← The Wolf Of All Streets
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- [00:01]
A
Bitcoin is sitting at 92,500 or so and people are tense on both sides. Fear is still high. Where is it going to go? Let's unpack it all with Alex Miller right now.
- [00:29]
Let's do. Well, good morning everyone. Dave Weisberger here subbing in for Scott once again tomorrow. Probably the last time you'll have to hear me for a while. Well, at least until macro Monday. But I'll be back in my normal spot, joined by Alex Miller to help unpack. What's going on with bitcoin? There's lots of confusion out there. Alex, what do you think is going on?
- [00:49]
B
It goes up, it goes down. I don't know. The, you know, I think everything, I think it's a reflection of just the general instability that everyone is feeling across, across the board right now.
- [00:59]
A
Right.
- [00:59]
B
We're seeing very similar movements across a lot of different equity markets. It's the holidays. I think, you know, one of the endless debates I think over the last year in particular and especially the last six months has been is the four year cycle dead or is it going to repeat itself? And obviously, you know, December and turn of the year has always been a weird time for people. Right. Like I think, I think one of the things once I've seen is like, you know, it goes up right after Thanksgiving because like everyone goes to the, you know, Thanksgiving table and like tells their family about bitcoin and then people go and buy it and then I feel like there's always something weird that happens around Christmas time. As someone who helps run a crypto ecosystem every year around like the Christmas holiday we have, I don't know, some kind of like surgeon usage or chaos. We had a whole weird thing with our testnet last year and stuff and so it's, this is always just a weird time of the year as more people have like, I think some excess time sitting around the computer and talking to people on the Internet made all the more so by nobody knows what inflation numbers are, nobody knows what the next job numbers are going to be and nobody knows when the Fed's gonna like if they're gonna go full on printing next year if they're not. And I just think that's showing up here that, yeah, I think that's just what's showing up.
- [02:18]
A
Yeah, I mean it's, it is interesting. Look, I, I think two things and, and one, you're incredibly well, well positioned to talk about so you'll know which one of the two the first one is. It always feels and it's Very strange. This time I'm not gonna lie. It always feels like bitcoin bottoms coincide with renewed calls of calling bitcoin tulip bulbs. Or it's, it's a, you know, or Ponzi scheme or things are wasting, you know, basic fud of some sort. Whether it's about China or the environment or these days about micro strategy. That one's a, that's an old favorite but a goodie. And that one's come back. You know, there's Satoshi fud out there. You know, it's just, it's, it's kind of. When I say that, I mean people talking about it being the CIA and they're getting ready to dump the market so that the US could buy it cheap. I mean, sure, all sorts of crazy stuff and, and the perma, the perma skept. The ones who have been wrong since $100, the Steve Hankies, the Peter Schiffs, the other ones that just have gotten more and more histrionic with daily posts. You always see that. At the same time, however, building and the network seem stronger than ever. Right. You know, you know, I checked this morning back up to 100 and you know, whatever. 115. Exahash. Am I getting the numbers right or am I off by a bit? And which is just for, for those who follow along at home is about more than 10x where we were when FTX collapsed the last time. We had greed and we had extreme fear ratings like this for a sustained period of time. So you know, the, the notion that the, that bitcoin is closer to dying now and people talking about an inevitable bare market because of this four year cycle narrative. Actually I think it's playing out the opposite. But I'm curious, you know, from a builder, which is what you are. I mean I think the building seem, the building community seems other than a knots versus core, you know, you know, spam versus no spam, which I think we should get into and I'm sure you have an opinion on, you know, seems stronger than ever. So you know, am I crazy or.
