Dan Held (00:02:34):
So I coined that term Super-cycle, and I think lately people have really gotten into the idea, because some of this stuff is starting to manifest. Some of this around for example, Tesla buying bitcoin, and Michael Saylor company treasury is buying bitcoin, I think was a really huge, huge validation that this time will be different, or this cycle might be different than the other ones.

Dan Held (00:02:57):
For me, we’ve got a lot of checkmarks here that people go, “Hey Dan, what do you look for, for a Super-cycle? What do you feel are check marks for being bullish on bitcoin right now?” First of all, we have the halving that occurred in 2020, this is a typical cycle that we would see play out where bitcoin has a bull run post halving, over the next year and a half, and we’re starting to see that happen. And we also have other things like you’ve got institutions finally validating bitcoin. You’ve got big macro trader folks, Paul Tudor Jones and others who say that bitcoin is gold 2.0. This was an investment thesis that I had when I first rendered my bitcoin position back in 2012, I said bitcoin is gold 2.0, and to see it being validated by the market, is huge. So this, I would say that’s more, I’ve seen the mainstream world start to buy into bitcoin, that’s another big checkmark.

Dan Held (00:03:43):
We also have very easy ways to buy bitcoin, Cash App. We’ve got Cash App, we’ve got, I believe today there is news that Charles [Schwab 00:03:52] is looking at ways to add bitcoin to the brokerage. So you’ve got that, you’ve got PayPal. There’s going to be almost and infinity number of ways to buy bitcoin, which increases the demand surface area so more and more demand can flow in, and there’s only 21 million bitcoin. So that’s a big component to bitcoin itself.

Dan Held (00:04:08):
And then the bitcoin narrative, we’ve got your podcast and other great folks in the space, like Peter McCormack, and Stefan [Novera 00:04:17], and there’s so much great content now. And we’ve shortened that ladder from going, I don’t know anything about bitcoin, to I kind of go after bitcoin, and I want to go buy it. That ladder has been much shorter than what it was in the previous cycles. Back in ’13 and ’17, it took a ton of self-reflection and really digging into understand bitcoin, and now we’ve made that narrative really, really simple.

Dan Held (00:04:38):
So we’ve got all that going on with bitcoin. And then we had COVID hit, and COVID, I think rattled everyone’s belief in the existing system. They go, okay, I’m starting to question my government’s response to not only COVID, but also their financial or fiscal and monetary response to the COVID economic crisis. And so people are starting to question the nature of their reality, and this I think is a huge, huge moment for bitcoin because it finally brings the lens of why bitcoin matters, it brings it into focus. So COVID brings bitcoin’s value prop into focus. I made an analogy that might resonate here, which is that, most people don’t think about buying earthquake insurance until an earthquake happens. And that’s kind of like bitcoin. Bitcoin has made, and its value prop shines when you start to lose trust in your government, and that doesn’t happen… In a normal basis, most people don’t want to question the nature of their reality, and COVID kind of forced that to happen.

Preston Pysh (00:05:33):
So Dan, you’re at Kraken, and recently there was big news on Kraken becoming, they’re going to get a bank charter, which I’m assuming automatically means that they’re going to FDIC insured for deposits. Is that assumption true, and what does all this mean as far as getting the bank charter?

Dan Held (00:05:52):
Yeah, good questions. I’m on the product team-leading growth marketing, and we stay pretty laser-focused on day-to-day work, so we’re building out spot, futures, other financial instruments we’re looking at. On the banking side, that’s a little bit more out there on the roadmap, so I don’t spend a lot of time digging in on that.

Dan Held (00:06:11):
From my understanding is that, since it’s full reserve, it’s a full reserve bank, you’re able to circumvent some requirements, and I think that might actually be around, I think we would be FDIC insured, but I don’t believe we have other requirements. But I’m not exactly sure, I’m speaking a little bit out of my expertise here. I do know that we can do, we can offer some services like lending and borrowing, where it is a full reserve bank, but some customers could elect to have some of their funds lent out. So I think some of that stuff is really fascinating.

Dan Held (00:06:45):
I think infrastructure level, it connects us much more deeply in the financial [inaudible 00:06:49], so we don’t have to worry about finding a bank account. Back in 2013, this was actually a big, big deal, and if you were a bitcoin company, having a bank account was like the holy grail. So Silicon Valley Bank, only banked Coinbase, they didn’t bank any other crypto startup. Coinbase had this incredible unfair advantage, likely due to their investor piece of [inaudible 00:07:11], hugely unfair advantage in the United States in 2013, and 2012, with the relationship with [SVB 00:07:16].

Dan Held (00:07:16):
So Kraken, I think it seems, Jesse has been in Kraken and has been around for a long, long time. We want to build the most stable infrastructure for Kraken to survive and exist with the most minimal amount of third parties that we have to rely upon, and the most minimal amount of regulatory check marks that we have to check off. So from my understanding, that’s what Wyoming gives us with the [SPVI 00:07:37] license.

Dan Held (00:07:38):
And then in the customer front, in terms of what value we offer, that’s where I’m not 100% certain around FDIC or not, but from my understanding, we’re creating a full reserve bank. So I’m not sure if FDIC would even be something that we would need to get.

Dan Held (00:07:51):
I think that’s what’s been brought up before, the cool value prop of Kraken is that, with the Kraken Bank we wouldn’t necessarily need to have FDIC insurance since it’s full reserve, you don’t need insurance if all the assets are there.

Preston Pysh (00:08:03):
Yes, I think through the evolution of not just Kraken, but any bank for that matter, and I find it really fascinating that Jack Dorsey had the big announcement with Square, and that they’re going to become a charter bank as well. And so, if I was going to work myself a year into the future, I don’t think it’s far off that people can change whoever their employer is, whoever they’re getting their paycheck from, and doing their banking today. They could start routing those pay checks to a Kraken or to a Square, to wherever, and then those deposits could be tokenized, and then these interest rates that we’re seeing, call it, especially in US dollars, is like anywhere from seven to 10%. Do people start to get those types of interest rates for their deposits into these types of banks? Is this happening soon?

Dan Held (00:08:53):
Yes. So those rates that we’re seeing, you’re kind of referencing like USDC and USDt stable point interest rates, these aren’t exactly like the same sort of risk profile that a savings account has. I think these are a little bit different. But certainly this new crypto world, especially with USDC, USDt, from my understanding, a lot of the borrow for USDC and USDt is coming from collateralized borrowing using the coin as collateral.

Dan Held (00:09:19):
So, let’s say you want to borrow dollars against your bitcoin as collateral, my understanding is that a lot of these services offer actual USD, or USDt or USDC. And that’s where the demand for borrowing USDt and USDC is coming from, is the demand to take a margin position with your bitcoin. So borrowing against your bitcoin as collateral.

Dan Held (00:09:39):
And so, from my understanding, there’s a dollar shortage with that trade or with that sort of set up. Currently, I pay 10 to 11% with my on-chain capital loan, which is dollars. But I noticed like on a Blockfi, if you borrowed against your bitcoin as collateral, then I think you can borrow USDC. So that’s where that really high-interest rate is coming from, is that there’s a dollar shortage when it comes to borrowing dollars against your bitcoin as collateral.

