that they have in the hopes that the speculation, the speculative asset that they purchase goes up in value, then they can sell that and buy more things. So Satoshi, early on, before Bitcoin was worth anything, he built a viral loop into the product. And the one variable that he plugged in is that he assumed humans would be greedy, that they would speculate with Bitcoin.

• 40:05Speaker 01

  So Satoshi says, I'm somewhat paraphrasing here, but he goes, "As Bitcoin's value rises, people become more aware of it. And as they become aware of it, they start to buy into that increasing speculative value." And so that increase makes the price go higher. So he's essentially describing a FOMO viral loop, that as the price increases, that singularly alone will bring in new people. And that's incredible. Not a lot of people understand the depth to what Satoshi thought about how Bitcoin might succeed. Again, Bitcoin was not worth anything when he wrote this, which is incredible, right? So he knew that, he understood human nature really well, and I think that is something that a lot of people don't give him credit for.

• 40:48Speaker 01

  They go, "Oh, Satoshi coded up Bitcoin." Kind of, but his way, his marketing approach, like how he marketed Bitcoin to cypherpunks with the white paper was really smart. He used a lot of verbiage that they understood. The way he understood human nature when it comes to being greedy and speculating was really, really interesting.

• 41:09Speaker 01

  And then when we look at how Bitcoin protects itself, how proof of work works, then we see some really, really interesting characteristics. So a lot of people worry that through the halvings, the halvings reduce the amount of newly emitted coins. That's called the block subsidy. The block subsidy is a component of the block reward. Block reward is the subsidy plus transaction fees. Now, what miners do is miners expand capex, which is the ASICs, so the specialized mining equipment, and they spend ongoing OpEx on electricity. By from for doing that or proving that the proof of work, Bitcoin miners are compensated with the block reward.

• 41:54Speaker 01

  Now, some people worry that as the subsidy decreases in that block reward over time, that miners won't be compensated properly. But what's interesting is that as the block subsidy has decreased, we've seen the US dollar value of the block reward increase exponentially, and that's due to speculative bubbles. And as those speculative bubbles occur, we see a corresponding rise in transaction fees. So Satoshi understood, and Satoshi talks about this, and he says it somewhat in a comical manner, at least that's how I'm interpreting it. He goes, "There will either be a lot of transaction fees in 10 years or none." He's like, "It's either gonna catch on or not."

• 42:35Speaker 01

  But Bitcoin inherently, Bitcoin has been constructed to understand human nature to where if Bitcoin's value rises, the block reward will become greater, which will financially incentivize the miners to behave properly, which will then protect the network, which is now protecting more and more money. So as Bitcoin grows in adoption, the security grows as well. It's not a linear one-to-one, but it still grows. And so that is really cool, and I don't think a lot of people really appreciate that, that Bitcoin's security model grows with the growth of the network.

• 43:10Speaker 00

  For sure. Leads to the question, who do you think Satoshi is?

• 43:16Speaker 01

  That's a, that's a great question. I, I think, uh, you know, if you had to pick two, the Hal Finney or Nick Zabo. I mean, those are, those are like the two classic ones. I think Finney exhibits a lot of great characteristics. I did a tweet storm on Hal Finney a few weeks ago. I'm a, I've signed up for Cryonics. So I'm getting cryopreserved when I die, uh, just like Hal Finney did, but I wasn't influenced by Hal Finney. I've been into this for the last decade. Um, go ahead.

• 43:45Speaker 00

  Why do you think that, uh, it could be one of those two?

• 43:48Speaker 01

  So what was really interesting about Hal is that Hal ghostwrote PGP. Um, he understood that to be the face of something was to also take the flak for it. So Phil Zimmerman, who was kind of a face for PGP, he, I think, I think he had a legal battle with the US government for like 10 years. And so Hal ghostwrote PGP for, uh, largely known as ghost, he's been largely known to have ghostwritten PGP for Phil Zimmerman. And so that's a very unique sort of perspective to have as a cypherpunk. To actually put out their production level code that is scrutinized by US governments is huge. You've got Hal Finney also came up with reusable proof of work, a very core underpinning of how Bitcoin works.

