Marty Bent: The Secrets of Bitcoin

Marty Bent is the Editor In Chief at Marty's Bent, a newsletter about Bitcoin. He's also the host of Tales from the Crypt, a podcast about Bitcoin. Marty is one of the most knowledgable people in the space. In this conversation, Anthony Pompliano and Marty cover all thing Bitcoin, crypto mining, why hash rate is way more important than people are giving it credit for.

• 0:03Speaker 00

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:15Speaker 00

  Marty Bent is the editor in chief at Marty's Bent, a daily newsletter about Bitcoin. He's also the host of Tales From The Crypt, a podcast about Bitcoin. Marty is generally one of the most knowledgeable people in the space. And this conversation covered all things Bitcoin, crypto mining, and why hash rate is way more important than people are giving it credit for. I hope you enjoy.

• 0:35Speaker 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. So Marty's here, we got a bunch of stuff to talk through today. Before we get started on the smart people stuff, let's just go through your background real quick and how the hell you got into crypto.

• 1:12Speaker 01

  God, my background, I think I have one of the most, I don't know if I can say this for certain, but one of the most peculiar, peculiar career paths out of anybody I know.

• 1:24Speaker 00

  Bam, we're starting with big words on the podcast.

• 1:26Speaker 01

  I'm not very good at big words, so if I mess them up, don't make fun of me. Yeah, so I started, let's go back to college, I was studying economics in Chicago at DePaul University. Luckily there, living and going to school in Chicago, you're afforded some opportunities just being in the city. So I interned at a managed futures fund, starting, I believe, the end of my junior year and then basically worked full time my senior year and took night classes. So Dearborn Capital Management ran a couple of LPs and suite of 40 act funds, specifically investing in CTA managers.

• 2:08Speaker 00

  Alright, so you're doing that all in Chicago?

• 2:10Speaker 01

  Doing that in Chicago. At the same time, I was studying economics, this is around like 2012, when I first sort of bumped into Bitcoin. I forget exactly what it was, but I was writing a paper on monetary policy for... A money and banking class I was taking and like was just Googling monetary policy, like weird monetary experiments on Google and stumbled upon the white paper and people talking about Bitcoin. Didn't think much of it, I was like, yeah, this might be interesting and then as happened to a lot of people, I think, late 2012, early 2013, people started writing a lot about

• 2:50Speaker 01

  the Silk Road, so that piqued my interest again and while all this was going on, I was working at the futures fund and part of my job there was to write commentaries and lead monthly and quarterly calls with the CIOs of the hedge funds that we invested in. So, part of my job was being a central Bangkok around the world, sort of following their policies, seeing what they were saying, whether they were coming close or not to hitting their projections and whether they were meeting their goals and basically how their policy changes affected markets and how our fund performed based on those market movements. So, I got really into monetary policy and specifically how central banks crafted, how they set their benchmarks, how they look back at their benchmarks and, and, and sort

• 3:34Speaker 01

  of, after three years of observing, I'd sort of realized that they never hit those benchmarks and was like, alright, this is a little fucked up. And so, back step a little further, so I was a senior in high school in the fall of 2008 and just so happened to be taking a intro to economics class and this is when the world was going to shit, so in that class in particular, we went through the TARP bill, the teacher was very astute and very in our faces like, hey, this is something wrong that you guys should probably pay attention to going forward, like this, this is not the way an economy should work. So they were on top of it? My teacher was, yes, luckily, so that's sort of what set me on the path and led me to Bitcoin.

• 4:15Speaker 01

  Yeah, so I was that analyst at the Man of Futures Fund, like, we should be paying attention to Bitcoin, we should be paying attention to Bitcoin. I got laughed, laughed at enough, I decided, you know what, I'm gonna go learn a couple new skills, I decided to quit there and go take a digital design bootcamp to learn about US. And how how basically how users love the apps that they love and how somebody designs a process and how apps are designed in general. And that was a really good course on like human psychology and sort of learning why people interact with the apps that they do.

• 4:49Speaker 00

  Yep.

• 4:50Speaker 01

  Uh, was still in Chicago at that point, uh, decided to move here to the Big Apple. Jump uh, straight into this hellscape and uh.

• 4:57Speaker 00

  Concrete jungle?

• 4:58Speaker 01

  Yeah, I worked for a software company uh, to learn more about backend development and stuff like that. We specifically worked with. Uh, CMS is more specifically Drupal. So it was really introduced to uh, to the FaaS mentality when working with Drupal for two years. And really got an up close and personal sort of uh, uh, experience with uh, a decentralized, a free, open source software community, which was. Which made my understanding of Bitcoin even better over time. And then uh, then yeah, somehow I got, I got here sitting next to.

• 5:31Speaker 00

  Well, what's interesting about it is uh, you almost went reverse, right? I think a lot of technologists over the last two, three, five years have started to learn monetary policy. And you almost went, you know, the other way first, right? You basically were studying economics, monetary policy, and then got into the tech side. Um, I was in the, I had a major in economics as well in college and. Like pretty much every economics course, if the professor's worth anything, they basically tell you, hey, this is how it's supposed to work. And then like, this is actually how it works, right? And the difference is pretty stark in a lot of economies. And so. Um, I think people who have that economic background, um, and then go into tech. Realize that like, hey, maybe the tech is actually better than humans at designing this stuff, you know, governing this stuff, et cetera.

• 6:14Speaker 00

  Um, and so the fact that then we end up with Bitcoin, blockchain, et cetera, is kind of a culmination of a lot of that. Um, and so it's super interesting to hear that that's, you know, your path in.

• 6:24Speaker 01

  Yeah, no, it was a strange one and it was, uh, I'm happy it uh, unraveled the way it did. I think uh. It wa- it wasn't easy at times, you know, going from like a cushy finance job to, to living on a buddy's couch over the summer, but. Uh, well worth it because then I had this sort of well-rounded uh, experience. Uh, obviously knew a lot about Bitcoin. So in Bitcoin in particular, I was a lurker for like the first five years I was in uh first four or five years I was in just had my list on Twitter would like tweets retweet every once in a while, but we never really put my voice out there and then uh last May. Or actually no, it was my birthday last year. My parents were down in Brooklyn.

• 7:04Speaker 01

  We got we got we were getting dinner and my birthday is in June doxing myself. And obviously it was when like the the the pump of last year was beginning to build and I was getting texts and DMs from friends and family like what about Bitcoin, what should I know about Bitcoin? I was like it was getting overwhelming. I was telling my parents this at my birthday dinner. My dad uh has a finance background as well. He's like, you should start a newsletter just to to sort of. Give little bits of information to these people every day. So that's how it started. The original list was like 10 people that I sent it out to and then I was like, all right, I'll just share these links online.

• 7:38Speaker 00

  Yep.

• 7:39Speaker 01

  And it took on a life of its own and so.

• 7:41Speaker 00

  It's amazing.

• 7:42Speaker 01

  That was the first iteration. So with that, I tried to bring like a bar stool of voice to try to make Bitcoin and the space over. The overarching space sort of approachable for people who want to learn more but aren't as technically inclined as as as a lot of the hardcore Bitcoiners are.

• 7:58Speaker 00

  Absolutely. Well, it's also uh it's just a really scary, complex subject from the outside, especially if you know nothing, right? And so if you can make it approachable, there's still complex subjects that you have to understand, but it's easier to at least get started.

• 8:09Speaker 01

  Yeah.

• 8:09Speaker 00

  Right? Um, all right. So let's let's go through uh you're talking about central banks earlier, you know, economies and how basically they don't work how they're supposed to. One of the promises of Bitcoin is it's sound money, right? And this idea that it is a better designed system that should provide a whole host of advantages uh over a long period of time for a global population. Walk me through when people say Bitcoin is sound money, what do they mean? And then we can get into kind of what that impact would be if it actually comes to fruition.

• 8:40Speaker 01

  Yeah, so I guess the most simple definition of sound money is a monetary good that is inherently scarce, that has no ability to be inflated away by by central bankers or governments or central authorities in general. I would I would argue that a sound money has to be somewhat apolitical where everybody has a

• 9:06Speaker 01

  what's the word I'm looking for? Everybody has a equal opportunity to sort of participate in the network. Like, anybody can go mine gold, anybody can go mine bitcoin. So as a sound money, something obviously that the the supply is scarce, it's not able to be inflated away. And then, yeah, so at its simplest form, I think that's that's what I would, I try to keep it simple stupid. So that's what I think it is. And then, why am I for sound money? Again, after the, and I think it does really hearken back to my my personal experience, like being a senior in high school and taking that class in the fall 2008 where things were going to shit, studying economics in college during QE1, 2, 3 Yep.

