moonshots ep32 bill barhydt crypto transcript

you think about all the frauds that have happened and all of the things that just we kind of repeat long-term Capital Management in the prime broker space uh the late ’90s now of course FTX this stuff becomes you know almost impossible in a defi world now we need probably another 5 to 10 years to really Harden defi from a security and implementation perspective but it is getting exponentially better already every few months and transformative purpose is what you’re telling the world it’s like this is who I am this is what I’m going to do this is the dent I’m going to make in the universe everybody it’s Peter on this episode of moonshots and mindsets I’m with Bill baright who is the CEO and founder of Abra uh it is a crypto Bank uh it’s full disclosure where I hold my Bitcoin and ethereum uh the world’s seen ups and downs and it’s seen a number of

[00:01:01] exchanges go out of business over the last year and a lot of folks are scared they’re concerned it’s like what do I do well Bill walks us through uh what’s really going on out there he builds an analogy says listen the early days of the internet the technology was working right in terms of uh all aspects of of the internet but a lot of companies were failing on top of it uh in the same way the technology for uh cryptography and for Bitcoin and ethereum uh it is all working we’ve had a number of Nefarious players who’ll go into the details there uh we’ll be talking about what his Holdings are how much he holds of his cash in crypto how much of it is in Bitcoin and ethereum and why we do an extraordinary 101 on the entire crypto Areno what is bitcoin what is ethereum what is defi uh so if this is early in your investigation of this world uh

[00:02:02] please check it out uh bill is brilliant he is one of the top thinkers in this field uh Stanford CIA NASA Goldman Sachs and then seeing the opportunity around Bitcoin and starting Abra uh really one of the first crypto Banks so what I got out of this episode were a number of things number one uh the failures we’ve seen over the last year uh really have their roots in greed and do not actually disrupt my faith in crypto as a place to store my assets number two ethereum may be a little more of an advantage for my investing dollars than uh Bitcoin today and we’ll explain why uh number three uh we’re at about 200 million wallets and when we get to a billion wallets that’s Bill’s prediction for when we’ll see uh Bitcoin really skyrocketing up towards a

[00:03:02] million dollars of coin that’s just three of probably 10 takeaways uh enjoy the episode hi everybody Welcome to moonshots and mindsets today is a conversation I’ve been waiting for with a dear friend who for me is my go-to uh thought partner and leader and really Visionary in the field of all things crypto uh a gentleman by the name of Bill baright Bill a pleasure to see you hey Peter how you doing good good I’m in uh in cold and rainy Santa Monica how about youday yeah last day in Miami so back to the I’m flying into the rain in a few hours so I’m going to enjoy uh the last couple hours in the sun my goal for this conversation is to really dive into what is the state of crypto today the state of Bitcoin ethereum uh what’s safe uh what’s going on given all the recent meltdowns what can people sort of derive from that and hope for in the future at the end of the

[00:04:00] conversation My Hope bill is that uh we’re going to get some clarity on what happened and where people who want to be using uh crypto using Bitcoin ethereum or other coins where it’s safe and in the long term what is the vision where things can go let me do a proper introduction of you Bill is the founder and CEO of Abra and full disclosure I use Abra I’m an adviser to the company so I’m definitely biased in this conversation and thankful to have Bill as a friend um bill has a distinction of having dropped out of Stanford Graduate School along with folks Like Larry pagee and Sergey Bren all the greats dropped out of Stanford I think uh was working at Nasa at the time uh previous to that was working in cryptography at the CIA uh your your bio is like perfect for everything you’re doing and then became a senior Analyst at Goldman Sachs early at Netscape with Mark dreon that was

[00:05:00] probably got some cool stories there and then you founded Abra so here’s the question um what was that event that you said there is an opportunity and I want to create this thing called Abra what was the original Vision cuz for a lot of folks a lot for me the founding story of an entrepreneur that energy that aha moment so what was it for you so so it it for me it was a convergence of like so many different things in my career from earliest cyppher Punk days I had hair down on my shoulder the earring the whole thing you know we were all about where is the where is the money for the internet where is that digital money and a lot of us thought that that problem was unsolvable the idea of trustless money that you know documented all the way back in in books that I can show you from the 80s and and 90s uh to work that I had done in Emerging Markets I was I had started a foundation in Haiti where we were trying to do remittances and

[00:06:01] mobile money on the ground after the earthquake back in 2004 2005 and it was a disaster dealing with International regulations um multiple countries State msbs and money service business regulation in the United States uh International correspondent banking law which came to the Forefront when we kind of canceled Russia after the Ukraine Invasion by shutting off their access to Swift and and you know but I was trying to help people sending $50 around right Haiti happen to get a third of its GDP from taxi drivers here in Miami and New York sending money home realize the overhead cost of doing that crazy right it it can range from six to 20% of funds depending upon the competitive nature of the market but it’s but that’s only one of the problems right after the earthquake the Western Union outlets were flattened so the so the United States Army was flying helicoptering cash into Haiti in order to deal with the problem because the outlets were under rubble and and so I

[00:07:02] was looking at ways to use feature phones because they didn’t even have you know smartphones they a lot of them still don’t uh or data access right so anyway so so I was fighting all these battles many losing battles uh and I’m knee deep in the tech as it relates to what we call Financial engineering and there’s always been this kind of underground movement to apply cryptography to money and and there’s been events that that kind of you know the tech nerds attend uh over the last few decades related to what we call Financial cryptography and but we’ve never been able to solve this so-called double spend problem and that was the problem that Bitcoin solved so back to your original question when I saw that this this guy or group or gal whoever it was thought that they had really solved the double spend problem I was like there’s no way I mean you know bright Minds have been trying to solve this problem for two decades since since public private key cryptography existed and no one has been able to solve it how many times did you read the white paper and call well okay so I

[00:08:01] wouldn’t say I call because I read it like probably 60 90 days after it was published on the cryptography mailing list and I was like I I I kind of understood it and my first reaction was I think this guy thinks that he’s going to use every single computer in the world to solve this problem which is what mining is meant to do and and I said well that’s not realistic that’s part of why I’m convinced by the way that satosi is not an academic because it’s on the one hand you could say it’s an elegant solution but it is without a doubt the most inefficient solution you could probably come up with I mean Bitcoin is without a doubt the most inefficient transaction processing system ever created but it wasn’t created to be efficient it was created to solve the double spend problem right when you’re at Goldman it’s it’s all about cost per transaction cycle and you drive that down you know in the in the 90s it was via Linux uh in the two early 2000s it was via Linux and now it’s via other means and you know etc etc and and that’s not Bitcoin right but it exists to solve a very different problem

[00:09:01] eliminate the state eliminate trusted third parties and and then so I came back to it a few months later and I said I said yeah you know I I actually think this could work it’s crazy it requires Mass adoption to work it’s one of these things where it really only works well if everyone is using it just because of the nature of Mining and proof of work and nodes the security of Bitcoin increases as the amount of computation power increases the number of nodes increases the number of wallet increases etc etc and I said okay that’s it’s interesting and so finally I kind of dug in and within a year I was all in so this is what 20 2010 2011 2010ish yeah and then I I met I was I was traveling a little bit because of the work I was doing in the money transfer world and I had u i i i attend the Ted conference every year um and and I told them about my research in this

[00:10:00] area to try to see what was going on I was trying to get the mining software to compile which was a nightmare in those days and they said you should talk to you should do a Ted Talk on this because I don’t think anybody really understands that this is a big deal I said I don’t think anybody’s even heard of it never mind understands that it’s a big deal uh Silk Road had just started it was trading for like maybe a buck right and and you can only get it on Mount gox which we all know what happened there and and or maybe maybe those of us in the inside know but Mount gox was kind of the first failure that preceded FTX by like you know 10 years um and there was a you know some supposed fraud and theft going on there not to the obviously degree of Ft of FTX but the entire space was very small it was like a billion dollars at the time whereas now the space at the time of FTX was a trillion dollars right which is insane um and and so uh you know I ended up doing this Ted Talk in 2011 and I think Bitcoin maybe it was a150 $2 I think maybe it got up to three and then back to a dollar and oh my God it went from $3 to a dollar it was all fraud the whole Space is going to die

