The Corporate Case For Bitcoin

Uh thank you Fernando as uh Fernando Said uh I'm Tyler we can skip to the Next slide and start off on that I've Been at block stream for about a year I Lead what we call our platforms efforts Which is the layer two stuff that we Build on top of uh Bitcoin so that's Lightning that's liquid that's some of Our research coming out of the Blockstream research team uh before that I've been a product manager in the Industry for about 15 years uh about Nine of those at Google and then some at Reddit and at Pinterest and then more Recently I ran a newsletter on crypto And bitcoin news at something Interesting. newws I don't get as much Chance to post there as I did before Joining block stream but I do still try And weigh in on important and Interesting crypto stories so if you Enjoy this presentation consider Checking it out I've also been a Bitcoiner since 2014 I don't say that Necessarily because I think my uh you Know age automatically Steeps me in Wisdom but just to say that the things That I am going to say to you today are All things that I have believed for a Long time that I have been around Through a couple of I didn't just get Hyped in the last Bull Run uh and these Are things that I've been really curious About and excited about in an increasing

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Way for a long long time and and Something that I think you can have Durability with too so we can go to the Next Slide okay so the goal of this talk Today is to talk about Bitcoin from the Perspective of a corporation so a lot of The times when I say you what I really Mean is the company that you work for And the decision makers that are driving That company's strategy those are the Folks that I think are going to benefit From the information today many of whom May not actually be on the call if You're listening to me now chances are Pretty good you're at least a little Curious about Bitcoin and I think what I Most want to do for you is to arm you With the talking points and the examples And the frames to help you explain the Usefulness of Bitcoin in a corporate Context to other decision makers who Maybe aren't as natively Curious so when I talk about you Generally unless I specify otherwise I Mean like the corporate entity that you Represent and we'll talk about four Things we're going to talk why it's Useful for corporations to own Bitcoin Denominated assets we'll talk about why It's useful for corporations to custody Those denominated assets themselves to Actually hold real Bitcoin we'll talk About why it's useful to use Bitcoin in

The course of making the payments that You're going to be making as a company And then finally we'll talk about the Case for building on the foundation that Bitcoin gives us to build new and Interesting applications in the Financial uh industry This is going to be in sort of steadily Increasing complexity but I will try and Keep it at a very approachable level Because the goal here again is to give You the kind of explanations that you'll Need in order to take this information Back to your decision makers and your Stakeholders we want to make sure that This is broadly useful so feel free to Send any questions to Fernando I'm going To try and make sure we leave some time At the end so we can do an interesting Q&A session to dive further into Anything that comes up that we didn't Get as deep into as you wanted there's Going to be a lot of ground to Cover okay so first of all the case for Owning Bitcoin as part of a corporate Portfolio responsible Bitcoin or Responsible companies need to have a Bitcoin strategy with respect to their Portfolio that doesn't mean going 10x Lever long on a huge YOLO bet but it Does mean considering what the financial Properties of Bitcoin are and what Utility they can offer you in the course Of your responsible portfolio management

Can we go to the next slide uh let's go To the next slide actually So the story that you usually hear about Bitcoin is that it goes up a lot and you Want to own it because it will keep Going up a lot and that the difficulty In owning it is that it is very volatile So you'll see that in the chart on the Left from bitwise Asset Management this Is the last say 10 years or so of Bitcoin performance compared to other Major asset classes in any given year Bitcoin is either wildly the most Successful or wildly the least Successful of Any Given asset class so The story you usually hear is something Like you'll suffer the the volatility in Exchange for the gains but that's Actually the opposite of the story that I want to talk to you about today the Story that I think is relevant for Corporate America is actually that Bitcoin has useful and desirable Volatility for which you should be Willing to tolerate even significant Losses so I will go into greater detail About what I mean there but the framing I want you to go In portfolio strategy so on the right Hand side the two charts there the right At the bottom is showing a comparison of Bitcoin to other major asset classes by Correlation and what you can see is that Over the course of history Bitcoin has

