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Bitcoin Is Eating The World | John Arnold

Jan 24, 2024
TFTC Podcast

Bitcoin Is Eating The World | John Arnold

Bitcoin Is Eating The World | John Arnold

Key Takeaways

The conversation with John Arnold from Ten31 highlights the vast economic opportunity that bitcoin and its infrastructure present to the world. Bitcoin, being superior money, is expected to be adopted universally, and this adoption will drive demand for companies building applications and services around it. The discussion delves into the potential of bitcoin to disrupt various industries, from financial services to energy, and the role of venture capital in fostering this transformation. The key takeaways from this dialogue are:

  1. The bitcoin ecosystem is maturing rapidly, with more companies emerging to innovate and build upon its infrastructure.
  2. Bitcoin's superior monetary properties, such as absolute scarcity, permissionless access, and global transferability, make it the best form of money and a catalyst for widespread economic change.
  3. The total addressable market (TAM) for bitcoin-related companies is immense, potentially reaching or exceeding the size of the enterprise SaaS market.
  4. Traditional industries, from payments to energy, will need to integrate bitcoin to remain competitive, leading to a broad spectrum of investment opportunities.
  5. Specialization and focus in venture capital, as demonstrated by 1031, offer significant advantages in understanding and capturing the value within the bitcoin space.
  6. The venture capital industry has been slow to recognize the potential of bitcoin due to distractions from other crypto assets and a lack of understanding of bitcoin's fundamental principles.

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Check out Bitcoin is Eating the World:

Bitcoin Is Eating the World
An Investor’s Case for the Biggest TAM on Earth.

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Best Quotes

  1. "Bitcoin is superior money. And there is no way that any self-interested economic actor will be able to ignore indefinitely the consequences of what that means and will be able to indefinitely not adopt and use bitcoin in some way." – John Arnold
  2. "Free markets are ruthless about excess margin and inefficiency. If there's a way to take costs out of the system, if there's a way to do something that serves end users better and that an entrepreneur can profit from doing, the market will do that." – John Arnold
  3. "Every company will have to become a bitcoin company to survive." – John Arnold
  4. "Focus is a highly powerful lever to driving investment returns, and that's a big part of what we do, focus." – John Arnold
  5. "We're just getting started, and there's a lot of work to do." – John Arnold

Conclusion

The conversation with John Arnold underscores the transformative potential of bitcoin and its underlying technology. As bitcoin continues to demonstrate its superiority as a form of money, its adoption is expected to reshape industries and create new economic opportunities. The venture capital space, particularly funds like Ten31, are poised to play a pivotal role in nurturing the growth of bitcoin-focused companies. Through specialization and a deep understanding of bitcoin's attributes, these funds are well-positioned to capitalize on the burgeoning market. The future of bitcoin is not only promising for investors and companies within the ecosystem but also for the broader economy as it embraces a more efficient, secure, and decentralized monetary system.

Timestamps

0:00 - Intro
7:06 - The real John Arnold
10:26 - John’s background
23:10 - Total addressable market
29:31 - Tech stock returns
34:42 - Best time to jump in
44:04 - Why Bitcoin is eating the world
52:01 - Financial services
1:03:06 - Consumer applications
1:09:06 - Replacing the incumbent system
1:21:48 - Venture capital not recognizing
1:29:57 - Ten31 network
1:35:07 - Bitcoin is fun
1:40:45 - Wrapping up

Transcript

00:00:02:16 - 00:00:05:03
Marty
John Arnold.

00:00:05:05 - 00:00:07:22
John
Mary Beth. It's an honor.

00:00:07:24 - 00:00:12:25
Marty
It's a long time coming, sir. Working together for, what, two years now?

00:00:12:25 - 00:00:16:12
John
Almost close to two years. Yeah.

00:00:16:15 - 00:00:25:04
Marty
We're very lucky to have you on our team at 1031. I just want to say that up front, I.

00:00:25:06 - 00:00:33:19
John
The feeling is mutual. Very, very bullish on what we're doing. I think it's very unique and we're just getting started. So I'm excited.

00:00:33:21 - 00:00:51:11
Marty
Yeah. Before we jump into what we're here to talk about, which is the fact that Bitcoin is eating the world. You wrote an incredible piece laying out the case for Bitcoin being the largest total addressable market on the planet. But before we do that, are you the real John? John Arnold? That's the question I think we need to.

00:00:51:13 - 00:01:19:02
John
My parents. My parents would say yes, but there is a slightly more famous and just slightly wealthier John Arnold out there who happens to be a billionaire. And I guess this quick background on me, I am a traditional finance refugee, starting an investment banking around a college, then went to work at the hedge fund Citadel for several years.

00:01:19:02 - 00:01:44:15
John
And while I was there, I got an email from another another billionaire by the name of Ken Griffin asking to to talk to me right away. And obviously assumed, as we're all trained, to assume that that's, you know, some kind of spams in a phishing attempt. But when I referred it to our I.T. department, I was assured know it's the real Ken Griffin and you better give him a call.

00:01:44:17 - 00:02:22:19
John
So I gave him a ring, and I believe he was trying to get my opinion on some gala or charity event. And I was unfortunately unable to provide any useful information to him and hung up the phone, assuming surely I'm about to be fired, checked in with his secretary to find out that he was actually looking for the John Arnold the the real one, the billionaire with whom he presumably has some kind of relationship and not the underlying John Arnold, who was, you know, a first year analyst at his firm.

00:02:22:22 - 00:02:28:27
John
So that's my claim to fame at this point as being the the second John Arnold in the world.

00:02:29:00 - 00:02:37:07
Marty
Well, the second John Arnold. But for a secondary like oh, Ken, Ken's like in my my work as an analyst, my pressing him.

00:02:37:09 - 00:02:58:02
John
You know, generally when you're like 23, 24 and the billionaire CEO of your company wants to talk to you, it typically isn't a good thing. So my first my my first response was not positive, but turned out to be turned out to just be a mistake, an innocent mistake. So we live to fight another day.

00:02:58:05 - 00:03:20:19
Marty
Yeah, that's one of the funnier stories that you have in your belt. You have a few of them. That's one of my favorites, but it's a good level setting for the context of this conversation. Obviously, you're with us at 1031. You've come full throttle into the Bitcoin ecosystem, helping back the companies that are building out the infrastructure for Bitcoin standard.

00:03:20:19 - 00:03:32:24
Marty
Before we jump into the article and all that. Let's talk a little bit more about your background, what you're doing at Citadel, what you're doing before that, what you were focused on and how that applies to what you're doing now. 1031.

00:03:32:26 - 00:04:02:26
John
Yeah, for sure. Post-college, like I said, I started in investment banking at Goldman. For those that don't know, that's a lot of Excel modeling, building PowerPoint decks, turning comments from, you know, senior members of your team at 4 a.m. and just trying to survive and learn, you know, the basics of kind of corporate finance. I knew I wanted to be an investor likely in the public markets.

00:04:02:26 - 00:04:40:00
John
And so recruited for positions at hedge funds landed at Citadel, which had me doing a lot of investment analysis publicly traded companies. I was on health care desks focused even more specifically on medical technology and the model of a lot of those modern kind of hedge fund businesses. The big shots is to have kind of an army of people who are inch wide, mile deep, focused on very particular subsectors and trying to be the acts in those subsectors and just kind of know them better than anyone else in the market.

00:04:40:03 - 00:05:05:18
John
That'll be relevant to kind of the story of what we're doing at 1031 in a second. But I did that kind of was a junior analyst working out to some extent, worked on a couple of different desks, always focused on medical technology, providing a lot of the underlying analysis for investment decisions that our desk would make for positions usually on very lean teams.

00:05:05:18 - 00:05:35:16
John
So only a few people typically worked for kind of just one person above me, providing input, analytical inputs, meeting with management teams, doing channel checks and just kind of learning as much as I could about the companies in our portfolio. And so kind of built up what I think is a pretty strong muscle on just basic blocking and tackling of corporate finance and investment analysis in a public markets context.

00:05:35:19 - 00:06:11:16
John
But I had always been kind of a big supporter of Austrian economics, even from high school onward. You know, you've you've talked at length. You just had the episode of Parker Lewis out about how you guys were kind of both formed by the financial crisis in a way. I was also kind of in high school at the time, right around the same age as you, and that caught my attention and made me interested in finance in a big way for the first time, but also interested in kind of what the causes of that debt crisis were and why suddenly all the smartest guys in the room seemed to not know what was going on and

00:06:11:16 - 00:06:44:16
John
why we needed to take out untold levels of debt and print untold levels of money on hold for that time to bail out the system. And so that naturally led me down. The Federal Reserve rabbit hole and into kind of Austrian economics and the thesis Institute and, you know, became a big Ron Paul supporter. And so I always kind of had that vein running through kind of my intellectual life here while I was working in finance jobs.

00:06:44:19 - 00:07:11:24
John
Obviously, as you would imagine, a lot of those principles are not you know, they're not orthodoxy on your your traditional finance desks typically. So didn't necessarily have a lot of opportunity to put those into practice. But, you know, over time, kind of working in those jobs, you sense like especially if you come to those jobs with the priors of Austrian economics, you can kind of sense that there there's something a little wrong, at least to say the least.

00:07:11:26 - 00:07:56:00
John
There are kind of strange like short term games being played and there's kind of less and less focus on fundamental analysis and attention, less and less attention paid to what's a fundamentally justifiable valuation for a company. A lot more focus on just short termism, quarterly earnings reports or even, you know, weekly monthly moves in a stock position, focus on others positioning and kind of just increasingly trading all stocks, as you know, more or less like shit coins, just like tickers on a screen that have maybe some tenuous link to real economic realities, but like, not really that you only have that you have to like, pay attention to.

00:07:56:03 - 00:08:22:05
John
So I kind of went through that career progression with those priors in mind, and you would think that that would have led me to fully grok Bitcoin much sooner. But I heard about it for the first time in 2013 in college. I think around the time that Malcolm X blew up, I knew it was kind of a it was popular among libertarians, but it seemed, you know, esoteric and scammy.

