← CRYPTO 101
CRYPTO 101
Ep. 652 Understanding Crypto: Misconceptions and Realities of Todays Volatile Markets
00:46:40
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- [00:00]
Les Borsai
Foreign.
- [00:10]
Bryce
Ladies and gentlemen, boys and girls, gather round the radio, gather round the Internet streaming device of your preference. Wherever you are in the world, you are certainly in the right place because you're joining the Crypto 101 podcast and we're here to kick some tushy and, and have some fun. Brendan, how you feeling, man?
- [00:27]
Brendan
I don't think we've had an intro that good ever, Bryce, but when you.
- [00:32]
Bryce
Got a guest like hours today who's just an incredible ball of energy and who's got some contrarian views, nothing gets me quite hyped up as that. So I'm pleased to introduce to everybody Les Borsai. Welcome to the show. CEO of Wave Digital Assets.
- [00:51]
Les Borsai
I want to take the CEO title, but not really. I hate co.
- [00:54]
Bryce
Founder.
- [00:55]
Les Borsai
Co founder. And so Dave Seymour, my partner, is the actual CEO, which is good because he can get shot with all the arrows and I'll just keep doing my thing. But I loved your introduction and it scared the shit out of me because I'm like, oh, shit, he said tush. He didn't say ass. My profanity, you know, I'm going to have to hold it back now.
- [01:14]
Bryce
So, you know, we, we, we pride ourselves on being a family show that, you know, folks who are listening, you know, they might be driving their kids to school and all that I got right when I first started the podcast. I'll never forget it. And my mom listens to every episode, so. Hi, mom. She, she called me out, she's like, son, you know, you don't, you don't need to be using those words as much as you've been using them. So I, I toned it back a little bit, but, you know, all. All in good fun. And with this market volatility, I've certainly said my, my fair share of swear words over the past few weeks, but, Les, we're really excited to, to dive in. You've got a. A storied past from, from, you know, working in the music industry to now, you know, and then in 2013, investing in Ripple, you know, 2015, being one of the earliest investors of Ethereum. So take us back in the time machine a little bit. How, you know, kind of how did you get into crypto? And what does crypto kind of mean to you? What pulled you in?
- [02:08]
Les Borsai
Well, you know, it's funny, the music business, we have to go back to the music business to really kind of think about what my thinking is and how I look at the world. And, you know, what I loved about the music business was, you know, it was an innovative that used to create lots of verticals, all the way from creating the technology to signing the artists and the creative process and the underlying ip. And as the music business kind of got worse economically, it wasn't quite as exciting. And it was a hard business to be in. And I tried to reinvent and innovate by moving in the direction of technology. And I did that throughout my career. So I would say, you know, the answer to the question is in 2013, I was curious and, you know, I had heard about Bitcoin and not soon enough. I think at the time it was trading at about 600 bucks. And I said, well, I'm not going to spend that kind of money on something I don't understand, but I am going to find the next one. And I went out and, you know, I knew how to use Reddit and, you know, kind of different websites. And I met this guy who had a digital wallet, one of the first ones with Ripple. And so I got to meet the ripple team in 2013. This is before Brad. This is Chris Larson and team. And they're all packed.
- [03:28]
Bryce
McCaleb.
- [03:28]
Les Borsai
Yeah. I think Jed had left already by then, maybe. Not really sure. He might have been there, but I think it was like towards the end where he was getting ready to leave and it was a room full of people and it's not what it is today. And somehow I think I convinced Chris that I should be an advisor and I could bring something to the table. And I think I got the better end of that deal. Not saying I didn't want to help along the way, because I really did, and I did here and there. And then in 14, kind of with that same narrative, I'd heard about the Ethereum pre sale, so I ended up doing the Ethereum pre sell. And I think the comparison for me was when you looked at bands that were breaking, there was this crowd, this, you know, group of people that you would lean into and they would know everything that was happening. So that network would tell you that Nirvana is going to be the next big thing off bleach or, you know, whatever bands were about to break. And if you looked at the crypto world back then, it was really kind of the same thing. You know, you had these really early adopters, and if you got to know who those early adopters were, you could really build a relationship with them and kind of figure out what's happening. So that's how I got into it. The mission is the boss. And it cuts across the whole company by organizing that way. We also created transparency. All these silos became porous, and when organizations are porous, it tends to be better.
