{ "episodeId": "SLP263", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "parker_lewis": { "name": "Parker Lewis", "role": "guest", "tag": "PARKER" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 9.17, "text": "Hi, you're listening to Stephan Livera podcast, a show about Bitcoin. Today for episode two hundred and sixty-three, Parker Lewis of Unchained Capital re-joins me on the show, and we're talking about the greatest trick that central banks ever pulled on us, and what that has done to money, our ability to save, and we also get into multi-signature with Un- unchained, as well as this topic of loans and living off your Bitcoin using collateralized loans, which is a very popular topic in our discussion circles these days." }, { "speaker": "parker_lewis", "time": "00:43", "start": 43.23, "text": "3:10 Stefan Livera finds. This is Dread here, and I have some big news to share. Swan Bitcoin's new private client services division is open for business. So last August, Michael Strategy's CEO, Michael Saylor, kicked off the trend of companies buying Bitcoin for their Balance sheets. A flood of high-profile investors and companies have joined them, names like Paul Tudor Jones, BlackRock, Square, and Tesla. Swan Private exists to meet the massive international demand from thousands of companies, family offices, and high-net-worth investors from all around the globe. If you're thinking of buying between one hundred thousand and one hundred million US dollars worth of Bitcoin over the next year, visit swanbitcoin dot com slash private. That's swanbitcoin dot com slash private. Fill out the onboarding form or email the CEO personally, cory at swanbitcoin dot com. That's c o r y at swanbitcoin dot com." }, { "speaker": "stephan", "time": "01:45", "start": 105.37, "text": "Unchained Capital are building Bitcoin native financial services, and as you'll see in this episode, I discuss with Parker around how you can use multi-signature to have multiple locations with multiple devices on your keys. And if you want a hand in with setting up, they've got a white glove treatment. It's called the concierge service. Their team will ship you some hardware wallets, they'll teach you about multi-signature, answer your questions, and deposit a thousand dollars of Bitcoin in your vault, and you get fifty dollars dollars off for using the code LIVERA. Unchained also offer an OTC desk and they also offer business accounts, which are great if you want to move your corporate treasury to Bitcoin, where you hold the private keys. Go to unchained dot com to find out more. Are you interested in mining? Compass is an online marketplace which makes it easier for everyone to mine Bitcoin and enhance the Bitcoin network's security. This is the anti-cloud mining option. You buy your own ASIC and secure hosting at great facilities around the world. So for years we've heard that mining's only profitable if you're investing tons of money, but now with Compass, everyone can tap into economies of scale and access reasonably priced hardware and cheap industrial power rates. So if you're unsure about how to get started, Compass offers Hardware and hosting bundles, which helps reduce that need for technical knowledge and allows you to get started mining Bitcoin with hardware that you own. Go to compassmining dot io and start mining Bitcoin today. On to the show. Parker, welcome back to the show." }, { "speaker": "guest_2", "time": "03:11", "start": 191.15, "text": "Stefan, great to be back on. I appreciate you having me and look forward to the conversation." }, { "speaker": "stephan", "time": "03:16", "start": 196.01, "text": "Yeah, so there's been so much going on in the Bitcoin space, I'm sure you guys are super busy over there at Unchained, and it's just a really crazy environment. I think I think it's worthwhile talking a bit about what brought us here and what are some of the ways we can sort of manage our way out, obviously with Bitcoin being a big part of that answer. it seems, you know, one of your recent pieces over on the Gradually Then Suddenly series was this whole idea of Bitcoin as the great definancialization. can you tell us a little bit about what, what spurred that piece?" }, { "speaker": "guest_2", "time": "03:49", "start": 229.3, "text": "So it's an idea that I've been thinking about a lot, but this idea that I think a lot of people sense it And it's difficult to quantify, but that one of the root causes of the financialization, in my opinion, and I, and I break it down in the piece, is that the actual monetary structure or the debasement of money that is engineered by central banks forces people into financial assets as a way to offset inflation. And that what we actually see is that, you know, not to, to a full extent, but that a lot of the risk- Taking is, is really not forced, and I, I think it's more akin to taking risk with a gun pointed to your head, and we don't know really, truly how much malinvestment there is, other than it exists, as a function of the, of the Fed and central banks all over the world debasing money and forcing people into, to, essentially, investing between a rock and a hard place." }, { "speaker": "stephan", "time": "04:48", "start": 288.15, "text": "Yeah, and I, I was struck by this idea that it's central banks are essentially pulling this great trick onto the rest of the world That we all must perpetually take risk just to even stay afloat." }, { "speaker": "guest_2", "time": "05:01", "start": 301.42, "text": "Well, yeah, and that, that's a key theme, of the article, which is, and, and so most, I, I, I try to articulate it in the piece, but I think it's good to talk about as well, that, this idea that I talk about, which is, or explain, that if you have money, then that is actually the end point. Of one cycle of risk taking. and, and what I mean by that is that for you to have gotten money, you would have had to taken some risk before that, which merited somebody compensated, compensated you for that risk. And, and that doesn't necessarily mean investing in a stock or a bond and having it go up in price and selling it for more money. It means that if you committed yourself to running a pod- Or working on a Bitcoin project like Unchained Capital, or, you know, investing and educating yourself how to play the violin and per-performing, and go- going to Juilliard and then, perfor-perform, you know, performing and people paying for that, or someone like Russell Kong, putting his blood, sweat, and tears into being a football player and then being paid for that, that, that basically risk is putting in time and energy to delivering some form of value to others. other human beings, and there's no assurance that someone's going to pay, pay you for that, or that you're going to be successful in your endeavor, but that the end point of a, of a risk-taking, risk-taking cycle is somebody compensates you money. And then from that point in time, you shouldn't be forced into perpetually taking more risk. That, that there's risk taking and then there's savings, and that in the Fed's construction of the economy, it essentially forces people into never-ending risk taking, which if you multiply that or consider that on an economy-wide or aggregate basis, it's incredibly unhealthy that we're all forced into that position by the Fed engineering it. and that the beautiful thing about Bitcoin is that it essentially stops that negative feedback loop, that it allows people to have a form of money that works in their favor rather than against it. And if you, just take that fly out of the ointment between money being engineered to lose its value versus not just the opposite, but just taking away that, that says, \"Let's just make it neutral and let's let the market decide.\" That all economic incentives by that critical barrier become aligned, and rather than people perpetually taking risk, they get to benefit for the risk that they've already taken, and then the consequence of that as well is that every economic decision point that they come to in their life, whether it be from the investment perspective or the consumption, becomes more informed by better prices, and, and you ultimately have a world where when you reintroduce a more obvious opportunity cost to money Then, then you ultimately get a more stable economic system as a whole." }, { "speaker": "stephan", "time": "08:07", "start": 487.14, "text": "Of course. Now, I'm on your side, right? I'm, I'm in the Austrian camp, but I can, I can presume, I can imagine, or I've seen other people, let's say, on the Keynesian side, they might come back and say something like, \"Oh, well, how is it fair that you expect to just sit on your money and get a free return out of that? Isn't that, you know, how, how can you expect that?\"" }, { "speaker": "guest_2", "time": "08:26", "start": 506.5, "text": "Well, I, I think one And maybe this is what, or at least it's one theme that I talked about, and I think, I think kind of it, it speaks to the heart of your question, which is, that, and, and that, that if I have a currency that's appreciating, that people will never spend it, and that, you know, if there is a slowdown in economic activity or growth, don't we need that lever to be able to debase currency, to be able to create the incentive for people to spend money? And I, and I think that, that is one of the most" }, { "speaker": "guest_2", "time": "09:03", "start": 542.56, "text": "uninformed, uneducated, breaking with the reality view of the world, that, that it's just ridiculous. And the way that I describe it in the piece is, imagine that there were a world where there were only twenty-one million Bitcoin and there's seven billion people, or seven billion plus people, and those seven billion plus people are all using Bitcoin, and the function of money is coordinating economic activity and trade, all seven billion people actually have to consume things every day. They need food, water Energy, healthcare, X, Y, Z, name whatever you want. Those people are all demanding things every day they are going to be spending. So that's one idea that, that, that you will have no problem with people spending a currency that has a fixed supply even if it's appreciating. And it's this concept that Saf Dean talks about, I think in, in large part in the Bitcoin standard, but conversations that I've had with him elsewhere, which there's, there's this idea of time preference. And the idea of time preference is there's high time preference and low time preference And high time preference, you're, you're waiting the present over the future more so, and then if you have low time preference, you're, you're waiting the future over the present. But in either of those scenarios, there's this recognition that everybody has positive time preference. Everybody on the margin is inclined to wait the present over the future because the future is uncertain and because our lives are finite. And, and that gets back to the same idea, if you use the, the example or the, you know, the way that I visualize this for people Or try to articulate it, is if you had twenty-one million Bitcoin, and yes, they're divisible to a hundred million units, but you had seven billion people, those seven billion people have to consume things every single day to survive. and that's how you know that despite the fact that, if a currency is appreciating or depreciating, people are going to spend it 'cause money is only a utility for us in helping to more efficiently affect trade. and so it's just ridiculous that, that people would think that, you know, if a currency is appreciating, They will spend it every day and they'll actually spend it more because it's, it's doing a better job at getting them the things that they actually value in the real world. The other way I kind of counter that, just for, for the Keynesians or the modern monetary theorists out there, is that Bitcoin has gone up fivefold in the past Six, seven months, and people are selling it every day. and then when Bitcoin just dropped fifteen percent from sixty thousand to roughly fifty thousand, or twelve and a half percent, however, however much it is, that, that people are both selling that and buying that. That, that what's actually happening is that Bitcoin's becoming the most liquid good in the market, and emergent consensus is occurring before our eyes that Bitcoin is being adopted as, as the, the monetary standard of value. and so I think that, we don't need an incentive to spend money, the The, the money is meant to be spent. It is the economic good that, that facilitates this exchange, and by definition, that means spending it. And, and for every exchange, someone is saving money and then somebody is foregoing that saving for present consumption. and that happens naturally and actually happens more efficiently and with less distortion when the money and the underlying base of money isn't being manipulated." }, { "speaker": "stephan", "time": "12:14", "start": 734.46, "text": "Yeah, great explanation. So I think there's probably two key points that I would draw out of what you were saying. So firstly I would say, I would summarize that really, it's the fallacy of composition. So what some Keynesians say is, \"Oh, look, there's gonna be this deflationary spiral if people aren't spending and all the businesses will go out of business and people will lose their jobs and that'll be terrible and we need to stimulate the economy.