{ "episodeId": "SLP773", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "mike_belshe": { "name": "Mike Belshe", "role": "guest", "tag": "MIKE" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.0, "text": "Hi everyone, welcome back to Stephan Livera Podcast. Rejoining me on the show today is Mike Belshe, CEO and founder of BitGo. Mike, I think it's been like maybe six or seven years since your last appearance on the show, so welcome back." }, { "speaker": "mike_belshe", "time": "00:14", "start": 14.0, "text": "Well, thanks for having me back. I guess you probably took a pause for the last five years or something, huh?" }, { "speaker": "stephan", "time": "00:20", "start": 20.0, "text": "That's right. Well, who knows? but obviously, I thought, you know, there's lots of things going on in the world of Bitcoin and security and AI, thought it'd be a good time to get you on to talk about it, obviously hearing a range of views, you know, across the industry, whether that's relating to people who are doing like, you know, full, you know, self-custody stuff" }, { "speaker": "stephan", "time": "00:44", "start": 44.0, "text": "And custodians. so let's, let's just start there. I mean, obviously, this recent round of hacks and attacks in the Bitcoin world has got a lot of people concerned. Do you have any initial reaction on that?" }, { "speaker": "mike_belshe", "time": "00:59", "start": 59.0, "text": "I have a lot of things to say. so let's see, for anybody who doesn't know who BitGo is, we've been around since 2013, started, you know, as a technology play for how do you secure Bitcoin better? That was like the original thing, and we helped pioneer the use of multisig in the Bitcoin wallets. We didn't invent it, you know, it was built into the Bitcoin protocol, you know, as part of P2SH way back when, but basically made" }, { "speaker": "mike_belshe", "time": "01:28", "start": 88.0, "text": "Multisig, we do a 2-of-3 variant, and help, help push that forward. I think what's going on right now is actually we're at a transition, which frankly, I think we talked about all the way, you know, ten plus years ago as a community, as an ecosystem, which is how much of this belongs in banks and how much of it belongs in self custody. and before anybody thinks I'm gonna just go pitch the bank thing, look, I am a huge, huge fan of self custody, and I think that if we ultimately lose self custody, and by the way, it's not a guarantee that regulators won't come and ban it, but if we lose self custody, we lose the power. we will end up with a system where there's a, a set of gatekeepers that control the banks, and they get to decide whether you're in or you're out. and most of the time, that probably works more or less okay, and sometimes it really doesn't work okay, and then you're really sad, that you didn't have self custody. So BitGo offers a" }, { "speaker": "mike_belshe", "time": "02:28", "start": 148.0, "text": "We're a US regulated, federally regulated bank here, I think we're the largest independent bank, in crypto of any, of any other player. although we're known for that, everything we do, we offer in custody and self-custody modes. and in fact, you can come to BitGo, you can come right now, you get full, you know, free access for individual users, of all the self-custody, you can upgrade to custody if you want, et cetera. Alright, so the transition I think that's" }, { "speaker": "mike_belshe", "time": "02:56", "start": 176.0, "text": "And the security requirements, you know, to secure assets of that value has now reached a level where people are like, \"Wait a minute, can I secure this myself?\" So first off, on the thesis and the premise, a lot of people are really excited about self-sovereignty. The ability to hold it on your own, have your own control, nobody can take it from you, it's a really important thing. But then that's got a trade-off of like, well, wait, what lengths am I willing to go to to secure my assets? And then also, who can I trust? Now, ten years ago, there was nobody you could trust because none of the banks were touching it, none of the traditional players that had built up all these layers from regulatory to security, et cetera, were there." }, { "speaker": "mike_belshe", "time": "03:36", "start": 216.0, "text": "These days, I think that part has definitely changed," }, { "speaker": "mike_belshe", "time": "03:40", "start": 220.0, "text": "Yeah, what goes into securing your own money? How much are you comfortable with? And I think here's an interesting question for you, for me, for anybody. You know, what percentage of your net worth would you be comfortable Having, responsibility to secure yourself. and it's an important question you're gonna have to grapple with, even if you're the, the biggest believer in, in Bitcoin, at some point, you know, Bitcoin," }, { "speaker": "mike_belshe", "time": "04:06", "start": 246.0, "text": "Way bigger than every other market, maybe it's ninety-eight percent of your net worth, how much are you comfortable holding on to yourself?" }, { "speaker": "stephan", "time": "04:14", "start": 254.0, "text": "I mean, for me, I, I am one of those dice roll multi-vendor, multisig guys, but even for me, I certainly do believe that you can spread it around, like in earlier year, and don't forget I think many of us have grown up in this, like, at the time many of us first got into Bitcoin, especially like I'm 38 and a lot of other Bitcoiners are kind of similar bracket. When we first got into it, we were single, no kids, et cetera. Like now, you know, married with children, like your life you know, the risk profile changes. Yeah, like what the risks you're willing to take when you're, you know, twenty-five or twenty-four or whatever, like versus now" }, { "speaker": "mike_belshe", "time": "04:54", "start": 294.0, "text": "I get a call every month from somebody that's had Bitcoin, they've been holding it ten plus years, and they're like,\"You know, it's enough value, it's enough of my net worth, I gotta figure out like what's gonna happen. I think my spouse could handle it if I disappeared, but maybe not, I'm the technical one. And, you know, how do you pass that on? It turns out to be tough. so it's a real challenge." }, { "speaker": "stephan", "time": "05:15", "start": 315.0, "text": "Yeah, and of course, it's— there's, there's no one size fits all. It's all kind of like, what's your net worth? What percent of your net worth is Bitcoin? Like, and if it's a very large percent of your net worth, then, yeah, you do need to be extremely careful about how you do that, whether that's like doing— going full DIY self-custody or you kind of use a guided solution or use a custodian such as yourself or use, you know, a BitGo wallet, this kind of thing. So I guess all of the" }, { "speaker": "mike_belshe", "time": "05:41", "start": 341.0, "text": "Questions You know, I mean, you know, there was a time when people held onto their own assets, you had it in your house, right? it was the wild, wild west, and then banks did start to emerge, and then you had this problem of like, well, that looks like a reputable guy that's gonna hold my money, he says he's a bank, but like, what if he runs away? And were there rug pulls in the 1800s? Absolutely, there were rug pulls from folks posing to be banks, you know, obviously nothing to do with digital assets. This happens. And so eventually, you know, you build up layers of systems, and you build up some regulation, you build up some laws, and you build up some insurance. Okay, so I think it's a destiny that of course we're gonna have a mix of the two. and as a, as an individual, you're gonna have a choice. What do you and probably you wouldn't wanna lose that cash in your wallet, you probably also wouldn't mind, terribly, and it probably wouldn't completely destroy your life if, if you did. but as you go forward with all of your assets, and remember, it's not just Bitcoin, right? Your stocks are moving, tokenized, your stablecoins are moving, tokenized, everything's moving tokenized. So there's gonna be more than just Bitcoin, in terms of assets that you're gonna need to figure out how to protect either at a bank or not. And then lastly, as the value goes up, I think individuals need to start thinking a little bit more like institutions have. At, at BitGo, we have the saying, we say,\"Retail deserves what institutions demand.