Thanks for downloading making a killing. I'm Bethany McLean, and I'm cutting through the noise to reframe the stories you know about and uncover the ones you don't know. I'll admit it, until very recently, the word fiat mostly meant cute little car. Okay, that's not quite fair, But if that sentence really resonates with you, you probably think more about crypto than I ever did. I remember friends telling me years ago that I had to buy bitcoin, but it seemed like a fad. There were too many unknowns. Fast forward eleven years, Bitcoin is celebrating double digit birthdays, at least if you're counting from Halloween two thousand and eight, when Satoshi Nakamoto first anonymously released his white paper Bitcoin Appeer to peer Electronic Cash System. Now bitcoin is the popular poster child or whipping boy for cryptocurrency in general. There are still so many unknowns, yet companies and investors are flocking to the space, despite so called crypto winters when bitcoin prices have crashed. Major global leaders are now making significant bets on the space. Starbucks, Microsoft, Visa, Facebook, the entire nation of China. Gone are the days of cyberpunks and computer science majors being the only ones in on the joke. But is it a joke? Digital assets are still in their infancy, yet it also feels like we're at a tipping point. What happens if cryptocurrencies totally upend the real financial markets? Is real? Even the right word? Are we in danger of that? I've learned never to look at any technology in isolation, and when I look at something like cryptocurrency, I think about the radiant effect it might have on how we transact in our everyday lives, how we value things, what the bigger effect might be on capital markets, trade relations, the US dollar. Today I'm in a San Francisco studio and my guest today is Chris McCann, an investor at proof of Capital, which recently announced a fifty million dollar fund to invest in blockchain and crypto related companies. I can't think of a better person to discuss the future of bitcoin with. Before we dive into all things crypto, I want to understand you and how you fit into this ecosystem. So tell us how did you get interested in crypto? So back in early twenty thirteen, I bought my first bitcoin, and the way I found out about it was, I guess so much to a lot of people in Silicon Valley. It was on a sort of random internet thread in hacker news if you know what that is. Yeah, And so I started looking into it, and then I stumbled upon like Silk Road and sort of tour and sort of all this stuff. But the thing that sort of fascinated me the most was not necessarily the marketplace, where I was like, what is this thing? Everybody's paying each other and like what is this bitcoin thing? And so it just sort of sparked my curiosity, and then I first bought a little bit, and then at the time I recently enjoined Greylock Partners, which is a more sort of traditional venture fund in the space, and so back in the twenty fourteen fifteen time frame, invested in Blockstream, Zappo, and coin Base, three sort of companies within the bitcoin space. And that really forced me to not look at it just from a more pure sort of currency angle, but more the actual companies, the operators, the developers, and sort of more like the overall market landscape, and long story short, I just really sort of fell in love with this category for a whole bunch of reasons. Yep, and what made you say though that this made sense as an investment as a startup landscape rather than is just a sort of intellectual curiosity. I think bitcoin in sort of cryptocurrency as as a whole is actually very very different than a traditional investment per se. One of the analogies I like to use is imagine if you're in a more traditional, you know, investment role, you know, venture capital firm, and you're looking at this bitcoin thing, and like, let's say you actually, you know, believe in the thesis and sort of the overall story. One of your first questions might actually be like, Hey, this bitcoin thing is cool. Can we have the founder the CEO come and pitch us? Right? And no such thing? No such thing. So you're like, okay, Like that's a little weird, but I can get over that. Can I buy like equity in this company? All right? No? Okay, who's on the board? Okay? Fine? I get over all that. You know, if I buy some of this bitcoin thing, what governance decisions do I get? Who actually controls this thing? Okay? Fine? All that? How do I actually store this thing? All like very normal traditional questions, But bitcoin is very counter to all of that, which again, it's a very simple analogy, but I think that's like a That's a major reason why I think a lot of people have a lot of difficulty with this is you almost sort of have to suspend your disbelief to a certain extent and treat this as kind of its own net new thing. Back then it was much more of a curiosity sake in wanting to learn more. But much more over the time and sort of have this market developed, and as I meant more people in the space, I've become much much more convicted that this isn't just a fat or fly by night thing like this is a much more real market landscape that I don't feel enough people are really spending the time and paying attention towards. Is there some way in which this grew out of the global financial crisis of two thousand and eight and a lack of trust in the financial system as it is, and does that form part of the founding principles of bitcoin? Or am I just reaching actually very much? Is so bitcoin? The first initial white paper and the first initial code implementation and was launched in two thousand and nine. It was actually very much a response to all the stuff we were seeing in the global financial system at the time. Again, the founder of Stosi, Nakamoto, is unknown, so you know, you kind of have to read into the tea leaves a little bit and a lot of his public form comments. You can't ask him or her directly. And then the other interesting thing is actually in the first transaction, so they call it like the Genesis transaction when you look actually look at like the hex code behind it, embedded in that is I think at the time there was a newspaper article about some sort of problem with one of the central banks in the United Kingdom, so that's actually embedded into it. So a lot of people sort of again read the tea leaves and say like, hey, this is actually a direct kind of correlation to it. So there definitely is a large contingency of people that just treat this as a more kind of call it sound form of money, and they very very much kind of buy into this thesas I was like the main sort of front and center, call it more like cipher punks kind of more people on the next gen sort of own financial rails, kind of its own form of currency. But now that it's it's a much much bigger market, you have much more traditional players from you know, Facebook to JP Morgans now even like large parts of the Chinese government sort of getting involved in getting involved into all this. So I would say the philosophical part is still a very important contingency, however, not the only one today. And that's such a major migration in a really short amount of time. How does that happen? How does it go from being this fringe thing celebrated by hackers and thebertarians to being very mainstream. How would you chart the key moments in that evolution. Yeah, no, it's a really good question because, yeah, back in twenty thirteen, like when we were looking into a lot of this stuff, nobody could have imagined the amount of just interests in development in the space today. I think at the time there's a lot of people theorizing you maybe at some point sort of the central bank governments would treat this more seriously and maybe even like buy bitcoin to put on balance sheet. But that was such a fringe for sort of out there notion. But literally within the span of ten years we've actually seen this only been a decade, and that's actually pretty remarkable. Yeah, like now you're starting to see much more of the larger, legitimate financial institutions, technical institutions, and even governments from around the world do real serious pilots in the space. Again, a lot of the stuff is still experimental and kind of early and a little weird, but like you're for the first time, you're actually starting to see real institutions treat the space as serious, not just like this really weird fringe thing. Is the world of crypto a world of competing platforms and technologies or is it a world of cooperating platforms and technologies. As much as I would love to say cooperating, most of the times, it feels more competitive when you add in a lot of the more philosophical and I almost feel sometimes more religious beliefs into and any one of these. Yeah, and definitely, and probably what also compounds this thing is you have a lot of these philosophical beliefs, but then you also buy whatever your choice of asset is, so then you actually really really feel strongly about it because your money's on the line. So people almost shoot it kind of like a religion sometimes, and you have people on very different sort of camps that literally will not even listen to an argument or not even you know, take other sides or not even be empirical about this. Wow, And does the divide generally fall among among uses for it, does it fall among sort of strictly technical arguments, or does it fall on these philosophical lines like this is what bitcoin was supposed to be and how can it be corrupted or co opted by the mainstream financial system. I'd say it's a little bit of all the above. Okay. So in terms of like the bigger camps that are out there, you definitely have the people on the bitcoin side, you have the people on the ethereum side. There's a whole other world of call it more people in the traditional financial institutions, you know, mostly in York and Chicago, that are trying to take all this stuff and fit this into the existing system. Some people in the corrupted world love this because it would bring actual more distribution and adoption. Some people hate this because this is the almost antithesis of Okay, it's anathema right to the original founding belief of what they've built this for. And then you have another almost separate sidecamp that more like blockchain for enterprise applications like supply chains, or like identity networks or sort of any of the consortiums or any of these kind of things that's like its own separate side view. And sometimes a lot of these different camps, a lot of them have religious and philosophical debates amongst one another, and also to some extent, like a lot of them don't even necessarily