\" However, that's a fallacy of composition. People are-- just because some businesses are going out, are going under, and some people are losing their jobs, doesn't mean all of them will. And so we can't just say that just because some The fiat time preference world may not exist in the Bitcoin low time preference world, or kind of, I'm, I'm kind of loosely speaking there. but it also means that people will repurpose those resources into other things, and that may mean that they re-repurpose the production into things that are only gonna come due or only gonna be, fully produced in ten or twenty years. Like, I mean, talk about aged whiskey or whatever, or forests or cutting down the trees or whatever, they're gonna reorient their production, and so there will be jobs in those other- Industries, right? And then the other point to which you were talking about was just about the way that, you know, it's, it's like, sorry, the second point was around the money that you are, I'm sorry, I'm totally, I'm missing it there. What was the second point?" }, { "speaker": "guest_2", "time": "13:35", "start": 815.03, "text": "So, I, I was making, you know- one point that the, that money is a utility to, to exchange, and that in even in an appreciating world, people have present demands and, and, and pre- and, and positive time preference, even if they're low time preference. And then the second piece that, you know, kind of, I, I just use the more empirical example that as Bitcoin increases in value, that they, that people are spending it every day, that they're, that they're foregoing that and still spending it. And then I think one idea too that you're keying in on there, which I Is, and, and, and I didn't mention this before, but it's this idea that Bitcoin is just a neutral currency. It, it doesn't, it's not actually inherently deflationary. And I think this is another thing that, that many people miss, and I think it's just a default position because they've been trained to, to believe that inflation is necessary, that they, they just have never actually thought about what, if there were a neutral currency that was neither increasing or decreasing, what it means for it to be, quote, deflationary? And, and really what I think about that, it is that in a world where you have a neutral currency that's neither increasing or decreasing, quote deflation is actually just an increase in purchasing power, and an increase in, in, in increasing purchasing power means definitionally that the currency is doing its job of accumulating capital or helping society accumulate capital and making it essentially, making goods more abundant. And, and so what I mean by that is if you have a fixed amount of money Money, and you're actually having more goods, such that the purchasing power of the money is increasing and the prices are decreasing, you have a money that, that, that only exists in that world, that, that means that it's doing its job, that it's basically, it's more effectively communicating prices, communicating information through an economic system, and the output of that ultimately being the, the greater productivity of those people that are functioning with that money. So it's like a, a deep, a, a, a currency That it's increasing in value and increasing in purchasing power means that it's doing its job and, and, and you wouldn't actually have an increase in purchasing power and people wouldn't be giving up their money for, for, for essentially more and more goods if the, the utility of those goods that they're getting isn't delivering value to them, but they're also doing it with the expectation that the economy is working so well and productivity is increasing that they're going to get money because they're delivering value to others. and so that is, it is a core fallacy of Keynesian MMT monet Interest theory, however you wanna describe it, I, I definitely think it, it's very shallow thought." }, { "speaker": "stephan", "time": "16:12", "start": 971.77, "text": "Yeah, I see. Yeah, and as you were saying with the inflation aspect and the conversation around inflation versus deflation, sometimes it's people, people operating on different definitions. So, so the classical definitions of inflation and defla- and deflation are more about inflation means an increase in the supply of money and a deflation is a decrease in the supply of money, but then nowadays people conflate inflation with, say, CPI, and then they're talking, \"If you- It becomes more of a conversation around purchasing power. So I guess if we're gonna be technical, or the way I would explain it, is Bitcoin currently is disinflationary. It is inflating at a, you know, reducing rate until we obviously hit the twenty-one million, and today it's what eighteen point seven million or something like that. but in terms of its purchasing power, it is deflationary. It is going up over time, and that is where the kind of conversation comes in around, I think it's that point around moniness, and I think you make this point as well Thinking about savings versus investment, and basically people have, in some sense, turned the stock market, stocks, into a monetary instrument, haven't they?" }, { "speaker": "guest_2", "time": "17:16", "start": 1035.53, "text": "Yeah, and I think there's a lot of debate that happens about this, which is, have monies versus near monies, and there's this recognition that, that money is never absolute, that, that I think that there is a, a good that emerges that is the most common use of, of the use of, I guess, of the term money, but that That, that if I'm thinking about Bitcoin or the dollar, Bitcoin or gold, you're evaluating Bitcoin's monetary properties based on the relative strengths to other forms of, or other goods that could be used as money. But while that may be true, there's also a reality that people have started to use things that aren't definitionally good forms of money as things that are near monies, or they, or they argue that they're, that they have money-ness. And, and, and in those instances, like they'll say stocks Are, are, you know, have, have some moniness to them, or real estate is, is a store of value. And I think that that is really just a function of the bastardization of money, that, that it's more realistic that those things aren't money or they don't have any moniness. It's just people are being forced in those type of assets to offset the depreciation in money that is being engineered by central banks. and so, and it's one of those, it's one of the ideas The ideas that I talk about in the piece that Bitcoin is the great defi-nancialization, is that Bitcoin will help reverse course and it will help draw the distinction between investments and savings. And, and one of the, one of the ideas that I talk about is There's this idea that most people have in their head that they must make their money grow. and it's really that people have this idea to a large extent in their heads, and it's been ingrained in it because they've also been trained to understand that their money loses its value, and that there really is a very, very clear distinction or definition between saving and investment. Again, speaking to what I brought up before, saving is you've already taken risk and you've got money. Investment, you're putting that money back at risk. You're putting it in some endeavor, and the endeavor is to get more money, to, to have, you're taking risk and you're getting reward back. When those lines become blurred to the point that they can't be deciphered where we even have this conversation of how, you know, how good of stores of value are stocks or real estate or is there moneyness in them or not? In my view, Absolutely not. The problem is that the lines became blurred, and Bitcoin is unblurring those lines. and that as more people learn about Bitcoin and as knowledge distributes, people figure out that they don't actually need to make their money grow, they just need a better form of money, and that's what Bitcoin is, and that's what it represents. And that doesn't mean that there won't be investment. And, and that's another one of the, I'd say, Keynesian tropes that it's-- that on the one hand, it's that people won't spend in the consumption side If you ju- this idea, oh no, if we, if we just have this better form of money, then people won't invest. And that's also just false, because while we all have present needs and we all need to consume things in, in the, in the present, like food and water and energy and healthcare, we also all want to improve our lives, and we are all also rewarded for doing that. and that is the function of trial and error and investment. And so it's, it's this fear that, that, that if you have a better form of money, that people won't do that. But it's actually the money that creates savers, that creates savings to then invest and consume. It, all that is happening is the economic incentives are being flipped from incredibly distortive or manipulative and ultimately counterproductive to one where there's a virtuous feedback loop." }, { "speaker": "stephan", "time": "21:03", "start": 1263.46, "text": "Yeah, I love that explanation there, because, Bitcoin is unblurred During that line, because now that we have a real choice of money and a real way to actually save our value into the future, that is just, the step, and that's gonna be part of the change that we see over this, call it ten, fifteen years, whatever it is, as the world Bitcoinizes, then people can really, get away from doing what they've had to do in the past. And I think it's funny because if we take, you know, what you're saying, and we look at what people say in the, let's call it the traditional wealth Or even some of these, financial independence kind of communities, they'll be talking about, \"Oh, hey, you've gotta, you've gotta stack it away into your ETF, and that's how you save for the long term.