{ "episodeId": "SLP652", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "gilded_pleb": { "name": "Gilded Pleb", "role": "guest", "tag": "GILDED" } }, "segments": [ { "speaker": "stephan", "time": "00:12", "start": 11.71, "text": "Hi everyone, and welcome back to Stephan Livera podcast, brought to you by Bold. You can find a, a place to buy Bitcoin and also store Bitcoin using your, your own multisig, custody with two or three coins, two or three keys over at getbold.io, that's for American listeners. Now, joining me on the show today is Gilded. Pleb. Now, Gilded Pleb, as I understand, is a developer and has worked on this interesting site which, I came across. I believe you texted it to me actually, Stackmath dot x y z. So we're gonna chat about that, and of course, you know, just Bitcoin in general. Now, I know you were engaging with a few, let's say, no coiners or, you know, skeptics, and they were talking to you about homelessness and, how Bitcoin doesn't help." }, { "speaker": "stephan", "time": "00:59", "start": 58.74, "text": "you" }, { "speaker": "gilded_pleb", "time": "01:01", "start": 61.06, "text": "Yeah. So, I mean, we could-- Actually, this kind of ties into like my own Bitcoin story, is just, is a way to, you know, introduce myself. I went to college, studied economics. graduated and was working in financial advisory, and then basically, I mean, it's a longer story, we don't have to get into it, but At no point in my education and studies and working in finance was anyone able to ever explain to me what money was. And so working a financial advisor, I'm like, okay, cool, we're, we're protecting people's money. But what is it? Like we're, we're adding value, but adding value to what, right? So I basically, it was just, basically just became an existential crisis for me where I was just like, I just can't, I just can't participate, I don't know what I'm doing, right? So I quit, worked in the music industry, music industry's unbelievably worse. I'm in Los Angeles and, you know, I had background in entertainment and a lot of friends and all this other stuff, and just, it was way worse. And that led to, I just quit my job and I was like, \"I'm done with participating in this bullshit world,\" essentially. Which was like, okay, cool, I'm just gonna quit, sold my, sold my car, like, I don't care, doesn't matter, whatever. That led me to be on and off homeless for, It was first month or first stint was three months, second stint was like fifteen months, as, like homeless-lite, where I was crashing on couches and all this other stuff, and, you know, but there were times where I was like, \"I don't have a place to sleep, I don't know where my next meal's coming from,\" like that kind of stuff. Now, basically, throughout this process, since a whole other, a whole other long story, came across Bitcoin and Was like, this is, this is, this is BS. Just, just like everything else, right? They're gonna shut it down, nothing can, nothing's gonna stop the, the, the fiat train. You know, nothing ever happens, you know? Yeah, nothing ever happens. Like, they're the ones with the guns and the aircraft carriers, we, we're just It's just game over for everybody. And years go by, and Bitcoin just continues to like poke me in the side, like, \"Hey, hey, check it out, I'm still here. I'm not dead yet, I'm not dead yet.\" And at some point, I was just like, \"Okay, I gotta figure it out.\" And then that's when everything was like, \"Whoa, this is the real deal, right? This is, this is the whole thing. Here is...\" This not only exposes the BS, but it fixes it. And from those, you know, from that base layer, we now get We can have a, a stronger economy, a stronger human relationships, everything, including homelessness, because the Cantillon effect is removed if we adopt a Bitcoin standard, and therefore all the people who are the furthest away from the insiders The furthest away from the money printers, the homeless people, the disenfranchised people, all of them now get access, and they-- you don't have-- there's, there's nobody stealing from them anymore. It is a direct solution to one of the underlying causes of homelessness. And here we are. People, you, you engage online and it's just like, \"No, you're, you're a moron.\" I was like blocked three times yesterday, and people were just calling me moron constantly because I was like, \"No, like this is explaining how Bitcoin...\" Alleviates a lot of the pressure causing homelessness. So yeah, that, yeah, that was my, that was my day yesterday. And they were giving" }, { "speaker": "stephan", "time": "04:35", "start": 274.72, "text": "you, and as I, I had a quick look at some of the replies and they were saying stuff like, \"Oh, it's a, you know, is it a Ponzi or a pyramid or the typical, you know, just the normal answers, or is it a security, these kinds of things.\" And it was just, I mean, it's stunning to see where people are. Like, here we are in" }, { "speaker": "stephan", "time": "04:57", "start": 297.37, "text": "Some of them have the most basic, rudimentary understanding and they commit the most basic errors of these things. So, and, and like we have," }, { "speaker": "gilded_pleb", "time": "05:07", "start": 306.58, "text": "it's like we have AI just, like, just fact-check yourself, just, like, I mean, anywhere is Bitcoin a Ponzi? Before you say, \"Is Bitcoin, Bitcoins a Ponzi?\" Like, just go fact-check it. Anywhere, like, there's so many free AIs out there, is Bitcoin a Ponzi? Ask the AI, it's gonna be like, \"No, because here's all the reasons Just do the research. So." }, { "speaker": "stephan", "time": "05:31", "start": 330.65, "text": "Yeah, and so, then, yeah, look, let's, let's get on to the topic of retiring on Bitcoin then, because I think this is an interesting website you created. I guess listeners can think of it kind of like a calculator, yeah, and, and so, maybe just give kind of the, you know, the one minute overview, and then we'll sort of dive into, you know, so first start with just what is it, and then we'll dive into" }, { "speaker": "gilded_pleb", "time": "05:50", "start": 350.36, "text": "it. So, Stackmath dot x y z," }, { "speaker": "gilded_pleb", "time": "05:57", "start": 357.4, "text": "Big picture, it's just a financial calculator, just like anything else. Unchain put together a good one. there's, there's like the, there's probably a Bitcoin fire calculator, there's a Kager calculator for Bitcoin, like all this, they, they essentially do the same thing, right? They say if Bitcoin- You know, if we project that Bitcoin has this trajectory, well, what does that mean for my, like, let's say my stack is three Bitcoin, how much or how long will that last me given this trajectory, right? And that, that's what, that's essentially, that's all it does. But most of the calculators out there, I think, Swan has a calculator that, that utilizes a Monte Carlo simulation for, for some of the stuff, but I'm not a hundred percent on that. I'd have to go do more research on that. It" }, { "speaker": "stephan", "time": "06:48", "start": 407.86, "text": "could be the, Nakamoto portfolio stuff. Yeah. But, yeah, the Nakamoto" }, { "speaker": "gilded_pleb", "time": "06:51", "start": 411.47, "text": "portfolio stuff, s-has some, Monte Carlo simulations. But basically The reason you need a Monte Carlo for this kind of stuff is because if you look at all like any of the models, like all the models are useful, none of them-- or no, all the models are broken, some of them are useful, right? If you look at all the models, they're all these essentially straight or linear or, you know, curved lines that are really pretty to look at and mathematical formulas, right? But then you look at the historic Bitcoin price and it's clear that that's not what happens in Bitcoin. Those lines give you ranges, and I was essentially looking at this like the, the idea hit me when the stock to flow Model came out and everyone's like, \"Oh my gosh, stock to flow, like this is, this is it, we're gonna expect these step functions.