Bitcoin Corporate Treasuries with Pierre Rochard | Bitcoin Infinity Show #181

0:00 Pierre, welcome to the Bitcoin Infinity Show. Nice to have you here. Hey, thanks for having me on. This is actually quite the moment for me because yours was the first pod I was ever on. Back when you had the Noded podcast, I looked it up. It was episode 63, I think, of the Noded podcast. I had just released Sovereignty Through Mathematics, and we had, I believe, met in Riga, maybe, or maybe it was before Riga. I remember, I remember it because I missed it. I missed the date because I was at an amusement park with my kids and I totally fucked up. And I thought I had made the biggest blunder of my life, but it turned out pretty well.

0:42 Now, even though I missed the park. You can never go wrong going to the amusement park with your kids. I think that's the right move. Yeah. Except in Sweden, because it's shit cold at the amusement parks. But anyway, that was, that was a good time. Yeah. And a lot has happened since. What, first of all, what, what, maybe we should start with giving our listeners a TLDR on Piero card, since you haven't been on my show before. So, so just give them the, the short one. Yeah, sure. So, you know, before Bitcoin existed, I got interested in monetary economics. I was kind of a sound money, gold and silver student of the Austrian school. And I also got interested in open source software.

1:23 So I was listening to Richard Stallman, and I never thought those two things would cross. But fast forward to the end of 2012, and I really took a deep dive into Bitcoin at the behest of my friends, Michael Goldstein and Daniel Krewis, who would later go on to develop some of these thoughts at the Satoshi Nakamoto Institute. And Michael Goldstein continues to maintain the Nakamoto Institute. He's the president there. So for people who really want to go deep on coin philosophy and history and kind of cypherpunk and all of the literature around that, I highly recommend it. And to donate and support it so that it continues to grow in its content.

2:04 So fast forward to, you know, kind of, I took a career in accounting. I got my bachelor and master in accounting at UT Austin. Started kind of a normal TradFi accounting role. but really wanted to work in the Bitcoin industry. So I took a role at BitPay in their accounting department in Atlanta. That was a Bitcoin payment processor. They still exist actually, but I feel like they're maybe less prominent than they were at the time. And worked in TradFi as well, later at Hudson River Trading, which is a high-frequency trading shop there. I was doing accounting, nothing to do with Bitcoin, but definitely, you know, fiat mining, right?

2:47 and also learning a lot about how the financial system and capital markets work. So when I really wanted to focus on open source full-time, I was really interested in the Lightning network. I'd started seeing videos of Jack Mahler's working on his Lightning software, and I thought it was really cool. And I was a Python guy. He was more of a, I think, you know, JavaScript guy. And I like JavaScript, but I felt more comfortable with Python. So I started working on some different lightning related projects. I did what they call a residency at ChainCode Labs back then. And you do a project as part of that. And so my project was actually an Excel plugin that allowed you to send lightning payments from within Microsoft Excel.

3:36 So I had a lot of fun doing that. And then that led me to the node launcher because the hardest part of that on Windows was actually running a Bitcoin and lightning node side by side and having them communicate with each other. And that led me to Kraken because Kraken was really interested in integrating with the Lightning Network. And it took a little while, but we eventually got that done. And then Elizabeth Warren started attacking Bitcoin miners. And so I joined Riot Platforms as their VP of research to provide the intellectual arguments for why she's wrong and pushed back on this by hiring lobbyists, hiring public policy experts to go and make sure that the regulatory risk around Bitcoin mining in the US was minimized. That was successful beyond anyone's imagination that we completely won that battle. Nobody cares anymore about Bitcoin mining from a political perspective and that decided to go out and focus on other things, namely the financialization of Bitcoin.

4:44 I think that's probably the biggest topic for the next few decades. You know, payments will continue to be important, obviously, and mining will continue to be important. But what I'm really excited about is taking over the financial system. Yeah, there's a lot to unpack there and a lot like we've had parallel careers in this. like but in completely different directions it's kind of kind of fun to to pinpoint that the timeline and what happens when and yeah i like to do this with a lot of bitcoiners like uh first of all like i remember using lightning back the first time we met was baltic honey badger 2019 this is the second year they do the conference i believe and i remember using lightning then and custodial lightning of course like i i could accept custodial lightning payments for my book i don't have anything against custodial lightning in fact you know that's what we need to crack and uh and it worked really well but i i don't have you know it's like because if you already have an account open at the exchange it's just so convenient yeah and i mean i view it as a superior form of a bank account because like sure you can do fractional reserve on on custodial lightning theoretically you could absolutely do that.

6:01 Cracken did proof of reserves, right? So it was, but yeah, I agree that it's a risk, right? That that would happen. I mean, it's safer than a regular bank because if there was a bank run on a custodial Lightning wallet, then there is no central bank to bail the Lightning provider out. Yeah. So that's actually a good thing then. So, yeah. And, you know, it's funny because people say, oh, what happens if Bitcoin becomes fractional reserve? It's like, well, what happened to FTX? What happened to MacGuy's? The people there get wiped out, and then everybody else in the Bitcoin economy is like, hey, you shouldn't have done that.

6:43 No, it's as it should be. It's what banking used to be before the central banks. If you weren't doing your due diligence to check if the bank was legit or not as the customer, you got wrecked. Yeah. And no one else got wrecked. The taxpayer didn't get wrecked. So that's the difference. People still get wrecked. It's just that it's obscured. And then, you know, to take it even further, like Sam Beckman-Fraid, he's in prison today. I don't think anybody who was responsible for the 2008 financial crisis is in prison today. No. No. There was one guy who committed suicide.