\" And, you know, BitGo started back in, you know, 2013, and at the time, the people that gravitated towards what we built were people that had lots amounts, lots of amounts of asset." }, { "speaker": "mike_belshe", "time": "07:16", "start": 436.0, "text": "And so they, they were willing to pay some for security, so we, we quickly found ourselves down this institutional path. But at the end of the day, why, why is the security of institutions somehow better or more advanced than individuals? Well Humans are good at some things, but security's probably not one of them. In particular, OpSec, we are terrible. I am, you are, I, I, I call everybody out. There's not, not an elitism here. Like, humans just aren't very good at OpSec. And, so the structure that we built with multisig, you know, 2-of-3, the number one principle of securing your asset is don't have a single point of failure. So if you have a single person that's responsible for Your money, hey, make it so that there's two. If you have it in one location, hey, make it so there's two. If there's one private key, make it so that there's two. if you have a single machine that can have malware on it, make it so that there's two. so this is a problem that we solved literally over ten years ago. The ease of use of multisig has been perceived to be hard. I would argue that we have this solved at BitGo, and please, like, try it, love feedback, like, there's" }, { "speaker": "mike_belshe", "time": "08:30", "start": 510.0, "text": "We've been doing this for a long time. At the end of the day, when you're using a multisig wallet at BitGo, you really can't tell much difference between that and a single sig wallet, but I'll tell you one big difference. When you get malware on your single sig wallet machine, whether that's your phone or whether it's your desktop, and we see these posts on X every single day, I opened up a new wallet, I just provisioned it, I deposited ten thousand dollars, and now it's gone five minutes later. Why did that happen? You had malware on your" }, { "speaker": "mike_belshe", "time": "09:00", "start": 540.0, "text": "Multisig, much, much harder. Now, there's still more to be done in this multisig, I'm not trying to say there's a panacea here, but we do put all of that, multi-user, like you and your spouse both wanna be on the account, pretty simple. You wanna have like a spending policy, hey, spend a thousand dollars? Who cares, spend it. You wanna spend a million dollars? maybe I'm gonna get a second person to approve that, and I'm gonna do that, you know, through a high security mobile app which got another" }, { "speaker": "mike_belshe", "time": "09:30", "start": 570.0, "text": "Thirteen, almost. we, we make them available to individuals as well, and, and try it. It's not, it's not hard." }, { "speaker": "stephan", "time": "09:38", "start": 578.0, "text": "So talk to us a bit about the, the suite you offer then. So on the BitGo wallet side or the self-custody side, can you talk to us about how that's working? Is there— can you use like a hardware wallet with that or is it more just like a phone and a server or what's the model there?" }, { "speaker": "mike_belshe", "time": "09:56", "start": 596.0, "text": "When you provision the wallet, it gives you a few choices about how you, you make your keys. So, so we use what we call a 2-of-3 model. It protects against both theft and loss. So theft is like no single point of failure, you can't have a single machine breach and lose all your money. Loss, we worry about it less, but we probably ought to worry about it more. This is where you, me as a user, we forget our passwords, we lose our keys, we forget our seed phrases, our house burns down, and we didn't realize, oh shoot" }, { "speaker": "mike_belshe", "time": "10:26", "start": 626.0, "text": "You know, loss is the backup key. and the challenge with backup keys is that you can recreate the single point of failure problem. So first you devise a system so that there's no single point of failure, but then you create a backup, oop, well that can't be a single point of failure. Like just giving a key to a lawyer or whatnot, well he can steal all your money. And of course, this has happened, many, many, many times in history. So we use this 2-of-3 model which protects against both. I think we're the only" }, { "speaker": "mike_belshe", "time": "10:56", "start": 656.0, "text": "Pinning that you absolutely have to have. The alternative is to create a secondary backup, which, you know, has a single point of failure problem. Alright, so in this model, we hold one key and you hold two keys. So when you provision a wallet with us That one key we provision on our servers, it's in HSMs, we've been doing, those are hardware security modules, we've been doing that longer than anybody,'cause we were the first kind of into the space, I think we're on generation four or something like that now. and then the other two keys, you get some flexibility about how you create. if you just create it through the browser, one will get created in your browser, another one you can use like Coincover, a third party service that we use, they've" }, { "speaker": "mike_belshe", "time": "11:39", "start": 699.0, "text": "That however you wish. So you've got a lot of flexibility, and of course, all of this is available programmatically, although, you know, individual users use that less, it's probably more for, for businesses, but you can. So you get total flex in terms of how this does. Then we give you some backup materials in terms of a key card, which by itself, you know, doesn't, doesn't create any single breach point. and there's a couple of other security features that we, we, we build around it. But you get a lot of flexibility. So if You can still fully recover your, your assets. By the way, we put out this thing is open source is on GitHub. It's called the Wallet Recovery Wizard, which allows you to recover any BitGo wallet, self custody wallet The hard thing about that is a simple tool, generally, except" }, { "speaker": "mike_belshe", "time": "12:27", "start": 747.0, "text": "We don't use any BitGo services as part of that recovery. The whole point is that you can recover your wallet without us, right? So imagine we disappear, whatever reason, good, bad, nuclear war, I don't know," }, { "speaker": "mike_belshe", "time": "12:41", "start": 761.0, "text": "You can use that tool, and by the way, our clients audit this stuff. They care a lot. They wanna make sure, and these are our big clients, our institutional clients, they're using self custody, they wanna know that, like, hey, if for whatever reason BitGo isn't there, be it regulatory, be it business fails, be it nuclear war, alright, so they test it. Anyway, you can use that to recover completely without BitGo," }, { "speaker": "mike_belshe", "time": "13:03", "start": 783.0, "text": "Anything. So anyway, you get a lot of flexibility, and then, on the custody side. You can also use custody, of course, for that, we have to go through an AML/KYC process, it's a regulated institution, it's got insurance behind it, it's a hundred percent cold storage. That means that all those assets are offline. In that case, BitGo does hold all three keys. you can still, you know, withdraw twenty-four hours a day, seven days a week, we've got staff that, that manages that. We stick true to the, cold storage, we also make it faster by, we've got some hot buffers" }, { "speaker": "mike_belshe", "time": "13:34", "start": 814.0, "text": "Where, you know He's in cold storage. so you can then use a blend, and you can just decide, you know, I'm gonna have this wallet for my self custody, I'm gonna connect it over here, I'm gonna be doing DeFi stuff like crazy, whatever, and then, I've got my savings on, on this other side. and you can, you can mix match." }, { "speaker": "stephan", "time": "13:53", "start": 833.0, "text": "Yeah. And then give us an idea, what are the fees? What are the costs for these things, whether you're doing the self custody side of it or the custody side of it?" }, { "speaker": "mike_belshe", "time": "14:03", "start": 843.0, "text": "For individuals, you can come to BitGo and you can do everything I just described, at no cost. So, you know, give it a try and let me, let us know. We hope that, some of our institutional-- I'm sorry, individual users will then use our trading services and our staking services, and we make money there. Or maybe you wanna take a loan, we make money there. so in general, what we found is, you know, people don't mind if we're taking a small clip as part of them making money, right? So when One thing I will say," }, { "speaker": "mike_belshe", "time": "14:35", "start": 875.0, "text": "I think our industry has failed retail in terms of living up to our promises of lower fees and fewer middlemen. And you can go right now and you can go look at the public, financials for the largest US-based retail exchange, and you can say,\"Hey, Claude,\" What was the retail take rate? I'm sorry, what was the take rate on retail trading in the last quarter for that company? And it's gonna come up with an answer of about 160 basis points." }, { "speaker": "mike_belshe", "time": "15:09", "start": 909.0, "text": "Institutions don't pay a hundred and sixty basis points to trade. They never-- I, I shouldn't say they never have, but they, they, they just don't. I mean, the fees that we charge institutions is in the tens of basis points at the best, and you can see this by going to BitGo and looking at, doing, asking the same question,\"What's BitGo's take rate on trading?\" And you'll see a big difference. We offer the same price, to all our clients. the other thing is we're not an exchange. So When you go to your broker for stocks in the US, there's this regulation called best execution. Broker dealers are required by law in the United States when you go to buy some Apple stock to get you the best price they can. That is, they can't fill your trade with their cousin Vinny and, you know, charge you an extra hundred and sixty basis points. No, they have to get you the best price. No such rules exist, of course, in crypto. And further, when you go to any single exchange That's only one price. So again, back to the, to the market, like the best price could be on the Nasdaq, could be on the BATS Exchange, the American Exchange, could be on any one of these exchanges, but the broker connects you to all of them and always gets you the best price. When you go to a retail exchange in the US today, that's a single venue. What BitGo does is, look, we're not an exchange, we have a smart order router, and what that is, is we take your order and we route it in and we get you the best price wherever we get it. We go to all the market makers, we go to all the exchanges, we connect all over the planet." }, { "speaker": "mike_belshe", "time": "16:36", "start": 996.0, "text": "By the way, we're regulated not just here in the US, but we're regulated, seven different, seven different jurisdictions, qualified custody, and, and doing a lot of activity, so we'll get you the best price. Well, what do you think the chances that are-- that, that whatever retail exchange you happen to be on is giving you the best price today?" }, { "speaker": "mike_belshe", "time": "16:53", "start": 