Kind: captions
Language: en
Crypto is eating the last big part of
the world which is finance. No human can
comprehend it. The reason why America
has been so successful is that we end up
building things faster than anyone else.
Do you think that crypto will completely
replace fiat? [music]
>> Our government is aging. I think the
Democrat uh leadership kind of shot
themselves in the foot with crypto.
>> What does the future of finance look
like?
>> I'm a super optimist. I think if all our
problems are [music] money problems,
we're truly blessed. Wow.
So you have said that crypto will win
against traditional finance but I want
to know why. What is it about crypto
that's better for the average person
today?
>> The the basic reason is that a lot of
the kind of growth over the last you
know I think since the 80s been software
eating the world. Um I think this is a
Mark and Dre line and you kind of see
technology as it improves start to
automate more and more pieces of what we
do um with like humans and fax machines
and and stuff like this. Um, and crypto
is eating the last part, I think, of the
the last big part of the world, which is
finance. And finance has been really,
really hard to replace with software
because there's just so much trust baked
into finance. Like, if you actually kind
of go through the process, anyone that's
been through the process of buying a
house, you get all the work that people
have done legally to make that as
trustless as possible.
You see that in the, you know, eight,
you know, 800 pages of disclosures that
you read and no human can comprehend it,
right? There's just no way to consume
that information and make a rational
decision. So, you trust the people in
the process, the brokers, the dealers,
etc. to kind of not screw you over. And
we have laws and stuff to kind of keep
everyone in line, but because of that,
it's really expensive. Um the cool thing
about blockchain and crypto is that you
can start replacing some of those pieces
with software and cryptography because
we have mathematical guarantees that you
cannot violate the um the cryptography
portion. So you can trust that
particular thing. Um it's still a really
slow and hard process because we still
have humans writing the software and
that software is going to have bugs and
and stuff like that and you see that
come out as you know big hacks in DeFi
and stuff like that. But I think uh
slowly but surely you'll start seeing
people replace their back office and
kind of all the stuff that they do
that's expensive that some person that
is doing a job can charge 20 basis
points can now be done with software.
It'll get switched over.
>> I've heard you talk about the current
way that the financial system works is
basically like a regressive tax on the
entire economy. What do you mean by that
and how would crypto solve that? Yeah.
So, um, my engineering brain like think
of it as roads. Like if you have roads
with potholes and tolls that that are
expensive, it that that's a cost that's
paid by by everybody in that, you know,
economy. Like the cars wear down faster.
You got to spend more gas because the
roads are inefficient, stuff like this.
And when you straighten everything out
and remove all the potholes, you remove
that tax on the economy. So you're
paying less less of that tax in every
transaction that you do.
>> If you were going to remove the analogy
and just say like these are the beats
that create the expense or the friction
or whatever like what are the actual
potholes?
>> Yeah. Basically anytime like especially
if you ever bought a house there's
always somebody that for every little
fee and every person that you interact
with they charge some percentage of the
sale of the house. They're doing the
same amount of work no matter what.
Right? This is kind of a that little
pothole or whatever that an expensive
truck full of expensive items drives
over. That's a cost that those items pay
and that cost is borne by the whole
economy. Um so can we replace those with
software and I think the stable coin is
kind of the easiest product to
understand. um you have
an a ledger, right, that represents
money in some bank account that has been
invested in treasuries and then you have
a digital representation of that that
anybody can transfer on a blockchain
like Salana or Ethereum and the cost to
transfer that doesn't require you to
pass that those funds through some
intermediary like you have with uh a
credit card payment that has to go
through the credit card issuer Visa or
the transfer of whatever agent, the
Visa, then the credit card issuer, the
credit issuer, the bank, then the
receiving bank, then the actual
merchants account, those all those
little hops somebody charges a fee for.
>> But on a blockchain, you've kind of
virtualized all of that and replaced it
with software where I can send you a
token. The cost to send that token is
the cost to move memory around in a
bunch of computers. And blockchains are
excruciatingly inefficient computers,
right? We're talking about like doing
the same computation tens of thousands
of times over and over to give you those
guarantees that nothing can go wrong.
>> Um, but even though that is the most
expensive computer ever built, it is
thousands of times cheaper than humans
or tr agents that can charge a spread on
trust and stuff like that. A very
specific example, we launched a phone
seeker and made it available everywhere
in the world and we had an option for
credit cards or stable coins without any
incentive, same price. And about half
the people picked uh the stable coin
option to buy this phone. It's 500
bucks.
>> And we sold like 150,000 of them. So
it's roughly $40 million through both
channels, credit cards and stable coins.
As a merchant, we had to pay a fee on
the credit cards about 2%.
