We need to remove the smell from bitcoin

Transcript

Hi everybody. Welcome to a new episode of Reinvent Money. That's how we call the show as of today. Um this is the show where we talk about Bitcoin of course and other cryptocurrencies and and several other monetary innovations. My name is Paul and my co-hosts today are Milto of Blocktail.com and Tim Pastor of two-way.io. Our guest today is the one and only Trace Mayer. We had him on six months ago as well. from Trace. Hey, good to be here. For people that don't know Trace, Trace is a seasoned investor. He's invested in Armory, Bit Pay, Kraken, and many other firms. He also runs a a podcast show on bitcoin.kn, and you can follow him on

Twitter at trace mayor. So, Trace, um, the main topic for this episode is the question, why do you hire Bitcoin? So you can see Bitcoin as as a as a as something you need to have a job done. You have a problem and you want to hire someone, you hire Bitcoin. So what is a problem that someone um needs to have solved and why do you use Bitcoin for that? So can you could you elaborate on why this is such an important question in in the space right now? Yeah, I think it's an absolutely critical question and a lot of people are really losing sight of uh the business application. See, we're under threat. Uh major financial

institutions have come out with patents. Coinbase just said that they're coming out with nine patents. Uh that, you know, patent challenging a patent costs hundreds of thousands of dollars. Uh running a compliant Bitcoin exchange with AML and KYC that costs hundreds of thousands of dollars a year. Uh, I mean, are we just building science projects or are we going to have a sustainable business model where we're going to be able to defend ourselves against patent lawsuits, against compliance costs, all of this stuff? And so, at the core of all of this is why do people hire Bitcoin? What job do they need done? And we're able to do it either with Bitcoin or with our startups. And I think that

that's just a critical central question for that that should undergur and overarch all of the other discussions we have. You know, whether it's the block size discussion, whether it's uh any changes to the core protocol, whether it, you know, whatever it is that we want to change, we need to figure out why do we hire Bitcoin and how can we make Bitcoin more useful and more valuable to the people that hire it. And I don't just mean people using Bitcoin. I mean people hiring Bitcoin. And hiring Bitcoin, we need to figure out who's willing to pay money. And we need to go after the people who are willing to pay the most money uh with the highest margins. Those are the types of

customers that we want uh when we're hiring Bitcoin. We don't we don't necessarily want people just using Bitcoin to make a bunch of dimminimous economic transactions and not be willing to pay anything for it. uh we need people who are really willing to pay a lot of money to hire Bitcoin and then we're going to have the resources to defend ourselves to build out the startups to build out the technology and all that stuff because otherwise like guess what we've been in a two-year bare market. People are getting laid off. We're going to have more people getting laid off. The community is going to shrink. We're obviously not doing the job very well. we we either haven't figured out what the job is or, you know, we're just not doing the job uh

that people hire Bitcoin for because if we were doing the job then the then then the price would be going up, people would be getting hired, startups would be getting funded, etc. Yeah. Because of course the question can be answered in so many different ways, right? You probably um hire Bitcoin for different reasons than I do and so everyone has his own use case for Bitcoin. Um, so how would you address that problem that Bitcoin has so many different use cases? Um, and it's difficult to converge all these different types of of scenarios and use cases. Well, you know, I think I think that's a great way to approach it.

Uh, I talk often about how Bitcoin has seven different distinct network effects all taking taking place at the same time. The first network effect is speculators. The second would be merchants that accept Bitcoin because speculators have Bitcoin. You know, that's why I invested in Armory because you have to have a wallet service in order to hold the bitcoins in order to speculate. Then I invested in Kraken because you need to have an exchange in order to speculate on the price between bitcoins and euros or dollars or whatever. Uh then I invested in Bitay because hey, a merchant processor making bitcoin easier to use. But that's the second network effect. So I would argue that the wallet or the exchange that

network effect is more important to focus on than the merchant processing network effect because it's the first and not the second network effect. Then the third network effect would be consumers who use Bitcoin solely because merchants accept it. And I think a good example of this is pur.io IO where you can order stuff on Amazon, get a 20% discount solely because you're using Bitcoin as the medium of exchange there. Because of that increased demand, you have miners that are securing the network because the block reward has a higher value in fiat currency terms.

