Low-Time Preference Bitcoin Infrastructure & Development with Erik Svenson – Blockstream talk #28

Welcome back to blockstream talk today We're speaking with blockchain's Co-founder and CFO Eric Svenson Blockstream has a number of high-profile Personalities on the roster but there Are also a number of key decision makers And long time team members that fly a Little bit more into the radar I think Eric probably Falls more into that Category he's a block stream co-founder And has been around since the beginning So I think it's interesting to get his Perspective on blockstream's long-term Vision and an update on how that fits in With current market dynamics Block stream is an almost uniquely low Time preference company as Eric puts it The goal is more to try and get ahead of The puck than to chase it in this Conversation we talked about the Interest block stream is getting for Institutional applications how the Investment industry is slowly moving our Way emerging versus develop Market Bitcoin usage how the different pieces Of the block stream product offering fit Together and what it's like to learn About Bitcoin from cypherpunk ogs like Greg Maxwell Peter Willey and Dr Adam Back Thank you Eric thanks for joining the show today Yeah great to be here long time first Time to start off can you tell us a bit

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About your journey um what's your Backstory and and how did you become CFO And co-founder of blockstream alongside Adam yeah so uh it's actually a pretty Interesting story Um my background is Uh traditional Finance Um I spent some time in Investment Banking and then I found my way to the Insurance industry And I was actually at AIG during the Financial crisis My job was pretty boring I was lending Money to food companies Um and it just really gave me a bit of Pause about how the traditional Finance System was working and I took that Opportunity to quit my finance career I started working for startups And I ended up Consulting for founding Teams and that's how I met Adam and the Rest of the co-founders Adam hired me as A consultant to build the financial Model and help them raise the seed round Uh and then he ended up inviting me to Join the founding team And uh now I'm president and CFO is that Kind of how you got into Bitcoin as well I mean that was the path for me is Around the the 2008 financial crisis and Just seeing all of the issues that Emerged from that and how the Legacy System appeared to have these glaring Cracks in it that I previously wasn't

That aware of and that kind of pushed me Towards Bitcoin as an interesting macro Asset and maybe a potential way for the World to kind of get out of this mess That we found ourselves in yeah exactly I mean I was really good at my job but I Realized during that period that what I Did didn't really matter and in a weird Way it kind of contributed to some of The problems that led to the financial Crisis so I had I knew about Bitcoin Um I owned Bitcoin I followed Bitcoin But it was still kind of a shock to walk Into the Airbnb and meet Adam and Greg Maxwell and Peter Willa and a lot of the Other core developers Um you know it was kind of like having Guitar lessons from Jimi Hendrix Um so it was definitely Um You know I definitely Dove down the Rabbit hole at that point uh and I'm you Know very fortunate that uh Adam invited Me to join the founding team but yeah it Was pretty surreal that I was looking at Um Joining a company that was hopefully Going to prevent another AIG financial Crisis from happening yeah I mean you Couldn't find a much better guide than That that three step there to kind of Take you through it yeah um what about Mount gox I've got Mountain gox on a List of questions here can you share

Your experiences there and how those Help shape your experiences at Blockstream yeah well it was really uh Interesting because I I met Adam uh in March of 2014. And that was a month after Mount gox Declared bankruptcy and so You know as I was doing my due diligence That was one of the questions I asked Him is how is this situation and and you Know potentially future mcgox issues Kind of impact the Bitcoin ecosystem Uh and he said well I have a plan for That and he went on to describe Um part of his vision for blockstream And how he had in mind to create some Technology that would hopefully prevent Another Mount gox from happening and Just in general reduce the the risk from Centralized exchanges and other Centralized intermediaries Um and then fast forwards a day you know That this is the the foundation of a you Know our non-custodial Um trade technology in other words you Can go to mount gox or any Exchange And find a counterparty but then you You've settled the trade peer-to-peer so You don't have to trust the exchange or The intermediary with receiving assets From both parties and settling the trade And you know that's you know Self-custody is something that is core To what we do at block stream

