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EPISODE: 133
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TOPICS: exchange traded funds changed the paradigm, supporting open source, embracing transparency
project website: https://bitwiseinvestments.com/crypto-funds/bitcoin
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(00:00:04) WBD Intro
(00:02:27) Introduction to Citadel Dispatch
(00:03:01) Introduction of Hong Kim, cofounder and CTO of Bitwise, and discussion on Bitcoin ETFs
(00:04:28) Challenges faced during the 6-year process of working on the Bitcoin ETF
(00:07:35) Discussion on the approval process and timeline of Bitcoin ETFs by the SEC
(00:15:16) Reflections on the significance of having a Bitcoin ETF and the impact on the community
(00:22:36) Comparison of assets under management in the Bitcoin ETF market
(00:28:26) Discussion on the model of funding open source contributors through profits from the Bitcoin ETF
(00:34:41) Explanation of the long-term commitment and financial implications of funding open source contributors
(00:38:04) Discussion on the success of a debut and comparison to an IPO moment
(00:39:10) Comparison of the ETF moment to a state change rather than a singular event
(00:40:01) Challenges faced by financial advisors in including a Bitcoin ETF in portfolios
(01:18:56) Bitcoin ETFs in kind redemptions
(01:19:30) Importance of Self-Custody for Bitcoiners
(01:21:08) Advantages of Bitcoin ETFs and In-Kind Possibility
(01:30:52) Discussion on eCash and Financial Privacy
(01:46:39) Progress and Urgency in Financial Privacy
[00:00:04]
Unknown:
Watch Sailor carefully, and I've watched his messaging. And, it's it's fascinating to me and I think highly intelligent on his part that he is not talking about Bitcoin as a replacement to the dollar, not shitting on the dollar, not talking hyperinflation. I mean, I think I think he he knows all of those things are in the cards, but he continues to talk about this just as an investment in digital property and comparing it to Apple and comparing it to Manhattan Real Estate, and he's just selling it as the best investment. And I I think that's really, really smart on his part. And the reason it's so smart is there's no point in pissing off the US government and all these idiots in DC who, if they realize we're going after their dollar, they're much more likely to do the Elizabeth Warren, come after our on and off ramps, and tax us and, I guess, disclose our, you know, our addresses and all that other shit. And so his you know, I I really respect his approach.
And, I mean, he even asked me in Madura, you know, to kinda tone down the hyperinflation stuff, and I respect that. I mean, I get it. It's like, why get the other side all pissed off, you know, about, you know, the fact that this thing's gonna crush the dollar, which it will. But why get them pissed off about that? Why not just make this the best digital property? You know? And, you know, the dollar the dollar's gonna die whether you know, what irrespective of what Bitcoin and gold do, the dollar is gonna die its own death based on the misbehavior of the politicians in DC.
You know? And and, I mean, I I tell people we're looking at investing my fund. I said the only way my fund doesn't work is if Washington DC gets incredibly responsible. And, of course, they always laugh. You know? They're like, well, I'm not too worried about that possibility, but it is a possibility.
[00:02:28] Unknown:
Happy Bitcoin Wednesday, freaks. It's your host, Odell, here for another Citadel dispatch, the interactive live show focused on actionable Bitcoin and Freedom Tech discussion. That intro clip, was prolific gold investor turned rider by Bitcoiner Larry Lapard on what Bitcoin did, talking about, how the dollar is fucked, but we shouldn't talk about it. Freaks, I have a great, great show lined up today. In person rip. The in person rips are always the best rips. Someone who I've gotten to know, through the Internet, through various calls and, interactions, but finally got to meet in person, just really moments before this rip. But we're live here from Nashville at Bitcoin Park, and I have Hong Kim with me, cofounder and CTO of Bitwise, most known for their recent Bitcoin ETF. How's it going, Hong?
[00:03:29] Unknown:
Going great. Super excited to be here. This studio and space is incredible. Yeah.
[00:03:36] Unknown:
It's a little bit ridiculous. Right? Yeah. Yeah.
[00:03:39] Unknown:
But, yeah, very excited to be here. Big fan of the show. And freaks, he's he's not wearing a suit,
[00:03:47] Unknown:
for what it's worth. He's wearing a Bitwise branded sweatshirt without a hood, so not a hoodie either.
[00:03:54] Unknown:
It's,
[00:03:55] Unknown:
yeah. I I don't really There's there's no video on this rip, so I felt like I should paint the picture for them. Mhmm. And it's a little bit unbelievable to me that, on dispatch, I have a cofounder of a company that has a Bitcoin ETF. Live in person is, kind of a weird timeline for me. I I kind of didn't think we're gonna have Bitcoin ETFs after, like, the Winklevoss failed, like, 10 years ago. Yeah. Or, like, 11 years ago, I just assumed that it's just not gonna happen for maybe another decade or so. So it's kind of still a little unbelievable we have ETFs now. It was unbelievable for me as well. We worked on it for 6 years.
[00:04:32] Unknown:
So crazy. We first filed in 2019, I think. And then, yeah, every 2 or so years, we we tried again. And it was I mean, every time and we thought and the whole industry thought that we were just like a year or 2 away. So every mo every year it was like a year or 2 away. And also, like, there's administration changes, like the chairperson changed. So like all this change that kind of made it really hard to, understand what's happening or not happening. Should we spend time in here? Should we not? And we just ended up being stringed along for 6 years. And ultimately everything that we did didn't really even matter that much. It was ultimately a lawsuit. But, yeah, sometimes I find it even hard to believe that we're finally at a moment that we do have an ETF. And to your comment about just, like, you being surprised about, me being here.
Yeah. I mean, I I I understand that, like, a TradFi product might not feel like it can ever truly encapsulate the Bitcoin ethos. And I recognize a lot of elements there, but we also try our best. And, yeah, there's like, I'm not a person that wears like, you know, I have a beard, long hair. I don't wear suit. Like, I think there's a reason they don't send me to Wall Street events. Right. But, but you're on Dispatch. Yeah. I'm on Dispatch. Like, I, like, last night, I was at bit devs,
[00:05:58] Unknown:
with National Crew. What did you think of the bit devs? It was incredible. Yeah. Yeah. Yeah. It was really good. I mean, there's a lot of topics to talk about. Like, Nostradov v 2 was a big topic, like Bolt 12. Have you ever been to a New York bit devs? I haven't. The New York bit devs is the creme de la creme. Yeah. Yeah. I I grew up on New York Bitdevs, and Jay runs the New York Bitdevs. Yeah. So when we launched the park, we waited, like, 7 months before we launched the BitDevs here because I hold it in such high esteem that it was important that we at least attempted to do it as best as we possibly could.
But Steve Steve Myers and and Matthew who run it, NP, IP wasn't there last night, but they do a really great job, and it's pretty cool to have a bid devs in house. Yeah. They did a great job. But if you're ever in New York, you should try and make a New York bid devs because Jay refuses to move to Nashville. So you have to go to New York if you want a proper Jay bid devs. In the comments, I see ASDF. This is in person, but no video. Yeah. I actually ironically enough, I like doing the in person rips with no video because it just I feel more comfortable with having the person here.
And then if you I, like, I kind of compensate for the remote episodes by giving you video. So it's like you either get the intimacy of an in person rep without video or you have the lack of intimacy of the remote rep, but then you have video. So, that's a little bit of of the thought process of the context of the of the no video. But me and me and Hong are we're chilling here at Bitcoin Park, and you you're gonna have to trust us on that one. I, so where to start? I wanna start with, the string of Bitcoin ETFs, not being approved.
I I when we first started chatting, I think it was, like, November of last year. Yeah. So it was, like, 3 months before the Bitcoin ETF, and it was because you were really interested in in supporting open source contributors. And Yes. It was actually quite refreshing because it wasn't us pitching like, to be frank, Freaks, like, I pitched every Bitcoin ETF to support open source contributors. I did not pitch Bitwise. Like, Bitwise came to us. Hong specifically came to us and was like, we wanna support open source contributors. We think this is how, would be a great way to have it set up. But, anyway, before we get to the supporting open source contributors part, I just want to just crystallize here that in November when we were talking about it, I don't think we I don't I didn't think it was gonna happen still. I mean, I I was pretty sure it was, at this point, was gonna be an eventuality.
[00:08:47] Unknown:
Yeah. Yeah.
[00:08:49] Unknown:
But, like, I like, a January launch date was still very much up in the air. Totally. Totally.
[00:08:56] Unknown:
So when I reached out to you was basically the time that it really settled to us that it was happening, that the SEC was very serious. Yeah. Because it was after the the lawsuit was decided in October. Right. And the SEC really sprinted from then to January. Like it was, it was a crazy time for us because imagine us working on it for 6 years and like never really getting anything back from them. Yeah. And like, you send something over the line and, like, wait, like, 5 months to get a response is like the kind of engagement that we had, And then overnight, because they were sprinting on a deadline, it was a short deadline for them as well to go from, like, rejecting it for years to, like, approving it in 3 months. They had a lot to work to do on their end as well. Like, every disclosure thing that they're not happy about, they want, like, mining risk to be described in this way and like the environmental risks to be described in that way. And like all these disclosure documents, even just going through the hundreds of pages of each of these issuers takes time. So we were like on a clock, like, like every week they would like send us stuff and then we would send reply. And then it would like next week, they would reply back like a crazy response speed that really indicated that, like, oh, shit. Like, they would this is different, and they wouldn't be doing this if they weren't serious.
[00:10:15] Unknown:
And But you didn't know it was going to be January.
[00:10:18] Unknown:
But there was a deadline. The specific 19 before process, that's jargon for just commodity ETFs. Spot commodity ETFs go through a specific regulatory pipeline, and it has a 240 day kind of timeline in which they have to decide. So there was a, end date that they needed to decide by, and if they were going to reject, they need to come up with They didn't have they could have delayed it again in January. Right? No. No. No. No. The you do can delay a few times along the way and get the full timeline. The full timeline is 240 days. But then after that, you have to decide. The SEC has to decide. So they've always always Wasn't there, like, technicality there? It was, like, they could have delayed most of them, but they would have had to reject a couple. It was that it? Or Yeah. Yeah. So the the one that had been in the queue for the longest that dictated that timeline, I think it was Van Eck or something. But but basically Right. But they could have just fucked Van Eck, said reject VanEck and then delayed and then No. Yeah. Yeah. Yeah. Okay. So just to maybe taking a step back, like, why did the SEC get into this position? Okay. Yeah.
It's because they've been trading Bitcoin in a specifically weird, discriminatory way, moving the goalpost many years. And, like, they just haven't been able to be consistent across administrations and across different chair people and across different, like, market regimes. Like, they felt differently before FTX or after. Like, you know, if the law should be applied in a consistent way. But but given the political process that is kind of surrounding all of our regulatory decisions, it has just not been consistent. And it's not my view. It is actually the the view of 3 judges, in DC, the 2nd appeals court that are very well respected judges took on this case.
Ultimately, after the a decade of the industry trying, Grayscale sued, and it went to, court in a second appeals court in DC. And the judges were looking at this, and they were like, what what the fuck is is going on here? Right. And everyone thinks that there's a meme around, like, oh, BlackRock filed, and then suddenly it was all approved. Yeah. That's I I prescribed to that meme. Yeah. The reality is is something much closer to BlackRock has people. Obviously, their legal team is paying attention to things. And there was, there was an oral They only filed when they knew it was gonna be approved. The oral hearing happened around May or so where there you you had audio recording and you had a transcript. And if you listen to that, the judges are very much upset. Like, there's a SEC lawyers trying to defend, like, how they the futures product is okay, but the spot product is not, and, like, how they they've made all these decisions over the years and, like, trying to come up with the coherent narrative. And the judges are like, what are you saying? Yeah. You're making no sense, and and and they're visibly very upset, and it's it's a pretty unanimous opinion.
[00:13:00] Unknown:
And anyone that listened to that could have known that probably Grayscale is winning this thing even though it's unlikely. But if you didn't listen to that as soon as BlackRock filed, it was like, okay. BlackRock filed because they know they're gonna get approved. So, like, you knew by the end of BlackRock's timeline, which I think was past January, but still
[00:13:17] Unknown:
by the end of BlackRock's timeline, they were gonna get approved. BlackRock filed around, like, August or so. So it was before the final decision landed. Like, the final landed in, like, October, but, like, they filed aft well after the hearing and well after they probably internally came to the view that that the SEC is losing this thing. And if if if it's if you have that view, then it's just a decision of, like, do we wanna be involved in this thing or not? Right. And, better to play the game than not. Yeah. Yeah. They're in the game of making money. They're in the game of making money. And they're like, we can definitely win this game. Like, why would we not play?
[00:13:50] Unknown:
And. Yeah, I mean, to me, I guess I guess my point is this to me, as soon as BlackRock filed, I was like, okay, this thing is happening. Was just a matter of what the timing I was like, I was like, I'm pretending to be a savant on the timing. But I think I even had tweets out there. Well, now my Twitter is deleted, but, I had tweets out there that as soon as they filed, I was like, okay. Like, buy as much Bitcoin as you can afford because the ETF is coming and the suit's gonna pump our bags. And Yeah. Yeah. Yeah. So I I guess the reason that I I came back to to that context is is to describe,
[00:14:22] Unknown:
that ultimately, the SEC was in a really tough position. Right. Because they, were, not consistent in how they applied the laws and then ultimately had a really embarrassing and high profile. Arbitrary and a capricious way in which the SEC handled all the filings that it was an arbitrary and capricious way in which the SEC handled all the filings over the years. So they didn't really have a way of going back from that and being, like, doing something willy nilly again. So, doing a rejection on a single filer with some cute narrative is just not something they can do. So at that point, they they had to approve the next deadline. They couldn't do another rejection with any reason.
That wasn't a new reason, but there were there are no good new reasons to come up with. So then they they ended up approving. And and so then that's their hand was forced. Yeah. Yeah. Yeah. Yeah. And it's so so that was what we were working with, and we kind of knew the January timeline. And and, ultimately, later on, they communicated that that was what like, the timeline that they were working with as well. And so I had a really hard time in my body, like, not thinking that we're being gaslit again. Yeah. But because we've just been beaten down for so many years. Yes. If you go through, like, being hopeful and being rejected 6 years, then It's just that you're a broken person. Yeah. Yeah. Yeah. Like, my body had a really hard time accepting that this time was different, but it really was different. And that's when we reach out to you guys. Like like, that's when, like, when I really like, the, there's a lot of other people in the company working on product structuring and, like, operations. They they were, like, working on all the, like, details with the SEC. But something that I was thinking about is that, like, when I finally it dawned on me. I was I was trying to, like, accept that this was happening. Then I was I was then I really, for the first time, like, thought about, like, okay, then what do we what should what do we owe the network, the community?
Like, how can it's both a great moment and a bit of a sad moment for the community, right? Like, because it is a custodial product and we're going to grow another user base, another owner base of custodial products. And yes, number might go up, but there is definitely kind of a sadness and a loss. And then we can, we can talk about how we can make those things better, like, inclined redemptions and stuff like that, which which I also care a lot about. But anyways, there is kind of that element, and I was thinking a lot about, like, how can we, the best we can, make that better. And I don't think at that time, anyone was really thinking that Bitwise would be a major player. I mean, it was like Block Rock Fidelity, and then You guys punched way above your weight. It was like like, you know, Frankel Templeton managed a a trillion and a half billion, in in dollars. Like, Invesco manages over a trillion. Like, these are, like, the largest asset managers that all manage over, like, 1,000,000,000 of dollars. Yeah. And then and then there's, like, us.
And so I don't think anyone was really thinking that we would be a serious player, but but we had big ambitions. And in that world, I think I we we thought a lot about, like, how can we still create the most aligned, and, product than something that gives back and and, has a relationship with the network and the community and and the code base and everything. And so You leaned into what you knew, which was being Bitcoiners.
[00:17:34] Unknown:
Yeah. Because that was the advantage you had over the TradFi suits that were just entering the game essentially. Right? Yes. Yes. I mean,
[00:17:42] Unknown:
the we the ETF is is a definitely like a mass product, and it's very horizontal product in a way. Like there is no special treatments amongst different like holders of the shares. It's a kind of a horizontal product in that way. So it's used it's used by, like, a self directed person that is putting in their retirement account and also by, like, an endowment or, like, a financial adviser that has 50 clients that they are, like, all allocating to, etcetera. So it's just used by everyone, and we tricky thing that we do navigate is that we we serve multitudes of constituents.
And so, for example, like, if, you know, we're going to Wall Street and talking to, like, financial advisers and etcetera, etcetera Right. We don't talk about the donation that much. They don't really give a shit. Because, like, for them, they're not used to seeing that on an ETF. An ETF is not supposed to, like, have, like, a world view and, like, some sort of, public mission like that. So ETFs don't have donations associated to them. And and it from their perspective, like, if you have, like, it, excess excess revenue like that, why don't you just reduce the fees? Right. So so I think to them, it's, like, kind of not a feature. It's like a weird bug. So we don't just don't talk to it about them. But but there definitely is also so so I'm not here saying that, like, we're all, like, doing this out of altruism. We definitely have our self interest as well. There's competition Yeah. To me there, especially at launch. Like, I think people don't remember
[00:19:06] Unknown:
How many ETFs were at launch? Was it 9 or 10? 9 new ones. Yeah. There was there was 9 ETFs plus GBTC, which was the juggernaut in the room. High fees, but tons of assets under management already, came in as number 1. There was intense competition, and there's there's only so many ways you can differentiate yourself from the competition. And you guys did it in 2 key ways. I mean, and we can go further into it, but open sort contributor to open source contributors and transparency, I would say are like the and fees. I mean, you guys were incredibly competitive on the fees, and there was a there was almost, like, a race to 0 on that, and you guys came in, the lowest. But, I just I just wanna capture, like, the it it was just such a crazy moment, and, like, the freaks don't realize, like, my other show, rabbit hole recap, I do it every week.
Haven't skipped a week in 5 and a half years. Right? And, like, you came in November with this amazing idea for funding open source contributors. I did, like, 22 rabbit hole recaps before I could talk to people about it. Oh, yeah. And that whole period was, like, such a crazy period in my life. I mean, it was probably way crazier period in your life. But I remember, like, the day before, like, the SEC bungled it and just, like, released the press release, and then, like, Hong messaged me. He's like, you can't talk about it still. Like, we have to pretend we didn't see it. It's not bad. And then the next day, they're like, oh, we've we've approved them. Like, it was just the most it was the most insane fucking period.
On the suits thing, you don't think there's an argument I think there's, like, a pretty compelling argument that Bitcoin is different than other ETFs. Yeah. And that that, like, if it's part of the security of the ETF is supporting open source contributors. I mean, I I maybe it's not for every suit, but I know at, like, 1031, like, we have a venture fund. We get institutional capital. Like, we have endowments. Like, our core we have conversations with pension funds and stuff. And, like, when we we take a portion of our management fees, actually, very similar to Bitwise at a much smaller scale, and contribute to open source contributors.
And when I talk to them about it, I always say, like, at the end of the day, like, if you're investing 100 of 1,000,000, 1,000,000,000 of dollars, you know, tens of 1,000,000,000 of dollars and holding Bitcoin with it, like, it's prudent to support the contributors that are maintaining the protocol that your wealth relies on. Like, it's it's almost like a it's a security thing to a degree. Right?
[00:21:41] Unknown:
Totally. I mean, that's how I feel. I mean, I I I think even the word, like, phrase donation is a little off. I I think it is very much kind of a a self investment. Yeah. Like if if if the US spends on a defense security budget, they don't call it a a donation. They don't say that we're donating to the military. We're it's like a self interested, investment into your own security. And I think that's a very similar mindset that I would have and how I would frame it to anyone that if I had a conversation like this to talk about. Right. But the reality is that a lot of people make allocations and use products without really having this type of conversation. And like, yeah, I mean, Bitwise did a good job. And I think we really punched them over weight, but we're still 5% of the market. Right. Like, BlackRock is at, like, 15,000,000,000 and Fidelity is at, like, 9, and then we're at, like, 2. I mean, it just GBTC is at what? GBTC is at maybe, like, 20 or something. Yeah. Yeah. Yeah.
They're just yeah. Well yeah. Yeah. Yeah. Yeah. So so And you're at 2 so you're you're 4th in terms of assets under management. Right? Yes. Yes. Because Arc is in there too? Arc is in there too. Arc is, like, 2a half. We're at 2,000,000,000. And then after us, it's a cliff. So it was basically, like, there were 4 spots. You're in the top quartile. Yeah. Yeah. Yeah. Yeah. Yeah. Which is incredibly impressive. Well, it's it's quartile in terms of ranks, but in terms of assets, like, I think we have more inflows than everyone after us added together. Oh, yeah. That's crazy. Yeah. So so it really was a cliff. There really wasn't that there wasn't 5 spots. You didn't fall off the cliff. Yeah. Yeah. There was 4 spots, and we kind of, like, held on to it. Yeah. But but but, the way why I say that to describe that is that, like like, we have the lowest fee. We do all these things that we think are more Bitcoin aligned. You're the only one on the cliff that didn't fall off the cliff that supports open source contributors. Yeah. And and and yet still, like, 95% of the people don't care about that. Right. So so that's the reality. I'm I'm just describing that, like, there are suits that people, like, that that care about this stuff. I mean, even in, like, large Wall Street firms, like banks and such, there's always Bitcoiners. That's also an incredible thing about this is that, like, it is really a movement. So, like, there are, like, secret people that are really about the the movement in any organization almost. That's what we see when we work with institutions. It's like just because the institution isn't Bitcoin focused doesn't mean someone on their investment committee isn't Exactly. Exactly. So so so there are definitely people that do, love the donation aspect of those things as well, but I'm just describing that in, like, in a general sense.
[00:24:02] Unknown:
Most people aren't like the low fees the most.
[00:24:06] Unknown:
Yeah. Yeah. Yeah. Yeah. Yeah. Everyone likes low fees. I don't so, I mean, I think one of the things that we did about the fees is that we were just very, we accepted the reality earlier than others, I think Yeah. That it was going to be competitive. Like, whatever you wanted it to be was not gonna be the reality. Like, your hopes doesn't dictate reality. Right. The reality is that, like, 9 people are like, 9 firms of the largest are, like, launching commodity products. Like, they're roughly the same thing. Right. So then it just was just going to be a a fee competition. And so we just went down earlier. So we ended up at our our 20 basis points, so 0.2%.