>> And that we didn't have to pay that fee
on the stable coin part. And we got the
stable coin funds immediately. We were
able to use them immediately. On the
credit cards, we had to wait 60 to 90
days before we actually got the funds in
our bank account. So that 90 days is a
cost. The 2% is a cost. And with the
stable coins, we literally had the funds
and we could use them immediately to pay
salaries and to go build the phones and
stuff like that. So that's a very clear
example of inefficiencies that just for
that one small kind of phone launch uh
added up to like several several
engineering salaries. That's like three
people's salaries that I could have paid
that I could paid for. Right? So we have
essentially a system that's made before
the internet. [snorts] uh a system that
overcame trust by essentially building
all this human infrastructure around it
and everybody just sort of holds their
nose and goes I'm going to trust the
credit card companies or I'm going to
trust the escrow or whatever uh to get
these things through. So assuming that
we can solve the trust problem and
people on mass really either become
completely agnostic and the companies
just integrate blockchain techn Yeah. So
you don't have to trust blockchain
because you can verify it. And this is
the the bene the reason why it's slowly
overcoming traditional finance is that
you're not replacing it with I got to
trust Joe at you know Bank of America
and now I'm trusting Vitalic at
Ethereum. No, you can verify the that
Ethereum or Salana work from the
software itself because the software is
open source. You can go download it
yourself. Now, vast majority of people
are not going to do that. But you have a
business that wants to compete with
those other kind of middlemen and wants
to cut them out and create a service
that's cheaper and faster. They can
verify that Salana is open source
software and they get the what exactly
what they get out of it, what they
expect. So somebody like Circle can
issue a stable coin on top of Salana
without trusting me or anyone else. And
this is how that that replacement of
trust of humans to software ends up
benefiting consumers. Um so we as a
merchant you know I ironically built the
built the protocol initially and now I'm
using it for the its intended purposes
right. So me as a merchant I could use
circle and know exactly that I'm getting
that I'm getting digital dollars without
paying all these intermediaries.
>> Okay. The reason I say there's probably
still a trust element or the reason I
believe there is a an aggressive trust
element is just
uh science doesn't advance one insight
at a time, it advances one funeral at a
time. People tend to get so locked into
their frame of reference, their way of
life that something new is just like I
don't know how it works, I don't
understand it. And so people are some
will just not do it because they don't
understand it. And so even if it's like
hey this system doesn't even require you
to trust it, they still need to trust
that it doesn't require trust if you see
what I Absolutely.
>> So, we'll have some of that, but
assuming that we can overcome that, do
you think that crypto on a nearishterm
timeline will completely replace fiat?
>> Um, so if you have a business and you
employ somebody to write a check and to
put it in a mail into the mail and send
it out, you're never going to replace
that person because this is just too
much risk, right? You've already paid
for them to to do that job. And finance
is one of those things you just as a
business owner, you just never want it
to break,
>> right? The cost is like a pain in the
butt, but you just never want to touch
it. So that process is like you said,
one funeral at a time. [laughter]
It's going to take some time for these
things to kind of to move. And the other
part of it is that much like the
internet, I don't know, I had I think a
very interesting experience with it
because I arrived to the states in like
91 and my neither me or my parents
understood computers at all, right? Like
so because I was young, I immediately
like my mind was very much malleable and
I immediately like adopted it. like I
was on chats as soon as my parents got
me a computer and you know playing
online games and whatever trying to
figure out IRC and stuff like that.
[laughter]
My parents didn't understand any of it
because to them it was very alien and
the idea that a link points to a
document that goes to a different server
domains and all this stuff just took
took him a very long time to build that
mental model that the web exists and how
it works. I think the same problem with
crypto is that you have mathematical
cryptography that is really hard to
understand and then it's hard to build a
mental model around it that this secret
seed phrase that you keep is like cannot
be broken with atomic bombs, right? Like
it is something that guarantees
ownership and trust. And what a public
decentralized ledger means is very
similar to like how your county keeps
track of who owns the house, right? All
those mental models for people to build
will take time to wrap their head
around. I think kids and stuff like
immediately get NFDs. And I don't know
if you ever played Ultima Online. This
was like one of the first it
[snorts]
>> I was I like my first experience with
crypto I would say was Ultima Online
because I would I wrote like some very
dumb Visual Basic scripts to mine to go
farm um wood and stuff like that and
then I would sell it on eBay.
>> [laughter]
>> That's so wild.
>> For like cashier's checks. Those were
like those those were digital currencies
>> like late '9s.
>> That's hysterical. [laughter] Selling it
on eBay
>> like whatever platform or C channel or
whatever it find like eventually on
eBay. [laughter]
>> That's pretty funny.
>> Interesting. We'll get back to the show
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Now, let's get back to the show.
>> Yes, maybe replaces fiat, but one
funeral at a time. So, not something
that is going to happen overnight. Um,
but right now, stable coins is like a
big deal in when you start talking
politically, people are really talking
about, hey, we got to get stable coins.
What do you have like a piffy breakdown
of what a stable coin is and why they
matter so much?
>> Yeah, stable coin is uh a bare asset.
