TILP #6: Future implications of Bitcoin becoming mainstream w/ Marty Bent

00:01.90

ilm

All right? Marty Bent thanks for thanks for joining me today I'm excited to have you here? Well ah, let's see I have as we we talked about before recording there's a lot of things that I would love to talk with you about. But we don't have enough time so where I would like to go with you today is just talking through. Um.

00:03.75

Marty Bent

Jim I'm excited to be here.

00:19.89

ilm

Where all bitcoin can go and how you see that playing out from a just the impacts we'll have on different economies and the business sector and everything but I guess before we go there launch. You just tell me and us about you What you do and business life who you who are you.

00:35.44

Marty Bent

So first and foremost I'm ah a father and a husband I've got 2 young boys and ah and a beautiful wife really the the anchor behind us but beyond that I own and run a media company tftc I found that in 172 essentially started as a newsletter to help educate my friends and family about bitcoin what it is what they should be paying attention to it was during the beginning of the bull run in 2017 or June 2017 I was getting text calls emails and I was like hey right everybody stop. Doing this I'll I'll write this newsletter I'll send it to you once a day you don't need to reach out to me that morphed into a podcast later that summer and beginning of September I believe which is tftc which is ah.

01:14.67

ilm

3

01:28.27

Marty Bent

Interview series I host that morphed into another podcast rabbit hole recap that I do weekly with Matt Odell covering the topics. Ah that pertain to bitcoin privacy freedom tech in the digital age and then I'm also a managing partner at 1031 which is a bitcoin investment platform focused on investing in companies building out the infrastructure that people leverage once we're under a bitcoin standard so we cover the whole gambit of the subsectors in the bitcoin industries that could be mining ah custody security. Ah, lightning network companies built companies building on the lightning network and then even credit products that are beginning to materialize as well. So started a media I have a background in finance before I started the media company and now parlaying that into. Ah, ten thirty one and what we're doing to to invest in the space.

02:25.10

ilm

Sweet so you've been in this space for a bit I actually listened to ah 1 of y'all's ah you Odell's most recent episode last night ah talking about or are we in the next bull run that was a lot of fun. Um I will abstain from going there. Um I think we both agree that ah. Bitcoin's in a foreverable run until we see global adoption and then then bitcoin will become really boring. That's the goal and but yeah, so with ten thirty one obviously you have you have the amazing I would imagine just amazingly fun job of getting insights and pondering. All the different places that bitcoin will go once as you mentioned once we're in a bitcoin standard. So I guess before we go into the the details like what do you What do you mean by bitcoin standard again, we're like let's just take it like we're talking to an audience that. Maybe just own some bitcoin and is just beginning so in these past conversations prior to you joining us today. We've had conversations about like Macroeconomics Monetary Policy fiscal policy how in the world. Do we get here? Oh bitcoin very well could be the solution that gets out of this absolute mess that we're in right now what is bitcoin from a generic. Or general a to z conversation. So when we talk through like all right bitcoin standard what in the world does that mean.

03:41.99

Marty Bent

I Think it's very simple ex of the explanation a a world living under a bitcoin standard is a world in which people acting throughout the economy save their money in bitcoin and transacting bitcoin. Um, it is the store value medium of exchange and unit of account. Ah, people use price the goods and services that they purchase within the economy I think think it's important just to keep it simple a bitcoin standard is a standard in which people use bitcoin as their money whether it's to save or spend.

04:16.62

ilm

It's it's interesting to think through the implications of just having a money that is not centrally controlled and not debased by anything and like 1 of my least favorite conversations. Especially a few years ago when um. When the money printers were on yet. We weren't seeing inflation day-to-day it was just in like aspects of life like houses I live just a little bit south of you in new bronfuls so here like I mean 2021 my house appreciated by 33% and at that point the money market funds and stuff hadn't caught up yet. So. Your your bank was yielding like a quarter percent but yet your house is appreciating by 33% so I hated the question of Jim I want to buy a house in 1 year how do I save for that and that's only a question in a system where the money's broken itself. Like if you have a but if you have money that's not broken. It's like hey I want to buy a house in a year what do I do it's like save your money because the money itself is it's it's it's meant to be saving mechanisms but when when you have money. It's hijacked. You lose you have. It's a currency. It's a means of exchange but it's not a means of savings and what you just articulate is it's it's it's. Both of these things which is so foreign like right now we use savings accounts basically a savings account is like the index like buying index funds like we're just hoping to retain value in that. So yeah, interested. So what do you like? How do you see that happening like right now there's a global adoption of like 1% of bitcoin. So like.

05:48.91

ilm

What how do you see that play out. Do you have a thought on it I mean obviously we're just guessing. Do you have a thought on like how that happens and what's the timef frameme will it be fantastic and this great deal leveraging of written Ray Daio's words or will be like will it be ugly I mean I have a picture right here on my desk of ah kids stacking money and in ah. Postord war one Germany like what look like that is the US dollar and around the world like kind give me your thoughts here.

06:11.90

Marty Bent

I don't know exactly how it will look. But since Parker Lewis is standing literally a dozen feet away from me outside. Ah the studio here. It's probably going to happen gradually then suddenly which means we're definitely in the gradually part. We may be approaching the suddenly part but.

06:26.18

ilm

Um.

06:31.93

Marty Bent

Ah I think that's part of the beauty of bitcoin whether it be ah via the the network topology. It's very grassroots individuals running nodes plugging miners in that part of the network is very grassroots. You have.

06:37.30

ilm

Was learning it.