1013.0, "text": "Not very good. I mean, it's whatever its market share is. If it's got five percent market share, it's probably what it's gonna be, right? And, and look, frankly, everybody in the, in the, in the industry knows if you're not trading on one of Binance, Bybit, or OKX, you're simply not getting the best price. The US prices are just way higher. So, anyway, BitGo. And then yes, we do charge a small fee for that, but, the fee is less by a lot than what those other retail exchanges are charging you, and you can check it in the, in the, in the public, financials that we publish as a public company, and, and secondarily, we're getting you the best price anyway across the planet, whereas they don't. So-" }, { "speaker": "stephan", "time": "17:34", "start": 1054.0, "text": "And then on the custody side, what are the rough fee ranges there?" }, { "speaker": "mike_belshe", "time": "17:39", "start": 1059.0, "text": "Again, for individuals, it's free." }, { "speaker": "stephan", "time": "17:41", "start": 1061.0, "text": "Yeah, I mean, at the institution custody level," }, { "speaker": "mike_belshe", "time": "17:45", "start": 1065.0, "text": "That's a different, that's a different thing. It, it, it varies, right? So, like when an ETF is holding just Bitcoin, like we can't stake it, like they're not trading it, like, et cetera. So, so we charge them some fees, but that's gonna be different than others. In general, look, I believe custody, is, is really part of a, a new move to a reserve banking system" }, { "speaker": "mike_belshe", "time": "18:09", "start": 1089.0, "text": "It's thanks to Bitcoin that we now have this. We have a whole banking system around depositories, which is different than what BitGo does, is a banking system around reserve. so depending on what activity you're doing, you know, we, we don't, we don't lend out your assets ever, we're not allowed to do that, we don't wanna do that. It's your assets or your assets, we can't, we can't hypothecate it without your permission. so sometimes we have to charge fees, but it varies. So anyway, I know I'm being a little bit," }, { "speaker": "mike_belshe", "time": "18:35", "start": 1115.0, "text": "Non-answer of your, your question, but it's'cause it's complicated. on the retail side, it's much easier" }, { "speaker": "stephan", "time": "18:42", "start": 1122.0, "text": "I see. Okay, yeah. And then, I guess coming back to what we were saying about like where is the industry going, as you said, so your points earlier have been, okay, look, people are being charged too much in terms of exchange fees, in terms of custody. Do you think a lot of people are gonna get spooked by what happened with some of the recent, you know, hacks, whether that's the Coldcard one or Liquid or kind of addresses being doxed? there's been a lot of these things, as I'm sure you're very well aware of. What do you think that means for the industry? Do you think new people will just kind of all go to the ETF or go to custodians instead of self-custody? What do you think?" }, { "speaker": "mike_belshe", "time": "19:22", "start": 1162.0, "text": "I think over time, yeah, people move their assets to, to banks and custody in general. I think, when you really think about large amounts of your net worth, being tied in digital assets, it's a lot of responsibility. it makes people scared and nervous, to hold it on themselves. And without getting into the hacks, I mean, just for a moment, I mean, even think about How do you protect against fire? I mentioned it earlier, but you gotta have your key, and then you gotta have your backup key. Right." }, { "speaker": "stephan", "time": "19:49", "start": 1189.0, "text": "And the usual answer would be, okay, get a metal backup, and you gotta have metal backups for each of your keys, and this kind of thing." }, { "speaker": "mike_belshe", "time": "19:55", "start": 1195.0, "text": "Or you put in a safe deposit box. There's other ways to do it off-site, but all of these are hard, and most people don't do it. The other thing that happens is a lot of people are getting into crypto today, and when they get in, they're like,\"Okay, Set it up, they set it up with security at home for how they would secure something that's worth ten thousand dollars. Now it's worth a million dollars, and when you're thinking about how you secure something that's worth a million dollars, of course you've got to think, at a different level. So, you know, wrench attacks, obviously become a thing, especially if you're in France. And then lastly, I think what happened with Coldcard is that," }, { "speaker": "mike_belshe", "time": "20:35", "start": 1235.0, "text": "We like to think of self custody as being trustless, but it's actually always naive. There's always trust somewhere, unless you're writing the whole damn thing as a developer yourself, in which case you have to trust you didn't make bugs, and you have to trust yourself that you're really good at programming. And then" }, { "speaker": "stephan", "time": "20:49", "start": 1249.0, "text": "There's still hardware involved, so--" }, { "speaker": "mike_belshe", "time": "20:52", "start": 1252.0, "text": "Well, there's hardware, there's supply chains, there's the algorithms that are used. So with Coldcard, like obviously the random number generation was done inadequately, people were trusting that this was done by professionals that wouldn't Those types of mistakes. Most people don't even really know how critical the random number generator is, even though a private key is nothing more than a random number," }, { "speaker": "mike_belshe", "time": "21:16", "start": 1276.0, "text": "I-it's critical, and so they were trusting that that was being done. That trust was breached. Now they're thinking,\"What do I do?\" By the way, the answer still, whether it's whether it's BitGo that you end up using or somebody else. multisignatures better because instead of having one random number, you've got three random numbers that are protecting your asset. Now, the next thing you have to think about is like,\"Well, where are those random numbers being generated?\"'Cause if they're all being generated with the same broken RNG, you're still in trouble. The BitGo model that I described, where the keys are generated in different places, it's different implementations for each of the keys. So, think about the probability of a failure. Like, and, and insurance guys think about this all the time, right? Like, what's the probability that one of your keys was done badly or you had malware on it at the time you didn't-- Okay, point zero zero one percent, whatever. What's the chances that two keys had that? Well, it's point zero one times point zero one, which is zero zero zero zero one, right? So the way you make things really rare is by, you know, eliminating single points of failure. You can't completely account for every possible type of risk. You should think about as many as you can, of course, especially when it's self-custody, especially when But the next thing you need is you need to be able to, do this kind of multi- multiplicative," }, { "speaker": "mike_belshe", "time": "22:35", "start": 1355.0, "text": "Protection by way of reducing risk across no single point of failure." }, { "speaker": "stephan", "time": "22:40", "start": 1360.0, "text": "Yeah. Now, I think for a lot of people, it kind of, it's, you have to balance all of these different things. As you said, removing single points of failure, sure, absolutely, and that's where, you know, people in the self-custody world will be looking at, okay, I, I use maybe two or three or three or five with different hardware wallet types, so that way we're diversifying that way, so we have fault tolerance. But then you layer on those other aspects of like, okay, not just that, but how do I make sure it's Make sure, it's inheritance is handled, that like when I die, that my wife and kids will get the coins, you know, all of these things. It's kind of like, how do you balance all of these things together, with, along with the complexity of dealing with different device types, right? Because if it's just one device type, that's kind of easy enough, maybe you can teach your wife to handle that, but once you now start, okay, well, actually, it's this Hardware wallet type A, type B, type C, et cetera, the complexity does start to blow out a bit. So I, I see it like, yeah, let me give a suggestion" }, { "speaker": "mike_belshe", "time": "23:39", "start": 1419.0, "text": "There. you know, over the years You know, so many people have come to me and said like,\"Oh, it should be a 2-of-3, a 3-of-4, a 3-of-5, a da da da da da da da.