- [04:55]
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- [06:39]
Bryce
That. That's awesome. You, you, yeah, you brought sort of that, that expertise and that knowledge from a different sector into, you know, the financial investing sector. And I think that you know a lot of people at home listening. It's like we, we always try to remind people to, you know there's many altcoins and apply maybe your expertise or your sector expertise to Your investing. So for instance, if you're a supply chain management guy and you know that industry through and through, go look for, you know, early altcoins or whatever, are kind of trying to upend that industry because you'll be able to really see, you know, are, are, is this fugazi or does this really, is this really onto something? If you're a banker, go to the defi sector. If you're an AI guy, invest in some of these AI coins and so kind of use that expertise. But, and, and so tell us about the genesis, you know, of, of wave digital assets and kind of, you know, how did that start and what was kind of the, the investment thesis.
- [07:31]
Les Borsai
Yeah, so I think, you know, the, the thing that I, I never give enough credit to. I love doing things alone. I'm really good with isolation and coming up with ideas and executing them. I never realized that if you collaborate with people, have skill sets outside of your own, you can actually build something bigger than yourself. I was fortunate because Dave Seymour came from finance and he had been an M and a banker. He had worked in venture capital, establishing some of the earliest venture seed stage funds in Asia, Southeast Asia. And you know, we had been friends, you know, through mutual friends for a while and you know, we, we decided we wanted to, to do something else. And Dave, you know, at the time it was almost kind of intimidating for me because, you know, I'm coming out of a business that's relationship based, that's creative based, that's, you know, culturally based, and moving into something that's, that's just numbers in a. So, in a sense. And so when I first got there, you know, look, I'm still really grateful that I got the opportunity to do it because, you know, there was all this, like, mystique behind it for me and I didn't want to deal with artists anymore because it was just too demanding, you know, kind of on an emotional level and everything else. And I always joke that, you know, finance, you know, won't call you in the middle of the night and say, they're in jail. And those are real life things that happened to me with some of the artists that I managed over the time that I was managing artist. So given the opportunity, when we launched the company, it was a pretty specific thesis. We took what he knew and that was seed stage investing in companies and built funds around that. But the other two things that I think we really excelled at that time were treasury management and looking at protocols and how they had these treasuries and could we Manage those using DEFI and other capabilities in a regulatory fashion. Because the first thing we did is we registered as an RIA with California, where others didn't. And then eventually, when we had enough AUM with the sec. And it's one of the reasons we just kind of stayed under the radar while everyone was kind of imploding. The final thing we did as a company was create financial products. I was looking back at some of the things that Ben, who's also one of our partners and Dave created back then were we did a bitcoin Yield product. In 2019, we did one of the first alternative token index funds. So Ben did a whiskey barrel tokenized fund. And these were all really interesting kind of innovative products back then. But then 21 hits and you see everything implode. And I'll say that's when it changed for me. And the way I interacted with the company, that was the big shift for me in my thinking in 21, which I'll get into if you want me to.
- [10:22]
Bryce
Yeah, well, for sure. I mean, as. As much as you'd like to.
- [10:26]
Les Borsai
Yeah. So in 21, you know, everything started imploding and we started to see bankruptcies and. And I think one of the big catalysts for me was, you know, we went after Voyager through the bankruptcy process and we lost to ftx and we were like, okay, how did that happen? And then FTX blew up and we're like, okay, let's do this again. And we went, you know, through the bidding process and. And we lost Binance us. And I'm like, Jesus. And, you know, in. We started looking at the alternative coins that these bankruptcies were holding, and we said, this is a really good opportunity to do exactly what everyone else isn't doing. Everyone else was panicking at that time and we said, look, let's go find the opportunity. So what we did is we started buying out all of those token inventories and liquidating them so they become ours. We'd buy them at a discount and we ended up doing that with all of the big bankruptcies. So everything from FTX to Prime Trust to Celsius, we bought those alternative assets and got a really good education on, you know, how to deal with these assets, what was the liquidity, and learned a lot along the way. Like, you know, and those are the lessons that would come in really valuable for the government work I would start to do.
- [11:41]
Bryce
And were you were buying bankruptcy claims from debtors or you were just buying these locked Solana assets, for instance, or.
- [11:49]
Les Borsai
They weren't Even locked. So, for instance, you know, with the first one we did was Voyager, and you know, they had a ton of alternative tokens. We'd make an offer for the tokens and we'd buy the tokens and that was it. So it wasn't the claims. And in cases there were locked tokens in the token inventories, we would buy, but we would go buy those at a discount. And because we were so good at liquidating and understanding the characteristics and who launched a lot of these protocols, we could do that pretty well. And a lot of credit goes to Ben and Dave for understanding the value and how to price these things. Because there wasn't really a super competitive, competitive marketplace because we were just thinking about it different. And you know, in that time in 21, where everyone is like running for cover, we're like, yeah, you know what, let's go buy this stuff. And it became incredibly profitable for us as a company. Wow.
- [12:42]
Brendan
So, you know, when you're doing this, and I know you work with a lot of high net worth individuals and family offices, but when you're going through this process and you're getting the opportunity to talk to them, what are some of the most common misconceptions that these high net worth individuals, these family offices, even on the institutional side, these institutional investors still have with the crypto market today?
