It's not just bigger than Ethereum, it's not just bigger
than Solana, it's bigger than all of them combined.
And if D Phi could ever be a lock there, this would be the
biggest opportunity ever to exist in crypto.
There's a really big proposal called OP Cat that's gotten a
lot of momentum, the Bitcoin community in the block size
wars. What we all agreed on was that
Bitcoin was going to scale in layers.
If that happens, we need to allow for trustless bridging in
a much more rigorous architecture of these L twos
connected to Bitcoins L1 and right now we don't have that.
You basically have to convince everyone to change their node
software to run your version of Bitcoin.
And so, you know, different proposals.
Hard forks are extremely difficult and Bitcoin doesn't
upgrade through hard forks and upgrades through soft forks.
This cycle, that's what we'll see, which 10% is still enormous
and by the next cycle then we eclipse Ethereum TBL in terms of
as a percentage of our market cap.
If you're looking to stake your crypto with confidence, look no
further than Course one. More than 150,000 delegators,
including institutions like Bit Go, Pantera Capital and Ledger
Trust Course One with the assets.
They support over 50 block chains and are leaders in
governance or networks like Cosmos, ensuring your stake is
responsibly managed. Thanks to the advanced MEV
research, you can also enjoy the highest staking rewards.
You can stake directly from your preferred wallet, set up a white
label node, restake your assets on Eigenia or Symbiotic, or use
the SDK for multi chain staking in your app.
Learn more at Chorus .1 and start staking today.
This episode is proudly brought to you by Gnosis, a collective
dedicated to advancing a decentralized future.
Gnosis leads innovation with Circles, Gnosis Pay and Metri
reshaping open banking and money.
With Hashi and Gnosis VPN, they're building a more
resilient, privacy focused Internet.
If you're looking for an L1 to launch your project, Gnosis
Chain offers the same development environment as
Ethereum with lower transaction fees.
It's supported by over 200,000 ballot errors, making Gnosis
Chain a reliable and credibly neutral foundation for your
applications. Gnosis Dow drives Gnosis
governance, where every voice matters.
Join the Gnosis community in the Gnosis Dow forum today.
Deploy on the EVM compatible Gnosis Chain or secure the
network with just one GNO and affordable hardware.
Start your decentralization journey today at gnosis dot IO.
Welcome to Epsom of the show, which talks about the
technologies, projects and people driving decentralization
and the blocs and revolution. I'm today with Dan Held, who's
the general partner at Asymmetric, which is a new
Bitcoin focus fund, and he's been in the space for a very
long time. I've also known Dan for a very
long time and I'm sure many of you will know him because I
think he's certainly one of the biggest, maybe the biggest sort
of, you know, influencer, communicator, educator around
Bitcoin. So really excited to have Dan
on. Cool.
Well, thanks so much for coming on Dan.
It's actually, this is like way overdue.
I think we I think we've talked a bunch of times about having
your own epicenter. So yeah, I'm glad it finally
happens and that you're coming on.
I. Appreciate the invite.
Let's start at the beginning. How did you get into crypto?
Yeah, so back in 2011, my buddy paid.
I was in Dallas, TX and my my friend was an engineer and he
paid me back for a beer and a cassetius coin, you know, those
physical gold coins. And of course, the first thing I
do is I figure out how to try to sell it.
You know, everyone back then, I think you know, so it was so
new. There was almost no content out
there to describe how Bitcoin worked or how it functioned.
It was basically just a bunch of very developer focused folks.
So he paid me back for a beer through that started to look
into it a little bit and saw that Silk Road was AI think good
testament to the resiliency of Bitcoin as a currency where I'm
like, I don't know how this thing works, but if the
government can't shut down this payment method, that's something
powerful. That's something, you know, that
has, I was for me, I, I was a libertarian.
So this sort of message resonated with me.
And so in seeing the resiliency of Silk Road that encouraged me
further to explore. I found out about the 21 million
hard cap. And for me, that was the, I
think kind of the Holy Grail moment of this is a breakthrough
of monetary policy. For me, that's the most
important thing here. It's the credibility of the
monetary policy of being the best sound money in the world of
being a goal 2 point O. And that really is what kind of
kind of woke me up to the opportunity.
And so 2012 and 2013 is when I started to really accumulate.
And then in 2013, I built my first product in the crypto
space. So are you interested in kind of
central bank money, gold, things like that before Bitcoin or was
it sort of Bitcoin that got into got into this?
Yeah, good question. So I was studying finance during
the 2008 financial crisis. That moment definitely
radicalized me as I realized the central banks were wrong, the
government was wrong, and all the banks were, you know, every
bank noticed at central banks, but all the banks were wrong.
So for me, that was kind of like a radicalization moment, as I
put it. And I was looking for
alternatives and that's where like gold was an alternative.
And hearing about Bitcoin a little bit later, that's what
really resonated for me as like this is the this is the solution
to our problem of trust with our money.
And then you said you started the company.
What was the company you started?
Actually I I remember I remember being a user of of your app so.
You're definitely OG if you remember 0 block, which is the
the company I built. So there's an app that was a
black and white color scheme, really slick.
It was real time market data, news feeds and charts, which no
mobile app tracking bitcoins price had that at the at the
time doesn't sound that revolutionary because we've had
a lot more builders come in and build great mobile products.
But at that time it was is quite rare.
We ranked number one for the keyword Bitcoin in the App
Store, which I figured out how to hack the App Store ranking
algorithm to get us there. Granted, it doesn't matter if
you ranked number one if you're not the most relevant and good
product for people to download. But that was our kind of growth
hacking strategy. And that launched my career in
marketing in tech because through figuring that out, that
was my specialization was SEO and conversion rate
optimization. So in finding users for the
first app I built, I learned that I'm a good marketer.
I'm a good user acquisition. That is very interesting because
yeah, I think today, right, I guess you're especially known, I
think as I mean among other things, but also as a marketer
right now as a really brilliant marketer in Big on End.
And you also worked on that right later at Kraken and stuff.
But that was really you sort of developed the skills just in
marketing your own product and. Yeah, we, we tried a lot of
different things. So 1, you know, I, I went to the
San Jose Bitcoin conference in 2013 and I went around and, and
met as many people as I could. And I said, what, what app do
you use to check the price of Bitcoin on your phone?
