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Tether's Big Four Audit, Blue Owl's Private Credit Risk, and a New Bitcoin Client?
01:19:47
Tether is finally conducting an audit, and the CLARITY Act is shaping up to be a dud for stablecoins.
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- [00:00]
Colin
Foreign. What's up, y'?
- [00:06]
Gord
All?
- [00:06]
Colin
Welcome back to Blockspace Live, brought to you by Clean Spark. We've got a packed docket today. Tether is gunning for its first audit, not an attestation from a big four accounting firm as it seeks to capture market share from Circle. We've also got an update on the Clarity act. And surprise, surprise, the banks won out over the crypto companies. We've got some really good interviews lined up as well with Gordy Gord on to talk about why is crypto so boring right now. We also have Jay Patel on from Lygos Finance to talk about private credit markets. And for our final two segments of the day, a new bitcoin client emerges. What are the odds that it actually gains market share? Charlie's got some good notes on this. And for a kind of cool down story on the day, everyone loves a good crypto crime story. An Irish drug dealer had 500 bitcoin seized and you won't believe how he hid it and where authorities found it.
- [01:10]
Charlie
Block Space goes live every Monday, Wednesday and Friday at noon Eastern. We run a little bit over an hour. We host the best guests and we do quick hits in the latest in bitcoin mining, AI, emerging tech. Make sure to hit subscribe. If you're on YouTube, there's that bell. Get notified. We go live on X YouTube and some of our personal accounts. My LinkedIn shout out to my LinkedIn viewers right now. This is also a podcast. Right after we wrap this up, you can listen to it on demand anywhere you find podcasts. And if you really like the podcast and the stream, you'll love our newsletter newsletter, Blackspace Media. Lastly, we have a conference in New York City April 16th. That's in about three weeks. Tickets are still available. Book that flight. It's a bitcoin technical conference for investors. For more information, go to Op Next Dev. That's Op N E X t.dev this show is brought to you by CleanSpark Ticker CLSK. Let's kick it off, Colin. I'm very excited to get around to this drug dealer story here, but I think we have unfortunately some real news to cover at the top of the show. You're muted.
- [02:26]
Colin
We're going to have to save page six for later. We actually have some pretty good headline news and that is Tether is, is finally getting an audit. So Tether is engaging a big four auditing firm. So that is one of either PwC, Deloitte, KPMG or Ernst and Young. And they are looking to audit, roughly $184 billion worth of stablecoin reserves, as well as multiple business lines. I think this is important to remember. Tether's not just a stablecoin issuer. They have a bitcoin mining business. They fund a lot of companies. So they kind of have like an incubator, you know, venture capital arm. I don't think they'd call it venture capital, but they do have an investment arm. They have a bunch of different businesses to audit. And for those of you who have been around for a while, this has been an extremely elusive thing for Tether. They have often come under fire from some of the more, how should we say, deranged critics in crypto and some of the legitimate critics saying, look, if this company is so legitimate and it is one of the most important companies in the ecosystem, why haven't we seen an audit yet? There have been numerous attestations, but this is the first audit. And I think that's an important distinction because for an attestation, it's basically like a watered down audit. You have a third party come in, take a look at your books, and in Tether's case, they'll say, yep, the assets are there. The stuff that they say that they have to back this stablecoin is in fact in their books, on their books and in their bank accounts or wherever they're holding this. But that's it. Then they walk away from it. There's not this whole look at the processes behind how that money flows in. You don't look at who has permissions to access those accounts. An audit is basically stripping the business down to the studs and looking at everything behind the drywall. And there are. I think it's important to contextualize too why this is happening now. And shout out to Noelle Atkinson of Crypto is Macro now newsletter. She had a really good post on this this morning. If y' all aren't subscribed to that highly recommend. She's a former head of research at CoinDesk and she has a really good breakdown of why audits are not boring is the subject line and really what this means and why this is happening now. And I want to quote directly from, from this piece here. She says in this piece, quote, one of the reasons audits for reserves are so scarce is that the big names are traditionally not wanted to be associated with the quote, renegade. And what did Gensler call it? Non compliant crypto industry plus for many, the requirements were still too vague. How do you value digital assets? What's more, auditors generally sign off on accounts being prepared faithfully according to established standards. Until recently, there were none for digital assets. Some big accounting forums would work with crypto companies, but only if their names were kept out of any public statement. Presumably, they felt their association with crypto would make their other clients nervous. With deepening legitimacy of digital assets, the institutional embrace of stablecoins, and a growing number of high profile IPOs, that has obviously changed. Circle, for instance, uses Deloitte for its financial statement audits, but its reserves are still verified via attestation. So this seems like a news item whose time has come. You know, crypto and Bitcoin generally are more institutionalized than ever. There are multiple public companies that are crypto native businesses. We have Bitcoin ETFs, we have members of Congress holding Bitcoin. The Clarity act is being pushed through, which we'll touch on in a second of falling on the heels of the Genius act last year. And to me, it seems like the reason this is coming now is because now Tether can really do it the proper way. Now my biggest question though, and then I'll throw it over to you, Charlie, for second takes, is, you know, Noel kind of spilled the tea there at the end saying Circle has done it for its financial statements, but not for reserves. And so, you know, Tether does seem, from their announcement, they seem to be indicating that they will audit their reserves. That's again, roughly $184 billion worth of reserves. Most of that is Treasuries, some of its cash. They also have a huge gold hoard, which I assume will be audited if they do the full sweep. And Bitcoin hoard, they have a user base of 550 million. But will they do the whole kit and caboodle or are they only going to do financial statements? I think that would be really interesting to see, to see if this is a full audit and also what does that mean for other stablecoins in the US But I will turn it over to you, Charlie.
- [07:18]
Charlie
Yeah, it's like Circle has had a regulatory moat around it for a while, which is kind of why it's been, you know, if you're in the U.S. it's always been a little easier to use Circle as your preferred stablecoin until recently. But Circle has kind of gone the path of we're going to get all this buttoned up and we're going to do more like audit type behavior. And that's benefited it really well. Although Tether has always remained king in the crypto economy, so what did we see when Tether announced that this audit would happen? The first of its kind, really, in the history of the company after many people have been calling for one for so long? Well, we saw Circles stock price plummet at the open of yesterday, like 30 minutes after markets open. Circle ticker crcl plummets. What was it? It was at 126 and it plummeted to 100. Holy smokes, down 20%. And a lot of people are like, well, is this the Clarity Act? Is this in response to the Clarity act possibly falling apart? And the answer might be yes, we'll get to that in the next story. But it seems much more correlated to the Tether audit announcement in my view because this, the timing lined up for this for just after the Tether announcement. So it is, it's funny, it's interesting because the market apparently does think that the stablecoin game is a winner take most, if this is the case at least. And you know, while I'm not privy to all of the elbowings going on in Washington for who gets the, you know, the blessing from the US Government, but if Tether's able to, Tether is the titan. And if they're able to navigate the this path and cross into fully audited, fully compliant territory, why don't they continue to take the field?
- [09:29]
Gord
Right?