06:48.50

Marty Bent

Tens of thousands of individuals and companies disperse throughout the globe just using economic incentives to drive them to do this thing whether it's running a node to verify that they're actually actually receiving the bitcoin they think they are or to plug in a minor to contribute to the production of blocks so that they can make bitcoin. Ah, it can produce bitcoin cheaper than the spot price and I at any given point in time so run a profitable business that allows them to stack bitcoin. But then the other side is ah of the grassroots movement is the individuals who decide. Ah, to use bitcoin as money whether it's via savings vehicle or a transactional currency and so that will really dictate when the suddenly part comes is when more and more individuals come to the belief that bitcoin is the best money that is on this planet and they decide to acquire it. Ah. By selling goods and services by exchanging their dollars for bitcoin and holding it on their personal balance sheets. Um, so that's I think the next big step to take is this educational effort. Maybe it doesn't even need to be effort. Maybe people come to the conclusion. Themselves but more and more people recognizing that bitcoin is money and it's better money and that's money that they should demand. Ah, and that is facilitated by companies in software projects that make it as easy as possible to receive and send bitcoin in ways that are at parody.

08:19.80

Marty Bent

With the ways in which people send and receive money in the incumbent financial system.

08:25.52

ilm

Um's there's one if if if if you're hearing that it's like what in the world is a node and mining and stuff a few episodes ago we listened we talked with guyiding michael schmidge go listen that episode. We talked through like what is a node What's what is mining what do these things mean and ah. Just to reiterate that like you don't have to know all these things like I don't know I have 0 clue how Marty you and I are talking right now and I can see you in real-time blows my mind I'm not going try to figure it out I just know it works and ah you know I don't know and ah you can't explore these things I think bitcoin. Is a lot easier to understand that our current fiat monetary environment like it's code. It's written out and there's there's certain principles that exist versus things that are made up ad hoc based off of a small group people in ah in a room I think it's easier to understand that our current financial situation. But I also think it's okay. Settle down and say I don't fully understand how it works but I'll use it and ah now with that There's right now just because you have to remember this is a young technology and if you're going to go do things if you're going to run a node or set up a lightning channel. It can be conky. Um, but as we see this thing progress. Will become more and more obtainable. Um from a use standpoint. So let's go let's go there um Marty like what are you seeing from a one I guess from it from an adoption standpoint especially with everything going on with like ets right now and blackrock and all that like what are your thoughts as far as adoption from.

09:58.42

ilm

Corporations governments and individuals um is one outpacing on adoption rate more than another or is it general like moving forward. How do you think that's going to take place as well.

10:10.75

Marty Bent

Ah, yes I do think individuals are certainly outpacing adoption or the businesses or countries for that matter. It's that's the beauty of bitcoin too again and going back to this grassroots nature. Um. Particularly of acquiring bitcoin individuals are usually the first that come to realize like oh bitcoin's a better money I want to hold a better money. Um, and so that historically throughout the first fifteen years of bitcoin existence is is probably the the main driver of adoption up to this point. From like an individual basis number of people adopting bitcoin. Ah because when you think of it too like when you get to the company level. The company makes decisions based off the consensus of a bunch of individuals and so for companies to put bitcoin.

10:58.46

Marty Bent

On their balance sheet and you need a bunch of individuals within that company to come to a consensus that hey we should probably acquire some bitcoin for our treasury so that adoption is obviously a bit slower than you would see at the individual level and then when you go up to like the financial system. The banking system pensions what it may be. Those decisions are even harder because they're much more conservative and they're much more burdened with regulation and allocation mandates that they have to live within and so the cell to get to the tipping point of bitcoin adoption is a much higher bar and so yes I do think. There are different tracks of adoption individuals have adopted it much quicker businesses um are are getting there Obviously Micro Strategy has been a big advocate of that and then institutions um like endowments pensions. Banks will probably be a bit slower. It's just the nature of how you come to the consensus for this. Decision to put bitcoin on her balance sheet with that being said I do think something like the fasb guidelines that were released earlier this year will be a catalyst to make it easier for the businesses to put bitcoin on their balance sheet the way that they can mark to market it year. Mark to market their bitcoin holdings year in and year out the new fasb guidelines make that much more palatable for a business whereas before ah you just had to mark to the lowest price of your bitcoin holdings at any given point in time and you had to keep it there. Um, which was not conducive for.

12:35.83

Marty Bent

Good financial reporting So It seems like particularly in the accounting world. The the regulations are getting to a point where it's going to make it easier for businesses to adopt. But yeah, and totality individuals are certainly adopting it and a much quicker pace which I think is good at the end of the day. Um, and then. Those individuals working in businesses and institutions have to convince the others that they're working with that. It's worth putting on their balance sheet and that that takes more time.

13:04.70

ilm

Yes, this is an opportunity to see I mean like front-run blackrock but also like sort of reverse the the canon effect of these people who've controlled the money large institutions. Um and generally people who just wield more control. Um, now's a time for the individual to come in and no one has more control than another over bitcoin. But the early adopters certainly will benefit um by price appreciation or purchasing power appreciation than a later Adopter. So This is an opportunity that we haven't seen before um with normal people to come In. And frontrun these institutions and corporations and and governments is just amazing to think about the long-term implications so bitcoin can seem volatile on a day-in-day out. Basis. You know there's There's a lot of there's a lot of memes in bitcoin and one of those being like 1 bitcoin is is one Bitcoin. It's worth one. Bitcoin. Um, but the same time when you if you're checking your bitcoin and you see that it's worth a.. It's pegged to a dollar amount and the what we're what we're concerned here is not necessarily not necessarily the ah the ah ah trade Amount. Of dollars to bitcoin. It's the purchaing purchasing power itself and eventually as you mentioned as we see Bitcoin become this unit of account and means of transferring value that ah the bitcoin itself will be denominated not in a dollar parody but rather.

14:34.56

ilm

It will be a means of communicating purchasing power itself. So I Guess let let's let's start talking through things that I guess excite you once we see this full bit bitcoinized world like what do you mean? like what would that change like will as I mentioned earlier. Having a sound form of money I think we'll just do wonders with making saving money so much more obtainable and way less complex. But what else like individuals companies like from ah from a project to just an opportunity for I know. Way Business is done like what are what are things that they excite. You.