Dan Held (00:10:05):
I’m not exactly sure why that exists, bitcoin is a pristine piece of collateral. It’s a phenomenal piece of collateral that if we look at other collateralized loans, like if we look at interactive brokers and how much it costs to borrow against your securities. If you borrow like a quarter of a million in USD against your securities as collateral, you’re borrowing 75 bit, so less than 1%. I would expect bitcoins, being able to borrow against bitcoin as collateral, that borrow rate should drop down to something equivalent to that. Bitcoin is a pristine piece of collateral that I can take, and if I’m the lender, I can take that collateral and go sell it at a bunch of different venues, instantaneously, and it’s fungible, so I can sell it anywhere I’d like. One bitcoin equals one bitcoin, it’s not like a piece of property where, for example like my home, one home doesn’t equal another home, and there’s maintenance cost and everything else.

Dan Held (00:10:53):
So, I think that’s where the higher rate of yield is coming from for those stable coin dollars. That’s what I’ve heard, is like that, plus other borrowing for other type of trading activity. I’m not sure if we can equivalently call that like a savings account. When it comes to these new banks of like Kraken and Square, I’m not sure if you could call it a savings account, but it might be more like people are going to be attracted to that yield, and that’s definitely going to attract depositors, regardless of it not being an equivalent risk.

Preston Pysh (00:11:21):
Yeah, it’s an interesting point that you raise on the risk, because if the deposit is being over collateralized, and you’re in a 24/7 market. The risk is really just the management of the keys at that point.

Dan Held (00:11:36):
Yeah. Well it depends on how the coins are being, if you’re lending out, let’s say you’re a lender of USDC or USDt, it depends on what those coins, or what those stable coin dollars are being used for. But yeah, certainly a very low risk operation and be lending to over-collateralized positions. That’s a phenomenal risk.

Dan Held (00:11:57):
That’s why I think that rates are going to go down over time. I think it’s just a phenomenal risk profile. I was talking more like if you’re lending USDt or USDC for folks taking advantage of arbitrage trading opportunities or other activities, which Blockfi and Genesis Capital, these other lending traps, we don’t know exactly what that counterparty mix is. Some of the counterparty mix are folks who have over-collateralized bitcoin positions and they’re borrowing dollars, which that’s a pretty low risk endeavor, but then there are also much higher risk ones, which are different types of trades that they’re facilitating.

Preston Pysh (00:12:29):
Those aren’t necessarily over-collateralized.

Dan Held (00:12:32):
Correct. It could be partial collateralization. Some of these desks, they accept 70% collateralization, so some of these aren’t fully collateralized.

Preston Pysh (00:12:42):
This is one that I really wanted to talk to you about. And I think it’s important for you to kind of describe this first to my audience, because I don’t think a lot of them fully understand this idea of using Lightning Pool to capture yield in the future. So describe this whole layer two to them, and kind of get into this Lightning Pool. And then after we kind of get into a lot of that, then let’s compare it back to just borrowing and lending markets that we were just talking about, as far as what kind of yield you expect in the future, and what this might all mean.

Dan Held (00:13:14):
Yeah, so I’ll try my best to cover some of these yield generation activities directly with the bitcoin network, which I consider Lightning Bolt to be one of those, and CoinJoin, as well, with JoinMarket.

Dan Held (00:13:25):
So I’ll speak to the best of my ability. I have not done a Lightning Pool trade myself, I have not lent any coins to Lightning channels, so I have not actually done this myself. I DM’d Ryan Gentry three days ago, he’s with Lightning Labs, he told me that there’s a [inaudible 00:13:40] now, so I didn’t realize that, I’ve been so busy with work, I haven’t popped my head up, I didn’t realize that there’s actually a [inaudible 00:13:46] now, because I’m not technical, I’m not an engineer. So I plan on playing around with that very soon. I’ll cover some of the basics, but I’m speaking from a very high level here.

Dan Held (00:13:56):
With Lightning Pool, from my understanding is that you’re providing liquidity for Lightning channels to be opened and closed in a certain fashion, and you’re being compensated for providing liquidity for others to be able to facilitate the routing and movement of coins through different Lightning channels.

Preston Pysh (00:14:14):
Dan, first get into what Lightning even is, because there’s a lot of people that probably listening to my show that don’t even know what that is when we’re talking about the second layer on top of bitcoin.

Dan Held (00:14:24):
That’s a great point. So bitcoin’s community and developers have decided to approach scaling by a stacked architecture, and so what we refer to as layer one, would be bitcoin transaction on layer one, and that would be a bitcoin transaction on the bitcoin blockchain. And then we call layer two and layer three are these stacked layers on top of bitcoin, what these represent are scaling layers where a lot of times what would happen is like a Lightning transaction. A Lightning channel is opened between two participants, and the channel’s originally opened with an on-chain transaction on layer one, and it close with an on-chain transaction on layer one. So two transactions to open and close a Lightning channel.

Dan Held (00:15:06):
And the way that it works is that the person A and person B, can transact very rapidly and very cheaply on layer two, which requires less settlement assurances, because these values are smaller, and it’s going back and forth very, very quickly. So, one of the bitcoin base layer can only handle X amount of transactions, like a very small amount of transactions, on layer two, we’re talking like X to the 10th power, 20th power. We’re talking like a huge magnitude more number of transactions can occur on these layers above bitcoin, and Lightning is one of those. Lightning requires only two on-chain transactions, the opening and the closing of the Lightning channel. It gets more complicated than that, but I’m just boiling it down to as simple as it possibly can here, without leading to a bunch of nuance.

Dan Held (00:15:50):
For example, we could have millions of transactions that happen between counterparty A and party B, and that net value, so let’s say we each have 10 dollars and we just shuffle that back and forth a million times, and then the net value is that I have $2 and the other party has $8. That net value is then closed out with that second on-chain transaction. So Nic Carter calls that as economic density. What Lightning provides is for bitcoin to be able to support many, many, many more transactions on the second layer, and it’s very economically dense because all those transactions are essentially the net values that are printed on the base layer one.

Dan Held (00:16:31):
So to facilitate that, the routing of a Lightning transaction between different parties, it gets much more complicated than between party A and party B. There’s party C and party D, and they have Lightning channels that they’ve opened up as well between each other, and then things can get really complex with that, where it’s sort of… You can think about it like a canal, like those locks that you see for boats when they’re going between two different bodies of water that are different altitude or different levels, these locks allow for that water and that boat to proceed from one body of water to another.

Dan Held (00:17:05):
You can kind of think about a Lightning transaction occurring as many of these different locks, between many different pools of liquidity, and you can imagine that to get between these different pools of liquidity, you have to find the right route, you have to have the appropriate amount of water in the locks. And so that’s what Lightning Pool helps with, is it helps these channels balance and make sure that they have enough liquidity to facilitate the proper routing of a transaction through these different locks. That’s the most simple way that I think I can describe it.