00:08:22:05 - 00:08:48:08
John
And I thought my science project got probably never going to work. Then I my next touchpoint was while I was working in finance in the 2017 Bull run, got a little more interested then, but still just didn't have the conviction to fully take the plunge. And you know, obviously you're drinking from a firehose on finance desks and you have a lot of time to to drill into something that takes 100 plus hours of work to to start to get.

00:08:48:08 - 00:09:19:13
John
So that didn't work either. But finally, you know, spring 2020 happened and that forced me down the rabbit hole. And after a week or two of some real diligent work, it finally clicked that this was indeed the fulfillment of the principles that I had learned from economics. This was Hayek's sly roundabout way to change the system, the monetary system for the better, in a totally peaceful, voluntary way.

00:09:19:15 - 00:09:40:06
John
And so from then on I was hooked. I continue to work my hedge fund jobs for, you know, other year plus just kind of learning as much as I could about Bitcoin being in the space as much as I could, you know, much too much of my wife's chagrin, as I'm sure a lot of you know, Bitcoiners can can attest, it becomes kind of the only thing you can talk about or think about.

00:09:40:06 - 00:10:22:13
John
So I went through that period, but to your point about coming from investing background around summer 2021, so after being in Bitcoin for a little over a year, kind of just started to have the intuition that if Bitcoin was going to do what I thought it was going to do and what most of people listening to this probably think it's going to do, there will be a massive kind of wave of demand behind that for companies building applications to make Bitcoin easier to use to extend its utility to both those retail users and enterprises.

00:10:22:15 - 00:10:43:24
John
And because Bitcoin is money, then there's no industry that it's not going to touch and we'll get into that more. But that by itself was kind of this intuition that made me start thinking about investing in Bitcoin companies and trying to figure out a way to do that. And right around that time, 1031 popped under my radar, kind of came out of stealth.

00:10:43:26 - 00:11:19:23
John
And, you know, I saw that very honest, combining traditional finance experience, you know, some of the two co-founders have experience in private equity and hedge funds. And then they were bringing, you know, you and Matt O'Dell on and, you know, you guys were formative in my orange building experience, my going down the rabbit hole. And so it just seemed like the perfect kind of shop to go try to build and stud a totally unique opportunity combining the two things you would need to be a successful investor, right?

00:11:19:23 - 00:11:52:11
John
In the Bitcoin space, which is some traditional finance investing experience and deep, deep Bitcoin knowledge in Bitcoin focus. So I think I slid into Grant's DMS, you know, in like summer or fall 21 and just kind of wouldn't let up until we got on the phone. He and I started talking and I started doing some work with you guys when it, when I had a chance on the side and one thing led to another and yeah, spring of 22, I think the day that Terra Luna blew up at full time.

00:11:52:14 - 00:11:53:27
Marty
Baptism by fire, maybe.

00:11:54:04 - 00:12:21:02
John
Yeah, exactly. Exactly. But it was validating, too, right? I mean, it's exactly the kind of thing where, you know, a couple of years before I'd been looking at all the investment in the crypto space broadly and thinking these things look like perpetual motion machines. You know, it's there's a ton of noise. Everyone's missing the signal of remaking money of kind of digital buried value that's absolutely scarce.

00:12:21:04 - 00:12:46:05
John
And, you know, that was one of the things that pulled me to 1031 with, you know, the concern and viewpoint that you guys were taking. And so I think it was appropriate that basically the day that I joined, we were kind of like vindicated in a very big way. You know, unfortunately, when one of the probably the perpetual motion machine of crypto par excellence totally blew up par excellence.

00:12:46:07 - 00:13:14:21
Marty
That's again, four level setting for this conversation. It's so true. I mean, I had a very short stint in traditional finance about three years, which included two years of college, whereas working full time and taking night classes. But it was different side of traditional finance with Men's Futures Fund, your fund of funds index, commodity trading advisors. So it wasn't like a long short equity portfolio where we're diving into individual companies and looking at valuations and trying to place bets that way.

00:13:14:21 - 00:13:40:04
Marty
It was more of a macro theme looking at commodities markets, and I had similar experience where I would sit there with the chief investment officers of these large commodity trading advisors, and this was in 2012, 2013, right around when Janet Yellen was taking over the helm and we were coming out of QE twist and into QE two. And I was simply asking them, like, you guys worried about all this monetary base expansion.

00:13:40:04 - 00:14:12:15
Marty
They're like, No, the Fed doesn't really control markets. And I think the amount of complacency that I witness at a young age at that level of high finance, if you will, for lack of a better term, was was eye opening for me. It was like, oh, all the quote unquote, smartest people in the room really don't care about something, which I'm pretty sure we'll have an immense impact on global markets everywhere, whether it's equity, equities or commodities and other financial assets like treasuries.

00:14:12:18 - 00:14:35:11
Marty
And that was really radicalizing for me in a way where I was like, wow, these nobody knows what's going on. And that's same time falling down the Bitcoin rabbit hole and really realizing, Oh, this is solution to solve all this insanity in the world, all this mispricing, we need to fix the pricing mechanism, which is the money. And that dovetails into what we're going to talk about.

00:14:35:15 - 00:15:07:16
Marty
I would argue that over the last 15 years, six years now post 2008, the ability to actually go in and properly value companies has been completely distorted. Look at a p e ratio of some companies like NVIDIA above 200, which is insane. Obviously the amount of monetary base expansion and debt expansion has flown into financial assets and yes, and P at all time highs or it hit all time highs in the last week.

00:15:07:16 - 00:15:27:22
Marty
I'm not sure where it is today and and check yesterday and people view that as the stock market being a barometer of the economy like oh everything's well and good but if you look at the dislocation that exist out there in terms of the quality of life that individuals have and the amount of economic pressure that your average Joe is feeling right now just does not compute with what's going on.

00:15:27:22 - 00:15:57:14
Marty
So there's a dislocation. Bitcoin, hopefully some money standard will get us back to a proper pricing mechanism that will allow us to then go allocate capital efficiently and properly to to do productive things, to increase the quality of life of everybody. And then what we're doing is sort of a layer above that, like we're going to fix the money, then to do that, we have to build out infrastructure that gives people access to that money and provides them utility to do things with that money.

00:15:57:14 - 00:16:22:13
Marty
So that's what we're trying to do at 1031, investing in in private company is building out this infrastructure. But before we dive into the nitty gritty of what we're doing, I think it would be a good place, a good place to start would be to just dive into the heuristic of total addressable market versus other heuristics, which you you up in the piece with these frameworks that investors use to sort of make their decisions.

00:16:22:13 - 00:16:32:16
Marty
It could be value based, could be team based. But the one that unites all that you put in the piece is total addressable market. What is the opportunity we have to get a return on our capital?

00:16:32:19 - 00:16:58:21
John
Yeah, absolutely. And I would say the various kind of pure risks that investors use to private investments are not mutually exclusive, right? So probably you should be evaluating a variety of things, including, you know, you have to even a great investment can actually you know a great company can't be a great investment if it's like very poorly priced.

00:16:58:21 - 00:17:23:12
John
Right. So if you get in at a level that is dramatically overextended relative to kind of the free cash flow that the company can actually generate over a reasonable holding period, then even if they are indeed like a good team in a good market with a good product and, you know, competitive moats, etc., you know, the pricing of the investment can completely throw your returns out of whack.

00:17:23:12 - 00:17:54:08
John
Right? So valuation is important and it's one of the things that I saw not really being kind of respected during my time at Rural Finance. So that's an important heuristic that I think will return to more and more as Bitcoin hopefully kind of resets our monetary framework. And you know, there are various other kind of ways that you can shop up and look at whether a company is an attractive investment and you should do all those different things.

00:17:54:10 - 00:18:41:17
John
But the point that I make in the beginning of the piece, as you point out, is pretty much every investor kind of regardless of whether they're just trying to buy, you know, the cheapest things possible and hope that they can kind of get a pop in a relatively short time, just as valuations. Correct. Or whether they're hyper focused on growth and in the most cutting edge technology that they can find or, you know, anything else everyone needs to and has to inevitably pay attention to TAM, as you say, total addressable market, because for a given probability of success of the investment and for a given quality of a team and for a given level of

00:18:41:17 - 00:19:06:01
John
scalability of a company using unit economics, the huge lever that will differentiate between all of those pulling them all kind of equal is just how big is the prize that they're actually targeting, right? You can think of it on one extreme, one extreme end of, you know, a local kind of, you know, contractor doing work around like his hometown.

00:19:06:03 - 00:19:36:08
John
That may be like an absolutely great business. And probably we need like a lot more of those. We need more skilled tradespeople and electricians than we have in this country for reasons that you talk about in other episodes of this podcast. But there's naturally kind of a ceiling on how much revenue that business is going to generate and thus also, you know, how much cash flow it can it can generate, which is ultimately what you have to care about when making an assessment on whether you're going to make an investment or not.

00:19:36:10 - 00:20:08:07
John
And so as you ramp up the the addressable market, the shots on goal, the the size of the customer base that a company is selling into you, you've lever up and you ratchet up the impact of the team and the impact of scalability and you know, the impact of the profitability for a given business with a 20% profit margin that can max out at, you know, $1,000,000 of revenue right?

00:20:08:10 - 00:20:30:27
John
Okay. Well, you get $200,000 of profit off that. If you can scale those same economics with that same team to, you know, $100 Billion market, just by having just by addressing a bigger opportunity, you've already you've dramatically levered up and scaled up the price that you can pay for the investment to make sense and the amount of free cash flow that it can generate.

00:20:30:29 - 00:20:51:14
John
And so as I point out in the piece, like TAM is not the only thing that matters by any means. And in fact, certainly there are kind of more traditional VC early stage investors that have gotten way too focused on kind of like pie in the sky tam numbers and said, I can pay pretty much any multiple that that I want.

00:20:51:14 - 00:21:10:06
John
I can I don't have to care about, you know, time to revenue generation or time to profitability because it's just this company is addressing $1,000,000,000,000 market, $100 trillion market. And so you can throw out these wild numbers and even at a very low probability of success, you can convince yourself that, you know, something is maybe a great investment.