\" And I was looking at that and I'm like, \"These are exponential step functions. Every single time there's an exponential change in anything...\" The human mind just breaks. We just don't comprehend a jump from ten to one hundred. We don't, we certainly don't comprehend a jump from ten to a thousand, right? And the stock to flow model is basically saying, \"No, we can just...\" Totally. You can just totally jump that, it's easy. So I was like, okay, this doesn't make any sense because if, if for instance, you have three Bitcoin and you're like, \"Well, what's my retirement gonna look like?\" If Bitcoin is at a hundred thousand versus a million versus ten million, it's like, no, these, these numbers don't-- It's like, and then, oh, what if it's not at ten million? What if it's at five million to fifteen million, right? It's still an order of magnitude different between your original. It's just like, you can't All your financial, yeah, yeah, all your financial calculators are just irrelevant. You jump one order of magnitude and everything's irrelevant because the order of magnitude, the range on the order of magnitude just blows everything out. Like you could be trading at the top of the range or the bottom of the range, and like that just blows everything out of the water. So The way you account for that is with a Monte Carlo simulation, which is, hey, we're just gonna plot a whole, like, thousands of different random Walks that, that go through the, the trade through the range and then according to different strategies and according to different walk patterns Make assumptions about what we think the Bitcoin price will do in that range, and then from there you can start to, to get probabilities of the price in the range, as opposed to just a flat line Where you don't get the nuance of how-- Like, so" }, { "speaker": "stephan", "time": "09:31", "start": 571.25, "text": "we can think of it like instead of just having a single estimate, you're running thousands of estimates and then looking at, okay, what are the probabilities that I have enough versus, just sort, just sort of thinking it's this one single thing. And I do like that you've got the power law on there as well, because I, I find that, interesting model. I don't-- maybe some people don't like it, but I, I think, I think it's interesting as a kind of a Rough, okay, am I overbullish or am I overbearish on where we are? and I, I actually find that kind of more convincing nowadays. So that's kind of why I'm sort of following what sort of the power law analysts are saying more nowadays. So I actually find that useful and even on your side, you've got the power law thing there, so it kind of gives you a good I think a, a realistic, you know, idea of what it might look like. but yeah, go on. So do you want to tell us a little bit about, I guess, the why? Why did you make this? Was it because of you, you, you saw the problem with the other calculators that they didn't do this Monte Carlo thing? Was that the main thing, or was it something else?" }, { "speaker": "gilded_pleb", "time": "10:36", "start": 635.66, "text": "Well, it, it was that range problem and Now, I mean, there's, there's a whole lot of problems with like, okay, well, how do you define the range? And like, where does the, where does the Bitcoin go through the range? And all this other stuff. But I basically came to all these calculators, and none of 'em, none of 'em did that. They just said, \"Here's, here's the expectation,\" and you're like, \"Cool, I'm gonna be able to retire at exactly this day in forty years.\" And it's like that. There's no possible way you can do that with any kind of accuracy. Like maybe you could, you could throw some probabilities at that, which this website attempts to do, but even with the probabilities, it's still gonna be problematic, of course. Now The why, the why I did it was because, one, it's just, it's just a better model. It's a, it's a better way to model these things when you're, when you're looking at future events. And, you know, anybody who's traded options, anybody who's done with any like financial forecasting, it's like, no, you- You're like, your, your career's dead if you're saying, if you're choosing the, the, the time and the price at, like, it's gonna be on this date, it's gonna be this price. Like, you're, you're dead 'cause nobody can do that. It's, it's an impossible thing. You could say There's a fifty percent chance it'll be at this price at that date, or above this price or below that price, and like that's a way more reasonable perspective because it gives you margin of error, and then with the probabilities, you can financial plan better, right? Like you can say, \"Okay, cool, if there's a fifty percent chance of this happening,\" That means I need to hedge proportionally for the thing to not happen, right? It gives you, gives you the, the, the pers-the right perspective on things. Doesn't get you locked into a particular outcome." }, { "speaker": "stephan", "time": "12:29", "start": 749.27, "text": "Interesting, yeah. And, I guess the other thing that I find interesting is that you can play around on this calculator. So like, you can pick what model. So if you wanna do power law, if you wanna do, I think you got stock to flow and, you know, rainbow chart and a few different ones in there. Yeah, the OG rainbow chart. But anyway, the point is really that you go in there, you can pick it, and you can put in, like, as an example, a hypothetical stack size, and, say retiring at, you know" }, { "speaker": "stephan", "time": "12:58", "start": 778.29, "text": "Seeing what do they believe fiat inflation will be, right? And I guess the default here you've got is eight." }, { "speaker": "gilded_pleb", "time": "13:04", "start": 783.86, "text": "Yeah, eight, which is extr- ex- like, according to all the legacy models, right, it's extremely aggressive. But if you don't actually" }, { "speaker": "stephan", "time": "13:11", "start": 791.27, "text": "think that's good, I'll tell you why. Like, if, yeah, we'll go on. Actually, I'd let's hear from you