• 44:34Speaker 01

  Um, he's one of the first people to be positive about Bitcoin. Hal Finney predicts Bitcoin could hit $10 million in Bitcoin in the first couple of months when Bitcoin's out. I mean, that's, I'm bullish, you're bullish, but that's, that's crazy bullish. I mean, Bitcoin wasn't even worth a penny and Hal Finney is going like, oh, it could be worth $10 million of Bitcoin someday. He also was the first recipient of a Bitcoin transaction and one of the first miners. Um, if we look at like Hal Finney's language and his writing style, he's very, very much like Satoshi, very patient, very calm. There has been some analysis done of his writing and it's somewhat correlated. So I think, you know, Hal clicks, you know, checks a lot of those boxes.

• 45:17Speaker 01

  There's also deficiencies though, and that's where I don't think it's clear cut that Hal or Nick, you know, that they are Satoshi. There's, there's gaps that don't make sense. So. Is it one person? Is it many? I tend to believe it's probably one or two. I don't really seen it be more than a few. I think, I think to keep a secret like that and to keep that amount of wealth that Satoshi mined early on, to keep that, you know, to not touch that, takes so much self-control and so much maturity. I, I don't know of a human in my network that would have that sort of self-restraint. So this individual, I think, this individual are a very small group. I think, it was probably one of those guys at least, you know,

• 46:02Speaker 01

  Satoshi himself says that a lot of the work was influenced by Hal, Nixalbo, WeDie, Adam Back. I, I think it's one of those two. They seem to be the closest fit. We're probably never gonna know. A good question that was posed to me was, as time progresses, do you think we'll become more or less likely to find Satoshi?

• 46:24Speaker 01

  I think we become less likely. You know, data decays over time. Satoshi gets older, people start to forget. I think it's a little tough to, to kind of pin down those details as, as those details kind of evaporate.

• 46:39Speaker 00

  It almost feels like there's a, a bell curve, right? In the beginning, nobody cares about Bitcoin, so who the creator is doesn't matter. Then you get into a highly speculative phase, probably actually like around seventeen and eighteen when literally like media companies were trying to figure it out. They really want to know. And then you get on the other side of the bell curve and Bitcoin is Bitcoin and people don't care about the creation story as much anymore because it's just this thing that they use, right? And as time goes on, kind of the history doesn't matter.

• 47:10Speaker 01

  Totally. I mean, I don't think most people could, could tell you who built the internet.

• 47:15Speaker 00

  Absolutely. That's a good way to look at it. What are, what are your thoughts on, on various other aspects of, of crypto? So things like DeFi, other blockchains, anything that you're, you're interested in, in understanding that, you know, you're probably very similar to me of like Bitcoin is the king and is really kind of the main focus of a lot of this. But is there anything else that you're kind of looking at saying, hey, that's interesting?

• 47:39Speaker 01

  Yeah, so I believe that Bitcoin, that blockchain was special purpose built to build Bitcoin. I wrote an article that was a comprehensive analysis of Bitcoin's security model. As people remember, earlier in this conversation, I talked about how miners are rewarded with that block reward. When you look at how this is all constructed, blockchain technology is very bad at doing almost everything. Like, it's not this general purpose, not this one tool for all things. It's blockchain's sacrifice and have trade-offs. And those sacrifices and trade-offs are really bad. I mean, you basically sacrifice everything to have a sound money, had to have a gold 2.0. And so, you know, we could look at it from that perspective, which is that

• 48:24Speaker 01

  a blockchain inherently can't do many things due to how it's built, due to the intricate nature of how it all works. Also, we can look at the empirical data. We can look at the 10,000 dead cryptocurrencies and go, or crypto projects and go, okay, well, it seems like all of these failed. And their hypothesis was that there are other use cases for blockchain tech. I think most blockchain tech out there now is basically trying to mimic the wealth effect of Bitcoin by producing a narrative that resonates. Ethereum is a good example. Ethereum started as a DApp platform. And they came out with that because that resonates very well with tech people. I live in San Francisco, I've been here for eight years.