• 9:45Speaker 01

  Infinity, and and then falling into bitcoin as well. So I think sound money is important because what I don't think people realize is is when money is created, when money is printed in our economy in the US, and people just focus on the Fed in the US. The people closest to the spigot of the money creation have an unfair advantage to the people below them. So that's naturally banks that that get access to the the Fed window. Yep. And I just think that's is from a moral standpoint, a bit immoral in the system. So a system based off a sound money. And before getting into that, the advantages that are afforded to these people closest to this bigot,

• 10:26Speaker 01

  I think they, in the long run, are a detriment on society. So reverting to a sound money seems more ethical to me. There's a really good back book, The Ethics of Sound Money. It's on Mises.org. I for, I can't pronounce, Holsman is the is the author, I forget his first name. But really, he wrote it in 2007 before bitcoin was even Wow. a thing. And he really dives into the ethics of sound money. And it's it's very interesting, the the lack of education around money creation. Yep. And so. Yeah.

• 11:00Speaker 00

  It's funny because we talk a lot about, so let's use your spigot example, right? Not only are the people closest to the spigot have the economic advantage, right? In terms of, you know, capitalism, etc., but also the security of that asset. The farther you get from the spigot, the less secure it is, right? So if you think of, you know, how many people have ever broken into the Fed? Stolen money, right? I don't think ever. And so if you kind of walk all the way down, then when you get into a bank, right? Somebody can come in and steal it through, you know, bank robbery, etc. But there's insurance and it gets replaced. Then all of a sudden, if it goes into, you know, cash in a safety deposit box and you walk all the way out until there's cash in your pocket and somebody can come up and just rob you, right? And so the farther you get from the spigot, not only is there less economic advantage, but also there's less security, right?

• 11:45Speaker 00

  And so, you know, those two things are, you know, in my opinion, correlated to some degree of the people with the greatest economic interest make sure that they have the best security. And the people with the lowest level of economic interest obviously have lower levels of security.

• 11:58Speaker 01

  Well, I wouldn't even, I wouldn't even attribute that to like secure, like anybody could put money in a bank, no matter how, how poor you are and have a certain sense of security. But the insecurity of the actual money in your bank account is another thing. Like, so right now, I think I saw a tweet, German banks are starting to institute negative interest rate policies against people with 200,000, I mean, this is affecting the rich first. People with more than 200,000 euro in their banking account.

• 12:26Speaker 00

  Something like that.

• 12:27Speaker 01

  Yeah.

• 12:27Speaker 00

  Yeah.

• 12:28Speaker 01

  So that's a way like your money can just be insecure. Just, it doesn't even matter where you're holding it. Just like the whole nature of the underlying money is just not secure from a first principles.

• 12:39Speaker 00

  Well, you don't own it, right? Once it goes in the bank account, right? The whole idea of a bank run.

• 12:43Speaker 01

  Yeah.

• 12:43Speaker 00

  Right? Is if all of a sudden everyone comes and says, give me my money, they don't have it.

• 12:47Speaker 01

  Well, that's, and that leads to another thing, like the existential question, what is money? And I think that's a lot of, that's one thing Bitcoin's doing that I'm probably most excited about is having people question these types of beliefs, like what the hell is money? Like, people never questioned it before, at least I didn't before 2008, 2009.

• 13:07Speaker 01

  And I think that's one thing that Bitcoin has sort of sparked, almost like a new enlightenment or Renaissance type of thinking around these subjects.

• 13:16Speaker 00

  Absolutely. Alright, so let's keep talking about kind of security, but let's go to the security of the Bitcoin network, right? So, obviously mining's a huge component of that. One of the big knocks against mining, which I know you've spent a lot of time on, is this idea that Bitcoin has a abnormally high amount of energy consumption in order to run the network.

• 13:35Speaker 00

  Agree, disagree, and kind of what's your response to people who say that?

• 13:40Speaker 01

  Well, it's interesting. It's hard to know exactly how much exact energy Bitcoin is consuming on a daily basis. So number one, that's hard. Number two, I mean, actually staying on number one, a lot of people actually think it's way less than 1%, like around less than a tenth of a percent right now. But that's not what we're talking about now. Number two, like people just assume that it's all dirty energy and that it's wasteful. So what people don't understand is that a lot of Bitcoin operations, especially here in the West and even in China. China uses a lot of coal, I'm sure, but they use a lot of hydroelectric energy as well.

• 14:23Speaker 01

  And one thing we're finding here in the US is some miners are going to, like in West Texas, going to oil fields and basically siphoning the excess natural gas that is being led into the atmosphere at these energy distilleries, oil distilleries. And basically, so that would be wasted energy if these Bitcoin miners didn't show up and instead of sending that, it's either methane or natural gas.

• 14:51Speaker 00

  Pollution.

• 14:52Speaker 01

  Yeah, sending that into the air instead of wasting that and polluting the atmosphere more, they're actually using that, harnessing that energy and turning it into Bitcoin and creating a whole online economy, which is incredible. It's something we've never had before in the course of human history, is basically a 24/7 live energy market.

• 15:12Speaker 00

  Well, it's interesting too, because so we've built a number of these mining facilities, right? That's how we got into Bitcoin. And one of the first ones that we built was at a plant where we'd invested in a company that took car tires, right? Put through this thermal demanufacturing process, which is just big words for burns the tires in a controlled environment, captures all of the excess output, right? And so it turns that car's materials into oil, steel, carbon, and syn gas, right? You sell the oil and the steel as a commodity, you get the carbon and syn gas, you can turn it into power. And rather than sell it to the grid, or allow it to just evaporate, we capture it and mine, right? And so like you can do this with natural gas, you can do this with, you know, these thermal demanufacturing processes. And so, you know, I think your point is that

• 15:56Speaker 00

  actually those aren't energy consum- like net energy, or net new energy consumption. Actually, what you're doing is you're capturing excess energy that could be harmful to the environment from a different process.

• 16:07Speaker 01

  Exactly. And it's not wasteful at all. It's actually very, very efficient. Like it's an efficient market if that's happening. If it's like, alright, this unused energy would otherwise be discarded. If you're turning that into useful, productive energy, then all the better for humanity in the long run. And then on top of this, people don't understand, like people, what's the benchmark for how much energy Bitcoin is wasting? Like, what are we benchmarking it against? And so everybody sees the stat, like 1% of the world's consumption's being used to mine Bitcoin. Number one, that might not be true. And number two, alright, what's the benchmark? And what type of, just because it's 1% of the energy consumption,

• 16:50Speaker 01

  what type of energy is it? And we're finding that it's mostly hydroelectric, or energy that would otherwise be wasted, and more harmful to the environment than if it was, if it was used to mine Bitcoin.

• 17:00Speaker 00

  Absolutely. Well, and also, I think if you compare it to US dollar production, right? So if you talk about this benchmark, if you just say, hey, what other types of money do we have? And what's that energy consumption to create the money? The US dollar, I think I'm getting this right, is like more than 10 times on an energy consumption basis than what it takes to run Bitcoin network. And so, is that good or bad? I don't think we know yet.

• 17:25Speaker 01

  No, we don't know. You can get even heady with it. Like, how much energy do we expend to uphold the dollar status as a reserve currency of the world? Like, how many wars have we gotten into? How many countries have we bombed to uphold this status of the petrodollar? If you want to talk about energy expenditure and wasted opportunities, like, let's talk about that.

• 17:45Speaker 00

  Yep.

• 17:46Speaker 01

  But, uh, a lot of people, a lot, it's, a lot of these subjects are too hard to dive down. People like to see what's been say, being said at the surface layer and that's what they tend to believe. And I do that with other subjects as well.

• 17:59Speaker 00

  Of course. Alright, so I saw that you were, I don't think you tweeted this, I think you retweeted somebody who said, uh, you know, Bitcoin mining's been transformed, or is in the process of transforming from a CapEx game to an OpEx game? Talk more about, you know, what does that mean and how do you see that actually playing out, um, you know, kind of in practice?

• 18:19Speaker 01

  I think, uh, I'm not an expert in this area, but I think what we're seeing is the, the price to manufacture ASICs is going down, is getting driven down. So, uh, mining's going to be most, uh, sort of most profitable at, at the steps before and, uh, after these miners get turned on.

• 18:38Speaker 00

  Yep.

• 18:39Speaker 01

  Not when they're, when they're bought. Um, so who can design the most efficient chip, which, that would be a CapEx, I would, isn't it?

• 18:46Speaker 00

  Mm-hmm.

• 18:46Speaker 01

  Yeah, that would be CapEx. But then operationally, when you find, uh, enough energy at an efficient price, like, how are your miners set up? Like, how are you fine tuning it, uh, at the hardware and firmware level to, to get the most, uh, energy per hash, you know?