Um, which means that it's stuff that you
own. Like it if you lose it, it's gone.
So this is something that is very
different from a bank account where you
can never lose it because the bank holds
your money. They owe it to you, right?
As a you effectively kind of lending it
to the bank. But if you own a a stable
coin, if you lose it, it's gone.
Nobody's going to recover it. So it's
kind of like old school stock
certificates that you put in your safe
deposit. If it burns down, those things
are gone.
>> Yeah.
>> So that's a very different ownership
model. But um the reason why you can
implement it now is because of
cryptography and all these all these
things that blockchains provide. Um and
the reason why you can lower the cost
now is because since you own it, when
you transfer to somebody else, that's a
peer-to-peer transaction. There's no
third party. So when you transfer it,
you have full guarantees that you
received it because of the cryptography
and blockchain. So the problems that we
had with those original stock
certificates are all gone in a similar
way that you know e-commerce in the '9s
added SSL and everyone started seeing
that cryptographic lock symbol and they
knew that their credit card is not going
to be stolen.
>> When I transfer you a token you have
full guarantee from cryptography the
same exact guarantees as you do with
like e-commerce. you can see that this
particular token that I transferred to
you was issued by Circle and you have
full control over it. So now you know
that digital dollars that Circle is
selling right um are now under your
control. Um
>> now why does the Trump admin for
instance why do they care so much about
this? Um, obviously
>> I think uh politically it was probably
just this weird environment where
this is I hope I'm not going to get in
trouble. My [laughter]
there's [clears throat] like kind of
similar problem with like people
adopting technology like my parents in
the '9s. I think our government is
aging, right? Like we have this kind of
entrenched problem where it one once the
the Senate moves forward one death at a
time, one retirement at a time.
>> Not exactly spring chickens.
>> Yeah. So there's just a lot of really
old people that don't understand it. And
for whatever reason right now in the
generation that we live in, Republicans
are younger. So they see this.
>> That's interesting.
>> They see a technology, they get it more,
they see the benefits of it. and they're
kind of more adapt uh like kind of they
truly I think more believe in that um
people can solve their own problems
given the tools and they see it as a
tool to solve problems. They don't care
that it competes with banks and I think
the old school Democrats Warren and
stuff like that are one getting old so
they don't it's takes them a long time
to understand any anything new
>> and two it disrupts the uh how they
control the systems that they've built
up um through the banking regulation and
all this other stuff. So they don't want
to disrupt it. They see it as like
reducing power. Um this is kind of my
theory. So you saw a lot of kind of this
adversarial
uh behavior from the previous
administration towards crypto and the
crypto people are like why like this
like if you own a stable coin on Salana
it takes it's a redeemable 10 cent fee
to open an account effectively no bank
offers you that [laughter]
you you it's just you're paying for
memory storage in all these computers
and there's no overdraft fees there's no
fees at all right so this is a net
benefit to consumer and it's not through
regulation where banks will find every
which way to like bypass the regulation
and find a loophole to charge people
fees. It's by design like it is
impossible for the chain to start
charging fees or or doing some something
that like through some weird loophole.
So it should be a net benefit to
consumers but there was this massive
resistance on the democratic side and
just like in a dynamic system like I
think vast majority of founders were a
fairly liberal and were probably not
Republicans or ever would talk to
Republicans
[laughter] just simply because one side
was so against this like thing that
we're building and us as engineers see
it as a net benefit. Um they were like
what the hell [laughter] man.
I think that shifted uh kind of I don't
know huge foot gun that I think the
Democrat uh leadership kind of shot
themselves in the foot with crypto.
>> How much of especially because as we're
recording this you've got the revolution
potential revolution going on in Iran.
There's a whole sense uh for some people
that like power to the people is a big
deal. It's something that if you're
Iranian some are willing to die for just
to be able to control their own destiny.
How much of that is inherent in the
engineers that are building crypto where
it's like no no no I want to get the
power away from the bankers. I want to
put it in people's hands. Like is there
some of that or is this an engineering
challenge purely about efficiency? I
think uh vast majority of crypto people
that I that I've talked to are fairly
libertarian and kind of believe that um
contestable markets are like the best
way to um deliver the most goods and
services to consumers. So like I think
at our heart
>> contestable market meaning uh there's
competition.
>> Yeah. like you you want to like
eliminate points where um this is
probably the biggest kind of if you're
deep into the crypto nerd uh trenches
the hardest problem right now is called
MEV uh which is
>> math ma
>> mev meuh okay like math I've heard of
math
>> maximally extractable value
>> so finding like points in these systems
where um if you if you operate in that
in that whatever part of the stack that
you can maximize how much value you can
extract because you have a uncontestable
market. There's no way for somebody to
use something else. So all the crypto
people I feel like from an engineering
point of view are against any kind of uh
unnatural monopolies or natural
monopolies. And so the view is the
current financial system has a horrific
me
>> and you see that right now like with the
banking lobbyists fighting the stable
coin regulation because they don't want
stable coins to to give uh consumers
rewards.