00:21:10:14 - 00:21:38:07
John
So that's not the way that we need to go. And again, I think as capital gets more expensive, as easy money goes away, that kind of thinking will go away. But there's still significant value as you differentiate between investments in looking at how big is the actual opportunity set, because that's going to, at the end of the day, you know, to bring it back to kind of like, you know, Boomer Warren Buffett language like your margin of safety goes up.

00:21:38:10 - 00:22:02:16
John
Yes. You're addressing a much, much bigger market than someone else. You just have more shots on goal to drive revenue, more potential customers and a bigger total pie that you can sell into and maybe, you know, take share up. Right. You know, would you rather have 10% of $1,000,000,000,000 market or, you know, 50% of $100 million market rate?

00:22:02:19 - 00:22:27:06
John
So the just gaming that ratio in your favor by addressing the biggest markets possible is, I think, a major lever of investment success that pretty much any investor, regardless of kind of their stripe and what they focus on in terms of methodology, needs to pay attention to. And you know what every investor out there who's paying cash, Pashtu.

00:22:27:09 - 00:22:56:29
Marty
Yeah, in this piece Bitcoin is even the world was obviously a play on software. Is he in the world? I mean you mentioned explicitly in the piece by Marc Andreessen from A16z Anderson Horowitz. And I think to set the context for the Bitcoin conversation and it is important to go back and look at the last wave of innovation that led to insane returns for investors, which is obviously the transition to digital age and the companies that really capitalized on that.

00:22:56:29 - 00:23:11:04
Marty
So you have a great chart here of the investment returns of the core for Apple, Microsoft, Google, Amazon, juxtapose the S&P gold in long bonds over a 20 year time horizon. And it is pretty insane when you look at it.

00:23:11:06 - 00:23:31:29
John
Yeah, absolutely. I mean, this is you know, I kind of acknowledge in the piece like this is not going to be surprising to anyone who looks at it. I think if you've been paying even the slightest amount of attention to if you have, you know, a retirement account, if you have any kind of like portfolio and, you know, increasingly, you know, no one has been able to really save and just in dollars in a bank account.

00:23:32:02 - 00:24:05:02
John
So we've all had to kind of pay more attention to this right over the last ten, 20, 30 years. I think everyone intuitively knows this is the case, right, That FAANG stocks broadly, these massive tech leaders, what are now being called like the Magnificent Seven, are really holding up a lot of a lot of the S&P and are explaining a lot of, you know, overall stock market returns because and part of that is because of, you know, monetary base expansion, that it's kind of deleterious consequences and forcing people to apply more premium to them.

00:24:05:09 - 00:24:44:21
John
But there's also there's also real dramatic economic value that's been generated by the right like there's a reason that these companies are in the position that they're in. It's because one of the main reasons is because they were leading infrastructure providers at the forefront of a radical secular shift in the way that commerce operates. Right. The materialization of communication and information storage and transfer through Internet enabled software was, you know, the highest leverage are among the highest leverage innovations and inventions in human history.

00:24:44:29 - 00:25:18:25
John
And people obviously needed tools and applications and services to fully avail themselves of the benefit of that. Right. And so the companies that you see on that chart, Apple, Microsoft, Google, Amazon and several others that we can think of, one by positioning themselves as market leaders, providing those services. And, you know, obviously the the path to get here is is is strewn with, you know, some corpses of companies that were once their competitors that that didn't quite make it.

00:25:18:25 - 00:25:49:11
John
And some of those companies just got bought by the few companies that you see on that chart. But nevertheless there was very clearly tremendous value generated even before the crazy kind of multiple expansion of the last 5 to 10 years by the bellwether companies that enabled mass, both retail and enterprise use the primitives of the Internet protocol stack and of, you know, consumer software, right.

00:25:49:14 - 00:26:16:17
John
And so, you know, Andriessen, as you referenced, wrote his piece in 2011, software is eating the world to kind of encapsulate that point, that exact point, that this is a massive secular shift. And the companies that were driving it were set to even in 2011, there were still a lot of low hanging fruit to be collected. The companies that were picking that low hanging fruit were set to drive massive returns for investors.

00:26:16:19 - 00:26:41:06
John
And that did right. The difference, I would say, with his piece versus kind of where we are right now with Bitcoin is in 2011, right like the iPhone had been around for years. Android followed shortly after Facebook had been around, I think seven years. I think hundreds of millions of users. At that point, Netflix was already doing streaming and that was clearly picking up steam.

00:26:41:08 - 00:27:05:27
John
Amazon had like pretty much already already, you know, signed the death warrant for, you know, physical bookstores and a lot of physical retail. So he wasn't really saying anything like highly controversial. Yeah, maybe like, you know, capital allocators weren't fully paying attention and maybe they were still somewhat underweight tech. But in reality, like your grandma was already on Facebook in 2011, right?

00:27:05:27 - 00:27:27:12
John
Like it was becoming a fairly consensus viewpoint, but we're said it where we're seeing that Bitcoin today is, you know, we're 15 years ahead, probably 15, 20 years ahead of where Andriessen was when that piece was written. The theme is just as powerful and I would argue even more powerful, but it is far less consensus at this point.

00:27:27:15 - 00:27:37:22
John
And that means that the asymmetric upside is orders of magnitude greater. So that's a reason to be excited, I think, about what we're doing.

00:27:37:24 - 00:28:05:09
Marty
Yeah, I mean, when you were going through that, the the fact that the competitors came, when it went throughout time in the tech sector, I couldn't help but think I always thought that Jeeves was going to is going to make it and compete with with Google. But I guess I mean I completely agree we're much earlier in Bitcoin's lifecycle compared to when Andriessen wrote his piece in 2011 where the tech cycle was then.

00:28:05:12 - 00:28:11:08
Marty
And I guess that gets into the question of timing. Can you be too early in this?

00:28:11:11 - 00:28:35:21
John
Yeah, I mean, that's that's a key like lesson to learn in investing is that, you know, being being early is tantamount to being wrong. So there are definitely situations where in my own career I've been kind of right on the investment thesis over like a 12 to 24 month period, but you very wrong in like a three month period.

00:28:35:23 - 00:28:56:01
John
It's a timing is very important. What I would say though is I think what we discovered over the couple of years, I guess four years now since the drone was launched, a couple of years since I joined is, you know, we people always say in Bitcoin that, you know, the the best time to buy Bitcoin was yesterday. The second best time is today.

00:28:56:03 - 00:29:21:02
John
I actually think the flipside is true for bitcoin infrastructure. You know a few years ago even Bitcoin still had not gone through as many stress tests as it has today. Lightning was still, you know, even more immature than it is today. And certainly I think it's still quite early for lightning, but there were very few companies even really building on it at scale.

00:29:21:04 - 00:29:52:06
John
And we multisig was still fairly new, Unchained was still having to really beat the drum on just even using collaborative custody at all. Now you can see like some real indications that those things have shifted significantly. We've had a lot more stress tests since, you know, five or six years ago. Blocksize wars tax, the China mining ban and a variety of other things.

00:29:52:06 - 00:30:17:14
John
You know, yet another 80% plus price drawdown. I think that's for now in Bitcoin's history, maybe 35. And so we're at a point now where there's a greater degree of maturity in the ecosystem, in the builders, in the ecosystem. And in just the last couple of years, we can say, you know, anecdotally and I think we might have actually put out some data on this in a prior piece that we wrote.

00:30:17:14 - 00:30:49:01
John
But the number of companies coming to market with really interesting solutions is inflecting. I don't have the numbers off top of my head, but there have been far more Bitcoin deal, Bitcoin only deals done in the last few years, even amidst kind of the carnage of the VC, carnage of 22 and 23 than the last couple of years probably, you know, combined the deals that we've that we've seen in the market overall that vastly outstrips the total deals done in the ten years prior.

00:30:49:01 - 00:31:25:28
John
Right. So I think we're entering the stage where the technology stack the ecosystem, the companies and the quality of companies are mature enough and have progressed to the point where you would have been to early like five years ago probably. I don't think we're too early anymore. I think we're at exactly the right time to lean into this thesis, especially heading into a period of the next famine coming up, and 11 major criminal finance institutions now having put their imprimatur on Bitcoin being an investable asset for institutions.

00:31:26:01 - 00:31:46:00
John
You and I might not care about that that much. And I know I will not be owning the ETFs and I highly recommend everyone listening to this choose a collaborative custody option like what Unchained offers or, you know, another option like that where you can actually own real underlying Bitcoin while also not having to take on the complexity of key management.

00:31:46:07 - 00:32:05:26
John
But that said, it's still very meaningful that the biggest asset manager in the world has now filed for this ETF. And Larry Fink, the head of that asset manager, has changed his tune in just a few years time from Bitcoin is a tool for criminals, is an index of money laundering. It has no intrinsic value it makes no sense to.

00:32:05:27 - 00:32:30:28
John
It's a tool. It protects you. It's it's there in case your your government tries to censor you or it's there to protect you against monetary debasement. You know, suddenly he sounds like, you know, Ron Paul like ten or 15 years ago. Right. He's kind of parroting those same lines. And I don't I think we shouldn't understate what that means for institutional awareness of and acceptance of an adoption of Bitcoin and what it will mean over the next 5 to 10 years.

00:32:30:28 - 00:32:54:13
John
And so I look at all that and I say, okay, no, we are not too early. Like this is just the right time where the asymmetry is still there, the alpha is still there, people still don't fully get why Bitcoin is differentiated and why these opportunities are exciting, but they're starting to wake up. The ecosystem is significantly more mature than it was even just a few years ago.

00:32:54:20 - 00:33:05:04
John
And so we're at a really good kind of balancing point where we're not too early, we're not too late. And I think it's exactly the right time to be leaning into investing in these companies.

00:33:05:06 - 00:33:36:29
Marty
I completely agree. Having been around Bitcoin for ten years, the maturity of the space over the last five years particularly has been amazing to see. And you couple that with the macroeconomic tailwinds that are coming our way, not only is the fiscal situation here in the United States utterly dire, it seems that the banking crisis that we experienced last year is probably just a Band-Aid over and lurking right under the surface, ready to pop up at any time.