- [04:25]
B
No, absolutely not. So the, the, I'd say building on bitcoins and again also in a little bit of a weird and like transitional place right now. But I'd say if you, you know, specifically as you talk about like data storage and programming on it, people are still trying to figure out I think what's next there. And it's just a ton of R going into it right now. There hasn't been kind of a huge major development in it like There was you know, in kind of since ordinals In March of 2023, February of 2023, there's obviously like bit VM and a lot of this stuff keeps advancing along. But the last year, the story of the last year has absolutely been integration into the core financial system more than direct building on top of bitcoin. Like that's what the market's been really interested in. And obviously with Trump coming into office and the resurgence in it and the insane amount of institutional adoption that we've seen, like that is where the activity has been. But to that point, like that makes it all the more insane that you would think it's going anywhere anytime soon. I think that is part of what's helping break kind of the traditional four year cycle that we've seen on it. Again you're going to continue to see up and down, you're going to continue to see it be more volatile than you know, say like the straight S and P or even you know, nasdaq. But yeah, it's really not going anywhere on it and the idea that it is crazy. You know, you made the point. Yeah, the hash rate is way up even over the last year, let alone like three years ago. I actually I have, I have a miner that I usually run over the winter to heat my garage using like the excess solar power.
- [06:04]
Traditionally I've run it in a pool because I at least made it's like a little 96 terahash thing. It's made a few bucks a day doing that. I think I'm actually going to swap and just go to solo mining now because you know, hash power has gone up so much again even in the last 12 months that there's not really a great point to me running in a pool. I'd maybe make like a dollar a day worth, $50 a day worth of bitcoin on it. So I'd rather go into the lottery ticket mode and like it'd be pretty, pretty sweet if I you know, hit a block running solo on there. Actually I think someone about an individual miner about six or eight weeks ago, a couple months ago, did have one and hit an individual block and like three months after they started mining. So that was actually pretty lucky for them. But yeah, like it's.
- [06:52]
A
Well you're running it basically you're running it off of excess power and the machines paid for from your perspective.
- [06:57]
B
Yeah, yeah, it's, it's all, it's all free money to me on it. But I think, I think that's a very interesting thing. Which is you saw some bitcoin miners pivot or look at pivoting into AI. I think it was core. We was even trying to buy Core Scientific, I want to say, or someone else and that deal actually fell apart. I think it's actually quite impressive given how well suited a lot of bitcoin mining operations were given their heat and power density for pivoting into AI operations haven't. I think that's a very interesting sign that there's a lot of people who've made investment here still think there's a lot of legs on bitcoin. So the idea that the people who put their money where their mouth on it is clearly don't think that there's something to go.
- [07:49]
You mentioned MicroStrategy as well. I think it's another interesting case where I think there are. I mean I have said for a very long time I don't like MicroStrategy accumulating the amount of bitcoin that they have. I don't think it's good that multiple percentage points of bitcoin are held by a single actor. I don't like the over complex financialization of it. I get why it's not like as problematic as taking straight loans to do it. But there's a reason that they announced this big US USD reserve fund now is that people were very, very reasonably getting worried about like are they going to have to start selling and dumping to satisfy the, you know, hundreds of millions of dollars like a month.
- [08:32]
Certainly a year that they have to pay in dividends out to people. They realized that was going to be a problem and so they just sold a bunch of more common stock to basically be able to do it, diluting their shareholders out in the press, which great. I'm glad that they're not going to be selling on the market. But I think there's a reason you saw bitcoin start to turn around and come back, you know, kind of bottom out right before that announcement and start to move back up. Now there's a lot of people who are rightfully worried about what happens to the market if MicroStrategy starts.