>> So you have this uh
>> wait I don't understand why.
>> Well if you deposit money in a bank
what's the savings rate that they give
you right now?
>> Low
>> like half of a percent maybe. But the
treasury yield when they take that
deposit and they put it in the in
treasuries is 5%.
>> So that difference the spread your
dollar [laughter]
>> they're paying you half of a percent
they're getting 5% right is it's an
astronomical 100x difference
>> in any kind of contestable market
>> that would be impossible. There's just
no way that the that wouldn't compress.
So when people are giving rewards,
they're basically saying, "Hold on a
second. I can beat the legacy system
simply by doing the same trick
>> but actually giving some of the benefits
back to the customer."
>> Exactly. I mean, like to grow your
stable coin business, you would offer m
the maximum reward you can. Maybe it's
not 5% because you still got to pay for,
you know, operations and whatever, but
it's four.
>> And then that shrinks the margins in in
the banks.
>> Very interesting. I have a growing
distrust of banks. my audience will be
well familiar with uh where I fall in
all this but okay so um basically in one
of the reasons that there's resistance
to this is these guys are just using
traditional business principles of like
I'm going to outperform my competitors
by giving a benefit to the customer and
one of the ways they're doing that is
just taking a smaller margin y
>> on the differential
>> that's the whole point of capitalism
>> very straightforward yes
>> it's very simple
>> yeah [laughter] okay so
>> somebody's profit is my opportunity
Right? Like as soon as as soon as I can
build something that is a competitive
product for less,
>> that's my incentive to go do it. And
vast majority of time as as soon as you
remove the friction for pe for people to
solve their own problems, they will
solve them.
>> So as an engineer, are you looking at
this and going I don't understand why
the rate of adoption isn't even faster
or is there a not a gotcha but like a
thing you get sort of why people aren't
moving on it? the benefit to consumers
is really small. Like you as a you're
you're most people are gotten so lazy
that they don't want to pay for c with
cash over credit cards even if the
merchant offers them a 2% rebate, right?
Like
>> and that 2% is just not enough to change
behavior. So we have so we have these
kind of like
>> um even if the markets are contestable,
people's behaviors have gotten so lazy
that they're not um they're not
incentivized enough to go make the
switch.
>> But it's a pretty big deal on the
savings side. Like if you think about
wait I could be getting 4% of my money
instead of 0.5% of my money. I get the
the sort of 2% on a transaction. Uh but
likeoo
>> you start talking about savings. So I'm,
you know, and to me like I'm totally
fine with that. Like I think if you've
built a product that is so convenient
that people are willing to pay the
spread, that's great. It means that
you've eased people's lives, right? Like
it is uh it is like a lot of work to
keep track of the minutia of finances
for humans. And if you like fine, I'll
pay more to do less. That means I can
spend most of my time doing something
else that I enjoy scrolling Tik Tok or
whatever. [laughter]
But at least like at least people are
making the choice to do that and there
is an opportunity for a merchant to go
fight him on it. Um what it obviously
like really irks me is when that
opportunity is taken away. Like a
merchant should be able to with a stable
coin to incentivize their consumers to
go use that stable coin for purchases.
And maybe that's not going to be just a
2% price difference, but an exclusive
product that is like the only way you
can get this particular product is if
you use, you know, a stable coin. That's
a way to start people to change
behaviors. And a merchant is really
incentivized to do that because 2% is on
their topline number that they sell,
right? We sold a $500 phone. We pay 2%
on the 500 bucks. But that's not our
profit margin. Our profit margin is $50,
[laughter]
right?
If if you've ever run a business, right,
you know exactly the difference between
uh your like your bomb or like your your
cost of components and what you can sell
for. [laughter]
>> For sure.
>> Yeah. So that that becomes actually a
huge incentive and merchants are I think
well positioned to do that and I think
it would be a shame if it was they were
legally not allowed to compete.
>> Yeah, agreed. And certainly uh there for
a while we weren't driving people
offshore, stifling innovation. It's
interesting. I never thought about um
the Republicans simply being younger
than Democrats. But I look at let's say
David Saxs who's a cryptosar. He's I
think even a little bit older than me.
So certainly not a super young guy.
>> No, none of them are spring as old as a
bag of dirt. So
>> look look look at the congressmen and
senators and you start seeing like an
age difference and I'm like okay this is
kind of we're blessed to at least have
two parties where there is competition.