- [09:29]
Colin
And so I think that's really important to mention. We don't know why Circle sold off because the thing is, like you said, Charlie, so the Clarity News that we will be covering in the next segment came out on the 23rd at night and then when Market opened, Circle puked. But that also coincides with Tether's announcement for this. And you just had Beau Hines, formerly of the White House, now he is associated with Tether, tweeting about usat, which is their US Compliant stablecoin. Now, in order to be getting ahead of the game, some of these changes that are happening in the regulatory apparatus and legislative apparatus for stablecoins, Tether is rolling out a US Compliant version of usdt, which is their flagship. And so you kind of have to look at these as being in conversation with each other, the audit and USAT being rolled out. And I think there were some questions from people like is the audit going to be for Tether's entire business or just for the US Compliant side of things? I would imagine it's going to be for the whole, the whole business. Like, why would you just do, admittedly probably the smallest part of their stablecoin empire in usat. I don't Know what the actual balance is between that and usdt. But you know, you said it right, Charlie, does this set Tether up? If this, if this audit is successful and it really dispels fears about Tether's solvency and their legitimacy, does Tether just sweep the field from here? Because then if that does happen, you kind of have to ask yourself what, what's the point of having USDC if Tether has all the liquidity anyway?
- [11:16]
Charlie
Yeah. And oh, I mean, even more to this, a couple more takes is like Tether has been spending the past several years becoming more than just a stablecoin. They are an active investor. They now have investments like significant investments outside Bitcoin. They are likely the world's largest private miner. See our other reporting from coin from block space 50x hash, maybe 5 to maybe 10% of the network, perhaps they are becoming not just vertically integrated in the stablecoin game, but kind of like every sector, mining hardware or mining software, firmware, that kind of stuff. So they are a pretty dynamic business and, and they are using the incredible cash flow from the stablecoin issuance to fund these other activities. Tether truthers down bad. If you've been in crypto for a long time, you've certainly come across Tether truthers. There's the famous Bitmex or sorry, bitfinexed account, the famous Bitfinex account which has been saying Tether is going to collapse the entire Bitcoin ecosystem. Tether is going to collapse Bitmax and these major core pillars of the ecosystem. And it just hasn't. Now whether or not there was any material to these conspiracies, maybe there was, but it didn't happen. So here we are now, Tether. It's like get with the program. It's 2026. Tether is now on a path to becoming fully legit
- [13:01]
Colin
100%. And I want to just pull up some market cap charts for either USDC and USDT before we move on to kind of contextualize where either of them in terms of total market share. But first I want to comment on the Tether truth or thing. For those of you who aren't aware of what Charlie means by that, there was a huge narrative circa 2017 and 2018 and the Hangover for this was a few years after, even into the last bull market, that the only reason Bitcoin's price is pumping is because Tether just prints tokens and then people buy up Bitcoin. So there's this idea that Tether's money printer go brrr and then that's why Bitcoin's price would go up. Anyone who knew anything about how Tether actually flows and knew anything about the market structure of these companies knows that that's nonsense. That's not how any of this works. Because Tether actually does hold. They don't hold dollars specifically, but they hold treasury bills, short term treasuries and they earn an insane amount of yield on that as well. I mean they are immensely profitable because of this. We're talking about like billions of dollars worth of revenue from those instruments because of the reserves they hold. But going back to the market share here, I'm actually surprised at this because this, the gap between Tether and USDC is closing. In terms of their market share, USDC has a roughly 80 billion dollar market cap which is almost half of Tether's 180 billion market cap. And last time I checked on this it was, it was more like a Circle probably had like a fourth of Tether and then versus a fourth of Tether's market cap. And it does seem like they're catching up now. That being said, anything could happen. We'll see what happens after this audit. It's really interesting to see these two stablecoins compete. Obviously Tether is kind of, it was the earliest and first US backed Stablecoin, USD backed Stablecoin. But Circle has entrenched itself with I would say the US's crypto stalwarts like Coinbase. Right. And some of the more buttoned up bitcoin and crypto financial institutions in the us. So story to keep an eye on. We'll be tracking the results of this audit, but very diligently because yeah, I think this is one of the biggest stories to come out this quarter. Honestly, Tether is a not so quiet giant in a number of crypto business lines. As Charlie was pointing out earlier.
- [15:31]
Charlie
Tether's really fun to cover just because they're such a dynamic company. It does feel like a once in a generation company. That said, I'm making these comments separate from my views on the US dollar which we'll probably touch on this later on the show when we bring Gordon. But it's incredible to watch Tether and the Stablecoin story play out. I'm a bitcoiner though. I can only get so excited about that kind of thing because I've never been like I don't hold US dollar meetups in my local community and old Stable Coin meetups. So.
- [16:16]
Colin
All right. And speaking of stable coins, really we could have had either of these stories be the hero slot for today because they're both pretty big. But it looks like prior reports on the action of the Clarity act were correct. Stablecoin yield and crypto Clarity act won't allow rewards on balances, latest text says. So for those of you who tuned in last week, I believe we covered this on Friday. There were leaks that the Clarity act was reaching a resolution on this contentious interest rate payment on stablecoin deposits provision. To recap that stablecoin issuers and crypto exchanges want to be able to pay interest on stablecoin deposits, banks do not want them to do that because that neutralizes one of their key services to their, to their clients. Although I'll have some, we have some stats here in a little bit. Really not paying that much. They need some competition in this, in this realm. But it's looking right now that per this CoinDesk article, the latest version would grant rewards programs on a narrow basis as long as they don't resemble interest from bank deposits in any way. So interest or rewards that serve as interest are completely out according to this new draft of the bill. And what that means is instead of interest payments on your crypto, you'll get rewards from the platform for certain stablecoin uses, whatever that means. You know, maybe this is trading with stable coins on a platform. Maybe this is. They're going to gamify your stablecoin use.
- [17:50]
Charlie
You know, somehow I need, I need another place to gamble. That's, that's just.
- [17:55]
Colin
Yeah, yeah, exactly. You know, you'll, you'll log on to your coinbase account and you know, there will be a little, you logged in for 30, 30 days in a row. Here's your reward. You know, something ridiculous, but to me this almost seems like an extension. Not quite, but the first thing I thought of was exchange tokens. So, you know, like BNB Finances token or other ones where you basically get trading incentives if you use these tokens. To me it seems kind of like a similar rewards program for this use the stable coins. Maybe you get reduction in trading fees or something like that. And it's just absolutely lacking. It is so unexciting and boring and anodyne. I mean, you know, what are we even doing here? If this is supposed to be a kind of sweetener for crypto companies, they're absolutely getting the shit into the stick on this. And I want to just highlight a few of these points really quickly from Eleanor Terrett, Drive Home what this means the proposal would permit activity based rewards tied to user Activity including loyalty promotions and subscription programs, provided they are not deemed economically or functionally equivalent to interest. It would also direct the SEC, CFTC and U.S. treasury to jointly define permissible rewards and establish anti evasion rules. One industry leader who reviewed the text today tells me the draft is a departure, to put it mildly. That's me saying that from what had been previously discussed at the White House. Warning, the economic equivalent standards is vague and could be interpreted more restrictively by future regulators. They also point to limits of time rewards to balances or transaction amounts, which could make incentives difficult to structure overall, quote, this is a more narrow and restrictive approach towards crypto, they said. Another source said, quote, this is the best possible result. Who knows, who knows, who knows who these people are.
- [19:52]
Charlie
You know, it's funny, we had a comment on the YouTube from jhy8557 says, what interest on bank deposits? And I'm like, yeah, I'm glad, good point.
- [20:04]
Colin
I'm glad that they mentioned that. This is coming from the St. Louis Fed. This is the national savings rate. So this looks at an average of what banks are offering for interest on your savings. Wow, this chart's up and to the right. That's great. Oh, it's only 0.4%. I mean, that's a joke, man.