Generally been pretty decorrelated with The other asset classes it has not moved To the same Rhythm which makes it very Useful as part of a broader portfolio The volatility because it is uh Decorrelated with the rest of the Portfolio acts as a kind of shock Absorber it dampens the volatility of The overall portfolio even though the Spefic specific ingredient of Bitcoin is In isolation volatile that means a small Allocation of Bitcoin even though Bitcoin is volatile can actually make The overall portfolio less volatile and Since it's less volatile you can either Sit back and enjoy the same returns with Less risk or push yourself further out Onto the risk curve to enjoy greater Returns at the same level of risk that You experienced previously and you can See that in the chart on the upper right Also from Fidelity and this shows a Comparison of portfolio per portfol Excuse me I can talk portfolio Performance across different Bitcoin Allocations from 0 to 10% and Specifically it Compares them by the Sharp ratio so if you're not familiar With investment Theory the sharp ratio Is a way of comparing the returns that You get for a particular asset to the Risk that you were assuming in taking That stance and what this is showing is That the higher allocations to bitcoin

Actually improve your sharp ratio which Means you are getting better returns per Unit of Risk uh can we go to the next Slide so this is a way of saying the Same thing but visually uh this analysis Is from bitwise Asset Management as well And it basically shows a kind of smooth Gradation of uh the sharp ratio by Bitcoin allocation assuming quarterly Rebalancing across a bunch of different Potential allocations from 0 to 10% what They found was that actually there was No point at which additional Bitcoin in The portfolio was not incrementally Valuable but that you got the majority Of the value uh below 5% so their Conclusion was that most corporate Portfolios should be holding something Like 3 to 4% of their portfolio Allocation in Bitcoin because of the Volatility properties that we've been Talking about so again none of this Recommendation is predicated on the idea That you're going to go to the moon it's Predicated on the idea that the shape of Bitcoin movement has useful properties In combination with the rest of your uh Portfolio folio can we go to the next Slide so the we've talked about how Bitcoin tends to Zig when the rest of Your portfolio zags it goes up when Things are going down and vice versa Which is extremely useful but actually

There's an additional quality which is That the shape of bitcoin's returns are Unusual Bitcoin is a high volatility Positive skew asset that means that the Rare events that make Bitcoin High Volatility are good events so most days Bitcoin you either have a stable or a Slightly degrading asset it's it's Generally kind of mediocre Returns on Most days and then every once in a while You have an explosively positive day Where the price goes up unexpectedly Fast that's a positive skew distribution Most high volatility assets most of the Assets that you use as sort of shock Absorbers for the rest of your portfolio Have a negative skew distribution so That means that in general most days They perform pretty well but then every Once in a while they have a Catastrophically bad outcome again your Goal in constructing a portfolio is to Have a blend of things that balance each Other out which means that Bitcoin Because it has a very unusual Distribution is capable of balancing out Your portfolio in a way that most assets Cannot to give you an example one of the Only other assets that is both High Volatility and positive skew is a Literal lottery ticket there really Aren't a lot of assets that have this Property shape which means it's Especially useful in building a truly

Diverse portfolio black Rock did an Analysis using Prospect utility Theory So if you're not familiar Prospect Utility theory is the theory of how Psychology responds to Performance like How we appreciate gains or losses it was What gave Daniel conoman his Nobel Prize Uh a a very very crude Oversimplification is that in general we Tend to treat losses as about twice as Bad as gains are good we will work Equally hard to avoid a $1 loss as we Would work to achieve a $1 gain or sorry A $2 gain so all of which is by way of Saying Prospect utility theory is a very Risk averse way of analyzing uh Portfolio performance it's a it's a way Of punishing losses twice as severely as Rewarding gains and if you assume that You view losses as twice as bad as gains Then the utility portfolio Max sorry the Portfolio that maximizes your utility is About 9 and a half% Bitcoin Bitcoin is That useful in dampening the negative Outcomes that it actually is a hugely Valuable part of an overall portfolio Even if you strictly assume that Bitcoin Is going to lose money so the most Interesting analysis in my opinion that Black rock did was that they did some Simulations where they specifically Assumed that Bitcoin would have a Similar distribution to the past but That its performance would net net lose

