[00:02:37] Alexander Leishman: I think it’ll attract a lot of investment, but I think that people will start to realize that their Bitcoin is really trapped in this instrument. By buying Bitcoin through this, you’re missing out on a lot of the benefits of having the self-sovereign liquid asset immediately at your disposal. I think we’ll see people sort of weigh the pros and cons of this and but, but I think overall it’s going to bring a lot of positive attention to the space.

[00:03:00] Preston Pysh: I mean, just from a proportion standpoint. Where are we at? 19 million have already been mined and are out there and are not in an ETF. Right? So with the remaining amount and how, how much of that 19 million will get sucked into an ETF? I think it’s going to be a pretty small proportion, relatively speaking to the amount that’s actually in circulation there that are out there.

[00:03:24] Preston Pysh: Any thoughts, additional thoughts on that? And like how I think it supports your argument that it’s not going to be a driving factor, but.

[00:03:32] Alexander Leishman: I tend to agree. I don’t think it’s going to be a massive amounts proportional to the amount of Bitcoin that’s already been mined. I mean, I think the, the sort of the thought pyramid is, okay, all the Bitcoin that’s been mined is either owned by somebody or lost.

[00:03:46] Alexander Leishman: What percentage of those people are willing to sell that Bitcoin to BlackRock? Not many. Yeah. But that, I know at least people are going to hold through this. You know, maybe, maybe long term we’ll see something there. Yeah, I think, you know, one risk is potentially like regulatory capture, BlackRock pushes for this as being the only way to buy Bitcoin.

[00:04:05] Alexander Leishman: Making it really, really hard to actually buy Bitcoin yourself and, and take control of it. So if we start to see moves like that, then I think we’ll know something’s afoot.

[00:04:15] Preston Pysh: You know, we’ve seen the regulatory approval come through over in Europe and I, I guess they’re getting ready to launch an ETF over there.

[00:04:24] Preston Pysh: I’m curious, and I know there’s really no way to say one way or the other, but it almost seems like here in the US that there’s this competitive piece that that’s why it’s being pushed so hard on the SEC. Like, Hey, come on, like, we’re losing the race here on the global scale of, of having these products in, in the market.

[00:04:42] Preston Pysh: I wonder if some of that might be also impacting the recent push that you’re seeing with BlackRock and whatnot. Have you heard any rumors on that side?

[00:04:52] Alexander Leishman: It’s certainly possible. I don’t, you know, it’s funny, I think for most people in this industry, the SEC still feels like a black box. And I, I really don’t know.

[00:05:03] Alexander Leishman: You know, I, I think that a lot of people there mean, well, they, they want sort of, they want American capital markets to be the safest in the world. But I do think there’s something else in the psyche over there, or, yeah, I think there’s like super political machinations. And how big of a driver is it to try and compete with Europe there?

[00:05:21] Alexander Leishman: Unclear. I really don’t know the answer.

[00:05:23] Preston Pysh: So this is where I, where I really want to go with this. So let’s say that we get, you know, I don’t know how much Bitcoin could flow into one of these ETF products. At the same time, you have this demand for Bitcoin as an immediately settling just like currency is.

But Bitcoin’s different ’cause it’s actually money. But this immediate settlement mechanism as the demand for this immediate settlement mechanism keeps picking up and becomes higher and higher. You’re also having an incentive for Bitcoin to be loaded into these channels through the Lightning Network in order for the Bitcoin to actually be used in this manner.

I heard you, you speak in Nashville and you were talking about the capacity in the channels not necessarily being a correlation to what people are accustomed to, and maybe the need for all these coins to be loaded in these channels isn’t as high as what some people might suspect it is. So there’s a lot wrapped into this question, so I’m, I’m just curious your, your thoughts at large.

But with all these ETFs now sitting on large swaths of coins, and I guess we’re warping ourselves five, 10 years into the future, Is there going to be a, a drive for them to load them into channels to collect fees on behalf of these people? Further making the, the custodial piece of this even more complex and complicated for the people that are just allocating into an ETF because they just want to turn key solution.

[00:06:52] Alexander Leishman: So I personally think it’s unlikely that large amounts of Bitcoin in the near future will be able to be efficiently allocated on the Lightning network to generate yield. The reason for this is because you don’t need that much Bitcoin on the Lightning network to process lots of volume. And if you were to draw a curve of sort of, you know, the theoretical yields you could earn by opening channels in a lightning network and facilitating payment routing and the sort of like maybe Y axis is sort of yield and percentage and per month per se, and X access is amount of Bitcoin, you’d see that drop off pretty quickly.

[00:07:35] Alexander Leishman: There’s just not like, there’s just a a point where adding more Bitcoin gets you quickly diminishing returns from a percentage yield perspective and you, you just quickly drive to zero after putting I think a couple hundred Bitcoin on the lightning network and, and I’m not so sure that chain that drop off moves substantially over the next five to 10 years.

[00:07:55] Alexander Leishman: But we’ll see that it’s going to be a very competitive market and I don’t know that funds will find that risk adjusted return worth it.

[00:08:03] Preston Pysh: So is it the network architecture itself? And when I say that the connection between various nodes and and servicing nodes that are kind of outliers on the network, that’s way more important than the, than the amount of coins that are loaded into the channels of the network.

