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[upbeat music] What's up, y'all? Welcome back to Blockspace Live, brought to you by CleanSpark. We've got a packed docket today.

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Tether is gunning for its first audit, not an attestation, from a Big Four accounting firm as it seeks to capture mar- uh, market, uh, share from Circle.

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We've also got an update on the Clarity Act, and surprise, surprise, the banks won out over the crypto companies.

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We've got some really good interviews lined up as well with Gordy Gort on to talk about why is crypto so boring right now. We also have Jay Patel on from Lagos Finance to talk about private credit markets.

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And for our final two segments of the day, a new Bitcoin client emerges. What are the odds that it actually gains market share? Charlie's got some good notes on this.

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And for a kind of cool down story on the day, everyone loves a good crypto crime story. An Irish drug dealer had five hundred Bitcoin seized, and you won't believe how he hid it and where authorities found it.

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Blockspace goes live every Monday, Wednesday and Friday at noon Eastern. We run a little bit over an hour. We host the best guests, and we do quick hits in the latest in Bitcoin, mining, AI, emerging tech.

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Um, this is also a podcast. Right after we wrap this up, you can listen to it on demand anywhere you find podcasts.

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Let's kick it off. Colin, I'm very excited to get around to this drug dealer story here, but I think we have, unfortunately, some real news to cover at the top of the show. [chuckles] You're muted.

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We're gonna have to save page six for later because we actually have some pretty good headline news, and that is Tether is finally getting an audit.

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So Tether is engaging a Big Four auditing firm, so that is one of either PwC, Deloitte, KPMG, [sniffs] uh, or Ernst & Young,

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and they are looking to audit roughly a hundred and eighty-four billion dollars worth of stablecoin reserves as well as multiple business lines. And I think this is important to remember.

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Tether's not just a stablecoin issuer. They have a Bitcoin mining business. They fund a lot of companies, so they kinda have like an incubator, you know, venture capital arm.

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I don't think they call it venture capital, but they do have an investment arm. They have a bunch of different businesses to audit.

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And for those of you who have been around for a while, this has been an extremely elusive thing for Tether.

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They have often come under fire from some of the more, how should we say, deranged critics in crypto and some of the legitimate critics saying, "Look, if this company is so legitimate and it is one of the most important companies in the ecosystem, why haven't we seen an audit yet?"

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There have been numerous attestations, but this is the first audit, and I think that's an important distinction because for an attestation, it's basically like a watered-down audit.

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You know, you have a third party come in, take a look at your books, and in Tether's case, they'll say, "Yep, the assets are there."

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The stuff that they say that they have to back this stablecoin is in fact in their books, on their books, and in their bank accounts or wherever they're holding this.

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[sniffs] And that-- but that's it, then they walk away from it. There's not this whole look at the processes behind how that money flows in. You don't look at who has permissions to access those accounts.

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An audit is basically stripping the business down to the studs and looking at everything behind the drywall. And there are... I think it's important to contextualize too why this is happening now.

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And shout out to Noelle Atkinson of Crypto Is Macro Now Newsletter. She had a really good post on this this morning. If y'all aren't subscribed to that, highly recommend.

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She's a former head of research at CoinDesk, and she has a really good breakdown of, uh, why audits are not boring is the subject line, and really what this means and why this is happening now, and I wanna quote directly from,

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from this piece here.

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She says in this piece, quote, "One of the reasons audits for reserves are so scarce is that the big names have traditionally not wanted to be associated with the, quote, renegade and, what did Gensler call it?

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Non-compliant crypto industry. Plus, for many, the requirements were still too vague. How do you value digital assets?

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What's more, auditors generally sign off on accounts being prepared faithfully according to established standards. Until recently, there were none for digital assets.

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Some big accounting firms would work with crypto companies, but only if their names were kept out of any public statement. Presumably, they felt their association with crypto would make their other clients nervous.

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With deepening legitimacy of digital assets, the institutional embrace of stablecoins and a growing number of high-profile IPOs, that has obviously changed.

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Circle, for instance, uses Deloitte for its financial statement audits, but its reserves are still verified via attestation." So this seems like a news item whose time has come.

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You know, crypto and Bitcoin generally are more institutionalized than ever. There are multiple public companies that are crypto-native businesses. We have Bitcoin ETFs.

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We have peop- uh, members of Congress holding Bitcoin.

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The CLARITY Act is being pushed through, which we'll touch on in a second, uh, following on the heels of the Genius Act last year.And to me, it seems like the reason this is coming now is because now Tether can really do it the proper way.

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Now, my biggest question, though, and then I'll throw it over to you, Charlie, for second takes is you know, Noelle kind of spilled the tea there at the end saying

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Circle has done it for its financial statements, but not for reserves. And so, you know, Tether does seem, from their announcement, they seem to be indicating that they will audit their reserves.

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That's again, um, roughly a hundred and eighty-four billion dollars worth of reserves. Most of that is treasuries. Some of it's cash.

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They also have a huge gold hoard, which I assume will be audited if they do the full sweep, and Bitcoin hoard.

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They have a user base of five hundred and fifty million, but will they do the whole kit and caboodle, or are they only gonna do financial statements?

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I think that would be really interesting to see, to see if this is a full audit. And also, what does that mean for other stable coins in the US? But I will turn it over to you, Charlie. Yeah.

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It-- Like Circle has had a regulatory moat around it for a while, which is kinda why it's been, uh, you know, if you're in the US, it's always been a li-little, uh,

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e-easier to use Circle as your preferred stable coin until recently.

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But Circle has kinda gone the path of we're gonna get all this buttoned up, and we're gonna do more like audit type behavior, and, uh, that's benefited it really well, although Tether has always remained king in the crypto economy.

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So, um, what did we see when Tether announced that this audit would happen? The first of its kind, really, in the history of the company, after many people have been calling for one for so long.

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Well, we saw Circle's stock price plummet, um, at the open of yesterday.

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Like thirty minutes after markets opened, Circle, uh, ticker CRCL plummets, what was it? It was at one twenty-six, and it plummeted to one hundred. Holy smoke, that down twenty percent.

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And, um, you know, a lot of people were like, "Well, is this the Clarity Act? Uh, is this in response to, like, the Clarity Act f-possibly falling apart?" And the answer might be yes, we'll get to that in the next story.

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But it seems much more correlated to the Tether audit announcement in my view because this-- the timing lined up for this for just after the Tether announcement.

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So, um, it is-- it's funny, it's interesting 'cause the market apparently does think that the stable coin game is a winner-take-most, if this is the case, at least.

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And, um, you know, while I'm not privy to all of the elbowing going on in Washington for who gets the, you know, the blessing from the US government, but, uh, if Tether's able to...

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Tether is the titan, and if they're able to navigate the, uh, this path and, uh, cross into, uh, fully audited, fully compliant territory, why don't they continue to take the field? Right. Yeah.

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And I-- So I think that's really important to mention.

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We don't know why Circle sold off, 'cause the thing is, like you said, Charlie, so the, the Clarity news that we'll be covering in the next segment came out on the twenty-third at, at night.

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And then when market opened, Circle puked, but that also coincides with Tether's announcement for this.

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And you just had Bo Hines, formerly of the White House, now he is, uh, associated with Tether, tweeting about USAT, which is their US compliant stable coin. Now, in order to be getting ahead of the game,

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some of these changes that are happening in the regulatory apparatus and legislative apparatus for stable coins, Tether is rolling out a US compliant version of USDT, which is their flagship.

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And so you kinda have to look at these as being in conversation with each other, the, the audit and USAT being rolled out.

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And I think there were some questions from people like, is the audit going to be for Tether's entire business or just for the US compliant side of things?

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I would imagine it's going to be for the whole s- the whole business, like, why would you just do admittedly probably the smallest part of their stablecoin empire in USAT.

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I don't know what the actual balance is between that and USDT. But, you know, you said it right, Charlie. Does this set Tether up? If this, if this audit is successful and it really

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dispels fears about Tether's solvency and their legitimacy, does Tether just sweep the field from here? 'Cause then if that does happen, you kinda have to ask yourself,

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what, what's the point of having USDC if Tether has all the liquidity anyway? Yeah.

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And I'll-- I mean, even more to this, a couple more takes is like, um, Tether has been spending the past several years becoming more than just a stablecoin. They are an active investor.

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They now have investments like- [clears throat]... significant investments outside Bitcoin. They are likely the world's largest private miner.

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See our other reporting from coin, uh, from, from Blockspace, uh, fifty X hash, maybe five to maybe ten percent of the network perhaps.

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Um, they're-- they have- they are becoming a like, not just like v-vertically integrated in the stablecoin game, but kind of like every sector, har- you know, mining hardware, uh, or mining software and, and like s- you know, firmware, that kind of stuff.