- [08:56]
A
D Now it's funny because in March and Look, I hold MicroStrategy for the long term in, in you know, a couple like retirement accounts and whatnot for a reason. It's just, it's a way of playing a, a bet which frankly the bet's going to be right and there is upside there and I'll explain in a heartbeat. But in March when he gave the earnings presentation I posted and I got a lot of heat for it about the fact that it's path dependent, meaning that there's, I use the word theta which is an option term for time decay. And I said that in a sideways market microstrategy will massively underperform. Why? Because they're paying all this interest and they are dependent. Their hurdle rate is if Bitcoin doesn't go up 10%, you're going to lose money being in MicroStrategy because it means that their loans are outperforming their assets. And so that's a bad thing. And that's okay. I mean if you know that going in, it's fine. And that is exactly what's happened over the last year. You know, Biker Strategies return profile is going to look like a, a option, a long option strategy where if Bitcoin doubles, Micro Strategy is going to triple or so or should. If Bitcoin goes down, it's going to go down more and if it stays flat it's going to continue to slide because of that time decay. And, and it's, it's really as simple as that. And you know, people need to understand what they're buying. The kicker with micro strategy and the only reason, and by the way I, I loathe all the other digital asset company digital asset Treasuries because they don't have this. The kicker is if one wanted to try to, to get 100,000 or more Bitcoin on their balance sheet to be able to do Bitcoin backed loans and do Bitcoin backed banking once Bitcoin can be treated as collateral in the system, you would pay a lot, a lot more money than Micro Strategy has it on their cost basis. Right? You know, Forget whether it's 74, I mean we're talking 200 if you want to try to accom it to accumulate that sort of stash right now, unless you found an OG willing to sell it to you. Right. It really is that simple. And so when the Basel rules change right now if, just to put this in perspective, you may not even know this. If you are Galaxy Digital and someone comes to you and says I want to buy a billion dollars worth of Bitcoin long will you sell me a swap and I'll take your credit and we'll figure out, we'll figure out who's going to custody the Bitcoin. But I don't want to have it on my balance sheet. I want to worry about that. I just want to have the economic returns over the next four years. So you say, okay, great. And then someone else says, I want you, I want to short Bitcoin over the next four years. And so you have a swap on both sides. Well, that's a billion dollars on both sides. Right now they have to reserve $2 billion in capital to have on that trade, even though their risk is limited to counterparty risk because they have a long and a short. If it were in the S and P, they probably only need 100 to 200 million in capital. Now in Bitcoin they'll probably need 2 to 400 million because of the volatility. But the reality is that difference is whether or not banks or, you know, under Basel rules can actually declare it as capital that is usable as collateral. Right now it is not. And when that rule changes, MicroStrategy has the ability to turn themselves into a bitcoin bank. And in fact, JP Morgan even, even said it yesterday. They and MicroStrategy even said that they see that as a funding source in terms of the ability to do it. So at that point now you have to start comparing it to banks and, and banks trade between 0.8, I. E. A discount to 1.8. That is a significant premium to their book value. And MicroStrategy's book value is obviously Bitcoin. So I don't hate MicroStrategy. What they're trying to do, they're trying to do it as a first mover and I certainly don't hate what Jack Mallers is trying to do. If you take him at his word of building operating businesses that can generate Bitcoin. But Bitcoin, treasury companies that are just purely buying bitcoin as an access vehicle, I mean, I never, I thought that that was going to end. I thought it was going to take a year or two years longer than it did. But I think that that's kind of dead now. And that's, that's a good thing for the market.
- [13:11]
B
Yeah, I mean you have, there has to be a reason people actually want to do the thing. And again, it's very hard to beat micro if you're, if you're just buying and holding Bitcoin, you're not going to be able to do it in the size and therefore beat MicroStrategy at the game. They're always going to be more efficient in it, especially because they've already got all the like, leveraged ETFs that are giving them the additional volatility that other traders want. Like it's the. Yeah, you're just never going to do it a little bit better than they were going to be able to. I think you've seen some of the other.
- [13:41]
Some of the other plays that are for some of the other assets. But again, even like the appeal of some of those go down as the SEC approves staking on ETFs. Right? So like that was at least one advantage to doing it. But I think the other thing you're going to see is you're going to see people, I don't think you're going to see the strategy on treasury companies go away entirely. But I think one of the things that the market's going to really want to see, and maybe this is just a bias because it's something that I want to see out of them, is like, how are you de risking the fact that this is a company run by people.
- [14:23]
Who can fuck this up basically, right? Because like the upside to an ETF is it's just the asset, right? Like, yeah, sure, I pay like, you know, what, 10, 20 basis, by the.
- [14:34]
A
Way, that is a great point and people need to understand that. And we've seen exactly this. I mean, I lost some money in Nakamoto thinking when it got below its M Nav that that would be a good buy. And it kept falling. And with all due respect to David Bailey, the market lost faith in him.
- [14:47]
B
Yeah, yeah. And that's the thing is that like, you know, it's, it's a lot more sure of a thing to pay 10 or 20 basis points on an ETF. Maybe it's, it's 25, but there's discounts on some of it. So, you know, 10, 20, 25 basis points on the Internet. Exactly what it is each year you're paying versus like, well, how much money are these people going to spend on CEO salaries and compliance and like, what if they get hacked? You know, there's just, there's a huge amount of like open ended risk there that has to get priced in. And again to your point, if you think it's just going to keep going up and they're going to keep raising and like be able to, you know, buy the, you know, buy get $2 of market cap for $1 a bitcoin, then fine, you'll keep doing it. But as soon as the market starts going sideways and they can't do that anymore, you're just left with the asset plus a bunch of additional risk.