[00:08:19] Preston Pysh: Is that what you’re saying?

[00:08:21] Alexander Leishman: Well, what really matters is how much, so if, if your goal is to earn returns by running a lightning node and facilitating payment routing, There’s a lot of variables here, but at the end of the day, what you actually want is payment flow coming through you times your average fee rate.

[00:08:40] Alexander Leishman: So you’re opt, you’re trying to optimize that number. So opening more channels doesn’t necessarily get you more payment flows. You know, the way I like to think about, it’s almost sort of like running a lighting note is almost kinda like being citadel. Like they’re trying to get order flow, right?

[00:08:53] Alexander Leishman: Something to market, make and, and a lightning note, you’re, you’re trying to get payment flow and so there’s a number of ways to get payment flow. Obviously to do that, you have to open channels with peers so that, you know, payments were out through you, but you, you’d have to be positioned in a network in an optimal way.

[00:09:09] Alexander Leishman: You know, just opening a node, starting a node and opening channels doesn’t necessarily mean anyone. Why would they route through you and not someone else, right? There has to be a reset. I think what we’ll see is you’ll see a sort of like a parade of distribution of, you know, some really big nodes getting most of the payment flows, and then you’ll get these longer tail nodes at a company like River, right?

[00:09:29] Alexander Leishman: We are running a, we have a number of different business lines. One of the business Lightning network infrastructure business. Which actually gives us proprietary payment flow. Like we’re getting people kind of like Stripe does for credit cards, right? We’re getting people making lightning payments through us.

[00:09:42] Alexander Leishman: So that flow is sort of like we have, that’s proprietary coming through us. We decide sort of how that gets routed out. So that’s another way to get payment flow, sort of playing a higher level game, if you think about it that way.

[00:09:55] Preston Pysh: So this is through the API that you guys offer through the Lightning service.

[00:09:59] Preston Pysh: Is that what you’re referring to, Alex?

[00:10:02] Alexander Leishman: Yes. Yeah, we have an API that makes it easy for apps to add lightning payments. And so, you know, Chivo, the app in El Salvador uses us and, and so do a growing number of exchanges and, and, and others.

[00:10:15] Preston Pysh: I guess when we’re thinking about this whole network, this layer two network and the immediate settlement, it’s almost like the, the net producers at the edge of the network, the, the edge nodes.

[00:10:28] Preston Pysh: Are the ones that all these SATs are being moved to. And people will use an abacus to talk about the Lightning network. And if I’m just trying to intuitively understand where the payment nodes that are going to collect the highest fees, I, it’s going to be correlated to where most of the buying power is ending up.

[00:10:47] Preston Pysh: So let me give you an example. If I’m Apple and I’m a huge net producer, and you can see it in their bottom line. Again, for folks listening, we’re like 5, 10, 15 years into the future trying to understand what this looks like. All those payments are being routed to these types of businesses that are net producers that are actually creating value in the marketplace because those SATs on those abacuses are just all flowing to this entity that’s providing value to the marketplace.

[00:11:16] Preston Pysh: Then what you’re describing is the turnkey services that are providing the, the route structure are another, you know, high level playing or a high level individual that’s playing in this space that’s collecting fees because they’re making that accessible for the smaller entities. You’re doing it right now for large entities, but in the future, If I’m a mom and paw business, I’m profitable.

[00:11:40] Preston Pysh: Like I’m going to go to a, an entity like you and your API that’s turnkey, that I don’t have to set up any of this infrastructure. Is that really kind of the two entities that are going to benefit the most from this in five or 10 years from now?

[00:11:54] Alexander Leishman: Yeah, exactly. It’s sort of, the analogy I would say is it’s kind of like visa, right?

[00:11:59] Alexander Leishman: Theoretically, if you really wanted to, and you were a mom and pop shop, you could build your own credit card payment infrastructure, or you could just use Square. Or strike, right? And that’s sort of the analogy here, is there’s all this complexity behind the scenes and how the Lightning Network works, how these channels work, blah, blah, blah, blah, blah.

[00:12:15] Alexander Leishman: But 99% of people are never going to need to know any of this stuff, and they’re going to use people who’ve abstracted away that complexity and made it really, really easy.

[00:12:24] Preston Pysh: So Alex, a person who’s hearing this and they’re, and they’re thinking to themselves, okay, so this sounds like centralization, like centralizations bad, this is Bitcoin.

[00:12:34] Preston Pysh: In your opinion, is the centralization piece just for layer one I, and I’m sure that’s not your opinion, but it almost seems like market forces are driving these solutions where people are just going to go to a turnkey for layer two. Is that okay?

[00:12:51] Alexander Leishman: That, that, that would be what happens? I think’s inevitable.

[00:12:54] Alexander Leishman: I think it’s just a law of nature, right? Spec specialization of skills. Everybody can’t be an expert in everything, and the people who are experts in building Bitcoin infrastructure will do that better than people who aren’t, you know, than. Than they’ll do it better than people who are experts at running an Italian restaurants.

[00:13:12] Alexander Leishman: And people just naturally specialize. I think it’s just a fundamental law of economics and it’s just going to play out that way. The, the big difference between Bitcoin and the existing system is that you can opt out, you can choose to do it yourself. You can choose to not trust or rely on anyone else. So the centralization is more just, it’s really a layer above the Lightning Network.