7:24 Slightly shortly after. But other than that, I've heard of no, if you can call that a repercussion, maybe it shouldn't, because who knows whatever made him make that horrible decision. But I mean, they haven't been held accountable, that's for sure. And the scariest part about that, and I remember even back then reflecting on this, even though it was happening on the other side of the globe, like the Democrats and the Republicans just colluding and saying that this was the best way forward to just bail out the bad guys. And I never understood it. I think that to not do it would have required admitting, like, because they actually didn't do anything illegal.

8:09 That's why they didn't go to jail. because all of this nonsense is legal. And it's legal by exception. It says that nobody can do this except this oligopoly, this cartel that can create money out of thin air and everybody else, it's counterfeiting. Yeah, I mean, this is where the distinction between legal and lawful from a libertarian perspective comes in. It may be legal, but it sure as hell ain't lawful. No, not at all. Because it's breaking natural law. So, yeah, back when I did the pod with you, that was episode 63 of Noded, which you did with Bitstein or Michael Goldstein. So when did that whole thing start?

8:51 When did you start doing that pod and why? Like what was the origin story there? The origin story was that there was an altcoin podcast that was becoming popular. And I thought, well, there should be a Bitcoin podcast as well. it might not become popular, but there should be one. And I enjoyed being a guest on other people's podcasts at that point. And so I was like, well, I could start my own. And with Michael Bilstein as well, because we have good chemistry together in having some sense of humor about this stuff. And the title came from a famous Barry Silberg tweet responding to what we would call it today, a Bitcoin pleb. And he said that the pleb, I forget his name now, but he said something along the lines of like that he thinks Barry Silbert's a scammer or something, right?

9:52 And Barry Silbert replied, noted, N-O-T-E-D, you know, period of like somehow, you know, Barry Silbert's writing this guy's name down and, you know, their enemies text. I thought it was a lot of people on Twitter thought it was a funny, you know, weird, egotistical thing to write. And so it kind of took off as a meme. And then I thought, well, how about noted? I know D-E-D. It's a playoff of the peer-to-peer network. And how many episodes did you record in total? Like for how long did that, is it a latent project, by the way? Is there a chance you'll revive it? We try to get an episode out once a year now. So it's still going.

10:32 You know, both Michael and I, we've got kids. It's hard to find both time that synchronizes with each other and with a guest. It's a little bit too much overhead. So we did do just Michael and I podcast episodes for the Nakamoto Institute. It's called The Reorg. And we went back and we looked at past writings on the Nakamoto Institute website and kind of have they withstood the test of time, you know, 10 years later. So how early was noted, like in comparison to, you know, what Bitcoin did or Tales from the Crypt?

11:13 Well, that's a good question. I'd have to go look because I was the first interview guest on Tales from the Crypt. I had met Marty Bett in New York. We were both living there and we had bone broths together while walking the streets of New York, I remember. And yeah, we recorded the, I think it was a two or three hour rip that we had as the first episode. So I definitely recommend people go back and listen to that. I think I want to say that was 2019. So after we started Noted. And then what Bitcoin did, I remember I was a guest on pretty early.

11:54 I'd have to go look. but Pierre McCormick was asking about like what why are you a bitcoin maximalist was kind of the gist of the podcast and I still think it's one of the most important questions in you know in the world but yeah I'd also recommend people go go listen to that one it was a while back he had just gotten himself into trouble for for saying something anti-maximalist but he does that right he gets himself in trouble, then talks about it for a little while. And I think it's an interesting way to go. Maybe there's a tactic there.

12:34 I will not comment any further on that, but it's this trying to become a big podcaster is a different game than trying to become a respected maxi for sure. Anyway, anyway, let's not, let's not talk about that. Uh, I have him down as a respected maxi for the record. Yeah. Yeah. I do too. Like the, the way I judge people is usually like, is their net contribution positive or negative? And like, I, I judged them on that. So you can have, I mean, it's not a, it's not a purity test in that sense, but like people do do things that sometimes farnish their reputation, but then they redeem themselves by, by just putting on good content.

13:20 like, and a lot of it. So on the whole, are they a net benefit or a net detriment? That's, that's how I try to like judge people. I don't know. Do you have a method for that? I try not to judge people. You know, I, I feel like who am I to judge, but also when I think about Bitcoin adoption, I, yeah, I, I don't know where some of these things net out. Right. Where I don really know So you know for example like let say Mt Gox like you could say well obviously a net negative right But it got a lot of people on self custody And so how do you balance the positive things that came out of something negative with, you know, the means don't justify the ends?

14:09 Yeah. I didn't necessarily mean judge meant judging people, but judging people's actions is a better term, I guess, because like, and how do you balance like, uh, if because you, you, you can't escape, you, you do value a person's opinion according to how much you trust them sort of like, you have to base it on some something. I just find it hard sometimes to disentangle whether their actions were motivated by, like, I feel like that, that matters is, was it motivated or was it out of ignorance? And sometimes it's kind of in a gray area. Yeah. I don't have all the information. No, there's a saying nowadays that you either die a big coiner or you live long enough to see yourself become the suit coiner.

14:55 You know, I love the term suit coiner. I would definitely put myself in the camp. I was a suit coiner, you know, in high school, I was on the debate team. And so I got to wear a suit all the time. And, you know, I was into silver coins. So I was Citcoining, you know, quite early in my life. And I think that one of the challenges for Bitcoiners is, well, and I think it's true historically, right? So if you look at any kind of what we could call a revolutionary movement, if they are successful, then there's a point where they have to change gears into governing because they've won. And I think that that makes Bitcoiners intrinsically uncomfortable.

15:37 role and we want to continue the revolution right it's like oh no we're not done yet we can't be satisfied here and i think that you know that for example like luke is like if if if not everyone is running a node and using a node then bitcoin has failed that's that's one of his axiomatic beliefs is that bitcoin has failed if if grandma is not running her node and i think i think the the the actual quote is like, if not at least 85% of the network of the coins are run by people who run or are owned by people who run nodes or something like that. I think it's slightly, it's not everyone, but like the majority needs to run nodes. Which I mean, the obvious problem is how would you know where you are on that spectrum? It's impossible, right? Yeah, it's impossible. But I also think that what really matters is the option value, the ability to run a node, the freedom to run a node, if you want to, is really why Bitcoin is decentralized. It's the cost of entry, basically.