- [13:06]
Les Borsai
Well, I mean, you know, I don't know if it's misconceptions. I think it's. It's what? Look, all of it comes down to risk tolerance. And, you know, is it, is it something that you want to get involved in or is it something that you're afraid of? And I think the reason that the FTX fraud could go so far is greed outweighed common sense. And that's why you had so many people kind of not responding to their best kind of inherent instincts. And that's really, really sad. But a story I like to tell is I was on a plane recently and I was sitting next to this guy. He's about 80 years old, nice man. And he had been in the taxi business and he had medallions. You know, these things cost about a million bucks apiece and he had 200 of them.
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Bryce
So he had like a fleet of taxi drivers essentially.
- [13:57]
Les Borsai
Yeah. And by the time he went bankrupt, he had about, you know, they were worth about 80 grand each. And, you know, for someone like that, you know, that was being pushed by his sons to kind of look at crypto, he was afraid. And by the time we were done with the flight, kind of really Being able to explain to him in a simple way what these assets are and how they function isn't really that different than any other world he's used to. And there is a way to get your feet wet based on what your conservative risk tolerance is. And I think, to answer your question, you have a lot of misinformation out there based on narrative that just isn't accurate. And it comes down to things like Silk Road in the early days where you had these massive implosions by bad actors. And you can argue that Ross was a bad guy or not. I'm somewhere in the middle, I suppose. I liked his innovation, obviously. But when you take a look at those narratives, they just seem to stick around. And I'll argue that we have those same narratives with cash. When criminals steal, they steal cash. When criminals are drug dealers, cash is involved. And, you know, people somehow cease to look at this just like another asset class, and they think it's a Ponzi scheme, but that's someone that is repeating narrative and not kind of looking in depth at what the underlying characteristics of these assets are.
- [15:27]
Brendan
So if we fast forward to the current day, do you think that, you know, this period that we're in right now is comparable to the 2021 or 2022 bear market? Or is that, like, maybe too much of an exaggeration? Right. You know, there's too many. Too much emotion that's getting into that.
- [15:44]
Les Borsai
No, it's not comparable to me, because having been in it as long as I have now, you know, the 21 bear market let me back up, you know, in 18, when we started the company, I think the only thing I've ever been cursed with is being early. And, you know, early there's, you know, that great statement, pioneers get shot with arrows. And I've done that in my career over and over again. There's such things being too early. And one thing about finance, which was really great for me was there was a learning curve, so it slowed me down. And that kind of made it the right timing in a lot of the things that we did. The other thing is kind of persevering and being able to roll with it. And the reason the partnership with my partner, Dave, specifically works so well is I always used to think I was the pessimist, but it turns out I'm an optimist. And Dave is more pragmatic. And we always have that discussion of it's a new asset class. Dave, stop looking at it like traditional finance, because it doesn't behave that way now. You can argue that the correlation to traditional markets does, but there are elements that make this a completely different experience. And I think that's really the way you have to look at it. So again, when we started the company, the idea was traditional adoption, but when you're way ahead of that, you know, I mean, I remember this, you know, I'm that guy that'll just reach out to anyone. And I remember early on there was this really famous guy who did the Yale endowment. I can't remember his name right now.
- [17:15]
Bryce
David Swensen.
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Les Borsai
David Swinson. Thank you. And you know, I reached out to David Swinson out of the blue and the guy got right back to me.
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Bryce
Wow.
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Les Borsai
We had this really great conversation and this was a really forward thinking guy and really opened up the opportunity for us to work with them early on. But it never happened because we were just so early. But it just showed you that the right type of people would think about it and it would just take time to adopt. So to answer your question about 21, if you take a look at this administration and what is happening and how it's happening, it's accelerated everything to a different place that will create comfort for a lot of the traditional institutions that are out there, which just means that the whole business should be elevated. And I've spent a lot of time in Washington thinking about all of this and interacting and kind of paving my own path. So that's the difference, because in 21, you still didn't really have confidence or adoption by Tradfi, which is a much bigger, you know, underlying number than what we're dealing with here.
- [18:24]
Bryce
Yeah, no, and, and I definitely want to get to the, the work you've been doing in Washington because, I mean, that is the epicenter of what's moving markets right now. I mean, for every line of policy that gets written or erased, you know, a billion dollars of market cap or whatever is like added or subtracted. So it's, it's, it's really important to dive into what's going on on the policy front. And I, I kind of am just curious, kind of from your perspective, though, before we get there, you know, is there any sector of crypto during this sort of period that you're looking at that could kind of have that tailwind? I don't know, maybe it's a policy tailwind. Like, obviously bitcoin is there. People are confident in it. They now have like the strategic reserve they're talking about. No, nobody now thinks bitcoin's a scam and going to go to zero. It's like kind of solidified its place. And I'm just curious if there's another sector outside of Bitcoin that you could kind of see, you know, rising up here.