00:33:36:29 - 00:34:04:03
Marty
And then you have the culmination of geopolitical events that have happened over the last few years where the U.S. has weaponized the dollar system, seized Treasury assets, and you have other large players in the geopolitical realm beginning to form alliances that that seem like they could attempt to erode the sanctity of the U.S. dollar as a global reserve asset.

00:34:04:03 - 00:34:28:10
Marty
And you mentioned the ETFs getting approved. And I think another thing socially, I mentioned earlier, like people really feeling the pressures of inflation in their everyday lives is beginning to stoke that that question in the common man's mind, like why is this happening? Why can't I live a higher quality of life like I was just able to five, six years ago.

00:34:28:13 - 00:35:03:02
Marty
And naturally that that question will will lead them to the solution which is Bitcoin. And once they come to understand it, which I think that's another part of the thesis here, is that think as it stands today in 2024, there's never been more of a wealth of a knowledge base built out for people to easily learn what Bitcoin is, why it's important, and you have different educational materials for the different types of archetypes of people in the way in which they learn.

00:35:03:08 - 00:35:45:09
Marty
So I think timing is perfect. We've got another having coming up. We were just in Nashville last week and I think that is I mean, obviously I've been hyper focused on mining for the last six years, but I do think that is one of the first big dominoes to falls once the energy sector really notices and leans into the benefits that Bitcoin mining as a an alternative revenue stream, a grid balancer, or in a way to be more efficient with your your stranded assets once that light bulb goes off in the energy sector and they lean in heavy, I think that's a massive domino that begins to spread and make it obvious that Bitcoin is

00:35:45:09 - 00:36:11:06
Marty
here to stay. It's it's a net benefit for humanity and there's going to be a lot of activity. Companies spun up people saving in Bitcoin. It's going to get really cool. And I think I've never been more excited. It is daunting. Ten years, many cycles, as you can see on my face. And look, I'm only 32. I probably look like I'm 42.

00:36:11:08 - 00:36:13:02
Marty
I've seen a lot, but.

00:36:13:05 - 00:36:15:03
John
I would I wouldn't have put you into over 28.

00:36:15:05 - 00:36:42:11
Marty
Oh, thank you. Thank you. Um, but not the timing feels feels good. And I think the fact that that Bitcoin has survived these waves and it just really reinforced the value prop of the network, the peer to peer distributed cash system, the hard supply, and the fact that hashrate has gotten to the level that it is and been distributed geographically as it has over time, I think it's you.

00:36:42:12 - 00:36:58:19
Marty
You'd be an idiot not to recognize that there's something here. But the fallback to sort of the the underlining first principles of why this is important like wise Bitcoin eating the world like in your mind.

00:36:58:22 - 00:37:37:27
John
Yeah, for sure. The the simplest answer is bitcoin is superior money and there is no way that any self-interested economic actor will be able to ignore indefinitely the consequences of what that means and will not be, and will be able to indefinitely not adopt and use Bitcoin in some way. The I go through kind of the properties that make Bitcoin secure money in the piece and like a little table, it's probably something that, you know, if you've been in this space for a little while and you've seen a version of it, if you're newer to the conversation, you know, we can walk through it together.

00:37:37:27 - 00:38:00:03
John
It is right there. I highly recommend just kind of taking a second to step through it, informed by people who have been in the space for a while, as well as just offering economics and kind of principles there. But these various properties kind of lead you to the inevitable conclusion that Bitcoin is the best money we've ever had.

00:38:00:05 - 00:38:24:27
John
And as 1031 advisor Parker Lewis famously, at least famously, for those who are in the Bitcoin space, wrote in the piece on Bitcoin obsolete all our other money. Money converges to one, right? You don't want to hold ten monies where your money A is like your best one. We also hold some of money which isn't quite as good and it doesn't hold value as well.

00:38:24:27 - 00:38:45:12
John
And it's not as liquid and salable, but still okay. And when we see etc. like no, you will always trade the inferior monies. You always tend to trade the inferior monies as much as possible for the superior money. Even in the world that we live in today, you can look around and say, well, every sovereign nation has, you know, just about every sovereign nation has its own currency.

00:38:45:14 - 00:39:06:02
John
And we're kind of in this world that topical, you know, partial barter between these currencies, which is like reintroduce the double coincidence of once the problem money was introduced to solve. And so you could say, well, you know, we haven't converged to one, you know, in the last 50 years since the start of the Fiat regime, like is it really true that one, convert it to one?

00:39:06:09 - 00:39:44:22
John
But the reality is that the world settlement asset is the dollar, right? You can have, you know, these little fiefdoms that have their own currencies that they've made up that they kind of manage. But at the end of the day, the dollar has the dominant network effect. And if given the choice and you see it around the world right now with the emerging stablecoins, especially people right now want dollars thanks to the petrodollar system which you've talked about on this podcast, a good amount and we have reason to believe is is crumbling partially for the reasons that you pointed out, which is that the US has really shown in the last few years that it

00:39:44:22 - 00:40:04:15
John
will debase and seize your dollar denominated assets and your U.S. Treasuries at will if it if it wants to. And that's just one of the reasons that that system is kind of crumbling. But for now, the dollar is the big dog. There are not ten big dogs. There are not ten major kind of reserve assets for the world that people want.

00:40:04:15 - 00:40:33:22
John
Above all else. There's one and it's a dollar. Our thesis is that that will inevitably change over who knows what the time frame is ten years, 20 or 50 years. But it will shift to being Bitcoin for the reasons that we outlined this piece about Bitcoin spare monetary properties. Bitcoin is absolutely scarce, so it will be the best store of value over time.

00:40:33:25 - 00:41:07:21
John
That's enforced by a decentralized consensus of self-interested actors that cannot be easily gamed. It's permissionless to interact with its digitally native barer value that can be sent globally 24 seven very, very difficult, if not impossible to censor, at least for any meaningful amount of time. And capital controls are not effective against it. And so everyone, as knowledge distributes, every person on the earth will want to increasingly get more Bitcoin.

00:41:07:24 - 00:41:33:23
John
We've seen that in history with kind of the emergence of gold as the global reserve asset up until the point at which gold no longer scale for global commerce. It naturally, spontaneously evolved as the world reserve asset and sell an asset across a bunch of different highly diverse societies around the world and at different points in history because everyone wanted the best money.

00:41:33:26 - 00:41:56:14
John
Gold was for a long time, the best money were now living in this fiat experiment that has for about 50 years disrupted that, and the seeds of that were sown by gold's failures and its spatial limitations and its inherent ability and its difficulty to take custody and move around. But that experiment, as you've referenced, is is probably not long for the world.

00:41:56:16 - 00:42:26:19
John
It's creating significant instability and political pushback in different pockets of the world in different ways. And it will be ultimately impossible for any corporation or any government to force people to value the dollar or any fiat currency more than they value Bitcoin. They might be able to for a time mandate usage. They might be able to enact certain laws that make using Bitcoin more burdensome.

00:42:26:21 - 00:42:51:17
John
But, you know, as MI6 points out, in theory of money and credit, they can't make people subjectively value a currency, right? So the properties that make Bitcoin superior will inexorably pull people around the world to use it until to use it and store wealth. It until the point at which everyone in the world is using Bitcoin as their reserve asset.

00:42:51:19 - 00:43:18:18
John
And oh, I can, I can stop there. But I would say there are two major implications of that that I think people who are even constructive on that thesis, people who even already own Bitcoin, whether you're an institutional allocator and you have some allocation of Bitcoin or you're just a pleb on Twitter, your stack SATs every day, both of those types of investors, both those types of savers will kind of only go that far and then stop.

00:43:18:20 - 00:43:51:02
John
But if that's true, then it has two big implications, one of which is the picks and shovels, if you want, that will enable people to acquire Bitcoin, use it, store it safely, put it into lightning channels, spend it, ensure it, distribute it's custody, you know, whatever you want, all these different kind of applications that we can get into will naturally be booted up and will be required ultimately for that distribution process to take place.

00:43:51:02 - 00:44:23:24
John
So for everyone, if everyone in the world is ultimately going to own and use Bitcoin, they will be doing that partially with the help of applications and service providers and tools developed by companies that are providing UX that allow them to do that with a ten x, 100 x better user experience. Some of that will be certainly free open source software that people can just download and run without any sort of connection to a company.

00:44:23:26 - 00:44:44:23
John
But there will also be corporate service providers like Unchained or Anchor Watch or Strike or any other company that you see in our portfolio that can provide that can and will provide a better experience that will be demanded by the market as people look for ways to acquire and use Bitcoin. So they kind of go hand in hand, right?

00:44:44:29 - 00:44:58:02
John
If you're bullish on Bitcoin's adoption, then you necessarily have to be bullish on it's picks and shovels too. So that's implication one, we can maybe unpack that or however you want to take it. We could have an application to maybe a second.

00:44:58:04 - 00:45:18:04
Marty
Yeah, it's digging in. Implication one. I mean, you mentioned many of the different companies that are providing these tools and services to be able to reap the utility and the benefits of Bitcoin. But let's get a little more granular and better define the subsectors and the verticals that you think are addressing these different needs.

00:45:18:07 - 00:45:42:05
John
Yeah, So I'll give you the way that we kind of cut it out, a temporary one, but this is not the only way to think about this space. And there's also obviously overlap between a lot of these. But the first most obvious one is, you know, to go back to Parker Lewis, you know, if Bitcoin is money, I think he wrote this in some piece ready to talk.

00:45:42:05 - 00:46:25:28
John
But Bitcoin is money. The first order of product of money is financial services, right? So that's kind of the if you think about the addressable verticals in like concentric circles expanding out, one of the first center, the concentric circles is financial services products that allow you to save in Bitcoin effectively to custody it, to have obviously to to buy it as well, to buy it and treat it as necessary to take out loans against it and do anything else that involves interacting with the traditional fiat system and doing those interactions between traditional fiat system and Bitcoin.

00:46:25:28 - 00:46:52:06
John
And so, you know, a few examples of a company like that would be obviously Unchained is one. They provide a lot of those services and we're kind of the forerunner in building kind of those services. It helped building out collaborative custody to allow a user to benefit from a, let's say, the benefit of a custodian without actually surrendering to custodial permission.