\" Or everyone wants to become a property mogul, and they think this is the way that, you know, you know, you go to the barbecues or you go to the events, and everyone's talking about these apartments and houses that they bought and so on. And that's very much a phenomenon here in Australia, and I'm sure it's very much" }, { "speaker": "stephan", "time": "22:07", "start": 1326.8, "text": "Having that clear delineation as you made it between savings versus investment because they've all been blurred." }, { "speaker": "guest_2", "time": "22:13", "start": 1332.71, "text": "Yeah, and I, I think, you know, one of the examples that, that I'll use, you know, when I was just coming out of college or university and I was working at Deutsche Bank And most people that work a nine to five job or work for a four to five hundred, five hundred company will relate to this. You basically, they make it very easy for you to take risk and essentially not save, but they bill it to you as savings. And, you know, one example is, you know, if you, your 401k, you, you click and you can max out your 401k, and they make it super easy for you to do that. Well, what are they doing? They're making it very easy for you to continue to take risk perpet" }, { "speaker": "guest_2", "time": "22:51", "start": 1371.13, "text": "Mutual funds, and you have no idea what they actually hold. They say something like conservative investment grade bond index, high yield bond index, high tech growth stocks, blue chip stocks, and you just choose a couple of those and you say twenty percent of this one and thirty percent of that one and maybe ten percent, but you have no idea what risk you're actually taking. It's just Madison Avenue marketing, but at the end of the day, you are taking risk. And they're making it very easy, and you would then equate it with savings because you've been conditioned to do that. and, and it becomes so second nature, and there's a very big difference between that. It's not just passive investing and active investing, I would say passive investing one hundred, one hundred percent of the time is a terrible decision. It's, you have to be intentional of the risk that you are taking, and if you're not, that is what I would call, the form of investment that is, that is trying to replicate what- Just a better form of money should do for you on its own. And, and that there really is, I experience this, I think most Bitcoiners experience this, that there's something deeply cathartic about finally having a form of money that works in your favor, rather than one that works against it, that is the opposite of that. and that, that, Phil Geiger and I, we, we often joke about it here at the office that it doesn't, it shouldn't be intuitive to people that they have to work Work, you know, during the day and then turn into a stock picker at night and become an expert." }, { "speaker": "parker_lewis", "time": "24:27", "start": 1467.1, "text": "But" }, { "speaker": "guest_2", "time": "24:29", "start": 1468.58, "text": "there's just not something that's normal about that, but it's been entirely normalized, and Bitcoin's fixing that." }, { "speaker": "stephan", "time": "24:35", "start": 1475.26, "text": "Yeah, that's excellent. And so taking that then to the traditional investment world and finance world, now we're getting into this position where there are large investment entities, and these could be pension funds, there might be insurance companies. They are now in a position where they have to invest, you know, some money or endowment funds as well, and they have to invest some money on behalf of, you know, their customers or their beneficiaries and so on. But now they're getting to a point where they actually can't make enough return that, that than what-- compared to what they need to. Isn't that what you're seeing as well?" }, { "speaker": "guest_2", "time": "25:12", "start": 1511.71, "text": "Yeah, one hundred percent. you know, it's the- pension funds, let's say, I mean, it's not just that the, that the pension funds have liabilities that they can't meet, it's that the function of monetary debasement forces people into taking risk that they otherwise wouldn't take if not for the manipulation in the markets, and that there's a really, really negative outcome that comes from that, and that- What many of them are finding is that are doing the work is that the Bitcoin facilitates the function that they actually need better than any type of financial risk that they could take. It's almost, it, it's the best of both worlds. I, I, I firmly believe that even though Bitcoin is, is volatile, it is the opposite of taking risk, of not taking risk. It's the definition of savings. It's just you're saving in a better form of money, and that a lot of the, the forward, I'd say Maybe not even forward-thinking institutions, but those that are able to work through the noise and understand Bitcoin for what it is, it's going to achieve their goal of Achieving the returns, 'cause its purchasing power is gonna increase, but it's also doing that while not taking risk, and not taking, you know, in many cases, number of them will continue to take counterparty risk and use custodial solutions, but, but it's the best of both worlds, and, and if you can achieve your goal of storing, storing value that you've already created in the world rather than taking risk, increasing your purchasing power and eliminating a lot of the, I think structural challenges that exist in financial assets, namely stocks and bonds, that, that you're going to work out better than, than anybody else that, that is more resistant to that change." }, { "speaker": "stephan", "time": "27:01", "start": 1621.03, "text": "And if you had to compare, obviously those of us in the orange-pilled world versus those in the more normie financial world, if you will, and some of them, the way they are thinking about it, it might be more like, \"Oh, see, I'm just gonna take a little one percent position on Bitcoin.\" how are you seeing that? Shift in their thinking, are they coming around to that or are they mostly in that kind of toe-dipping, level from your experience in your kind of, assessment of the industry?" }, { "speaker": "guest_2", "time": "27:30", "start": 1649.79, "text": "In my experience, I think we're seeing both, right? a-and, and I'll, I'll speak to some of things that I, I see privately, but then others that I, that I see publicly, just to articulate, it's that we see the mass mutuals of the world where they announced a hundred million dollar position, and that's four basis points, point zero four percent. World, you know, again, different types of institutions and they think differently and they're doing it for different reasons and they have different governance structures, but they moved a billion and a half in, and, and that's far more than four basis points. I'm not sure what, what percentage of the cash, but I believe it was around ten percent or if it wasn't, it was high single digits or low double digits. it was a more significant position. I think Michael Saylor really said it best. I think we've all been, walking around the space for a while, but Said in one of the earliest interviews that he did, that if you actually understand Bitcoin, there's no way that you only have one percent of your assets in it. and, and I think that's really true, and I think it's, it's a part, it's natural to- Call it what you mean, education, knowledge distribution, but as your understanding of Bitcoin changes over time, and, and I think that Bitcoin's bigger than all of us, and we all each think about Bitcoin differently, and that's fine, but as ones, Ability to understand how and why Bitcoin has a credibly fixed supply, your willingness to store more value in the network necessarily increases, and that the way that I would probably describe it, or the way that I recommend to people is that if you just knew that the idea behind Bitcoin is that there will only ever be twenty-one million, and if that statement were true, without any understanding beyond that, the minimum that you have to have is one percent, because that thing is Incredibly asymmetric, it represents the greatest asymmetry that exists in the world. But as you start to gain an appreciation for how or why that's possible, that something could be finitely scarce in the world, and that thing might be digital, and maybe it has to be digital to be finitely scarce, then you start to, to realize that, that you can't just have one percent of your, of your assets in that thing. And then as you start to develop conviction around it, not just an understanding of how it might be possible, but that the- That it's probable, then you're probably looking at five to ten to twenty percent, and then if you get to be the real, you know, crazy people like ourselves, where it becomes increasingly inevitable, and that, that while, while we believe it's inevitable, we're also, I'd say, probably the greatest skeptics, where we try to, to undercut our own belief, you know, kind of understanding of the network, that, that once it starts to become inevitable, that, that you start to look at it in a world where, the majority of your assets Assets would be in Bitcoin, and that it's not some, hail mary or trying to get rich quick, it's that you've created value in the world, and how are you going to best protect that? every, every financial decision counts, and, and Bitcoin is the best store of value because it is the best form of money that ever existed. So in the experience that I'm seeing, I'm seeing a range of institutions doing the, the toe, the dip, the toe in the water versus the actual taking a material position, and, and I think that, that that's just Function of knowledge and it's natural, it's the same idea for individuals as it is for institution, and it's going to map to and it will map to, an individual or an organization's Understanding fundamentally of how and why Bitcoin has a, a twenty-one million fixed supply and what that represents." }, { "speaker": "stephan", "time": "31:07", "start": 1867.31, "text": "And also as the cycles take place, typically people learn, and so even for somebody, hypothetically, let's say somebody started with a five percent allocation into Bitcoin, then after another cycle, they might be twenty, thirty percent into Bitcoin, and so just over time, people end up being close to all-in or very, you know, very high percentage allocation. in Bitcoin. But I guess then the question is, do you think some of these instit-institutions will learn even faster than that, that they would learn even without having gone through a full cycle? Or do you think that, you know, you kind of have to have been through a full bull and bear to really get to that point?" }, { "speaker": "guest_2", "time": "31:46", "start": 1905.98, "text": "I'd probably say somewhere in between, not, not to, not to be hedgy, but I think that certain people will, because the access to information is only improving, that, that really per- Provides that, that breadcrumb or kind of, you know, kind of where, you know, Michael Saylor's ability to go down the rabbit hole of Ross Stevens in twenty twenty or twenty nineteen, and even if those guys were paying attention to it before, it just continues to get easier. Podcasts, books, blogs, whatever it may be, more and more information is there and it can, can accelerate the path. there's also a reality that for the average person, not necessarily of average intellect, just the normal person, Bitcoin is different Difficult. It is, it is not intuitive, and the questions about what, what is and what isn't money, and can Bitcoin be it? Those are just hard questions, regardless of someone's intellect. and that, that realistically, there is a function of time seeing the network operate, going down, having the incentive to go deeper and deeper down the rabbit hole, that, that your confidence and your understanding and your, your, your willingness to store more wealth in the network necessarily