speak the whole the same language. And so a lot of people treat the blockchain or cryptospace in general as like this one monolithic thing. But the more and more time you spend with the actual people building this, it's actually much much much more divided than you might think, and the feature is much much much less clear than you might think. That's really interesting analogous in some ways, at least in the first part of it, to the financial system, which seems monolithic to people on the outside, but is actually composed of all these warring and very differently motivated entities. Right, So in some ways there's an analogy there. I guess where does bitcoin fit into this, fear? Do you still think of it as the critical part of this universe or do you think of it as a little corner of the universe that has since been eclipsed by all sorts of other more interesting developments. Yeah, so before this actually pulled some quick stats. So one, if you look at the overall market today, bitcoin is still sixty six percent of the total cryptocurrency market. Wow, that's bitcoin. So Bitcoin has been dominant, and it's still very dominant, and that market share has actually been increasing. So bitcoin alone, the asset as a whole, is worth one hundred and sixty eight billion dollars. There's three thousand to six thousand other tokens out there, depending on sort of what you look at, but by and large, bitcoin has the most dominant market share. And so again I think it's easy to get distracted by a lot of the new and emerging and sort of smart contracting, all this other stuff out there. But again, just when you look kind of empirically at the market, bitcoin is still buy and large the biggest one. That's really surprising to me. So you've likened to where we are in the crypto revolution to the early nineties, mid nineties and the Internet revolution. Talk about that a little bit. So about call it thirty to forty million people worldwide in total probably have store own or whole cryptocurrencies in totality. That's probably a rough, rough measure and that number's granted about twenty percent per year, again with the caveats of sometimes during the crazy periods it grows very very fast. Sometimes it drops much lower, but that's kind of a volatility as part of the name of the game, right. Yeah, that's kind of a rough, summed out estimation on the space. And that's analogous too in terms of the number of users and the growth rate to the mid nineties Internet. In my post you have the second portion, I was trying to plot that again, how big is this space currently and how does that look like to the Internet landscape. So again with all of that assumptions and kind of roughness to it, Yeah, we look like we're closer to nineteen ninety two to nineteen ninety four, even though we had the crazy run up that looked like the dot com. When you actually just look at the raw number of people interacting with the system, it's still a smaller subset of people. So we're still in that early phase, even though for a lot of people in the space that might not necessarily feel like that. But we're still kind of very much in that early adopter phase. We've not really moved over to the earlier late majority what are the areas that you guys are most excited about. You mentioned all these possibilities. What are the things that you're seeing real usage and that you're seeing the most opportunity and are the most excitement around. Yeah, So from a proof of capital fund standpoint, there's three broad areas we tend to gravitate towards. So there's one sort of all use cases around fintech and financial infrastructure, so think like exchanges, derivatives, wallets, lending, merchants, payments, kind of that whole world. It's the use case where we see the much more real traction in terms of like real volume and real payments, sort of real things flowing through. Secondly, which is a slightly unique tess, is we actually look at a lot of things on pull it the mining side, so mining, mutation, A six hardware, These are all the things that actually provide all the security guarantees for all the public open blockchains. You see most of the sectors tends to be mostly located in Asia, so from proof of capital we do about half investments half Asia, half US. And then the third category we tend to gravitate towards is things on the privacy and self sovereignty application side, so not necessarily the new privacy protocols, but the things more real people could use. So think like VPNs, secure messaging clients. Browser is kind of that whole more application side of things. Pause now, and that divide between the US and Asia and why that's important. Yeah, So this is another thing that's if the asset class in the space and the entrepreneurs is very different than you know, Web one or Web two. The other biggest difference is the geographical dispersion of this. It's not Silicon Valley. Yeah, that's the basic answer. But yeah, when you looked at a lot of the most significant companies in the Web two space, they all were mostly located thirty miles around Silicon Valley. Sure there were some pockets and you know a few other locations around the US, but a lot of the innovation and entrepreneurs and larger companies and everything tended to be in this space. Bitcoin and crypto very much challenge this notion where when you actually look at the entrepreneurs and where people are, Silicon Valley is a hub, but not the only one. In fact, I would actually very much argue that in this space, Asia actually plays a much much more important role because when you actually look at a lot of the trading volume and distribution and usage of this, it's actually mostly in Asia, not so much in the US. So while a lot of the technology and protocol developers and that side of the world still might be located here or visit here, a lot of the real activities actually mostly going on in Asia. And why is that? Yeah, another quick, very overgeneralized analogy. So one, when you talk about you know, bitcoin and all this cryptospace to a developer in Silicon Valley very generalistically, most people's reactions are, this is really cool. What can I use this for? What applications could I build? How is the protocol constructor to tell me about the rules, show me the code. When you say this exact same story to somebody in call it Hong Kong, let's be very general and you say, hey, we have this you know new thing. It has an asset, it's like you know, traded, it's on all these different exchanges. The purse the over generalization person in Hong Kong would say, Okay, that's cool. I get it. There's almost no question about what do you use it for? Like, what applications can you build? They're like, Nope, this is an asset that trades, that has a price that is independent of all the other things before, and then it's return profile also tends to be very discorrelated with everything else, so it doesn't really follow equities or debts. It kind of just does its own thing. And you know, traders and speculators and quant funds and financial people, they totally get that. In are just much more inherently natively comfortable with that fact. Are there some sort of cultural or personal associations with what money is that dictate that? Do you think? Two things? I had two other partners, so Edith Young's used to be gp AT five unders start ups doing a lot of their China and Asia investments. And our third partner's name is Phil Chen used to be a gp AT Horizon Adventures with le Cushing and Hong Kong. So they're much more equipped to like talk about a lot of the cultural aspects. But two sort of things that they're out there. One is, in general, there tends to be a lot less investment products. So in a lot of the specific countries, like even in Korea, for example, it was actually much harder to get access to the equity markets, it was much harder to do a lot of the things that people were doing in the US, so there was a lot of pent up demand for something new. And then maybe a second point is in general, like say specifically like mainland China, people there tend to be much more comfortable with just purely digital currencies. Like actually, when you even look at the primary forms of moving money in China is mainly we chat and alipay, and in that form, like there is almost no physicality to it. It's all on a phone, it's all sens people, it's all through QR codes. So if you have something like a bitcoin which has no physical form or not, like they they're just more inherent inherently. Okay with that that concept, I wonder if there's something to it that because the US dollar has been the reserve currency of the world, that there's something about moving away from that in the in the US. There might be some sort of interesting cultural underpinning there. But that's just pure speculation. I just just just thinking thinking out loud. Have you during your your adventures, I'm just going to call them adventures in cryptocurrency, has it changed the way you think about what money is? Yes, and I've always had a little bit of this h bias in me. One thing I actually don't talk about all too much. But back in the two thousand and seven two thousand and eight time frame, it's so much much longer story. But me and are a really close college friend of mine, we actually shorted a lot of things in the housing in sort of financial space, didn't you You could have been a character in the big short it was. It was aweso smaller amount. We're much poor college students. We didn't raise like a big fund or anything. I was. I tended to be a little bit more distrustful of that side. But you don't view money as this thing that just is that is absolutely solid, the way you might have if it hadn't been for this experience. Yeah, that's probably fair to say. And again when you look at the just going back to to bitcoin, what they do, which is a it's a very revolutionary concept, but they take all of the preconditions and rules and all that and they actually embedded into code and they put it open source school you can read it, so you don't necessarily have to trust the people who are building this or trust the founders. In fact, like the founders, SOTOSI is completely unknown. You just read it for yourself and you see the fix. The supply sketch schedule of bitcoin is fixed. There will only ever be twenty one million bitcoin ever minted, and it has a very fixed supply schedule that has every like one to two years or show depending on the mining schedule, where the issuance actually dropped. So all of that has actually known upfront from day one. So what happens when the last one is from mind? So right now, if you're a part of the mining ecosystem, part of your reward