Fidelity and BlackRock are at 25 basis points, so so 0.25. Right. And then the rest And Arc did the meme number. Right? You know, it's 21. 1 bps. Yeah. Yeah. Yeah. But, yeah. I I think we ended up roughly we're not that much lower than everyone else, but because we committed to being low early because that we just we knew that that was going to end up, leading up to it at any point in time, people like kept adjusting fees for, like, for 3 days in a row. But in any days, if you wrote an article about who had the lowest fee, then it was us. So I think that was really helpful in, like You're always the lowest. We yeah. Yeah. Yeah. And everyone ended up being where we were, so it didn't really matter that much in the grand scheme of things. It's not like we'd lost a lot of revenue over that decision, but, we just accepted that earlier than others so that we got credit. We got a disproportionate amount of credit for being the lowest when in reality, we have similar fees. Yeah. Yeah. I mean, I liked how aggressive you guys were with it. Like, you're obviously, like, in it to you you were prioritizing, and you were in it to win it. And We're we're in it to win it. We're in it to like, we we weren't shy.
[00:25:48] Unknown:
We we we did a TV ad, before, like, we We were very proud of that TV ad. Yeah. Yeah. It was fine.
[00:25:56] Unknown:
Yeah. I mean, the the thing is, like,
[00:25:59] Unknown:
it was with by the way, Freaks, if you haven't seen it, it was with the most interesting man in the world,
[00:26:05] Unknown:
the Dos Equis guy. Yeah. Yeah. Yeah. And I think we we were just, like, leaving it out on all on out in the field. Right. And we had to. I mean, I think the record shows that, like, everything that we did combined ended up with us holding on to 5% market share. And it's a great place to be because now we have a serious enough product that we can go out and sell. Like, if we had a $100,000,000 product, then it's not like no amount of it doesn't matter. Like fees, donations Very relevant. Proof of reserves, like, how how much you spend on marketing and sales. At that point, you don't have a product that has enough liquidity Right. To anyone else to further decide. They they can't in their good conscious. It's just like a slow spiral to death. Yeah. Yeah. Yeah. But but $2,000,000,000 product is a viable product. Yeah. Like, nobody, like $2,000,000,000 is it's sizable. Yeah. Yeah. And and that's that's great. I mean, I I think I I also feel proud about, like, the the then things that we can really push for with that amount of, like, seriousness.
If we do, if we publish our addresses and do proof of reserves, like, nobody can be like, they're just fly by the night. They don't take seriously. It's not a real product, like, so, like, you can't like, real serious people can't do proof of reserves. Like Right. You can't say that when there's, like, a $2,000,000,000 products, out there. And also like, you know, we if there's something that we're not happy about, like our custodian, let's say, like there were a lot when we published our addresses, people were upset about the fact that it was, like, not even a segued address and stuff. But but, like, we can we can go back and really have a serious conversation about Kobi's, like like, what the fuck, guys? Like, it really is, a problem that you are putting us into this position. Right. And this is, like, not okay. And and and they take us seriously because, like, again, we're a big client. So so there's some things that I really feel, we we've been able to, like, push in in a way that, is material because we we got like, again, of course, I would have been great if we were in BlackRock's position, but I think we have enough for it to be, like, powerful.
And we also am excited to grow it from here. Yeah. I mean, you should be proud.
[00:28:11] Unknown:
And that's coming from the guy who says fuck the suits in all caps. Like, you should be proud. I, so let's talk about we'll get to Coinbase custody and transparency and that stuff. Let's talk about, how you how you did your your open source, contributions. I thought it was it's quite clever. It was not our idea. It was it was Hong's idea. Like, he came with this idea of 10% of profits for 10 years, nice long term reoccurring, aligned commitment, where if they make more money, open source contributors get more money, and then split between 3 organizations. It wasn't just OpenSets. It was HRF, Brink, and OpenSets. And since you brought that to me, that has been essentially the model that I've tried to pitch as many because I don't want OpenSats to be.
Yeah. Like, I have enough pressure on me. Yeah. I I I say to everyone who's who can I think OpenSats is, you know, one of the best nonprofits in the world? I think we have plenty of plenty of places we can improve, but I think we're more ethical, more transparent, more efficient than 99% of the nonprofits that operate in the world. But anyone who gives me a critique, I would love for them to launch their own. And, like, I think as the the the more people working on this problem, the better, because there's no easy solutions here. So I've actually used your model, in pitches since then. I mean, they haven't been quite successful. Like, it's a long grind.
But let's talk about that model a little bit because I think it's it's quite compelling.
[00:29:52] Unknown:
Yes. So, as we were talking about, a moment ago, I think around, like, November or so Right. It was, like, a month after the court case, like, 3 3 months after BlackRock filed. I think, like, at that point, we really knew this was happening, and I was I was thinking about it. And and so once I really felt that, like, we really need to figure out a donation, to devs here, and and and I think it's it's like, I mean, because it there is a unique opportunity here where, like, this is, a custodial product, pulled Bitcoin together. We take fees. So, it's much easier for us to then take a portion of the season and make that donation. It's inherently monetized. Yeah. It's inherently monetized, and it's also inherently monetized in a transparent way because it's a public product. Like, I mean, if another business were doing it, then they would be kind of disclosing their revenue details, and that can be a little bit uncomfortable. Right. But this product is already a public product. The fees are transparent. The AUM is transparent. Because it's an ETF. It has to be. Yeah. Yeah. Yeah. So so in some ways, it's already taking, again, it's inherently monetized inherently transparent.
And so we weren't really, like, it was a really great vehicle. And also it's really well aligned in terms of, like, let's say if it's an exchange, then your revenue is tied to trading volume, so it can be more volatile, but our revenue is just with along the AUM. So if this whole thing becomes more valuable, then we make more money. So it's in a way, like, it's if we tie it to a rent recurring model, then it can be a more sticky and kind of stabilizing force Yeah. Compared to, I think, donations generally are a little bit even, like, further cyclical than the market cycle because people feel even further squeezed when the market is down than just the price level. No one donates when Bitcoin price is down. Exactly. Exactly. And so we could our our our revenue would go down, but it wouldn't go down to 0. And and I think that was also an opportunity. So so so there was a lot of ways in which it was a good opportunity, and but then when I was thinking about actually implementing it, there was a fair amount of, like, questions. Right.
How do we do it in a way that people don't feel threatened by TryFi firm, like, us showing up and saying, we're donating that Even a buyer developers. Yeah. Yeah. I mean, even though even if we have good intentions The suits are here to bribe our developers. Yeah. Yeah. Yeah. Good intentions are not enough. Like like, Bitcoin in itself has that ethos as well. It should be the design of the incentives or like the model itself should be, should embed as much as possible kind of a, clarity about what's possible and what's not. And so, like, us, making a donation to an individual dev and just saying that we're not pressuring them, that's just not great for people to believe. Gonna believe you. Yeah. No one's gonna believe us.
And so it it needed to be no strings attached, but it also had to go through other entities. It couldn't be direct. And then when I thought about, like, it being 1 and 1 nonprofit Right. That also comes with problems. What if we become incredibly successful? I mean, we want to be incredibly successful. Then then let's say we, like, dominate the ETF market. Then then suddenly one organization gets, like, a disproportionate amount of the open source funding that also can create problems. And and yeah. So then it had to be multiple, and that's kind of like where that was the kind of the idea maze that I went through of thinking, and then, okay, like, deciding that set was a little bit of a judgment call. Right.
I went out and talked to everyone that I respected, in the space. Like I talked to, like, Steve Lee, I talked to Adam Jonas and a few others too that were very deep in the work of it all and like what types of organizations that they felt were doing the best work. And thankfully, it was pretty a pretty easy decision. Everyone kind of coalesced to OpenSats and Brink and HRF, And those are also the 3 entities that had the kind of cleanest, like clear nonprofits, mission and, We made it very easy for you. Yeah, yeah, yeah. It was, it was like the options were very clear that that was like the best set. And also it had the most kind of well set up kind of governance structure around that as well.
Because we we don't want there to be trouble there. So so it it it just ended up being that that was Dirk's right side and the easy set to go with. And, 3 felt like a good number, and, like, ultimately, 10% of the, the net profits of that product was also just a number, but 10 felt like the right number. And It's a big number. Yeah. They yeah. But,
[00:34:35] Unknown:
I mean, I wanted the meme number of 21%, but, you know, I'm not gonna complain. Yeah. Yeah. Yeah. So that that's how we ended up with it. Yeah. Yeah. I, I will say as someone who is intimately involved with raising money for Open Sats, I'm very grateful for the long term commitment because I make no money from Open Sats. And this idea that I have to just constantly be calling people and texting people and circling back to try and get new commitments, The reoccurring model is a breath of fresh air. You know, 10 years is, like, a 100 years in Bitcoin terms. So I have, like, a century, I have a century commitment. You know? I, it it it it is it is it is a massive it's a massive departure from the usual, like, one off donations.
So I appreciate that. I'm curious. What do you say to the critics that say, well, you know, 10% of profits right now, like, isn't that much?
[00:35:41] Unknown:
I think we have really big ambitions for the product. Yeah. I think something that, something that, so so so let's just, like, kind of do the rough math. I think, like, we have, a $2,000,000,000 product right now. 20 basis points means that we have 4,000,000 in annual revenue from that product now. Right. And, let's say it has a 50% profit margin. Okay. So so then, 2,000,000 in kind of, like, profits from the product, and 10% of that would be 200 k. Right. Not a game changing amount of money. I recognize that. But if that 10 x's, yeah, it's that 100 x's, then it can be a meaningful amount. And, it can like and and also, I'm not here saying that we're solving open source funding You did it. Problem. You did it, Hong. You solved it.
Like, I'm saying that we want to Mission accomplished. We want to pull our weight. Yeah. And and it is kind of well incentive aligned if we have more success. But but but but maybe to just paint a picture a little bit about, like, how it could be a bigger product is so GLD, which is the 4th gold ETF in the US, launched in 2004. Yeah. And that in the first 3 days or a week gathered about $1,000,000,000 in assets. Right. That was the most successful, wildly, like historic launch, like $1,000,000,000 in 3 days. Crazy. And then the next 3 months maybe gathered about another half $1,000,000,000 or so, like a 1,000,000,000 and a half, and then it kind of died out there.
And then people thought that it was an event that came and passed because, like, launched 1st day 1st few days is 1,000,000,000 and then, like, a a little bit more trickled in, and then, like, it's it's quiet now. Right. The reality of what happened after that is that, like, the next year in 2005, maybe about another 2,000,000,000 came in. Next year, I think about, like, 3, 3a half, 5, and then there was a $10,000,000,000 year. Ultimately, there were positive inflows that were growing, and the kind of like sustaining in those levels for another 8 years after that, that were, and the launch year was an insignificant moment in the grand scheme of things. And I think that is also likely what we will see with Bitcoin ETFs as well. We had a historic time. We launched in the 1st month. Right.
Outside of GBT's flows, we had maybe a 2 or 3,000,000,000, and then in, like, next 3 months, we had, like, 10,000,000,000 or so. So, like, we had, you know, an incredible incredibly successful, debut. I mean, if you think about it as kind of like maybe, like, an IPO moment, like, it was a successful IPO.
[00:38:20] Unknown:
It beat all expectations.
[00:38:22] Unknown:
Yeah. It beat all expectations. And and I but I think there's a way in which Like, it insanely beat all expectations. Yeah. Yeah. It it only beat be all There was people that say it was a nonevent. It was a sell the news event. Yeah. Yeah. Yeah. Yeah. And I think those people, Were wrong. Yeah. Were wrong and and regretted it. And and I think the market priced that in as a, like, you know, the market dipped because people thought that it was the the sell that it was over. It didn't launch. Yeah. Yeah. Yeah. And after the 1st month, it seemed like the things were quieting down. And then on month 2 and 3, another $10,000,000,000 of net flow showed up, and then everyone And now we're at $65,000. Yeah. Yeah. Yeah. So, like, price went up, like, 50%, and and the market has kind of adjusted to that new reality now. But, what I'm trying to paint the picture here a little bit is that, like, there's a way in which crypto Twitter, or traders kind of like to think about the ETF moment as, like, an event, like, and the market event. A singular event. A singular event, and it came and went.
But in reality, it's much closer to like a state change. Right. It's much more closer to paradigm. A company going public. Like, it's not that the company itself changed. Like, why you would invest in the company? What is the value or the moat of the company, why it exists, didn't change. But when a company goes public, it just goes from having private market liquidity to public market liquidity. The amount of market participants and the dollars that can really easily engage with that company's stock just changes and it changes forever. It doesn't never unless it delists, It doesn't it it just maintains that, and I think that's closer to what we have here. And, and but but that state change is now a new world in in terms of just, like, kind of public market liquidity, but saturating the opportunity set is just gonna take some years. And to paint a picture a little bit there, like, most of the dollars time. Yeah. Like, we think think about, like, the like, wire houses, like, large banks, like Morgan Stanley or UBS or Wells Fargo, these firms, a financial advisor that's managing money for, like, their clients can't really put a Bitcoin ETF into their portfolios yet. It's considered high risk. It's new. It's No. It's just not approved for that. So so so currently, it's allowed if the client asks, but there is no discretionary allocation that's allowed. It's just not allowed by the home office, and they're going through due diligence. And due diligence for ETFs, new ETFs usually take, like, 6 to 12 months. I think everyone is racing towards trying to do a little bit earlier because They're all competing too. Yeah. Yeah. They're all competing, and they're all also trying to, like, meet their client needs. Right. You know, they they have customers that want it, but, but it's still they're like, the first firms are, like, coming out of the woodwork there, really, like, because we're now 4 months in, 5 months, it's just like the first set of firms are starting to come out of the, the tunnel.
And so really in terms of, like, actually Bitcoin ETFs taking in the money that was, like, structurally unable, like, the public market liquidity that really wasn't able to interact with it. We we got, like, a taste of it, like, the the $12,000,000,000 that showed up in the 1st 3 months Right. Was a taste of that. A small taste. But really, that takes time. It's the tip of the iceberg. Yeah. And even after they have discretionary ability to so right now, it's just not allowed. Once it gets allowed, I mean, if you think of even how, like, the retail played out, it Right. It played out over time. Like, people put in a little bit amount, and then they lose that money or, like, they go through the volatility, and then they realize that they should have, like, just held on to it, and then they put in a little bit more. Stack sets. Yeah. Yeah. And and they learn about Bitcoin, and then they learn about, like, auction economics. It just takes time. So I think, like, right now, the gates haven't even really opened for them, and it will open, and then they will all find out, like, find their ways in. And and that's why a product like GLD just had incrementally higher, flows for years that ultimately, like, paled the 1st launch year. Launch year again was like $1,000,000,000 and like 4 or 5 years later, a single year bought in like 10.
So I think, that's the dynamic that we're at play, and we're just so early, like, like, yes, that's why we're bullish and why we're, like, really committed and excited about this part of the journey. Because now that Bitcoin is, like, a little sideways, a little bit died down, all the other firms like BlackRock, still ultimately is a small product for them or like Fidelity or or are they all have other asset classes that are much bigger. Baby. We're we're focused on only one thing. Like, we don't have another, $2,000,000,000 product out there. And and so I think this is kind of the part that we feel excited about. They're not trying to show me a copper ETF, you know? Yeah. Yeah. Yeah. I'm not gonna be talking about, like like, Chinese equities or or fixed income, or or something like that tomorrow.
And and and so yeah. Anyways, I think I think, basically, I think the message is that, like, the category is actually much bigger than what it seems now, and it can grow into something much bigger, not just from prices going up, but also just from saturating the public market opportunity. And I think if we do that well, our ETF could be a much bigger product and hopefully,
[00:43:17] Unknown:
donate a lot more to to Dez as well. Yeah. I mean, I think, like, on the institution side, like, you have institution level, time that takes family offices, as you talked about. I mean, family offices are a big part of the American economy that people should not discount. That's like money managers of rich families. But even on, like, the individual level, I mean, we saw so many stories. I still hear stories of, like, people going to, like, their broker at UBS or their broker at Morgan Stanley or whatnot and be like, I wanna buy the ETF. And they just send them through so many hoops if they even let them buy one of the ETFs to begin with. Yeah. And these things take time. So, like, it really is definitely a paradigm shifting moment. And my answer is is quite simple when people give me that critique. My answer is, like, look. At the end of the day, Bitwise put their balls on the table.
They directly aligned it with how much money they're making. So, if you have any critique on no matter how much money they're making, it's 10% of it, which is a sizable portion. So that's huge. The second thing is is I say, our the the the deal we made is is that 5 to 10 year the years 5 through 10 are where it's gonna be most significant from an absolute terms, and I won't have to call you back at that point. You've already committed to it, which is huge. And then third of all, you've told everyone else on the cliff why, you know, why aren't you doing what we're doing? Like, why is why is GBTC not supporting open source developers? Why is BlackRock not? Why is Fidelity not? Why is Arc not? And they've noticed. Like, they they have definitely noticed, and and I I do not think I I think it's it's very hard to overstate what you guys have done, and most people are understating it. I remember Hong messaged me, like, a week before the ETFs approved, and he's like, we have no idea if they're gonna get approved or not.
Like, I have no insider information. But if we do get approved on the date that everyone expects us to get approved, like, I would love to have you on the Twitter spaces. Is that out of the question because it's the demon app? Because you you knew I didn't like I didn't like Twitter. And I was like, yeah. Sure. Sure. I'll go on Twitter spaces right before I I deleted my account. And our Twitter spaces had, like, a 150 people in it. Like, we did not have that many there was there was the the big some of the other ETFs had massive Twitter spaces, and they had, like, a full celebrity group of influencers, like, all on stage or whatnot. And we're just talking about supporting open source contributors.
And I I think, like, a lot of people fated it. A lot of people fated it. And the fact that you guys had the conviction and the aggressiveness to actually make it fucking happen is is why we're here today, but is also, like, why it's a significant thing. And I think it's something that, like, goes down in history books. Like, I think I think it's, like, it actually does. It it it will make the difference as time goes on, and people will look back and be, like, holy shit. Like, Bitwise really did lead the charge there. I've had so many private conversations where people are like, that Bitwise news was the one of the most incredible things I've ever seen. And I I do I really appreciate you, Hong, for for leading the charge there, and and and thank you. Wow.
[00:46:59] Unknown:
Thanks for saying that. I think, I'm feeling a little emotional. But I really do yeah. I think there is a way in which it was not, like, in retrospect, now that Bitwise had some success, I think it's easy to say that, like, oh, yeah, it was a good business move, blah, blah, blah. But I think and and and now we're even having a conversation about, like, why are these other players not doing it? And And that is a conversation to be had. Yeah. It's a conversation to be had because an alternative exists. And I think there is. Yeah. Yeah. So I appreciate you kind of recognizing that that, required someone on a conviction.
I mean, I think ultimately it, it, it really was, I mean, I did think about the business aspects of it as well, but also it was just a right, thing. We're ultimately Bitcoin. The right, thing. We're we're ultimately Bitcoiners. Yep. Like
[00:48:04] Unknown:
and and this is something The business rides or dies on Bitcoin. Like, Bitcoin fails, you guys are fucked. Yeah. Yeah. And also also,
[00:48:11] Unknown:
I mean, even beyond the business, and and I think this is, like, Bitcoin is just a very important thing for the world. Right. That's why most of us are here. Yeah. Like, the the idea of, like, a user controlled money. And I think it's just a radical idea that is very important to, and it just doesn't have like, just just obviously is going to work out. Obviously, is it going to win? I think there's a way in which, there's sometimes I feel like a bit of a complacency in people. Yeah. I mean, because because I I also There's a lot of complacency. I mean, I also get it as well. Like like, there's so much, like, bad faith critiques that I think when we talk about it in public, I don't like giving, like, showing weakness. Like, best Bitcoin critics are Bitcoiners. Yeah. Yeah. Yeah. So so so, like, when when I'm talking about it publicly with people that are, like, putting forth, like, bad faith arguments against it, then, of course, I'm like, yeah. Bitcoin is is rock solid. You like, that's all, like, bad argument. Well, like, I would I would do that. I would kind of do the microsailer.
Right. But in in with Bitcoiners, I think we can recognize that, like, it's just not a given that this is a thing is going to be allowed to exist and work and be secured, and, like and and people think about, like, consensus stuff all the time as, like, the main thing to think about and maintain, but, like, that's a small part of what the open source devs do. I mean, ultimately, it's a network, and, like, the mempools are always, having different types of issues to navigate and different and the issues change over time, you know. Like, it's it's a live freaking network, and and all sorts of things that needs to be to be maintained. And, like, the, the yeah. So, and it's just not obvious to me that, that it, we can be complacent in, like, supporting our devs and, like, just expect this thing to work out. Someone else will do it. Right. Yeah. So I think, there's a part of part of part of that as well, that I wanted it as a Bitcoiner. Yeah.
[00:50:22] Unknown:
Yeah. I mean, I I believe we will do this thing, but I believe we will do it because people stand the fuck up and make it happen. And we haven't won yet, and we haven't made it happen yet. And and until then, people have to do things, and they have to do the hard things. And, complacency fucking kills, and I don't want, you know I I keep going back to the meme of just mission accomplished George Bush on the aircraft carrier. There's a lot of Bitcoiners that embody that meme. Don't be one of those Bitcoiners.
[00:50:56] Unknown:
Yeah. I mean, the reality is that, like, all the things that we, like public key cryptography being a thing that is that we enjoy as like a right that we have, is not a thing that was given to us. We fought for that. Right. And Continue to. And, yeah, it's it's just it's just gonna be something that we have to continue to fight for. I mean, just one thing about the the the the years 5 to 10 point, we don't have intentions of pulling it on year 11, at least that's how we think about it. We, we, we gave the 10 year number as a minimum, because saying that it's indefinite sounds in some ways like a weaker commitment
[00:51:36] Unknown:
and making a concrete number. We could do 21 years if you don't wanna do indefinite.
[00:51:41] Unknown:
I mean, what what what what what I'm saying is, I don't think we're we're, like, secretly looking looking to to to Year 11, you're gonna fuck us. Right? I I I mean, we if we have the success that we hope to have, then I think we'd be happy to continue to donate 10%. Well, I hope my successor at Open SaaS calls you up, year 11. Yeah. And if I'm still if I'm still involved, I just
[00:52:05] Unknown:
Yeah. I'm I'm exhausted, freaks. I'm exhausted. So but but I no. I I I never I I definitely didn't mean it in that respect. Yeah. Yeah. Yeah. I mean, I mean, I mean, all Me, like, 10 years is a nice round number. We did we did 10%. Yeah. Nice round number. 10 years, nice round number.
[00:52:21] Unknown:
Just just We can circle back. The audience. And and to some extent, like, of course, it's all, you have to to to trust our intentions to some extent that we we will continue to, and, like, that is like, it's just me me saying that. But also, I think you can attest to the fact that, like, we came to you with this. It it like, I'm not I'm not,
[00:52:40] Unknown:
No. It was the single easiest open sats deal I've ever done.