[00:13:33] Alexander Leishman: The Lightning network itself isn’t centralizing, people are building, are plugging into the Lightning network with big, centralized entities. But anyone can plug into the Lightning Network unlike Visa.

[00:13:44] Preston Pysh: So Alex, there’s been a lot of chatter since the Miami conference because there was an announcement made down there about Ark, which is another layer two solution.

[00:13:55] Preston Pysh: I believe it requires multiple soft forks. Back to layer one. What I really want to get at is the argument for this Ark was proposed that it solves this inbound liquidity issue that you have with lightning. What are your thoughts? Is there actually an issue here with inbound liquidity that prevents it from scaling?

[00:14:16] Preston Pysh: And I think that’s really kind of the bigger question is are there scaling concerns or issues with lightning as it is right now?

[00:14:24] Alexander Leishman: There are always scaling challenges in building any new system or new protocol and inbound liquidity is certainly one of them. One of the opinion that the Lightning Network killer appin the short term is connecting exchanges, connecting centralized institutions, and making, moving Bitcoin between these institutions, instant, frictionless, and 10 xing the user experience for, for any customers of those services. The reason for that is partly because of sort of this, if you want to, for consumers who want to run their own nodes, they need someone to open a channel with them so that they can receive payment.

[00:15:03] Alexander Leishman: Well, that’s really challenging economically because that means someone else has to lock up capital Bitcoin and put that sort of on the lightning network to facilitate a future payment to you. Now with these, with centralized institutions, you have so much volume, so much Bitcoin moving between them that that’s justified.

[00:15:19] Alexander Leishman: It’s easy to justify that there’s lots of transaction activity happening there. You get a lot out of putting up a little bit of capital, but with these sort of lower volume destinations, consumers, small merchants, How much would someone have to charge to lock up Bitcoin in a channel to you? And so that’s sort of this question of, so, so I think this inbounds capital question and, and lightning, it’s, it really is a fundamental question for these small nodes.

[00:15:44] Alexander Leishman: Is running a small node in lightning or having a small node ever going to be economically viable? And that’s, I think that’s a, that question is. I think there will be, it won’t be cheap and some people will be willing to pay that price and, and, and many won’t. And so the, the question that Ark tries to tackle or the challenge that Ark tries to tackle is, well, how can we avoid having to lock up this capital to one destination?

[00:16:07] Alexander Leishman: And it makes a number of trade-offs to accomplish that. And, and I, I want to be clear, you know, there’s a big difference between a protocol that is running live in production that has been hardened over many years. Such which Lightning has to, you know, what is still sort of a back of the envelope idea, right?

[00:16:24] Alexander Leishman: There’s still not an Ark implementation. So it is in a very different category of protocols. I would say. It’s still very, very theoretical and you don’t start, you don’t really have any confidence in a protocol until you’ve actually built a system for it and put it in production. Arc is still really just an idea and, and some of the downsides around Ark are that it requires the capital, large capital lockups by these sort of hubs that are, are sort of running and facilitating.

[00:16:51] Alexander Leishman: All these payments and the new structure, it proposes you kind of attach yourself to a hub and it’s facilitating payments for everyone in that, in that and, and it’s also making an on chain Bitcoin transaction every, I think it’s every five to 10 seconds. I think the jury’s out. I’m sort of skeptical.

[00:17:09] Alexander Leishman: It’s certainly not a silver bullet. I can already tell you that. I think, my guess is that there’s going to be innovations and breakthroughs in making lightning more capital efficient that will help move the needle faster than Ark will.

[00:17:22] Preston Pysh: Yeah, I agree with you, Alex. I, I think that the more interesting thing about Ark is that it’s potentially proposing Lightning doesn’t scale or that there’s issues with lightning, and it, it forces us to kind of think through maybe a better approach or how we could even improve lightning itself.

[00:17:40] Preston Pysh: With the, the issues that are being raised through the Ark piece, but I’m curious generally your thoughts on the maturation of layer one. Michael Sailor has come out and has kind of suggested that he thinks that we’re getting to a point where maybe we just stop screwing with layer one and we just kind let it solidify and like, hey, let’s start focusing on layer two and, and other things.

[00:18:05] Preston Pysh: Because we’re just introducing potential issues that could corrupt the entire quote unquote experiment. What are your thoughts on that, and I guess soft forks in general from here on out?

[00:18:18] Alexander Leishman: I think there’s merit to the ossification arguments that said, there are known bugs in layer one that we do need to fix at some point with a soft fork.

[00:18:30] Alexander Leishman: And actually like, there’s a bug where, I forget what estimated year it is, but sort of like after the last block reward is produced, more Bitcoin will start being produced again. There’s like a, there’s like a, a, a bug there that we need to just sort of like fix with a soft work. Little things like that, you know, we can’t totally ossify there, there likely has to be another software and there’s a chance.

[00:18:51] Alexander Leishman: I’m mistaken about that, but I’m pretty sure that’s that’s the case. And there are also some other little like minor things that would just kind of fix a few warts that are sort of known and potential like risks to the protocol. There are some changes that probably should be made and as to whether there should be new, new changes that unlock functionality like covenants, which is this concept in the abstract of being able to define how coins get spent after you send it to somebody.