Um you know we believe it's an important Part of everything we do and Um hopefully Um we can convince Um others that self-custody at least as An option Um is something that's very critical to The you know the future Bitcoin economy Yeah it's it's like groundhog day isn't It like these Mountain gox type events Just keep playing out every cycle and we Talk a lot about on the podcast about You know Trace Mayors and then not your Keys not your coins and you used to have A specific day of the year where people Would you know were encouraged to pull Their coins off the exchanges just to do A stress test and of course like one Percent of people would do that and you Really you kind of do need these events Though that happen unfortunately like Clockwork to remind people about to Remind each new generation of investor Um about the importance of self-custody And I guess Mount gox was the first of That series of events yes and I like to describe our industry and I'm Talking about the broader crypto Industry not Bitcoin you know Bitcoin is A crypto but it seems like the the Broader industry doesn't just step on Rakes they race to rakes and then step On them because there's Mount gox and Then there's you know

Um it seems like unfortunately pretty Regularly there's another reminder that Um you know not your keys not your Bitcoin yeah yeah definitely yeah it's Just an unfortunate thing that seems to Have to constantly happen um just to Keep people keep that idea at the front Of people's minds Um You know so block stream has been Through multiple Market Cycles at this Point can you share some of the key Strategies that have helped the company Stay resilient and and not only survive Through all of those Cycles but I think Probably really Thrive as well yeah so If you're if you've been in this space Long enough you've been through at least One cycle Um and for Block stream Uh it doesn't get any easier because Oftentimes a lot of the events that kind Of lead to the the cycle just underscore What we're building so you know you Mentioned Mount gox other you know Things that have happened very recently 2022 was you know a brutal year for the The broader industry Um all of those things underscore what We're building But the opportunity grows and the Opportunity cost grows like it becomes More important for us to execute on what We're doing

Um I think the the thing that's kept us The most resilient during the bad times Is being very consistent during the good Times So when we started the company You know ethereum was just coming on the Scene So we kind of went through the Ico Period and we deliberately avoided doing An Ico Um You know why do we need another asset if We have Bitcoin you know we focused on Building the hard tech Instead of working on things that were Faster to monetize such as I you know Proof of concepts with some of the you Know the banks that were spinning up Innovation teams you know kind of in the 2015 time period Um you know we We deliberately avoided those because we Didn't think that those projects would Uh we didn't think the technology was Mature enough to do what they wanted to Do and we didn't think that they would Deliver the value that those Innovation Teams were shooting for and so we you Know stayed the course and focused on Um delivering on the promise of Blockchain technology and not taking a Blockchain and stripping out everything That makes it a blockchain just to Complete a proof of concept

And so Our consistency and kind of staying the Course through times when everybody was Focused on you know Tokenized assets icos through proof of Concepts you know that consistency has Helped us kind of stay the course during The bad times or the the down times when We you know kept our head down and kept Moving forward yeah that 2015 area was Era was kind of a funny one right where You had blockchain but not Bitcoin And you talk to a lot of these big Banks And the the mentality at the time I Think was you know they want Innovation But they don't really want anything to Change Um at all yeah we Had people literally tell us that they Were dusting off old I.T projects Slapping blockchain on it and getting Approval to move forward uh and you know Adam had this analogy where Um You know somebody comes to you like Imagine you're at a at a car you know a Car lot and and the car salesman says Well you know what do you want and you Describe well I want you know a sunroof Well you live in Seattle you know I want Four-wheel drive well you know you live In the planes Um or they're describing all these Features that they want and instead they

Could just point to the you know the Silver four-door sedan sitting at the Lot that does 90 of what they want Um but giving people the option to Customize Um through these proof of Concepts Um that a lot of these Innovation teams Were pushing forward Was really you know insisting on the Moon River for a sunroof when you live In Seattle Earth convertible now the Benefit of that is a lot of these teams Have really uh made progress they've Educated themselves they've you know Rolled up their sleeves and dove into The tech And so that was a benefit of that Ico or Is excuse me the proof of concept craze Um and interestingly we're seeing a lot Of those same teams come back to us and Say you know we've tried to do this with Uh you know another chain ethereum based Blockchain and we can't you know Confidentiality or you know we're having Issues with smart contracts or whatever The the challenges and they're realizing That Um they could have or should have just Um taken the time to understand our Platform which is based on bitcoin Um and you know admittedly a bit harder To Um to master but now we're seeing a lot Of those same teams return and we're