comes from the It's actually called a coin based reward. That's actually where coinbase gets its name from. Oh I didn't realize that. So you get a coin based reward, so that's the bitcoin that is is minted for you solving a new block, and then you get the transaction reward. So those two things together that's your revenue so to speak, for for mining that block. So when the last bitcoin gets mine, instead of having the coin based reward plus the transaction fee, there will be no more coin based reward anymore, and it'll just have to be purely subsidized by just the transaction fees. Okay, so it doesn't cease to exist at that point right now? Okay, back to that notion of what you believe in and what is money? There is a great tweet on Twitter that someone said about gold versus bitcoin. What do you believe in old shiny rocks or breakthrough in human incentives that enable the new species of money? Right? I mean, there's a point to that. And yet the thing I still get hung up on is that with the US dollar, with a fiat currency, it's it's backed by something. There's there's tax dollars behind it, there's a there's the government's ability to pay its bills. So how does bitcoin just float out there without any without any support? Am I thinking about that the wrong way? Yeah? So maybe two ways to answer that, one the more philosophical way, one the more real empirical way. I tend to feel have that split on a lot of things. I like that slot. So the much more philosophical version of that is, well, like, what truly is the dollar backed by a long time ago? It ud be backed by a gold standard, and you could actually redeem your dollars for amount of gold, And right now there's no sting that individually backs it. Sure it's you know, it's part of taxes. Sure, it's part of the US military, Sure it's it's it's it's a kingmaker as the worldwide reserve currency. But again, all those are valuable, and all of those are not necessarily going to stay forever, and so you know, you can get into much much more philosophical conversations like what is money and a lot of people in the bitcoin space like go back to like when people you know, treated like cshells like other sort of objects. Is money and money is really just a sort of a concept or figment of humanity to really put a unit of account in. So when you actually look into it, the definition is far more fuzzy than you might think. Again, a more realistic standpoint is the thing that actually really backs bitcoin specifically is actually all of the all of the people in the mining ecosystem, because all of the people in the mining ecosystem have to buy hardware, so specifically ASIC chips, they have to build these really huge facilities and do long term energy contracts, and so they are backs stopping or they have a fixed price on the supply side of what it actually costs to generate a bitcoin, and so that price today is about call it six to seven thousand dollars, depending on the energy sort of input in the system. So miners in general have an incentive not to let it fall before below that because their base cost for doing it is that that price. So it's really sort of that energy that mining in that hardware ecosystem that is giving it the security is also the supply input that gives it its real world sort of value to it. The short version that people say is mining ecosystem is basically converting energy into bitcoin, and the real world cost of the energy is the thing that gives the bitcoin the price weight to it. So I see you could get into a very deep philosophical argument about which is more real and which is more stable right between this, But let's go back to this the intersection of these two worlds. Now that you have these things colliding, where you have whether it's the existence of an ex change and custody, or whether it's the idea that you have this system that can convert crypto into US dollars and these stable coins, how do these two worlds coexist and does that mean some inherent corruption of the crypto ideal? So maybe answer the question in two parts one and a more broader long term time horizon. There's a certain camp of people that want to fit bitcoin in the cryptosystem into the traditional financial institutions. So think like there's a one of the more well known companies in the space as a company called Backed, which is found in and started by Ice, which is the parent company that owns the New York Stock Exchange. So back to I think around one hundred sixty two hundred and eighty million dollars, about as establishment as you can get, right as establishment as you can get. They're doing exchange and sort of features and options. They have a partnership with Starbucks, you know for all this. To try to kind of fit all this and put this into the purview of the traditional sort of financial system and fit it under the rules, there's a lot of friction in this because, you know, at its most basic level, then people start asking the question, well, like what is bitcoin? Is it a commodity, is it a currency, is it a asset? Is it a property? It sort of has a little bit of everything. It's kind of not it's not one thing explicitly, So bitcoin as a whole like doesn't really fit into an easy definition. And what a lot of also people say in the bitcoin world is bitcoin is is what bitcoin does. Like it doesn't really have a it doesn't have a need, it doesn't have a want. It's not trying to be something. Everybody's trying to put its own definitional rules on it. But no matter what you what you want, bitcoin is just going to keep doing what it does. I think, so I think therefore I am. So there's definitely sort of that side in that world. And then on the other hand, you actually have what I think is the kind of far more interesting side of the equation, where again, when you actually look at a lot of the trading volume, most of it actually tends to be outside the US, And so what some exchanges are doing is like, well, we'll just lean into that and just completely cut off all US users, and you know, maybe we'll set up in Singapore or Hong Kong or mainland China or Malta in sort of all these other places. So there's a company that I was a personal and early investor and called Binance Finance is a started office like just a pure spot market exchange, although they've now branched off to doing their own form of derivatives they have staking they have their own decentralized exchange, and they actually created their own currency that ties all this stuff together called it's called the Binance token, so B and B token. And what gives the B and B token its value or its weight is they actually take a portion of all the profits made through the exchange, and that goes to buy back their own token so restrict the supply. So almost think like a share buy back, although it doesn't have all that definition attached to it. So Binance as a whole this past year did a billion dollars in profit. Wow, which again like for like taking a step back just as a pure empirical investor to see a company start in less than two years to a billion dollars in profit, you almost never see that. No, that surpasses Amazon, Google everything, Right, I don't think there's ever even been anything like that in history before. Yeah, I don't know if anybody's actually compared that. A lot of people show like the time to valuation and like the times of revenue, but like this isn't just revenue literally profit of the exchange. So yeah, you almost never never see this happen. And what makes this company so interesting is they are purely tied to the call it pure bitcoin and crypto world. So what actually makes this crazy is like they actually pay their employees in the own b and be token. When you look at where their company headquarters are, they don't have a place that they're in there. The whole team, I think there's three hundred people. They're literally distributed all over the place. There's no exact jurisdiction. All the employees are getting paid. And like the native asset, all the traders of this are all mostly coming from not us, so all sort of natives to the crypto world. So another contrasting vision of all this is it's going to take some more time, but the entire bitcoin and cryptocurrency is its own quasi micro ecosystem, and that economy is going to grow in and of itself, and people could get paid in bitcoin or crypto, people would spend in bitcoin or crypto, and it's actually going to live apart and outside of the system versus being one to one part of it. But will regulators around the world allow that to happen? Will governments around the world allow that to happen? I guess the following would be, can I stop it from happening. But let's start with will Let's start with will they allow it to happen, Because the government's control of its currency is what a government has right for the longest time, I think people would have assumed that this whole space is way too early. None of these questions need to be answered for the longest time, and you know, they might not necessarily like it, but it might be very sort of hard to stop and once it's big enough that these companies can kind of solve that at the end. But I think what has happened over this ten years is this space has grown faster than what most people thought, and you have far more people paying attention to this than what you've thought. And so I do think that all of these companies as a whole will need to answer all of these questions for themselves from a regulatory standpoint, from a government standpoint, to how this fits into existing financial institution standpoint, and even if not necessarily all of them are solved. Like the mean critical thing that most of these companies really have to worry about is the FIA in and out portion of this, because most financial institutions, like what they really care about is when you're in putting money into the financial institution, or when you're taking it out, where has it gone? What have you done with it? What is the source of funds? So I think from an immediate term, like most of the exchanges are around the world, are really paying attention to those portions. I don't think there's far enough emphasis on the longer term standpoint of Okay, if you treat you know, bitcoin as a as an asset with you know, a real dollar value attached to it, what does that mean for all these other things? And you know, now with the some of the announcement of what's Facebook's doing versus what China is doing, I think that makes that question even more pressing. But yeah, I don't think there's necessarily an easy answer for that yet. But we don't really have any answers. That's fascinating. And so the following question then, I