- [15:34]
A
Right? And that's exactly what's happened. I mean it's risk and cost. I mean over. Right. You know, it's like there's a big difference between it. I mean treasury companies that are doing things uniquely like staking, earn and things that, that they can do at scale, you know, on certain assets. I understand that. The truth is, is I've said this all along. Treasury companies will go away and you'll be left with companies. And a lot of companies are going to say, I have excess cash on my balance sheet. I have a choice. Do I want to buy back my stock at this valuation or am I going to put it in Treasuries and underperform the market or am I going to put it in productive, a potentially productive asset? And the answer to that is going to be they're going to try to outperform and people will start using Bitcoin on balance sheets for a very specific reason as momentum builds back into the market. And I'm a very simple guy, Alex. I just look at the price to hash rate and I'm happy to buy at a price to hash rate at basically all time discounts because every single time in the history of bitcoin it is corrected.
- [16:41]
C
Every single.
- [16:42]
A
And if you think Bitcoin's going to drop to 50, down to 10 or whatever some people are talking about, I mean you're basically saying it's going to fail. Meanwhile the smart money is investing and I'm not, when I, when I say the smart money, I'm not only talking about miners like individual economic actors, I'm talking about nation states. Right. I mean it's, we're talking about a geopolitical, you know, arms race and it's there. And, and with AI people totally don't appreciate that the component of the cost of a miner actually, you know this better than whatever, what, what percentage of the cost of mining Bitcoin is power and you know, data center space basically vis a vis the actual mining equipment themselves these days.
- [17:26]
B
Depends when, depends where in your depreciation cycle you are. I mean, yeah, it's a huge percentage of it is marginal cost on, on electricity and things. And you know, this is one of the things is there's actually a bunch of miners who bought their mining hardware like three years ago and are coming up on refresh cycles and having to do that. And there's a bunch of new machines that have come out again, like me running an old, you know, s 1996 terahash machine is not even what it was a year ago, let alone what the power was two years ago. There's been a huge shift in that right now. And so yeah, absolutely, it's absolutely driving a shift. And depending on where you are in your cost of power really, really affects how much you want to do it. But the price of bitcoin is still high enough that it's clearly worth people investing in because we're only seeing the hashing power go up rather than think.
- [18:17]
A
About it from the AI perspective. So look, ASICs are not for AI, but the data center power and the data center platform is. And data centers space of the data center is not nearly as important as the power and cooling. Right. And people don't understand, especially in a lot of these remote data centers, the land space, the land cost is really, really small. So if you're building a data center to power AI and you, you know it costs you x. But the problem with, with AI data centers are other than the training, everything else is demand response, meaning there's significant peaks. And this, it's a not an even use. And bitcoin could be turned on and bitcoin money can be turned on and off. So you can get. This is why 90% discounts, 80% discounts on power by running it alongside on an intermittent.
- [19:04]
B
Yeah, I mean this is part of how Texas has built so much solar is that bitcoin miners can go there and use it as load shedding. Because yeah, you can ramp your demand profile on Bitcoin mining in 15 seconds faster, potentially. Like you can just turn them off. And there's no downside to that. You can definitely load shed AI, but not in the same way. You can't do it as fast.
- [19:29]
And you, you know the, you can do it much easier with training runs. It's interesting with training runs you want to run it at 100% but you can, you can control the demand profile so you can ramp it down with inference profiles. You're dependent on what the other people are doing, but you're not running at 100%.
- [19:46]
A
Right. Which means having some bitcoin alongside it in a one of these data centers. So you know, there's been all this, this talk yesterday which actually makes a lot of sense using small nuclear reactor technologies, the kinds of stuff that in the previous generations powered submarines and aircraft carriers. Right. But now all of a sudden you build data centers with that stuff that's expensive and that'll be expensive for AI, but it's a lot less expensive if, when it's not being fully utilized. If you can use it for bitcoin as well.