Seeing a lot of traction with our Platform yeah I mean that goes back to The block stream vision and how Blockchain has really stood the test of Time I mean the vision you know I think Time has really shown that it's it's Spot on right with Concepts like Self-custody and then and then liquid as Well I feel like the whole market like You mentioned how the market over time Seems to be coming back to these these Core value propositions from blockstream And I think liquid the market is really Coming back to those core value Propositions around liquid again I think There probably was a period like you Know 2017 until very recently where a Lot of mainstream institutional Investors that are investing into the Space or you know hedge funds family Offices whatever it is they prefer to go With the custodian route just because it Meets a lot of the same objectives as as Liquid then maybe it's a little bit Easier it fits in a little bit better With their structure but with these last Kind of string of recent blobs over the Last 12 or 18 months I feel like the Liquid value proposition is really Coming to the Forefront again right like Controlling your own assets faster Cheaper more confidential and it feels Like Um you know just a broader Vision over

Time I think has proven to be pretty Spot on yeah I mean because we didn't do Our own Ico it's been Um you know a struggle to to get people To Um you know early on it was a struggle To get people to pay attention when they Were getting paid you know quite a lot Of money from other coins to integrate With their chain Um and you know the value proposition so So liquid is two things it's a layer two For Bitcoin Um so it's it basically the native Currency is Bitcoin and it allows you to Um do things that you can't do on the Bitcoin main chain such as you know very Fast lock confirmations Um very valuable if you're sending large Amounts of Bitcoin between exchanges Um or otherwise just want to use Bitcoin But Um you know want to have a faster Confirmation It's also its own Blockchain that supports stable coins Like tether Um or block street Mining Node security Tokens and so Um for that use case it's incredibly Valuable because it's based on the Bitcoin protocol But Self-custody or or um

You know centralized sources that Support hundreds of all coins In some people's minds are more valuable They don't necessarily value a One-minute block confirmation they want An instant confirmation and they don't Care that it's through a centralized Intermediary So it's it's you know that's one of the Challenges is constantly balancing The Um the risks associated with Centralization with the the benefits That some people perceive through Centralization so it's it's taken Um more time than we've uh wanted to to Get liquid Um kind of up and running Um and but now we're seeing lots of Organic growth for the reasons you Mentioned every time a bomb drops in the Broader ecosystem people realize well Wait liquid solves that Um and you know you can go down the list To a lot of the issues that the Industries faced over the last couple Years and Um you know liquid Lowers those risks significantly it Almost feels like block stream is is Almost too early to Market at points Like we have these great ideas and the Market just isn't there yet do you feel The same way uh in some ways you know

There's the analogy of you know don't Skate to the puck skate to where the Puck's gonna be you know sometimes I Feel like we're in another Arena waving Our arms around saying hey at some point We're going to create a new sport it's Going to be in this on this field Um but that's you know that's the Approach we've taken that's you know Um what Adam envisions when I first met Him Um we're really looking towards the the Kind of the long-term Um potential with technology doing Things that you know shouldn't be pushed Through Bitcoin proper And making it more flexible and Extendable to to you know really high Value Enterprise use cases So yeah we we always kind of look out a Couple clicks ahead of where the market Is it's always that balance between Um you know showing the users what they Want versus building what they say they Want Um but you know that's I think that's part of our vision is to Kind of keep moving towards where we Know the Puck's going to be yeah and I Mean when blockstream says they're Thinking long term I think you guys mean It in terms of like decades right we Talked to Um Christian last week from the

Blockchain research team about Simplicity and he mentioned that Simplicity's been out for around a Decade and we asked him about how long Do you think it's going to take until It's implemented on the Bitcoin main Chain and he said you know maybe another Five maybe another 10 years so I mean The the very very low time preference I Just focused on doing what you think is The right thing and what will be most Impactful and move the needle the most In the long term yeah and I mean that's That's a challenge right that's a an Asset and a liability because Um you know a lot of my job is is Raising money and it's not a traditional Um we're not a traditional software Development company You know this this industry in general Is is just very under capitalized like Um you know especially in markets like This Um and I hope none of our potential Investors are listening but uh we we Find that there are a very few Um number of investors who actually Understand the long term And we're fortunate to have Um many of those on our cap table Most of the people in this space love to Buy high and sell low and especially you Know we we haven't talked about our Mining business but especially