[00:19:22] Alexander Leishman: That could potentially unlock some interesting use cases for Bitcoin. I’m on the fence with that stuff. It can unlock some cool new things, but at the same time, it does have the risks of introducing a lot more complexity to the protocol. Adding one more, yet, one more degree of freedom, one more thing to keep track of.

[00:19:37] Alexander Leishman: And I think that these conversations are important to have. I do think it’s important to really listen to the core devs. I do think there’s a big disconnect between core devs and sort of the Twitter sphere. The core devs, you know, I think would be the first to a degree adding more complexity. Like there’s just enough to do, just to maintain the code base right now and improve the code base and, and add more tests and get people reviewing more PRS for maintenance.

[00:20:01] Alexander Leishman: Adding yet another big new change is, is, is scary, so I’m on the fence. I think it should be done very, very carefully and Bitcoin core has always had a very conservative approach to things. I’m sort of like a maybe soft fork once every five to 10 years kind of person.

[00:20:16] Preston Pysh: From my point of view, and I come with this really hardcore financial vantage point or lens and not so I know you’re the CTO, like you’re a tech guy, right?

[00:20:27] Preston Pysh: You’re, you’re right in lines of code. For me, looking at it from this financial lens. Like the only thing we have to do is make sure we produce some type of digital store value that can’t be debased to solve what I would describe as this monster that’s creating all these issues in society. Because when I look at the debt markets and I look at the central banks that are just debasing money and debasing the value of everything on the planet.

[00:20:58] Preston Pysh: We don’t need immediate settlement. We don’t need any of that stuff to at least like peg this monster to the wall with layer one right now, we could get into a whole ar well, let’s, we need to get into the argument of immediate settlement next with ai. But we have to get layer one, right? We cannot mess it up.

[00:21:21] Preston Pysh: And so like every time I’m seeing people saying, oh, we need to do CTV, we need to do drive chains, we need to do all this stuff. I’m just sitting there with my financial hat on and I’m saying, no, stop. Slow down. Like we need to make sure we don’t screw up layer one at all costs no matter what. And maybe what I’m describing is just my fear of not understanding the tech and the proposals, and I’m sure that’s a huge part of it.

[00:21:47] Preston Pysh: But if I was going to argue with myself, I would say, I think a lot of these tech people that are introducing these gee whizz things, don’t have an appreciation for how insanely broke credit markets are and how broke financial fractional reserve banking is in the world right now. So I guess that’s my pitch for agreeing with you that at most five years, 10 years for these soft forks because like it has to be shaken out.

[00:22:15] Preston Pysh: Like whatever we do, we have to make sure that we don’t screw up layer one. That’s all I guess I can say.

[00:22:21] Alexander Leishman: I think we’re aligned and I think where we’re, what, what, how I would describe my take is a soft fork and adding any sort of complexity is, is only merited if it can. If there is a strong argument that this change can make Bitcoin better money, and so, you know, I would say Bitcoin didn’t need to launch being programmatic.

[00:22:45] Alexander Leishman: Like it didn’t need to launch with any scripting or anything like that. That was sort of premature complexity. Satoshi added, and a lot of it was kind of like never really used, kind of just like technical debt that probably shouldn’t be there, but the subset. But he didn’t know what would be used. And it turned out that that flexibility unlocked lightning.

[00:23:06] Alexander Leishman: And I would say that made Bitcoin better money, that is unlocked, you know, the, the ability for Bitcoin to be better money and so what are there other things like that. And that, I think that’s sort of how I think about it.

[00:23:19] Preston Pysh: So let’s go. So after saying all that, let’s talk about AI immediate settlement.

[00:23:25] Preston Pysh: The tasking of resources computer resourcing processing for ai and where this is all heading, where you’d, you really need some type of currency that acts like money in that it immediately settles. It’s a, it’s this instrument that is a bearer instrument that doesn’t exist with fiat and can exist with with fiat.

[00:23:50] Preston Pysh: Talk to us about that and where you think some of this maybe is going in five to 10 years from now.

[00:23:57] Alexander Leishman: An analogy I like to use is when the internet first came out, one way to view it was, oh, it’s a better way to send a message to somebody else. That’s a better way to transmit information to someone else.

[00:24:07] Alexander Leishman: And that would’ve been a very like myopic view of what the internet is like. Yes, that was true. But the second and third order implications of that were beyond what most people imagine. The instant settlement of value and open network that Lightning provides developers and people writing software applications, many of which will be AI enabled.

[00:24:30] Alexander Leishman: The implications of that I think are going to be drastic long term, and I think the jury’s still out into exactly what that looks like. I wrote a paper when I was in grad school, actually about machine to machine economies back in 2015. Positing this idea that intelligent software agents will be economic actors and will transact with each other via Bitcoin over the internet.

[00:24:54] Alexander Leishman: Each sort of optimizing, each sort of like, you know, has its own sort of optimization function. Like what is, what is it trying to accomplish? And I think we’re quite a ways from, from seeing that, from what I can tell. The ai boom we’re seeing is, is very much around sort of LLMs that I haven’t seen sort of this paradigm of them really serving as like long running agents trying to sort of problem solve and like constantly to optimize for any sort of economic objective.