[00:11:00] and you know so that was the first kind of 75% pullback we ever had in price right and now it moves $2 a second in price um and so you know I’ve seen you know kind of back to your original opening commentary about where this market’s at I have to separate in my mind trading and price and the value that the movement from a technology perspective is bringing so if you go back to like like 2000 right is imploded it’s all garbage uh the internet was a waste of time the internet was working just fine it was scaling you had you know you had new backbones being built to basically interconnect you know to lay the lay the groundwork for future home internet you had fivr being laid uh you had you know the beginnings of these web 2 apps that were being built and and everything was working fine what wasn’t working well was public

[00:12:02] markets and Retail investors who were getting crap dumped on them way too early in an investment cycle and so the crap got flushed out from 99 to 2003 is right or 2002 2003 as maybe if those of you who were live remember still very painful memories yeah for a lot of people and and I get it right I was part of it and I remember you know I had some Investments that went to crap and and some that made money and and but but I remember thinking none of this matters long term for the viability of the problems that the internet itself is going to solve the adoption is growing exponentially it can’t be stopped then of course you know I think it was 15 or 16 years ago today Steve Jobs announced the iPhone which basically created a second revolution there around access and it didn’t matter that the public markets I mean not not

[00:13:01] not um to to downplay the value of the money that people lost we’re going to come back to that it relates to crypto but but the space of the internet providing information access to the to the billions of people who could use it for the first time plow ahead exponential growth and we know where we’re at today and it’s invaded every single part of our lives and I would certainly just assume give up pretty much every other Vice in my life before I give up access to the internet and and and my phone there’s another important part there which was in the 99 to 2000 uh early 2000 period it was the consumer feeling comfortable putting their credit card in right it was consumer adoption of trust right it was uh it was this strange uh mechanism of exchanging money for products that was can I believe it

[00:14:00] is it going to get stolen and I think that same that same situation is present here in in the whole crypto space yeah I worked on this even in my Netscape days I worked on one of the first credit card Gateway uh a trip down memory lane today credit card Gateway projects for the for the internet and um it was a disaster at the beginning because we had two versions of the Netscape browser we had the version that you could use in the US and then because um you know Netscape we created SSL which is the S in HTTPS and I was a little involved in that because I worked on creating setting up some of the certificate authorities outside the US when you set up a web server you have to put a certificate on there in order to create the encrypted connection we had a second version of the browser that we were allowed to export because the encryption in SSL was considered Munitions grade cryptography laws dating back to World War II which meant that the SSL version that we could export you could hack and everybody knew it that the NSA could hack the version of SSL that we were exporting and so of course I’d go to meet with all these Banks and

[00:15:01] isps and e-commerce players and the AOL equivalents in Europe and and they’d say well F this we’re you know we’re not going to basically support this you know it’s a disaster right and and so of course eventually we figured it out Phil Zimmerman put his famous pgp key on his shirt in order to prove that your export laws were nonsense uh and and eventually you know other competitors like Opera and others started building browsers in Europe to get around the export regulations and finally the the Commerce Department capitulated and a lot my point is is that we’ve been dealing with this Commerce trust issue for a long time so the broader point that I wanted to make as it relates to kind of crypto is that the internet plow ahead right the technology the entrepreneurs the underlying research the infrastructure it just continued to evolve be built the adoption was exponential crypto is seeing a similar thing play out the difference with crypto versus most

[00:16:02] tech is that because of the tokenomics of a lot of these protocols the public has access to buy a lot of these tokens very early in the life cycle of these projects as opposed to let’s say stock that you might sell in a very early stage Venture Capital deal where the public has no access because it’s not traded it’s not a it’s a private company right and so that happened a little bit in the lat stage.com era when companies were being pushed into public markets very very early this is a really important and and beautiful analogy here right because the whole the whole point is if you’re wealthy enough to take the risk right if you’re a uh a investor who um is able to lose the capital in the Venture markets uh if you’re an accredited investor uh then the Securities and Exchange Commission says okay you’re you’re smart enough or dumb enough to lose the money but you’re right companies were just going public I

[00:17:01] remember the ridiculous valuations and they were being it was pumped and and dumped and yeah the the crypto market right now all the tokens and coins that are being put out there and anyone can buy them and it’s all being purchased on a hope and a prayer and what their what their friend told them at 4:00 a.m. in morning right now if if I would I I don’t develop kind of Bas layer protocols for crypto I don’t do that if I was I would figure out a way to do it where it was fairly distributed like Bitcoin right where there’s no you know buddy who got a bunch of tokens up front even sat Satoshi and the few Genesis blocks had to use Hardware to mine that didn’t pay very much because they weren’t competing but they did the same thing with their laptop that you know a mining Farm does with millions of CPUs today running in Texas on a its own grid okay that’s fair you could make the case that you know the way ethereum did it

[00:18:02] was fair because they didn’t open it up to a large retail investor base uh until the network was actually running and you couldn’t really buy and sell it at Large Scale that’s not completely true but but it’s mostly true most of these protocols today they become accessible to the retail investor very very quickly often before the product is live I have a problem with that but it’s also the free market okay so so I also don’t believe in the accredited investor rules and I know that I’m in a minority in that space I think if you can go into a casino and drop $10,000 playing roulette I think you should be allowed to do this now I don’t think I think you should be punished if you’re pushing fraudulent stuff on the consumer right so that’s where I come out on that as well so but but these are a bunch of different issues intersecting at the same time okay the technology works the idea that you can have decentralized computing decentralized smart contracts to replace the banking

[00:19:01] stack to replace uh gaming to replace money that is working right if you look at the companies that failed it was centralized actors in This crypto space that failed defi or decentralized Finance kept working this episode is brought to you by levels one of the most important things that I do to try and maintain my Peak vitality and Longevity is to monitor my blood glucose ose more importantly the foods that I eat and how they Peak the glucose levels in my blood now glucose is the fuel that powers your brain it’s really important High prolonged levels of glucose what’s called hyperglycemia leads to everything from heart disease to alzheimer’s to sexual dysfunction to diabetes and it’s not good the challenge is all of us are different uh all of us respond to different foods in different ways like for me if I eat bananas it spikes my blood glucose if I eat grapes it doesn’t if I eat bread by itself I get this

[00:20:02] prolonged spike in my blood glucose levels but if I dip that bread and olive oil it blunts it and these are things that I’ve learned from wearing a continuous glucose monitor and using the levels app so levels is a company that helps you in analyzing what’s going on in your body it’s continuous monitoring 24/7 I wear it all the time really helps me to stay on top of the food I eat remain conscious of the food that I eat and to understand which foods affect me based upon my physiology and my genetics you know on this podcast I only recommend products and services that I use that I use not only for myself but my friends and my family that I think are high quality and safe and really impact a person’s life so check it out levels. l/p give you two additional months of membership and it’s something that I think everyone should be doing doing eventually this stuff is going to be in

[00:21:00] your body on your body part of our future of medicine today it’s a product that I think uh I’m going to be using for the years ahead and hope you’ll consider as well so I want to take a second and and and talk through the terminology here uh for folks who are coming to this in the beginning you know you’ve you purchased some Bitcoin or ethereum but you’re not really sure what’s the difference between a token and coin what what’s a we talk about Abra as a a bank what exchanges defi security could you give us the 101 here to Def let’s do a primer on all the moving Parts here and and break it down so what’s really interesting about Bitcoin is it’s that it’s the first money that we’ve ever had for the internet so let’s we’re going to put Bitcoin in its own bucket Bitcoin represents something totally new that has never existed before before Bitcoin and that is decentralized ized money

[00:22:00] that runs on the internet that you don’t need to trust any third party to hold or use all right and you basically can choose to hold it by holding a private key you can either memorize it in your head have it on a piece of paper put it on a hardware wallet put it on a phone and no one else can ever see it if you do that if you do it that way or you can trust a third party like Abra or a crypto exchange or bank to hold to hold your Bitcoin that’s Bitcoin it does nothing else you can move it between two people you can hold it that’s all it does it’s really meant to act as like a digital gold and eventually act as the base layer for a new monetary system and and just take a second here you know the reality is you can move millions of dollars in uh in seconds um and there’s an advantage there I mean it’s interesting most people don’t realize the reason that the US uh treasury decided to only the maximum