[00:52:44] Unknown:
Yeah. And and and maybe that kind of shows a little bit, of the proof of work of, like, that it was something that we decided to do, and we thought, and and so part of yeah. Anyways, we I think that's the Yeah. You're great.
[00:53:00] Unknown:
But, yeah, years 5 to 10, man. That's gonna be we're gonna Great. The open source contributors are getting a lot of money those years, I think. And we'll have bigger problems then. I, let's talk about so we talked about the the from my angle, the 2 big things that you guys, business just raided us. So he brought his audience over here. Thank you, appreciate you. Rat or die freak. Good Internet friend. I don't think I've ever met you in person. One day, maybe. That'd be great. Also, I wanted to say to KNI Calverio, I appreciate you. Don't, let the people in the chat bully you.
Say whatever you wanna say. Our our chat is unmoderated, and, they can't censor you even if they wanna censor you. As always, freaks, you can you can join us in the live chat, at civil dispatch.com/stream. The rider died freaks that joined the live chat, make this really special. I met at bitcoin BitBlock Boom in Dallas. Great event. I can't place you. I apologize, but I appreciate you. I wanna talk about to me, there's there's 2 big things. And I I think I think there's a strong argument that, a lot of us, like I mean, me, personally, I'm probably as anti ETF as they come.
Self custody all the way, use your own note. I'm like, don't trust third parties. But at the end of the day, like, I have a lot of friends and family that the Bitcoin ETFs opened up a whole like, opened up the possibility for them to actually hold Bitcoin for the first time or hold a Bitcoin ahead of you for the first time. And I always just recommend them Bitb. Right? Like, I recommend them your product because I think it's it's most aligned with ethos, and I think just dropped from the open source contribution side is fucking massive. And I tell them that's why. And and I I think there's a strong argument.
And this is why, me, personally, like, I always focus on the rider dies. Like, the rider dies are the people that go out there, and then they they talk to a 100 people, a 1000 people, and you don't know who those a 100000 a 100 to a 1000 people are. They could be movers or shakers or wherever they are, and they get shit done. But the transparency is really cool. I think it's really cool what you guys have done in terms of proof of reserves, in terms of Hoseki. I I think we should talk about that a little bit. So, like, what was your what was your thought process on on proof of reserves and and and making your addresses public? I mean, I don't think there's not a single ETF that has done it besides you guys. Right? So so on the open source side, Van Eck, which is a smaller ETF, much smaller ETF, they give 5% of their profits to Brink.
Besides Bitwise and VanEck, nobody else is giving to open source contributors. And then you guys are the only ones who have actually made your addresses public and done proof of reserves, and you went even farther with Hoseki in terms of, like, proving ownership of those addresses. How do you think about that?
[00:56:33] Unknown:
Yeah. Yes. That one is another one that I I would hope the other ETFs would, also consider. I mean, it's been some time now, so I think it's in a 2nd case, how did we think about that? I mean, ultimately, again, I'm a Bitcoiner and I've just been frustrated with, all the shit over the years of custodial products not having transparency, and then ultimately them growing to become kind of systemically large and then, and then blowing up and, and kind of the community having to then clean up the mess and kind of, like, move on from that. And, when we got to a certain size, I think we were either a 1000000000 or 2,000,000,000 I think like month 2 we were 2, but like, it felt like it now we were sitting on an amount of Bitcoin.
That is a pretty meaningful amount of Bitcoin. And, like, we should do it is kind of, there's no,
[00:57:37] Unknown:
like, argument not to ninja launched it. What? You kinda, like, just woke up one morning and just, like, tweeted out your addresses.
[00:57:45] Unknown:
I mean, it was it was considered. I mean, we we did have to I mean, the the reason that we could've do it, like, immediately after day 1 or something, because we didn't fully think it through at that time. And then once we started thinking it through, it still took some time with, like, legal and compliance. Like, everyone still had like, we had to make sure that it was, buttoned up, but we're we're, you know, we don't take like years of these these things. So, so like a month or 2 was enough for us to, to get clarity there. And yeah, and I, and I think that's another area where I feel excited that we can kind of be an example because like, no one can say that it's not doable. Right. You did it. Yeah. Yeah. And we You did the thing. We definitely take, like, legal compliance, regulatory stuff very seriously. We've worked with SEC for 6 years on this product, like, so I think nobody can say that, like, it's not allowed or like it's not doable.
And, and like another few things is just like, I was also a little post launch, feeling a little bit like people were treating it a little bit too much like gold or like that type of narrative. Like, I like the digital gold narrative as an investment narrative, but when people go too far in thinking that that's literally what it is, then they don't understand that they're dealing with a radically different thing here. Right. Like, gold cannot do proof of reserves. Yeah. Like, gold, you cannot securely custody, but also publicly verify or or or maintain public transparency about your holdings. It's one of the benefits of Bitcoin.
[00:59:19] Unknown:
Absolutely. Like, is that like That someone around the world can trustlessly verify ownership without without giving them custody. Exactly. Like, public auditability
[00:59:28] Unknown:
is, like, one of the really big strengths of Bitcoin as an asset and network and idea. And there's there's a way in which,
[00:59:37] Unknown:
like, the GLD people were, like, actually, they they took pictures, like, in the gold vault Yeah. Yeah. Yeah. Yeah. Proves nothing, really. It proved nothing. But but but but that's just the best they can do. But just to show, like, what a difference
[00:59:48] Unknown:
difference there is between Bitcoin and gold. Exactly. Like like, GLD launched, GoldBugs were, like, upset about GLD because, like, how do you know that paper gold? And then, like, they they did it, like, a media tour of, like, bringing some people inside to the vault and, like, taking pictures. They took selfies inside the vault. Legit. Yeah. Yeah. And, like, that's supposed to prove a point. Look at all this gold. Yeah. But we're there's a way in which we're kind of treating Bitcoin in the same way, and that frustrates me a little bit. Or or, like, it's it's not like the full and and to some extent, like, showing versus tell telling is is always more effective. It's so much more effective. Yeah. Yeah. Like, we can talk about, like, oh, there's a public key and there's net blockchain. Change you want to see in the world. Fucking do it. Do the thing. Yeah. But, like, when you show the address to people, like, set of addresses to people and, like, look, it's here.' It doesn't mean that it's the custody is not safe. That's how public key cryptography works, and that's how Bitcoin works, and like, you can have public audibility without it being any more at risk at loss and, like, don't have anyone tell you otherwise and even a regulated product like us can do it, like, when you show it to people, then I think people have to have to, go through some cognitive dissonance in, like, really trying to think through what is different here and come to realize that like gold and Bitcoin isn't, isn't, it's nowhere near the same thing. And especially also like when people, and it's a really important part because when people think about things like, let's say, free banking Yep. At the gold era and Bitcoin era, they they kind of talk about it as if it has the same set of risks. That is just not true. Yep. Because you can have the type of public transparency and accountability while having custodial services. That's just not possible with gold and probably with Bitcoin. And and so anyways, like, I just, wanted yeah. It wasn't like I one day woke up and I was like, we're shipping this. It kind of felt like that. It it kind of did post launch. I think there was a way in which it was very successful, but but it was successful in a way that kind of too much of it was kind of, like, removed, and wanted to push to surface more of like Bitcoin ness to the product, and then really started pushing our legal and compliance team and and like kind of like or like, I mean, to give them a ton of credit there, we have we didn't build a firm of like, people that don't also have this ethos. They are also Bitcoiners. So so they are trying to make this work in a way that we still don't get into trouble. And And so they're trying to dot, you know, dot their I and cross the t's and, like but but they they did the work, and then we came out feeling that there's nothing
[01:02:21] Unknown:
no problem here, and then we move forward with that. Yeah. Yeah. I mean, one of the I think one of the coolest parts about Bitcoin companies is, we've never had this before, which is like it's yeah. I I like to call it, like, almost like a shared equity. Right? Like, 1031 has 36 portfolio companies. Most of those companies own Bitcoin. Most of the employees own Bitcoin. Most of the people involved in those companies are Bitcoiners. And so if one company does does things that that are successful, it usually benefits everybody else, which is is something that we've just never seen. It just has never existed, which is a it's like a crazy thing to just, like, wrap your head around.
On the transparency side, on the proven reserve side, I know it wasn't you woke up one morning and just decided to tweet out your addresses because I had been talking to you about it, for a while Mhmm. Before you did. I just wanna say to anyone who's listening that's a Bitcoin Twitter influencer, Just you can go fuck yourself. Like, in the whole and I know you're you you're more reserved. You're more deliberate in in your I'm actually pretty deliberate in my comments. People don't give me enough credit for that. But Bitwise comes out, and it's like, here's our addresses.
And Bitcoin Twitter was just, like, overwhelmingly negative. They were they were just like, oh, like, what is not native Segwit? It's you know, like, what are you doing here? Like, look how antiquated they are. The only ETF to actually post addresses and and do some semblance of proof reserves, which you guys have gone even further since then, with Hoseki, in terms of actually verifying ownership of those addresses. I mean, like, any you Craig Wright has a perfect example of someone whose post addresses that he doesn't control, was just really disappointing.
Like, get your priorities in order, and you don't have to comment on that. I think the the segued stuff, I think it's cool that you used your your position as a big client at Coinbase to push them to move to the new address type was cool. Unnecessary, but cool. I my bigger question, and I'm gonna kinda put you on the spot here. My bigger question is, I I think the bigger concern for a lot of people is that everyone that almost everyone is at Coinbase except for Fidelity. I forget who one of them is at Gemini, which might be worse.
I mean, the Winklevoss twins, they don't have, like, the best record. I think they still owe people a $1,000,000,000 from Gemini Earn, thanks to Barry Silbert. What are your thoughts what are your thoughts on on being solely reliant on Coinbase custody? I I if you wanna talk about centralized points of failure, like, that is the the I'd like I could I could give 2 shits if it's in a legacy address versus a segued address. Totally. Totally. I,
[01:05:35] Unknown:
I see that. What I would say is that I imagine that the future is likely multi custodian and that that transition will happen in not too long of a timeline. Let's say, like, in 12 months from now, if it was still this concentrated with Coinbase custody, I would likely be surprised.
[01:06:03] Unknown:
So you're saying a situation where, like, ETFs are holding 30% of 1 custodian, 30% of another, 30% of another. Mhmm. Mhmm. So a single Like, compartmentalize. Like, she had poor man's multisig.
[01:06:17] Unknown:
Yes. An an ETF, as a vehicle can definitely have multiple custodians. Okay. That's not a thing that is precluded. Right. We don't have any product that does that yet. Okay.
[01:06:28] Unknown:
But it's None of the ETFs do that right now. Right?
[01:06:32] Unknown:
Don't quote me on that. But but none that is Quoting freaks. That is a large product. Okay. But, we're definitely exploring it, and I think there's good reason to, imagine that that is likely where the space is going for many reasons, related to centralization that you're talking about. It's also just a pretty competitive market, so, that I think also just generates natural amount of some, diversity. Maybe some context is helpful. I I think this is Yeah. Incredibly context. Yeah. Incredibly fair critique, and I, would own up to anyone saying that, But a little bit of context about, like, why we had this amount of like, everyone just had the same choice.
And why that happened is because we talked a little bit at the beginning of this episode about it. It's suddenly going, like, in October, November, going from, like, no word from the SEC to, like, they're they're they're giving us comments every week, and we're, like, racing towards, a a January deadline. And in that process, your worst nightmare is that, like, you're caught up in, like, comment like, replying about some specific issue, and then everyone else moves on from that. And then, like, the you don't get the day one launch. Like Right. The 8 others go, and then you're stuck for 3 months. You're dead. You're dead in the water if that happens. Even a single day, you're dead in the water. Like like, it just so much of it happens on the launch moment. So much of the game plays out in the launch moment Right. That even if you are, like, a week later, then it's over. So I think everyone had that fear, and everyone was just, like, trying to have the least amount of back and forth with the SEC as possible. Like, just one of the most noncontroversial selections on every dimension.
[01:08:21] Unknown:
Right.
[01:08:22] Unknown:
Like, so if you go at it from that perspective and Coinbase was a public company that Etsy was had The Goldman Sachs of crypto. I mean, it's a company that the the SEC knows and also that BlackRock chose. It was just a consensus pick, Yeah. And and and you don't want to be talking about multiple custodians. You don't wanna be talk you don't wanna be the one that is, like, bringing You're not bringing the artisan
[01:08:45] Unknown:
custodian, play.
[01:08:48] Unknown:
None of that. You you you I think people I mean, rightfully, though, but, like, it was just a crazy time. Yep. And we were, like, racing towards they were racing, we were racing, and you just did not want to raise another question. Yeah. Yeah. Yeah. Because this is the thing that we were look, if we after we get it out, then then everything, you know, we can talk about multiple custodians. Like, we we do everything, but, like, until and and yeah. Another issue that was kind of this way was I think people this crypto Twitter caught on a little bit about, but, like, in kind contribution in kind creates and redempts. Like, you can't put Bitcoin in and get Bitcoin out of this product. Yeah. That's not an ETF structural, like, legal I mean, all all gold ETFs as in kind and creates some like, all commodity products. Okay. Yeah. Yeah. So so it was an arbitrary thing that the the SEC was drawing a line about, like, with Bitcoin ETFs,
[01:09:41] Unknown:
at least for now. Oh, really? So in kind is in play?
[01:09:44] Unknown:
In kind is definitely in play. Okay. Yeah. I mean, there It doesn't require, like, an SEC rule change or something like that? No. It's just them changing their opinion about like, big there's these, like, weird things that the SEC has positioned about Bitcoin specifically. Right. Like like like like, for example, SAB 121 is another one of this. I think it's gotten a little bit of attention on Twitter this week. SAB 121 is, like, special accounting bulletin board item or something 121, where SEC just put out just just specifically targeting Bitcoin guidance around the fact that if a regulated entity like a bank wanted to custody Bitcoin for their customers, then they have to also have one to 1 reserves of dollars. Fucking insane. So if you're custodying a $100,000,000 of Bitcoin for clients, so you have to take on the capital cost of just holding another $100,000,000 of of dollars treasury. In addition to the 100,000,000 Bitcoin you hold already. So it makes it not viable for any regulated I mean, of course, we we want more self custody and all that, but we also just want, like, it's a permissionless network and asset. Like, if regulated entities want to custody it for their clients, they should be able to do that as well. But the SEC is saying, no. No. No. No. We have a specific accounting
[01:10:52] Unknown:
because we think it's risky. And and and and Especially since with dollars, they're doing fractional reserve banking, so they're not even holding 1 to 1 dollars. And if they hold 1 to 1 Bitcoin, it still doesn't qualify because they need to hold an additional It's it's really level of dollars. It's really fucking insane. It's really
[01:11:10] Unknown:
quite absurd, and, it it really it went to I think the house voted on it last week. Okay. And it actually was a bipartisan like like that it was a weird, unlawful, or like this this this was not, it's not right. And then it it passed. And it's and now I think going up to the senate, but, like, there are these arbitrary things that is just not a legal constraint, not like what is what the spirit of the law says or, like, what this is, a specific reason that this is shouldn't be allowed, but more so just guidance level decisions by the SEC that, that really is mostly targeting Bitcoin in in some ways.
And in in kind was just another one of those things. And, the SEC was pretty clear that, like, if you wanna be out on the first batch,
[01:12:00] Unknown:
you just have to I mean, so you brought it up, Hong. I think this yeah. So, I mean, that's the argument I make to most people behind the scenes about Coinbase. It's like no one wanted to rock the boat. They just wanted to get approved. They needed to be there for launch. Coinbase was the easy answer. Public company, $60,000,000,000 mark cap, ex Goldman Sachs founders, selling surveillance software to US government and other governments. It was, like, it was the easy answer. And these things will evolve over time, and and and the beauty of of capitalism when it's not captured by government is that there's competition, and and people will improve the products. Absolutely.
And and at the end of the day, like, what is the risk? The risk is that funds are lost, and that is a central point of failure. And and that is a risk that any ETF operator, It's about. Yeah. Obviously, because it it destroys your business. So the incentives make sense. But I I wanna ask you, you you you brought up this in kind redemption. I think we have some visitors. Yeah. He he's just gonna listen in. It's it's rare that you get to be here for an in person dispatch, so I respect anyone who wants to to enjoy it in person. Guys, if you come to Bitcoin Park, you can sit on the couch and listen to dispatch in person and get to enjoy it. So consider coming down to Nashville.
We're having a fun time down here. In kind redemptions, Hong. I think it's incredibly predatory to not have in kind redemptions, because I think GBTC has proven that if Bitcoin does its thing and it goes up you. I know you agree with me, but I'm just I'm incentives are important. Right? So I wanna talk about this a little bit because you brought it up. And you can tell me, like, I don't wanna discuss it. Yeah. Oh, you're always welcome to do that. I told you beforehand. And you haven't done it yet, but you're welcome to. Because GBTC proved that if you have Bitcoin appreciation that increases the way we've seen it to do it historically, and you don't have in kind redemptions, then the only way for them to leave the lobster trap is to take cap gains so they will accept a higher fee. So if you don't have in kind redemptions, you can actually increase the fee over time. So it's actually the opposite of what you usually see in most industries where fees compress to 0 and go down and get more competitive.
Fees can actually go up if you don't have any kind redemptions. Do you think that there there's actually, like, a world where we start where where some ETFs, like, actually move to in kind, where you don't have like, you can't trap your customers. Like, you can't actually trap them in the in the product and increase your fees. Absolutely.
[01:15:15] Unknown:
Again, in kind is the norm in all other commodities spot commodity ETFs. All gold ETFs in kind is possible. There's even a gold ETF where if you redeem as an individual shareholder, they they can send you gold bars and coins to your door. They would, like, size it up and, like, send it to your door. And and and that's not a taxable event. Yeah. Yeah. Yeah. There there's, like, event. But most people, like, if you're gonna take, like,
[01:15:43] Unknown:
a $100,000,000 in kind on gold, like, that's
[01:15:47] Unknown:
many trucks. Right? It's like it's it's difficult. Yeah. Yeah. Yeah. Yeah. But but, again, for Bitcoin, very doable. Yeah. With Bitcoin, you could do it from your cell phone. Yes. But but what I'm saying here is that that's allowed for gold. Right. We have a gold US ETF that does that, that delivers gold coins to your door. It's it's not that it is legally not possible or against the spirit of the securities laws or something. It is just an arbitrary point that, was drawn. And, like, we, we're definitely motivated. I mean so we don't need any rule change. We don't need any rule change. It it so so so the main thing that actually does not allow in kind redemptions right now is that the, the APs, authorized participants, or, like, a specific entity, do you think about broker dealers, like Right. For for our our fund, it's, like, disclosed, like, let's say, like, Goldman Sachs and, like, James Street and blah blah blah, are are the broker dealers that can create and redeem shares.
But the current situation is that the SEC says broker dealers cannot touch Bitcoin. So the reason in kind is not possible, it's not because they specifically have something about in kind. It's about 2 things. Only broker dealers can create and redeem shares, and broker dealers are not allowed to custody or touch Bitcoin. And if you say those 2 things and in kind is by, kind of a derivative fact that it's not possible because you say only these regulated entities can create and redeem shares. Right, and those regulated entities are not allowed to touch Bitcoin, then in kind of just not possible. But, am I hopeful about the broker dealers being able to custody and service Bitcoin soon? I am. The reason I'm hopeful is that the tides are turning there in the sense that, like, SAB 121 or or, like, these types of arbitrary things about regulated entities not being able to touch Bitcoin. Who's lobbying against those things?
Who who who who who's who's, like, pushing the government on that? Actually, the banking lobby is now doing that. Because they want to get involved. Yes. Because, like, if you were a U. S. Bank and you like a Blockrock, they're they're effectively custodying a lot of customer's Bitcoin and, like, making a ton of money on that. Can't compete. Why are we not not allowed to do it? Yeah. Like, why why are you saying that the ETFs are possible and we shouldn't be able to service, a Bitcoin for our clients? And so the arbitrariness in which the SEC has been, kind of putting up these roadblocks are now being highlighted and pushed by banks. Yeah. The incentives are kind of The incentive is kind of pushing through the the and and and we're not even asking for any type of special treatment for the client. No. Just just let it treat it at Like non special treatment. Yeah. You're asking for non special treatment. Else. Like, every other spot commodity. Like, please, like like, let's just get it to that point. And so I I'm hopeful, like, that the in kind stuff get resolved in not too distant future because ultimately broker dealers and banks will solve that for us. Their business incentives will solve that for us.
And then at that point, we can all these things are really on the table. And That'd be awesome. Yes. For for me, the I will be the first first person to say that the major the the main con of a Bitcoin ETF in its current form is definitely the fact that you can't take it out in kind. Without paying cap gains. Exactly. Because You have to sell it for dollars, pay cap gains, and then buy Bitcoin. Exactly. Exactly. So if you buy, this is a very common experience. You buy some Bitcoin, then it goes up 10 x, 100 x. Right. And then you and then you take it seriously. Like, you you like Every GBT dealer understands this. That's why they're paying Yeah. 1 1 and a half percent because they they have to. Otherwise, they have to pay 20, 25%, whatever cap gains. Yes. Also as a Bitcoiner, I am very much like everyone that feels comfortable doing so and, like, can educate themselves and should should do self custody and do, like, interact with the network in a self custodial way because we need more people doing that to be to for people to using these products, have a larger user base. I mean, that the government is definitely coming after a lot of like self custodial, users, and the more users we have there, I think there can be definitely much more political pressure and agreement on, like, that being something that we wanted. Anyway, there's just many reasons that, like, more people using the network directly is a good thing for the network, and ultimately, there is no world in which Bitcoin fails and, like, our ETF succeeds. Right. So so I I want that as Bitcoiner. I also want that as just, like it just make the product better.
Like, I'm I'm, again, like, we shared a little bit in the beginning, but even though the 12,000,000,000 of the 1st year was was a big chunk, what's coming in the coming years are much bigger. Yeah. So so I, there's, like, we're nowhere close to thinking about, like, oh, we'll, like, raise we'll like capture a little bit more and then like start raising fees and like, we'll be good. That's not where we're at. I think we're much more closer to like, we want better products so that more people can buy this thing and we want to have the best product so that, we will win more market share because how much market share of the dollars that we win in the coming years will determine whether we end up with 5% market share or 50% market share.