- [20:25]
Charlie
That is insane when we're dealing with such small numbers. It's not 0.4%, it's 0.39%. Because if it's 0.4, the bank will roll out a whole campaign to say, oh, we're bumping up your, the interest rate on your deposits. Because like, that's how minute and inconsequential these savings rates are.
- [20:43]
Colin
Yeah, I mean, that's like depending on how much you have in there, that would barely be enough to maybe cover your fees for using the bank, you know. And you know, the publicized inflation rate from the government is like 3% right now annually. So the actual inflation rate is much higher than that. And so if you're holding your savings in a US Savings account, if you're holding dollars in there, you're losing out in real terms month over month over year because the value of your dollar is eroding. And Nick Carter had a really good point on this where he was saying, and I don't know if I don't have his tweet up, I have it,
- [21:26]
Charlie
I'll put it up.
- [21:27]
Colin
Yeah, can you throw it up? He's just saying like, look, this is ridiculous. And he quotes this 0.4%. I'm assuming he got it from St. Louis Fed website basically saying we need to have this provision for stablecoin interest rates for on or interest on stablecoin deposits because it's going to drive competition. And he says here quote the out the outcome here quote will force stablecoin innovation offshore and stymie business models domestically. Bad for consumers, bad for startups, good for bank shareholders. And there you go, banks get their way once again.
- [22:03]
Charlie
Yeah, it really feels like the banks absolutely handed it to the crypto lobby industry because like crypto lobby really took a couple W's over the past year or two put together a big old single issue super PAC or pack and getting a lot of stuff over the line and now the banking lobby booted up and absolutely won with what Nick Carter calls a quote anti consumer bank bailout. I am kind of curious Colin. So apparently the only way I'm going to get I can get rewards on my stable coins if they this is how the bill lands is I have to do things with my stable coins from the activities. So it's like this could have big implications for consumer behavior. Now consumers have to say full yeet their use at into some liquidity pool so they can bet on polymarket or else they're not going to be able to get their rewards or something. I don't know.
- [23:04]
Colin
This is kind of shadows of, of a CBD CBDC based systems that have time limits on your deposits or your checkings account. You know we've seen these reports of early drafts of CBDCs or I don't know if this is true. I heard, I heard that this is something that is done somewhat with the social credit system in China where it's sometimes in order to stimulate economic activity. The idea is that you can tell users of the CBDC or the citizens of the country hey by the way you have until next Friday to use this paycheck or your money's gone.
- [23:40]
Charlie
We got another comment on the YouTube from invalidate block quote competition and yield leads to promising more yield leads to promising more yield. Don't disagree with that. But also the competition from what I can tell is near zero at the moment. So.
- [24:01]
Colin
Yeah and I just, it's really unfortunate to see this. You know I, I mean I'm not, I don't know. It is kind of. You got to root for the home team. Obviously some of these companies have not always had Bitcoin's best interest at heart.
- [24:17]
Charlie
Yeah.
- [24:18]
Colin
But the fact that the banks got one over on this and the fact that it seems like Coinbase is kind of lying down and just going to accept it. And same with Circle. It really is kind of a black bill for the quote unquote crypto Congress and crypto presidency. I mean, you know, Trump's administration has some input here for sure. They're at the negotiating table. They're not the ones totally driving the conversation. But lest we end too much on a black pill, I do want to highlight some of the other things that the Clarity act does that I do think are probably benefits. You know, it breaks down digital currencies into three buckets. You're going to have digital commodities, which is like Bitcoin. There are stablecoins and then there will be securities. So tokens that are basically investment contracts. And we covered that on the show a while back. CFTC gets exclusive regulatory jurisdiction over spot and cash markets for digital commodity. The CFTC currently has anti fraud and anti manipulation authority over commodity spot markets, but not comprehensive oversight under the Clarity Act. Digital commodities exchanges, brokers and dealers all register with an answer to the CFTC. It also narrows the SEC's reach over crypto. I think this is probably one of the most positive things in the bill. By defining most blockchain native tokens as digital commodities rather than securities, the bill moves regulatory authority over the largest and most active part of the crypto market to the cftc. The SEC remains authority over crypto tokens that function like traditional securities and over private market transactions. There's also all these other provisions like a blockchain maturity test that would define a mature blockchain as one not controlled by any person or group of persons under common control. An important distinction. This is part of the reason why Ethereum ducked any sort of security violations for a long time. Because when Vitalik et al were bootstrapping it, you basically were in this wild west period where no one was really paying attention. And then after the fact they said, well, they've kind of stepped away from it. So now it's deficiently decentralized. I would like to say though, the Ethereum foundation would like to have a word with that. And there are a number of other things like anti money laundering and national security provisions that probably I would, if I looked into them deeply enough, I would find some fault with, you know, all of these things. It's like, it's like with the Patriot act, you know, they're like, you don't want to be against the Patriot act. Now it's called the Patriot Act. So you, if you don't want to
- [26:39]
Charlie
be, are you not a patriot?
- [26:41]
Colin
You know, are you not a patriot. You know all of these things. When you really dig through the duplicitous language of some of these bills, you get the sense that they're actually doing the exact opposite of what they purport to do. So perhaps clarity will actually give us less clarity on certain things. But I think judging by at least the SEC being neutered from this, it's largely, largely beneficial to the industry.
- [27:06]
Charlie
Classic call. And he's got to get a dig on Ethereum, calling it not decentralized. Colin, you can just get, you can skate to the puck is going and say eth is down versus bitcoin. Like nobody cares that it's the whole decentralized argument. The price is down. So on this narrative thread, we have our first guest, Gort, coming up here in a second, but not before we get a word from our sponsor, CleanSpark.
- [27:33]
Colin
We are CleanSpark, America's Bitcoin miner. A publicly traded company with the largest operating hashrate powered entirely by self operated infrastructure across four states. This is our proof of work.
- [27:52]
Jay Patel
We are setting the standard for what's next.
- [27:55]
Colin
Learn more about the intersection of energy and bitcoin@cleanspark.com
- [28:04]
Charlie
and we are live with our podcaster provocateur, Gort.
- [28:10]
Colin
Gordy.
- [28:11]
Charlie
Gort. Welcome to the block space show, Gort.
- [28:16]
Gord
Thanks, guys. Can you hear me okay?
- [28:18]
Charlie
Yep. You sound great.
- [28:20]
Gord
Nice. Thanks for having me.
- [28:22]
Charlie
Absolutely. And I guess we finally get to do our full crossover episode here. You've been one of our star podcasters for a while and you do a number of content. You interview all the smart people in crypto and get them to talk about bitcoin, but unfortunately it feels like crypto is really boring right now. I'll throw it to you. Do you feel the same?
- [28:54]
Gord
Yes, I think. I mean, I probably don't have thoughts that most other people don't, but yeah, I mean, like, there's not a lot that seems to be going on. I think that the past bull market was pretty depressing and I think that, yeah, people are waiting on regulation and yeah, it's definitely in a lull. Most people seem to have pivoted to macro and commodities and metals and so yeah, I think that your overarching statement that crypto is pretty boring right now is accurate.
- [29:31]
Colin
So
- [29:33]
Charlie
I mean, I want to double tap on this because it feels like a lot of people expected the 2021 cycle to just repeat and just bigger this time, but it really didn't. I mean, retail got nuked, retail got eviscerated, even like the VCs are kind of seem to be doing pretty poorly. I don't know, man. Like, do you think we just had bad expectations or do you think there is like, this is just what the sign of like maturing industry looks like?