[00:25:23] Alexander Leishman: I don’t know, I, I’m not an AI expert. I’m not deep in it. I have a sort of cursory understanding of the tech, but I haven’t seen anyone build this sort of paradigm yet. I actually think this is an interesting situation where the, the, the tech for transacting value is ahead of the, is ahead of the AI substantially.

[00:25:43] Alexander Leishman: But it’s probably only a matter of time until some developer writes a blog post or, or, or maybe it’s happening now and we just don’t know. But as light, as lightning gets bigger and bigger, and as more and more commerce happens, over lightning, there will be more opportunities for some smart engineer to throw, like run a, run a autonomous like system on a w s that just starts making money on the internet for him.

[00:26:05] Alexander Leishman: And would he tell anybody? I don’t know. No, they would not. So probably, probably not. Right. And then eventually, like people write Twitter threads about how to make money running these things in Aw w Ss once, once other people figure it out. I think the building blocks for actually transacting the value are in place.

[00:26:21] Alexander Leishman: But I think more lightning commerce needs to be enabled. Right? It’s not like there’s, what would that AI even be doing right now, right? Is the question, what would it be doing to make money? I don’t know the answer to that.

[00:26:33] Preston Pysh: It would be interesting. So everybody talks about the Turing test, which you just described, is maybe a better form of a Turing test.

[00:26:42] Preston Pysh: Is some type of artificial intelligence that can create market value and not into perpetuity, but it’s able to create market value and demonstrate that it’s, that it’s smart enough to make money on its own without any input beyond a prompt. Right? I think that’s better than a turing test.

[00:27:03] Alexander Leishman: It’s, yeah. Maybe we’ll call it the, the pitch test or the-

[00:27:06] Preston Pysh: No, you’re the one that came up with it. You’re the one that came up with it, not me. Yeah, because, you know, maybe that’s the definition of intelligence, right? Everybody wants to like pontificate on what they think intelligence is. Maybe that’s the, maybe that’s the test.

[00:27:20] Preston Pysh: Right?

[00:27:21] Alexander Leishman: Interesting. You know, there’s an interesting concept that I’ve, I’ve talked about with some friends. One of my buddies, he, he runs a startup and he flagged this interesting idea to me, this, this thought experiment of the single person, unicorn. One person, like kinda, you have this spectrum of big company with a lot of headcount, making a lot of money on one side of the spectrum.

[00:27:41] Alexander Leishman: And on the other end of the spectrum is, is the the one person unicorn, right? One guy, billion dollar company. You, at some point that’s going to happen, but this is almost like the zero person unicorn, right? Yeah. Yeah. It’s like maybe there’s somebody who like got it started, but like can this, can you give this AI access to, I don’t know, like a, a Google Cloud account and just say, go.

[00:28:03] Alexander Leishman: Or an AWS account and just say, go make money.

[00:28:06] Preston Pysh: Well, the thing that’ll make your mind run wild is okay, so it figures out, let’s say it can figure out how to do this through some product or service. What’s going to stop it from doing it for a different product line or a different service line, and then replicating that a hundred times over.

[00:28:21] Preston Pysh: Well, and, and so when we, when we take this back to Bitcoin, like if something like this would happen, it’s going to be using, the resourcing requests are going to be something that has near zero fees and that’s immediately settling. Like that has to be it. So when we look at Bitcoin relative to everything else, Nothing else is doing this in the manner that it’s doing it.

[00:28:43] Preston Pysh: Correct. Like at, at least not in a decentralized way, which is of primary importance. Right. Like the most important thing. Unbelievable. So how far out do you think something like that could potentially ha I mean that’s a, that’s a question nobody can answer, but it makes your mind run wild, huh?

[00:29:00] Alexander Leishman: Yeah. You know, I think it’s further than people think.

[00:29:03] Alexander Leishman: I would be surprised to see it within 10 years personally. I’ll qualify that with saying I’m not the most, I’m not the deepest expert on these AI systems. I mean, they have come a long way, but I haven’t seen them like show real reason and, and I, and I don’t know, there’s a whole, whole philosophical discussion there, but it seems like we’re quite a ways away from being able to just say, go make money.

[00:29:26] Preston Pysh: So there’s been such a massive leap ’cause I’ve been playing around with GPT for a lot. I was playing around with GPT3 in 3.5, and then when I went to four maybe it’s just me overhyping it, but like I noticed a significant difference in that capability and where I’m using it a lot is really in coding and programming.

[00:29:48] Preston Pysh: So like I run an Enbrel because I don’t have the tech chops to get log into terminal and do all these things, but with GPT four, I’m very comfortable s just stating this. This is the hardware. This is my, my son and I are programming an automatic dog feeder. I have no clue what I’m doing, but I’m using GPT four and it’s helping us out and like I’m just blown away at how well it’s helping me do what I would say are very complex tasks that somebody that would have to have a lot of experience in, in software engineering to be able to walk us so quickly and efficiently through such a process.

[00:30:29] Preston Pysh: Do you think that that quantum leap was just something of the last five years and it’s going to take another five or 10 years till we see another jump like that? Or do you think that we’re going to see continual leaps in ai like we just saw from three to four in a year and a half? Or are we going to see that again in another year and a half?

[00:30:47] Preston Pysh: That GPT five is exponentially better than four? Or are we kind of hitting a plateau there?