Half the value of the investment over The lifetime of the analysis so they're Strictly stipulating that Bitcoin will Go down over time it just has this Interesting volatility shape in that World the optimal allocation is still 3% Bitcoin's volatility shape is so useful That even if we strictly stipulate it's Going to lose half its value you should Still have a sizable chunk of it in your Portfolio and then rebalance because it Will zig at the other times that your Rest of your assets are Zagging okay we can move to the next Slide and then uh finally you know we Won't spend a lot of time on this Because it's not really the ethos of the Space but Bitcoin is the only crypto Asset at this moment that has regulatory Clarity it is widely agreed to be a Commodity which means that the rules Governing it are well understood uh I Think if we go to the next slide it'll Play that clip Hopefully oh well imagine that uh Brian Armstrong the CEO of coinbase is saying That the SEC told them that everything Other than Bitcoin should be considered A security Now the SEC is not a legis Ative body so their interpretation is Not necessarily the law but I think this Is a good explanation of how there's Still quite a bit of additional Regulatory risk with most of these

Crypto tools but that isn't true of Bitcoin Bitcoin has gotten the clarity It has lived long enough and had a Straightforward enough definition of its Existence that the authorities are Starting to digest it into our rules in A more clear and straightforward way Let's keep rolling Forward so a common misconception and One that I want to make sure that you All are ready to explain to your Audiences stakeholders decision makers Is that the decision to acquire exposure To bitcoin does not require you to have Cryptography expertise you do not need To be a elite computer coder who knows How to make the machines go beep boop I Myself am uh fairly humble in my Technical expertise there are many tools For people at every end of the spectrum So that can be uh all the way to bitcoin Denominated assets which might make Sense for a company that's interested in Strictly the portfolio properties of Bitcoin but not interested in some of The actual utility properties which We'll talk about in a little bit or it Might also involve uh exposure to Adjacent Bitcoin assets like publicly Traded Bitcoin mining firms all of these Things can have similar although not the Same properties of uh Bitcoin uh itself And then you could choose to acquire Bitcoin but through a custodial

Relationship now that does mean that you Are taking on a counterparty risk with That custodian and we'll talk more about The significance of that as well that's A non-trivial decision but it is a way Of sidest stepping the complexity of Using Bitcoin while still incorporating The possibility of Bitcoin is part of Your portfolio strategy I expect over Time a lot of the portfolio management Tools to start incorporating custodial Bitcoin as an automatic portfolio Component for the people who strictly Want the ability to dampen out the Volatility in their portfolio but aren't Necessarily interested in the industry Or the asset or the sort of advantages Of self- custody and then finally and in My opinion the most important in the Long run certainly the thing I think People will eventually need to move Towards although they may not do that as Their first step is true self- custody And a lot of blockstream products are Specifically dedicated to making self- Custody manageable for people of Ordinary knowledge so again we want to Make it so that an ordinary human being Can take control take Sovereign control Of their wealth uh or a company can do The same without needing to have In-house cryptography expertise you Should not need to be a mathematician in Order to be able to secure private keys

And use them to sign transactions Blockstream Jade is our Hardware wallet And blockstream uh green is our software Wallet uh they work together and they uh Cover all of the products that we'll be Talking about today uh firmly recommend Each of them if you haven't experienced Already uh can we go to the next slide There are also another of number of Other products that blockstream offers Uh that are more geared specifically Towards Enterprise Bitcoin mining Services so we do a hosting service for Companies that wish to actually directly Do Bitcoin mining we also have an Blockstream mining note which is an Asset that sort of represents uh a Corresponding share of hash rate uh and The the returns that will come from that Over a window of time uh and then we are Just starting up now what's uh called The blockstream basic fund which is a Fund that is uh indexed towards uh Bitcoin mining Hardware right now so it Would allow you to take a stance on the Relative valuation of Bitcoin mining Hardware compared to the Bitcoin Market Itself bit more sophisticated probably Not the sort of thing you're going to do As your first step towards getting Involved in Bitcoin but it's just worth Noting that there's actually a lot of Different ways to approach Bitcoin Exposure Beyond just the uh naive hold a

