{ "episodeId": "SLP41", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "dhruv_bansal": { "name": "Dhruv Bansal", "role": "guest", "tag": "DHRUV" } }, "segments": [ { "speaker": "stephan", "time": "00:02", "start": 1.5, "text": "You're listening to the Stephan Livera podcast focused on Bitcoin and Austrian economics. Listen in and learn alongside me as I interview some of the sharpest minds ranging from economists, software developers, investors, entrepreneurs, and writers. Hey guys, it's your host Stephan Livera, and today my guest is Dhruv Bansal. Dhruv is an entrepreneur and physicist, and he's working at Unchained Capital. He's the co-founder and chief science officer, and Unchained Capital are primarily known as a crypto or Bitcoin lending business. And I think Dhruv ha-has done some really fascinating things, such as his earlier posts on the HODL Waves, which is now a famous article, I think, within the Bitcoin community. And I've also listened to Dhruv's interviews with some of my Bitcoin podcast colleagues, Marty Bent and also Vortex. So, welcome to the show, Dhruv." }, { "speaker": "dhruv_bansal", "time": "00:56", "start": 55.73, "text": "Thanks a lot for having me, Stefan." }, { "speaker": "stephan", "time": "00:57", "start": 57.17, "text": "Yeah, as I was saying, I think you've done some really, cool stuff in this space, and, you know, I, I see you've got a, an upcoming article coming out, which is a continuation on that Hoddle Waves post, and it's from your series called Bitcoin Data Science Part Three, Dust in the Engine. So, yeah, me Maybe, actually before we do that, maybe just, just give a quick background on yourself and then we can, dive into the article and some of the other topics." }, { "speaker": "dhruv_bansal", "time": "01:23", "start": 82.58, "text": "Sure, Stephane. I, I started out my career really as a physicist. I was meant to be a professor. I was working on a PhD, here in Austin, Texas, in statistical mechanics, doing a lot of data science, working a lot with cloud-based systems and doing calculations in them. that led me to start my first company, and, through that company," }, { "speaker": "dhruv_bansal", "time": "01:46", "start": 105.92, "text": "computation at, you know, on, on cloud-based systems for other companies, for insurance companies, for some of the projects that my, my prior company built. and then blockchain showed up in my life, and you can imagine as a person who is already pretty fascinated with distributed systems and analyzing large and interesting datasets, blockchains felt like immediately very compelling to me. What an interesting dataset to analyze, a, a, a tran-- a financial network which records every transaction pseudonymously So it's both mysterious but transparent at the same time, like that, that was very interesting. and it was, it was maybe years before I bought any Bitcoin and even, further on before I started a company in the space, Unchained Capital, but that whole time my fascination with this dataset has, has always been there. And so I think one of the luxuries of working at Unchained is that I now have a little bit more resources, to spend thinking about these issues and, and coming up with some interesting perspectives perhaps, Public data and sharing them, I think with the rest of the community. And Change itself really started by looking at that kind of work and realizing that, in our HODL Waves post, we actually show it very visually, but we had the first inklings and, and visions of that data early on, and it showed that not a lot of Bitcoin really moves. so many people might own it, but it's a speculative asset and it wasn't, being used for anything, it was just being held. And so that idea of how can we do more with it was The origin story of our own company, and so we continue to be really data driven and invest time where we can get it, in continuing to analyze and think about, big, Bitcoin not just as a financial system or as a market opportunity, but as a data set." }, { "speaker": "stephan", "time": "03:31", "start": 210.67, "text": "Yeah, I love the way you guys are very data driven, and I love the insight there that not a lot of Bitcoin moves, because some people in the community, or not necessarily community, but just people in that kind of quote-unquote crypto world, they don't consider hodlers as As users, and then the common refrain that many Bitcoiners have said is, \"No, actually,\" and perhaps, Dan Held and some others have made this point, is that actually hodlers are, in a sense, they are users." }, { "speaker": "dhruv_bansal", "time": "03:58", "start": 238.01, "text": "Yeah, no, they absolutely are, and I think like you c-- you might compare them to almost, if you want, lurkers or something like that, right? A social media site might be dominated by a small fraction of people who engage in a lot of the discourse and a lot of the content creation, but a lot of the value of that site comes Many millions engaged with it, kind of watching what's happening and, you know, consuming, and, and, and Bitcoin is a little bit like that, except those lookers are a lot more participatory. If you're not engaging in transactions constantly all the time, if you're not part of a Bitcoin business or you're not building a company, you're just an investor and you're watching what's happening in the market and you're holding, you are participating, and you see that effect in statistical aggregate, in the HODL Waves data that we produce, you see that as the market rallies, coins Which were just, you know, frozen, coins which didn't look, hadn't moved in five, six years, come out of hibernation and participate in the wealth creation. and so it's, it's interesting to see, like there is always going to be a vanguard of people who are engaged in a daily way, with any kind of new technology, and then there's like that, that larger population for whom the technology does mean something, they're part of the community, but they're not as active. Bitcoin gives you a way, or blockchains in Gives you a really nice way to see that, engagement, at scale." }, { "speaker": "stephan", "time": "05:20", "start": 320.22, "text": "I love the way you've explained that 'cause it's a really fascinating parallel with the whole social media and internet and the idea of lurkers. I think that's a really, I've never thought about it that way, but, and I, I don't have the exact numbers on this, but people have, you know, it's colloquial that people have said online that often for every, you know, out of a hundred people who might interact with the internet, maybe ninety of them are" }, { "speaker": "stephan", "time": "05:46", "start": 345.64, "text": "ever might actually comment on an article or comment on the forums, and then there's sort of that one percent who are actually creating a lot of the material and they're kind of like the vocal ones. So in that sense, what you're saying is almost like the Hoddle waves and the blockchain analysis is almost how you can analyze what that ninety percent lurkers are doing, and because they are observing, right? They're watching what's happening in the space because obviously they're invested." }, { "speaker": "dhruv_bansal", "time": "06:09", "start": 368.9, "text": "And in some platforms, maybe, maybe they're given the right to vote, so as a aggregate, they can shape the Even if they're not directly commenting or participating in it. And I think in Bitcoin and in blockchains, voting is kind of, you know, hodling is a form of vote, right? It's continuing to not sell in the face of maybe adversity sometimes because of belief in the network. that's why it can be emotional, and that's why there's great memes about it. But ultimately, it's even a more participatory form of voting than just clicking a like button on a social media website, 'cause it's really skin in the game. So I think that's one major difference and" }, { "speaker": "dhruv_bansal", "time": "06:46", "start": 405.6, "text": "Media websites give you the, I think, superficial illusion that you're dealing with a distributed cloud-based system that's kind of out there in the ether and everyone's, you know, parsimonious and equal and interacting, and that's a col- that's a sculpted illusion, right? The cloud should always have been called the mine, in my view, because it happens deep in a data center in a centralized company's, control. And the systems that feel so open are actually systems as more and more people are realizing in the last few years that But, you are the product, right? And it's, and you don't actually have control, and you can't opt out of the system in a way that, again, I think, superiorly, blockchains like Bitcoin do give you. So that there's always gonna be, as we've discussed in this analogy, a large group of people who aren't as-- aren't active participants, but who anchor a lot of the value for any network, and in blockchains, those people have a lot of a stronger voice because they're the ones that ultimately dower" }, { "speaker": "stephan", "time": "07:46", "start": 465.62, "text": "Related to that