\" And there's a lot of great ways to protect things. The, the reality is, it's a trade-off of security and usability. so having-- I spent a lot of time, it's not that I'm wed to like 2-of-3, it's like the one thing, and we stick to it. Like, we've really tried to figure out, is there a better" }, { "speaker": "mike_belshe", "time": "24:12", "start": 1452.0, "text": "If you've got your account, it's a username, it's a password, it's a, it's a two-factor authentication. I strongly recommend a YubiKey, something that's got a, physical component to it." }, { "speaker": "mike_belshe", "time": "24:25", "start": 1465.0, "text": "Just like this one. Yeah. Perfect. you know, BitGo hasn't used SMS-based two-factor authentication since before anybody else banned it eons ago. okay, but, but it, it, it starts with that." }, { "speaker": "mike_belshe", "time": "24:39", "start": 1479.0, "text": "And then, I lost my train of thought here. Yeah," }, { "speaker": "stephan", "time": "24:42", "start": 1482.0, "text": "So you were talking about how you, you the 2-of-3 as the model, and then, you know, password, user password, and 2-of-3 versus others," }, { "speaker": "mike_belshe", "time": "24:50", "start": 1490.0, "text": "Right? So, so BitGo has one co-signing key, and you, you tell BitGo, and you configure it, and it's all cryptographically done, like what policies you wanna have in terms of approvers or spending limits or delays and all this kind of stuff. Now, we can take care of that. So normally" }, { "speaker": "mike_belshe", "time": "25:08", "start": 1508.0, "text": "A key and a signature, but you only had to deal with one, we deal with the other one. That's how you get the no single point of failure. There's still a third key, which is a backup, and, and hopefully you never have to use it. It sits in a vault somewhere and like it's, it's fine. When you move to the 3-of-5 model, and by the way, Casa does a good job of this, so Casa's a, also kind of a retail thing. Well, now you've got five keys you've got to figure out" }, { "speaker": "mike_belshe", "time": "25:38", "start": 1538.0, "text": "Your co-signer can't have a majority,'cause then that's not self custody, so you have to have three, they can only have at most two. but now where do you put those keys? And they recommend one at home and one at your office, and one as a backup, which is a reasonable thing to do. But it turns out to also be hard. So it is a level up in terms of how much complexity you wanna have. So the 2-of-3 model, I think, solves the issue of no single point of failure, solves the issue of having a backup, and is usable by you. At the end of the day, you've got one key. It looks exactly like you're using a single key wallet, except for that you're not. You're using all of these things. So that, that's why we like it, and it's served pretty well, certainly compared to any model, it's better. And then it solves this problem of having to trust a single," }, { "speaker": "mike_belshe", "time": "26:29", "start": 1589.0, "text": "RNG, because you've got multiple keys that contribute into that. In terms of the other things you mentioned, like, Your spouse, you know, all BitGo accounts are multi-user accounts, so you can invite your spouse onto the account, and then you can even choose roles for you and your spouse. So there's administrators that have like control level, can set policy, and by the way, if you-- once you have two administrators, if you wanna change the policy, you gotta get approval from both, both administrators. then you got spenders, then you got viewers. So if you have an accountant, you can bring your accountant right in, they can look right into your account and So they can pay your taxes or whatnot, without having any, any private key material. Alright, so it's multi-user, and then, and then there's policies, and there's all kinds of policies that we build, just recently added IP restrictions, location restrictions, I think we've got timing restrictions, velocity limits, so there's a bunch of things. This gets pretty complicated, I think actually maybe, the, the things that the team is working on in terms of the retail usage is to kinda just give a couple of simpler- Suggestions. I think one of the great things that Steve Jobs did is, you know, he, he takes away choice, right? He like limits the time, things you can configure. And on one hand, that seems like, you're preventing me from doing what I'm trying to do, but on the other hand, there's some good reason for it because it helps make sure that the design is clean and that you're not getting into corners where you can get yourself into trouble." }, { "speaker": "mike_belshe", "time": "27:59", "start": 1679.0, "text": "So, there's still more work to be done, I think, for BitGo and others on" }, { "speaker": "stephan", "time": "28:08", "start": 1688.0, "text": "I'm curious, would you say there's a threshold above which, you know, people really should look at having a professional custodian? Like, is there a threshold above which, you know, even with multisig, you think people should not self-custody, that or at least they they should start thinking about splitting and having like some in their own self-custody multisig and maybe some with a, with a big custodian, this kind of thing?" }, { "speaker": "mike_belshe", "time": "28:31", "start": 1711.0, "text": "I think it's up to everybody to decide on their own. I'm not sure if everybody actually is equipped to decide on their own, but, you know, I'm, I'm, I'm really about liberty. So, I think it is your responsibility to figure out what that number is for you. And by the way, if you've gone through life changes where when you started in the industry you weren't married and now you are married, you might have a different, you know, risk profile either of your own making or by way of your family." }, { "speaker": "mike_belshe", "time": "28:58", "start": 1738.0, "text": "So, anyway, It's," }, { "speaker": "mike_belshe", "time": "29:03", "start": 1743.0, "text": "I, I wish I could say, say it's easy. by the way, so somebody that lives in the Philippines, you know, their economies are very small compared to US economies generally, so of course they're gonna have just a, a very different number," }, { "speaker": "mike_belshe", "time": "29:16", "start": 1756.0, "text": "I don't know, I had a venture investor years ago," }, { "speaker": "mike_belshe", "time": "29:20", "start": 1760.0, "text": "He got into Bitcoin, it was before we were a custodian at all, we just had self custody wallets, and the wallet got to be worth, I don't know, a couple hundred thousand dollars, and for this guy It wasn't big deal, but he was nervous about it. He's like afraid he's gonna lose the money, and so he just had to get out. We didn't have custody, he sold his Bitcoin early, because he was so nervous about holding on to what he felt was a large amount of money under his own control, even though His net worth was so much more. So it's really a personal choice. I don't think there's anything wrong with his conclusion, that was his, his choice. Similar to like if you had gold, you know, how would you vault gold? or if you had a lot of cash, how much would you put in your closet? How much are you putting in your closet before you got bars and you put them on your window? How much would you have in your closet before you decided to hire a security guard or, or get a, get a gun?" }, { "speaker": "mike_belshe", "time": "30:10", "start": 1810.0, "text": "These are, these are personal questions." }, { "speaker": "stephan", "time": "30:13", "start": 1813.0, "text": "Yeah, okay. and so then coming back to the, yeah, I, I, I think it's, I, I get, I can only speak of, let's say Trends or let's say, typical things that people would do, like above a certain, but actually, let me, let me add one more thing. Yeah." }, { "speaker": "mike_belshe", "time": "30:31", "start": 1831.0, "text": "You know, being CEO of a public company, we've gotten to a little bit higher public profile. so for me, the answer is zero. and I, I just, I don't wanna have anyone thinking that they can come and, and, and do anything physically to me, to either take my money or the company's money or our clients' money. simply won't work. So, anyway, I think that also comes into, into account, which is like if you're a celebrity profile, you know, what are you gonna do?" }, { "speaker": "stephan", "time": "31:04", "start": 1864.0, "text": "Yeah, absolutely. If you're a public name, especially if you're a public Bitcoiner, then, yeah, maybe that tips you more towards like, you know, obviously multisig and of course maybe some of that with, you know, professional custodians or whatever, different kind of diversifying out your exposure a bit. of course, you know, there'll be different views on that, but I also wanna get back to just for listeners to understand a bit more. Did you see the," }, { "speaker": "mike_belshe", "time": "31:27", "start": 1887.0, "text": "Yep, did you see the Revolut news this week?" }, { "speaker": "stephan", "time": "31:30", "start": 1890.0, "text": "Yeah, unfortunate. So there was like a KYC leak, and basically they leaked the KYC data to someone who was faking to be the government, basically. And so that's like, I mean, it's AML, KYC laws, FATF, sanctions laws, all this stuff. I mean, yeah, it's hard to-- Look, I mean," }, { "speaker": "mike_belshe", "time": "31:46", "start": 1906.0, "text": "First off, you know, I feel sorry for the victims, especially given kind of what's going on right now. second thing, you know, look, Revolut screwed up here. now being at a regulated firm, I've seen this stuff come in. It's interesting, you know, the first time you get- An email from some guy at DOJ. You're like,\"Huh? Like, he's just emailing me? Like, how am I supposed to believe this guy is actually at the DOJ?\" Yes, you actually have to check all these. Like the idea that somebody's gonna just send you an email, I mean, that's, that's not an authenticated channel. but the government officials all do it. I'm not talking about just DOJ, like the states all do it, the federal all do it, et cetera. And then you have to say,\"No, I have to, I have to verify you out of band in order to be able to answer this.