Literal Bitcoin can we go to the next Slide but I do think in spite of what I Just said that it is important and good To hold literal Bitcoin uh so I want to Talk a little bit about the value of Actually custody Bitcoin yourself rather Than holding a Bitcoin denominated asset Or paying a third party to custody Bitcoin on your behalf can we go to the Next Slide so the two things that Bitcoin Itself allows you to accomplish is to Avoid incumbrance and to avoid Counterparty risk all the capital that You're storing on the Bitcoin Network Can be moved anywhere you want on the Bitcoin Network at any time with no Constraints no one can stop you no one Can slow you down and no one can lose it On your behalf so yeah can we go to the Next slide So counterparty risk is a constant uh Subject of financial news in general if You're paying someone else to hold your Money they have all sorts of incentives To loan your money out or to use it for Themselves or to lose track of it or to Have it stolen or to steal it themselves And there's just a a host of negative Consequences towards having a banking Relationship with a third party Especially when you start getting into More complicated Financial structures Where you have dependent relationships

On the relationships that they have in General Capital held on bitcoin is the Only way to scalably hold zero Counterparty risk assets other than that You're stuck holding like literal Physical assets gold and oil and things That are just not practical for the vast Majority of organizations to do and Certainly radically more expensive so Capital held on bitcoin allows you to uh Eliminate counterparty risk and that in Turn allows you to shelter your Portfolio against these risks as they Rise and fall you should think of the Quantity Bitcoin that you hold as being Again just a percentage of your overall Portfolio allocation in times of high Risk you can dial that percentage up in Times where you have more confidence in Your counterparties you maybe don't Necessarily have to have as much held in Self- custody but there's certainly Times when we all know that there are Systemic risks in the air and the way For your company to escape systemic Risks in a fundamental sense is to buy Bitcoin and withdraw it fully into self- Custody that's the only form of Capital Management that has truly no Counterparty risk So we can go to the next Slide similarly you have no interference Risk no encumbrance there's no Capital Movement restrictions on bitcoin there's

No impositions on the network there's no Cap there's no asset seizures so unlike Capital held in say a local banking System which you may or may not have Full confidence in capital held on Bitcoin is freely available at any given Time it is as liquid as any Capital can Possibly be so we can move to the next Slide Again as I mentioned earlier blockstream Has a number of products that are Intended to make self- custody Approachable safe manageable uh not Risky so blockstream green is our wallet Infrastructure it's both a client side Wallet and then also a server side Multisig which allows you to set up uh Optionally some safety uh measures that Uh blockstream can help uh build a multi Signatory governance uh over your assets Green light is a tool for allowing you To get a lightning node in the cloud While still retaining self- custody over The keys themselves so you can leverage Block streams expertise in running and Managing a node and also our sort of Privileged position within the network While also retaining full custody over Your keys and having no counterparty Risk to block stream itself so green Light is in my opinion the best way for Corporations to enter into the lightning Network it gives them the full upside of Lightning participation without nearly

As much surface complexity to be Managing in-house and then finally Blockstream Jade is the hardware wallet That uh blockstream produces which is a Way of keeping your private Keys fully Safe by storing them on a device that is Uh not connected uh to the internet and Not uh um capable of running any sort of Untrusted Code when you reach a certain level of Security the hardware wallet is going to Be a necessity it may or may not be part Of your opening Journey okay so that's why you should Hold Bitcoin yourself the simple answer Why you should hold Bitcoin yourself is That no one can take it away from you And you can send it anywhere you want Whenever you want and that's not Generally true of money in general money Is hard to move around quickly and hard To move around in a predictable way Because there's so many entities Involved in permissioning that money Then the case for using Bitcoin is Somewhat built off of the top of that Once you have Bitcoin once you've held It yourself now you have the option to Pay using Bitcoin and there are some Times in which that can produce some Uniquely powerful advantages so we can Go to the next Slide basically the lightning network is The fastest cheapest and most private

Way to make payments and you can do it Without taking a directional position on Bitcoin's price although it's easier if You already have Bitcoin incorporated Into your portfolio so we can go to the Next Slide traditionally speaking a company Will tell its Bank to send a payment to Its suppliers bank and then the Suppliers bank will tell the supplier That they have received the payment I'm Simplifying here often there might be a Chain of banks in between them those Banks may or may not keep the Information that you want private Private they may or may not successfully Route the payment in general that's very Slow and it is error prone uh it is Historically what we've done for Payments between companies which is you Know kind of a rubbe Goldberg machine of Accomplishing things the could we go to The next Slide the lightning Network allows you To have a direct chain of payment Between you and the manufactur between The manufacturer and the supplier or Between any uh two companies that wish To make payments to each other payments Made on a private lightning Channel Clear instantly the transfers can be Restricted to a known list of Counterparties the payment history is Completely private but also perfectly