- [30:07]
Gord
Well, I mean, I think it's probably some combination of both. I think that this cycle was different. Like, I think that people, you know, I had this tweet, I don't know, this started this whole debate that I did with Haseeb. Two rounds of debate where I basically said like, there's, there's no buyers coming in for these massive rounds. This is, it's over. Retail has learned. It's a bit of, it's, I mean, a little bit sensationalist. But I think it has largely proven to be true and I think it will continue to be true. I also don't agree, like, I think that your point about VCs being, yeah, not, not doing so well right now. I think that the, the, this is going to be, this is going to take a long time to unwind. If you think that crypto has had 10 years basically of varying degrees of mal investment and funding things that don't make money and will not make money, it could take 10 years to unwind. And I don't think that there's going to be anybody to step in to buy these astronomically high rounds. Also there's sort of this thing like sort of toy example would be, you know how we talk about Solana traders now holding times being extremely low and because the trenches are so cooked, anytime there is the ability to make money, you kind of have to take gains. I think the same dynamic is going to play out with VCs whereby any marginal ROI, they basically are mandated to take. And so you hear a lot of sort of optimistic talk about doubling down on winners and consolidation around projects that are, you know, sound and, and going to have a viable future. But I don't know that I believe this entirely. I think there's a little bit of masquerading about this. In fact, I've heard, to be honest, I've heard stories, or I say stories. I mean, I've, I've heard, you know, secondhand that these up rounds of the few companies or projects that are doing well, I mean a lot of these VCs are having to take profits, right, Because a lot of these other things are down so catastrophically. So I don't know, it doesn't paint like a very good picture. Now I would somewhat distinguish this from bitcoin and then Perhaps the small handful of projects that are doing well, I think those, I think I don't have necessarily a view on ripping bull market in the near future. But I, yeah, I'm not convinced. I think this could be like a very long unwind. I mean, we saw projects in 2022 raising at billions, right? And a lot of these have now launched and are trying their very hardest to stay at their, you know, ICO price or whatever. So you just think, and the last thing I would say about this, which I still think it's under discussed, you can have a bunch of like the way VC is structured, right? Like you can have a bunch of small bets. Like if you invest at 10 million to seed round and it goes and you exit at 200 million. If you turn around and pile that into a round, that is 2 billion, 3 billion, 4 billion. Like you need a lot of those smaller outsized returns to compensate when one of those massive, you know, I don't know, high FTV low floats doesn't do well. And this is like, you know, embedding. We think about this as something like Kelly criteria where like you're sizing your bet. So like in theory, these, these massive rounds, I mean if you invest at 2 billion, like you, you really want to see a few of those go to 40, 50 billion. Right. And I don't know that we're going to have this again. So anyways, yeah, I'm like kind of secularly bearish on virtually all tokens. And I also think that this unwind is not like the poor bull market we had was not by any means the end of this. And I just don't see a lot of this stuff coming back. It's not anything really novel now, to be honest. It's not like an opinion that will set me apart. But yeah, this is just going to take time. And I think you can already tell a lot of the VCS are pivoting either implicitly or explicitly to AI or FinTech now. Right?
- [34:26]
Colin
So, yeah, Gord, I have two questions. I'll start with this one. You mentioned they're doubling down on winners. Who are some of those winners? Because if I look back at the last two years, granted, I'm thinking more from the bitcoin side of things. I don't really keep track of a lot of the altcoins and alternative blockchains and other things that have been launching. I don't see very many companies that really, really raised and have come out with a product that is compelling. So who, what are some of those Winners in your mind, what do you think actually succeeded?
- [34:58]
Gord
Even. Okay, so this is ironic. Like even when I say winners, it's a lot of these are still in private markets, so everything is fake and there's. They're marked to, you know, astronomically high valuations. An example of a winner perhaps could be polymarket. Right. And there were a number of crypto VCs that got in fairly early. Polymarket now, I don't know what the most recent round is, 15 or something like this. It's like every other week there's a new valuation. Is that a real number? I don't know. Polymarket yesterday announced that they're finally going to turn on fees. So were, you know, at least moving toward understanding the viability and, and like sustainable revenue capacity of this stuff. But no, I, I tend to agree like with your. The irony of me saying doubling down on winners, it's like it's harder to find winners. Right. I think an obvious, I mean sort of the, the sweetheart right now obviously is hyper liquid. A lot of VCs bought at, I, I don't know, I've heard right. Like between $10 and 35. So there are, there is money allocated there that is weathered fairly well. Like there, that there hasn't been some insane, I mean apart from the initial kind of up and then down hype has done quite well. So I think that could be considered one outside of that. I mean a lot of these, I think a lot of these, you know, winners are in the private market still and probably not even looking to launch tokens or become protocols or whatever we had prior. Right. So I don't know. It's a good question. I use polymarket as an example of one where you. There's definitely some, at least on paper, decent multiples there from vcs. But that's one where I've heard ironically, you know, I don't know if they're, if they're trying to hold those bags in perpetuity or if they have to take some off the table in secondaries or whatever. So.
- [37:04]
Charlie
And, and one of the interesting things you need to bring up market because I would say Polymarket's a real business. Like a lot of these other things, I'm not really sure what. Well, they're not leaving a business.
- [37:13]
Colin
Casinos are a business.
- [37:15]
Charlie
Yeah, there's a business.
- [37:16]
Gord
Yeah. But I mean polymer like calcium actually makes money. Poly Market is just now starting to make money as of like literally yesterday. They're turning on fees in almost all markets, I guess, except outside of geopolitics. Which kind of interesting and maybe, yeah, maybe an interesting strategy actually. But regardless, we'll see. We'll see if first of all, there's a whole casino lobby that's trying to come at them from the other side and then there's competition from a number of angles because yeah, casinos are profitable businesses, so we'll see. Right. Like the durability there. I think Polymarket has definitely escaped kind of the crypto containment that, that's kind of undeniable. But yeah, I don't know what this looks like. Is it worth $20 billion right now? I'm not sure.
- [38:06]
Colin
Two observations from what you just said there. Sorry, Charlie, Gord is interesting. You said they're turning on fees for everything but geopolitics.
- [38:14]
Gord
That's what I read.
- [38:15]
Colin
I'm fairly sure if that's true, that's very interesting because I would have to imagine next to sports, Geopolitics is probably the big, the silver tune up for them.
- [38:25]
Jay Patel
Right?
- [38:25]
Colin
It's probably the thing that nets them the most trading volume and really would be curious to your point, Gord, about. We'll see how viable this is. This is not uncommon for a lot of these tech companies that are VC backed. We saw this with Uber, we saw this with Airbnb, we saw this with Doordash. When they're in the bootstrapping phase, fees are low or non existent, so they can get, they can accrue users and then they end up blasting people with fees. And in those three scenarios, we saw all of the services get more expensive as a result. I mean, it's not the best corollary in the sense that it's not like betting on that will get any materially more expensive. Right. I mean, they're going to take a cut of it, but it's not like the price of your Airbnb going up from $1,000 to $1,500 for a weekend. I have one last question, but I'm going to close on it because Gord, you mentioned Hyper Liquid and I know that Charlie's got some questions for you on that.
- [39:20]
Charlie
Yeah, I mean, Hyper Liquid got the Wall Street Journal article this past week and we saw Oil rip on hyperliquid over the previous weekend during the Ron thing. I think it's hard for us to pull ourselves out of our crypto biased information ecosystem. But does Hyper Liquid seem to be like crossing the Rubicon into mainstream use? Polymarket did this like we just said. Do you think Hyper Liquid's position to do this?