\" you know, they'll send subpoenas right over email. It's crazy." }, { "speaker": "mike_belshe", "time": "32:34", "start": 1954.0, "text": "So, but then the second part of this isn't just Revolut, like we have seen PII leakage over and over in our financial sector, and it has nothing to do with crypto, it has everything to do with the fact that we've created these honeypots." }, { "speaker": "mike_belshe", "time": "32:51", "start": 1971.0, "text": "I don't think there's a solution coming here, unfortunately. I think the government wants to know where your money is. There's a war on cash, they want more of it put into the institutions so that they can get a handle on it, kind of if they ever need it." }, { "speaker": "mike_belshe", "time": "33:07", "start": 1987.0, "text": "And, I think it's unfortunate. So, the government creates this, the government does nothing to protect, individuals, and, you know, you can yell at the regulators, it's not quite their fault. There's kind of layers of this. It starts with legislation, goes into this regulator, and then ultimately into this enforcing regulator, and the enforcing regulator is just like doing his job. so you can complain to him all you want, but you gotta go to your lawmakers. If you want to get rid of this. my own personal belief is that the PII collection has never worked for stopping crime, and there's, I think there's very little evidence that it does work very well. I think it's mostly about making sure you pay your taxes, actually. and, you know, they say it's about Financial crime, but it's really about pay your taxes. So it's unfortunate they are putting us at risk. Ain't gonna change, that's one thing that you, you lose when you go into custody." }, { "speaker": "stephan", "time": "34:03", "start": 2043.0, "text": "Yeah, that's a, I mean, this is one of-- I've spoken about this on the podcast, and I've hosted people who, like, there's an academic, Ronald Pol, and he's spoken about how the the actual number of crimes stopped by these KYC/AML, it's like a tiny, tiny fraction, and of course, and the massive compliance burden, and of course, you and I in Bitcoin land, we see all these, you know, data leaks and hacks and people getting attacked and crypto kidnappings and all It's terrible, but it seems to me like, of course, if I, if I could wave a wand and abolish KYC, AML, sanctions laws, you know, sure, I wish, but is it happening anytime soon? Probably not. most of the people probably believe in it, and so that's probably the challenge, right? That people who are more, you know, Bitcoiners tend to be more libertarian, cypherpunk aligned, so they, they might agree with that idea of abolishing those policies, but the masses won't, and they drive most of the" }, { "speaker": "mike_belshe", "time": "35:02", "start": 2102.0, "text": "I don't know, I think actually most Americans don't, don't really have a view. I think it's like a lot of debates, you'll have like some people that are staunchly opposed, some are staunchly for, mostly are in, in the middle. The staunchly for is the statists, right? The statists wanna make sure the state has power. money is power. Anytime you see a conflict like this, it's usually related to money. in, in fact, I might even go so far to say it's always related to money." }, { "speaker": "mike_belshe", "time": "35:29", "start": 2129.0, "text": "So Well," }, { "speaker": "stephan", "time": "35:31", "start": 2131.0, "text": "I mean, let's say, let's say, as you said, a lot of people are ambivalent or they don't really know or care. They just kind of think, \"Oh, my bank officer is always asking me all these questions about what I wanna do with my money, and I just kind of answered them'cause, you know, how else am I gonna get my money?\" I guess that's probably how a lot of people are thinking about it, unless they're ideologically libertarian or cypherpunk." }, { "speaker": "mike_belshe", "time": "35:50", "start": 2150.0, "text": "Well, those are the silly ones, right? Like, you know, what's your source of income? how many transactions are you gonna do this month? I mean, these are silly, right? Like, they don't help anybody, they don't really hurt anybody either. The main thing that hurts is like, once you've collected all this information, now you become a honeypot, and then like, it's super easy to accidentally lose it, like what happened with Revolut, but also what's happened a zillion times over, even remember," }, { "speaker": "mike_belshe", "time": "36:15", "start": 2175.0, "text": "Not TransUnion — Equifax. Equifax a few years ago, right? That was a big deal. They dribbled all the, all Americans' money, I'm sorry, information all over the, the, the dark web. They're still around. Happily operating, still a credit, credit bureau, still collecting the information." }, { "speaker": "stephan", "time": "36:33", "start": 2193.0, "text": "Wasn't there a recent case where the French government or a French tax agent, I think, leaked a bunch of info and, you know, so I, I don't know, I don't know if it really happened twice. Yeah. It" }, { "speaker": "mike_belshe", "time": "36:42", "start": 2202.0, "text": "Happened twice. The first one was," }, { "speaker": "mike_belshe", "time": "36:45", "start": 2205.0, "text": "Yeah, somebody that works at the French IRS, was paid to cough over the Bitcoin list, and they didn't really realize apparently exactly what they were doing. She's in jail, I believe, For that. So she sold out the IRS information, and then they had a second one where they were just hacked. so, you know, as soon as you start collecting this, you are a honeypot, and it's actually super hard. And by the way, the, the interesting thing, I mean, BitGo, we consider this a lot. Like, we started out, how do you secure the bitcoins? Number one, don't lose the money, right? Okay, that's number one, we all agree. and so we built all these layers at this technical level and" }, { "speaker": "mike_belshe", "time": "37:28", "start": 2248.0, "text": "Now, I think the reason it leaks so much is A, you end up with, compliance, legal, operative personnel that just aren't very technical. B, we tend to prioritize it less than the money. I, I mean, I guess if you have to prioritize one or the other, the, the money should be prioritized higher. C, we use a lot of fintechs to manage this. So basically, the government has come in and slapped all these requirements on you. You need this, you need that, you need this, you need that, and you're So you hire somebody, right? And it's Persona, or it's Sumsub, or it's Sardine, da da da. and those guys now need to have access to it. Now you're like, \"Wait, you're gonna give the PII to a third party,\"and there's all kinds of legal stuff that comes in that. So the, the government regulation is so expensive that it's kind of forced this. So now you've got a third party you're dependent on them to also operate perfectly. But then lastly, look, look, we do have to do more as an industry. Like, how do you store it? Who has access to it? Like, when you call customer support, can I impersonate Stephan Livera? Right? and what are we doing to prevent that? You have to-- all the same controls that you have on your money, you have to put on the PII. Yes, it's technically less important, but- When it turns out it's important, it's really important. so, yeah, you gotta do it. And, and it's expensive." }, { "speaker": "stephan", "time": "38:49", "start": 2329.0, "text": "And I don't know where-- like,'cause the thing is, whenever you travel, right? If you're flying internationally or you check into the hotel, get-- you need your passport, right? You need-- like, so there's just so many places where people are collecting this information and it's being recorded and this database that they store it, like, when you check into the hotel and they-- some, some countries they will scan your What's the security on that? Right? So then like they'll have, they'll have all this stuff and your info will just be out there, and I don't, I don't really know what the solution of this is gonna be because imagine longer term Like basically everyone's gonna get doxed some way somehow. What do we do about it? Is there anything we can do about it?" }, { "speaker": "mike_belshe", "time": "39:28", "start": 2368.0, "text": "I kind of assume that, I am already just all over the dark web, you probably are too. you know, I mean, just look at the, the number of breaches from major institutions that have lost, you know, fifty percent of all Americans' stuff. it just happened over and over again. So I assume that's all out there. The more concerning one is when you start tying it to somebody's actual holdings. So in France, the reason it was so dangerous is because the IRS had specifically said, \"Hey, if you're a Bitcoiner, you have to tell us where your Bitcoin is and how much you have.\" So now, that's a different level of information. And yes, people then say, \"I'm gonna go physically attack those people.\" So the fact that they went after self-custody as something that you have to report is the problem." }, { "speaker": "stephan", "time": "40:18", "start": 2418.0, "text": "Yeah, but I mean, realistically, what is gonna be actually done about it? Is it just that we just have to like hope that enough people use multisig or that enough people, have Bitcoin that it's assumed that everyone has some? Or, I don't know, like, what, what is the, where is it gonna go? Or is everyone just gonna use a custodian because, you know, people don't go and rob Jeff Bezos for his Amazon stock because they know you can't steal that?" }, { "speaker": "mike_belshe", "time": "40:41", "start": 2441.0, "text": "Well, you can't, you can't get away with stealing it. I think that's, that's the issue. But, look, I, I think there's a, a higher level issue, which is really kind of a war on cash and a war on personal property rights. this will resonate with Bitcoiners, it's part of why they're here. But I do think politically, we have to start making sure that cash is protected. I know a lot of Bitcoiners don't like cash, that's not my point. My point is, you should be able to use cash" }, { "speaker": "mike_belshe", "time": "41:10", "start": 2470.0, "text": "Anonymized and self-sovereign with cash. Did you know, in France, it's illegal to spend more than a thousand euros in cash to buy something. Most people don't know that." }, { "speaker": "stephan", "time": "41:21", "start": 2481.0, "text": "Yeah, I know, and most of the EU is getting pretty bad in terms of war on cash, so it's the same