increases from point zero of the- The first time that you bought a Bitcoin to today or tomorrow or the next day or a month from now or a year, and so there will be people that, that fall down that path faster than others, but it's also part of probably the human condition of figuring out, you know, and becoming comfortable with the idea of Bitcoin as money, which, which is something that's fairly foreign, admittedly, I struggled with it for a long time, and, and practically speaking, if everyone admitted it, they-- everyone probably does to, to different extents. so people will, people have the tools fall down the rabbit hole faster and harder than they've ever had before, and that will only accelerate. but, but it also will remain hard for, for people, you know? And I'd say more, more people than less." }, { "speaker": "stephan", "time": "33:41", "start": 2020.52, "text": "Yeah. And I think while we can talk about it at a more intellectual level, there'll be some who just, you know, it's just a peer pressure social thing or it's an emotional thing, you know? They might be, so I guess at one level they might just be looking at, oh, hey, what are my family and friends doing? And I feel the necessity that I need this thing, or it's a greed thing. Like I feel like, hey, the greed is gonna motivate me to go and learn more about this thing as opposed to just kind of staying in the fiat world." }, { "speaker": "guest_2", "time": "34:10", "start": 2050.3, "text": "Yeah, and I, I think there's two realities there, which is one, once you have some Bitcoin, you have a vested stake and you're, you're more curious, you're paying attention more, you're, you're seeking information on the margin more than somebody else. So there's a benefit to just dipping the toe in and then," }, { "speaker": "guest_2", "time": "34:28", "start": 2067.67, "text": "and You know, when, when the price is going up, and, and, and it's fear and speculation and, hey, my friends are getting rich and I don't want them to, without me, that, while that, if they're just operating on that, that's inherently irrational, Bitcoin and its price going up is also a price signal. There's also information being communicated as part of that process. So even if you don't know why, if you're buying it because the price is going up, again, possibly irrationally, you're taking a very rational decision whether you know it That there's a signal being sent which is the market is converging on Bitcoin as money, and that is causing its price to go up. Price is the output, monetary properties are the input, and the price going up fundamentally on the margin, not to say a hundred percent of people that, that buy it do it, but the reason why it goes up consistently over time and why it always finds a higher base is because people are evaluating the credibility of its monetary properties. And then the people that are being dragged in by FOMO or some other speculation and aren't doing the fundamental work, they're following that And, and what oftentimes happens is they get dragged in via FOMO, and then a certain percentage of those people naturally seek out information and understand the right reason, the fundamental reason, the twenty-one million, how it works, why it works, how transformative that technical innovation is and what it means, and that converts long-term holders and people that then become, you know, from a dip the toe in the water, and a, you know, somebody that's just there for the, for the easy money that, that falls down the rabbit hole Hole and understands the real reason why they should be there, and, and they, they, they turn into storing more of the wealth in the network to deciding that they wanna convert their goods and services to Bitcoin like a Tesla. So, I just think about it as it's, it's an evolutionary process and people will be at different ends of the spectrum and, and get there for, for, for different reasons, but they'll end up in the same place inevitably for the right reasons." }, { "speaker": "stephan", "time": "36:21", "start": 2180.84, "text": "Yeah, and it's an interesting example there with Tesla because they are now accepting Bitcoin for their cars and you With Bitcoin, and the important po-point as well, is that they are using open source software, they're accepting Bitcoin, and they're planning to hold the Bitcoin, which is very, much more advanced than the typical twenty thirteen, twenty fourteen merchant adoption, but really they are just insta-dumping it for fiat, right? Yeah." }, { "speaker": "guest_2", "time": "36:45", "start": 2204.79, "text": "Yeah. I mean, I, I think I found that announcement to be, I mean, it, it's important for a number of reasons. You know, there's, there's the reality that, you know, they, they announced when they announced that they The language was in the SEC filing, but it was along the lines of, \"We plan to, accept Bitcoin for, you know, the people have the opportunity to buy cars for Bitcoin. \" So it was already messaged that they'd be doing this, but they announced that they did it and that it, that, that it's live and that, they're using internal and open source tools, only internal open source tools, which means that they're somehow in, you know, not somehow, but practically speaking, they're investing resources within Tesla to, to understand the, the tech- Technical applications of Bitcoin, which is really important. they also said that they're gonna, anything that's paid in Bitcoin, they're gonna retain in Bitcoin, it's part of how they're managing treasury, and that they're storing their wealth, they're, they're, they're putting their balance sheet in Bitcoin to protect the future of the company for their employees, for their investors, for their customers. and that there is so, there are so many people that look at it and say Bitcoin's too volatile, it, it, it's not used as a day-to-day currency evolutionary path, that as people decide that they're gonna store wealth in Bitcoin, that is the necessary precursor to, \"I'm going to directly transfer my goods and services for it.\" And you've already grappled with that question of volatility, and, and you've, you've come to understand that volatile things aren't necessarily risky, and, the, the, the reverse or the opposite is also true. And this is a demonstration which we can make the fundamental argument, you and I, we can go out there to the world and we can intellectually- Say, \"No, but you see, it's, it's not too volatile, and people will actually sell their goods and services for it.\" But then when you have the cover to say, \"Hey, and oh, by the way, Tesla's actually doing it right now.\" and you, the onus is really on you to understand why, because they're doing it, it's real, and once they do it, somebody else is gonna do it. And practically speaking, somebody else already are, is doing it, CoinKite, you know, any number of people that just, you What is an intellectual conversation into a real world marketplace, and when others see it happening, they, they may not know why, but they can no longer deny that it's happening. And there's just a reality that, you know, whether it's an appeal to authority, what may have you, you know, in my book, Tesla has, you know, no more authority than the coin kids, coin kids of the world or the unchained capitals of the world, but others think differently, and it helps set an example and others are contemporaries of, of different types of people, And having those contemporaries do things, cause change to happen. So, it really does have an impact, and it, it demonstrates a leadership perspec- position for, for a number of, ways and, and for, for different reasons." }, { "speaker": "stephan", "time": "39:42", "start": 2381.86, "text": "Back to the show in a moment. Lend at HodlHodl is a non-custodial Bitcoin-backed lending platform, so you can lend and borrow globally and anonymously. So if you've got stablecoins, you can lend them and earn returns. HodlHodl's lending allows you to earn twenty-five percent APR on average, one of the highest returns on the market. 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It offers PSBT partially signed Bitcoin transactions, and it works great as part of a single signature setup or when you're ready To upgrade to multisig, you can use it for that also. So go and check them out, they've got all sorts of features. They've recently included some new firmware version four with libsck P two fifty-six K one. They've got deterministic builds, the ability to calculate the checksum, and lots of other features. Go and buy one at coinkite dot com and use the code levera for a discount there. Back to the show. Yeah, and now we have this increasing ability to access Bitcoin because now we've got a lot more of a conversation around new Bitcoin funds coming into play. We've got a lot more conversation around ETFs, and it's going to be a matter of time until a US Bitcoin ETF is fully formally approved. We've got, I think it's Fidelity, Skybridge, Van Eck, Bitwise, I know Nidec also are looking at getting into that game. So, and we've got large banks and custodians getting into the game. how are you, looking and Thinking about, at that, accessibility question." }, { "speaker": "guest_2", "time": "42:50", "start": 2570.07, "text": "Yeah, look, I, I think that, you know, just as Tesla is buying Bitcoin and then GM and Ford and every other Fortune 500 co-company is inevitably, maybe not everyone, but, but practically speaking, many of them are questioning both their approach to, to treasury that, that Michael Saylor really has helped, you know, lead the charge on, that that's happening in one corner of the world, and as that's happening, it also impacts other people that are investors in companies like Tesla or MicroStrategy. And those type of people that may be traditionally more in financial investors, they are people that invest in ETFs. And you and I, we believe that people should hold their own keys to their Bitcoin. And I think that over time, the longer that somebody holds Bitcoin, the more likely they are to understand why they should do that and why it delivers greater security. But what ultimately is beautiful about Bitcoin is that it is a-- it is the most free market in the world. It oftentimes gets ragged on for being manipulated by X, Y, Z, but practically speaking- It is the most free and unmanipulated market in the world, and it is attracting all sorts of mindshare. And so when I see the Fidelity of the world, the Skybridge of the world, the Van X, the Bitwise, the Valkyries, the Nidigs working on ETFs, I think they're increasing competition, they're delivering products to the market that wouldn't be being delivered if people didn't demand it, and that that is, and that, that, that competition is good, and that they're likely speaking won't be, you know, a thousand It's gonna solve a need for people, and I think that, you know, one of the needs it's gonna solve is that there's a product in the market called gBTC, and it's a terrible product, but people demand it in a big way because certain people aren't at the point where they wanna take on that risk or, not, that's a bad way to say it, take on the responsibility, 'cause I don't think it's a risk, and it's only a risk if you spend the time, to, to understand and to take it seriously. But there" }, { "speaker": "guest_2", "time": "44:47", "start": 2686.84, "text": "Risk and two percent fees, and it can't, it's not managed to NAV, and, and look, GBTC will likely be converted, but, but the point is that as more competition exists in the space of institutional money management having access to Bitcoin, that's a good thing because it will ultimately result in better products with lower fees. Nidec just announced yesterday, I believe, it's not