• 19:02Speaker 00

  Yeah. Well, and part of it too is, do you think that the CapEx, uh, requirements are coming down because there's just more competition around chip design, hardware design, um, and a lot of the people who maybe were building, you know, GPUs, CPUs, et cetera, over the last couple of decades are now realizing, hey, there's a lot of money to be made here. They're rushing in, competition brings, you know, not only innovation up, but price obviously goes down. Uh, and the manufacturers, that pressure as well, uh, through their supply chain, is that? About right?

• 19:32Speaker 01

  I mean, I, I don't know for sure, but I would assume. So I actually have a good anecdote here. My, uh, my wife's aunt, I guess my aunt by extension too.

• 19:41Speaker 00

  Is that a step aunt?

• 19:42Speaker 01

  A step aunt, step auntie.

• 19:43Speaker 00

  Just checking.

• 19:44Speaker 01

  Um, she works for a company that, that sells, uh, GPUs and ASICs like at wholesale. And last year in particular, you had like a massive shortage, uh, towards the end of the year. And she was like, I could not figure out like why GPU mines specifically, GPU computers specifically, you know, GPU chips specifically, uh, were sold out. Like I've never seen anything like this. We assumed it was gaming. And I was like, no, it's like people mining cryptocurrencies. So just like an anecdote out from the field there, there, I mean, last year there was the massive rush for all these types of chips. And, uh, if you're a believer in efficient markets, that, that supply is gonna, gonna get, uh, or that demand's gonna get, uh, gonna get quenched with supply at some point, you know?

• 20:28Speaker 01

  So the, the mode of profit is there and like Bitmain, for as much as people, uh, hate them, like they took the rest risk in the first decade of this technology, uh, they really went full on. And I think they set like a floor, like, obviously Bitmain has a bit of a reputation in the space, but I would go and thank them as well because they're right. You proved that this is something worthwhile and can be profitable for your competitors. And now they're deciding to get in the game.

• 20:55Speaker 00

  Well, and you know what's funny is I, I read about this earlier this year. Um, so last year, uh, if you think about supply and demand, right? So the supply of hardware for crypto mining drastically lagged behind the demand, right? So also you saw this huge spike in demand, everyone wanted to mine, not enough hardware, prices spike, right? Because of the supply, demand, uh, offset. And then all of a sudden, as prices start crashing in the crypto markets, demand starts to flatline and eventually decline. But because of the lead time of manufacturing, what ends up happening is the suppliers had, oh wow, this is a huge business. They'd ramped up all this production and now they're sitting there with, you know, an overflow of hardware. And so now they gotta liquidate it, right? And so you just saw the prices, uh, just plummet. And so I, I literally know people who are buying.

• 21:41Speaker 00

  S9s at about forty five hundred dollars per machine in like late January this year. You can go buy an S9 right off, you know, Bitmain's website for like six hundred bucks, five hundred bucks.

• 21:51Speaker 01

  Right.

• 21:51Speaker 00

  Right. And so we're talking in less than 12 months to see that type of decline in the price of a piece of hardware. Um, is pretty incredible.

• 21:58Speaker 01

  It's absurd. It's like, and at the same time, you look at the hash rate, like I checked the hash rate today. It's sixty two X a hash. It was at like six X a hash last June, like.

• 22:07Speaker 00

  Mm hmm.

• 22:07Speaker 01

  It's gone 10 X in 13 months or 14 months, which is insane.

• 22:12Speaker 00

  So, so let's dig into this because I think this is part of.

• 22:14Speaker 01

  Exa hash.

• 22:15Speaker 00

  We're, yeah, we're starting to get into some of the more complex pieces around mining in the network. Explain what that is and why it's important to people.

• 22:24Speaker 01

  All right. So again, I'm not an expert on this, but uh, so the, the amount of energy used to secure the Bitcoin blockchain. Uh, right now is at sixty extra hash a second. So to, to add up, is it to add a block uh, to the network. You, the, the cumulative hash rate around the world right now is expending like sixty two X a hash of energy per second. Or they're solving uh, that many hash functions per second, excuse me. Um, so that basically means that miners have come on, uh, come on to the network in a huge way in the last. Uh, 14 months. The, if you look at the chart, it's exponential and that's where I'm sort of sitting here like, damn, like if it keeps going at this pace, like.

• 23:08Speaker 01

  How secure is this network going to be in a year or five years, 10 years? Like how much energy is going to be used to mine this and how secure will this network be and?

• 23:16Speaker 00

  Well, it is the most secure network in the world, right? It is the largest computer in the world, right? If you actually take all of the, um, the, the hash rate that you're throwing at it, right? So, so it has the most computing power um, in the world. And so when you look at this, um, it's heavily, heavily decentralized. Right? Now are there, um, you know, these concerns around some centralized components of it, right? You know, mining pools and certain people have, you know, larger um, kind of mining farms and things like that, of course. But I think if you look across the entire ecosystem, it is by far the most decentralized. It is by far the most secure. Uh, and ultimately that's going to translate to value.

• 23:56Speaker 01

  Yeah, I mean, that's the one thing about decentralization, it's so hard to measure. Like, that's the, uh, that's what everybody's trying to do in this space. Like, who's the most decentralized and what facets of their network are decentralized? But I think with mining in particular, Bitcoin, like we're seeing, uh, like I was telling you before we recorded, like, the effects of, uh, Bitmain's moves in the last year, uh, helping to decentralize mining. Like, uh, uh, they made a big, big bet on Bitcoin Cash. Uh, they, I would argue, they, that, uh, hubristic move and, and sort of positioning by them, uh, left them a bit vulnerable and people are taking advantage of it. If you look at, like, the, uh, the breakdown of hash rate between pools, it's becoming more and more decentralized.

• 24:41Speaker 00

  Okay, so, let's back up for a second. Let's go to Bitmain and, um, so Bitmain's a hardware manufacturer, uh, is, I think they started 2014? 13, 14, somewhere in there, right?

• 24:51Speaker 01

  Yeah, can't say it for sure.

• 24:53Speaker 00

  Yeah, wherever it started, right? Uh, and walk us through, you know, they started out, they've built, you know, let's call it 10, 12 different versions, uh, of kind of their main miner, right? And then now they've kind of expanded their, um, offering to other types of miners, et cetera. Uh, they're preparing for this IPO and so all of a sudden now people are getting a more in-depth look at the company, their balance sheet, you know, kind of their future plans, historical, uh, uh, information. And so what is, right now, what do you think are the pros around Bitcoin and then, or around Bitmain? And then let's go into, uh, what we think, you know, kind of the negatives are.

• 25:29Speaker 01

  I mean, the pros up to this point is they, they're an incredible case study in, uh, what you can achieve with economies of scale in this space. Like, they, like I said, they worked hard to, to get where they are, created very, uh, very tight relationships with the, uh, the fab manufacturers. Uh, there's only four in the world, I believe, that can, that can make, uh, the type of fabrication needed for ASIC miners. And they just so happen to have a really good relationship with one of the best in the world and had a really tight supply chain and, and were able to sort of figure out how to, uh, up for, for an extended period of time, how to do the R and D process and get, get these, these new chips turned around in a, in a pretty quick fashion. Um, those are the pros.

• 26:11Speaker 01

  Like, they, they really paved the way for like, all right, how do you achieve economies of scale in this mining network?

• 26:16Speaker 00

  And that, and that brought them, uh, reportedly 1.1 billion in profits in Q1 this year.

• 26:23Speaker 01

  Yeah, and it's like, people keep going back and forth on that number. I don't, who knows exactly what it is, but it was a considerable It's a lot of money. It was considerable amount of profit. Um, so yeah, that's a pro. The cons, um, I think, this is a personal opinion. I have no uh, inside information or I've not talked to anybody at Bitmain, so I can't say this for sure, but I think Jihad and crew honestly thought that Bitcoin Cash was uh, was going to take over Bitcoin at one point and they, uh, I think they, this goes all the way back to like the Hong Kong agreement in 2015 when Bitcoin developers and miners in the ecosystem met to to have a sort of scaling agreement and agree on a roadmap. Uh, and I think what came out of that meeting, most importantly to me at least,

• 27:07Speaker 01

  uh, was you really saw that there was a cultural divide between the miners in the east and the developers and the users in the west. From what I can glean from that meeting in particular, the miners felt a little uh, perturbed that they weren't getting enough respect per se, like in the, in the direction of how Bitcoin uh, development played out. Um, but that being said, uh, I think that type of mentality carried over into the fork wars of last year where uh, Jihad and crew tried to exert their power. They thought miners had more power than they did and things like the user activated soft fork and no Seg with 2X sort of proved that, hey, actually users have a lot of, a lot of the control in this network and you sort of have to have

• 27:49Speaker 01

  that checks and balance. And I think uh, Bitmain tried to make a power play uh, at that juncture and it's backfiring. I mean, I don't, I can't confirm anything coming out on Twitter, but it seems like uh, they messed, actually I can confirm that they messed up their, their like last wafer chip was, was terribly inefficient, like their last line of wafers. Uh, so their product was, at least a part of their product suite was uh, not up to par, especially in Bitcoin mining where you need everything to be as efficient as possible. And then I hear they're having like a mass exodus on their teams, uh, specifically around chip design and, and the supply chain of it. So, I think it's a cautionary tale of, of sort of keep yourself in check and, and don't get too hubristic in this space. Um.