Preston Pysh (00:17:34):
And the big advantage that we’re really getting by stepping into this layer two of Lightning, in layer one, it takes 10 minutes for these blocks to occur. So you might, let’s say you are trying to go to Starbucks, pay for your coffee on layer one, you’d have to stand there for 30 minutes to get three blocks to clear in order to pay for your $5 coffee. But if you have a Lightning channel that you’ve opened up, now the payment of $5 can immediately go through. They can immediately see that the transaction’s complete, and it solves this whole speed and immediate clearance, the second one.

Preston Pysh (00:18:13):
So, when you’re talking about Lightning Pool taking your bitcoin, putting them into a pool on this second layer, and then receiving an interest rate on top of it. What are some of the numbers that you’re hearing this might evolve into, because right now today, it’s really almost meaningless, but in the future when we all expect this to be used, what are some of the numbers that you’re hearing Dan?

Dan Held (00:18:36):
It’s pretty hard to nail down like what a long-term interest rate might be that you would earn on lending your coins to Lightning Pool. If I were to guess, Lightning Pool is trust minimized, which means I don’t have as high counterparty risk when providing liquidity to these channels, versus the counterparty risk that I might have lending coins of Genesis, Blockfi, [inaudible 00:19:01]. Those are facilitating certain type of arbitrage trades and whatnot, which encourage, I would say a much higher counterparty risk.

Dan Held (00:19:07):
So I would expect that a lot of supply would be willing to lend to these Lightning Pools, and I’m guessing demand to pay this interest rate to borrow these coins to facilitate these channels. I would guess the demand is probably lower than supply, and demand and supply dictate everything in this world, so I would imagine that there’s a lot of supply chasing much less demand, due to how low risk this would be. So my assumption is probably under 1% long-term, like a 1% annualized yield. It is probably what I would expect from this.

Dan Held (00:19:40):
We see a similar level with CoinJoins. So with CoinJoins, CoinJoins are a way to [obfuscate 00:19:47] your bitcoin transactions on layer one. Essentially you’re mixing your, I don’t want to get too complicated using terminologies like [UTXO 00:19:55], but you’re essentially mixing your coins in a function to obfuscate the history of them, with other peoples coins. And with JoinMarket, JoinMarket is a software that doesn’t have any centralized counterparty, and you coordinate peer-to-peer, and with that, you’re able to, there are folks who want to mix their coins right now and are willing to pay for that convenience, and there are individuals who have coins readily available to mix, and you pay them for that convenience of mixing your coins at this moment. For example, let’s say you wanted to mix half a million dollars of your coins to obfuscate the transaction history. You need to find a counterparty who wants to mix that amount right now. And so you pay them for that convenience.

Dan Held (00:20:40):
And so, annualized yields on CoinJoins, which CoinJoins have been in operation for five years, it’s a pretty robust software, they haven’t been, from my best of understanding, there hasn’t been [inaudible 00:20:51] or any sort of flaws or exploits, and it uses the bitcoin base layer. So it’s a pretty trust minimized way to earn yield. From my understanding, it’s really difficult because if people are getting paid to mix their coins, they’re not exactly talking how much yield they’re earning because you’re being paid to mix coins with other folks.

Dan Held (00:21:11):
From my understanding, we’re talking about between 20 and 80 bits, so less than a percent as well there, due to very low risk. With the CoinJoin markets, you’re also being paid to mix your coins, so you’re obfuscating your own transaction history, just kind of an added benefit of earning yield there. So I would expect that Lightning Pool, probably there’s a similar function, where there’s a lot of supply willing to provide liquidity to be channeled, to provide liquidity to Lightning Pool. And there’s probably not as much demand for it, so rates, I would probably expect long-term will be under 1%.

Preston Pysh (00:21:45):
Talk to us about some of your thoughts on non-financial uses of blockchain. Are there any? Insurance, identity, and do you see that being built on top of bitcoin? Do you see other platforms… How do you see a lot of this moving forward, beyond bitcoin as a token of decentralized currency or?

Dan Held (00:22:08):
That’s a great question. So I always think about it from a product mindset of, Satoshi built blockchain tech to build bitcoin. Blockchain technology has a pretty minimal surface area of what it is useful for. Similar to how a shovel is useful for very few things, and a tank, for example, isn’t useful for ride-sharing or picking up groceries or dropping off the kids at school. Everything in this world is special purpose-built for a certain function. Blockchain is the same thing.

Dan Held (00:22:35):
So with blockchain technology, I think that if we look at how it functions, there’s a lot of things we can eliminate, that it could potentially do. For example, having real world assets on a blockchain, I don’t think makes a lot of sense and here is why. Let’s say I tokenize my house and I take my house, and I take the deed to my house and stab, and digitize. Okay, well let’s say that, that deed that I own on the blockchain is transferred to someone else because they hacked my account and moved it. So, in the real world, the US government, which enforces the title and the other counterparties as well, I think there’s different, I don’t have a home, so I know that there are title folks who have title insurance, and there are title transfers and whatnot. They don’t recognize the legitimacy of that transaction on a blockchain. In the real world, they’re the legitimate recognized party that deems who owns what. And the government enforces that physically in the real world, so that any tokenized asset on a chain, may or may not be recognized by authorities as a legitimate transaction.

Dan Held (00:23:46):
Furthermore, enforcement of that, again falls on to, it’s not only the recognition, but the enforcement as well, falls onto the local physically present individuals. If someone stole the title to my house on a blockchain, I’m still going to live in it. Good luck getting me out.

Dan Held (00:24:02):
So, I think these real-world assets, it’s a big problem bringing them on-chain, because one, you got the physical-based authorities who don’t recognize it as a legitimate way to transfer assets that exist in the real world. You also have the problem of validating that the asset is on-chain. So, if you tokenize something like you tokenize an Apple and put it on-chain, you still have to rely on some trusted party to verify the physical nature of it, that it exists in a certain location or whatnot. All you’ve really done is added a wrapper, like a digital wrapper around a real-world asset, put that on-chain, but you still have all the problems that you would with any centralized system of validation that this real world asset exists.

Dan Held (00:24:45):
I think that only digitally native assets like bitcoin itself, the token that’s digitally native to the chain, is the only asset you can truly own and utilize blockchain technology for. That’s my opinion on blockchain tech, in terms of the assets that you can have on-chain. I’m also, I would say a bitcoin realist, so when it comes to bitcoin versus other potential cryptocurrencies or crypto assets, I’m primarily just a fan of bitcoin. I think bitcoin’s blockchain was created to solve a problem of storing value, being gold 2.0, and there are other hypothesized use cases of blockchain technology, or other hypothesized assets that could be alternative stores of value. But I find it very unlikely that bitcoin will be taken out of its number seat as a globally recognized store of value.