Um you know the mining industry is is Suffered through that the last 18 months Or so Um where investors are actually Institutional investors are actually Starting to educate themselves about Bitcoin mining Um you know a couple years ago we'd get Questions like what's your average cost Of electricity Um what what type of mining Hardware do You you manage and now we get questions Like what's your curtailment strategy Um you know what's your you know what's Your average daily hash rate for this Facility or this this container of Miners so investors are really getting Up to speed on mining but it still feels Like again we're operating a couple Steps Um ahead of the the industry I remember Convict trying to convince investors That they should really lend money uh Against Bitcoin miners Um oh no that's you know that those Assets are are too uh you know exotic Um well now they're you know a dozen People that lend money uh and use Bitcoin miners as collateral Um and then we said okay well Len you Know Finance building a big substation So we can build a hosting facility Oh no that's even though those are super Boring you know assets that last 30

Years it's related to Bitcoin mining so We can't do that well now there are Thankfully a half dozen people that will Lend for those projects Um what we're trying to to show people Now is that the the container itself or The data center complex That hosts these miners is kind of the Goldilocks asset where it's not as Volatile as the price of it or the value Of a Bitcoin miner and it doesn't take 12 15 years to pay off like building a Massive substation would Um And we're still trying to get people to To recognize that too Um so so the the industry is very under Capitalized which makes it even uh more Challenging to go through a market like We've Um gone through and there are signs that Things are thawing Um but you know my job is getting easier Um it's getting easier to help us uh you Know kind of continue to fund these Longer term technology projects that we Think have you know incredible Opportunity massive you know addressable Markets but will take time to develop Through no fault of the technology just Just more of the the attitude of the People that need to adopt it yeah and I Think also at time it takes time to put All the building blocks together so I'm

Thinking of that slide that we have in The the block stream deck where it has All the product verticals and each one Of it's just at a really broad product Offering right you have everything from Wallets to satellites to layer two Solutions and and it looks almost like When you look at it at a first class You're like well this is such a broad Offering like why can't they just focus On a couple of things but when you think About it each one of those is an Important building block to the overall Kind of vision that the blockstream has Of being Um you know a Bitcoin infrastructure Company and and having all of these Different assets like security tokens Working on top of of Bitcoin so I guess All of that takes time to put together As well yeah and another part of our Strategy is to validate the utility Um of our portfolio and our platform in The Bitcoin ecosystem and then Use that proof point in other parts of The capital markets to really Drive Revenue So we could go to some of the the you Know the smaller startups that are using Our platform and try to monetize their Usage But that doesn't help the ecosystem and You know they're startups themselves so Their their ability to pay is limited

And so if our goal is to really show Institutions you know Trad Phi Enterprise users that this blockchain Platform that we've developed is one That they should basically pivot pretty Important parts of their business Um to to build on We need to have Options for them in all parts of those Ecosystems or I'll I'll Um in every part of that the ecosystem So we need to have Software wallet Hardware wallet HSM Asset issuance tools the actual you know The infrastructure you know blockchain Technology itself so Um it doesn't do us a service to pick One or two of those components and Really try to lean into those We need to develop the the entire TurnKey platform that we can then focus On maybe a use case or two right so Um our our product is really the entire Um offering including liquid and Lightning and the hardware components And the software components and the the Future r d that we're working on and Then we can focus in terms of one Specific target market so what would you Say is the main within all those Different products and services what Would you say is the would you see as The primary focus at the moment you know We've tried to optimize our blockchain

Um around asset issuance And so I think that is the area of Traditional Finance that's going to see The the the you know Short or the the most adoption in the Short term So You know it's kind of a chicken and an Egg right in order to attract asset Issuers you need to show that you've got Enough users to to Really you know want To invest and trade their asset in order To attract users you have to show that They're interesting assets you know a Reason for them to get on the dance Floor We've chosen Asset issuance as kind of the The chicken or the egg depending on Where you fall Um so I think Our ability to make it easier for asset Issuers To issue assets on our platform and Focus on the tools that will make that Possible to not just issue them but to Manage them you know it have been their Assets be auditable That'll attract pretty interesting Assets and then that involves other Technology as well like some of the the Work our research team is doing to you Know allow for derivatives on these Assets that are issued once we have a