thing that all the CBDC stuff is happening all around the world, so-" }, { "speaker": "mike_belshe", "time": "41:30", "start": 2490.0, "text": "Yeah, I think the same thing is gonna happen in the US, you know, as people opt out of, of the system. So I did meet with, Secretary Bessent of Treasury, a couple weeks ago, and I asked him about You know, his views on the war on cash, and he hadn't really thought about it. so in America, we do have stronger property rights, which makes it so it doesn't seem like it's as big of an issue. But just think about what's going on with the, the real meaning of like why there's a fight over CLARITY right now. it's really about- Are you gonna keep your money in the system or are you gonna be outside the system? And it is about self-sovereignty. This is why self-custody is so important. But more importantly, we need to make sure cash is preserved. If they start eroding cash, that's eventually gonna erode on gold, it's gonna erode on Bitcoin as well. and I think, I think we have to watch out for, for that. So vote for people that have a strong belief in You can have your own property and that you can pay in cash." }, { "speaker": "stephan", "time": "42:29", "start": 2549.0, "text": "Well, yeah, for sure. I mean, that's, that's, that's definitely a part of it. I think, the political activism part of it is becoming more and more of a thing, like Bitcoin is becoming bigger and bigger, and therefore, Bitcoiners can start being politically active in terms of donations and things like that. I guess some people will have a bit of a, that gives a bad taste in the mouth because maybe they don't wanna be involved in the state or politics at all, but yeah, I kind of do align more on that side of, hey, It's," }, { "speaker": "stephan", "time": "42:58", "start": 2578.0, "text": "What's the saying? It's like politics, you may not be interested in politics, but politics is interested in you, and for that reason," }, { "speaker": "stephan", "time": "43:05", "start": 2585.0, "text": "Yeah, I think, we're gonna have to try to improve that situation, and that's kind of in many places around the world." }, { "speaker": "stephan", "time": "43:12", "start": 2592.0, "text": "I wanted to get back to kind of the custody side of things and like security questions," }, { "speaker": "stephan", "time": "43:20", "start": 2600.0, "text": "On like BitGo and HSMs and things like this. how do I—" }, { "speaker": "stephan", "time": "43:28", "start": 2608.0, "text": "I, because this is something that I know, I actually, I think we spoke about it, yeah, six or seven years ago. Is this something that you're looking at from a multi-jurisdiction perspective as well, that you might start, you know, you, you'll start, you, you'll have keys in different jurisdictions as a, as a protection?" }, { "speaker": "mike_belshe", "time": "43:45", "start": 2625.0, "text": "Yes, you know, you might recall that a couple years ago we moved WBTC, which, you know, we were the custodian for, into a multi-jurisdictional, storage, and that was, you know, primarily because we were really afraid of what was happening here in the US at the time as a different regulatory scene." }, { "speaker": "mike_belshe", "time": "44:06", "start": 2646.0, "text": "Right now, I guess those fears here in the US are a little bit subsided, but I do think it's an important thing to get to. So, we have it in some- Some areas not as perfect as I'd like it, mainly because there's been other areas of focus, more recently, but that will come back up, in the future. And then, yes, one nice thing about multisig is that it's, it's very doable to get kind of this multi-jurisdictional protection. So, then even if any particular region, you know, has a, a straight-up banning, you can protect against it. I guess even as I think about the go-forward, I think that's a less likely" }, { "speaker": "mike_belshe", "time": "44:44", "start": 2684.0, "text": "I think fortunately, you know, we're getting" }, { "speaker": "mike_belshe", "time": "44:47", "start": 2687.0, "text": "Legislation all across the world about how to treat digital assets, and as that comes in, I think the, the chances of just a confiscation or a ban gets pretty low. but, you know, this thing can change. I mean, it's only- Twenty-four months ago, we were talking very differently, than we are right now." }, { "speaker": "stephan", "time": "45:05", "start": 2705.0, "text": "Or even think about the debt situation of the US, right? What is it, forty trillion in debt or whatever that, whatever the number is? Imagine in another-- A mere forty trillion. Right? And then imagine in another ten years' time or fifteen years' time, like if Bitcoin is, you know, over a million dollars at that point and the, the national debt is, you know, much more than forty trillion, does the confiscation question become more serious at that point?" }, { "speaker": "mike_belshe", "time": "45:29", "start": 2729.0, "text": "Look, I'm sure your viewers are all well aware of Executive Order 6102, right? and it absolutely could happen. and then that would be an order, at the custody level and the self-custody level, potentially, right? So, you may not have any legal protection of it, at least with self-custody, you have choices like you can move. but, yeah, let's, let's hope it doesn't come to that. But look, I, I do think money is power Money, they go hand in hand, and the state, needs more money, to maintain power. So, it, it is something that, that bitcoiners that have a little bit of paranoia should worry about. Yeah." }, { "speaker": "stephan", "time": "46:13", "start": 2773.0, "text": "And then I guess diving into some of the more technical sides of things, I know obviously you were an innovator in multisig, right? Like, so for listeners who aren't familiar, I guess I'll give a very kind of brief-- Like, there used to be bare multisig, right, from day one, but that was not very practical, and then what you did in, was it 2012, 2013? you you came up with this idea of P2SH multisig, Pay to Script Hash multisig, and, talk to us a little bit" }, { "speaker": "mike_belshe", "time": "46:44", "start": 2804.0, "text": "Sure. but the, the bottom layer, like you mentioned, we've had multisignature, UTXO outputs, from the beginning of-- and this is where, you know, at the end of the day, Bitcoin is a bunch of, you know, transactions with unspent, and in order to unlock an unspent, you have to provide some sort of proof, and so the idea that you could have multiple keys that need to be provided to, to make that proof happen, that's always been there. That's at the transaction level." }, { "speaker": "mike_belshe", "time": "47:12", "start": 2832.0, "text": "Every transaction. With, P2SH, they said,\"Okay, let's wrap that inside of the address. So you get a special address which has kind of that, script in it, and then it applies to the whole wallet. So every UTXO in that wallet, uses the multisig path, and now humans can kind of manage a whole wallet.\" I think the second level of, of changes actually-- there, there's more on the multisig that I'll get to in a second, but, you know, just like best practices on wallets" }, { "speaker": "mike_belshe", "time": "47:43", "start": 2863.0, "text": "Not all wallets do this, but, you know, never reuse addresses you're familiar with. Always use change and new, new change addresses so that you're constantly, you know, moving. Lately, we have this thing quantum, people are worried about. people sometimes say,\"Mike, this, I, I'm gonna make a statement that we have a quantum-resistant wallet at BitGo, which we do, but people are like, 'Mike, you can't be quantum-resistant unless you change the, the, the signature from ECDSA to, to.'\" I know, look, there's more to it, but my point is this Quantum resistance today, if you put your Bitcoin at BitGo, A will tell you how much is exposed to quantum, meaning how much is exposed to a public key or set of public keys that have already been put onto the chain." }, { "speaker": "mike_belshe", "time": "48:26", "start": 2906.0, "text": "And, we also let you move and operate your wallet in a way that anytime you expose a public key, we move everything that would have gone with it. So, I think- Around thirty percent, I might have this wrong, of UTXOs right now, are using public keys that have already been exposed. So this can be fixed. All wallet providers should be moving to the same unspent algorithm or something like it, like what BitGo did. And what this would do is it would make it so that everybody's quantum resistant right now. So if a quantum computer showed up tomorrow, your bitcoins wouldn't be vulnerable. But there's still more to be done. We gotta get the mempool fixed. And this is" }, { "speaker": "stephan", "time": "49:06", "start": 2946.0, "text": "The, the short range- Interesting versus long range attacks, and what you're talking about there is it would make you safe against the long range attacks just to not have re-address reuse, but the short range attack, which is kind of if, if the, the quantum hacker can see your transaction in the mempool and he does it, you know, that kind of thing, but by then we'll probably have mitigations on that too." }, { "speaker": "mike_belshe", "time": "49:27", "start": 2967.0, "text": "Correct. I saw there was a report that just came out, I think it's last week, about a quantum, computer at twenty thousand qubits or something like that, and they estimated it To hack a, a private key from a public key. So by the way, that means if you had two keys that need to be hacked, like in a 2-of-3 multisig, you'd have to do two seventy-three day sequences. So, again, the multisig will be more resistant than single sig always, although that's not enough by itself, really should be doing more. But by moving to a wallet that's