00:46:52:06 - 00:47:32:07
John
So in a two of three multisig I as a retail or I as a company can hold two keys on chain, can hold one, and thereby eliminate the risk of eliminate or greatly reduce the risk of catastrophic loss. If my private keys, if my harbor walls are compromised. Right. They also provide kind of intuitive trading and lending services on top of that on one interface so that I can interact with my Bitcoin more in the way that I would be kind of used to doing if I'm coming from the traditional finance or fiat world, which ultimately like definitionally everyone is right, everyone's kind of coming from that world.

00:47:32:13 - 00:48:12:21
John
And so a company that can provide a way to much more safely custody the Bitcoin and then also use it in these different ways that people are familiar with is highly valuable and very necessary to. Right. It's it's necessary for most people to have something like that to bridge from, you know, not just buying Bitcoin and leaving it on Coinbase, you know, having their Coinbase IOU or having their ETF IOU as as will increasingly be the case for for many people as their first kind of touchpoint in Bitcoin, but also not have to immediately make the leap to, you know, holding generational wealth on a hardware wallet in their desk or bearing in the ground

00:48:12:21 - 00:48:54:27
John
somewhere right? Those are those are two ends of the spectrum that people are naturally uncomfortable with when they come to Bitcoin. And so having a collaborative custody option that also gives them the ability to interact with Bitcoin in ways that they're familiar with from a finance perspective is highly valuable and very important. And now we're also seeing, you know, you've bang the drum on this a lot over the last year or so, Multi-institutional Multisig So not just not even only having a relationship with Unchained, but having a two of three relationship with Unchained or on ramp or Egg Watch or various other kind of custody providers that we can talk about who form a quorum

00:48:54:27 - 00:49:25:01
John
for you and allow you to interact with Bitcoin without ever actually having to touch private key material, which is necessary for a lot of institutions and enterprises that might want to use Bitcoin as a Treasury asset, but have fiduciary responsibilities that prevent them from being allowed to have the discretion over private material. Obviously, there's more of a trust tradeoff there, but it's trust distributed across three institutions rather than just a single point of failure.

00:49:25:04 - 00:49:49:04
John
And for those who are listening, I would highly recommend reading Dhruv Bansal's piece from Unchained on building a network of keys, a network of designers. And I think that that principle will become very important to real institutional adoption of Bitcoin. And to our point earlier, that's an example of something that was not even on anyone's roadmap 3 to 4 years ago, right?

00:49:49:06 - 00:50:11:26
John
It's only come about because of advances in Multisig and understanding of Multisig and getting more institutions kind of on board for that. And so that's an example of how a lot can really happen in a very short time. And a lot has happened to put Bitcoin and Bitcoin companies in a position to really bring mature offerings to market.

00:50:11:26 - 00:50:18:21
John
So that's a lot. Just financial services. And I would you quickly run. Yeah.

00:50:18:23 - 00:50:47:28
Marty
Well I was going to I was going to say I would add with Unchained particularly, not only do they have the technical expertise to manage and create the software to manage these these multi-site quorum, so they also understand the asset as well and the financial side and the cyclical nature of Bitcoin's price history. And on their lending products specifically, I think this really shines through where they have extremely low LTV, which most people look at and like, Oh my God, that's pretty insane.

00:50:47:28 - 00:51:21:09
Marty
But they understand the asset, the team understands the asset and they know that they're going to be a lot of volatility. So they have a low LTV to reduce the amount of liquidity and they never had a loan loss throughout their five plus years of offering this product. And when you juxtapose that like leaning into two to the 1031 horn here, a disclaimer for this episode, obviously 1031 is invested in a lot of the companies we're talking about, but I think Unchained shines through because we were getting made fun of four for quote unquote missing the Blockfi wait wave a few years ago.

00:51:21:09 - 00:51:53:24
Marty
They hit a $4 billion valuation at the peak of the 2021 or 2022, and we made the conscious decision like, we don't trust the way that they're they're running their their lending product. It doesn't make any sense to us. And that proved to be a wise decision at the end of the day to allocate towards Unchained, which was much more conservative, having a fine understanding of the asset and the volatility that comes with the Bitcoin price and blockfi, which tried to apply this fiat model to the Bitcoin standard.

00:51:53:24 - 00:52:00:03
Marty
And there's no lender of last resort in Bitcoin and if you lend it out, somebody lose it. You're not getting it back.

00:52:00:05 - 00:52:26:28
John
Yeah, absolutely. It's a great point. Not having any loan losses on a product like that through two bear markets and the carnage that we saw in 2022 multiple times with and then blockfi then at the end of the year. Right. Like to, to make it through all of that with no loan losses. It's just really testament to what they built and also testament to just focus on Bitcoin and the importance of that.

00:52:27:00 - 00:53:09:01
John
That's true for all the companies in our portfolio right? It's not just an ideological theme where we're we're Bitcoin maxes and so we only want to invest in people who are ideologically aligned. You could say that's like there's relevance to that. And I think that's a it says something about you as a founder. If you have kind of made the jump to understanding why Bitcoin is a sphere of money that will obsolete all of the money, but even more importantly just from an investing perspective, there's significant edge in understanding the asset that you're dealing with and the things that can go wrong with the volatility that Bitcoin experiences.

00:53:09:08 - 00:53:35:15
John
If products like Bitcoin backed loan product is not structured well in terms of conservative LTVs and non rehab application of the underlying collateral, right? So that's just a feather in the cap, not just for Unchained, but for every business that is exclusively focused on Bitcoin because that is, that drives a real commercial edge and real sustainability to the business that I as an investor care about.

00:53:35:15 - 00:54:03:08
John
Even independently of some sort of ideological viewpoint on Bitcoin versus any other cryptocurrency. But to to just quickly round out on your other question about the verticals that we look at, the others would be that are major ones would be kind of lightning and layer two. That's something like a strike or mutiny wallet, very different kinds of the spectrum of what they provide that those are leveraging lightning to do really innovative things.

00:54:03:10 - 00:54:27:27
John
I would say also it's not even our focus is not even so much on lightning as such, although that's the only real like layer to protocol that is battle tested and has existed for, you know, five plus years. So we've done a lot in lightning, but I think I say lightning slash layer two because we are open to the idea of new protocols coming along that could also have commercial viability and commercial use cases.

00:54:28:04 - 00:54:51:03
John
You might call, you know, it's like controversial perhaps what you might call experiment protocol, right? Like a layer two in some way. I know, again, like there's some disagreement on if that's the right way to approach that. But it is kind of an additional protocol that, you know, only really came about in the last couple of years that extends Bitcoin's utility and provides kind of new ways to interact with Bitcoin.

00:54:51:03 - 00:55:15:01
John
And you're seeing that with what fairly is spinning up. And, you know, famously kind of you and Odell were the ones that spoke very into into existence. And I let you speak on that a little but if you want but also now muni wallet, like I mentioned on the lightning side, also doing a lot with the payment protocol to kind of carve out their own use cases in their own niches.

00:55:15:01 - 00:55:37:18
John
And so that that also speaks to what you were asking earlier about whether it's too early or not. Like Ferryman is a great example of that, of just the vibrancy that we're seeing in the ecosystem over the last couple of years. And because these are open source protocols, a lightning company can very easily kind of integrate very many capabilities in some way or financial services company.

00:55:37:18 - 00:55:58:26
John
You can integrate lightning or, you know, you can have all these kind of cross vertical pollination in a way that you really can't in closed source tech stacks or kind of more broadly diversified VC portfolios where you're investing in fintech and insurer tech and health tech and all these different kind of things that don't really talk to each other, play with each other.

00:55:58:26 - 00:56:29:17
John
So, you know, that's kind of the second major vertical. Again, I said A round it out quickly and I failed to do that. But take your time. I'll just say quickly, you know, consumer applications are maybe the next one. So something like primal or fold or, you know, Bitcoin gaming plays, all of those are kind of using Bitcoin in ways that talk to and, you know, make sense with existing consumer use cases.

00:56:29:20 - 00:56:58:28
John
They're not necessarily about Bitcoin, but they're more akin to using Bitcoin as a means to an end to drive consumer engagement and establish consumer behaviors. So social does you know, rewards. Obviously rewards is I don't have the number stuff in my head, but a massive category that merchants spend billions of dollars on every year and fall is focused on using Bitcoin to create interoperable rewards much more valuable to consumers.

00:56:59:01 - 00:57:23:13
John
You've got Primal, which is obviously a noster client. Noster is itself not just an utter client, but a master client and tech stack. But Noster itself is, you know, another kind of protocol which some have maybe call it a layer three. I don't really like that classification, but whatever. But it's one of these other kind of edge protocols that can naturally directly interact with Bitcoin.

00:57:23:13 - 00:58:00:19
John
As you know, it's an open source communications protocol interacting with an open source money protocol. Right. And so that's that's another good example of like replication. And then you also the last two would be kind of mining infrastructure. And so that's prop mining plays like actual companies that are doing self mining grid being an example of that, and then also just picks and shovels around mining value added services and technology to allow miners to gain advantage or to power themselves off power sources that would otherwise be inaccessible.

00:58:00:21 - 00:58:22:08
John
So upstream data is an example of that. Also Giga Energy, but both of whom are really seeing a lot of great uptake among oil and gas producers, something that you've talked about a lot on the show and we think is going to be a huge theme, which maybe we can talk about a little more as it relates to the way that Bitcoin was slowly kind of spread out and hit the world and get these other industries.

00:58:22:10 - 00:58:47:24
John
And then, you know, last vertical, I would say would be security infrastructure. So that's any hardware or software that enables either a single user or institution to securely and or privately interact with Bitcoin. The most obvious example of that being coin tight and, you know, the gold card, the taps or the various products they have to make that accessible for everyone.

00:58:47:24 - 00:59:14:27
John
And that's another good example of, you know, five years ago those products were substantially less advanced than they are now. Taps on or didn't exist. Gold Card was several iterations earlier, and they've made a variety of improvements since then that have kind of turned that product into the gold standard for for interacting with Bitcoin securely and privately in a way that any random web can go access.

