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- [00:07]
Steve Lee
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, bitcoin is the Victoria. I mean, that's part of the bull case for bitcoin.
- [00:32]
Matt Odell
If you're not paying attention, you probably should be. Probably should be.
- [00:35]
Steve Lee
Probably should be.
- [00:37]
Matt Odell
Thank you for having me in your studio, sir.
- [00:38]
Steve Lee
Great to be here. As we were just saying, this is the first time I've been interviewed in the studio, so I'm excited for it.
- [00:45]
Matt Odell
I am too. I mean, this is a long time coming. We've been talking behind the scenes for many years now.
- [00:49]
Steve Lee
Yeah, I've never been on the show.
- [00:50]
Matt Odell
I know. I'm sorry it took so long. I mean, it's been a big week for the Block organization.
- [00:57]
Steve Lee
The past week extended into this week. There's even more announced on yesterday. The D.C. policy stuff. Oh, yeah, the de minimis tax. So there's been a good week and a half of really great stuff from Block and extended to the whole bitcoin community. I think I got through the whole Miles Suter episode of yours, so I'm up to speed on that. He did a great job talking about all, all the efforts. And then today's the investor day for Block, which only happens there was one, like three years ago that was Covet era. So it was like remote, remote and you know, this one will be in person and I think, well, better for two reasons. One, there's a ton of exciting stuff to share. And then being. Just being in person, it's more intimate and better feel to it.
- [01:50]
Matt Odell
Well, the reason I bring up the week that was for Block is because a lot of the products that were launched revolve around using Bitcoin as everyday money, obviously payments and merchant adoption. And it aligns very well with, correct me if I'm wrong, but based off of our conversations over the last few years with something that you're worried about, which is if Bitcoin doesn't become everyday money, it's not going to attain the full potential that you think it can.
- [02:21]
Steve Lee
That's definitely true. That it would not attain full potential, then the question is, can it just be digital gold and sustain with all the properties that make it valuable as store value? I think that's a really interesting question to get into. We can certainly Talk about it, but there's no doubt it doesn't reach its full potential. And I also feel strongly that even for people that are into bitcoin, there's different reasons people are into bitcoin, right? But for the group of people who are just in it for number goes up, they believe in store value and that's it, that's completely fine. But even for that group of bitcoin users, they should care. My opinion, they should care about daily usage. It makes bitcoin more resilient, it gets more people involved using it, more people will care about it. So in terms of a political force and voting, voting segment, it grows. Like imagine if millions of small businesses around the world depend on their, for their business. That's a strong voting block. It also helps distribute the price discovery of bitcoin because instead of just a few global exchanges as the primary points of discovering the price of bitcoin, you'd have millions of touch points around the world where people are exchanging value. I come to your store, you give me, you know, I buy fish from them, from you or whatever, or bread or whatever and I give you bitcoin. And we're establishing a price right there. And that one single instance isn't going to really move the needle. But billions of those data points on a rate, you know, on a daily or weekly basis or whatever absolutely helps establish the price.
- [04:01]
Matt Odell
Steve, why would you spend your Bitcoin? There's only 21 million and it's going to.
- [04:05]
Steve Lee
That's another thing. I feel pretty strongly about it.
- [04:07]
Matt Odell
It's a multi hundred trillion dollar market cap potential and it's only $2 trillion. Why would you spend your bit should.
- [04:12]
Steve Lee
Absolutely spend your bitcoin here. It's definitely a common thought process to, you know, I mean people who own bitcoin most like believe it's going to keep going up a lot. Right? Including me, probably including you. So why would you you spend it? Well, so multiple reasons. One, humans are already accustomed to like the concept of a spent like checking account, savings account or like spending money in your wallet or purse and then like your IRA or something. So that, that mental construct is very normal for, for folks. So sure, if, if you have your stack, that is your bitcoin savings, don't touch that, don't, don't spend from that, don't touch it. Like cold storage, secure it and don't mess with it. But you know, if that's like tens of thousands of dollars or more, whatever, great spending wallet is like you know, 20 bucks, 50 bucks, 100 bucks, whatever you'd have in your bill full, maybe a couple hundred bucks. But just spending amounts of money for that. Just spend and replace, spend and replace. And I mean for super hardcore bitcoiners who are just like throw out Gresham's law at you or whatever, if you feel that strongly that fiat is crap money and bitcoin strong, then go all in on bitcoin, have all of your money in bitcoin, hold no dollars or fiat and then you have to spend bitcoin because you, because, because that's the only way, the only money you have. So I think, I think people can still be strong hodlers and still spend bitcoin. Then there's the reason I just mentioned which is even if you care about your stack that you're saving by spending it, it actually strengthens bitcoin overall the network resilience and it, and it protects it as a store of value.
- [06:02]
Matt Odell
Yeah, the distribution. And when it comes to spending bitcoin, building on what you were just saying about living on a bitcoin center, I mean Parker, our good friend Parker Lewis has run the numbers. I forget the exact name of the post that he, that he wrote earlier this year, but it was basically the logic of spending bitcoin. And if you actually run the numbers over many years, if you use bitcoin as your long term savings account and actually spend it as well on top of that on a bitcoin standard and you can run the numbers, you're still making money, you're ending up with more.
- [06:36]
Steve Lee
Purchasing power which is actually my personal situation like block pays me and folks on the Spiral team in bitcoin. So I receive it as bitcoin, I keep it in bitcoin and then I only convert it to dollars if I have to make still sadly but realistically most of my payments are still are denominated in dollars. So then I would convert sort of on demand.
- [07:00]
Matt Odell
It's the way I do it as well. It's great living on a bitcoin center. It's hard. It has been hard historically from a UX perspective, but it's getting easier. I mean the products that are making it very fluid to switch from bitcoin to fiat to bill pay features and strike cash app and top two.
- [07:17]
Steve Lee
Well certainly like with cash apps, announcements and new features from the past week it definitely helps, right? Because now all four combinations work. You can, I can have bitcoin pay you as a merchant, you know, I can pay you in bitcoin, you receive it as bitcoin. Or Bitcoin to dollars or dollars to Dollars. Dollars to Bitcoin. So sort of each party in that two party transaction uses whatever they're comfortable with and what they want to do today. And I think some hardcore beginners might like say that's fake or not really embracing Bitcoin. It's a, it's a baby. It is, it's absolutely a meaningful baby step. And everyone has their journey with bitcoin. Not, not everyone starts as like hardcore fully embracing and understanding self sovereignty and privacy and all these important properties of Bitcoin. So meeting people where they're at today, whether they be the small business or the consumer, gets them started on that journey.
- [08:12]
Matt Odell
Yeah, preference optionality is, is how I would describe it. But to get to all this, many people sort of gloss over or simply don't understand particularly the masses that this technology needed to be built to enable people to live on a Bitcoin standard and use it as a payments vehicle. And that's been a lot of your focus at Spiral, particularly open source infrastructure around the Lightning network and privacy as well. And so how would you describe the progression of the technology layer of this payment stack over the last five years?