• 28:32Speaker 00

  And so what do you think happens from here? Do you think that more and more of these hardware manufacturers will come online and will actually be able to compete? Or do you think that it's going to still kind of concentrate in power of two or three, you know, main companies that are better than most, right? And they take, you know, 80% of the market and now the crumbs are left for everybody else?

• 28:51Speaker 01

  Can't say for sure. I mean, I hope the formers, sort of the former of what you just described comes to fruition, but I stop making predictions in this space. It's a, it's a good way to get your dick pushed in at some point. So like, sorry.

• 29:08Speaker 00

  There goes the G rating.

• 29:11Speaker 01

  But no, like I, I have faith that, that mining is getting more decentralized and it's things like, again, this is, I think, if we are able to achieve and bootstrap the better hash protocol laid out by Matt Corallo, it'll make me even more certain that Bitcoin mining is on its way to full decentralization. But I am, I'm optimistic that it's getting more decentralization, more decentralized, excuse me, and that more competition will, will drive further decentralization as well. I mean, you're seeing it, like, look at the hash rate, like.

• 29:43Speaker 00

  It's crazy.

• 29:44Speaker 01

  Price is down 80%, but hash rate's still going parabolic, so.

• 29:49Speaker 00

  Absolutely. What, okay, so let's keep going on this theme of decentralization, right? One of the things I think many people who see the beauty and advantage of Bitcoin have an issue with when it comes to other cryptocurrencies is the idea of a pre-mine, right? So let's talk about, you know, what is a pre-mine and kind of what are the, you know, what is it that the community has an issue with around the pre-mine?

• 30:12Speaker 01

  Yeah, so pre-mine, this is like, so the drama with the pre-mine goes back to like 2012, 2013, when the scambrian explosion of altcoins proliferated. Basically what people figured out that you could copy and paste this, this code, tweak a couple of parameters and have voila, have a brand new blockchain. And as long as, as miners were mining, you'd have a network with bootstrap value. So a lot of anonymous people online on BitcoinTalk.org specifically, this is where most of the, most of the marketing for these types of coins went down. They basically say, hey, we're going to launch a coin.

• 30:49Speaker 01

  At first, like developers weren't even telling people, but they would launch a coin with a certain supply schedule and they would write into the genesis block of the chain, like, hey, in the first block mine, like. A hundred thousand coins and then they'll keep it for themselves and then just go on with their regular uh supply schedule and uh.

• 31:07Speaker 00

  Which by the way is the exact parallel to what happens in capitalism in a lot of other areas of life. But when you're talking about decentralization, it is the exact opposite of what is supposed to happen.

• 31:20Speaker 01

  Exactly. So it's and yeah, so that like the whole ethos of this whole goddamn.

• 31:27Speaker 01

  Project, this experiment we're in is full decentralization. Nobody has complete decision power or uh. Or economic influence over the network. Um and a pre mine, a lot of people's eyes, especially the hardcore. Bitcoiners uh is against the ethos of what this is all about. So it's it's basically you get some, the creator gets something for nothing because they copied, pasted. Some code, changed a few parameters and were able to dupe some people into buying it. So that was a lot of. Uh I think a lot of the scorn towards pre mines comes from the fact that a lot of people were launching these coins and then dumping their pre mine. Uh back in the day on uh Yobit, Polonix, MintPal, rest in peace, a few other.

• 32:11Speaker 00

  What uh can we get you to name one or two that uh that are the prime examples back then?

• 32:17Speaker 01

  I mean.

• 32:22Speaker 01

  Back then, like anything Bryce Weiner touched, so like.

• 32:26Speaker 01

  Black, I think Blakecoin was one, ZetaCoin. Uh there was, there were, there were a dime a dozen back then. There was like. And then it became like popular to do a fair launch and that's how other affinity scams sort of bootstrap their.

• 32:38Speaker 00

  And and part of it too was not only what was actually occurring, but then there was just no transparency to what was actually happening, right?

• 32:44Speaker 01

  Yeah, unless you were had the ability to dive into the code and sort of discern what was going or explore blockchain.

• 32:52Speaker 01

  Basically, the the the concept is uh these projects and now they're getting. People are getting very uh creative with how they justify their pre mines. Like it's a development fund to incentivize development going forward.

• 33:04Speaker 00

  Yep.

• 33:04Speaker 01

  Uh which some people would argue is very uh.

• 33:07Speaker 00

  So let's talk about a couple of them, right? The kind of larger chains that have these pre mines that still hold. You know, double digit or or mid to high double digit percentage in a central uh entity, Ripple, Stellar, Neo, etc.

• 33:25Speaker 00

  Good for the ecosystem, bad for the ecosystem, where do you fall?

• 33:29Speaker 01

  Um, I mean, I just don't care about them. They like Ripple in particular like.

• 33:36Speaker 00

  It technically it is XRP, which I will correct us.

• 33:39Speaker 01

  XRP.

• 33:40Speaker 00

  Yeah, but.

• 33:41Speaker 01

  The token. Um, we're the first 33,000 blocks. Like, that's what I know. Once you can answer that, uh, XRP troll army, I'll, I'll give Ripple a semblance of, uh, of legitimacy. I don't think that's gonna happen. Um, but yeah, like, uh, again, like, on what you would consider a Bitcoin maximalist, I'm in this for sound money. And I think a lot of, a lot of the people in the space have sort of missed exactly like why we're in this. And I would argue, don't even understand why this experiment exists in the first place. Um, so yeah, pre mind all coins, like, doesn't Stripe have like six billion dollars worth of stellar lumens or something?

• 34:16Speaker 00

  I don't know the details, but there's, there's something there. And I don't know if they bought them or granted them.

• 34:21Speaker 01

  They were granted them as equity in something.

• 34:23Speaker 00

  Got it.

• 34:24Speaker 01

  I don't know. But again, it's, uh, again, going back to sound money, that's all I care about. Like, I think the, the recreation of sound money in the digital age is the only thing worthwhile focusing on in this space. Because it has, again, money is one half of every transaction on the planet. And if you can recreate, like, the opportunity to recreate, uh, or create a new form of money, um, only comes around once every few millennia. And we just so happen to be born during one of those inflection points. And that's why I think a lot of people miss it, because this is something that somewhat of a black swan. Like, it never happens typically. Like, it's not your, it's not like the stock market or, or VC fund. It's completely different.

• 35:06Speaker 00

  Absolutely. Um, all right. So, so let's get into, uh, take the ethos of decentralization and kind of what's going on from a technology standpoint. And, uh, now there's a whole host of people, um, who are trying to take that and apply it to, um, the financial system. Right? So not just money itself, but this is banks, this is, uh, kind of all the rent sinking middlemen, you know, all of that stuff. Where, where do you think we can actually go? Um, and what do you think has to happen for us to be able to decentralize a lot of Wall Street financial organizations, etc.?

• 35:43Speaker 01

  Like, that's like, so that dives into like another overarching question in this space as well. Like what needs to be decentralized and what is able to be centralized? And I think what we're finding is the only thing that really needs to be decentralized in this space is money. So I do think there will be bank-like structures in the future and there will be benefits to holding your Bitcoin. Essentially, this is, this is anathema to, to a lot of, sorry, beauty on, sorry, I'm saying this, but.

• 36:16Speaker 00

  Alert, alert, controversial opinion.

• 36:18Speaker 01

  Just from like, and again, this comes from like a UX background, like there will be centralized services that utilize Bitcoin. And that's okay. Like not everything has to be decentralized. What I really am looking at is things like Unchained Capital and the BlockFi's of the world that are, that are allowing people to leverage their Bitcoin. And to, to lever up and reinvest and really use their Bitcoin as a financial good, as a piece of collateral. Like that is, has a shit ton of utility in my mind. Like that is actually useful and actually worth paying attention to.

