What is going on with the Bitcoin ETF!? And the future of Crypto Market with Omid Malekan

[00:00:06] So much happening in crypto. There was a flash crash of Bitcoin when there was rumors that the Bitcoin ETF might not happen But there's a lot of other news a lot of other catalysts for big moves in crypto

[00:00:18] I brought on my good friend and super crypto expert omid malekan Omid is a professor of crypto at Columbia Business School he's written two books the story of the blockchain and His most recent book which is a great book. I highly recommended

[00:00:35] Re-architecting Trust the Curse of History and the Crypto Cure for Money Markets and Platforms He also was one of the first people to help guide Citigroup on the entire largest bank in the world on the topic of crypto So we talked about everything from the Bitcoin ETFs

[00:00:55] to the convergence of crypto and AI to the Ethereum upgrade And all sorts of other catalysts for Bitcoin and crypto in general. So a lot of topics here goes This isn't your average business podcast and he's not your average host this is the James Altucher show

[00:01:28] Just doing trying to do a lot of writing like bite-sized writing about pertinent topics and crypto and then planning for the upcoming semester where Enrollment in my class is once again maxed out after a one semester hiatus where it wasn't

[00:01:46] That's funny. Like all it takes is for crypto to start having like an like like crypto, you know Bitcoin was of 144% last year So that means you're gonna have students the year before Bitcoin's a fad Like no one cares anymore

[00:02:01] Yes with the caveat that that only impacted like 20% of enrollment because I actually I imagine The types of students who just want to learn about the most cutting-edge thing Probably we're opting to learn about AI instead of crypto But market forces and animal spirits always help

[00:02:20] Well, it's interesting like crypto is a situation where the reality has not yet caught up with the hype Like there's lots of Things that need to happen for crypto to be a mature industry but AI there's the exact opposite sort of arbitrage

[00:02:34] The hype has not caught up with the reality like AI is actually much greater than The hype of it and the hype's pretty high That's interesting. I will say so I spent a lot of time actually last year over the summer during the

[00:02:50] calm time before the current rally began just thinking about What was it about crypto that was fundamentally so challenging and confusing and ultimately disruptive and One of the things I realized is that if you sort of List all the major

[00:03:10] Technological things that have happened in our lives in the last 20 years Crypto is the only one that nobody saw coming So if you think about like the internet Mobile AI all you got to do is go back and watch or read science fiction from 50 or 70 years ago

[00:03:27] And you know like that 2001 the space Odyssey Where the AI becomes self-aware and kills people that was 1968 I think right and there are definitely science fiction books where people are watching TV on their phones, you know from like the 1950s Yeah, I mean like Star Trek they had

[00:03:46] Mobile communication and everything right crypto I will say there there was um an Alternative currency in the book the crying of lot 49. It was Thomas Pynchon's first Novel oh, that's interesting. Yeah, and so it was like 1961 62 It wasn't a digital currency

[00:04:06] But it was basically a global currency to avoid that was it was more of a conspiracy kind of currency like there was this secret concern Currency to avoid all the global one so you can transact with other You know Illuminati or whatever without countries knowing

[00:04:23] I'll have to add that to my reading list because I didn't know about that but you mentioned digital currency I actually think it's kind of amazing that Apparently nobody ever really thought about the future of money Because even if you take like the two most prominent

[00:04:42] Futuristic space based sci-fi universes that we have in the West right? You have the Star Trek world and the Star Wars world in the Star Trek universe They've just magically don't need money anymore. They've achieved some was Peter teal pointed out

[00:04:56] When asked whether he favors Star Trek in Star Wars, he said Star Wars of course Star Trek's like a Marxist fantasy right but even in the Star Wars world like somehow despite having faster than light

[00:05:09] Travel and lightsabers and the force when it comes to money. They've gone back in time to like commodity money There there was some currency like Harris, you know Han Solo as Peter teal again pointed out

[00:05:23] The entire plot premise is based on in to some extent this bounty Jabba the hut has on a debt that Han Solo hasn't paid back Yeah, so that the ideas of money are all there

[00:05:37] But no one really thought like hey if technology is going to transform how we travel how we communicate where we source energy from Might it also transform money So all of which is to say I think with crypto

[00:05:53] It's a rival is sort of like orthogonal to the perceived path of history Which I think is one reason why it creates a lot of confusion and controversy I'll contradict that a little bit or I'll push back a little bit in that

[00:06:11] Every evolution of money, I would say was unexpected so you know Gold as a currency there was thousands of years where they had to kind of figure out we need one common currency

[00:06:25] Perhaps a metal that is hard to or difficult to mine and we'll use combination of metal Silver perhaps bronze nickel and so you know, that was an evolution that Took hundreds or thousands of years to expect

[00:06:39] But then the advent of money backed by gold that like paper money backed by gold was an accident It was just sort of like people would the pot where do you put all your gold?

[00:06:50] You put it with the goldsmith and then he would give you an IOU and those IOUs heck I might even have learned about this in one of your books, you know people with those IOUs would would

[00:07:01] Transact and that was sort of like the first form of paper money Yeah, no, I actually fully agree with the idea. I'd never thought about it that Let's say that it's true that all major evolutions in money were very much unexpected and nobody saw it coming

[00:07:17] I don't think that contradicts What I'm saying about crypto is compared to something like AI like AI is something that's been seeping into our lives Yeah, ever like the NPC characters in video games were a form of AI and that goes back to what the 1980s

[00:07:34] Yeah, and speech recognition is AI and that's been around since the 90s and computer vision has been around since the OO's so So going back to your point about hype versus reality I think it's very possible that with AI the hype hasn't Caught up to the reality

[00:07:54] But maybe part of the reason is because like people are like well, yeah, you know, I've known this is coming And it's finally here But that's different from crypto where people like me are like it's finally here and they're like what are you talking about?

[00:08:07] I've never even thought about that. Yeah, it's it's it's interesting like I think AI People are amazed by it particularly like the consumer version which is chat gpt And now they're trying to figure out the many use cases Like, you know

[00:08:22] You can look at every industry or aspect of your life and figure out where AI could perhaps make it more efficient And that's a process that's still happening, which means you know in other words

[00:08:33] There are use cases that are obvious that have not been thought of or developed yet And then there are use cases that are unobvious that we haven't even begun on yet

[00:08:41] And or maybe people have but it's it's not as well known and so that's what and that's where there's opportunity So whenever there's a Whenever something is growing exponentially say but there's some distance between the hype and the reality in either direction You have opportunity so with crypto

[00:08:57] I think a one problem crypto had and this reminds me of the internet in 1992 The one problem crypto had is that the initial users were were obviously extremely tech savvy they were there were tech people and Tech people don't like when the mainstream is using their toys

[00:09:18] And so I found like in 27 2018 when I was starting to write a lot about crypto I found there was a lot of resentment among people who quote-unquote hodled and You know, they had their own vocabulary. They're at the one subculture

[00:09:33] They resented someone like me trying to explain crypto to everyone not in every case but in a lot of cases Yeah, I think that's actually still true in some corners of crypto to this day

[00:09:47] I mean the other thing that's really changed from 2017 is that in 2017 there was really there was Bitcoin and Ethereum was this new thing that people thought was interesting, but We're not sure what we turned into now the the

[00:10:05] Like the bucket of what we call crypto has massively expanded to yeah, and also Crypto initially up until recently and this is your point on Ethereum Crypto the only use case or the main use case was thought of as currency, but now I can see two equally large