- [08:51]
Steve Lee
Yeah, so for people that don't know, Spiral has a full time team and most of that full time team focuses on the Lightning development Kit project. We also have a really robust grant program and fund over a dozen open source bitcoin projects as well. So our scope is Bitcoin but we do fund and support many different projects in the space. I'd say overall we, we tend to fund protocol development and developer tools because six, six years ago when we got started that's where a couple things, one, that those were very weak areas in Bitcoin and two, they're not really naturally money making opportunities. So like it's not going to attract venture capital or angel investment or be able to generate quick cash flows for an entrepreneur to bootstrap. Yet they're really impactful, important things. So I felt like with spiral's budget we have these magical dollars for bitcoin to give to developers to work on high impact projects that don't have a business model behind them. And that's our criteria with all our grants too. Like if you came to me with a great idea, but also one that could make money, I'd be like that's awesome, but we're not going to give you a grant. And because it's like you can go build it yourself, generate money or get VC money and you know, and I totally support that so we're looking for projects that are high impact that aren't going to make money and developer tools and protocol development are two categories that fit that. So yeah. But the full time team has focused on Lightning development kit. Anyone who's followed along with Lightning at all knows it's a very complex protocol. It's very ambitious protocol because it's intends to like scale Bitcoin and, and improve the U user experience relative to onchain in a dramatic way but preserve as many properties of onchain Bitcoin as possible. And it does a, it does a. I think a, a really good job at preserving those properties. It, it's a little bit weaker security model, different and weaker security model to onchain, but it does a. Relative to all the other new protocols that have popped up. It's still is the king, Lightning's the king at preserving those properties. User experience has improved dramatically both for the developer and the user over the past six years. It still is not. It still has some rough edges, some of which are fundamental and so we can talk about other payment protocols as well which choose different trade offs.
- [11:20]
Matt Odell
Yeah, well, important to bring up trade offs. You mentioned like not the same security assurances as on chain, but this is what happens when you move up layers. Like you make the trade offs for UX usability but you can always fall back to the main chain and reap the benefits of all the benefits that exist there. Security, ability to self custody, which we'll talk about with Lightning. But before we go on to sort of the overall state of lightning and emerging second layer protocols as well, what would you say to the haters to say it's a failed experiment, it's centralized, it can't scale and nobody uses it.
- [11:59]
Steve Lee
Well, different answers to different points you made there. But I mean overall to call it a failure I think is ridiculous. I mean I under. I can certainly steal man, why people are saying that if you have certain expectations or you had a certain use case in mind, like if Your expectation was 8 billion people with a mobile wallet each with like one or more lightning channels, if that was your expectation and a great ux, then it's failed at that and no one ever expected it to scale to that point. I mean simple math because it's a function of the blockchain size, so it can't scale that much. But has it failed outright? Absolutely not. Um, because it, it, it definitely has won at being the glue between a bunch of different subsystems and those subsystems could be custodial like products like Coinbase or Cash App or all the other systems that have popped up like Arc and Spark and Fediment and Cashew and these new layer two don't leave out liquid. The blockchain Liquid as well. Yeah, liquid as well. You know, whether you want to call it, you know, call it later too or I'll call it a subsystem.
- [13:13]
Matt Odell
I hate the semantics, but I like subsystem.
- [13:16]
Steve Lee
I think that's a good subsystem. But the these, you know, they, they all have trade offs and, and I can, yeah, I'm happy to go through each and every one of them if we want to. I think they all have merit. All the ones we just mentioned have merit. I'm not a hater on any of them. In fact, Spiral supports almost, almost all of them. But the, you know, if you live in the Ethereum world or Salana, if you're using like stable coins there, it's a total nightmare in terms of UX and interoperability because I might have DO on USDC Base or something and you have USDT on Tron and they're not compatible. So then we have to, as users we have to bridge or swap or do crazy stuff just to send dollars. But on Bitcoin Lightning is the protocol between all these subsystems. So I simply am sending and receiving Bitcoin as a user. That's all you need to know. I'm sending and receiving Bitcoin. You're sending and receiving Bitcoin. You might be on a cashew wallet and I might be using Custodial Cash app. I don't have to know you're using a cashew wallet. You don't even have to know you're using a cashew wallet. And we can send and receive Bitcoin and what makes that tick? It's the Lightning network and also the payment protocol right now bolt 11, but in the future it'll be bolt 12. So that glue is essential. So it's absolutely one at that. It'll keep winning at that. The only way it's displaced is if one of those subsystems ends up being subsumes. Subsumes all use cases and all payments work through one of those subsystems or some future invented one. And we'd all like to see that. We'd all like whether it's Lightning, Arc zero knowledge proof roll ups or something no one's never thought of before. We'd love to have a technology that checks every box and scales to everyone and every AI and every machine and every possible use case we'd love that. That is not on the horizon right now. It's. There's will it ever be and will it. Yeah. So given what we know now, there's no way in the next five years that's going to happen. So in the best case scenario in the coming years something will emerge that is the silver bullet and then maybe in 10 years we're there. But even that's, I would assign a low probability of that given what we know, even if that's what we all hope for. So we're going to have different subsystems, I'm quite confident in 10 years and beyond and because they have different trade offs. So your use case might. Arc might be the right solution. In my use case, Cashew might be the right solution and that's totally fine. But to keep that great user experience between us so that we're sending and receiving Bitcoin and keep it simple. The Lightning network is that backbone. So to me it's one there. It's going to keep winning there and in 10 years it's going to be there for that purpose and it's actually a great technology fit for that. Now, running a mobile phone in your wallet with Lightning, that's where it's a lot more interesting discussion and debate. I think it clearly hasn't won there. We already know it won't scale to every use case and every person, but are there still some use cases and people that will benefit and that'll be the right technology? I think absolutely, for sure. Anyone who uses a Phoenix wallet, I mean people who criticize the Lightning UX even for mobile, I mean, have you used Phoenix? I, I'm not saying it's, you know, I'm asking. I get the audience right? I mean, you know, have you used Phoenix? We can certainly still find things to critique about Phoenix is not perfect, but it's, it's a good user experience. So you can create a good user experience with Lightning and the ldk. You know, Phoenix is built on, on Async's own technology stack and Lightning implementation, but with the LDK ecosystem, it now has all the APIs and tools and SDKs and features for anyone to build a wallet that matches and surpasses the Phoenix user experience as well. So I don't think it's. No one should have the expectation that every wallet on a phone is going to be running Lightning and have channels, but I think there will absolutely be, you know, it has the capability and capacity to have tens of millions of users who benefit from that. And, and it's the right choice for them and and also merchants too. I think it actually might be a more better sweet spot for merchants versus individual users. But where you know right now with the Square launch that's awesome. We're going to onboard more more merchants and kickstart that. Fast forward into the future when there's tens of millions of small businesses around the world accepting bitcoin custodials. How most of them will start but you know tens of millions and then if 10% go through their journey and realize the value of self custody to them and their business or just the situation they're in, the environment they're in, the country or the banking situation or what their Commerce is. If 10% self custody that'd be millions of small businesses who are looking, you know who, who are looking for like a lightning based solution for their for accepting money.
- [18:24]
Podcast Host / Advertiser
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- [18:37]
Matt Odell
Put your hardware in that.
- [18:38]
Podcast Host / Advertiser
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- [18:46]
Matt Odell
The cardholder does the same thing.