• 49:07Speaker 01

  Tech people hear the word DApp and they go, oh, an app, and app, apps and app, you know, platforms, app stores and apps, oh, this is the new Apple. But for decentralized, you know, decentral, more decentralized nature. And so Silicon Valley wholeheartedly embraced Ethereum because they fundamentally don't understand sound of money or gold or the economic system at all, they understand apps.

• 49:32Speaker 01

  But as we saw, that was a, I would consider a gross, grossly misinterpreted or grossly marketed narrative. Because there's no way you can scale an application on Ethereum, right? Like, as soon as we saw CryptoKitties get any sort of meaningful attraction, which meaningful attraction means 10,000 users. I've built a couple of side project apps that have 10,000 users. Those were something I work on on the weekend, like this negligible, not even anything material, right? I've worked at Uber. I was on Rider Growth, which is that rider app is the app that you all call Uber. I was working on that team with Andrew Chen, like we're looking at metrics that are 10 to 100 million, right?

• 50:13Speaker 01

  And so, you know, this DAP platform narrative was basically fake. And so that dissipated fundraising platform narrative in 2017 for Ethereum. That also dissipated and now Ethereum, the Ethereum community is pivoting to sound money? Fucking kidding me? What? This is nuts. I, I mean, I remember going to Satoshi Roundtable in 2015, the first one. And they're all talking about Ethereum being this DAP platform and now they're talking about it being a sound money? It's crazy. So we're seeing one of the oldest alternative use cases for blockchain tech. We're seeing their narrative pivot to sound money. So I think overall, like the only surviving narrative here is probably going to be a sound money or money narrative.

• 50:58Speaker 01

  As we see that blockchain tech doesn't really work very well with other things. Now, of course, this is my personal opinion, doesn't represent my employer's, but yeah, just personally how I think about it.

• 51:11Speaker 00

  For sure. And I guess as part of it, right? You know, and I've, I've been very non shy about my thoughts on a lot of this. And it just feels like, one, there's a lot of people holding on to the narrative of what I'm built or what I'm working on or what I hold is quote unquote working. But the metrics to your point are in the grand scheme of things negligible at best, right? I mean, just, just the numbers that we're talking about here just honestly don't matter. And I think part of that is there's a balance between like you want to encourage the experimentation and the innovation

• 51:52Speaker 00

  and the work, right? Because it's good to have smart people working on things that are tangentially related and, and you know, kind of in the same industry. At the same time, there's this element of like, should you be working on the next project? Or should you actually be taking your skills and time and resources and devoting them to the most important project? Right? And I think that balance is, is hard for a lot of people to kind of think through.

• 52:16Speaker 01

  Humans respond to incentives and the incentive to print money is irresistible. So when humans were given the ability to print money by creating a token that represented some sort of utilization or some sort of narrative, they did it. And that's an irresistible function of humans. I don't think that it's necessarily a bad or good thing. It just was inevitable. Working on Bitcoin, there is no Bitcoin, you know, core, there isn't like a core entity that can give you a grant. There's nothing baked into the protocol like Zcash that gives, you know, X payouts for developers. And so working on Bitcoin is somewhat of a selfless act.

• 52:56Speaker 01

  It's hard to monetize that. And so other people felt that monetization through money printing was probably the easier way to go. You know, you're a growth guy. I'm a growth guy. I think you worked at Snapchat, right?

• 53:09Speaker 00

  Facebook and Snapchat.

• 53:10Speaker 01

  Facebook and Snapchat, yeah. So, you know, I find a very large lack of products and growth people in the space. You see a ton of engineers who, you know, their projects that they like to tinker on were never taken seriously. They never knew how to monetize it. They never knew how to like build a product around it. And so they went to market with their ICO. They went to market with a shiny tech idea. But as we know, to find product market fit, you can't start with a shiny tech idea. You have to iterate and find traction. That's to solve a problem for someone. And there are metrics to indicate if it's tracking closer or farther away from product market fit. One might be a flattening of the retention curve. To where users are sticking around and they're not leaving the platform anymore. They're not leaving the product anymore or the protocol.