• 36:50Speaker 00

  And for everyone who's listening, what those companies are basically doing is they're, it's an asset-backed loan where Bitcoin is the asset. And they lend out fiat currency in exchange for that collateral.

• 37:01Speaker 01

  Exactly. And then, so like going back to like banking, banking utilities on top of Bitcoin. We're going to be able to derive, I believe we are at least, to derive things like reference rates using the Lightning Network. Like what Nikah Abatia @TimeValueOfBTC on Twitter is working on right now, trying to figure out a way to sort of derive an interest rate using Lightning Network transactions. And it's a completely emergent process where you're basically observing the economic activity between channels. Seeing how long Bitcoin was held in a channel and trying to derive an interest rate off the fees you made

• 37:45Speaker 01

  because you facilitated payments on the Lightning Network. So things like, things that we're used to in the traditional banking sector, I think they will merge on top of Bitcoin. But they'll be in completely different ways than we're used to. So like right now, the Fed sets the Fed Fund rate. The economic activity hypothetically may be able to set the rate on the Lightning Network and on top of, by extension, on top of Bitcoin in the future. So I think that's, that's the type of stuff that fascinates me.

• 38:12Speaker 00

  Absolutely. Alright, so you and I can go deep, deep in the weeds and crypto decentralization, Bitcoin is sound money, etc. On the flip side, you've got kind of the mainstream media, right? And they're outside looking in and they realize there's a bunch of activity, right? And there's probably some confusion with motion and progress.

• 38:33Speaker 00

  They really have a hard job, right? Because they've got to basically weed through everyone and their mom saying, "I'm building the next Bitcoin, I'm doing this, I'm doing that." Big numbers are getting thrown around, they don't know who's real, who's not.

• 38:49Speaker 00

  You've got a newsletter, right? So you come at it from a coverage standpoint at times. What do you think they're doing well? And what do you think that they can improve on when it comes to that mainstream media?

• 38:59Speaker 01

  That's a very pertinent topic because I just had Joe Weisenthal on the podcast, actually just posted it today. And obviously, he works at Bloomberg as part of the mainstream media. In my opinion, I think he's top class of journalists covering this space in particular. What I think he does well is he was notoriously skeptical in 2013, so five years ago. And has since become less skeptical. He doesn't think Bitcoin's got a foregone conclusion, but he understands why his notions were wrong five years ago and has since changed course and be like, "Alright, I'll give this some tick." But I think what's most important, like I said earlier, like I was a lurker for five years. Like this is, this is so much to understand and there's so many moving parts

• 39:43Speaker 01

  and so many people to remember and so many, it's a global phenomenon. So you're talking about seven billion people, seven plus billion people are potentially involved. So I think with the mainstream media in particular, it's tough. Like to get thrown on the Bitcoin cryptocurrency beat, like that's what people have to realize. Like a lot of these reporters are given assignments and

• 40:03Speaker 00

  Yep.

• 40:04Speaker 01

  I would hope that they're doing their best, but it has been piss poor.

• 40:09Speaker 01

  And I think that's just a sort of

• 40:16Speaker 01

  That is because they haven't been in the space and inundated themselves.

• 40:20Speaker 00

  Yeah, they don't have the base of knowledge that people who are in space have, right?

• 40:23Speaker 01

  Yeah, and it's, it's tough. So that's like when you're, again, like, it's, we're moving into the information age. The importance of critical thinking is, is going to become more, the, the gravity of how important it is to critically think. Moving into the future is just going to get stronger and stronger. So you really, as an individual, have to do your, do your research and find out who is actually feeding you good information and bad information in the space and sort of de- alienate between what is good news and what is hash quote-unquote fake news. And that's at, for each individual, that's like, uh, that's something you have to do yourself, which isn't always easy. And that's something I did with Twitter, using the list, like a crypto list I've been curating for like

• 41:08Speaker 01

  four or five years now. And it, it takes time as well. So you have to go through these cycles and see who was right at one point and who led you the wrong way at another. And, and you sort of have to, it, it takes time to figure out exactly what's going on.

• 41:23Speaker 00

  Absolutely. So we, we got to talk about it because I think you and I have both seen the, the preview. It, I think aired earlier this week, but, but neither one of us watched. Uh, so CNBC did this, you know, kind of dedicated segment to Bitcoin, crypto, et cetera. And they had two, uh, characters. It was probably the best way to, to describe it, uh, at, featured on the segment. So the first was Jordan Belfort of, you know, the Wolf of Wall Street. Uh, I guess infamy rather than fame. Uh, and, uh, and then they had a, a gentleman who, as I said, as I said on Twitter, I probably want to be like his best friend, but he, uh, he lives in a treehouse, uh, and he walks around and wears, uh,

• 42:03Speaker 00

  these tiger paws on his hands. Uh, and he was the other featured person in the preview. Like, what is going on?

• 42:11Speaker 01

  I don't know. I think this is. I mean, I don't want to bash CNBC. I do want to bash CNBC. I mean, CNBC has been terrible crypto coverage for the last four years. They've been letting, I mean.

• 42:21Speaker 00

  But here's my question to you. Is it because they are looking at this from a journalism or looking at it as an entertainment?

• 42:27Speaker 01

  I think CNBC has gone full entertainment. I mean, Jim Cramer's Fast Money was the beginning of that and you're seeing it play. I mean, crypto drives clicks.

• 42:36Speaker 00

  Shout out Jim Cramer, by the way. Legend.

• 42:38Speaker 01

  Shout out Jim Cramer, Eagles fan. Go Birds. But I would, again, like, I wouldn't consider it news journalism or anything. It's something that's out there to drive clicks. And their information in the past has been pretty piss poor. I mean, and they were letting analysts pump shitcoins in 2014. Like, and then again in 2017, when they made everybody buy the Ripple top. Rest in peace if you did.

• 43:04Speaker 00

  I took that video. The video where they pulled the order book on live television?

• 43:10Speaker 01

  Yeah.

• 43:10Speaker 00

  That's my single greatest contribution is I documented.

• 43:15Speaker 01

  But it's like, and that's the other thing. Like, people have to realize there's a long history of the people in the space and the cover of the space. And if you understand that, you'll, you have a clear sense of what's going on. So people forget, again, like CNBC was pumping Nautilus coin in 2014. Like, what's going on with that? Like, Dirac, they're more entertainment based. So again, going back to like first principles, like as an individual, learn how to critically think and decide for yourself, like who you trust and who's giving you good information and who's trying to drive clicks.

• 43:50Speaker 00

  Who do you think is on the high end of a quality journalistic spectrum for crypto? So you've got Joe at Bloomberg, obviously. Who else do you put, you know, up there?

• 44:01Speaker 01

  I mean, shout out Kyle Torpey and Aaron Van Weerden. Kyle Torpey writes for Torpey, Torpey, I'm sorry if I'm butchering your name, Kyle. He writes for Forbes or Bitcoin Magazine every once in a while. And then Aaron Van Weerden is Bitcoin Magazine. I think Aaron's work in particular is leaps and bounds above where anybody in the mainstream or Bitcoin in particular is. And then.

• 44:28Speaker 01

  Yeah, I mean, Laura Shin, she does a good job of getting everybody, getting in front of everybody in the space to sort of see their case. But yeah, again, I like, I like the indie guys. I like, like the Aaron Van Weirdums, Kyle Torpies of the world. I think they're

• 44:44Speaker 00

  I'm with you.

• 44:45Speaker 01

  I think they, they know, and it's because they understand the space and they know what they're talking about.

• 44:50Speaker 00

  Absolutely. All right. So you've got a, you've got a newsletter and a podcast, which I'm fascinated by. And we'll get into why, but let's, so podcast is pretty self-explanatory, right? Tales of the Crypt?

• 45:02Speaker 01

  Tales from the Crypt, very similar to your podcast, trying to get people in the space. I'm very Bitcoin focused.

• 45:10Speaker 01

  Try to get developers, investors and designers and people that are interested in the space, sort of see how they got into it. And we drink on the podcast, so it's a little bit longer form.

• 45:22Speaker 00

  Hey, I came on an 8 a.m. one morning. We didn't get any.

• 45:25Speaker 01

  You couldn't get in late night.

• 45:27Speaker 00

  There was no drinks.

• 45:28Speaker 01

  And I had to work after, so I couldn't do Irish coffee.

• 45:32Speaker 01

  But yeah, we drink. And actually, what I find is the booze helps open up these smart people who might otherwise not be willing to go into certain areas.

• 45:41Speaker 01

  Than if they were sober. Not everybody's forced to drink.

• 45:46Speaker 01

  But I think it helps. So yeah, just long, long, long form conversations, sort of very, very big range of the type of people I talk to. That's been fun.