- [18:48]
Podcast Host / Advertiser
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- [18:55]
Steve Lee
At the house too.
- [18:55]
Podcast Host / Advertiser
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- [20:12]
Matt Odell
Up Just one more sort of steel man of the Lightning network or a refutation of a FUD that's often thrown in. It's like there's no activity. Look at the amount of Bitcoin locked in the Lightning network compared to the TVL of these DeFi protocols. Like, it's a pittance. And I think there's two things here. Like, number one, it's a mischaracterization of it's a bad comparison because the way lightning channels work, it's actually bullish if you have less because it means you're doing more with less. And then on top of that, Lightning is so distributed. I think Lisa put it best when she was last on the show. It's literally, if you look at any quote, unquote L2 across any blockchain that's out there, Lightning is objectively the most distributed. And that means that it's very hard to track what's actually happening.
- [21:03]
Steve Lee
There's a lot of unannounced channels that aren't. That aren't, you know, so like the number of channels reported is a bad metric. Basically all the popular metrics that are reported are misleading or relatively poor metrics. So it doesn't really tell the story, which is. Which is. It's also Lightning is relatively private too, which is a good thing. But then it's hard to do like data analysis and know is it healthy or not. But in terms of is it growing? I forget. I forget exactly what like Miles Suter from Block at the Vegas conference gave a really great presentation on Cash App and Block and reported a bunch of juicy numbers. I forget exactly what he revealed, but definitely I can say that a couple of years ago, river came out with a report where they collected a lot of private data from companies and assembled it into a report and I think it was like 1212% growth of payment volume and lightning network over the past 18 months. And that was two years ago. What I can say is looking at Cash app and lightning node data from Block since then, the ensuing two years that growth rate of on the order of 15% monthly has sustained. So the data that we're seeing at Block is very, very strong payment growth. So it's, and, and, and you'll note that if you look at the capacity that the number of bitcoin locked into lightning does, is, does not reflect that it's sort of been constant, roughly what, four or five thousand Bitcoin or something in that entire three or four year period. So that I think that indicates how misleading that that metric is. And it's what you said. I, I, I think the answer you might then someone might ask well if it's growing so much, why isn't that growing? I think it's what you said. Lightning operators are learning how to be more efficient and operate with more efficiency. So like river kept closing channels and closing channels and then people are like oh are they getting out of this business or whatever. It's like they're just making their operations more efficient. Now of course once you reach sort of optimal efficiency then if you still keep continuing to grow payment volume, you're going to see that number go up and I think it did recently go up and I think we're going to, we are going to see it, it'll be a grind I think with square payments and people paying in bitcoin. It's not, we're not going to, it's not going to like 10x from now to Christmas or something but we're going to see a steady growth month to month to month with that as well and we will see that capacity grow.
- [23:31]
Matt Odell
Well, it's not happening right now but another thing to take into consideration is when the price of bitcoin goes up like prices denominated stats goes down. So you need less Bitcoin to move through these channels to actually purchase goods and services.
- [23:44]
Steve Lee
Yes, that's another good point.
- [23:46]
Matt Odell
Yeah.
- [23:48]
Steve Lee
So I think the easy, simple metrics that are reported don't really tell the story or you certainly have to. I mean I would agree that 10 years from now the capacity of Bitcoin and lightning channels should go up a lot compared that metric I think is important to look at. If you zoom out in a four year window, is it, is it going up? And I think that is important. But if you zoom in more Right now you have to have access to, to these private data sources and stuff. But I think another thing, something that I thought of recently, a lot, a lot of my friends who aren't into bitcoin, but they're techies, they're Silicon Valley people, not into bitcoin. And they think like bitcoin, at least as everyday currency, it's failed, but also that it's, it's over. Like it had its moment and it should have caught on. Like their mentality is like back in 2013 or 2014, like the first wave of excitement of bitcoin payments, at least in Silicon Valley, that, that is, it didn't take off then and it should, you know, and if it was a, if it was as great of technology or promising of money as, as everyone is talking about, then that it, it would have taken off then. And so they just write it off. Well, there's a little more to it, right? And so I think with the Square launch and now there's going to be stickers and windows that show the bitcoin symbol next to Visa, MasterCard and Apple Pay. And even if no one's actually making bitcoin payments, normal people will see that sticker in the window and they'll, they will think, oh, it has arrived. People are paying. In bitcoin, it is everyday money. So I think it'll be this huge psychological shift with the narrative, which we haven't really talked about the narrative, but the narrative that dominates bitcoin is like ETFs and number go up and store of value.
- [25:39]
Matt Odell
That narrative's hurting today.
- [25:41]
Steve Lee
Yeah, well, right, but I mean that again, for my own experience in bitcoin the last eight years, the store of value that was to me sort of obvious from the beginning and just inevitable, preordained, didn't really need much work. I mean, it still needed to work, but in terms of like software development and design and the kind of things where I'd want to contribute to, it's like, yeah, it's already, it's already done, but, but everyday currency, a lot of work needs to be done including, you know, improving the tools and creating better products and new use cases, blah, blah, blah. Um, so I think, I think it's a great use case, but it, it's, it's really crowded out the everyday money narrative. And so last week to me was awesome. Not just for block the company, but for all of everyone who's into bitcoin for as everyday money. I, I think that's why it was easy for bitcoiners. To cheer block on because of the alignment around that. And, and hopefully it's not just a one week wonder in terms of narrative, but it's the start of recreating this narrative and joining alongside the store. The digital gold narrative, I don't think it needs to replace that. Like the digital gold narrative shouldn't go away. It should just be. We should be talking about everyday money way more.
- [27:04]
Matt Odell
Yeah, well, I want to, since we're in San Francisco, I'll say it because this is the nomenclature on here. Let's double click on your Silicon Valley friends saying that it failed. Yeah. As payments technology. That blows my mind. Like to me it highlights some sort of time preference mistakes that are being made in this part of the country and other parts as well. How could you honestly expect something to be launched in 2009 and to take over the world and be an everyday payment in five years if this was happening in 2014 or the expected that would happen? Like, how do they not recognize that Rome wasn't built in the day? And there's a process to this.