- [39:54]
Gord
I think it's the second closest, I guess. I don't know, it's hard for. I'm not really a trader. Right. And so much of crypto actually just, you know, outside of perps like so much of it is the past couple of years been focused on trading high performance, so on and so forth. So I don't know, it does seem to be a very good product. It has users that have sustained post airdrop and now for quite some time, right. Like there I was talking to somebody and their, their thought was, you know, you give every, you give people 2 million dollar, you give casino goers 2 million dollars. Like that takes time to bleed out. But the point, you know, to spend it back at the casino. But the point is that there is clearly some durability beyond that initial kind of airdrop and obviously the price has done quite well. And it makes money, right? Like it, it does make money. Again, there's, everybody has an opinion about competition and you know, whether these fees compress substantially. This is obviously a high, well, you know, relative to some other businesses, this is relative pretty high margins in, in perps trading. So I don't know, it's hard to say. But yeah, like, I mean outside of. Again, it's like we were talking about winners before. It's like, yeah, okay, it's been prediction markets maybe as a whole and then hype and we'll see. So I think it's impressive, let's put it that way. And I think that there's something to be said about a team that really is kind of bootstrapped and follows some of the ideals of permissionless building or whatever and having the amount of success they've had. So that, that shouldn't be kind of. We shouldn't like relegate that to nothing
- [41:47]
Charlie
kind of Last topic I'll throw at you. And you know, we, before we had you on, we did two pieces on stable coins and compliance and regulatory stuff. I know this is, I'm not going to hear a new take here, but I want to hear you riff on this. Is crypto taking over tradfi or is tradfi taking over crypto?
- [42:12]
Gord
I think it's, I don't know, the delineation, I don't know. Is that important, to be honest, it seems like we're moving to, you know, 24, seven markets, more permissionless systems. A lot of it is tradfi recycled. A lot of it I don't care that much about. Like all of us come from maybe bitcoin backgrounds and a lot of this stuff is like, you Know, not to sound too laser eyed, but this is just like fiat games. Like almost all of it is fiat games. Even like I heard you guys talking before about the Circle and Yield and all this stuff is just like, you know, it's all arbitraging. The fact that every company wants to become a bank, right. And everybody just wants a lot of assets under management. They can skim a little bit for themselves and it's just not that interesting to me. Like stable coins. Yeah. Like, of course they should be able to pay yield. Like I think any rational person agrees that this is like, would be unfair to the banking lobby. But at the same time it's like I, I, I feel like I'm being compelled to care about a bunch of stuff that I never cared about. Right. And it's like we're all in this together. Like we're really not. Like I don't care about that stuff. This isn't some, you know, ideological thing for me. This is quite boring. And really it does feel like a bunch of, you know, new parasites coming in and wanting to get their little tentacles on some negligible amount of, you know, gill. They can skim off the top of everybody. It's just not very, you know, this isn't what got me into this at all.
- [43:45]
Charlie
Well, you are certainly, you have certainly a fantastic, precise, comedic and acerbic way of communicating this. One of your recent tweets, one of my favorite tweets, which I retweeted, quote, the hardest part of being in crypto is pretending to care about agent payments. I feel that right now this is
- [44:05]
Gord
such a marginal, like this is a prime example is like such a marginal improvement. I mean we're really like compressing on the things that that are useful. Like this is an open payment standard is like in terms of the, the impact this has on the average person is like so uninteresting. And all of these things were just, I, yeah, the agent payment thing is kind of a charade. I mean, I don't know, it's just another, like another narrative. So.
- [44:35]
Colin
Well, and it's interesting you're saying back with the common person, the value for that is going to accrue to power users of AI, Right. Which is almost certainly not the average person.
- [44:45]
Gord
Yeah, that. But also it's just, it's not like so much so a lot of the whole like agentic payment thing is that your bot or whatever is like autonomously doing stuff for you. And this is more just like anthropomorphizing code to me. It's like a narrative. It's a way to hype up and personify lines of code that are doing like little chatbots doing tasks for you. And it's not something that is. I just don't find it that like, I mean, I'm kind of, I don't have great words to explain this. I just don't think it's that like compelling for from the end user. It's a very marginal improvement to your tech stack, if you will. And where I had this response, it's like, well, it's really fascinating where the moats can be built and the value creatures are like, yeah, it's not that interesting to me.
- [45:45]
Charlie
We have to wrap this up. Gore, thank you so much. Thank you very much for hitting on all these topics. We'll have you again. And for the listeners, Gord has a podcast, the Gort show, and follow him on Twitter for hilarious takes which do really crazy numbers.
- [46:02]
Colin
Thank you, Gord.
- [46:04]
Gord
Thanks, guys. Yep.
- [46:09]
Colin
For those who are wondering, yes, Gort is a disembodied voice that lives on the world Wide web. Gord is not a person. Gord is more of an idea.
- [46:20]
Charlie
All right.
- [46:21]
Colin
And with that, we'll go ahead and hop into our next guest segment and welcome Jay Patel of ligo's Finance to the stage. Hey, welcome back, sir. How we doing?
- [46:31]
Jay Patel
Doing well, doing well. How are you guys? Embodied voice here.
- [46:35]
Charlie
Yeah, Embodied voice. Jay's here. Came on. Let's go.
- [46:40]
Colin
Yeah. So Jay, there's a lot we could unpack today, but you had mentioned that we are starting to see cracks in the pre private credit market and I think that is a great jumping off point into some questions that we have for some other news items in the news cycle recently, like with strategy really doubling down on stretch and also as it relates to bitcoin backed credit in general. But to start this conversation, can you give us a rundown on what's going on in private credit markets and also for those who don't understand what these are, how private credit markets function in the wider flow of finances.
- [47:18]
Jay Patel
Yeah, for sure. So, you know, I think most of the recent headlines have been primarily around different managers gating redemptions on various vehicles. So either limiting or all out stopping the redemption for investors in various private credit vehicles. So, you know, folks trying to take their money out and the investor is limiting them to a certain percentage of their request or all out denying redemption requests. And you know, I think what's interesting is it's not like legal or you know, unheard of. You know, clearly within These vehicles, they have the right to do that. But I think maybe what folks don't understand is actually like underlying problems like what caused it and why did so much money flow into private credit over the last really the post Covid era that is suddenly fleeing. So I think a good kind of like way to understand the market is really that there's publicly traded kind of BDCs, private credit type vehicles and then there are these non traded closed end vehicles. And the real difference is like one functions similarly to an etf. I can buy and sell it. If you think back to the grayscale trade back in the day where the bitcoin is in there and I can buy and sell it, someone might not pay me one bitcoin equivalent for one BTC worth of grayscale the trust, but if I need to get out, I can. And then on the non traded side it's really kind of off exchange. And the managers usually have some commitment on interval funds to say hey, we will provide 5% redemptions per quarter or 7% or whatever it might be. And on some of these vehicles it can also just be that there's a cap. You know, the manager could in theory say hey, you know, there were 9, 12, 13, 15% redemption requests. We're going to honor 5% and distribute it pro rata. So that article you just pulled up, you know, there's been kind of numerous headlines, similar things across all the managers, where all these managers are basically gating redemptions because they're getting redemptions far in excess of the liquidity they have, which all of these stocks have seen kind of like turmoil across the managers because the way they make money is they charge a fee on the assets and the market sees that, hey, all the money is trying to leave these vehicles. Regardless of what's happening in the vehicles. That is the income stream for the managers. But I think what's more interesting is what's happening in the vehicles. If all of these loans were doing well, clearly they could have a secondary market where someone else could buy the loan or if the loans were performing, they use the interest. And there's plenty of new demand coming in to put in money. And that can replace the kind of folks looking for an exit. But what's interesting is over the past five or seven years a lot of private credit has shifted to making loans to software companies. And I'm sure you guys talk about AI plenty but, but a lot of these software companies that once had durable moats, great businesses, growing revenues are not in that position anymore. And A lot of these loans, you know, I think it'll come out that they were actually pretty poorly underwritten. You know, I think Cliffwater is the kind of biggest one in the news over the past few days. But their whole strategy was basically, hey, you know, we can have a more efficient and lean business by not doing the underwriting ourselves, but we'll just put money into other private credit funds and then they'll give us access to the deals for us to put in money directly into those loans. So, you know, it's a, it's a, I wouldn't say it's scary situation, but I do think that there's still a lot more carnage to be had. And I think the biggest reason is the panic is kind of just now setting in like you see here, because, you know, these managers are gating redemptions right now, but they haven't marked the portfolios to the current value of the assets. But the publicly traded BDCs trade at something between like 50% and 70% of NAV. So it's almost like, you know, you really got to like close your eyes and, you know, spend disbelief to think that this manager is telling you, hey, all the loans are fine over here, everyone's paying 50 cents on the dollar, but trust me, they're fine. But obviously it's not their incentive to really mark them to where they are.