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So, um, they are, uh, a pretty dynamic business and, and they are using the incredible cash flow from the stablecoin issuance, uh, to fund these other activities. Tether truthers down bad.

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If you've been in crypto for a long time, you've certainly come across Tether truther- Tether truthers.There's the famous BitMEX, uh, uh, or sorry, Bit- Bitfinexed account.

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The famous Bitfinexed account, which has been saying Tether's gonna collapse the entire Bitcoin ecosystem.

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Tether's gonna collapse, uh, BitMEX and these, you know, major core, uh, you know, pillars of the ecosystem, and it just hasn't.

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Now, whether or not there was any material to these conspiracies, maybe there was, but it didn't m- it didn't happen. So here we are now, Tether, it's, it's like, get with the program.

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It's twenty twenty-six, Tether is now, uh, on a path to becoming fully legit. One hundred percent.

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And I, I wanna just pull up, uh, some market cap charts for either USDC and USDT before we move on to kinda contextualize where either of them are in terms of total market share.

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But first, I wanna comment on the Tether truther thing.

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For, for those of you who aren't aware of what Charlie means by that, there was a huge narrative circa twenty seventeen and twenty eighteen, and the hangover for this was a few years after, even into the last bull market, that the only reason Bitcoin's price is pumping is because Tether just prints tokens, and then people buy up Bitcoin.

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So there was this idea that Tether's money printer go brr, and then that's why Bitcoin's price would go up.

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Anyone who knew anything about how Tether actually flows and who, who knew anything about the market structure of these companies knows that that's nonsense. That's not how any of this works.

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Uh, because Tether actually does hold-- They don't hold dollars specifically, but they hold treasury bills, short-term treasuries, and they earn an insane amount of yield on that as well.

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I mean, they, they are immensely profitable because of this. We're talking about, like, billions of dollars worth of revenue from those instruments because of the reserves they hold.

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But going back to the market share here, I'm actually surprised at this because this, the gap between Tether and USDC is closing in terms of their market share. USDC

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has a roughly eighty billion dollar market cap, which is almost half of Tether's hundred and eighty billion market cap. And last time I checked on this, the, the...

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it was, it was more like a f- Circle probably had, like, a fourth of Tether, and then, uh, versus, uh, a, a fourth of Tether's market cap, and it does seem like they're catching up.

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Now, that being said, anything could happen. We'll see what happens after this audit. It's really interesting to see these two stablecoins compete.

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Obviously, Tether is kind of-- it was the earliest and first US-backed stablecoin, USD-backed stablecoin, but Circle has entrenched itself with, I would say, the US's crypto stalwarts like Coinbase, right, and some of the more buttoned-up, um, Bitcoin and crypto financial institutions in the US.

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So story to keep an eye on. We'll be tracking the results of this au-a-audit very, uh, diligently because, yeah, I think this is one of the biggest stories to come out this quarter, honestly. Yeah.

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Te-Tether is, is a not so quiet giant in a number of crypto business lines as, as- Yeah... Charlie was pointing out earlier. Tether's really fun to cover just because they're such a dynamic company.

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It is ki- it does feel like a once in a gener-generation company. Um- Yeah...

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[clears throat] uh, that said, you know, uh, I'm, I'm making these comments separate from, like, my views on the US dollar, which we'll probably touch on, uh, you know, this, like, later on in the show when we bring Gord on.

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But, like, you know, uh, it's, it's incredible to watch Tether and the stablecoin story play out. Uh, I'm a Bitcoiner though.

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Like, I can only get so excited about [chuckles] that kind of thing, 'cause I've, you know, I've never been, like, a... I don't hold US dollar meetups in my local community. So, [chuckles] um- Right...

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I hold, I hold, I hold stablecoin meetups, so. All right. And speaking of stablecoins, really we could have had either of these stories be the hero slot for today- Yeah... 'cause they're both pretty big.

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But it looks like prior reports on the direction of the CLARITY Act were correct. Stablecoin yield and Crypto CLARITY Act won't allow rewards on balances, latest text says.

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So for those of you who tuned in last week, I believe we covered this on Friday, there were leaks that the CLARITY Act was reaching a resolution on this contentious interest rate payment on stablecoin deposits provision.

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To recap that, stablecoin issuers and crypto exchanges want to be able to pay interest on stablecoin deposits.

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Banks do not want them to do that because that neutralizes one of their key services to their u- to their clients, although I'll... we'll have some, we have some stats here in a little bit.

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They're really not paying that much. They need some competition in this, in this realm.

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But it, it's looking right now that, uh, at per this Coindesk article, the latest version would grant rewards programs on a narrow basis as long as they don't resemble interest from bank deposits in any way.

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So interest or rewards that serve as interest are completely out according to this new draft of the bill.

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And what that means is instead of interest payments on your crypto, you'll get rewards from the platform for certain stablecoin uses, whatever that means. You know, maybe this is trading with stablecoins on a platform.

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Maybe this is they're gonna gamify your stablecoin use, you know, somehow. Oh, that's just what I need. I need another place to gamble. That's, that's just- Yeah. Yeah, exactly. Thank you.

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You know, you'll, you'll log on to your Coinbase account, and, you know, there will be a little, "You logged in for thirty days in a row. Here's your reward," you know, something ridiculous.

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But to me, this almost seems like an extension, not quite, but the first thing I thought of was exchange tokens.

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So, you know, like BNB, Binance's token or other ones, where you basically get trading incentives if you use these tokens.It, it, to me it seems kind of like a similar rewards program for this.

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Use the stable coins, maybe you get a reduction in trading fees or something like that. And it's just absolutely lacking. It, it is, it is so unexciting and boring and anodyne.

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I mean, y- you know, what, what is... what are we even doing here? If this is supposed to be a kind of sweetener for crypto companies, they're absolutely getting the shit end of the stick on this.

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And I wanna just highlight a few of these points really quickly from Eleanor Terrett to drive home w- uh, what this means.

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The proposal would permit activity-based rewards tied to user activity, including loyalty promotions and subscription programs, provided they are not deemed economically or functionally equivalent to interest.

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It would also direct the SEC, CFTC, and US Treasury to jointly define permissible rewards and establish anti-evasion rules.

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One industry leader who reviewed the text today tells me the draft is a departure, to put it mildly, uh, that's me saying that, from what had been previously discussed at the White House, warning the economic equivalent standards is vague and could be interpreted more restrictively by future regulators.

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Uh, u- um, they also point to limits of time, rewards to balances or transaction amounts, which could make incentives difficult to structure.

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Overall, quote, "This is a more narrow and restrictive approach towards crypto," they said. Another source said, quote, "This is the best possible result." Who knows? Who knows who these people are?

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You know, it's funny, we had, uh, a comment on the YouTube from JHY8557 says, "What interest on bank deposits?" And I'm like, yeah. Yeah. I mean- I'm glad- So yeah, good point. I'm glad that they mentioned that.

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This is coming from the St. Louis Fed. This is the national savings rate, so this looks at an average of what banks are offering for interest on your savings. Wow, this chart's up and to the right. That's great.

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Oh, it's only 0.4%? I mean, that's a joke, man. That is insane. I mean, look, look, we're dealing with such small numbers. It's not 0.4%, it's 0.39%.

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'Cause if it's 0.4, the bank will roll out a whole campaign to say, "Oh, we're bumping up your, the interest rate on your deposits." 'Cause, like, that's how m- minute and inconsequential these savings rates are.

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Yeah, I mean that's like, b- depending on how much you have in there, that would barely be enough to maybe cover your fees for using the bank. You know, and

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y- you know, the, the, the, the publicized inflation rate from the government is, like, 3% right now annually. So the actual inflation rate is much higher than that.

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And so if, if you're holding your savings in a US savings account, if you're holding dollars in there, you are losing out in real terms month over month, year over year, 'cause y- the value of y- of, of your dollar is eroding.

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And Nick Carter had a really good point on this, where he was saying, and I don't know if I... I don't have his tweet up. I have it. I'll, I'll put it up. Yeah. Can you throw it up? He's just saying like- Yeah...

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look, this is ridiculous. And he quotes this 0.4%. I'm assum- I'm assuming he got it from St. Louis Fed website,

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basically saying th- th- we need to have this provision for stable coin interest rates for, uh, on, or, or, or interest on stable coin deposits because it's going to drive competition and he says here, quote, "The out-" the outcome here, quote, "Will force stable coin innovation offshore and stymie business models domestically.

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Bad for consumers, bad for startups, good for bank shareholders," and there you go. Banks get their way once again.