[00:10:23] The currency use case is huge because When you look more deeply at it The global payment system around the world and currencies around the world are Flawed in the same way that gold was flawed and needed paper money backed by gold

[00:10:37] In the same way that barter was flawed that needed gold for a common currency In the same way that paper money backed by gold was flawed as countries increased their debt And so they needed paper currency backed by kind of the goodwill of

[00:10:52] The country so so so the payment current payment system is flawed like around the world the whole You know international wiring system the fact that banks are intermediaries and there's all the typical problems there

[00:11:06] So I think currency is a big use case and that was the initial use case for Crypto, but now equally big as decentralized computing We're seeing that with the growth of tokens like render or or Akash or even bit tensor which is used on large AI models and

[00:11:25] Marketing which we have not begun to see the use for the marketing use case because there aren't enough users yet So I think that's another thing that has helped crypto is that Ethereum has opened the door to many more use cases

[00:11:40] Yeah, and I know very smart people who tell me that the actual killer app of a Decentralized cloud computer in the sky which was one way to think about Ethereum and blockchains like it

[00:11:58] We haven't even seen it yet like sure defi is great stablecoins are great nft is great. You can even use it to the projects that you listed are Part of what the industry now calls the pin or decentralized physical infrastructure

[00:12:16] Which certainly for compute rendering, but also for telecommunications itself And countless other applications you know hardware Sorry, just cloud storage like with projects like filecoin So yeah, I think those are going to develop and become a important part of the economy

[00:12:38] But you know to your point about the internet in the mid 90s very few people saw what it is today Right like even in 1995 no one knew that the web was gonna be this commercial medium

[00:12:50] Like we could you couldn't figure out is this an artistic medium where you can do your interesting hypertext projects? Like people doubted then people said oh, maybe it's good for marketing We'll put like a pamphlet of our company as our website and then people eventually realize

[00:13:06] I people would say no one's gonna put their credit card on the internet And but then people realized of course that became the main use was was commercial use Yeah, and it's always fun brainstorming about what sort of like the dark horses are in crypto

[00:13:23] One thing that I am very bullish on is We call it digital identity or decentralized digital identity, but that's not really doing it justice This something that is fundamentally important

[00:13:38] But none of us ever think about is how do we establish who we are throughout life and in the economy? Like what makes you James Alteutche? it's some combination of Government documents like literally your birth certificate your driver's license Some and then you have privately issued

[00:14:01] credentials like your college degree for example Then you have modern more modern things like your social network your social graph on the internet which includes This podcast your writing linked in etc and then Even things that are tougher to nail down like there are

[00:14:22] Companies that probably have an understanding of you based on your consumption patterns in the past and they're social groups that you loosely belong to I think I'm actually confident that there is a future where

[00:14:36] Blockchain becomes the medium through which all of our identity credentials are issued stored verified and transferred I agree. I think even one step further. I think a block might be The smallest unit by which data is transmitted It's like the atoms of data in AI models

[00:14:56] So this is the convergence of crypto and AI is when you know like the New York Times is suing open AI right now Because they're like hey you trained chat GPT in part on New York Times articles

[00:15:08] Certainly, that's the worst part of chat GPT is those particular articles that what they were trained on but You know at some point we're gonna want to know what our sources are Particularly if they're sensitive like data about my identity for instance. Yeah, I The

[00:15:25] Intersection of AI and crypto was such a hot topic last summer and I I think There is some future state where what you just discussed is There in terms of using blockchain to figure out

[00:15:40] What data train which model and then also the beauty of blockchain is you can also if there's going to be compensation Then you can also use the same infrastructure for it

[00:15:49] That one though is really if you sit down and think long and hard about how you would physically pull that off It's many years away and I think there's not as much interest as people would say like there are people who are like

[00:16:02] Activists about this and I feel like they're the only ones who truly care about it Yeah, well the New York Times care because if there is going to be financial compensation, they would get a lot

[00:16:12] You know like do I care because maybe my books and blogs and tweets combined could earn me like eight cents You know in aggregate. This is actually something that came up when People were working on decentralized social media and one of the arguments was like, oh

[00:16:30] It's not fair that Facebook gets all the revenues from our content, which is fair I actually agree with that as you know in my last book I have a whole chapter on this but then as far as motivation to try blockchain based social media is concerned part

[00:16:46] Of the problem is like the average person's Facebook footprint is probably worth eight bucks or something It's not like it would be life-changing money. It's when you aggregate all of that together That it makes a difference

[00:16:58] But all of that said I actually think there's a couple of low hanging fruit For the intersection of AI and blockchain Some of which is already being used and you actually when you mentioned Decentralized compute I only learned about this recently

[00:17:17] There is a problem that certain kinds of AI models have if what they're doing is controversial They get kicked out of the legacy Web to big tech cloud like if you want to do AI models for adult content or something You know like Microsoft doesn't want that right

[00:17:39] So Apparently, they're already projects. Let's say well if we can't go use a centralized Cloud for no GPU power to train our model. We need to go use the decentralized one So and that already exists are already token-enabled projects for decentralized

[00:17:58] GPU compute a while ago. I pitched the idea of a decentralized token for Computing large language models So it would be much better, you know Microsoft or open AI took three years running on a supercomputer or Microsoft is or a supercomputer before it really was finished and

[00:18:33] The VC said if you come up with this we'll fund it, but then I found out there's already tokens Of course doing this. I don't know if they're widely used

[00:18:42] But they're they're interesting to look at and there it's kind of the I think that's the biggest convergence right now Of crypto and AI actually that's right. I agree and I would say second which I

[00:18:54] Don't think is live yet beyond like a proof of concept, but I wouldn't be surprised if a year from now It's actually being lively use AI and and these LLMs create this massive authentication problem

[00:19:07] Which is that like anybody can have chat GBT write an article that sounds like it's the New York Times or whatever Authoritative source that there is and it's really hard to differentiate And that's something you can do today like any

[00:19:22] Media outlet or even you could already say like hey, I am going to start Doing something as trivial as every time I write an article I'm gonna put a hash of it on the blockchain that way and then I'll sign it with with a Wallet that's been

[00:19:41] Affiliated with me. I'm gonna tell you this is my wallet We need a little bit more infrastructure But all the technology we need to do this today is already there where you could literally have a browser plug-in

[00:19:51] That as you go and use different sources of information on the internet, it's constantly pinging digital fingerprints of Articles videos podcast episodes or whatever that are stored on chain somewhere. It's telling you like yes, this is original This is authentic. I think

[00:20:13] people are so scared of the whole like fake news problem of AI that There's an impetus there to for people to invest time and money to build these solutions. Well, and there's it brings up

[00:20:26] The point also and I actually want to talk about a lot of the current news like Bitcoin ETFs blah blah blah But this is a fascinating there's there's an interesting point in that this is where the opportunities right now exceed the What's actually out there

[00:20:45] For instance, what if I want to put on a blockchain Basically private information about myself and have a model trained on that information So so yes Chat GPT has read all my books has read all my blog posts and so on but that's because it's public information

[00:21:02] What if I wanted to basically record all of my phone conversations all of my actually on the street Conversations all my emails like everything that's private to really make a chatbot Or or an AI virtual assistant for myself

[00:21:19] That can't be done at the moment and there's not a private way to do it But blockchain becomes I kind of think that's going to happen for everybody at some point or at least we'll have the option to do it and

[00:21:29] That seems like an opportunity for convergence as well Related to what you were just saying. Yeah, the one thing that we need a little bit more development of I believe to have solutions like that is