Auditable and if you desire you can Offset the position in Bitcoin using uh Cash settled derivative hedges in the Opposite position so if you want to Maintain a one Bitcoin capacity channel Of payments between you and your Counterparty you could then go take a One Bitcoin short position on a Derivative exchange and end up neutral To the perspective of Bitcoin price While still being able to take advantage Of bitcoin's properties as a payment Tool no one gets to see your corporate Intel your payments clear instantly and Extremely uh Securely we perfect so just to kind of Pause and observe something that I've Said implicitly here but that is worth Making sure is explicit especially with People who don't know Bitcoin as well And probably don't have this natural Assumption the decision to become Exposed to bitcoin the asset and the Decision to use Bitcoin the network do Not have to be the same decision they Don't have to happen at the same time And not every entity will choose to do Both I think that the strongest value Proposition of Bitcoin lies at the Center of this intersection with self- Custody Bitcoin but it is entirely Possible to do things with Bitcoin in a Slightly less direct way and still Retain a lot of interesting properties

That can be incorporated into your Corporate strategy so that means you can Use Bitcoin to smooth out your portfolio Without needing toar learn how to self- Custody Bitcoin it means you can use Bitcoin to do instant payments over the Bitcoin Network without needing to Incorporate Bitcoin into your corporate Treasury both of those decisions can be Done entirely independently they're Strongest and most synergestic when done Together but they don't require each Other in order to be Valuable we move to the next Slide uh so this is just a little bit More detail on what block streams Greenlight actually offers for people Who are using uh lightning in General uh When you're using lightning you need a Computer to be online and watching the Lightning Network in order to be Supervising your node receiving inbound Payments uh catching anyone who's trying To misbehave on your channels and Blockstream has a series of servers that Can run 247 in order to support all the Supervision and management that your uh Node would need without you needing to Maintain a server for that purpose Yourselves there's also some liquidity Uh uh problems that you need to be uh Managing when you have an active node on The network you need to make sure that Your Chanel your channels are balanced

And blockstream has the expertise to do That for you in the most efficient way So that you're always at a good State Can do it in a cost-efficient and effort Efficient manner that's an area where There's like a lot of benefit to Expertise so this is an example of how You want to retain control you want to Still be the custodian that has the Private keys that gives permission but It's nice to be able to hire experts to Manage these sort of more complex Details and liquidity is a great example Of that similarly when you're working With green light get support from the Green light uh experts and you also get A bunch of analytics that will help you Better understand the performance of Your node and the nature of payments on Your particular part of the network we Can go to the next Slide all right we're making pretty good Time so I think we'll have a good uh Good opportunity to do some Q&A at the End uh this is going to be the most Technically complex of the stuff we Talked about and I think it's the thing That you graduate into after having kind Of become immersed in the first three Sections so I do think it's really Valuable to give you a preview of where Things are going but my guess is that in A lot of cases this will be something That people are working up to over time

But it's a lot of what blockstream is Building towards it's a lot of the Vision that we think the future holds we On the next Slide so loosely Bitcoin the network Allows you to use Bitcoin the asset in a Lot of interesting and useful ways we Just talked about the self- custodial Properties the lightning Network Properties the fact that you can do this Kind of like trustless Fast clear Settlement is extremely useful for Bitcoin it would be nice to be able to Do those same things with other assets Besides Bitcoin and that's Loosely Speaking what the liquid network is good At so liquid which is one of the Blockstream products is a a Federated Network side chain of Bitcoin it's a Tool that allows businesses to issue Assets that have the cryptographic Properties that they desire and then get Enforced in a way that is similar to and Kind of inherits from bit coin consensus So uh can we go to the next Slide so the cool thing about that is Assets that have been issued on the Liquid Network you can fully custody Yourself and you can fully verify the Supply of those assets which means you Can be confident that Your asset has not been re hypothecated You don't have the counterparty risk That you have with a traditional asset