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Yeah, it really feels like the banks absolutely handed it to the crypto lobby industry because, like, uh, crypto lobby really took a couple Ws over the past year or two, uh, putting together a big old, you know, single issue super PAC or PAC and, uh, getting a lot of stuff over the line and now the banking lobby, uh, booted up and absolutely won with what Nick Carter calls a, quote, "Anti-consumer bank bailout."

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I am kinda curious, Colin, like, so apparently the only way I'm gonna get, I can get rewards on my stable coins if this, if this is how the bill, uh, lands, is I have to, like, do things with my stable coins, like from the activities.

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So it's like this could have, like, big implications for consumer behavior.

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Like, now consumers have to, say, like, full yeet their US, their USAT into some, like, liquidity pools so they can bet on Polymarket or else they're not gonna be able to, like, you know, [laughs]

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get their rewards or something. I don't know. Um, you know- This is kind of shadows of, o- of, o- of CBD- CBDC-based systems that have time limits on your deposits or your checkings account.

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You know, we've seen these reports of early drafts of CBDCs, or I, I don't know if this is true, I heard, I heard them, this is something that is done somewhat with the social credit system in China, where it's sometimes in order to stimulate economic activity, the idea is that you can tell users of the CBDC or the citizens of the country, "Hey, by the way, you have until next Friday to use this paycheck or your money's gone."

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[laughs] We got another comment on the YouTube from Invalidate Block, uh, quote, "Competition in yield leads to more, leads to promising more yield, leads to promising more yield."

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Don't disagree with that, but also the, um, competition, it, from what I can tell, is near zero at the moment. So- Yeah. And I just, it, it's really u- unfortunate to see this, you know?

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I, I, I mean, I'm not... I don't know. It is kind of you gotta root for the home team. Obviously, some of these companies have not always had Bitcoin's best interest at heart. Yeah.

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But the fact that the banks got one over on this, and the fact that it seems like Coinbase is kinda lying down and just gonna accept it, and same with Circle-It, it's, it's, it really is kind of a black bill for the quote unquote crypto Congress and crypto presidency.

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I mean, you know, Trump's administration has some input here for sure. They, they're at the negotiating table. Um, they're not the ones totally driving the conversation.

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But l- lest we end too much on a black pill, I do wanna highlight some of the other things that the CLARITY Act does that I do think are probably benefits.

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You know, it, it, it breaks down digital currencies into three buckets. You're going to have, uh, digital commodities, which is like Bitcoin, there are stable coins, and then there will be securities.

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Like, so, you know, tokens that are basically investment contracts, and we, we covered that on the show a while back. Uh, the CFTC gets exclusive regulatory jurisdiction over spot and cash markets for digital commodity.

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Uh, the CFTC currently has anti-fraud and anti-manipulation authority over commodity spot markets, but not comprehensive oversight.

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Under the CLARITY Act, digital commodities, exchanges, brokers, and dealers all register with an answer to the CFTC. It also narrows the SEC's, uh, reach over crypto.

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I think this is probably one of the most positive things in the bill.

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By defining most blockchain native tokens as digital commodities rather than securities, the bill moves regulatory authority over the largest and most active part of the crypto market to the CFTC. The CA...

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The SEC remains authority over crypto tokens that function like traditional securities and over private market transactions.

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There's also all these other provisions like a blockchain maturity test, uh, that would define a mature blockchain as one not controlled by any person or group of persons under common control.

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Uh, an important distinction, this is part of the reason why Ethereum ducked any sort of security violations for a long time, 'cause when Vitalik et al.

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were bootstrapping it, you know, you basically were in this Wild West period where no one was really paying attention, and then after the fact they said, "Well, they've kind of stepped away from it, so now it's sufficiently decentralized."

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Uh, I would like to say, though, the Ethereum Foundation would like to have a word with that.

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And there are a number of other things like anti-money laundering and national security provisions that probably I would, if I looked into them deeply enough, I would find some fault with. You know, all of these things.

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It's like, it's like with the Patriot Act, you know? They're like, "You don't wanna be against the Patriot Act now. It's called the Patriot Act." So you, if you don't wanna be jailed- Yeah, are you not a patriot?

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[laughs] You know, are you not a patriot? You know, all of these things- Yeah...

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it, wh- wh- when you really dig through the duplicitous language of some of these bills, y- you get [laughs] the sense that they're actually doing the exact opposite of what they purport to do.

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So perhaps clarity, uh, will actually give us less clarity on certain things, but I think judging by at least the SEC being neutered from this, it's largely a, largely beneficial to the industry.

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Classic Colin, he's gotta get a dig in on, on Ethereum, calling it not decentralized. Colin, the, you, you can just get... You can skate where the puck is going and say Eth is down versus Bitcoin.

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Like, nobody cares that it's the whole decentralized argument. Uh, the price is down. So, um, on this narrative thread, we have our first guest, Gwaert, coming up here in a second.

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But not before we get a word from our sponsor, CleanSpark. [gentle music] We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash rate,

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powered entirely by self-operated infrastructure across four states. This is our proof of work, and we are setting the standard for what's next.

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Learn more about the intersection of energy and Bitcoin at CleanSpark.com. And we are live with our podcaster provocateur, Gwaert. Gwerty Gwaert, welcome to the Blockface Show.

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Gwaert. Uh, thanks, guys. Can you hear me okay? Yep. You sound great. Yes, sir. Nice. Thanks for having me. Absolutely. Thanks for joining. And I guess we finally get to do our full crossover episode here. Um- Mm-hmm...

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uh, you've, [laughs] you've been, uh, uh, one of our star podcasters, uh, for a while, and, um, you do a number of content. You interview all the smart people in crypto and, uh, get them to talk about Bitcoin.

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Um, but unfortunately, uh, it feels like crypto is really boring right now. Um, I'll throw it to you. Do you feel the same? Uh, yes. I think... I mean, I probably don't have thoughts that most other people don't, but

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yeah, I mean, like, there's not a lot that seems to be going on. I think that the past bull market was pretty depressing, and I think that, yeah, people are waiting on regulation, and yeah, this is definitely in a lull.

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Um, most people seem to have pivoted to macro and commodities and metals, and so yeah, I think that your, your overarching statement that crypto is pretty boring right now is accurate. So, uh,

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I mean, I wanna double tap on this because i- it feels like a lot of people expected the 2021 cycle to just repeat and just bigger this time, but it, it really didn't. I mean, retail got nuked, retail got eviscerated.

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Even, like, the VCs are kinda seem to be doing pretty poorly. Uh, I don't know, man.

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Like, uh, do you think we just had, uh, im- like bad ex- you know, bad expectations, or do you think there is like this is just what the sign of a, like, maturing industry looks like?

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Well, I mean, I think it's probably some combination of both. I think that this cycle was different.

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Like, I think that people s- you know, I, I had this tweet, I don't know, this, uh, started this whole debate that I did with Haseeb, two, two rounds of debate, where I basically said, like, "There's, there's no buyers coming in for these massive rounds.

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This is... It's over. Retail has learned."

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It's a bit of, it's, I mean, a little bit sensationalist, but I think it has largely proven to be true, and I think it will continue to be true.I also don't agree-- Like, I think that your point about VCs being,

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yeah, not, not doing so well right now, I think that the, the-- this is going to be, uh, this is gonna take a long time to unwind.

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Um, if you think that like crypto has had ten years basically of varying degrees of mal-investment and funding things that don't make money and will not make money, uh,

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ten-- it could take ten years to unwind, and I don't think that there's going to be anybody to step in to buy these, you know, astronomically high rounds.

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Also, there's sort of this thing like, uh, sort of toy example would be, you know how we talk about like Solana traders now holding times being extremely low, and because the trenches are so cooked, anytime there is the ability to, to make money, you kind of have to take gains.

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I think the same dynamic is going to play out with VCs, whereby any, you know, marginal ROI, they basically are mandated to take. And so you hear a lot of, you know,

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sort of optimistic talk about doubling down on winners and consolidation around projects that are, you know, sound and, and going to have a, a viable future. But I don't know that I believe this entirely.

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I think there's a little bit of, uh, masquerading about this.

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In fact, I've heard-- [chuckles] to be honest, I've heard, um, stories, or I say stories, I mean, I've, I've heard, you know, secondhand that these up rounds of the few companies or projects that are doing well, I mean, a lot of these VCs are having to take profits, right?

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Because a lot of these other things are down so catastrophically. So I don't know. It doesn't paint like a very good picture. Now, I, I would somewhat,

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you know, distinguish this from Bitcoin and then perhaps the small handful of projects that are doing well. I think those... I think-- I, I don't have necessarily a view on

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a ripping bull market in the near future, but I... Yeah, I'm not convinced. Uh, I think this could be like a very long unwind. I mean, we saw projects in twenty twenty-two raising at billions, right?