- [27:45]
Steve Lee
I think it's, I mean, I think there is a good explanation. I mean it's, it's wrong thinking, but it's a, there's a good explanation. If you think about the success stories through in Silicon Valley over the past many decades and the patterns that people build up in their head here, working on it, being part of it, or seeing these success stories, things do happen fast. Whether it be Google or Facebook or Instagram or YouTube. Like you go from like zero to high growth in users very quickly, revenue quickly and acquisitions quickly, or IPOs like it's, it does move fast. So if it doesn't, if things don't click in a few years, or at least within the first four years, you, you usually just, you write it out, you shut the thing down and you move on to the next idea. That is the common pattern. And so that's the pattern matching. All the smart successful people here have. So when you have something like Bitcoin, sure, it was introduced in 2008, 2009. And so by 2014, oh great. This emerging technology, let's VC fund. All these startups make a lot of money. And then there was no one was making payments then it wasn't used. None of these companies, I mean except for like Coinbase, which had to go way beyond bitcoin. They had to create a gambling casino to make a lot of money. There was just failure after failure from a venture capital and startup perspective. So I think that's why they wrote it off. Now we know the bitcoin community knows that that's an absurd expectation. I think another dynamic was people thought that they compared it to PayPal or Visa as the justice payments technology and they didn't have a deep appreciation for like, oh no, this is way bigger idea. This is not disrupting Visa. This is disrupting the US dollar. And there's, if you look at history, there's not that many things that have been money. Like we, you know, we have like a piece of artwork here at Presidia, Bitcoin from Cryptograffiti with a history of money. And there's like eight different symbols of representation going back to like, you know, seashells and rocks and stuff like that, and obviously gold and depending on how you define things, like a credit card or something. But even that actually is a bit of a mistake to think of that as money, as dollars, the money behind it. But there's not that many things in history that have been money. And now bitcoiners are saying, this is the new money, this is going to be the new money. And then to your point, that doesn't develop overnight, especially if it's not fiat, if it's not declared, if it's not forced upon all of us from, from a up high. It has to be a grassroots effort. It also happens to be like super complex and counterintuitive from many different angles. So it's very common whether you're a Silicon Valley person or Wall street or just whatever your lot in life is. You, it's, it takes a leap of faith. And then, and it requires a journey of learning to really see, like, how does this work? So I think Silicon Valley missed that. This is not just displacing and competing with the payment layer, but actually the money layer. And once you appreciate that, then you realize, oh, this is obviously not going to happen in five years. This is like a 20 year or more process. And then all the other disruption happens on top of that, sort of in parallel suffrage.
- [31:14]
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- [31:31]
Matt Odell
I've had two children.
- [31:32]
Podcast Host / Advertiser
A couple of health events in that time period and Crowd health has been there. You pay a monthly fee. You contribute to the crowd. We were paying $1,800 on Cobra as a family of three. Now we're paying around $900 a month as a family of five. And that's with crowd health and direct primary care. You can opt out of health insurance. Go to joincrowdhealth.com TFTC you're going to get $99 a month for the first three months if you use the code TFTC. Join crowd health.com TFTC Sup freaks? Been seeing a lot of YouTube comments. Marty, your skin looks so good. You're looking fit these days. How are you doing it?
- [32:03]
Matt Odell
Well, number one, I'm going to the gym more, trying to get my swell on.
- [32:07]
Podcast Host / Advertiser
Trying to be a good example for my young sons, a fit, healthy dad. But part of that is having a good regimen, particularly staying hydrated, making sure I have the right electrolytes and salts in my body. That is why I use salt of the earths. I drink probably three of these a.
- [32:25]
Matt Odell
Day with one packet of salt the earth.
- [32:26]
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- [32:32]
Matt Odell
I've added this to my regiment.
- [32:33]
Podcast Host / Advertiser
They have it in these packets as well. Makes it extremely convenient if you're traveling.
- [32:37]
Matt Odell
You want to work out while you're traveling, but you don't want to be.
- [32:40]
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- [32:46]
Matt Odell
You have to explain, hey, it's, it's not what you think it is. It's creatine.
- [32:49]
Podcast Host / Advertiser
I'm trying to get my swell on. Make sure you're staying hydrated. I have become addicted to these. It's made my life a lot better. I can supplement this for coffee in the morning and be energized right away. I can supplement. I can bring the creatine wherever I need to. Just put a couple packets in here before I head to the gym. Bring this to the gym. Drinking out of a glass bottle. Make sure I'm not injecting any microplastics into my body. Go to drink sotay.com, use the code TFTC and you'll get 15% off anything in the store. That's drinkso.com code TFTC.
- [33:24]
Matt Odell
You think people are coming around to recognize, like, oh, we mischaracterized this a.
- [33:29]
Steve Lee
Decade ago and sadly I don't think so. Hopefully we'll talk a little bit about presidia bitcoin too on, on, on this episode. But one of the missions for Presidio bitcoin is to help bridge that gap. We're going to take advantage of the fact that we're here in Silicon Valley physically and we've got a bunch of people here who have ties to Silicon Valley and so be it. Through events we host here, myself and Max Webster and David King do the Presidio Bitcoin Jam podcast.
- [34:01]
Matt Odell
Great show.
- [34:02]
Steve Lee
Yeah, thank you. We're podcasters now. Watch out. Everybody becomes a podcaster. Yeah, big proponent. But it. Our intended audience for that show is Silicon Valley people. It's not. It's people who would not identify as a bitcoiner. Now of course people who are into bitcoin watch the show and I think like it and that's great. But like what we have in mind, we want to bridge that gap to Silicon Valley. So we, well, I mean we're just ourselves in that show. But like I think we, you guys can talk to talk. Well, we come from, I mean I worked at Google for a decade as a product director, so I come from Silicon Valley. David King does as well. We know that culture, we know that we come from that world. We're part of that world. We also happen to be hardcore bitcoiners, so it's kind of rare to be in both camps. So we can speak both languages. So hopefully we can bridge that.
- [34:54]
Matt Odell
Thank you for Google Maps, by the way.
- [34:57]
Steve Lee
You're welcome. I'm glad you said that instead of Google Glass because I worked on both. Google Maps is an I ragged on you. Unquestionable success. But yeah, class.
- [35:09]
Matt Odell
Hey, Kyle Samani liked it, you know.
- [35:11]
Steve Lee
Yeah, everything. Yeah, let's not go there. Everything, everything's. Everything's bad in that direction.
- [35:16]
Matt Odell
Well, we're, I mean we were just focusing on Silicon Valley, broader Silicon Valley's perspective on, on bitcoin and how it may be. The perception may be sort of misguided because they don't understand what's actually happening. Shift to the bitcoiner focus. That's a bitcoiner really dedicated to building out bitcoin as everyday money. How would you grade bitcoin's success up to this point?
- [35:40]
Steve Lee
Is it as everyday money or just.
- [35:43]
Matt Odell
Like where it is on the trajectory? Understanding that Rome was in the day. This is going to be a multi decade process. How would you, I don't want to say grade. How would you describe bitcoin's progression up to this point? Is it over exceeding where it should be? Underperforming.
- [36:03]
Steve Lee
Given the way you framed it, appreciating how long it takes to establish it as money and stuff, I'd say I'd give it a good grade overall. Like high level, very good. Because we can easily nitpick and say like the everyday currency narrative is, has been sort of squeezed out and obviously it's not like heavily used for that yet. So we can say like, oh, it's kind of, it's so far failed at that. But, but again, appreciating how long realistically it's going to take to, to do that, I'd give it, I give it a good grade. A good grade to this point. But like a lot of work ahead of us. But I remain super optimistic about that future. But it's, but it's to, to attain like a sustainable good grade. Like we are, like we've won, we've succeeded. That's going to take another 10 plus years. But that doesn't mean, that doesn't mean meaningful progress is not going to happen every year. Right? I mean, so there should be a sense of urgency among all of us. There needs to be intentionality and not just assume, oh, you're going to do it. No. Each person who's into bitcoin, find your own way to contribute and help will this into action. I'm a strong believer in the individual can make a real big difference and you don't have to be like Elon Musk or something. Any individual can contribute value. I mean like with the launch last week in Spiral's small part in it, we created like a bitcoiner marketing kit to help people go to their favorite merchant and help them persuade them to turn on bitcoin payments. And it's a laser sharp focused save on fees. Right? Get rid of the 3% fees. And so we have like a one pager leave behind and plushies. We've distributed like six different Bitcoin physical hubs around the country. That's our small part. But then as an individual bitcoiner, you don't have to be a bitcoin core developer or an engineer to just go to your local merchant and talk to them about bitcoin and talk to them about saving. I mean my recommendation, start with you want to save fees? Don't the fees suck? Don't you know, Aren't they like a significant part of your profit margin? Wouldn't you like to get rid of them? And then they're going to say yes and that's the hook. And then you can say, well here's how you can do it. And that's a way for anyone to contribute and I don't.