And they'd show me. And I'm like, well, I built this
one. It's free.
It's better. So that doesn't scale though.
I think I got like 100 users through that method.
I tried all sorts of other methods as well.
And what we landed, you know, we got press.
I was in Wired, Wall Street Journal, Forbes, Fortune.
That didn't move the needle either.
We didn't have time to do SEO and and we didn't have really
any resources at all as me and my Co founder.
So App Store search was a really lucrative channel and that's
where a lot of people found apps that they wanted to go download.
So, and being obsessed with that Channel, with being obsessed
with how the App Store worked, I figured out flaws in the, in the
algorithm where I was able to game that and get our app ranked
very highly for the ranked number one for the keyword
Bitcoin, which it wasn't rocket science, but you had to go
experiment and you had to try your luck and you had to be
really obsessed over it to go find that, that, you know, sort
of hacker mentality, I think is really fun for me to find little
things that are, are, are ways I can have an advantage versus
versus other channels. I, I also applied that with my
own personal brand as well. My, you know, I, I, I had
written a series of, of long form pieces of content and if
you write it and no one reads it does, it doesn't really matter.
And I had to go get that content out there.
This is in 2019. This is the development of my
personal brand. In trying to find out how to
distribute my content or get in front of more eyeballs, I had to
figure out how to build a social media presence.
It wasn't entirely by chance that I'd built on my audience.
There are formulaic and calculate calculated ways to
build an audience where I could definitely do it again in like
another category. But it's it's it's a marketing
skill in in conjunction with the message you want to deliver.
But how to leverage your content on social media is a whole
different skill. But anyways, yeah.
I'm actually maybe just briefly, yeah, I mean, we're not going to
go into like a lot of details there, but I'm curious, what are
the for people who are interested in this, right And
they want to kind of amplify their own their own reach, what
are some of the best simplest tapes or lessons?
I'll tell you the secret, but no one who listened to who listens
to this is going to do it. You have to post every single
day and never, ever miss your dog dies.
You got to post. Have a bad day, You got a
hangover, you got to post. That is the number one factor of
success. And it sounds easy, right?
You're like, tweet a day. I can do that.
Try doing it for seven years. It's, it's not that easy.
And the reason why that's important is that the engagement
algorithm, what it does is, you know, 99% of people are
consumers of content, 1% of folks produce content.
So the algorithm for the consumers of content, when they
session in the app, say it's Twitter, the, the algorithm has
to go fetch content that they think this person will like to
read or, or digest. And if they like it, they'll
stick around and keep doom scrolling.
That's what we all do on social, right?
So how does it pick which content to show you first?
Well, the only way to pick content to show you first is
content that from content creators that you've previously
engaged with. So if you've liked a Dan
Helltweet the last 15 days in a row, if the algorithm's like,
let's give him a Dan Helltweet, he's probably like that.
And so that's how that sticky habit gets built with you and
your audience. And if you're not there, if your
content isn't there that day, it has to go find someone else.
And that's where you lose that engagement loop.
Posting in the morning, your audience is awake.
There's so many times where I see people tweet out at like
10:00 PM, you know, like US time.
And I'm like, cool. Well, maybe like a fraction of
your audience is awake. So the chance of this going and,
and gaining traction and going viral's like almost zero.
Now, of course, if it's timely or topical, sometimes you have
to. But posting in the morning gives
it the greatest shot to get the most engagement possible.
And then, you know, I think a lot of this isn't rocket
science. It's create content that people
want to consume. I think a lot of people get
really stuck on like producing incredibly high quality content
or content they think is good. And all that really matters is
what your audience wants. What content does your audience
want? And if you want to do it to such
a degree that it dilutes your message or you're not posting
what you believe in, but at the same time you should be humble
enough to be like, OK, maybe my joke wasn't as funny as I
thought. You know what I mean?
So, yeah, that's where I feel like there's, yeah, a lot of
people approach it with their own subjective version of what
they think the market might want versus versus like what their
audience will like. Great.
So basically I, I love it. Yeah.
Like, well, it's supposed to every single day.
And then I guess it's just a lot of you also looking at data sort
of what, what's popular do more of that.
And I, I guess then it becomes kind of a bit similar to the way
you approach to hacking the the App Store right where you just
running experiments. Yeah, I mean, some fun, fun
things to give people some tactical insights here you can
use, there's all sorts of different tools.
One of them is called Social social Blade.
On Social Blade, you can look at other people's new follower
count metrics. And so I looked at some of the
top influencers in crypto and I looked at their spiky moments
when they got a lot of followers.
And then I went on and I used Twitter advanced search to go
look at which tweets they put out on the day where they got
the most followers. It's really not rocket science,
but I, I, I have gone down the rabbit hole pretty extensively.
So yeah, Twitter Advanced Search and Socialblade 2 free tools
that are great. Twitter Advanced search as well.
You can look for every single tweet that mentions Bitcoin
mining. And I'm just coming up with
random words here and Trump. And you could look for the top
performing tweets ever or between a certain date range or
from a certain influencer with those keywords.
So Twitter advanced search is built into Twitter.
I used to go to the toolbar, type in a a query into the in
the Twitter search bar and then tap the three little dots
that'll open up the the Twitter advanced search.
Almost no one uses that. It's, it's pretty funny too,
because you know, my professional capacity, and we'll
touch on this in a second is, is in marketing where I used to
leave marketing when I Kraken and now I do fractional CMO work
and marketing advisory work alongside my fund.
What's funny is I interview social media managers and I'm
the rare CMO that understands social to a degree that is
extremely proficient, right? Most CMOS don't have a huge
social media presence. So for me, I, you know, if they
don't use Twitter advanced search, I'm, I'm definitely not,
not going to hire them. I'm like, this is one of the
easiest ways to find alpha. So it's funny though, most most
people don't pull open Twitter advanced search or they won't
have much insights into like how they think through optimizing
their content for conversion or for like maximum engagement.
Great No, I love this and I really appreciate it.
I think it's I'm going to I'm going to aim to be one of the
people defying your rule of nobody ever follows you single
lessons. So.