>> It's interesting. So when I look at
them, so the thesis that I came up with
was very much more along the lines of
okay uh they tend to be though not now
historically speaking Republicans were
uh let's put the power in the hands of
the people, keep government small, let's
be fiscally responsible. Again, I am
hyper aware that they are not currently
fiscally responsible at all. Uh and so
my map was oh we see an opportunity here
to we've got a debt problem and we're
going to leverage stable coins to create
appetite for US debt by creating a
regulation that says you can do a stable
coin but so that we avoid any sort of
rugpull that you've got to have a
provable one to one backed like if
you've got a dollar's worth of stable
coins you've got a dollars worth of
treasuries sitting on the balance sheet
that's not comingled with anything and
so
>> yeah and that that is the right way to
do it and that that's basically like I
think Um, this what the Genius Sack
does. I think it's it's a like a really
good build overall.
>> If you were going to grade David Sachs
on what he's done so far, where would
you put him?
>> Um, probably A+. Like I think Yeah, I
think
>> given the the really hard challenging
problems that he's working on. I think
they've done the maximum amount they
can. I think market structure is just is
really complicated. I'm hoping they pass
it this year, but we'll see.
>> Market structure. What's that?
>> Digital dollars. I think everybody can
understand and grasp and that the fact
that everybody wants dollars outside of
the US to transact like literally a
merchant in Argentina will pay their
supplier in China using USDT
>> because it's the most convenient for
both of them. [laughter]
>> That's great. And that creates demand
for for treasuries and we need a lot of
demand for treasuries because our
deficits are so huge. So,
>> so barring the Congress cutting
spending, I think we [snorts] got to
like figure out all the all the possible
ways that we can incentivize people to
buy our debt. Um, so I think that part
is great. The other part of it is for
securities, if you think about when how
the securities law came to be, there was
this massive railroad boom in the late
19th century. and your neighbor would be
like, "Hey, buy my railroad certificate
[laughter]
and it was a piece of paper." And when
you bought it, you had no idea that the
railroad company existed, that they were
actually building any railroads
>> or you weren't like all those all those
things could fail in all the possible
ways you imagine, right? Somebody could
create a fake certificate, somebody
could create a fake railroad company or
buy, you know, sell a bunch of stock and
never spend it on actually building any
railroads, stuff like this. Mhm.
>> So
in that free-for-all that led to kind of
the failures in in 1929 and a lot of
laws came about with the securities act
to prevent that from happening. And the
way they're designed is they separate a
lot of those functions. Broker dealers,
transfer agents, the issuer, all those
things are different people. Much like
when you buy a house, you have different
people that do all the all the different
parts of the transaction. And the reason
for separating them is that
hopefully if one of them is honest in
this chain that they catch the bugs of
the other one or the the fraud that any
anyone else could do and they can
surface that and you don't end up with a
bad transaction and they report them and
the bad guys go to jail. That actually
works really well. US I think is the
best financial system that's been built
in in the world but has been built in
that time before the internet. Um, so
much like what with e-commerce when we
built like just cryptography SSL so you
can pass a credit card through the
internet without it being stolen. when I
transfer a certificate to you that's a
token you actually full have full
cryptographic guarantees that some
company you know SpaceX hopefully one
day issued a token as their stock on
Salana and when you receive it you know
exactly that it was issued by SpaceX
because there's a cryptographic chain
from the token when you receive it all
the way to the issuer you can validate
the certificates your browser should be
doing it for you so all of that
effectively becomes cryptographically
verified. So all those middle guys,
transfer agent, brokers, all those
things can go away. Um this is
effectively what market structure is
trying to resolve. That tension of all
these people that are existing
businesses and making money [laughter]
and are part of this very successful
financial system um can be replaced with
something that's cheaper and faster and
that's a good thing. Uh but we need to
do it in a way that doesn't create
loopholes for people to take advantage
and and kind of start doing the stuff
that was happening before 1929.
>> Okay. It's just really complicated to to
merge those two. It's it's a regulation
or they're trying to deregulate
essentially in a sensible fashion away
from the old
>> um create like a path for the new to
have the same level playing field uh as
the as the old
>> because right now there's some
regulation tied to that era that trips
up.
>> Yeah. There's rules that just don't make
sense. Like if I transfer this token to
you, there is no transfer agent or
broker dealer. You you actually received
it like as if I gave you a physical
stock certificate. But legally they're
supposed to be. Got it. Got it. So
they're essentially forcing a middleman
into the scenario which 100 years ago
made sense but today not so much.
>> Got it. And undermines the entire
advantage of the current system. Okay.
The big thing. So um I'm very invested
in crypto both from uh things that I'm
building. It's integrated into our video
game to being as an investor. It's
something I'm heavily invested in. And I
have anxiety around the social
engineering part of all this. You were
talking about look, this is a different
kind of ownership.
>> You've got this stable coin. If you lose
it, that's that game over.
>> Um, do you see that as a critical part
that's going to need to be solved before
we get mass adoption?