concept of, you know, you see in, you know, Bitcoin and online discussion, people talk about this economic majority as opposed to, say, the miners deciding what happens or the business deciding what happens, it's really the economic majority who do that, and one way they do that is through kind of expressing their preference. Absolutely." }, { "speaker": "dhruv_bansal", "time": "08:03", "start": 482.95, "text": "and, and, and then because there's no one in charge and it really is a decentralized system, that preference becomes real data on a public dataset that we can then go back and look at years later when we have a, a lot better understanding of what" }, { "speaker": "stephan", "time": "08:16", "start": 495.62, "text": "Fantastic, and I think that's probably the perfect, moment now to seg into, you know, this article, which is an upcoming one, which relates to dust in the engine. So, maybe you can just give a high-level summary and then we can dive into specific points." }, { "speaker": "dhruv_bansal", "time": "08:31", "start": 511.03, "text": "Absolutely. so the phrase \"dust,\" right, in Bitcoin at least, it refers to a very precise concept, a UTXO, a little bag of unspent bitcoins that someone owns, that are at a particular address, and that bag- Is the result of, you know, a little bit of change or, or, or whatever that was created in some prior transaction, like a spark, like flicking off of a flint. It's a tiny little bit of Bitcoin, and it's so small that unfortunately, it's, it can't pay for itself to be spent. Like when a transaction is drafted, the cost of that transaction in the network, you remember, you're paying for shared space, in a public dataset, and the, the cost to, to put in a transaction is dependent Length and complexity of that transaction, the more bags of Bitcoin, these UTXOs that you're spending, the more complex your transaction is, and it's possible for a bag to be below a certain size called the dust limit, in which case it can't pay to even support spending itself, much less sending to other people or paying for fees or doing anything else. And so, that concept isn't just an interesting concept that there exists such an idea in, in the Bitcoin blockchain, but then the question becomes, okay, is it really a problem or not? And depending on who you- You asked, at various times over 2017 when, you know, the rallies were occurring and usage was extremely high, a lot of people pointed fingers at dust and worried about it, Was it, you know, in, in some ways it looks like it's a huge problem, in other ways maybe not so much. So this article was as an attempt, now that things have quieted down a little bit and we've gotten a chance to look at this issue, to, to see what really happened during that time, again, 'cause blockchains let you go backwards, and then think a little bit more about what it means going forward and, and honestly philosophically, like why is there even dust in the first place? So this article kind of gets into those issues." }, { "speaker": "stephan", "time": "10:22", "start": 622.02, "text": "Fantastic summary. Okay, so, I probably have a fair range of listeners ranging from beginner to sort of more intermediate and some advanced people. Maybe you could just outline a little bit on the key differences because Bitcoin has a UTXO model versus an account model. So could you just maybe outline a little on, on the differences there?" }, { "speaker": "dhruv_bansal", "time": "10:44", "start": 644.17, "text": "yeah, wow. I wish I, I should have prepared a, a really good analogy for this. the, the best I've-- I, I used that word bag a couple times in my last explanation, and that's unfortunately maybe the best analogy I even have in my own mind. if you want to, you can analogize, Bitcoin addresses to, let's say, Ethereum addresses. Both are things you share with other users of the network, both are the place, quote unquote, where your coins live. That's how we- Think of them, these coins are in this address or in this other address. and in that sense, they're superficially very similar, but you're right, Bitcoin uses a UTXO model and Ethereum uses an account model, and those are just specific jargon words, and what they mean is, in Ethereum, it works probably intuitively how you might expect it to, where your address receives some ETH and it's now in that address, and then you can take out some other ETH and put it somewhere else, send it to somebody however you want to. ETH is divisible into various small part-parts And in particular, there's no tracking of if two different, transactions deposited Ethereum into the same address and some more Ethereum came out, it's very difficult to say which of the original transactions depositing the Ethereum did the Ethereum that's coming out come from. That question doesn't really deeply make sense in a lot of ways in Ethereum. So, and to make it concrete, if my, if, my brother and my sister both sent me, you know, one Ethereum and And I then sent one Ethereum to somebody else. It's impossible for me to say that I sent my brother's Ether, or my sister's Ether, or a precise combination of half and half. It doesn't work like that. I just sent one. I had a balance of two. I sent one. That's it. and that seems intuitive. and Bitcoin's a bit more complicated. Bitcoin tracks each of those deposits separately, and those separate deposits are what's called UTXOs. and each of those separate deposits can, when, when I decide to spend from my address, Containing two Bitcoin from two separate, deposits, I actually have to choose which of those deposits to spend. And the example I gave, if they're the same, maybe it makes no difference, but sometimes one can be really large, one can be small, and just the math works out that the person or rather software authoring the transaction decides, to Choose a transaction in order to send somebody some money that leaves a very small amount of, Bitcoin left over. In Ethereum, that wouldn't matter, that's just a small amount added to a pool of undifferentiated Ether. But in Bitcoin, since it's contained in these smaller, independently tracked deposits, it kind of sits around on its own, and then that is what causes dust, because then to spend it, we've gotta describe it and refer to it, and that costs bytes, and that takes up space in the, in the transaction and the blockchain, and we pay for So dust is a problem, that's a little bit unique to Bitcoin that Ethereum doesn't suffer from, at least not in the same way." }, { "speaker": "stephan", "time": "13:41", "start": 820.88, "text": "Right, right. And so then it comes to the next point around that, what is the value density of those UTXOs? So, i.e., how m-how much, how many BTC or how many satoshis will it, you know, take per byte of space on the ledger to-that's required to spend it? So can you talk a little bit about this concept of value density?" }, { "speaker": "dhruv_bansal", "time": "14:03", "start": 842.64, "text": "Yeah, that's a metric that, as far as I know, that's, that fray, that the idea isn't new. There's been a few academic papers, that have explored this issue that we link to, in our blog post, a-about, about dust. But the idea, the, the, that label value density is, I think, one that we're coining here, and it's coined in, in particular, to parallel another metric which is probably a little bit more familiar if you've authored a transaction yourself, if you've used, wallet software that fee that you were setting has a unit, and that unit is typically something like Bitcoin per kilobyte or satoshis per byte, depending on how you measure it, it's a different number, but it's-- that unit describes exactly, how much money in Bitcoin or satoshis for how much data, and the data that you're talking about there is the space, the bytes that you're taking up in a transaction. And so that's a really important number because that number is very volatile, just like Bitcoin's price itself, this, this number of how many bytes are my Miners expecting to be comp-- excuse me, how many satoshis are miners being expected to be compensated per byte of a transaction that's going into a block that they're attempting to mine? That number is a market-indicated number. It goes up and down by factors of ten or even a hundred, over the, over the course of a market cycle, similar to the price itself. And so as a result, the, a, a, a bit, a U, a UTXO, a, a bit, a bit, a blob of, Bitcoin, it, it's not either dust or not, it's dust or not dependent on whether the fee market is, low enough to be able to let it be spent, economically. So when the fee markets were much higher in the summer and late fall of twenty seventeen, there was a lot more dust, in the Bitcoin blockchain. Those fee markets have receded and collapsed along with the overall Bitcoin and a lot of other cryptocurrencies, they're much, much lower today. You can set a transaction fee of one or two satoshis per byte and still expect your transaction to get mined very quickly today. that wasn't possible, it was close to maybe a hundred or a few hundred satoshis per byte for