want to get to what does that mean for the US dollar? But that's also equally unanswerable. Yeah, I think it's it's equally answerable. And there's also another call it trend, which is sort of similar but slightly different to the whole bitcoin narrative, is there's a lot of these stable coins that are out there. So stable coins, if you've heard of these before, are basically tokens that represent one to one peering of a real world asset. So the easiest way to think about it is a US dollar stable coin. You know, one token equals one dollar, the one dollars held in reserve, you could always see, it's always there. So there's companies like USDC, which is done by coin Base and Circle that are out there. The one that is far more used than traded is this thing called USDT, which is slightly sketchier with the reserves not one hundred percent necessarily being there, but that's the one that people actually use and sort of trade with, but kind of zooming out in the longer term time frame when you look at that is that is actually very much in line, and in fact, that's almost the hyperdollarization, if you will, because you're actually getting dollars in the hands of more and more people, you're locking up more dollars, you're making dollar almost the native underpinning currency of a lot of these different things. So again, like maybe just the step back, I think it's sometimes hard to characterize this space as one monolithic thing. There's a lot of different experiments going into this, and from a venture investor, I think that's what makes the space so exciting too. Yeah, and you've had a big change in the government. There is a great quote from of all people, Senate Banking Committee Chairman Mike Krappo who said during a hearing, if the United States were to decide we don't want cryptocurrency to happen in the United States and tried to ban it, I'm pretty confident we couldn't succeed in doing that, which is a pretty big statement. Right. You have this development that could challenge the supremacy of the US dollar and could challenge many things about our world as it is, and you have powerful person and government essentially saying we can't do anything about it. That's pretty pretty dramatic, I thought. Yeah. Again, to take aside from the more purely bitcoin side, is to hold their store bitcoin, all you need to do is generate a public and private key pair. That's essentially how you hold it. And to transact with somebody else as you just need to know their public address and it goes directly to the person and it's settled with the person in about ten to twenty minutes, and you don't have to go through any third party. That was kind of the whole point of bitcoin to begin with. And so I think there's ways to restrict the feet in outpoints, there's a way to restrict like the merchants involved. But when you just look at the pure P to P side of this, it's very very hard, if not impossible, to outright ban this, even if you really wanted to. And that's that's what I think makes bitcoin to some extent so powerful. Is that like setoshi for better for worse, meet it. So there's no there's no person, there's no entity, there's no company. Yeah, it goes back to your point about why it was hard to figure out investment in the beginning, But it's also why it's hard to control and hard to figure out what to do with it. Right. It's the that that that whole point of who is it? What is it? Where is it? The basic questions are that's what that's what gives it both it's it's mystique and it's it's scariness and it's appeal, right all wrapped up into one. Okay, so I've found this quote from John McAfee, who of course has a competing um Tech kind of don't laugh, But he said, in his view of books, labor is an abomination, a twisted perversion of cryptocurrency. But it's very definition. Cryptocurrency wants to free us from control. But libra is nothing but control. Is that fair? I might not go so far in the fact to say that Facebook is the end all and be all evil. It is that it is. However, I will say from the fact that it is very opposite what many of the ideals that a lot of people in the bitcoin world share. In the fact that you know, in the Facebook world, it would have to be mediated. It would go through a big company or multiple sort of big companies, or a part of the association. It would effectively get to see all the transactions that were happening. They could probably do you know, more targeted ads on you based on what you're actually buying and selling who you're transacting with. So yeah, I don't necessarily agree with many of the things that mcaffee has to say, but to some extent, like people in the bitcoin space, do feel that Libra is opposite towards many of the ideals that they hold very strongly. Does that explain why you've had such a reaction to it. One thing I found interesting is you had so many people signing onto it initially, and then now you've had everybody saying, whoa stepping back? And is it because of pushback from regulators or is it because they figured out that it actually is just part of Facebook's ongoing bid to rule the world personally, Like, I've been somewhat critical of the Facebook leab story, so on day one when they made the announcement, I wrote this long post talking about the announcement, and my main prediction at the end of it is I thought that they would be delayed, not for any technical reasons, but majority regulatory reasons, just because of Facebook's is a very unloved company for lack of a better word. I was actually really surprised when you actually look at the NPS score for Facebook. I think it's negative forty seven, Like it's really really bad, like actually worse than most financial institutions, And so that's an astounding accomplishment. Actually yeah, so yeah, I thought there was no way that they'd be able to launch us on the timescale that they initially set out to do so, and it's looking that is likely to be the case. To say the other side, I think many people in the crypto ecosystem we're very initially excited about Libra is because one of the biggest questions that a lot of people ask in the spaces, hey when is real mainstream adoption going to happen? And Facebook had the answer was, well, we have It's about as mainstream as it gets, right, you know, we have I don't know the exact stats, we have two to three billion daily active users. So if you know, we really create this cryptocurrency, put in everybody's walls, put into a messenger like, we can push it out to many people. And I think many people in the cryptospace will might not necessarily have loved that per se, they might have liked the fact that, hey, if you get this in the hands of enough people, a certain subset or portion of them are going to say, hey, now that I have this digital asset, well, hey what about this bitcoin thing? What about this ethereum thing? It kind of gets them crypto curious for lack cryptocurious is the best phrase for lack of a better phrase. I think it's dangerous because again, you're giving up a lot of those ideals for the hope of distribution and adoption. But then also, like my personal takeaway is I think the sole reason why Facebook was doing this from the beginning was not necessarily to create a new, open, decentralized sort of finance ecosystem. If they did, they would have just bought into bitcoin very so much like what Square and Jack is doing, I actually think they did this more for monetization reasons for Facebook itself. My two cents. I don't know if this is true or not, but when you look at the actual LTV of a user, most of the values coming from all their US users. They have a lot of users outside of the US, but they an LTV, I mean long term value just to okay, yeah, sorry for the acronyms, but yeah, the value per users much higher in the US, and when you look outside of the US, it tends to be lower because the ad rates and that sort of ad purchases is a lower amount. And so my opinion, I think Facebook has always had this dream that hey, if we can actually get into the payment flow, in the monetary flow of particularly users outside of the US, then we can increase the value per user for all these other ones. So when you actually look at Facebook's history, they actually did like a Facebook credit system that they were doing, like things with PayPal and David Marcus from before. This is kind of just another iteration on the chain that they've been following. And I think this is actually a much more inherently Facebook revenue monetization sort of story. They just kind of co opted bitcoin and crypto and this all other stuff in order to push their narrative. I think it's smart and sort of sneaky at the same time, but at least from my opinion, I think that's the larger reason why they did it, not necessarily because they're bought into this new financial system. It's a perfect way of sending up for the epitome of this conversation we've been having, right, which is the benefits of co option and a cooperation versus idealism. And Facebook's move in some ways is the ultimate cynicism, right, And then the ideas do you celebrate that and go along with it because it's making the market bigger and more vibrant potentially, or do you say, WHOA, this is not the direction we want this to go. It's sort of a fascinating encapsulation of the whole debate in some ways, right, Thank you so much for being here. It's been really fun to talk to you. Yeah, I think it's been really fun. Thank you for having me so. I never would have guessed then in a conversation about Crypto, I would have learned a new story about the financial crisis. But maybe given crypto's philosophical underpinnings, I should have guessed that which in Gears entirely. My producer Megan and I were both thinking the same thing as we listened to Chris. We were thinking Dune. Seriously, remember the famous science fiction book with its warring fiefdoms, but also the hero of sorts, Paul Atreides, becomes the one who can be many places at once and can see many paths into the future. Right now, we can see many paths for cryptocurrency, including that it upends one of our most basic institute money, but we can't yet see the path it will take. Makia Killing is a co production of Pushkin Industries and Chalk and Blade. It's produced by Ruth Barnes and Laura Hyde. My executive producers are Alison McClain no relation in making Casey. The executive producer at Pushkin is Mia Loebell. Engineering by Jason Rostkowski. Our music is by Jed Flood. Special thanks to Jacob Weisberg at Pushkin and everyone on the show. I'm Bethany McClain. Thanks so much for listening. Find me on Twitter at Bethany mac twelve and let me know which episodes you've most enjoyed.

