Dan Held: Bitcoin DeFi Will Change Everything! - Asymmetric. Ep. 570

Transcript

it's not just bigger than ethereum it's not just bigger than Salata it's bigger than all of them combined and if defi could ever be a lock there this would be the biggest opportunity ever to existing crypto there's a really big proposal called opcat that's gotten a lot of momentum the Bitcoin community and the Block siiz 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 uh rigorous architecture of these l2s 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 tbll in terms of as a percentage of our market cap welcome to EP the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm today with Dan held uh who's the general partner at asymmetric uh which is a new Bitcoin Focus fund and he's uh 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 uh sort of you know influencer Communicator educator uh

around Bitcoin so really excited to have that on and uh just very briefly before we get into it I want to share a few words about our sponsors if you're looking to stake your crypto with confidence look no further than course one more than 150,000 delegators including institutions like Bido Penta capital and Ledger trust cores one with their assets they support over 50 blockchains and are leaders in governance or networks like Cosmos ensuring your stake is responsibly managed thanks to their Advanced me research you can also enjoy the highest staking rewards you you can stake directly from your preferred wallet set up a white label note restake your assets on Iona or symbiotic or use the SDK for multi-chain saking in your app

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governance where every voice matters join the nosis community in the nosis Dow Forum today Deploy on on the evm compatible nosis chain or secure the network with just one gno and affordable Hardware start your decentralization journey today at nosis doio cool well thanks so much for coming on Dan it's uh actually this is like way overdue I think we I think we've talked a bunch of times about having you own epicenter so yeah I'm glad it finally happens and that you're coming on I appreciate the invite let's start at begin how did you get into crypto yeah so back in 2011 um my buddy paid I was in Dallas

Texas and my my friend was an engineer and he paid me back for a beer in a caceis coin you know those physical gold coins and uh 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 it was so new there was almost no content out there to describe how coin worked or how it functioned it was basically just a bunch of very developer focused folks um so he paid me back for a beer through that started to look into it a little bit and saw that Silk Road was a I 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 um 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 um 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 2.0 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 um and then in 2013 I built my first uh product in the crypto space so were you interested in kind of central bank money uh gold things like that before Bitcoin or was it sort of Bitcoin that got into got you into this yeah good question so uh 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 not just central banks but all the banks were wrong so for me that was kind of like a uh radicalization moment as I put it um 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 uh uh of your app so you're definitely OG if you remember zero block which is the the company I built so there was an app that was a black and white color scheme really slick it was um realtime Market data news feeds and charts which no mobile app tracking bitcoin's price had that at the at the time doesn't sound that revolutionary because we've had a lot more Builders

come in and Bill great mobile products but at that time it was it was quite rare we uh ranked number one for the keyword Bitcoin in the app store which uh I figured out how to hack the App Store ranking algorithm to get us there granted it doesn't matter if you rank number one if you're not the most relevant in good product for people to download but that was our kind of growth hacking strategy um and that launched my career in marketing in Tech because uh through figuring that out that was my specialization was SEO and Converse rate optimization so in finding users for the first app I built I learned that I'm a good marketer a good user acquisition that is very interesting cuz yeah I think today right I guess you are uh especially known I think as a I mean

among other things but also as a marketer right as a really brilliant uh marketer in bigco and and you also worked on that right later at Kraken and stuff but that was really uh you sort of developed the skills just in marketing your own product and yeah we we tried a lot of different things so one you know 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 a hundred users through that method I uh tried all sorts of other methods as well and what we landed you know we got press