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And a lot of these have now launched and are trying their very hardest to stay at their, you know, ICO price or whatever. So you just think... And the, the last thing I would say about this, which

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I still think is under-discussed, you can have a bunch of-- Like the way VC is structured, right?

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Like you can have a bunch of small bets, uh, like if you invest at ten million as a seed round, and it goes, and you exit at two hundred million.

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If you turn around and pile that into a round that is two billion, three billion, four billion, like you need a lot of those smaller outsized returns to compensate when one of those massive, you know,

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I don't know, high FDV, low floats doesn't do well. And this is like, you know, in betting, we think about this as something like Kelly criteria, where like you're sizing your bet.

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So like in theory, these, these massive rounds, I mean, if you invest at two billion, like you, you really want to see a few of those go to forty, fifty billion, right? And I don't know that we're gonna have this again.

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So anyways, yeah, I'm like kind of secularly bearish on virtually all tokens.

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Um, and I also think that this unwind is not like the, the poor bull market we had was not by any means the end of this, and I just don't see a lot of this stuff coming back.

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Uh, it's not anything really novel now, [chuckles] to be honest. It's not like an opinion that will set me apart.

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But yeah, this is just gonna take time, and I think al- you can already tell a lot of the VCs are pivoting either implicitly or explicitly to AI or fintech, fintech now, right? So, yeah. Gord, I have two questions.

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I'll start with this one. Y-you mentioned they're doubling down on winners. Who are some of those winners? Because if I look back at the last two years, granted, I'm thinking more from the Bitcoin side of things.

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I don't really keep track of a lot of the, uh, alt, other, uh, altcoins and alternative blockchains and other things that have been launching. I, I don't see very many, uh, uh, companies- I know...

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that really, really raised and have come out with a product that is compelling. So who, what are some of those winners in your mind? What, what do you think actually succeeded? I mean, even... Okay, so this is ironic.

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Like, even when I say winners, it's a lot of these are still in private markets, so everything is fake, and there's, they're marked to, you know, astronomically high valuations.

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An example of a winner perhaps could be Polymarket, right? And there were a, a, a number of crypto VCs that got in fairly early. Polymarket now, I don't know what the most recent round is, fifteen or something like this.

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It's like every other week there's a, a new valuation. Um, is that a real number? I don't know. Polymarket yesterday announced that they're finally going to turn on fees.

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So we're, you know, at least moving toward understanding the viability and, and like sustainable revenue capacity of this stuff. But no, I, I tend to agree, like, with your...

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The irony of me saying doubling down on winners, it's like it's hard to define winners, right? I think an obvious, I mean, sort of the, the sweetheart right now obviously is Hyperliquid. Um, a lot of VCs bought at,

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I, I, I don't know, I've heard, right, like between ten dollars and thirty-five dollars. So there are-- there is money allocated there, um,

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that has weathered fairly well, like there, the, there hasn't been some insane dr-- I mean, apart from the initial kind of up and then down, Hype has done quite well. So I think that could be considered one. Um,

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outside of that, I mean, a lot of these, I think a lot of these, you know, winners are in the private market still and probably not even looking to launch tokens or becomeProtocols or whatever we had prior, right? So

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I don't know. It's a good question. Um, I use Polymarket as an example of one where it-- you-- there's definitely some, at least on paper,

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decent multiples there from VCs, but that's one where I've heard [chuckles] ironically, you know,

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I don't know if they're, if they're trying to hold those bags in perpetuity or if they have to take some off the table in secondaries or whatever. So...

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And, and one of the interesting things, you know, you bring up Polymarket, 'cause I would say Polymarket's a real business. Like, a lot of these other things, I'm not really sure what- Well-...

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they're not even a business. Casin- ca-casinos are a business. Yeah, that's a business. Yeah. The revenue. But I mean, Po-Polymarket, like Kaoshi actually makes money. Um,

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Polymarket is just now starting to make money as of, like literally yesterday. They're turning on fees in almost all markets, I guess, except outside of geopolitics, which is kind of interesting and maybe, uh,

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yeah, it may be an interesting strategy actually. But regardless, we'll see. We'll see if, first of all, there's a whole casino lobby that's trying to

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come at them from the other side, and then there's competition from a number of angles because, yeah, casinos are profitable businesses. So we'll see, right? Like the durability there.

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I think Polymarket has definitely escaped kind of the, um, crypto containment. That, that's kind of undeniable. But yeah, I don't know what this looks like. Is it worth twenty billion dollars right now? I'm not sure.

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Two observations from what you just said there. Sorry, Charlie. Gord, it's interesting you said they're turning on fees for everything but geopolitics. That's what I read. I, I, I'm fairly sure.

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If that's true, that's very interesting 'cause I would have to imagine next to sports, geopolitics is probably the big tu- like the silver tuna for them, right?

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It's probably the thing that nets them the most trading volume. And really would be curious to your point, Gord, about we'll see how viable this is.

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You know, th-this is not uncommon for a lot of these tech companies that are VC-backed. We saw this with Uber, we saw this with Airbnb, we saw this with DoorDash.

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When they're in the bootstrapping phase, fees are low or nonexistent so that they can get-- they can accrue users, and then they end up blasting people with fees.

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And, you know, in those three scenarios, we saw all of the services, uh, get more expensive as a result.

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I mean, it's not the best corollary in the sense that it's not like betting on that will get any materially more expensive, right?

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I mean, they're gonna take a cut of it, but it's, it's not like, you know, the price of your Airbnb going up from a thousand dollars to like fifteen hundred dollars for a weekend.

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I have one last question, but I'm gonna close on it Ch- because Gord, you mentioned Hyperliquid, and I know that Charlie's got some, some questions for you on that. Uh, yeah.

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I mean, Hyperliquid got the Wall Street Journal, uh, article this past week, and we saw oil rip on Hyperliquid, uh, over the previous weekend during the Iran thing.

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Um, it's-- I think it's hard for us to, to pull ourselves out of our, like, crypto-biased information ecosystem. But does Hyperliquid seem to be, like, crossing the Rubicon into, like, mainstream, uh, use?

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I-- like, Polymarket did this, like we just said. Like, do you think Hyperliquid's positioned to do this? Uh, I think it's the, the second closest, I guess. Uh, I don't know. It's hard for...

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Like, I'm not really a trader, right? And so much of crypto actually just, you know, outside of perps, like, so much of it is the past couple of years been focused on trading high performance, so on and so forth. So

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I don't know. It does seem to be a very good product. Um, it has users that have sustained post-air drop and now for quite some time, right?

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Like they're-- I was talking to somebody and their, their thought was, you know,

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you give every-- you, you give people two million dollars, you give casino goers two million dollars, like they, it takes time to bleed out. But- [laughs]... the point, you know, to, to spend it back at the casino.

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But the point is that there is clearly some durability, uh, beyond that initial kind of airdrop, and obviously the price has done quite well and, and it makes money, right? Like it, it does make money.

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Again, there's-- everybody has an opinion about competition and, you know, whether these fees compress substantially.

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This is obviously a, a high, well, you know, relative to some other businesses, this is really, like it's pretty high margins in, in perps trading. So I don't know. It's hard to say.

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But yeah, like I mean, outside of [chuckles] again, it's like we were talking about winners before. It's like, yeah, okay, it's been prediction markets maybe as a whole and then hype and we'll see.

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So I, I think it's impressive, let's put it that way. And I think that there's something to be said about a, uh,

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a team that really is kind of bootstrapped and follows some of the ideals of permissionless building or whatever, and having the amount of success they've had. So that, that shouldn't be kind of, um...

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We shouldn't like relegate that to nothing. Kinda last topic I wanna throw at you, and you know, we-- before we had you on, we did two pieces on stable coins and, and, uh, you know, compliance and regulatory stuff. Um,

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I know this is-- I'm not gonna hear a new take here, but I wanna hear you like riff on this. Is crypto taking over Tradfi or is Tradfi taking over crypto? Um, I think it's... I don't know.

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Like the, the delineation, I don't know, is that important, to be honest. It seems like we're moving to, you know, twenty-four/seven markets, more permissionless systems. A lot of it is Tradfi recycled.

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A lot of it I don't care that much about. Like all of us come from, you know, maybe Bitcoin backgrounds, and a lot of this stuff is-Like, you know, not to sound too laser-eyed, but this is just like fiat games.

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Like, almost all of it is fiat games. Even, like, I heard you guys talking before about the circle and yield, and all of this stuff is just like, you know,

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it's all arbitraging the fact that every company wants to become a bank, right?