- [38:28]
Matt Odell
And another thing I like about marketing kit and I don't know if you guys actually made this or square merchant just put it on their door but a bitcoin preferred sticker, I think that the preference signal from the merchant is very strong too.
- [38:40]
Steve Lee
Yep. Yeah, yeah. I'm glad you noticed that. I think that's great copy. And the, you know it's a multi phased approach to get people to spend bitcoin. I think at least at like a retail outlet in America I used even two months ago I was actually bearish on this becoming popular compared to other. Wow. Other types of payment use cases because like an American buying coffee like it. Like I, I just, I use Apple pay and I get 2% cash back. It's like that and it's a super good user experience. So like why spend bitcoin? Right. That. But I've turned from bearish to bullish just in the past two months and largely thinking through it through the lens of the merchant like the small business, those fee card fees are very material to their business and most small businesses are low margin and it's like a, it's a passion pursuit for them and they just want to stay in business. And so being able to eliminate or significantly reduce that fee is an enormous value prop. So but that's just step one like and of course with the square product introduction that makes it so much easier for them because if they're using a payment solution, whether it's toast or clover or square or whatever, and then someone comes in with a bitcoin wallet as the POS and there's several of them out there and they're good user experiences on the surface but it doesn't integrate with the small businesses like accounting system and backend system and you have to be a pretty hardcore bitcoiner I think as a merchant to adopt that. But now with square it's integrated into the system you're already using for your whole business. So that, that's a much smaller lift. But that's just step one, getting them to turn it on because then they'll learn early on they'll attract some rabid bitcoiners to come in and spend some bitcoin and attract new customers. That's a marketing win. They'll like that. But it's not sustainable and it doesn't grow to a larger part of their consumer audience or customer base. So then it's like, well I love the pitch of saving fees but no one's coming in and spending bitcoin anymore or only like my 3% of my customer base who are crazy bitcoiners do and it's saturated. So how do you get everyone else spending bitcoin? And that's where Pink Owl Coffee helped change my mind because they're like we're going to give 21% discount. And I'm like, wow, that's something that's going to wake up a normal person, right? 21% discount at your favorite merchant. Then that's going to get a lot of people over the hump to install a bitcoin wallet, a spending wallet on the phone and get some. And load it up with some Bitcoin.
- [41:30]
Matt Odell
$5 coff becomes a $4 coffee.
- [41:32]
Steve Lee
Yeah. Less than $4. Well it adds up when you do that every day.
- [41:34]
Matt Odell
Yeah.
- [41:35]
Steve Lee
So. And I do think early adopter merchants who are hardcore bitcoiners or, or see the value in con changing consumer behavior to eliminate. Well or to spend bitcoin in order to eliminate the fees. Merchants will, early adopter merchants will come out with crazy promotions like that. And it's a, it's kind of a one time thing because if you convert a consumer to install a bitcoin spending wallet, get some bitcoin on it, then that cost to the consumer, they don't have to do it over again. It's only a one time thing to get the wallet set up and just sort of change your behavior. So all other merchants in your local community will benefit from that one time onboarding. So it's not like every merchant has to offer 21% and has to do it indefinitely in order for bitcoin payments to work. It's like a bootstrapping thing. So I think, I think that'll be, I think that'll be effective. And then I think so another part of the spiral initiative is not just a bitcoiner marketing kit, but we're going to come out with a merchant marketing kit as well. We also established a Facebook community. I haven't used Facebook for over 10 years.
- [42:43]
Matt Odell
I've been off since I literally haven't used.
- [42:47]
Steve Lee
Minor complaint to my team that I have to like log into Facebook again. But it's a smart move. Some people, some people are like Darth Coin on Stacker. News is critical of the choice of Facebook news because who uses Facebook but guess who uses Facebook merchants. Small businesses around the globe are not on Twitter. They're on Instagram and Facebook. So my mom, my mom runs a.
- [43:08]
Matt Odell
Coffee shop in her hometown. I can Confirm that.
- [43:12]
Steve Lee
So we've created a Facebook community that is for merchants, by merchants, for merchants. So we've seeded it with some merchants who have been accepting bitcoin and know bitcoin and can answer one on one questions. And then other merchants who are new to it can ask questions or look stuff up there. So we did that. And then the merchant marketing kit will include ideas like offering financial incentives or putting a bitcoin plushie by your cash register. I actually am pretty bullish on that. The plushie is sitting in front of you right now.
- [43:43]
Matt Odell
I get one of these for my boys.
- [43:45]
Steve Lee
You can grab one. Yeah. But you can grab one after the show. For sure. You can grab two. And then you can also give your favorite merchant one of those. And we've seen evidence of merchants actually not just taking it home and giving to their kid, but actually putting it by the cash register because it's a great way to communicate, hey, we accept bitcoin, you should pay in bitcoin. And it does so in a silly, goofy way. It's like non confrontational. Right.
- [44:10]
Matt Odell
It's not like a he's grimacing like.
- [44:13]
Steve Lee
Well imagine like hey, give me bitcoin. Well, look at most of the. Most of the. Well, our one page lead behind tells the story of why he's grumpy because he doesn't like 3% fees. So we're missing at the people paying with credit cards. Yes. But I think it's a really nice conversation starter at a local business where you have that human to human connection to just start talking about bitcoin and then so I do think there's a plausible story to convert people to consumers to have bitcoin on their mobile wallet and start spending. Also, you know another thing that greases the the wheel is like cash apps now dollars in lightning. So you can have the 58 million. I know Miles talked to you about this on another episode. But 58 million active users in cash app have dollar balances in all of them can now pay via bitcoin like via the lightning. And bitcoin rails cut out the card fees but the cash app customer doesn't have to have ever owned bitcoin or be into bitcoin at all. And is that the full experience we're hoping for long term? No, but it's a baby step. It allows the merchant to save fees, it allows the merchant to save in bitcoin if they want to. And then, and eventually those, those cash up. Some of those cash up customers will keep converting over to using bitcoin.
- [45:43]
Matt Odell
Yeah, I'm very bullish. Somebody who's been spending bitcoin using the Lightning Network for years now. I talked to this with Miles and talked with many other people like merchant adopt. I think there's an apprehension to really lean into bitcoin payments and merchant adoption specifically due to the sort of failed attempts at it previously. Most famously back in like 2014-2016 era. I think that was a big push. But like Roger Burn, that, that early bitcoiner crew and I haven't really seen it since. Until now, a decade later. Yeah, I think it makes sense. And I, I thought Miles point was really good, which is like, hey, today's the best day, tomorrow will be the best day. Let's just get it out there and it's time. Yep.