Thanks for downloading making a killing. I'm Bethany McLean, and I'm cutting through the noise to reframe the stories you know about and uncover the ones you don't know. I'll admit it, until very recently, the word fiat mostly meant cute little car. Okay, that's not quite fair, But if that sentence really resonates with you, you probably think more about crypto than I ever did. I remember friends telling me years ago that I had to buy bitcoin, but it seemed like a fad. There were too many unknowns. Fast forward eleven years, Bitcoin is celebrating double digit birthdays, at least if you're counting from Halloween two thousand and eight, when Satoshi Nakamoto first anonymously released his white paper Bitcoin Appeer to peer Electronic Cash System. Now bitcoin is the popular poster child or whipping boy for cryptocurrency in general. There are still so many unknowns, yet companies and investors are flocking to the space, despite so called crypto winters when bitcoin prices have crashed. Major global leaders are now making significant bets on the space. Starbucks, Microsoft, Visa, Facebook, the entire nation of China. Gone are the days of cyberpunks and computer science majors being the only ones in on the joke. But is it a joke? Digital assets are still in their infancy, yet it also feels like we're at a tipping point. What happens if cryptocurrencies totally upend the real financial markets? Is real? Even the right word? Are we in danger of that? I've learned never to look at any technology in isolation, and when I look at something like cryptocurrency, I think about the radiant effect it might have on how we transact in our everyday lives, how we value things, what the bigger effect might be on capital markets, trade relations, the US dollar. Today I'm in a San Francisco studio and my guest today is Chris McCann, an investor at proof of Capital, which recently announced a fifty million dollar fund to invest in blockchain and crypto related companies. I can't think of a better person to discuss the future of bitcoin with. Before we dive into all things crypto, I want to understand you and how you fit into this ecosystem. So tell us how did you get interested in crypto? So back in early twenty thirteen, I bought my first bitcoin, and the way I found out about it was, I guess so much to a lot of people in Silicon Valley. It was on a sort of random internet thread in hacker news if you know what that is. Yeah, And so I started looking into it, and then I stumbled upon like Silk Road and sort of tour and sort of all this stuff. But the thing that sort of fascinated me the most was not necessarily the marketplace, where I was like, what is this thing? Everybody's paying each other and like what is this bitcoin thing? And so it just sort of sparked my curiosity, and then I first bought a little bit, and then at the time I recently enjoined Greylock Partners, which is a more sort of traditional venture fund in the space, and so back in the twenty fourteen fifteen time frame, invested in Blockstream, Zappo, and coin Base, three sort of companies within the bitcoin space. And that really forced me to not look at it just from a more pure sort of currency angle, but more the actual companies, the operators, the developers, and sort of more like the overall market landscape, and long story short, I just really sort of fell in love with this category for a whole bunch of reasons. Yep, and what made you say though that this made sense as an investment as a startup landscape rather than is just a sort of intellectual curiosity. I think bitcoin in sort of cryptocurrency as as a whole is actually very very different than a traditional investment per se. One of the analogies I like to use is imagine if you're in a more traditional, you know, investment role, you know, venture capital firm, and you're looking at this bitcoin thing, and like, let's say you actually, you know, believe in the thesis and sort of the overall story. One of your first questions might actually be like, Hey, this bitcoin thing is cool. Can we have the founder the CEO come and pitch us? Right? And no such thing? No such thing. So you're like, okay, Like that's a little weird, but I can get over that. Can I buy like equity in this company? All right? No? Okay, who's on the board? Okay? Fine? I get over all that. You know, if I buy some of this bitcoin thing, what governance decisions do I get? Who actually controls this thing? Okay? Fine? All that? How do I actually store this thing? All like very normal traditional questions, But bitcoin is very counter to all of that, which again, it's a very simple analogy, but I think that's like a That's a major reason why I think a lot of people have a lot of difficulty with this is you almost sort of have to suspend your disbelief to a certain extent and treat this as kind of its own net new thing. Back then it was much more of a curiosity sake in wanting to learn more. But much more over the time and sort of have this market developed, and as I meant more people in the space, I've become much much more convicted that this isn't just a fat or fly by night thing like this is a much more real market landscape that I don't feel enough people are really spending the time and paying attention towards. Is there some way in which this grew out of the global financial crisis of two thousand and eight and a lack of trust in the financial system as it is, and does that form part of the founding principles of bitcoin? Or am I just reaching actually very much? Is so bitcoin? The first initial white paper and the first initial code implementation and was launched in two thousand and nine. It was actually very much a response to all the stuff we were seeing in the global financial system at the time. Again, the founder of Stosi, Nakamoto, is unknown, so you know, you kind of have to read into the tea leaves a little bit and a lot of his public form comments. You can't ask him or her directly. And then the other interesting thing is actually in the first transaction, so they call it like the Genesis transaction when you look actually look at like the hex code behind it, embedded in that is I think at the time there was a newspaper article about some sort of problem with one of the central banks in the United Kingdom, so that's actually embedded into it. So a lot of people sort of again read the tea leaves and say like, hey, this is actually a direct kind of correlation to it. So there definitely is a large contingency of people that just treat this as a more kind of call it sound form of money, and they very very much kind of buy into this thesas I was like the main sort of front and center, call it more like cipher punks kind of more people on the next gen sort of own financial rails, kind of its own form of currency. But now that it's it's a much much bigger market, you have much more traditional players from you know, Facebook to JP Morgans now even like large parts of the Chinese government sort of getting involved in getting involved into all this. So I would say the philosophical part is still a very important contingency, however, not the only one today. And that's such a major migration in a really short amount of time. How does that happen? How does it go from being this fringe thing celebrated by hackers and thebertarians to being very mainstream. How would you chart the key moments in that evolution. Yeah, no, it's a really good question because, yeah, back in twenty thirteen, like when we were looking into a lot of this stuff, nobody could have imagined the amount of just interests in development in the space today. I think at the time there's a lot of people theorizing you maybe at some point sort of the central bank governments would treat this more seriously and maybe even like buy bitcoin to put on balance sheet. But that was such a fringe for sort of out there notion. But literally within the span of ten years we've actually seen this only been a decade, and that's actually pretty remarkable. Yeah, like now you're starting to see much more of the larger, legitimate financial institutions, technical institutions, and even governments from around the world do real serious pilots in the space. Again, a lot of the stuff is still experimental and kind of early and a little weird, but like you're for the first time, you're actually starting to see real institutions treat the space as serious, not just like this really weird fringe thing. Is the world of crypto a world of competing platforms and technologies or is it a world of cooperating platforms and technologies. As much as I would love to say cooperating, most of the times, it feels more competitive when you add in a lot of the more philosophical and I almost feel sometimes more religious beliefs into and any one of these. Yeah, and definitely, and probably what also compounds this thing is you have a lot of these philosophical beliefs, but then you also buy whatever your choice of asset is, so then you actually really really feel strongly about it because your money's on the line. So people almost shoot it kind of like a religion sometimes, and you have people on very different sort of camps that literally will not even listen to an argument or not even you know, take other sides or not even be empirical about this. Wow, And does the divide generally fall among among uses for it, does it fall among sort of strictly technical arguments, or does it fall on these philosophical lines like this is what bitcoin was supposed to be and how can it be corrupted or co opted by the mainstream financial system. I'd say it's a little bit of all the above. Okay. So in terms of like the bigger camps that are out there, you definitely have the people on the bitcoin side, you have the people on the ethereum side. There's a whole other world of call it more people in the traditional financial institutions, you know, mostly in York and Chicago, that are trying to take all this stuff and fit this into the existing system. Some people in the corrupted world love this because it would bring actual more distribution and adoption. Some people hate this because this is the almost antithesis of Okay, it's anathema right to the original founding belief of what they've built this for. And then you have another almost separate sidecamp that more like blockchain for enterprise applications like supply chains, or like identity networks or sort of any of the consortiums or any of these kind of things that's like its own separate side view. And sometimes a lot of these different camps, a lot of them have religious and philosophical debates amongst one another, and also to some extent, like a lot of them don't even necessarily