16:49 And so to me, the biggest question is, what's the cost of running a node and what percentage of the world's population could afford to pay that cost if they were motivated to do so. And I think that if it's framed that way, then we don't have to continue the revolution until 85% of the coins, you know, we verify are being, you know, self-custody by people running their own nodes. And so I think that, yeah, that's where my headspace is at on the suit coining versus the bitcoining. All right. Yeah, there's a lot to dive into there.

17:31 Because, yeah, a lot of moral questions about how to rationalize for yourself, like merging the Bitcoin world with the legacy world. Isn't that like what we're trying to get away from? And aren't we sort of giving in if we're on a dollar standard in legal terms? So I guess the deeper question is, if a politician gets to dictate what a node is or isn't, haven't we already lost the game? Or at least on a very slippery slope to do so? Yeah, I don't know that a politician has that power to decide what is a Bitcoin node or not.

18:14 I don't know how they would be able to coordinate that. Maybe the closest thing we have to that is Luke and the core developers. Maybe they're the politicians who decide what a Bitcoin net is. Trump isn't really in a position to do that. Also, if you look at, for example, BlackRock, right they've got this giant ibit etf they're charging fees on it and the c's are so substantial in the aggregate that it's actually now a material percentage of their revenue for blackrock the world's biggest asset manager and if you go look at and so to me like larry fink is the epitome of the suit coiner right like he is the the king of suits maybe not the coiner but the suit well he was on national television saying that Bitcoin is above governments. And so I think that raises a really serious philosophical question of whose side is he on, right? And then if you look at their marketing materials for iBit, you know, the central question they're trying to answer is why does Bitcoin have value, right? Because they're selling a Bitcoin ETF, right? They're not selling an ETF, ETF, they're selling a Bitcoin ETF. They sell lots of other ETFs. And if they wanted to, you know, warn people against that, they could take the Vanguard approach and warn people against it. So what does the marketing material say on their prospectus on kind of what they're trying

19:46 to sell to investors? Bitcoin is decentralized. It's scarce. It's permissionless. And you can, you know, use it 24-7 globally. And that's why it's increasing in market share. You can self-custody it. So it's quite the paradox that they're advertising the centralized product using the properties of the underlying. And obviously, people are very interested in an ETF because it's convenient. They don't have to think about keys. They don't have to think about all the tech aspect of it. They can use it for options trading. They can borrow against it at much better terms than other options out there. And so would Larry Fink want to take over Bitcoin and co-opt it and centralize it and run all the nodes or decide what a node is?

20:37 I actually don't think so. I think that would be against his rational profit maximizing commercial interests. I think that he would be killing the goose that's laying the golden egg right now for and that if anything, what I see them actually doing is going in the opposite direction. For example, they are pushing to be able to create redeem in kind, meaning that you'd be able to convert from physical, you know, real UTXOs into IBIT and back in as frictionless of a manner as possible. And the reason why they want to do that is because that's ultimately how they get paid the most fees, right? is to have the most users, have the best product.

21:20 And they know that people can opt out very easily, right? If IBIT is annoying and inconvenient, people just go use real UTXOs. And so I think that the option value of self-sovereignty ultimately puts massive competitive pressure on anybody trying to build long-term profitable products around Bitcoin. The other part of it, when we look at, you know, So the state, like here in Texas, I had the joy of testifying for a strategic Bitcoin reserve for the state of Texas. And I couldn't believe it. The state senator, who is the chair of the Business and Commerce Committee, very serious guy.

22:06 He opened up the reasoning why we need to have a strategic Bitcoin reserve is because the U.S. dollar is going to collapse. and so the state needs to have you know an insurance policy against that and that's where i think that kind of on one hand okay we don't want to empower the state by having its own you know having more bitcoin right and more resources on the other hand we do want to disempower the state by removing its monopoly on the issuance of currency right on the senior edge and that it's not going to happen overnight. But I think that if we don't build bridges between the fiat world and the Bitcoin world, because we hate fiat, the outcome is extremely immoral. Because the outcome is that you have a handful of people who, one, are young and risk-seeking enough to hold Bitcoin because it's so volatile, and two, tech-savvy enough to run their own node, hold their own keys. Everybody else in society would have to essentially experience the collapse of fiat, which might take centuries. Let's be realistic because Soviet Union took decades to collapse. Fiat could last another century. There's no question about it. I think that that would be the worst outcome. The best outcome would be that we find ways to help everybody upgrade to Bitcoin

23:41 and meet them where they're at. If they think Bitcoin is too volatile, then they can go invest in securities offered by strategy, like the perpetual preferreds that are powered by Bitcoin, but are not volatile. And so all of these critiques of Bitcoin ultimately are just an opportunity for businesses to build products that address those problems by taking advantage of Bitcoin's properties. Okay, I'm trying to come up with a good devil's advocate angle here, because it's usually the best for getting the conversation going. If we go back to the core versus not debate, if there's one thing I think people should be happy about, it would be the fact that this thing is happening at all because it is making people run nodes to like a lot of people are now running nodes because this debate is happening and they are doing their homework sure they might be making the wrong decisions regardless of what side of the debate you're on you will probably think that they're making the wrong decisions if they're on the other side of the debate or what but they are running nodes and they are actively participating in the network and that's a good thing so so like and this is something you cannot say about the strategic reserve companies like they are not actively they all have their coins with custodians right and if there's one phrase i miss from mishearing at these conferences it's

25:16 not your keys not your coins you never hear that anymore because it's all about these paper bitcoins And we went sort of from being very, very adamant about the crucial importance of not your keys, not your coins, because it's a whole new form of ownership in a way. Abstract thinking that other people don't have the secret you do, kind of not really owning anything at all, but just keeping a secret. And we've gone from that to this all of a sudden thinking that paper bitcoins is okay. And it's the same thing with mining. If now mining is centralized, which some people raise alarm bells about mining being centralized and really owned by the same entity.