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And everybody just wants a lot of assets under management so they can skim a little bit for themselves, and it's just not that interesting to me. Like, stable coins, yeah, like of course they should be able to pay yield.

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Like, I think any rational person agrees that this is like, uh, would be unfair to the banking lobby. But at the same time, it's like I, I, I feel like I'm being compelled to care about a bunch of stuff that

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I never cared about, right? And it's like we're all in this together. Like, we're really not. Like, I don't care about that stuff. Um, this isn't some, you know, ideological thing for me.

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This is quite boring, and really it does feel

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like a bunch of, you know, new parasites coming in and wanting to get their little tentacles on some negligible amount of, you know, yield that they can skim off the top of everybody. It's just not very, you know...

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This isn't what got me into this at all. Well, uh, you are certainly-- You have certainly a fantastic, uh, uh, precise, comedic, and acerbic way of communicating this.

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Uh, one of your la- one of your recent tweets, one of my favorite tweets, which I retweeted, quote, "The hardest part of being in crypto is pretending to care about agentic [chuckles] payments."

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Uh, I feel that right now, um- This is such a marginal, like this is a prime example. It's like such a marginal improvement. I mean, we're, we're really like compressing on the things that, that are useful.

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Like, this i- a, an open payment standard is i- like in terms of the, the impact this has on the average person is like so uninteresting. Like, and all of these things were just, um, i... Yeah.

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The, the agentic payment thing is a sh- kind of a charade. I mean, uh, I don't know. It's just another, like another narrative. So we'll see.

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Well, and it's interesting you're saying, but then back to the common person, the value for that is going to accrue to power users of, of AI, right? Which is almost certainly not the average person.

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Yeah, that, but also it's just... Uh, it's not like so mu- so a lot of the whole like agentic payment thing is that

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your bot or whatever is like autonomously doing stuff for you, and this is more just like p- anthropomorphizing code to me. It's like a narrative.

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It's a way to hype up and personify lines of code that are doing, like little chatbots doing tasks for you, and it's not something that is...

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I, I just don't find it that, like, uh, I mean, I'm kind of, I don't have great words to explain this. I just don't think it's that like compelling for, from, uh, the, the end user.

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It's a very marginal improvement to like your tech stack, if you will. So yeah, and, and where... Like I, I had this response.

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It's like, well, it's really fascinating where like the moats can be built and the value accrues. Like, yeah, it's not, it's not that interesting to me, [chuckles] you know? We have to wrap this up. Gort- Awesome.

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Thanks, guys... thank you so much for the very, thank you very much for, uh, hitting on all these topics.

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We'll have you again, and for the listeners, Gort has a podcast, The Gort Show, and follow him on Twitter for, uh, hilarious takes which do really crazy numbers. Thank you, Gort. Thanks, guys. See ya.

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And for those who are wondering, yes, Gort is a disembodied voice that lives on the World Wide Web. Gort is not a person. Gort is more of an entity. Of an idea. All right. Yeah.

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And with that, we'll go ahead and hop into our next guest segment and welcome Jay Patel of Ligos Finance to the stage. Jay, welcome back, sir. How we doing? Doing well. Doing well. How are you guys? Embodied voice here.

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Yeah, embodied voice. [laughing] [laughs] Jay's here. Came on. Let's go. Yeah. So Jay,

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there's a lot we could unpack today, but you had mentioned that we are starting to see cracks in the private credit market, and I think that is a great jumping off point into some questions that we have for some other news items in the news cycle recently, like with Strategy really doubling down on Stretch, and also as it relates to Bitcoin-backed credit in general.

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But to start this conversation, can you give us a rundown on what's going on in private credit markets, and also for those who don't understand what these are, how private credit markets function in the wider flow of finances?

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Yeah, for sure. So, you know, I think most of the recent headlines have been primarily around

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different managers gating redemptions on various vehicles, so either limiting or, um, all out stopping the redemption for investors in various private credit vehicles.

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So, you know, folks trying to take their money out, and the investor is limiting them to, uh, a certain percentage of their request or all out denying redemption requests. Um, and you know, I think what's interesting is

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it's not like legal or, you know, unheard of. You know, clearly within these vehicles they have the right to do that.

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Um, but I think maybe what folks don't understand is actually like underlying problems, like what caused it, and why did so much money flow into private credit over the last, you know, really the post-COVID era, um, that is suddenly fleeing.

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Um, so I think a good, a good kind of like, uh, way to understand the market is really that there's publicly traded kind of BDCs, private credit type vehicles, and then there are these non-traded closed-end vehicles.

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And the real difference is like one functions similarly to an ETF, you know. I can buy and sell it.

270
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Um, if you think back to like the grayscale trade back in the day, where the Bitcoin is in there and I can buy and sell it, someone might not pay me one Bitcoinequivalent for one BTC worth of Grayscale, uh, the trust.

271
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But if I need to get out, I can.

272
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Um, and then on the non-traded side, it's really kind of off exchange, um, and the managers usually have some commitment on interval funds to say, "Hey, we will provide five percent redemptions per quarter or seven percent," or what- whatever it might be.

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And on some of these vehicles, it can also just be that there's a cap. You know, the manager could, in theory, say, "Hey, you know, there were nine, twelve, thirteen, fifteen percent redemption requests.

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We're gonna honor five percent and distribute it pro rata."

275
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Um, so that article you just pulled up, you know, there's been kinda numerous headlines, similar things across all the managers, where all these managers are basically gating redemptions because they're getting redemptions far in excess of the liquidity they have.

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Um, which, you know, all of these stocks have seen kind of like turmoil across the managers because the way they make money is they charge a fee on the assets, and the market sees that, hey, all the money is trying to leave these vehicles, regardless of what's happening in the vehicles.

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Like that is the, the income stream for the managers. But I think what's more interesting is what's happening in the vehicles.

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Like if all of these loans were doing well, clearly they could have a secondary market where someone else could buy the loan, or if the loans were performing, they use the interest, and there's plenty of new demand coming in to put in money, and that can replace the kind of l- folks looking for an exit.

279
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Um, but what's interesting is over the past five or seven years, a lot of private credit has shifted to making loans to software companies.

280
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Um, and I'm sure you guys talk about AI plenty, but a lot of these software companies that once had durable moats, great businesses, growing revenues, are not in that position anymore.

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Um, and a lot of these loans, you know, I think it'll come out that they were actually pretty poorly underwritten.

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Um, you know, I think Cliffwater is the kind of biggest, uh, one in the news over the past few days, but their whole strategy was basically, "Hey, you know, we can have a more efficient and lean business by not doing the underwriting ourselves, but we'll just put money into other private credit funds, and then they'll give us access to the deals for us to put in money, um, directly into those loans."

283
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Um, so,

284
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you know, it's a, it's a-- I wouldn't say it's a scary situation, but I do think that there's still a lot more carnage to be had, and I think the biggest reason is, um, the, the panic is kind of just now setting in, like you see here, because, you know, these managers are gating redemptions right now, but they haven't marked the portfolios, um, to the current value of the assets.

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But the publicly traded BDCs trade at something between like fifty percent and seventy percent of NAV, um, so it's almost like, you know, you really gotta like close your eyes and, you know, suspend disbelief to think that this manager's telling you, "Hey, all the loans are fine.

286
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Over here, everyone's paying fifty cents on the dollar, but trust me, they're fine." Um, but obviously it's not their incentive to really mark them to where they are. Um,

287
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so Jay, I don't really, uh, follow-- But, you know, macro and private credit's absolutely out of my wheelhouse. Um, uh, I'm kind of curious, like how do we track and get a sense for the market?

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'Cause I see news stories and, you know, announcements from, say, Blue Owl, Cliffwater, like, "We've done this much." I don't know, like how do you follow the market?

289
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Because I have a-- I have difficulty getting a sense for scale and direction. Yeah, no.

290
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So I think the market, it's, it's, it's quite difficult to follow just because a lot of these vehicles are not publicly traded, right? They're accessible via your wealth manager or RIA.

291
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Um, and I think this is probably what links it to the success that MicroStrategy and the other treasury companies have had, which is basically that a lot of the capital that started to go into private credit wasn't endowment or pension fund with a twenty-year time horizon.

292
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It was, you know, retirees and everyday folks, and their wealth manager told them, "Hey, you can get twelve percent fixed every month, like, you know, on an annual basis.

293
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Every month you'll get some liquidity, and you'll have that for perpetuity, and there's high quality credits." And, you know, that was very attractive.

294
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But the difference between me and you and an endowment is that I might need liquidity. I can take the money out, you know.