Dan Held (00:25:30):
I think that, for example, Litecoin or Dashcoin, would never replace the trust that people have in bitcoin, and bitcoin’s origin, and bitcoin’s governance, and other issues that its gone through that demonstrate the resiliency of the agreed upon social, the social contract that we have with the bitcoin blockchain. For example, like the enforcement of the 21 million hard cap, and for the bitcoin cash hard fork. These demonstrated bitcoin’s resiliency, and demonstrated why it deserves the title of digital gold. Whereas these other assets, I don’t think deserve that, and I think long-term investors will likely realize that, and so I think bitcoin being challenged in that store of value asset category, is very unlikely.

Dan Held (00:26:12):
Some people go, “Oh, is bitcoin, MySpace, or Facebook?” And in this case, when bitcoin is being a new digital gold and store of value, its unchanging nature leads to confidence being built in its longevity over time, this is called the [inaudible 00:26:27]. And so I think bitcoin is basically unchallenged in the store of value category.

Preston Pysh (00:26:33):
So you were talking a little bit about physical items being terribly difficult to rely kind of put into a blockchain. And one of the things that’s a really big thing in this space right now are NFTs or non-fungible tokens. First explain what these are to the audience, and then give us your thoughts on NFTs?

Dan Held (00:26:54):
Non-fungible tokens, fungible by the way would be, one bitcoin equals one bitcoin. So the item I have is interchangeable with any other exactly similar item. A non-fungible token would mean that the item is uniquely different than any other item, that’s why we call it non-fungible tokens. You can definitely tell an engineer came up with that term, versus a marketer, because it’s a bit technical for a normal person to crock. Fungible isn’t a word people use very often.

Dan Held (00:27:23):
So NFTs rise in popularity recently, NFTs are not a new idea, by the way. NFTs have been since around 2015 with, I think [Rare Pepe’s 00:27:32] on the, what was that called? Counterparty blockchain. NFTs have been around for a long time, and what they represent, they represent a certificate of ownership over a graphic asset, typically a graphic asset because people like to… You can kind of think about it like you don’t own the Mona Lisa, you own the certificate that validates the Mona Lisa, essentially. And that’s what an NFT is. The graphic asset typically is not stored on-chain due to how much data you have due to the bloat that would occur if you were storing all these graphic assets on-chain. They don’t have to be graphic assets, it just makes it easier, I think for your listeners to kind of conceptualize what we’re talking about there.

Dan Held (00:28:13):
Most of time what you really own is essentially like a hash. A hash which represents the certificate, essentially, of ownership over this digital asset. So different types of assets that we’re talking about, to use real-life examples, there’s the NBA Hotshot, it’s what it’s called. So different NBA clips, from basketball, different video clips of different moments. You can technically own that moment. Now again, you just own the certificate that validates that, that’s the moment. Anyone else can download that moment and own it in their own form on a computer, or anything else, it’s subjectively recognized onto other participants on a certain blockchain that you have the certificate.

Preston Pysh (00:28:59):
This would be for licensing the clip to prove that you have the certificate of ownership, so that you could license it?

Dan Held (00:29:04):
I’m not even sure if you have licensing rights. I’m pretty sure it’s probably very limited. I assume that the NBA would not give out licensing rights to this. To these different NFTs. That’s just one example of types of things you can own. For example, there’s an artist called [3LAU 00:29:21], and 3LAU is a musician and he created some pieces of art that you can own as well. 3LAU sold $11 million worth of this art in the form of NFTs, that individuals can own. It’s a really interesting dynamic.

Preston Pysh (00:29:37):
If you’re not licensing it Dan, why would you want to own the certificate, or why would you pay these outrageous prices?

Dan Held (00:29:44):
Look, personally, I’m not buying this, I’m describing how they work, and I’ll get into a little bit of what I think is going on psychologically with the ownership of these.

Dan Held (00:29:54):
So what happened during 2017, I’m going to take a step back and then we’ll go back to NFTs real quick. What happened in 2017 with ICOs was, demand in the markets, so individuals who wanted to hold ICOs demand became so large that supply printed as much as demand wanted. With ICOs, you can think of them as a Black Scholes model of every possible narrative you could append to an investment. You want Uber on the blockchain, we got that for you. You disrupter of Amazon AWS, we got an ICO for you.

Dan Held (00:30:27):
And so these ICOs produced as much supply as demand wanted, because demand kept buying it, and so people were like, “Sure, I’ll come up with an ICO to solve cancer,” or whatever bullshit. And so into the tunes of tens of billions of dollars of supply, and demand kept eating it up until it didn’t until demand eventually started to evaporate. The only reason why demand existed for these assets, 95% of the time, people didn’t give a shit about the narrative. They’re like, okay cool, I don’t care what this coin does, they just wanted to flip it. They just wanted to buy it and flip it to the next purchasers. So it was essentially, I’m hoping to pump it down. That drove most of the demand in the ICO space, was purely driven on the idea that I can flip this to someone else at a higher price, because almost none of these had anything resembling a real product or anything resembling something real that was solving a problem.

Dan Held (00:31:21):
Now when we look at NFTs, they’re a little bit different because they’re collectables and more art based, which is highly subjective. But it feels a little bit of the same vibe, and Charlie had a tweetstorm today where he had a couple of great point, I recommend everyone check that out. He had some great points around some of the resemblance that he sees between ICOs and NFTs.

Dan Held (00:31:40):
The way that I see it resemble ICOs, artists will produce as many NFTs as you want, as long as you keep buying them. If an artist can make $11 million, which makes this artist like one of the most highly paid artists in the world, an artist, as in a musician artist, this makes 3LAU the highest-paid musicians in the world. Every other musician will print as much supply as demand will be willing to pay. These pieces of art are extremely cheap to create, relative to the value that’s being generated for the artist selling it.

Dan Held (00:32:12):
So I think what we’re going to see it, is a lot of folks, and I think a lot of the folks buying NFTs, I think a lot of them aren’t buying them because they love 3LAU, a lot of them are probably buying them because they think they can flip it. I’m not personally a fan of 3LAU, I don’t listen to his music, I’ve got some of my own favorite artists that I’m of course really into. I’m not going to pay a million dollars to have the NFT for a song, and by the way, you don’t actually own the song, you just own the certificate of the song. I think what we’re seeing here in the NFT market is another frothy market where folks think that they can buy this scarce asset in expectation that they can flip it to someone else at a higher value later. And there will be an infinite number of NFTs created. There will be sports NFTs, which is what we’ve seen already. There will be maybe porn NFTs. The list goes on, it becomes near infinite of the number of certificates you can sell someone. You could have NFTs for literally everything.

Dan Held (00:33:07):
And so that’s what I think what we’ll see here is a Black Scholes model of pretty much an infinite number of NFTs, as long as demand is there. And NFTs will be printed until demand is fully satisfied, and then I think there will be turning point where people go, “Okay, wait a second. Why am I paying a million dollars for this NFT?” And then that sort of spiral out, just like we saw with ICOs where people were like, “Wait, no one is going to buy this from me at a higher value. I’m going to stop buying NFTs, or I’m going to stop buying ICOs.” And then demand starts to really dry up.

Dan Held (00:33:40):
I think we’re going to see the same function happen with NFTs as well, where yes, it’s a novel, it’s a cool idea. I find it very unrealistic that the output, graphic output from a musician is worth $11 million.