• 45:56Speaker 00

  Yeah. Okay. So then you got this newsletter and I'm fascinated by the newsletter for two things. One is you go super deep, you know, Bitcoin, Bitcoin network mining, kind of all that stuff. It's written in a fairly easy to understand way, or you could have some sort of knowledge, but for the most part, anyone could pick it up and read it day one.

• 46:14Speaker 00

  Walk us through the process of how you started it and then like, do you write it at night, in the morning? Is it easy? Is it hard to come up with topics? Like just kind of spill the beans on all of it.

• 46:25Speaker 01

  Yeah. So Marty's Bent, the lore of Marty's Bent. Yeah. So Marty's Bent is my newsletter. I write it every weekday. This is published issue number 306 today. And so that started, first issue was June 8th, 2017. So a little over a year ago. And that basically started, my parents came to town, Bitcoin was approaching like $2,000, $2,500, I believe. I forget exactly where it was.

• 46:51Speaker 00

  Feels like a decade ago.

• 46:52Speaker 01

  Right. And, and that was around the time when.

• 46:57Speaker 01

  All the normies started reaching out tweeting, texting, DMing, emailing me like, what the hell's going on with Bitcoin? It got overwhelming at a point. I was telling my parents this, uh, last June. My dad was like, you should start a newsletter for like your family and friends who want to learn more and teach them a little bit. So that's how Marty's Bent started in particular. I think the first time I sent it out was to like 10 people, uh, within my, uh, close family, friends. Then I decided to post it, uh, on Twitter, took a life of its own and basically what I try to do at Marty's Bent is really get people inundated with the ideas behind Bitcoin, uh, and, and sort of what's going on. So the way I write it every morning, uh, right when I wake up. It is, uh, it is at this point, it's sort of like a mental exercise for me to get my thoughts down, start my day on a good foot.

• 47:43Speaker 01

  Uh, and the way I basically decide what I'm going to write about is, is probably the day before, just, uh, I'm a tweet deck fiend. I feel like I'm plugged into the matrix at, at any point in time I'm looking at my, uh, tweet deck. So I'll see somebody, uh, tweet something interesting or I'll read an interesting article that somebody linked to and I'll have, uh, sort of an idea in my mind like, all right, I'll probably write about this tomorrow. So I go to bed, like, all right, I'm going to wake up and write about this. So I have a little bit of an idea of what I'm going to write about. Um, and yeah, it's been, people have been really receptive. I think, uh, people like the randomness. Uh, it's not, it's not very cut and dry. Uh, it's not very formulaic at all. It's sort of random, uh, and based off of

• 48:25Speaker 01

  the ideas that I think people should be paying attention to any certain day.

• 48:29Speaker 00

  What, what do you think the type of subscriber is, right? Is, are we talking retail investors who want to speculate on tokens? Is this more kind of hardcore decentralized, you know, crypto anarchist world? Have you snuck a couple of, you know, CIOs at endowments in there?

• 48:45Speaker 01

  Yeah, the, the, I mean, I have access to the list. I'm not going to dox anybody, but, uh, Yeah, the range is

• 48:52Speaker 00

  Pretty good.

• 48:52Speaker 01

  Pretty good, yeah. So, fund managers, people writing at other publishers in the space, retail investors, obviously. And yeah, a lot of traditional investors. I got people from a few banks reading. So I think it's a wide range. And I think that's because I try to bring the barstool voice to it. And again, that's that's the niche that I sort of have focused in on after starting the newsletter. Because I noticed that there was this huge gap between the people that wanted to learn more and then the technical barriers, the technical knowledge barriers that exist in Bitcoin. Again, like we've been talking about this whole episode. It's so

• 49:34Speaker 01

  daunting almost to jump in with with no knowledge of what's been going on and swim. So I just try to bring a lighthearted spin to it and inundate everybody slowly but surely, one issue at a time.

• 49:46Speaker 00

  And then at the bottom, you've got the the thought of the day.

• 49:50Speaker 01

  Final thought.

• 49:51Speaker 00

  Which is is probably the weirdest, yet funniest thing I have found in the entire crypto space. Is Marty's bent, final thought of the day. Today, I think yours was, you know, there's nothing better than a morning workout when you're sitting in the shower, Indian style afterwards, and like questioning your life or something, right? Where did that come from? How do you think of them? What's going on there?

• 50:17Speaker 01

  It was sort of the, again, so sorry to out with family and friends. At the beginning, I was just fucking around with my family and friends, like just throw a joke in at the end, sort of an inside joke, the first few were. And then as it expanded beyond my family and friends, people started DMing me like, I love your final thoughts. I was like, alright, I'm gonna give the people what they want. And yeah, it's completely random. And I think it's just a good,

• 50:41Speaker 01

  I think it's just a good way to end the letter, just to get people like, hey, this stuff's really serious. Some of the top, like maybe dump into some pretty heavy topics. It's just to remind everybody like, hey, I'm a person, just like, yeah, this is, and also like, I hope you realize you're you're reading the writings of a dunce.

• 50:59Speaker 00

  I think you actually called yourself a dunce today, which is, which I respect. Okay, so, that is too funny. What's the most valuable company in crypto today, in your opinion?

• 51:14Speaker 01

  I think, I mean, by

• 51:19Speaker 01

  By like empirical stats, probably Bitmain, but I think most undervalued and potentially the most valuable company in crypto long-term probably be Square, what they're doing with Cash and I use the Cash App to buy Bitcoin now and I just think it's an impeccable UX. I think.

• 51:37Speaker 00

  They're sneaky, man. They're sneaking up on people.

• 51:39Speaker 01

  I think Jack and the team behind specifically what they're doing with Bitcoin and cryptocurrencies is top-notch. They come from, they really understand like what Bitcoin's trying to achieve and have a very good ethical mindset to what's going on and they execute extremely well. Yeah, so Square is probably the company I'm most bullish on just because again, I think their UX is impeccable, team is top-notch and then like the overarching exposure they have just via their POS systems in general right now and if you could forfeit Bitcoin on top of all that, it could be huge.

• 52:18Speaker 00

  Absolutely. Okay, and then what's the one thing you believe in crypto that you think a high majority of people you know would disagree with you on?

• 52:31Speaker 00

  If you say something lame, I'm calling you out.

• 52:33Speaker 01

  I think Satoshi could move his coins and spend them at one point.

• 52:36Speaker 00

  Really?

• 52:37Speaker 01

  Yeah.

• 52:38Speaker 00

  Why?

• 52:39Speaker 01

  Long time down the road. It would have to be, I don't know. I just think like, I don't know. Do we ever want to know who Satoshi is?

• 52:46Speaker 00

  So, hold on, let's back, wait, wait, wait, hold on, back up, you gotta back up, back up. Who do you think it is first?

• 52:51Speaker 01

  I don't know. I have no idea.

• 52:52Speaker 00

  No idea. No guesses?

• 52:54Speaker 01

  No guesses. It's better than we don't know. And this is like, this is probably, I think if Satoshi were to, I'm not saying this is going to happen. I'm saying if Satoshi were to come back under certain circumstances, I think it would be okay. I don't think he ever will, he, she, or they ever will, but I don't think it would be the end of Bitcoin, which a lot of people see this thing.

• 53:14Speaker 00

  Do you think it would be bad, though?

• 53:15Speaker 01

  I think temporarily, yeah, it would definitely shock the market.

• 53:20Speaker 01

  Yeah, we'll see. That could be, that could be the dumbest thing I say in a long time. We'll find out.

• 53:24Speaker 00

  Well, I mean, I, I think that the, the counter belief, right, is that the fact nobody knows who it is and it's this more mythical, you know, entity, um, has a lot of value.

• 53:36Speaker 01

  So that, yeah, so this, this hypothetical Satoshi coming back includes like a, an anarcho cipher punk, anarcho capitalist cipher punk future where he's still anonymous and is able to, um, able to contract out jobs anonymously over the web and just pay people on Bitcoin to, to do a certain task. Maybe it's not for him exactly. Maybe he wants something built for a certain community in a certain part of the world.

• 53:59Speaker 00

  So you're saying, so you're basically saying, come back and not reveal identity?

• 54:03Speaker 01

  Yes.

• 54:05Speaker 00

  I've never heard that one before. That's pretty good.

• 54:07Speaker 01

  It's, that could be, it could be completely idiotic.

• 54:11Speaker 00

  So go back to, you said, uh, move, what, 800,000 Bitcoins, I think it is? Something like that, right?

• 54:16Speaker 01

  I think, yeah, it ranged from like 800K to 1.5.