[00:23:03] uh currency we have is a $100 bill to make it difficult to move large amounts of money for uh nefarious purposes right it used to be I think we had probably like $10,000 bills uh you know decades decades ago and then of course moving gold is very heavy metal so it’s a it’s a challenge so it’s being able to move things very rapidly any place around the planet for effectively uh frictionless very little cost so that’s a major advantage as well and that’s also done what you’re describing is done for the Bad actors because good actors are you know the the government’s definition of good actors is basically people moving ones and zeros around anyway the the paper cach never moves anymore a lot of it’s just held at the fed and banks are basically moving ones and zeros around so so Bitcoin itself think of it as basically a base layer monetary AR system that for the first time requires

[00:24:01] no banks no government no trusted third party only thing it requires is the internet and there’s even projects that have been done to to basically do this over radio satellite connectivity that doesn’t even require you know ethernet type of connectivity itself um to continue running because the you know obviously the internet um uh is is normally required to to access uh Bitcoin note and and and Bitcoin is unique bill because there is no other I mean there are other versions of Bitcoin and Bitcoin could be duplicated but the fact of the matter is it’s pervasive and the number of holders and miners make it massively dominant what’s going on there it’s got the network effects right so it’s got probably 100 million plus holders now if not more um it is the only large scale what we call proof of work mined cryptocurrency uh and that means that it uses this mining concept where bunch of computers are trying to

[00:25:00] solve a game every 10 minutes in order to win more Bitcoin and in theory um they’re expending energy in exchange for winning the Bitcoin and they’re also processing any transactions that were pending from the previous 10 minutes that they can fit into their kind of checkbook if you will during the next 10 minutes that’s what these miners do and in exchange for that they simply compete to win Bitcoin for for processing these transactions and it is the only network of that type that has achieved massive global scale and kids are forking Bitcoin and MIT all the time just go into the GitHub or whatever source code you Fork it you create a new version Litecoin was created that way right for example it’s kind of like a a silver and a lot of the Maxis hate it when I say this like a silver to bitcoin’s gold but but it’s it’s it has you know and some of these forked projects are interesting for a couple of reasons around Bitcoin itself I’ll get into ethereum in a second in our in our

[00:26:00] primer but but like you think about Litecoin and some of these other projects they Fork Bitcoin and then these PhD grad students they start testing different things that you don’t want to test on the Bitcoin Network right Bitcoin is like you know M you know our friend Michael sailor says this it’s like gold well you can’t change the atomic structure of gold so it should be very hard to change the structure of Bitcoin and he’s right it shouldn’t be impossible because it is software but it should be very hard so don’t want to basically be doing a like a a Windows like upgrade every two weeks for Bitcoin that would be very bad very risky right so that’s one of the great things about these Forks that these kids from MIT and other places do that they can test all this crap that they want to try like there’s all kinds of new algorithms and Technologies and you know ZK snarks and mimble wimble and all these other buzzwords that they throw out that they’re testing on these Forks of Bitcoin and sometimes the new technologies make it make their way into Bitcoin and most times they never do and

[00:27:01] that’s great okay so so a lot of that forked stuff is a test bed we need to move the space forward so so that’s part one in the primary is that we now have a decentralized monetary Network in Bitcoin that we’ve never had before right and it gets the more it gets used the more secure it becomes that’s a feature of the network right got it somebody came along few years after Bitcoin and said hey you know Bitcoin is great for all the reasons I described but what if we could add programs to bitcoin meaning you could actually have programs inside of Bitcoin we call these program smart contracts they’re smart because they run out on the internet without a trusted third party so you’re not using uh a cloud service to run your software you’re using the entire internet to run your software that that was the idea that vitalic had vitalic buin the

[00:28:01] creator of ethereum had was to basically extend the idea of Bitcoin with smart contracts and again that became ethereum and so ethereum effectively acts as the world’s computer what do I mean by that so the world’s computer is different from client server where you have an application running on a server and you you can access it via your smartphone app or a web browser uh it basically used us es all these nodes running all over the Internet to run and it used to use a proof of work model very similar to bitcoin to run these smart contracts okay and because of the uh computing power and energy consumption required by Bitcoin the ethereum community decided to migrate to a different technology platform called proof of stake uh there’s a lot of resources online about how proof of stake Works what it is uh but it us the most important feature is it uses 99% less energy than or more

[00:29:02] percent less energy than than Bitcoin itself and sets ethereum up to scale to visa and MasterCard like numbers meaning Bitcoin itself is not very scalable and it’s not meant to be again it was not meant to be efficient it was not meant to be scalable it was meant to solve one problem and that was to be decentralized and be completely trustless and it does that incredibly well whereas ethereum because it’s meant to be the world’s computer actually does need to scale so what they need to do is they make they need to make a tradeoff uh which you’re always going to have to make now in this new kind of blockchain world between a certain amount of scalability and a certain amount of security which proof of work provides for Bitcoin and so proof of stake is setting up ethereum to scale to visa and MasterCard like numbers over the next couple of years okay and there’s a lot of resources you can go to online around some of the new tech technologies that you’re going to see that help ethereum to scale so this is

[00:30:01] part of the point I was trying to make before that with all of this stuff this bad stuff that people are hearing about online about exchanges and whatnot the technology here is plowing ahead Bitcoin was upgraded last year ethereum was upgraded last year it’s about to be upgraded again in the spring another major upgrade and these upgrades are super important for ethereum to become the backbone for the future of banking uh you know gaming uh and and a whole bunch of other you know applications that that that we can talk about all right and and so now there are competing Technologies to ethereum right that offer smart contracts um some of your some of our viewers here maybe have looked at them to buy the tokens but Solana would be one uh cardano would be another one uh and there are others okay and they’re all basically those levers that I talked about they’re using the levers in

[00:31:00] different ways to make different tradeoffs right um and that Services different communities over time and the competition is great now from a price perspective because all these tokens are publicly available they do kind of tend to move in in in sync right with with the exception that it all kind of moves with network effects so the stuff that gets the most Network effects is the most volatile up and down and is price simply a function of demand and Supply is it basic economics here no well it depends on your definition of basic economics but if you actually look at Price charts for things like Amazon in the ’90s when money was really cheap um it looks a lot like what was happening with Bitcoin and ethereum at similar points in time plus the network effects of adoption right so folks like rob Paul from Real Vision others have looked at this from a macroeconomic perspective we’ve looked at it as well the two thing

[00:32:01] the actually there’s three things that really matter for exponentially growing Technologies when you’re trying to price them in public markets number one is money supply things that move exponentially get an outsized price movement when the money supply is increasing that’s number one that includes tech stocks the Fang stocks etc etc and they also are more volatile to downside investors have more money to investors have cash they have to put somewhere with the expectation that the money is free and that there’s more money coming because the money’s free and so the expectation is these things are growing faster so we should put the money there makes sense okay yep like Tesla right it’s not because everybody thinks elon’s a genius it’s because the damn things growing so much faster than everything else but in a down Market when they’re tightening the money supply the things that move exponentially tend to move down faster it turns out crypto is no different in that regard so that’s Point number one Point number two is it’s relative as I said to exponential growth so if you have an asset that is

[00:33:02] growing exponentially like Amazon was in the late 90s right it got the the huge benefit of the move up and also lost 80% of its value in 2000 just like Bitcoin and just like ethereum I can show you stock charts that are scary because they look you wouldn’t know the difference unless I told you which one you were looking at right so um you know and and and then the the there’s a third aspect to this which has to do a little bit more with the application of it meaning what am I using Bitcoin for what am I using ethereum for but but believe it or not it’s the first two that in the early days are driving the price even more the network effects and the money supply all right now ethereum is interesting because it has all of these applications that are live now um you know there’s three kind of killer apps that are already basically generating billions of

[00:34:00] dollars in Revenue so people who uh stake ethereum or process ethereum transactions actually make a lot of money okay and the money comes from three applications the first is defi right or decentralized Finance so back to our primary what is decentralized finance so most people have no idea how the banking system works right what’s the difference between a checking account and a money market account all I know is if I move my money over to the money market account and get a little bit more interest why why is it happening the average person has no idea why that’s happening there’s a reason why it’s happening right the bank is putting the money to work and and you know repo transactions and other things that actually generate income and you get a tiny tiny tiny piece of that okay whereas in checking accounts it’s it’s more of a reserve model and therefore there’s there’s generally no interest paid and but there’s a whole bunch of there’s a stack to the banking system of services and interconnects and interbank lending and Federal Reserve interconnects and Swift and all this other stuff that no one has any idea what it means but it’s all necessary to