first." }, { "speaker": "gilded_pleb", "time": "13:17", "start": 796.79, "text": "Well, it makes more sense to me that it's-- that you plan for something like eight and potentially up to twelve because if you look at M zero, the money supply, like that's essentially the numbers that it, that goes around and targets. you look at global money supply, and that's, it's, it's the same thing. You look at national or global, and it More around eight to twelve percent. Consequently, the expectation is that inflation, though inflation, you know, clusters and isn't evenly distributed and hard to measure, you would expect that it kind of normalizes around that. Amount. So that's why I go for eight to twelve percent. You probably have a strong opinion on that. Yeah, and I, I totally agree" }, { "speaker": "stephan", "time": "14:00", "start": 840.28, "text": "with you, 'cause I'm, here I'm thinking of, you know, Matthew Meschinsky's work over at, Polkopolis, exactly, yeah. And he does this quarterly monetary update, and if you look at his stats, right, it is in that range, like you said, eight to, you know, it's kind of like if you look at USD monetary base rate, so we're not talking M2 or M And, you know, and then you kind of add other things onto it to get M2 and M3 and all these different metrics. I think M3 isn't used that much nowadays, or at least not disclosed. It's kind of hard to figure out what some of these numbers are. But basically the way Matthew has calculated it, it looks like if you look, if you go back to, I think 1969, from then to today, the annualized rate is something like nine or ten percent per year. And obviously that's a lot more than the typical CPI, right? Like if Half percent, three percent, maybe they wouldn't see this kind of eight or nine percent. And so really a lot of people are just losing a lot of money and they think they're making money, but really they're just losing purchasing power because obviously their dollars, their euros, their yen, whatever fiat is going down over time, and they just don't get that. So it's, it's important that you, had a, a good, default inflation rate there." }, { "speaker": "gilded_pleb", "time": "15:17", "start": 917.41, "text": "Yeah. And there's also something to be said about- How badly people don't get it. When you, when you take the SPX or SPY, the, the futures for the, you know The stock market, the S&P 500. If you take those futures and you divide them by M1 over and you normalize it for the last sixty years, you've, you've literally lost seven percent of your value. There was no gain in the economy when it's denominated in M0. It's completely ridiculous. Makes no sense. Now, there's also something to be said, you know, in terms of financial, models and planning around like, okay, cool, we're gonna set the inflation rate at eight Well, it's not eight all the time. One of the things that I'd love to do with, with Stack Math that I haven't done yet, it's another, it's a whole nother bag of tricks, but to do the Monte Carlo simulation on the inflation rate itself, because that'll give you a more, like, robust-- It's, 'cause the inflation rate's not gonna be eight percent. It's gonna be totally chaotic within a range of, you know, extreme deflationary environment four percent to an extreme inflationary environment twenty-five percent, and you just don't know when that It's gonna happen over the next twenty-five years, and so just planning it at eight, and, and every financial calculator kinda does this, when you just planted at eight, it's just, well, we're just gonna take a bet here and, see what happens. But really, and I think this" }, { "speaker": "stephan", "time": "16:42", "start": 1002.42, "text": "reminds me in the financial planning world, they talk about sequence of returns risk. So this is kind of like sequence of inflation risk, right? Because if you had, let's say, you start your retirement, and there's a very high inflation period at, in that year or in those few And actually spend down, right?" }, { "speaker": "gilded_pleb", "time": "16:59", "start": 1019.21, "text": "Yep. Yep. Exactly. So" }, { "speaker": "stephan", "time": "17:02", "start": 1021.88, "text": "Gotcha. So, yeah, really interesting. So, I guess kind of zooming out a little bit before we sort of get into the kind of the, some of the more nuts and bolts areas of it. When we are talking about retiring on Bitcoin, and for people who are, you know, maybe people who are at that phase of life, maybe not you and I, maybe we're a bit younger or whatever, but just hypothetically, what are some of the key strategies and ideas here? So as a quick example, things like, you know, the four percent rule from Fire, or what other ideas, do you see as being the key ideas?" }, { "speaker": "gilded_pleb", "time": "17:35", "start": 1055.19, "text": "Man, the key ideas, I think, I think the, the best way to go is to find a financial advisor and just, just have a conversation with a financial advisor because your situation is gonna be different and you're gonna be in a life stage that really has, like Its own peculiar inputs and outputs. Your income is gonna be-- Your income over, you know, your lifetime is going to change. You know, at some point you wanna retire, which case, well, your employment income just drops off, goes to zero. How do you account for that? When is that gonna be? How do you, how do you work through all the difficulties there? And then you're like, well, how much money are we gonna be consuming at the different stages of retirement? How much money are you gonna be consuming at the different stages of your life? Do you have kids? Do Those are gonna radically affect your, you know, spending proclivities and everything else. So, you know, the, the thing you need to do is probably talk to a financial advisor. Now, that said, somebody, like I've worked as a financial advisor a long time ago, so I'm very, very rusty." }, { "speaker": "gilded_pleb", "time": "18:44", "start": 1123.89, "text": "there are some good rules of thumb. One of 'em's the, the four percent rule that you mentioned. Now, the four percent rule is actually a, it was put together on via a study in the nineteen nineties, late nineteen nineties, predicated on your modern portfolio theory and how it interacts with a retirement drawdown and modern portfolio theory, meaning like the your standard sixty forty, distribution, and then your less than Sixty percent stocks or s- sixty percent bonds, forty percent stocks, and you, you change it as you, you work through your career. But the way that they got to the four percent rule was via a Monte Carlo simulation running all these portfolios, thousands and thousands of different portfolios over different assumptions and over different time frames and all this other stuff, and then they came to the four percent rule being like, \"Okay, cool, if you, you know, assuming inflation's this and assuming your retirement is thirty years, you should be able to- To expect four percent, or you should be able to expect that you won't need to, or that if you draw down