>> Yeah. And this is I think uh part of I
think Shroudfy as well. Like I think the
the biggest spend they have on security
right now is effectively um um identity
fraud. Like people stealing your credit
card and spending it somewhere else or
pretending to be you and and like
applying for credit and all of this
>> and that's nightmarish. However, because
I've had it happen to me, you can call
the bank and be like, "Nope, that that's
fraud." And they'll for the most part
back it out. And so you want to talk
about something that's worth 2% of the
transactions. that one feels worth the
2% of the transactions. Do you just see
that as an opportunity for this? And in
fact, let me let me paint a picture
really quick for anybody that's gotten
this far, but they're pretty new to
crypto. Um, one of the big anxieties
that people have is that um you're now
in the digital world, so you're clicking
on links. Is that link real? Is that
being spoofed? Was that email that
reached out to me sending me the link
one letter off from the actual person
that I'm expecting it to be? Is the
person in Discord actually who they say
they are? Are they just spoofing that
person? And so there's like feels like a
thousand ways that people can get you to
do a thing that is technologically
sound,
>> but like they've moved you through
what's known as social engineering over
to clicking the wrong link or giving
them access to your computer or god
knows what because there's no banking
infrastructure. It's just scammer versus
you. And if you're tired and not paying
attention one day and you click a link,
like the number of people that I've seen
get like their NFTs just cleared out of
their wallet. Oh, it's terrifying. And
so I'm relatively sophisticated with
this stuff. And I live in a constant
state of paranoia. And so I'm just like,
will somebody please solve that problem?
So this is where I think uh crypto
adoption will probably be faster outside
of the US is because interesting
>> you have like you have all this
investment in that's paying for with a
two with a 2% fee that everyone's
willing to pay out of a convenience to
basically solve this problem in trady
and it's also being solved in parallel
in crypto without the 2% fee. So you're
saying because of this legislation
that's still slowing us down, people are
solving it. But
>> no, I think the the problem is that the
marginal improvement over the existing
system in the US is minimal to
consumers, but outside of the US
>> where it's a bigger pain point.
>> You don't have these
>> banks and third parties that are
effectively very trusted. Like I I
effectively trust my bank, right? Like I
mean
>> stuff will happen, but for the va v vast
majority of people, you're right. like
they actually have better UX and safety
out of the traditional financial system.
But outside of the US, they don't have
those traditional financial systems that
they can trust.
>> Like it's no way you can do that in
Ukraine or anywhere else or like half of
Eastern Europe, even if it's part of the
EU still. [laughter]
>> Wow, that's wild.
>> Right. So you you're much much better
off actually using um the tools that
people are building to prevent all of
the same fishing attacks but on top of
crypto rails. Uh people there's a ton of
investment in that like wallets are
becoming more sophisticated and
identifying links and responding to
fishing scams and all this stuff just
like in Trafi. M
>> um so I think you're going to see that
adoption grow much faster outside of the
US and especially cross border where
that really like that trust that you
have with a bank doesn't actually work
as soon as you go across borders you do
something in Mexico or vice versa um it
becomes much much harder to reverse that
transaction once the money's gone. We'll
get back to the show in a second, but
first let's talk about getting the most
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Head to bevel.healthact
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first month free. That's I think a good
primer for people about where we are,
why this is um on a long enough timeline
seems pretty self-evident that it will
win. Less friction, it's cheaper if you
grow up with it. You're not going to be
weird about the transition. You're just
going to go with it. Um, also you can
take the upside instead of the bank
capturing the upside of loaning your
money. Um, what does the future of
finance look like? So, in a world where
I think you said in 2026 that we're
going to see something like a trillion
dollars in stable coins.
>> Basically, I think the you're going to
go from 1 trillion to 10 much faster
than from 0 to one.
>> And I I think that part's inevitable.
Like I I think the growth of stable
coins is is is
like growing I think faster than anyone
expected. Um I think we're at like 300
billion I think issued already. Um and 1
trillion to me is like an astronomical
number. Like it's hard for me to imagine
but that means that all these funds are
effectively digitally available in all
these public permissionless blockchains.
So this is where you start seeing that
inflection point where in the internet
to me in the late 90s you kind of went
from um 6° to frontster and all those
people were kind of experimenting with
hyperconnection of humans and that was
happening right when we hit that 500
million people on the internet mark that
were active like internet users. So as
you start seeing like one trillion, you
know, we hit that one trillion number in
digital dollars, you can build a very
scalable business that with hundreds of
millions of revenues a year on top of
crypto rails alone. And that's a similar
moment inflection moment where
cryptonative businesses will just not
even think about trad.
>> Okay.
>> So, it's a weird world to think about.
There's no way I could have predicted
Facebook in the '9s that it would be
such a huge, you know, thing and own no
assets at all, right? Like Facebook is
just a social graph in fact, [laughter]
right? Like it's just data.
>> Yeah. So,
>> who would have thought the data would be
so useful?
>> Yeah.
>> So monetizable. That's the wild thing.
>> Um, yeah, it's interesting. I had, do
you know Brian Johnson of Do Not Die
Fame or Don't Die Fame? Yeah.