26:00 And if that is true, then Bitcoin still has some type of resilient architecture because no miner wants to destroy Bitcoin. They don't have an incentive to actively destroy Bitcoin, but it's not at all as robust as it would have been if the node runners were actually in charge of what was going on. So like, what do you, what do you view as the biggest attack vector here? And is there, is there an attack vector baked into all this to the suit coining, let's say, or to the paper bitcoins? Yeah. I mean, I think that it's, I think the challenge is that the economic equilibrium outcome is different than our ideological preferences.

26:43 And so if we look at, for example, not your keys, not your Bitcoin, that I think addresses two risks. One is the risk by the custodian of stealing the Bitcoin, right? Or getting hacked. And if you look at the history of exchanges, there's plenty of examples to point to, right? But there's also plenty of counter examples to point to. So, you know, Coinbase, Kraken, BitGo, they've not gotten their private keys compromised. there have been lots of accounts compromised at these exchanges so I still think that self-custody is actually better in that regard that you know I worked at Kraken like I heard these stories all the time of somebody getting their account drained because their credentials got you know compromised but that's not materially different than somebody inputting their seed phrase on an online service and getting swept right Which also happens right But I think that the equilibrium of well actually a lot of these custodians have done a semi-decent job of, you know, not stealing people's Bitcoin or losing people's Bitcoin.

27:59 If Coinbase got hacked tomorrow, right, and the private keys got compromised, I think that we would see hardware wallet sales take off and that then there would be kind of a renewal of the ethos but it's kind of hard to say that oh i hope coinbase gets hacked so that we see more not your keys not your bitcoin because lots of innocent people would be harmed right so i feel like that's not not not not necessarily like a good idea to advocate for and then on the 6102 attack side I think that this one is much more serious in the sense that governments are going to be facing financial difficulties and they're going to be incentivized to seize Bitcoin.

28:47 we just saw the u.s government seize i think it was a hundred thousand bitcoin from this pig butchering scam in asia where these people were you know i think it was chinese men who were being seduced by foreign women and then they were sending bitcoin or something like that i'm still asking chat gpt to figure it out for me and somehow the u.s got their hands on the Bitcoin. So I was like, how did the U.S. seize the Bitcoin on something that seems like it was not happening in the U.S., right? And so the question is, will the U.S. seize IBIT? And it could. I think that what we'll start seeing is institutions using multi-sig in multiple jurisdictions. So if you have a three or five multi-sig and you set it up in areas that have better asset protection, right? So you put a key in Hong Kong, you put one in London, you put one in Zurich, and then one in the US, and then one in St. Kitts or Bermuda or something, where now in order to seize the Bitcoin, the US government would have to jump through a lot more hoops. And so I think that, or even more practically speaking, civil litigation, right?

30:08 What happens if somebody sues BlackRock and, you know, tries to take the Bitcoin or something like that? So I think that just reputationally, that's a different situation than we were in five, 10 years ago. And we could argue against it until our faces are blue and wish, you know, people would take Not Your Keys, Not Your Bitcoin more seriously. But ultimately, I think that that responsibility is on the people who are offering those services, right if if you're like if we look at the landscape of self-custody there's plenty of services that are open source and free and people can go use those and it's pretty frictionless i'd point to like sparrow as as an example of something that's really easy to set up multi-sig on and i've helped other people set them set themselves up on that and i don't really see what the practical problem is where like why is it that more people are not doing that right and i i think it's just because they don't have the motivation to do it and then it's like how do you create that motivation okay let me offer an explanation yeah i i think entities like coinbase and kraken have our forces in the opposite direction because of course they want people to custody their bitcoin with them and yeah you rightfully say that they've been good at not losing people's bitcoin but a lot of that has to do with them making enough money to not lose people's bitcoin because

31:45 because they've been scamming people with all this fucking shit coins and and like marketing shit coins as as legitimate as bitcoin like and uh i mean uh uh what's his name the bog the the Coinbase guy. Brian Armstrong, yeah. Yeah, Brian Armstrong. He never says the word Bitcoin. It's always Bitcoin and crypto. And it's like he can't say anything but crypto because he needs to keep this fooling people over and over again to be able to store people's Bitcoin. So he's not fucking over Bitcoiners, sure, but he's fucking over other people by legitimizing these other things.

32:26 And so don't you see a problem with that? Is that morally okay? Or like, what's your view? Well, I mean, I think that it's putting it. Look, I think that morally it's not okay. I like services like River. I recommend people use river.com over Coinbase. From a market perspective, it seems like a losing battle for them, right? If you look at Bitcoin dominance, it's actually pretty healthy. The S coins keep getting wrecked. And, you know, even like the Ethereum ETFs have been a lot less successful than the Bitcoin ETFs.

33:08 So, you know, even like on the treasury company side, I think that the altcoin treasury companies are going to underperform the Bitcoin treasury companies. and you know it's like i i've met you know over the past decade plenty of altcoiners some of them are just trying to make more bitcoin and so that i feel like that's kind of dishonest right i think it's more honest to say like oh i actually believe this has utility and like i'm accumulating ethereum so that i can spend gas on my future stablecoin payments that would be the honest but utterly ridiculous position to have. Usually, they're just trying to flip and get more Bitcoin at the end of the day. So I think that ultimately, the market-driven process is twofold.