And we want to be at 50%, not at 5%. And so, yeah. We we definitely want to make in kind possible. And and and, you know, I know you're an ETF, a skeptic, but, like, if we have I own no ETF shares. Yeah. Yeah. Totally. Totally. I recommend Bitby and own no Bitby. Yeah. Yeah. Yeah. Totally. Totally. Totally. Disclosure. And but if we I own Bitcoin. Yes. Yes. That's great. That's great. But if we have inclined Yes. Then I do think the converse like, the ETF becomes a pretty useful, product in Top of funnel. Yeah. Exactly. It is like because when it goes up is when you realize why self custody matters. Yeah. Yeah. Yeah. Yeah. No one realizes why self custody matters until it goes up. Yeah. Yeah. But even if you want more people to do self custody, who who learns to do do self custody? People that have a lot of Bitcoin. That's what I'm saying. Yeah. Yeah. Yeah. You learn as it goes up in value. Exactly. So so so the main thing that if we want more people that own Bitcoin or soft cost of Bitcoin, etcetera, is that we just want more people that that have economic exposure to Bitcoin. Right.
And and if we think about the process now, if if if, like, open up like, you have to open up a you have to not only convince someone to the put in, like, a hunt just put in a $100. Like, you you can't tell someone for the first time, like, tell them to buy a $10,000 worth of this thing. You're you're actually gonna tell them to buy a $100, but for that $100, they need to open up a new account, go through KYC AML, and then wire money or or or, like, or or It's ridiculous. It it it's it's too high of a friction. So imagine the amount of, like, Bitcoiners, the potential Bitcoiners that we're losing because we can't kind of convert like, any everything is to some extent. Friction really matters on conversion.
And, as a top of funnel thing, it is true that Bitcoin ETFs are very like like, you could just convince someone to buy some, and then they probably have some brokerage account, and then a few taps. That's it. No accounts. No wires. No additional
[01:22:57] Unknown:
KYC. Like like, it just Yeah. They just log in to TD Ameritrade. Buy the yeah. Buy the ETF. And then when it goes up in value, they realize they wanna take self custody, and they go through the portal or whatever. They put their Bitcoin address. They take self custody as that as it should be. That is my ideal world. Yeah. Yeah. That is my ideal world. And and I don't think it is that far yeah. I don't think that is that far out. I love it, hon. Be the change you wanna see in the world. Yeah. Yeah. I mean, look Even if that means less fees for Open Sats,
[01:23:25] Unknown:
I'm I'm cool with that. I I I don't You have my blessing. Yeah. Yeah. I I just don't think that would mean less business for us. That like like, that's the thing that I I think that would be make way it would make your ETF way more competitive. Exactly. Yeah. That would be another reason why everyone would, recommend it, or make it as their first product that it allocates to. I mean, it I think it it it is is not yeah. Yeah. So We're aligned. That's dope. Definitely. Okay.
[01:23:56] Unknown:
That's fucking awesome. Okay. I did not know that. I thought we need an SEC rule change. So No. I didn't realize that was one of the things that just, like, everyone coalesced on just to get approved. That's awesome. Okay.
[01:24:08] Unknown:
We're definitely having still, even this week, someone, leadership from our team went and to DC to meet with SCC people around in kind specifically. So so, you know, it's a thing that we're actively That's awesome. Thank you. Talking about that. Thank you for your service. I will say I mean, you compare it to, like, something like oil
[01:24:26] Unknown:
where, like, during COVID, like, we went negative because no one can take barrels of oil in kind. It's, like, the most insane thing. But, like, Bitcoin, you can take in kind so easily. It's it's It's the most natural thing. It's designed for it. It is designed for it. That's right. That's right. And and but we're allowing it for for gold to, like, them to ship it into your I can take in kind of oil. I just where am I gonna fucking store the barrels? I don't know where I'm gonna put it. I should've during COVID, I should've just fucking figured it out Yeah. And just taken a bunch of barrels of oil somewhere. It probably would have been an environmental disaster,
[01:25:01] Unknown:
because I don't know how to store oil. But we're making progress. I I I I I do, like, I guess, I guess it's tough to be too bright eyed about, the regulatory landscape right now, given the DOJ stuff. Yeah. It's pretty bad right now. But for the stuff that has very clear business intensive aligned, like, there's no money to be made in in private or it's much harder, but, with stuff like this, in kind just needs broker dealers and banks to be able to do business with Bitcoin. It's currently not allowed. They'll make it happen. And I think there it is not controversial now. Like 5 years ago, if a bank wanted to custody Bitcoin and service it for their customers, I think, most people, even the public opinion, would be that, like, that bank is crazy and reckless. I don't think anyone says that now about Bitcoin.
[01:25:53] Unknown:
So then now that the businesses see the business, want the business, will push it forward, I think it'll happen. That's freaking good. But it requires people like you and and the Bitwise team to actually, like, make it fucking happen. So thank you. Yeah. You you you'll see it from us when it's when it's possible. Yeah. Yeah. You did briefly mention during authorized participants, Jane Street. I just wanted to do a huge shout out, to Tim Reynolds. His foundation did support Open Sats. He's one of the cofounders of Jane Street. There's Bitcoiners everywhere, and they're standing up and making this thing happen.
Hong, I wanna talk about I wanna talk about Noster. You love Noster. I love Noster. You're on Noster. You're a cofounder of a company that launched a Bitcoin ETF, and you're on Noster. Why? Why are you on this ridiculous protocol that we're using?
[01:26:48] Unknown:
Because I think I really think about Bitcoin as user controlled money. Yeah. And I think there's a way of looking at it as like gold. It's just like this kind of perfect thing that will always be fined. And I think of it as like the users need to be vigilant and coordinate and defend this thing because it is, it is not our or it is our right, but our rights have to be defended. They're not always upheld. And so then if you imagine a type of world where users really need to be, vigilant to maintain this network. If they, if they aren't sovereign about the ways that they communicate to each other, then how is that coordination and resistance supposed to happen?
Like, I don't know. If, like, if we're all on Twitter and there's a Twitter policy change and, like Yeah. Yoland just wakes up one morning. He's like, no Bitcoin talk. Then it's over. Or or I mean, I'm I'm I'm being a little bit, Provocative. Provocative here. But but, like, I like provocative. I I think it is not that hard to understand why kind of having sovereignty over your communication and identity network is critical to a sovereign money and the users and owners of that sovereign money. And, I think the social layer is as important as the technology layer. Yeah. And, as much as we care about the decentralization of like the mind, like everything the code, I mean, we should care a lot more there as well. I think this recent few weeks of, like, minor centralization is also something that we should but but as much as we care about and so that that also doesn't get enough attention. So, like, that's also a problem. But but but but as much as we talk about that, I think we should also talk about, like, are do we have sovereignty over our communication? I mean, we shouldn't be talking about, like, Bitcoin consensus changes on Twitter. Like, you need a fucking account.
[01:28:52] Unknown:
They, like, block people left and right. Like, come on, people. Get your shit together. And and Bitcoin consensus is not gonna be won by Twitter debates. Get over yourself. Be better.
[01:29:06] Unknown:
So that there's one level there. And then I also am very excited about just like, I think this type of web of trust is like ultimately the identity layer for the internet that is compatible with the ethos of the internet. And also something that can still practically work. Yeah. I also think that I'm very excited about things like, Ecash.
[01:29:33] Unknown:
I wanna talk about Ecash. But before we talk about Ecash, are you gonna delete your Twitter account, Hong? Or yeah.
[01:29:42] Unknown:
Yeah. Yeah. Yeah. The the reality of the matter is we're still, you know, trying to run a bit. Honestly, one of the best emails I ever got was you. Like, oh, Matt, will you join the Twitter spaces or is it just a demon app? No. That that It was like one of the best Yeah. I felt a little bad. Like like like, if if I don't know what you're you know,
[01:29:58] Unknown:
I I felt a little bad pulling you back into it or, like, I don't know. But I hadn't posted on Twitter in 6 months, but I joined your Twitter space. Yeah. Yeah. Yeah. That's how I feel about you. Yeah. Yeah. Proof of work. Appreciate that. But yeah. Yeah. Yeah. I mean, like,
[01:30:11] Unknown:
I also recognize that a lot of these networks are really kickstarted by people that take a stance like you do. And it really just kind of make the like put a stake in the ground and say that this is where I'm going to talk. And like, if you want to talk to me, come here because there's a network effect, and the beginning of the network effect is brutal. So so some people have to make it to Yeah. So it's that, like
[01:30:33] Unknown:
yeah. I'm doing the same thing as you. I'm I'm, like, the 5th largest Bitcoin ETF, and I'm I'm Nostra only. You know? Like, that's I'm doing the same exact thing Yeah. In a different way. So You don't have to leave your Twitter. I was just fucking with you. Yeah. I couldn't put it. I had to ask. ECash. We're pretty excited about ECash. So excited about ECash. Yeah.
[01:30:56] Unknown:
ECash, I think people trip over the fact that it's a custodial. Yeah. Whether it's, you know, single sig with, like, cashew or, multi sig with, like, a federation with Fediment, etcetera. But I think, like, you have to think about it from, like, where it fits in. Like, I think the Mutiny Wallet's approach is incredible. Yeah. We're we're like, if someone is just trying to get $10 of Bitcoin. Right. They should not be running a self custodial letting note. Like, I I'm sorry. They should not. Yeah. But but but then like, manage the liquidity together. This is not like, you know, same thing as, like, I mean, how I feel a little bit about the Bitcoin ETF stuff as well. Like, someone's buying $10, a $100, there's it's not gonna figure out so so it it's just, like, not economically viable for them, and it's also not if you add up that much much friction, then they won't do it. Right. So I I think it's very smart that they go e cash for a certain threshold of stats, And then when it goes, it's a larger balance or the dollar value of it goes up, then they might change their mind. Yeah.
So so but then, so to me, it's just pretty obvious that, like, we still want the, a low dollar amount, engageable custodial layer because we still want people to start using Bitcoin for money. Right. And like the reality is that Bitcoin is not winning as much like a medium exchange right now. So we do need to make it easier for people. So that for the small dollar amount and for the first kind of early, part of the journey user using a solo experience is, like, very obvious to me that that is actually what they should do. But then do we want them to be, just using like, the the current flavor of custodial services? Right. We have to KYC and AML, and, like, in certain certain jurisdictions, they're not allowed to use it.
I think I think if people are religious about the self custodial lightning, they need to be kind of, clear with themselves that that is the world that they are pushing for it. Right. That, like, everyone that onboards onboards with KYC and MO, and like, that type of not, a custodial service that doesn't preserve your privacy. And I would rather the first step be a custodial service because that's the economically viable thing, but in it being private. And that is what eCash is to me. No. And And it's cryptographically
[01:33:29] Unknown:
native. Graphically native. And even if it was even if you had an e cash custodian that was KYC AML, it would still be better than the current status quo because they can't see your your your total balance and your transactions. To me, it's like, we live in a world where people are using custodians,
[01:33:51] Unknown:
so let's make the custodians better. Yeah. Yeah. And it's not just a temporary thing. I mean, Bitcoin transactions on the l one will just always have economic costs.
[01:34:02] Unknown:
Or do you think mempools will clear? Mpools will not clear. That's okay, guys. Thank you for joining us for solo dispatch. We have Hong here.
[01:34:12] Unknown:
I mean, I don't know if you're if you imagine Bitcoin to do the thing that you want it to do, I mean, maybe not like, at some point, we will get to a point where mempool is just not clear. Yeah. That that It's an eventuality. It isn't if Yeah. Bitcoin either does not work or it's an eventuality. So so, like, I I want to when when we're thinking about futures, talk about an eventuality. And in that world, like, it's so so so there's a there's like a argument about, like, oh, we're living in a KYCML world solely we do, but, like, if it weren't, no, it just is the reality that at a certain sat threshold, people will just not be able to open up Lightning Channels and have that run us up. So like it is an economic reality in my mind, not a political reality. It is just an economic reality that the small sat amount users will begin with custodial services that take that economic hurdle away from them. They take the burden. Yeah. And we want that because we want Bitcoin as money to work and win for everyone, not for a small group of people. So then we're living with a custodial, element, not because we're lazy as Bitcoiners, but because that is the
[01:35:28] Unknown:
the economic reality of the system that we have. Yeah. If your first experience of Bitcoin is a 10 sat zap, like, it's not gonna be on with on chain Yeah. Guarantees. Yeah. It's not going to be. Yeah. And,
[01:35:43] Unknown:
so so in that world then, like, it's also not that, like, I I am, like all k y c, AML, like, it's bad, and we we should live in, like, the wild west. We're here to fix this. But but the thing that I believe in is that, like, we shouldn't it shouldn't be all or nothing. Right. It shouldn't be like you have to send your passport and, like, sell out your life versus, like, not being able to use anything. I mean, it's this is how I feel. Like, this is, in the physical world, that's often true, but in the digital world, in the same way we talk about proof of reserves, like being possible, like that thing not possible for gold, impossible for I think this is also private thing available for privacy that people have not wrapped their mind around. Like right now I go into a bar. They check my driver's license.
What are they, what legally, what are they trying to check? They're trying to check that I am not underage. Yeah. But I I just because of the form factor, I have to reveal where I live, like, what my date of birth is, what
[01:36:41] Unknown:
it there's an By the way, I still give my grandfather shit that, like, it requires KYC for me to enter a bar. Like, how do they not fight that? Like, that is that seems ridiculous to me. Yeah. I mean,
[01:36:55] Unknown:
but but but at the same like like, but if we, we can society doesn't agree that we don't want underage people to be able to go into spaces where people drink. We can agree that as a society. Yeah. But but we there's a kind of a violence in the current modality of privacy. Yeah. That it it kind of forces people to do the kind of an overexposure. Right. And and I think modalities like e cash start to get very interesting because now that we have the full, toolkit of digital kind of encryption and privacy embedded to the assets, then now we're talking we we can we can negotiate as a society. What do we want? What do we want guarantees of? Do we want them to have to, like, literally reveal everything about themselves? Right. Or what is it? What is the guarantee that we want here that they're not sending to us? Or I I mean, that has problems, so I'm not advocating for that. But but, anyways, that's kind of what I'm excited about in the kind of Ecash world.
[01:37:52] Unknown:
What's up, guys? Are you are you gonna record now? Is that okay? I was waiting for you to come here before I wrapped. If you didn't show up, it wasn't gonna be proof of work. Rod just walked in. He's he wants to record a podcast, so we're we're we're kinda we're kinda tight on time, so we're gonna wrap it here. But, he doesn't have the rest of his people, so we're not gonna wrap it yet. I agree. I agree. I think options. I think the world we're going towards is options. I wanna give people as many options as possible. I don't wanna I don't wanna pick their prescription for them. I don't wanna say this is how they should do things.
I want them to be able to choose how they interact with the world, whether that's a speech, perspective with something like Nostra or whether that's a financial perspective with something like Bitcoin, it should come down to options. Right? Yeah.
[01:38:49] Unknown:
Also, like, there's a difference between privacy and secrecy. I think I think the, and and and really, like, privacy as, like, a right is about me having control over what I want to selectively reveal to people. It's a cyberpunk manifesto. Yeah. Yeah. Yeah. Yeah. I mean, a recent book that was really great was, Genesis book by Aaron Van Virdam.
[01:39:14] Unknown:
Awesome, dude. Haven't read the book. Bought the book to support him.
[01:39:18] Unknown:
You should read it. I mean, I I thought it was the best. I mean, we I only just buy I buy Bitcoin books. I don't read them. Yeah. Yeah. It it really lays out, like, I mean, there's something a bit of, like, a purity in in what the cypherpunks were thinking about because they were thinking about it prior to a lot of the economic incentives to think about it, and they were struggling with all these these issues, and I think that, yeah, the articulation about privacy and secrecy and kind of like how, you know, that that also resonates with me. Anyways, so I'm excited about a world because they they wanted to make it a reality in the eighties nineties. Right. ECash, Tommy and eCash, and weren't able to do it. Why? Because it required banks to do it and dollars to do it. It required permission.
Yeah. The underlying you still need an asset to back it to to do this kind of issuance of notes that are private, have privacy embedded, and the you didn't have the And they're bearer notes. Exactly. So you didn't have the thing to back the bearer notes, and it had to be dollars or or fiat money. And that didn't have to be banks, and then it had to be permission. So so so it just was an idea that, didn't really get the full, to live its life. And now we have an alternative. Now we have a fully, endogenously digital asset in Bitcoin for the first time that we can now use to build all these systems that we dreamed of with different levels of privacy or for what people are are comfortable with or or kind of different amounts of disclosure that people are comfortable with, different entities that they're engaging with. We can give them that control and granularity.
It was just not possible in the prior world and and, and before the conversation gets too dark, I think there's a way in which, like, the government is currently trying to, bring a very blunt conversation to the privacy, like digital privacy to financial privacy conversation, but it's, like, it's gonna be black or white, and it's gonna be, like, for criminals or good people. And before it becomes too black and white and we don't have a chance to build our case, like, I think that's why pushing eCash now is so important so that we can actually get it used for real people for the real use cases and kind of demonstrate this type of full spectrum privacy and full spectrum kind of sovereignty over that, such that when we are forced to negotiate as a society, like what should and shouldn't be allowed, then we have a lot more to show and demonstrate and like concretely talk about because the physical analogs don't work. The physical analogs is just a driver's license. You just like that, that it's black and white is the physical modality of privacy.
So that's the only mental model people have and to break people out of their mental model, that you just have to show them something that's different. Give them a different option. Yeah. And and when when when people are showed is only when they really question their mental model. Yeah. People are like, it's ridiculous that you're surveilling my $600
[01:42:28] Unknown:
Venmo transactions, but they don't understand there's another option.
[01:42:32] Unknown:
Yeah. And the and the regulations were written that way because there was no other way. Yeah. And and and and and so or, like, in some ways, even people pushing or lawsuits or, like, kind of the public discourse can't happen when there isn't an option. What I mean by that is that like, okay, the initial Internet was like all just public. There's no encryption, anything. There's no, we didn't have discourse about whether privacy is should private communication online should be a right that we have Right. Until encryption was actually a possibility. Right. You know, the Internet happened in the seventies, 8th and eighties, and it was gaining steam by early nineties, and until it was a practical option, we just didn't talk about it because why what would you talk about? Right. You know, But but once public key cryptography kind of got to a point that it could be used, then people started using it. Then then now there is a is a discussion to be had. And from, like, a rights perspective, of course, we have private conversations in a room, like, why shouldn't we able to have it in a in a in an online setting? Like, that makes no sense to me, but it still was a thing that we had to be fought because the way that technology progresses is usually the non private thing. Public thing happens first and the private thing comes after, and that's when you have a material thing to talk about and you have to fight for it. And so, like, in some ways, I feel there's a lot of analogy to that in in the current Bitcoin world where where, like, we we fought that for public communicate online communication, private, you know, online communication, but we didn't have to talk about financial transactions Right. Because it wasn't possible.
It wasn't possible to have a private financial transaction because Private digital trend. Yeah. Sorry. Sorry. Sorry. Yeah. Yeah. Yeah. Because we had cash. We had cash. Exactly. So it's the same thing. Like I walk into a bar. I pay cash. Exactly. No one fucking knows what the I'm doing. Exactly. And that was fine. So we have it in again, the same analogy is that we have privacy for financial tax dollars in the physical world. Just don't have it in the in the digital world. And but just the way in which we are progressing here, we didn't have to have that conversation because it wasn't an option. And now that it's an option, it's becoming a problem and a conversation, and
[01:44:50] Unknown:
we're discussing it. Yeah. Hong, you're a fucking legend. Thank you for being a friend and an ally. Freaks, I wanna agree with Kieran. KYC is the illicit activity. It's not effective against criminals. They just buy or steal, financial credentials to to get into these sites, and it it just affects regular people. I wanna thank all the freaks who joined us in the live chat. You guys make this show unique and special. You guys are the true rider dies. Thank you. I wanna thank everyone who supports the show. Our biggest supporters this week was 8 Myth Rendur, rider die freak with 24,000 sets. We had v with 23,000 sets, and Erza CC with 10,000 sets. We're gonna have another seal dispatch on Friday with Matt Hill of start 9 at 1700 UTC, the usual time.
RHR tomorrow at 1800 UTC, and I'm gonna have some guests here in the studio. Don't tell Marty he doesn't listen to dispatch, so he won't expect it, But we're gonna have some great guests live here in the studio at Bitcoin Park. Hong, this has been fucking awesome. I really do appreciate you. Thanks for having me. Thank you for being a friend. I feel like it's been a whirlwind. It's been, me and Hong have only been French for about 6 months. It was it's a good friendship. Yeah. Right? It's a good friendship. We went through a lot. Yeah. Yeah. Together. Yeah. Yeah. Yeah. With Gigi.
Gigi, fucking boss man running open sets. Hong, final thoughts before we wrap.
[01:46:36] Unknown:
Excited for the future, but we have to fight for it. Like, I, I, I think the, the moment that we have to really the users of the user controlled money having to be vigilant and care for the whole stack from like the software to the mining, to the, to the, the, the platform that we have these conversations on the communication channels, like Novstar, to like how we make, custodial financial transactions that are necessary at the onboarding stage, more private, like e cash. Like we just have to care for the whole stack. And as much as the, the opportunity is really big and kind of more and more real for us to be realizing these, these things, I think the, the urgency of making progress before we have to the resistance becomes bigger is that timeline is also shrinking. So excited for, you know, excited for all that. Excited for, I mean, very thankful for what what all you do as well. Yeah.
[01:47:35] Unknown:
Appreciate it, Hong. Until next time. Let's let's try and make this a reoccurring thing. Yeah. Absolutely. That'd be awesome. Like, I mean, we said tip of the iceberg. We're at the tip of the iceberg. Let's do, like, an ETF update every 6 months or something like that. Great. Yeah. For those to do that. Let's fucking go. Appreciate you freaks. Stay humble, Stack Sats.
[01:48:07] Unknown:
I keep a close watch on this heart of mine. I keep my eyes wide open all the time. I keep the ends out for the tide it finds because you're mine. I walk the line. I find it very, very easy to be true. I find myself alone when each day is through. Yes, I'll admit that I'm a fool for you because you're mine. I walk the line. As sure as night is dark and day is light, I keep you on my mind both day and night. And happiness I've known proves that it's right because you're mine. I walk the line. You've got a way to keep me on your side. You give me calls for love that I can't hide.
For you, I know I'd even try to turn the tide Because you're mine, I walk the line. Open all the time. I keep the ends out for the tide of mine. Because you're mine. I walk the line because you're mine. I walk the line.