>> The super optimizer. I had him on the
show. I mean, this has got to be eight
or nine years ago.
>> And that was what we talked about. We
didn't talk about not dying. We didn't
talk about AI. We talked about him
saying that data was like a right and
people needed to own their own data. And
I remember thinking, what? Like, why do
we even want to talk about this? And
obviously that ends up being like this
super insanely impactful thing. So when
I look at this um the sort of data idea
that I see maybe years ahead of other
people just because I've the more I've
researched money and finance the more
angry that I've gotten. So my background
to speedrun I told you a little bit
about it. Did not grow up with money.
Came into wealth through
entrepreneurship. Uh in that transition
realized I knew how to make money but I
didn't understand money itself. I
certainly didn't know how to invest it.
And so as I started learning about that
to try to help people during COVID blah
blah blah, uh you end up going down a
rabbit hole of understanding that when
people say money makes a world go round,
they're they're really glossing over
something that's kind of terrifying that
right now because we've created this
global K-shaped economy, people can
feel, but they don't necessarily
understand what's driving it. So when I
think about, oh, we've got this um
libertarianleaning
ideology that's pushing people to put
control of money back in the hands of
people, I go, that is transformational.
Because people don't understand, the
reason you can't make ends meet right
now is precisely because bankers and
politicians understand how to create an
extractive system where they run
deficits, print money like crazy, use
the hidden tax of inflation to
confiscate wealth, and then only the
people that understand asset ownership
are protected. And since they all
understand asset ownership, they're
like, "Me, I don't mind." And so the
bottom essentially falls out of the
world every so often, which is what
we're living through right now. But my
maybe overly optimistic eye is
as we move towards
a world that's built on cryptocurrency.
Now it's like you get to choose what
currency would would you like to be in?
And if you go into one like a Bitcoin or
something like that that can't be
inflated now you at least have that
hedge.
I think the big problem is people just
can't build the new mental model. So
it's like the generations that grew up
with fiat, they're kind of screwed. But
generations that grow up where it's
like, yeah, this is just how money
works. They don't have to understand
like shadow banking and all that stuff.
They can just be like, oh, I put my
money in this one. It can't be inflated.
Yay. Now I can actually save my way to
prosperity. Uh, I don't have to invest
my way to prosperity, which is the game
that's being played right now. Um, do
you think I'm overblowing it? Is that
delusional? Never thought about it.
>> Um, I think I'm I'm a super optimist. I
think if all our problems are money
problems, we're truly blessed.
>> Wow.
>> Because I think uh money is virtual.
Like Bitcoin is virtual. It is just
data, right? If you double the amount of
Bitcoin in the world, the world's not
any wealthier, right? like I create more
Bitcoin networks. It's not [snorts]
marginally wealthier, but not really as
as as if I like double the number of
Teslas in the world. You can measurably
say we have more stuff now. There's more
stuff per person. There's twice as many
people have fully [snorts] autonomous
cars. I can't kill somebody. It's all
good things, right? But doubling the the
fiat is just a value of exchange. It's
just super virtual thing. Um, it sucks
when we don't have contestable markets
and there is middlemen that can extract
that value uh without ever being
challenged. I think that's where you
start getting these hidden taxs that
drains the rest of the economy. The
vampire squid. That that part is bad.
>> The vampire squid.
>> This is what
>> I never heard that before.
>> Oh, this is the the meme of what to call
Goldman Sachs the vampire squid or
whatever.
>> That's funny. Just cuz it's tentacles
everywhere extracting every turn. But
like I think if it's contestable, if you
can go and bid against their business
and charge less, then you start converge
at a value that that's appropriate to
whatever service they're providing. I
think that that part is good. Um, so I
think what like how I think of store of
value I think is actually I've I mean
I've gotten in trouble on Twitter for
saying this, but if you look at the
intelligent investor uh book um store of
value or commodities, they don't have
they're not investable instruments. you
shouldn't actually be investing in them
because they don't have any model
[snorts] that can show that they're
going to actually build something like
create more in the future.
>> So
>> there's no fundamentals upon which to
base your investment. Is that the
>> exactly? So what the traditional
fundamental valuation is called discount
cash flow. So you look at the future
>> and how much money this thing will make
and think of your investment as if
you're buying a hot dog stand. [snorts]
You're gonna pay money, right, to own
this physical thing. And then you're
gonna sell hot dogs. And the cost of
materials and your profit margin should
tell you how much you should invest in
this particular hot dog stand over
another one.
>> It's very straightforward,
>> right? And if the hot dog stand doesn't
sell any hot dogs, it'll make zero money
and you've just bought a stand that
maybe you can eat your own hot dogs, but
that's about it, right? [laughter]
It's it's pretty much useless. Um but
there's still reason I think for store
value to exist and for the reasons that
you said there is a lot of middleman and
a lot of these inefficiencies that are
run by humans throughout all the stack
whether it's banking and even like
private sector or public sector um
that is effectively like bitcoin can be
a small hedge and the example that I
bring up is kind of unfortunate but like
just in my lifetime you um roughly 50
years I've seen one superpower collapse
that was really bad. My family had to go
through that and flee to come to America
right in '91. So just based on my
priors, there's 2% chance of a
superpower collapse per lifetime.