Preston Pysh (00:33:53):
This is totally crazy to me because my understanding of the certificate was, or at least my assumption when I saw some of this taking place, is that then you become the owner of whatever. If it’s a song and you buy the song, you get the certificate digitally over a blockchain or however, they’re managing these NFTs. And then you could then be the owner of all the income that, that song could then generate if it’s played. But it doesn’t seem like that’s… You’re saying that’s not the case.

Dan Held (00:34:26):
I believe that most of these do not have a royalty component. I’m sure some might try to configure it, but I’m pretty sure most don’t.

Preston Pysh (00:34:34):
Wow. Crazy. All right, you wrote an article and it’s called, Bitcoin Security is Fine. And this is a really interesting article because what you’re getting at is this idea that right now people are really familiar with how there’s a block reward for every 10 minute block that is mined. The miner that solves the puzzle gets their block reward, but they also get some transaction fees that people are competitively bidding, to get their transaction put into the next block. So as time goes on and we march much further into the future, these rewards start to actually be larger than the block reward that the protocol automatically supplies to the person that finds the next block.

Preston Pysh (00:35:20):
You talk about this crossover, you talk about what this is going to lead to, and there’s a lot of people that try to make the argument that there’s not going to be enough miners that are going to want to capture just the transaction fees as their reward, and it could lead to a blockchain that’s not nearly as secure as we see it today, or our expectations. Talk to us through how you lay out this argument and kind of where you think that this is going with respect to the security of the blockchain in the longterm.

Dan Held (00:35:54):
All right, well if you’re listening, you might either want to grab a cup of coffee or grab a drink, because it’s going to get a little technical here.

Preston Pysh (00:36:00):
Go for it. I’m real curious on this. This is really a fascinating subject.

Dan Held (00:36:05):
Yeah. This is where, I wasn’t as familiar with this until a couple of years ago when I started to spend more time researching it. This is where, once you come to realize how intricate proof of work is, how intricate bitcoin security model is, you understand how a very narrow use case for a blockchain can be. So it’s in these moments when I’ve continually fallen down the rabbit hole of bitcoin and fell more and more in love with the architecture, and also a little bit more negative around other use cases for blockchain technology.

Dan Held (00:36:38):
So the way that the coin secures itself is, bitcoin issues something called a block reward to bitcoin miners. Bitcoin miners through the proof of work function, expend energy and work, and they expend energy in the form of proving that they did the work, and they are compensated with the network, through this block reward. Now why is this important? Why do they do this?

Dan Held (00:37:04):
Miners purchase the equipment, they pipe in energy through the equipment, and then they are given a validation that they’ve done the proof of work and they interact with the bitcoin protocol, and bitcoin then gives them a certain percentage of the block reward. Now, per block it’s randomized, so you can think about it more like a lottery. So if I’m the miner and I represent 20% of all the hash rate, on average, I will win one out of five blocks. So it’s not a percentage per block, it’s on average of I keep mining, and my percentage of the hash rate or my percentage of my proof of work relative to the rest of the network, is the probabilistic percentage of all the block rewards during the time period that I operated within, that I’ll receive.

Dan Held (00:37:46):
What the miners are doing when they find a new block, the new block consists, or each block consists of newly minted bitcoins called the block subsidy and transaction fees. The miners are performing a couple of functions here when they’re finding a new bitcoin block. They’re not only issuing new units, so the block subsidy, they’re also validating and including transactions in that 10-minute block. So, that’s a function of protecting the ledger, if you will. We can think about it in the way of that these miners are receiving this block reward which is comprised of the newly minted bitcoins, the block subsidy, plus transaction fees that people attach through transactions to be included. It’s what they pay the miners to be included in that block, and that total sum value, a couple of block reward, is what incentivizes miners to behave properly.

Dan Held (00:38:37):
Miners have spent all this money buying these specialized computers that are only useful for mining bitcoin. They’ve piped electricity through it, and they are ordering these blocks in a sequential fashion, and they’re being compensated with the block reward because they’re doing it properly. That is what secures bitcoin’s linear time, if you will, of the series of transactions that occur.

Dan Held (00:39:02):
We know definitively that the ownership of this coin is owned by this UTXO because it occurred at a certain time, and that is recorded in this ledger, this chain of blocks, this blockchain. And we know that the ownership of these coins exists to party A instead of party B because [inaudible 00:39:24] later.

Dan Held (00:39:25):
These miners are compensated with the block reward to behave properly, get all these transactions ordered in the right sequence, and they could, a 51% attack could occur if miners are willing behave improperly. Now, the miners have already bought the equipment and pipped electricity through it, which costs a lot. And so the miners would have to be willing to sacrifice the block reward in order to mess with the ordering of transactions, because what would happen is then people would become less confident in bitcoin if miners aren’t behaving properly, which means that the value of the block reward would drop. And so the miners would be shooting themselves in the foot, essentially, and they’ve already expended all their money buying these specialized equipment that can’t be used for anything else.

Dan Held (00:40:11):
That’s the fundamental game theory that protects, it not only issues new bitcoin but also protects the ledger, is that these miners are financially incentivized to behave properly and do their job of ordering transactions in the right direction.

Dan Held (00:40:24):
The total cost, or the total annualized block reward value I think right now is around eight billion, to $10 billion. So you can find a pretty raw aggregate metric here to quantify how much money it would cost for someone to attack bitcoin, because someone has to not care about the money, they have to be willing to burn the money because the only way to perform this attack is to buy the equipment, run all electricity through it, and then start to misbehave, which makes the value that you receive in form of block reward, be worth a lot less. You have to be essentially willing to burn the money.

Dan Held (00:40:55):
Their concern is that over time, the subsidy inside the block reward, the subsidy being the newly minted bitcoins, through bitcoin issuance schedule every four years, the number of newly minted bitcoin being produced in a block, drops in half. And the worry is that over time, transaction fees will not rise to compensate for the drop in the block subsidy. So essentially what’s happening is the issuance newly minted bitcoins is slowing down, and the worry is that people won’t pay more and more money in transaction fees in order to continue the same level of security spend or the same level of the block reward spend as there was historically.

Dan Held (00:41:32):
So, there’s a couple of ways to think about this. One is that, we don’t know what an appropriate level of blockchain security spend should be. We don’t know if that’s one billion, five billion, 10 billion, 100 billion. The way that we phrase that or the way that Nic Carter frames it is that there is a threshold security model, there is some sort of threshold in which there’s a level of $10 billion, 100 billion, and once we get over that, bitcoin is super secure, even against [inaudible 00:41:57] attacks.

Dan Held (00:41:58):
There’s the stock inflow models, which are more around security spend as a percentage of bitcoin’s market cap, and there’s also the flow valuation method of looking at what’s our security spend per amount of money flowing on-chain. How much value fall in on-chain, and how much security spend are we spending.