more than four percent per year, like You will run out of money with a ninety-five percent certainty, or you'll-- I forget what the exact numbers are. If you draw down at four percent, you'll, you have a ninety-five percent certainty that you won't run out of money after thirty years. But if you draw down five percent, you'll have a higher percent certainty of, of running out of money, right? And if you draw down less, you'll have a higher percent of certainty of not running out of money, et cetera. Now All of that's just predicated on a Monte Carlo simulation for a specific, like, set of inputs. Now, and then they, they generalized it for a monetary consumption so you could have a heuristic, right? So that we can talk about a four percent fire rule because it's easy to, to comprehend. Oh, if I have a million dollars, I can't spend more than forty thousand dollars per year in retirement, and that'll get me through all my retirement. However, this was also in the late nineties, and Monte Carlo simulations were extremely expensive to run and to use. And now we can just make our own Monte Carlo simulations and put them on a website, and now you can just do-- you can figure out whatever your like percentage return is yourself, and that's what StackMeth essentially does. It allows you to run the Monte Carlo simulation yourself with the inputs that you want, the things that you think are reasonable, and then you can go through and, hey Wow, it-- like if I save this much Bitcoin over my career and then draw down at this rate, will I survive? Like, will my stack survive or will it not survive? You know, and then how do you adjust the inputs and try and plan for that, so given all your assumptions? So-" }, { "speaker": "stephan", "time": "21:33", "start": 1292.6, "text": "Back to the show in a moment. This show brought to you by CoinKites dot com, the creators of the best Bitcoin hardware security devices, such as the Coldcard Mark IV and the new Coldcard Q. Now, we use Bitcoin hardware security devices to keep our keys offline, our private keys offline. Now, the way these work is you can do that setup, write down your twelve or twenty-four words on those, the seed word cards, and keep that secure. Now, you can use this device to interact with the Bitcoin- Network using software such as Sparrow Wallet, Electrum, or Specter Desktop or Nunchuk as a few examples. Now, you have a range of security features that you can use with these devices such as passphrases, you can use seed x or, or my favorite is multi-signature. Now, if you're starting in a basic way, just start with the device and the USB-C cable, plug it directly to the computer and use it that way, and then later improve your setup. But I believe these devices are great at helping secure your coins Especially as you start to migrate up into multi-signature security. But don't be disheartened or don't be, scared away. They are accessible, and I think you actually do learn about Bitcoin in the process. So to get yours, go to coinkite dot com, use code Livera to get a discount on your cold card. This episode brought to you by Galloy. They are building banking software for the Bitcoin age. So if you are with a bank, a fintech, or a startup looking to offer some kind of Bitcoin product, whether that is a Bitcoin collateralized loan deposit accounts or payments, Galloway can help you. Their latest product is called Lana. It is a loans management platform, and you can use this to come to market quickly and offer a loans or Bitcoin collateralized lending product for your customers. Now, Galloway have a lot of experience in the space. They started with Blink Wallet in twenty twenty, and they've since grown this to become a community favorite over time, and so they have a lot of experience making things work in a secure, reliable, and scalable way. So if you need assistance Coming to market quickly with a Bitcoin banking product such as lending or deposits or payments, talk to the team at Galloy. You can email them, the email is biz at galloy dot io, or go to the website galloy dot io. And now, back to the show. Gotcha. And as part of those assumptions that you build in, it's things like, what date do you choose to retire? Like, are you retiring, you know, next year, or are you retiring in ten years from now? And then, what's the stack size, obviously, and then You know, and then you put in things like, \"What's your annual drawdown rate? Like, are you spending a hundred thousand a year? Are you spending two hundred thousand a year because you've got a family or whatever? Like all the different things. And then I, I also-- So you've got even like, you can build in one-off things. So I mean, obviously it gets hard to predict, but like as an example, if you thought, \"Oh, okay, I'm gonna try to buy this house in fifteen years,\" then, you know, you could try to Genuinely, a lot of this stuff is difficult to think about because we don't know just how bad fiat inflation is gonna get, right? So it's just kind of like, y-you are kind of playing a bit of a guessing game. But I guess the idea is you put in the numbers as of what you think they are today, and you build in that, let's say, eight percent inflation rate, and then you just have to sort of- You know, take that estimate." }, { "speaker": "gilded_pleb", "time": "24:44", "start": 1484.05, "text": "Yeah. Yeah." }, { "speaker": "stephan", "time": "24:46", "start": 1486.45, "text": "So one other question around, the models. Do you have a thought on which model should apply? Like, I know, for example, there's like the-- I think you've got the power law that builds in like a, a some kind of boom and bust aspect of it. can you talk to which model cho-- can you speak to model selection? Right." }, { "speaker": "gilded_pleb", "time": "25:07", "start": 1506.54, "text": "So there, there's actually two, two interesting things here, in my opinion, I think they're interesting. there's the model selection, which is the, essentially the range that you expect Bitcoin to trade within. So for the power law, they have, published What they think the power law support is and what the power law like maximum is, and they say basically, you know, there's a ninety-nine percent chance that all Bitcoin trading will happen within this range. So that's the range Highs and lows. Now, how does Bitcoin traverse through that range? That's where you get into like the ergodicity of, of, of whether or not it's gonna trade the whole range, is it gonna stay on the bottom of the range, is it gonna-- like, is the range not as wide as they think it is? Is, you know, is the range smaller? So then- That's when you talk about the walk itself. How does Bitcoin go through the range? Is it, does it randomly just bounce off the top and bottom? Is it more like a bubble pattern where it spikes to the top and is, is there for like a second and then crashes back down, which is more consistent with the Bitcoin historic price, or is it something where it's like, well, it really- We're just, you know, the, the best assumption here is just we don't