Lot of interesting assets then we think It it will attract users and is Investors Um but in in you know my personal Opinion and in our experience you are Probably better positioned to comment on This as well a lot of the early security Tokens the settings table comes aside But a lot of the more interesting Security tokens are kind of Buy and Hold Assets they're they're novel assets that You probably can't get anywhere else Like our block stream binding node but You you know there isn't you know a Healthy daily trading volume on those Um But but that has that attracts users it Attracts other tools like wallets and Other things that support that which Will then lead to I think assets that Might see more velocity and then that's When the flight Rule really turns over Um so anyway I know you have thoughts on This I want to get your thoughts I want To hear your what you have to say I I Definitely agree and I think that you Know we have a lot of issuers coming to The platform that are kind of more Traditional and they're not as you know They're conventional issuers they do Like regular Bond issuances stuff like That Um but they haven't done anything on on On bitcoin or blockchain yet and I don't

Think I I agree that you know that that Liquid isn't maybe the most used Platform out there but they ask us for a Recommendation say what's your Preference um and what have people done So far and you know we like liquid so we Put that in front of them and if it you Know if they can go through it and it Makes sense to them then they're they're Happy to use it and adopt it Um And I would say also that First Security Tokens I don't think there have been Many actual real security tokens ever Issued so I think there's been a lot of Headlines over the last you know Probably since 2018 but most of them Especially the ones that have been Issued in the US like the real estate Tokens and stuff like that do they have A secondary Market can you self-cost you Though can you trade them peer-to-peer And it's almost universally no so There's a lot of smoke and mirrors Within this industry and I and I still Think that the BMN is probably the Flagship asset within security tokens Because you know we were able to do it In decent size we issued almost 50 Million dollars over eight tranches People can self-custody it it's trading On a couple of different exchanges People can pull it off you know one Exchange send it to the other for

Arbitrage and they can even do Peer-to-peer trading within that Whitelisted ecosystem in a telegram chat You know how Wild is that so it's super Cool So I think it's early days Um but I think the market is definitely Heating up there's going to be more Interest here and I think I think El Salvador is going to be a massive driver Because if people don't know you know El Salvador is very very Bitcoin focused You know and they want everything issued In terms of security token type products That are doing you know Equity Equity Like debt like kind of offerings they Want everything to be issued on bitcoin Based technology Um so I think that'll be a massive Driver for liquid because there's not That many options out there there's like Liquid and RGB and it looks like liquid Is probably much farther ahead so I Think this will be a big driver of uh Bitcoin Bitcoin applications and uh and And liquid and I think also just in Terms of proof of concept we've Basically in the sto world I think we've Got like you know one really decent Sized proof of concept which is a block Stream mining note when we get like 10 More in El Salvador I think that's just Going to attract so many more people Right and you know the

The block stream binding note we Think will eventually be an asset that Would be an interesting asset to include In a portfolio that might get a lot of You know active increasing exposure Decreasing exposure but right now it's Just a really cool way to get access to Bitcoin mining and so You know even that Um people that have it are kind of Reluctant to sell it and so they're Psycho Diamond hands yeah yeah I bought It with Bitcoin because they want more Bitcoin and they're not going to sell it Right and they're going to get more Bitcoin if they if they invested in it But but yeah so it yes it sounds like You agree with me like the the first Milestone is to show that these assets Can be asked issued And then you like we're doing continue To build kind of next-gen technology and Features to make those assets even Interesting like imagine if you could Take the blockchain mining note and you Know Jesse and I know this asset well There's plenty of information about what The blockchain money node is but think Of it as a tokenized in small sliver of A multi-year institutional hosting Contract and so Um part of the value of the asset is the Bitcoin that have been mined so far it's Been a bit over two years so all the

Bitcoin that was mined by that hash rate Over two years and then the rest of the The value of the asset is the remaining Life of the contract folks on our Research team are doing you can Deconstruct that so that you can only Get exposure to the value of the hash Rate like It's easy to get exposure to the Bitcoin Portion right you just buy Bitcoin but Imagine adding some smart contracts Through simplicity so that you can take That blockchain mining note and just Isolate the value of the hash rate And maybe you think you know the value Of Terra hash is going to go up if the Bitcoin price moons well you can Construct this asset that is a bundle of Different derivative products that just Isolates the value that Um the hash rate to strip it out yeah And so once you kind of create those Kinds of things well now you're you're Doing things that you cannot do with Tradfi Um and so that I think is going to be You know a huge opportunity and the Reason I think that Trad five is going To really lean into digital assets first Is that actually makes the money right a Lot of the blockchain use cases that People have talked about are related to Improving efficiency reducing costs you Know saving money firing people yeah and