295
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Um, I think the reason that Stretch and these other prefers are so attractive is because it's a high rate, yes, but also I can sell out of Stretch, you know, on a daily basis whenever I want to.

296
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Um, and I don't think that the underlying structure for private credit really made that possible. I think people were disillusioned by the fact that the rate was so high. But if you think about the underlying rate, um,

297
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you know, A, a lot of these are software companies, not great credits underneath.

298
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But also, the way that they get that twelve percent is they make nine percent interest rate loans to mostly middle market companies and then lever up two X, pay a bunch of fees, pay interest, and now you're at this magical twelve percent.

299
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But, um, yeah, you're right. It's, it's an opaque market.

300
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Um, and I think that is why you will sh- see more and more of this capital over time shift to things like Stretch, but also probably you're gonna need some sort of, um, real Bitcoin collateralized debt.

301
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I think the one gap there, and, you know, there was a big NYDIG report out this week that kind of, um, characterized it as basically like Stretch is great for everyday retail investors who want instant liquidity, and they want a good yield, but there's a lot of folks who need to put in assets, um, and make sure that there's real collateral backing it, right?

302
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So like Stretch, you don't have a direct lien on the Bitcoin. It's not directly collateralized by any part of MicroStrategy's Bitcoin pool. Um, but I do think that those structures will evolve. We saw the lead in ABS.

303
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You know, Galaxy had a few CLOs earlier this year. So I think that play-- that space will evolve. Uh, just to double tap on the first part of the conversation here, Jay, some of the headlines that have come out recently.

304
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We, we touched on Blue Owl. BlackRock has capped withdrawals from a twenty-six billion dollar fund.

305
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Uh, Blackstone has avoided gating its eighty-two point, point five billion dollar fund, um, only by injecting four hundred million of firm and employee capital. And then you mentioned Cliffwater.

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Shareholders in Cliffwater's thirty-three billion dollar flagship private credit fund sought to withdraw seventeen percent of their stake.

307
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Um-And there are a few others, like with Apollo and we, we've covered some of these in our, uh, podcast lineup and on the newsletter because a lot...

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Private credit is driving a lot of the AI CapEx boom and, you know, we actually covered a story, I, I wanna say it was at the end of twenty twenty-five, maybe the beginning of twenty twenty-six, that Blue Owl told Oracle, "We're not going to give you...

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We're not gonna give you any more credit for your future builds," almost preempting this.

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And so I guess another way to take this conversation, my question, and you brought up, you know, a lot of these software companies, people are worried about their credit risk, the, the collateral for some of those loans is probably lacking, so they weren't, they weren't underwritten well.

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The, uh, software's going to zero as people keep saying. On the AI side, there's a fear that these big data center projects aren't going to be able to ROI this CapEx spend as quickly as, as investors originally thought.

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In your mind, is this an oh shit moment for private credit and for, uh, financial markets r- uh, at large, or are, are, are you still a little bit calm about what we're seeing?

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I don't think it's an oh shit moment for financial markets at large, but I do think it is for these private credit managers, and I think there's two reasons.

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One is, you know, I think compared to making a loan to a software company that was acquired by a PE sponsor, um, making a loan to a data center operator is, like, incrementally better.

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At least there are some power assets and GPUs and, you know, there's real collateral. It's not future ARR or something like that. Um, but the issue that all these managers have is they don't print money out of thin air.

316
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I mean, I like to...

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You know, we like to make the fiat joke that all this money is whatever, but, you know, they need investors to put in dollars to make these loans, and if there's no new investors putting money into these vehicles and these software companies are barely repaying these loans as it is, they have to use all of their available liquidity to, you know, meet these redemptions and, you know, like you said, they're even injecting these four hundred million dollar, you know, their own capital in to process redemptions.

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So I think there is a constraint on, like, the private credit space. There's only so much capital that they can put in, um, and I think, like, the AI boom has, you know, for what it's worth, drawn a lot of capital.

319
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You know, you see Sam Altman going to the Middle East and everywhere.

320
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Like, there's an insane amount of capital needed, and I don't think private credit will be able to fulfill that, um, because they have their own set of problems now.

321
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Um, the other piece on the BlackRock thing that's just interesting is, like, a lot of these managers are like, "Don't worry, we stand behind the vehicles. We're gonna put in our own money to process redemptions."

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What's funny about that is they're doing this for the private vehicles, like, the ones that are available to, you know, uh, investors via their RIAs or wealth advisors, but at the same time they have these publicly traded BDCs that are at like fifty, sixty, seventy cents on the dollar.

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So you almost wonder, like, why are they putting hundreds of millions of dollars here when, you know, if the assets were so great, they can buy them at a sixty percent discount on the public market?

324
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And the reason is because they don't wanna kill the golden goose, which is the fee revenue that they have because if they stop doing this, then everyone is just gonna put in full redemption requests.

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If they realize that, hey, BlackRock's no longer gonna honor redemptions, I'm not gonna put in for my five percent, I'm just gonna put in for my hundred percent and hope that I can get as much as I, I can out.

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Um, but there goes, you know, BlackRock's two percent management fee or whatever it is. So to close out, uh, you mentioned Stretch, and I wanna just double tap on, like, the Bitcoin-backed credit markets.

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What does this mean for those, and, uh, any ramifications specifically for the Bitcoin-backed credit markets? Yeah.

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I think this is gonna be a slow shift, but I actually think this is positive for our industry, you know, 'cause the biggest, you know,

329
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uh, you know, beneficiary of private credit so far has been most of these managers who make a bunch of fee income.

330
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But, you know, if you think about a Bitcoin-backed loan, just a simple Bitcoin-backed loan, it's very different than making a loan to a software company or even an industrials business that has a factory or whatever in the sense that, you know, you have the underlying Bitcoin collateral, you can liquidate it if you need to.

331
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It's twenty four/seven. You can verify it on chain, you can hold it at a custodian or, you know, in a DLC like we do at Lagos, or a smart contract on another chain, but it's there.

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Um, and I think that once the carnage, and I don't know how long it will take, occurs on the private credit side, investors will wisen up and realize, hey, I like that nine to twelve percent return, but I need to know what these loans are.

333
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I need to know what the collateral is, and it's gotta be real. It can't be future receivables for your CRM software that was sold to, I don't know, hair salons in Idaho.

334
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There's just not enough people buying that anymore, and there's no defensibility to that software. So I think that will open up this market to Bitcoin-backed lending, things like Stretch.

335
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Um, I think Stretch will probably remain kind of like a,

336
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I don't wanna say retail, but, like, retail-esque product in the sense that the benefit of Stretch is that daily liquidity, but I think it opens up the door for more complex products or, you know, maybe slightly lower rate but higher collateral quality and credit quality products, um, uh, for the institutional side.

337
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So, uh, what I... You know, sometimes all you need for Bit- Bitcoin-backed, uh, products is for the other products to look, uh, less, uh, look shakier.

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So I hear, uh, bullish on Bitcoin-backed credit markets from you, Jay. Uh, thank you so much, Jay from Lagos.

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Uh, we will have you on again very soon whenever we need an expert on the things that I cannot possibly understand, like private credit. Thank you, Jay. Take care, guys. Cheers. Cheers, Jay. Thanks, man.

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341
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Big whales, hedge funds, and lending desks are going under after the notorious 1010 and two five liquidations. Maybe something about private credit in there too.

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01:01:19.056 --> 01:01:28.496
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01:01:29.196 --> 01:01:41.296
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01:01:41.705 --> 01:01:51.356
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01:01:51.476 --> 01:02:08.556
Go to ligos.finance, that's L-I-G-O-S dot F-I-N-A-N-C-E to learn more. And now for the next story, Colin, I will take this one.

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Uh, this is more of a Bitcoin tech story. Uh, this is, uh, some news that came out this week that there is a new Bitcoin client on the block, or maybe there will be a new Bitcoin client.

347
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Or maybe more specifically, there's a new team which is going to raise money to fund, quote, "a new Bitcoin client." This is the, uh, work of a,

348
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uh, a f- a new 501[c][3] called Production Ready, led by well-known Bitcoiners Samson Mow, Jimmy Song, Parker Lewis, and I believe another person or two.

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Um, and this is an initiative to, quote, "decentrali- decentralize Bitcoin development." And, um, uh, Jimmy Song accompanied this with a X article called The Case for a Conservative Bitcoin Client.

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So basically, they're spinning up a 501[c][3] similar to other like not-for-profit entities, which are like kinda either labs or grant, uh, groups, I guess like a Chaincode or like a local host or a Spiral.

351
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And they want to fund development of a, quote, "conservative Bitcoin client." Um, little context here. The folks who are kinda leading this are on the board, and like Jimmy Parker, uh, Samson Mow,

352
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all, um, very... really leaned into the filter, uh, argument. That is the, like the Bitcoin, I would say the Bitcoin Puritans that I, that I often refer to on Blockspace content.