the same, ability, last year at this time. And so as a result, there's much, much less dust in the blockchain today because many more UTXOs are capable, or are rather, are large enough compared to what it would cost to spend them. And that number, that value density, is the metric that we calculate for UTXOs in order to be able to compare them to the fee market at any given time. The blog post that we produced has, a rather dense chart that compares historically, the value density as it changed in Bitcoin's money supply over time compared to the fe- the fee market, and what it shows is indeed this effect that, you know, depending on how you choose to measure it, maybe between twenty-five to fifty percent of all Bitcoin's UTXOs, so all the little bags of Bitcoin that are out there in the world attached to people's addresses, maybe between a quarter and a half of them would reasonably have been called dust at the peak of the market last year, which is a pretty shocking claim. that same fraction has dropped substantially Today to be closer to, let's say, five percent or, or, or so, the article goes into the details. So, so that was really interesting to kind of quantify, in just raw numbers, not value, which we should get to in a minute, but just to quantify that massive decrease, was, was pretty interesting to see that." }, { "speaker": "stephan", "time": "17:33", "start": 1052.63, "text": "Right, I see. And so I guess to sort of put it in other words, it's basically the point-- you're making the point that certain UTXOs are uneconomical. To spend, i.e. it would cost you more to spend it than you would actually gain from being able to, being able to spend it. Now, the challenge here, and one of the difficulties people have in thinking about it, and you were alluding to this in some ways before, is what's your unit of account? Because if you're denominating things in terms of Bitcoin, then it's not so much of a problem. But what happens is people can, be talking in terms of USD or AUD or whatever fiat that they, you know, what country they live in. And that can make it a little bit confusing. So maybe if you could just outline, just for the listeners, what are some kind of high-level numbers in terms of what was the typical transaction fee, say, you know, during that crazy bull run in late two thousand and seventeen versus what is the typical fee nowadays, but maybe in a fiat view and then also in a Bitcoin view for a typical transaction?" }, { "speaker": "dhruv_bansal", "time": "18:37", "start": 1117.37, "text": "Right, and, and you're, you're right, let's separate those two ideas, because the, the, given transaction will cost the same number of bytes to spend regardless of whether it's being spent at a time of high fees and high market prices or low. So really the translation factor really is the price and the fee market rate. So to, again, concrete terms, last year, if you were doing a large tran-- an average transaction, it would probably cost you, if my memory serves me, let's say five to eight dollars at At peak, fees to get a transaction through. That's maybe an average transaction. If you were doing a very complex transaction in my business, in the loans business, we, you might imagine we had certain business loans that had a lot of, UTXOs associated with them or, or had very complex transactions with multiple signatures. some of those transactions cost us tens of dollars. we even had some three-digit, transaction fee transactions, which was shocking. consider, but, just the fee- Market had gone crazy, for certain weeks, during that, during last year. these days, those exact same transactions would cost cents, or maybe a dollar or so at the most. So we're talking about a reduction of ten to a hundred in price, in, in real terms, because of the product of both a reduction in the price of Bitcoin, therefore making Bitcoin worth less and fees worth less, but also at the same time, a reduction in competition for space in the Bitcoin blockchain. Most likely due to an overall reduction in transaction volume, and so that's also further diminished the actual fees in, in the end denominations, Satoshi's per byte units as well. So the product of those two effects has been to massively reduce, real fees in real terms to users, which can be thought of as a very good thing. it's allowed, for example, people to start cleaning up dust, which is an interesting aspect, that we go into in our article." }, { "speaker": "stephan", "time": "20:32", "start": 1232.03, "text": "Yeah, fantastic. Okay. And then we've got different UTXO, you know? There are different transaction types within Bitcoin. So a few of the well-known ones are you've got, P2PKH, Pay to Pub Key Hash, we've got P2SH, Pay to Script Hash, P2WPKH, which is Pay to Witness Public Key Hash, and a few others. Can you outline maybe just what are some of the differences in those from a fee point of view and maybe just on the different-- obviously they, they take up different amounts of space on the blockchain. So So there's different impacts there from a fee point of view, can you comment on those differences?" }, { "speaker": "dhruv_bansal", "time": "21:11", "start": 1270.79, "text": "Yeah, absolutely. I might just first talk about like the, framework for how to predict how expensive a transaction is gonna be. Sure. Probably like the, the very first thing is obviously like, what are the fee rates? like that's just, that's the, the, in real terms, what's gonna set it. But in terms, if you're trying to calculate, well, how many bytes will, will be needed, then yeah, it does become a function of the Excuse me, of the address type from which you are spending those UTXOs. but the biggest thing that's gonna really make a difference is how many UTXOs you're spending. So like the first question to ask is, like, how many am I spending here? and your wallet-- this isn't a question many, use- and users of Bitcoin have really ever probably asked themselves, because your wallet software handles stuff at this layer. You say, \"I want to send three Bitcoin or point three or point o three Bitcoin to somebody,\" your wallet goes and finds a collection It knows about that you have the right to spend, that, that in total add up to what you'd like to send, plus enough for fees, plus a bit of change. And all of those UTXOs get consumed, your amount that you wanna send out is sent out, miners are paid, and the remainder of the change is created in a new UTXO, which is now added back to your wallet. So this is an interesting process by which sometimes UTXOs split, sometimes they're merged again. So the, the biggest thing that's gonna determine how expensive a transaction is to spend is how" }, { "speaker": "dhruv_bansal", "time": "22:33", "start": 1353.21, "text": "Well, two transactions who have the exact same number of UTXOs that they're spending, if that's the same, the next biggest effect is going to be," }, { "speaker": "dhruv_bansal", "time": "22:44", "start": 1363.7, "text": "what is the type of address that they come from? And addresses in Bitcoin's history have, have essentially increased in flexibility and, and security. They started out in what's called pay-to-private-key, and very quickly that transitioned over into pay-to-private-key hash, and the difference between them isn't essential for this discussion Just the latter is a little bit more secure, and-- but it's still, these are both very restrictive, modes, these are both restrictive addresses. one key is required for each of these addresses. They're, they're not multisig. You can't talk about time, you can't put any conditional logic into addresses like this. They're very direct. They're the, exactly the analog of Ethereum's account addresses in terms of security. They're controlled by one private key, typically. Bitcoin at some era decided to- I'm, I'm skipping over some of the more minor transaction types which aren't really, which weren't ever really used, broadly. But Bitcoin very quickly, it added a new transaction type, which is one of the more interesting ones, called P2SH, which is really, you write your own arbitrary piece of code and you have a lot of flexibility in there. And you don't have as much flexibility as you might get with Ethereum and Solidity programming, but really this is Bitcoin's own version of smart contracts. And what's interesting is these contracts aren't just smart enough to do stuff with. And so P2SH is that category, that's not a hugely dominant category in Bitcoin, but it has grown tremendously, since inception. and then all these addresses finally, in the last year or so, have a W flavor, if you want, a, pay to witness, private key hash or pay to witness, script hash, which are segregated witness fl- variants of the same concept from before. those, again, are seeing increasing use, but aren't, aren't certainly nowhere from From, from being dominant yet. So in the article, we get into the fact that if you really wanna make a chart like we've made, you have to get into some of these distinctions, and we pull a lot of these, tables and estimates from