even their ETF, but they have a, a fund that gives access to, to institutional money managers, and they reduced the, the, the operational fees or the, the management On that down to thirty basis point, point three percent. so that's ultimately good. Bitcoin is gonna flow to those vehicles, again, over the long term, I believe more Bitcoin will, far more Bitcoin will live outside of it than in it, but like in this current iteration of Bitcoin, it's a positive thing, and, and it may be the most positive because it's helping to mainstream Bitcoin, and it's, and it's a, it's a function of Bitcoin stealing mine shares, Bitcoin steals mine share, the monetary network advances. and I, and I, and I'm I'm excited for it. Again, I'm gonna go out and, and, and, you know, push, you know, hold, hold your own keys till, till the, you know, cows come home. But, but, but I also support, different types of custody and different products and, and ultimately the competition is good for Bitcoin." }, { "speaker": "stephan", "time": "46:04", "start": 2763.58, "text": "Of course, yeah, and I think you make a really good point about how it's a stepping stone for many people, that it's not the final step, that they just buy this thing and leave it in there. And obviously Brokerage or some kind of exchange and just trust them, you wanna actually take a more active step here and take responsibility for yourself and for those keys. there is-- and it also does kind of bring up that conversation about how, people look at, you know, the Glassnode statistics and say, \"Oh, look, the coins on the exchanges are going down,\" but I wonder whether that is just kind of keeping more coins are going to the big custodians, right? The, call it whatever, Coinbase custody and, you know, Anchorage and BitGo and those players And I wonder then, is that, you know, is there an opportunity here to get more people into a multisig self-custodial scenario here?" }, { "speaker": "guest_2", "time": "46:54", "start": 2814.47, "text": "Well, look, I, I think that there certainly is, and there, I ultimately think that, that, that will be the clear standard. And companies like Unchained Capital and companies like Casa, we are in the process of establishing that as a standard. So while it's, it's not a hundred percent clear how much of the Bitcoin that's leaving the exchanges is going to more primary custodians versus non-custodial, but I can tell you that a lot of assets are coming onto platforms like Unchained Capital and Casa, and that is a good, I also believe that competition between Coinbase and custodians like Fidelity and NIDIG and Gemini are good, right? Like decentral-- Bitcoin decentralizes fundamentally. The longer that Bitcoin continues to work, the more people that get drawn into it, the more decentralized Bitcoin. coin becomes, and that is inevitably a good thing. So rather than there be one Coinbase, it's a good thing that Fidelity exists and Bitco exists and Nidex exists, and Gemini exists and others will, that those people be in competition because they're offering custodial solutions for a certain target market, and they have to compete with each other, and that forces each of them to be better and their products to be better. That being said, there's also a reason why Nidex invested in Unchained, and I think that there's a reality that, you know, custodial market or the market that we estimate to be not on exchange or not on a custodian is larger than those that do, and I think that there's a fundamental reason and why that is. But you have somebody like Nidig that, when I think about them and, and, you know, we've established a relationship, they took a minority stake in Unchained Capital, but it was really precipitated by a relationship that we developed personally with their management team, and, and they wouldn't have invested in Unchained if they'd- They didn't see the value, and they, they've directly communicated that, that they see value and they understand why people want to hold their own keys, should they hold their own keys, and, and why that is, that, that is viable, and that they're interested, you know, individually as NIDIG, but I presume each one of these custodians is gonna come to the same conclusion that that market is big, it's likely bigger than their own market over time. Again, they might not, you know, believe that as much as I believe That, but in that world, you have this custodial architecture and this non-custodial architecture. Those two things complement each other at the end of the day. Both of them are large, both of them are gonna be viable. What binds us all is a belief in Bitcoin, and that I do think part of the, part of the recognition on their side of, of why people hold their own keys, why that's important for individuals to have that capability, but also why it's important for Bitcoin, that, that Nidex involvement of Unchained and their investment Unchained, in Unchained, will help institutionalize the non-custodial business. It will help bring not just the capital that we need to build the platform, But then similarly, Fidelity through their venture arm invested in Casa, and that's good, that's great, right? And as we get more capital to invest in these solutions, we will make it easier, we will make it more secure for our clients, but then more holistically as we invest in, in open source applications like Caravan or as open source applications like Specter get built, and all of that is a function of there is an incredibly valuable asset which is Bitcoin. It has a finitely scarce- Supply, and we're in the process collectively, well, whether it's the Fidelis of the world, the NIDIGs, the custodials, the non-custodials, that we're figuring out the ways that people can most securely secure that, and, and the best are gonna win. and in NIDIG's case, they're helping us actually advance, the non-custodial architecture and, and have the resources to be able to, to realize the vision that we have, and as we do that, the whole ecosystem will get better, not chain, but because of the competition that's happening to deliver the most value to Bitcoiners." }, { "speaker": "stephan", "time": "51:02", "start": 3062.19, "text": "Yeah, that's a really great way to put it, because you can see it, depending on how you think about it, you might think, \"Oh, see, all these people are just going to the custodial things, and that's not true Bitcoin, and that's not gonna help overall.\" But on the flip side, that money coming in does drive interest and it drives attention, it drives mindshare, and then the investments made by some of these companies, for example, like Nidec investing Ecosystem because now if you want to have self custody multisig, you can achieve that, and that's some of the tools that Unchained are providing, and the ecosystem and the competition out there. It, you know, we could almost think of it like it, it doesn't matter that much, you know, the dog wagging the tail or the tail wagging the dog, while ultimately Bitcoin is becoming more valuable and the view that, let's say, you and I have is that when you use non-custodial Bitcoin, it's so much more powerful, and so other people will" }, { "speaker": "guest_2", "time": "51:58", "start": 3117.57, "text": "Yeah, and I think that one of the things that, you know, especially people that, that have a fundamentally, sound understanding of Bitcoin like Robbie and Ross and the team at Nidig have, and, and I've seen it from others, at, at other institutions, that they recognize that there are both worlds and they are both important and that there oftentimes are and will continue to be contexts where they might have investors that, that need a qualified custodian like Nidig, but then they, as in the- Individuals might need a non-custodial solution like Collaborative Custody at Unchained, that both those things are true at the same time, and that I think for stewards of capital, and certainly executives like Ross Stevens and Robbie Gutman, that, that in their own interest, if they have Bitcoin and they are, they are interested in preserving value and creating value, that they wanna help build the banks that they need, right? And they see value in both and they- They're helping to fund both, and they're also helping to fund other parts of the ecosystem. I think there's a reality that, and, and this is something that I said when we announced the, the deal, that it takes Bitcoin-minded entrepreneurs to create value for Bitcoin, and that's what the team at Nidig is, and that's what they saw on Unchain, and that's why they're helping to, to fund our business and ultimately to help fund the development of both open source and non-custodial applications that we offer here, because they're important. Somebody that Understand Bitcoin, that, that is looking at it more from a Silicon, a traditional Silicon Valley VC of the world, that this is about blockchain and a thousand different cryptocurrencies, they're not gonna look at a company like Unchain and understand why it is that we're building the things that we are. It takes a Bitcoiner, and, and ultimately the, the, I, what, from what I've seen in the space, that, that Bitcoiners understand Bitcoin and they're more open to competition and they're open to, to, to wanting to further the development of Bitcoin Bitcoin while also being just straight up capitalists and wanting to create value for themselves, and the way that they do that, the beautiful thing about Bitcoin is they can do it both at the same time." }, { "speaker": "stephan", "time": "54:07", "start": 3247.41, "text": "Yeah, that's awesome. And so for listeners out there, because I think many of them might be sitting on, say, a single signature wallet, or maybe they've left their coins on the exchange, or maybe they've just got a small amount on a phone wallet, and they're-- maybe they've got a little bit of, what's the word, hesitation around going to something like an unchained multis What does it take to get an unchained multisig setup? What does that process look like?" }, { "speaker": "guest_2", "time": "54:33", "start": 3272.75, "text": "Yeah, so I, I like to think about it as we, we have a range of clients that we work with that most, even, even the most sophisticated Bitcoiners have questions about multisig, and that realistically speaking, people don't change how it is they're securing their Bitcoin for a marginal improvement in security. That people only change how it is they're securing their Bitcoin if the increase Increase in security and the sleep at night benefit is material, and, and that's what we're seeing with platforms like Unchain Capital and Casa, that these, these applications were released kind of over twenty eighteen, twenty nineteen, and it required time for, for early adopters to come in and for the platforms to develop and for the security to improve and for early standards to start to emerge, which we, we still think that we're early at, and there's a lot of ways that we can continue to, to improve the security, but that recognize- That it's not just about the fact that, that people that are new to Bitcoin or that might be working with a single key and are non-technical, it's just that there's a reality that anytime you're asking people to change how it is they're securing their Bitcoin, that people don't take that decision lightly, nor should they. And, one of the ways that I would describe it is the bar that we set for ourselves as a company, as well as in general people that hold Bitcoin, it's not like if Twitter goes down for five minutes. Because if Twitter goes down for five minutes, you show back up five minutes later and you start tweeting again or reading your tweets. Whenever you're dealing with Bitcoin, every, every single instance matters. It can't fail