- [51:46]
Charlie
So, Jay, I don't really follow the, you know, macro and private credits absolutely out of my wheelhouse. I'm kind of curious, like, how do we track and get a sense for the market? Because I see news stories and you know, announcements from say, Blue Owl Cliff Water, like we've done this much. I don't know, like how do you follow the market? Because I have, I have difficulty getting a sense for scale and direction.
- [52:11]
Jay Patel
Yeah, no, so I think the market, it's quite difficult to follow just because a lot of these vehicles are not publicly traded. Right. They're accessible via your wealth manager or ria. And I think this is probably what links it to the success that MicroStrategy and the other treasury companies added, which is basically that a lot of the capital that started to go into private credit wasn't endowment or pension fund. With the 20 year time horizon, it was retirees and everyday folks and their wealth manager told them, hey, you can get 12% fixed every month on an annual basis. Every month you'll get some liquidity and you'll have that for perpetuity and there's high quality credits. And that was very attractive. But the difference between Me and you and an endowment is that I might need liquidity. I can take the money out. I think the reason that Stretch and these other preferreds are so attractive is because it's a high rate. Yes. But also I can sell out of Stretch on a daily basis whenever I want to. And I don't think that the underlying structure for private credit really made that possible. I think people were disillusioned by the fact that the rate was so high. But if you think about the underlying rate, a, a lot of these are software companies, not great credits underneath. But also the way that they get that 12% is they make 9% interest rate loans to mostly middle market companies and then lever up 2x, pay a bunch of fees, pay interest, and now you're at this magical 12%. But yeah, you're right, it's an opaque market. And I think that is why you will see more and more of this capital over time shift to things like Stretch. But also probably you're going to need some sort of real bitcoin collateralized debt. I think the one gap there, and there's a big NYDIG report out this week that kind of characterized as basically like Stretch is great for everyday retail investors who want instant liquidity and they want a good yield. But there's a lot of folks who need to put in assets and make sure that there's real collateral backing it. Right. So like Stretch, you don't have a direct lien on the bitcoin. It's not directly collateralized by any part of MicroStrategy's Bitcoin pool. But I do think that those structures will evolve. We saw the lead in abs Galaxy had a few clos earlier this year. So I think that space will evolve.
- [54:31]
Colin
Just to double tap on the first part of the conversation here, Jay, some of the headlines that have come out recently, we touched on Blue Owl. BlackRock has capped withdrawals from a $26 billion fund. Blackstone has avoided gating its $82.5 billion fund only by injecting 400 million of firm and employee capital. And then you mentioned Cliffwater. Shareholders in Cliff Waters $33 billion flagship private credit fund, sought to withdraw 17% of their stake. And there are a few others, like with Apollo. And we've covered some of these in our podcast lineup and on the newsletter because a lot private credit is driving a lot of the AI Capex boom. And you know, we actually covered a story, I want to say, at the end of 2025, maybe the beginning of 2026, that blue owl told Oracle, we're not going to give you, we're not going to give you any more credit for your future builds, almost preempting this. And so I guess another way to take this conversation, my question and you brought up, you know, a lot of these software companies, people are worried about their credit risk. The collateral for some of those loans is probably lacking. You said they weren't underwritten. Well, the software is going to zero, as people keep saying. On the AI side, there's a fear that these big data center projects aren't going to be able to ROI this capex spend as quickly as investors originally thought. In your mind, is this an oh shit moment for private credit and for financial markets at large or are you still a little bit calm about what we're seeing?
- [56:10]
Jay Patel
I don't think it's an oh shit moment for financial markets at large, but I do think it is for these private credit managers. And I think there's two reasons. One is, you know, I think compared to making a loan to a software company that was acquired by a sponsor, making a loan to a data center operator is like incrementally better. At least there are some power assets and GPUs and you know, there's real collateral. It's not future ARR or something like that. But the issue that all these managers have is they don't print money out of thin air. I mean, I like to, you know, we like to make the fiat joke that all this money is whatever, but you know, they need investors to put in dollars to make these loans. And if there's no new investors putting money into these vehicles and the software companies are barely repaying these loans as it is, they have to use all of their available liquidity to, you know, meet these redemptions. And you know, like you said, they're Even injecting these $400 million, you know, their own capital in to process redemptions. So I think there is a constraint on like the private credit space. Like there's only so much capital that they can put in. And I think like the AI boom has, you know, for what it's worth, drawn a lot of capital. You know, you see Sam Altman going to the Middle east and everywhere. Like there's an insane amount of capital needed and I don't think private credit will be able to fulfill that because they have their own set of problems. Now the other piece on the blackrock thing that's just interesting is like a lot of these managers are like, don't worry, we stand behind the vehicles, we're going to put in our own money to process redemptions. What's funny about that is they're doing this for the private vehicles like the ones that are available to investors via their RIAs or wealth advisors. But at the same time they have these publicly traded BDCs that are at like 50, 60, 70 cents on the dollar. So you almost wonder why are they putting hundreds of millions of dollars here when if the assets were so great they can buy them at a 60% discount on the public market. And the reason is because they don't want to kill the golden goose which is the fee revenue that they have. Because if they stop doing this then everyone is just going to put in full redemption requests if they realize that hey, BlackRock's no longer going to auto redemptions. I'm not going to put in for my 5%, I'm just going to put in for my 100% and hope that I can get as much as I can out. But there goes BlackRock's 2% management fee or whatever it is.
- [58:27]
Charlie
So to close out, you mentioned stretch and I want to just double tap on the bitcoin backed credit markets. What does this mean for those and any ramifications specifically for the bitcoin backed credit markets?