I hope to see some Brian tweets 2 years from now.
Let's let's, let's do it. Yeah, yeah.
OK. So and then you mentioned, so 0
block was acquired right, that was required by Kraken or?
So block blockchain.com acquired A0 Block back in December 2013
and I came on board blockchain.com as the first
product manager, which is quite some time ago.
And to be honest, I was a very mediocre product manager, but
none of us really knew what we were doing at the time.
So it's just what it was in crypto back then.
There weren't there were many a players in the space and I was,
I was doing, we were all doing our best.
So yeah, blockchain.com was one of the hottest companies back in
2013. Nowadays, no one really talks
about them. They kind of they very much
faded from relevancy. But back in 2013, blockchain.com
was the most popular non custodial wallet.
There weren't hardware wallets back then, or at least not that
I can remember. And before BIP 39, we didn't
have, we didn't have mnemonics, 12 to 24 word backups.
So you still have to print out your private key.
Watching a COM was the first non custodial wallet that you know,
they, they had the wallet that basically they had the wallet
file and they would deliver, you know, the wallet file down to
the browser and you would decrypt it in your browser, you
know, entering your your password.
So it was a pretty huge user experience breakthrough and it
was the most popular wallet at that time.
So that was a really cool experience.
But yeah, if we want to kind of round out the court, the career
side did that did change tip? You probably remember change tip
but we did micro payments. Yeah, yeah, on Twitter where you
could. Yeah, you could send someone a
beer and the beer would represent $2.00 worth of Bitcoin
or yeah, which is a pretty fun dynamic, you know, because
Twitter eventually came out with like the ability to tip each
other in, like Satoshi's so explored that.
That company failed though, unfortunately.
So I was just an employee there, but that company failed.
Then I worked at Uber headquarters on Ryder Gross and
growth marketing. Worked for some legendary folks
there. That was very formulative to
building out a kind of my my more formalized career in
marketing. Uber was a really fun company, a
very libertarian company where Uber, people forget Uber was
illegal in every single city it launched.
And like, there's not many tech companies who are like, yeah,
fuck the laws, we're just going to go full illegal.
You know, Uber was a very fun culture of like high intensity,
but like, and, but very polite. But also the idea that there are
no rules. Like there's consequences to
breaking a rule, but don't let these rules define you and, and
stop you from building something amazing.
You know, same with like Elon Musk and other companies where
they kind of break all these barriers of what people thought
was never possible. You know, laws are laws.
But like, are, are taxi laws moral?
Not really. You know, I don't think there's
any morality there. That was just a cabal.
So we broke up that taxi cabal and then left there, did another
startup called Interchange. We got bought by Kraken and I
came over. I came on board at Kraken and
eventually built out the marketing team from 2 to 30.
That was from 2019 through 2022. What was the experience like
doing marketing at Kraken? Krakens intense, we had a lot of
catch up to do. I think to be I think this is
like both pretty obvious with our our website and other
marketing materials. We had done very little
marketing. The previous CMO had just been
let go and I had brought in Jeremy Welch, the Chief Product
Officer And so I pitched Jeremy and and Jesse, I said, hey, I
think I could take this team from 2 and scale it out to be in
a real marketing org. The previous CMO didn't really
have that crypto sort of mindset and they just weren't a good
fit. And so it was a pretty strenuous
intense process of like marketing hadn't really been
represented well in the company. We hadn't redesigned our
homepage in four years. I mean this, you can use the
Wayback Machine to look at this. So this isn't sharing sensitive
information, but there were a lot of things that we hadn't
done before that were brass tacks for marketing org.
So we had a lot of catch up to do, a lot of work to take it
over what marketing did to some degree.
So I had to claw back that territory.
So clawing back that territory and building up the analytics
infrastructure, building up trust, which is, you know, takes
a very long time to do, especially when you're looking
at budgets of Kraken and and coin basis size.
When you go start to spend and you're allocating, you know,
millions of dollars per different marketing channels.
So there's two things in marketing that are kind of
define the success of marketing, right?
It's incrementality. Did US spending money on
marketing lead to incremental revenue, right, which is
actually quite difficult to to to determine.
And then oftentimes the way to calculate that is turning all
the ads off and then turning them back on again.
So there's which at Uber we did that called an incrementality
test incrementality. So did the additional, the
marketing dollars that we spent at it increase additional income
or or revenue? And then calculating the
lifetime value of a customer, that's really difficult because
we know what it costs to acquire a customer, but predicting how
much money they're going to make us, that is, you know, that is a
complex future cash flows calculation, which are what
requires a lot of assumptions. So Long story short, those
conversations are really nuanced and took a long time to develop,
I would say a rigorous framework that we all agreed, agreed upon.
So yeah, building, I'm working at crack.
It was a very strenuous, very intense role.
I worked at about 100 hours a week for three years.
So it was not sustainable long term.
That's where I left crack. And I wanted to go do something
a little bit more, a little bit better work life balance.
And also three years at an exchange, three years in crypto
at any companies, a long time. And I wanted to go to like, go,
go get my arms around the next challenge.
So let's talk about your fund should also disclose here.
I actually talked about your fund with you at the Situation
Roundtable earlier this year and then ended up investing in your
fund as well. So I want to disclose that here.
But yeah, so you, you launched a Bitcoin focused one called
Asymmetric. Why did you decide to do that?
Yeah, great question. So when I was at Kraken, I was
in, you know, I was putting out content around Bitcoin and I
started to look into Bitcoin Defy.
Now at this time, that was like lightning coin joins, stacks,
liquid really wasn't a lot going on there.
But I saw a glimmer of something that could happen.
And if Defy could happen on top of Bitcoin, which Bitcoin is the
biggest chain out there in terms of like like market cap, it's
bigger than everything else combined.
It's not just bigger than Ethereum, It's not just bigger
than Solana, it's bigger than all of them combined.
And if Defy could ever be a lock there, this would be the biggest
opportunity ever to exist in crypto.
So when I was leaving Kraken, this is where I identified where
I wanted to spend the rest of my career was in Bitcoin Defy.