• 53:56Speaker 01

  And so we've just seen a complete lack of product metrics and people came in and they bought these narratives. Because they were hoping it was gonna pump. And there was very few product minded people going, wait, so what KPIs are you guys monitoring to monitor success? They were like, I don't know, uh, trading volume. And so, you know, I think there's been a complete lack of product mindset in the space. Because money is easy. You can print money and make millions, tens of millions and even billions for some people doing that.

• 54:28Speaker 00

  For sure. You're at Kraken now. Talk to us a little bit about Kraken as a business and a platform, and then what you're doing there on a day-to-day basis.

• 54:39Speaker 01

  Yeah, so Kraken was founded by Jesse Powell. He's an incredible individual in this space. He was also part of those early meetups in San Francisco, and that's where I met him for the first time back in early 2013. Jesse put tens of thousands of his own Bitcoin into Kraken. I don't think there's many founders like that, and I think that's a story that not many people know, that I feel is important to reflect how much of a skin in the game a founder has in their own company. When you look at other crypto startups or other startups in Silicon Valley, that's a very rare thing to see, is a founder put a lot of their own capital into the company. So I have a lot of respect for Jesse putting his own money in, and I know it wasn't easy.

• 55:21Speaker 01

  I think there were some struggles in the 2015-2016 bear market to where things didn't look so good. And so Kraken, I think, is demonstrating incredible resiliency. It's one of the oldest Bitcoin crypto companies out there. Jesse's a great founder. I think a lot of what we'd lacked, though, I think we could be a little bit better on user experience, and I think that's something that we're cognizant of, and I think that's something that we're going to be working on in 2020. It's very top of mind. I know Jesse is really empathetic towards the average experience of both the retail trader and the larger traders and hedge funds and other institutional types. So that's what we're really laser-focused on, is making

• 56:02Speaker 01

  that user experience better, having more liquid markets, kind of going back to the basics a little bit, but I think these are very, very core functions of what we do. And you know, a lot of companies out there are going and building kind of more on a fringe, new experimental stuff, but I think we just want to provide that core service that we do really, really well.

• 56:24Speaker 00

  Yeah, it makes sense. And then maybe just talk a little bit about when people go and they sign up for Kraken, like, what exactly can they do on the platform? Because there's obviously the exchange component, but what else?

• 56:34Speaker 01

  Yeah, so Kraken is a spot trading, a spot exchange, which means you can buy Bitcoin. You can buy and sell Bitcoin, you can buy and sell other crypto assets. We do enable margin trading as well, so you can trade with leverage. I would recommend you only do that if you're a sophisticated trader. We also have a futures platform called Crypto Facilities. That's only for institutional types and that's in Europe. As well, we have Crypto Watch. So Crypto Watch is a multi-vine trading platform. You can also go there to check how Bitcoin and other crypto assets move in price. It's a really beautiful website, really well-designed. And kind of like, it might be a good replacement for CoinMarketCap. You know, with Kraken, I mean, our core function is buying and selling Bitcoin.

• 57:17Speaker 01

  If you look at our fee structure, we're one of the cheapest in the space. And if you look at Bitwise's real, Bitwise's real volume index, we're one of the most liquid real volume exchanges out there. This is also validated by KaiKo and by Whalepool. So when you see a price at Kraken, when you see volume at Kraken, when you see the depth of the order book, that's real volume. And a lot of the crypto space, you're going to see exchanges with fake volume. They're going to manipulate the numbers, they're going to add zeros to it. They're going to have different, you know, they're going to have bid and ask orders where as soon as you trade against it, they evaporate. Kraken, through independent third parties, very much shows that Kraken has true volume and has, it's a, it's a very pure exchange in terms of what the, the execution that you

• 58:02Speaker 01

  get, what you see in the order book is real.