That's the fourth network effect. So then we have the most secure blockchain. Because it's the most secure blockchain, we're going to get more developers and more startups and more people building on top of our protocol instead of other protocols that are out there. That will lead to the six network effect of financialization. And uh we're seeing that already with companies like Ledger X and Solidex which are doing Bitcoin derivatives and and swaps. And then the seventh network effect would be uh world reserve currency status. uh that's where people are actually settling into Bitcoin instead of just settling into dollars or euros. Uh and so those are our seven network effects right there.

And yeah, we have different use cases in each of the network effects, but I think we need to prioritize the earlier network effects to the later ones because they're the much more foundational network effects. Yeah. Earlier on you said we need to target the people with the most money. Obviously that is I guess Wall Street in this case. they already investing heavily in Bitcoin or blockchain technology. Do you think that's a good group to focus on then? Not necessarily because we we've got two different branches there. We've got financialization which is the sixth network effect and world reserve currency status which is the seventh network effect. But I don't necessarily think world current world reserve

currency status will happen for you know a decade or two at the very earliest. uh when it comes to financialization, well, Wall Street and everybody, they can use blockchain technology without using Bitcoin. And it doesn't necessarily even mean that they'll actually pay to use Bitcoin for those particular services anyways, because they're using it to cut costs, not to increase them. And so, you know, when we're looking at who are the people who are willing to really pay a lot of money to use Bitcoin, I would say that it's primarily monetary sovereignty is the people who are looking for monetary sovereignty who are willing to pay for that. Those a very small group.

Of course, that's you, that's me. Uh, that's still a very limited. No, I don't think it's a very small group because we've got people on the border of Venezuela that are moving millions of dollars worth of bolivars through Bitcoin. Uh I was talking to somebody. There's an exchange in Switzerland that because of FACTA is actually the largest Bitcoin exchange in the world in terms of volume doing more volume than all the other Bitcoin exchanges combined. But they're all doing it off the radar. And it's because they don't want to attract the attention from FATKA. And the world has been plagued by monetary crisis now for so for so long and especially over the past few years we we don't see that easing or any there just so many different um situations across the world

where people need monetary sovereignty but at the same time we we don't see the bitcoin price rising so how come we don't see yet an influx of wedded money going into bitcoin well I think there's uncertainty you know take the block size debate for example you know becoming very public being made a spectacle of it's I had a friend who was on Bloomberg discussing it. It's shaking confidence in Bitcoin and at the heart of it, you know, is is part of this discussion why we're hiring Bitcoin. For example, I was having dinner with Dr. Adam Back, Gavin Andre, and Greg Maxwell. Just the four of us. It was like a 5-h hour dinner. It was very, it took a long time. And you know, I brought this point up. I'm like,

why do we hire Bitcoin? And both Greg Maxwell and Adam Back were like,"Well, we hire it for monetary sovereignty." And Gavin said, "Well, because when I make a payment, I feel good." I mean, does that really cut it? How much are you willing to pay to make a payment in order to feel good? you know, is is kind of the question to ask because do we want somebody moving a million dollars of value into it because it's not safe in Greece or Venezuela or Argentina or do we want to go after a bunch of people who want to play around with a faucet or play around with uh Satoshi dice or you know some other dimminimous economic transaction where they're not actually moving a lot of

money into Bitcoin? like which one is going to actually have more of an economic effect, which one is going to provide, you know, so that that helps frame the debate like why do we want to increase the block size? Well, you know, I think it would be great to increase the block size if we had, for example, confidential transactions getting rolled out. Why? Because confidential transactions will increase the value proposition that people using Bitcoin for monetary sovereignty want. You know, can you explain what confidential transactions are? So, confidential transactions is an invention by Dr. Adam Bach and Gregory Maxwell where it uses homamorphic encryption and zero knowledge proofs to