So this is 20/22. Remember, this is before
Ordinals came out. Ordinals very much popularized
Defy on top of Bitcoin. But before that, this was a very
weird thing to do. Most people didn't believe this
could happen. This belief was attacked by both
the Bitcoin Maxis and the other other crypto folks.
Everyone's like, that's impossible.
That's never going to happen. And so TechCrunch actually wrote
up my departure from Kraken where I lay out my thesis in
July of 2022 for Bitcoin Defy, which is fun to read back on,
read back on because it's it's kind of prophetic.
So in doing that, I left Kraken and started to do fractional CMO
work where I helped out companies like Taproot Wizards
and Trust Machines. These are really popular, really
well known companies in the Bitcoin Defy world.
I was boots on the ground at seeing what they were building
and seeing what they were capable of doing with whether it
be ordinals or Bitcoin layer two tech like stacks in seeing how
those could be built. For me, this was kind of a
breakthrough where I'm like, this is going to be a thing.
This is this. I'm an early product builder,
early marketer and I I can see this category being huge.
So I started to cut Angel checks into the space.
And then in earlier part of this year, I decided to formalize
this into a fund called the Asymmetric Bitcoin D5 Venture
Fund. It's a fund within the firm
called Asymmetric. Asymmetric has another fund,
another two funds in the firm I run the Bitcoin D5 intra fund.
We invest in the early stage Bitcoin D5 projects that are
focused on like protocols. So this could be a Bitcoin L2A
meta protocol or a DAP. And so we've already cut 6
checks into the category one of the mean fractal Bitcoin.
I don't know if you've been paying attention to that fractal
Bitcoin. They've already debuted.
So they've already had their initial token off their initial
token generation event and they have like $20 million a day in
trading volume at like a $3 billion market cap.
So I'm not sure if you even knew that yet.
I'm I'm sort of delivered. Actually, no, I, I I fractal is
is one I'm not I mean, I follow a bit the this space.
It's also something where you know, it primarily run course 1
staking company. So we are also spending a fair
bit of time, you know, starting to run infrastructure for some
of these Bitcoin site, Bitcoin connected associated protocols.
But this is not one I I actually didn't follow this one.
I think a connected connected is an easier way to phrase it.
It's hard to what what is the definition of an L2 these days?
It's a little bit subjective. So yeah, connected to Bitcoin in
some sort of way. I think that's a fair way to
associate it. But yeah, we, we already made
six investments. The fund started in February.
We came out of the gate storming because this was the right time,
right opportunity. So for us, it's been, it's been
a very exciting six months. It's been a very exhausting 6
months. Raising and deploying at the
same time was, was quite intense.
But we got into some really good deals.
I've spent a ton of time as a founder, almost a decade as a
founder. So I know what founders look
like, what founders are going to, you know, really hustle for
seven to 10 years to make this happen.
I look for people that are in it for the log haul.
So it's been it's been cool to see and been been really fun to
be on the other side of the table as an investor.
Cool, amazing. So let's maybe let's talk a
little bit about sort of Bitcoin history because in a way this is
an interesting thing that has happened.
And I think it's sort of surprised many people, including
me, you know, because I mean, I got into interesting big on
2013. You know, it was we excited
about Bitcoin. I was always very excited about
interested in other things as well, like non Bitcoin.
I mean, of course, back then we already had some protocols that
were, you know, there was a protocol called Counterparty.
There was one called Master coin.
Later we branded the Omni that were basically looking to build
things on top of Bitcoin like, you know, issuing different
assets, stuff like that. And then of course, Ethereum
came and I would say all of that activity kind of, you know,
moved to Ethereum and then to other blockchains.
And, and now, of course, there's a bit of, well, it's not fair to
say all of it, right? I think there's a good little
bit that remained on, on Bitcoin.
I mean, lightning, right, was very early on and I think some
work started there and I think kept going.
And then I remember there was also a big a big moment right in
the Bitcoin history was this block size debate, which
probably most listeners do not remember, but some of you will,
right where there was a huge controversy around sort of
should the block size be increased.
But I think it was also a more a deeper controversy about, you
know, how should we think about protocol changes to Bitcoin.
So how do you see that kind of like history of Bitcoin and how
it LED now to this new emergence of these new protocols and this
innovation? Yeah, that's a really good
question. I appreciate that you brought it
up. When we look at what what the,
the short take on this is that a lot of these things started on
Bitcoin, Ethereum popularized them, and now they're coming
back to Bitcoin. For example, NFTS started on
Bitcoin with Counterparty, Rare Pepes.
Rare Pepes are the first NFTS ever created.
And so it wasn't crypto kitties that were the first NFTS who was
actually on a Bitcoin called Rare Pepes Ethereum.
Though, of course, I think the architecture of the Ethereum
protocol is much more advantageous for the blossoming
of, of NFTS in the 17 through 2023 era.
NFTS have come back to Bitcoin in the form of ordinals and
actually think it's a better way to do NFTS on a blockchain cause
the graphic assets exist on chain.
There's a lot of elements of that that I think are a little
bit more congruent with what we really want an NFT to be.
We also don't want a contract for NFTS to be changed.
Or you could, you could add or remove items from a collection,
whereas like they can't happen with ordinals.
So there. And there's a costliness factor
as well. Like with other chains, you can
spin up NFTS, 10s of thousands of them almost for free.
Versus on Bitcoin, you have to inscribe them, which is very
costly because you have to pay for that block space like anyone
else does, like any other transactor.
So there's some, I think kind of really interesting game dynamics
that appear here where these are very costly to inscribe, which
reduces the number of collections and I think
increases the quality of the output.
That's one example. We also have things like, you
know, layer twos like Bitcoin experimented with lightning and
liquid being in rootstock, being in stacks, but liquid has no
activity. Same with rootstock and
lightning has minimal activity. I mean, I'm still bullish on, on
all these. I, I want to see all these L
twos succeed, but that's just kind of like I'm just laying
down the facts of what's going on today.
But on Ethereum, you saw this hugely emergent blossoming L2
ecosystem. And I think we're going to see
that come back to Bitcoin in this cycle.
And that's why we're investing in that category.
There's a lot of Bitcoin L twos here that I think are have
looked at how the Ethereum L twos launched the last bull run
taking those playbooks and bringing them back to Bitcoin.