• 58:05Speaker 00

  And I think if I remember correctly, Jesse had told me that like, most of the company is remote, right? And kind of very decentralized in nature?

• 58:15Speaker 01

  Yeah, so Kraken, so Kraken very much embodies a lot of the OG crypto culture, which I think can kind of be evidenced by the recent hirings of a couple of different individuals over at Kraken. But yeah, the the remote first culture is kind of a core component of that decentralized OG crypto nature, you know, to not have one centralized place where someone could come in and and cause damage to Kraken. Kraken is very much distributed first. So I work in San Francisco. I work in the San Francisco office, but very few people actually go to the office. It's most people work from home. Everyone is remote first and you're then is a few offices across the world. You can then go work in those offices if you like, but naturally

• 59:00Speaker 01

  everyone is remote for remote first.

• 59:04Speaker 00

  Got it. Makes sense. Before we wrap up, I'd asked everyone for some questions on Twitter, and my favorite one came from Catherine Coley, who said, what was the biggest obstacle in your life and how did you get through it?

• 59:20Speaker 01

  Yeah, that's that's a really good question. I think it was probably my transition to tech. I was an analyst at a small investment firm in Dallas. That's where I'm from originally, and that was my first job out of college. They relocated me to San Francisco in early 13. And so when I built Zero Block, I was actually building that while I was working full time as an analyst at at the small investment firm. I didn't know anyone in San Francisco, but I moved out here. I'm sorry, I knew my roommate. He was the only person I knew when I moved out to San Francisco. I didn't have any buddies from Stanford or Berkeley. I didn't know anything about growth culture, growth mindset

• 1:00:03Speaker 01

  or product mindset. I knew nothing about how what the whole product even meant. You know, I I really didn't know and understand anything about tech. I had no idea how startups were fun. I created how you iterate and find product market fit. And so my greatest struggle was my stumbling and bumbling into tech. That's the way I put it, because honestly, a lot of it was luck. A lot of it was pure obsession to go build something great with Zero Block, for example. And I think a lot of people might find this a little bit humorous. So back in 2013, you might remember this, but on mobile, Apple recommended that apps be designed that were to be designed as skeuomorphic. So skeuomorphic meant that buttons looked like buttons.

• 1:00:48Speaker 01

  Now, when you look at an app, it's all flat. And that's called flat UI. It's a kind of very slick futuristic looking. Most, most apps have that design aesthetic. So when I designed Zero Block, because I was everything other than the code, I designed it with flat UI because I didn't know how to make bevels and stuff in Photoshop. So I, I literally, you know, I obsessed over making it really simple because I couldn't design anything more complex. So the black and white, the black and white aesthetic was because I didn't want to have a color palette that was, is more difficult to work with. Um, people loved it because it was so simple. And that kind of built my foundational knowledge about how to build great products is

• 1:01:29Speaker 01

  delivering value to the user right away demonstrates why they want to use the product. So I, you know, I didn't put an onboarding flow in because that would be more work. You know, I launched them right into the product and simply showed them what they cared about. And so that, that kind of, you know, through that stumbling and bumbling process, I learned in tech, the core fundamental components of building great products, how teams work with each other, how to work and build and iterate and go launch and be successful. Also how to fail. With, uh, with Changetip, we failed. We didn't find product market fit. So, you know, with a lot of that as well, I had experience in early crypto startups. That doesn't get you a job in Silicon Valley.

• 1:02:14Speaker 01

  Uh, it didn't really mean much at all. So when I got a job at Uber, that was a very like lucky stroke to where I was very specifically new. Uh, I specifically understood a very intimate thing around app stores. And that's what Uber hired me for. And that kind of like opened up my experience to a bigger tech company to understand how they operate, how they think and grow product from 10 million monthly active users to 100 million. So I would say the biggest challenge in my life was, was getting into tech. And it's something that I'm personally really passionate about. I've helped two buddies get into tech. Luca, which is a big tax company in the space, Jake Vincent and I played high school football together. And he slept on my couch three months when he started Luca in San Francisco.