Where there's essentially A a person who's maintaining a table or An organization that's maintaining a Table in this case the table is Maintained by the network and it is Verifiable by the individual holders of The asset so mfil is a company that is Doing this out of Mexico right now They're using liquid to token promisory Notes so these are lending instruments In Mexico that are privileged in the Local legal context so they're Tokenizing those promisory notes and Then use as pristine collateral to go to The Global Lending Market and borrow Greater funds to then go issue and Create more promisory notes they're Taking these kind of locally stranded Assets digitizing them and then using The digitization of them to access Global markets in a confident way Because those lenders know that their Their uh asset has a verifiable supply And that they know that they aren't Being reh hypothecated or Disintermediated this is uh in my Opinion a really exciting example Because I think it basically applies Li To any asset that has value but does not Have a correspondingly liquid Market This is a way of allowing all sorts of Esoteric insurance contracts or shipping Bills of ladles or municipal bonds or Local uh asset fundraising of any kind

To better access the Global Lending Markets by allowing them to Cryptographically prove qualities about Their asset that would be difficult to Convince people to build the local Knowledge of and the local trust Network For by eliminating the those trust rails You enable the global to access the Local let's go to the next Slide the liquid Network also enables Some really interesting and Powerful Trading tools so transactions on the Liquid Network are Atomic even if they Involve multiple parties and multiple Assets so this little like pretzel Graphic here is basically showing you That Alice can trade token a to Bob in Exchange for token B from Bob and both Of them are going to do that trade in a Single transaction that either confirms And pays both of them or does not Confirm and pays neither of them there's No escrow needed and there's no Counterparty risk there's no moment when Bob has Alice's token but Alice doesn't Have Bob's token or vice versa all of This happens in a single Atomic swap That means that you don't need Escrow Services it also means that you can do Decentralized peer-to-peer trades Because you don't need to be going Through a trusted Marketplace you can Simply trade in between uh two users on The network who want to exchange value

That also enables all sorts of Interesting Downstream derivatives that Can be built on the same basis of a a Fundamentally Atomic initializing Transaction that eliminates all sorts of Race conditions and all sorts of trust Conditions that are necessary to build More complicated contracts and it's also Just useful directly to be able to swap Assets we can go to the next One the liquid ecosystem is intended to Be a place where companies can operate With confidence and part of operating With confidence means that it needs to Be able to enforce the rules that they Need in order to be able to operate so The way that we approach that is liquid Has support for what we call blockstream Amp the asset management platform and Amp is essentially a multi- signatory Server that co-signs on transactions for An asset issued on liquid and then that Server can enforce whatever policies That you want within a given asset the Network enforces only that the Transactions are valid so the network Has no visibility into the particular Compliance rules that you're choosing But you have perfect control over the Compliance of your particular asset and That can mean compliance in the form of Kyc sort of permitted wallet lists it Can also mean compliance in the form of Cap table rules of like how much can be

Held by a single entity or how many Entities are allowed to hold up to what Percentage anything about your cap table Or about transfers of the asset can be Enforced at the asset management Platform and then all of the assets Whether or not they Have individually idiosyncratic policies Can interoperate on a shared neutral Network where each individual asset can Be confident that their compliance is Insured without needing visibility into Or responsibility for the compliance of Other assets on the network no one can Observe your cap table except for the Issuer of the asset but everyone Including all of the holders can your Cap table does reflect the things that You have said it will reflect you can Also prove to third-party Auditors that You have enforced the rules necessary so That makes liquid the natural place to Be issuing tokens that have some sort of Corresponding compliance expectations And liquid exists as a a neutral Substrate across which all of these Different systems can Operate so we can go to the next One the most I think Salient thing about The liquid Network today I think there's A lot of things that will become really Significant over time as the industry Matures but the one that I think is the Most pressing today is that the liquid

Network is built for True privacy now You'll hear a lot of people talking About exciting new zero knowledge Cryptographic systems but they don't Usually talk about the fact that the Liquid network has been using zero Knowledge cryptography in practice since Launch that's what powers confidential Transactions on liquid so on liquid it's Possible for anyone to observe that a Transaction took place but you don't get Visibility into the number orp types of Assets in the transaction and that means That you don't have the uh corporate Intelligence about what you're buying or Selling leaked you can make large Positions without being sniped or front Run it also means that people don't get Insight into your future looking plans Or your supply chains and kind of at a More systemic level it means that the Liquid network is less vulnerable to Exploits like uh maximal extractable Value or minor extractable value me Which is a significant threat on some of The other smart contract networks where Validators have too much insight to and Authority over the transaction ordering And they use that leverage in order to Capture value for themselves very Complex stuff but the tldr is that the Validators on the liquid Network Basically don't know very much about What you're doing so they don't have