- [20:14]
B
Yes, well, and I think the, the goal, the desire for SMRs also comes down to a whole other Just reality of what it takes to get Internet connected to the grid. Especially here. Right. Like there's this whole funny thing right now where nobody actually knows how much power demand there is. Because right now like the timeline to get interconnected to the grid is anywhere depending on where you are from 18 months to 7 years. Right. If you're trying to get into PJM which is out on the east coast, you know, basically around Virginia, that whole area, it's like a six, seven, eight year wait right now. But part of the reason there's that wait is you have a bunch of these people with phantom applications for interconnect because there's like a multi year wait. And so. Right. It just like keeps exacerbating and stuff. And so they may not actually have to. So it like said it all comes down to nobody knows exactly what it is right now. And so the idea of like oh my God, I could just like buy a nuclear reactor and just like drop a gigawatt of power is like really appealing to people. Which is why you've seen I don't know how many hundreds of millions of dollars of investment into SMR companies in the last 12 months. Also the fact that you know, thanks to, thanks to the Trump administration's difference in view on nuclear power from the Biden administration's people actually think like it might happen this time and they're actually, you know like rushing to do it. So it's. Yeah, it's a lot of it is about just reestablishing control over your business and your timelines and de. Risking things.
- [21:44]
A
Right.
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B
Reducing your dependence on outside.
- [21:46]
A
From a macro investing point of view, if you think that, that a modern grid can be recalibrated for double the amount of power demand, which more or less is not far off of what what is. I mean it's. Some of the estimates are much more than double can be reconfigured without a stabilizing technology like Bitcoin running alongside of it. As I think that you're smoking something.
- [22:11]
B
Because I really think the way that.
- [22:12]
A
You'Re going to be able to do it without wholesale massive infrastructure projects that even if you did a wholesale massive infrastructure project, the time it would take so you know, being able to. People just don't understand the harmonics inside of stabilizing grids. I mean you made the point about bitcoin and said 15 seconds like well that's massively important. Well, what people don't understand is when a grid fails, starting it up again is a non trivial task.
- [22:37]
B
It is Incredibly complicated. Yeah. And the grid is incredibly complex with the number of interconnections between different things. The way all of this works, the economics behind it.
- [22:49]
And that's just the running of the day to day of the grid. That doesn't even start to factor in what it takes to upgrade it. The legal, legal situations. And again, the funny thing for me is it's not just about AI, it is simply that. And you'll see these charts posted over the Internet all the time. But there is a simple truth, which is there is no such thing as a, you know, rich energy poor society. Right? All rich societies have a lot of energy, and the cheaper the energy is, the better. Right. Also, the cheaper the clean energy is, the better.
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A
And by the way, the cheaper the and most accessible the energy.
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B
Well, I, I think those go hand in hand with each other.
- [23:33]
A
Yes, you and I do, but a lot of people don't understand that, that there, this is a multivariate problem. And so you're trying to evaluate assets. You need to evaluate the assets that contra. That are contributory versus extractive. Bitcoin is undeniably a contributory asset despite. And yet. But, but if you listen to only the New York Times or Stephen Hanke or Peter Schiff, they would say it's extractive. They would say, well, you know, bitcoin takes all this electricity small countries and this is like. Well, yeah, but as it does so, it allows you to build grids in a much more efficient.
- [24:05]
B
I think there's a very interesting dynamic, which is bitcoin doesn't have politics here, right? Bitcoin, just like almost any other financial transaction, cares only about the input and the output, right? Which means if you make it really easy to build a ton of green power and you lower, you know, you lower the cost of it, right? Then bitcoin miners will buy that power cheap and they will sign the offtake agreements. Right? Again, as we've seen happen in Texas, where they've made it really easy to do that. If you don't do that and you keep the cost of renewable power cheap or high, then bitcoin miners will go and they will buy old coal plants and reactivate them and burn coal power to do it, because that's the cheaper cost of power for it. They will do just like anybody else, just like the same thing you will do. If you get the cost of electric cars cheaper, people will go buy electric cars and do that. If you don't, they will buy ICE cars and they will use those, right? Everyone does this. They will Go to the cheapest source of power they, that they can find. Obviously depending on who it is, there's a little bit around the margins there. But fundamentally people will use the cheapest power. So if you make it really easy for people to build green power, Bitcoin mining will fund the next generation of, of green power. Build out the same way that AI is like driving a move back to nuclear. But if you don't let them do that, yeah, they will use dirty ass power to make the next buck. And like I always come back to this is why I like capitalism is I've it, it capitalizes, it capitalizes on what I think is just innate human nature to try and make money. Whereas communism, socialism tries to deny it, right, battle against it instead of pointing it in a productive direction.