- [46:27]
Steve Lee
Well, like I mentioned, I think it'll be, it'll be a grind, it'll be a lot of work, but I do think we'll see steady growth and that's just like Square in America, but then like the world's big place. So I think Square will also light a fire under like other payment providers too. I mean I would hope that Toast and Clover here in the US and other established payment providers around the world will be seeking out a bitcoin solution too. But that's just one type of bitcoin payment solution, I think, or like use case or category. And one I mentioned, I sort of went from bearish to bullish in the last few months. But others that I very excited about. One is just like new, new applications and new ways to integrate bitcoin and like Noster's apps is the canonical example or Stacker News apps. But like micropayments within these social media experiences or community forums, people showering us with SaaS as they listen to this podcast. Podcasting 2.0. Yeah, that as well. So they're we, we have these real world examples that were, we see, they're not scaled yet but they, we do see retention and usage and anyone who's done it, I think like I, I love zapping people's posts. It makes me feel good. I mean getting back to also another reason about spending, spending my bitcoin or whatever, it's like, okay, well you know, I've got my savings account, my spending account, in the spending account. I mean I'm zapping sats. But what is it? Like a few dollars a month or. I don't know what it is, but like it's not that much money but it makes me feel good to do it. And then obviously on the Receiving end. My, my zaps alone aren't. Don't move the needle. But you know, hundreds of people doing it, then it's kind of, kind of a nice, nice amount. I mean it's at least like, you know, it's like being. Having a dinner paid for you because of your work or whatever. It's like a nice gesture.
- [48:14]
Matt Odell
Well, I, I was talking about this last night with somebody because they were asking about podcasting 2.0. Like, ah, is it.
- [48:21]
Podcast Host / Advertiser
Does it actually work?
- [48:22]
Matt Odell
I mean, we. I think TFTC was literally like one of the first five podcasts in the world to ever put a Lightning address in our RSS feed to begin receiving sats over the Lightning Network. That was 2018. 2019. 2019, because Lightning launched. It was definitely before I left New York, so It was like 2019. So it's been six years. And I think a lot of people think it's a dead model, but you can. Fountain makes it very easy to look at the data. Like the numbers have been going up. I mean, it's not enough to run the business, but it's consistently up and to the right in terms of revenue from people streaming and boosting and commenting on the show via podcasting 2.0 and Noster. And then we'll live stream Rabbit Hole recap every Thursday or Friday to Noster. And we've sort of gamified the, the zapping there. If you zap us more than 21,000 sats, we'll read your comment and have a brief discussion around it. And that went to your point of like spending bitcoin. Like, I have my Fountain app, my Fountain wallet, my Primal Wallet, and when I. Those are my main spending wallets. And I. It's all bitcoin that's been sent to me from the content I've been producing.
- [49:39]
Steve Lee
That's great. That's great.
- [49:40]
Matt Odell
Yeah.
- [49:41]
Steve Lee
So I'm all the, all the bitcoin billions around microbiomes and stuff is still niche, but I'm optimistic about that. Anytime you can see usage and repeated behavior, even if it's on a small scale, if you see that repeated behavior in retention, I think that's a very good sign. And it's just a matter of scaling it now. I think another really positive trend is vibe coding and just the development tool. So it's. That opens up access to new product development to like literally a hundred times more people or a thousand or like orders of magnitude more people who, you know, you no longer have to be a coder to take an idea in your head and manifest that into an application or a mobile app and allow people to use it. Vibe coding is incredible for that. Where English is a language to program. Anyone can create an application now, one that is good enough to realize your vision or at least mostly and get it out to like a hundred people or a thousand people to use. And that's really all you need to like for most things to. To prove out is this actually useful to people? Is it something people come back and do a second time, a third time, make it a recurring habit. And if they do, it's hard to do that, by the way. So it's like law of large numbers. So if we have. But if all of a sudden we have a thousand times more attempts at creating the right recipe, we're going to see way more at the end of that funnel. We're going to see a lot more compelling applications, ones that do have a thousand users who are using it constantly and love it. And then maybe vibe coding isn't then you actually need real human engineer still to create something that secure scales and checks all the boxes from an engineering stability standpoint. But you don't have to do that until that point in time and you've already. And so 999 out of a thousand ideas fail by that point. So don't invest the hardcore expensive engineering resources until you reach that point. I think we're going to see that that's happening right now and that's going to lead to thousands of applications being developed that people wouldn't call bitcoin applications, but they just integrate bitcoin. Because the second trend is that the tools around bitcoin are much easier. You can now take Lexi or Spark or Liquid or all these and like literally one shot Vibe code. An application has big bitcoin payments integrated into it. That's amazing.
- [52:15]
Matt Odell
Integrate this API or something like that or use this development kit too.
- [52:18]
Steve Lee
Yep. Like Matt Velez did a one shot into replit and was able to create a bitcoin tipping app, you know, circa 2014 or whatever. But in 2014 the people creating a Bitcoin tipping app was like two developers for a year. They spent that much time and highly skilled engineers to build a bitcoin tipping app. Now you have literally a one sentence or paragraph prompt that you can speak to the computer and then nine minutes later have the same bitcoin tipping application that existed 10 years ago from two person years of engineering effort. That's amazing. Right? So I think we're going to see thousands of quality applications created over the coming years that integrate Bitcoin in ways that we couldn't have thought of or imagined or I'm certainly not thinking of them right now. And that is going to yield some, some home runs and then payment growth. So I think I'm, I'm very, very bullish on that. And then the, and then AI. I'm still not super articulate on exactly what this looks like, but it just, I mean obviously AI is explosive right now. AI agents, you can imagine a world with payments between agents and you can imagine like AI agents don't have an identity. Like they're not going to be able to KYC or onboard. So like permissionless just to me make intuitive sense for this world. But I still don't know exactly what it looks like. And it's important to compare like, okay, where do stablecoins fail and where can bitcoin succeed in that use case? So that's still like a learning process for me and I think for most of us trying to figure that out. But I'm generally bullish in that area as well. And one thing I'd sum up for that category, for the micropayments and sort of new application categories, what's really important for those is no kyc. And so let's talk about that a little bit because I think most bitcoiners, when they think of no kyc, the reason they think it's important is like government shouldn't have my data or privacy focused. And that's completely legitimate and a very, very good point. But I think that's sort of, it's my impression a lot of bitcoiners, that's the start and end of that argument. And I think there's other arguments too. It improves the user experience. Like if I have to fill out a bunch of forms, if I have to upload selfies holding my passport and like all that like so ridiculous, it's a horror. I just stop. Something has to be really important to me, like buying bitcoin or whatever. I mean, you know, it has to be. It's a really high bar to go through that effort totally independent of the privacy. Even if you don't even care about it or you're ignorant about it, you don't even think about the ramifications of that. Just the friction of onboarding is a, is horrible with kyc. So getting back to the like the zapping stuff, let's say NOSTR takes off in a big way and actually