• 1:02:59Speaker 01

  So, you know, once I kind of moved up the ladder a little bit and understood tech, I helped a bunch of buddies from Texas get out here. And also I invested in like a buddy startup called Career Karma and they help people learn how to code. So for me, it's kind of a, it's kind of a, you, once you get there, you got to help others come along the way. So it's a, it's a big passion for me.

• 1:03:19Speaker 00

  For sure. I recently had Ruben Harris from Career Karma on the podcast.

• 1:03:26Speaker 00

  For a, for a while. What, um, what's the most important book you've ever read?

• 1:03:34Speaker 01

  That's a, that's a good question. I mean, that's hard. It's kind of like asking what your favorite flavor of ice cream is, or like what your favorite food is. It's kind of depends on the mood a little bit.

• 1:03:45Speaker 01

  Man, I, you know, the Bitcoin standard is pretty phenomenal. I think as a Bitcoiner, of course, that's like a go to.

• 1:03:54Speaker 01

  Let's see, you know, some of my earlier books that I read that I think really kind of changed my perspective were like around Malcolm Gladwell. That was really cool. I think Malcolm Gladwell was, it kind of enabled me to zoom out a little bit and kind of think a little bit more about behavioral. Things and how humans respond to different sort of sets of incentives and, and, uh, you know, how to look at data. And this, this was when I was, you know, pretty young. So I think that was kind of formulative in terms of helping me better. Kind of zoom out and zoom out from like what you learn in school context and zoom out and kind of understand that more behavioral side of things. So I think that that's probably one of my favorite earlier books that I read.

• 1:04:36Speaker 00

  For sure. I got one more question for you than you had to ask B1 to finish up. Uh, we got to talk about aliens. Believer, non-believer?

• 1:04:44Speaker 01

  Well, certainly, given the vastness of space, we would likely see a lot of alien life. I find that somewhat probabilistic. How much intelligent life is there? I think we might find a lot of goo out there. We might find a lot of moss and fungi and very primitive life forms. Something that does worry me is that when we look into space, if you were to build like a Death Star or a Star Destroyer, all those big spaceships in Star Wars, if those were moving around space, we would see huge energy displacements. I mean, these things are gigantic. But we don't see that anywhere. We don't see any abnormal energy displacement across the whole universe, which would be kind of scary if

• 1:05:26Speaker 01

  we are the only advanced species out there. So intuitively, I would say we should see a lot of life. Is it intelligent? Maybe, maybe not. I am a little bit, it's a little sad to see that we don't see a lot of energy displacement from like giant civilizations way out there, which I don't know if that's a good or bad thing. But I kind of refuse to believe that aliens are this like evil malicious sort of species. I think if they achieve that level of consciousness and they can build spaceships that travel across the universe, they're probably not going to come check us out and then destroy us. I think that's kind of a very human sort of thing to feel, which is, oh, what if this new weird thing comes and hurts me? You know, I think with any new technology or any new

• 1:06:09Speaker 01

  thing, we were scared of it naturally. So I think if we did encounter aliens, it would likely be a, it would likely be a good thing.

• 1:06:18Speaker 00

  Yeah, it's a weird thing. You're not freaked out by any of the UFO videos that recently got released?

• 1:06:26Speaker 01

  Man, I don't know. I mean, those are pretty wild. I watched a few of those and, you know, I also don't think that if I'm an alien species and I fly a billion years or some shit, I'm not going to come around and mess around with Navy fighter pilots, right? If I'm going to show up, I'm going to show up in a pretty grandiose style. I'm going to roll up and be like... Hello, you know, I, I think kind of playing, uh, playing tag with fighter jets is a little bit of our imagination kind of running wild as to what an alien species might do. Let's put it this way, if I'm an alien, I travel that long, I, I want to have some meaningful conversations. I don't want to play tag with fighters.