- [25:47]
A
I always phrase it very simply capitalism which is we do not have capitalism in America today. We have cronyism but you know, but capitalism is about letting human incentives achieve what human incentives will achieve allowed to do so. And, and communism, socialism is let's deny human incentives and try to force our way around that. Which is why there is no such thing as a socialist or communist country that doesn't have a totalitarian government. And in fact you know, when people say, well Sweden or Norway, it's like, yeah, they both, all the Scandinavian countries went hard back in the direction of capitalism and freer markets because they've always.
- [26:26]
B
Those countries have always been heavily capitalist. They had a very good strong social safety net in part because they had massive national natural resources to do it with.
- [26:37]
A
That's right. No, I understand the dynamic. We could have that conversation too but I don't think our audience really cares about it.
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B
But the point, I feel like there's not a lot of communists watching the Wolf of Wall Streets yet.
- [26:47]
A
That's probably true. But look, the SMR point, which stands for those, in case you don't know what small modular reactors. I consider that the ultimate green energy. I know there's a waste issue, but we have, it's a solved technology really. It's a solid technological problem. The fact that the Green movement was in large part founded because of hysteria about nuclear energy has set back the.
- [27:12]
B
Green movement unbelievably so.
- [27:14]
A
Decades, decades of setback. I mean it's actually one of the most craziest things that the green movement, which started, you know, you talk about Greenpeace, started with Save the Whales, is actively campaigning to ignore studies and ignore data that says that wind power off the coast of, of North America is killing the North American Right whale. It's one of the, the craziest things that drives me nuts. But the fact is that AI is going to demand power. Bitcoin allows technologies like small modular reactors and wind and solar to be more economically viable and help build out a better grid, which we now know we're going to need. And whether it's electric cars or AI, there's no doubt we need a bigger grid. And I don't see any path to doing so without bitcoin side by side. Which is why a lot of people pushed Trump to make that EO that people have ignored since he signed it, which is that bitcoin is a strategic asset. It's strategic, not just in the financial sense. And I think that's the point. I know you understand this, but I don't think that's in the price. I think it's in the hash rate. I think you could see what's going on, but I don't think it's in the price, do you?
- [28:22]
B
No, I mean I again, I think bitcoin's price is still highly volatile. I think it's in the long term. It's certainly not priced in on it. You know, you were talking about like, does it go to 50 does obviously. I say obviously I don't want to jinx. It doesn't go down to 10 or something. But yeah, it's going to go up, it's going to go down, it's going to do its freaking thing. But again, I think the level of integration and adoption, there's a lot of people with a lot of, a lot of incentives for why they've done that. And at the end of the day people want to make money so they're going to do that. But I think there's good principle reasons to like it and then there's just good practical ones. And I do really think that the energy build out and transition there is a huge, huge positive use case for it. And it's just a matter of people needing to channel it and take more advantage of it.
- [29:10]
A
So we have five minutes left. What are you up to these days? And is there anything in particular that you know that you think that people want to hear about?
- [29:18]
B
Yeah, I'm building on bitcoin. Yeah. So for those who don't know, I up run the stacks projects. We're a layer two for bitcoin. We just actually a couple weeks ago rolled out our dual stacking as we call it, where you basically can earn return yield on your bitcoin by holding bitcoin and a Lesser ratio of STX on it. It's created from the stacks mining process. Again, I think this goes into a major theme right now, which is people want to earn yield and return on their bitcoin, right. You have a bunch of bitcoin, you don't want to have to sell it in order to live or you also just want to grow and accrue more of it. And we've seen massive demand on it. You see every single bitcoin dat talking about how they're going to earn yield on it, but no one really has very good ways to do it right now when you lack the programmability and you lack kind of the inherent staking mechanisms that you see on like Ether Salon and things. And so that's what we're working on doing is trying to, you know, just make bitcoin more programmable, more usable by folks. And there's a ton more that we have coming up soon that's going to actually again just continue to improve kind of the security and privacy profile on bitcoin while still just making it more usable for people. And I think, you know, yeah, bitcoin is this. It's. It's established itself. Obviously, you know, years ago we were talking about like, well, some people, not those of us who knew, were talking about the flipping and the idea that like right eth would overtake bitcoin. And I think, I think any idea of that happening at this point is, is pretty well dead and buried.