some of the research literature that's out there. it's stuff that's really interesting for me as a physicist. I really enjoy digging into a system at this level of depth, and I think if you're into that stuff, you'll see all the gory details, in the article. But the," }, { "speaker": "dhruv_bansal", "time": "25:04", "start": 1503.89, "text": "Maybe I should-- before I, before I reiterate that point, I would say the net result of analyzing all these different address types is really that the average number of bytes required to spend a UTXO has been roughly constant over the last few years. Constant enough where we felt we could just use an estimate of a hundred and seventy bytes or so in our analysis. and that's, by the way, an overestimate. So all of the figures that I've been quoting are definitely overestimates, trying to be conservative." }, { "speaker": "stephan", "time": "25:30", "start": 1530.41, "text": "Yeah, sure, sure. And, and so they And then they have a different impact on the blockchain, obviously. so then I think the next thing that would be really interesting to discuss is just some of the mechanisms to remove dust, because, well, I guess before I go there, one thing to comment is that it's almost like a tragedy of the commons, that people, you know, depending on their own incentive, they may be able to push the cost of their particular, you know, model for crafting a transaction onto somebody else, and, you know, you know, so- So historically, certain Bitcoin companies could just push that cost onto the customers, and because the customers, because there was a frenzy, they were just happy to pay that fee. but then what that does is it pushes that cost, you know, onto everyone who is storing the blockchain and so on. And then you, you, you go into this, model around, you know, what are some ways that we could try and remove the dust? Do you wanna comment on some of those?" }, { "speaker": "dhruv_bansal", "time": "26:27", "start": 1586.86, "text": "Yeah, absolutely. I mean, and I think, you know, so-so far, if you've been Doing it to be mysterious, that dust is this huge problem, and indeed it might be for some people. There's clear evidence that certain companies spent a lot of time and energy cleaning up their dust, and so they must have had an incentive to do so and the ability to get it done. but maybe before we even ask, okay, about how, how users or other folks can get into the picture to clean up all this dust that's out there, it's interesting to look and actually measure, okay, I said before maybe at peak rally times between twenty-five and fifty percent of all Bitcoin And today that number has shrunk to about maybe five percent or so, but those are still large numbers. If we translate them, however, into, well, how much Bitcoin is that exactly? remember, by definition, these UTXOs, these dusty UTXOs, they don't contain a lot of Bitcoin. That's their whole problem, that's why they're dust. So, yeah, there might be a lot of them, but if you were to add them all up, would they add up to a lot of Bitcoin? And the answer is no. Not at all. So if you actually go look at the calculation and you look at, and this is stuff you can see because it's in the blockchain, if you go look at the, those UTXOs that at a given moment in time you might call dust, even with our conservative overestimate, and you add up how much Bitcoin it, it takes at market prices, at the rally, you know, that twenty-five to fifty percent of all UTXOs that's dust in real dollar terms, that was maybe twenty-five to fifty million dollars. So That's a large number by, by any measure, but except when you compare it to the market cap of Bitcoin at that time, which is, you know, some two hundred billion plus, that's a very small percentage of Bitcoin in, that's actually dust, which suggests that this isn't a problem that's affecting like users, today, because again, the amount of dust has decreased dramatically and Bitcoin's price has fallen, that same dust today, that figure, our estimates are, it's three hundred to five Five hundred thousand dollars, that's it. And so, again, very small. Extremely, extremely small. And again, they're still five to ten percent maybe of UTXOs by count on the blockchain are dust, but the economic impact of that today is very small. And so, a little bit when we think about incentives, the real question is, well, are there incentives at all before we can even think about what people are-- can do about the problem? Are they willing to do anything about the problem? and I think the answer is, is no, not really right now. Most people, don't have this problem. It will come back, and for certain, I think constituencies, they'll wish they might have dealt with certain aspects of it beforehand. but most, players in this space don't experience this problem directly. So far, the only teams, the only kinds of companies that have really, Have, have really had to deal with dust, have been some of the worst offenders, in particular Coinbase and some of the major exchanges who were experiencing huge volumes in twenty seventeen, but weren't using sophisticated processes for how to flush that transaction trading volume out to the blockchain. So in particular, they weren't using Segregated Witness even after it became available, they weren't batching their transactions, they're-- they, they were through in that process creating a lot of dust, but even more, even more- Perhaps dramatically for the rest of the ecosystem, they were creating a lot of transactions, and that created upward fee pressure, and that made fee, prices worse for everybody, which then exacerbated the dust that they were creating. So it was kind of a vicious cycle. and I think as the market cooled off at the top of twenty eighteen, Coinbase had a few, great posts where they talked about, \"Okay, we're rolling out batching, we're rolling out SegWit support, and, and so on,\" and you can see in the data how quickly after that blog post The amount of dust in the chain diminishes. and so Coinbase was causing this problem a lot, they were clearly incentivized to fix it because they did. why were they incentivized? I don't think it's because they were necessarily worried about all the millions of dollars that were locked away in dust, You know, there were probably millions of dollars in dust that they were able to consolidate, and that's a, a boon. But I think probably they were just more concerned, my guess is, with the operational burden of just having to track all those many millions of UTXOs, each of which is so small. It's just operationally easier for a company that has to manage a hot wallet to aggregate that information, right? so I think that was their bigger motivation. Ongoingly, I mean, if dust continues, like, it'll come back. There's already twenty Today than there was, after the Coinbase cleanup, in, in actual dollar terms. So it's growing, it's not, it's, it's not stopped, it's not going to ever stop in, in our view. the creation of dust is ultimately an optimization problem that's, that's impossible to solve, at least not globally. And so we're gonna keep creating it, the question is, okay, one day if it becomes more of a problem for someone, what might they do? and so we kinda get into that by splitting it into a few different roles" }, { "speaker": "dhruv_bansal", "time": "31:36", "start": 1896.16, "text": "Developers do, and really I think what we conclude is that it's always going to require a good amount of coordination. That, Bitcoin is always, is a bearer instrument, it's a point I'd like to come back to in this discussion. it's controlled by the person who controls the keys to it. That's usually the user. In some cases, that's the, an exchange or a business that custodians funds, but ultimately the person who's responsible controls the dust has to agree to spend it. Miners can't just clean up dust, you know their mining equipment as any more than, you know, a, a neat freak can, can come into your home and start cleaning up your bookshelves. Like, you have to allow this process to occur and participate in it. So that requires com- cooperation from users, but because this is a tragedy of the commons, i- users can't just decide to, to do it on their own. They require collaboration with not only software creators who enable all of this in the first place, but with each other. They need to coordinate. We think some of the best ways to actually clean up As the, as the, as the economically sort of untractable problem that is, and appeal, to sort of extra-economic concerns, things like, hey, what if we have a day where everybody donates their dust, using a process that, you know, you can get into the details of it with particularly pre-signed transactions and so on, what if everyone donates their dust to a cause that we believe in? Okay, three hundred thousand dollars of dust that might not be the biggest motivation, but if we're back in a regime one day where there are tens of millions of Like continued development on the Bitcoin protocol, paid for by dust, right? or other kinds of projects that