[00:21:42] Advanced cryptography because you want to be able to share your data in a way that doesn't expose your data Right, but blockchain is you can't break a block on Bitcoin unless you have quantum computing No, I'm not talking about that. I'm saying that like

[00:21:58] You can do it now or you could send all your data to a company and then they can train a model on it But now the problem is the company has all your data you've exposed your entire life to a corporation

[00:22:09] So with right, that's why if everything was done essentially the way Contract law works on on blockchain. Then I think there's ways to protect Your data what you can and I'm getting out on a ledge here in terms of the extent of my knowledge

[00:22:26] But with zero knowledge proves and I believe even better homomorphic encryption You Can have a situation where you could train models on encrypted data So you don't have to worry about Exposing your data in order to use it to train to a model

[00:22:47] It's just we need a little bit more develop because cryptography is a technology. I don't think people understand this and like any technology it has a development curve, but you can accelerate it with Money and resources and one of the great contributions that the cryptocurrency industry has made

[00:23:07] to the rest of society is That it has brought in significant capital To developing and advancing cryptography the benefits of which will be enjoyed far beyond the Cryptocurrency industry and we're already seeing this with zero knowledge proofs because thanks to

[00:23:27] Older projects like Zcash, which was a presa privacy preserving coin that's really fallen off the map but also See I know I'm a seed investor of Zcash Maybe maybe too far ahead of its time but there's like ironfish is kind of like a

[00:23:48] Revised revamped version of it. Okay. I'm not familiar But all of them right like whatever ironfish is there's somebody whose job it is is to do research and develop better Cryptography and it's being funded by

[00:24:04] Whatever the business goal of that project is same thing with all of these zero knowledge based roll-ups on Ethereum They're spending a lot of money on R&D But how are they advanced the cause of cryptography every other industry including AI will be better off for it

[00:24:23] Yeah, I agree. I mean to some extent the one situation I'm describing about Creating a chatbot using private data I think that can already be done using these decentralized tokens that are themselves computing large language models

[00:24:40] So there needs to be a front end to kind of like connect all the dots and maybe There there's a privacy issue. So I don't know but I think this speaks to a lot of the problems in crypto is that

[00:24:51] Crypto is very complicated. It's like even it's still I would say to be honest It's still hard to buy a single Bitcoin and by hard. I mean, you know My parents wouldn't be able to do it really

[00:25:05] They're not gonna call up they're not gonna figure out sushi swap and buy a Bitcoin and coin base Which is the best by far. Let's say the best exchange of crypto right now is so bad compared with like

[00:25:19] I don't even like Charles Schwab or a merit trade like there's no customer service. There's no things go wrong and And they're the best so all that's the opportunity in crypto is that

[00:25:32] A the entire infrastructure has to improve to make it easier for people to use and then as you get more users There's gonna be more people buying it and then more more opportunities and more projects and more and then and then the virtuous cycle

[00:25:44] We'll begin. We don't quite have that virtuous cycle yet. I think what's got to happen with crypto as a long-term catalyst is what happened with Linux, which is that Linux itself is unusable at a at a corporate enterprise level and yet

[00:26:00] Why is it the case that almost every Device operating system now is based on Linux is because there were commercial companies that were basically in intermediaries between Corporate players who wanted to use a simple operating system and then a company like red hat which says no problem

[00:26:17] We'll make it for you and we'll manage it for you You never have to deal with the guts of Linux itself. We'll take care of the whole thing and Those front-ends have not yet happened on crypto but are necessary

[00:26:30] That's a great point and I was actually talking to a friend of mine who's an entrepreneur who's trying to build a solution to this but there is this paradox at the heart of evolving crypto which is that at the

[00:26:43] Protocol layer, you know at the Bitcoin or Ethereum layer For it to do what it's supposed to do, which is to be decentralized. It has to be this In some ways horrific anything goes kind of infrastructure where like you could get hacked

[00:26:58] You make a mistake and you could lose all your money and there's no way to get it back Right, it has to work that way. You cannot have a you know undue button or charge backs on

[00:27:10] Decentralized infrastructure because then they're not it's not decentralized anymore. So that's crypto being crypto But then from the user's perspective, it's terrifying right So imagine the front end where oh you need to buy some Akash well

[00:27:27] Okay, they sell on you want to call someone you want to just call your broker and say You know buy me 50 tokens of Akash and then the brokers like well I could get some on coinbase but I can also get some on pancake swap and sushi swap and

[00:27:40] Crackin and they kind of you never see what's going on behind the scenes just like it is right now with the brokerage You don't know when you buy shares or something. You don't know what exchange you're buying it on like you might be buying on the NASDAQ or

[00:27:53] NASDAQ OTC or some weird options market So there just needs to be human interfaces to some extent which is which is not the complete dream of Crypto from the technology side, but I think that's what makes it usable. I

[00:28:09] Agree, I'm also not a I think these purists that will tell you so that there's a smaller and smaller corner of crypto that still holds on to this Radical decentralized dream that I never subscribed to that like everybody will have their own self-hosted wallet and

[00:28:27] Will own all of our assets in a non custodial way Which then those people are now outraged that there's going to be ETFs Which I think it's kind of hilarious because if you own Bitcoin You should really want there to be a Bitcoin ETF

[00:28:40] But yeah, you want to make it easy for grandma and grandpa in Indianapolis Nothing against Indianapolis. You want to make it easy for those people To buy a Bitcoin otherwise, how is it going to be used like these people? This is what people never

[00:28:55] By the way, this happened with the internet. So I mentioned 1992 That's when I believe AOL opened up the floodgates so that their members, you know AOL wasn't on the internet, right, but they opened up the floodgates I think it was 92 or 91 where their users could use use net

[00:29:12] Which was a subset of the internet involving news groups and I remember The most tech people I knew were like storm into my office. Like can you believe this like AOL? We're gonna have like

[00:29:24] You know these idiots on our message boards and they and people were like planning to do an internet 2.0 That was in discussion like, you know to a place where quote-unquote weak and all hang out without being bothered by those AOL, you know idiots I

[00:29:42] Didn't know this. I remember when I started using AOL There was like the 12 things you could do 11 of them were just on their servers Like they're their newsrooms and their games and their e-commerce But then there was like the 12th tab was worldwide web

[00:29:57] Yeah, and you would click and a browser would open up and like at the time I had no idea that really like that's the internet Yeah, or that's the part of the internet that'll matter in five ten twenty years

[00:30:11] Which I think should be a stark warning for all of these corporate people working on their enterprise blockchain and private blockchains and stuff like that Yeah, that's not the future but but looking at that as a historic example

[00:30:22] That shows why the rise of crypto is an eventuality AOL was a centralized network Internet was decentralized and money right now is centralized and there's all sorts of problems with that but as

[00:30:38] Just like with the internet as the customer service arrived as people became comfortable with it as it became easier to build a website and easier To log on no matter where you are then the usage went up exponentially

[00:30:52] It wasn't exponential until that happened and then you know short while later reached a billion users Which you know crypto is on the way towards as well, but I do think there's an entrepreneurial opportunity with You know creating some convenient User front-ends that are fully regulated

[00:31:09] You don't have to worry about taxes and the law like now there's these new tax laws involving crypto Which again people view negatively like if you if you sell a crypto and make ten thousand dollars You have to report it to the IRS

[00:31:21] It's it this is but this is not an unusual type of law as it showed to me It shows that the government including the IRS is taking crypto as a legitimate Form of it's assuming crypto is a little legitimate form of payment

[00:31:36] Like when it when you take ten thousand dollars cash out of the bank the bank reports it to the IRS if you bring ten thousand dollars Into the country from another country you have to report it

[00:31:45] So the IRS is aware if you win more than ten thousand dollars in a casino you report it so the IRS where now finally crypto is being regulated in the same way as the dollar and

[00:31:56] Everyone's like agitated like what does this mean? Are they trying to stop crypto? No, they're actually opening it with the same open arms that the government does with all other forms of currency now Yes, and no I'll only I'll halfway agree with you

[00:32:10] We've certainly come a long way from the point where most people in governments would just Five years ago. They'd probably be at the people at the IRS who would say who cares it's all going to zero anyway but the danger is when

[00:32:24] Governments and regulators say well, we already have rules So we'll just treat crypto according to those rules and they don't take into account What makes crypto special so one of the reasons we have all of these?