encrypt the amounts and the addresses that are used in Bitcoin transactions. So now instead of the blockchain being in plain text, it's actually in cipher text. And so that means that you you can either have a transaction be have the amounts and the and the receiver or the sender, you can have that either public or not. If it's not public or if it if it is encrypted, then you've now cut the audit trail. So you can't just trace back all the transactions. You know it Ross Albrech for example, you know, life in prison for running Silk Road. Do you think he feels warm and fuzzy because of all the Bitcoin transactions he engaged in? You know, that's just one particular

use case, but it shows that, you know, just because Gavin feels warm and fuzzy because he makes Bitcoin transactions, there there are potentially a whole another market with lots of other actors who don't feel warm and fuzzy when they make Bitcoin transactions. for example. So to summarize, can you can you then um what is your position in the whole scalability debate? Well, your concrete or actionable position, right? Well, I think we have to figure out why do we hire Bitcoin and confidential transactions because of the proof those those types of transactions take, you know, 7 8 10 times as much block size space in as a regular transaction does.

So yeah, we would we would probably need to increase the block size, but we don't just need to increase the block size so that people can make more faucet transactions. We need to increase the block size for people who are willing to hire Bitcoin and pay money, you know, to for a real good or service. And I think I think confidential transactions is a good service that people are willing to pay for. In fact, I bet they're willing to pay a lot of money for it. And we could very well see a huge increase in the Bitcoin price because of that because people's transactions would be much more private. Bitcoin would be much more funible. Uh all of those things would be very positive for the Bitcoin price and how easy is it to implement? Uh Dr.

back said it could actually be implemented as a soft fork which you know helps us understand like why are we debating this block size issue when we could have the smartest people in Bitcoin working on implementing confidential transactions. In fact, he said that it would be implemented already but for this massive distraction of the block size increase. You know, I was on a call with over 70 CEOs at Bitcoin companies where they were talking about this block size increase. I figure that that call cost our industry $300,000 at a absolute minimum. How many millions and millions of dollars have we spent on this block size issue and is it really something that people are willing to pay us for? I mean that's the question confidential

transactions. Yeah, I think people would pay us for that. But like increasing the block size to make faucet transactions, I don't think people are going to pay us for that. And so, you know, people who are on those on those calls, they might be getting laid off pretty soon because that's not a very wise use of resources to just be debating something that customers aren't willing to pay for. I mean, it's a it's a hard reality, especially for people that want to work on science projects because that's more fun. But at the end of the day, we have to deliver goods or services that people are willing to hire to do a job and and they're willing to pay. is also like a classical ownership problem because normally as a businessman you can if you have uh a business and you notice that

demand is is lacking or there's something wrong you can pivot your model you can you can change a thing here or there but with Bitcoin you build your services on top of this protocol that you don't do not own directly yourself so it's very difficult to steer the future of the protocol you depend your business on well and that and that's that's where I think it like I had a discussion between Dr. back and Gavin Andre on my podcast and Gavin had made a comment about well maybe we need to fire all the core developers and I retorted with but Blockstream has raised $21 million you know and how much money has Gavin raised to to fund this development and at the end of the day it's the people who have the money and who are

delivering products and goods and services that the market is willing to pay for that are going to have the resources to build out the code and so you can have an opinion about the code, but if you don't actually have the financial resources to build it out, then your opinion doesn't mean jack. And not only do you have to build out the code, but then you have to have the mining power to actually get it implemented. And if you don't have the financial resources to have the mining power, well, guess what? Then you're just not a player when it comes to to a lot of this stuff. And so, you know, it really begs the question like why would we want to be having these debates with people or including people in the process that aren't necessarily players that don't necessarily have the financial resources to make any to make

a difference. Uh, you know, and yeah, it is an open source project, but at the end of the day, so is Linux and Red Hat and, you know, a lot of these things. And they they have ways of going about getting uh decision-making process done and a lot of it has to do with who has the money. Mhm. But apart from all the use cases which um which we're discussing right now um where it comes to Bitcoin when you look at the at the graphs uh at the statistics when you look at the the all-time amount of uh transactions that's being done you can see an exponential growth uh of transactions. So at some point we will either need um an increase in the block size or we will need something like the