[01:50:06] Unknown:
I love you freaks. Stay on the sax ads. I'll see you Friday well, Thursday, tomorrow, if you listen to RHR. But if you don't listen to RHR, I'll see you Friday. That was, I Walk the Line by Johnny Cash if you live under a fucking rock. But I've been told I need to tell you guys what I play. I love you all. Stay humble, and if someone is gonna buy an ETF, just recommend Bitb, and, otherwise, recommend self custody. Appreciate you all. Peace.
Watch Sailor carefully, and I've watched his messaging. And, it's it's fascinating to me and I think highly intelligent on his part that he is not talking about Bitcoin as a replacement to the dollar, not shitting on the dollar, not talking hyperinflation. I mean, I think I think he he knows all of those things are in the cards, but he continues to talk about this just as an investment in digital property and comparing it to Apple and comparing it to Manhattan Real Estate, and he's just selling it as the best investment. And I I think that's really, really smart on his part. And the reason it's so smart is there's no point in pissing off the US government and all these idiots in DC who, if they realize we're going after their dollar, they're much more likely to do the Elizabeth Warren, come after our on and off ramps, and tax us and, I guess, disclose our, you know, our addresses and all that other shit. And so his you know, I I really respect his approach.
And, I mean, he even asked me in Madura, you know, to kinda tone down the hyperinflation stuff, and I respect that. I mean, I get it. It's like, why get the other side all pissed off, you know, about, you know, the fact that this thing's gonna crush the dollar, which it will. But why get them pissed off about that? Why not just make this the best digital property? You know? And, you know, the dollar the dollar's gonna die whether you know, what irrespective of what Bitcoin and gold do, the dollar is gonna die its own death based on the misbehavior of the politicians in DC.
You know? And and, I mean, I I tell people we're looking at investing my fund. I said the only way my fund doesn't work is if Washington DC gets incredibly responsible. And, of course, they always laugh. You know? They're like, well, I'm not too worried about that possibility, but it is a possibility.
[00:02:28] Unknown:
Happy Bitcoin Wednesday, freaks. It's your host, Odell, here for another Citadel dispatch, the interactive live show focused on actionable Bitcoin and Freedom Tech discussion. That intro clip, was prolific gold investor turned rider by Bitcoiner Larry Lapard on what Bitcoin did, talking about, how the dollar is fucked, but we shouldn't talk about it. Freaks, I have a great, great show lined up today. In person rip. The in person rips are always the best rips. Someone who I've gotten to know, through the Internet, through various calls and, interactions, but finally got to meet in person, just really moments before this rip. But we're live here from Nashville at Bitcoin Park, and I have Hong Kim with me, cofounder and CTO of Bitwise, most known for their recent Bitcoin ETF. How's it going, Hong?
[00:03:29] Unknown:
Going great. Super excited to be here. This studio and space is incredible. Yeah.
[00:03:36] Unknown:
It's a little bit ridiculous. Right? Yeah. Yeah.
[00:03:39] Unknown:
But, yeah, very excited to be here. Big fan of the show. And freaks, he's he's not wearing a suit,
[00:03:47] Unknown:
for what it's worth. He's wearing a Bitwise branded sweatshirt without a hood, so not a hoodie either.
[00:03:54] Unknown:
It's,
[00:03:55] Unknown:
yeah. I I don't really There's there's no video on this rip, so I felt like I should paint the picture for them. Mhmm. And it's a little bit unbelievable to me that, on dispatch, I have a cofounder of a company that has a Bitcoin ETF. Live in person is, kind of a weird timeline for me. I I kind of didn't think we're gonna have Bitcoin ETFs after, like, the Winklevoss failed, like, 10 years ago. Yeah. Or, like, 11 years ago, I just assumed that it's just not gonna happen for maybe another decade or so. So it's kind of still a little unbelievable we have ETFs now. It was unbelievable for me as well. We worked on it for 6 years.
[00:04:32] Unknown:
So crazy. We first filed in 2019, I think. And then, yeah, every 2 or so years, we we tried again. And it was I mean, every time and we thought and the whole industry thought that we were just like a year or 2 away. So every mo every year it was like a year or 2 away. And also, like, there's administration changes, like the chairperson changed. So like all this change that kind of made it really hard to, understand what's happening or not happening. Should we spend time in here? Should we not? And we just ended up being stringed along for 6 years. And ultimately everything that we did didn't really even matter that much. It was ultimately a lawsuit. But, yeah, sometimes I find it even hard to believe that we're finally at a moment that we do have an ETF. And to your comment about just, like, you being surprised about, me being here.
Yeah. I mean, I I I understand that, like, a TradFi product might not feel like it can ever truly encapsulate the Bitcoin ethos. And I recognize a lot of elements there, but we also try our best. And, yeah, there's like, I'm not a person that wears like, you know, I have a beard, long hair. I don't wear suit. Like, I think there's a reason they don't send me to Wall Street events. Right. But, but you're on Dispatch. Yeah. I'm on Dispatch. Like, I, like, last night, I was at bit devs,
[00:05:58] Unknown:
with National Crew. What did you think of the bit devs? It was incredible. Yeah. Yeah. Yeah. It was really good. I mean, there's a lot of topics to talk about. Like, Nostradov v 2 was a big topic, like Bolt 12. Have you ever been to a New York bit devs? I haven't. The New York bit devs is the creme de la creme. Yeah. Yeah. I I grew up on New York Bitdevs, and Jay runs the New York Bitdevs. Yeah. So when we launched the park, we waited, like, 7 months before we launched the BitDevs here because I hold it in such high esteem that it was important that we at least attempted to do it as best as we possibly could.
But Steve Steve Myers and and Matthew who run it, NP, IP wasn't there last night, but they do a really great job, and it's pretty cool to have a bid devs in house. Yeah. They did a great job. But if you're ever in New York, you should try and make a New York bid devs because Jay refuses to move to Nashville. So you have to go to New York if you want a proper Jay bid devs. In the comments, I see ASDF. This is in person, but no video. Yeah. I actually ironically enough, I like doing the in person rips with no video because it just I feel more comfortable with having the person here.
And then if you I, like, I kind of compensate for the remote episodes by giving you video. So it's like you either get the intimacy of an in person rep without video or you have the lack of intimacy of the remote rep, but then you have video. So, that's a little bit of of the thought process of the context of the of the no video. But me and me and Hong are we're chilling here at Bitcoin Park, and you you're gonna have to trust us on that one. I, so where to start? I wanna start with, the string of Bitcoin ETFs, not being approved.
I I when we first started chatting, I think it was, like, November of last year. Yeah. So it was, like, 3 months before the Bitcoin ETF, and it was because you were really interested in in supporting open source contributors. And Yes. It was actually quite refreshing because it wasn't us pitching like, to be frank, Freaks, like, I pitched every Bitcoin ETF to support open source contributors. I did not pitch Bitwise. Like, Bitwise came to us. Hong specifically came to us and was like, we wanna support open source contributors. We think this is how, would be a great way to have it set up. But, anyway, before we get to the supporting open source contributors part, I just want to just crystallize here that in November when we were talking about it, I don't think we I don't I didn't think it was gonna happen still. I mean, I I was pretty sure it was, at this point, was gonna be an eventuality.
[00:08:47] Unknown:
Yeah. Yeah.
[00:08:49] Unknown:
But, like, I like, a January launch date was still very much up in the air. Totally. Totally.
[00:08:56] Unknown:
So when I reached out to you was basically the time that it really settled to us that it was happening, that the SEC was very serious. Yeah. Because it was after the the lawsuit was decided in October. Right. And the SEC really sprinted from then to January. Like it was, it was a crazy time for us because imagine us working on it for 6 years and like never really getting anything back from them. Yeah. And like, you send something over the line and, like, wait, like, 5 months to get a response is like the kind of engagement that we had, And then overnight, because they were sprinting on a deadline, it was a short deadline for them as well to go from, like, rejecting it for years to, like, approving it in 3 months. They had a lot to work to do on their end as well. Like, every disclosure thing that they're not happy about, they want, like, mining risk to be described in this way and like the environmental risks to be described in that way. And like all these disclosure documents, even just going through the hundreds of pages of each of these issuers takes time. So we were like on a clock, like, like every week they would like send us stuff and then we would send reply. And then it would like next week, they would reply back like a crazy response speed that really indicated that, like, oh, shit. Like, they would this is different, and they wouldn't be doing this if they weren't serious.
[00:10:15] Unknown:
And But you didn't know it was going to be January.
[00:10:18] Unknown:
But there was a deadline. The specific 19 before process, that's jargon for just commodity ETFs. Spot commodity ETFs go through a specific regulatory pipeline, and it has a 240 day kind of timeline in which they have to decide. So there was a, end date that they needed to decide by, and if they were going to reject, they need to come up with They didn't have they could have delayed it again in January. Right? No. No. No. No. The you do can delay a few times along the way and get the full timeline. The full timeline is 240 days. But then after that, you have to decide. The SEC has to decide. So they've always always Wasn't there, like, technicality there? It was, like, they could have delayed most of them, but they would have had to reject a couple. It was that it? Or Yeah. Yeah. So the the one that had been in the queue for the longest that dictated that timeline, I think it was Van Eck or something. But but basically Right. But they could have just fucked Van Eck, said reject VanEck and then delayed and then No. Yeah. Yeah. Yeah. Okay. So just to maybe taking a step back, like, why did the SEC get into this position? Okay. Yeah.
It's because they've been trading Bitcoin in a specifically weird, discriminatory way, moving the goalpost many years. And, like, they just haven't been able to be consistent across administrations and across different chair people and across different, like, market regimes. Like, they felt differently before FTX or after. Like, you know, if the law should be applied in a consistent way. But but given the political process that is kind of surrounding all of our regulatory decisions, it has just not been consistent. And it's not my view. It is actually the the view of 3 judges, in DC, the 2nd appeals court that are very well respected judges took on this case.
Ultimately, after the a decade of the industry trying, Grayscale sued, and it went to, court in a second appeals court in DC. And the judges were looking at this, and they were like, what what the fuck is is going on here? Right. And everyone thinks that there's a meme around, like, oh, BlackRock filed, and then suddenly it was all approved. Yeah. That's I I prescribed to that meme. Yeah. The reality is is something much closer to BlackRock has people. Obviously, their legal team is paying attention to things. And there was, there was an oral They only filed when they knew it was gonna be approved. The oral hearing happened around May or so where there you you had audio recording and you had a transcript. And if you listen to that, the judges are very much upset. Like, there's a SEC lawyers trying to defend, like, how they the futures product is okay, but the spot product is not, and, like, how they they've made all these decisions over the years and, like, trying to come up with the coherent narrative. And the judges are like, what are you saying? Yeah. You're making no sense, and and and they're visibly very upset, and it's it's a pretty unanimous opinion.
[00:13:00] Unknown:
And anyone that listened to that could have known that probably Grayscale is winning this thing even though it's unlikely. But if you didn't listen to that as soon as BlackRock filed, it was like, okay. BlackRock filed because they know they're gonna get approved. So, like, you knew by the end of BlackRock's timeline, which I think was past January, but still
[00:13:17] Unknown:
by the end of BlackRock's timeline, they were gonna get approved. BlackRock filed around, like, August or so. So it was before the final decision landed. Like, the final landed in, like, October, but, like, they filed aft well after the hearing and well after they probably internally came to the view that that the SEC is losing this thing. And if if if it's if you have that view, then it's just a decision of, like, do we wanna be involved in this thing or not? Right. And, better to play the game than not. Yeah. Yeah. They're in the game of making money. They're in the game of making money. And they're like, we can definitely win this game. Like, why would we not play?
[00:13:50] Unknown:
And. Yeah, I mean, to me, I guess I guess my point is this to me, as soon as BlackRock filed, I was like, okay, this thing is happening. Was just a matter of what the timing I was like, I was like, I'm pretending to be a savant on the timing. But I think I even had tweets out there. Well, now my Twitter is deleted, but, I had tweets out there that as soon as they filed, I was like, okay. Like, buy as much Bitcoin as you can afford because the ETF is coming and the suit's gonna pump our bags. And Yeah. Yeah. Yeah. So I I guess the reason that I I came back to to that context is is to describe,
[00:14:22] Unknown:
that ultimately, the SEC was in a really tough position. Right. Because they, were, not consistent in how they applied the laws and then ultimately had a really embarrassing and high profile. Arbitrary and a capricious way in which the SEC handled all the filings that it was an arbitrary and capricious way in which the SEC handled all the filings over the years. So they didn't really have a way of going back from that and being, like, doing something willy nilly again. So, doing a rejection on a single filer with some cute narrative is just not something they can do. So at that point, they they had to approve the next deadline. They couldn't do another rejection with any reason.
That wasn't a new reason, but there were there are no good new reasons to come up with. So then they they ended up approving. And and so then that's their hand was forced. Yeah. Yeah. Yeah. Yeah. And it's so so that was what we were working with, and we kind of knew the January timeline. And and, ultimately, later on, they communicated that that was what like, the timeline that they were working with as well. And so I had a really hard time in my body, like, not thinking that we're being gaslit again. Yeah. But because we've just been beaten down for so many years. Yes. If you go through, like, being hopeful and being rejected 6 years, then It's just that you're a broken person. Yeah. Yeah. Yeah. Like, my body had a really hard time accepting that this time was different, but it really was different. And that's when we reach out to you guys. Like like, that's when, like, when I really like, the, there's a lot of other people in the company working on product structuring and, like, operations. They they were, like, working on all the, like, details with the SEC. But something that I was thinking about is that, like, when I finally it dawned on me. I was I was trying to, like, accept that this was happening. Then I was I was then I really, for the first time, like, thought about, like, okay, then what do we what should what do we owe the network, the community?
Like, how can it's both a great moment and a bit of a sad moment for the community, right? Like, because it is a custodial product and we're going to grow another user base, another owner base of custodial products. And yes, number might go up, but there is definitely kind of a sadness and a loss. And then we can, we can talk about how we can make those things better, like, inclined redemptions and stuff like that, which which I also care a lot about. But anyways, there is kind of that element, and I was thinking a lot about, like, how can we, the best we can, make that better. And I don't think at that time, anyone was really thinking that Bitwise would be a major player. I mean, it was like Block Rock Fidelity, and then You guys punched way above your weight. It was like like, you know, Frankel Templeton managed a a trillion and a half billion, in in dollars. Like, Invesco manages over a trillion. Like, these are, like, the largest asset managers that all manage over, like, 1,000,000,000 of dollars. Yeah. And then and then there's, like, us.
And so I don't think anyone was really thinking that we would be a serious player, but but we had big ambitions. And in that world, I think I we we thought a lot about, like, how can we still create the most aligned, and, product than something that gives back and and, has a relationship with the network and the community and and the code base and everything. And so You leaned into what you knew, which was being Bitcoiners.
[00:17:34] Unknown:
Yeah. Because that was the advantage you had over the TradFi suits that were just entering the game essentially. Right? Yes. Yes. I mean,
[00:17:42] Unknown:
the we the ETF is is a definitely like a mass product, and it's very horizontal product in a way. Like there is no special treatments amongst different like holders of the shares. It's a kind of a horizontal product in that way. So it's used it's used by, like, a self directed person that is putting in their retirement account and also by, like, an endowment or, like, a financial adviser that has 50 clients that they are, like, all allocating to, etcetera. So it's just used by everyone, and we tricky thing that we do navigate is that we we serve multitudes of constituents.
And so, for example, like, if, you know, we're going to Wall Street and talking to, like, financial advisers and etcetera, etcetera Right. We don't talk about the donation that much. They don't really give a shit. Because, like, for them, they're not used to seeing that on an ETF. An ETF is not supposed to, like, have, like, a world view and, like, some sort of, public mission like that. So ETFs don't have donations associated to them. And and it from their perspective, like, if you have, like, it, excess excess revenue like that, why don't you just reduce the fees? Right. So so I think to them, it's, like, kind of not a feature. It's like a weird bug. So we don't just don't talk to it about them. But but there definitely is also so so I'm not here saying that, like, we're all, like, doing this out of altruism. We definitely have our self interest as well. There's competition Yeah. To me there, especially at launch. Like, I think people don't remember
[00:19:06] Unknown:
How many ETFs were at launch? Was it 9 or 10? 9 new ones. Yeah. There was there was 9 ETFs plus GBTC, which was the juggernaut in the room. High fees, but tons of assets under management already, came in as number 1. There was intense competition, and there's there's only so many ways you can differentiate yourself from the competition. And you guys did it in 2 key ways. I mean, and we can go further into it, but open sort contributor to open source contributors and transparency, I would say are like the and fees. I mean, you guys were incredibly competitive on the fees, and there was a there was almost, like, a race to 0 on that, and you guys came in, the lowest. But, I just I just wanna capture, like, the it it was just such a crazy moment, and, like, the freaks don't realize, like, my other show, rabbit hole recap, I do it every week.
Haven't skipped a week in 5 and a half years. Right? And, like, you came in November with this amazing idea for funding open source contributors. I did, like, 22 rabbit hole recaps before I could talk to people about it. Oh, yeah. And that whole period was, like, such a crazy period in my life. I mean, it was probably way crazier period in your life. But I remember, like, the day before, like, the SEC bungled it and just, like, released the press release, and then, like, Hong messaged me. He's like, you can't talk about it still. Like, we have to pretend we didn't see it. It's not bad. And then the next day, they're like, oh, we've we've approved them. Like, it was just the most it was the most insane fucking period.
On the suits thing, you don't think there's an argument I think there's, like, a pretty compelling argument that Bitcoin is different than other ETFs. Yeah. And that that, like, if it's part of the security of the ETF is supporting open source contributors. I mean, I I maybe it's not for every suit, but I know at, like, 1031, like, we have a venture fund. We get institutional capital. Like, we have endowments. Like, our core we have conversations with pension funds and stuff. And, like, when we we take a portion of our management fees, actually, very similar to Bitwise at a much smaller scale, and contribute to open source contributors.
And when I talk to them about it, I always say, like, at the end of the day, like, if you're investing 100 of 1,000,000, 1,000,000,000 of dollars, you know, tens of 1,000,000,000 of dollars and holding Bitcoin with it, like, it's prudent to support the contributors that are maintaining the protocol that your wealth relies on. Like, it's it's almost like a it's a security thing to a degree. Right?
[00:21:41] Unknown:
Totally. I mean, that's how I feel. I mean, I I I think even the word, like, phrase donation is a little off. I I think it is very much kind of a a self investment. Yeah. Like if if if the US spends on a defense security budget, they don't call it a a donation. They don't say that we're donating to the military. We're it's like a self interested, investment into your own security. And I think that's a very similar mindset that I would have and how I would frame it to anyone that if I had a conversation like this to talk about. Right. But the reality is that a lot of people make allocations and use products without really having this type of conversation. And like, yeah, I mean, Bitwise did a good job. And I think we really punched them over weight, but we're still 5% of the market. Right. Like, BlackRock is at, like, 15,000,000,000 and Fidelity is at, like, 9, and then we're at, like, 2. I mean, it just GBTC is at what? GBTC is at maybe, like, 20 or something. Yeah. Yeah. Yeah.
They're just yeah. Well yeah. Yeah. Yeah. Yeah. So so And you're at 2 so you're you're 4th in terms of assets under management. Right? Yes. Yes. Because Arc is in there too? Arc is in there too. Arc is, like, 2a half. We're at 2,000,000,000. And then after us, it's a cliff. So it was basically, like, there were 4 spots. You're in the top quartile. Yeah. Yeah. Yeah. Yeah. Yeah. Which is incredibly impressive. Well, it's it's quartile in terms of ranks, but in terms of assets, like, I think we have more inflows than everyone after us added together. Oh, yeah. That's crazy. Yeah. So so it really was a cliff. There really wasn't that there wasn't 5 spots. You didn't fall off the cliff. Yeah. Yeah. There was 4 spots, and we kind of, like, held on to it. Yeah. But but but, the way why I say that to describe that is that, like like, we have the lowest fee. We do all these things that we think are more Bitcoin aligned. You're the only one on the cliff that didn't fall off the cliff that supports open source contributors. Yeah. And and and yet still, like, 95% of the people don't care about that. Right. So so that's the reality. I'm I'm just describing that, like, there are suits that people, like, that that care about this stuff. I mean, even in, like, large Wall Street firms, like banks and such, there's always Bitcoiners. That's also an incredible thing about this is that, like, it is really a movement. So, like, there are, like, secret people that are really about the the movement in any organization almost. That's what we see when we work with institutions. It's like just because the institution isn't Bitcoin focused doesn't mean someone on their investment committee isn't Exactly. Exactly. So so so there are definitely people that do, love the donation aspect of those things as well, but I'm just describing that in, like, in a general sense.
[00:24:02] Unknown:
Most people aren't like the low fees the most.
[00:24:06] Unknown:
Yeah. Yeah. Yeah. Yeah. Yeah. Everyone likes low fees. I don't so, I mean, I think one of the things that we did about the fees is that we were just very, we accepted the reality earlier than others, I think Yeah. That it was going to be competitive. Like, whatever you wanted it to be was not gonna be the reality. Like, your hopes doesn't dictate reality. Right. The reality is that, like, 9 people are like, 9 firms of the largest are, like, launching commodity products. Like, they're roughly the same thing. Right. So then it just was just going to be a a fee competition. And so we just went down earlier. So we ended up at our our 20 basis points, so 0.2%.
Fidelity and BlackRock are at 25 basis points, so so 0.25. Right. And then the rest And Arc did the meme number. Right? You know, it's 21. 1 bps. Yeah. Yeah. Yeah. But, yeah. I I think we ended up roughly we're not that much lower than everyone else, but because we committed to being low early because that we just we knew that that was going to end up, leading up to it at any point in time, people like kept adjusting fees for, like, for 3 days in a row. But in any days, if you wrote an article about who had the lowest fee, then it was us. So I think that was really helpful in, like You're always the lowest. We yeah. Yeah. Yeah. And everyone ended up being where we were, so it didn't really matter that much in the grand scheme of things. It's not like we'd lost a lot of revenue over that decision, but, we just accepted that earlier than others so that we got credit. We got a disproportionate amount of credit for being the lowest when in reality, we have similar fees. Yeah. Yeah. I mean, I liked how aggressive you guys were with it. Like, you're obviously, like, in it to you you were prioritizing, and you were in it to win it. And We're we're in it to win it. We're in it to like, we we weren't shy.
[00:25:48] Unknown:
We we we did a TV ad, before, like, we We were very proud of that TV ad. Yeah. Yeah. It was fine.