Dan Held (00:42:15):
I think that no one knows because bitcoin, and so here’s the weird thing is that bitcoin’s security spend, so the amount of money paid to miners in the form of a block reward, over time has increased exponentially. Bitcoin’s total annualized, I use annualized because it’s an easier sum to come up with, just to think about… Anyway, we’re talking back in 2013, we’re talking tens of billions or hundreds of millions of dollars annualized, would be the amount in the security spend. And now we’re in the tens of billions.

Dan Held (00:42:45):
So bitcoin has, while the subsidy has been decreasing through halvings, the total value of the block reward has increased exponentially due to the appreciation of the price of bitcoin, and the rise of transaction fees being paid per bitcoin transaction. So, over time we’ve seen the total block reward value go up a whole bunch, and bitcoin hadn’t been attacked before when the total value was worth much less, and so it’s really hard to know, are we secure or not? And so, it’s a very subjective thing.

Dan Held (00:43:15):
I do think that $10 billion annualized security spend is high, there are only a few attackers who’d be willing to spend that sort of capital.

Preston Pysh (00:43:24):
I think another important point to kind of add to that is just the production of hardware and the consolidation of hardware, and the time that would be required to do something like that without anybody in the market noticing, or raising a red flag saying, “Hey, I think there are some issues here. Why are mining rigs getting so expensive all of a sudden? And why is there such a substantial delay in delivery, because somebody or some entity is acquiring all this hardware?” So I think that there’d be a lot of signaling that would occur in the marketplace just for hardware, well in advance of something like that just coming online out of nowhere.

Dan Held (00:44:08):
Yeah, this topic is really nuanced. I was surprised you brought it up because there’s a lot of different rabbit holes to this. What you’re talking about is for example, there’s always so many number of foundries or chip manufacturing facilities that can produce these ASICs. ASICs being the specific machinery that’s used to mine bitcoin. And yeah, we would be able to see this activity occurring far in advance because we’d see the price of these ASICs start to skyrocket, and we would go, “Oh, okay, who’s buying all these?” Which is funny because then that actually might send a signal to the market that maybe everyone starts to buy the ASICs, and then maybe more foundries are created.

Dan Held (00:44:46):
The game theory behind bitcoin is really interesting, I wanted to cover the basics of the block reward function and the circumstance that was happening with the decline of the subsidy, because that’s where people are worried that transaction fees won’t compensate. But there’s even deeper game theory that plays out here of like, what happens if someone actually attempts to do this? So this raw number of currently around $10 billion worth of annualized spend in the block reward. This is again, like I mentioned earlier, we don’t know what an appropriate level of security spend is. There’s a lot of other ways to counter an attack like this, so it isn’t a guaranteed successful attack. This is just a way to disrupt the tip of the blockchain, and remember there are other good miners here too. So there’s all sorts of games that can be played, that get really, really technical.

Dan Held (00:45:30):
So, what I did is I looked at, I’m a product guy, so my background is in growth both on product management and growth marketing, and I’ve worked at companies like Uber [inaudible 00:45:40] growth and the growth marketing team, and equip those products. Currently, what I do over at Kraken, I lead growth marketing and little touch of growth product.

Dan Held (00:45:49):
The way that we look at how to build products, is we develop KPIs, key performance indicators to calibrate all of our actions. Why am I building this new feature? Well this new feature will get us more users, or the users will become more engaged with the product and ultimately both of those drive more revenue. We use KPIs as the alignment mechanism to align our efforts.

Dan Held (00:46:08):
When we look at a KPI or a way to monitor performance for bitcoin’s security model, a good way to look at it would be transaction fees over the block subsidy. So what that metric gives us in Glassnode, by the way, has this metric, which is really awesome. And so what this metric shows us is our transaction fees are replacing the subsidy over time, and what we’re seeing is that they roughly are. Bitcoin has many, many, many halvings ahead of it, and a lot of price appreciation, which we all hypothesize. With that, we’ve got a lot of time for this to be figured out, this doesn’t have to be figured out immediately. We’ve got like 10 to 15 years before we’d see signs that there might be an issue.

Dan Held (00:46:47):
And what we’re seeing is that over a very long period of time, transaction fees indeed, are replacing the block subsidy, which the worrisome moment that transaction fees won’t be large enough in value to properly incentivize these miners. I don’t think we’re seeing that. First and foremost, we don’t even know what that value would be. So when people go, “Oh, bitcoin’s long-term security could be poor.” I’m like, “Cool, what value is it? Because that’s totally subjective.” Number two, if we look at a primary KPI that would indicate if this is trending in the right direction, things look fine. I think bitcoin as of this moment… All right Preston, so I just pulled up Glassnode data, and the percentage miner revenue from fees for bitcoin is around between 10 and 15%. And if we look at it on a large chart over time, again anyone can look up this data on their own on Glassnode, it’s very much trending in the right direction.

Dan Held (00:47:39):
Now, I’ll go ahead and preemptively address some of the concerns that people throw up, because I’ve debated dozens of people on this topic. What they claim is that the price elasticity that these transactors affinity to go a higher fee or how price inelastic they are, there’s concerns that people will choose not to pay higher and higher transaction fees on bitcoin’s blockchain. So that’s where they go, “Oh cool, well you’re seeing transaction fees as a percentage of miner revenue go up, but it’s going to be capped out because people at a certain amount will stop paying that.”

Dan Held (00:48:10):
I think we’re pretty far away from that, and what I used was real world comps to calibrate how much people might be willing to spend on a layer one transaction. So we have a couple of different ways to think through this. One, we’ve got US dollar wires. Those are between $20 and $40 roundtrip and people pay those every day. People are very willing to pay those as a way to settle large amounts of value. And so bitcoin transaction fees could hit a median, so not just like a peak, but the average transaction or the median transaction could be around $20 to $40, and I don’t think anyone would bat an eye. But I think we can go much higher than that as well. Bitcoin isn’t just a wire, bitcoin is like an offshore bank account, it’s like a physical gold settlement.

Dan Held (00:48:53):
Physical gold settlement is extremely expensive. In terms of the dollar value, it’s so prohibitively expensive to physically settle gold that it occurs very rarely. But when they do, do it, they’ve got Brink’s of security trucks, security individuals. When Germany repatriated its gold from the US and the UK, it took like three years and 10 million dollars. So we’ve got that. So physical gold settlement.

Dan Held (00:49:18):
And then we’ve got a couple of other transaction types. We have offshore banking, and offshore banking, to set up and offshore bank account is at least in the thousands of dollars. In addition to wiring money on occasion or to you’re paying international wire fees of 40 to 60 bucks. So people are willing to pay thousands of dollars, and there’s also a management fees with a lot of these banks in offshore banking to manage your money. People are paying thousands or tens of thousands or millions of dollars to facilitate the movement of large amounts of capital.

Dan Held (00:49:46):
Then we also have a real estate transaction. You’ve got title insurance for a real estate transaction. You’ve got broker fees, you’ve got all these fees associated with it. So bitcoin as a store of value asset, to pay what I would estimate like a long-term transaction fees of around $50 to $100 per transaction, seems pretty reasonable to me, especially compared to these other real-world transaction types that are closely equivalent to a bitcoin store of value transaction.