So I think we're going to see a Bitcoin L2 renaissance happen
this cycle. We we've seen some early
glimmers of this with like STAX, for example, has a 3 billion
market cap. And so STAX, I think the STAX is
almost 10 years old now. The protocol didn't launch until
a few years ago, but they've been working on it for almost a
decade. I think that they're sort of
leading the way of of expectations of like what this
cycle is going to look like. But yeah, we are just so again,
to mimic the NFT route, but started on Bitcoin, Ethereum
popularized them or did them at scale.
Now it's coming back to Bitcoin in a certain fashion.
So there's that. Now going back to your question
around block size, Bitcoin protocol upgrades, kind of
community and political split. So there definitely is a riff in
the community politics wise of folks who want this activity to
happen on Bitcoin versus those who don't.
Most of the people who do not want this activity to happen on
Bitcoin are very new Bitcoiners. They weren't around for the
block size, whereas they also weren't around for any of the
early Bitcoin discussions where in the 2013 through 2016 cycle,
we would often say, well, let's let the other alt experiment on
stuff and we'll bring what works back to Bitcoin.
Well, we clearly saw this worked on Ethereum and Solana and we're
bringing it back to Bitcoin. So, you know, those folks aren't
Ogs. They're not, they haven't been
around a long time and they don't really rock why Bitcoin's
valuable. They're also really obsessed.
These kind of newer Bitcoins are, which is very bizarre, kind
of like the B cashiers. They're obsessed with payments,
like using Bitcoin to pay for coffee and stuff, which again,
does not solve the problem. I mean, you're OG enough to
remember this. We've gone through three waves
of this. We made a serious attempt at
that, I mean, but that just did not work at all and it's not
going to work. For a very simple product
reason. What problem is it solving?
It's not solving a problem. Bitcoin solves other problems.
It solves the problem of storing your money in a way that's hard
to be hard to seized. So like Bitcoin is extremely
hard to seize if you if you store them on a private key that
you control like you, you, you control your private key.
It has a monetary policy that is the best monetary policy on the
planet amongst crypto assets and traditional Fiat and gold.
And then you look at it the other factor which is it's
immutability. You can't censor it.
That's great, but I don't need it.
Censorship resistant nuclear grade payments for my cup of
coffee. And so in, you know, to
sacrifice the user experience. It's also more costly to ask a
consumer to do that. I think it's a grossly negligent
way to approach product building.
And if we look at the last 12 years have been in the space,
we've seen hundreds of payment startups fail hundreds.
I mean, there's no, there's no reason why a consumer would want
this. And they consistently bring up
talking points like, well, merchants like it.
I'm like, that's great. I'm sure merchants love it, but
that doesn't solve the other part of the equation of people
wanting to pay. And so I feel like I'm taking
crazy pills after all this time. ANYWAYS, I, I, I'm going off on
a tangent. There's A2 categories of
Bitcoiners is like the OG ones who understand all the nuances
of how Bitcoin development has occurred so far, which by the
way, Bitcoin has changed a number of times.
Not materially though, but these are like some more small
upgrades and they understand that Bitcoin has to change a
little bit in the future to sort things like bugs and and some
things that allow for more expressibility.
So there's a really big proposal called OP Cat that's gotten a
lot of momentum, the Bitcoin community and the block size
wars. What we all agreed on was that
Bitcoin was going to scale in layers.
Then not all the activity was going to happen on the Bitcoin
base layer because we couldn't just keep keep increasing the
block size for forever. We had to scale Bitcoin in
layers as part of that. That means we have to push user
activity to the Bitcoin layers as transaction fees.
It could be more expensive on L1.
People can only transact on L twos and maybe occasionally
transact on the L1. If that happens, we need to
allow for trustless bridging in a much more the rigorous
architecture of these L twos connected to Bitcoins L1.
And right now we don't have that things like OP cat or covenants
allow us to, I would say, deliver on our original
compromise and promise of Bitcoin scaling and layers to a
level that I think really supports that user activity in a
way where people don't have to make all these trade-offs when
they're on this L2. They can use this L2 with almost
the same security assumptions as Bitcoin L1.
I think that's that I think is extremely important for the
future of the protocol. I know this is also something
that I think there's been discussions for for many years,
right, where people were like, hey, let us add a bit of
functionality to Bitcoin that basic then allows, you know,
verification much more easily or things happening elsewhere.
So I remember I think there was also, you know, snarks or there
was a bunch of stuff that was discussed here.
Can you just explain what OP cat like how it works and what
exactly it is? Yeah.
So OP cat was originally in Bitcoin.
Satoshi put it in Bitcoin and then removed it because he
wasn't sure if there might be a bug introduced.
He also, there was a lot of other OP codes.
That's where OP stands for OP code.
There's a lot of other OP codes that he disabled as well.
Some of those were RE enabled, some of those weren't.
When we look at OP Cat, cat stands for concatenation, which
means combining and so it allows you to combine code and through
that you are able to build things like trestles, bridges.
I am not technical enough to dive into the details of exactly
code wise how that works, but this works with eight lines of
code. That's it.
It's an extremely tiny upgrade. And what's nice too is it's not
a, it's not a hard fork, it's a soft fork.
So with that, what that means is that we don't have to.
For example, most of the bridged Bitcoin today is protected
through a Federated model, which means multi sig.
There are multiple folks who control this Bitcoin in a in a
pot and we have to trust that they won't collude with each
other to take that Bitcoin away from us, which that's an OK
security assumption, but it's not great with OP cat.
We can have trustless bridging where we don't trust this cabal,
we don't trust this group. We can use Bitcoin on these L
twos in a way that we don't have to trust the L2 or any other
group. We can use that Bitcoin in a
almost purely trustless manner. I had, I feel like I had a
podcast or I had the conversation just recently
where, you know, there's also discussion around the ZK and you
know, whether you could like verify or bring in the future
make them change for Bitcoin so you could verify ZK proofs Is OP
cat, would it enable that? Or do you think this is going to
be sort of like the only and last change that's needed?