speak the whole the same language. And so a lot of people treat the blockchain or cryptospace in general as like this one monolithic thing. But the more and more time you spend with the actual people building this, it's actually much much much more divided than you might think, and the feature is much much much less clear than you might think. That's really interesting analogous in some ways, at least in the first part of it, to the financial system, which seems monolithic to people on the outside, but is actually composed of all these warring and very differently motivated entities. Right, So in some ways there's an analogy there. I guess where does bitcoin fit into this, fear? Do you still think of it as the critical part of this universe or do you think of it as a little corner of the universe that has since been eclipsed by all sorts of other more interesting developments. Yeah, so before this actually pulled some quick stats. So one, if you look at the overall market today, bitcoin is still sixty six percent of the total cryptocurrency market. Wow, that's bitcoin. So Bitcoin has been dominant, and it's still very dominant, and that market share has actually been increasing. So bitcoin alone, the asset as a whole, is worth one hundred and sixty eight billion dollars. There's three thousand to six thousand other tokens out there, depending on sort of what you look at, but by and large, bitcoin has the most dominant market share. And so again I think it's easy to get distracted by a lot of the new and emerging and sort of smart contracting, all this other stuff out there. But again, just when you look kind of empirically at the market, bitcoin is still buy and large the biggest one. That's really surprising to me. So you've likened to where we are in the crypto revolution to the early nineties, mid nineties and the Internet revolution. Talk about that a little bit. So about call it thirty to forty million people worldwide in total probably have store own or whole cryptocurrencies in totality. That's probably a rough, rough measure and that number's granted about twenty percent per year, again with the caveats of sometimes during the crazy periods it grows very very fast. Sometimes it drops much lower, but that's kind of a volatility as part of the name of the game, right. Yeah, that's kind of a rough, summed out estimation on the space. And that's analogous too in terms of the number of users and the growth rate to the mid nineties Internet. In my post you have the second portion, I was trying to plot that again, how big is this space currently and how does that look like to the Internet landscape. So again with all of that assumptions and kind of roughness to it, Yeah, we look like we're closer to nineteen ninety two to nineteen ninety four, even though we had the crazy run up that looked like the dot com. When you actually just look at the raw number of people interacting with the system, it's still a smaller subset of people. So we're still in that early phase, even though for a lot of people in the space that might not necessarily feel like that. But we're still kind of very much in that early adopter phase. We've not really moved over to the earlier late majority what are the areas that you guys are most excited about. You mentioned all these possibilities. What are the things that you're seeing real usage and that you're seeing the most opportunity and are the most excitement around. Yeah, So from a proof of capital fund standpoint, there's three broad areas we tend to gravitate towards. So there's one sort of all use cases around fintech and financial infrastructure, so think like exchanges, derivatives, wallets, lending, merchants, payments, kind of that whole world. It's the use case where we see the much more real traction in terms of like real volume and real payments, sort of real things flowing through. Secondly, which is a slightly unique tess, is we actually look at a lot of things on pull it the mining side, so mining, mutation, A six hardware, These are all the things that actually provide all the security guarantees for all the public open blockchains. You see most of the sectors tends to be mostly located in Asia, so from proof of capital we do about half investments half Asia, half US. And then the third category we tend to gravitate towards is things on the privacy and self sovereignty application side, so not necessarily the new privacy protocols, but the things more real people could use. So think like VPNs, secure messaging clients. Browser is kind of that whole more application side of things. Pause now, and that divide between the US and Asia and why that's important. Yeah, So this is another thing that's if the asset class in the space and the entrepreneurs is very different than you know, Web one or Web two. The other biggest difference is the geographical dispersion of this. It's not Silicon Valley. Yeah, that's the basic answer. But yeah, when you looked at a lot of the most significant companies in the Web two space, they all were mostly located thirty miles around Silicon Valley. Sure there were some pockets and you know a few other locations around the US, but a lot of the innovation and entrepreneurs and larger companies and everything tended to be in this space. Bitcoin and crypto very much challenge this notion where when you actually look at the entrepreneurs and where people are, Silicon Valley is a hub, but not the only one. In fact, I would actually very much argue that in this space, Asia actually plays a much much more important role because when you actually look at a lot of the trading volume and distribution and usage of this, it's actually mostly in Asia, not so much in the US. So while a lot of the technology and protocol developers and that side of the world still might be located here or visit here, a lot of the real activities actually mostly going on in Asia. And why is that? Yeah, another quick, very overgeneralized analogy. So one, when you talk about you know, bitcoin and all this cryptospace to a developer in Silicon Valley very generalistically, most people's reactions are, this is really cool. What can I use this for? What applications could I build? How is the protocol constructor to tell me about the rules, show me the code. When you say this exact same story to somebody in call it Hong Kong, let's be very general and you say, hey, we have this you know new thing. It has an asset, it's like you know, traded, it's on all these different exchanges. The purse the over generalization person in Hong Kong would say, Okay, that's cool. I get it. There's almost no question about what do you use it for? Like, what applications can you build? They're like, Nope, this is an asset that trades, that has a price that is independent of all the other things before, and then it's return profile also tends to be very discorrelated with everything else, so it doesn't really follow equities or debts. It kind of just does its own thing. And you know, traders and speculators and quant funds and financial people, they totally get that. In are just much more inherently natively comfortable with that fact. Are there some sort of cultural or personal associations with what money is that dictate that? Do you think? Two things? I had two other partners, so Edith Young's used to be gp AT five unders start ups doing a lot of their China and Asia investments. And our third partner's name is Phil Chen used to be a gp AT Horizon Adventures with le Cushing and Hong Kong. So they're much more equipped to like talk about a lot of the cultural aspects. But two sort of things that they're out there. One is, in general, there tends to be a lot less investment products. So in a lot of the specific countries, like even in Korea, for example, it was actually much harder to get access to the equity markets, it was much harder to do a lot of the things that people were doing in the US, so there was a lot of pent up demand for something new. And then maybe a second point is in general, like say specifically like mainland China, people there tend to be much more comfortable with just purely digital currencies. Like actually, when you even look at the primary forms of moving money in China is mainly we chat and alipay, and in that form, like there is almost no physicality to it. It's all on a phone, it's all sens people, it's all through QR codes. So if you have something like a bitcoin which has no physical form or not, like they they're just more inherent inherently. Okay with that that concept, I wonder if there's something to it that because the US dollar has been the reserve currency of the world, that there's something about moving away from that in the in the US. There might be some sort of interesting cultural underpinning there. But that's just pure speculation. I just just just thinking thinking out loud. Have you during your your adventures, I'm just going to call them adventures in cryptocurrency, has it changed the way you think about what money is? Yes, and I've always had a little bit of this h bias in me. One thing I actually don't talk about all too much. But back in the two thousand and seven two thousand and eight time frame, it's so much much longer story. But me and are a really close college friend of mine, we actually shorted a lot of things in the housing in sort of financial space, didn't you You could have been a character in the big short it was. It was aweso smaller amount. We're much poor college students. We didn't raise like a big fund or anything. I was. I tended to be a little bit more distrustful of that side. But you don't view money as this thing that just is that is absolutely solid, the way you might have if it hadn't been for this experience. Yeah, that's probably fair to say. And again when you look at the just going back to to bitcoin, what they do, which is a it's a very revolutionary concept, but they take all of the preconditions and rules and all that and they actually embedded into code and they put it open source school you can read it, so you don't necessarily have to trust the people who are building this or trust the founders. In fact, like the founders, SOTOSI is completely unknown. You just read it for yourself and you see the fix. The supply sketch schedule of bitcoin is fixed. There will only ever be twenty one million bitcoin ever minted, and it has a very fixed supply schedule that has every like one to two years or show depending on the mining schedule, where the issuance actually dropped. So all of that has actually known upfront from day one. So what happens when the last one is from mind? So right now, if you're a part of the mining ecosystem, part of your