15:13.78

Marty Bent

There's many things. There's so I think to jump it to this part of the conversation. It's probably to deal like ah like demarcate the different sectors and so we'll start with like the base layer and I should probably make the point that I believe for bitcoin to succeed. As wildly as I think it can. There's an order of operations to its success and the lower runs that order of operations to the front ah end of those order of operations revolve around custody and security and ah there have been a lot of developments in the custody. Realm particularly that have me extremely bullish and really paint a fascinating picture of how business can be done in the future and so as I'm sure you're aware ofropic wins 15 year history there's been many exchange hacks mount gox ah bitfin x bitstamp obviously ftx. And sometimes not even hacks just pure frauds ftx Celsius blockfi have taken in people's money told them that they're going to take their money and buy bitcoin with that hold it for them and they've completely lost it and I think this is due to the nature of people trying to apply the incumbent. Fintech infrastructure and user experience to bitcoin and not really leveraging. Bitcoin's native properties that give the end user and the end customer more assurances than exist in the incumbent system and so what I'm excited about.

16:44.71

Marty Bent

In the custody sector is this move towards multi-insti institutiontion multisig custody. So within bitcoin you can set up a wallet in a way where to move the bitcoin out of the wallet you need n of m signatures ah to move the bitcoin and so you need. 2 of 3 let's use the example of 2 of 3 if you want to move bitcoin from the address you need 2 signatures from 3 of the wallets in the quorum. Ah, and this allows us to create new standards for custody that rival the incumbent financial system and so. Down the hall for me is unchained. They're really they have trailblazed. Um this this part of the bitcoin industry which is using multi-institution custody to secure. People's bitcoin and so on that side of things we've seen unchain. Do it. We have companies like onramp. Anchor watch. There's more and more of these companies coming to market and essentially when the adoption of the tools that they're building becomes widespread. You have this incredible ability as an end user to verify that the counterparty you're interacting with has the bitcoin they say they do and so. With this I think new standards are going to be built where when I go to unchained and I take out a loan For example I put my bitcoin in a 2 or 3 multi-sig wallet. Ah I have a key in that quorum on chain holds a key and kingdom trust holds the third key and so that's myself and 2 institutions evolved.

18:18.10

Marty Bent

Since I have a key in that quorum I have visibility ah knowing throughout the duration of my loan that my bitcoin is where I think it is unchained and kingdom trust have not moved that and re-hypothecate it and len it out to some degenerate tradeor that can use it on a bet and I think this. Ability is really going to change the landscape of the sort of structural integrity of the financial system built on bitcoin it really reduces the ability for institutions to misallocate funds and commit fraud which I think is going to be massive. Really disincentivizes those actions and so it's really a forcing function for ah, good business at the end of the day so that's 1 thing that I'm very excited about.

19:07.32

ilm

Um I was was with where that's heading from a custodian and even the safety and security being able to take a loan and use this as collateral we're seeing growing pains and I was thinking about this last night actually with ah this last bull run the amount of people who were. Advocating for ah using x-exchange where you would get a whatever 14% ah yield on your bitcoin that's kept there and then the amount of bitcoin that was totally lost and the just the grand scale of rug pulling that took place. Um, yeah, there's obviously you you use the word he but reypocation. Do you want to fear before we keep going do want just like what does reypotheate mean just make sure we're using like people understand as we go forward.

19:54.80

Marty Bent

So reypodication is essentially when you're interacting with a custodian and either buy bitcoin from them that they're supposed to hold on their balance sheet or you send bitcoin to to them that they're supposed to hold on behalf of you. Ah re-hipothecation is them essentially taking that bitcoin. And giving it to somebody else that isn't you so your bitcoin is being re-ypothecated and typically throughout ah the history of the industry built around bitcoin when companies rehypothecate bitcoin they're usually giving it out to. Traders who are taking risk with that bitcoin and that is how you can get yield products like Gemini's earn product. Um, and they were partnered with genesis genesis was re-hypothecating gemini users bitcoin and sending it to trading houses like 3 hours capital who were taking that bitcoin and making degenerate. Bets on other cryptocurrencies that essentially went to 0 and when you rehypothecate that bitcoin and your custodian's counterparty on the other end loses that bitcoin you don't get it back at the end of the day. Um.

21:00.20

ilm

Yeah, so during that process of re-hypothecation all the while you've seen oh I bought I have one bitcoin I see it on this screen when I go to Xwever.com it says one bitcoin. So it's there but you're not seeing that behind the scenes your bitcoin that you purchased was. Used as collateral in someone else's trade so they then essentially created a second faux bitcoin the one that you're seeing on your login and then the one that you're actually they're actually utilizing in some 1 else's trade so they're creating fake paper bitcoin as a means of trading behind the scenes. Versus having it locked up and cussy that that's not able to be done ah that that that process and is unable because again like using a multi-sig setup you remain you retain the keys and these other institutions who should have your best interest in mind and can't move it on their own. Um, are not able to take this and use it as a means of collateral without your permission. Um, so that's yeah, it's pretty important from a security and safety perspective. Do you have any? you have any thoughts there.

22:05.26

Marty Bent

Yeah, and I think it's I think what you touched on there right? You don't with bitcoin particularly these multi-sig primitives that are available to bitcoiners if you're in it. We we now live in a world where if you interact with a counterparty. They don't have unilateral control of. Funds and they can't do things with your funds that you wouldn't want them to do and so with the multi-institution set up. Ah, you don't even have to have a key in the quorum. You just have to have an address that you can audit at any given point in time to know that the bitcoin's there and isn't moving It's totally possible with this setup too. But again going back to the economic incentives and the social incentives that this new paradigm introduces to the market is you can interact with a counterparty like unchained but due to the multi-institution. Set up that they have particularly with kingdom trust now coin cover to mismanage your funds. You need 2 institutions to collude to mismanage your funds and again going back to incentives that is significantly reduced the possibility of that is a.

23:14.11

ilm

Mentalism.

23:18.67

Marty Bent

Significantly reduced because you have 2 institutions that have many different business lines and you have to assume that they're not willing to ruin their reputation by mismanaging funds and the fact that one company on chain doesn't have unilateral control. Even if they wanted to mismanage your funds because they gotten a problem and this is just an example I don't think unchained is doing any of that. Um, they can't which is a big shift of power back to the end user at the end of the day.