Or are there some other things that would also be powerful to
have in the future? Yeah, I mean, there's been
discussions of bringing back almost all these these OP codes
or kind of like the it's called like the great script
restoration process where like we would it would be OP CAT and
a bunch of other ones, Covenants, CTV, these other
proposals have a lot of energy behind them, a lot of political
momentum. Some of these allow for
verification of like CK Starks, like what you mentioned.
You know, I would say it's TBD on on if one or multiple get a
get sort of through consensus. But I would say like CTV and
OPCAD have the highest momentum behind them.
And and so I mean, I also remember actually at this block
size, when this block size debate happened years ago, of
course, one of the big challenges was that or one of
the big challenges, But you know, it's also a feature of
Bitcoin to some extent is that there's no governance process,
right? So we basic or no official like
governance process. So you basically had, you know,
on the one hand, Bitcoin Co developer who controlled the bit
GitHub repo, there was some sort of governance on that.
Who has access, who gets kicked off?
And then of course, you have the miner ultimately who decide what
software they run, who are like really the ultimate arbiters.
How do you see this kind of governance process playing out
around around OP Cat? And when do you hope this is
going to be part of the Bitcoin protocol?
Yeah. So you know, when we look at
the, the biggest thing in the box has was there was two
things. One, technically the protocol
can't just scale in larger and larger block sizes for forever.
Now is the Bitcoin current block size perfect?
No, but we don't know what the perfect block size should be.
But what we do know is that you would eventually want to have
some sort of cap on the block size.
And you want a cap because the bigger it is, the harder it is
to run a node, the less number of nodes you have and the less
amount of people who can connect directly to the Bitcoin network.
Bitcoin network prizes itself prides itself in the ability for
people to connect directly with it and make that semi easy to
run. This is different than a lot of
the other block chains which are much more complex to run a node
or much more costly to run a node.
That were some of the considerations.
The reason why you know, So what is the right what's the right
block size? No one knows what the right
block size should be. But what we did know is that the
process to make changes in Bitcoin, there were a group of
businesses that wanted to push a a block size increase and the
Bitcoin community revolted against that.
And so that's where Bitcoin Cash was, the hard fork that was
resulted from this kind of cabal coming together and trying to
push changes in Bitcoin. The outcome of this basically
showed that the Bitcoin network isn't owned or controlled by
companies. It's controlled by everyone in
the process of getting something upgraded.
And Bitcoin is extremely complicated.
You basically have to convince everyone to change their node
software to run your version of Bitcoin.
And so, you know, different proposals.
Hard forks are extremely difficult and Bitcoin doesn't
upgrade through hard forks. It upgrades through soft forks,
primarily through soft forks. So with soft forks, you know
that that's a much easier upgrade process.
But essentially you have to get, you know, miners, node runners,
economic actors and the community all on board.
And so that process is extremely convoluted.
But if you go to Qantas, so Tappert Wizards, one of my
clients, they built out something called BIP land, VIP
land. BIP land is a comic strip that
shows you how a BIP or Bitcoin, you know, improvement proposal
gets implemented, which is any sort of upgrade to Bitcoin, what
process it goes through to be evaluated.
Most of these of course have a multi year evaluation period
where it's talked about, theorized, analyzed by some of
the top brightest minded cryptography.
And then people make it, it's given a BIP and the BIP is a
proposal and eventually there's enough political buy in from all
those parties I mentioned earlier to where that BIP gets
implemented. But yeah, it's a it's a
convoluted and very lengthy and laborious political process,
which is good. You don't want changes to be
easy to be added to the protocol because if they could malicious
actors like states like governments or people who've
paid off certain individuals, they could push proposals
forward with little. If there's little resistance,
then all of a sudden you've got a lot of changes in the protocol
that could be hazardous. Yeah, for sure.
I mean, I, I was in the time in favor of the block size increase
as I think a lot, a lot of people were right in the
community. Now, I do feel that in
retrospect, and I felt like the arguments against increasing it,
it didn't make like a ton of sense to me, except one that I
actually feel like wasn't really made a lot during that debate.
But I feel like later I was like, that's actually a really
big benefit that it sort of the heartful didn't happen, which is
exactly your point, right? It's basically just about, you
know, the difficulty of changing a Bitcoin protocol also gives
you, you know, a huge amount of resilience against, yeah state
actors or others that will end up wanting to disrupt the
network. And when when we look at
bitcoins purpose, right, like what problem does it solve?
A lot of the block size increase folks were like, oh, it's meant
for payments and we did never really saw the payments use case
take off. So not only was a technical,
the, the technical knowledge was off because you can't just keep
scaling for forever. You have to eventually have a
limit. 2 is that they didn't even understand bitcoins value
prop like why Bitcoin is valuable?
What problem was it solving? And it's not cheap payments.
And then finally, you know, the process to upgrade Bitcoin.
Yeah, that it had to be this really laborious process,
because otherwise you would introduce easy political changes
that would be kind of done out of whim.
Do you hope, OP Cat's going to happen like this year, next
year? I mean, this year probably not,
no. Next year or like what's the
sort of timeline that you hope? I think we're looking at
probably one to two years. I think other folks are more
optimistic. I'm also throwing out a
prediction that had OP cat. If it does get implemented
sooner, it'll mark the top of the cycle.
So, so the top of the cycle being it gets implemented.
We, we saw a little bit of this in previous cycles where
protocol updates are highly anticipated and a lot is traded
as people think, OK, upgrade to the protocol.
That's a good thing, which almost always is.
So I think it would trade really well and that would probably
mark kind of the peak fervor and peak FOMO of the market.
You're doing this Bitcoin D5 fund.
Why is Bitcoin D5 so important? What what do you hope are the
kind of like use cases, utilities, user experiences that
Bitcoin D5 will enable? Yeah.
Well, we've seen all these use cases over in Ethereum and
Solana. So I think it's pretty well
established, but easy ones to pick out lending and borrowing
other types of assets. You have NFTS and governance
tokens, which are unique types of assets that do not compete
with Bitcoin as a money. They're very distinctly
different. Like we wouldn't say that
Bitcoin competes with Apple stock.
It's not the same thing. I mean, some Bitcoiners might,
they could claim that like people park their wealth in S&P
just to like make sure that their money doesn't get inflated
away. But for all the intents and
purposes, like a money doesn't compete with other asset types.