- [30:50]
It's. It's just pretty clear bitcoin's going to be around for the long run.
- [30:53]
A
So. So, so look, Alex, all boomers like me ask the question when someone says the word yield. Where does yield come from? And you know, I always laugh and I go back to one of the only big services that Sam Bankman fried actually did other than kick ass conference in the Bahamas.
- [31:11]
B
Was.
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A
Was.
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Yeah, it was. We went. Thankfully it was. It. He caused a lot more pain net. Net net to me and the company that, you know, that I co founded and our clients than anything else. But he did expose a lot of the hypocrisy about yield in crypto with the whole magic box thing with Matt Levine. So I always ask, so when. Look, yield. For yield to exist, there has to be demand for someone to borrow. Now there is demand for Bill to borrow bitcoin for a variety of purposes.
- [31:43]
B
Well, I'll call it. No, there has to be an economically valuable transaction taking place.
- [31:48]
A
That's what I mean. Right? Yeah. Whether. Well, but some. Right. So could you just Like I'm a five year old, tell me how stacks help take that economically viable transaction, where the demand comes from and where the.
- [32:00]
B
So Stacks, Stacks. Mining on stacks works using a system called proof of transfer. And if you think about proof of work mining, right, proof of work is pretty simple. You bid electricity to win Bitcoin, right? Stacks works. One layer up from that is you bid Bitcoin to win stx. And then all of that Bitcoin that's been bid by miners gets rolled up and distributed out to people who stack stx or in this case who stack STX and Bitcoin together. And so it's, you know, there's no lending, there's no counterparty risk going on there. The economically valuable transaction that is generating that Bitcoin, that becomes part of it is securing the stacks network so that mine, you know, which allows users to use it, which means miners want to mine on the network and they bid the bitcoin to do so. So it partly comes out of, in effect, inflation on the Stacks network, right, because there are new STX being generated all the time and that goes to miners. The miners bid the Bitcoin. So you don't have to have lending, but you do have to have economically valuable transactions going on. And that is, I think the thing that a lot of people in crypto do miss is that they don't ask that question of fundamentally like, and you know, you'll hear people say the things of like, if you're not, if you're, if you're not paying, you are the product, right? Or there's similar thing. If you don't know where the yield's coming from, you are the yield. And that's absolutely true. If you don't know what the economically valuable transaction is, you're the economically valuable transaction to someone.
- [33:26]
A
Okay, so how could people learn more.
- [33:28]
B
About Stacks and obviously Stacks co, Stacks co. Check it out. You can follow me on Twitter. Alex L. Miller Shoot me a DM if you got any questions. And yeah, like you said, our goal in life is just to make, build, build the bitcoin economy. I think the, you know, there's a very funny thing where the US dollar is already, for many people around the world, has been for decades the equivalent of how we talk about Bitcoin for the future, right? Like it is the hedge against a shit government run system and things. One of the, one of the great joys I have is the fact that the first thing in crypto to ever find product market fit was stablecoins. But it makes sense because again, the dollar's already been playing that role. A stable coin is just a better way of doing that. I think you fast forward this out 5, 10, 15 years, you see bitcoin gradually take place. Especially if we're just going to have a bunch of cronyism in the US and rapid changing a financial policy all the time based on the whims of the President.
- [34:28]
A
I think that's a great place to end it. So everybody obviously give Alex a follow. Check out stacks and we will be back tomorrow for the Friday 5 and hopefully we'll start on time tomorrow. My fault this morning. Sorry guys.
- [34:43]
B
Thanks Dave.
- [34:43]
A
Take care.
- [34:45]
C
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