That that's a huge opportunity to cut Out some of the waste in the system but There's nothing sexier than Adding to income by having new assets to Sell right yeah no I think that's Probably a lot of like what the you know The big bank interest in blockchain is Is on that we can fire our back office Well look when I was working it's in the Insurance industry you know I was Placing loans to food companies right And those Um those are the liquid Um it takes you know weeks to settle a Trade so sometimes we would say okay We're you know we have too much exposure To the you know processed tomato Industry so we want to sell part of our Exposure Well you know that and there might be Another insurance company that says we Want to increase our exposure in the Process tomato sector but that trade Would take weeks to settle so that is a You know that's something private Placement settlement is something that Companies have been focused on Um and that's incredibly valuable but Again not saving money it's much sexier To think about creating new assets or New asset class really so these trade Fight companies can increase the top Line so what other crossovers do you see Between Bitcoin and traditional finance

And and what are some other synergies You can think of well I think those are The two big ones in my mind adding an Asset class to generate more income Um and then so I think that's probably Going to be the progression where [Music] Um Trad five leans into digital assets Um so that there's another Revenue Stream that for them it increases Availability and accessibility to Individual investors and not just you Know their High net worth clients but You know it can trickle all the way down To you know people like me who don't Have you know massive margin accounts With these big Banks And then once the Was that asset class is established and People get used to things like Self-custody and get used to things like You know non-custodial trades then you Can add on some of the You know more you know next-gen features That I was talking about where you can Create derivatives and other things that You just can't do with traditional Finance now And then once Banks Get used to that now they're kind of Operating on a blockchain based system And then some of the things that are More efficiency based or cost-saving

Based would be easier for them to adopt And that's where you get a lot of the Value because you're hopefully Preventing another financial crisis from Happening because you know I remember When I not to digress to back back to The first question but one of the first Things I did when I met Adam is I Listened to some of the podcasts that he Had been on and he talked about Literally In some teacher State we could put the Balance sheets of these big financial Institutions on a blockchain So that Traders literally could not Um get the balance sheet out of whack Because they couldn't make trades if it Violated some smart contract-based Covenants so you know that's kind of a You know a long-term long time in the Future but that I think is another huge Benefit to the technology is it could Not just Improve people's ability to access these Interesting assets but it could also Prevent these like major economic hits From happening if things are governed by A blockchain and not Um you know trusting uh these big Banks To to make decisions that affect every One of us do you see interest in liquid Is it coming do you think um from Banks And from these intermediaries that I Think in a lot of cases you know people

Like bitfinex Securities we're looking To disrupt Um you know and people wonder why are You why are you registered and regulated In Kazakhstan in the Astana International Financial Center and why Are you in El Salvador and the reason is Is that you know Financial Services in Uh Kazakhstan are like four percent of GDP it's probably like two percent in El Salvador so there's they're looking to Create a new industry and that's the Opportunity for us and we don't get as Much pushback from these intermediaries That have dug super deep moats Um that you get in like across the G7 so Do you see interest in liquid coming From like those the big Banks the people That are standing in the middle of Trades or do you see more coming from Issuers and investors Um yes All of the above yeah so so you know for For some Um Banks and I I mentioned that some of The folks we talk to Back in the you know 2015 2016 proof of Concept wave are coming back to us Um having you know worked with the Technology for years having tried Different things And recognizing that a protocol based on Bitcoin Is what they should have started with