once, and you have to be damn sure that, that, that you do, do not screw up. And, and one of the benefits about Bitcoin is It drives ultimate accountability. There is no moral hazard, there are no bailouts, all Bitcoin transactions are final. If you screw something up, it's on you, and the ultimate benefit to the network is massive because it aligns all incentives. But When we're talking about the development of multisig and the application of multisig and collaborative custody, and the application of multisig and collaborative custody with a new partner like Unchain, which, you know, we've been in the market since twenty nineteen, but when we were establishing it as a standard or on that path, it required a lot of diligence on behalf of a lot of forward-thinking bitcoiners. But we're at the point now where we have a concierge program, and that program is designed to take people Who are both the most sophisticated Bitcoiners, but haven't used multisig, and help them understand the important aspects of multisig that they need to know to, in order to use multisig safely and securely. but also put those people who've never had Bitcoin, or are somewhere in between, to help them go from zero to holding their own keys and holding their own keys in multisig. And one of the ways that, that I really think about it is Through multisig and particularly the application of collaborative custody, we're taking a lot of people that would otherwise not feel secure in holding their own keys and putting them in a position and empowering them to accelerate their process to doing just that, to having absolute control of their wealth in the form of Bitcoin and in the form of holding Bitcoin with keys and that they ultimately have unilateral control over. So when people come to Unchain, even if they don't, you know, they could be the most Sophisticated, they could be starting at zero. We have a concierge onboarding process where clients sign up for it, we ship them keys directly from the manufacturer or they can bring their own keys. we help them set those keys up, we, we talk to them, we help them explain how keys work, how to backup keys, why we approach custody the way that we do. We then move over to their unchained capital account, we help them use those keys to build a, a multi-sig wallet with Unchain, we demonstrate for them how they can use our open source application Caravan, should anything happen to Unchain, the whole core of our idea is a fault, a highly fault tolerant form of custody. and then we also provide them with oper-operational security guides. it is the best money that, that people can spend. and the service is basically a crash course in how Bitcoin actually works. And when I talk to a lot of people that are coming into, to Bitcoin for the first time, and we're- We're starting to, to, you know, reach people that, you know, are in their fifties and sixties, run businesses, aren't super technical, we're finding that they're able to easily get up that curve because not just that it's multisig, not just because it's clapper custody, but because we have this concierge process and we can, we can help educate them, and, and it's really that even for somebody, and I, and I, I believe this, you know, from a number of the VCs that I've spoken with, a lot There's a reality that you can't understand Bitcoin in the way that you would if you've actually touched a private key, set up a key, used a backup. Understood how a, a Bitcoin address works and sent money to and from, a non-custodial solution where you're actually creating, cryptographic signatures with your own private keys. And so I, I tell people that when you go through that process, there's nothing that says that you actually have to use it, but the education alone allows you to understand things about Bitcoin that you couldn't otherwise understand, and once you do understand those things, you are going to be more confident in- Storing more wealth in Bitcoin and in the Bitcoin network. It is a natural precursor to getting Bitcoin is interacting with keys. If you haven't done that, you don't stand a chance. and so I, I recommend people go through that process because if you, if you set up keys, you build a vault, you, you, you do test transactions, there's nothing that says you have to, to move the, the majority of your wealth over to that. However, it is so easy and it is digestible, and we are there as a partner that we do- And we are every day expanding the universe of people that are going to naturally be capable of holding their own keys and accelerating them down that path. So, you come in, you sign up for concierge, we send you keys, we help you set up those keys, we help you build a multi-sig vault. you know, in certain cases, we've, we've done it in a twenty-four hour period for clients that are purchasing large amounts to our OTC desk, but in general, people should expect a one week to two week process, and, and they can go from zero to multi It's a really valuable service." }, { "speaker": "stephan", "time": "01:01:18", "start": 3678.89, "text": "Yeah, of course. And so this is also available not just for individuals, but you offer this on a business level as well with the business concierge service. So what's, what's the difference there on the business side?" }, { "speaker": "guest_2", "time": "01:01:30", "start": 3690.18, "text": "Yeah, and I think, you know, one thing that's important to know about our platform at Unchain Capital is that really what defines it is our approach to custody, collaborative custody, and then how we integrate financial services. When people come to appreciate the nature and our approach to security and custody, of Bitcoin. For those people that demand private key ownership and value our approach and value us as a partner, we wanna serve those people in both their personal capacity, their retirement capacity, and their business capacity. That there are synergies between being that one stop shop. But we also recognize, as a company, as individuals, because we work across different contexts, that there are different challenges and problems to be solved when you're dealing with a, a business that's securing Bitcoin versus an individual. When you're in the individual context, it's your Bitcoin, it's yours alone, you can secure the keys, you might share one of the keys with a loved one, a, a spouse, a partner, maybe a child or maybe a sibling. But it's your Bitcoin and you're in control. When you start to bring in multiple people in an organization of people, definitionally, the complexity of how you store that Bitcoin, particularly if you're doing it in a non-custodial arrangement like collaborative custody with Unchain, it's a different challenge. It's not, it's not only different from, affecting financial controls, but it's also different in terms of how the keys are held, what, what controls need to exist on the physical side In terms of segregating keys across individuals, what type of redundancy you need for each of those keys, whether or not you should have multiple individuals that have access to the same key, or how you should think about redundancy within your organization. and so there's more people involved, there's, there's different considerations to be had. And so the difference, the key distinctions between the, the individual concierge and the business concierge is business is tailored to the needs of, of an organization that has multiple people People. Now, if you have a, a, if you have a small business and you're the only one that, that is going to be touching keys, you can just sign up for individual, 'cause your individual, context is gonna map very similarly to your business context. But as soon as you start to introduce multiple people in an organization of people, there's, you have to educate more people on, on private key ownership, so it, it requires more meetings with more people. you're going to have, different considerations as it relates to operational security. You're locations of where you store those keys and backups is going to change, and, you're also going to need consulting as it relates to, to that process of, of the nature of, it's not just where keys are stored, but it's also, well, you know, you might have four people that need access to keys, and if we're working in two of three with, with backups and recovery seeds, which is how our application works, clients have two keys, we have one, but then our clients both have backups, that you might ha-wanna have two people that have access to the That key, and you want, might want to have two other people that have access to the other key to make sure that you always have redundancy, that if someone's out of the loop or they've gotten sick or they got hit by a bus, that, that you're there and secure. So there's a, there's a lot more time that is spent on our side, there's more considerations, there's different considerations, and it really just maps to and, and, and requires a different process. But with both pieces of that, we want to create an easy path for people to go from zero" }, { "speaker": "stephan", "time": "01:04:56", "start": 3896.53, "text": "to Listeners out there to consider Unchained, they're a really top-notch team. I'm a big fan of their work, and so whether you're an individual or you're looking for retirement or you're a business person, I think they're a great place to look. And, also, I wanted to chat a little bit as this has become a topic that people are talking about now, it's this idea of living on your Bitcoin. So I guess high level, there's a few ways people can go about this, right? So people might be thinking, okay, number one is just Which country you're in, you'll be paying capital gains tax, and that's a capital gains event, et cetera. another option, and, you know, I'm not necessarily recommending this, but some people might look at some of the interest account sort of things that are available in the space. But then thirdly, there's this collateralized loan idea, and so it's this idea that you can collateralize some Bitcoin and get back some fiat, and now, yes, you're paying interest, but that's a potential option in terms of, you know, being able to And, you know, how, how that would work if, let's say, somebody wants to, you know, go through that process and then maybe they're rolling over that loan." }, { "speaker": "guest_2", "time": "01:06:07", "start": 3967.08, "text": "Yeah, sure. So kind of c-couple key considerations upfront. One, when you're taking a loan, the most important thing is the security of your Bitcoin, and I think that the most important education that people need to go through is understanding what is happening to the Bitcoin when you are taking out a loan and that Bitcoin is serving as collateral. you need to understand Understand that from principally two sides. First, how is the Bitcoin actually being secured from a custody perspective? And then two, what is the nature of the legal agreement with the person that's providing the loan? and a couple things that I would mention there for people. On the legal side, in the case of Unchain, the Bitcoin remains in the title of our clients, which is a really important legal distinction. It is not a liability of Unchain, it's not a liability and an asset. Which means that if anything ever happens to Unchain, from a legal perspective, it's not a li- it's not a liability of our estate, that you wouldn't have to, you know, submit a claim in an Unchain bankruptcy should that ever happen, which we never expect it to, but if it did, it's your asset, it's, it remains in your title throughout the, the, the entirety of the loan, which is something that most people don't have an appreciation for, but myself having worked previously in the bankruptcy world, understand and appreciate