There's multiple types of assets.
And so NFTS and governance tokens I think are really key.
We've got L twos. L twos love Bitcoin to scale.
And what's really interesting about Bitcoin L twos versus
Ethereum L twos is that Bitcoin L twos are more expressive.
Ethereum L twos are just cheaper and faster.
Bitcoin L twos are cheaper, faster and more expressive
because these Bitcoin L twos can be like EVM or SVM, which means
that you can get all of these really cool D fi things that you
want to go build on this Bitcoin L2.
That's an amazing thing to happen.
And I think that that will pull a lot of TVL up from Bitcoin L1,
bring it to L2. And I think that the we're going
to see huge amounts of TVL, much higher than Etherium L twos.
Because again, the Ethereum L twos don't allow you to do more
things. They just allow you to do it
cheaper and faster. Whereas there's a very strong
reason you should use a Bitcoin L2 because you can do all the
cool defy stuff with it. So what's your prediction like
what percentage of Bitcoin do you think ends up getting used
in, you know, whether it's staking or some sort of
protocols or even just move to to some L2, but.
Good question. I mean if you look at the
relative like TVL lock of of Bitcoin versus Ethereum L2's
currently it's like a tiny fraction like .01% or .1%.
I mean, I think we'll see Bitcoin let's let's just talk
about D5 locked up in Bitcoin, locked up in Bitcoin D5, whether
that be L2's meta protocols, you got things as well like Babylon,
which is restaking where Bitcoin is being used as proof of stake
assets for other block chains. I think as a percentage of
Bitcoins market cap, probably 10%, which is enormous.
You know, like that's still gigantic.
I think Ethereum is closer to 20 to 30%.
But I think this cycle that's what we'll see, which 10% is
still enormous. And by the next cycle, then we
eclipse Ethereum TBL in terms of as a percentage of our market
cap. Yeah, that's interesting.
I mean, my my expectations definitely mean that it it will,
it will sort of remain lower because just because I think
Ethereum people are more used to like, you know, that kind of
from the beginning, those kind of things are like a part of the
Ethereum vision or as I think for Bitcoin, it's a sort of new
thing. So I imagine there's like maybe
more people who are not or it's going to take more time, right,
for people to really sort of wrap their head around, oh, I
can do something with my Bitcoin and now I can earn, you know,
some kind of yield. Well what's cool is that 87% of
Bitcoin owners hold them to the crypto asset.
So it's not like these are just a giant group of Bitcoin Maxis.
The Bitcoin holders all along have been multi coiners, so
they're, I think they're very willing and ready to do that
with their Bitcoin. I think that they've been doing
this with their Ethereum and Solana, and if they could do
that with their Bitcoin, they definitely will.
And do you think the timeline this is kind of like starting to
happen now and you know, sort of you, you expect we're going to
see a lot of protocols go live in 2025 or like what's, what's
sort of the expectation on the pace of which this, this sort of
wave unfolds? Yeah, we've already had some go
live. I would say most of them are
targeting late Q4 or early Q1 for like going live with that.
You know, there's so much there that you know we're we're we're
about to see kind of an explosion of activity.
I think people, I think folks will definitely time their
launches based on market conditions.
So I think you're going to see a lot of these be contingent based
on the bull run happening. Yeah, yeah.
And what, what are you mentioned for a fractal earlier or like
what, what are the some of the projects that you think you're
most excited about and that you think will have the biggest
impact? Yeah, we invested in Bob Mezzo
and Bitlayer. Those are all Bitcoin L twos,
really great builders, love the go to market strategy.
We think that the go to market strategy is the most important
element of this. When you look at Bitcoin L twos,
there's, it's really hard to differentiate the different L
twos. And so brand positioning go to
market strategy is going to be critical.
We believe that these founders at those, those 3L twos have
that specific capability. Outside of that, we've got
Fractal, which Fractal is a meta protocol.
So it's not a Bitcoin L2, it's it's more of interacting with a
Bitcoin base layer. And it's sort of like meta
protocols are really interesting because essentially activities
happening on Bitcoin L1 and there's a another network that
interprets the activity happening on the Bitcoin L1 and
that kind of lock smart contracts and other other sort
of event based kind of financial primitives.
So then outside of Fractal, the two Daps we've invested in are
Liquidium. Liquidium allows you to borrow
Bitcoin using your ordinal as collateral and that uses
discrete law contracts in the Bitcoin base layer to do that.
Really cool piece of tech. I've been looking at DLCS for a
long time. I think it's super interesting.
So we've got DLCS powering, powering Liquidium, and then SAP
Flow is a MEV visualization tool.
A lot of the Dexes that are the Dexes that work on Bitcoin
currently use partially assigned Bitcoin transactions, and with
that, those transactions can be sniped.
So they built the first MEV visualization tool and with that
they allow for people to snipe those transactions.
They're using that to go build out something bigger.
I can't talk about it now, but they've got a really cool
strategy to go become a much bigger player in the space.
And they're utilizing their, I think, unique visualization of
Bitcoin mem pool to leverage that to something for something
that's I think a really, really cool bigger, bigger concept.
Yeah. I mean, I think that's of course
something that is also going to be very interesting to see,
right? I mean, on Ethereum, we've had a
huge amount of interesting activity around MEV and I think
it's also on some other ecosystems like Solana.
There's a lot happening right now.
But of course that kind of thing coming to Bitcoin and then
interacting with the mining is going to be interesting too.
I'm curious. So one of the concerns that
people both the had around Bitcoin is also concerned that I
think was always felt like a really legitimate one to me.
Is that OK with time, the block rewards go down, the security
budget goes down, you know, hopefully the Bitcoin market cap
goes up So like as a percentage of the value at stake attacking
it becomes cheaper. Now, of course, the one thing to
encounter act that is if if we do see significant transaction
fees. And so I guess it seems pretty
obvious that all of this Bitcoin L2D5 meta protocol can result in
that. Is that also one of the things
you see or? Yeah, it's a huge benefit.
What I've written extensively on the Bitcoin block subsidy, our
block Bitcoin's long term security model based on the
declining subsidy over time. For those who don't know the
Bitcoin, each block has a block reward.