start scaling to, to other people. That's going to be the first introduction point to most people for bitcoin at least bitcoin payments, right? They'll have never done a bitcoin payment before. They probably don't even have any bitcoin. So that's going to be their first introduction to bitcoin. And let's say I'm that person. I'm new to this, but new to this. But I love Primal or Domus or whatever new application gets built on us. I love that and I'm really interacting with that. And then all of a sudden people start zapping my posts and I get this bitcoin. If I have to upload my passport and go through all this onboarding friction, I'm unlikely to do that because I'm not, I, I don't have a strong enough reason yet in my head to do that, so I'll just opt out. But if it's like frictionless and it just accumulates because there's like no onboarding cost really then sure. And then once it, then once that, that stash grows big enough, then it's all of a sudden it's like, oh, and you mean I can spend it here or I can use it here or I can zap people back. So I think no KYC is like very important for that application. And then like for the AI agents it's super important again because if they don't have identity, it's just impossible. It's just fundamentally they need no kyc. So to me there are many important reasons for no KYC and not just sort of down to the state privacy reasons. And that's why it really. And it, it just scales to everyone. Like everyone. People don't walk around thinking oh I need no KYC in my life. But like it impacts everyone, it's important. And, and then that leads to why are trust minimized systems very important? Which this gets all the way back to like why do we work on lightning and LDK at Spiral? Because it's a very trust minimized system. If you know, if you're running a lightning node, I'm running a lightning node, I don't have to trust you. You can't steal my money. I mean there's a few, few areas like if I'm offline and then maybe then you could, you could try to steal. But it like overall it's a very trust minimized system. And so that's why I think it's worth continuing to invest in lightning or any technology that minimizes trust. Some of the other newer payment protocols, I really like them as a recipe. They make Smart trade offs and I think they're valuable for the ecosystem but they are more trusted and some of them are going with the no KYC approach now and I think that's great. I'm glad they're doing that. How long will it last? I don't know. When will the state crack down on some of these other ecosystems? And I think it's a matter of time. I mean I think it's like three, three to five years away. It won't really be an issue until they become really popular or there's a lot of illegal activity through it. That's when it gets the attention of regulators. But ultimately I think it will fail at that. It will then require KYC and then all of a sudden all these cool, interesting, valuable application categories we just mentioned won't be possible with them anymore. So it's very important from a developer and protocol perspective to keep investing in trust minimized systems. Even if it like even if people are saying things are dead, failed or whatever, we got to keep working at it.
- [58:46]
Matt Odell
Yeah and I, I mean I had the conversation recorded with Kyle Olney in here yesterday is really on the tip of the spear in terms of Save our Wallets campaign ensuring that we get the ability to developers like yourself and everybody working at Spiral and other open source projects across space have the ability to write open source code and not be held liable for what their end users do. And it just gets like and, and I completely agree based off the trade off some of these other second layer solutions are making or sub network solutions are making subsystem subsystem excuse me, are making the states and will eventually be like hey you got a KYC. And we've seen it with the FinCEN treasury coming out with guidelines like hey, they want to sort of connect PII with bitcoin addresses and try to make it so wallets are doing the job of the state collecting this information. It's just like it's so demoralizing number one. But two it's infuriating because it's like are we free? Are we free? Do we even live in a free country? But broader point being once if and when manifesting positivity here we get the blockchain regulatory clarity act in the market structure buildings the way we need it to be which protects individual developers and individual users and their ability to self custody. Next battle has to be repeal the bank secrecy Act. It is insane that we have to have this conversation and go through these mental cycles, go through all the cost, go through the UX Hurdles. Yeah, just because they want to force this ineffective sort of data aggregation system on us.
- [60:32]
Steve Lee
Since you brought that up, I'll, I'll, I've tweeted this before, but like, SPIRAL will offer a grant to someone who want, like, and this would probably be like a, like a lawyer or policy type person. So it's, it's not. We have not given a grant to a lawyer or policy person before, but we would totally would with the project being something like imagine the world without the bsa. So imagine a world where it is repealed, but also imagine like the real world where there, there are like legitimate policy issues that need to be addressed somehow, like, you know, antiterrorism and AML type stuff. So let's say we have to address those, but we, we get to start from scratch and let's learn. What have we learned in the past 50 years with the BSA? What have we learned with new technologies like incorporate the fact that bitcoin exists and that there'll be an AI exists in these technologies and just start from scratch and develop a new policy that's credible. I think that would be a really awesome project because it also gives bitcoiners more credibility if you are in D.C. talking to regulators or politicians, whatever. Because if you just, if you just go in there and rant, then they're not going to listen to you. Even if that's, even if that's your view and that's what you want, you're not going to win that argument. But if I think it does two things. One, in the somewhat remote possibility that the BSA would be revealed, well then, okay, here's a credible alternative that we've thought about and would be pro.
- [62:11]
Podcast Host / Advertiser
You.
- [62:11]
Steve Lee
Know, pro society, pro American, and ultimately like everyone in the world and Pro technology, etc. Um, but secondly, even for the nitty gritty, like we're debating the Clarity act or whatever, like incremental changes we're either wanting to see happen in legislation or things we don't want to see happen. If we have this body of work to fall back on, it can influence, I think, these other more, you know, smaller year to year decisions.
- [62:40]
Matt Odell
So this is in any case needs to happen.
- [62:42]
Steve Lee
So you're out there. SPIRAL would give a grant for anyone who wants to work in something in that vein.
- [62:46]
Matt Odell
I know there's many esteemed lawyers in the audience. Okay, please do your, do your duty to bitcoin in your nation. Yes, it is, it is insane when you, number one, how much friction it adds to any interaction you have with financial applications. And then number two, how completely ineffective it is. It's. It's not stopping well, like this.
- [63:07]
Steve Lee
We briefly mentioned in the beginning of the show the de minimis tax. And, like, Block's doing a marketing campaign in D.C. right now around that. And it's just. We're talking about spending bitcoin. Well, I mean, you know, right now it's in the US And I think. I think many other countries, but certainly the U.S. it treated as a capital gains when you. When you. When you buy a coffee. And it's kind of ridiculous. Right. So the proposal is like a 600 de minimis. So if your payment is under 600, you don't have to pay taxes.
- [63:40]
Matt Odell
It's too low.
- [63:41]
Steve Lee
Sorry, it's too low. A little bit of inside.
- [63:46]
Matt Odell
Let's think big.
- [63:49]
Steve Lee
Yeah, I agree, but so a little bit of context. Senator Lummis original bill, I think, was $300. There are other cryptocurrency stakeholders that I've heard are pushing for $50 scumbags, which is completely ridiculous to the degree that's true. I've got to think that is like companies that have a vested interest in stable coins. And so that's really just. That's throwing bitcoin under the bus to do a $50 de minimis. So in that context, 600 is a lot better than 350. But I agree that it should be ideally a lot higher.
- [64:40]
Matt Odell
So we're taking the wins that we can get. If we can get.