23:46.16

ilm

Your let's it's hard to think through this objectively considering just it's the environment. The environment that we've been in I mean our whole lives so like for like for instances banking like it's it's hard to think through a bank. Their job actually just being keeping your money safe like that's so foreign to us as a concept like everyone I think most people recognize if you put money to a bank It's not there it then immediately becomes someone else's asset as well and you see it there and you expect it to be re-hypothecated. You own it but yet it's somewhere else and if you go and you ask for a million bucks they're not going to have all million because it's somewhere else. So it's foreign really expect that to bank for banks we know that they're not the business of actually protecting our money and holding it. They do other things with it I would say the same thing with like if you're going to take a loan and use your bitcoin is collateral. I think though the water we've swam in for so often has ah at least maybe maybe I'm just speaking for me I think I'm speaking for a lot of people though we become so normalized to thinking like well how else are they going to make money like why would someone else take that risk and set up a business of literally just owning. And like allowing an asset to be on their balance sheet. That's alone if they're not taking creating yield off of it and to create yield off of it. They have to go take that asset and do something with it and they can't so like how how would that business even function like why would someone else set up a business to do that if they're not able to like.

25:16.50

ilm

Take it and go and speculate on that asset that they're supposed to be just watching like how does that work.

25:20.21

Marty Bent

Like the business model is going to have to shift where people particularly if they're engaging in ah with a with a partner or multiple partners in the multi-intitution model that are going to secure their bitcoin bitcoin. I believe is going to be 1 of the most valuable assets on the planet and so it's going to be worth paying to secure it and so I think that'll be 1 way in which these companies ah create new revenue streams. Ah and then two while we're in this transitionary period on chain has our lending desk and ah you can. Use bitcoin as collateral to get a loan and there's an interest rate associated with that loan typically higher than your average interest rate right now just because of the relative lack of information on behalf of ah credit funds understanding bitcoin. It's it's a bit riskier to them even though they.

26:16.20

Marty Bent

Sort of collateral setup that unchained has is 40% ltv. It's one of in my opinion 10 unchains at 1031 portfolio company. It's one of my in my opinion. Nothing's risk-free, but it's like 1 of the least risky sort of credit products that exist on the market right now can get. Revenue from that and then value added services like actually providing value in terms of advisory services. Um I think we'll we'll see a lot of these bitcoin custody solutions like unchained and the companies behind them evolve into the goldman saxes of the. Bitcoin standard where they really understand what's going on in the market whether pertains to custody financing um in opportunities that exist out there to invest and take equity positions and companies. That's where it's going to go I believe is um, instead of. Sort of expanding the economy via debt. It's going to be equity investments and brings opportunity costs back to the market. That's what a bitcoin standard will do and so the idea is that you'll be able to get equity positions and companies that are producing cash flows and they're able to return that capital plus some. Moving forward and so I think in terms of the business models of these companies. That's how I think they'll evolve. We're at the very early stages but people are actually going to have to provide value at the end of the day.

27:38.66

ilm

With the with growth pains we're experiencing and just some of the rug pools we've seen over the like several years obviously there's a lot of unfortunate results of that I mean a lot of people have got really hurt. Um and it's created a lot of fear for for people who are starting to. Have comfort in this and now suddenly something bad comes out and said oh maybe the fears that I had were were rightful. Um, and yeah people lost a lot of money and that's that's really sad, especially like I mean I've I've known people who. You know like I actually I didn't think I knew anyone but I found out a few months ago that a friend of mine had all this bitcoin at ftx um, lost a whole bunch of money and that's really sad like this kid worked really hard all of his 20 s saved insanely aggressively saving like 80% of his income and it's all gone and ah so that's really sad.

28:18.77

Marty Bent

Ah.

28:30.83

ilm

But another sad outcome is for the lack of clarity at who's at fault here and what I mean by that is I've heard people say like when we talk about these these exchanges being hacked or the re-hypofication and then the. Loss due to gambling on the third parties act. Um people who don't understand bitcoin say hey I thought that thing that just happened I thought bitcoin was supposed to fix that suddenly you lost your bitcoin because of x or or y bitcoin is supposed to fix that and then suddenly bitcoins. This scapegoat of blame. So could you help us understand that I know this is sort of off topic. But these things that have taken place these scams that have come out or like literally I lost my bitcoin because of this bitcoin's at fault like why is bitcoin at fault or why is why is bitcoin not at fault and who is then when all these things happen.

29:26.91

Marty Bent

Now I mean what you're leaning into is centralized. Third parties are security holes and that's what ftx was that's what Mount Gox was that's what celsius blockfi were and I think a lot of the money that's been lost over the first fifteen years particularly via these. Third -party security holes is due to a lack of knowledge on the end consumer's part not understanding that with bitcoin. They had the ability to audit where their bitcoin should be at any given point in time and again, that's why I'm very excited about what on chains doing and others to push forward this multi. Institution multisig model because I do think that will be a standard once the knowledge of this type of custody solution permeates the market and then consumers understand that it exists in the first first and that it's possible in the first first we'll get to a point where it's demanded where you will not engage. With a third party that's handling your bitcoin unless unless they have this multi-insti institutiontion multisig custody enabled um because the benefits provided by this model are step function improvement that you would be dumb not to interact with a company doing that.

30:41.31

ilm

Yeah I agree. What? a I sorry I took us you you you presented 1 very you said it's like a base level for you further we need to understand this and then I sidetrack conversation for 10 minutes so yeah what else like. What other things. Do you see is like all right. This will be an impact from a bitcoin standard.