[00:32:37] Cash reporting rules whether it's casinos bank withdrawals is because cash is completely untraceable Crypto is traceable. It's pseudonymous, but it's traceable. So I think there's going to be this chaotic period in the middle where

[00:32:54] The powers that be try to say you know like Gary Gensler has been doing like oh well, you know, we have done 1930 securities laws and the 1940s sec Sorry, the Supreme Court rulings and that's all I need to know to determine. What's a security? That's nonsense

[00:33:11] It's deliberate nonsense. That's meant to hurt and hold back the industry And there's the tax version of this as well There's the anti-money laundering version of this I think the chaotic period will be the industry pushes back and says wait a minute like this token

[00:33:29] That's part investment part fan club You know part Meme is not the same as the shares in Apple It's preposterous to treat it as such so we need new rules And then the same thing will happen with the traceability that like hey you have a

[00:33:49] Transparent universal ledger that gives you a lot of information about who is doing what Maybe in a world where that exists You don't need me to surrender every bit of personal data every time I want to open a bank or brokerage account

[00:34:04] Right because your point is your point is is that just like my paycheck I don't have to report every single time I get paid Because the banks because it's in the system the banks do it your point is that because it is a traceable system

[00:34:19] To some extent then it is different from cash laws and I agree with that But I do think it is hard to wrap your head around it since it's also a global payment system

[00:34:32] So who's tracing what becomes the question like the IRS doesn't have the capability really to trace this So they will kind of want to be to be more transparent than that So I think that's an argument that will be ongoing Yeah, and the IRS is actually

[00:34:47] Very sophisticated on this in fact some of the major busts of People you know they're like the multi-billion dollar attempted money laundering on Shane If you look at the court documents, it's IRS investigators that have the one where I dated the woman who was involved in that yes

[00:35:07] That's scary that was your exes undoing was partly fueled by an expert at the IRS It was really good at using on chain forensic tools. Well good for that guy But the global nature of it is it's good. We want a global financial system

[00:35:22] You know when US government officials tell me that well, that's not gonna work for us my responses I say it respectfully but I'm like too bad like the world doesn't exist to make your job easy and

[00:35:34] Like part of the reason the rest of the world is increasingly moving to adopt crypto is because it Reduces the power that the US government has over how financial regulation is done everywhere This plus your mention of Gary Gensler earlier segues into current events

[00:36:08] Yes, I think the a the weaponization of the dollar this past year for good or for bad has turned countries away from Always relying on the dollar as kind of the global reserve currency I think also central banks are looking for better ways to do payments

[00:36:24] I mean the swift wiring system is 51 years old something like that. It's it's an antique already It's funny. I actually ran into the creator of it a few weeks ago I was in Amsterdam and he was at the same

[00:36:37] We were both observing a chess tournament and the chess tournament He used to organize a chess tournament called the the swift chess tournaments And I always just thought that was a cool name for a chess tournament and I say so

[00:36:50] What do you what did you do for a living when you were sponsoring all these chess tournaments? And he's like, oh I created this swift wiring system and I had no idea Like my world's converged and so I started asking him all these questions and he agreed

[00:37:02] It was kind of an antique but at the same time He wasn't a hundred percent believer in crypto because he's loyal to his antique. So Yeah, not surprising. Yeah So so but like so all these catalysts are happening, you know dollars

[00:37:19] You know people don't like the dollar in other countries Inflation dollar has to get debased at some point just because of all you have to pay down this debt somehow Unless the economy like grows too fast. So all this everything's in place for crypto to be a new

[00:37:37] global infrastructure for finance What's going on with Bitcoin ETFs? We got this report yesterday from matrix port saying that Hey, the SEC is not just going to roll over This is what the report says they're all Democrats. So they kind of like don't like crypto for that reason

[00:37:54] I'm not sure I totally agree with that and and and what the concerning part with this report is that The guy is known to be bullish on crypto in general. So everybody got concerned Oh, this bullish guy says ETFs aren't gonna happen

[00:38:08] although he didn't he didn't say they weren't gonna happen he says it's going to be a Q2 thing which Drastically changes how people have been interpreting this report for one thing, but like what else what's really going on you think?

[00:38:21] Well, I'm particularly on that all the serious people. I know who know about crypto Wall Street and ETFs Dismissed that as a non serious report all the evidence Otherwise points to the fact that approval is imminent when I don't know if that means this week next week

[00:38:41] There's various deadlines that are relevant here, but you've had all of the dozen or so companies that are Trying to launch ETFs Constantly meeting with the SEC even over the holiday season. I mean the last yeah

[00:38:58] amendments on I think black rock CTF were filed with the SEC on December 29th like people and you know They're not just doing it in a vacuum like Their success rate is 99.999% for ETFs like you know, they're in touch with the SEC

[00:39:14] They're not gonna make fools of themselves here Yeah And also it was one thing if Gary Gantzler is taking on a relatively small crypto company like grayscale It's another thing if he's gonna sort of stick it suddenly to black rock and fidelity and Franklin Templeton

[00:39:29] right and to put it in perspective when the financial crisis was happening 2008 2009 The government didn't know how to deal with unwinding trillions of dollars of mortgage-backed securities that

[00:39:41] Companies like AIG and the banks had so guess who they hired to do it black rock. They're not gonna screw over black rock I mean black rock is essentially the government's financial infrastructure so I believe also in in

[00:39:58] 2020 during the pandemic when the Federal Reserve decided to bail out everyone and everything One of the things that they did was they started for the first time sort of bailing out the Corporate debt market and the junk bond market

[00:40:12] And if I recall correctly, they did it through black rock In fact, we can look this up But I think the Fed actually was buying a black rock bond ETF as a means of propping things up that could be that could be like if you're I

[00:40:27] Mean essentially then like the government owes black rock. They're not it's not like The ec's now gonna reject black rock and the next time a bailout is needed You know black rocks just gonna you know wave your hands in and not expect anything like this ETFs gonna happen

[00:40:43] The question is is Gary against they're gonna pull one more trick and say well, I gotta wait now And again like all the all the filings have been done and people were filing up to December 29th up until the last possible day

[00:40:57] Because they want it to happen now Yeah, I don't see that happening and also let's not forget that the SEC lost a lawsuit So they're all to grace under to grayscale. So they're also under pressure to comply with

[00:41:15] The court's findings. So I think now we can assume there's going to be an ETF And the more interesting question is What does that mean for Bitcoin going forward and and just to ask again like, you know

[00:41:31] I've been go I've been in the group and I still firmly believe this based on everything I've been reading outside of this matrix port report. I Firmly believe it's gonna happen, you know, basically any day at this point or within the next, you know