lightning network or side chains or some solution because preferably I think most people don't want to move it off the chain. They would like to keep it on the chain uh decentralized uh preferably handled by Nakamoto consensus or in any other way that can be verified in a public way. Um, so don't you think it's necessary for us to look for this solution anyhow for any kind of Bitcoin business to be doing business in the future? Yeah, I I think the lightning network, for example, is vital for Bitcoin scalability because that'll actually increase scalability and not just throughput. increasing the block size only increases throughput and it

actually could decrease scalability particularly when it when it comes to validating transactions or things like that. So I mean yeah we have to we have to look at solutions uh that scale uh that scale as opposed to just increased throughput. Uh but also who's going to build out the lightning network? You know that's complicated stuff that's expensive. Who's going to build that out? I mean, Blockstream has Rusty Russell, a Linux kernel developer, building it, but who else is building it? I mean, a lot of people have opinions, but like, who's actually building it? Who's putting their money where their mouth is? Is what I'm interested in. Another thing that's interesting to look at is, you know, not looking at a chart not just of transactions, but of transaction fees

normalized to US dollars and then comparing that chart to the market cap of Bitcoin. And you know what? The market cap of Bitcoin is almost follows almost exactly how much people are willing to spend on transaction fees. So the conclusion we can draw from that is the more people are willing to spend on transaction fees, the higher market cap Bitcoin is going to have because then we get to see who's actually willing to pay to use it because they have to pay money to a minor that they don't necessarily know who's going to get it, you know. So, that's a hard cost that that that people incur using the Bitcoin network. I think it's great to see more hard costs from

using the network because then we're able to filter out who the real users are because they're willing to pay money to use it. Yeah. So, very interesting point there. You got that, Trace. Maybe we finally see all those transaction spammers that are around finally quitting off like if we have a transaction fee. Well, yeah. I mean I mean I I the whole concept of like a transaction spammer. I don't I don't know that I really even like that. I mean at the end of the day a transaction is a transaction. They're all valid. So you know if somebody is quote unquote spamming well just make it more expensive for them, you know, and then the value that they get that they

derive from spamming a transaction a bunch of transactions they're just not willing to pay for that or it's not financially sustainable for them anymore. I mean that that's a very simple solution. Uh I mean we we don't have people we don't look at like Uber spammers, right? Like because people are paying for rides. I mean if we just hired all the Uber cars uh and and and had them drive around completely empty uh not having any actual economic value getting taking place. But if people still had to pay for it, well guess what? an attack on the Uber network would only last so long before whoever was attacking it decided you know what I don't derive the value. I don't feel good anymore from uh you know having all

these Uber transactions happening. So you know I think it I think it's very important we need to look at the transaction fees and dollars and look at our market cap and it shows us who's willing to pay for Bitcoin and how much they're willing to pay for it. And and at the end of the day he who has the gold makes the rules. He who has the private keys makes the rules. I mean th this is a very long-standing uh premise especially in Austrian economics that we need to focus on the customer and the subjective value theory. You know the the the reason people value stuff and the way that we can discern that is through the pricing mechanism. And it enables us to perform economic calculation. It enables us to determine what needs to get built and

what doesn't. Which science projects should get funded and which ones shouldn't. who needs to get laid off and who doesn't. Yeah. So, how can we go from here? Because we had skating Bitcoin in Montreal. Maybe can you wrap up or summarize what the conclusions were there and and what's the next step? Um, I thought there were a lot of very good uh proposals and discussion that was happening, but at the end of the day, it was a lot of tail chasing. Uh, and I don't even know that uh the I mean, maybe they'll come up. I think it was they were they were looking over a bunch of ideas and then in Hong Kong in December they're going to hopefully have some hard proposals to implement. But at the end of the day, I don't even know that it necessarily needs to happen. We need to figure out how much people are

willing to pay to use Bitcoin first before we allocate all the resources on this type of stuff. I mean, there were over 400 people there from from many of the top companies, a lot of really smart devs. I mean that conference over the weekend when you look at the billable hours it cost our industry millions and millions of dollars to discuss this issue and I don't even know that this issue needs to be discussed right now. I mean are people willing to pay millions and millions of dollars to use Bitcoin? I mean, if they're whining about uh paying a fraction of a penny for a transaction uh as you know, as opposed to paying a whole penny for a transaction, uh I mean, what are you going to do to to um to further your mission? Are you going to