31:00.24

Marty Bent

So bitcoin peer-to-peer digital cash system running on a distributed system with limited counterparty risk and very importantly, quick time to transaction finality relatively quick time compared to. Incumbent banking system. Um, and that gets supercharged on second layers like the lightning network which allow you to lock up bitcoin in a 2 of 2 multi-sig and then send big small amounts bitcoin or large amounts of bitcoin instantly and settle instantly and so I think the instant settlement. Aspect of second layers like the lightning network is going to unlock a lot of economic opportunity that simply is not possible in the incumbent banking and financial system and the payment system built on top of it via companies like mastercard visa stripe paypal um, the fact that. Now have the lightning network that allows us to send small or large transactions. Very small. We talkingn microransactions instantly have final settlement is a massive unlock it prevents things like chargeback risk for companies which end up in higher prices for end consumers. Because those companies have to factor in chargebacks if somebody buys something with a credit card and then they go to their credit card company and say hey I actually didn't buy this That's that's a significant cost for a lot of businesses throughout the economy lightning network solves that and is it cross-border payments without permission.

32:36.18

Marty Bent

Being able to remit money back to a family member who may be living in a country like Venezuela or Argentina or Nigeria or India to do that instantly while evading companies like western union that typically take up to 30% of the transaction when you make it that's going to be. Massive cost savings for the end consumer and then what I'm really excited about for the lightning network and where it really get sci-fi it is it has given us the ability to fully realize the the original view of the internet and so when they designed the internet. Built the protocol they envisioned that there would be a payments layer and they actually built a payments layer or sort of an http four zero two error into the the layered stack of the internet imagining that there would be a payments layer of the internet when they originally designed it. And it wasn't until bitcoin and more specifically the lightning network launched that we've had the ability to realize ah that original idea and so now with the lightning network with bitcoin. We can essentially inject. Ah. The internet with a native payments layer and it's happening in real time and so to give you actionable sort of examples of this like 1 thing ai is very popular right now. Um, but right now if you want to use AiCompute

34:10.11

Marty Bent

You set up an account with Openai. You can your credit card information. You pay a monthly fee and you may use it once or twice a month just for just for fun. Maybe you're not using it. You're using it as a hobbyist but you're paying $20 a month which is very inefficient. You're not getting $20 worth of value out of the 3 times that you use it per month. With something like the lightning network you can completely granualize your usage ah of Ai tools ah in in a way that was never possible would not be possible using the incumbent rails and so there's. Extensions extension wallets in your browser. 1 of them is Albee Getalbe Dot Com is their website a l b y and this essentially allows you to put a bitcoin wallet in your browser and load it up with bitcoin and then as you go surf the web and you interact with. Websites that accept bitcoin over the lightning network. You can automatically pay it. Ah right there and we're beginning to see this with Ai models where somebody doesn't want to pay a monthly fee to open ai but they just want to use a model once or twice they can go to particular websites that have set up. Essentially a lightning ah bitcoin payment gateway between the end user and the ai compute and so you would go say hey I'd like you to make a picture of Jim Kreitter looking handsome in New Bronhels by by the river you'd hit. But.

35:41.23

ilm

We don't need Ai for that baby. Got the real thing. Ah.

35:44.70

Marty Bent

Hit send and then essentially your browser says hey if you want this give us ah 10 sats worth of bitcoin. Give us half a penny and bitcoin and you hit send boom you get your compute right back and so that um is a use case. Ah. Again, it was not possible in the incumbent system. So it gives the end user the ability to spend um ah small amounts of money to get things done on the internet very quickly and from the Ai company's perspective like they're okay doing that. Ah, because they know they don't have any chargeback risk as soon as the invoice is paid. The bitcoin is in their wallet and there's nothing I can do I can't call American Express and say hey I didn't I didn't buy that ai compute I need you to send me those sats back. It's not possible.

36:32.14

ilm

Yeah, someone else wanted that handsome picture of gym by the river that wouldn't be let me, um here we'll we'll break this down I'll play stupid play stupid. Um, well ah, what's the difference. You have a internet native payment system versus. Being able to pay via venmo or put my credit card information on the internet. Why is how is that any different and what's the benefit of having a internet native payment versus like giving my Mastercard online.

37:04.21

Marty Bent

So when you give your Mastercard online. It's again, it's not internet native who's essentially duct taped a ah like credit card form on top of a website and then once you fill that out the website sends that information.

37:04.85

ilm

He just.

37:19.50

Marty Bent

Up to Mastercard of visa says hey is this information good and you say yes, it's good and then manually using their own systems visa mastercard will take money out of your account. Give it to the company. Um that you're that you're paying for their good or service and that's not native at all. It's very clunky. You have. Ah, message going from the website to visa Mastercard server. They're saying yes, you're good. Give them the good and then they're on their servers taking money out of your account and giving it to the business and you're getting the good in return whereas with. Bitcoin being natively integrated into Http. There's no calling of that service. It's either. You have the bitcoin in your wallet or you don't in the browser and so it's essentially the company just calling your you. Your endpoint and saying hey do you have the money to pay you say yes I do sends the payment and it's a peer-to-peer transaction between you and that service or good provider at the end of the day they're not pinging something externally um and depending on somebody else's servers. It's literally a. We'll know you had the bitcoin. Um, if we ping you and you're able to pay the invoice. We don't want to ask anybody else.

38:36.71

ilm

Which I mean this carries out it practically benefits in a few huge ways one from a time perspective. It's instantaneous settlement versus a lot of people don't recognize like I guess we do sort of in a sense but like. When you go, there's a baker you cross a street from office dangerously close if I go there and buy a ah buy a crosant in a bit and I pay with my credit card that doesn't actually settle instantaneously I swipe the card it sort of feels like it does. So a lot of people don't recognize that. That's a difference between paying a credit card versus paying in bitcoin the actual instantaneous settlement. So the how quick this happens but also just the I think some it's really important here is the the fees that we're seeing so like at least in in my town I'm starting to see a lot of smaller restaurants. Are increasing their cost and we'll have an itemized or line item on their on the receipt for credit card fee. So things are getting really tight I mean obviously where everyone's experiencing inflation including the businesses themselves. Um, in 1 total sidetrack. There's a lot of people who don't understand how we've arrived at where we are from an economic perspective and they blame corporations. Ah for inflation as if as if like every few years corporations get together and they do this little thing with their fingers.