Very much opportunity to change what They do in response which means there Isn't much opportunity for them to Profit at your expense that's not true Of many of the other networks where meev Is a more significant problem Can we go to the next Slide taking a step back from the sort Of uses of the network just to kind of Talk about some properties of the liquid Network itself the liquid network is a Federation of Independent businesses I Believe last I checked it was around 60 Independent businesses in the liquid Federation of which blockstream is only One uh it does not require proof of work Mining uh it has no environmental Footprints so I know that there are many Corporations that are hesitant about the Specific uh implications of Bitcoin Mining there is no proof of work mining Involed in using the liquid Network it Uses a federation consensus instead it Also doesn't use proof of stake it uses The Federated consensus which means There is no equity likee staking token At the base of the network that might or Might not come into regulatory trouble Over time because of the nature of of How It's redirecting profits in the System in the liquid Network the base Token is Bitcoin itself uh and so there Is no equity like token because Bitcoin Already has the clarity that we talked

About earlier the liquid network is just A neutral transaction ordering and Validity platform it checks to make sure That the signatures are there and then It puts them in the blockchain in order And that is all it attempts to do and Then all of the more sophisticated logic Happens either in covenants on the Network which is the local equivalent of Smart contracts or in systems like amp Which are multi- signatures that then Enforce offchain policies of whatever uh They desire for that particular asset uh And then you know a subtle but in my Opinion really important quality of the Liquid network is that it Cleaves pretty Closely to the Bitcoin codebase that it Inherits from in general the only way That we acquire confidence in the Security of cryptoeconomic systems is by Putting money in them and then seeing What goes wrong it's like putting water In aquariums to check the leaks there's Really no way to be confident until you Actually take the risk and the the code Logic that powers Bitcoin is the most Battl tested crypto economic code in the Universe it's existed the longest it's Had the most value behind it it's had The most attacks against it it's had the Most scrutiny which means it is the Safest in a kind of praxiological sense And so we view keeping closely aligned With the Bitcoin Network as being a huge

Security advantage of liquid because it Means we inherit by implication all of The scrutiny that's gone into making Sure that Bitcoin is safe and Secure has indirectly benefited all of The ways in which we use that same code So rather than building something Entirely from scratch and then having to Start the Lindy effect of evaluating of That system from scratch we view it as a Significantly Superior approach to stay As close as possible to bitcoin itself And then to inherit all the properties Of Bitcoin as a result a nice side Effect as well is that we have seen some Features that have been test run on the Liquid Network that then eventually Graduate or may eventually graduate into Bitcoin itself blockstream really cares A lot about that but that's not Necessarily a reason for you to adopt Liquid that's more of a business Strategic goal of Blockstream we can go to the next Slide Well that is uh the the four things that I wanted to convey today I think all Responsible companies should own some Bitcoin as part of their corporate Portfolio because it will unambiguously Improve your returns it will make for Better purchasing power preservation I Also think the majority of companies Should be holding at least some actual

Bitcoin because of the flexibility and Safety that it gives you from Counterparty and incumbrance risk and Then one once you are holding Bitcoin I Think it makes sense to figure out if There are places where you can use it to Make more efficient payments when you're Using Bitcoin and you're sending Payments and then you get to the point Where you're like gosh I wish more of my Other corporate processes looked like The Bitcoin processes then you turn to Liquid and liquid can help you imbue the Properties the cryptographic properties Of Bitcoin into other assets so that you Can take advantage of them in other Contexts yeah so uh we would love to Help uh you and your companies make this Journey we know the vast majority of Companies are still very very early in Their exploration of Bitcoin or figuring Out what their strategy should look like Uh so if you are interested in learning More if you think there's an opportunity For us to work together reach out to us At business blockstream we'd love to Hear from you

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