people choose. so there are some ways that, through social coordination, good software and, and massaging people's incentives, we could, we could do something like that. Miners could participate as well. They could, if they are the ones who are experiencing the pain of too many UTXOs to track, which I actually question whether a lot of miners even have that problem, but say that they did, they could coordinate and have, you know, fee in which they allow for UTXOs which they recognize to be dust to come through at, you know, lower than usual fees because they wanna subsidize the process of dust removal. And so you can combine these two ideas, the former of spring cleaning, or and the latter of fee holidays, to kind of imagine, you know, a community-driven, you know, cycle in which as dust starts to become recognized as a problem, people get together and as a distributed, you know, organization try to solve it, right? I can, that one thing that makes it easier for coin base to clean up their dust, 'cause they're just a company. They can just tell their programming and DevOps team to go get it done, and it'll eventually happen, whereas the network itself doesn't have that kind of top-down control. So this is a problem we're, we're forever gonna be stuck with, and I think it's kind of a deep problem, but it's interesting that we can literally watch it block by block, occur and then fix itself in the dataset." }, { "speaker": "stephan", "time": "34:29", "start": 2069.04, "text": "Yeah, fantastic. I, I think that's, a great explanation" }, { "speaker": "stephan", "time": "34:36", "start": 2076.2, "text": "There, in terms of, you know, we could collate this dust and do a spring cleaning every now and then, and, you know, I like that idea, it's very clever. but I, I think, we wanna save some time as well, just to discuss, the Bitcoin financial services and, some of those broader topics as well. So, Dhruv, maybe you wanna start, and you mentioned earlier Bitcoin as bearer instrument, maybe you just wanna start with, overview on how you think about Bitcoin financial services, Like in the future and how do you, how do you think about that?" }, { "speaker": "dhruv_bansal", "time": "35:09", "start": 2108.56, "text": "Yeah, no, I think that's really the central insight into Bitcoin is that it is different than traditional finance in a lot of ways, but probably the most important way, is that it is a bearer instrument, one of the most important ways. In addition to being distributed and being leaderless and, and, and hard to censor, it is a bearer instrument. That's one of the ways it achieves that prop-- those properties. And in particular, what that means is that, you know, he who holds it In that way, that if you're occupying it or possessing it, you, you have it. It is unlike fiat currency, right? As we all know, fiat currency is by decree. if I claim to have your money, it's, it's not the same. Even if I, you know, take cash from you, there are ways to get your money back. if I steal digital money, you know, dollars in a bank from you, there are ways for my copy of those dollars to be null and void and so on. huge, huge difference For cryptocurrency, for blockchains, for Bitcoin, you've got to start by asking questions around custody, and around who bears these keys. That's like the place where it must begin from. and I think, you know, there's a lot of folks like myself perhaps who are coming from the worlds of engineering, physics, data science, technical, you know, computing subjects and learning a lot about economics and, financial instruments and capital markets as we, engineer products. Products and services in the space, but I think there's just as much learnings that need to happen from folks who are coming from the financial services space who understand how to build things like loans and, fundraising vehicles and derivatives markets and, all these interesting exchanges and all these, like really highly useful and necessary financial structures. They need to also understand like the cryptographic primitives, not the implementations and the details, but the abilities and constraints that they create And in particular, they need to internalize how important it is to, to hold those keys, to have direct control, or at least know who has control and to be comfortable with that process. So many of the folks that I meet coming from the financial services space don't worry about that. They just say, \"Well, these guys are just gonna custody it, and then that's the solution.\" that's an insufficient characterization of one of the most complex problems in the space, in, in my view, that if you're not conversant Deeply with how you custody and the right ways to do it, you're missing out, I think, on a lot of what makes cryptocurrency special and, and even worse, so not only are you exposing yourself to, to, to danger by not understanding this model, you're missing out on The kinds of products that are ultimately going to win, because those products are going to be engineered in the spirit of, of how this technology wants us to work, which is to use keys, to distribute controls, and to not decentralize. and I think decentralization to a certain extent is an inevitable first swing of the pendulum. You don't get Bitcoin at twenty thousand dollars if you didn't have Coinbase, a centralized company that enabled an easy to use exchange that anybody could sign up for. But at the same time, if we get-- you don't get to Bitcoin a million dollars Unless you get away from some of that centralization and create like truly robust distributed structures for people to custody, trade, interact, invest with each other." }, { "speaker": "stephan", "time": "38:28", "start": 2308.1, "text": "Right. I like the way you talk about the fact that, well, it's sort of like, I might summarize it like some people who come in from the traditional financial world, they're almost trying to fit a square peg into this round hole, and, you know, Bitcoin and cryptocurrency is a little bit different, and it enables things that are tr-- are truly, it's a structurally different- product or service that can be offered, and so that means things like, like you said, custody. It enables things like proof of reserves, although proof of reserves obviously isn't perfect, but that's one example of a way in which- The financial services of the future may be delivered in a differ- in just a fundamentally different way than simply trusting the bank or simply trusting a certain financial provider that they truly do hold your Bitcoin or your Ethereum or whatever cryptocurrency you hold with them. So Dhruv, maybe you wanna tell us a little bit about what you guys are doing with Unchained Capital and just a little bit about how, you know, Unchained Capital differentiates itself from other crypto financial services. Services providers." }, { "speaker": "dhruv_bansal", "time": "39:37", "start": 2377.18, "text": "Yeah, absolutely. I mean, I think we take the principles that we were just discussing and really elevate them to be the core design principles for our company. Like, we try to build the kinds of products that are in the spirit of the underlying technologies. They're fundamentally cognizant of these, of these assets as bearer instruments, and, and we recognize that the, that the, that the people who hold these instruments, who, who invest in Bitcoin and similar assets, want ownership, they want some- They want sovereignty, they want control. It doesn't mean that they don't also want other kinds of financial products like loans, like insurance, like financial advice, custody, but they also want those first set of things. And too often they're given a very stark choice between, \"Look, just hold your own keys and-- or, and don't ever get value from Bitcoin, don't ever trade, it make it, makes it hard to trade, you can't use it for, you know, almost anything because it's just sitting on a paper wallet.