40:04.78

ilm

And a couple scrooge mid ducks and swim around and and gold and then they they say hey let's let's go ahead and you know we've been been making good profits lately. But let's really stick it to them and let's all increase our prices at the same time and to think that that's how economics work and like oh that's why I don't like. Um, that's why I don't like this and we need to go to a marxist society is because of of this you know it's it's capitalism as if as if that's what's yeah, it's as as if that is what's causing inflation is this gathering of corporate leaders every few years to say all right now we're going to do it. It's clearly.

40:28.64

Marty Bent

It's the bourgeoisie.

40:39.59

ilm

It goes back to the money itself. Okay, total side track anyways, so people are experiencing and experiencing inflation and so are companies and 1 thing I'm what I'm I'm seeing right now is companies in my town are passing on one of those inflationary hits the way they're hedging that is by passing on. Credit card fees because they're expensive like three four percent for a credit card transaction in a first world country I'm not talking if I go to Africa and try to pay and they're trying to verify payments across borders just in town. So I would I would love to see like and this is a very simple one like this could happen very quickly and it's already happening obviously with with companies that. Do accept bitcoin lightning payments but I could see this being a very entry-level way of more of like hyperbit bitcoinization in a real- life day-to-day manner of restaurants taking lightning payments and hey if you if you pay via bitcoin you'll get. You won't have this three and a half percent increase or we'll give you a three and a half percent ah deduction on your bill. Um I would love to see that like and are you familiar with any companies that are working on this outside of like obviously there's super niche places like that you and I are familiar with you go and buy like a bitcoin shirt or a bitcoin little fun gadget. You can pay in bitcoin. But are you familiar with? is there anyone who's working on ah actual payments that you know like the mexican restaurant down the street would be able to set up and like I go in and pay on my bitcoin. It's not this weird like oh you like bitcoin too like.

42:08.52

ilm

Normal people. My parents go out and it's like hey if I do this I can download this wallet I can pan bitcoin and I just save money and we start seeing this in a real life place like are you seeing anything like that.

42:18.94

Marty Bent

Yeah I mean I mentioned him earlier I don't want to pump his ah pump his wheels too hard here but Parker Lewis works for companies zap right? And that's exactly what they're doing doing. They're building invoicing software for businesses and individuals we use it here at tftc. Ah. She found out last month that my direct personal care doctor is using it now and so essentially what zap right? allows you to do is to connect your wallets their wallet agnostic so you can have an account at strike at river unchained and you can plug your wallets into their. Software you could self-hot your own wallets your own hardware wallets and plug that in to their software and then essentially what they do is they allow you to hook up your fiat payments as well. So stripe and and bank accounts directly and create this invoicing software. It allows you to set permissions or set up your invoice in a particular way where. You can present to your end user or your client hey here's your invoice you can pay using stripe and pay million in dollars here's the price and if you pay in bitcoin. You can get a 10 percent discount 20% discount they've actually fixed the flipped the framing where and I think this is actually very smart instead of getting a discount in bitcoin. It's a premium for the fiat where if you're going to pay in fiat. It's 10 % more expensive and I think that small psychological tweak is actually pretty important. But yeah that software.

43:47.37

Marty Bent

Gets back to what I said earlier in the conversation was like how do we get to hyperbiquinization. It's creating tools like zap right? that abstract um, something as simple like invoicing where you don't have to go into a wallet and pick ah an address to send to somebody you just plug it in to zap right? and. Software knows how to go find an address and send it to somebody a lightning invoice and sending it to somebody. Um, so that it's tools like zap right being built and then getting adopted and again going back to my personal life I was actually shouldn't be but I was shocked that my wife my kids and I always. Ah, direct personal care doctor that we essentially pay a monthly fee. It's called ultra personalsonal health care based out of dripping springs right? outside of Austin and Veronica runs that decided she wants to hold bitcoin in her balance sheet and uses apppright to give us the option hey here's your monthly bill. And paid fiat or bitcoin and so yeah, more of that being enabled by software like zap right is how we get closer to this bitcoin standard.

44:55.23

ilm

What else? Ah so I think that is one the most practical outside of like buying bitcoin holding bitcoin those are fundamental. We have to have onramps for right now and eventually the on-ramps if we think through like a total bitnized world like theoretically and there's. You know, does the Us dollar always coexist or whatever fiat or country's currency coexist with bitcoin or bitcoin be the money itself and you know I don't know like I think I think fiat currencies will exist for quite a while longer than I like them to um. And I think that will probably make for a healthier transition anyway, so we'll we'll have to have off-ramps and on-rampps and then obviously holding it is super important to make sure it's actually safe. Um, so those are foundational. How do I how do I get access to this be it buying it or mining it or transfer transferring it from peer-topeer. Then? how do I make sure that's kept safely so we spoke to both of those earlier and then how do I spend it. That's something you just spoke to right now like there's companies that are popping up like I can I can set up and receive this and there's means of sending it and that's primarily going to be through the lightning channel like we we talk through this is ah. And a previous conversation. The lightning network versus base layer payments and how you know that's one of the critiques of bitcoin is it's too clunky and takes too long but like there's tradeoffs with that you can have something goes a lot faster but there's there's again, there's there's any fishies that take place with trying to highlight that efficiency if you think to like a.

46:27.14

ilm

Um, not much of a video game person. But ah if you're if you're playing an old school video game maybe and you're building your ideal basketball player and you have a hundred points. You can Divvy up. You can make that basketball player. The biggest guy on the like the tallest guy on the on the court but he has a terrible shot or you can go for a guy who is amazing 3 pointer but like. He can't he like he's super slow. Whatever there's so many points you can divvy up and that's when we think through bitcoin itself like there's tradeoffs. There's opportunity cost and like bitcoin itself. It is slow and clunky every 10 minutes for a block and only so many things that go into a block but that makes sure the security and the decentralized nature of bitcoin itself. Is emphasized and that's where personally I think anyone who understands bitcoin and understands the problem that bitcoin set out to solve is we're not trying to get the most fast and efficient means of payment we're trying to get the most secure and decentralized means of payment online and ah out there. So um.