very well." }, { "speaker": "guest_2", "time": "01:07:30", "start": 4050.23, "text": "in our world, we don't rehypothecate collateral. Bitcoin sits in a multisig address. We allow our clients to have one key. In that instance, our clients have one key, we have one key, and our, third party partner of our Citadel SPV holds the third key. that is really important. People might look at it and say, \"Well, I'm not in control, and how do I know that Unchain and Citadel SPV can't collude? \" Point is that no single party has unilateral access. It's in cold storage. Private keys distributed across three parties, and borrowers can verify one hundred percent of the time that the Bitcoin hasn't moved. Because if everyone unchained loans exists that same way, then if it ever happened, it wasn't the case for one borrower, all borrowers would know about it. So, it's an important part where we think about minimizing trust that's required in unchained to ultimately increase security of our borrowers. So those, that becomes the first part. You have to evaluate if the whole purpose of you taking out your loan Is to preserve your Bitcoin, then in your evaluation of, of a lender or whether or not you should take that, that is the first and most important thing you should evaluate. If you, if you, if you are uncomfortable there, where it's either becoming a liability of your lender, a co-a company called Cred was a lender and they recently filed for bankruptcy, and, and a lot of their bor-borrowers that have posted collateral are gonna be out all their Bitcoin, if your lender is rehypothecating collateral, again, it's It's up to you to evaluate whether or not you should do that, but you need to understand what the risks that present, and then that will cause you to evaluate whether or not you're comfortable in that arrangement, but know the risks that you're taking when that happens. then when you get from there, it's an evaluation of, okay, well, what, what are the other, what are the other potential risks? Well, you know going in what the interest rate that you would pay is, and it's very clear in our case that our, our loans have fixed interest rates, Between three months and three years, and there are no pre-penalty payments. so if you take out a loan, you do pay an origination fee, but then if you prepay it early, you don't, you don't pay a penalty. a-and I'd say most loans in the space that, that work that way. but then there's also this, this consideration of there are risks, and that's why, we, we want everyone to be educated on those risks, that we effectively, we, we manage our loans We don't rebalance every night, but we rebalance on thresholds, and that is one of the risks where, you know, if, if the price of Bitcoin falls precipitously, there's a risk that, that, that if Bitcoin get to a certain threshold and you haven't posted additional collateral or repaid a portion of the loan, that your Bitcoin could be liquidated. And we want everyone to, to understand those risks. One of the things that we've done recently to, to help avoid them is that we've lowered both the loan-to-value that we issue loans at, Where we can lend out more collateral on the back end, it's principally to ensure that clients don't have a combination of margin calls or get liquidated. We're basically helping our clients be more conservative in terms of how they borrow, but it, but it still remains a risk and it needs to be a risk. People need to understand how the margin requirement works and how it must be maintained and, and, and that they're in a position. We always tell people, don't borrow against all your Bitcoin. I wouldn't recommend borrowing against more than twenty-five percent of your Bitcoin. One of the ways that Reducing the, the, the, the loan to value ratio. So today we lend, lend at forty percent loan to value. So if somebody wanted a, a hundred thousand dollar loan, we'd require two hundred and fifty thousand dollars worth of collateral, to give a sense using, using an example. but then once a loan is, when a loan comes to maturity, like you asked about, then, borrowers can either repay the loan or, or they can, request to, to renew the loan and take out a new loan. The vast majority of all of our borrowers, when a loan comes to term, they, they do take a, a new loan out and just roll it, essentially refinance the old loan and have a new loan with, with a new term. so there's a lot of, there, there, there are risks involved, but for a lot of our clients, it adds a lot of value for those that use it conservatively, don't get ahead of their skis, borrow, borrow conservatively and, and are able to, manage and, and consume in The Bitcoin in the future upside." }, { "speaker": "stephan", "time": "01:11:59", "start": 4319.29, "text": "Yeah, so I guess to summarize that then, obviously as you mentioned, there are some risks you have to consider that, and obviously Unchain are doing everything they can to minimize the risk as well by giving the client the possibility to hold one of three keys and know that it's not being rehypothecated, and as you mentioned, the risk around liquidation. So I guess that one just means basically you need to be, you, you know, you wanna be prudent and you wanna overcollateralize the amount, and I mean, you could theoretically, Two hundred and fifty percent of the amount you're loaning, you could, like, the client could potentially put in even more if they wanted to, right? And just borrow less on it, and then that way they're even more safe. And I guess the other part is to make sure that they're not, putting up a big percentage of their stack into the loan, that they're doing a small portion, of their stack onto the platform, and then in doing that, they are, I guess, minimizing that risk. And let's say hypothetically the Bitcoin price were to" }, { "speaker": "guest_2", "time": "01:12:57", "start": 4377.17, "text": "Yeah, and, and that, that, that's a good point because one, ba-- people can and do put way more than two hundred and fifty percent to avoid just that, to say, \"I'm, under no circumstance am I going to be subject to a drawdown in the price that could result in a liquidation.\" Now, at forty percent loan-to-value for, for a, a full liquidation would require a, a six-- you know, approximately a fifty-five to sixty percent drop in the price, which is significant, and, but for that reason, and The change. Many of our borrowers are just remaining in over collateralized position as the price of Bitcoin goes up, which is one of the unique features about our loans is that as the price of Bitcoin goes up, we do, we do allow for people to, to take collateral back up to a certain extent, and we also increase that threshold also to, to, not to prevent from people from taking their collateral back, but just to ensure that their loans stay in a conservative position. So before we used to issue loans at a fifty percent loan to value, we, we reduced that, which essentially requires more Collateral to fifty percent, but then rather than when, when Bitcoin got to two hundred fifty percent, so say they, they, they took out a, a hundred thousand dollar loan, and then before they would have had to post two hundred thousand dollars worth of collateral, if the price went up such that it was two hundred fifty thousand, we'd allow for collateral to be returned. Now we require it to be three hundred percent or three hundred thousand before we reduce collateral, and we only reduced down to two hundred fifty percent rather than two hundred percent. but to give people a sense too, right now," }, { "speaker": "guest_2", "time": "01:14:27", "start": 4467.17, "text": "Ratio are at a, you know, below a twenty-five percent loan-to-value because they're choosing to be conservative, which we certainly encourage, and they can do that not worried about their collateral because it's all segregated, it's in dedicated multisig addresses. Where clients want to, they have one key, we have one key, and our independent third party does. So in their view, in many of our clients' cases, it's, \"I'm doing this to ensure against having to, to actively manage margin, and, and I'm comfortable that the Bitcoin isn't- That risk, it's not moving, I can see, I can validate on chain, I can validate, you know, I can put a watch-only vault with my own node if I want to, and, and I'm, I'm comfortable that my Bitcoin is there, so I'm, I'm actually, feeling more secure because I know how it's custed, in, in having it be in an, an over collateralized position more than, than is required." }, { "speaker": "stephan", "time": "01:15:18", "start": 4518.41, "text": "Yeah, and in terms of the interest rate, then, is that pos-possible to also be," }, { "speaker": "stephan", "time": "01:15:27", "start": 4527.15, "text": "It's like people could borrow, they could just borrow the amount additional if they, like, let's say they had a lot of Bitcoin, but they didn't have a lot of income, they wanted to do that kind of collateralized loan, is that also a possibility? Is that something people do as well?" }, { "speaker": "guest_2", "time": "01:15:39", "start": 4539.2, "text": "Yeah, truth, right now, we, we don't offer that as an option. Certain, certain people, we basically, they're, they're interest-only loans. They, they're required to pay, fiat interest, dollar interest, and, but, but certain borrowers do" }, { "speaker": "guest_2", "time": "01:15:57", "start": 4557.51, "text": "so, so they do do that, we just don't allow them to, to immediately take collateral and convert that into, into interest." }, { "speaker": "stephan", "time": "01:16:05", "start": 4565.02, "text": "I see. Yeah, yeah. And then, just in terms of, I guess, rolling over the loans, I guess the choice there is, also around if they wanted to, let's say, do the full three-year loan, then the interest rate for that is around fourteen percent, whereas if they're doing the shorter term, they are doing it at a lower interest rate, I think that's, anywhere between sort of" }, { "speaker": "guest_2", "time": "01:16:27", "start": 4587.15, "text": "I mean, in, in, in a, on an APR basis, it's between eleven and four, and fourteen percent. I would say we have the, generally have the highest rates in the market, and we're proud of that, and it's because we don't take additional risk with your Bitcoin. If people wanna know the true cost to borrow against their Bitcoin, it's the rate that we have. if you're, if you're getting a lower rate, it's likely because the security isn't as high or additional risks are being taken. and, and, Loans and interest rates effectively act as, as almost like a forward interest rate of the currency, with some discount being put in for the overcollateralized nature. That, that, that when people ask me about why the interest rates are so high, I, I turn around and I ask them, what interest rate would they lend to somebody else to allow them to hold Bitcoin rather than themselves? because that's effectively what we're enabling via our loans. So, the, the, the interest rates aren't low, but the, the thing that characterizes our borrowers are really a Three or four things that they've held Bitcoin for a long time, so they have a very low tax basis, such that if they were to sell any Bitcoin to fund a purchase, it would result in a, in a high cap gain tax. second thing is that because they've held Bitcoin for a long time, their Bitcoin represents, disproportionately high share of their net worth. and then the third thing is they've managed to hold the Bitcoin to the point that it does represent both a high disproportionate share of their net worth, as well as having a low tax basis means that they really believe and so when they think about that world, if again, I'm, I'm not for somebody that predicts prices, but I do think the Bitcoin adoption is gonna go up on a hundred x, that they would rather pay between, eleven to fourteen percent than, than forego that upside optionality." }, { "speaker": "stephan", "time": "01:18:12", "start": 4692.68, "text": "Yeah, I say, yeah, and so the way they might be thinking about it is if they want to invest in something, or maybe it's even a business project that they want to invest in, they realize that by using this kind of loan for them, it forgoes the capital gains tax, and it, like, essentially, it means they have to forego less Sats, net net, so long as, you know, they've managed their risk appropriately and it all plays out, then essentially they end up foregoing less Sats because now they didn't have to spend and they didn level of capital gains tax that they otherwise would have had to, right?" }, { "speaker": "guest_2", "time": "01:18:45", "start": 4725.8, "text": "Yeah, one hundred percent. That's how we think about, that's how we think about our entire platform, which is we want our clients to have as much Bitcoin as possible. Our clients having as much Bitcoin as possible is good for Unchained, it's good for them. and when we, when we think about, you know, scenarios where and the reason why we've lowered LTV is that we don't like clients getting Bitcoin liquidated and being uneducated of the risks, is not good for Unch and we've actually had a number of clients that came through that said that they, they actually chose Unchain because we, we did reduce the, the LTV, that they looked at that and they said, \"That's not what somebody would do if they were, if they were trying to drive loan volume.