I was in wired walshire Journal Forbes fortune that didn't move the needle either um 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 in 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 um 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 um that you know sort of hacker mentality I think is really fun for me

to find little things that are are ways I can have an advantage versus uh versus other channels I I also applied that with my own personal brand as well um 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 doesn't it really matter and I had to go get that content out there this is in 2019 this is the development of my personal brand um 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 uh by chance that I built up my audience there are formulaic and calculate calculated ways to build an

audience where I could definitely do it again in like another category um but it it's it's a it's say marketing skill uh in in conjunction with the message you want to deliver but uh how to leverage your content on social media as a a whole different skill but anyways um yeah I'm actually maybe just briefly uh 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 tips lessons I'll tell you the secret but no one who listen 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 to 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 uh 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 or or digest um 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 hell tweet the last 15 days in a row the algorithm's like let's give him a Dan held tweet he's probably going to like that and so that's how that sticky H 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 um posting in the morning your audience is awake there's so many times where I see people

tweet out at like 10 p.m. 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 getting traction and going viral is 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 um 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 uh 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 um what content does your audience want and you don't 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 okay maybe my joke wasn't as funny as I thought you know what I mean uh so yeah that's where I feel like there's um 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 one it's post 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 that 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 uh there's all sorts of different tools um one of them is called social uh social blade on social blade you can look at other people's uh new follower count metrics and so I looked at some of the top influencers in crypto and I looked at their spiky moments where they got a lot of followers and then I went on and I used Twitter advance 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 advance search and social blade two free tools

that are great Twitter advance 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 advance search it's built into Twitter uh you just 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 advance search almost no one uses that it's it's pretty funny too because uh you know my professional capacity and we'll touch on this in a second is is in marketing where I used to lead marketing at Kraken and now I do fractional CMO work and marketing advisory work alongside my fund um

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 advance search I'm definitely not not going to hire them I'm like this is one of the easiest ways to find Alpha um so it's funny though most most people don't pull open Twitter ADV 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 your single lessons so I hope to see some Brian tweets two years from now let's let's let's do it yeah yeah okay so uh and then you mentioned so zero block was acquired right that was required by uh Kraken or blockchain.com acquired a zero block back in December 2013 and I came on board blockchain.com as the first product manager um which was quite some time ago and uh 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 weren't many a players in the space and uh I was I was doing we were all doing our best um so yeah blockchain.com was

one of the hottest companies back in 2013 nowadays no one really talks about them they kind they very much faded from relevancy but um back in 2013 blockchain.com was the most popular their non- custodia wallet there weren't Hardware wallets back then or at least not that I can remember um and before bip 39 we didn't have uh we didn't have pneumonics 12 to 24 word backups so youed to have to print out your private key blockchain.com was the first non-custodial wallet that you know they they had the wallet uh basically they had the wallet file and they would deliver you know their wallet file down to the browser and you would decrypt it in your browser you know entering your your password so uh um 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 um but yeah if we want to kind of round out the cor the career side did that did did a change tip you probably remember change tip we did micro payments yeah yeah on Twitter where you could yeah you could send someone a beer and the beer would represent $2 worth of bitcoin or send them SATs that which was a pretty fun Dynamic you know cuz Twitter eventually came out with like the ability to tip each other in like Satoshi so explored that company failed though unfortunately so I was just an employee there but that company failed then I worked at Uber headquarters on writer growth and growth marketing worked for some legendary folks there um that was very formulative to building out kind of my my more formalized career

in marketing um Uber was a really fun company a very libertarian company where Uber people forget Uber was illegal in every single City it launched in like there's not many tech companies who are like yeah 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 um 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 does are are taxi laws moral not really you know I

don't think there's any morality there and that it's just a cabal so we broke up that Taxi cabal um and then left there did another startup called uh um interchange we got bought by Kraken and it came over came on board at Kraken and it eventually built out the marketing team from 2 to 30 uh that was from 2019 through 2022 what was the experience like uh doing marketing at Kraken kraken's intense um we had a lot of catchup 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 um 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 Jesse I said hey I

think I could take this team from Two and scale it out to being a real marketing org uh the previous CMO didn't really have that crypto sort of mindset and they just worked a good fit and so uh it was a pretty strenuous intense process of like marketing hadn't really been represented well the company we hadn't redesigned our homepage in four years I mean this you can use the Wayback machine to 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 tax for marketing orc um so we had a lot of catch-up to do a lot of work had takeen over what marketing did to some degree so we had to claw back that territory so clawing back that territory and building up the analytics infrastructure building up trust uh which is you know takes a very