[00:30:54] Alexander Leishman: I mean, I think it’s a better at what? It’s a better at what question? I think there’s things that, it’s already way better than Google. Sometimes you just want an answer to a question. Google’s giving you content.

[00:31:05] Alexander Leishman: You don’t want content, you want an answer. For that, I would say it’s already getting better, but for reasoning about new things, things that actually still require sort of a, a first principles understanding of the world and coming to conclusions that you haven’t told it, that haven’t been written somewhere.

[00:31:26] Alexander Leishman: Unclear, unclear. I don’t know how long that takes. I don’t know. Sort of what I think we’re still trying to figure out like what are the fundamental, fundamental limitations of these LLMs and how close to reason can the approach and the architecture of these of these GPT models get? I think it’s really a question of sort of, yeah, it’s TBD.

[00:31:46] Preston Pysh: Alright, so let’s talk about River. So you’ve stood up this monster from nothing, right? Like just from the ground up. What was the original value prop that you had for customers? ’cause I mean, this was, this is a pretty crowded space and you step in and so like, what was, what was your value prop that you went after?

[00:32:10] Alexander Leishman: Started River almost five years ago, and to be totally honest, the original idea, it, it was more of a feeling than an idea at first. The feeling and, and sort of the feeling I was chasing was this void in the market that I saw, which was that Coinbase was what I thought on a trajectory to become the Bitcoin bank of the world.

[00:32:35] Alexander Leishman: And I’m using the word bank here very loosely, right? Just sort of as the best script word. We are not a bank. Coinbase is not a bank. But then Coinbase pivoted. They started adding lots of different cryptocurrencies. They started taking this, they sort of took this philosophical approach that this isn’t about redefining money purely.

[00:32:52] Alexander Leishman: This is about this whole new asset class with lots of different cryptocurrencies, and we’re going to build a way to trade these things and, and, and lean into making this asset class accessible to the world. I very much thought that that was a big mistake, optimizing for short-term value. And short-term returns.

[00:33:13] Alexander Leishman: And I thought that they, they really missed sort of this big picture opportunity out in the distance beyond the cloud, like, you know, behind the fog. Right. But I, I thought that there was, that’s where the amount Everest was. Coinbase sort of veered off to chase this local maximum and sort of the Mount Everest was this building, the Bitcoin bank of the world, like leaning 100% into this idea that Bitcoin and Bitcoin alone is redefining money and entirely new financial institutions are going to be built around this concept.

[00:33:44] Alexander Leishman: And so I didn’t even really know at first what exactly that would look like. And to some extent, we’re still figuring it out. We have a much better idea than we did five years ago. But the first place we decided to start was, We kinda decided to take the Tesla approach, which was Okay. The obvious gap in the market at that time was Coinbase had really bad customer service.

[00:34:04] Preston Pysh: You could have a couple million dollars really bad go,

[00:34:08] Alexander Leishman: You could have a couple million dollars in Coinbase. Yeah. And you still couldn’t get anybody on the phone. Yeah. Or get any help. And that was just like unheard of in traditional financial services. Yeah. If you had a million, if you have a couple million dollars at a bank, they will be calling you, checking in to see how your weekend is.

[00:34:22] Alexander Leishman: The, so, so that was like the obvious first step, which is like start at the high end, build a Bitcoin brokerage where we’re building our brand and reputation around serving the, the sort of elite clients in the United States. Focus on, you know, high LTV customers and a smaller number of them so that we could serve them really well.

[00:34:43] Alexander Leishman: So that was like step one. And then since then, sort of we’ve expanded to more sort of like the broader consumer market, the, the institutional market. A lot of our early clients also run businesses and you know, have, have other legal entities. So now we’re serving, we provide bitcoin brokerage custody and wallet services, and a nice, easy to use app for high net worth mass market and businesses in the United States.

[00:35:09] Alexander Leishman: That, that’s growing very, very quickly. We’re actually seeing all time high monthly transacting clients month over month for the last five months in a row during this bear market. So we’re seeing really nice growth. People are coming to something that’s focused and simpler and and, and leading into, leading into doing Bitcoin really, really well.

[00:35:26] Alexander Leishman: ’cause that’s what at the end of the day, everyone wants. We’re seeing a divergence in sort of crypto trading over here. Your Bitcoin bank is over here and they’re probably not going to be the same thing. Then we also have this enterprise Bitcoin payments infrastructure business that I was talking about earlier.

[00:35:44] Alexander Leishman: So it’s been a very wild ride. It feels like it’s been 15 years, not five years. Everything goes so fast in this industry. We’ve been through probably the equivalent of like two great depressions at this point. So, so yeah, it’s been, it’s, it’s been a fun journey. What are your thoughts?

[00:36:03] Preston Pysh: Going back into the tech a little bit, minis script has really taken off as a talking point in things that people are getting really excited about from a tech standpoint.

[00:36:14] Preston Pysh: Is that something that, first of all, explain Minis script to the audience and then is that something that you guys are thinking about incorporating, using for your wallet or at large there at River?

[00:36:26] Alexander Leishman: Minis script really is, it’s really just a way to, it’s really just a subset and easy way to, to use easier way to use the Bitcoin scripting language.