>> Yeah.
>> Right. That and that and when that
happens, you got to take all your stuff
in a suitcase and go somewhere else. And
you need enough stuff to go restart your
life. So you need something that you can
sell somewhere else. And Bitcoin is very
easy to sell somewhere else and also
very easy to take in that environment.
So without thinking of Bitcoin as an
investment, I don't care what price it
is. It's a natural kind of rule of
thumb, I can put 2% of my wealth into
Bitcoin and if it drops, I put more in.
If it goes up, I'm overinsured. I don't
think of it as an investment. It is
effectively an insurance hedge when the
worst thing that happens where I
actually have to flee because of my
entire place where I'm living is
collapsed to the point that it's like
unlivable, right?
take take all my kids and go somewhere
else, right? And then I sell my Bitcoin
there and I restart my life. So, if you
think of it that way, a store of value
um with the properties of Bitcoin that
there's no essential third party that
could ever prevent me selling it
somewhere else that it's and that means
that that it's truly censorship
resistant um from an engineering first
principles, right? It relies on extreme
redundancy of the internet, relies on
cryptography, so nobody can mint extra
Bitcoin. Nobody can um run miners long
enough to prevent me from selling it
when I actually need to flee. All those
properties that Bitcoin has because of
its simplicity and the proof of work and
all this stuff are actually like the
right product properties. Like if you if
you're selling this insurance thing,
[laughter]
how would you build it? You'd probably
build a Bitcoin, right? and you're like,
"Here's my insurance product for, you
know, hitting the fan." [laughter]
Bitcoin is a very very decent like very
good implementation of it. I, you know,
I'm not sure what I would change about
it. Um, so this is my bull bull bullish
reason for store value Bitcoin to exist.
My bearish reason is that it has no
discount cash flows. There's no other
way to price it fundamentally. But
that's true about gold and it has 30
trillion market cap. So
>> yeah, gold has historically if it's been
issued by the bank, it's gotten just as
abused as anything else. But gold from a
trusted party um is interesting because
it inflates at sort of a roughly
knowable rate of around 2% a year. Um,
but what I've come to understand about a
store of value is in a world of fiat,
which we have been in exclusively in the
US since 1971,
um, empires always and forever will
inflate the life out of the currency
until it ultimately collapses. Like it
it just it repeats over and over in
history. They can't stop themselves. You
get a good run. I mean, you get like
150ish years. So for most people it's
like I don't really have to think about
it until you do and then all hell breaks
loose and for anybody paying attention
what's going on in Iran. Um that's what
kicked this most recent round of unrest
off was their currency started to
hyperin not technically hyperinflate
like 50%. And so that's pretty bad and
people are going to react. And I didn't
take the time to verify this, but
supposedly purchases of Bitcoin in Iran
have like just a straight vertical line
because people suddenly realize, oh wait
a second, I don't control this currency.
The government is doing policies that
make bad things happen to this because
it's not backed by anything. So once if
something's backed by the full faith of
the government and the government is no
longer full of faith, then it's like
poof, that thing no longer has value. Uh
and so while I get what you're saying
about there's no business fundamentals
to um invest with, I don't think people
certainly people do not always invest
based on that. Oftentimes I think
investing is people fleeing the
stability of a currency and so or
instability. They're trying to get out
of the fact that you can inflate a fiat
currency, get into the stock market,
art, gold, whatever, because they're
like, "Well, there's a far more limited
supply of this, and my money is likely
to hopefully grow, outpace inflation,
and now I've got um a way to get out of
the problem of the fiat currency."
Because I look at the stock market today
and I'm just like, none of this is about
business fundamentals. None. And once
you have a entire market that's not
about business fundamentals, something
else is happening. And to me, it's
you've got people that realize, oh,
they're going to print more money. And
because they're going to print more
money, my dollars are going to devalue.
So, I've got to go somewhere. And so,
I'm going to go into the stock market.
But because there's a finite number of
things in the stock market just to pick
one asset class then it goes up in value
uh because there's more money being
printed and then like you said earlier
value is not actually going up but when
you relate it to dollars because there's
more people chasing it the same number
of things the price appears to go up.
Um, so
I'm less I think tense about the fact
that crypto as yet another asset class
that people are investing in that isn't
tied to business fundamentals. It
doesn't have as good of a cover story. I
will give you that. Um, but I look at
the stock market and go, nah, it's
largely a cover story. The fact that
there are businesses that underpin it.
Does that seem crazy?
>> Um,
yeah. I would push back on that a bit.
[laughter] I think