[00:35:01] make the current system work decentralized Finance attempts to take that entire system and rebuild it basically without the Banks without the FED right banks are closed way more than they’re open stock markets are closed way more than they’re open right you know not even County holidays just N9 to5 stock markets are closed or closed like 18 hours a day defi is meant to be open 24/7 have no borders be always on right the first kind of like killer truly decentralized application for consumers right uh was actually music file sharing right so so the first the first kind of file sharing sites that you couldn’t shut off were an example of a decentralized application right uh so after was one that was centralized and it got killed crushed right and so then everybody

[00:36:01] moved to decentralized systems and so bit Torance being the most famous one which is where the bit comes from and Bitcoin and you know to this day it runs yeah whether you like it or not it’s there just like some P okay so so defi is basically taking lending Forex uh the ability to move between coins the borrow um the ability to issue equities and moving all of that into smart contracts running on the ethereum network or competitors to ethereum taking everything that we’ve built since Brett Woods in the United States and rebuilding it on Smart contracts and and Bill you know I looked into defi I never uh dove into any of the uh liquidity pools or exchanges there but the returns were crazy that were being offered it’s it’s very simple and the early days of these systems there’s not a lot of users

[00:37:00] and so the early users are getting outsize benefits of you know because there’s two parties to transaction I have to pay the other party to incentivize them in the transaction and so so that will stabilize into normalized uh interest rates fees over time as more and more people enter the system but the beauty is there’s no company in the background making decisions the network figur it all out on its own what interest rate do I have to pay to get more money in the system in order to lend more it’s all automated so when when companies were dying when blockfi died and Voyager died and celsus died FTX died they were centralized actors making very bad risk management decisions and we didn’t know that until they died you could look at these smart contracts right and they were working just fine as a matter of fact some of the companies that died had lent money to these contracts and they had to basically pay back the loans or they were going to have their collateral liquidated so they wouldn’t pay back the

[00:38:01] courts but they paid back the defi contracts because the defi contract wasn’t willing to negotiate it was literally going to liquidate and the court said we get it you you have no choice do what you have to do right and and and so that’s just proof that the defi model worked it’s getting a massive amount of investment it will continue to do so it is the future of banking but we’re in year look the term didn’t exist four years ago it’s brand new so we’re in year four or three of 20 in order to rebuild the banking stack and it’s incredibly exciting uh and it’s accelerating right I I predict that in 20 years the highest market cap banks in the world will be based on defi rails if somebody new to this wanted to explore defi what would be besides you know popping up and watching a few videos uh what would be their onramp there yeah I mean there’s so many um there’s a there’s another podcast called Bank list they dig in it’s a little bit Tech techn it’s not a

[00:39:01] good primer if you’re not already into it a little bit um there if you just basically Google uh defi we can put some I can send you some links for the show notes uh we’ve done a bunch of podcasts on it at Abra we have a show called Money Talks where we’ve dug into what defi means how it works um it’s not for the faint of heart but once you go down the rabbit hole it’s super exciting just to realize that you think about like I was watching the the Bernie made off um documentary uh crazy um what happened there and you think about all the frauds that have happened and all of the things that just we kind of repeat long-term Capital Management in the prime broker space uh the late 90s now of course FTX this stuff becomes you know almost impossible in a defi world now we need probably another 5 to 10 years to really Harden defi from a security and implementation perspective but it is getting exponentially better already every few months just given the sheer brain power that’s that’s moving into it

[00:40:01] but U but yeah we can we can provide some links there I think that some some primar that are super interesting so so that’s one application right so back to the primary so we have defi then you’ve probably heard of stable coins right so what is a stable coin a stable coin is a way of taking a dollar and making it available as a cryptocurrency token itself and why would someone do that so the original reason ironically was was that exchanges couldn’t open accounts because they were considered high-risk businesses just like cannabis companies or firearm sales money service businesses like Western Union totally legal businesses regulated licensed but for whatever reason the government considers them high- risk so they couldn’t get a bank account so somebody invented this idea of a stable coin they said hey our company can get a bank account so we’ll put a bunch of dollars in the bank equal to the amount of dollars that you’re depositing and we’ll give you back tokens equal to the value the dollars down to the penny and you can move it as many pennies as you want

[00:41:00] around many dollars as you want around and the dollars in the bank simply won’t move and that’s what a stable coin is it would be like having poker chips in the physical world that you would spend at a store knowing you could go back to the casino you go back to the Bellagio to get your dollars out of the token Bo okay got it I wouldn’t recommend that by the way but but but you it’s the kind of an analogous idea now it’s incredible from its early uh adopters in the exchange space which was the use case that couldn’t get a bank account now it’s used for crossb money transfer supply chain Finance defi lending crossb lending remittances it’s insane how and and and exciting how the stable coin space has quickly evolved entrenched itself in so many applications just like defi is rebuilding that stack there’s a whole new kind of industry uh revolving and evolving around um the stablecoin space including some exciting work on

[00:42:01] the regulatory front and there’s a competitive aspect to that with governments now looking to potentially do this right stable coin is the phrase that we tend to apply to private companies doing this like Circle or tether these are private companies set up by entrepreneurs with Venture Capital funding in most cases then there’s the Central Bank digital currency where governments might be looking to issue their own version of what we’re calling a stable coin but it’s not stable coin because they don’t need to put a dollar in the bank because they’re the ones creating it so meaning if the government issues a digital dollar that is the dollar the token itself is the dollar I have a major problem with that but there’s a lot of different opinions on it my biggest problem with the digital dollar model or the Central Bank digital currency model is is that China’s version of this can track everything you do everything so once you start spending that digital Yuan they know everything about you they know the entire history of every movement of that digital Yuan

[00:43:01] and everything you’ve purchased with it who you’ve given it to where you’ve been etc etc I have a major problem with that because if you’re using paper money the government doesn’t have those rights because technically it’s impossible to track right so so anyway so that’s the stable coin right and then the third is this new area that that we’ve all been talking about and and I know you’ve been looking at as well which we call you’ve heard of this this threel acronym nft nft stands for non-fungible token so stable coins are meant to be fungible meaning my dollar should be the same as your dollar okay not always true but but it should be true um and and so uh an nft is non-fungible in so far that my piece of art is not the same as your piece of art the key to your house is not the same as the key to my house so you can basically

[00:44:00] create digital tokens that exist on the ethereum blockchain that aren’t fungible with each other and and the space that has gotten the most Traction in this area so far is digital art which makes sense because art is not meant to be fungible right meaning my art object is not the same as your art object but the applications here are endless probably even bigger than big on that conversation exactly yeah exactly so huge massive space and also emergence from the ethereum network itself actually has its roots back to bitcoin which is a long conversation but really emerging in the ethereum network itself so those three killer apps decentralized Finance or defi stable coins nfts all built on ethereum all processing trillions of dollars in transaction volume today doesn’t care the network doesn’t care about exchanges doesn’t care about the price doesn’t care about FTX or fraud it just works

[00:45:02] again just like the internet worked in 2000 when pets.com and others were dying a brief note from our sponsors let’s talk about sleep sleep has become one of my number one longevity priorities in life you know getting eight deep uninterrupted hours of sleep is one of the most important things you can do to increase your vitality and energy and increase the health span that you have here on Earth you know when I was in medical school years ago I used to pride myself on how little sleep I could get you know used to be 5 5 and 1/2 hours today I pride myself on how much sleep I can get and I shoot for 8 hours every single night now usually I’m great at going to sleep if I’m exhausted you know I’ve worked a hard day I’m right out but if I’m having difficulty and it occurs I’m having insomnia or my mind’s overactive and I need help to get that 8 hours I turned to a supplement product by life force called Peak rest now Peak rest has been formulated with an extraordinary scientific depth and background includes everything from long