34:00 One is just the fundamentals of Bitcoin just has more reliable software parameters than any other network. But two is economic on the liquidity. So Bitcoin has liquidity network effects that are self-reinforcing and ultimately will make it such that these altcoins, despite Kraken and Coinbase screwing over their customers, will not really take market share from Bitcoin. But isn't the strategic reserve companies, Bitcoin on the balance sheet companies, isn't that this cycle shit just this cycle shit coins then because a lot a lot of them are going to rug people right like it's uh there's a lot of added third-party risk third-party risk upon third-party risk since it's held by a custodian and then you buy the stock of the company that is keeping its coins with it's double right so so do you view them as as that i'm i know you're involved with some of them so so obviously you don't view the ones you're involved with as that But I see a big risk there.

35:11 Do you? So I don't. I think it's a huge opportunity. And so one is on, are these, this cycles S coins? And what I look for is like, what is the valuation model for the asset? So when I look at a SHIB or Dogecoin or, you know, all these other altcoins, I know this is anti-Austrian, but just the terminology, intrinsic value, fundamental value. My subjective valuation of them would be the more Austrian way to put it.

35:51 When I do my subjective valuation of Dogecoin, the value I come to is zero. Zero BTC is what one Dogecoin is worth from my perspective. When I look at the value of a Bitcoin treasury company, I first start with how many Bitcoin per share do they have, right, as kind of the first fundamental. Then secondly, kind of what's the trajectory for that? Is that going to increase or decrease? And then what risk probability do I assign to having to rely on third parties, right?

36:32 And basically, in order for a Bitcoin treasury company to be interesting from a valuation perspective, my subjective valuation of it has to be less than the market price. So if the market price is greater than my valuation of it, then that overvaluation is the S-coin component of it, where I just think that it's overvalued relative to its fundamentals. But it could also, there could be times where sentiment is bad and people's expectations, I believe, are incorrect subjectively. And that coin treasury company is undervalued relative to my subjective valuation of it.

37:16 And so whether at any particular point in time the company is overvalued or undervalued in its stock price, I think that that's open to debate. what I don't think is open to debate is to say, oh, the fundamental value of these companies is zero. That's just saying my subjective risk assessment, I multiply the probability of the Bitcoin disappearing by 100%. And so there I would say, well, you're mispricing the risk. And that really, but that's subjective, right? So you can disagree with me and that's what makes a market yeah but if if you extrapolate uh into into infinity so so like if if you think of this at from the longest time on the longest time frame you can then they do go to zero because either bitcoin outperforms them in case it was better to hold bitcoin than to hold these paper bitcoins with added counterparty risk, or Bitcoin goes to zero and then they also go to zero because then they have no underlying asset.

38:28 So what time frame are we talking about here? Or do we have to re-evaluate these things every year or every month or every week or every decade? What's your time frame when you talk about these things? Yeah, you have to re-evaluate them on a daily basis. I think that's really the strongest argument against Bitcoin treasury companies. is that the active management of the asset, you have to keep your eyes on it if you actually want to understand when to sell the stock or buy the stock. And I think that most Bitcoiners are not interested in investing in equities. They want to save money. They want to hold stats in cold storage and hold Bitcoin. And so that's why I think that Bitcoin treasury companies are not particularly interesting to most Bitcoiners. It's kind of a niche interest of you have to be interested in capital markets. You also have to believe that the US rule of law and property rights are going to hold together well enough that this isn't going to be an issue going forward.

39:38 And yeah, so I definitely don't think that it's for most people something that they can wrap their heads around and keep tabs on. Even within the Bitcoin treasury industry, sometimes I'll hear people say things that I believe are incorrect and they're in the industry, right? So it's like, well, yeah, I think they even, even I say things incorrect because I would also point out, this is very new. So the Bitcoin treasury playbook only, I would argue, started getting written this book, or sorry, this year because of the perpetual preferreds that started this year, So before, it was only about convertible bonds and what Sealer was doing with that kind of leverage.

40:20 Now we're on a completely new model. And so I think that not only are you underwriting all the risks that we've discussed, you're also kind of underwriting a new business model. And so it's almost like you're a startup VC more so than just a value investor. Yeah, I mean, the biggest positive I see with them is that they somehow managed to tap into this giant pond of boomer money that was inaccessible to that wasn't flowing into Bitcoin before. But now somehow it's like everything connects to Bitcoin in a way that it didn't before. Like it's even in the Swedish pension funds now because they own some micro strategy stock or something.

41:04 So like inadvertently, like everything touches Bitcoin and all the boomer money and they're going to have to live with it. That's a good aspect of it, I guess. I think that's it. I think it's crucial from a political perspective. This is actually what minimizes the risk of a 6102 is that everybody in society has some kind of exposure to Bitcoin. So everybody is getting rich together. Yeah There is though in the EU there a 6102 light in a way because they trying as hard as they can to ban what they call unhosted wallets So they basically trying to prevent you from holding your own keys which is like vulgar to a Bitcoiner. I mean, I never wanted to meddle with these. Like you say, if you have to check the price every day, I mean, the reason I found Bitcoin so compelling, one of the reasons was that I didn't want to be a trader. I didn't want to watch Shards all day and not know if I was going to win or lose when I can just hold the sats for a decade and be happy. And I believe you can still do that. You're still going to win massively if you hold sats for a decade. The chances that you will are enormous. The upside is still enormous. So yeah, where was I going with this? I don't don't really know where I was going with this. Thoughts? Yeah. So, I mean, I think that to me, like what big picture from an economic perspective, the reason why I think Bitcoin treasury companies

42:38 came about and will continue to grow at an astonishing rate is really because they are doing a speculative attack on seat currencies. And so on one hand, they are going leverage long Bitcoin with the equity part, let's say MSTR. On the other hand, they're shorting fiat currencies by issuing these perpetual preferreds. And so they, for example, you know, yesterday they announced STRE, which is a stream, which is aimed, it's denominated in euros. And I think it pays like 10% yield or something like that. I'd have to go double check, but it's basically, you know, double digit percentage. In Europe, the current fixed income products are paying single digits, low single digits. And so what happens when an investor in Europe, they sell their government bond that's paying 1% or 2% or whatever it is, and they go buy Stream that pays 10% and they give euros to Michael Saylor and then Michael Saylor goes out and buys Bitcoin and then Bitcoin does better than 10% over the long run, that then this fixed income instrument was smoothing out the returns of Bitcoin in the short run so that the boomer has price stability and has income on his euros or her euros.