campaign? Are you going to uh how are you going to make people aware of your goal of of trying to make the Bitcoin network more profitable and focus on users that are willing to pay? Well, we we need to we need to figure out what people hire Bitcoin for. You know, I think that's the the important question. And then we need to hone in on those customers that are willing to pay a lot of money to hire Bitcoin. And then we need to focus on delivering the good or the service that those particular customers are after. So, are you using your your your investments, your startups to to answer that question? Are you going to do survey? Are you going to have um sessions with customers to better understand whether why you're hiring Bitcoin? Well, I mean, with with

uh with most of our with most of my startups, we already have customers that are paying money. So, we're we're serving those customers according to what they hire us to do. Uh you know, we aren't just working on science projects. We're we're working on paying customer work. And so, uh, you know, hopefully we'll be able to find more customers that want to pay us more money and then we can hire more people. And if we lose customers, then we'll have to lay off people. Uh, that's just the nature of how it works. You know, there's not an unlimited amount of money. Uh, and nobody's just got a god-given right to venture capital. Uh, and I think that the Bitcoin space in general has been overly

uh overly coddled with venture capital money. And I think that that we're going to see the venture capital money going to much more established entrepreneurs like Chain.com and itbit and Coinbase and the smaller uh the smaller startups and stuff. I don't know that they're going to keep getting funded because at the end of the day, they're just not really delivering the return on investment that the venture capitalists need in order to justify the investments. Yeah. And the best funded um firm I think still is 21 Inc. What do you think of um of their product? Uh I haven't researched their little uh their little computer enough to really make a

an assessment of it. It look cute though. It's very cute. you think you you're kind of a mining expert. What do you think of their propos of their proposition? Oh man, I love to try it, but $400 for a Raspberry Pi, come on. I got I I got to look into it. But the software that they put in there and the claim what they made on the software, I I would really love to try that software. So maybe in the end it will even result in me buying $500 just to play with the software. Yeah, I mean maybe it it'd be a fun thing to play with. I think that we should be much more skeptical of what the intentions might be because uh if they can acquire a huge amount of hashing power through consumer devices that they ship out that all come and mine on their pool and then

they're also able to buy or acquire uh through you know a small amount incremental hashing power from other pools then they could take control of or acquire Bitcoin uh for a fairly small amount of money uh relative to the total market cap. So, you know, at the end of the day, he who has the gold makes the rules. And it wouldn't surprise me if you could actually uh take control of a large majority of the hashing power with $100 million. Uh and so, and hey, you know, then then you've got control of Bitcoin. One hash is one hash. You know, nobody has a god-given right to uh to have a transaction appear in the blockchain. Nobody has a god-given right

to use Bitcoin. So, you know, you're you're going to have to be able to pay for it. Uh, and I think I think we're going to increasingly be moving into that type of a space. Uh, there's so much increased competition from Wall Street and the Sil in Silicon Valley uh that we're we're going to have to increasingly have to have the financial resources to hang on to, you know, our our toy. Yeah. But that's also one of the few things that I don't really understand about why people are cheering at 21 um for decentralizing Bitcoin further because I believe correct me if I'm wrong but I believe that they will uh collect 75% of the mining rewards

from uh from each device and if they want to do that they have to they probably well that's what I assume they probably have to do that through a mining pool so that will only increase centralization further. So yeah, it I mean it I'm wrong, but I don't see how it helps decentralization. It's it's the opposite in my opinion. Yeah, because it's not necessarily the decentralization of the mining power. It's who controls what that mining power is directed towards. So sure, if they got millions of devices out there, but they're all mining on their pool, then they get to control how that that hashing power is used. So yeah, I mean it could be it could be a great play on on actually acquiring or co-opting uh