00:59:15:00 - 00:59:45:18
John
So yet another example that we're exactly at the right point to start investing aggressively in these companies, we're hitting the point at which to or to paraphrase Andresen in his software piece, he said, we're finally at the point where all of this technology can be delivered to consumers at scale around the world, where we're maybe not exactly like right there at that spot yet with Bitcoin, but we're very close and want to be investing in these companies.

00:59:45:18 - 01:00:06:29
John
When you can see the contours of that taking shape, not when it's already happened and you're kind of just saying what everyone's already right. So there's still a lot of alpha to be generated in investing in these types of companies. It's a long winded response, but that's the general kind of heuristic I guess I would use to carve up the overall infrastructure.

01:00:07:01 - 01:00:40:07
Marty
Yeah, as there's a lot to go down. That's why I love about the team we've assembled at 1031 because obviously I have experience on the mining side of things. That's heavily focused on privacy, lightning, Napster, freedom, tech, more broadly yourself. Grant Jonathan, really understand the financial services side of things, and I think we complement each other extremely well, which allows us to go do a lot of these interesting deals and explore the full breadth of the industry as it's forming.

01:00:40:07 - 01:01:07:04
Marty
And the going back to the mining stuff like that is again, coming off the tails of the Energy mining summit in Nashville. The one thing that interests me about the mining place specifically is it's somewhat of a proxy play on energy more broadly, which I think is going to be a massive theme over the next decade as it's becoming abundantly clear that we've completely bought the energy systems of the world to a certain extent, it needs to be fixed.

01:01:07:04 - 01:01:31:17
Marty
There's going to be a lack of supply in a lot of areas, which is naturally going to drive up prices, and these companies are going to be looking to create efficiencies and off grid mining on grid mining for that matter as well. Both provide alternate revenue streams are just going to be desperately needed by these energy companies. But then going on that too, like the rewards play with fold just makes sense.

01:01:31:21 - 01:01:51:07
Marty
Why would you lock somebody into some company ship token? We can just give them bitcoin rewards. They can spend that anywhere. Financial services. I think they're going to get more robust as people begin to hold more Bitcoin for longer periods of time and you have it in the piece, yet the hodl waves that prove that that is happening.

01:01:51:10 - 01:02:00:10
Marty
So yeah, I think the timing is ripe and now we just spent like 30 minutes on the application. One What's application to do you remember. Yeah.

01:02:00:12 - 01:02:25:27
John
Yeah. And I, I, I got it. Yeah. I mean putting a pen, an application one, it's basically, there's probably $1,000,000,000,000, I'm throwing out a number but I think it's something like that, $1,000,000,000,000 of revenue opportunity just in the picks and shovels, if you want to call it that, of the enabling technologies that will see tremendous demand on the back of growing Bitcoin adoption.

01:02:25:29 - 01:02:58:15
John
And it's it's both just the companies that exist today with the capabilities Bitcoin already has. But it's also, you know, the companies that will emerge on top of this current generation of, you know, innovators. Right. I think I think about something like I put in the piece like a Shopify, $100 billion plus market cap business or, you know, Salesforce or ServiceNow or you can think of a bunch of different kind of tech businesses are not in like the Magnificent Seven but are still like very, very valuable and do billions of dollars of revenue.

01:02:58:17 - 01:03:41:13
John
Those couldn't have existed like 20 years ago. You needed prior advancements in bandwidth and networking and server architecture as well as just like the distribution of like high speed Internet and the growth of like consumer computing devices to enable something like e-commerce. Right? But once you have all of those things in place and you have the capability for e-commerce, then now you can build a business like Shopify and there will be more businesses coming down the pipe just in kind of the picks and shovels category of Bitcoin companies that couldn't have existed without work being done by like the current innovators that we're seeing today.

01:03:41:21 - 01:04:02:16
John
So that will continue to be, you know, it's not just like what's the opportunity right now for the companies that exist today. It's also a question of what are the companies today going to enable that will allow for some totally, you know, a possible use case use case that's impossible today, but will be very mainstream within kind of Bitcoin picks and shovels in ten years.

01:04:02:16 - 01:04:28:25
John
Right. So that'll compound of that. That'll be in our community kind of by itself over the next couple of decades. That's implication one generally the picks and shovels are going to do great. I think application too is what we like to say at 31 is just like every company had to be an Internet company had become an Internet company over the course of the last 20 years to survive and to stay relevant and to thrive.

01:04:28:27 - 01:05:05:24
John
So every company will have to become a Bitcoin company to survive. The kind of reasons for that and the drivers for that are multifold. You No. One is that as those Bitcoin picks and shovel providers start to gain traction, start to build real businesses, the ones that are touching those kind of inner parts of the concentric circles of Bitcoin verticals will start to naturally disrupt things like payments, infrastructure, right, and financial services, which we just talked about and asset management.

01:05:05:26 - 01:05:38:14
John
And you know, I think it shouldn't be understated how revolutionary digital buried value that's absolutely scarce that can be instantly settled anywhere around the world at any time. How radical how radical of a paradigm shift that is relative to the Rube Goldberg machine of the chain of, you know, credits and IOUs and counterparty risks that are required to make, you know, a single transaction at a supermarket work right?

01:05:38:22 - 01:06:08:25
John
There's so much fixed cost built into that. There's significant delays in settlement. There's armies of accountants and technicians and lawyers kind of holding that all together with duct tape. And that's how, you know, the traditional payment system is built. And over time, you know, the history of economic development, I guess the arc of history bends toward technological innovation, winning.

01:06:08:28 - 01:06:38:22
John
Now the arc of history bends toward, as Jeff Bezos said, you know, your margin being my opportunity. Free markets such as we have them, maybe they're not as robust as we as we would like in the US today, but they're still still operating to some extent. Free markets are ruthless about excess margin and inefficiency. And if there's a way to take costs out of the system, if there's a way to do something that serves end users better and that an entrepreneur can profit from doing, the market will do that.

01:06:38:24 - 01:07:03:29
John
It's just a question of what it takes. And, you know, payments, infrastructure and financial services are kind of like the first industry in the crosshairs of Bitcoin picks and shovels, companies that will develop and start to kind of encroach on their territory, right, Because they're providing end users a better, more cost effective, more secure way to make payments to custody assets, etc..

01:07:04:01 - 01:07:30:15
John
And so when you think about an application, that's kind of the first way it plays out is incumbents look at that growing trend, which is an inexorable trend. If you believe that Bitcoin adoption is is inexorable and it will grow to everyone in the world, they'll look at that trend and say we need to either integrate Bitcoin in some way, we need to, you know, develop capabilities on our own or we need to buy some of these companies.

01:07:30:15 - 01:07:58:28
John
Right. We think, you know, at 1031 that the option that a lot of incumbents will choose is to be strategic acquirers to avoid kind of being the victims of the melting ice cube of watching their businesses evaporate. But there will also be, you know, forward thinking companies, forward thinking blue chips that you know, maybe do have the ability to kind of develop in-house.

01:07:59:01 - 01:08:26:03
John
But either way, what you will effectively see is more incumbents of traditional industries needing to integrate Bitcoin in some way and becoming Bitcoin companies. And so that expands the service area for what you can invest in as as an investor focused on Bitcoin infrastructure. The the other thing to consider is I guess I would say just to put a little more detail on that, it's not just speculation, right?

01:08:26:03 - 01:08:57:06
John
Like we're already seeing it with a variety of companies, even outside of you're seeing it in payments, you're seeing it in your services. But even expanding outside of that to some of these further the rings that are further out in the concentric circles right. Oil and gas, power, utilities, like you mentioned, Bitcoin mining is getting substantially more integrated into those industries in a way that, you know, was very much on display as as you mentioned in at the National Energy and Mining Summit last week.

01:08:57:09 - 01:09:46:02
John
There are senators that are kind of seeing that connection. There are major energy executives on both the grid utility side and also on the regulatory side and the oil and gas side that are seeing that the synergy between Bitcoin mining and what they do and trying to leverage it. So that's already playing out and it's not surprising because it's exactly what we saw happen, you know, with the Internet, logistics companies, manufacturing companies, medical device companies, you know, all had to start leveraging Internet capabilities if they wanted to compete with both upstarts, you know, start ups that were kind of doing something interesting with Internet enabled software in their industries and also their more forward thinking

01:09:46:02 - 01:10:16:05
John
incumbent competitors that were either buying those companies or trying to develop similar solutions in-house. Right. And so if Bitcoin is just as or more influential to global commerce as the Internet, then you would expect to see the exact same with companies in every industry. And, you know, like I said, we're already seeing at some of the points in the portfolio and maybe the most kind of exciting implication.

01:10:16:07 - 01:10:48:07
John
So the implication of that, I guess for us as investors is when we see companies like Stat News, we have an A portfolio, a non Bitcoin company see the power of Bitcoin and what it might be able to do for their business over the long term and come to us to invest in them and to give them some guidance on their Bitcoin strategy and to have us on the cap table because we're aligned with seeing the way that the world is going to go with Bitcoin adoption.

01:10:48:10 - 01:11:30:25
John
And so that's an example of, you know, an early example of something that I think we'll see a lot more over the next ten years is nine Bitcoin companies of various different sizes kind of, you know, pre-seed stage startups and Series B series C companies that are about to go public looking at this trend and deciding they need to find ways to integrate Bitcoin in some way, whether that's lightning micropayments for like a consumer application or whether that's, you know, heavy industry companies looking at ways to they're going to use bitcoin mining like you've referenced, we you know that will dramatically open up service or even further for investors who are focused on on the

01:11:30:25 - 01:11:37:08
John
space. And you know, I put some numbers around it at the end of the piece. It's it's virtually impossible to call that up.

01:11:37:08 - 01:11:38:07
Marty
Well.

01:11:38:10 - 01:12:09:23
John
Yes. You know, it's a little I don't want it to be, you know, moon math or kind of pie in the sky thinking. But if everything that I've just said is right, is Bitcoin adoption is going to do what we think it's going to do, if it's going to lead to, you know, $1,000,000,000,000 plus of new value created by picks and shovels, providers and is itself also that's going to lead incumbents to look for ways to integrate Bitcoin in their own industries, All of which I think is kind of, you know, follows from just being superior money.