know. We just kind of suspect that it'll be around these things, and so we'll, we'll like put a, A clamp on the, the, the max and the min, so Bitcoin just kind of bounces around at random within those, within that range. So again, two things here, the model itself, and then the walk with inside, the walk inside the model. me personally, I tend to agree with you. I think the power law makes the most sense. I think somebody, posted about it the last couple of months where they basically said The idea that nation states are gonna adopt Bitcoin and it's gonna be like, it's like all over, it's like... No, no, no, no, that's built into the power law. Like the next ha-- the next more pocketed buyer that can elevate the Bitcoin price to maintain the power law shape would be nation states, large corporations, right? And that's, you know, we're starting to see that Come to play. Now, the price doesn't reflect that yet, but hey, the price is just, who knows? Like, if you're, if you're trying to predict the price, you're just gonna have a bad time. You have to, you really have to put it into these broad strokes probabilities." }, { "speaker": "stephan", "time": "27:32", "start": 1651.58, "text": "Yeah, gotcha. okay, and then in terms of comparing, I guess there are other ideas that some people have about this, right? So the kind of, and I, I think it actually makes a lot of sense, this simple kind of, quote-unquote, fire style, just pick a, pick a number, whether it's four percent of your stack or whatever, a certain fiat number, but with this inflation adjustment as you, as you build in, with the eight percent as an example, users, you can change that yourself. You can modify it on the site. that's one approach, and I think that, that's a reasonable approach, right? Like if people DCA it in for, let's say, ten years, it's not unreasonable to think, hey, just DCA out, right? It's not, it's not so crazy, right? But other people have different ideas, right? So we're gonna spell out a few of them, and I'm gonna get your reaction. So one is-- So I'll, I'll list a few. So one is, okay, borrow against your stack, Do the borrowing against your stack kind of thing. There's, using fiat instruments, things like MSTY and things like that, there's margining against, let's say, iBit in a stockbroking account, that kind of thing. so I guess those are some of the different alternatives. I'm curious to get your reaction on those. So maybe just start with the borrowing against your stack. What, what do you think about that idea? Is that A feasible thing, or, or is there a reason why you would discount that in favor of, this just st- just a drawdown, a si-simple drawdown approach?" }, { "speaker": "gilded_pleb", "time": "29:04", "start": 1744.12, "text": "Yeah. It's complicated. Like, debt itself is complicated. from a, just from a high level, like if I am essentially collateralizing my Bitcoin to withdraw in- or withdraw money that I'm consuming will That, the money I'm consuming is, is paid for by debt, which means there's an interest rate attached to that, which means I have to pay down the interest rate at some point. Now, a lot of the, the theories are going like, okay, well, the, the cap around Bitcoin is gonna outpace the interest rate, so your principal is going to be, or your collateral is gonna, you're gonna be able to withdraw your collateral and, and draw down the debt on that. Now, that could totally work for some people, right? It depends on your situation, it depends on the, the nature of the debt, depends on the specific contracts, like, you know, all whole financial planner thing, like, right? It's just, it, it is an extremely complicated setup and everyone's gonna have to go through it themselves. For me personally? I don't like the idea of being in debt. I just, it, it seems antithetical to me to the Bitcoin ethos, to sovereign individual, like even if the debt is totally collateralized or overcollateralized, it's still like Right, but I'm responsible to somebody else now for this particular contract. And it's like, okay, you know, e-- like, that means there are restrictions on my life and my time. And, and there are new risks on my life and my time. Like one of the incredible things about Bitcoin is that you can just store it in your head and cross a border. Now What are the odds that my country, America, just goes totally fascist? Probably not zero, but probably not high either. So then, you know, you look at the, you look at the totality of the situation, you're like, okay, well, this is-- You have to start placing the probabilities on these risks and, and plan appropriately. Does it make sense that I want my, my Bitcoin stack as collateral where I don't have the, you know, the private keys necessary to- Walk across a border with that. Like now I'm kind of stuck in this fiat paradigm, right, where somebody else owns a bit of my life, and that just seems so antithetical to Bitcoin A similar thing applies to the MSTY and the MSTR like categories. I've, like, I, I love it that there's now a, a, a movement on, on Twitter from hardcore Bitcoin Maxis being like, \"Here's the, here's the Bitcoin that MSTR owns. It's just IOUs. It's just IOUs.\" And it's, it's awesome to see that because it- That's true, it's just IOUs. Now," }, { "speaker": "gilded_pleb", "time": "32:05", "start": 1925.0, "text": "hopefully MicroStrategy is, is implementing stuff where they start to custody their own Bitcoin, I think they are, and that, that's, that's exactly what- They should do. but again, if you're just buying mstr stock, well, you just have an IOU, like they owe you the stock, and it's just sitting on some exchange somewhere, and we're kind of just playing the same fiat games of who owns what and how is it, what are the contracts, and like maybe some of that's like- You know, civilization building and, and adding value. But, man, there's a whole bunch of structure there that is largely obsoleted by just the fundamental reality of Bitcoin itself. And when you turn into the fundamental reality of Bitcoin itself, a lot of that just, you're like, \"Something doesn't rub me the right way.