44:11 and that, okay, well, wouldn't it be better if these people could just buy Bitcoin and be okay with being down 80% and then up 5,000%? Yes, in theory, it would be better. In practice, they would panic sell. Or they would sell too early during the bull market. They would make trading mistakes despite us yelling at them to hold it in cold storage and ignore it. And one of the reasons why is that either they're very risk averse or they need the income this year, right? They needed the 10% income this year. And so they have to go sell some percentage of the Bitcoin if they were holding Bitcoin. And that a lot of people are just, you know, they're worried about the principle.

44:58 And what if Bitcoin goes sideways or down for, you know, three years that they can't hold through that psychologically or economically. So I think that these products are solving a real problem for the people buying them. And they're solving a real problem for strategy because strategy wants to get leveraged on Bitcoin. And so that's the two legs of the Bitcoin treasury trade. And so, you know, how do we get to a world without fiat? Well, the governments are going to have to do some things, right? If people are selling government bonds to buy Stream or any of these other fixed income products, the governments are either going to have to compete and raise interest rates.

45:46 They can't do that because they're over indebted. And so that would cause the financial system, the fiat financial system to get into some serious problems. or they impose capital controls. You could imagine that the EU could ban strategy from issuing perpetual preferreds or Elizabeth Warren could try to ban strategy from holding Bitcoin. They could say you can't have more than 50% of your Bitcoin or balance sheet in Bitcoin. So they have capital controls. And I would argue that's what they tried here in the US with Operation Chokepoint 2.0, where they were trying to stop Bitcoin companies from having bank accounts.

46:28 So they try to separate. It's funny, it's kind of the horseshoe theory. Like there's Bitcoiners who want to separate the financial system from Bitcoin. And there's also fiat maxis who want to do the same thing, right? They don't want Bitcoin to get intermingled with the financial system. The third thing that governments can do, and I think should do, in order to stabilize their currencies is to print fiat to buy Bitcoin. and to do that until they can back the fiat one-to-one with Bitcoin and speedrun the gold standard in reverse with Bitcoin. Yeah, we're going to have to see how that plays out because like that seems like...

47:09 Those are the only three options. There's not like a fourth option that they have. Well, there's the non-option, which is just letting it die. And this seems to me like a dead horse having spasms. It's already dead. Fiat is already dead. When you can get this product based on Bitcoin that can guarantee 10% yield, which is probably not really 10% because I believe the real euro inflation is above 10%. And especially if it's denominating Bitcoin. And as an Austrian, we know that the natural state of the free market is falling prices.

47:54 So stable currency is a lie in itself, right? We should have seen falling prices. And it's definitely not going to cover if you take that into account. I agree. I mean, it's just about having the least worst product, right? it's like when you're running from the bear you just have to be faster than the slowest person oh yeah i saw that in some some documentary about a guy that was worried about peak oil once yeah that very analogy but that's that's a good yeah the other analogy is the musical shares like that's how fiat works there's always a loser and on a bitcoin standard there there are no losers like we're all winning together and i think people have such a hard time wrapping their heads around that because they never lived in an economy where in order for someone to win someone else always had to live always had to lose like they never they never realized that it can be uh all boats rise with the tide game it doesn't have to have losers as the the money printing is creating the losers right so but and also like the the very notion of separating the two systems.

49:08 Sure, we want Bitcoin to win and the dollar to eventually die, but us to have a lifeboat when it does. Still, if you just look at the internet movie database, are you aware of Kevin Bacon numbers and how interconnected people are? They could find six degrees of separation between a person who has been in a movie with Kevin Bacon. that has Kevin Bacon himself as Kevin Bacon number zero. And if you've been in a movie with him, you have Kevin Bacon number one. If you've been in a movie with a guy who's been in a movie with Kevin Bacon number two and so on, the longest chain they could find was six degrees of separation. So there is no circular economy.

49:50 There is no fiat economy in a Bitcoin economy. We're all connected. And every action we take has an effect on other people's lives. Butterfly effects are everywhere. so I don't believe they do coexist for now and one is going to win and the other is going to lose in the end we can't have we can't have them coexist forever I don't know about that I mean I think that the way bitcoin wins could be through the continued existence of let's say dollars where one dollar equals one satoshi and so people just use those words interchangeably and that, you know, there's JPMorgan Chase has dollar bank accounts that are just, you know, you can deposit there with lightning.

50:36 Yeah, but why though? It's because people are, you know, not highly regarded, but they're set in their ways. I could smell that word coming. Yeah. Yeah. You know, if you've been, it's like, do you know how many people still think the dollar is backed by gold? Most, I'd guess. Yeah, it's an astonishing percentage. And so I think there's a huge amount of momentum. And there's also just the ethical question of, okay, somebody was saving dollars their whole life for their pension fund. and then the dollar goes to zero and they don't have any savings for retirement.

51:22 And it's not because they had any kind of moral culpability in the dollar. They're just basically collateral damage from this. And so I just think that it would be much better if we actually bridged it so that dollars become Bitcoin. and that dollars become backed by Bitcoin one for one. And you might say, well, if we're recreating the gold standard, won't the same thing happen again, where the government will default on the exchange ratio between dollars and Bitcoin and print too many dollars? Maybe, right? But that's certainly less bad than the alternative of the dollar going to zero.