- [58:44]
Jay Patel
Yeah, I think this is going to be a slow shift but I actually think this is positive for our industry, you know, because the biggest, you know, you know, beneficiary of private credit so far has been most of these managers who make a bunch of fee income. But if you think about a bitcoin backed loan, just a simple bitcoin backed loan, it's very different than making a loan to a software company or even an industrials business that has a factory or whatever in the sense that you have the underlying bitcoin collateral, you can liquidate it if you need to, it's 24, 7, you can verify it on chain, you can hold that at custodian or in a DLC like we do at Lygos or a smart contract on another chain. But it's there. And I think that once the carnage, and I don't know how long it will take occurs on the private credit side, investors will bison up and realize, hey, I like that 9 to 12% return but I need to know what these loans are, I need to know what the collateral is. And it's got to be real. It can't be future receivables for your CRM software that was sold to, I don't know, hair salons in Idaho. There's just not enough people buying that anymore anymore and there's no defensibility to that software. So I think that will open up this market to Bitcoin backed lending things like Stretch. I think Stretch will probably remain kind of like a, I don't want to say retail but like retail esque product in the sense that the benefit of Stretch is that daily liquidity. But I think it opens up the door for more complex products or you know, maybe slightly lower rate but higher collateral quality and credit quality products for the institutional side.
- [60:23]
Charlie
So what? You know sometimes all you need for Bitcoin backed products is for the other products to look less look shakier. So I hear bullish on bitcoin backed credit markets from you Jay. Thank you so much Jay. From Lygos we will have you on again very soon whenever we need an expert on the things that I cannot possibly understand like private credit. Thank you Jay.
- [60:49]
Jay Patel
Take care guys.
- [60:51]
Charlie
Cheers.
- [60:51]
Colin
Cheers Jay. Thanks man.
- [60:54]
Charlie
And now a word from our sponsor. Lygos hedge funds are getting liquidated.
- [61:02]
Colin
Lygos Lygos hedge funds are getting liquidated.
- [61:07]
Charlie
Is your Bitcoin safe? It's not just Bitcoin price drying up big whales, hedge funds and lending desks are going under after notorious 1010 and 25 liquidations. Maybe something about private credit in there too. Counterparty risk is rampant. So it's more important than ever to understand who actually controls your Bitcoin. Don't be the next FTX or Celsius victim. If you are working with another loan provider, do yourself a favor before it's too late and check out Lygos finance block Space's preferred non custodial Bitcoin lender using native Bitcoin smart contracts to protect your stack. With Lygos you always know where your Bitcoin is. Hold your keys, no wrapping, no bridging, no rehypothecation. Get competitive rates as low as 10% APR. Go to Lygos Finance. That's L Y G O S dot F I N A N C E to learn more. And now for the next story con. I will take this one. This is more of a Bitcoin tech story. This is some news that came out this week that there is a new Bitcoin client on the block. Or maybe there will be a new Bitcoin client. Or maybe more specifically there's a new team which is going to raise money to fund quote a new Bitcoin client. This is the work of a
- [62:41]
Jay Patel
new
- [62:41]
Charlie
501C3 called Production Ready led by well known Bitcoiners Samson Mao, Jimmy Song, Parker Lewis, I believe another person or two. And this is an initiative to quote decentralized bitcoin development. And Jamie Song accompanied this with a X article called the case for a conservative Bitcoin Client. So basically they're spinning up a 501C3 similar to other like not for profit entities which are kind of either labs or granted groups, I guess like a chain code or like a local host or spiral, and they want to fund development of a quote, conservative bitcoin client. Little context here. The folks who are kind of leading this are on the board and like Jimmy Parker, Samson Mao all very really leaned into the filter argument. That is the, like the Bitcoin, I would say the Bitcoin puritans that I, that I often refer to on block space content and they've been very unhappy with the fact that transactions they don't like get onto bitcoin and through that they've been very critical of the developers and ecosystem of developers that contribute to the dominant bitcoin client, Bitcoin core. So they want a different client and they use terms like conservative, unchanging, pro ossification. And so they've kind of written out some of their thesis and saying that they're giving node operators an option and they're saying that this is a quote, third implementation, which I think is one false and also kind of.
- [64:45]
Colin
Wait, hang on, they're saying that there are four. This would be the fourth implementation. Well, or not more than.
- [64:52]
Charlie
That's a good question, Colin. That's a good question. What is a different, what's a different implementation of Bitcoin? Obviously Bitcoin core is an implementation. There are other bitcoin clients. There is Bitcoin D a separate implementation. There's LibitCoin a separate implementation. Do you consider a fork of Bitcoin Core? So if you were to go to the bitcoin core repo and fork that GitHub repo and change some settings, do you consider that a different implementation?
- [65:22]
Colin
So this is like an ontological argument. If you fork it and don't build it from scratch, then it doesn't count as its own implementation. That's the argument basically.
- [65:31]
Charlie
Well, I think it's unclear. So the funny thing is that I think that the claim that Bitcoin from production ready their client is a third implementation is pretty misleading because it says that there's bitcoin core bitcoin knots and then whatever implementation Bitcoin production ready is going to build because there's more. There's bdcd.
- [65:58]
Colin
There's Bitcoin. Eric Voss.
- [66:01]
Charlie
There's more. Yeah, and if we're talking about like different implementations, then we could say like there's Libre Relay, which is just Bitcoin Core with the guardrails taken off and prefer preferential peering. So I think this kind of language indicates that they're either trying to communicate and market this to a less technical user who cares a lot about the Puritan angle, or that they just don't know what they're talking about. I think it's a little bit of both. I'm pretty critical of it. I've thrown out some very sarcastic tweets about this because my view is that Bitcoin Core is the conservative client and also conservative conservatism. Conservativism by. But you're just changing like relay policy. They haven't been very clear about exactly what they would change with this. There are certainly a lot of things with Bitcoin Core which are inefficient that other people have kind of stripped down or removed to make the client like perform better. But like, I'm not really sure what they mean by conservative client. Are they talking about a client with different default Relay policy settings? Because if that is is what they're talking about, I think this is a total BS initiative. And if they're talking about more rewrites or actual changing functionally how the client works, then I think they could be arguably an implementation which could be an alternative. This idea that I really just think that the filter camp and the anti core camp has done a terrible job and in most cases willfully muddied the waters and muddied the conversation distinguishing between what is a consensus change and what is a relay policy change. Because none of these actually change what bitcoin blocks include. It's more.
- [68:11]
Colin
They wouldn't be bitcoin.
- [68:12]
Gord
Right.
- [68:13]
Charlie
I mean, yeah, then they would have to fork off. And so yeah, there's, there's. I don't really see by my definition of what is a conservative client. I think that this would just not do that. Do they add more reviewers and add more days to review? Like, you know, PRs that are merged on core. Do they just wait 30 days and merge it on the this new client? So I think it's like really confusing and at best. And even, and even if I try to be charitable, I think this is a pretty ridiculous angle. I think if I could just predict and give you a one liner of what this probably is, if they raise any money, they're going to fork Core, do very little except change some very inconsequential social signaling, relay policy changes, and then pay podcasters to shill it. So I think that's basic, probably what I'm going to do. If you want to pay us to shill it, we'll consider it.
- [69:09]
Colin
Yeah. 2 Comments Here, Charlie, to close out, unless you have anything else to say, but just to trigger the filter, folks, it's only Bitcoin if it comes from the core region of the blockchain. Everything else is just sparkling crypto. And then number two, I love your distinction that you feel like Core is actually the conservative client because this to me kind of gets into it reminds me of the. I'm a classical liberal from a lot of conservatives. You'll hear conservatives say that like they believe in the ideas of classic liberalism, but not what it's become. And I think that that's an interesting distinction here because if you look at Bitcoin core, there is a strong argument to be made that it is the more conservative option and that the changes being made in these other things are more progressive in the sense that they are less democratic and more top down from the maintainers of these various implementations. And I wonder if the case for the conservative client has to do it. Did I hear you correctly that they said that they are in favor of ossification? Is that yes, this is a core point.