Bitcoin. Can we call it a distributed pool then in the No, no, because it's not a distributed pool. No, you No, of course not. I mean, we we already have a distributed pool uh that people keep an eye on if they want to pay pool, right? You mentioning Yeah. And and they're not directing the hashing power there, are they? No. Um let's uh you know open you have something cool to share with us. Block recently launched a new wallet about real solutions for for users. Are people going to pay for it or uh no obviously not. It's a wallet so people are not going to pay for it. Um there

are a few things where we uh where we focused on with this wallet. Uh basically you always be the own owner of your coin. So, it's not like a a banking wallet like uh what what the Coinbase is and all the other ones are doing. Uh Tim is showing it right now on camera. Uh and the second big thing that we built in there is that um once you verify your your wallet against your phone number, you will actually be able to send bitcoins directly to your contacts in your telephone without the hassle of putting in QR codes and and or yeah or whatever other way. You can just uh click people, send the bitcoins and they will arrive directly. I actually tried it uh last Friday with one of my mates here in cafeteria. I

don't know what the correct English word is. Cafeteria snack bar around here. And I need still needed to pay for my fry. So I just, hey, you're my friend. Here's your phone number. Download the wallet. Click send bitcoins and you receive his bitcoins instantly. So that's actually uh pretty awesome to see that it works so fast. And the other night, my girlfriend was just downloading the wallet to try it from. Hey, let's use my boyfriend's wallet. And she put a photo on Twitter from, oh, my wallet is empty. I have no transactions. And of course, I got a phone number. So, I just press the button, phone number, send bitcoins, and the wallet got loaded. So, that's solving like one of the issues we still see open with wallets. And then again, Bitcoin, own your own money, be in control. That's

that's really what the wallet told us about monetary sovereignty. Exactly. Was it difficult was it difficult to uh to get it approved by Apple and Android, Google? Um not not difficult to get approved, but there are some countries that limit uh actually uh how do you say it? Encryption on your phone. So we are not available in uh in some countries with our Apple wallet and China is one of them because they don't allow encryption to taking place in the app itself. Right. Interesting.

So, that actually got uh that triggered me a few questions to study on some other apps in the Chinese app store to see what's going on in there and but does that mean that any Bitcoin wallet that's being allowed in China that you shouldn't use that? Well, that's basically what triggered my question mark from hey, if there are Bitcoin wallets that say they do signing in the app and they are in the app store in China, what's up with that? you know, it's I don't know what's up, but it certainly ask it rings an explanation for it rings a mark. I got to check it out later. But we're just busy rounding up. We just released all the uh the open source code yesterday of it so people can actually check how we do the security and that we are secure

because that's one of the most important things you have to do as a wallet, we think. So nice. To to address and trace earlier concerns about you, we need to be able to keep on um paying for our staff. We need to make sure that the that the machine keeps on churning. So how what is what is the business model behind behind this wallet or or behind some of the other services? Then uh with Ro uh behind the wallet right as it is right now there is no no monetization in that but we will launch extra features in the upcoming month or two months that will show some monetization options and that will be directly buying and selling from the app in the Netherlands and probably in the rest of Europe as

well within a month or two. So that's uh what we're finishing up right now. Right. But that's the the big thing where we are aiming on is keeping control of your bitcoins especially uh for all those guys in Greek in Greece. Um we think that's the the big thing why people will come in to Bitcoin in the the upcoming year with more countries coming up with having uh currency problems and uh that's what I was a bit disappointed by I mean Greece was such a a big issue but it didn't really lead to of course there it's it's so so small still and and it's it's not a country known for its no of technology and all of that but it's I

was a bit surprised about the slow uptake there and also I would have I would have expected a bigger impact on the price itself. What's your take on that? Um no sorry I agree with you there but I think China was even bigger the way the week afterwards there people do realize that they need to own uh their own stuff to be able in control they are more on that street than the Greece are but I don't have a clear vision of on China so yeah I mean I think a lot of the people in Greece uh that were impacted uh they aren't necessarily the smartest uh pencils in the drawer, right? Like the the the people that were most likely

to to be affected were the least likely to actually uptake Bitcoin. Uh and the people who were already Bitcoin users, they were smart enough to not have any money in the Greek banks because everybody in their dog could see that coming from, you know, a couple years away. So, you know, I I think we we probably already saw people in Greece uh move into Bitcoin far before the Greek crisis actually happened. Uh and I do agree that I think China is even a bigger mess. But, you know, the Chinese are they're they already have a five IQ point average uh higher than uh the US for example. So, they're already a little bit smarter.