52:08 And that's just, I look at it from the perspective of the people who are relying on the continued existence of the dollar. And they're not all parasites, right? Some of them are just people who grew up in the dollar system and are retiring. No, most of them, if they are parasites, they're probably unaware that they are. But the whole system is corrupt, right? And there's nothing ethical about it. If you can conjure... I mean, fiduciary media is, by its very nature, unethical. It's giving out, conjuring up a loan out of thin air and demanding to get paid back with interest. It's stealing from everyone else who holds that currency.

52:50 Yeah, sure. But if I look at, for example, insurance contracts are denominated in dollars. The insurance contract can be completely libertarian and not coercive at all and perfectly rational. But because it was denominated in dollars, now its value goes to zero. if the dollar goes to zero. And so I just think that there's a lot of systems that are depending on the dollar as a unit of account that if the dollar goes to zero, it tears apart the social fabric of society in a really chaotic manner that is unnecessary if we build bridges and we actually get the government to do the right thing.

53:35 Yeah. uh we'll we'll see i i it's it's a it's a hopeful thought and i hope you're right and that this is a good transition thing because you say it's it's less bad than what the dollar is now yes but it's also less good than just educating people to hold their own keys and and and doing a bit properly do we have time right do we have the time to do that i think that you know if we had like how long would it take to onboard everyone onto Bitcoin? So currently, let's say we've got about 100,000 people or maybe a million people holding their own keys.

54:18 I don't know what your estimate would be. Closer to a million, but maybe 100,000 in the US, yes. Or globally, a million? Yeah, I don't have... I'm pulling numbers out of my ass. Let's say it's like 10 million even, right? In 16 years, the growth rate has not been accelerating as far as I can tell. You know, on-chain is kind of empty. That's why we've got all this spam coming on. And so how many more decades would it take to get everybody onboarded? Well, let me offer you a perspective on that. Because I think the dichotomy between store of value and medium of change is false and like very influenced by Keynesian mindset.

55:00 Sure. So I view them as two sides of the same coin. and medium of exchange over space and time. Like store value is just medium of exchange with your future self from a certain perspective. And that whole framing is just to point out that you can't have one without the other, really. And gold was a good store value and fiat was good medium of exchange. That's the narrative. And now we have something that can do both, right? But we still come from a fiat mindset where velocity of money is is an important metric, according to Keynes. That's why they're pro-money printing, because they think they create value every time a $100 bill changes hands.

55:43 Yeah. That's basically the Keynesian theory. What they omit from the theory is that, yeah, but what's the alternative? What can that $100 bill have been used for if it had been sounder and people were saving and delaying gratification and so on and so forth? So we think that it's not being used at a medium of exchange, but maybe we just have the wrong timeframe. Maybe people just choose to not use it for 100 years. And who's to say that that's wrong or right, right? so if bitcoin is just and and i and i can predict like right now there there's a ton of micro payments everywhere you you pay to go to the bathroom in the central station somewhere in europe by putting a coin in a slot and to open the door blip your card at a machine somewhere there's always a transaction and i think on a bitcoin standard it's much more likely that you buy a lifetime subscription service to all the train rides you can and wash your rooms you could ever want because the the seller always has an incentive to acquire the bitcoin sooner rather than later so so what i what i take away from that is like fewer transactions in total because you don't need as many transactions it's like if you have 10 poor friends who eat together for 10 days then they all buy a pot of noodles each because no one can afford to pick up the bill if you have 10 billionaires who eat together for 10 days then they someone picks up the bill every night

57:18 then maybe it's the same person picks up all bills regardless there's fewer transactions taking place because when when everyone's wealthier and you have money that goes up in value you don't need to transact as often as you do when when you have inflation like the whole point of the inflation according to the inflationists themselves is that they want many transactions to happen. So yeah, thoughts about that? Yeah, I mean, I think that like one way to think about market share would be transactional. The other would be balance sheet, right? So Bitcoin's a $2.1 trillion asset at this point. Global wealth, you could say it's like $500 trillion of stocks, bonds, real estate, art, gold. And so how do we get more market share for Bitcoin in this context?

58:12 I think that essentially we're firing on all cylinders on Bitcoin as a spot commodity, right? Whether it's because of self-sovereignty reasons that people have demand for real Bitcoin, or it's because they like the risk return profile and so they've got IBIT, right? In order to tap those other adjacent markets like the bond market or like the equity market, then you have to actually build products for those. And so I don't think that there's a path to, well, so I mean, the other path would be that bonds go to zero, stocks, you know, really in sats terms go to zero, and that we're only onboarding people onto real Bitcoin right And I feel like that the nirvana fallacy of because that would be the ideal world we going to reject the existing you know we going to it kind of the Soviet like new man thing We going to we're going to create a new person and he is the sovereign individual and he holds his own keys and he runs his own node. And we're going to reprogram society and re-educate everybody to, to, to be like this. And I don't know that we have time to do that. I'll be honest. I also think that in order to get to that pragmatically, the best way to do that is to upgrade society to Bitcoin

59:43 through these products. And so I really see it as like long-term, even if your goal is to just have people self-custaining Bitcoin, the shortest path to that is all of these custodial products. and it's as frustrating as that may be yeah well time will tell i guess there's also like we we use the word we a lot here in this discussion and maybe that's like the crucial from from an austrian perspective that would be mistake because who's we really like what what's society and so on and so forth uh and there is a point to it being more important that you know honest and daring and intelligent people hold Bitcoin than everyone holds Bitcoin.

1:00:32 Bitcoin is more for anyone than for everyone from a not your keys, not your coins perspective, I guess. Because right now, you can become very wealthy from quite bad behavior. You can have a quite immoral code of conduct and still get very wealthy. And that's much harder on a Bitcoin standard because you can't manipulate stuff as easily. So maybe it's more important to just onboard honest entrepreneurs than everyone. And then these derivatives and stuff could be for everyone else. Is there a middle of the bell curve thing here going on? I don't know.