long time to do especially when you're looking at budgets of Kraken and and uh coinbase 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 determine and then often times the way to calculate that is turning all the ads off and then turning them back on again so there's uh which at Uber we did that called an incrementality test um incrementality so did did additional marketing dollars that we spent to increase additional income or or Revenue

um 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 com you know that is a complex future cash flows calculation which 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 um so yeah building on marketing at Kraken was a very strenuous very intense role I worked about 100 hours a week for three years so it was uh not sustainable long term that's where I left Kraken 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 company's a long time and I wanted to go like go go uh get my arms around the next challenge so uh let's talk about your fund should also disclose here I actually uh talked about your fund with you at the sub Round Table earlier this year and then ended up uh investing in your fund as well so I want to disclose that here but yeah so you you launched the Bitcoin Focus pH called asymmetric um why did you decide to do that yeah great question so when I was at uh Kraken I was in you know I was putting out content about Bitcoin and I started to look into Bitcoin defi now at this time that was like lightning coin

joins Stacks liquid um really wasn't a lot going on there but I saw a glimmer of something that could happen and if defi 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 salana it's bigger than all of them combined and if defi could ever be unlocked there this would be the biggest opportunity ever to exist in crypto so so uh when I was leaving Kraken this is I where I identified where I wanted to spend the rest of my career was in Bitcoin defi so this is 2022 remember this is before ordinals came out ordinals very much popularized defi on top of Bitcoin but before that

this was a very uh weird thing to do most people didn't believe this could happen uh 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 uh Tech crunch actually wrote up my departure from cra where I lay out my thesis in July of 2022 for Bitcoin defi which is fun to read back read back on CU it's it's kind of prophetic um so in doing that I left Kraken and started to do fractional CMO work where I helped out companies like tap rot Wizards and Trust machines these are really popular really well-known companies in the Bitcoin defi world I was boots on the ground seeing what they were building and seeing what they were

capable of doing with whether it be ordinals or Bitcoin layer 2 Tech like Stacks in 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 uh early marketer and I I can see this category being huge uh 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 defi Venture fund it's a fund within the firm called asymmetric asimetric has another fund another two funds in The Firm I run the Bitcoin D5 interf fund um we invest in early stage Bitcoin D5 projects that are focused on like protocols so this could be a Bitcoin L2 a meta protocol or

a Dap and so uh we've already cut six checks into the category one of them being fractal Bitcoin I don't know if you've been paying attention to that um fractal Bitcoin they've already uh debuted so they've already had their initial token off uh their initial uh token generation event and they have like $20 million a day in trading volume at like a $3 billion Market cap so um I'm not sure if you you even knew that yet I'm I'm sort of delivered actually no fractal is as one I'm not I mean I follow a bit the this space it's also something where you know it uh primarily Run course one staken company so we are also spending a fair bit of time you know starting to run infrastructure for

some of these uh Bitcoin side uh Bitcoin connected Associated protocols but this is not one I'm actually didn't follow this one I think it 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 connect Bitcoin in some sort of way I think that's a fair way to associate it but yeah we uh we already made six Investments the fund started in February um we came out of the gate storming because this was the right time right opportunity um so for us it's been it's been a very exciting 6 months it's been a very exhausting 6 months uh raising and deploying at the same time was was quite intense uh but we got into some really good deals um