[00:46:00] lasting melatonin to magnesium to L glycine to Rosemary extract just to name a few this product is about creating a sense of rest and really giving you the depth and length of sleep that you need for Recovery it’s a product I hope you’ll try it works for me and I’m sure it will work for you if you’re interested go to myli force.com back/ Peter uh to get a discount from life force on this product but you’ll also see a whole set of other longevity and vitality related supplements that I use we’ll talk about them some other time but in terms of sleep Peak rest is my go-to supplement hope you’ll enjoy it go to my life force.com back/ Peter for your discount I mean I think this this point you’ve made now four or five times is probably one of the most important points um out there which is the fundamental technology is is not the issue and is not what um uh has caused

[00:47:00] the challenges we’ve seen over the last over the last year in particular and I do love the analogy uh uh due to the internet because today we don’t take a a microsecond to think about whether the internet is safe secure if it’s working if you see it there it’s well represented and it is uh you’re you have a you know five NES reliability that it’s going to execute as you expect it to and I think uh where are we how far out are we do you think on in the in the crypto World from that same level of um confidence yeah I see where you’re going so let me put it this way when when you could first process credit card transactions on the internet back to your earlier comments about the trust the first companies to adopt this were nefarious actors there was a lot of porn there was a lot of garbage there was a lot of frauds and scams I would posit it that there’s probably even more of those frauds and scams today than there were

[00:48:02] in the early days of the internet but nobody talks about it or we don’t talk about it as much anymore because it’s been totally diluted with all of the positive stuff everything we use the internet for all day long right buying stuff on Amazon you know using Netflix you know using your your iPhone you know using your dating site well all the positive stuff that we use smartphones for I believe that the positive applications of crypto are going to dilute all of the bad stuff in the same way that it happened on the internet itself we’re already seeing it with the examples I just gave you okay um with Bitcoin as sound money now look if you’re in Ukraine we have employees in the Ukraine at Abra all right if you’re in the Ukraine Venezuela turkey even Russia this is not Pie in the Sky stuff you have problems with the bank Bing system and money right now and you are have a very good chance of being

[00:49:00] using Bitcoin right now or stable coins right now this is real for these people and we’re talking about hundreds of millions of people right U and and that’s not to mention you know just poverty famish countries that are starting to look at Bitcoin to very quickly um make internal payments because they can’t get cash out into these places and by the way cash is disgusting from a health perspective so if you’re in a war zone or a place if you’re in a place you know I I well I was in Haiti at the earth earthquake we had a big c problem and so because I was traveling a lot I was asked to help the UN people out and bring color medicine with me and and one of the things that I learned very quickly was was you know if you’re handling money unfortunately you have wear gloves because it’s disgusting what’s on the money and and and that’s true in the US by the way it’s it’s not picking on the Asians right I mean if you actually do an examination there’s there’s feal matter on the average $5 bill right so uh and and my point my my point is is that if you’re in these areas there’s a really big advantage to actually having a digital Bearer

[00:50:01] instrument because you can’t have a bank account the Haitian government can’t afford to open bank accounts for people holding 50 cents right so so this model is infinitely cheaper for them to be able to to do that right so these people are using this technology today so to your to your question though about you know how far until it becomes kind of you know either Mass adopted or whatever you’re not going to know it meaning you don’t know how Netflix works or your view most people don’t know how you do but most people don’t know how Netflix works most people don’t know how Google search works like just like they don’t know how the banking system works and and there’s a lot of complicated internet technology going on behind the scenes to make it work like I said banks are going to adopt Defi and you’re not going to know it that’s when we know that it’s here to stay there is a challenge though that I have faith in the internet to use that generalized term because I know I’m using it

[00:51:01] on a thousand different uh apps and and and uh and applications if I don’t know that I’m using uh a Bitcoin or ethereum network um is it going to provide the same confidence to me when I’m I’m thinking about it yeah it depends who when you say who is me in this in this question right so in this case it’s user right yeah if it’s the average consumer there’s a lot of cases where you know if you’re in like I said if you’re in Ukraine or in a war zone or in a country where the banking system has gone to or in Argentina where it goes to every 10 years right you are going to know that you’re using Bitcoin you are going to know that you’re probably holding a dollar stable coin because you don’t want to trust the banks so those people have an acute need yeah this is one of the conversations that I had with with my Michael sailor which is you know if you truly want to create abundance in the world uh you’re going to have to adopt

[00:52:02] uh Bitcoin or ethereum or basically a cryptocurrency that allows you to retain uh the value of the work that you’ve been creating before you know centralized uh Banks destroy it for you yeah Bitcoin is the ultimate insur insurance policy on government policy run a muuk for 50 years right one of the charts I’ve shown and I’ve shown it at Year events is is basically what happened in 71 when we came off the uh the gold standard and the price of goods and services in the west basically went from Bretton Woods in the 40s was like this 1971 price of goods and services went like this why well the whole point of taking us off the gold standard it was a bait and switch B Brett Woods turned into one big bait and switch and Nixon got on TV and said it was really about uh the FX Traders and all it was all basically pulling the wool over the average person’s eye because he knew that in 50 Years everybody who voted for him was going to be dead anyway so it didn’t matter right it it really was it

[00:53:00] was one big bait switch so so now you know the money becomes worthless now worthless well at the time worthless now worthless and that’s what happens when governments do this Argentina is is unbelievably efficient it’s like having a matrix every generation and they become exceedingly efficient at destroying the people living inside the Matrix and now we finally have an alternative in Bitcoin where you have the ultimate insurance policy as long as you have access to the internet you have access to bitcoin and the governments by and large can’t stop it even China with all the the humming and hawing that they’ve done doesn’t stop their population from holding Bitcoin because they know they can’t they they’ve stopped the miners from accessing the electricity grid but they can’t stop their own people from holding Bitcoin Bill let’s turn the conversation to ABRA um when was the company founded what was your your sort of moonshot your your massive transformative purpose your MTP as I call it so I started Abra in 2015

[00:54:02] is time frame uh had some ideas earlier than that Visa the money transfer stuff I was working on I saw where Bitcoin was going there was no ethereum yet even and I wanted to build a new type of bank that really leveraged Bitcoin and and then cryptocurrency to replace all of the Arcane stuff and democratize access I wanted to build the first bank that everybody in the world could use today every Bank gets a moat based upon jurisdiction like a a lord getting you know kned by a a king that says this is your title to this land and and it’s an artificial like you know mode around your business that the government gives you crypto undoes that I wanted to basically because I I knew that people were going to need help to navigate this stuff like the the computer science phds can hold keys to bitcoin and and and use Hardware wallets the average consumer has no idea what I just said so how are

[00:55:01] you going to navigate this world so I wanted to build the first bank that helped everyone on the planet navigate this world whether it was just to get access to my Bitcoin get access to my ethereum build lending systems that could take advantage of this technology so that I could lend to people in Mexico Philippines Central America India wherever maybe wealthy people in the west are lending to people in the East who need it and because those markets are now global the rates plummet over time because the markets are more efficient right so my idea was to build a global banking system that democratized access to all these services using crypto rails and that’s what we’re doing today and it’s amazing I mean I I think uh I first heard about Abra I guess you and I met in in the in the earlier days uh around the singularity University world and I became a user of Abra just because I felt like the policies you had in place

[00:56:01] made it safe and it was uh easy to use and uh most people don’t know is if you’re holding your private Keys you know written down in a piece of paper or memorized what the case might be we should talk about the difference between the two um that that those that ethereum that Bitcoin isn’t working for you and if I’ve got in my Abra account it’s earning interest for me which is which is an advantage um what what makes Abra different and what makes Abra safe what’s your you know when people say well none of the stuff is safe yeah and and and a lot of it’s not and so it’s it’s a tough um uh it’s a tough thing for the non Tei to navigate and and so and you know we’re recording this in early January and um we can recap what’s happened in the last six months you know competitors have pretty much abage competitors have pretty much all died right and so what really separates us besides the fact that we’re still here

[00:57:00] servicing our clients who are happy that we’re still here uh what really separates us is is we’ve taken tried and true risk management processes from the traditional banking world and we’ve overlaid them into this new cryptocurrency banking Market we call it crypto Banking and crypt banking is different because it’s always on 247 right it’s cross border it’s Global in nature um it it uses this new kind of smart contract technology so we have to make that easily accessible if you’re borrowing money which you can do in Abra right we use crypto rails in the background but it doesn’t look like that to you as a consumer you’re just borrowing dollars okay and and so you know we’ve really tried hard to make it easily accessible extremely secure I don’t think we’ve I’m I’m quite positive we’ve never had a hack at ever in all the years the billions of dollars we’ve moved around um the millions of consumers we’ve served never had a hack and I I’m pretty sure with the way we do