Yeah. And maybe before we wrap up, Trace, uh what do you think of this um R3 announcement the other day where nine banks have um decided to join force and and collectively study or invest in blockchain technology? Is that positive or how do you um how do you see that news? Uh uh well, I I I mean I think it's very positive for the blockchain industry. I don't know whether the banks are going to decide to go with Bitcoin or not, although they probably will because uh you know that they should take advantage of all the open source development that's happened uh just like they take advantage of the internet and they still run their own internets and they can run their own intrinsets uh

with side chains uh and have permission blockchains and everything that they need. Uh I also agree with the chief information officer at NASDAQ at the consensus conference in New York. He said that, you know, they're going to they're they're there they're there they're there going to be lots of players that are going to waste millions and millions of dollars exploring their own thing and not get anywhere and they're not going to be able to overcome the network effects just like and he had been the chief information officer at eBay and he said Yahoo had come at eBay and they couldn't even overcome the two network effects that eBay had and they wasted millions and millions of dollars trying it and so did a lot of other players and so you know I think the banks banks together have a much bigger

network effect than than Bitcoin itself, right? The bank not the nine banks the users they have it's it's a multiple what Bitcoin has for Yeah. But but I think I think we should keep in mind the banks are dying dinosaurs and their zombies. They had to get bailed out. But if you take the market cap of Goldman Sachs, Morgan Stanley, JP Morgan Chase, Deutsche Bank, Barclays, and you add it all together, their market cap combined is smaller than Google's market cap. And so the big banks, not only are they zombies and haven't innovated for 30 years and are giant bureaucracies that are protected by regulation and extremely slow, but now they've got the tech companies,

Google and Apple chiefly, that have trained their howitzers on their industry and they're going to obliterate the big banks. They're going to unbundle them. They're going to go after their most profitable customers. The the tech companies are going to obliterate the banks. already with Apple Pay of course as just an example. Oh, just getting started. You know, Apple Pay and Google Wallet, but the tech companies, you know, the these big banks are going to have to become tech companies is what's going to happen. Uh and Goldman Sachs is, you know, they're ahead of the curve. Over a third of their employees are tech employees, interestingly, and they've invested 50 million in this uh Circle deal. Uh but the the big banks are going to have to become tech companies. And I think that Silicon Valley and the tech companies are a lot

better at being tech companies than the banks are. Yeah. And they're a lot better at innovating, too. Interesting. Yeah. Cool. You guys any any remaining questions for for trades before we uh conclude? There's one more I'd like to ask. Um recently you regulator, I believe it was a CF uh CFTC uh commodity futures trading commission if I'm um they placed Bitcoin under the under commodities.

um some countries see it as a currency. Um how do you see it and what do you think of this move? Well, I don't think we've actually seen any countries that have classified it as a currency uh in terms of legal tender status. Uh and that's you know under the uniform commercial code in the US in order to get the protections against say encumberments in a bankruptcy it has to be legal tender otherwise it can get clawed back being property. uh you know I I think that classifying it as a commodity or a digital commodity is probably the way it should be classified uh and then the other regulator should be uh looking at how it's being used by particular individuals or businesses to

then apply other regulations whether that's money transmission or whatever and so that that actually appears to be kind of how the US is is approaching it. the CFTC it's a commodity fence in uh if you're doing money transmission as an exchanger versus an issuer versus an administrator in their guidance uh you know so uh but but I mean at the end of the day it is a new technology it is not not defined in any of the law and the statutes there is political speech and religious speech uh that is embedded in the blockchain uh the the US Supreme Court has already upheld crypto pography is protected speech in the n in the crypto wars cases in the mid '90s. Uh