\" Or a tr- or a hardware wallet somewhere, or, you know, or an offline wallet, excuse me. or put it on an exchange. For a long time, that was like the default choice that, that the community had, and neither of those options is really a good option. things have started to get better, like the technology at the custody layer, things like hardware wallets a-and stuff are starting to have come out now, and more and more people are using them, and I think they're educating more and more people about how these protocols really work. I remember" }, { "speaker": "dhruv_bansal", "time": "41:05", "start": 2465.26, "text": "Pretty conversant with how things work, it really opened my eyes, at a, at, in a very real and direct way as to how Bitcoin addresses are related and connect in transactions, 'cause I had to see it, when I was using my hardware wallet. That's a story that a lot of folks who've used Trezor's or Ledger's or what have you, have experienced that same thing. tools that, tools that are designed well educate us about how different this space is compared to older spaces, and that's, I think, the way that Unch" }, { "speaker": "dhruv_bansal", "time": "41:36", "start": 2495.88, "text": "the analogy with social media, I think one of the major things that a lot of publishers, content companies, distributors, folks who ran media, a lot of, a major- Just in retrospect obvious, but at the time maybe difficult to perceive, idea was that, hey, the internet's gonna change everything about media and so on, but it's still gonna be the major studios and labels, and existing power players creating everything and owning how content works. That's, and, and a lot of things changed, but in particular, one of the major things that changed with the internet was that everyone became a content creator, and that that was democratized so, dramatically, and it's changed the kinds of businesses that can be built, and I think that's the insight that we have at Unchained, is that instead of just going out there and building banks again, or building loans, or building fixed income products, or insurance, all of which are things we want to do and that, you know, the ecosystem needs and that investor Users and hodlers want, you have-- you, you can go build them, but you have to go build them with the right understanding of what that world is gonna look like. And I think a big part that, that just-- that we see is that just like content curation, excuse me, content creation, well, and curation became, democratized, ownership and sovereignty over one's financial assets will become democratized and indeed expected and the norm. And this idea of, well, I don't manage keys because it's difficult or I don't know how to use a hardware wallet With good technology, good devices, good software, and enough just familiarity, where like we will be operating in a web of interconnected, like, controls and protocols instead of just being shunted from hub to hub as we are today as customers with very little control and power. And so when we engineer products, instead of assuming that you're gonna give us complete control and that we're gonna go talk to a big bank and that we're gonna get a deal done and that you're gonna meter it out over a credit card to us, but secretly Bitcoin was, was somewhere involved, we wanna bring it down to the protocol. We share keys with you, we expect you to count sign and countersign transactions with us and participate in your own security, and through this process gain a huge amount of transparency into what's happening with your funds. that's of course an example of our loan this general idea of, of collaborative cold storage, of working with other financial services companies, by sharing keys and controls in order to build useful products, like that is the right way forward. And so I think in everything that we do, starting from the way we think about our website, our marketing, our technology, our custody, our loans, we're always cognizant of this idea and trying to design towards it." }, { "speaker": "stephan", "time": "44:18", "start": 2658.21, "text": "Sharing keys? How communist. Haha. I'm kidding. but, yeah, no, look- I think this whole idea of, collaborative custody is an interesting feature that you guys have recently come out with. Maybe you can just, ex-give, give the guys a, a background on this feature, how does it work, so on." }, { "speaker": "dhruv_bansal", "time": "44:35", "start": 2675.02, "text": "Yeah, I'll distinguish it in two ways. First is collaborative custody as it applies to our loans and lending product. we're one of the oldest and, and most successful lenders in the crypto back lending space, but for most of our history, we were lending in what you would have to call a more centralized model, where when Alone, we would give you a dedicated per user, per loan address on the blockchain, so it was extremely transparent, far more transparent than any competitor, but you would still have to trust us. You had very little control over that address. just a few months ago, at the end of, I think November, oh, that's last month, we launched a, publicly a new feature in our loan product that lets you participate and share keys with us just the way that I've described. So now you go ahead and give us a key, a from your hardware wallet, your Trezor or Ledger, if you want, and then we use that public key and two others, one from us and one from a totally independent third party that works with us to secure your funds. You no longer are just trusting us, there's a totally independent third party that is, is separate and separately compensated, and most transactions will be signed by yourself and by us, so it's a very participatory model. we're also extending that same idea into a new product, which is not alone, it's going to be a purely custom- custodial product. So there's no principal obligations, at all. You're going to be able to hold two keys and we'll hold one, and you can see maybe immediately why in a two out of three quorum like the ones we use, that wouldn't work for a loan because you holding two keys would be able to sign away the collateral, and that obviously would put us at risk with respect to the principal that we would have lent you. So that model doesn't work for loans, but it's extremely interesting for vault products. If you're holding cryptocurrency And you want to protect it, and you're already using a hardware wallet like a Trezor or Ledger, you could be doing it a lot better using this product. all you need is another, hardware wallet, another Trezor or another Ledger, or a friend with a Trezor or Ledger, and if you with the your two devices, or you and your friend, each with a device, are signed up on our site, you can collaboratively use each other's public keys and one of ours to build vaults together, and then fund them, and collaboratively," }, { "speaker": "dhruv_bansal", "time": "46:53", "start": 2812.65, "text": "You can imagine depending on how you choose to arrange who you work with, whether it's yourself or with a partner, how many keys you keep live versus on paper and secure in banks versus on your person. There's a lot of interesting combinations to a model like this, and then of course, you've got a company like us holding that third key, so when we're countersigning for you or when we're, rekeying you in the case of you having lost a key, you're getting all the experience that we've had for years protecting our loan Apply directly to you, but you're still in control. This isn't a depository relationship, it's not an exchange, it's something that you continue to retain, complete executive authority over." }, { "speaker": "stephan", "time": "47:34", "start": 2854.38, "text": "And it, I guess, it also does provide some level of assurance then that there's not fractional reserving going on, that the, you know, all the bitcoins that have been deposited or, you know, are quote-unquote in your name, they are, you can see them right there." }, { "speaker": "dhruv_bansal", "time": "47:48", "start": 2867.57, "text": "Absolutely, and that's not to vilify the idea of fractional reserve lending or- Re-hypothecation, indeed, re-hypothecation is one of the chief, one of the top things our customers ask us for and ask us if it's available. I think the key idea is to know when it's happening and know when it's not happening, be able to be sure that it isn't happening. And I think, we've always tried to be transparent, about our-- the way we manage collateral and deposits for our customers, but they previously to features like this didn't have a lot of direct control over that. now they do, in particular with the Vault product, since they hold two out of the three keys and that's sufficient to sign the quorum, it's-- they have as much control as if they had just one key, a, if it was just one out of one, a singular, single signature solution, except they have a lot Redundancy, and that's really interesting for real world businesses. It's something we learned operating a loan book at the tens of millions of dollars scale for years. You need redundancy, you need multiple signers, you need internal processes, and that's just hard to engineer, especially when you want everything to be cold, and you don't want hot wallets, you're not willing to just use BitGo, this solution lets you do that really easily using a tool that a lot of people have already come to trust very implicitly, their hardware wallet, and so- If you're, if you're conversant with how to use that hardware wallet, you immediately can participate in, in a product like this." }, { "speaker": "stephan", "time": "49:13", "start": 2952.6, "text": "Yeah, that's a good point I wanted to ask about as well. So part of the question was around customer feedback on the product so far, on the collaborative custody, and then also if you could comment on whether there's been difficulties in terms of, or difficulties or costs in terms of your business in terms of training people how to do it correctly, because it's a new thing, it's not, it's not just like using a standard banking app. What's difficulty you face around training people." }, { "speaker": "dhruv_bansal", "time": "49:39", "start": 2979.26, "text": "it, that's an