[00:58:00] things it’s it’s probably I I don’t see how it be possible to hack ever so there’s that that is not a challenge by way no no please I have you know as a known person out there in in in the Twitter sphere crypto Twitter the sharks are in my moat 247 so I you know it’s it’s crazy what I have to deal with but but um then there’s the the compliance aspect of this right so we’re a highly regulated company people refer to crypto as the West and in many ways it is but it’s people are usually astonished as to how regulated centralized actors are in the space s bank would freed SBF in the US particularly but also in other countries in Europe SBF was arrested because the laws that he broke were very clear right they didn’t make up the laws after he was arrested the laws already existed the regulations that he broke and the rules he broke and the laws he broke existed in many cases for years right so so there are very I think clear sets of regulations in the U G7 in

[00:59:01] particular it’s very clear us Europe Japan um even China it’s pretty clear what you can and can’t do there are some questions in the Securities Market that the SEC needs to get their act together on and I I hope they will eventually but but by and large we know what the rules are for how we need to operate and we can tell our clients what those rules are so if you think about what’s transpired this year right so most of our competitors are no longer operating can you list some of the ones that have gone down sure FTX Voyager blockfi Celsius Vault and there’s more I’m stop there it’s it’s unbelievable now I say unbelievable but honestly I’ve made this point to investors in the past that I’ve talked to in private about why I thought many of these companies were going to go away and they say yeah bill but they competitors we understand you’re trashing your comp I’m like no I like some of these CEOs you know some of them I don’t like by the way you know like

[01:00:00] there’s a couple that I actually was friendly with um and and but I’m sorry but they didn’t really understand traditional risk management either they didn’t come from Financial Services or they didn’t hire the right people and and we talked to their clients we knew what was going on and so if you look at things like long-term Capital Management in the prime broker space long-term Capital Management was basically uh one of the largest prime Brokers operating they were basically borrowing from every other Prime broker in the space and they were reusing the same collateral over and over again it’s called rehypothecation the problem with rehypothecation means you’re so overleveraged that if the value of the collateral Falls and you start to unwind the system collapses very very quickly and and and nobody there is no bag to hold right that’s what happened with ltcm now that’s what happened here because basically Bitcoin went from 68,000 69,000 back in in March of last

[01:01:00] year I think it was or May of last year to today I think it’s trading at about 177,000 in early January when we’re recording this that’s that’s a large drop but again we’ve seen that drop three or four times before in the crypto space and we may see it again the difference is we didn’t have these crypto banking players in the space the last time this happened so all of them were lending to each other it turned out right just like ltcm it doesn’t matter what the product is it could be wood chips it doesn’t matter it could be ice cubes if the value of the Ice Cube is 68,000 and it falls to 177,000 and you’re all lending ice cubes to each other you have a big problem you’re screwed and and so the Temptation for them was what just make more money the Temptation was faster growth what why does leverage always rear its head in markets where the government is printing money it’s all greed it’s always greed right so rehypothecation has been the bane of the banking system existence for

[01:02:02] decades now that’s most of the players I mentioned on top of that we had one very special player who Not only was doing the rehypothecation that I was talking about which is excessive leverage they were committing outright fraud which is the FTX okay now the history there is is that they had FTX which is the exchange that everybody knew it’s on the Miami arena it’s on Empire uniforms turns out by the way that those were customer funds that they were using as marketing dollars right same fraud but it’s worse so Sam started out Sam bankman freed SPF um started out basically with a hedge fund very similar story to to to uh not not a hedge fund a Trading Company very similar story to uh Bernie mof actually very profitable totally legit um just like made off’s original company was was totally legit irony there was R never needed to start a hedge fund he was making tons of money with his Market making company which was totally legit

[01:03:01] same with bankin fre he was basically doing totally legal ARB trades in Bitcoin uh and other cryptocurrencies a few years ago printing money for himself decided that hey you know what I could actually front run everybody if I actually had my own exchange for my my my own uh Market making and and and trading business which in every other product category is totally illegal by the way you can’t own both companies there’s a reason for that but he went one step further remember I told you earlier when we were talking about stable coins that the exchanges couldn’t get a bank account which is why stable coins existed because they didn’t have to hold cash anymore they could hold stable coins well FTX was no different they couldn’t get a bank account but their trading company could hedge funds get bank accounts all the time so they said oh while we’re trying to figure this out why don’t we just have FTX clients who are wiring US money money wire the money to our hedge fund to our Trading Company which is a big

[01:04:01] big no no illegal bad unethical like not independent of his intentions you don’t do it it’s just any any any compliance officer who’s in their first semester of of school should say don’t do it somehow not only did this happen it never stopped never and so all of the client money was being wired unb known to the clients directly to their trading company Alam and most clients never knew it eventually Alam was just treating that like their own slush fund I don’t know if it was up front or or at the end or both but they were just they were basically taking money from a totally different company they had no right to those to that money and they were trading it and losing most of it excuse me and it they made it worse by printing their own token and then using that token as collateral to to do more of that leveraged borrowing that I was talking

[01:05:01] about before so you have this this this never ending circle of printing your collateral to borrow money taking client money and just spiraling out of control the price Falls somebody in the Press gets wind that the balance sheet isn’t what they want you to think it is withdraw start happening that’s when the rehypothecation starts to unwind that’s when it Unwound when Bernie made off when the 2008 crisis happened that’s when it Unwound with long-term Capital Management when there was a crisis there with the prime brokers in the late 90s and that’s when it happened when FTX when clients started withdrawing their money and then all of a sudden everybody was standing naked at the beach When the tide went out and uh there was not enough blankets to go around insane yeah yeah crazy and and in a in a industry that was uh partially regulated um what level of Regulation are we going to see as a result of all these uh these shutdowns well look if you are committed

[01:06:01] to fraud you may get away with something like I said it doesn’t the product is less relevant meaning this has happened with equities it’s happened with home mortgages it’s happened now with crypto it’s happened with gold in the past you know if you commit fraud you go to jail well you should go to jail right you know I’m a Libertarian but I I believe if you cheat people and there’s there’s clear laws about theft there are consequences and there have to be so the question is what level of proactive policing makes sense in the banking system the banking system has very clear rules and setup that’s why abra’s we we announced uh in the fall that we’re forming Abra Bank uh which is going to be a state chartered depository institution which is subject to banking oversight Capital requirements public disclosures all the things that in my opinion the crypto exchanges we’re not an exchange we’re crypto Bank should be doing right and I hope that they’ll

[01:07:01] basically adopt either banking or Securities rules over time not just they operate mostly as money transmitters ironically which is more like Western Union that doesn’t really make sense to me um you know basically coinbase and and and okx and other exchanges and binance they basically operate like Western Union in 2022 that that makes 23 that makes no sense anyway there are banking rules that much more easily and straightforwardly address this you just have to step up and and and do it it’s harder that’s why they don’t do it is anybody stepped up has anybody stepped up to this level other than Abra that you know of not that’s live I know in the background others are starting to talk about it like Kraken um but they’re taking a different approach which is more complex so it’s going to take them longer from what I’ve been told by The Regulators and so I think we’ll be the first that’s live with this banking model later this year amazing there’s a saying out there in the uh uh in the crypto investing world uh uh you know not your keys not your tokens um

[01:08:02] basically uh saying you should hold your your Bitcoin or ethereum on a hardware wallet uh that you keep in your safe uh versus holding it on an exchange and for a lot of the exchanges that went down that would have been the the smart move um you know I have some amount of tokens I have on a hardware wallet but the majority of my Holdings are in Abra what’s the argument for holding your your crypto in in some place like Abra yeah so it’s very simple look so if you have a degree in computer science I I would strongly encourage that even if you don’t do it longterm that you learn how public private key cryptography works so you can hold crypto and that’s one use case of it it’s always secure email by the way it’s the same thing and and learn how that works because it’s the basis for the web 3 the average consumer first of all my mother wouldn’t understand what I just said all right so there goes your question right out the window now you have I think two phds