quantum resistant now, you know, like whenever that quantum computer shows up, your coins aren't gonna be lost. Now Satoshi's coins and all that Well, you know, that's a different issue that has to be solved. but yeah, every wallet should be doing this. So anyway, back to innovations on multisig. look, BitGo does more than just Bitcoin, we do Ethereum and we do more coins than anybody else, more of the top hundred, more of the top two hundred and fifty than any other provider from Fireblocks to Anchorage to Coinbase, et cetera. And a lot of times the technology we're using there is MPC instead of multisig. The reason, you know, a number of blockchains, including Ethereum, don't support multisig on-chain. Now, multisig is strictly better than MPC in all cases, and the reason for that is that you get multiple independent keys that be signed completely asynchronously, completely independently, and you don't have to come online to sign." }, { "speaker": "mike_belshe", "time": "50:56", "start": 3056.0, "text": "With MPC, it's a protocol and it goes around and around, and it, it's, it's really hard to do in cold storage, but moreover, it's not independent implementations. Every MPC protocol, is like that vendor's MPC protocol and You can't have independent implementations like the thing we were just talking about, you need in order to mitigate the Coldcard bad random number generator. So, I'm not trying to say MPC is bad, MPC is good, right? And we do 2-of-3 MPC and it's, it's used all over the place, but, multisig is better. And then the next problem you run into is like, well, how do we make- multisig or an MPC, kind of work in a multi-vendor mode, or in a, compatible way across multiple blockchains, and here you start to run into trouble. So, BitGo does support, some models that we use in conjunction with, like Onramp is a client that does, AnchorWatch is another one. Well, they'll use a BitGo key along with another key that they provide, plus another provider, so that gets you kind of multi-vendor stuff. There's some, some advantages to that, it at least Different operators, which, takes away that, that single point of failure at the operator level. disadvantages like you can't get it insured very easily, you can't really do qualified custody very easily'cause it's different vendors. the SOC audits and other, things can, can vary. The mean time between failure actually gets worse, when you bring multiple parties together, rather than better, which is Not so you're" }, { "speaker": "stephan", "time": "52:31", "start": 3151.0, "text": "Saying there's actually a higher failure rate there in terms of like, is that like process failure, security failure, what, what, what kind of failure are you referring to there?" }, { "speaker": "mike_belshe", "time": "52:39", "start": 3159.0, "text": "Anytime you-- so anytime you have a, a risk that's got some, some chance of a failure, like a hard disk" }, { "speaker": "mike_belshe", "time": "52:47", "start": 3167.0, "text": "Has a, a failure on average once every two years. you know, when you throw in lots of hard disks, a hundred hard disk, well, what's the chance that any one of them is gonna fail next week? Pretty high. So, it, it kinda doesn't matter. When, when you're talking about failures, you're talking about like any of those companies losing a private key, getting hacked," }, { "speaker": "mike_belshe", "time": "53:10", "start": 3190.0, "text": "Going out of business, you know, obviously it's different failure rates for each of those different types of risks, but when you go to multi-vendor, you, you do end up with that. on the other hand, you don't have any single party that can like, you know, unilaterally- Gotcha. So it's like" }, { "speaker": "stephan", "time": "53:24", "start": 3204.0, "text": "More secure, but there can be more failure rate in certain contexts, is what you're getting at there. But in the context of multi-institutions, yeah." }, { "speaker": "mike_belshe", "time": "53:33", "start": 3213.0, "text": "Yeah, so look at it this way, BlackRock," }, { "speaker": "mike_belshe", "time": "53:38", "start": 3218.0, "text": "You Use one custodian, that's Coinbase, and everybody's like,\"Ahh, you know, that's, that's a lot of money just at one, one custodian. You should split it up.\" From a," }, { "speaker": "mike_belshe", "time": "53:50", "start": 3230.0, "text": "You know, catastrophic loss perspective, maybe, right? Like they could take it, put it at two, and now instead of having fifty billion at one entity, they'd have twenty five at two entities, but" }, { "speaker": "mike_belshe", "time": "54:02", "start": 3242.0, "text": "Every entity goes, dies eventually, and if you figure that the, the, the meantime between failure of a custodian is X, you've actually increased the chance that you will have a twenty-five billion dollar failure." }, { "speaker": "mike_belshe", "time": "54:15", "start": 3255.0, "text": "Although you've decreased the chance that you'll have a fifty billion dollar failure. so it's, it's, you know, everything's risk, I guess, at some level. obviously you take a lot, a lot of precautions to avoid these things." }, { "speaker": "stephan", "time": "54:30", "start": 3270.0, "text": "Yeah, kind of scary when we talk about all these things, but I mean, ultimately, there's risk in everything, and you have to just, you have to manage it somehow, and you sometimes you spread that out across different providers, sometimes that's better technology, and, I guess, I kind of, back to the, I guess the Bitcoin multisig, I guess there's, there's been some evolutions and things along the way also, right? and actually, I believe you at BitGo did, MuSig2, right? You guys have MuSig2. That's like, so there's been kind of further evolutions there also, and maybe in the future people will look at things like FROST, which is like another thing, or like Miniscript stuff, or I guess these are all different ideas that, Can add different things," }, { "speaker": "stephan", "time": "55:15", "start": 3315.0, "text": "Can you give us any insight onto in, if you're looking at any of those or do any, are any of those interesting to you or not really?" }, { "speaker": "mike_belshe", "time": "55:22", "start": 3322.0, "text": "Yes and no. Like, I think they're always interesting, but it's hard when they operate on one chain and not others for Bitcoin because we're trying to provide that same protection across all chains, and so per-chain specific things gets a little, little tricky, but The other problem I think is one of human nature, and, and again, kind of back to like I've heard over the years, people like,\"Oh, you should use 3-of-4, or you should 5-of-7, da da da da da.\" Like all these are good ideas, and yet, like at the end of the day, you've gotta- Take the concept, operationalize it, and make it ready for everybody to use without any errors. So every key that you add is more complexity. That means you have to have opsec on every single one of them, that means you have to have recovery routines on every single one of them, that means you have to have different people in charge of every single one of them. There's a lot that goes into building that, and the same thing is true of like, we've got Miniscript and other things which would push policy all the way down onto the chain." }, { "speaker": "mike_belshe", "time": "56:18", "start": 3378.0, "text": "Well, a, it seems like every user seems to have kind of a different idea of what policy that they want. so it's not like there's a universal like one single truth for what to do there. the great, I love these things because they give you like a ton of control and you can pick. on the other hand, if you lock up your coins for three years and then afterwards you kind of realize,\"Oh, wait, I locked up my coins for three years and they're on-chain locked,\" that can be a problem. So, I've definitely seen a lot looking, a lot, a lot of proposals around time locks. I feel like we can do those pretty well at the application layer, which is how we do it at BitGo today," }, { "speaker": "mike_belshe", "time": "56:59", "start": 3419.0, "text": "But you could push them down. I look, I'm excited about the never-ending stream of innovation that comes from, having all of this technology in front of us. So I think, I think more will come. So far, at least right now, we think we're, we're mitigating the risks. We've got the on-chain, With that, we split them across different locations, like our three keys that we use in custody, they're all separated by a thousand miles apart from each other. That allows us to get insurance. Where we're, where the insurance policy covers geographic natural disasters. I think we might be the only company that has that. And look, I think it's on one hand kind of a small thing, but I, I also think it, it demonstrates the power and the care that's gone into the deliberate choices that we, we've made. so anyway, yeah, there, there will be more evolutions in terms of how do you on-chain secure, and I think, I think those are good. The, the harder part's gonna be getting the opsec right and then getting models that Kind of fit with what everybody wants, I think, you started to get pretty tailored and, and, and personal. Yeah." }, { "speaker": "stephan", "time": "58:04", "start": 3484.0, "text": "Which is interesting though, because I, in, I would say, from what I'm reading, the, it's, your, which, and rightly so, it's a bit of a conservative approach. You don't necessarily want to take on like every latest, newest thing. But I would say If anything, you guys were relatively early on getting MuSig2 support, like that was probably a relatively early thing compared to some of these other things, right?" }, { "speaker": "mike_belshe", "time": "58:29", "start": 3509.0, "text": "True, but that was really