- [19:16]
Les Borsai
So it's what I've been working on. And it's one of those rare times for me in particular where my timing has worked. I think when I first got into cryptocurrency, you see These cycles and pre2017, you see the ICO cycle and everyone that's launching a company and isn't this easy and it's going to replace venture capital, and then it implodes. You see the NFT cycle, which I was really an advocate of and still am in some ways, because I think we're just going to see a reinvention of that in certain sectors, like gaming anyway, and, you know, with AI components, but it essentially disappears. Then you see what happens with meme coins and the shift in protocols. And now the typical marketing drivers have shifted to kind of economic drivers, which really bodes well for this younger kind of native audience that looks at these things in detail. Although the process of it is completely, you know, kind of risky for. For people that don't understand it with the way that these meme coins function. So when I think about it, you know, it's not so much, you know, the specific tokens or specific companies. I'm not looking at it like that anymore. I'm looking at it more. More from the perspective of scale and infrastructure. So in 2023 is when I did the first RFI for the U.S. marshals Service. And so it's not that I'm working what's an rfi? So it's a request for information. And so just to back up a little bit, I looked at the world in a different way and I knew a little something about government, and I knew that there were pools of capital being held by different facets of government. So I wouldn't say I was consulting to government. I still don't. I would say that I had some self interest to build things with government. So instead of thinking of it like I'm consulting to government, I was more interested in public private relationships because government is really good at certain things and really bad at others, and private companies can be a great help. And that's the underlying nature of how TRADFI has worked with government for forever. So when we did the request for information, the goal was how would the U.S. marshals Service handle digital currencies that had been seized? And I'm Going to try not to go down this nerdy rabbit hole right now. It's going to be really difficult. But when we think about the way it currently works, the US Marshals Service has been doing RFIs and RFPs requests for proposals since 2019, and they failed, I think six times now and may fail again. And it's incredibly complex with the way that the government has set this up, because there's multiple agencies that seize digital assets. And without getting too deep, some of that kicks up to the US Marshal and some of that kicks up to doj. But you might have seen that Senator Lummis asked a question to the U.S. marshals Service and it was how much digital currencies have been seized and they can't answer it.
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Bryce
Yeah, they don't know.
- [22:25]
Les Borsai
Well, it's not that they don't know. On a top line level they know, but what they're not really able to account for is you have seven agencies that do seizures. So if you think about it, you have a Secret Service, Homeland Security, you have the FBI, dea, irs, Criminal Investigation Unit, which is really the biggest, and a handful of other agencies that do these seizures. And then they do seizures with the state that are federal that they split with the state. All of these seizures funnel into kind of two pipes in the federal government. And to do an accounting, you have to figure in things like, well, was there victim restitution on that? What was that percentage? Every one of these state seizures has different percentages that they share with the state. Then we have blockchain transaction fees, Then we have things like forks and airdrops. So you start to see why it's complex to get an actual accounting of what you hold. And I think, you know, look, David Sacks came out and said one of the biggest travesties is we sold $370 million worth of Bitcoin. That's worth 17 billion. And I kind of say, yeah, okay, maybe, but bitcoin could have went to zero for whatever reason. And is the government really in a place where it should be speculating in that way? And there's this premise or concept that actually can be achieved of budget neutral being able to purchase bitcoin and other currencies through a budget neutral approach. And that actually does exist and can exist. But going back to the problem is government has been really good at track and trace. They've done that since 2016 with companies like Chainalysis and TRM, and they're pretty good at custody. There's companies out there like Bitgo and Copper and so on. But what they're not really great at is the handling of these assets and the management understanding them. And it's why we've seen things like about a year, year and a half ago the federal government liquidated Bitcoin and they didn't know that Germany would do it. At the same time, they didn't plan out how they were going to do that liquidation and it tanked the market 16%. And these are things that would never happen in traditional finance. So for me, what the opportunity really became was, okay, how can I look at all of this different and find my opportunities? And that's when I built out that vertical. And that's all whole nother story that gets incredibly complicated because you know, pioneers get shot with arrows. Not in this case. So in 23 I started meeting with the states individually and I was just fortunate. Before this administration ever got here, I had a really good understanding of how it's being held, who holds it, you know, and there's all of these things that people do not think about. Sorry, I'm going on a bit of a rant. But sure, seizures are something that can be used in lots of interesting ways. But the other travesty, when we talk about the 17 billion loss, it's not even a loss, it's not gained. What about all the alternative currencies that we didn't do simple staking on in pre forfeiture seizures, they seize dollars and they'll put them in T bills and generate interest that goes back to the government or the state. It's the same thing with digital currencies, but they're much more complex and you can generate much better returns through defi and other mechanisms. So these are the things I started to think about and how could we take, I mean when we think of the states. I'll finish on this and pause for a minute. It's not just about seizures. It's about them accepting digital currencies, it's about taxes, it's about civilization, it's about unclaimed property that has a lot of cryptocurrencies. And then you start to say, okay, someone's going to have to handle these because there's no way that the treasurer in a state's going to know how. And that's what the big scaled infrastructure opportunity is.