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 uh I look for people that are in for the Long 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 uh maybe let's talk a little bit about sort of Bitcoin history CU in a way this is an interesting thing that has happened and I think it sort of uh surprised uh many people including me you know because I I mean I got into interested in Bitcoin 2013 you know I was very excited about Bitcoin I was always very excited about interested in other things as well uh

like non-bitcoin I mean of course back then we already had uh 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 like a 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 uh block siiz 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 protocal changes to bitcoin so how do you see that kind of like history of Bitcoin and how it l now 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 um when we look at what what I 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 um for example nfts started on bitcoin with counterparty rare Pepes rare Pepes are the first nfts ever created and uh so it wasn't crypto kitties that were the first nfts it was actually on a Bitcoin called B Pepe's 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 um 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 because 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 nft to be we also don't want a contract for nfts to be changed where you could you could add or remove items from a collection whereas like they can't happen with ordinals um so there and there's a costliness factor as well like with other chains you can spin up nfts tens 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 um that's one example we also have things

like you know layer twos like Bitcoin experimented with lightning and liquid being and root stock being the in Stacks uh but liquid has no activity same with root stock and lightning has minimal activity um I mean I'm still bullish on on all these I I want to see all these l2s succeed but that's just kind of like I'm just laying down the facts of what's going on today um 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 l2s here that I think are have looked at how the ethereum l2s launched in 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 in this cycle um we we've seen some early glimmers of this with like stacks for example has a 3 billion market account um and so sta I think sta 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 um I think that they're sort of leading the way of of expectations of like what this cycle is going to look like um but yeah we are just so again to mimic the nft route 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 uh 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 um 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 siiz Wars they also weren't around for any of the early Bitcoin discussions where in the 2013 through 2016 cycle uh we would often say well let's let the other alt experiment on stuff we bring what works back to bitcoin well we clearly sold this worked on ethereum in salana and we're bringing it back to bitcoin so um you know those folks aren't ogs they're not they haven't been around a long time and they don't really grock why bitcoin's valuable uh they're also really obsessed these kind of newer Bitcoins are which is very bizarre kind of like the bcers 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 uh 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 with 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 it on a 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 crypto assets and traditional

Fiat and gold and then you look at it the other factor which is its immutability you can't censor it that's great but I don't need censorship resistant nuclear grade payments for my cup of coffee and so in you know to sacrifice user experience it's also more costly to ask a consumer to do that I think is a grossly negligent way to approach product building and if we look at the last uh 12 years I've 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 uh 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 a two categories of bitcoiners there's 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 um and they understand that Bitcoin has to change a little bit in the future to sore things like bugs and and some things that allow for uh more expressibility so there's a really big proposal called opcat that's gotten a lot of momentum the Bitcoin community and the Block siiz Wars what we all agreed on

was that Bitcoin was going to scale in layers that 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 get more expensive on L1 people can only transact on l2s and maybe occasionally transact on the L1 if that happens we need to allow for trustless bridging and a much more uh rigorous architecture of these l2s connected to Bitcoins L1 and right now we don't have that things like opcat or covenants allow us to I would say deliver on our original compromise and promise of Bitcoin scaling in 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 the cell2 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 a bit of functionality uh to bitcoin that basically then allows you know verification much more easily of 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 opat like how it works and what exactly it is yeah so opcat 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 um when we look at opcat 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 trustless Bridges um I am not technical enough to dive into the details of exactly codewise how that works but this works with eight lines 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 multisig 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 okay security assumption but it's not great with opcat we can have trustless bridging where we don't trust this cabal we don't trust this group we can use Bitcoin on these l2s 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 a conversation just recently

where you know it was also discussion around the ZK and you know where you could like verify or bring in the future makm change a big coin so you could verify ZK proofs is opcat 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 it's called like the great script restoration process where like we would it would be opcat and a bunch of other ones um covenants CTV these other proposals have a lot of energy behind them a lot of political momentum um some of these allow for verification of like ZK snarks like what

you mentioned um you know I would say it's TBD on on if one or multiple get get sort of uh through consensus um but I would say like CTV and opcat have the highest momentum behind them and and so I mean I also remember actually at this block size when this block sizee 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 the Bitcoin core developer who controlled the bit GitHub Repro there