[00:41:45] One week two weeks a lot of people expected by January 10th The prediction markets like poly market as January 15th as the date but But there's an 88% It's basically the people gambling on this say there's an 88% chance it happens by January 15th or earlier. So

[00:42:06] so again, would you say that's your view as well that Bitcoin ETF happen, you know, and we should just ignore this report that caused that flash crash yesterday Yeah, I think I think it's inevitable in the first half of January

[00:42:25] But importantly that does not mean that the price is gonna go up. I'm not saying it's gonna go down. I don't know my I'm enough of a reform trader to know that I should not try to call the short-term machinations and the crypto market

[00:42:42] But I do think it's interesting as to what might be worth talking about for a minute why a American Bitcoin ETF is believed to be such a big deal Because on the one hand you could say that there are now unlike say three four years ago

[00:43:02] There are many places where People could get exposure to crypto Whether it's exchanges like coinbase who could get it through PayPal Robinhood Fidelity there are private funds and then there were sort of like this ETF like products like grayscale the GBTC product, but

[00:43:24] There's a couple of important things that even I've had to get educated on in the past year One is that there are many Legal or bureaucratic barriers for institutions or investment advisors to access Bitcoin more directly through those sources that I mentioned of course like in their charters

[00:43:48] Almost every mutual funds got to buy listed New York Stock Exchange or Nasdaq stocks right and then there's also the question of it's Currently difficult to access Bitcoin and something like an IRA or a retirement account, but almost any retirement account will let you buy a

[00:44:06] iShares ETF that happens to be backed by Bitcoin there's the question of Registered investment advisors who control some trillions worth of dollars of assets They don't like to tell their clients to go things that are outside of their purview, right?

[00:44:24] Right so you know previously if a client asked an RIA say I want to get crypto exposure I mean sure they could tell them like well go open a Coinbase account and buy some but you don't want to do that because that's no longer money

[00:44:35] That you're technically managing for them, but again a Nasdaq listed or New York Stock Exchange ETF Almost any RIA will be able to easily get their clients in it and I'll throw a final one out there that I

[00:44:52] Discovered through actually some of my personal work and the consulting that I've done There are many large American hedge funds that would like to get involved with crypto Particularly Bitcoin just because you know if you man if you have some billions of dollars in assets under management

[00:45:11] You're not going to be like trading some shitcoin that doesn't have a lot of liquidity You want to go with something that's mature establish and liquid and you know Bitcoin and maybe ETH are the only coins that qualify and These funds have not

[00:45:26] Today they can have an institutional account at a Coinbase There are prime brokers that they could use to get direct action But and they're sophisticated enough and they have the right people to figure out Custody and trading and liquidity and etc

[00:45:42] But what's been holding them back is the fear of how the SEC might respond Not because it's illegal even Gary Gensler and his reign of terror has Generally said Bitcoin's okay because it's a commodity But I know from personal experience talking to people who work at these funds

[00:46:03] They tell me look yeah We can go you know set up a deal with a custodian and exchange and so I train Bitcoin But then we would have to report that and we don't want the SEC to use that as an excuse to come after us

[00:46:16] That's a good point, but also Any problem like that is why a Bitcoin ETF is so great because that means Just and you're just talking about American hedge fund managers

[00:46:29] Which is admittedly there there are some huge hedge funds out there, but it's still a drop in the global wealth that's out there, but They're gonna start buying Bitcoin only when the ETF is approved

[00:46:43] So unlike a lot of news where there's run-ups in anticipation and that certainly happened with Bitcoin and Ethereum There's anticipation so speculators have been running up No serious buying has occurred yet because the the hedge funds and we'll talk about the sovereign wealth funds in a second

[00:47:00] They haven't started buying they physically cannot buy yet Yeah, I yeah where we are on the question of what's already priced in or not I don't know we have had a massive run in prices Particularly Bitcoin in the last few months in anticipation of this ETF

[00:47:21] So just basic market theory would tell you that some of its priced in But now is it possible that there is a wall of liquidity just waiting? Billions or even more of dollars to come in as soon as it's available. Yes

[00:47:38] But is it also possible that there are other people who've bought waiting to sell to those people? I may or may not be one of them. That's another option and then the other thing I wonder is I

[00:47:53] Do agree that a year from now this ETF is going to be a widely used very successful product I just don't know if that means that

[00:48:03] Tons of money is going to go into it as the day after it's listed or it's just going to be a slow process Across the span of weeks and months. I mean look you flew around the world for city group talking to countries or

[00:48:19] Extremely wealthy people about their appetite for crypto like in the Middle East you if you if you're Dubai or Saudi Arabia Was sitting on I don't know whatever it is a trillion dollar sovereign wealth fund

[00:48:30] Just like the hedge funds you're going to think okay. Well, maybe I'll put 1% of the assets into Bitcoin but everyone thought like that you're talking about at least At least, you know Many more if depending on how fast the buying occurs

[00:48:46] We're talking about many multiples higher for Bitcoin and by the way, I should mention you and I both are more into Ethereum Like I wrote to my readers a year and four months ago selling all my Bitcoin replacing with Ethereum

[00:48:58] So that's just Bitcoin though could go up several multiples it seems But what do you think do you think that's possible from just the wealth that you've spoken to personally? I think in the long run is inevitable

[00:49:11] I actually might theory of Bitcoin specifically is eventually it becomes everybody's backup Break yeah, ask in case of emergency asset The questions we would have to answer though I agree with you that yes, there are these foreign

[00:49:26] Sovereign wealth funds or pension funds or whoever that have a lot of money and what will want some exposure I don't know how much they're dependent on a US list at ETF to get it

[00:49:38] There are I would say they're worried about the same things though the hedge funds are they don't want to do something Illegal or or that's going to get regulated so that the way they buy what their crypto will be confident

[00:49:49] They just don't know they're they're unsophisticated in some ways and they they they want to just do it by the book And the book is in America as the SEC the other thing is Does some

[00:50:01] Employee at the do you know the Saudi Arabia or the Yemen sovereign wealth fund want to use sushi swap and then Screw up their wallet and everything gets lost that guy's not just gonna get fired. He's gonna get killed I

[00:50:18] Agree what I what I was saying is like there are ETFs in many other countries already and other kinds of securitized products They're even like a lot of the big banks already have You know they're exclusive and limited but they have like

[00:50:32] You know not so liquid funds that are backed by Bitcoin Obviously a US regulated US listed dollar them nominated ETF will be the cream of the crop We will see how much and pass the test that has not yet been passed, which is

[00:50:48] There always still is the question. I Mean I heard it yesterday when that matrix report came out suddenly people on Twitter were saying see I told you Bitcoin's gonna be banned. It's going to zero. There's still that small group and so again

[00:51:05] The you don't want the king of whatever Yelling at you. How can you how could you have bought Bitcoin? It's not even regulated yet But once this ETFs approved those questions are over That's true And the other underrated thing is

[00:51:22] The other financial infrastructure that can then get built on top of the ETF So for example derivatives No one you know Bitcoin as large and liquid as it already is as a NASA class does not really have a good

[00:51:39] Regulated derivative market around it most of the options that trade are over-the-counter And there's a lot of counterparty risk for whoever trades it The the CME futures product is not a great product for various reasons

[00:51:55] So you could also argue that you know how like the spiders and QQ ETFs have this massive options market on top of them Via an ETF we might finally get that for Bitcoin. Yeah, I mean there's a there's a decent. There's a defy market