01:12:09:26 - 01:12:39:10
John
If that's the case, then Bitcoin infrastructure will capture some percentage of the revenue generated by all those industries that need to start integrating Bitcoin. It'll enter their value stack in some way or they'll just be disrupted and the revenue streams will be replaced by companies that are leveraging Bitcoin. And so with just all the just the set of industries that I talk about specifically in the piece, obviously this is not even, you know, all the industries in the world.

01:12:39:10 - 01:13:13:21
John
These are just the ones that are kind of the most obviously impacted by Bitcoin. You know, with 1% revenue penetration, you can get to like, you know, $100 billion in category revenue for kind of Bitcoin companies. This is a very like high level rough heuristic way to kind of think about the opportunity. But it gets at the intuition that because Bitcoin is money and monetary technology will affect every industry in some way, there is no commerce at any scale that can avoid tapping into and being touched by monetary technology.

01:13:13:24 - 01:13:32:17
John
Bitcoin will have a role somewhere in the value stack of all those industries and even more. And so once you start to take that seriously, you have to ask yourself, even at very low penetration of those revenue streams. And to be clear, like in financial services and payments in oil and gas, like I think the penetration is going to be a lot higher than 1%.

01:13:32:20 - 01:13:54:04
John
What does that mean for the available revenue? What does that mean, like the TAM? Right. To go back to the beginning of our conversation of this category of companies and, you know, it puts them even at a conservative estimate, you know, around like the size of enterprise SAS Enterprise SAS is like a 200 to $300 billion revenue category annually.

01:13:54:08 - 01:14:15:01
John
And so at fairly penetration of even just a select few of the most obvious industries that should be disrupted by Bitcoin or should be affected by Bitcoin in some way, you're basically asking a process level because Bitcoin gets to play across all of these different verticals because it's money, because this is monetary technology that everyone needs in some way.

01:14:15:03 - 01:14:21:27
John
So as you know, as Andreasen says, that's the big opportunity. That's where we're putting our money.

01:14:21:29 - 01:14:32:20
Marty
I mean, I thought I was bullish after helping you edit read the piece then read again after you published, but hearing you articulate it in person just got me even more bullish. It's pretty insane.

01:14:32:22 - 01:14:37:10
John
Yeah. I mean, no one is bullish enough, right? But it's also.

01:14:37:13 - 01:15:07:29
Marty
And so I think with all that in mind, like we've talked about the trend of incumbent companies adopting a Bitcoin strategy, why do you think the incumbent venture capital space has not seen this? And why do you think even within the broader crypto venture capital space, this thesis hasn't been recognized and there's a relatively small pool that we're playing in at 1031?

01:15:08:02 - 01:15:37:09
John
Yeah, absolutely. I think it's a couple of things up until 20 to 22 when you finally had the wash out of a lot of the froth of zero the and observe and a lot of which was in kind of the altcoin industry. Part of the reason, I think, was because venture capitalists, you know, looked at altcoins as this unprecedented opportunity to get quick liquidity.

01:15:37:09 - 01:15:59:04
John
Right. You can in the market where literally every asset that's not tied down is just constantly going up in value. And you can always underwrite like someone's going to come pay me two X or five x or ten x multiple for, you know, this round that I'm doing right now. Someone's going to come work me up or, you know, there's just money sloshing around and I can I can find a buyer somewhere.

01:15:59:06 - 01:16:24:13
John
There's, you know, there's, first of all, minimal incentive to diligence in the long term viability of any project because it's it's all kind of a greater fool game. But I think specifically with crypto in DC, there was this unprecedented opportunity to pull forward liquidity events, right? Normally in venture capital, you know, when you're making an investment, it's it's a liquid.

01:16:24:15 - 01:16:43:10
John
You know, your investment timeline could be anywhere from three years to five years to seven years to like ten years. Right. And, you know, ideally, if you make good investment selection, you're compensated at least on a few of those investments with, you know, outsized ten x 20, 600,000 X type returns. But it takes a long time to get there.

01:16:43:13 - 01:17:11:10
John
And there's there's kind of like the purest form of VC is like the ultimate low time preference game where it should be. But in the last few years, again, up until the the wash out of 2022, you had a lot of VCs able to get, you know, liquidity in like six months by funding some token project and taking a big allocation of a pre mined or just an allocation of, you know, founder tokens, right.

01:17:11:13 - 01:17:39:04
John
And then listing those publicly somewhere on some exchange and hiding it, spending some amount of money to hype them up, having a good marketing team and you know, selling those I'll say to to retail aggressively and for some retail investors that maybe out a little bit if you timed it exactly right. But for most that was probably not a good trade, but it was generally a great trade for for the VCs that had the pre mines.

01:17:39:04 - 01:18:09:13
John
Right. And you know, it allowed them to operate with to have kind of the return profile of a venture capital fund with the time horizon of a hedge fund, which is a compelling argument. If all you care about is kind of very short term fiat gains and not kind of building a long term business and, you know, investing for where the world is going, not just kind of where it is right now, kind of right at the tail end of observer, Right.

01:18:09:16 - 01:18:43:12
John
So that was one of the big things that I think led to substantial distraction in DC space, which just like you can't do that with Bitcoin right this time I'm at 21 million Bitcoin. You there's no way to game a bitcoin company such that you can, you know, go sell a bunch of pre-made tokens to do retail. And so if you're going to invest in a company that's building on Bitcoin, you have to be willing to invest for at least a few years, right?

01:18:43:15 - 01:19:29:12
John
I do think we will have some exits in our portfolio within the next like 3 to 5 years, but there will be some that take longer. And in any case, like we will be unlikely to have, you know, 5000 next market event in the next month from, you know, a pre mine that we kind of drove. And so if if that's what you're optimizing for I can see why you would only focus on kind of you know crypto schemes as we saw you know as we predicted at 1031 and, you know, as we structured ARC an investment thesis to express this theme, but that all ultimately blew up to significant kind of reputational damage to

01:19:29:14 - 01:19:48:27
John
some of the investors were involved me, the founders who were involved. And you know, also beyond reputational damage, like if, if you were not the winner of the musical chairs game, then you're sitting there with a really big markdown and a lot of zeros to take back to your lips. So that worked out ultimately, kind of as we thought it would.

01:19:48:27 - 01:20:08:04
John
It was, as I said, like a musical chairs game that could be played for a little while but was not ultimately sustainable. But it was, I think, a huge distraction and a huge source of noise for any crypto. We see that otherwise it might have taken the time to look at where the space is actually going over the next ten years.

01:20:08:04 - 01:20:43:26
John
Right now. So that's the first big thing. The other thing I think is Bitcoin is a big paradigm shift in thinking for anyone who comes from a traditional finance background. We referenced this a little at the beginning, but yeah, you generally like when you're operating in kind of a fairly short termist, Keynesian influenced mindset and that's how you've been taught in college and all of your colleagues around you think the same way and that's how you have to play the, the game that you're in professionally.

01:20:43:28 - 01:21:08:09
John
It actually it's like it's not profitable for you on a day to day basis to step back and ask yourself the question of what is money right? That's like a huge distraction. It takes 100 plus hours to even start to kind of grok the underlying problems that money is trying to solve. And then another thousand hours to understand like why Bitcoin is money and how it works and everything.

01:21:08:12 - 01:21:33:28
John
If you're from a background where 2% inflation is good because because economists say so, and that's the sign of a growing economy. And that's just like an axiom that you take for granted. It's very difficult for you to kind of step back and evaluate what would actually make good money and where Why actually does money need to lose value progressively over time?

01:21:34:00 - 01:22:10:06
John
And why why do we have a central bank issuing money ex nihilo to greater and greater degrees every every year? Right. So I think part of it is just there's a need to step back and do work that traditional finance roles don't necessarily incentivize you to do so for the people who are early to that process and take the time and get pulled down the rabbit hole early, you know, there's there's alpha to be generated.

01:22:10:06 - 01:22:48:23
John
There's there's an asymmetry in kind of being first to that to the conclusions that would follow from asking those questions. Just like there's a symmetry to, you know, just owning Bitcoin initially, you know, before before the rest of the world catches on. So there is also asymmetry to owning equity in Bitcoin companies. Before most crypto investors or traditional VCs understand the implications of Bitcoin being money and what it means for their investments in, you know, other crypto projects and what it also means for their lack of exposure to Bitcoin infrastructure companies.

01:22:48:26 - 01:23:15:19
Marty
Yeah, extremely well put. And I think beyond that, like I think what we're doing a 1031 to, to pump a pump around chest here I think again since we're bitcoin I think that's a it's becoming clear in the broader VC market as if you have a thematic fund focused on a very niche market. It's probably more advantageous for you.

01:23:15:21 - 01:23:43:27
Marty
But I really like what we've done with Grant, Jonathan, Matt, myself, you have done to really imbue the nature and the ethos of Bitcoin on what we're doing with our with our tribe events, really trying to communicate, hyper communicate with LPs to let them know what's going on in the portfolio and then getting the portfolio companies themselves to speak with each other, to do some knowledge share to figure out how they can work with each other, because that's another unique.

01:23:43:27 - 01:24:06:01
Marty
Part of what we're doing at 1031, the portfolio that we've developed is a lot of the companies you didn't even mention explicitly, but you're talking about Unchained. They work with Code Card, They work with them pulled out space to an extent as their block Explorer. There's many other synergies across the portfolio that the can materialize because you're building on this open source protocol.

01:24:06:03 - 01:24:16:29
Marty
It's so early and so investing in one company, you can help out another company in the portfolio as they can collaborate and sort of raise each other's boats.

01:24:17:02 - 01:24:42:04
John
Yeah, absolutely. And like I said, you know, I referenced this earlier, I think a little bit, but you don't get that opportunity to benefit from those synergies if you are like a broad, diversified investor, you know, early stage investor, ABC Investing in pretty much every vertical out there and kind of taking a spray and pray approach to not just every vertical, but also the many companies populating those verticals right.