47:23.73

ilm

That's where these other layers come in. It's like right? How do we Then once we have security nail down. How do we? then? add efficiencies. Um, okay so that brings us to lightning network and payment rails. Um anything else. You're seeing like there's I mean there's there's there's neat things I think like streaming where you can pay like. Ah, sat per second or whatever for something you stream like you could I don't know I live in this really small bubble of bitcoin and weird spot of bitcoin and traditional finance. But you have this awesome opportunity to see other things like what are things that out there excite you it could be super boring or it could be like wow this is I haven't thought of that yet.

47:58.40

Marty Bent

Well, we'll combine a couple things here I'm very interested in mining as well. I've been professionally involved in the industry for 5 years now. It's one of the early members of great american mining we did off-grid bitcoin mining in. Ah, on upstream oil and gas wells to do flare mitigation North Dakota had learned a lot during that and have really fallen down the mining rabbit hole over the last five years and I am wholly convinced that what we're witnessing. Is the beginning stages of an integration of the energy sector in the bitcoin mining industry and I I think that's extremely bullish. Um, and what we're seeing both on-grid and off-grid is just bitcoin mining being this mechanism too. Be as energy efficient as possible to to eke out as much economic value from the energy sources. We're pulling out of the ground the electricity we're creating on the grid as possible. So Ongrib. We're also involved with a company called standard bitcoin now where essentially what we do. We go and we find rural areas in Tennessee and Kentucky right now that have falling populations and they have falling populations because they had large manufacturing facilities move out of the neighborhood either recently or decades ago because of globalization because the way the dollar works.

49:28.59

Marty Bent

Is we had to flood the rest of the world with dollars to drive demand for dollars reserve currency and one of the ways we did that was buy cheap goods from other countries and neglect our own manufacturing base. So um, we're seeing a standard bitcoin is this sort of fixing of that problem where we're able to go. Into these small virol areas that have substations that haven't been fully utilized for years because the manufacturing facility that was pulling electricity from it doesn't exist anymore and so there's not as much demand for that electricity. But the substation still there with a ton of capacity and so what we do is we we. Show up to town and we say hey you notice you got the substation here like how much excess capacity. Do you have and they say all right? We got ten Megawatts and of excess capacity. We go all right? We'll buy that from you and what this does is ah allows the local utility to buy more power and bulk from the Tv where we are and since they can buy more power in bulk. They get lower pricing and since they're utility co-op with a mandate to keep residential prices low they're able to pass that low price. Ah onto residential consumers who are paying their electricity buck bill month and month out and again this is a perfect example. Of bitcoin just creating this economic incentive to create efficiencies like we're able to get lower pricing. Um because the utility is able to buy in bulk the residents able to get lower pricing because they can buy in bulk. We're able to mine ah bitcoin profitably um, the town benefits and you begin reversing.

51:00.78

Marty Bent

This problem ah that the globalization of the dollar created starting in 1971 and so like that's not really a technical aspect of bitcoin. It's the physical aspect of bitcoin which is the mining world which is very energy intensive and so that's another thing I'm extremely excited about I mean at standard bitcoin. Um, again, the whole mining game is driving your cost down as low as possible. So our thesis is what we're building next to these substations right now is essentially a proof of concept for utilities companies that are going to see what we're doing. They're going to see the revenues. We're able to pay them and then there's going to be a. Ah, switch that flips in their minds eventually which is like hey we can actually mine cheaper than these guys because we have the power and we can just mine a cost and eventually utilities companies and power companies and energy companies that are extracting molecules upstream or wherever they may be will.

51:45.68

ilm

I.

51:56.82

Marty Bent

Integrate mining into their business stack. So that's a big one and then we can tie it back to lightning network as well. There's companies like Satoshi energy and sonota where they're building lightning software and accounting software that enables or starting with miners as their first users that enables miners to pay. Power bills to utilities using the lightning network on a daily basis for the utility that is a massive benefit because they don't have to wait and 60 and 90 whatever it may be to get paid then you can paid every day as these miners are mining bitcoin. You get paid in bitcoin. Ah. Ah, your pool pay outcome and then you're able you set up a lightning channel and you're able to pay your bill on the go and that actually gives a utility comfortability with the miner where the miner then doesn't have to put up a big deposit on the front end and lock up all that capital. They can go be more capital efficient outside. Ah. That setup as well. So yeah, the efficiencies that bitcoin brings both in the digital and physical world I think are extremely underappreciated right now and we're at this point fifteen years in where they're really beginning to coalesce and become obvious to those of us who are. Very close to the industry and live and breathe a day and and day out. But I think over the next decade the the benefits that it provides both on the software side and on the hardware side in the physical world are going to be completely obvious retrospect you'm like oh yeah, this was everybody's going to be like that this with no brainer.

53:29.00

Marty Bent

Bitcoin was always going to succeed.

53:32.50

ilm

Um I think obviously mining bitcoin gets a lot of critique and one of those is more directly to related to the mining aspect and the quote unquote waste of energy it is and I think there's 2 places that people view a waste of energy and I was actually thinking about one of these this morning. Um.

53:50.63

ilm

The one that's usually alluded to is the waste of like physical energy so electric cost and oil and gas or whatever. It's like okay that that could be better used by heating homes or cooling homes or I don't know like whatever like funding the war machine or whatever. Whatever we think is a better use of Energy. Um the other. Another critique that I don't hear is often is the better use of Energy. We have Energy. It's going towards bitcoin that can be better used elsewhere and that's the people's energy the amount of smart minds working in Bitcoin. What is these? What if bitcoin want a thing. Why do we have this weird pet project that we're Using. Energy and mind power on when we could better focus that on building things. So like I'll know for medicine to save. People's lives or I don't know any any project you deem more valid and those sound good until you recognize the problem that bitcoin solving. So if you think that if you think that the the physical Energy. Exp expand ah expended to mine Bitcoin is a total Waste. You have not got to a point of recognizing the alternative. The alternative is the current money system that we have so okay if you don't want bitcoin a better form of money in our opinion then you have we we stay with status quo and status quo right Now. There's There's no money going towards it. Versus Bitcoin is it seems like all right bitcoin costs a lot of physical energy status quo costs nothing This is way off but like what are the costs of staying on a dollar standard like what does that cost us and why why should we expand expend energy on bitcoin from a physical. Ah.