353
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And they've been very unhappy with, uh, the fact that transactions they don't like get onto Bitcoin. And through that, they've been very critical of the, uh, developers and,

354
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uh, ecosystem of developers that contribute to the dominant Bitcoin client, Bitcoin Core. So they want a different client. Um, and they use terms like conservative, unchanging, pro-ossification.

355
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Uh, and so, uh, they've kind of written out some of their thesis,

356
01:04:30.076 --> 01:04:43.386
um, and saying that they're giving node operators an option, and they're saying that this is a, quote, "third implementation," which I think is, one, false, and, uh, also kind of, uh, misleading.

357
01:04:43.396 --> 01:04:46.416
Whoa, whoa, what are you-- What, what... They're the-- Wait, wait, hang on. They're saying that

358
01:04:47.636 --> 01:04:56.956
there are four-- This would be the fourth implementation- Well- Or not more than that, I mean- That's a good question, Colin. That's a good question. What is a different, what's a different implementation of Bitcoin?

359
01:04:57.656 --> 01:05:10.606
Um, obviously Bitcoin Core is an implementation. There are other Bitcoin clients. There is Bitcoin D, a separate implementation. There's Libbitcoin, um, a separate implementation. Right.

360
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Do you consider a fork of Bitcoin Core, so if you were to go to the Bitcoin Core repo and fork that GitHub repo and change- Uh..... some settings, do you consider that a different implementation?

361
01:05:21.936 --> 01:05:33.656
Um, like- So this is like an ontological argument. If you fork it and don't build it from scratch, then it doesn't count as its own implementation. That's, that's the argument, basically? Well, I think it's unclear.

362
01:05:34.036 --> 01:05:52.856
So, um, the funny thing is that I d- think that the, this, the claim that, that Bitcoin, that, uh, Bitcoin, uh, p- from Production Ready, their client is a third implementation, is pretty misleading because it says that there's Bitcoin Core, Bitcoin Knots, and then whatever implementation Bitcoin Production Ready is going to build.

363
01:05:52.936 --> 01:06:02.936
Um, and 'cause there's more. [laughs] There's, there's, there's BTCD, BitCD- Yeah, there's, there's Libbitcoin- But Bitcoin- Eric Vos- There's more... also, you know. Yeah.

364
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And if we're talking about like different implementations, then we could say like there's Libre Relay, which is just Bitcoin Core with, um, you know, the guardrails taken off and prefer- preferential peering.

365
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So like, um, I think that this kind of language indicates that, uh, they're either trying to like communicate and market this to a less technical user who cares a lot about the, the Puritan angle, or that they just don't know what they're talking about.

366
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I think it's a little bit of both. Um, I'm pretty critical of it.

367
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I've been, I've thrown out some, uh, very sarcastic tweets about this because, uh, my view is that, um, it, uh, Bitcoin Core is the conservative client, and also, uh, conservative, conservatism, conservatism, uh, by, but you're just changing like relay policy.

368
01:06:57.056 --> 01:06:59.706
They haven't been very clear about exactly what they would change with this.

369
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There are certainly a lot of things with Bitcoin Core which are inefficient that, um, other people have kind of stripped down or removed to make the client like perform better.But like I'm not really sure what they mean by conservative client.

370
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Are they talking about a client with different default relay policy settings? Because if that is what they're talking about, I think this is a total BS, uh, initiative.

371
01:07:23.036 --> 01:07:35.946
Um, and, uh, if they're talking about like more like rewrites or actual like more funct- like changing functionally how the client works, then I think they could like be, you know, a

372
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arguably, you know, an implementation which could be an alternative.

373
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This idea that like I, I really just d- think that the filter camp and the anti-core camp has, um, done a terrible job, and in most cases willfully, uh, uh, muddied the waters a- and muddied the, the conversation distinguishing between what is a consensus change and what is a relay policy change, because, um, none of these s- actually change the w- what Bitcoin blocks include.

374
01:08:09.636 --> 01:08:17.236
Um, it's more of a- Well, they couldn't... structural thing. Then they, they wouldn't be Bitcoin, right? I mean- Yeah, then they would have to fork off, and so yeah, there's, there's...

375
01:08:17.436 --> 01:08:26.766
I don't really see by my definition of what is a conservative client, I think that this would just not do that. Do they add more reviewers and add more days to review?

376
01:08:26.796 --> 01:08:38.536
Like p- uh, you know, PRs that are merged on core, do they just wait 30 days and merge it on the, this new client? So I think it's like really confusing, um, and at best, uh, and even at...

377
01:08:38.866 --> 01:08:43.296
and, and even if I try to be charitable, I think this is a pretty ridiculous angle.

378
01:08:43.456 --> 01:08:57.996
I think if I could just predict and give you a one-liner what this probably is, if they raise any money, they're gonna fork core, do very little excha- except change some very like inconsequential social signaling relay policy changes and then pay podcasters to shill it.

379
01:08:58.616 --> 01:09:09.336
So I think that's basic probably what they're gonna do, gonna do. Um, if you wanna pay us to shill it, uh, we'll consider it. [laughs] Two- Yeah.

380
01:09:09.596 --> 01:09:14.686
Two, two comments here, Charlie, uh, to, to close out unless you have anything else to say. Yeah.

381
01:09:14.696 --> 01:09:24.196
But, you know, just to trigger the filter folks, it's, it's only Bitcoin if it comes from the core region of the blockchain. [laughs] Everything else is just sparkling crypto. Yeah.

382
01:09:24.346 --> 01:09:33.126
Uh, and then number two, the, the like... I, I love your distinction that you feel like core is actually the conservative client- Absolutely... 'cause this to me kinda gets into --

383
01:09:35.076 --> 01:09:44.755
It reminds me of the I'm a classical liberal, you know, from a lot of cons- conservatives. You'll hear conservatives say that, like they believe in the ideas of classic liberalism but not what it's become.

384
01:09:45.516 --> 01:10:03.996
And, and I, I think that that's an interesting distinction here because if you look at Bitcoin Core, there is a strong argument to be made that it is the more conservative option and that the changes being made in these other things are more progressive in the sense that they are less democratic and more top-down from the maintainers of these various implementations.

385
01:10:04.516 --> 01:10:13.796
And I wonder if the case for the conservative client has to do with, did I hear you correctly that they said that they are in favor of ossification? Is, is that the idea? Yeah, this is the, this is the core point.

386
01:10:14.016 --> 01:10:27.936
Jimmy makes this point, uh, a multiple times, um, in, in his ri- in his, in his, uh, in his writeup. Now, what's funny is like I don't... uh, there's very few like s- uh, discrete statements that I disagree with.

387
01:10:28.396 --> 01:10:31.716
I really challenge his framing, but that's a longer conversation.

388
01:10:32.696 --> 01:10:48.146
Yeah, I mean, I think that's interesting, and, and if I were reading this, if I'm reading this correctly, I think that's probably what they mean most about conservative is we want the fewest changes to Bitcoin as possible, which also probably extends into we want the fewest, how, how do we put it,

389
01:10:49.116 --> 01:10:58.656
the fewest use cases outside of the original use case for financial transactions as possible going back to the- Yeah... relay policy as it relates to ordinal- Yeah... inscriptions and arbitrary data and things like that.

390
01:10:58.676 --> 01:11:08.656
But the, but the whole thing is that there have been no changes to Bitcoin. There have been no changes to Bitcoin, and critics of Core claim that they have made changes to Bitcoin when they haven't.

391
01:11:08.666 --> 01:11:25.456
The Bitcoin is the same as it was since N- since November of 2022. No consensus, no new consensus has emerged, um, so these are simply relay policy which has, uh, proven empirically, functionally, uh, ineffective.

392
01:11:26.075 --> 01:11:37.356
So this is, these are, there have been no new changes to Bitcoin despite what the not C- the not people will tell you. Um, on... Let's move on. We gotta move on.

393
01:11:37.456 --> 01:11:48.776
I'm, I'm gonna say- Yeah, that, that, that was a good rundown, Charlie. Thank you. All right. Yeah. And we will close on a story of interest, uh, for the week, a little bit of page six. I've got it up here, Charlie.

394
01:11:48.796 --> 01:12:03.766
I'll share it. Yeah. And that is, uh, a, a, an interesting little, uh, drug dealer, uh, crime, uh, little drug dealer crime duo story here.

395
01:12:03.856 --> 01:12:08.856
Irish police crack code for 35 million Bitcoin stash tied to former drug dealer.