- [64:44]
Steve Lee
It's arguably a big win over, or it is a big win over what we have now and arguably is maybe the best. The best that can be achieved. And we haven't achieved it yet either, so we'll see. But it also suffered, I mean, a problem with the BSA and everything since then is that the way they're written into either law or regulations is a fixed amount of dollars. Well, as we as certainly all bitcoiners know, like inflation. Right. So what. What a $3,000 limit in the 70s was. Is way different than today. Like, $3,000 in the 70s was like a substantial amount of money. So it might have seemed like a reasonable. Or whatever the limits. 3006, when you have to, like, report certain transactions, whatever, like. And now all of a sudden it's like, well, that's like a pretty common. That's like a nice bicycle or something. I mean, it's. It's not like buying a house. So that de minimis tax will be. Yeah, so some. Some bitcoiners want it denominated. In Bitcoin as well. Which again I philosophically agree with. I mean I agree with that. It's just like, is that, is that practical?
- [65:47]
Matt Odell
Practical? I know we got to get going here soon, but I mean on this note to BSA privacy, like on chain privacy too. I think everybody's like, oh, that's a big narrative. There's a bunch of people in Silicon Valley trying to pump zcash right now looking at you Naval Balaji. We see it, they're like, bitcoin's not private enough. It certainly has its pitfalls on chain when it comes to privacy, but it's not impossible. And one thing I want to make sure I ask you about is page one development kit, like making the case for pay join at a large level, particularly at exchanges, because it'll improve on chain privacy by messing with the chain surveillance heuristics that exist. But just as importantly, maybe more importantly for these exchanges creates efficiencies in terms.
- [66:42]
Steve Lee
Of being able to batch and so it can be positioned that way too depending I think how you position that technology and project. You want to know your audience. But I've always liked paid join and big credit to Dan Gold who's like carried that torch for many years now.
- [67:00]
Matt Odell
Thankless torch carrying.
- [67:02]
Steve Lee
Thankless torch carrying. And like no one else is really working on it despite the. I like the like when it was first. I, I forget when it was even like originally like thought of but I like the trade offs from the get go. But then yeah, no one was working on it but he, he started working on it and now there's a really healthy set of developers working on it. Spiral funds it in a big way. We're big believers in it starting with like, well, why is it attractive? I think it's like there's a couple different versions of pageoin now too. So I'll start with like the one that is implemented today and integrated into some wallets. I feel like it's a very practical and pragmatic solution. It's not overly complex. It also, it doesn't require like the whole ecosystem to adopt it for everyone to benefit because you only need. I don't know what the threshold is, but as long as there's just like a nominal amount of usage of it, it benefits everyone because it destroys the common input heuristic which chain analysis heavily depends upon and is very successful at right now because pretty much. Or it's a good heuristic right now to identify like help identify everyone's coins into. Oh, these are all these coins which are disparate, are actually all from your wallet. If you can break that common input heuristic, it really destroys that level of analysis. And Pay Join does that. And as you mentioned, Pay Join also has a benefit of like, of batching. And if I'm the receiver, if like I'm a merchant and you're paying me, I'm incentivized to do it because I actually get to consolidate my UTXOs as part of that transaction. So I think it has a number of attractive properties. It improves, it's not a silver bullet for privacy, but it definitely improves privacy. You don't need the whole ecosystem to adopt it. So I think it's very, very promising. Then there's PayJoin v3 which is like a much more advanced version of it. Yuval Kogman, he goes by Nothing Much on most of his online handles. He's a full time member of the Spiral team and super, super sharp guy, really passionate about privacy and he, he used to contribute to Wasabi. He's sort of the architect behind that. So yeah, he has a lot of experience from that and he learned a lot of things from that too and things he didn't really like about what was created at the time. And so he has a lot of ideas on how to improve it that ultimately. So he was working on a project called Fungi which was that and it's really multi party coin joins but he worked with Dan Gold and other pageoin contributors in that project to fold it into the Page Join project. So Now Pay Join v3 is that vision? Because Pay Join is just two party like you're paying me and we both put UTXOS as inputs into the transaction but with Pageoin v3 it can be more than two.
- [70:08]
Matt Odell
Is this, is this similar to what Dusty Damon was, I talked to him at Bitcoin plus plus earlier this year and he was saying like a pageo protocol where you could sort of have a gossip network looking at lightning channels and with their rebalancing and probably.
- [70:24]
Steve Lee
I don't know exactly what he is referring to but that's.
- [70:26]
Matt Odell
I think it was an idea. I don't think he implemented anything but in the context of like splicing it's like yeah, Page one can be implemented.
- [70:31]
Steve Lee
But similar to that where it sounds, it sounds similar. So that's still R and D mode but that, that'll be, that'll be coming and then that, that takes the privacy to another level. It's a lot more challenging for that to be successful. But if it is successful, there has to be a very high volume amount of payments willing to do that so that you don't have too much latency with your, with your payments.
- [70:54]
Matt Odell
Like channel rebalancing is like a perfect thing to.
- [70:56]
Steve Lee
Yeah.
- [70:56]
Matt Odell
Put into that.
- [70:57]
Steve Lee
Right, right. Yep. So in any case. But back to what you're saying, like getting, getting people to adopt it. I think getting mobile wallets to adopt it is relatively easy. I mean, it's always a prior prioritization game. Yep. And cake Wallet as well. Getting exchanges too. I think, you know, most likely this to succeed, you have to go in with the save, save efficiency, save transaction fees.
- [71:26]
Matt Odell
We're looking out for shareholders here. Yeah. Yeah, we're looking out for shareholders. Yeah.
- [71:29]
Steve Lee
And, and it's definitely worth the effort to make that sales pitch and get it to happen so that, that sales pitch will, will happen within Block, but within other, other companies too. And we'll, we'll see. I mean these come. These companies have compliance departments. So unclear how they'll, how they'll respond to it.
- [71:49]
Matt Odell
Just using the Bitcoin protocol in a more efficient way. Why don't you want to do that? Yeah.
- [71:53]
Steve Lee
There is power. My observation for speaking with lots of compliance teams, not just Block, but many others, is that the more something is part of the product, it's part of the open protocol. Everyone's doing as part of the open protocol. That does help. That does help.
- [72:10]
Matt Odell
I've been on this page one journey for years. Dan, thank you for your work.
- [72:13]
Steve Lee
Yep.
- [72:14]
Matt Odell
Exchanges seriously consider it. Like, I think this is one of the lowest hanging fruits, highest leverage sort of tech implementations at the protocol level that everybody can make in the space. Steve, we got to get going. Any final thoughts, parting notes for the audience out there?
- [72:34]
Steve Lee
Yeah, thanks for having me on. I'd say that people should remain optimistic on Bitcoin. Even the price is going down. Even if the. They're not happy with our lightning is Atom mobile phones. There's just a lot of promising stuff ahead. So everyone keep their spirits up.
- [72:51]
Matt Odell
We're going to win.
- [72:52]
Steve Lee
We're going to win. Yeah. That's your email signature. I just noticed some people, some people don't.
- [72:58]
Matt Odell
Some people don't think it's a signature after the first email. And I think I'm just writing it. Get a thread. That's your, that's your signature.
- [73:04]
Steve Lee
That's great.
- [73:05]
Matt Odell
We're going to win. You got to have that irrational optimism.
- [73:07]
Steve Lee
We're going to win.
- [73:08]
Matt Odell
Peace and love, freaks.
- [73:10]
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