\" It's not to say that it's all scammy, but it is, it is to say that there's, there's something about it that's just not fully there yet. Like somebody somewhere hasn't internalized what Bitcoin gives us and what it does. Like, what are the, what are the benefits here? Like a A micro, micro, multisig contract in a lightning channel, like that's a real fundamental solution to some of the, some of the things we see here, right? Like, what are the real fundamental solution, like, for payments, right? What are the real fundamental solutions for These, these structures, these corporate structures that are actually Bitcoin native as opposed to fiat native, and like, maybe we're not there yet, maybe we'll never get there. Yeah. I don't know. It's a, it's a- Yeah." }, { "speaker": "stephan", "time": "33:44", "start": 2023.51, "text": "So let me, explain where I kind of agree and disagree. Now, I obviously, first and foremost, self-custody Bitcoin, right? Of course. You know, get your cold card, get your multisig, verify it using your own node, all that. First and foremost, you know, that should be what most, you I'm not opposed to people having, like, let's, let's say, a smaller portion, of their portfolio that they choose if they are-- if they, if they want a little bit more risk. You know, like if they want more, if they want access to, let's say, some leverage that those public companies, the, the Bitcoin treasury companies and so on, that they can access this cheap leverage that we everyday plebs can't. And then, I guess here's the other point, there is a lot of, like, just if we zoom out and think about- What is the size of Bitcoin today? It's a little under two trillion. Depending on the estimates you look at of global wealth, it's anywhere from like four hundred trillion to maybe a thousand trillion, depending on which numbers or whatever. But if you add up, you know, equities and bonds and physical, you know, property and, you know, the monetary aggregates and things like that It's still really, really small, and there are entire pools, trillions, tens of trillions of dollars of capital that can't directly buy Bitcoin. So for them, they're gonna come into some of these Bitcoin treasury companies and ETFs and things like this. So while I agree overall on the kind of, \"Hey, not your keys, not your coins.\" I still see a role that y-you might, it might make sense for people to do that, to sort of say, okay, I'm gonna take a small portion, not, you know, most of it is gonna be in my cold storage, in my multisig, but I could see a scenario where you take a small percent and say, \"Okay, I'm gonna put that into whatever Bitcoin treasury company because you expect BTC yield. You're expecting to actually- Make Bitcoin using access to the fiat leverage. Now, of course, there are risks to that. Nobody here is gonna say, \"You know, obviously the cold storage Bitcoin is safer, but it's, you know, it's more risk, but also potentially higher reward.\" so I think this might be one of the times. Now, I understand obviously people are, might be thinking of like, \"Okay, Celsius and BlockFi and all this stuff,\" but I just, I think these are in a different category, you know? I, I think it is a different- thing when you are able to access fiat leverage to get more Bitcoin. yes, it's an IOU, but I, I think for some people that risk is worth, that return, the potential return may be worth the risk. What do you think?" }, { "speaker": "gilded_pleb", "time": "36:18", "start": 2178.36, "text": "Oh, totally with you on that. And, in fact, I think that is a, so going back to the modern portfolio theory, like sixty forty denominator thing, like Mr. Unfriendly Taleb, like put, put out a, a mathematical technical paper that essentially proved the modern portfolio theory was, was lacking in that it doesn't account for fat tail risk, right? And his, his solution, Taleb's solution to fat tail risk is that you, you essentially denominate your portfolio in ninety percent extremely extremely secure, fundamentally sound investment for, for us and for anybody who knows how Bitcoin works and what it does, that's your, that's that. It used to be Treasuries, but like, come on, Treasuries, there's so much counterparty risk. So you denominate ninety percent in Bitcoin, and then the-- this is a barbell strategy, by the way, is the name of it, and then the ten percent is, is allocated as you describe. High risk but fundamentally sound things, and that could be, \"Cool, I'm gonna put ten percent in MSTY, \"or \"I'm gonna, you know, diversify that ten percent across MSTY, MSTR, and other, you know, debt instruments or other kind of instruments.\" But There's a, there's a limited downside for all of that stuff, and the limited downside is that ten percent, and then you're still exposed at ninety percent to the, the fundamental nature of your Bitcoin and, and how that Is gonna protect you. So there's not, yeah, to your point exactly, there's, you get the upside and you limit your downside and you still maintain this like chunk of your wealth that is actually secure, sovereign, and get you out of the rainy day kind of stuff. So, yeah, totally." }, { "speaker": "stephan", "time": "38:12", "start": 2292.46, "text": "The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. For listeners in the US, Bold lets you secure your financial future with complete peace of mind by integrating a low fee Bitcoin only brokerage with next gen multisig vaults. With Bold, you can smash buy Bitcoin or set a DCA plan for only zero point nine nine percent fees and seamlessly deposit the Bitcoin. Direct to your Bold Vault. The Bold Vault is a two or three collaborative multisig where you hold two keys and Bold holds one as a redundant backup protecting against loss or theft. You can use Trezor, Ledger or Coldcard hardware wallets to spin up a Bold Vault in just a few minutes, and the Bold Vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars of Bitcoin buys and twenty five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try Bold today and upgrade your st- staking experience over at getbold dot io. And now back to the show. Yeah, so, so I think this is probably-- I think this is, this might be how things kind of go. Now, I think we are still early in this kind of Bitcoin treasury company era. I think we're gonna see more. Now, as, as I'm sure you just saw, there's been this news today that, basically, Cantor Fitzgerald and SoftBank and Tether and Bitfinex are kind of joining forces to create this new entity called Twenty One, and Jack Ma is gonna be Basically, they're coming out the gate with like forty-two thousand Bitcoin. So, I mean, this whole Bitcoin Treasury company thing, like, I think, I think it's got legs. I think it's, it's gonna happen. Like, I think it's not something that, I, I, I don't necessarily, I don't see it as like it's a bad thing. I think it's just people want access to the fiat printer, and it's kind of like the Pierre Rochard speculative attack kind of idea, like they are using the fiat system to get leverage, to get more Bitcoin. And if you think about it today, what do most people do today? The typical thing is, okay, get out of school, go to university, get a good job, then next, get a mortgage, right? So they lever up on property. Right now, yes, it" }, { "speaker": "stephan", "time": "40:17", "start": 2417.39, "text": "Your property, but doesn't it make a lot more sense to lever up on Bitcoin instead of levering up on property? So, I mean, to me, that part of it makes sense as long as you are, you know, important caveat, most of your coin should be self-custody. Yes. Most of your portfolio, like, I think this kind of ninety ten idea makes a lot more sense. Like, you might be like, okay, ninety percent in my multisig or whatever. And maybe ten percent is where I'm looking at some of these Bitcoin treasury companies because I'm, I'm expecting them, I'm anticipating them to provide BTC yield. I guess the other caveat, at least how I'm seeing it, I'm