[00:52:15] For derivatives there are many but to your point to like Whoever doesn't want to get yelled at by the king for using the decentralized verse also importantly about Bitcoin because the Bitcoin blockchain is Very limited in what it can do. There's no

[00:52:35] There's virtually no native Bitcoin defy, right? You don't have smart contracts on the Bitcoin blockchain So it's almost impossible to do decentralized finance on Bitcoin So Bitcoin as an asset does get integrated into defy on Ethereum and in other blockchains

[00:52:51] But those are bridged or derivative products that have a lot of risk so There too, you could say that I've actually never thought about this before but Bitcoin lends itself to financialization via the traditional securities markets

[00:53:11] More than say an Ethereum would because on Ethereum you could build whatever you want in defy Do you think do you think though once the big Bitcoin ETF happens the roadmap? Seems to definitely suggest an Ethereum ETF is right afterwards

[00:53:28] And then people are even talking about things like an ETF for Solana and other currencies like that Do you see do you see that happening? Eventually and there are I guess in anticipation of this some of the more minor grayscale Trust products have been trading at significant premiums

[00:53:48] Where it gets a little bit more tricky is One the SEC still holds that almost everything in crypto is an unregulated security I believe In in the coinbase lawsuit or the Binance lawsuit they call Solana or soul and unregistered security

[00:54:07] Which is just ridiculous on that one. I mean, I agree some of them do seem like securities but not Solana I think it's mostly just obstructionism and absurdism and history will not remember mr. Gensler well if it remembers him at all but

[00:54:23] That does make it harder to then get a ETF know with Bitcoin The CFTC declared it a commodity long time ago actually when Gensler was the chair there With Ethereum there have been some questions, but notably because there are CME futures on ETH and

[00:54:47] Because the SEC has already approved Futures-based ETH ETFs then the logic by which grail Grayscale wanted to lawsuit against the SEC also applies to eat in that Gensler can't come out and say we're not going to approve a

[00:55:03] ETH ETF for blah blah blah because then people would say well No, the court already ruled that if you approve the futures ETF You have no logical reason to not approve

[00:55:15] A spot ETF but then for every other coin the SEC could hold that line if it wanted to yeah No, that's true and like look as you mentioned grayscale has a close-in fund for just ETH You know ETH which is ETH E. That's the stock symbol for it

[00:55:33] disclosure I actually switched out of all my crypto ETH to ETH E when it was trading in a 50% Discount it's that asset value that discount now is closed to basically zero because people are anticipating an ETH ETH their anticipating grayscale will become

[00:55:52] an ETF instead of a close-in fund Yes, I just looked actually ETH E is trading at a 11% discount as of yesterday's closed So first of all 51% discount congrats a year ago on an all-time great trade I owned a little bit too but I believe the

[00:56:13] if we wanted to use it as a If we will use the discount to nav as a proxy for expectation of approval GBTC is at a 7% discount ETH E as a 10 and a half 11% discount

[00:56:29] So the market is saying yes likely conversion, but perhaps not as imminently as the Bitcoin one Yeah, I mean the bitcoins first and foremost and that's the one in everyone's mind So okay, we agree on that this ETF stuff is that was kind of like

[00:57:01] Whatever you call it fake news from yesterday Although I still don't know I mean that guy's gonna be embarrassed if he's wrong and he's a prominent commentator on crypto but Maybe he figured people won't remember him if he's wrong and they'll

[00:57:16] They'll praise him forever if he's right kind of like a new neural ruby in 2008 situation doctor doom What was that joke about ruby knee that he's predicted nine of the last two recessions or something? Yeah?

[00:57:29] Yeah, oh, I mean he's that he always his thing is every time you would talk to him The market's gonna go down 20% tomorrow But of course it never never happened until by the way COVID. He's also now famous for predicting the demise of crypto

[00:57:44] Testifying in Congress as to how it was all bad and going to zero and then as of a couple of weeks ago he had a Block post or op head in the Financial Times Talking about his so-called stable coin that he's now developing

[00:58:01] It's kind of a nonsensical idea because it's basically like a mutual fund that invest in eight different things And he's calling it a stable coin and it'll be appealing to people in emerging markets and blah blah blah, but

[00:58:13] Yeah, it's the one thing that's been fun in the past couple of weeks is all the People that were once certain that the demise of crypto is imminent having to publicly walk that back

[00:58:28] Yeah, and I agree. But you know what though? I have yet to see someone. Well, this is not true I have started seeing people recognize the ones who have been bullish on it all along

[00:58:41] You know, but it's not it's not as much as when things go down everyone's like see I told you and The well famously Jim Kramer came around Just this week to the chagrin of yesterday in the same hour as the flash crash

[00:58:56] Right, which some people actually blamed him like oh man You know Kramer helped create the bottom by telling people to sell everything last November and now he might be helping create the top by Coming around I actually think Kramer's

[00:59:11] You know he's a super smart guy one of the smartest guys I've ever met in all of the financial industry and yeah He's the problem. He has is every time he's on TV

[00:59:21] He's got to have a new opinion and so that's difficult to be right a thousand percent of the time on 500 opinions a year So people hold on to the negative ones and completely forget the many positive things that have worked out that he said but

[00:59:36] Let's talk about another major catalyst which has been sort of under no noticed in this ETF news which is that on December 31st Vitalik Buddha and the founder of our initial creator of

[00:59:49] Ethereum he laid out the product roadmap for Ethereum and although we've all kind of known the roadmap a lot of it is in 2024 like you know, and there's the verge the splurge

[01:00:02] The scourge I don't know there's all these things that run with urge and it's the net goal though is to make Ethereum be able to process more transactions than visa per minute and at cheaper fees

[01:00:16] So, you know with more applications that you can do so, you know and adding more security What you were talking about earlier like adding zero knowledge proofs and all this kind of stuff So that's pretty impressive. I think that's actually long term a bigger catalyst

[01:00:31] Ultimately, you need use cases and you need users. You don't need just speculators So ultimately to me, that's a bigger long-term catalyst. I Actually think the ETF is in some ways overrated as the catalyst for why crypto has rallied so much in the past year

[01:00:48] I mean sure it's a good meme Billions of dollars will come in through it whether next week or next year. That's all great but I think the most important thing is For people like you and I who have always believed that crypto is the inevitable future

[01:01:06] then the last year has shown significant strides in maturation and The scaling aspect of it is a big one Because the talak is just highlighting what comes next but let's let's take a moment to reflect on what's already happened just in the past year which is that this

[01:01:27] Layer two roll-up centric vision of how Ethereum would scale is live There are roll-ups now with a lot of users a lot of activity There are days actually where there are more users on the roll-ups and they're on the Ethereum main net

[01:01:42] Which you would expect because it's it's cheaper and faster and made for for like the every man or woman And not only have these roll-ups launched They're starting to mature what they do one of the big improvements expected this year that Vitalik alluded to is

[01:02:06] Changing sort of like the fee market on Ethereum layer one in order to make it even cheaper for roll-ups to operate so That's already happening. This is something that's been on the roadmap for years and it's real now we saw the

[01:02:22] Launch of a very particular roll-up base which coin based the company Developed which is actually very exciting because coin base has I don't know over a hundred million global customers It also has all the other infrastructure needed That when combined with their own roll-up

[01:02:44] It could really take us to sort of that like a well moment that you were alluding to with you know They have a wallet and they have all sorts of other services. They have partnerships

[01:02:53] they have people whose job it is to think about the UI UX of crypto and You have a lot more flexibility With the design of a roll-up so I believe coin base already announces if not they should or they will but