- [26:30]
N/A
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- [26:58]
Bryce
Go to wix.com it sounds incredible. It almost sounds like maybe a good integration for Doge or something like that. The Department of Government Efficiency bringing the, I think Elon calls it, tech support to the government. Sounds like something you're working on. And I kind of wanted to comment on one aspect of this which was the seizures. And like this idea of the government doesn't necessarily know how to account for how much crypto it owns, where it is, all that kind of stuff. So David Sachs, who you mentioned, who's, you know, the, the head of crypto and AI at the White House kind of commissioned a report that was apparently due April 5th.
- [27:34]
Les Borsai
Right.
- [27:34]
Bryce
And it was supposed to kind of disclose how much the government actually still had, where it was, what the wallets were. Do you have any insight into that? I mean, here we are, you know, weeks after what. Yeah, there you're smiling. I want to hear about it.
- [27:49]
Les Borsai
I mean, look, the insight is, is, you know, really the foresight, there's no way they could do it. And you know, they have to have software that does that, you know, and you know, like, I hate the idea of guys that come on shows and pitch their companies and shit like that because it just always bothered me. I'm not a salesman, but those are some of the problems that we thought about ahead of time, like education, for instance. We created a curriculum and I hired a bunch of government people just to give it away because I knew if there wasn't a baseline understanding in government of what these assets were. And really we catered the first iteration of this to law enforcement and we've educated some law enforcement agencies over the last couple of years. And that was something I just wanted to give away. Well, in the same way we have a partnership and created some software that will account for all this and be able to account for the digital currency. And it's the same scenario. We're going to give it away because we think it's good for the industry to understand what is actually being held. But you can't really create tools for that unless you understand two sides of the coin. What are the financial elements and the government elements. Three sides of the coin, I guess, if there are three sides and what are the crypto elements? And that's really what we did. And we've been in conversations about deploying some of that and we'll see where that ends up. But for us as a company, the bigger opportunity is to take our expertise and hopefully share that with people that are willing. Where the opportunity gets really big is you have 27 states that have come out with legislation for either digital currency reserves or Bitcoin reserves. And all of those are very nuanced. Six of them, I think, failed at this point. But that doesn't mean that there isn't going to be something that needs to happen around those states. And that's really a lot of what I've been focusing on.
- [29:40]
Bryce
Wow, that's. Honestly. Yeah, it's fascinating. We certainly don't speak to many folks that are in your sector and kind of doing your thing. And if we take a step aside, outside of parsing through these seized assets, where are the biggest challenges for on our side of the House? On the crypto side, where the biggest, like regulatory challenges are hurdles that you see those barriers starting to come down, right? Like the things that the antagonistic regime of the past four years put up, all these barriers, which ones are like the closest to coming down?
- [30:16]
Les Borsai
Oh, well, I'll answer that two ways, actually. I mean, look, unbanking was a big one. You know, you saw Nathan, you know, with Anchorage, you know, testifying, and, and a lot of people got unbanked. I think we got unbanked. And, and I think to see those barriers coming down, obviously the sec, with crypto task force and Paul now coming in, these are things that indicate that the tide has changed. And the thing I was always fearful of, and I've known Beau for a little while, for instance, Bo Hines. And I love this about this guy.
- [30:51]
Bryce
He's the guy who's David Sacks, his right hand man at the White House.