[00:25:56] Unknown:
Yeah. I mean, the the thing is, like,
[00:25:59] Unknown:
it was with by the way, Freaks, if you haven't seen it, it was with the most interesting man in the world,
[00:26:05] Unknown:
the Dos Equis guy. Yeah. Yeah. Yeah. And I think we we were just, like, leaving it out on all on out in the field. Right. And we had to. I mean, I think the record shows that, like, everything that we did combined ended up with us holding on to 5% market share. And it's a great place to be because now we have a serious enough product that we can go out and sell. Like, if we had a $100,000,000 product, then it's not like no amount of it doesn't matter. Like fees, donations Very relevant. Proof of reserves, like, how how much you spend on marketing and sales. At that point, you don't have a product that has enough liquidity Right. To anyone else to further decide. They they can't in their good conscious. It's just like a slow spiral to death. Yeah. Yeah. Yeah. But but $2,000,000,000 product is a viable product. Yeah. Like, nobody, like $2,000,000,000 is it's sizable. Yeah. Yeah. And and that's that's great. I mean, I I think I I also feel proud about, like, the the then things that we can really push for with that amount of, like, seriousness.
If we do, if we publish our addresses and do proof of reserves, like, nobody can be like, they're just fly by the night. They don't take seriously. It's not a real product, like, so, like, you can't like, real serious people can't do proof of reserves. Like Right. You can't say that when there's, like, a $2,000,000,000 products, out there. And also like, you know, we if there's something that we're not happy about, like our custodian, let's say, like there were a lot when we published our addresses, people were upset about the fact that it was, like, not even a segued address and stuff. But but, like, we can we can go back and really have a serious conversation about Kobi's, like like, what the fuck, guys? Like, it really is, a problem that you are putting us into this position. Right. And this is, like, not okay. And and and they take us seriously because, like, again, we're a big client. So so there's some things that I really feel, we we've been able to, like, push in in a way that, is material because we we got like, again, of course, I would have been great if we were in BlackRock's position, but I think we have enough for it to be, like, powerful.
And we also am excited to grow it from here. Yeah. I mean, you should be proud.
[00:28:11] Unknown:
And that's coming from the guy who says fuck the suits in all caps. Like, you should be proud. I, so let's talk about we'll get to Coinbase custody and transparency and that stuff. Let's talk about, how you how you did your your open source, contributions. I thought it was it's quite clever. It was not our idea. It was it was Hong's idea. Like, he came with this idea of 10% of profits for 10 years, nice long term reoccurring, aligned commitment, where if they make more money, open source contributors get more money, and then split between 3 organizations. It wasn't just OpenSets. It was HRF, Brink, and OpenSets. And since you brought that to me, that has been essentially the model that I've tried to pitch as many because I don't want OpenSats to be.
Yeah. Like, I have enough pressure on me. Yeah. I I I say to everyone who's who can I think OpenSats is, you know, one of the best nonprofits in the world? I think we have plenty of plenty of places we can improve, but I think we're more ethical, more transparent, more efficient than 99% of the nonprofits that operate in the world. But anyone who gives me a critique, I would love for them to launch their own. And, like, I think as the the the more people working on this problem, the better, because there's no easy solutions here. So I've actually used your model, in pitches since then. I mean, they haven't been quite successful. Like, it's a long grind.
But let's talk about that model a little bit because I think it's it's quite compelling.
[00:29:52] Unknown:
Yes. So, as we were talking about, a moment ago, I think around, like, November or so Right. It was, like, a month after the court case, like, 3 3 months after BlackRock filed. I think, like, at that point, we really knew this was happening, and I was I was thinking about it. And and so once I really felt that, like, we really need to figure out a donation, to devs here, and and and I think it's it's like, I mean, because it there is a unique opportunity here where, like, this is, a custodial product, pulled Bitcoin together. We take fees. So, it's much easier for us to then take a portion of the season and make that donation. It's inherently monetized. Yeah. It's inherently monetized, and it's also inherently monetized in a transparent way because it's a public product. Like, I mean, if another business were doing it, then they would be kind of disclosing their revenue details, and that can be a little bit uncomfortable. Right. But this product is already a public product. The fees are transparent. The AUM is transparent. Because it's an ETF. It has to be. Yeah. Yeah. Yeah. So so in some ways, it's already taking, again, it's inherently monetized inherently transparent.
And so we weren't really, like, it was a really great vehicle. And also it's really well aligned in terms of, like, let's say if it's an exchange, then your revenue is tied to trading volume, so it can be more volatile, but our revenue is just with along the AUM. So if this whole thing becomes more valuable, then we make more money. So it's in a way, like, it's if we tie it to a rent recurring model, then it can be a more sticky and kind of stabilizing force Yeah. Compared to, I think, donations generally are a little bit even, like, further cyclical than the market cycle because people feel even further squeezed when the market is down than just the price level. No one donates when Bitcoin price is down. Exactly. Exactly. And so we could our our our revenue would go down, but it wouldn't go down to 0. And and I think that was also an opportunity. So so so there was a lot of ways in which it was a good opportunity, and but then when I was thinking about actually implementing it, there was a fair amount of, like, questions. Right.
How do we do it in a way that people don't feel threatened by TryFi firm, like, us showing up and saying, we're donating that Even a buyer developers. Yeah. Yeah. I mean, even though even if we have good intentions The suits are here to bribe our developers. Yeah. Yeah. Yeah. Good intentions are not enough. Like like, Bitcoin in itself has that ethos as well. It should be the design of the incentives or like the model itself should be, should embed as much as possible kind of a, clarity about what's possible and what's not. And so, like, us, making a donation to an individual dev and just saying that we're not pressuring them, that's just not great for people to believe. Gonna believe you. Yeah. No one's gonna believe us.
And so it it needed to be no strings attached, but it also had to go through other entities. It couldn't be direct. And then when I thought about, like, it being 1 and 1 nonprofit Right. That also comes with problems. What if we become incredibly successful? I mean, we want to be incredibly successful. Then then let's say we, like, dominate the ETF market. Then then suddenly one organization gets, like, a disproportionate amount of the open source funding that also can create problems. And and yeah. So then it had to be multiple, and that's kind of like where that was the kind of the idea maze that I went through of thinking, and then, okay, like, deciding that set was a little bit of a judgment call. Right.
I went out and talked to everyone that I respected, in the space. Like I talked to, like, Steve Lee, I talked to Adam Jonas and a few others too that were very deep in the work of it all and like what types of organizations that they felt were doing the best work. And thankfully, it was pretty a pretty easy decision. Everyone kind of coalesced to OpenSats and Brink and HRF, And those are also the 3 entities that had the kind of cleanest, like clear nonprofits, mission and, We made it very easy for you. Yeah, yeah, yeah. It was, it was like the options were very clear that that was like the best set. And also it had the most kind of well set up kind of governance structure around that as well.
Because we we don't want there to be trouble there. So so it it it just ended up being that that was Dirk's right side and the easy set to go with. And, 3 felt like a good number, and, like, ultimately, 10% of the, the net profits of that product was also just a number, but 10 felt like the right number. And It's a big number. Yeah. They yeah. But,
[00:34:35] Unknown:
I mean, I wanted the meme number of 21%, but, you know, I'm not gonna complain. Yeah. Yeah. Yeah. So that that's how we ended up with it. Yeah. Yeah. I, I will say as someone who is intimately involved with raising money for Open Sats, I'm very grateful for the long term commitment because I make no money from Open Sats. And this idea that I have to just constantly be calling people and texting people and circling back to try and get new commitments, The reoccurring model is a breath of fresh air. You know, 10 years is, like, a 100 years in Bitcoin terms. So I have, like, a century, I have a century commitment. You know? I, it it it it is it is it is a massive it's a massive departure from the usual, like, one off donations.
So I appreciate that. I'm curious. What do you say to the critics that say, well, you know, 10% of profits right now, like, isn't that much?
[00:35:41] Unknown:
I think we have really big ambitions for the product. Yeah. I think something that, something that, so so so let's just, like, kind of do the rough math. I think, like, we have, a $2,000,000,000 product right now. 20 basis points means that we have 4,000,000 in annual revenue from that product now. Right. And, let's say it has a 50% profit margin. Okay. So so then, 2,000,000 in kind of, like, profits from the product, and 10% of that would be 200 k. Right. Not a game changing amount of money. I recognize that. But if that 10 x's, yeah, it's that 100 x's, then it can be a meaningful amount. And, it can like and and also, I'm not here saying that we're solving open source funding You did it. Problem. You did it, Hong. You solved it.
Like, I'm saying that we want to Mission accomplished. We want to pull our weight. Yeah. And and it is kind of well incentive aligned if we have more success. But but but but maybe to just paint a picture a little bit about, like, how it could be a bigger product is so GLD, which is the 4th gold ETF in the US, launched in 2004. Yeah. And that in the first 3 days or a week gathered about $1,000,000,000 in assets. Right. That was the most successful, wildly, like historic launch, like $1,000,000,000 in 3 days. Crazy. And then the next 3 months maybe gathered about another half $1,000,000,000 or so, like a 1,000,000,000 and a half, and then it kind of died out there.
And then people thought that it was an event that came and passed because, like, launched 1st day 1st few days is 1,000,000,000 and then, like, a a little bit more trickled in, and then, like, it's it's quiet now. Right. The reality of what happened after that is that, like, the next year in 2005, maybe about another 2,000,000,000 came in. Next year, I think about, like, 3, 3a half, 5, and then there was a $10,000,000,000 year. Ultimately, there were positive inflows that were growing, and the kind of like sustaining in those levels for another 8 years after that, that were, and the launch year was an insignificant moment in the grand scheme of things. And I think that is also likely what we will see with Bitcoin ETFs as well. We had a historic time. We launched in the 1st month. Right.
Outside of GBT's flows, we had maybe a 2 or 3,000,000,000, and then in, like, next 3 months, we had, like, 10,000,000,000 or so. So, like, we had, you know, an incredible incredibly successful, debut. I mean, if you think about it as kind of like maybe, like, an IPO moment, like, it was a successful IPO.
[00:38:20] Unknown:
It beat all expectations.
[00:38:22] Unknown:
Yeah. It beat all expectations. And and I but I think there's a way in which Like, it insanely beat all expectations. Yeah. Yeah. It it only beat be all There was people that say it was a nonevent. It was a sell the news event. Yeah. Yeah. Yeah. Yeah. And I think those people, Were wrong. Yeah. Were wrong and and regretted it. And and I think the market priced that in as a, like, you know, the market dipped because people thought that it was the the sell that it was over. It didn't launch. Yeah. Yeah. Yeah. And after the 1st month, it seemed like the things were quieting down. And then on month 2 and 3, another $10,000,000,000 of net flow showed up, and then everyone And now we're at $65,000. Yeah. Yeah. Yeah. So, like, price went up, like, 50%, and and the market has kind of adjusted to that new reality now. But, what I'm trying to paint the picture here a little bit is that, like, there's a way in which crypto Twitter, or traders kind of like to think about the ETF moment as, like, an event, like, and the market event. A singular event. A singular event, and it came and went.
But in reality, it's much closer to like a state change. Right. It's much more closer to paradigm. A company going public. Like, it's not that the company itself changed. Like, why you would invest in the company? What is the value or the moat of the company, why it exists, didn't change. But when a company goes public, it just goes from having private market liquidity to public market liquidity. The amount of market participants and the dollars that can really easily engage with that company's stock just changes and it changes forever. It doesn't never unless it delists, It doesn't it it just maintains that, and I think that's closer to what we have here. And, and but but that state change is now a new world in in terms of just, like, kind of public market liquidity, but saturating the opportunity set is just gonna take some years. And to paint a picture a little bit there, like, most of the dollars time. Yeah. Like, we think think about, like, the like, wire houses, like, large banks, like Morgan Stanley or UBS or Wells Fargo, these firms, a financial advisor that's managing money for, like, their clients can't really put a Bitcoin ETF into their portfolios yet. It's considered high risk. It's new. It's No. It's just not approved for that. So so so currently, it's allowed if the client asks, but there is no discretionary allocation that's allowed. It's just not allowed by the home office, and they're going through due diligence. And due diligence for ETFs, new ETFs usually take, like, 6 to 12 months. I think everyone is racing towards trying to do a little bit earlier because They're all competing too. Yeah. Yeah. They're all competing, and they're all also trying to, like, meet their client needs. Right. You know, they they have customers that want it, but, but it's still they're like, the first firms are, like, coming out of the woodwork there, really, like, because we're now 4 months in, 5 months, it's just like the first set of firms are starting to come out of the, the tunnel.
And so really in terms of, like, actually Bitcoin ETFs taking in the money that was, like, structurally unable, like, the public market liquidity that really wasn't able to interact with it. We we got, like, a taste of it, like, the the $12,000,000,000 that showed up in the 1st 3 months Right. Was a taste of that. A small taste. But really, that takes time. It's the tip of the iceberg. Yeah. And even after they have discretionary ability to so right now, it's just not allowed. Once it gets allowed, I mean, if you think of even how, like, the retail played out, it Right. It played out over time. Like, people put in a little bit amount, and then they lose that money or, like, they go through the volatility, and then they realize that they should have, like, just held on to it, and then they put in a little bit more. Stack sets. Yeah. Yeah. And and they learn about Bitcoin, and then they learn about, like, auction economics. It just takes time. So I think, like, right now, the gates haven't even really opened for them, and it will open, and then they will all find out, like, find their ways in. And and that's why a product like GLD just had incrementally higher, flows for years that ultimately, like, paled the 1st launch year. Launch year again was like $1,000,000,000 and like 4 or 5 years later, a single year bought in like 10.
So I think, that's the dynamic that we're at play, and we're just so early, like, like, yes, that's why we're bullish and why we're, like, really committed and excited about this part of the journey. Because now that Bitcoin is, like, a little sideways, a little bit died down, all the other firms like BlackRock, still ultimately is a small product for them or like Fidelity or or are they all have other asset classes that are much bigger. Baby. We're we're focused on only one thing. Like, we don't have another, $2,000,000,000 product out there. And and so I think this is kind of the part that we feel excited about. They're not trying to show me a copper ETF, you know? Yeah. Yeah. Yeah. I'm not gonna be talking about, like like, Chinese equities or or fixed income, or or something like that tomorrow.
And and and so yeah. Anyways, I think I think, basically, I think the message is that, like, the category is actually much bigger than what it seems now, and it can grow into something much bigger, not just from prices going up, but also just from saturating the public market opportunity. And I think if we do that well, our ETF could be a much bigger product and hopefully,
[00:43:17] Unknown:
donate a lot more to to Dez as well. Yeah. I mean, I think, like, on the institution side, like, you have institution level, time that takes family offices, as you talked about. I mean, family offices are a big part of the American economy that people should not discount. That's like money managers of rich families. But even on, like, the individual level, I mean, we saw so many stories. I still hear stories of, like, people going to, like, their broker at UBS or their broker at Morgan Stanley or whatnot and be like, I wanna buy the ETF. And they just send them through so many hoops if they even let them buy one of the ETFs to begin with. Yeah. And these things take time. So, like, it really is definitely a paradigm shifting moment. And my answer is is quite simple when people give me that critique. My answer is, like, look. At the end of the day, Bitwise put their balls on the table.
They directly aligned it with how much money they're making. So, if you have any critique on no matter how much money they're making, it's 10% of it, which is a sizable portion. So that's huge. The second thing is is I say, our the the the deal we made is is that 5 to 10 year the years 5 through 10 are where it's gonna be most significant from an absolute terms, and I won't have to call you back at that point. You've already committed to it, which is huge. And then third of all, you've told everyone else on the cliff why, you know, why aren't you doing what we're doing? Like, why is why is GBTC not supporting open source developers? Why is BlackRock not? Why is Fidelity not? Why is Arc not? And they've noticed. Like, they they have definitely noticed, and and I I do not think I I think it's it's very hard to overstate what you guys have done, and most people are understating it. I remember Hong messaged me, like, a week before the ETFs approved, and he's like, we have no idea if they're gonna get approved or not.
Like, I have no insider information. But if we do get approved on the date that everyone expects us to get approved, like, I would love to have you on the Twitter spaces. Is that out of the question because it's the demon app? Because you you knew I didn't like I didn't like Twitter. And I was like, yeah. Sure. Sure. I'll go on Twitter spaces right before I I deleted my account. And our Twitter spaces had, like, a 150 people in it. Like, we did not have that many there was there was the the big some of the other ETFs had massive Twitter spaces, and they had, like, a full celebrity group of influencers, like, all on stage or whatnot. And we're just talking about supporting open source contributors.
And I I think, like, a lot of people fated it. A lot of people fated it. And the fact that you guys had the conviction and the aggressiveness to actually make it fucking happen is is why we're here today, but is also, like, why it's a significant thing. And I think it's something that, like, goes down in history books. Like, I think I think it's, like, it actually does. It it it will make the difference as time goes on, and people will look back and be, like, holy shit. Like, Bitwise really did lead the charge there. I've had so many private conversations where people are like, that Bitwise news was the one of the most incredible things I've ever seen. And I I do I really appreciate you, Hong, for for leading the charge there, and and and thank you. Wow.
[00:46:59] Unknown:
Thanks for saying that. I think, I'm feeling a little emotional. But I really do yeah. I think there is a way in which it was not, like, in retrospect, now that Bitwise had some success, I think it's easy to say that, like, oh, yeah, it was a good business move, blah, blah, blah. But I think and and and now we're even having a conversation about, like, why are these other players not doing it? And And that is a conversation to be had. Yeah. It's a conversation to be had because an alternative exists. And I think there is. Yeah. Yeah. So I appreciate you kind of recognizing that that, required someone on a conviction.
I mean, I think ultimately it, it, it really was, I mean, I did think about the business aspects of it as well, but also it was just a right, thing. We're ultimately Bitcoin. The right, thing. We're we're ultimately Bitcoiners. Yep. Like
[00:48:04] Unknown:
and and this is something The business rides or dies on Bitcoin. Like, Bitcoin fails, you guys are fucked. Yeah. Yeah. And also also,
[00:48:11] Unknown:
I mean, even beyond the business, and and I think this is, like, Bitcoin is just a very important thing for the world. Right. That's why most of us are here. Yeah. Like, the the idea of, like, a user controlled money. And I think it's just a radical idea that is very important to, and it just doesn't have like, just just obviously is going to work out. Obviously, is it going to win? I think there's a way in which, there's sometimes I feel like a bit of a complacency in people. Yeah. I mean, because because I I also There's a lot of complacency. I mean, I also get it as well. Like like, there's so much, like, bad faith critiques that I think when we talk about it in public, I don't like giving, like, showing weakness. Like, best Bitcoin critics are Bitcoiners. Yeah. Yeah. Yeah. So so so, like, when when I'm talking about it publicly with people that are, like, putting forth, like, bad faith arguments against it, then, of course, I'm like, yeah. Bitcoin is is rock solid. You like, that's all, like, bad argument. Well, like, I would I would do that. I would kind of do the microsailer.
Right. But in in with Bitcoiners, I think we can recognize that, like, it's just not a given that this is a thing is going to be allowed to exist and work and be secured, and, like and and people think about, like, consensus stuff all the time as, like, the main thing to think about and maintain, but, like, that's a small part of what the open source devs do. I mean, ultimately, it's a network, and, like, the mempools are always, having different types of issues to navigate and different and the issues change over time, you know. Like, it's it's a live freaking network, and and all sorts of things that needs to be to be maintained. And, like, the, the yeah. So, and it's just not obvious to me that, that it, we can be complacent in, like, supporting our devs and, like, just expect this thing to work out. Someone else will do it. Right. Yeah. So I think, there's a part of part of part of that as well, that I wanted it as a Bitcoiner. Yeah.
[00:50:22] Unknown:
Yeah. I mean, I I believe we will do this thing, but I believe we will do it because people stand the fuck up and make it happen. And we haven't won yet, and we haven't made it happen yet. And and until then, people have to do things, and they have to do the hard things. And, complacency fucking kills, and I don't want, you know I I keep going back to the meme of just mission accomplished George Bush on the aircraft carrier. There's a lot of Bitcoiners that embody that meme. Don't be one of those Bitcoiners.
[00:50:56] Unknown:
Yeah. I mean, the reality is that, like, all the things that we, like public key cryptography being a thing that is that we enjoy as like a right that we have, is not a thing that was given to us. We fought for that. Right. And Continue to. And, yeah, it's it's just it's just gonna be something that we have to continue to fight for. I mean, just one thing about the the the the years 5 to 10 point, we don't have intentions of pulling it on year 11, at least that's how we think about it. We, we, we gave the 10 year number as a minimum, because saying that it's indefinite sounds in some ways like a weaker commitment
[00:51:36] Unknown:
and making a concrete number. We could do 21 years if you don't wanna do indefinite.
[00:51:41] Unknown:
I mean, what what what what what I'm saying is, I don't think we're we're, like, secretly looking looking to to to Year 11, you're gonna fuck us. Right? I I I mean, we if we have the success that we hope to have, then I think we'd be happy to continue to donate 10%. Well, I hope my successor at Open SaaS calls you up, year 11. Yeah. And if I'm still if I'm still involved, I just
[00:52:05] Unknown:
Yeah. I'm I'm exhausted, freaks. I'm exhausted. So but but I no. I I I never I I definitely didn't mean it in that respect. Yeah. Yeah. Yeah. I mean, I mean, I mean, all Me, like, 10 years is a nice round number. We did we did 10%. Yeah. Nice round number. 10 years, nice round number.
[00:52:21] Unknown:
Just just We can circle back. The audience. And and to some extent, like, of course, it's all, you have to to to trust our intentions to some extent that we we will continue to, and, like, that is like, it's just me me saying that. But also, I think you can attest to the fact that, like, we came to you with this. It it like, I'm not I'm not,
[00:52:40] Unknown:
No. It was the single easiest open sats deal I've ever done.
[00:52:44] Unknown:
Yeah. And and and maybe that kind of shows a little bit, of the proof of work of, like, that it was something that we decided to do, and we thought, and and so part of yeah. Anyways, we I think that's the Yeah. You're great.
[00:53:00] Unknown:
But, yeah, years 5 to 10, man. That's gonna be we're gonna Great. The open source contributors are getting a lot of money those years, I think. And we'll have bigger problems then. I, let's talk about so we talked about the the from my angle, the 2 big things that you guys, business just raided us. So he brought his audience over here. Thank you, appreciate you. Rat or die freak. Good Internet friend. I don't think I've ever met you in person. One day, maybe. That'd be great. Also, I wanted to say to KNI Calverio, I appreciate you. Don't, let the people in the chat bully you.
Say whatever you wanna say. Our our chat is unmoderated, and, they can't censor you even if they wanna censor you. As always, freaks, you can you can join us in the live chat, at civil dispatch.com/stream. The rider died freaks that joined the live chat, make this really special. I met at bitcoin BitBlock Boom in Dallas. Great event. I can't place you. I apologize, but I appreciate you. I wanna talk about to me, there's there's 2 big things. And I I think I think there's a strong argument that, a lot of us, like I mean, me, personally, I'm probably as anti ETF as they come.