[01:09:00] okay so I would expect you to understand what I just said all right the average person has no chance so so that’s why I said once Defi and and these other Technologies are everywhere most people won’t know it just like you don’t know how the how how does Netflix stream a movie in 4k that seems very complicated to me right well you don’t have to know just push play It’s All Good right and and you can if you want to there’s plenty of articles that describe how realtime streaming protocols work by the way you can go read them if you want to there’s plenty of articles that describe if you’re in Afghanistan or in Argentina or in Ukraine and you want to hold your own Bitcoin which you probably should if you’re in the Ukraine teach your mom how to do this because she needs to know my mother doesn’t need to know this right now but if my mother ever does need to know I’m going to teach her so that’s related to your question right about Aber so so our take is is that everyone in our space is entitled to personal agency over their digital assets so 247 for the stuff that

[01:10:01] you have’t invested into the yield product you can withdraw 247 if it’s in a trading account it’s in the yield product you have 7-Day access to it unless you’re in one of our term offerings which functions more like a CD security where you might be in for three months or six months but then you just withdraw when you’re done if you want to go to a hardware wallet but again 99% of our users don’t understand how they work there was a a case that U and he was very public about it and I I really applaud him for doing this because he didn’t have to do this a very well-known Bitcoin developer had his private key hacked that he was storing on a private server that he should say oh my God how in the world and we’re talking about hundreds of Bitcoin year okay how is this possible how could this happen and it’s still unclear like he still we’re starting to get inkings of how it happened you know if he can’t do it how is the average consumer supposed to do this now he was doing it in a way which was very convoluted and you know not what you would do but but but it

[01:11:01] still happen the average consumer is going to need help and Abra is here to give that help Abra is the go is the easy button for for people I mean that for me at least it’s the easy button right perfect but you have access 247 to go into your Abra app on the phone and say I want this on my Hardware wallet right now yep and it will be moved Y and that’s a core tenant of what we do and we do believe in the ethos of of of not your keys not your coin because we’re a trusted third party we get we we understand our responsibilities that’s why we’ve said we need to be a bank there’s no other way right but even the bank should be sending the message that you have access to your stuff 247 if you’re using any other bank in the United States you don’t have access to do a bank wire 247 Bank wires are only processed during the week like six or seven hours a day it it is going to be thought of as crazy like you had to actually go to the bank

[01:12:01] or call them on the phone and only during a certain hour you could move your money it’s like it’s insane I mean we’re the the whole the whole underlying elements of of exponential technology is the speed of the world is accelerating right it’s the convergence of these Technologies and it’s the ability to do a multitude of things faster than ever before and the speed of capital um is driving the economy and driving increasing abundance one one point make so you know Mark andreon has this this man of software is eating the world and if you think about it we all have access to the to our mobile versions of our bank accounts but they’re the same Mainframe based systems that are managing your bank account basically as they were 40 years ago they’ve been upgraded over time but they’re basically this people who wrote them in Fortran they long gone if it’s a city or some of these other arcane places and God us people right so so they’re long gone but we’ve never had a whole sale software is

[01:13:02] eating the world for money itself and the banking systems themselves the mobile interface yes but the money itself and the banking systems itself this represents that and that’s cool and that’s why if you’ve ever done a bank wire you know that the process never goes well ever right but when you do this and after you’ve done it once the process always goes well because you know how to do it it’s it’s it’s it’s easy right and and so this is the and it’s crossborder and it’s Global it’s not zel which is just us right it’s everywhere anyway so we have we have several million users uh we operate in over 100 countries uh We’ve processed billions of dollars in transactions um our largest backers are American Express um HDM which is a finance subsidiary foxcon bunch of venture firms uh in the blockchain and traditional VC space u r ventures in New York lar hippo in in New York first round Capital has been with us since the beginning fantastic

[01:14:00] group um blockchain Capital um and yeah um so we’re uh we’re not going anywhere we’re here for the long term it is extraordinary and I’m just so proud uh bill of of what you’ve built and just the moves you’ve been making hey everybody this is Peter a quick break from the episode you I’m a firm believer that science and technology and how entrepreneurs can change the world is the only only real news out there worth consuming I don’t watch the crisis News Network I call CNN or Fox and hear every devastating piece of news on the planet I spend my time training my neuronet the way I see the World by looking at the incredible breakthroughs in science and technology how entrepreneurs are solving the world’s Grand challenges what the breakthroughs are in longevity how exponential Technologies are Transforming Our World so twice a week I put out a Blog one BL blog is looking at the future of longevity age reversal biotech increasing your health span the

[01:15:00] other blog looks at exponential Technologies AI 3D printing synthetic biology AR VR blockchain these Technologies are transforming what you as an entrepreneur can do if this is the kind of news you want to learn about and shape your neural Nets with go to demand.com back/ blog and learn more now back to the episode um let’s let’s talk in the last few minutes about um where where Bitcoin is going uh I have seen your presentations over the years I’ve seen presentations from a multitude of uh really the smartest thinkers in this in this area and the predictions have been off for the last few years um but at the same time uh you know I’m speaking to Kathy Wood uh on the stage at abundance 360 with was it last year and when she says listen it could get to a million bucks a coin I fundamentally believe it um and I I do

[01:16:01] believe it but my first gut reaction is when we’re seeing hyperinflation and when we’re seeing uh a lot of concerns about stability in the world I my gut feeling was always that people would Retreat to something like Bitcoin for stability for safety and that would drive the price up what’s wrong with that basic thesis nothing so so money dollars and Western currencies lose 3 to six% of their value a year and have unabated since 1971 that’s that chart basically I showed you which which basically shows that you know price inflation there’s currency inflation right which is what we did at the beginning of covid during through be quantitative easing and in in the largest amounts ever since 2008 and then there’s price inflation which usually follows not always but usually follows suit and and price inflation uh basically uh is anywhere which basically means your money is becomes worth less and eventually worthless if you live in

[01:17:00] Argentina for example four to 6% a year 3 to 6% a year now if you take let’s let’s make it four at the low end right so you do uh you know um 1.04 to the 25th power yeah it goes to zero yeah right okay so that’s how much less your money is worth in 25 years right now if you were born in 1970 and your parents have been saving for you since 1970 right and and you you do the factor of the time value of money and you apply this on there you’re you’re basically doing Fred Flintstone where you’re spending your wheels because your savings rate combined with the the rate at which your money becomes worthless is the same if you have as opposed to that inflationary asset which is traditional Fiat money a deflationary asset which means you know exactly what the fixed Supply Y is going to be over time which is what Bitcoin is you have the opposite right its value relative to goods and services should go up over time not down

[01:18:03] right so if you actually see pictures where you see how many Bitcoin it takes to buy a loaf of bread you know it actually it’s the number the amount goes down over time because it’s deflationary as opposed to Dollars where the amount goes up over time cost more money to buy the same loaf of bread over time right that’s the beauty of having a deflationary asset that was the original intent by the way of our monetary system and it’s the original intent of most monetary systems they all start off with the greatest of intentions this is the premise of Mich of Ray Delio’s latest Book Changing world order right the premise of Brett Woods which was the monetary system we set up after World War II was that it would be based upon a gold standard everybody would use that gold standard the United States because To the victor goes the spoils would be the ones to issue the global Reserve currency and we would manage everyone one’s gold it was a bait and switch we were neged on that promise it is what it is right and but but you know not to just piss on the US every country that

[01:19:02] has been in this position for the last 600 years according to Doo’s research has done exactly the same thing everyone because it’s human Frailty right Bitcoin represents sorry Bitcoin represents an opportunity to eliminate the possibility of human Frailty yeah so it’s just ultimate power corrupts ultimately in that regard I mean a government able right that’s why to Kathy Wood’s point if you do the inverse and you just increase the value of Bitcoin times the amount of inflation plus factor in the exponential adoption right the 1.04 probably becomes something more like 1.25 do that to the 15 to the 20th power you get a million doll the other the other point I think that’s important and this is the conversation I had with uh uh with Mike sailor and with with Kathy which is the adoption of Bitcoin by