was some sort of governance on that who has access who gets kicked off and then of course you have the minor ultimately who decide what software to run who are like really the ultimate Arbiters how do you see this kind of kind of governance process uh playing out around around opat and when do you hope this is going to be part of the Bitcoin protocol yeah um so you know when we look at the the biggest thing in the block size Wars 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 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 blockchains 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 uh 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 comall 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 and the process of getting something upgraded and Bitcoin is extremely complicated you basically you have to convince everyone to change their node software to run your version of Bitcoin and so you know different proposals hardforks are extremely difficult and Bitcoin doesn't upgrade through hard Forks it upgrades through soft fors um

primarily through softw works so with softw works you know 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 uh Quant so tapet wizards one of my clients they built out something called bip land bip land bip land is a comic strip that shows you how a bip or Bitcoin uh you know Improvement proposal gets implemented which is any sort of upgrade to bitcoin what process it goes through to be evaluated um most of these of course have a multi year evaluation period where it's talked about theorized analyzed by some of the top brightest

mind in cryptography uh and then people it's given a bip and the bip is a proposal and eventually there's enough political buyin from all those parties I mentioned earlier to where the bip kits 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 um people who paid off certain individuals they could push proposals forward with little if there's Little Resistance then all of a sudden uh you've got a lot of changes in the protocol that could be hazardous yeah for sure I mean I I I was in a time uh in favor of the block size increase as I think a lot a lot of

people were right in the community now I I do feel that in retrospect and I felt like the arguments against increasing it it they did 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 hard folk didn't happen which is exactly your point right it's basically just about you know the difficulty of changing the Bitcoin protocol also gives you you know a huge amount of resilience against yeah State actors or others that will end up wanting to um disrupt the network and when we look at bitcoin's 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 didn't never really saw the payments use case take off so Not only was a technical cap the technical knowledge was off because you can't just keep scaling for forever you have to eventually have a limit two is that they didn't even understand bitcoin's value prop like why Bitcoin is valuable what problem was it solving and it's not cheap payments uh 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 a whim 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 um I'm also throwing out a prediction that op cat if it does get implemented sooner it'll bark the top of the cycle so so the top of the cycle being uh it gets implemented we we saw a little bit of this in previous Cycles where protocol updates are highly anticipated and a is traded as people think okay 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 uh fomo of the market you're doing this Bitcoin eii fund why is Bitcoin defi so important what what do you hope are the kind of

like you use cases utilities user experiences that Bitcoin defi 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 um 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 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 um we've got l2s l2s allow Bitcoin to scale and what's really interesting about Bitcoin l2s versus ethereum l2s is that Bitcoin l2s are more expressive ethereum l2s are just cheaper and faster Bitcoin l2s are cheaper faster and more expressive because these Bitcoin l2s can be like EV or SPM which means that you can get all of these really cool defi things that you want to go build on this Bitcoin L2 um 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 that we're going to see huge amounts of tvl much higher than ethereum l2s because again the ethereum l2s 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 defi stuff with 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 um I mean if you look at the relative like tvl lock of of Bitcoin versus uh ethereum l2s currently it's like a tiny fraction like 0 1% or 0.1% I mean I think we'll see Bitcoin let's let's just talk about defi locked

up in uh Bitcoin locked up and Bitcoin defi whether that be l2s meta protocols you got things as well like Babylon which is reaking where Bitcoin is being used as proof of stake assets for other blockchains um I think as a percentage of bitcoin's market cap probably 10% which is enormous you know like that's still ch gantic um 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 is definitely mean that it it will it will sort of remain lower because just because I think ethereum people are uh more used to like you know that kind of from the beginning those kind of things are like a part of the ethereum vision oras I think for Bitcoin it's a sort of new things so I imagine there's like maybe more people who are not 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 another crypto asset so it's it's not like these are just a

giant group of Bitcoin Maxis the Bitcoin holders all along have been multi- coiners so they I think they're very willing and ready to do that with their Bitcoin um I think that they've been doing this with their ethereum and salana and if they can do that with their Bitcoin they definitely will and do you think the timeline this is kind of like starting to happen now and uh 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 at which this uh 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 um with