and so you know I I don't know that you I don't know that it is good for anybody to have any significant constitutional challenges happen uh because that could just really bog down and and increase the uncertainty for the industry. But at the same time, that potential is there uh for for any particular individuals that decide they want to flex their rights. Uh and and man, it could get really interesting because it would cut at the very heart of a lot of the major major constitutional principles and and so I think there are a lot of constitutional challenges uh that could come about to a lot of these uh you know whether it's guidance or interpretations

or whatever. I mean Finson for example they haven't followed their own administrative rulemaking. So even their guidance uh it you know it it could be challenged as having not gone through the proper rulemaking procedure with all the attendant due process of law that's required to to accomplish that. Uh but you know is that helpful for the industry or is it just going to create more uncertainty? And meanwhile you got jurisdictions like the aisle of man which have gone through their parliament and signed off by their prime minister both the proceeds of crime act and the designated businesses act which goes into effect later uh in October. And so they're rolling out the red carpet for this industry and removing any of the legal uncertainty. And they're not

throwing the entrepreneurs in jail which is uh which I think is helpful. Although to to to to you know give the regulators in the US their their due share I do think that they've targeted mainly very egregious actors uh and those are the ones that they've gone after you know whether it's Albert or Charlie Shrim or uh uh let's see the uh the guys running like the credit card hacking scam and the Bitcoin exchange like you know so they've gone after the the much more egregious actors which I think is you know they if they're going to slay dragons, at least slay the real dragons, the guys that have been doing, you know, the the very egregious stuff and not just the the entrepreneurs that are just

trying to, you know, do do stuff, but do it in a compliant way where they have chief compliance officers, etc. So, when you look at um uh for example, Bit License in the state of New York, do you think that other um states in the US now have a really big comparative advantage over the state of New York? Do you think that for example, now has a really big comparative advantage over New York. Yeah, I I think Texas has a huge comparative advantage over New York. Uh because the bit I mean the bit license is bad news. It's expensive.

Uh thou hundreds of pages for the application uh just leave. You know, it's not like the New York market is that big to serve and it's going to get served anyways by people who don't comply with the bit license and they're going to get to charge more uh in order to do it because it's uh not a legal sanctioned activity. But what they charge, even though they charge more, it's going to be less than what the actual legal businesses would have to charge in order to cover the compliance costs. So, I mean, it's very ironic like the bit license is going to drive out all the legitimate businesses, bring in the illegitimate businesses, uh, and then I think you'll have a very few number of legitimate businesses, uh,

like Circle and Itbit that are going to be able to operate, and then the banks, of course, uh, but, you know, when the tech companies decide that it's time to just eat the banks, uh, they're going to be able to, you know, pay for any of this regulation and license stuff that they need to or they'll just buy the banks, you know, they I mean Apple's got more cash on their balance sheet. They could buy Deutsche Bank, Goldman Sachs, and Morgan Stanley just with the cash on their balance sheet. I mean, the the big banks are really kind of pygmies compared to the tech companies. Uh so joke, we as Europeans would love to sell the Deutsche Bank. So if anybody's

uh Well, that Well, that's the problem. You don't know what you're buying. German companies are on sale for Atlanta. So, yeah, American companies, you know, buy buy companies in Chile and Brazil right now. They're a good deal. Yeah. Well, thanks so much again, T. Anything else you want to add? No, I think it's been a great discussion and I think we we need to keep our eye on the prize. Like, why do people hire Bitcoin? And we need to do that job the best that we possibly can versus any competitors.

In terms of monetary sovereignty, yeah, Bitcoin in a lot of ways is superior to gold even because you can transfer it over a communications channel and you don't actually have something physical that can be seized. Uh so you know it like why not why not in why not increase the value proposition that it offers with something like confidential transactions so that Bitcoin transactions would no longer have smell like they currently do where you're able to just track them all through the blockchain. You know if we remove that smell, guess what? Bitcoin becomes so much more attractive for people wanting to use it for monetary sovereignty purposes. That's a nice title for the show. Let's let's remove Bitcoin smell.

I like that. Okay. Well, thanks uh Tra. And people can find you on Twitter at Trace Mayor and and Bitcoin.kn, right? Yep. Yep. www.bitcoin.kn. Thanks, Paul. Let's talk in six months. Thanks, guys. Bye. Ciao.