[00:36:37] Alexander Leishman: The idea behind Minis script is to sort of create this standard way to create more complex constructs in your logic and like wallet logic. So instead of just saying, Hey, you know, you need one signature, or you need two outta three signatures, you can say, You can, you can more easily sort of create a wallet that has custom logic, like you need this signature and this signature, or, you know, a two month delay with just one signature.

[00:37:05] Alexander Leishman: Or you know, like things like that. I think that there’s interesting use cases for this stuff, but my opinion generally as, as an operator is that simplicity is really key and the complexity is the enemy of security. So while these things do have merit and benefit, I don’t think most people should be using like custom scripts.

[00:37:25] Alexander Leishman: I think you’re much more likely to just mess up something complicated and lose your access to your Bitcoin than it is. I think that the increased risk of messing something up is not offset by any sort of increase in security. Usually with that kind of stuff, you know, I think it’s a, and I’m glad to see people sort of trying to do more there, but we don’t have any plans.

[00:37:47] Preston Pysh: As far as like a use case goes, you know, let’s say you have three executives at a company and you have two of three multisig, but you want to make sure that the CEO is at least one of those two signatures. You could use something like Minis script to code that in there so that no matter what the c e o has to sign off on something leaving.

[00:38:06] Preston Pysh: And, I mean, you could take this in many different directions, but just kind of as, as an example for people to kind of conceptualize. In the past 12 to maybe more months, there has been the quote unquote crypto crackdown at all of these large exchanges. Coinbase, Kraken, it doesn’t matter which one you name, they’re feeling the pain of all these lawsuits that the SEC is bringing upon them as a Bitcoin only exchange.

[00:38:35] Preston Pysh: Has this impacted you guys at all? Is it something that you’ve had to spend a lot of? Human capital to deal with. Like, what’s that experience been like for you guys?

[00:38:48] Alexander Leishman: It hasn’t caused us any issues. It just sort of sent more clients our way because Bitcoin is the one thing that, that the SEC said wasn’t security.

[00:38:58] Alexander Leishman: So we just didn’t have any issues. And this is, this is sort of another sort of, one more example of why running a Bitcoin, why we run a Bitcoin only business. At first, when we were starting, a lot of investors didn’t really understand like. Isn’t it just worse to not have more coins? Like why would you just want Bitcoin?

[00:39:14] Alexander Leishman: And it’s becoming increasingly clear, like supporting a multi coin operation is, you know, there’s revenue benefits ’cause people like trading this long tail of assets. But it’s a huge doss on your time. It adds a ton of complexity, not just to your product, not just to your engineering, but also to your legal posture, your regulatory posture, which has ripple effects across the entire business.

[00:39:38] Alexander Leishman: And so those are problems we completely avoided, thankfully.

[00:39:42] Preston Pysh: So you can focus your time on the stuff that’s important and provide a better, yeah. That’s awesome. Walk us through the, the incentives on the mining piece. So you guys offer, and I was looking at this on your site, and is the pitch for doing the mining it just to lower your vol as a, as a user, as a person that would be paying for that, that you’re kind of removing the volatility of the, of the Bitcoin price by, by mining.

[00:40:08] Alexander Leishman: So yeah, there’s a few ways to think about Bitcoin mining. Our hosted mining product allows you to easily buy Bitcoin miners that get hosted in a co-location facility and then the Bitcoin gets mined to your account every day. You’re the owner of that machine. A lot of the people mining with River are actually optimizing for dollar returns.

[00:40:26] Alexander Leishman: That’s how they’re doing the math. We have, we have people mining who never even bought Bitcoin, which is interesting, but a lot of people have as well. And it’s, the way I would describe it is it’s just at a different point on the risk return curve. You’re making a different bet. There’s different variables than buying spot Bitcoin.

[00:40:43] Alexander Leishman: And so what I typically would tell people is if you’re just optimizing for like growing your Bitcoin stack, the simplest thing to do is just buy some Bitcoin or set up a dollar cost average. But if you’re looking to sort of diversify, sort of on the, that, that risk return curve, you, you, you’re sort of making some betts on different variables such as difficulty, maybe even geopolitical betts, right?

[00:41:04] Alexander Leishman: If there’s something that happens with, like Taiwan and silicon manufacturing gets, you know, restricted, then there won’t be more miners produced. And like there’s, so there’s a whole sort of another world of, of betts you can be making with a mining investment. It’s not guaranteed to want a Bitcoin denominated return, outperform buying spot.

[00:41:25] Alexander Leishman: But there are interesting points in that risk return curve where, for example, the Bitcoin price theoretically could stay flat and you could have an ROI mining but not buying spot. Those are, those are the sort of dynamics that a lot of mining clients find interesting.

[00:41:40] Preston Pysh: So Alex, this is the part of the show that I’ve been looking forward to most.

[00:41:45] Preston Pysh: Because you don’t know what’s, what’s coming here. So the last time I had dinner with you, I was with Andy Pitt, and after Andy and I walked outta the restaurant, I said to Andy, I said, that guy’s a silent killer. And she goes, what’s a silent killer? I said, oh, in the military, it’s like this saying that it’s a person who just like crushes it but doesn’t have to go around telling everybody that they’re, that they’re crushing it.