interesting question. Partly the answer is we don't even try that, you cannot use this product if you don't have a hardware wallet or an offline wallet. We also work, with those, but Very few of our customers are in that situation, is what we found. After a year, year and a half of being in the lending business, folks who are taking hundred thousand, million dollar loans, they have a lot of Bitcoin, and they're almost certainly using Trezor's or Ledger's. Something like eighty or ninety percent of our customers are using hardware wallets, in a survey that we took. And so it was our conjecture that, like, we all use hardware wallets, like personally as well as at the company, our customers use them. This is a huge amount of Bitcoin The world is held on a combination of, of Trezor, Ledger and other hardware and offline devices, probably more than is held on exchanges, and it's not like this stuff is ever going back to the exchange. Once people have decided that they're uncomfortable with exchange-based models and they want to be in control of their own keys, they don't go back. And so for these people, yes, this isn't like, if you're an average Bitcoin owner and you've bought a little bit in the last rally and it's on Coinbase, this isn't a product probably that you," }, { "speaker": "dhruv_bansal", "time": "50:53", "start": 3052.76, "text": "Or can really honestly value. It's only when you, you know, have a substantial amount of cryptocurrency, and that-- and you've already started to use hardware wallets that you have the experience, familiarity, and understanding of why this is an important and valuable product to buy. but that kind of matches with our existing customer set for our loan product, and so we kind of figured like, this is exactly the right, group to be marketing this product to. and so far, uptake has been really good. we've started using the pro-- we, we have- We've, we're running a private release right now. It's not publicly accessible, it's only open to, I, I've got all my own Bitcoin in there, my co-founder, a lot of our employees, investors, some family. we've really started, at that level, trying to get the user experience and the UI really correct. One of the biggest feedbacks we got in, in particular, since now we have two keys that the customer can own and there's a lot of autonomy there that the customer can exercise on their own, we wanted to really make sure Clear. And in our view, it worked a lot better for the situation where they had just one key, which is the one we've already been supporting in our loan product. So we're waiting to, deploy a new user interface, at which point we're gonna have more of a limited release. And if you'd like to sign up for that, please get in touch, email hello at unchainedcapital dot com, or get in touch with us through Twitter. we're going to be launching in the first quarter of the new year, and, and so far, pricing," }, { "speaker": "dhruv_bansal", "time": "52:23", "start": 3142.76, "text": "Start using the product, if, in our view, if they're willing to trust us enough with their public keys and to trust us with their Bitcoin, we wanna give them the opportunity to teach us about how they wanna use the product. There are some pretty essential questions that we're not a hundred percent sure of how to answer right now. So for example, what kind of SLA would we wanna offer on, you know, how quickly we sign things? we have a pretty slow process that's gonna involve, you know, actual hardware wallets and offline wallets on our side. Identity and intent verification of what our customer really wants. This isn't an immediate process, this isn't something that happens instantly. What are the expectations that we should set with the customer given the price we might charge for this? Furthermore, is this the kind of product that should be priced on an, on an AUM basis, like how much do you have, and, you know, and we'll just charge you a percentage every month or year, or is this the kind of thing that should be, you know, priced on a transactional basis? There's a lot of reasons that all of these things make Groups. And so our goal right now is to get people to start using the product, start validating that the idea of collaborative cold storage is compelling enough, for people to trust us and want to use this, and then I think we'll start to ask and survey our initial usership during this limited release about what they think the right model is on pricing going forward, because we think this service is just extremely valuable. As a person who's been using a hardware wallet for a few years now, especially at the height of the rally, you know, I started to get really uncomfortable about the- Physical security around this device, you know, putting it into a bank vault, like duplicating the wallet words, splitting them up geographically, doing all this crazy stuff. and I'm frankly not even at the, you know, scale of some of the customers that we deal with. Their version of this problem is, is even larger. and so I know this product has a lot of value, it's just not clear to us right now how's the best way to meter that out. So if you're, if you sound like you're listening to this and you're someone that Come check us out, we'd love to let you use it and get some feedback from you on how to make it better." }, { "speaker": "stephan", "time": "54:28", "start": 3268.44, "text": "Right. And I think the other thing that's really interesting about this is that it really is somewhere in between, right? So it's not the individual taking full custodian-- full, well, having the full risk on themselves, but then it's also not them fully trusting the business. That it, this truly lies somewhere in between and it's something truly new. It's" }, { "speaker": "dhruv_bansal", "time": "54:47", "start": 3287.11, "text": "a nuanced answer to the, to the, I think, the gaping void between, Not your Bitcoin, not your keys, which is a, you know, a reasonable position, and then, hey, I wanna be self-sovereign and have my own key, which is also a reasonable position. Excuse me, which is, hey, I don't know how to manage a key and I wanna put it on Coinbase. Those are both actually, they're complete opposites, but they're both absolutely reasonable positions. When I first started in Bitcoin, I used Coinbase. I didn't know how to do it, and that was the safest possible choice for me to make. At some point," }, { "speaker": "dhruv_bansal", "time": "55:23", "start": 3322.74, "text": "Could have paused. and that's a frustrating experience. Like, despite my own paranoia in this space, despite my, my love of what that feeling of self-sovereignty has felt like for me over my bitcoins, I still want redundancy, I want protection. God forbid I become incapacitated or die, I'd like a way for people I have trust or have designated to be able to, with the appropriate controls and ident-ident-identity verification, to be able to recover these funds that, you know, I've protected now for so many years. That's a, a new conversation that we're trying to introduce into the market. something like proof of keys days, which is an interesting thing that's coming up here in January at the ten year anniversary, I think it's like kind of perfect timing for stuff like this, right? That a lot of people maybe, shouldn't be just ripping their stuff off of exchanges and throwing it onto their own private key if they're not capable of doing that without some redundancy or backup, from people that they trust. And so I think this is a way to kind of achieve that." }, { "speaker": "stephan", "time": "56:18", "start": 3378.39, "text": "Yeah, I think I was keen to discuss with you, Dhruv, is, bear market blues. Oh my gosh. So, so I think it's been, it, it's obviously it must be, you know, it's part of the cycle that, many Bitcoin and crypto companies have to face. Can you talk a little bit about how you guys are facing that at Unchained Capital?" }, { "speaker": "dhruv_bansal", "time": "56:41", "start": 3400.85, "text": "Yeah, you know, I, I think it helps a lot that a lot of us, the founders and investors and executives at the company have been in" }, { "speaker": "dhruv_bansal", "time": "56:53", "start": 3412.8, "text": "And never coming back. We've, we've, we've been there before. I remember twenty thirteen and fourteen. there are those who've been there even longer than us who saw cycles before that. Again, the HODL Waves research does show like how cyc- how cyclical, like this market really is. so this is another part of the cycle, it's the downward part of the cycle. At this point, having been here for a while, part of me is just very, I won't say blasé, but serene about it, like it was bound to happen, you" }, { "speaker": "dhruv_bansal", "time": "57:23", "start": 3442.92, "text": "I don't know if we reached that point yet. and, and so in that sense, it's completely unexpected. It's unpleasant still. It's not nice to feel that what once was, you know, so huge has now collapsed and is smaller. It, it, it, it-- the snide remark sometimes you might overhear at, at friends' parties