curious how you see it as well, but the way I'm seeing it is We're in this era now where access to the fiat printer is still available, and we're still so-- like, because Bitcoin again is under two trillion in a world of, let's say, five hundred trillion to one thousand trillion worth of financial assets out there So I think there's still a, a decent period of time that BTC yield is available, like it's possible to get. Maybe over time, maybe the argument would be, look, in ten years or maybe twenty years time, then, okay, now the BTC yield would have come down, it's all matured, the Bitcoin market might be You know, ten to one hundred x the size then, and so then at that point maybe there's not as much BTC yield available, and so then it's kind of a different story. But that's kind of how I'm looking at this. I'm curious what you think." }, { "speaker": "gilded_pleb", "time": "41:41", "start": 2500.57, "text": "Yeah, I, I think that's, I think that's accurate. one of the things that, that's coming to mind for me recently is the idea that like, well, and, and we've, we've known this for years, that the volatility in Bitcoin comes out as it matures because it's, it's being monetized and you can only be monetized once, and the end goal of that is that it's just everyone uses it as money and there's no more monetization happening. In the meantime, the volatility, you know, is just, is wild. But The volatility, especially recently, it's just been much more muted than it has been historically. Now, what historically has always had the highest volatility is like low cap stocks And hey, well, all these Bitcoin treasury companies are essentially low cap, mid cap, and with very few exceptions, larger companies. Now One would expect that the volatility there is gonna be considerably more than Bitcoin going forward as Bitcoin monetizes and the volatility comes out, 'cause the stocks are still predicated on crazy amounts of third parties, counter parties, and all sorts of other contracts and risks and exchanges and it just The whole fiat system again. So, yeah, I mean, if you're, if you're trading and if you are capable of, of, consuming these things on a responsible way, then go for it. If you're, if you are, again Ten percent, ninety percent. But if you're, if you're just like, \"I don't wanna deal with any of that, \" then I'd just go for more Bitcoin. But, you know, there's, you should have those options. Yeah, of course. And I think, I agree" }, { "speaker": "stephan", "time": "43:14", "start": 2594.3, "text": "with you that the, let's say the idealistic answer would be, \"Look, everyone, just focus on your craft and just stack Bitcoin, \" and so, and, you know, just, just head down, focus on your craft, focus on improving your income, lowering your expenses, stacking S" }, { "speaker": "stephan", "time": "43:32", "start": 2612.13, "text": "That's the, you know, the idealistic, idealistic and, you know, a totally reasonable approach. I just think there may be people for whom it may, it might make sense, right? Like as an example, and I'm sure you know this even from the financial world as well, people sort of, normally they say like, if you're a young single man, maybe you're, you've got more risk tolerance, but like, let's say you're an older man, you're, you know, you're married with children and you have to, you know, mouths to feed, That, you know, if I was advising my, let's say I was advising my twenty-year-old self, I might say, \"Look, it's okay to take a bit more risk now, because, you know, you're young, you have time to try to-- you wanna try to make some, wealth.\" Now, because you can afford to take a little bit more risk now compared to when you're older or when you're more established and you can't afford to take those risks." }, { "speaker": "gilded_pleb", "time": "44:26", "start": 2665.79, "text": "That's right. That's a standard thing in all financial advisory. Like if you're twenty, like I did this, when I was twenty, I was trading all the time, now I'm like In my forties, I'm like, I don't know, like I wanna focus on the things that are like giving me joy in the everyday and like building things and making things and improving things. It's like, okay, cool. That's why I'm putting together like, like, in part why I put together Sackmaths, like, how long can I just like build cool stuff? Oh, Sackmaths kind of solves that problem for me, where I don't have to like pay attention to MSTY and MSTR, like, and like go through the, the process of doing due diligence on all this stuff, and you gotta do the due, due diligence, and you gotta figure out when's a good, what's a good entry price, when's a good en-exit price, and it's just like, You're working for somebody else's, somebody else is essentially telling you what to do, you don't necessarily have a strong grasp on like whole entire global economy and like what's, you know, what's gonna hit next or whatever. It's a great time to learn how to trade. It's gonna be a lot of process and a lot of learning and a lot of risk, and you'll probably get washed out a couple times. But at the end of the day, you'll have a much more robust financial education, and maybe you'll get bored with that. I got bored with it, and I was just like, \"Cool, now I'm gonna do software engineering.\" And Maybe you can't even see what you're gonna do next, right? Like the whole, hindsight is, is-- or twenty, what is it, looking backwards? Hindsight is twenty-twenty. Yeah. Yeah, hindsight is twenty-twenty. And, which is to say, looking forward, you just don't know what's gonna happen in the future, right? But hindsight's twenty twenty. Play, play your cards, play the field, see what's, see what, you know, what connects, what hits, what-- some things are gonna work for other people and some things aren't. Now, be responsible Right? Like, don't spend your ninety, like ninety percent of your, your portfolio, your Bitcoin, don't spend it on MSTY. Just like, don't do that, please. Just- It's not the thing, right? But you gotta, you gotta explore, you gotta figure stuff out." }, { "speaker": "stephan", "time": "46:37", "start": 2797.31, "text": "Yeah, interesting. And so then I guess while we're on that topic of Bitcoin treasury companies and things like this, would they ever fit into this kind of stack math analysis? Like, would you ever look at having, like, let's say you wanted to do a ninety ten, let's say ninety percent Bitcoin and ten percent... MSTR or something like this. Would that make sense in this kind of, model also?" }, { "speaker": "gilded_pleb", "time": "47:03", "start": 2823.13, "text": "So, i-immediately, like, as an engineer, I'm like, how would you model that in a model like this? That's tricky, because w-with Bitcoin, you, you were, as we're starting to see, like, okay, there is, there's some trajectory, some patterns here, broad strokes, right? Power law kinda makes sense. With, with stocks How do you model those in a Monte Carlo simulation? That is a lot of volatility. That is a, oh yeah, the CEO had car accident. No longer with us, right, right. And then how do you plan that, yeah? The, the company's like, that just goes to zero, you know, especially if he was a charismatic CEO, this whole, the whole company was on his shoulders kind of thing, right? So how do you plan for that? Well, you, you essentially-- so this tool doesn't plan for that, to be clear. This tool is, is strictly for Bitcoin and Bitcoin drawdown. Now You like to plan for that, you would have to, you know, put together a different, Monte Carlo simulation that, that essentially says, \"Cool, I'm gonna have this much invested in stocks.