• 1:07:07Speaker 01

  So I think those are likely to be anomalies, uh, like flight, you know, like maybe some light anomalies or tracking anomalies, but you know, I don't know how that equipment is manufactured. So I, I really can't, uh, I don't know how real it is or not.

• 1:07:21Speaker 00

  Yeah, I, uh, I have no clue, but, uh, but just the fact that they're releasing it is, uh, is pretty interesting. Uh, what one question do you have for me to, uh, to finish this thing?

• 1:07:33Speaker 01

  Well, what are you most excited about in terms of technology with Bitcoin? Like, um, it can be a product or service built on top of Bitcoin, or it can be an improvement to the core protocol.

• 1:07:44Speaker 00

  So I'm going to cheat, I'm not going to give you a technology answer. I'm going to give you a, a boring, but, uh, but I think powerful, uh, perspective, which is, uh, time. I, I think that that's the most important thing. Um, and it's the thing that Bitcoin has on its side, right? If, if you think of, um, most technology, uh, they get built on, uh, and, and there's a timeline to it. So especially when you raise money, right? Um, in a venture capital, private equity style, uh, I, I like, I think it's Andrew Wilkinson, uh, from Tiny always says like, it's like raising money and then getting a gun put to your head and basically do X before, you know, the gun gets pulled. Right? Um, and, and so I think that there's these artificial time, uh, lines that get put on a lot of technology,

• 1:08:28Speaker 00

  uh, advancements in companies and things like that. Um, but at the same time, this isn't just a technology play, right? Kind of this idea that money is a belief system and it takes time to build trust. It takes time to build that belief, uh, it takes time to, uh, educate people and get that buy-in. And so I always look at it just like, what's the most important thing for Bitcoin? It is the expiration of time, which sucks as an answer because people want instant gratification and they want to know how they can kind of, you know, accelerate this. And do all this stuff, but the time kind of interlaces with that as well because it takes time for developers to build products. It takes time for liquidity to build up. It takes

• 1:09:09Speaker 00

  time for people to get educated. And so it's kind of this weird overlap, but everything to me just revolves around time. And the nice thing is, you know, so far, so good. We're what 11 years in or so. And, and I think people are actually blown away by how much Bitcoin has accomplished in that time period. And so when you look out kind of another 11 years, it's like, well, you know, what could it do in that time period? Like, I think we're all gonna be pretty surprised, right? And so I always fall back to the Bill Gates quote of, we overestimate, you know, in one year what we can do, but we underestimate what can be done in 10. And so I think that's, you know, Bitcoin is kind of the epitome of that. And so we'll see kind of what happens there.

• 1:09:54Speaker 01

  Yeah, I totally agree.

• 1:09:56Speaker 00

  Awesome, man. Where can we send people? If they listen to this, they want to get in touch with you, with Kraken, where would be the best place to send them?

• 1:10:05Speaker 01

  Yeah, so for me, if you're, you know, if you want kind of more shorter, quicker takes on Bitcoin, you can find me at Dan Held, twitter.com/danheld. If you like more long form content, you like to spend some time reading a long article, you go to danheld.com and check out my blog. For Kraken, I'd say go to kraken.com. A lot of people listening to this are probably getting more interested in the spot exchange where you can buy and sell Bitcoin. Go to kraken.com, you can get signed up there. If you're interested in Crypto Watch, I think Crypto Watch is a really phenomenal way for you to go check Bitcoin and check the price of Bitcoin and other crypto assets. That's Crypto Watch. And so just give that a quick Google and you can go find that. But yeah, those are the two products I'd recommend at Kraken. And Pom, thanks for having me on. Really had a good, really had a great conversation

• 1:10:50Speaker 01

  with you and I'll see you around.

• 1:10:52Speaker 00

  Look, man, you've been doing this for a long time and your enthusiasm has not dissipated, which I think is important. So keep it up and we'll definitely have to do this again.

• 1:11:02Speaker 01

  Sounds good. Cheers.