The block reward is comprised of newly minted Bitcoin, called the
subsidy and transaction fees. Given that at every single
halving we have the amount of Bitcoin subsidy per block, that
means that the number of Bitcoin being issued over time is
decreasing exponentially. That means that transaction fees
over time need to compensate for the reduction in subsidy.
That's why it's called a subsidy.
After all. There are a couple different
components here that a lot of people gloss over. 1 is that
despite the halvings, the dollar value of the Bitcoin block
reward has gone up exponentially over time because Bitcoin's
value has gone up. So if Bitcoin's value goes up,
then the subsidy decrease doesn't matter that much because
the Bitcoin's value has got up so much.
The US dollar value, which is a much better way for us to
evaluate long term security model is using something more
stable than Bitcoin's price to evaluate security.
So the dollar is typically used for that of dollar value of the
block size reward and that's going up over time due to
Bitcoin's value increasing relative to the dollar, which
makes sense. Transaction fees ultimately
though need to replace the subsidy and with ordinals we saw
a glimmer of that where transaction fees are extended
periods of non bull run time periods where transaction fees
went higher and much higher and sustained for a good amount of
time. I think in this next bull run,
due to meta protocols like ordinals becoming even more
popular, we'll see very long term sustained high fee markets,
which is indicative that bitcoins long term security
budget problem is going to be solved.
Now on the Ethereum side, there's been some incredibly
intellectually dishonest folks not going to call out names, but
I think we know those types that constantly whine about bitcoins
long term security budget problem.
And the common question I asked them what they all refuse to
answer is I tell that I asked them what is an appropriate
level of security budget. No one knows no one knows how
much is necessary. And so to say that it's flawed
and bitcoins going to have to change a 21 million hard cap to
keep the subsidy going because we, because the security will
fall so low. I find that incredibly dishonest
and just like just a really weird way to debate because they
won't even come up with a level that they find appropriate.
I'll be the cool, what's the number?
What's, what's an appropriate level of security spend?
And they're like, I don't know, but it's going down.
And it, I, I think that since the Bitcoin and the per block is
going down and the transaction fees aren't going up, then then
it for sure will fail. And I'm like, well, what if
there's an inflection moment like Ordinals where all of a
sudden there's huge demand for Bitcoin block space, which is
what we're seeing with Bitcoin Defy.
There's going to be huge demand for Bitcoin block space because
people want to use this immutable Ledger that is is
incredibly secure. So through that demand for that
block space, we'll see transaction fees rise.
And here's another fun one. You know, we have had much lower
security budgets in the past, but Bitcoin hasn't been
destroyed. Yeah, absolutely.
Right. Like, so, you know, you could
have destroyed it much easier previously.
And it's becoming much harder as Bitcoin gets more and larger,
larger in value and it has more and more transaction fees.
So, yeah, A, the the critics don't know what an appropriate
level of security spend because it's entirely subjective.
B, Bitcoin security spend has been increasing in dollar value,
not decreasing. Yeah.
That's true. I mean, although of course, it's
also the case that as Bitcoin becomes more valuable, sort of
the the potential gain or incentive someone has to attack
it and willing to suspend to attack, you know, you'd expect
that to also go up. I agree that's a, that's a good
counter to that where you'd expect the security spend.
So pushing that question back on them, I'm like, cool, what
percentage of market cap do you find as an appropriate level of
security spend, which again introduces the topic of like
subjectively, what's an appropriate level as a
percentage of market cap? Is it one percent, 2%?
You know, you could use comps, but comps are really hard.
There's no such thing as before Bitcoin.
There's never a thing like a blockchain.
So you could look at defense spending as a percentage of GDP.
Like it's really tough to come up with a number that makes
sense. You could also look at what's
the maximum burnable amount that a government could deploy to
attack the network, like the US government.
I mean, you know, they would attack their own citizens in
this in this sort of circumstance.
But you know, maybe they're willing to spend 200 billion
just to burn it because, you know, in order to take the to
attack the Bitcoin network, the game theory is that essentially
you have to burn the money. If you want to attack Bitcoin,
you would have to buy the miners and those miners can only print
Bitcoin. And if you attack Bitcoin, you
would make the output of the miners Bitcoin worthless.
So you'd have to be willing to burn the money.
So the only actors that can do that are state actors with a
huge budget. And you're talking about like
US, China, Russia, and it's mainly China, China, US that
could go burn that amount of capital.
So that would be I think a fairway for them to argue like
what an appropriate level of security spend should be.
But then if they use that argument too, then you look at
Ethereum and it has minuscule amount compared to that, like
200 billion as well. So that would also be an issue.
But I think that would be the intellectually honest way to
talk about this is a percentage of market cap.
And then we can look at comps or we could come up with some sort
of framework to evaluate what that spin should be.
Yeah. I mean, I think one thing that
is for sure is that, you know, if we do see, you know, a lot of
activity that you know, then is, is is sort of accurate in, in
Bitcoin and leads to higher transaction fees that that is
certainly going to be extremely positive for the long term
security of the network. For sure.
Cool. Well, thanks so much, Dan.
It was really great to have you on and I really enjoyed talking
a bit about, you know, sort of state of Bitcoin and something's
happening and yeah, hopefully we can do it again sometime and
excited to see how it's going to develop in the next years and
where you're going to take asymmetric, too.
Yeah, thanks for the support of the fund.
It's been too long since we caught up and I hope everyone
found this entertaining. Absolutely.
Thanks so much, Dan. Cheers all.
Thank you for joining us on this week's episode.
We release new episodes every week.
You can find and subscribe to the show on iTunes, Spotify,
YouTube, SoundCloud, or wherever you listen to podcasts.
And if you have a Google Home or Alexa device, you can tell it to
listen to the latest episode of the Epicenter podcast.
Go to epicenter.tv/subscribe for a full list of places where you
can watch and listen. And while you're there, be sure
to sign up for the newsletter so you get new episodes in your
inbox as they're released. If you want to interact with us
guest or other podcast listeners, you can follow us on
Twitter. And please leave us a review on
iTunes. It helps people find the show
and we're always happy to read them.
So thanks so much and we look forward to being back next week.