just kind of the cryptography, and the cryptography's been well established there. So, you know, Schnorr as well, you know, I mean, you know, that's not, that's not a new thing. MPC, we were actually slow, and the reason we were slow is because we wanted the 2-of-3 model. So the early variants of MPC were 2-of-2, then they came out with 3-of-3. Those protected against theft, but they don't protect, protect against loss. And by the way, We're still using 2-of-2 and 3-of-3 today. They've never upgraded to 2-of-3. The 2-of-3 MPC took longer to evolve. It's, it's more computationally expensive, it's harder to scale. but, but we felt like, look, you just have to have that across everything that we do, otherwise" }, { "speaker": "mike_belshe", "time": "59:19", "start": 3559.0, "text": "The losses will happen, and in fact they do, right? There's documented cases of where people used a 3-of-3 MPC and they had that theft protection, but then they screwed up, they lost one piece of it, and they didn't have a backup, and so then they lost their coins." }, { "speaker": "stephan", "time": "59:36", "start": 3576.0, "text": "Yeah, as you said, it's, it's, it's a balancing game of making sure you have redundancy and security, and not just only one-- like if you make it too secure, but that you, you forget or, don't prioritize the redundancy component enough that you can recover from the failure." }, { "speaker": "mike_belshe", "time": "59:52", "start": 3592.0, "text": "Well, slight correction, you know, you can totally have both theft protection and loss protection. That's doable, that's not a balance you have to make. That, that you, you can get. The balance, I think, is around usability or ease of use for accessing your coins versus security. and to some degree, this is easy to deal with. You just risk mitigate, right? So I've got my hot wallet, it's got less protections on it, I can spend whatever, it's on my mobile phone, it can still be multisig, it still operates just like a single sig, but a single breach on your phone won't steal your money," }, { "speaker": "mike_belshe", "time": "01:00:28", "start": 3628.0, "text": "And then you can have your cold storage and your more advanced stuff for your large, large amounts of money. So, so risk based mitigation, I think, is how you deal with this. You have two different policies for two different sets of activity." }, { "speaker": "stephan", "time": "01:00:39", "start": 3639.0, "text": "Yeah. and then on the insurance side of the house Can you talk to us a little bit about that? Like, do you think it will be more and more commonplace that your entire balance is insured, this kind of thing, like over time? Or no, it's, it's difficult to do that?" }, { "speaker": "mike_belshe", "time": "01:00:57", "start": 3657.0, "text": "It, it's gonna depend on the use case a little bit. So," }, { "speaker": "mike_belshe", "time": "01:01:00", "start": 3660.0, "text": "I mentioned Coincover, you know, we work with them on third keys. They sell insurance for retail on multisig wallets. So for personal stuff, they, they can provide insurance like today, and that'll cover some, some amount of size. For the global- Bitcoin digital assets are out there. The total underwriting coverage in the world is probably five, seven billion dollars in size, and yet Bitcoin is like one point six trillion or whatever. Yeah. So That, that means that BitGo and Coinbase and Fireblocks and Kraken and all these other companies added together only have about six billion in cover." }, { "speaker": "mike_belshe", "time": "01:01:43", "start": 3703.0, "text": "That's just not gonna change. I mean, the reality is you've never had a hundred percent cover of assets for, for insurance ever. so alright. Then you might say,\"Well, isn't insurance useless?\" No, insurance is still very important. It's important for a few different reasons. A," }, { "speaker": "mike_belshe", "time": "01:01:59", "start": 3719.0, "text": "We can absolutely architect solutions where you reduce risk by Making losses uncorrelated," }, { "speaker": "mike_belshe", "time": "01:02:09", "start": 3729.0, "text": "Meaning that you split things up into, to multiple pieces. I'll come back to that, in a second. And the second part is, when you get somebody to stand behind your product with a two hundred and fifty million dollar check, it's a big deal. They look at a lot. They look at the governance, they look at like the technology, they look at the operations, they look at everything. So even though just having that inspection, like having an audit, isn't a guarantee It does mean that you had somebody that put two hundred and fifty million dollars behind that they think it's unlikely that you're gonna have an issue. Back to the first issue, a lot of wallets out there, they reuse the same keys, they'll, they'll derive them from a common root. you know, BitGo does some of that within a wallet, but actually we use separate keys across our client segregated funds. And so what that means is that you breach one client, like there's zero chance, zero correlation to another. and then inside of our own storage, we split, as well. So even though we got, you know, upwards of a hundred billion dollars of assets, you know, in the bank, it's not like it's sitting in one big pile. And in fact, if you were to show up- And, have a billion dollars to put a bitgo, we would split that, into somewhere in the neighborhood of ten to fifteen wallets. And a couple of good things come from that. A, it means that if you lost any single wallet, it's like a hundred million dollars instead of a billion dollars." }, { "speaker": "mike_belshe", "time": "01:03:35", "start": 3815.0, "text": "And this happened, right? Remember, Bybit was hacked? I think two years ago now," }, { "speaker": "stephan", "time": "01:03:40", "start": 3820.0, "text": "Right? Right, that was the Gnosis Safe thing. I think there was like a North Korean Lazarus group or something, and they had like, I think the CEO Signed something, and then like the Ledger guys are coming out saying,\"Well, that was because you didn't do clear signing and blind signing. That was what-- that, that was the one, right?\"" }, { "speaker": "mike_belshe", "time": "01:03:57", "start": 3837.0, "text": "That's correct. Right. So the Ledger device was blind signing, so they're just like,\"Uh, click, click, click, click, click.\" So that thing failed, and then the hack was into the user interface, which affected, I guess, all of the approvers on it. But then third, you know, without using a BitGo wallet, without like, you know Split it, just don't. You don't need to spend one point five billion dollars, in a single transaction, just doesn't happen, but they did, right? So had they split that the way BitGo's been doing since 2018, the loss would have been a hundred and fifty million dollars instead of one point five, one tenth of the loss. Yeah. so look, these are things you can do, and then, you know, separating the keys across, clients is one, and then also when, when we do take a client, we split them across" }, { "speaker": "mike_belshe", "time": "01:04:48", "start": 3888.0, "text": "That all just happens at wallet A, wallet B, C, D, E, F, and G. Those keys are parked and not touched, so the chances of having a single event that breaches all those wallets is low. I can't say it's zero, right? Like there's things that we do that, you know, we got the same people, we got the same vaults, we got the same tech, but we minimize that stuff, which is why we're able to get really big insurance packages, et cetera. It's also why You can feel comfortable, at a company like BitGo, even though we don't have-- and it's not possible to get a hundred billion dollars of insurance coverage. Yeah." }, { "speaker": "stephan", "time": "01:05:21", "start": 3921.0, "text": "One other question I had, now you've mentioned earlier in passing, multi-institution custody, right? So Onramp and AnchorWatch are, are in this camp, and I believe you are, you're one of the, participants there. How should people think about that in terms of using, let's say, BitGo as a single custodian versus a multi-institution custody?" }, { "speaker": "mike_belshe", "time": "01:05:44", "start": 3944.0, "text": "Well, so those are really more like kind of elaborate self-custody solutions, I think. You know, they're not qualified custodians. So BitGo tends to hit kind of the institutional side of it. They use some of our tech, to feed into theirs. if it's something that appeals to you, you should, you should use it. and," }, { "speaker": "mike_belshe", "time": "01:06:03", "start": 3963.0, "text": "You get a little bit of advantage there, I don't know, I feel like we get most of the cover from what BitGo does, but different people want different things, so it's a very good choice." }, { "speaker": "stephan", "time": "01:06:14", "start": 3974.0, "text": "Yeah. Look, I think that's, that's probably the, you know, that's probably the one big takeaway, right? Like, there's no one size fits all, there's no one answer that's best. Some people are gonna do self custody, some people gonna do their own multisig, some people are gonna go, you know, whether that's using a BitGo wallet or some other wallet, they're" }, { "speaker": "mike_belshe", "time": "01:06:32", "start": 3992.0, "text": "Gonna use, whatever. so I think- Well, I'd be remiss if I didn't say there's one that's best, we'll just you should use them. you know, be smart, be educated, and, make the best choices for you." }, { "speaker": "stephan", "time": "01:06:51", "start": 4011.0, "text": "Alright, well, I think we'll leave it there, and, let's make sure it's not, six or seven years until our next interview. Thanks for joining me, Mike." }, { "speaker": "mike_belshe", "time": "01:06:59", "start": 4019.0, "text": "Thanks, Stephan." } ] }