- [70:14]
Charlie
Jimmy makes this point multiple times in his write up. Now what's funny is like I don't. There's very few like discrete statements that I disagree with. I really challenge his framing, but that's a longer conversation.
- [70:33]
Colin
Yeah, I mean I think that's interesting. And if I were reading this, if I'm reading this correctly, I think that's probably what they mean most about conservative is we want the fewest changes to Bitcoin as possible, which also probably extends into we want the fewest. How do we put it, the fewest use cases outside of the original use case for financial transactions as possible. Going back to the relay policy as it relates to ordinal descriptions and arbitrary data.
- [70:59]
Charlie
But the whole thing is that there have been no changes to Bitcoin. There have been no changes to Bitcoin and critics of Core claim that they have made changes to Bitcoin when they haven't. The Bitcoin is the same as it was since November of 2022. No consensus, no new consensus has emerged. So these are simply relay policy, which has proven empirically, functionally ineffective. So this is these are. There have been no new changes to bitcoin. Despite what the Nazi. The Naz people will tell you on. Let's move on. We gotta move on.
- [71:38]
Colin
Yeah, that was a good rundown, Charlie. Thank you. All right. And we will close on a story of interest for the week. A little bit of page six. I've got it up here, Charlie. I'll share it.
- [71:49]
Charlie
Yeah.
- [71:52]
Colin
And that is an interesting little drug dealer crime. Little drug dealer crime duo story here. Irish police crack code for 35 million bitcoin stash tied to former drug dealer. So Irish officials, with the help of Europol's European crime Cybercrime unit, has seized approximately 30 million euros worth of Bitcoin, 500 Bitcoin from a wallet that belonged to one Clifton Collins, who was drug dealer who was arrested in 2017. Now, when I was looking at this story, at first I had these delusions, like, oh, did they just nab one of Ireland's key drug pins? No, this was just some silly Mick growing cannabis in his backyard in County Galway. When the police arrested him, he only had, like €2,000 worth of pot, and he ended up going away for five years. So he's actually released now. And so. But he's not like a huge drug dealer, but he'd been doing it for some time. And back in 2011 and 2012, maybe to launder money, maybe to have a currency that was less traceable than cash, he bought like 6,000 bitcoin. And the funniest part about this story for me is how he chose to hide that bitcoin. He printed out the seed phrases or the private key. I saw mnemonic used in one of the official press releases, so I'm assuming it was the seed phrase. Seed phrases were around back in 20. Well, he bought it in 2011, 2012.
- [73:38]
Charlie
We don't know when he actually happened in early in the early 2000 and tens or something like that. I forget when.
- [73:42]
Colin
Yeah, yeah. And anyway, we don't actually know when he printed them out, but he printed out 12 seed phrases. He split the Bitcoin into 12 buckets of 50, 500 Bitcoin each. He printed them out and stored them in fishing rods and hid them in his house, which he was leasing in County Galway in a town called Far. Not if I'm. If I'm pronouncing that correctly. Now, when he was arrested, you've got the hat.
- [74:07]
Charlie
You should be able to pronounce it correctly.
- [74:09]
Colin
Far, not. Oh, I know it well. Goes back to me. Goes back to me great, great grandfather. Yeah. So. But when he was arrested in 2017, his landlord threw everything out. And so all of these seed phrases in their. In their casings, in these fishing rods were thrown into a dump, and Collins thought they were lost forever. And according to this. This Guardian article, I thought this was a really funny quote. Collins apparently told the police he has come to terms with the loss of the fortune and considers it punishment for his own stupidity. So I think that's really funny. But the other. There's something not adding up here. I almost wonder if one of these were spirited away by one of his compatriots or they were hidden somewhere else. Because according to this Guardian story, which is quoting from the Irish Times here, workers of the dump told Irish police they remembered seeing discarded fishing gear. But waste from the dump goes to Germany and China to be incinerated. The fishing rod case has never been found. So, ostensibly, the majority of this bitcoin was sent to an incinerator either in China or in Germany, but somehow they've managed to recover one that had the seed phrase for 500 bitcoin on it. Something's not really adding up here. So who knows how this was actually found? Also, the police, you know, in their official statement, which I thought was kind of cute, talked about how they had decrypted something. And if these were just seed phrases, there's no decrypting that you need to do. You just type the seed phrase into a wallet and then you get the funds. So who knows what really happened here? But I just want to close on this before I throw it to you, Charlie. What is going on with British Isles citizens and losing bitcoin in landfills? Those of you who have been around the block for a while might know of this famous story of Welsh engineer James Howells, whose wife threw away a hard drive with 8,000 bitcoin on it in 2013. And this poor SAP has been lobbying his local government for years now, trying to excavate that hard drive from the dump to see if he can recover his lost funds. He's promising up to 30% of the funds if he finds them, to give to the. Give to his local government and to give to locals in the area. And I believe at this point. How much is that? 8,000 Bitcoin? Yeah, it's 568. $569 million worth of Bitcoin. At the peak, it was almost. It was a little over a billion. So something going on with the Brits and the Irish and losing bitcoin and landfills, man.
- [77:01]
Charlie
Yeah, I do think that you. That the most hilarious story about this particular drug dealer called Collins is that he was not some kingpin. He was not some. At least we don't assume he was on, like, selling on the Silk Road or something like that. No, he was like, literally like your neighborhood weed dealer. Like, he was the guy down the street who was like, oh, well, I made it big. I got like 20k. I should put like half of it in bitcoin or something. And then he does. I'll also say, like, great forethought. Great, great thinking because, you know, maybe you don't have it now and. But. But at least somebody has it now. All of that could have disappeared. So now it's in the good hands of the British government, who I'm certain will do good things with it.
- [77:54]
Colin
Oh, hold on there, boyo. It's the Irish government.
- [77:57]
Charlie
It ain't. Oh, the Irish government. Oh, I'm so sorry. Oh, God, I'm. I'm.
- [78:00]
Colin
I'm gonna get f. Our, like, two Irish viewers. Yeah, I think that's as important. It's like this guy was just selling mids in County Galway, right? That he was. I mean, I can't imagine. I can't. I mean, well, it rains a lot in Ireland, so you do get enough moisture. Maybe you can grow a good pot there. But. And. And one last thing for people who are like, why the hell did he store it this way? I will add that when he did this, I don't. It doesn't give a timeline for when he hid them. I would imagine it was probably shortly after he bought hardware. Wallets weren't really commercially, and they weren't. They weren't proliferated the way they are today.
- [78:32]
Charlie
So I actually, I think it was a good idea. I'm not going to lie. I'm going to give him props for storing it in fishing rods because I would have. Would not have thought to look there. And the fact that if they. If the seed phrases or private keys on paper in these metal fishing rods have held up over 16 years, then he succeeded. It worked. You did it. Yeah.
- [78:56]
Colin
I would just say my first call when I got to the jail would have been to one of my close buddies, were like, boyo, you gotta get over to me garage right now. There's millions of dollars worth of bitcoin in these fishing rods. You gotta get them out before me landlord throws away me fortune.
- [79:11]
Charlie
Michael, how many times do I have to tell you? There's money in fishing. And that's the show, folks. Thank you so much for listening to Block Space Live. We do this Monday, Wednesday, Friday like and subscribe. Check out the podcast, check out the newsletter newsletter block space media.com and buy tickets to the conference. April 16 New York City Time center op n ext d. Catch you all next week. Friday, Friday. We're on Friday. Catch you Friday.