reward comes from the It's actually called a coin based reward. That's actually where coinbase gets its name from. Oh I didn't realize that. So you get a coin based reward, so that's the bitcoin that is is minted for you solving a new block, and then you get the transaction reward. So those two things together that's your revenue so to speak, for for mining that block. So when the last bitcoin gets mine, instead of having the coin based reward plus the transaction fee, there will be no more coin based reward anymore, and it'll just have to be purely subsidized by just the transaction fees. Okay, so it doesn't cease to exist at that point right now? Okay, back to that notion of what you believe in and what is money? There is a great tweet on Twitter that someone said about gold versus bitcoin. What do you believe in old shiny rocks or breakthrough in human incentives that enable the new species of money? Right? I mean, there's a point to that. And yet the thing I still get hung up on is that with the US dollar, with a fiat currency, it's it's backed by something. There's there's tax dollars behind it, there's a there's the government's ability to pay its bills. So how does bitcoin just float out there without any without any support? Am I thinking about that the wrong way? Yeah? So maybe two ways to answer that, one the more philosophical way, one the more real empirical way. I tend to feel have that split on a lot of things. I like that slot. So the much more philosophical version of that is, well, like, what truly is the dollar backed by a long time ago? It ud be backed by a gold standard, and you could actually redeem your dollars for amount of gold, And right now there's no sting that individually backs it. Sure it's you know, it's part of taxes. Sure, it's part of the US military, Sure it's it's it's it's a kingmaker as the worldwide reserve currency. But again, all those are valuable, and all of those are not necessarily going to stay forever, and so you know, you can get into much much more philosophical conversations like what is money and a lot of people in the bitcoin space like go back to like when people you know, treated like cshells like other sort of objects. Is money and money is really just a sort of a concept or figment of humanity to really put a unit of account in. So when you actually look into it, the definition is far more fuzzy than you might think. Again, a more realistic standpoint is the thing that actually really backs bitcoin specifically is actually all of the all of the people in the mining ecosystem, because all of the people in the mining ecosystem have to buy hardware, so specifically ASIC chips, they have to build these really huge facilities and do long term energy contracts, and so they are backs stopping or they have a fixed price on the supply side of what it actually costs to generate a bitcoin, and so that price today is about call it six to seven thousand dollars, depending on the energy sort of input in the system. So miners in general have an incentive not to let it fall before below that because their base cost for doing it is that that price. So it's really sort of that energy that mining in that hardware ecosystem that is giving it the security is also the supply input that gives it its real world sort of value to it. The short version that people say is mining ecosystem is basically converting energy into bitcoin, and the real world cost of the energy is the thing that gives the bitcoin the price weight to it. So I see you could get into a very deep philosophical argument about which is more real and which is more stable right between this, But let's go back to this the intersection of these two worlds. Now that you have these things colliding, where you have whether it's the existence of an ex change and custody, or whether it's the idea that you have this system that can convert crypto into US dollars and these stable coins, how do these two worlds coexist and does that mean some inherent corruption of the crypto ideal? So maybe answer the question in two parts one and a more broader long term time horizon. There's a certain camp of people that want to fit bitcoin in the cryptosystem into the traditional financial institutions. So think like there's a one of the more well known companies in the space as a company called Backed, which is found in and started by Ice, which is the parent company that owns the New York Stock Exchange. So back to I think around one hundred sixty two hundred and eighty million dollars, about as establishment as you can get, right as establishment as you can get. They're doing exchange and sort of features and options. They have a partnership with Starbucks, you know for all this. To try to kind of fit all this and put this into the purview of the traditional sort of financial system and fit it under the rules, there's a lot of friction in this because, you know, at its most basic level, then people start asking the question, well, like what is bitcoin? Is it a commodity, is it a currency, is it a asset? Is it a property? It sort of has a little bit of everything. It's kind of not it's not one thing explicitly, So bitcoin as a whole like doesn't really fit into an easy definition. And what a lot of also people say in the bitcoin world is bitcoin is is what bitcoin does. Like it doesn't really have a it doesn't have a need, it doesn't have a want. It's not trying to be something. Everybody's trying to put its own definitional rules on it. But no matter what you what you want, bitcoin is just going to keep doing what it does. I think, so I think therefore I am. So there's definitely sort of that side in that world. And then on the other hand, you actually have what I think is the kind of far more interesting side of the equation, where again, when you actually look at a lot of the trading volume, most of it actually tends to be outside the US, And so what some exchanges are doing is like, well, we'll just lean into that and just completely cut off all US users, and you know, maybe we'll set up in Singapore or Hong Kong or mainland China or Malta in sort of all these other places. So there's a company that I was a personal and early investor and called Binance Finance is a started office like just a pure spot market exchange, although they've now branched off to doing their own form of derivatives they have staking they have their own decentralized exchange, and they actually created their own currency that ties all this stuff together called it's called the Binance token, so B and B token. And what gives the B and B token its value or its weight is they actually take a portion of all the profits made through the exchange, and that goes to buy back their own token so restrict the supply. So almost think like a share buy back, although it doesn't have all that definition attached to it. So Binance as a whole this past year did a billion dollars in profit. Wow, which again like for like taking a step back just as a pure empirical investor to see a company start in less than two years to a billion dollars in profit, you almost never see that. No, that surpasses Amazon, Google everything, Right, I don't think there's ever even been anything like that in history before. Yeah, I don't know if anybody's actually compared that. A lot of people show like the time to valuation and like the times of revenue, but like this isn't just revenue literally profit of the exchange. So yeah, you almost never never see this happen. And what makes this company so interesting is they are purely tied to the call it pure bitcoin and crypto world. So what actually makes this crazy is like they actually pay their employees in the own b and be token. When you look at where their company headquarters are, they don't have a place that they're in there. The whole team, I think there's three hundred people. They're literally distributed all over the place. There's no exact jurisdiction. All the employees are getting paid. And like the native asset, all the traders of this are all mostly coming from not us, so all sort of natives to the crypto world. So another contrasting vision of all this is it's going to take some more time, but the entire bitcoin and cryptocurrency is its own quasi micro ecosystem, and that economy is going to grow in and of itself, and people could get paid in bitcoin or crypto, people would spend in bitcoin or crypto, and it's actually going to live apart and outside of the system versus being one to one part of it. But will regulators around the world allow that to happen? Will governments around the world allow that to happen? I guess the following would be, can I stop it from happening. But let's start with will Let's start with will they allow it to happen, Because the government's control of its currency is what a government has right for the longest time, I think people would have assumed that this whole space is way too early. None of these questions need to be answered for the longest time, and you know, they might not necessarily like it, but it might be very sort of hard to stop and once it's big enough that these companies can kind of solve that at the end. But I think what has happened over this ten years is this space has grown faster than what most people thought, and you have far more people paying attention to this than what you've thought. And so I do think that all of these companies as a whole will need to answer all of these questions for themselves from a regulatory standpoint, from a government standpoint, to how this fits into existing financial institution standpoint, and even if not necessarily all of them are solved. Like the mean critical thing that most of these companies really have to worry about is the FIA in and out portion of this, because most financial institutions, like what they really care about is when you're in putting money into the financial institution, or when you're taking it out, where has it gone? What have you done with it? What is the source of funds? So I think from an immediate term, like most of the exchanges are around the world, are really paying attention to those portions. I don't think there's far enough emphasis on the longer term standpoint of Okay, if you treat you know, bitcoin as a as an asset with you know, a real dollar value attached to it, what does that mean for all these other things? And you know, now with the some of the announcement of what's Facebook's doing versus what China is doing, I think that makes that question even more pressing. But yeah, I don't think there's necessarily an easy answer for that yet. But we don't really have any answers. That's fascinating. And so the following question then, I