\" And actually, like a lot of the, a lot of trading platforms will have, or, or you can get software that has Monte Carlo simulations, like, \"Hey, here's my trading portfolio, like I expect to win forty percent of my trades, but and lose sixty percent of my trades, but my average loss...\" versus whatever ten dollars versus my average win, which is a hundred dollars, and so you do the probability and your average, your average trade therefore has, I don't know, whatever that's gonna be, a forty percent win or something, right? So you can do a similar thing with stocks where you just say, \"Here are my assumptions. I assume that it's gonna be really low risk that the CEO Gets in a car accident. Not zero, but really low, and then you can kind of build volatility on that. You can look at the, you know, the, the fundamentals of the company, their income, the revenue, like their expenses, like What their team looks like, like all sorts of other stuff, do fundamental research on stuff, and you can also put together some variables and assumptions from that, and then you can plot those. It's like, okay, cool. If we're, if we're plotting all of the, the probabilities for all these companies, well, then you can start to do a Monte Carlo simulation for a portfolio that operates in a similar way. But, oh, that's gonna be way more random and way more, like your, your, your cone, your, your forward-looking cone of, of probable outcomes is gonna be just huge. And- Yeah. So I guess, I guess the" }, { "speaker": "stephan", "time": "49:45", "start": 2984.71, "text": "short, the short answer is it would just be really difficult to model that kind of thing together, Bitcoin plus Bitcoin Treasury Company in this drawdown sort of, visualization. so I guess, yeah, just bring it back. There's tools out there that can do it, yeah," }, { "speaker": "gilded_pleb", "time": "49:58", "start": 2997.88, "text": "for sure. In fact. It, it would take six months or whatever, I could probably build it into this, but it's just, yeah." }, { "speaker": "stephan", "time": "50:05", "start": 3004.95, "text": "Maybe not worth the while, yeah. Yeah. Yeah, right. Because, as I get, I, I presume this is like a side project for you or it's not your main thing, is it? Yeah. It's a" }, { "speaker": "gilded_pleb", "time": "50:13", "start": 3013.13, "text": "fully open source project. I wanted to, I built this for myself to, to solve the problem I mentioned. How long can I just build cool stuff for myself? And, yeah, fully open source, FOS. I Could be improved. So if there's any, de-- if there's any designers out there that would love to contribute to a fully open source project, love to, love to chat. I know" }, { "speaker": "stephan", "time": "50:40", "start": 3040.09, "text": "there's the, the Bitcoin Design Group. Maybe you could get in touch with some of them. Maybe some of them would, would be interested to kind of be a part of this project. I think it's a cool project. but you go on." }, { "speaker": "gilded_pleb", "time": "50:50", "start": 3049.8, "text": "Yeah. So this is a, total side project for me. mainly I just, I'm working, starting a new podcast and just, my, my interests are kind of all over the place, and they've always been all over the place, and it's just kind of- What's the next thing? What's the next thing I gotta check out? So," }, { "speaker": "stephan", "time": "51:06", "start": 3065.69, "text": "yeah. Okay, cool. Well, yeah, look, I guess, yeah, summary-wise, like, as we said, I mean, there are different ways people are talking about retiring in Bitcoin and things like this. I mean, for me personally, you know, I'm still gonna, I'm still working, it's not that I'm retiring, but if I, I honestly think the draw-- the simple drawdown percent is actually A, a pretty smart idea, if anything. I actually would be kind of against, let's say, the MSTY, which is the, like, I'd kind of, I mean, I understand why some people might wanna use that, but I just think, to me, it would make more sense to just have Bitcoin and maybe Bitcoin Treasury Company and just draw down some of that if I was actually retiring and just leaving off my stack per se. but Yeah, I, I, that there are these different options people have, and everyone has to sort of do their own assessment. Like, what are they gonna do? Are they gonna borrow against their stack? Are they gonna use some of these instruments? Are they gonna try to margin on like a stock broking platform? Or just the simple, just, hey, just, just pick a percent, a safe percentage, whether it's four percent or three percent or whatever, and just say, hey, I'm just gonna draw that down every year. you know, I think it's a reasonable thing." }, { "speaker": "stephan", "time": "52:20", "start": 3139.88, "text": "Or whatever model and the wallet you select, it gives you this percentage and it sort of shows you, okay, based on your projected spending, based on this inflation rate that you've estimated, you're gonna have this much left over and you might have this much Bitcoin and that Bitcoin may be worth X, Y, Z fiat in, in twenty, eighty or whatever, whatever dollars. Two hundred trillion, I thought that was two hundred" }, { "speaker": "gilded_pleb", "time": "52:42", "start": 3162.35, "text": "trillion," }, { "speaker": "stephan", "time": "52:43", "start": 3162.65, "text": "yeah, ridiculous. I mean, who knows, who knows, right? But, I think it's a, it's a cool tool. and- Any," }, { "speaker": "gilded_pleb", "time": "52:54", "start": 3174.1, "text": "closing thoughts for listeners out there? yeah, check out stackmath dot x y z, and also just in terms of closing thoughts, Stephan, like, thank you for all the work you've done for Bitcoin. You are- Like I remember listening to you, I first heard about you on Noted years ago with, Pierre. cool. And, yeah, I listened to a handful of your early episodes and was like, \"Oh, this guy gets it.\" So thank you again for the work you've done in Bitcoin. It's been tremendously important for the space, for the technology, for people's understanding about stuff, just Very nice, thank you." }, { "speaker": "stephan", "time": "53:30", "start": 3209.6, "text": "Hey, man, thank you, I appreciate it. Well, yeah, listeners, check it out. I will link, in the show notes, but as always, you know, you can check it out at stackmath dot x y z and gildedpleb on x dot com. So, gildedpleb, thanks for joining me." }, { "speaker": "gilded_pleb", "time": "53:44", "start": 3223.64, "text": "Thank you." } ] }