that you know there's just so much there that you know 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 a bull run happening yeah yeah and uh what are you mentioned fractal earlier or like what what are the some of the projects that you think uh you're most excited about and that you think will have the biggest impact yeah we invested in Bob meso and bit layer those are all Bitcoin l2s really great Builders love the go to market strategy we think that the go to market strategy is the most important

element of this um when you look at Bitcoin l2s there it's really hard to differentiate the different l2s and so brand positioning go to market strategy is going to be critical we believe that these Founders at those uh those three l2s have that specific capability um 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 Bas layer and it's sort of like uh meta Protocols are really interesting because essentially activi is happening on bitcoin L1 and there's another Network that interprets the activity happening on the Bitcoin L1 and that can unlock smart contracts and other other sort of uh event-based uh kind of financial Primitives um so

then outside of fractal the two daps we've invested in are uh liquidum liquidum allows you to borrow Bitcoin using your ordinal La collateral and that uses discret law contracts and the Bitcoin base layer to do that really cool piece of tech I've been looking at dlc's for a long time I think it's super interesting so we've got DLCs powering um powering liquidum and then satf flow is a Mev visualization tool a lot of the dexes that are go the dexes that work on bitcoin currently use par sign Bitcoin transactions and with that those transactions can be sniped so they built the first M visualization tool and with that they allow for uh 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 mempool to leverage that to some for something was 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 uh very interesting to see right I mean on ethereum we've had a huge amount of interest and activity around me and uh I think it's also on some other systems like salana 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 had around Bitcoin is also concern that I think was always felt like a really legitimate one to me is that okay 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 that can counteract that is if if we do see significant transaction fees and so I guess it seems pretty obvious that uh all of this Bitcoin L2 D5 meta protocol can result in that is that also one of the things

you see or yeah it's a huge benefit um what I've written extensively on the Bitcoin block subsidy 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 limited Bitcoin called the subsidy and transaction fees given that at every single having we have the amount of Bitcoin subsidy per block that means that the number of Bitcoin being issued over time is decreasing exponentially uh 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 one is that despite the havs 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 bitcoin's value has gone 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 a dollar value of the block size reward and that's going up over time due to bitcoin's Value increasing relative with the dollar which makes sense um transaction fees ultimately they'll need to replace the subsidy and with ordinals we saw a glimmer of that where

transaction fees were extended periods of non bullrun time periods where transaction fees went higher much higher and 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 bitcoin's longterm 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 uh that constantly whine about bitcoin's long-term security budget problem and the common question I ask them which they all refuse to answer is I tell them I ask them what is an

appropr level of security budget no one knows no one knows how much is necessary and so to say that it's flawed and bitcoin's going to have to change it 21 million hard cap to keep the subsidy going because we because the security will fall so low I find that incredibly dishonest and dis 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 I I I think that since the Bitcoin and the block is going down and the transaction fees aren 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 defi 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 um and here's another fun one you know we have had much lower security budgets in 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 a larger and larger 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 um 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 willingness to spend 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 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 as it one % 2% um you know you could use comps but comps are really hard there's no such

thing as there before Bitcoin there's never a thing like a blockchain so like 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 attack the bit 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 burrow the money so the only actors that could 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 that amount of capital so that would be I think a fair way for them to argue like what an appropriate level of security spin should be but then if they use that argument too that you look at ethereum and it has a minuscule amount compared to that like 200 billion as well so that would also be an issue um but I think that would be the intellectually honest way to talk about this is a percentage of market cap and then we could 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 you do see you know a lot of activity that you know then is is is sort of anchored in in Bitcoin and leads to higher transaction fees that that is certainly going to be extremely positive for the longterm security of the network for sure cool well thanks so much Dan it was really great to have you on and really enjoyed talking a bit about you know sort of state of Bitcoin and some things happening and yeah hopefully we can do it again sometime and excited to see how things are going to develop in the next years and where you 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 then cheers