want to get to what does that mean for the US dollar? But that's also equally unanswerable. Yeah, I think it's it's equally answerable. And there's also another call it trend, which is sort of similar but slightly different to the whole bitcoin narrative, is there's a lot of these stable coins that are out there. So stable coins, if you've heard of these before, are basically tokens that represent one to one peering of a real world asset. So the easiest way to think about it is a US dollar stable coin. You know, one token equals one dollar, the one dollars held in reserve, you could always see, it's always there. So there's companies like USDC, which is done by coin Base and Circle that are out there. The one that is far more used than traded is this thing called USDT, which is slightly sketchier with the reserves not one hundred percent necessarily being there, but that's the one that people actually use and sort of trade with, but kind of zooming out in the longer term time frame when you look at that is that is actually very much in line, and in fact, that's almost the hyperdollarization, if you will, because you're actually getting dollars in the hands of more and more people, you're locking up more dollars, you're making dollar almost the native underpinning currency of a lot of these different things. So again, like maybe just the step back, I think it's sometimes hard to characterize this space as one monolithic thing. There's a lot of different experiments going into this, and from a venture investor, I think that's what makes the space so exciting too. Yeah, and you've had a big change in the government. There is a great quote from of all people, Senate Banking Committee Chairman Mike Krappo who said during a hearing, if the United States were to decide we don't want cryptocurrency to happen in the United States and tried to ban it, I'm pretty confident we couldn't succeed in doing that, which is a pretty big statement. Right. You have this development that could challenge the supremacy of the US dollar and could challenge many things about our world as it is, and you have powerful person and government essentially saying we can't do anything about it. That's pretty pretty dramatic, I thought. Yeah. Again, to take aside from the more purely bitcoin side, is to hold their store bitcoin, all you need to do is generate a public and private key pair. That's essentially how you hold it. And to transact with somebody else as you just need to know their public address and it goes directly to the person and it's settled with the person in about ten to twenty minutes, and you don't have to go through any third party. That was kind of the whole point of bitcoin to begin with. And so I think there's ways to restrict the feet in outpoints, there's a way to restrict like the merchants involved. But when you just look at the pure P to P side of this, it's very very hard, if not impossible, to outright ban this, even if you really wanted to. And that's that's what I think makes bitcoin to some extent so powerful. Is that like setoshi for better for worse, meet it. So there's no there's no person, there's no entity, there's no company. Yeah, it goes back to your point about why it was hard to figure out investment in the beginning, But it's also why it's hard to control and hard to figure out what to do with it. Right. It's the that that that whole point of who is it? What is it? Where is it? The basic questions are that's what that's what gives it both it's it's mystique and it's it's scariness and it's appeal, right all wrapped up into one. Okay, so I've found this quote from John McAfee, who of course has a competing um Tech kind of don't laugh, But he said, in his view of books, labor is an abomination, a twisted perversion of cryptocurrency. But it's very definition. Cryptocurrency wants to free us from control. But libra is nothing but control. Is that fair? I might not go so far in the fact to say that Facebook is the end all and be all evil. It is that it is. However, I will say from the fact that it is very opposite what many of the ideals that a lot of people in the bitcoin world share. In the fact that you know, in the Facebook world, it would have to be mediated. It would go through a big company or multiple sort of big companies, or a part of the association. It would effectively get to see all the transactions that were happening. They could probably do you know, more targeted ads on you based on what you're actually buying and selling who you're transacting with. So yeah, I don't necessarily agree with many of the things that mcaffee has to say, but to some extent, like people in the bitcoin space, do feel that Libra is opposite towards many of the ideals that they hold very strongly. Does that explain why you've had such a reaction to it. One thing I found interesting is you had so many people signing onto it initially, and then now you've had everybody saying, whoa stepping back? And is it because of pushback from regulators or is it because they figured out that it actually is just part of Facebook's ongoing bid to rule the world personally, Like, I've been somewhat critical of the Facebook leab story, so on day one when they made the announcement, I wrote this long post talking about the announcement, and my main prediction at the end of it is I thought that they would be delayed, not for any technical reasons, but majority regulatory reasons, just because of Facebook's is a very unloved company for lack of a better word. I was actually really surprised when you actually look at the NPS score for Facebook. I think it's negative forty seven, Like it's really really bad, like actually worse than most financial institutions, And so that's an astounding accomplishment. Actually yeah, so yeah, I thought there was no way that they'd be able to launch us on the timescale that they initially set out to do so, and it's looking that is likely to be the case. To say the other side, I think many people in the crypto ecosystem we're very initially excited about Libra is because one of the biggest questions that a lot of people ask in the spaces, hey when is real mainstream adoption going to happen? And Facebook had the answer was, well, we have It's about as mainstream as it gets, right, you know, we have I don't know the exact stats, we have two to three billion daily active users. So if you know, we really create this cryptocurrency, put in everybody's walls, put into a messenger like, we can push it out to many people. And I think many people in the cryptospace will might not necessarily have loved that per se, they might have liked the fact that, hey, if you get this in the hands of enough people, a certain subset or portion of them are going to say, hey, now that I have this digital asset, well, hey what about this bitcoin thing? What about this ethereum thing? It kind of gets them crypto curious for lack cryptocurious is the best phrase for lack of a better phrase. I think it's dangerous because again, you're giving up a lot of those ideals for the hope of distribution and adoption. But then also, like my personal takeaway is I think the sole reason why Facebook was doing this from the beginning was not necessarily to create a new, open, decentralized sort of finance ecosystem. If they did, they would have just bought into bitcoin very so much like what Square and Jack is doing, I actually think they did this more for monetization reasons for Facebook itself. My two cents. I don't know if this is true or not, but when you look at the actual LTV of a user, most of the values coming from all their US users. They have a lot of users outside of the US, but they an LTV, I mean long term value just to okay, yeah, sorry for the acronyms, but yeah, the value per users much higher in the US, and when you look outside of the US, it tends to be lower because the ad rates and that sort of ad purchases is a lower amount. And so my opinion, I think Facebook has always had this dream that hey, if we can actually get into the payment flow, in the monetary flow of particularly users outside of the US, then we can increase the value per user for all these other ones. So when you actually look at Facebook's history, they actually did like a Facebook credit system that they were doing, like things with PayPal and David Marcus from before. This is kind of just another iteration on the chain that they've been following. And I think this is actually a much more inherently Facebook revenue monetization sort of story. They just kind of co opted bitcoin and crypto and this all other stuff in order to push their narrative. I think it's smart and sort of sneaky at the same time, but at least from my opinion, I think that's the larger reason why they did it, not necessarily because they're bought into this new financial system. It's a perfect way of sending up for the epitome of this conversation we've been having, right, which is the benefits of co option and a cooperation versus idealism. And Facebook's move in some ways is the ultimate cynicism, right, And then the ideas do you celebrate that and go along with it because it's making the market bigger and more vibrant potentially, or do you say, WHOA, this is not the direction we want this to go. It's sort of a fascinating encapsulation of the whole debate in some ways, right, Thank you so much for being here. It's been really fun to talk to you. Yeah, I think it's been really fun. Thank you for having me so. I never would have guessed then in a conversation about Crypto, I would have learned a new story about the financial crisis. But maybe given crypto's philosophical underpinnings, I should have guessed that which in Gears entirely. My producer Megan and I were both thinking the same thing as we listened to Chris. We were thinking Dune. Seriously, remember the famous science fiction book with its warring fiefdoms, but also the hero of sorts, Paul Atreides, becomes the one who can be many places at once and can see many paths into the future. Right now, we can see many paths for cryptocurrency, including that it upends one of our most basic institute money, but we can't yet see the path it will take. Makia Killing is a co production of Pushkin Industries and Chalk and Blade. It's produced by Ruth Barnes and Laura Hyde. My executive producers are Alison McClain no relation in making Casey. The executive producer at Pushkin is Mia Loebell. Engineering by Jason Rostkowski. Our music is by Jed Flood. Special thanks to Jacob Weisberg at Pushkin and everyone on the show. I'm Bethany McClain. Thanks so much for listening. Find me on Twitter at Bethany mac twelve and let me know which episodes you've most enjoyed.