396
01:12:09.476 --> 01:12:32.116
So Irish officials with the help of Europol's European Crime, Cyber Crime Unit has seized approximately 30 million euros worth of Bitcoin, 500 Bitcoin from a wallet that belonged to one Clifton Collins, who was a drug dealer who was arrested in 2017.

397
01:12:32.176 --> 01:12:48.656
Now, when I was looking at this story, at first I had these delusions like, oh, did they just nab one of Ireland's key drug pins? No. This was just some silly Mick growing cannabis in his backyard in County Galway.

398
01:12:49.196 --> 01:12:59.976
When, when the police arrested him, he only had like 2,000 e- euros worth of pot, and they, he ended up going away for five years, so he's actually released now.

399
01:13:00.676 --> 01:13:04.596
And so but he's not like a huge drug dealer, but he'd been doing it for some time.

400
01:13:04.736 --> 01:13:22.440
And back in 2011 and 2012, maybe to launder money, maybe to have a currency that was less traceable than cash, he bought like 6,000 Bitcoin.And the funniest part about this story for me is how he chose to hide that Bitcoin.

401
01:13:23.040 --> 01:13:35.960
He printed out the seed phrases or the private key. I, I saw mnemonic used in one of the official press releases, so I'm assuming it was the seed phrase. Um, seed phrases were around back in, in, in, in 20...

402
01:13:36.780 --> 01:13:42.540
Well, he bought it in 2011, 2012. We don't know when he actually- Every year. Yeah, seed phrases happened in early, in the early 2010s or something like that. I forget when. Yeah, yeah.

403
01:13:42.600 --> 01:13:51.700
And, and anyway, we don't actually know when he printed them out, but he printed out 12 seed phrases. He split the Bitcoin into t- uh, 12 buckets of 50, of 500 Bitcoin each.

404
01:13:52.140 --> 01:14:04.560
He printed them out and stored them in fishing rods, and hid them in his house, which he was leasing in, uh, County Galway in a town called Farnaghrt, if I'm, if I'm pronouncing that correctly.

405
01:14:04.880 --> 01:14:14.320
Now, when he was arrested in 20- You look like a, you've got the hat. You should be able to pronounce it correctly. [laughs] Farnaghrt. Oh, I know it well. Yeah. Goes back to me, goes back to me great-great-grandfather.

406
01:14:14.330 --> 01:14:28.360
[laughs] Yeah. Yeah. So, but when he was arrested in 2017, his landlord threw everything out, and so all of these seed phrases in their, in their casings in these fishing rods were thrown into a dump,

407
01:14:29.420 --> 01:14:34.390
and Collins thought they were lost forever. And according to this,

408
01:14:35.460 --> 01:14:48.040
this, uh, Guardian article, I thought this was a really funny quote, Collins apparently told the police he has come to terms with the loss of the fortune and considers it, it punishment for his own stupidity.

409
01:14:48.360 --> 01:14:53.520
[laughs] So I think that's really funny. But the other, th- there's something not adding up here.

410
01:14:53.600 --> 01:15:16.040
I almost wonder if one of these were s- uh, spirited away by one of his compatriots, or they were hidden somewhere else because according to this Guardian story, uh, which is quoting from The Irish Times here, workers at the dump told Irish police they remembered seeing discarded fishing gear, but waste from the dump goes to Germany and China to be incinerated.

411
01:15:16.080 --> 01:15:26.589
The fishing rod case has never been found. So ostensibly, the majority of this Bitcoin was sent to an incinerator either in China or in Germany.

412
01:15:27.040 --> 01:15:37.470
But somehow they've managed to recover one that had the seed phrase for 500 Bitcoin on it. Something's not really adding up here. Uh, so who knows how this was actually found.

413
01:15:38.100 --> 01:15:49.380
Also, the police, you know, in their official statement, which I thought was kinda cute, talked about how they had decrypted something, and if these were just seed phrases, there's no decrypting that you need to do.

414
01:15:49.440 --> 01:15:57.440
You just type the seed phrase into a wallet, and then you get the funds. So who knows what really happened here, but I, I just wanna close on this before I s- throw it to you, Charlie.

415
01:15:58.480 --> 01:16:10.340
What is going on with British Isle citizens and losing Bitcoin in landfills? Those of you who have been around the block for a while might know of this famous story of Welsh engineer James Howells,

416
01:16:11.280 --> 01:16:30.710
whose wife threw away a hard drive for, w- with 8,000 Bitcoin on it in 2013, and this poor sap has been lobbying his local government for years now, trying to excavate that hard drive from the dump to see if he can recover his lost funds.

417
01:16:31.060 --> 01:16:45.839
He's promising up to 30% of the funds if he finds them to give to the c- give to his local government and to give to locals in the area. And I believe at this point, you know, how much is that 8,000 Bitcoin?

418
01:16:46.760 --> 01:17:01.100
That is 568, $569 million worth of Bitcoin. At, at the peak, it was almost, it was a little over a billion. Yeah. So something going on with the Brits and the Irish and losing Bitcoin in landfills, man.

419
01:17:01.220 --> 01:17:12.340
Yeah, I, I do think that you, that the, the most hilarious story about this, this particular drug dealer called Collins, uh, is that he was not some kingpin.

420
01:17:12.880 --> 01:17:23.620
He was not some, uh, or at least we don't assume, he was on, like, selling on the Silk Road or something like that. Um, no, he was, like, literally, like, your neighborhood weed dealer.

421
01:17:24.140 --> 01:17:33.790
[laughs] So, like, he was just- Yeah... the guy down the street who was like, "Oh, well, I made it big. I got, like, 20K. I should put, like, half of it in Bitcoin or something," and then he does.

422
01:17:34.360 --> 01:17:46.780
Um, I'll also say, like, great forethought, great thinking because, uh, uh, you know, maybe you don't have it now and, but, but at least it, somebody has it now.

423
01:17:46.940 --> 01:17:56.560
Like, all of that could've disappeared, so now it's in the good hands of the British government, who I'm certain will do good things with it. Oh, hold on there, Boyle. It's the Irish government.

424
01:17:56.960 --> 01:18:03.750
[laughs] It ain't the Brits. Oh, the Irish government. Oh, I'm so sorry. Oh, God, I'm, I'm, I'm gonna get banned. Yeah, you just pissed off our, like, two Irish viewers. Oh, my. Yeah, I think that's- Oh, my God...

425
01:18:03.760 --> 01:18:07.700
it is important. It's like this guy was just selling mids in County Galway, right? [laughs] That he was...

426
01:18:07.800 --> 01:18:14.820
I mean, I can't imagine that you can gr- I can't i- I mean, well, it rains a lot in Ireland, so you do get enough moisture. Maybe you can grow good pot there.

427
01:18:14.840 --> 01:18:23.020
But, and, and one last thing for people who are like, "Why the hell did he store it this way?" I will add that when he did this, I, I don't, it doesn't give a timeline for when he hid them.

428
01:18:23.100 --> 01:18:29.650
I would imagine it was probably shortly after he bought. Hardware wallets weren't really commercially- Yeah, they weren't... viable. Everything was on the back then. They were a thing back then.

429
01:18:29.650 --> 01:18:37.079
They weren't, they weren't proliferated the way they are today, so you kinda- Yeah, I actually think it was, I think it was a good idea. I'm not gonna lie. Yeah.

430
01:18:37.110 --> 01:18:42.480
[laughs] I'm gonna give him props for storing it in fishing rods 'cause I would have thought, would not have thought to look there.

431
01:18:42.560 --> 01:18:55.710
And the fact that if they've, if the seed phrases, uh, or private keys on paper in these metal fishing rods have held up over 16 years, then he succeeded. It worked. You did it. Yeah.

432
01:18:55.820 --> 01:19:03.860
I would just say my first call when I got to the jail would've been to one of my close buddies. Be like, "Boyle, you gotta get over to me garage right now."

433
01:19:03.890 --> 01:19:14.900
[laughs] "There's millions of dollars worth of Bitcoin in these fishing rods. You gotta get 'em out before me landlord throws away me fortune." M- Michael, how many times do I have to tell you? There's money in fishing.

434
01:19:15.420 --> 01:19:24.980
[laughs] And that's the show, folks. Thank you so much for listening to Blockspace Live. We do this Monday, Wednesday, Friday. Like and subscribe. Check out the podcast.

435
01:19:25.020 --> 01:19:41.360
Check out the newsletter, newsletter.blockspacemedia.com, and buy tickets to the conference, April 16th, New York City, Time Center, o- opnext.dev. Catch you all next week, Friday. Uh, Friday. We're on Friday.

436
01:19:41.640 --> 01:19:46.860
Catch you Friday. [outro music]