or family events, you know, can be a little bit off-putting. people's FOMO really comes out at times like this, especially those who didn't participate in any kind of wealth creation or, And then as a business owner who works in this space, of course, there's an impact there too, that, you know, originations go down when, for, of our loans, when, when the market prices are falling. we have finally, finally, throughout the entire year twenty eighteen, surviving most of it without having to do any forced liquidations, in the last, final price drop down from six thousand or so per Bitcoin down to three or so, we finally were forced to liquidate some customers. I think they just ran out of collateral. They just didn't have any more Bitcoin left, after trying to salvage some of their loans for most of the year. these are very unpleasant situations for us. We're not happy to liquidate our customers, we wanna avoid it at all costs, but, we also aren't eager to put our investors' capital at risk, those lending capital, our lending capital has remained completely above the threshold that we set in our margin call policies, our borrowers, all of whom, all of, everyone has understood the nature of their obligations. it's been painful for a lot of people, we joke that some of our client services folks, have become a little bit part-time therapists, like, really, you know, So there, there are certain things that like only another person in the crypto world maybe will understand, right? And it feels like some of our customers are having those conversations with our client services staff, and so we, we feel like the pain that's happening in the market, but we're also proud of how we've done. Crypto has served as a great form of collateral during this entire year, through, throughout the bull run, up at the top and all the way down, and our, our practices have worked, our margin call process was robust, we feel confident going This really is a great business to be in. the market m- being much smaller than it was at the top of the year, we're glad that loans isn't the only business that our-- or isn't the only product line our company is in. Like getting into custody stuff, is really exciting, and we think gives us, more reasons for customers to work with us and for us to be able to earn a bigger share of their wallets, especially maybe during times and prices where they're not maybe wanting to borrow as much. So we're really happy That we've anticipated kind of this outcome by working on all this stuff last year and getting it ready so that we, it would be ready now. that feels like we were prudent. we're also prudent in the sense that, you know, we have a good amount of runway, like we're, we're, we're really, feeling in comparison to some of the other competitors in our space and, and to other blockchain companies in general and, and, you know, ICOs in particular, we're feeling like we're surviving this winter really well right now. Now, part of that is just our product is a real product, it has real users who, who solves a pain for that are happy to pay for it and have loan, we have loans going out five years, and so that's like, that's really anchoring and it makes us feel like no matter what happens, like we at least have this one thing that has some traction and is working well, as we continue to develop new stuff and kind of build upon our winnings. So blues, definitely blues, definitely blues, but I kind of like the blues, is, It is, it can be, I will also admit, there is a sense of Schadenfreude watching bad projects fail. And so it is sad, it is stressful. I, I of course was more ecstatic when prices were up, but the winter can be a great time to build, and my team is extremely technical and we've known this was happening for a while and we're eager and ready to keep going. So, I say we, you know, bring it on. Let's, let's see what this next market cycle contains. I'm, I'm already thinking" }, { "speaker": "dhruv_bansal", "time": "01:01:33", "start": 3693.89, "text": "And how I want our business to be well positioned for it." }, { "speaker": "stephan", "time": "01:01:36", "start": 3696.49, "text": "Excellent. And so with that in mind, then let's now talk a little bit about, you know, what's your future vision, for Unchain Capital and Bitcoin financial services? What does the future of, you know, Bitcoin banking look like?" }, { "speaker": "dhruv_bansal", "time": "01:01:48", "start": 3708.76, "text": "g-going back to a lot of the, the, the same point around Bitcoin as a bearer instrument, custody kind of being king, and the way that our company thinks about engineering services in this space is always anchored in recognition that, you know, you can be nuanced, you can Can define custom protocols between participants in a financial instrument. Taking that and projecting it out ten, twenty years, what do I see? I, I see, you know, obviously a much more distributed world. I don't, it's not like banks don't exist, it's not like, you know, we don't have loans or fixed income or bankers. All these are extremely useful and interesting and like valuable jobs and positions, they're just gonna work slightly differently. And I think a lot of the underlying context will have been spread out. I often in my mind get, A visual metaphor of, like, you know, if you want plate mail versus chain mail, it's not the best, metaphor, but I sometimes think of the way we do custody right now and, and, and financial services right now is very rigid, and heavy and expensive, like these big centralized repositories like Coinbase that house and custody so much of the world's Bitcoin, and then we have like, you know, completely isolated dust like, treasurers and ledgers just out there. What we really want is something, again, nuanced in the middle, something like chain mail, Little rings of protection, you know, imagine each person in a small quorum with like their wives and, and family members or with their coworkers or with some friends or with some project, members, and all those little quorums are all managed by people's devices, like just like in their phone or in some device they carry with them or, or it's easy for them to use, All like the world's money or large parts of the world's money are split, are, is spread amongst such distributed quorums that like interlock, because human social relationships interlock and like the web of trust is ultimately built in the real world and using that and leveraging that through physical controls like hardware and offline wallets, which people are holding and interacting with in the real world, but at the same time having the same scale as today's incredibly centralized systems, having the ability to work at that global scale with flows of money and capital capital that are as large as that, and as smart and as nimble. That's a really challenging vision, is how do you replace, you know, the innards of this system, a lot of the custody controls and access controls of a system like this, still allow it to be able to operate like essentially the way that Iris does, so as large and as, and maybe hopefully more efficient, but definitely more fair, more distributed and more robust? I think we are a few big exchange hacks or recessions away from remembering again some of the reasons why Bitcoin is built the way that it is. I think when markets are up and everyone's kept on their money despite continuing to centralize and pool risk for many years, we sometimes get inured and forget why the system is built this way. So over time, you know, the probability of bad things happening increases, they'll happen, we'll be rem-- we'll be reminded, and that will spur us to improve. This more distributed model for how to build things." }, { "speaker": "stephan", "time": "01:04:51", "start": 3891.63, "text": "Excellent, I like the way you, put that there. so Dhruv, just before we let you go, obviously I'll put all the notes in, I'll put the links in the show notes, but just if you could, tell the listeners where to find you on Twitter and where to find Unchained Capital." }, { "speaker": "dhruv_bansal", "time": "01:05:03", "start": 3903.94, "text": "Yeah, absolutely. Yeah, c- again, if you're interested in our coming limited release program for custody using collaborative cold storage, come check us out at unchained, U N C H A I" }, { "speaker": "dhruv_bansal", "time": "01:05:19", "start": 3919.55, "text": "and you can follow me, I'm at Dhruv Bansal on Twitter." }, { "speaker": "stephan", "time": "01:05:23", "start": 3923.25, "text": "Excellent. Well, thanks very much for coming on the show, Dhruv." }, { "speaker": "dhruv_bansal", "time": "01:05:25", "start": 3925.35, "text": "Thanks a lot for having me, Stefan." }, { "speaker": "stephan", "time": "01:05:28", "start": 3928.88, "text": "Check out the show notes for this episode on my website, stefanlivera dot com. If you enjoyed it, remember to subscribe so you don't miss out on the next episode, and please share the podcast with your friends. You can also follow me on Twitter, my handle is at Stefan Livera. Thanks for listening." } ] }