- [30:54]
Les Borsai
The funny thing about Bo is this is a guy that before he was 30, ran for Congress, was like a football star at Yale and really cared about digital currencies. I'm one of the few guys that can say this about him because I know his concern was really similar to my concern. And it was, is the SEC going to push innovation out of this country? Because we saw it happening. When people look at these alternative tokens, they don't really think about the fact that they're American companies, in a lot of cases are launching them. There's more technology there than just a token. And I think Bo really recognized that early on and had those concerns. And I think those concerns start to go away. But if I look at it from my contrarian point of view, I like barriers to Entry, the more of them, the better. Because if you're someone that, the way I think about it is a registered investment advisor, which was a barrier to entry, understands government, understands altcoins. You start to create this natural kind of, you know, fence around you that that kind of can allow you to do things other people are not doing. And then when you mix in being early and these are all lessons that came from entertainment and music, you know, I often joke, I won't say the profanity that the politics in Washington, what's the word I can use, are for kids. And you know, because, you know, the music business had real politics and it was hard to accomplish anything. So you had lots of different angles that you would have to go through for a barrier to entry. And I'm not really seeing that yet. What you're seeing is a lot of voices from a lot of companies that, you know, may or may not have self interest. And I think the way I'm looking at it is really kind of different, that there are things we can do that are good for the country, that we don't need to profit on every nickel. And it's good for the industry if we can bring people up to speed, whether that's members of Congress or someone that's a treasurer in Oklahoma, you know, these are the people that are going to be dealing with these assets and they have to understand it. So I think I've had a real clear vision for a long time of how I want to approach it.
- [33:04]
Brendan
So in hindsight here, you know, we've talked about a lot. Do you feel like we are at least on the path to getting this done the right way now?
- [33:13]
Les Borsai
Yeah, I do. And one other thing I'll say about being contrarian in a way. You asked about legislation.
- [33:20]
Bryce
Yeah.
- [33:20]
Les Borsai
You know, I'm not real. Like, I know we need legislation and policy and I understand that. And you know, I've never really had a great time with authority or courts. So it's really ironic that I'm, you know, doing things within government, you know, if I can find ways to accelerate something I want to do without legislation to get the same result, you know, and there's ways to do that. There's certain things that need to be approved by a state, for instance, and other things that don't. And when we think about legislation, buying digital assets from a budget that sits in a state or federal government, well, that's going to require all sorts of things, Congressional approval, probably legislation, how they're going to move forward. And it's like that Stuff takes a really, really long time and costs a lot of money to go fight those battles. And there's really good associations that are doing that with the help of all these big companies. And it's something I have no interest in. And what I would rather do is be a builder and figure out ways to work with entities now and move quicker. So while that's all happening, I think it's just something that takes so long. Now this administration is working like a Silicon Valley tech company. They're moving fast and breaking things on purpose and it works. So I kind of love that about them because I also kind of joke that this is the only administration in history that would ever let me get near them. It's kind of like that thing about I don't want to be a member of a club that would let me in. There's just no way. Like if this was the Biden administration or any other administration, I'm not getting an invitation and nor is crypto for that matter. It's an afterthought. And the fact that they see the value of it, to me, that's really kind of like Silicon Valley thinking in some ways.
- [35:07]
Bryce
Yeah. And I definitely want to touch on as well, kind of a completely different side of, of the industry, outside of the government stuff. You, you obviously have such a breadth of knowledge in music and music is one of those industries that is ripe for disruption with blockchain, with NFTs, particularly concerning music rights, distribution and revenue streams that are going to directly benefit the artist. But I would love to have you riff on, you know, your thoughts of, you know, is blockchain actually going to come in and disrupt the music industry or is this a pipe dream?
- [35:40]
Les Borsai
I'm going to say it in the best way I can. I don't care. And I say that flip on purpose because I'll tell you why. Now, you know, a handful of years ago I figured out a way to get pre cleared content into a digital platform. A website essentially where game developers and web creators could go and not have to deal with a natural selection of the record company process of licensing content. So I knew a fair amount about this. And when you look at a song, let's be really clear, there's ownership that is constantly changing that you don't follow. They don't even have a centralized copyright database. So first off, the way to identify and AI will help with all this for sure. But back then, the first way to identify ownership, you'd have to go through Google and Wikipedia and every other site to see who owns one of these tracks, then you'd have to get approvals from all those people to use that track. So when we got to the point of doing deals with all the labels and publishers for a small bucket of content that developers and different folks working in technology, app developers and things like that could come use, the problem was the labels didn't really push it. So I said, okay, well, let's do this a different way. Let's put it into Unity or Unreal or one of these engines, and let's see if that works. And, you know, without the label support, because they don't want to support innovation, really. I mean, look at, you know, the way they did deals with the streaming services. The one thing that saved their industry. Because I remember what was happening with the industry before those deals, you know, now becomes this kind of massive, massive problem over time because of what those rates look like. And it's become a standard. So when I say I don't care, it's only from the standpoint that you can't convince an industry to change the way they behave. And what that means is the economics behind it are not favorable to anyone who wants to build for them. So if I'm now saying, well, blockchain's a really great technology, they could really benefit from it, there would be transparency. Finally, their response would be, well, a, we don't want to change the way we work because we don't want transparency. We want to be able to extract as much value as we can. And that's what we've been doing forever, because we don't build technology anymore. So the only thing we build is economics. Meaning if you're licensing content in what business in the world? If I was like, hey, Bryce, you want to start a business and you do all the brain damage and you come up with the money, and I'll give you 23% because you're using some of my stuff. Who says yes to that? And that's why I'm kind of like, you know, as much as I love music, I'll listen to it now. I'll go work on my stereo system and make it bigger, you know, by buying new equipment. But, you know, I don't believe there's a business there because the gatekeepers don't allow for it. And that's just heartbreaking to me because artists deserve it, ultimately.