01:24:42:06 - 01:25:23:04
John
And so I think that's you know, I reference this earlier, it's kind of the very beginning, but like there's there are huge returns to specialization and focus, even if you're a capital allocator out there, kind of hearing this message and thinking, you know, being somewhat skeptical of some of our conclusions about money or about Bitcoin as money, you know, there's no denying, I think that, like I mentioned earlier, the citadels, the millenniums, values and etc., of the world that have kind of gone to this highly focused multi-manager framework where you have very smart investors going into wide mile deep on very particular sectors, you know, has generated outsized returns for those strategies.

01:25:23:10 - 01:25:56:01
John
And I think it's no different here. You can't overstate the power of being highly hyper focused on one very particular theme, which for us is Bitcoin and Bitcoin infrastructure, both because it makes you understand that the companies building on that better than anyone else. So you can identify what looks promising and what doesn't, where the weak points might be, where the opportunities might be better and faster than anyone else, but also because it gives you just the best network that you could possibly have.

01:25:56:04 - 01:26:25:19
John
Many of the companies in our portfolio, you know, are exclusive to us because you and Matt and Grant, Jonathan, have just developed relationships with some of the founders over years and years. And when, you know, smart developers finally just kind of wanted to put pen to paper and build out an idea into a company, like they came to us and said like, Hey, I want you to be the only investor on cap table because I know you and I learned a lot from you In the case of you and Matt.

01:26:25:21 - 01:26:57:08
John
And I know we're aligned and I've gotten a ton of advice from you in the past, and so let's just do it. You guys will be the only one of the cap table. You don't get that by being highly diversified, right? You don't get by having, you know, a sleeve that invests in Solana and a sleeve that focuses on the Ethereum ecosystem and a sleeve that you know does some other random like tech vertical integrated with them, like a $100 billion portfolio that's invested in some other things.

01:26:57:08 - 01:27:28:06
John
Right? You get that by being hyper focused and on the ground all the time with the the smartest people who are pushing the space forward. So again, as I just think about like, you know, whether you care about the Federal Reserve, whether you care about, you know, Bitcoin as money or not, you know, I would just consider, as you're looking at the space you know, ask yourself who's best positioned to if we're right about this to benefit the most from it and to make the best investment selections within.

01:27:28:06 - 01:27:56:04
John
This theme is it someone who spends 1% of their time per year kind of casually thinking about the space and trying to arrange some calls with founders whenever he can? Or is it someone who is entirely obsessively focused on this and lives and breathes it every single day? You know, 24 hours, seven a week? Basically, I think that the questions to kind of answer itself focus is a highly powerful lever to driving investment returns.

01:27:56:04 - 01:27:58:28
John
And that's a big part of what we do focus.

01:27:58:28 - 01:28:07:06
Marty
It's important. It's important for us, the companies. It's beautiful thing, It's fun. Are you having fun, John?

01:28:07:08 - 01:28:14:18
John
I am having fun. It's it's a great time waking up and doing Bitcoin stuff all day is a dream come true. It's a ton of fun.

01:28:14:21 - 01:28:39:17
Marty
Well, there's a big leap of faith for, you coming from Citadel. You could have rode that train pretty far. Uh, came to a somewhat upstart venture fund in the Bitcoin space in 1031 at a time when the market was blowing up. What's the first two years working full time in the space been like? Reflecting right now or introspection?

01:28:39:19 - 01:29:12:04
John
Yeah, I mean, it should tell you a lot about my conviction, right? Like, yeah, you know, just I wouldn't just of jump for any opportunity. I really do think temporary one's very unique. I think you know if you look at what we've done just in the last two years, deploying over $100 million, the space the biggest portfolio in the space, like I mentioned, a ton of our investments are exclusive because of the relationships we built up over the last ten plus years with with you and Matt and the Grant Jonathan as well.

01:29:12:07 - 01:29:37:26
John
And I think it's just fully validated. The last two years have fully kind of why I made the decision I made and made me even more kind of bullish about the opportunity that I see out of us. The ecosystem is, like you mentioned, even more vibrant than I expected it to be, kind of when I was, you know, on the outside looking in, paying attention as much as I could to companies and the builders in the space.

01:29:37:28 - 01:29:57:10
John
You know, that was not enough to help me fully appreciate how much development and how much innovation there actually is and how quickly it's moving. When you're focusing on it every day, you really see that, you know, front and center. And so that's all been very validating. But yeah, I, I think, you know, the proof is in the pudding.

01:29:57:10 - 01:30:12:15
John
Our work speaks for itself. And, you know, I think there's $1,000,000,000 plus of deployment opportunity out there in just the next few years in the space that we can go tackle and that we plan to tackle. So excited.

01:30:12:18 - 01:30:53:05
Marty
Yeah. What excites me to like this morning we sent out that letter to FinCEN and cosigned by a lot of the companies in our portfolio. And that's that's one thing that gives me incredible joy. Obviously working with people like you, Matt Grant and Jonathan is incredible, but then obviously continuing to develop relationships with the people, the builders, for lack of a better term, creating the infrastructure that is going to lead us to a Bitcoin standard has been extremely rewarding and to add to that, like I do think the people that are building out this infrastructure right now are in it to win it, number one, but get it as well.

01:30:53:07 - 01:31:20:04
Marty
I think the cosigning of that letter to FinCEN was indicative of that, that people understand the gravity of the situation that exists in our world right now, that things are terribly broken. We need to to fix them. And people have formed companies and are building tools to go fix the world. And it there's obviously a large enormous economic opportunity as you laid out in Bitcoin is eating the world.

01:31:20:04 - 01:31:42:10
Marty
But that's the other thing when you can marry that economic opportunity with a a drive for virtue in the world, which I believe all the companies in our portfolio are doing, it's just a very special thing. And I feel very fortunate to be on this journey with you, with everybody else at 1031 and everybody else in the portfolio.

01:31:42:12 - 01:32:27:18
John
Yeah, no, no doubt. Yeah. I would be remiss if I didn't mention, you know, when I as I as I said, kind of at the start of this conversation, you know, growing up 15, 16, 17 year old kid into Ron Paul and into ending the Fed and preserving, you know, civil liberties in the US and kind of returning the country to some of the principles on which, you know, I think it was founded I was really disillusioned with the prospects for that over kind of my time going to college and then going into internal finance roles, not necessarily because there's anyone particularly I mean, certainly I think there are executives in the space and some

01:32:27:18 - 01:32:56:28
John
of those companies that are actively working against all of those principles. But more than anything, I just you know, you kind of encounter like a degree of apathy about any of that. And, you know, I think it's been very invigorating to see both my coworkers. 1031 you guys, but also, like you said, all the founders that I work with that we work with are also very driven by, in most cases, those principles.

01:32:56:28 - 01:33:24:17
John
And and sometimes in some cases, certainly we disagree. There's not, you know, ideological homogeneity among the portfolio by any means, but where it matters and where it counts, the people that we invest in are very, very highly principled. And yeah, I shouldn't understate how unique that is. And frankly, I also think on the long term, on a long term basis, that that drives investment returns too.

01:33:24:21 - 01:33:37:21
John
So it's a it's a double edged benefit for us both the financial case long term of the winning in the world and also just what it means for the types of founders that we get to interact with.

01:33:37:24 - 01:34:02:28
Marty
Yeah It's a beautiful thing. John. This piece was incredible. If you haven't read it yet, you're listening to this. Go read, go read it. We'll link to it in the show notes if you want to find out anything more, we're doing it. 1031 Find us at 1031 dot V.C. Before we wrap up here, is there anything we didn't cover or mention that you think we should get out to the freaks before we wrap up here?

01:34:03:01 - 01:34:33:13
John
Yeah. You know, the last thing I'll say is, just like, I think we all see a temporary one. Like, there's a degree of humility required in being, like, an investor. Like, none of us know exactly where the space is going to go over the next couple of years. I don't think, like, you know, Freddie, that we mentioned earlier like that as much as you and that we're kind of on the forefront of kind of speaking that whole project into reality and really marketing it and getting the right people in the right rooms to, you know, bring it forth.

01:34:33:15 - 01:34:52:20
John
You know, none of us necessarily saw that coming like only a couple of years ago. And there will be things like that in the next couple of years where we're like, you know, things develop in a certain way a lot faster than maybe we expected or, you know, a new like scaling initiative happens, you know, in terms of like a soft fork or a new layer to protocol.

01:34:52:20 - 01:35:12:13
John
It's that opens up really interesting new possibilities. Like all those things are possible. And I think, you know, the I guess the sign of a good investor is someone who has like strong convictions, weakly held. You know, we have the ability to kind of look at the landscape and see it evolving and have the humility to know, like we can't plot out like exactly way that everything is going to go.

01:35:12:17 - 01:35:42:04
John
We certainly have some opinions, and I think many of our convictions will be proven correct over the next ten years or so. But what I would say is I'm just really excited to be in a position where we have a unique position to see those changes kind of as they unfold like we're on the ground at the King Park and the Bitcoin commons, you know, with the founders and the devs and the really intelligent people who are making those changes and pushing things forward and innovating.

01:35:42:07 - 01:36:00:22
John
And so, you know, we have humility, the humility to know that we don't exactly know everything's going. But I think we are uniquely positioned to kind of be there when those inflection points happened and kind of see the big changes. But before almost anyone else is looking at the space. So, yeah, that's what I close with.

01:36:00:25 - 01:36:08:08
Marty
Yeah, it's perfect. Close with John. It's been a pleasure. We're going to do this quite often moving forward, you know?

01:36:08:13 - 01:36:09:12
John
Yeah. I mean.

01:36:09:14 - 01:36:28:04
Marty
We need to break you out from what we've been. We've been hiding, John. Like in a corner. Not in a corner, but like, Hey, this guy's got too much alpha, but it's a it's been a pleasure working with you. The way you approach what we're doing at 1031, your consummate professional, I think you really accelerate what we what we're trying to do here.

01:36:28:04 - 01:36:40:02
Marty
And it's I feel very fortunate to be able to work side by side with you and meet up in different cities around the country, around the world, even just yeah, go push Bitcoin forward.

01:36:40:05 - 01:36:46:16
John
Appreciate it, man. Totally, totally agree. Still, he's mutual and there's a lot of work to do, so we're just getting started.

01:36:46:18 - 01:36:49:09
Marty
Yeah, that's what we got today for this piece of love You.

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