[01:03:08] With stable coins, which is the other big thing that in the past year as far as maturation Is concerned they've really began to take off in certain countries

[01:03:21] You could have a world where on its roll-up coin base says hey anybody who has a coin base wallet has USDC Which is the stable coin that they're a partial issuer of? Up to a thousand dollars you get free instant payments

[01:03:35] Gasless payments as we called them so now suddenly this infrastructure becomes a rival to a PayPal But on a global scale using crypto infrastructure in a wallet where somebody can be sending dollars back and forth But they could also be investing in ETH participating in DeFi

[01:03:56] Collecting NFTs concert tickets, whatever So I think we're at the point now where you can actually take a step back and be like wow We're finally getting all of the infrastructure in place for mass adoption to show up

[01:04:11] Yeah, I agree and I think this has been a critical barrier to getting to that billion user moment Like you mentioned coin base is 100 million users. Let's say there's another hundred million outside of coin base That's 200 million

[01:04:24] But again with the ETF there'll be a lot more users or owners of crypto in some form or other But then with Ethereum and it's in the various projects actually starting to become Usable and used by real customers. I think that's that's basically the moment where crypto

[01:04:44] Takes over and we're I don't know where we are on the tipping point for that But this year next year it could eat this could easily happen and that's the real tipping point I agree with you the ETFs overhyped except for the fact that as a

[01:04:58] As a speculator, it's reasonable to speculate that big a Bitcoin ETF will drastically increase the price of Bitcoin which of course Increases the price of all the tokens and we've seen that happen. So the other tokens go out much more than than Bitcoin and

[01:05:19] So I think it's reasonable to bet on that just as a speculator But what's gonna really keep it going is when people start using it and we have not we have not even seen We're not even an inning one of the use cases. I believe

[01:05:31] Agreed, and we should also give a shout out since we're talking about what's changed to Solana Because as a layer one sort of Ethereum competitor Solana has a very unique approach to scaling and consensus

[01:05:47] And a lot of people including me had sort of written it off for dead A year ago because one it had these series of outages like there's one thing you can't do as a blockchain is to just go down

[01:06:00] Because decentralization is supposed to be far more resilient than central infrastructure And then Solana was also very closely affiliated for various reasons with FTX and Sandback Manfred but it had a passionate community of entrepreneurs and developers who believed in it it has a

[01:06:20] Founder who I actually really respect because I find them to be very open-minded and humble in ways that most crypto people are not and it survived and Suddenly as of a few months ago

[01:06:32] I mean the manifestation of it was that the sole token has been one of the best performing tokens But I think importantly It showed that like hey, you know perseverance

[01:06:43] Works and if you have unique infrastructure that has a special value prop which Solana does have almost every other Ethereum competitor I think is gonna go away because Their whole shtick was well, we're more scalable Ethereum, but now Ethereum itself is scaling so you serve no purpose

[01:07:01] Solana is just architecturally fundamentally different. I'm not 100% sold that it will withstand the test of time But it's great that it's there and I think The way it survived and also if you've I don't know if you ever used it, but from a UI UX perspective

[01:07:19] Using Solana is just a lot more like the more traditional internet experience that you and I are both saying crypto is gonna have to Develop so that's it's been an exciting thing and it's really exciting to see what gets built on there in the next year or two

[01:07:36] yeah, and I do think like you know, I recommended my writing these various tokens and Even a year ago, I normally wouldn't have recommended Solana because I didn't personally know any projects being built with Solana

[01:07:52] I mean you would hear about it, but it wasn't like anything exciting to me But just and I was just lucky in this just as I felt like I needed some diversification To Ethereum so I basically recommended Solana Cardano, which I don't believe in at all

[01:08:08] but it's still moved and Hadera H bar Because that one I don't believe in at all. Yeah, but you I actually met people using it for games because it's so scalable right now

[01:08:21] But I agree with you as Ethereum completes its product map the use for for it goes to goes close to zero So unless it's already entrenched somehow in some projects, so I doubt I haven't looked into it in years

[01:08:34] But it was a private permissioned blockchain, which to me is just a really bad database There were grandiose plans that in the future they would make it permissionless. I doubt they've done that but anyway neither here or there I

[01:08:51] Think competition is good as you know with technology while there's a tendency eventually to coalesce around one or two standards It's not always clear ahead of time Which the better standard is? competition Helps the market sort that out

[01:09:09] So I think it's great that we have viable technology in Solana, which is in what we call the monolithic Blockchain like just put everything on the layer one and figure out how to make it as scalable as possible

[01:09:22] That's one philosophy and then we have the what we call modular philosophy on Ethereum with Larry twos and layer threes Maybe the future is actually both of them just for different use cases But there is like an excitement and vibrancy now that I think

[01:09:38] Ultimately has also translated to token prices Yeah, and I think again the product roadmap with Ethereum which includes Sharding with the verge and then the purge and the splurge Like I think there's a lot of features that are going to make the need

[01:09:55] For these other tokens that aren't as maybe aren't as safe or secure in various ways just There's going to be no reason not to use Ethereum unless somehow fees, you know rise higher than expected but

[01:10:08] Um, which speaking of which we have the halving coming up in a few months everybody there's a lot of I Statistically, I think it's total BS like any anticipation going into the the halving because we just we don't really know It that it's quote-unquote correlated to

[01:10:26] Bitcoin going up, but you only have four instances. So who knows? There's no real evidence that the halving means anything Um other things have been going on in the world that has caused bitcoin going up like right now anticipation for an ETF

[01:10:39] But but people are also arguing anticipation for the halving But when the halving happens and let's say it happens again and again and again Do transaction fees for bitcoin Sarco in a lot more because miners aren't making as much money

[01:10:53] No, because one of the very interesting design choices and how bitcoin works Is that the one thing that always stays constant is capacity So you could you know mining could go up 10x the amount that is today or could fall by 90% That impacts the security of the network

[01:11:16] It does nothing to improve the capacity of it just because the protocol has an effectively hard coded limit on what the size of a block is And more or less mining does not change that even though the even though the rewards get cut in half

[01:11:33] Yeah, so here's why the halving in a way could be problematic Um, you know, I remember like the halvings when I first started paying attention Eight years ago that one and then even the one four years ago. They were interesting because like

[01:11:50] They were great advertising for what crypto represents to people who don't normally pay attention to it That was like it would you know in 2020 it was actually perfect because That halving happened just as every central bank on earth was Going into overdrive printing money

[01:12:07] Because of covet so from a mimetic marketing standpoint to be like there's only one currency on the planet now That's ratcheting down its inflation while every other currency is exploding it but at a certain point Bitcoin inflation right now is already very low and um, excuse me

[01:12:27] To go even lower actually becomes a cause for concern Because of what you said about minor profitability and it matters because The hash rate the aggregate amount of mining is at an all-time high But there'll be one day in this spring where minor

[01:12:47] Revenues effectively get cut in half from one block to the other And if a bunch of them turn off their machines and go away That's not going to do anything for capacity, but it's going to be bad for security Right because uh

[01:13:01] You like a lot of miners because it's more reason to believe the validity of every transaction right And so then maybe this will be the final interesting catalyst that goes underrated People have been talking about what to do about

[01:13:15] The future of bitcoin because unlike in ethereum where the transaction fees Make up most of the income that they're not miners anymore We call them validators or stakers, but almost all the money they make is from fees And something related called mev

[01:13:34] With bitcoin historically the inflation has been 80 90 percent of minor revenue And there's been this question out there for the last couple of years, which is what happens as that trends towards zero Because right now the inflation rate is six and a quarter bit coins per block