- [38:41]
Bryce
Yeah, it is fascinating because it's like, music is an art form, right? And it was always an art form. And then it was kind of bastardized and industrialized. And I see the point you're making. It's very well said. And I kind of want to.
- [38:54]
Les Borsai
It's from Love. You know, it's like, for sure. If I could, you know, walk into a label and say, see, the other problem is because of the way copyrights work and the way that they've been, you know, sold and resold and resold, you know, you. You can't get a fresh start, because if you don't have the catalog to launch a new business, then what are you really launching? You know, how many people have tried to launch, like, independent streaming because we can get the rights? Well, no one's listening to that, so, you know, that's not Rihanna or whatever they're listening to. I don't know why I said Rihanna. Never listened to a Rihanna track in my life. Okay. That's not true. A couple Eminem Rihanna tracks. But, you know, but. But you see what I'm saying? It's like you have to change the whole industry. You know, the last person that actually did that is Steve Jobs. Steve Jobs did something no one was ever able to do. And people don't really think about this. They say, oh, he built the ipod and all that. But you know what he actually did that was genius. He put all those record company guys in a room and said, this is how we're going to do it. And he was the last guy to really change an economic model and create something that was innovative.
- [39:59]
Bryce
Wow. Yeah. Rest in peace, right? I mean, one of the great innovators of our time and completely changed the trajectory of the world. And I want to go back to. I had a thought, because you were talking about the transparency that this all brings, how the record companies probably don't want it, and all this kind of stuff. Stuff. It's like, adopting blockchain would be not beneficial to the guys in charge.
- [40:23]
Les Borsai
Right.
- [40:23]
Bryce
And I. And I want to. You know, it kind of reminded me of an episode of the House of Cards where they were talking about bringing blockchain to voting.
- [40:32]
Les Borsai
Right?
- [40:33]
Bryce
And. And, you know, hey, we're, you know, and, like, it's actually a feature, not a bug, that voting is obscured. And it's in the dark and it's behind the closed doors. It's in. It's something that, like, the people in power actually want to be in control of. They don't want to make that all transparent. Like. And you're very, you know, in deep with dc. Do you think that we'll ever have blockchain voting?
- [40:55]
Les Borsai
No. And. And here's why. Well, no, I'm not going to say no. We will have it in parts and parcels. So, you know, the thing that's really interesting is think of it this way. When we think about the federal government, federal government, you know, does things in a certain way, but then you have different states that have different makeup depending upon how they're built. Are they red, are they blue? And you have different votes for different initiatives. So the idea of taking kind of a federally mandated blockchain initiative for voting and making every state do it, I mean, we vote on recounts and things that go wrong with voting. So I don't think it's really feasible from an adoption standpoint. And with the way that that's another industry that's a little bit broken. My guess is without knowing anything about this, is different states have different companies that supply the voting machines. That's not across every state. So as long as it functions like that, and that's really where I see opportunity with the things that I want to do. It creates barriers to adopt and barriers to entry. And so there will never be a federal mandate necessarily. I think that says you got to use blockchain, even though it might be an improvement, but some states will adopt it. And I think the other thing that we will see is. And we are seeing is, you know, when the federal government says we don't want to liquidate crypto assets right now, we want to hold them, we are seeing some of that spill into some states. You know, if you take a look at Wyoming, you know, where Cynthia Lummis is such an advocate for bitcoin. Absolutely. But then there's other states where they don't believe in it at all. And we're not going to see that move. I mean, only 27 came with legislation. So, you know, so. So complete adoption on a national level, I think it's going to be difficult. That was a long winded answer for an easy question. Sorry.
- [42:50]
Bryce
All good.
- [42:52]
Les Borsai
I tend to do that.
- [42:54]
Bryce
Yeah. I mean, hey, I like the details. That's why people come to the show, you know, they. They don't want to just hear short answers. So I love it. And I just kind of want to kind of round out the conversation. Bringing it back to bitcoin. Here we are, you know, markets at, you know, historic levels of volatility. What do you see as bitcoin sort of roll going forward and should people be scared or should people kind of, you know, say, okay, you know, take the long term view, Bitcoin's still going to be a part of the portfolio going forward?