• 54:19Speaker 00

  Okay. Uh, to purchase something, to just move it to show that somebody's got control of it? What's the, where's that come from?

• 54:28Speaker 01

  I mean, uh, well, so this gets into another theory and we're getting down a rabbit hole here. So some people think that Satoshi's stash is a quantum computer alarm system.

• 54:39Speaker 01

  Cause the way that his coins are secured and type of contract, there's two types of way to do it, I believe. There's pay to pub key and then there's pay to pub key hash. And the pay to pub key hash is what most people use today if they're not using, uh, it's like the most secure way, not the most secure, but it's more secure than pay to pub key. Um, because it adds like a hash onto, uh, your public key, I believe, which makes it harder to figure out your private key. Satoshi's are pay to pub key, no hash. Um, and I could be butchering, I could be.

• 55:10Speaker 00

  Yeah, yeah.

• 55:12Speaker 01

  Maybe pay to pub sig or something like that. I forget exactly. But the way Satoshi's coins are, are, uh, secured in, uh, his UTXOs are secured in the type of, uh, wallet structure he has, it is susceptible, it is more susceptible to like quantum computing than, than your typical address. So a lot of people think that was done on purpose by somebody from the future to, to one of us. If Satoshi's coins ever moves, it means quantum computing is here and that is the alarm.

• 55:40Speaker 00

  Okay.

• 55:43Speaker 00

  That is, I actually haven't heard that one, that one's.

• 55:46Speaker 01

  No, so it's all serious and maybe.

• 55:50Speaker 00

  Sorry, so I gotta ask then, government's involved or not involved?

• 55:55Speaker 01

  Could be, could be the fifth pillar. Bitcoin sign guy brought that up on my, on my podcast. This idea of the fifth pillar of people working within the government that sort of have the altruistic views of the people and anti-government slant. Maybe somebody from the NSA saw this and it's fifth pillar and released it to the world altruistically and with good intentions behind it. But it could also be a nefarious play by the NCAA, NSA, excuse me.

• 56:24Speaker 00

  NCD.

• 56:24Speaker 01

  NCAA is a nefarious as well, but the NSA too.

• 56:28Speaker 00

  I don't know if the NSA or the NCAA is taking more money from people.

• 56:32Speaker 01

  If you believe the Bitcoin Cash Build-A-Bear conspiracy theories, it's a big NSA ploy to, to enslave us all to the Bitcoin network in the long term. Who knows though? I just think it's interesting because it's sound money experiment and just the fact that anybody can download software and participate in this network is, is incredible.

• 56:50Speaker 00

  Absolutely. All right. Last question for you and then I'll let you ask me one question. Probability that Bitcoin can actually become the global reserve currency in the world?

• 57:02Speaker 00

  We're doing this in end of August 2018.

• 57:06Speaker 01

  End of August 2018. So Matt Corallo came on my podcast, probably November of last year, and he gave it a 5% chance. But with the way the hash rate's growing and the way mining's decentralized, I'll bump that up to a 10% chance.

• 57:21Speaker 00

  Ooh, first person to break double digits.

• 57:23Speaker 01

  Yeah. I'll bump 10%.

• 57:26Speaker 00

  Five to 10% is, 10 is definitely the highest that we've had. Five is probably average, right? And that's anecdotally. But like, that's a pretty high percentage, given.

• 57:38Speaker 01

  It gets higher every day. The longer it survives, the more probable it will survive into the future. But again, anything could happen. Like the governments could cripple it overnight. That's why.

• 57:48Speaker 00

  But how do you think that happens, right? Like, I recently wrote this thing and I was like, uh, so I compared, you'll love this. I compared Bitcoin to, uh, Four Loko. So, uh, I was in college and, uh...

• 58:00Speaker 01

  That's a bad Four Loko.

• 58:02Speaker 00

  Yeah, Four Loko was a, for those who don't know, it was an alcoholic energy drink. And there was a bunch of speculation rumors floating around that the government was gonna step in and ban, the, not the ingredients, but basically the recipe for how they created this, cuz it was putting a lot of people into, uh, the hospital. Right? Cuz basically, you didn't realize how drunk you were. And so, uh, I think that there was like, in one or two places, um, at a state level or like a local level, uh, it got banned. And all of a sudden, sales exploded because everyone ran to the store and tried to buy all the existing inventory off the store shelves. Um, ultimately, the government did step in and say, "Hey, you can't do this. Um, you've gotta basically redo the recipe."

• 58:44Speaker 00

  Well, one, sales had exploded, so the company actually made a ton of money. Um, so I've literally talked to the founder, uh, one of the founders, and he's like, "Look, it's one of the best things that happened from a sales perspective." Uh, and then two was everyone then was hoarding all of the, uh, the cans.

• 58:58Speaker 01

  I was once a Four Loko hoarder.

• 59:01Speaker 00

  And then, basically, they dumped them on the market, right, once it was, uh, banned by the government. And they made much money or had these parties, whatever. So Bitcoin, if all of a sudden a government stepped in, say, US government stepped in and said, "Hey, illegal." What happens, right? Do we see a spike in adoption? Do we see it just goes away? That nobody really cares? You know, kinda, what do you think happens there?

• 59:22Speaker 01

  Right, like, essentially, I have no idea how it exactly would play out, but again, going back to the game theory that Satoshi created within Bitcoin, I think it's just so fucking perfect because if the US, let's say the US were to ban Bitcoin, that gives a country an opportunity, a country that is outside the US, an opportunity to sort of fill that gap and really take over. And I think in the long run, it's a prisoner's dilemma. Uh, as soon as one country sort of dedicates resources and, and sort of endorses Bitcoin in particular, I think that's when you're gonna see like a mad rush. And I don't, I think at that point, it will be impossible for governments to regulate, cuz it's like, if we don't keep up, we are gonna fall behind. That's one thing.

• 1:00:04Speaker 01

  And yeah, the other thing, the Shrey San effect comes into play. Like if you look at Venezuelan Bitcoin buying volume on local Bitcoins, it's been pretty consistent for the last year almost. Basically on a dollar bought per day term, not Bitcoin, US dollar bought per day. You can't even, can't even value in bullie bars anymore. But that's somewhere where Bitcoin mining was banned. They're apparently being forced to use the Petro, but the evidence is showing that people are still buying it no matter what. And that's just one government that's tried to ban it.

• 1:00:35Speaker 00

  Well, what's interesting about that example is some of the surrounding countries, they're also seeing spikes in purchases, right? And I saw somebody was speculating on Twitter saying, hey, these countries have not yet stepped in and banned this or tried to really regulate it. But what these individuals are afraid of is that they will. And therefore they're basically taking, you know, an example of their peer or their neighbor country. And so they're getting ahead of the regulation, ahead of the government intervention, and they're just buying up as much of these digital assets they can, mainly Bitcoin. With the, you know, with the protection built in that if their government does step in, they've already, you know, acquire accumulated Bitcoin.

• 1:01:11Speaker 01

  And that's the ideal time to accumulate Bitcoin is before any of that shit goes down. And then even beyond that, you get into the sticky situation like it's code speech. And at the end of the day, Bitcoin is just code. You just execute code on a computer, it's software. And I think what we're seeing right now with defense distributed and what's going on with the 3D printed gun is a good sort of precursor to the type of fight we could see in the future with Bitcoin. So that's something I'm following very closely now because the government, local governments and local DAs and state.

• 1:01:41Speaker 00

  All right, we got, we got, we got to dive in. We were going to end it, but let's spend two minutes on it real quick. So Guy basically comes up with a blueprint for 3D printed guns, right? Creates a YouTube video, goes viral, literally printed every part, the entire gun, 3D printed, and then open sources that blueprint, right? I believe, what is it, federal government stepped in, or somebody stepped in and said.

• 1:02:08Speaker 01

  Federal government in 2015, I believe, stepped in and said, you cannot offer this on your website anymore. And that's when he took the case to court and he recently won like in the last three months.

• 1:02:20Speaker 00

  And so now it is, you know, what he was doing was considered free speech, right?

• 1:02:25Speaker 01

  Yeah. So that's like the tricky thing because I'm not a gun guy at all. Like I don't.

• 1:02:30Speaker 00

  Yeah.

• 1:02:30Speaker 01

  My, I wasn't allowed to watch Power Rangers because they had guns in it. Like, I came from like a no-gun background. I grew up in north, northeast Philly, like, I really felt a need for a gun. I don't go hunting. But I do believe, like, at the end of the day, like, this is a very interesting topic because, at the end of the day, you go to a library and they have books on like, literally, like, How It's Made, like, the show How It's Made?

• 1:02:52Speaker 00

  Yep.