\" and, and we did it, you know, particularly in the world where we're not rehypothecating any collateral to, to really help our clients protect themselves by forcing them to be more conservative. but then when we think about our whole platform, it's this Ways to secure our Bitcoin, and then we have needs as Bitcoiners, and if we're de-delivering value, it is allowing in many ways, more than one, our clients to hold on to Bitcoin and to, to maximize the value of it. And, and the loans are just one small part, the, the custody is a big part. We help people execute on the OTC side, buying and selling. we, we actually don't sell, but, but we have, you know, in a certain few, few instances for, for clients that were only set up with us. Loans as a tool, again, if used correctly, and people need to understand the risk, we've got a guide, think we call it the Ultimate Guide to Bitcoin Backed Loans, that everyone should read before they take out an Unchain loan, that if you know the risk and if you do it conservatively, it can be a very powerful tool. if, if you don't do it conservatively and you don't understand the risk, you can get wrecked, a-and we don't want clients to do that." }, { "speaker": "stephan", "time": "01:20:32", "start": 4832.61, "text": "Of course, yeah. And I guess one other point for to, if they were comfortable with a more, with the rates moving around a little bit, I guess they could go for a shorter term, but just keep rolling it over, correct? Correct. Yeah. And also from an international perspective, obviously Unchain is based in the US, can you spell out any additional consideration there for people who wanna do that internationally?" }, { "speaker": "guest_2", "time": "01:21:01", "start": 4861.59, "text": "Yeah, so, we do, one, we facilitate custody internationally, so if people just want collaborative custody and wanna work with Unchain, we can help them. we do, we do lend- In certain international markets, not many today, we're really focused in the US, but, but we do, we do lend in Australia, and we do lend in Canada. we're, we're looking at other jurisdictions, and we have lent in others beyond there, but we've really looked at it on a case-by-case basis. but, but really, people's expectations should be, you know, beyond the United States, Canada, and Australia, where, we're, we're not really available beyond those markets on the lending side," }, { "speaker": "stephan", "time": "01:21:42", "start": 4902.66, "text": "yeah, and I think it's also just interesting that, as the world is moving into a more Bitcoinized world, I think, I mean, I've often commented on this that I think we're moving into a more equity based world, but just right now we're living in a very debt based world, and so this is almost like the, the judo move of using the fiat system, to fund your, whether, whether it's your business or your living expenses and things like that in the here and now, while still holding onto more of the thing, you know When the music stops. but I guess over time, do you see it like, you think interest rates on these kinds of loans might come down over time or what, what do you, do you have any speculation on that or if you're allowed to comment publicly or not?" }, { "speaker": "guest_2", "time": "01:22:24", "start": 4944.74, "text": "Yeah, I mean, I, I'll, I'll happy to comment publicly. The, I expect them to come down, but I don't expect them to come down like people think. They'll come down because more capital and, and more, I think institutions are becoming comfortable with not only holding Bitcoin, but then" }, { "speaker": "guest_2", "time": "01:22:42", "start": 4962.22, "text": "It'll, it'll drive down those rates, and, and we're, we're incen- we're incentivized, just as Naidig announced today, that they're reducing the fees on their, on their, Bitcoin, their, their fund, Bitcoin fund for institutions. we're inc- we're, we're incentivized to go out and find cheaper sources of capital and, and pass those on to our clients. If we're not doing that, we're not doing our job. At the same time, there is a reality that as more people start to appreciate the Bitcoin, that creates competitive pressure as to people, I think about it as, for every dollar that is o- going to one of our borrowers, that is somebody that's foregoing the right to own Bitcoin themselves, and that there is this natural relationship that as people get more comfortable with providing capital to lend against Bitcoin, the more likely they are to want to own Bitcoin, and that it's not necessarily an equation of, \"Well, someone's looking at it as, well, is this as good a collateral as a, as a home? It's actually better, should the rate be lower, theoretically, but...\" The person also has the opportunity to buy the Bitcoin, and the person isn't just gonna buy the home. and so that, that, that reality of, of what the loan means, that it is effectively, f- A forward currency rate, and the fact that Bitcoin has so, so much stronger monetary properties than the dollar, that, that people kind of get wise to, to not wanting to give up the, the future asymmetry that's in Bitcoin themselves. Not to say that they don't, they will, and, and there will be more capital, but the reality is that that will buoy the rate of interest, that rather than seeing something like three or four percent, again, if Bitcoin isn't being rehypothecated, if it was just a true rate of interest, that, that, Is that someone's foregoing the right to gain more Bitcoin for the fact that you get to keep it as a borrower, dictates that the, the rates will come down, but I, I don't expect them to be in high, high single digits rather than, than low double digits, but not, you know, kind of dropping to a manipulated world where-- And again, I have to reiterate for people, a mortgage for a super wealthy person is only three percent via monetary manipulation. and in the Bitcoin world, everything is inherently non-manipulated and is, is really set by the, To envision a world where we get to something crazy like, you know, two to three percent interest rates to borrow against Bitcoin." }, { "speaker": "stephan", "time": "01:25:00", "start": 5100.41, "text": "Yeah, that's really fascinating to think about, and I think you had a really great answer on that point. and yeah, I wonder what happens. I mean, looking further out into the future, into this kind of, you know, in a more Bitcoinized world, I think, yeah, maybe, you know, loans won't be that easy to come by, like it, it, once we are in a fully Bitcoinized world. Obviously, that's, that Because of all the fiat manipulation." }, { "speaker": "guest_2", "time": "01:25:26", "start": 5126.79, "text": "Yeah, yeah, in many ways and in many markets, and in Bitcoin, it just happens to be more-- I'd say the opportunity cost is more direct, because if you think about a lender, and imagine whatever context they're lending in, high yield credit, you know, kind of junk bonds, triple C credit, mortgage backed securities, CMBS, investment grade, Treasury, whatever you wanna think about, the, the person that's providing the lending capital literally- doesn't want to own the underlying asset. That will be different in Bitcoin, it already is today. and so because Bitcoin's just a better form of money, and everybody needs money, and as more people think about it as that, the more they, they come in, oftentimes they think about it as a credit instrument, but then they get more comfortable with that type of lending, they love it, and then they're like, \"Oh, wait, what if I had just owned Bitcoin? What if I'd owned ten percent of Bitcoin? \" You know, so, so those, just those Market more so than they do in any other, because the lenders inherently, because Bitcoin is money, they're gonna be owning the money themselves too. they're, they're gonna wanna own the underlying asset." }, { "speaker": "stephan", "time": "01:26:35", "start": 5195.59, "text": "Yeah, it's really funny when you put it that way, because it's almost like you want, like hypothetically, right? Just, just talking it out, right? It's almost like as a customer on these kinds of loan products, you want the other side to be really interested to lend for Bitcoin, but not to go buy it themselves, because once they've gotten to that themselves and then now there's actually less availability for you to borrow, so it's a funny," }, { "speaker": "guest_2", "time": "01:26:58", "start": 5218.83, "text": "right. Yeah, and, and that's what, that's, that's what makes a market, right? That, that the interest rate gets set on that kind of finding that balance where somebody's willing to forego their right to, to just buy it outright versus charge somebody an interest and then use that interest to buy Bitcoin, and, and that, that we find a balance or equilibrium in what we call, you know, our interest rate." }, { "speaker": "stephan", "time": "01:27:21", "start": 5241.48, "text": "Yeah, really fascinating stuff. Parker here. Parker, I've really enjoyed chatting with you. Obviously, before we let you go, where can listeners follow you online?" }, { "speaker": "guest_2", "time": "01:27:30", "start": 5250.79, "text": "So you can check us out on our website. We got a new URL, www. Unchain. Com. and then also you can, so all the things that I've written about, the article that we were talking about ear- earlier, that Bitcoin is the greatest defi-nancialization, it's on our blog, under our resources there. But there's also a lot of product resources as well. And then, if I've got laser eyes and I am at Parker A Lewis." }, { "speaker": "stephan", "time": "01:27:58", "start": 5278.21, "text": "Excellent, thank you, Parker. Thanks, Stephane. Always a pleasure. So if you enjoyed that and you're getting good value out of this, I'd really appreciate if you share the show with your family and friends or share it on social media, as well as leave any reviews on any Podcatcher platforms you have. That obviously helps new people find me. You can also get the show notes at stephanelivera dot com slash two six three for this episode. Thanks for listening, and I will see you in the cit" } ] }