- [43:27]
Les Borsai
Well, I mean, you know, kind of love these questions, too. Again, everything is about individual risk tolerance. And if you take a look, the fear that happens around digital currencies, I believe, are around people that don't really do the research to understand what they are in the first place. And I always joke, imagine the first guy saying, let's do pork belly speculation. And you think about that for a minute. It's like, what? How's he going to sell that concept of speculating on pork bellies? And I'm sure there was a lot of fear. And I was doing some reading and I was looking at when energy was created, electricity was created, and how everyone said it was a scam and they did all these crazy experiments and they literally killed cows experimenting about electricity because they thought it was just not real. And it's like every industry experiences that, because you're going to have two sides of an argument. So when I think about bitcoin, I just think about the natural facts around it. 20, 40, 21 million, we're done. So that is something that we've never seen in a commodity, gold. We don't know how much is out there necessarily. We control it with a reserve. And I think with something like bitcoin, we know exactly what's going to happen with it. So if we apply economics to that, what do we think is going to happen? That's the most basic way to think about it. You know that. That's really the way I think about it. But in terms of your question about, you know, should it be in someone's portfolio, it depends on the individual, like anything else. And, and if they, you know, I don't think anyone who doesn't understand this stuff, you know, should be investing in it if they don't understand it.
- [45:08]
Bryce
Yeah, I, I always say the same thing too. Like, if you don't understand it, probably don't own it, because you're not going to know at what point to get in or get out. Like, if you don't know why you own something, how are you going to know when to sell or when to buy? Right.
- [45:21]
Les Borsai
Yeah, I mean, that's a big part of it, for sure.
- [45:24]
Brendan
Yeah. And you're right. That's where a lot of people get themselves in trouble in the first place, is that they come in. And I think you could say that about any asset class, right? People come in and they try to get exposure to things that they don't understand. And then when things start to go south because they don't understand that they don't know what to do. And I think part of that is understanding, like, where to enter, where to exit, how to manage risk and a lot of these basic things. And, and yeah, you're right. I mean, people, people get themselves into trouble with this. And so as we're looking at, you know, maybe the rest of this year, as Bryce mentioned, there's a lot of crazy stuff that's happening in the world, especially around the, the economic landscape. How do you kind of see the crypto market coming out of this?
- [46:08]
Les Borsai
Well, I mean, you know, the obvious answer is if the regulatory, you know, guardrails are loosened a little bit, which we see happening, then you're going to have more innovation. Now, sadly, you're going to have more people get hurt because they're going to be a little looser with what they build. But it'll also let innovation do what it needs to do. And you're going to have a lot of creative people and companies really supporting the ecosystem. The other thing is BlackRock has the fastest ETF in history. With Bitcoin, there is going to be a hunger for additional products. Traditional finance markets have all sorts of really interesting products. And then you mix in, you know, how DEFI works and what those return profiles. You know, I mean, that is the dream of crypto in some ways. You know, when you look at all the DEFI elements and, you know, not having a centralized exchange that extracts fees and, you know, you have these, you know, these things happening in DEFI that are really amazing. And I think when you start to create these hybrid financial products is when we're really going to see adoption. Because remember, this is truly a global currency. And you know, that that's what makes everything really, really interesting. And it's weird, when I was growing up, you know, you used to watch these shows like the Jetsons and Land of the Lost and all this shit, and I feel like we're living in that simulation right now. It's like AI, you know, what it can do right now and where it's going and, you know, just everything around us is, is just insane. You know, when we look at the world and it really is like all of those things we used to watch in cartoons. So I think with digital currency and adoption of it, we're going to see a lot of really interesting things as long as people still have the ability to be creative and build.
- [47:47]
Bryce
Yeah, and it's really the accelerating. We're kind of hitting that inflection point. Technology is accelerating so quickly and the AI is getting so much better and so much smarter. Every single day. And yeah, we're really excited, optimistic about this year and the years to come in Crypto. But, Les, that's all the time that we have today on the Crypto 101 podcast. We were so grateful and we can't wait to have you back. This was a incredible conversation, a ton of fun. Learned about a different side of the industry that we just don't let. Don't get to learn about very often. So we appreciate you sharing your. Your time with us and your information. Where can people kind of keep in touch? Are you on Twitter? Are you, you know, do you have a site?
- [48:27]
Les Borsai
You know, it's weird. I did this thing when I took down most of my social media because I was spending too much time on it, like, feeding ego. All I have left is, is a, is a X page or Twitter or whatever it is and a Facebook and that's it. Or LinkedIn. And I usually answer anyone who reaches out. So, you know, awesome.
- [48:45]
Bryce
So we'll, we'll definitely. I'm sure some folks from crypto101 will. Will reach out and we really appreciate it and we, we hope to speak with you again. Thank you, Les.
- [48:54]
Les Borsai
Appreciate it.
- [49:06]
Bryce
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