[01:20:00] institutions it’s you know we’re seeing we’ve seen it from just a few computer geeks to uh so high-risk investors inventure capitalist to now financial institutions and having folks like American Express plugged into Abra um when do we start to see what’s going to be what should folks be watching out for that will be a the ultimate Tipping Point uh for for Bitcoin I think that a billion wallets is the magic number to basically say Bitcoin is going to hit a million dollars within a couple of years of hitting a billion wallets with with real balances right now where do you think we are now in terms of w where we now you think maybe 200 million probably less in terms of of active balances um so you know look with with where we’re headed I believe we’re in a deflationary environment now and that the Federal Reserve is a trailing indicator on

[01:21:00] reality uh I understand why they’re doing that I get it but it’s crazy but I I understand why they’re doing it uh and they’re a trailing indicator and the trailing indicator is basically going to say Hey you know we’ve overshot the Mark again which is what they believe they have to do and at that point it’s game on again in order to save us off from from the Next Great Recession which is coming and they’re going to basically go back to what they’ve done for 50 years which is print more money and at that point you know Bitcoin went up what so we went from 3,000 to 6 65,000 let’s say so roughly let’s say roughly 20x in the next runup so let’s say maybe 14 15x in this one each run up seems to be a little bit less so that could easily put us in the 250,000 to 300,000 range and then in the run up after that you’re probably looking at you know anywhere from 1 to 1 a half million at least and so but but these numbers are not crazy when you think of it in terms of where Bitcoin is in its adoption curve and

[01:22:01] compared to things like Apple and Google and Facebook and Amazon and and the increase in the money supply that’s going to happen over this coming 10 15 year time frame I don’t want to put you in a position of giving Financial advice but I do want to talk about how someone who is sitting with enough Capital that they can think about putting some into into the crypto Market uh place and they have cash in the bank and they have equities they own some Amazon and some apple and some Tesla and and a few other things they own some real estate and thinking about uh Bitcoin as an asset class for divers diversifying your your portfolio how should someone think about that let’s you know risk balancing but there’s a risk also of not holding some Bitcoin in in your portfolio yeah I I’ll tell you all I’ll do is I’ll tell you what I do personally and why and I’ll tell do okay yeah yeah so I have um I

[01:23:02] have like uh let’s take I have 100% of of a certain amount of assets let’s say in my case it’s higher because the amounts gone up the value’s gone up so much over time but let’s say let’s say you start off and and you know you reasonable net worth and you want to put 20% of your assets in crypto maybe for most folks it might be 10 uh some folks start off with five and then it gets to 10 but I I started most people that in my world that I deal with are putting somewhere between 5 and 20% in the crypto my personal allocation is 60% ethereum 40% Bitcoin for any new money coming in interesting and obviously the ethereum appreciates faster but it’s also more volatile um and that’s because of the applications that I mentioned mostly and ethereum is become deflationary now faster than Bitcoin uh because of its migration to uh proof of stake they’re not paying out rewards like they were before uh on such a large scale that the staking rewards are are

[01:24:01] actually lower than the the proof of work reward so it’s becoming deflationary faster uh but that’s my preference and I’m also very comfortable with the fact that you know there’s a very good chance that if we get to 250,000 whatever I haven’t sold or used for other things might fall 80% before it gets to a million and a half and I have a mental model and and a financial model in place for how I want to manage that and and um it’s not let it ride it’s it’s conviction around where I believe this is going and why right for all the reasons we just discussed you know and if if you need this money to pay rent and the rent is in dollars not in Bitcoin then you need to hold your your money in the asset that you’re paying those bills in for at least several months and and that is financial advice by the way and and and don’t have 100% of your stuff in something that is wildly volatile I’m not just talking about crypto I’m talking about anything and and everybody should have a certain

[01:25:01] amount of their you know Savings in in in Fiat for immediate expenses going out at least a few months and then for your for your savings and Investments you you need to decide what you have conviction around in my opinion I have conviction around all the things we just discussed and I and I act accordingly I personally don’t hold stocks anymore I used to I have a few small Holdings here and there um but but you know I I’ve and I’ve allocated accordingly and um my kids who are much younger for example they do hold some stocks and and so or more a higher percentage in stocks versus versus crypto but they also have a lot of crypto and they also understand why and they can make those decisions for themselves now for those that are old the two that are old enough yeah I I I said I’ll mention what I do I I’ve been rebalancing my portfolio to have 20% % in crypto as sort of my Baseline uh right now and I may increase that over time I I think uh for me it’s real

[01:26:02] estate and and and equities and a few other uh Financial tools and then historically I’ve been 8020 80% Bitcoin 20% ethereum um uh and you’re getting me to rethink uh that uh were you more Bitcoin years back yeah I mean we look at the beginning it was all Bitcoin because there was nothing else and then um my conviction and I had a huge percentage before covid of my net worth in Bitcoin bigger than it is now and I sold some and and actually moved some to ethereum and as stable coins and nfts and and particularly defi started to evolve I became extremely bullish on ethereum and at that point I I allocated um a bigger percent to to ethereum but that that Bitcoin is still there and and you know it’s it’s I really consider that my safest holding honestly uh of everything that I own except maybe my home um just

[01:27:03] you know just because I know that um like you know to Michael Taylor’s point it’s that Atomic gold structure that you don’t change and there’s never going to be more than 21 million I know how to move it to a hardware wallet if I need to and it just works y you know uh my niece got married last uh last summer and I remember when you’d get married or to have an important birthday you’d get a you know a government savings bond uh given to you and so now I’ve started giving Bitcoin as the uh as the gift for uh for folks getting married or yeah or graduating so I think that’s an interesting because it is an investment in the future which what government savings bonds used to be uh in the in the past as well um I have one final question question I’m curious uh the uh the found the foundation blocks of uh uh of crypto

[01:28:00] of Bitcoin in particular the Genesis blocks will we ever see any of them sold that’s a great question I for Bitcoin I don’t think so I think the keys are gone um I have my theories as to how Bitcoin was created and I think that there was some deaths involved with uh this Dave climing guy and some other folks that were involved that um and this Craig Wright fraud I think was tangentially related and and and I think the keys are probably gone which is why you know this fraudster is out there doing what he’s doing because he’s trying to figure out how to finagle access to stuff that that he doesn’t have access to so I my gut tells me that the Genesis keys for for Bitcoin are gone um now balic does own his early blocks of ethereum but it’s ethereum is much more spread out via the earliest blocks and so that you can’t really dilute the have an outsize impact on the network by selling I do I do have I do have one other question I I think that something that’s interesting there was a much higher concentration of uh of of crypto

[01:29:03] held by whales uh years ago and the the drop in price has really out allowed for a redistribution hasn’t it a little bit um you know but there are still some pretty big whales in the Bitcoin space but you know another interesting phenomenon related to that is there actually is um earlier research on this topic so somebody in the Austrian School haek actually wrote a book on privatization of money in the 70s before the internet obviously before crypto and he hypothesized on what would happen if money became private and he actually predicted it would be hoarded first because it would be deflationary and it would be so valuable and that’s exactly what’s happening with crypto and you can actually read the rest of the Playbook he actually predicts what’s going to happen you just the value goes up eventually you hoard it because the value is going up so fast and eventually it becomes worth so much that you loosen up the per strings because it doesn’t

[01:30:00] make sense it doesn’t make sense to continue to hoard it the way you have been and I believe that’s what’s going to happen uh with Bitcoin and ethereum and maybe a couple of the other protocols over time uh but it certainly seems to be playing out Hayek’s uh Playbook that he wrote in his uh I I I I forget what the book was called privatization of of of national currencies I don’t remember exactly what it’s called I’ve got a a long book list that I share with people but um that was definitely an interesting Insight that he had 50 years ago so listen I I do love Abra it’s easy to use it’s always there it’s been uh you know I have my my uh ethereum my Bitcoin in the interest bearing accounts and you know it’s nice to get have that money uh working for me uh someone interested where did they go how easy is it to start an account yeah you just Go download the Abra app uh or you can basically if you’re one of our private clients you can go to abra.com and click on the private banking page

[01:31:00] and fill out the form there and uh so you can either download the app on the App Store search for Abra and crypto or go to abra.com either way you’ll get to us and um it’s super easy you’ll be online and on boarded in in minutes Bill baright uh congratulations for standing the test of time and building something with uh solid foundations uh and I love your MTP your moonshot of really making this accessible to the world uh because capital is energy and energy is the ability to make the world a better place so thank you for all you do capitalism is the tide that raises all [Music] boats