Dan Held (00:50:14):
I think this is why I get very annoyed with the payments narrative. And not only is it damaging to bitcoin’s adoption, because we solved the bitcoin cash hard fork, which was due to misperception that bitcoin should be used as a cheap PayPal. You also lead to a circumstance where people become very disenfranchised with bitcoin. Fees will rise, we have essentially a fixed amount of block space for, just easy math that it’s basically fixed, and we have a lot of demand that will increase for this block space. So block space is this space that transactions can be put into a block and so it’s like a fixed parcel of land and we have a lot of people coming in. And so transaction fees will naturally rise.

Dan Held (00:50:55):
And so these payments narrative folks, I find it really disingenuous because I’m like, transaction fees for bitcoin will rise. We can all see it, it’s a supply and demand function, and this is good for bitcoin because it means that the longterm security will be great.

Preston Pysh (00:51:09):
It also doesn’t prohibit from being used as a payment mechanism, at least on the layer two like we were talking about earlier. So, although a person might be listening to this and saying, well that’s crazy, no one’s ever going to use this thing on a day to day basis if the transaction fees are 20 to $30. But I would tell you, if you’re doing any type of meaningful amount of $10,000 or more, which those types of transactions are happening all day long, all across the globe. And so are your $10 transactions, which would be happening on the second layer for near nothing in fees, and you have immediate settlement.

Dan Held (00:51:48):
That’s a good point around layer two facilitating those lower value transaction types. But I think when I talk about disingenuous with the payments folks, it’s because they promote layer one being used for that, and I’m like, well that’s not going to happen.

Dan Held (00:52:01):
Nic Carter again, Nic Carter is a free thought leader in this space. He’s currently in a battle with a guy named [Maraj 00:52:06], to get to 100,000 Twitter followers. So if you’re listening to this, follow Nic Carter on Twitter. We’ve got to [crosstalk 00:52:12] Maraj.

Preston Pysh (00:52:13):
For sure. Nic is brilliant, yes.

Dan Held (00:52:16):
Nic has a great way of explaining this, which is that bitcoin layer one transactions, that’s a cargo ship, the containers are like layer two. You put a bunch of containers on a cargo ship and move it into a layer one transaction. You don’t try to move those little containers, one little container in an entire cargo ship, you put a whole bunch of them on there. Like we talked about before with Lightning, there’s a lot of economic density there. There’s a lot of smaller value transactions on layer two that occur, and those net out on layer one.

Dan Held (00:52:42):
And the reason why we use layer two is, it’s a proper way to scale. There’s a lot of different reasons why, but the [TLDR 00:52:49] is that trying to scale on layer one essentially would make bitcoin equivalent to a Visa, where you’ve got three servers in the world, they could facilitate a lot of transaction, but it’s not very decentralized. And so bitcoin’s block space, layer one needs to remain small and compact, and that’s where we push scaling solutions to layer two, where we don’t need a completely trustless environment or a trust minimized environment. We sacrifice a little bit of that for speed and cost. And that’s what these layers upon bitcoin provide with layer two, like Lightning.

Preston Pysh (00:53:24):
When you think about the technology adoption curve. So folks that might not be intimately familiar with this, you have the early innovators, you have early adopters, then you start getting into early maturity, late maturity, and then the laggards. We’re at a trillion dollars right now in market cap for bitcoin. Where do you see where we’re at in that technology adoption curve?

Dan Held (00:53:47):
That’s a really good question. If we look at some of the raw numbers of market penetration, so percentage ownership, it depends on the country. It depends on a lot of European countries, the United States have higher penetration in terms of ownership. Some countries like Korea, I think during 2017, had double-digit percentage ownership of crypto.

Dan Held (00:54:09):
And so I think on bitcoin’s adoption curve, I’d say we’re still very early stages. I think the estimated number of unique bitcoin Hodlers is probably around 100 million. And this is an estimate from survey data from people compiling unique user number from Coinbase and Kraken, and other companies, other exchanges and brokerages. So I think 100 million is probably reasonable, it’s an easy math here, right? So you’ve got around 7.7 billion people on earth, so we’re talking a pretty low percentage own bitcoin. So I would say we’re still in the very early adoption cycle of bitcoin. And a trillion dollars, that’s one way to think about it, is the number unique holders compared to the world population, and then you’ve got a metric which would be around valuations, so market capitalization, the total value of all bitcoin.

Dan Held (00:55:00):
So bitcoin as an asset, one trillion dollars is a huge moment for bitcoin, I thought that was incredible. One trillion dollars, it solidifies bitcoin as a real asset, a mature real asset that can be taken seriously by institutional investors. A trillion dollars though, isn’t that big, and if we look at other store of value assets, bitcoin I think has a long way to run. Gold itself is worth around 10 trillion. We’ve got other store of value assets like real estate in the hundreds of trillions. For example, I bucket real estate into that, so people are like, “Why are you talking about real estate as a store of value asset?” Well, the raw utility of your home, a very low percentage of the value of your home is the raw utility of your home. A lot of value of your home is in owning a fixed parcel of land or fixed amount of space, that can’t be easily printed. So scarcity of the land.

Dan Held (00:55:51):
Hence, why we see, you’ve got cities like New York city and London that are used, and some of these homes are purely, basically purely used as a store of value asset, where you’ve got wealthy South Arabians or Russians who purchase a $10 million home in London and never live there. So that’s why I bucket real estate into store of value, or another type of asset that bitcoin competes with.

Dan Held (00:56:14):
You’ve also got like essentially broad money metric, so around how much fiat money is out there. You’ve got sovereign bonds, which are like $100 trillion market. These are a little bit rounded, I’m sure these numbers aren’t exact, so don’t take this verbatim as exact metrics here. These are directionally accurate in terms of size of market.

Dan Held (00:56:36):
What I’m trying to say here is that bitcoin at a trillion dollars, is a very small store of value asset relative to all these other store of value assets out there, and I would say it has supremely better characteristics as a store of value asset. And then also the supply of gold is unknown, we don’t know how much gold has been mined, and we don’t know how much gold will be mined. With bitcoin we have extreme mathematical precision over its supply and it’s instantly transferable to anyone in the world.

Dan Held (00:57:07):
So bitcoin is definitively a superior asset relative to gold, and then when we look at real estate, as we mentioned before, one home does not equal one home. There are maintenance costs because the real estate exist in the physical world, which has weather, and all sorts of other mechanisms that erode its value. Versus bitcoin, which can be stored on a piece of metal and be locked away somewhere super cheap for eternity.

Dan Held (00:57:30):
Bitcoin as a store of value asset is incredible in terms of its characteristics, and that’s why I think bitcoin will very much gobble up the gold market capitalization, fiat, sovereign bonds, and likely some of the real estate, which puts it in the tens or hundreds of trillions of dollars worth of value.

Preston Pysh (00:57:48):
What are your thoughts on some of the on-chain data that you’re seeing right now, compared to previous cycles?