Um I think that some of those institutions Are comfortable Using liquid proper we're using liquid Directly But liquid is just one instance of our Elements open source toolkit One of the things that we've improved Over the years is you know when we would Have You know a U.S stock exchange proposed That we put their Equity exchange on our Blockchain as a proof of concept and Kind of mirror the actual operations of The the you know their actual exchange And then that proof of concept would be Presented as you know potentially Justification for moving their exchange To a blockchain Um you know that sounds amazing it was Not trivial for a startup of 20 people To work on Um well now we can spin up a a Federation you know very easily So that proof of concept is now Something that we can do Um without dedicating six nine months of Our entire engineering teams time so For those that can't use Liquid proper Because of regulatory reasons you know Kyc requirements you know depending on What they're doing where they're doing It we can take our Elements toolkit and create another

Version of liquid And let them You know kind of spin up their own Version of it still based on bitcoin Still interoperable with both Bitcoin And liquid and any other Side chain that spins up using our Toolkit and so we're we're seeing Interest from Um you know folks that want to integrate To liquid proper folks that are Interested in spinning up their own Federation based on their specific use Case and a lot of interest and asset Issuers that wanna Um Create these really cool novel assets on Liquid what is the dynamic like between You and Adam giving your different Backgrounds I mean Adam is like the OG Cypherpunk but I think maybe people Don't appreciate his depth of knowledge When it comes to trading and capital Markets so for the first time I met Adam In person was we did a Bitcoin Conference for Macquarie in the McCoy Hong Kong offices in like 2017 and Adam Presented on liquid and how it could Operate it as a dark pool and it was Completely not what I was expecting or I Think what the audience was expecting um You know just the depth of his knowledge Of of of of of of markets and I think You know you can tell by his tweets that

He enjoys trading um and and that's how His mind works so I think he probably Has a deeper understanding of financial Markets and maybe people expect but how Do you guys work together what's the Dynamic like given you know your Slightly different backgrounds yeah no You're you're exactly right um Adam is Brilliant Um You know Bring cryptographer incredible Um engineer but also very Savvy when it Comes to the business part of things Um and so yeah we have a really a really Good relationship Um there are lots of things about us That are different and so we balance Each other very well Um You know an example of that is uh you Know he burns the Midnight Oil uh he's In Europe I'm in California I can't tell You the number of times I've been on the Phone with him and said like Let's pick this up in the morning I Gotta go to bed and it's 8 P.M for me And like you know pretty much the next Morning for him Um he also thinks in code I think in Spreadsheets so you know how his mind Works he you know he comes up with ideas You know like I breathe oxygen And so it's really

It well it's helpful that I'm able to Kind of quickly bang out some back of The envelope spreadsheet to show you Know if it's worth spending more time on And it's even more helpful that he's Open to Um listening to that point of view he's Very uh I've never met anybody that says Um brilliant as he is but also is open To being affected by the ideas of others Um and there are also things that we Have in common so we balance each other By being similar so you know he he has Uh you know his Integrity is incredibly High just some of the Strategic Decisions that we've made such as not Choosing to raise hundreds of millions Of dollars by issuing you know Adam coin Um just just speak to uh you know his His ethos and you know he's very he Takes a very long-term view which is Required when we're working on the stuff That we're working on Um and he believes in our strategy I Mean that financial model I built for Him in March of 2014 is essentially what We're doing today except there are a few Things we haven't had the time to do yet Um and so we're we're very aligned in Those areas too so Um it's it's you know it's very uh it's Incredible working with him yeah um so For broader Bitcoin adoption and for

Adoption for liquid do you see this as Being incremental or do you think we're Going to hit a a Tipping Point and then There's sudden implementation how do you See that playing out yeah I I do think There are going to be some pretty big Um kind of inflection points in general I feel like you know I like to measure Things in terms of like what would my Mom do like would my mom use online Banking for the longest time she Wouldn't use online banking and now she Does right Um my mom wouldn't use Bitcoin even Though she would benefit from it and so I think before we get to that level of Adoption you know my mom runs circles Around me when it comes to you know Posting on Facebook Um but I think it'll be it'll be a while Before moms are the last people still Using Facebook Right Um but I think a big reason why it might Take a bit longer than a lot of Bitcoiners would like for Bitcoin to Just kind of like cross that Chasm of Mass adoption is that Especially in the US and in a lot of Countries it's you know a credit based Society we've got to convince people not Just that self-custody is valuable but That moving to you know a debit based Financial model is valuable and that's