55:23.79

Marty Bent

Yeah, on on this note and I've got to run here in a bit but I think it's important to end on this because what I just described is a very direct first order effect of the energy efficiency that bitcoin mining can provide the world. There is all these inefficiencies whether be flaring.

55:24.00

ilm

Energy perspective.

55:41.58

Marty Bent

Natural gas upstream or just having all this electrical infrastructure that's completely underutilized in the rust belt because all the manufacturing capacity moved out like that's a first order efficiency gain by bitcoin mining miner showing up reducing that flair taking a advantage of that excess capacity that makes systems more efficient, more profitable and. Ah creates a better economic outcome for everybody involved at the end of the day the second order effect of a bitcoin standard which is I think what you were alluding to is it brings opportunity cost back to the market which makes it hard to print money. It makes it impossible to print money ah out of thin air which brings the opportunity cost back. And so in the incumbent fiat system. The fact that the governments and central banks of the world can just go in and create money at no cost and then go allocate that money to whatever they deem necessary to any any given point in time whether it be war solar and wind infrastructure health care education. Ah, that many would argue has been misallocated money pretty terribly. Yeah, the big man. Yeah, and so what bitcoin does and the bitcoin standard will reintroduce is since you can't do that you bring opportunity cost.

56:41.63

ilm

The big the big man. Whatever but.

56:55.52

Marty Bent

Back to the market so you've reduced the misallocation of capital because instead of just hitting a button printing money and throwing it at whatever you want you have 21000000 bitcoin and you have to make an informed decision of how you allocate that capital Ideally you allocate that Capital. And invest in things that are going to be productive and create cash flows that return your money then some at the end of the day and add value quality of life and productivity to the rest of the economy and so that is when you talk about the energy debate and juxtaposing fiat to bitcoin where I think people really need to internalize is the. Ability to print money out of thin air at no cost and then throw it at whatever The government wants is a massive waste of Energy. There's no opportunity cost. There's no economic calculation that needs to go into that you can just print money and throw it at what you want under a bitcoin Standard. It's simply Impossible. You have to make. Educated decisions about how you're allocating Capital and when the opportunity cost of misalcating that Capital is high. You're not going to waste energy on things that aren't going to return productivity and increase the quality of life to the rest of the economy.

58:01.27

ilm

Yeah, it's It's ah it's a cheap, very expensive alternative. It would be like on it I know you have you have you have a couple young kids I have a few young kids as as Well. So The the fiat versus bitcoin If for my kids I just thought of right now would be like. Yeah I do dishes feel like nonstop and the fiat way like my kids are fighting I hear them fighting The fiat response would be for me to yell hey shut up, you know, like whatever just go off on them that is that is that is that doesn't cost anything I can keep doing the thing that it was important to me at that moment and it solves a problem right? Then it costs me nothing or I can stop what I'm doing. Use energy to go sit down with them talk through hey what's going on. How do we fix your behavior right now but also change the way you behave moving forward and learn something from that in that moment that costs a lot more that would be the bitcoin it costs something but the long-term perspective of like well the other the yelling at them is free. No, But what are you creating by that you're creating a whole system that is built on fragility and is not healthy and that's where we're at right now is like look we're looking at just the cost in this moment like I have to stop doing dishes like what are you actually building and I think that's what bitcoin forces you to take a step out and say Like. What is the what are the long-term implications multi-generational impact here and ah, what are we are we building something that's healthy versus we building on something that's convenient in this moment and unfortunately we've been building base off convenience for a long time and it's It's certainly catching up to us.

59:28.27

Marty Bent

Yeah, the the backend pain created by that high time preference decision to take the easy route out is I mean. As you mentioned you've talked with Preston and James Lavish and I'm sure if you've watched this episode you understand the severity of the situation we put into as we've been put into as a global society due to all the debt It's been run up by these governments ah could be a lot of pain in the future. It's because. Um, the governments and central bags took the easy way out. They hit the button printed money out of thin air and just threw it at problems instead of taking the time to sit down and say hey maybe we shouldn't have been using our money this way. Maybe we should think about moving in another direction, especially considering. We're transitioning into the digital age. Um, it's I do think it's important for people to really grock this the the fact that opportunity cost in a world in which money can be printed out of thin air does not exist or if it does exist. It's very small. It's very small cost under a bitcoin standard. Opportunity cost gets correctly priced and people make allocation decisions based on educated sort of frames of mind that force people to actually think through the implications of how they're allocating money where today it really does you can.

01:00:57.38

Marty Bent

Spin up trillions of dollars and throw it at airlines and pharmaceutical companies and banks and again that creates a disincentive for them to actually act nobly or morally or ethically within the economy. They know that. The central banker government's always going to hit the button and bail the ball it the other day.

01:01:21.59

ilm

And on and on that light note now that's I think what it comes down to is like to fully understand this, you have to change your way of thinking and ah zoom out and yeah, there's place of being myopic and like understanding the technicalities of this which. Love like again, a lot of the companies you've mentioned and stuff they've zoomed in on very specific areas of making bitcoin better in the world. Um, but you also have to Zoom out and see like why are we doing this and ah so I appreciate you taking time and letting us zoom in a little bit and also um retain a healthy perspective of why why is this important. So Marty again. Thanks for thanks for joining me I appreciate it is sir.

01:01:55.90

Marty Bent

Jim thanks for having me it was blessed all right? see you.