Self custody all the way, use your own note. I'm like, don't trust third parties. But at the end of the day, like, I have a lot of friends and family that the Bitcoin ETFs opened up a whole like, opened up the possibility for them to actually hold Bitcoin for the first time or hold a Bitcoin ahead of you for the first time. And I always just recommend them Bitb. Right? Like, I recommend them your product because I think it's it's most aligned with ethos, and I think just dropped from the open source contribution side is fucking massive. And I tell them that's why. And and I I think there's a strong argument.
And this is why, me, personally, like, I always focus on the rider dies. Like, the rider dies are the people that go out there, and then they they talk to a 100 people, a 1000 people, and you don't know who those a 100000 a 100 to a 1000 people are. They could be movers or shakers or wherever they are, and they get shit done. But the transparency is really cool. I think it's really cool what you guys have done in terms of proof of reserves, in terms of Hoseki. I I think we should talk about that a little bit. So, like, what was your what was your thought process on on proof of reserves and and and making your addresses public? I mean, I don't think there's not a single ETF that has done it besides you guys. Right? So so on the open source side, Van Eck, which is a smaller ETF, much smaller ETF, they give 5% of their profits to Brink.
Besides Bitwise and VanEck, nobody else is giving to open source contributors. And then you guys are the only ones who have actually made your addresses public and done proof of reserves, and you went even farther with Hoseki in terms of, like, proving ownership of those addresses. How do you think about that?
[00:56:33] Unknown:
Yeah. Yes. That one is another one that I I would hope the other ETFs would, also consider. I mean, it's been some time now, so I think it's in a 2nd case, how did we think about that? I mean, ultimately, again, I'm a Bitcoiner and I've just been frustrated with, all the shit over the years of custodial products not having transparency, and then ultimately them growing to become kind of systemically large and then, and then blowing up and, and kind of the community having to then clean up the mess and kind of, like, move on from that. And, when we got to a certain size, I think we were either a 1000000000 or 2,000,000,000 I think like month 2 we were 2, but like, it felt like it now we were sitting on an amount of Bitcoin.
That is a pretty meaningful amount of Bitcoin. And, like, we should do it is kind of, there's no,
[00:57:37] Unknown:
like, argument not to ninja launched it. What? You kinda, like, just woke up one morning and just, like, tweeted out your addresses.
[00:57:45] Unknown:
I mean, it was it was considered. I mean, we we did have to I mean, the the reason that we could've do it, like, immediately after day 1 or something, because we didn't fully think it through at that time. And then once we started thinking it through, it still took some time with, like, legal and compliance. Like, everyone still had like, we had to make sure that it was, buttoned up, but we're we're, you know, we don't take like years of these these things. So, so like a month or 2 was enough for us to, to get clarity there. And yeah, and I, and I think that's another area where I feel excited that we can kind of be an example because like, no one can say that it's not doable. Right. You did it. Yeah. Yeah. And we You did the thing. We definitely take, like, legal compliance, regulatory stuff very seriously. We've worked with SEC for 6 years on this product, like, so I think nobody can say that, like, it's not allowed or like it's not doable.
And, and like another few things is just like, I was also a little post launch, feeling a little bit like people were treating it a little bit too much like gold or like that type of narrative. Like, I like the digital gold narrative as an investment narrative, but when people go too far in thinking that that's literally what it is, then they don't understand that they're dealing with a radically different thing here. Right. Like, gold cannot do proof of reserves. Yeah. Like, gold, you cannot securely custody, but also publicly verify or or or maintain public transparency about your holdings. It's one of the benefits of Bitcoin.
[00:59:19] Unknown:
Absolutely. Like, is that like That someone around the world can trustlessly verify ownership without without giving them custody. Exactly. Like, public auditability
[00:59:28] Unknown:
is, like, one of the really big strengths of Bitcoin as an asset and network and idea. And there's there's a way in which,
[00:59:37] Unknown:
like, the GLD people were, like, actually, they they took pictures, like, in the gold vault Yeah. Yeah. Yeah. Yeah. Proves nothing, really. It proved nothing. But but but but that's just the best they can do. But just to show, like, what a difference
[00:59:48] Unknown:
difference there is between Bitcoin and gold. Exactly. Like like, GLD launched, GoldBugs were, like, upset about GLD because, like, how do you know that paper gold? And then, like, they they did it, like, a media tour of, like, bringing some people inside to the vault and, like, taking pictures. They took selfies inside the vault. Legit. Yeah. Yeah. And, like, that's supposed to prove a point. Look at all this gold. Yeah. But we're there's a way in which we're kind of treating Bitcoin in the same way, and that frustrates me a little bit. Or or, like, it's it's not like the full and and to some extent, like, showing versus tell telling is is always more effective. It's so much more effective. Yeah. Yeah. Like, we can talk about, like, oh, there's a public key and there's net blockchain. Change you want to see in the world. Fucking do it. Do the thing. Yeah. But, like, when you show the address to people, like, set of addresses to people and, like, look, it's here.' It doesn't mean that it's the custody is not safe. That's how public key cryptography works, and that's how Bitcoin works, and like, you can have public audibility without it being any more at risk at loss and, like, don't have anyone tell you otherwise and even a regulated product like us can do it, like, when you show it to people, then I think people have to have to, go through some cognitive dissonance in, like, really trying to think through what is different here and come to realize that like gold and Bitcoin isn't, isn't, it's nowhere near the same thing. And especially also like when people, and it's a really important part because when people think about things like, let's say, free banking Yep. At the gold era and Bitcoin era, they they kind of talk about it as if it has the same set of risks. That is just not true. Yep. Because you can have the type of public transparency and accountability while having custodial services. That's just not possible with gold and probably with Bitcoin. And and so anyways, like, I just, wanted yeah. It wasn't like I one day woke up and I was like, we're shipping this. It kind of felt like that. It it kind of did post launch. I think there was a way in which it was very successful, but but it was successful in a way that kind of too much of it was kind of, like, removed, and wanted to push to surface more of like Bitcoin ness to the product, and then really started pushing our legal and compliance team and and like kind of like or like, I mean, to give them a ton of credit there, we have we didn't build a firm of like, people that don't also have this ethos. They are also Bitcoiners. So so they are trying to make this work in a way that we still don't get into trouble. And And so they're trying to dot, you know, dot their I and cross the t's and, like but but they they did the work, and then we came out feeling that there's nothing
[01:02:21] Unknown:
no problem here, and then we move forward with that. Yeah. Yeah. I mean, one of the I think one of the coolest parts about Bitcoin companies is, we've never had this before, which is like it's yeah. I I like to call it, like, almost like a shared equity. Right? Like, 1031 has 36 portfolio companies. Most of those companies own Bitcoin. Most of the employees own Bitcoin. Most of the people involved in those companies are Bitcoiners. And so if one company does does things that that are successful, it usually benefits everybody else, which is is something that we've just never seen. It just has never existed, which is a it's like a crazy thing to just, like, wrap your head around.
On the transparency side, on the proven reserve side, I know it wasn't you woke up one morning and just decided to tweet out your addresses because I had been talking to you about it, for a while Mhmm. Before you did. I just wanna say to anyone who's listening that's a Bitcoin Twitter influencer, Just you can go fuck yourself. Like, in the whole and I know you're you you're more reserved. You're more deliberate in in your I'm actually pretty deliberate in my comments. People don't give me enough credit for that. But Bitwise comes out, and it's like, here's our addresses.
And Bitcoin Twitter was just, like, overwhelmingly negative. They were they were just like, oh, like, what is not native Segwit? It's you know, like, what are you doing here? Like, look how antiquated they are. The only ETF to actually post addresses and and do some semblance of proof reserves, which you guys have gone even further since then, with Hoseki, in terms of actually verifying ownership of those addresses. I mean, like, any you Craig Wright has a perfect example of someone whose post addresses that he doesn't control, was just really disappointing.
Like, get your priorities in order, and you don't have to comment on that. I think the the segued stuff, I think it's cool that you used your your position as a big client at Coinbase to push them to move to the new address type was cool. Unnecessary, but cool. I my bigger question, and I'm gonna kinda put you on the spot here. My bigger question is, I I think the bigger concern for a lot of people is that everyone that almost everyone is at Coinbase except for Fidelity. I forget who one of them is at Gemini, which might be worse.
I mean, the Winklevoss twins, they don't have, like, the best record. I think they still owe people a $1,000,000,000 from Gemini Earn, thanks to Barry Silbert. What are your thoughts what are your thoughts on on being solely reliant on Coinbase custody? I I if you wanna talk about centralized points of failure, like, that is the the I'd like I could I could give 2 shits if it's in a legacy address versus a segued address. Totally. Totally. I,
[01:05:35] Unknown:
I see that. What I would say is that I imagine that the future is likely multi custodian and that that transition will happen in not too long of a timeline. Let's say, like, in 12 months from now, if it was still this concentrated with Coinbase custody, I would likely be surprised.
[01:06:03] Unknown:
So you're saying a situation where, like, ETFs are holding 30% of 1 custodian, 30% of another, 30% of another. Mhmm. Mhmm. So a single Like, compartmentalize. Like, she had poor man's multisig.
[01:06:17] Unknown:
Yes. An an ETF, as a vehicle can definitely have multiple custodians. Okay. That's not a thing that is precluded. Right. We don't have any product that does that yet. Okay.
[01:06:28] Unknown:
But it's None of the ETFs do that right now. Right?
[01:06:32] Unknown:
Don't quote me on that. But but none that is Quoting freaks. That is a large product. Okay. But, we're definitely exploring it, and I think there's good reason to, imagine that that is likely where the space is going for many reasons, related to centralization that you're talking about. It's also just a pretty competitive market, so, that I think also just generates natural amount of some, diversity. Maybe some context is helpful. I I think this is Yeah. Incredibly context. Yeah. Incredibly fair critique, and I, would own up to anyone saying that, But a little bit of context about, like, why we had this amount of like, everyone just had the same choice.
And why that happened is because we talked a little bit at the beginning of this episode about it. It's suddenly going, like, in October, November, going from, like, no word from the SEC to, like, they're they're they're giving us comments every week, and we're, like, racing towards, a a January deadline. And in that process, your worst nightmare is that, like, you're caught up in, like, comment like, replying about some specific issue, and then everyone else moves on from that. And then, like, the you don't get the day one launch. Like Right. The 8 others go, and then you're stuck for 3 months. You're dead. You're dead in the water if that happens. Even a single day, you're dead in the water. Like like, it just so much of it happens on the launch moment. So much of the game plays out in the launch moment Right. That even if you are, like, a week later, then it's over. So I think everyone had that fear, and everyone was just, like, trying to have the least amount of back and forth with the SEC as possible. Like, just one of the most noncontroversial selections on every dimension.
[01:08:21] Unknown:
Right.
[01:08:22] Unknown:
Like, so if you go at it from that perspective and Coinbase was a public company that Etsy was had The Goldman Sachs of crypto. I mean, it's a company that the the SEC knows and also that BlackRock chose. It was just a consensus pick, Yeah. And and and you don't want to be talking about multiple custodians. You don't wanna be talk you don't wanna be the one that is, like, bringing You're not bringing the artisan
[01:08:45] Unknown:
custodian, play.
[01:08:48] Unknown:
None of that. You you you I think people I mean, rightfully, though, but, like, it was just a crazy time. Yep. And we were, like, racing towards they were racing, we were racing, and you just did not want to raise another question. Yeah. Yeah. Yeah. Because this is the thing that we were look, if we after we get it out, then then everything, you know, we can talk about multiple custodians. Like, we we do everything, but, like, until and and yeah. Another issue that was kind of this way was I think people this crypto Twitter caught on a little bit about, but, like, in kind contribution in kind creates and redempts. Like, you can't put Bitcoin in and get Bitcoin out of this product. Yeah. That's not an ETF structural, like, legal I mean, all all gold ETFs as in kind and creates some like, all commodity products. Okay. Yeah. Yeah. So so it was an arbitrary thing that the the SEC was drawing a line about, like, with Bitcoin ETFs,
[01:09:41] Unknown:
at least for now. Oh, really? So in kind is in play?
[01:09:44] Unknown:
In kind is definitely in play. Okay. Yeah. I mean, there It doesn't require, like, an SEC rule change or something like that? No. It's just them changing their opinion about like, big there's these, like, weird things that the SEC has positioned about Bitcoin specifically. Right. Like like like like, for example, SAB 121 is another one of this. I think it's gotten a little bit of attention on Twitter this week. SAB 121 is, like, special accounting bulletin board item or something 121, where SEC just put out just just specifically targeting Bitcoin guidance around the fact that if a regulated entity like a bank wanted to custody Bitcoin for their customers, then they have to also have one to 1 reserves of dollars. Fucking insane. So if you're custodying a $100,000,000 of Bitcoin for clients, so you have to take on the capital cost of just holding another $100,000,000 of of dollars treasury. In addition to the 100,000,000 Bitcoin you hold already. So it makes it not viable for any regulated I mean, of course, we we want more self custody and all that, but we also just want, like, it's a permissionless network and asset. Like, if regulated entities want to custody it for their clients, they should be able to do that as well. But the SEC is saying, no. No. No. No. We have a specific accounting
[01:10:52] Unknown:
because we think it's risky. And and and and Especially since with dollars, they're doing fractional reserve banking, so they're not even holding 1 to 1 dollars. And if they hold 1 to 1 Bitcoin, it still doesn't qualify because they need to hold an additional It's it's really level of dollars. It's really fucking insane. It's really
[01:11:10] Unknown:
quite absurd, and, it it really it went to I think the house voted on it last week. Okay. And it actually was a bipartisan like like that it was a weird, unlawful, or like this this this was not, it's not right. And then it it passed. And it's and now I think going up to the senate, but, like, there are these arbitrary things that is just not a legal constraint, not like what is what the spirit of the law says or, like, what this is, a specific reason that this is shouldn't be allowed, but more so just guidance level decisions by the SEC that, that really is mostly targeting Bitcoin in in some ways.
And in in kind was just another one of those things. And, the SEC was pretty clear that, like, if you wanna be out on the first batch,
[01:12:00] Unknown:
you just have to I mean, so you brought it up, Hong. I think this yeah. So, I mean, that's the argument I make to most people behind the scenes about Coinbase. It's like no one wanted to rock the boat. They just wanted to get approved. They needed to be there for launch. Coinbase was the easy answer. Public company, $60,000,000,000 mark cap, ex Goldman Sachs founders, selling surveillance software to US government and other governments. It was, like, it was the easy answer. And these things will evolve over time, and and and the beauty of of capitalism when it's not captured by government is that there's competition, and and people will improve the products. Absolutely.
And and at the end of the day, like, what is the risk? The risk is that funds are lost, and that is a central point of failure. And and that is a risk that any ETF operator, It's about. Yeah. Obviously, because it it destroys your business. So the incentives make sense. But I I wanna ask you, you you you brought up this in kind redemption. I think we have some visitors. Yeah. He he's just gonna listen in. It's it's rare that you get to be here for an in person dispatch, so I respect anyone who wants to to enjoy it in person. Guys, if you come to Bitcoin Park, you can sit on the couch and listen to dispatch in person and get to enjoy it. So consider coming down to Nashville.
We're having a fun time down here. In kind redemptions, Hong. I think it's incredibly predatory to not have in kind redemptions, because I think GBTC has proven that if Bitcoin does its thing and it goes up you. I know you agree with me, but I'm just I'm incentives are important. Right? So I wanna talk about this a little bit because you brought it up. And you can tell me, like, I don't wanna discuss it. Yeah. Oh, you're always welcome to do that. I told you beforehand. And you haven't done it yet, but you're welcome to. Because GBTC proved that if you have Bitcoin appreciation that increases the way we've seen it to do it historically, and you don't have in kind redemptions, then the only way for them to leave the lobster trap is to take cap gains so they will accept a higher fee. So if you don't have in kind redemptions, you can actually increase the fee over time. So it's actually the opposite of what you usually see in most industries where fees compress to 0 and go down and get more competitive.
Fees can actually go up if you don't have any kind redemptions. Do you think that there there's actually, like, a world where we start where where some ETFs, like, actually move to in kind, where you don't have like, you can't trap your customers. Like, you can't actually trap them in the in the product and increase your fees. Absolutely.
[01:15:15] Unknown:
Again, in kind is the norm in all other commodities spot commodity ETFs. All gold ETFs in kind is possible. There's even a gold ETF where if you redeem as an individual shareholder, they they can send you gold bars and coins to your door. They would, like, size it up and, like, send it to your door. And and and that's not a taxable event. Yeah. Yeah. Yeah. There there's, like, event. But most people, like, if you're gonna take, like,
[01:15:43] Unknown:
a $100,000,000 in kind on gold, like, that's
[01:15:47] Unknown:
many trucks. Right? It's like it's it's difficult. Yeah. Yeah. Yeah. Yeah. But but, again, for Bitcoin, very doable. Yeah. With Bitcoin, you could do it from your cell phone. Yes. But but what I'm saying here is that that's allowed for gold. Right. We have a gold US ETF that does that, that delivers gold coins to your door. It's it's not that it is legally not possible or against the spirit of the securities laws or something. It is just an arbitrary point that, was drawn. And, like, we, we're definitely motivated. I mean so we don't need any rule change. We don't need any rule change. It it so so so the main thing that actually does not allow in kind redemptions right now is that the, the APs, authorized participants, or, like, a specific entity, do you think about broker dealers, like Right. For for our our fund, it's, like, disclosed, like, let's say, like, Goldman Sachs and, like, James Street and blah blah blah, are are the broker dealers that can create and redeem shares.
But the current situation is that the SEC says broker dealers cannot touch Bitcoin. So the reason in kind is not possible, it's not because they specifically have something about in kind. It's about 2 things. Only broker dealers can create and redeem shares, and broker dealers are not allowed to custody or touch Bitcoin. And if you say those 2 things and in kind is by, kind of a derivative fact that it's not possible because you say only these regulated entities can create and redeem shares. Right, and those regulated entities are not allowed to touch Bitcoin, then in kind of just not possible. But, am I hopeful about the broker dealers being able to custody and service Bitcoin soon? I am. The reason I'm hopeful is that the tides are turning there in the sense that, like, SAB 121 or or, like, these types of arbitrary things about regulated entities not being able to touch Bitcoin. Who's lobbying against those things?
Who who who who who's who's, like, pushing the government on that? Actually, the banking lobby is now doing that. Because they want to get involved. Yes. Because, like, if you were a U. S. Bank and you like a Blockrock, they're they're effectively custodying a lot of customer's Bitcoin and, like, making a ton of money on that. Can't compete. Why are we not not allowed to do it? Yeah. Like, why why are you saying that the ETFs are possible and we shouldn't be able to service, a Bitcoin for our clients? And so the arbitrariness in which the SEC has been, kind of putting up these roadblocks are now being highlighted and pushed by banks. Yeah. The incentives are kind of The incentive is kind of pushing through the the and and and we're not even asking for any type of special treatment for the client. No. Just just let it treat it at Like non special treatment. Yeah. You're asking for non special treatment. Else. Like, every other spot commodity. Like, please, like like, let's just get it to that point. And so I I'm hopeful, like, that the in kind stuff get resolved in not too distant future because ultimately broker dealers and banks will solve that for us. Their business incentives will solve that for us.
And then at that point, we can all these things are really on the table. And That'd be awesome. Yes. For for me, the I will be the first first person to say that the major the the main con of a Bitcoin ETF in its current form is definitely the fact that you can't take it out in kind. Without paying cap gains. Exactly. Because You have to sell it for dollars, pay cap gains, and then buy Bitcoin. Exactly. Exactly. So if you buy, this is a very common experience. You buy some Bitcoin, then it goes up 10 x, 100 x. Right. And then you and then you take it seriously. Like, you you like Every GBT dealer understands this. That's why they're paying Yeah. 1 1 and a half percent because they they have to. Otherwise, they have to pay 20, 25%, whatever cap gains. Yes. Also as a Bitcoiner, I am very much like everyone that feels comfortable doing so and, like, can educate themselves and should should do self custody and do, like, interact with the network in a self custodial way because we need more people doing that to be to for people to using these products, have a larger user base. I mean, that the government is definitely coming after a lot of like self custodial, users, and the more users we have there, I think there can be definitely much more political pressure and agreement on, like, that being something that we wanted. Anyway, there's just many reasons that, like, more people using the network directly is a good thing for the network, and ultimately, there is no world in which Bitcoin fails and, like, our ETF succeeds. Right. So so I I want that as Bitcoiner. I also want that as just, like it just make the product better.
Like, I'm I'm, again, like, we shared a little bit in the beginning, but even though the 12,000,000,000 of the 1st year was was a big chunk, what's coming in the coming years are much bigger. Yeah. So so I, there's, like, we're nowhere close to thinking about, like, oh, we'll, like, raise we'll like capture a little bit more and then like start raising fees and like, we'll be good. That's not where we're at. I think we're much more closer to like, we want better products so that more people can buy this thing and we want to have the best product so that, we will win more market share because how much market share of the dollars that we win in the coming years will determine whether we end up with 5% market share or 50% market share.
And we want to be at 50%, not at 5%. And so, yeah. We we definitely want to make in kind possible. And and and, you know, I know you're an ETF, a skeptic, but, like, if we have I own no ETF shares. Yeah. Yeah. Totally. Totally. I recommend Bitby and own no Bitby. Yeah. Yeah. Yeah. Totally. Totally. Totally. Disclosure. And but if we I own Bitcoin. Yes. Yes. That's great. That's great. But if we have inclined Yes. Then I do think the converse like, the ETF becomes a pretty useful, product in Top of funnel. Yeah. Exactly. It is like because when it goes up is when you realize why self custody matters. Yeah. Yeah. Yeah. Yeah. No one realizes why self custody matters until it goes up. Yeah. Yeah. But even if you want more people to do self custody, who who learns to do do self custody? People that have a lot of Bitcoin. That's what I'm saying. Yeah. Yeah. Yeah. You learn as it goes up in value. Exactly. So so so the main thing that if we want more people that own Bitcoin or soft cost of Bitcoin, etcetera, is that we just want more people that that have economic exposure to Bitcoin. Right.
And and if we think about the process now, if if if, like, open up like, you have to open up a you have to not only convince someone to the put in, like, a hunt just put in a $100. Like, you you can't tell someone for the first time, like, tell them to buy a $10,000 worth of this thing. You're you're actually gonna tell them to buy a $100, but for that $100, they need to open up a new account, go through KYC AML, and then wire money or or or, like, or or It's ridiculous. It it it's it's too high of a friction. So imagine the amount of, like, Bitcoiners, the potential Bitcoiners that we're losing because we can't kind of convert like, any everything is to some extent. Friction really matters on conversion.