[01:13:52] Uh, which is what no 300 000 something like that But after this having it goes through three and an eighth and then another having and it's like wait if if miners are making less than Two bitcoins per block. That's significantly lower revenue

[01:14:10] So the one thing that would make up for it would be a significant pickup in fees And that's right. That's what that's my worry right, so we've already had that though because of uh ordinals and inscriptions

[01:14:26] I don't know how closely you followed this but this has been a very controversial and massive development in the world of bitcoin in the past year and basically through a sort of like a Jerry rigging MacGyvering kind of process smart people have figured out how to

[01:14:48] Embed data into the bitcoin blockchain Which means you could also issue nfts on the bitcoin blockchain And even do fungible tokens sort of like we have the erc20 tokens on ethereum They now call them brc20 tokens in bitcoin and these have

[01:15:08] Jacked up fees because it's very expensive to do all of this Because bitcoin is not designed for this right and whereas like ethereum is designed for people to issue fungible tokens and non fungible tokens bitcoin wasn't so the process of doing it

[01:15:22] Is very fee intensive and this is really like divided the hardcore bitcoin community Because on the one hand you have people like me who are like, this is great One it's experimentation. It's fun. I actually um took the

[01:15:37] The cover of my last book and a hash of the content of it and I embedded that into the bitcoin blockchain Because it is the most decentralized network in the world and i'm like now I can't change it

[01:15:49] If I do people could be like hey the hashes don't line up um And people are doing all sorts of other interesting things and people like me more revenue from miners is good for the security of bitcoin the other side are like the hardcore libertarian

[01:16:07] Hard money gold buck type of maxis who believe in bitcoin As money that's their religion So to them this is a form of blasphemy. You know, how dare you? um waste block space on Stupid jpegs

[01:16:24] When you know when the world ends this is going to be the money that we all use to buy coffee and live off of and You're now pricing out people on el salvador who would buy coffee with bitcoin because the fees are in order of magnitude

[01:16:37] higher than they were prior to the invention of ordinals, but Nobody really takes them seriously and I think the fact that the bitcoin economy now has these new source of

[01:16:48] experimentation innovation fees that have actually been startups that have raised vc money because they plan to do cool things with inscriptions That's also been a underrated bullish development for bitcoin

[01:17:01] Yeah, and that's that's kind of like let's say an easy use case. You don't need a country to say Okay, we're going to use bitcoin as our currency now This is just like like you use it like, you know people use this

[01:17:12] So again, is there a solution when the when the rewards get too little I I don't quite understand how the fees don't go up Automatically, but the good news now is that I'm looking right now in the past seven days Bitcoin has actually generated more fees than ethereum

[01:17:31] That used to not happen at all in recent years Just because you would look at ethereum be like there's a million things to do on ethereum They all generate gas fees for the miners or validators then you look at bitcoin and be like

[01:17:44] There's literally one thing to do which is send other people bitcoin which has limited utility It's great to save in bitcoin right, but like No, I don't want to buy coffee with my bitcoin. I expect it to go up in value

[01:17:56] I want to buy coffee with my fiat money This year's version of the pizza for 10 000 bitcoin guy from 10 13 years ago indeed But now it's like oh well We can do All sorts of interesting other things than bitcoin and I actually don't think we have yet

[01:18:15] Found the product market fit as with everything in crypto like the djens show up and do mostly stupid shit like nfts and meme coins and stuff that'll probably end up worthless but If you say bitcoin is the most decentralized resilient network digital network on planet earth

[01:18:34] And you can now embed whatever information you want even if it's not financial into it Then might there be use cases in the future where important contracts? peace treaties yeah, absolutely like look One of the initial predictions for crypto for crypto in general

[01:18:54] But bitcoin in particular was it's going to replace all contract law And that was kind of a side benefit of bitcoin as a currency because of the smart contracts But it's like what we're talking about earlier. We haven't even begun to see

[01:19:07] You know use cases in decentralized computing which essentially Makes every supercomputer a slow computer compared to what happens when you have millions of You know regular computers processing on a parallel problem And then we have not seen the use cases for crypto in marketing

[01:19:25] So imagine when every company like let's say uber issues an ubercoin To customers who ride frequently issues ubercoin to drivers who get high ratings and drive frequently So that's a form of mining And then you can use ubercoin later to buy

[01:19:42] Ride so you borrow from future profits to do marketing right now by issuing these coins Which by the way if those coins become part of the ecosystem of every Product out there plus they're fungible through exchanges

[01:19:55] That that actually does a lot to change the inflation equation because you're not just talking about dollars buying goods But other currencies. So I think I think that's going to be an enormous

[01:20:06] Multi-trillion dollar use case that has not even not even one dollar has been spent on that yet Maybe there are brands and projects playing around with it, but I agree with you

[01:20:17] I think it's the future of everything. I don't know one of the things I'm very excited to see There's going to be differentiation, you know, like we might have a world where there's bitcoin ethereum ethereum layer two salana, etc. And then the market will decide which one is

[01:20:33] um more appropriate for the use case And I actually think part of the calculation will be like how vital and important is the activity Because some things like I foresee a future where a If there's a future

[01:20:51] You know breakaway nation like america was and they need a declaration of independence that will be embedded into bitcoin Because this is like the founding document or constitution for a new country That you want to be in the most decentralized thing in the world and if it

[01:21:06] Costs you five hundred dollars worth of bitcoin to do that. It's almost better that it's expensive, right? But then if you're like uber or doing coupons that are nfts that also have some art associated with them Well that you can do on a layer three

[01:21:22] Because doesn't need that much security and decentralizing still better than existing in uber's database their benefits And there's going to be this self-selected market segmentation Based on decentralization and security versus cost Yeah, and look again. I I agree. I don't think we've even seen

[01:21:42] The potential kind of just like with AI. We haven't even fully seen the potential I would say AI is just ahead though in terms of consumer awareness and you know People could even if you've never tried chat gpt you could try it in one minute from now

[01:21:56] Whereas bitcoin you can't It requires some knowledge which that starts to end the day that bitcoin etf happens, which I think is why It's in part why it's so important but

[01:22:09] Omen malacon as always I learned so much talking to you. You're a valuable resource in this whole area Um, let me say the names of your books because I can never remember them in part because the books were amazing titles not as good

[01:22:27] Although what do I know? I told so jaco willing, you know, he is um, yeah Yeah, so jaco willing. He's a regular on the podcast whenever he has a book out And I want I once said oh, so what's your this is like years ago

[01:22:40] I said, what's the name of your next book and he said dichotomy of leadership and I'm like, oh, that's a horrible name But of course came out was a new york times bestseller And jaco did say see I told you so but at least he didn't kill me

[01:22:54] So I wish you could Omen malacon author of re architecting trust the curse of history and the crypto cure for money markets and platforms And then okay. This is a better title Omen malacon the story of the blockchain a beginner's guide to the technology nobody understands

[01:23:13] I like the title. I will give you the uh, the right to name my next book james No, the story of blockchains. That's pretty good Uh, what else what what's your next book? Do you have a next book planned? No, no nothing planned yet. What about you?

[01:23:30] I do but it's on a completely different topic which my listeners have heard about so but I'll tell you offline Okay, I've been working hard on the next project, which is very different from all my other book projects before

[01:23:42] Cool, but thanks once again omit and hopefully you'll come back and we'll do this a lot more Would love to always enjoy it. Thanks for having me. Thanks omit