Dan Held (00:57:56):
That’s a good question. I’m not [inaudible 00:57:58] through on-chain analytics super often. There are some interesting ones that I’ve heard about in terms of like I hear about on Twitter, and through my personal network. One would be supply of coins held on exchanges. I think this is a really interesting metric around people can look at the aggregate number of bitcoin that are help on centralized exchanges like the company I work at, Kraken, Coinbase, et cetera.

Dan Held (00:58:20):
And the total value of bitcoin held, the total number of bitcoin held by these exchanges is dropping over time, and people hypothesize what’s occurring is that, institutional investors are buying it and then either soft custodying it, or moving it in custody elsewhere. People think that this is a bullish thing because it reduces the amount of supply on exchange, which has the potential to reduce sell side pressure. The only way people can buy bitcoin is if someone is willing to sell it, and if there’s less and less sellers, and there’s more demand, the number goes up. That’s the TLDR of that idea.

Dan Held (00:58:55):
I think it’s pretty interesting. I do think the 21 million hard cap is such a brilliant beautiful thing of that. There’s only 21 million, there is no supply response. So with gold, if gold becomes more valuable, we can dig deeper into the earth to find more and more gold. But we can’t do that with bitcoin. As demand increases for bitcoin, supply doesn’t do anything, supply is like, “Cool, all right, 10 times the number of people want bitcoin, tough luck.” And so that’s what leads to bitcoin’s volatility, which is a good thing. It’s the volatility in bitcoin’s exponential rises in price. So I think the supply at exchanges definitely demonstrates less and less sell side pressure, so I think that’s a bullish metric that I found particularly interesting.

Preston Pysh (00:59:42):
All right, so rumor has it that you’re making a documentary. I’m kind of curious how that’s going, and then talk to us about the methodology of how you’re going through the layout of how you want to present your documentary?

Dan Held (00:59:56):
I’m actually participating in two. These are other individuals documentaries on bitcoin in the ecosystem, and I’ve been asked to participate in two of them. So that’s what I tweeted about the other day.

Dan Held (01:00:09):
Now, there is something that I will bring up, that I am working on, and it’s a video project. So, I have set up a YouTube channel, so I first got started with my personal [inaudible 01:00:18] on Twitter, and I’ve got about 140,000 followers on Twitter. I’m @danheld on Twitter, by the way, for folks who want to check that out. And I recently started to spin up a couple of other channels. So I spun up my newsletter. So if you want to know some of these longer form topics, check that out as well, it’s danheldsubstack, if you Google that, you’ll go find it. It’s called The Held Report.

Dan Held (01:00:38):
And The Held Report started to make some money because I write this weekly, it’s kind of my more intimate thoughts around bitcoin, and different niche topics within the bitcoin ecosystem. I go deep on price, I go deep on bitcoin versus Ethereum, but I what I really love is video. Video content is super cool and I spun up a YouTube channel about three months ago. And so I’ve just started to build that up, which has been really fun. I fly drones for fun, and I’ve taken that footage and I’ve had to use Premiere Pro and cut it up and craft narratives. I think video is an extremely compelling medium to convey topics about bitcoin.

Dan Held (01:01:14):
What I’m doing is, I’m working with my animator to try to build out a video series of very compressed ways to talk about bitcoin and how bitcoin works. That is me walking you through it, combined with visual imagery that I handcrafted with my designers [Sphin 01:01:32], because Sphin knows after effects, so he knows how to animate all this. So what we do is I sit down and I sketch it, and sketch out a time series, essentially, of what this visualization will look like. And then we think through how it’s going to be rendered and him and I work together on it.

Dan Held (01:01:45):
So, I’m really excited to bring this up because it’s something where him and I are just now working on this. It takes a ton of time to not only script it, so you’ve got to write a script for the video. You’ve also got to, for example, in the video, I point, and then an animation forms, so I have to time it very precisely. I’m very, very particular with animations that I create, so Sphin and I have created a bunch before, if you’ve seen a black and white gif on Twitter that has to do with bitcoin, that’s probably one of mine.

Dan Held (01:02:14):
And so, we’ve already done this with different bitcoin topics, and so I’m trying to compress bitcoin’s narrative to the maximum compression and simplicity as possible. So, I’m really excited about video content. It’s really cool because you can repurpose it. So if we build it for YouTube, we can also take it and put it on LinkedIn, Instagram, Twitter, and so I’m really stocked about that.

Dan Held (01:02:33):
So yeah. I’m not doing a documentary, I’m participating in two documentaries, but I am producing a series of videos and I don’t have an exact date as to when these come out, but I want to get it done in the next three months. But we’ll see if that actually happens. Video content is a lot of work-

Preston Pysh (01:02:49):
It’s a lot more than audio work, that’s for sure.

Dan Held (01:02:54):
And audio has a bunch of work too. Preston probably has a couple of support people that help him out on stuff, and so even audio, you’ve got to sit down, take time to record with me, Preston, you had a bunch of great notes and homework, and I know you asked your followers if they had questions for me too. So video content is the maximum amount of work.

Preston Pysh (01:03:12):
It definitely is.

Dan Held (01:03:14):
I’ve got a full-time job and I also have to keep my girlfriend happy, and I still have friends. So I’m going to try to get it done in the next three months, but we’ll see if that actually happens.

Preston Pysh (01:03:26):
Well Dan, we’re going to have links to all the things that you mentioned in the show notes. Is there anything else you wanted to highlight or point people towards?

Dan Held (01:03:33):
Well I think that’s it, and almost all my content’s free. My paid newsletter, if you want to get it first, that comes out Thursdays. A couple of days later, I tweet about it, because I want to bring these topics out that everyone can hear. But if you really like the way that I explain things, if you want to support me, that’s the best way to do it. I think Twitter is where you’re going to get kind of, Twitter and the newsletter, you’re going to get the raw Dan Held, so on Twitter, I’m pretty unashamedly speaking exactly how I feel about bitcoin. And same with the newsletter, for example today I wrote about bitcoin versus Ethereum, and this was a topic that had been highly requested. I send out a survey at the end of every newsletter I write, to my readers, and this is the one that they voted for, as the number one requested topic.

Dan Held (01:04:14):
So this one was kind of a meatier one to dig into, but I gave my very raw feelings about exactly how I feel about bitcoin and Ethereum, especially compared to each other. So I’d say Twitter and my newsletter are the two best places to kind of stay up to date with what I’m talking about. That’s where I hang out the most.

Preston Pysh (01:04:33):
Dan, we really appreciate this, and what fun to finally be able to talk in person instead of on the keyboard like we have been for years, at this point. So Dan, thank you for making time.

Dan Held (01:04:44):
Preston, thanks for having me, and I’ll hopefully come back on again and we can cover more topics.

Preston Pysh (01:04:49):
You bet.

Preston Pysh (01:04:50):
Okay, so thanks for everybody listening to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you’re using, we really appreciate that. And if you have time, leave us a review.

Preston Pysh (01:05:01):
So, thanks for joining us this week, and we’ll catch you next Wednesday.

Outro (01:05:05):
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