Not like places like El Salvador where It's you know that's a necessity and so I think Um like you said that type of wave of Adoption will occur in places like El Salvador before it'll occur with you Know my mom Um but I do think that what we talked About before where this kind of new Asset class you know Bitcoin is at a Commodity is it a security is it of this No it's it's different it's Bitcoin it's A different asset class that Traditional finance will lean into Um that will necessarily Drive demand For tools for issuers tools for Traders Um you know other types of smart Contracting features that just amplify The value of the assets so I think That's kind of the Cadence that we'll See probably through Traditional Finance but I'm Expecting not just hoping I'm expecting Some pretty big inflection points with Things like Um you know the the BlackRock ETF and And places like El Salvador yeah it is Interesting I think there's a really big Kind of global Equity Equity story to to Bitcoin that I think doesn't get enough Coverage you know how Bitcoin is really Used in places that need it and and the The difference in how Bitcoin is used Between the developed world and the

Emerging markets and the Emerging Markets it's something that's like you Know a survival people need it the same For tether you know people it just works So people use it um and they they don't They don't uh you know have as much of The tinfoil hat stuff going on as people On Tether do about around people on Twitter do about tether Um and then in the developed World Bitcoin is really you know mostly it's a Speculative asset right it's maybe a Hedge against inflation but it's it's Probably seen mostly as a risk asset and Then there's a real opportunity for These places like El Salvador or Kazakhstan or places through Central Asia or Africa to leverage the Technology and develop uh Capital Markets I mean I had this one question Asked to me the last time I was in Kazakhstan by a presenter saying you Know how do we get Bitcoin and crypto Companies to interact more with Financial Centers and my thought was you Know maybe not that's not the right Question I think our focus is more on Developing new Financial Centers so I Think that's a huge opportunity with Bitcoin that probably doesn't get enough Coverage certainly not in Twitter or Kind of like the Western World yeah I Know you're right I think you know Getting people to change the way they do

Something is different than providing People with something that they haven't Had before and so I think you're exactly Right like creating Financial Centers Creating uh or empowering people to Um You know control their own you know Generations of wealth through something Like Bitcoin versus a local currency I Think that is Um I think those places will see the Value the fastness and with you know Kind of the continued work of some Companies that are really focused on Those parts of the world I think that Will generate the most adoption in the Short term to wrap things up what Excites you most over the next maybe 12 Or 18 months in terms of both the block Stream product line and Bitcoin more More broadly wrap it up with that we Should start over with that question Um So I you know I'm I'm A bit biased but I'm I'm really excited About the things that uh we're working On with the You know constant reminder of why we Started the company you know the the Layer twos that Um we and other people are working on I Think are finally hitting their stride Like we haven't spent any time talking About lightning right we could spend

Another couple hours talking about Lightning Um you know we've we've invested you Know just like Simplicity we've been Working on Lightning for you know almost The entire Um life of the company we've been Working on liquid for a long time we're Finally starting to see the kind of Organic results of of all that work We've put in Um you know lightning and liquid are Valuable Um full stop Combining the two so now you've got Um you know not only is Bitcoin the most Scalable blockchain in the world when You look at the the layered approach but When you add lightning on liquid that is Kind of another way to scale Bitcoin Because it allows you know lightning to Potentially grow faster and cheaper and So I'm really excited about us finally Pulling together a lot of these strands Adding Simplicity Um you know fully integrating all the Parts of our platform that you know we Kind of envisioned from the beginning And then in terms of the broader Ecosystem I think in the next few years we'll Finally start to see the the true impact That the Bitcoin is going to have you Know the financial inclusion stuff we

Just talked about but also you know Using Bitcoin to in Bitcoin mining to Accelerate renewable energy Um you know the I'm not sure what it's Like where you are but the weather in California has just been crazy over the Last couple years and we just had a Typhoon run through here yes Bitcoin Uses a lot of electricity but that's an Opportunity that's not a Um that's not uh you know adding to the Problem of climate change and we could Talk for another hour about that too Um but you know and then eventually Preventing another AIG financial crisis Right that's that's kind of what Immediately compelled me to Um want to join the company and that Still might be a few years off but I do Feel like Um that opportunity is going to come Into Focus over the next couple years Even if it's still Going to be another decade before Adam Builds his blockchain dark pool well That's great well I really appreciate The time today Eric and I hope we can do It more regularly going forward yeah Absolutely

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