• 1:02:52Speaker 01

  It's basically the only thing he's doing, but with a gun. Like, how's a gun made? Like, I think that, that should be information, like, that's open to the world. Like, people should know, like, he, I believe, Cody Wilson, the man we're talking about, the founder of Defense Distributed, posted a tweet the other day, is basically, like, is, is Michelangelo, uh, like, a terrible terrorist, and it just basically showed a blueprint of him, uh, of how to make like, uh, an arrow shooter, like, an arrow gun.

• 1:03:21Speaker 00

  Oh, interesting.

• 1:03:22Speaker 01

  So, like, this, this stuff's been around for a while, and just because you can, you can print it out now via code, uh, it's still, like, a how-to guide.

• 1:03:32Speaker 00

  Well, what's the difference between a dad writing it down for his son, or, you know, somebody for their mentee or whatever, versus this guy doing it and putting it on the internet?

• 1:03:39Speaker 01

  Exactly. And that's the other, that's the other interesting argument. There's like a huge cottage industry of people who make, uh, people who make, like, custom guns, and they have access to these books. They're like, alright, here's how you make a gun. That's been completely fine up to this point. I just think, again, going back to mainstream media, I think they, they like to scare a lot of people, and this is, uh, it's a good boogeyman to put before people.

• 1:04:00Speaker 01

  And I, I think it, like I said, I think it's gonna be, uh, the way the government and the media attacks Cody and what they're doing at Defense Distribu-, Distribu-, excuse me, is gonna be a good precursor to, to what we can expect with Bitcoin in the long run.

• 1:04:13Speaker 00

  We live in a wild, wild world.

• 1:04:15Speaker 01

  Yeah.

• 1:04:16Speaker 00

  Alright, uh, you get, uh, one question. What, what do you want to ask me?

• 1:04:19Speaker 01

  Alright, put me on the spot here. Um, so you just changed your prediction?

• 1:04:26Speaker 00

  Yep.

• 1:04:26Speaker 01

  What was the original prediction? Fifty?

• 1:04:28Speaker 00

  Fifty thousand end of year.

• 1:04:29Speaker 01

  End of year. Um...

• 1:04:33Speaker 01

  I just want to commend you and say, hey, it's okay to change your, change your

• 1:04:37Speaker 00

  Listen.

• 1:04:38Speaker 01

  Your, your thoughts, but how, how, how has it been since you've changed? How's it been since you changed your prediction?

• 1:04:44Speaker 00

  So, let's go back. So, 50 is a little, there's a little bit of a folklore here, if you will. I got put on the spot on Bloomberg, I think it was. I think it was Bloomberg in like December of last year. And they were like, you know, how high can it go? And I said to him, I was talking about, you know, look, there's these corrections that happen every so often. You know, five or whatever that happened, I think in 17. And so I said, look, the next big psychological number is 50, right? So I could see it going there. And so it started out as could see it going there, said on public television. And then it was like, all right, psychology, psychol- right? And so I just kept on it, kept on it, kept on it.

• 1:05:22Speaker 00

  And I, and to, the, the mistake I made was I continued to stand by that number, right? And present the psychology argument, right? Of just like, people are going to continue to invest in this asset to the next round number, etc. I had a conversation with Ethan Ackerman.

• 1:05:43Speaker 01

  Shadow crypto Ethan.

• 1:05:44Speaker 00

  Yeah, yeah, yeah. So he, so he came here and to his credit, he, he pushed me on it. He was like, look, I think we're going down. I think we're going sideways for a while. And, and he really just kinda, he, he wasn't trying to convince me of anything. He just, that's what he believed and then he kinda walked me through it. And so I went back, I started looking at a bunch of the data. And, you know, the, the funny thing about data is like, if I asked you right now, how long was the bear market? Between 2013, 2014 and into 15, right? If you ask 10 different people, they'll all come up with different numbers, around 400 days, right?

• 1:06:16Speaker 01

  Yeah, like 18 months.

• 1:06:18Speaker 00

  Some people hit you with, you know, 403, some hit you with 420, you know, whatever. And so one of the problems in crypto is just the data sucks, right? Because we, we just don't have standardized data and these data sources that we all kind of follow, etc. But if you go back and you look at, you know, the general trend,

• 1:06:34Speaker 00

  it suggests, and I think a lot of people would agree, that we got a ways to go, right? In terms of falling, could be as much as 50%. And so I think- When that happens and you've got this kind of bottoming out, you go sideways for a while and there's that parabolic run again. From a psychology standpoint, right, one of the things that I I keep going back to is like, you can't have another bull run until people forget about the last crash. Right? Like people like we, you know, it's the, um, and I forget who says it, but, uh, you know, the time to buy is when there's blood in the streets.

• 1:07:04Speaker 01

  Yeah.

• 1:07:05Speaker 00

  Like, there's not blood in the streets yet. There's people who, you know, they bought at the top, they've written it down, they think it's coming back. Until those people believe it's over, I think we still got pain to suffer.

• 1:07:16Speaker 01

  Yeah, there's gotta be mass humiliation to a point and, no, that's one thing. I mean, I stopped trying to, again, like I said, predict, make predictions, so I try not to do that. But what I do do is I've been keeping a journal for like the last five years and I like to go back, your journals, it's multiple books. I like to go back and sort of look at what I was thinking, like, uh, like at the depths of the bear market in 2013 or 2014, 2015. And that's always given me some solace because you, it is interesting seeing like the sentiment then, like there was a lot of worry. Uh, because that was my first bear market that I experienced. So, and I was like keeping track of it and it's funny going back and, and using that. Almost as reassurance for this bear market, like things are gonna get better, but I, it's funny how like just, uh, I had the same emotional reactions to

• 1:08:01Speaker 01

  the, the price changes, uh, during this bear market and I, and the bull market that, that, uh, that preceded it, uh, than I did back then. So that's good to like, that's one thing I would recommend. Keep a journal, write about like how you, how you react to, to price changes and just the ecosystem overall. And, and get, get, get a good amount of reps in there and then like look back what you said, like a couple of years ago and, uh, it's a good source of solace for me.

• 1:08:27Speaker 00

  Absolutely.

• 1:08:28Speaker 01

  And, and then another thing, like when, when we bottom, who knows? Like it's different, uh, this time around, like the block reward. 2014, 2015 was that 25 Bitcoin per block for most of that. So there's, uh, there's less Bitcoin to liquidate in the market today, but again, the price is higher, so, uh, it's probably the same amount of, uh, demand getting eaten up each day. Uh, and then obviously more people are educated, there's a, there's a more saturation of, of the user base.

• 1:08:57Speaker 00

  There's other liquidity options too, right? There's asset back lending, et cetera now.

• 1:09:01Speaker 01

  Yeah, CoinShares, dude, the people from CoinShares just wrote a great piece like this Bitcoin bull markets usually get preceded with new on and off ramps to the masses. And again, like go back to Square, like just past Venmo and downloads and a lot of people have had this app for a while, love it, and Bitcoin is just becoming more and more integrated with their product. Maybe that's the next, a lot of people are looking at backed and the potential ETF, but again, they also said in the CoinShares paper that's probably institutions are going to be waiting on the sidelines and watch the, uh, watch the retailer sort of push this market up going forward. We'll see though, who knows?

• 1:09:38Speaker 00

  Yeah, I am, uh, I'm a big fan of your approach in not making the price predictions. Um, I, I, uh, now when I make the price predictions, I basically say, listen, I was already wrong, right? So you gotta take all this with a grain of salt, but, uh, making the prediction and writing it in a journal, right? To me is probably the smarter thing to do.

• 1:09:55Speaker 01

  Yeah.

• 1:09:56Speaker 00

  Um, making it publicly forces you to think even more critically because you know that you will face the public humiliation of being wrong.

• 1:10:03Speaker 01

  Exactly.

• 1:10:03Speaker 00

  And so for the last 48 hours, I've had, you know, all these people yelling and screaming at me on the internet, it's over now, right? We're, we're, we're back to regular scheduled programming and we're off to the races. Um, but dude, thank you, thank you so much for coming. This is, uh, this has been a ton of fun and, uh, we're, we're big fans. So I really appreciate it.

• 1:10:20Speaker 01

  Thanks for having me. It was fun.

• 1:10:21Speaker 00

  Yeah, of course.

• 1:10:22Speaker 01

  It's, it's interesting to be on the other side of the, the mic.

• 1:10:25Speaker 00

  We gotta get you, we got videos here too. So, uh, so we're gonna, we're gonna have to get your, uh, your face on YouTube and stuff, which I'm fortunate for all your listeners.

• 1:10:33Speaker 01

  All right. Thanks, man.

• 1:10:36Speaker 00

  Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.