And, as a top of funnel thing, it is true that Bitcoin ETFs are very like like, you could just convince someone to buy some, and then they probably have some brokerage account, and then a few taps. That's it. No accounts. No wires. No additional
[01:22:57] Unknown:
KYC. Like like, it just Yeah. They just log in to TD Ameritrade. Buy the yeah. Buy the ETF. And then when it goes up in value, they realize they wanna take self custody, and they go through the portal or whatever. They put their Bitcoin address. They take self custody as that as it should be. That is my ideal world. Yeah. Yeah. That is my ideal world. And and I don't think it is that far yeah. I don't think that is that far out. I love it, hon. Be the change you wanna see in the world. Yeah. Yeah. I mean, look Even if that means less fees for Open Sats,
[01:23:25] Unknown:
I'm I'm cool with that. I I I don't You have my blessing. Yeah. Yeah. I I just don't think that would mean less business for us. That like like, that's the thing that I I think that would be make way it would make your ETF way more competitive. Exactly. Yeah. That would be another reason why everyone would, recommend it, or make it as their first product that it allocates to. I mean, it I think it it it is is not yeah. Yeah. So We're aligned. That's dope. Definitely. Okay.
[01:23:56] Unknown:
That's fucking awesome. Okay. I did not know that. I thought we need an SEC rule change. So No. I didn't realize that was one of the things that just, like, everyone coalesced on just to get approved. That's awesome. Okay.
[01:24:08] Unknown:
We're definitely having still, even this week, someone, leadership from our team went and to DC to meet with SCC people around in kind specifically. So so, you know, it's a thing that we're actively That's awesome. Thank you. Talking about that. Thank you for your service. I will say I mean, you compare it to, like, something like oil
[01:24:26] Unknown:
where, like, during COVID, like, we went negative because no one can take barrels of oil in kind. It's, like, the most insane thing. But, like, Bitcoin, you can take in kind so easily. It's it's It's the most natural thing. It's designed for it. It is designed for it. That's right. That's right. And and but we're allowing it for for gold to, like, them to ship it into your I can take in kind of oil. I just where am I gonna fucking store the barrels? I don't know where I'm gonna put it. I should've during COVID, I should've just fucking figured it out Yeah. And just taken a bunch of barrels of oil somewhere. It probably would have been an environmental disaster,
[01:25:01] Unknown:
because I don't know how to store oil. But we're making progress. I I I I I do, like, I guess, I guess it's tough to be too bright eyed about, the regulatory landscape right now, given the DOJ stuff. Yeah. It's pretty bad right now. But for the stuff that has very clear business intensive aligned, like, there's no money to be made in in private or it's much harder, but, with stuff like this, in kind just needs broker dealers and banks to be able to do business with Bitcoin. It's currently not allowed. They'll make it happen. And I think there it is not controversial now. Like 5 years ago, if a bank wanted to custody Bitcoin and service it for their customers, I think, most people, even the public opinion, would be that, like, that bank is crazy and reckless. I don't think anyone says that now about Bitcoin.
[01:25:53] Unknown:
So then now that the businesses see the business, want the business, will push it forward, I think it'll happen. That's freaking good. But it requires people like you and and the Bitwise team to actually, like, make it fucking happen. So thank you. Yeah. You you you'll see it from us when it's when it's possible. Yeah. Yeah. You did briefly mention during authorized participants, Jane Street. I just wanted to do a huge shout out, to Tim Reynolds. His foundation did support Open Sats. He's one of the cofounders of Jane Street. There's Bitcoiners everywhere, and they're standing up and making this thing happen.
Hong, I wanna talk about I wanna talk about Noster. You love Noster. I love Noster. You're on Noster. You're a cofounder of a company that launched a Bitcoin ETF, and you're on Noster. Why? Why are you on this ridiculous protocol that we're using?
[01:26:48] Unknown:
Because I think I really think about Bitcoin as user controlled money. Yeah. And I think there's a way of looking at it as like gold. It's just like this kind of perfect thing that will always be fined. And I think of it as like the users need to be vigilant and coordinate and defend this thing because it is, it is not our or it is our right, but our rights have to be defended. They're not always upheld. And so then if you imagine a type of world where users really need to be, vigilant to maintain this network. If they, if they aren't sovereign about the ways that they communicate to each other, then how is that coordination and resistance supposed to happen?
Like, I don't know. If, like, if we're all on Twitter and there's a Twitter policy change and, like Yeah. Yoland just wakes up one morning. He's like, no Bitcoin talk. Then it's over. Or or I mean, I'm I'm I'm being a little bit, Provocative. Provocative here. But but, like, I like provocative. I I think it is not that hard to understand why kind of having sovereignty over your communication and identity network is critical to a sovereign money and the users and owners of that sovereign money. And, I think the social layer is as important as the technology layer. Yeah. And, as much as we care about the decentralization of like the mind, like everything the code, I mean, we should care a lot more there as well. I think this recent few weeks of, like, minor centralization is also something that we should but but as much as we care about and so that that also doesn't get enough attention. So, like, that's also a problem. But but but but as much as we talk about that, I think we should also talk about, like, are do we have sovereignty over our communication? I mean, we shouldn't be talking about, like, Bitcoin consensus changes on Twitter. Like, you need a fucking account.
[01:28:52] Unknown:
They, like, block people left and right. Like, come on, people. Get your shit together. And and Bitcoin consensus is not gonna be won by Twitter debates. Get over yourself. Be better.
[01:29:06] Unknown:
So that there's one level there. And then I also am very excited about just like, I think this type of web of trust is like ultimately the identity layer for the internet that is compatible with the ethos of the internet. And also something that can still practically work. Yeah. I also think that I'm very excited about things like, Ecash.
[01:29:33] Unknown:
I wanna talk about Ecash. But before we talk about Ecash, are you gonna delete your Twitter account, Hong? Or yeah.
[01:29:42] Unknown:
Yeah. Yeah. Yeah. The the reality of the matter is we're still, you know, trying to run a bit. Honestly, one of the best emails I ever got was you. Like, oh, Matt, will you join the Twitter spaces or is it just a demon app? No. That that It was like one of the best Yeah. I felt a little bad. Like like like, if if I don't know what you're you know,
[01:29:58] Unknown:
I I felt a little bad pulling you back into it or, like, I don't know. But I hadn't posted on Twitter in 6 months, but I joined your Twitter space. Yeah. Yeah. Yeah. That's how I feel about you. Yeah. Yeah. Proof of work. Appreciate that. But yeah. Yeah. Yeah. I mean, like,
[01:30:11] Unknown:
I also recognize that a lot of these networks are really kickstarted by people that take a stance like you do. And it really just kind of make the like put a stake in the ground and say that this is where I'm going to talk. And like, if you want to talk to me, come here because there's a network effect, and the beginning of the network effect is brutal. So so some people have to make it to Yeah. So it's that, like
[01:30:33] Unknown:
yeah. I'm doing the same thing as you. I'm I'm, like, the 5th largest Bitcoin ETF, and I'm I'm Nostra only. You know? Like, that's I'm doing the same exact thing Yeah. In a different way. So You don't have to leave your Twitter. I was just fucking with you. Yeah. I couldn't put it. I had to ask. ECash. We're pretty excited about ECash. So excited about ECash. Yeah.
[01:30:56] Unknown:
ECash, I think people trip over the fact that it's a custodial. Yeah. Whether it's, you know, single sig with, like, cashew or, multi sig with, like, a federation with Fediment, etcetera. But I think, like, you have to think about it from, like, where it fits in. Like, I think the Mutiny Wallet's approach is incredible. Yeah. We're we're like, if someone is just trying to get $10 of Bitcoin. Right. They should not be running a self custodial letting note. Like, I I'm sorry. They should not. Yeah. But but but then like, manage the liquidity together. This is not like, you know, same thing as, like, I mean, how I feel a little bit about the Bitcoin ETF stuff as well. Like, someone's buying $10, a $100, there's it's not gonna figure out so so it it's just, like, not economically viable for them, and it's also not if you add up that much much friction, then they won't do it. Right. So I I think it's very smart that they go e cash for a certain threshold of stats, And then when it goes, it's a larger balance or the dollar value of it goes up, then they might change their mind. Yeah.
So so but then, so to me, it's just pretty obvious that, like, we still want the, a low dollar amount, engageable custodial layer because we still want people to start using Bitcoin for money. Right. And like the reality is that Bitcoin is not winning as much like a medium exchange right now. So we do need to make it easier for people. So that for the small dollar amount and for the first kind of early, part of the journey user using a solo experience is, like, very obvious to me that that is actually what they should do. But then do we want them to be, just using like, the the current flavor of custodial services? Right. We have to KYC and AML, and, like, in certain certain jurisdictions, they're not allowed to use it.
I think I think if people are religious about the self custodial lightning, they need to be kind of, clear with themselves that that is the world that they are pushing for it. Right. That, like, everyone that onboards onboards with KYC and MO, and like, that type of not, a custodial service that doesn't preserve your privacy. And I would rather the first step be a custodial service because that's the economically viable thing, but in it being private. And that is what eCash is to me. No. And And it's cryptographically
[01:33:29] Unknown:
native. Graphically native. And even if it was even if you had an e cash custodian that was KYC AML, it would still be better than the current status quo because they can't see your your your total balance and your transactions. To me, it's like, we live in a world where people are using custodians,
[01:33:51] Unknown:
so let's make the custodians better. Yeah. Yeah. And it's not just a temporary thing. I mean, Bitcoin transactions on the l one will just always have economic costs.
[01:34:02] Unknown:
Or do you think mempools will clear? Mpools will not clear. That's okay, guys. Thank you for joining us for solo dispatch. We have Hong here.
[01:34:12] Unknown:
I mean, I don't know if you're if you imagine Bitcoin to do the thing that you want it to do, I mean, maybe not like, at some point, we will get to a point where mempool is just not clear. Yeah. That that It's an eventuality. It isn't if Yeah. Bitcoin either does not work or it's an eventuality. So so, like, I I want to when when we're thinking about futures, talk about an eventuality. And in that world, like, it's so so so there's a there's like a argument about, like, oh, we're living in a KYCML world solely we do, but, like, if it weren't, no, it just is the reality that at a certain sat threshold, people will just not be able to open up Lightning Channels and have that run us up. So like it is an economic reality in my mind, not a political reality. It is just an economic reality that the small sat amount users will begin with custodial services that take that economic hurdle away from them. They take the burden. Yeah. And we want that because we want Bitcoin as money to work and win for everyone, not for a small group of people. So then we're living with a custodial, element, not because we're lazy as Bitcoiners, but because that is the
[01:35:28] Unknown:
the economic reality of the system that we have. Yeah. If your first experience of Bitcoin is a 10 sat zap, like, it's not gonna be on with on chain Yeah. Guarantees. Yeah. It's not going to be. Yeah. And,
[01:35:43] Unknown:
so so in that world then, like, it's also not that, like, I I am, like all k y c, AML, like, it's bad, and we we should live in, like, the wild west. We're here to fix this. But but the thing that I believe in is that, like, we shouldn't it shouldn't be all or nothing. Right. It shouldn't be like you have to send your passport and, like, sell out your life versus, like, not being able to use anything. I mean, it's this is how I feel. Like, this is, in the physical world, that's often true, but in the digital world, in the same way we talk about proof of reserves, like being possible, like that thing not possible for gold, impossible for I think this is also private thing available for privacy that people have not wrapped their mind around. Like right now I go into a bar. They check my driver's license.
What are they, what legally, what are they trying to check? They're trying to check that I am not underage. Yeah. But I I just because of the form factor, I have to reveal where I live, like, what my date of birth is, what
[01:36:41] Unknown:
it there's an By the way, I still give my grandfather shit that, like, it requires KYC for me to enter a bar. Like, how do they not fight that? Like, that is that seems ridiculous to me. Yeah. I mean,
[01:36:55] Unknown:
but but but at the same like like, but if we, we can society doesn't agree that we don't want underage people to be able to go into spaces where people drink. We can agree that as a society. Yeah. But but we there's a kind of a violence in the current modality of privacy. Yeah. That it it kind of forces people to do the kind of an overexposure. Right. And and I think modalities like e cash start to get very interesting because now that we have the full, toolkit of digital kind of encryption and privacy embedded to the assets, then now we're talking we we can we can negotiate as a society. What do we want? What do we want guarantees of? Do we want them to have to, like, literally reveal everything about themselves? Right. Or what is it? What is the guarantee that we want here that they're not sending to us? Or I I mean, that has problems, so I'm not advocating for that. But but, anyways, that's kind of what I'm excited about in the kind of Ecash world.
[01:37:52] Unknown:
What's up, guys? Are you are you gonna record now? Is that okay? I was waiting for you to come here before I wrapped. If you didn't show up, it wasn't gonna be proof of work. Rod just walked in. He's he wants to record a podcast, so we're we're we're kinda we're kinda tight on time, so we're gonna wrap it here. But, he doesn't have the rest of his people, so we're not gonna wrap it yet. I agree. I agree. I think options. I think the world we're going towards is options. I wanna give people as many options as possible. I don't wanna I don't wanna pick their prescription for them. I don't wanna say this is how they should do things.
I want them to be able to choose how they interact with the world, whether that's a speech, perspective with something like Nostra or whether that's a financial perspective with something like Bitcoin, it should come down to options. Right? Yeah.
[01:38:49] Unknown:
Also, like, there's a difference between privacy and secrecy. I think I think the, and and and really, like, privacy as, like, a right is about me having control over what I want to selectively reveal to people. It's a cyberpunk manifesto. Yeah. Yeah. Yeah. Yeah. I mean, a recent book that was really great was, Genesis book by Aaron Van Virdam.
[01:39:14] Unknown:
Awesome, dude. Haven't read the book. Bought the book to support him.
[01:39:18] Unknown:
You should read it. I mean, I I thought it was the best. I mean, we I only just buy I buy Bitcoin books. I don't read them. Yeah. Yeah. It it really lays out, like, I mean, there's something a bit of, like, a purity in in what the cypherpunks were thinking about because they were thinking about it prior to a lot of the economic incentives to think about it, and they were struggling with all these these issues, and I think that, yeah, the articulation about privacy and secrecy and kind of like how, you know, that that also resonates with me. Anyways, so I'm excited about a world because they they wanted to make it a reality in the eighties nineties. Right. ECash, Tommy and eCash, and weren't able to do it. Why? Because it required banks to do it and dollars to do it. It required permission.
Yeah. The underlying you still need an asset to back it to to do this kind of issuance of notes that are private, have privacy embedded, and the you didn't have the And they're bearer notes. Exactly. So you didn't have the thing to back the bearer notes, and it had to be dollars or or fiat money. And that didn't have to be banks, and then it had to be permission. So so so it just was an idea that, didn't really get the full, to live its life. And now we have an alternative. Now we have a fully, endogenously digital asset in Bitcoin for the first time that we can now use to build all these systems that we dreamed of with different levels of privacy or for what people are are comfortable with or or kind of different amounts of disclosure that people are comfortable with, different entities that they're engaging with. We can give them that control and granularity.
It was just not possible in the prior world and and, and before the conversation gets too dark, I think there's a way in which, like, the government is currently trying to, bring a very blunt conversation to the privacy, like digital privacy to financial privacy conversation, but it's, like, it's gonna be black or white, and it's gonna be, like, for criminals or good people. And before it becomes too black and white and we don't have a chance to build our case, like, I think that's why pushing eCash now is so important so that we can actually get it used for real people for the real use cases and kind of demonstrate this type of full spectrum privacy and full spectrum kind of sovereignty over that, such that when we are forced to negotiate as a society, like what should and shouldn't be allowed, then we have a lot more to show and demonstrate and like concretely talk about because the physical analogs don't work. The physical analogs is just a driver's license. You just like that, that it's black and white is the physical modality of privacy.
So that's the only mental model people have and to break people out of their mental model, that you just have to show them something that's different. Give them a different option. Yeah. And and when when when people are showed is only when they really question their mental model. Yeah. People are like, it's ridiculous that you're surveilling my $600
[01:42:28] Unknown:
Venmo transactions, but they don't understand there's another option.
[01:42:32] Unknown:
Yeah. And the and the regulations were written that way because there was no other way. Yeah. And and and and and so or, like, in some ways, even people pushing or lawsuits or, like, kind of the public discourse can't happen when there isn't an option. What I mean by that is that like, okay, the initial Internet was like all just public. There's no encryption, anything. There's no, we didn't have discourse about whether privacy is should private communication online should be a right that we have Right. Until encryption was actually a possibility. Right. You know, the Internet happened in the seventies, 8th and eighties, and it was gaining steam by early nineties, and until it was a practical option, we just didn't talk about it because why what would you talk about? Right. You know, But but once public key cryptography kind of got to a point that it could be used, then people started using it. Then then now there is a is a discussion to be had. And from, like, a rights perspective, of course, we have private conversations in a room, like, why shouldn't we able to have it in a in a in an online setting? Like, that makes no sense to me, but it still was a thing that we had to be fought because the way that technology progresses is usually the non private thing. Public thing happens first and the private thing comes after, and that's when you have a material thing to talk about and you have to fight for it. And so, like, in some ways, I feel there's a lot of analogy to that in in the current Bitcoin world where where, like, we we fought that for public communicate online communication, private, you know, online communication, but we didn't have to talk about financial transactions Right. Because it wasn't possible.
It wasn't possible to have a private financial transaction because Private digital trend. Yeah. Sorry. Sorry. Sorry. Yeah. Yeah. Yeah. Because we had cash. We had cash. Exactly. So it's the same thing. Like I walk into a bar. I pay cash. Exactly. No one fucking knows what the I'm doing. Exactly. And that was fine. So we have it in again, the same analogy is that we have privacy for financial tax dollars in the physical world. Just don't have it in the in the digital world. And but just the way in which we are progressing here, we didn't have to have that conversation because it wasn't an option. And now that it's an option, it's becoming a problem and a conversation, and
[01:44:50] Unknown:
we're discussing it. Yeah. Hong, you're a fucking legend. Thank you for being a friend and an ally. Freaks, I wanna agree with Kieran. KYC is the illicit activity. It's not effective against criminals. They just buy or steal, financial credentials to to get into these sites, and it it just affects regular people. I wanna thank all the freaks who joined us in the live chat. You guys make this show unique and special. You guys are the true rider dies. Thank you. I wanna thank everyone who supports the show. Our biggest supporters this week was 8 Myth Rendur, rider die freak with 24,000 sets. We had v with 23,000 sets, and Erza CC with 10,000 sets. We're gonna have another seal dispatch on Friday with Matt Hill of start 9 at 1700 UTC, the usual time.
RHR tomorrow at 1800 UTC, and I'm gonna have some guests here in the studio. Don't tell Marty he doesn't listen to dispatch, so he won't expect it, But we're gonna have some great guests live here in the studio at Bitcoin Park. Hong, this has been fucking awesome. I really do appreciate you. Thanks for having me. Thank you for being a friend. I feel like it's been a whirlwind. It's been, me and Hong have only been French for about 6 months. It was it's a good friendship. Yeah. Right? It's a good friendship. We went through a lot. Yeah. Yeah. Together. Yeah. Yeah. Yeah. With Gigi.
Gigi, fucking boss man running open sets. Hong, final thoughts before we wrap.
[01:46:36] Unknown:
Excited for the future, but we have to fight for it. Like, I, I, I think the, the moment that we have to really the users of the user controlled money having to be vigilant and care for the whole stack from like the software to the mining, to the, to the, the, the platform that we have these conversations on the communication channels, like Novstar, to like how we make, custodial financial transactions that are necessary at the onboarding stage, more private, like e cash. Like we just have to care for the whole stack. And as much as the, the opportunity is really big and kind of more and more real for us to be realizing these, these things, I think the, the urgency of making progress before we have to the resistance becomes bigger is that timeline is also shrinking. So excited for, you know, excited for all that. Excited for, I mean, very thankful for what what all you do as well. Yeah.
[01:47:35] Unknown:
Appreciate it, Hong. Until next time. Let's let's try and make this a reoccurring thing. Yeah. Absolutely. That'd be awesome. Like, I mean, we said tip of the iceberg. We're at the tip of the iceberg. Let's do, like, an ETF update every 6 months or something like that. Great. Yeah. For those to do that. Let's fucking go. Appreciate you freaks. Stay humble, Stack Sats.
[01:48:07] Unknown:
I keep a close watch on this heart of mine. I keep my eyes wide open all the time. I keep the ends out for the tide it finds because you're mine. I walk the line. I find it very, very easy to be true. I find myself alone when each day is through. Yes, I'll admit that I'm a fool for you because you're mine. I walk the line. As sure as night is dark and day is light, I keep you on my mind both day and night. And happiness I've known proves that it's right because you're mine. I walk the line. You've got a way to keep me on your side. You give me calls for love that I can't hide.
For you, I know I'd even try to turn the tide Because you're mine, I walk the line. Open all the time. I keep the ends out for the tide of mine. Because you're mine. I walk the line because you're mine. I walk the line.
[01:50:06] Unknown:
I love you freaks. Stay on the sax ads. I'll see you Friday well, Thursday, tomorrow, if you listen to RHR. But if you don't listen to RHR, I'll see you Friday. That was, I Walk the Line by Johnny Cash if you live under a fucking rock. But I've been told I need to tell you guys what I play. I love you all. Stay humble, and if someone is gonna buy an ETF, just recommend Bitb, and, otherwise, recommend self custody. Appreciate you all. Peace.
WBD Intro
Introduction to Citadel Dispatch
Introduction of Hong Kim, cofounder and CTO of Bitwise, and discussion on Bitcoin ETFs
Challenges faced during the 6-year process of working on the Bitcoin ETF
Discussion on the approval process and timeline of Bitcoin ETFs by the SEC
Reflections on the significance of having a Bitcoin ETF and the impact on the community
Comparison of assets under management in the Bitcoin ETF market
Discussion on the model of funding open source contributors through profits from the Bitcoin ETF
Explanation of the long-term commitment and financial implications of funding open source contributors
Discussion on the success of a debut and comparison to an IPO moment
Comparison of the ETF moment to a state change rather than a singular event
Challenges faced by financial advisors in including a Bitcoin ETF in portfolios
Bitcoin ETFs in kind redemptions
Importance of Self-Custody for Bitcoiners
Advantages of Bitcoin ETFs and In-Kind Possibility
Discussion on eCash and Financial Privacy
Progress and Urgency in Financial Privacy