1:01:17 So, yeah, well, I think that it's, you know, it reminds me of like the Hal Finney forum post where he was saying like, oh, this is going to end up, you know, decentralizing the banking system, but people will still use banks. I think that was kind of the gist of the Bitcoin standard book from Safety and Amos as well and the conclusion of it. And I think that ultimately, the past is the best predictor of the future. And so I do think it'll continue to be a mix of people self-custodying and of companies, large platforms being trusted third-party custodians.

1:02:00 But at the same time, I like to point out, all of the Bitcoin are self-custody, right? So Coinbase is self-custodying against Bitcoin. and that you've got claims on those Bitcoin and they have specific properties and trade-offs. But ultimately, from a systemic perspective, it's not like there is some kind of ephemeral permanent trusted third party here. No, this is the point I'm trying to make all the time when I talk about these things. And that is that some guy at Coinbase has a lot of power at this point and could just evaporate and buy an island some somewhere at any point like yeah he end up in prison like SBF right So I think that in the current context with great power comes great responsibility.

1:02:50 If we were to descend into chaos, maybe that would change, right? If there really was a destruction of society such that the whole judicial system fell apart, then people could get away with just looting like that. But SPF went to jail. So I don't know that there's one person at Coinbase who has control over the keys. I imagine they've got a slightly different system, but also that those people, they're getting, they are getting paid money to hold those roles, right? They're not like doing it for free because they know they're going to be able to steal the Bitcoin. I think they're requiring to get paid because they're having to have this responsibility hanging over their head.

1:03:37 Yeah, absolutely. And it seems to be working for now, and hopefully it does. Like, the not your keys, not your coins part is, for me, that was what intrigued me from the get-go. Like, I was fascinated by the promise of something on the internet that couldn't be copied. And it took me like 10 years to realize why. And that is because the coins are actually not on the internet. They're in people's heads, like really literally in people's heads, because it's just keeping a secret from everyone. And also believing that the system is set up in such a robust way that it will not change to such an extent that the 21 million cap will change or something so that my coins become valueless.

1:04:22 So I was thinking about this the other day. You know, we back up our private keys on metal plates. was 12 or 24 words to be resistant to fire or flood, right? Yeah. Why don't we back up the entire Bitcoin source code and the 600 gigabytes of transactional history onto metal plates and just add a plate every day that has that day's history somewhere or in multiple places, right? That protects it from EMP attacks or more extreme scenarios. I was thinking about this. I asked ChatGPT how much it would cost.

1:05:03 About $30 million. That's nothing. Yeah. This is a really cool project. Because I've been thinking for a long time, these metal plates, I heard somewhere there was 70 competing companies worldwide that are manufacturing steel seed solutions. And my question is, will these things even exist 50 years down the line or even 10 years down the line? Are these things as permanent as they pretend to be? And maybe they are, but only if we can store the rest of it. So that would be the ultimate insurance against quantum computers, right?

1:05:47 Because then we can always freeze the chain in time and then solve the problem and start building on the last metal block. Yeah. Yeah. So 30 million, let's say you need it on all different continents. So that that's 150 million, maybe. Yeah. Super cool idea I bet that I bet that that thing would be worth more than 30 million once it actually done Well it kind of a tragedy of the commons because everybody would benefit from this right Yeah, but you could, being the custodian of the blockchain on metal plates, it's a pretty cool thing to be.

1:06:31 like, and how big would each plate like so so so a block is at most four megs. So how much is four megs etched into it into metal? Like, yeah, I'd have to dig into kind of the most efficient encoding method, because then you want to be able to scan them back in right as well. So maybe giant QR codes. I don't know. Yeah, or just the hashes. But that's sort of you want the raw data. Yeah, the raw data. Yeah. So yeah, I think that, you know, it would take some laser etching, but it's not like it's infeasible, right? It's not like an unsolved physics problem. It's just purely, you know, a cost engineering consideration.

1:07:15 Yeah. Yeah. Well, cool idea. Pierre, it's been absolutely great talking to you anywhere we haven't gone yet. The stuff you wanted to talk about that we haven't covered yet. no we covered so much i really appreciate the tough questions i think that it's important to to get people's perspectives out there yeah absolutely i think so too like civil debate is humans have two ways of resolving conflicts and one is aggression and the other is communication and i i definitely prefer the latter so so anywhere you want to send our listeners Where can they find you? Yeah, at Bitcoin tier on X. I'm also on Noster, but I won't, you know, spell out my whole Noster key here.

1:07:59 But yeah, come and find me. Watch out for impersonators. Yeah. And are you coming to Historico next week? Unfortunately, I won't be able to make it. I really wanted to go, but I have a conflict. Oh yeah. I think I saw you on the list there somewhere. Yeah, I was a yes. Yes. And then something family related came up that I couldn't say no to. Oh, well, I hope it's something good. It is. Yeah. Good to hear. Family is the most important thing. So we won't see each other there. When's the next time we'll see each other? I don't know. Are you going to Las Vegas? Probably. No, I'm not. I'm boycotting them.

1:08:39 That's okay. That's okay. What about BitBlockBoom? Gary Leland. I'd love to go to BitBlockBoom. Yeah, I think that's probably the most based Bitcoin conference in the US at the moment. Don't you think? I do think so. And it's an easy drive for me. So I'm definitely going to be there. Yeah. When is that? I believe that's in April. Let me double check for our audience so that they don't book tickets on the wrong date. April 9th to 12th. April 9th to 12th. Yeah, I should check that out, actually. I'm writing it down. I know I might be going to the U.S. end of next summer to Lake Satoshi.

1:09:24 Oh, yeah. We'll see. Anyway, great chat. Good luck with everything. And see you next time. Thank you. See you next time. Thank you.