[00:42:08] Preston Pysh: And so she, she was laughing, but. You’re introverted, you’re an introvert. I don’t know if you’re comfortable with me saying that, but like you’re, you’re just, you’re quiet and but, but you are extremely technical. Competence is just way out there. And so I just want to have a little fun here and I’m just going to ask you some personal questions and so stuff that really doesn’t have anything to do with Bitcoin.

[00:42:31] Preston Pysh: Because I think it’d be fun and I think that people need to get to know you better. Here’s my first one. What’s your favorite thing to talk about when you’re not talking about bitcoin? Probably history.

[00:42:42] Alexander Leishman: Okay. I love talking about history and learning about history. Anything in particular? You know, it, it, it changes, it depends on who I’m talking with.

[00:42:50] Alexander Leishman: I think one of my favorite conversations recently was with a group of Puerto Rican friends late into the night talking about Puerto Rican history and Puerto Rican independents and learning about their views on, on, like that, that thing. And so, you know, I love other cultures. I love other groups of people.

[00:43:06] Alexander Leishman: I love learning about how other people think. And yeah, I, I love like sort of seeing the world and learning about learning about all that stuff.

[00:43:14] Preston Pysh: So what’s one of the most, what’s one of the most interesting or fascinating places you visited Myanmar?

[00:43:20] Alexander Leishman: It was a very interesting place. I visited Myanmar in 2013, I think it was.

[00:43:25] Alexander Leishman: And it was like right after they just got ATMs in the country for the first time. And it was one of the, one of the most different places I’ve ever been. It was extremely religious, but in a Buddhist way. I had never like seen like a sort of dogmatic Buddhist country before and it was, it was like really fascinating and very traditional, sort of untouched by a lot of Western culture.

[00:43:48] Alexander Leishman: Very fascinating history. Obviously having some issues at the moment, but I really enjoyed that country.

[00:43:53] Preston Pysh: What’s your favorite outdoor activity?

[00:43:56] Alexander Leishman: Running. Running out in the park, like I would say running, and I’m sort of just like not naturally a good runner. That’s for my body type, you know? My best friend is like an extremely strong, like powerlifter who hates running.

[00:44:08] Alexander Leishman: I’m like the opposite. Like I, I can’t lift nearly as much as him, but I can run for miles. I would say running and then just chilling in the park with friends. I, I love that touching grass.

[00:44:20] Preston Pysh: Something that’s really underrated in your opinion.

[00:44:23] Alexander Leishman: I, I think if this is one of those, if you know, you know, Uruguay, Uruguay is an underrated country.

[00:44:31] Alexander Leishman: It is an extremely beautiful and pleasant place to visit with a great culture. The way I would describe it is it’s like Argentina, but without all of the sort of political and economic problems. It’s not as sort of like widely and sort of like party friendly as Argentina, but it has a lot of that. It’s also summer there when it’s winter in the Northern Hemisphere.

[00:44:54] Alexander Leishman: So if you’re looking for a good place to just sort of get some fresh air, spend time on the beach and be in an extremely pleasant culture with very respectful people in a family oriented place with amazing food, Uruguay.

[00:45:09] Preston Pysh: I love it. Alright. Favorite TV show of all time?

[00:45:14] Alexander Leishman: Okay, that’s a good one. Oh, Fauda.

[00:45:18] Preston Pysh: What? I never.

[00:45:20] Alexander Leishman: It was a Netflix show. It’s like a, it’s an elite special forces team in Israel and it’s sort of, it captures sort of like the, the Israeli Palestinian conflict through this like really tight knit team. Oh, okay. That does like special ops and I, it’s just an extremely well done show.

[00:45:39] Preston Pysh: Alright. Favorite book?

[00:45:40] Preston Pysh: This is the last one. Favorite book.

[00:45:43] Alexander Leishman: This is going to be kind of weird one, I, you know, there’s so many books I love, but one that just I think has so many fond memories for me. ’cause my dad read it to me when I was a kid, was the Richest Man in Babylon. It’s a short book. It’s like a series of stories based in ancient Babylon teaching you the principles of saving and, and money.

[00:46:04] Alexander Leishman: And I just have very fun memories of that book.

[00:46:07] Preston Pysh: Huh, interesting. Alex, this has been a blast. Is there anything that you want to highlight to the Bitcoin community that you think is important? And it could be. It could be anything.

[00:46:19] Alexander Leishman: I think Matt Odel has the best stay, humble and stack sets. Yes, we have a long road ahead of us.

[00:46:24] Alexander Leishman: Bitcoin is by no means guaranteed to win. You have a lot of work to do and we’re still very, very early on this journey. And it’s important to, it’s important to keep that in mind.

[00:46:35] Preston Pysh: I love that. So Alex, we’re going to have links in the show notes. You’re active on Twitter. River.com if people want to check out your company.

[00:46:44] Preston Pysh: Anything else that you want to highlight?

[00:46:46] Alexander Leishman: Nope. No, that’s it.

[00:46:48] Preston Pysh: Alright, well we’ll have that in the show notes and thank you so much for your time. It has been a pleasure to get to know you over the past six months where we’ve had a lot more interactions, Alex and just really admire your contributions to the space, your intellectual thinking.

[00:47:05] Preston Pysh: And just making time to come on the show, so thank you so much.

[00:47:08] Alexander Leishman: Thanks for having me on, Preston.

[00:47:10] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm.

[00:47:23] Preston Pysh: So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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