[00:00:52] Intro: Celebrating 10 years. You are listening to Bitcoin Fundamentals by The Investor’s Podcast Network. Now for your host, Preston Pysh.

[00:01:11] Preston Pysh: Hey everyone. Welcome to Bitcoin Fundamentals. I have two good friends, massive builders in the space with Becca Rubenfeld and Rob Hamilton.

[00:01:20] Guys, welcome to the show. 

[00:01:22] Rob Hamilton: Thanks for having us. Yeah. Long time listener. First time caller. 

[00:01:26] Preston Pysh: Yeah. We need to fix that. 

[00:01:27] Becca Rubenfeld: Long time coming.

[00:01:28] Preston Pysh: Yeah. We need to have you guys back.

[00:01:29] I already know it’s going to be fire. So here’s where I want to start off. So I was invited over to the Plan B School over in Luo to give a talk to some of the students there. The only thing I understand, or the only thing that I’m like doing in this space is very finance heavy.

[00:01:46] And so for me, I’m like a pig in mud talking about these Bitcoin treasury companies, right? Because it’s like mixing security analysis with Bitcoin and I’m just loving it, right? But when I went over there, when I realized is I’m talking to the students in the room. There’s a lot of people there that are very tech heavy and I’m there briefing them on like MicroStrategy and Michael Saylor and how these Bitcoin treasury companies are going to be like really big thing moving forward.

[00:02:11] And it was funny because in the audience, everybody who’s listening to this is looking at me and they’re like, yeah, but don’t you think it’s a problem, like all this paper, Bitcoin and like we’re kind of really getting away from like the roots of everything we’ve talked about for the last decade? I didn’t hear it from one person.

[00:02:27] I basically heard it from everybody. And for me I was a little just like, I don’t know. because I was so excited about the Bitcoin treasury stuff. Yeah. But where a lot of this went and my immediate thoughts as I was like responding to some of these really valid points with Bitcoin paper, Bitcoin, and all of the Bitcoin being held by institutions, it quickly moved to this idea of institutional custody.

[00:02:49] And which is so different than like how an individual IES or Bitcoin. And as I’m like having these conversations luana, I’m thinking I need to get Rob and Becca on the show because you guys are doing this in a way that in my opinion is like the best in the business. So first, give people, why would I be saying this type of thing?

[00:03:10] Tell people the vision of AnchorWatch, like what it is you guys are doing and why you’re kind of the masters at this idea of institutional custody. 

[00:03:17] Becca Rubenfeld: Well, if we’re going to talk about paper Bitcoin summer, definitely Rob needs to lead that part of the conversation. I do want to, before we jump in and do the vision, I think it’s really interesting and maybe worth conversing about that you say Bitcoin treasury comes automatic paper Bitcoin, right?

[00:03:35] Yeah. So are they, is that a direct correlation? Does every treasury know a paper Bitcoin situation? 

[00:03:41] Preston Pysh: No. I think people are just looking at it and they’re saying, I don’t know whether, I mean, the big beef with MicroStrategy is Michael’s really kind of keeping it close hold where he has the Bitcoin cued, how he’s doing it, all of that is kind of like a black box.

[00:03:55] And then you’re basically securitizing it by issuing all this traditional preferred stock on top of it to give yield to people that are owning the preferred stock. And I think in the minds of. Your hardcore Bitcoin that’s been in the space for years. They’re looking at this and they’re saying like, what in the world is that?

[00:04:13] It doesn’t look like Bitcoin. It looks like a bunch of paper receipts on top of Bitcoin. And so if the underlying is being customed by these institutions, how do we know they’re doing it correctly?

[00:04:23] Is it one person holding the key, or is it, you know, multiple people holding the key? And you guys have such an elegant design in how you’re assisting institutions or people that are really wanting to have a robust custody situation of like, how is that custody being managed? Like you guys are the masters at that.

[00:04:42] Rob Hamilton: Yeah. Maybe just to level set, at a high level, who are we? I’m Rob Hamilton, that’s my co-founder, Becca Rubenfeld. And we’re the co-founders of AnchorWatch. AnchorWatch is an old nautical term referring to the crew of sailors who watch the ship at night when you’re at Port or you’re at dock or at anchor in the middle of the sea and just kind of watching over the ship, making sure everything’s okay.

[00:05:01] And that’s how we do our role, right? When it comes to Bitcoin in custody. Now, the thesis that we’ve had since we started the company was around this idea of tying in risk markets to the underlying Bitcoin itself, right? Bitcoin is a 15 plus year journey up until this point. All of the security practices people talk about with multisig, seed, phrases, hardware, wallets, all of these things came from a place of there was no insurance market.

[00:05:29] You’re doing in what’s in insurance is called self-insuring. You’re owning the risk. It’s your money, you mismanagement, it’s your problem. No one else’s problem, right? And the long vision, when we started the company back in early 22. Was ultimately, as Bitcoin continues to mature as a financial asset, risk markets like insurance are going to develop.

[00:05:49] It is an inevitability when you think about it as everyone likes to most compare Bitcoin to as like a bar of gold. You can pay to have your gold custody somewhere, and part of your custody fee is insurance in the event that something goes wrong, right? And how this extends into the actual custody and management of it is Bitcoin often sometimes gets called the, like a digital bar of goal.

[00:06:08] And there are trade-offs for something being physical versus digital. Physical, you just physically watch the thing. You put it in a vault, you put arm guards in front of it, you have to physically access it. Bitcoin though, since it doesn’t have that same physical nature, you’re able to leverage it as programmable money in things like a multisignature, right?

[00:06:25] You can don’t have to have all, you can’t two, a three year bar a goal. You can’t split it up like that, but you can with Bitcoin. And what we did was we kind of extended the principles of Bitcoin as programmable money to enable greater fidelity and control and redundancy to make sure you can access the Bitcoin at the end of the day, no matter what happens.

[00:06:43] Right? And the other part of that is we have this custody tech we can go into more. That I would say is like very advanced in kind of leveraging the feature set of what Bitcoin can do today without a fork or without any changes. And then additionally tying that with a traditional financial contract of insurance.

[00:06:58] And so from the insurance piece, we are a Lloyd’s of London cover holder, meaning we are direct agents of Lloyd’s of London. We do the underwriting, we do the distribution, we oversee the product. And with that, we’re able to take the best of both worlds of having, making the most of Bitcoin as the asset itself and with the best quality insurance market that exists out there.

[00:07:20] And bringing those two together to provide comprehensive coverage, understanding that you are able to, at the end of the day, have safety and knowing that your Bitcoin will be there and if something were to go wrong, you directly are named as a beneficiary of a policy that’s going to directly remunerate you.

[00:07:34] Preston Pysh: This is going to sound very random and I’m sorry to the listener, go for it. But I never knew that about the name, the AnchorWatch. And I was in the military. And, but I was Army. I wasn’t Navy. Navy and I have pulled my fair share of the guard duty, which was what we called it. We called it guard duty.

[00:07:52] And at the end of the show, when we’re done talking, I’m going to tell you, I think it’s a hilarious story of one of my guard duties. I’ll tell you the end. So stay tuned to the, if you want to hear that, wait till the very end of the episode. I’ll tell you the story. 

[00:08:05] Rob Hamilton: As a small shout out. that was American HODL came up with the name. He was our first investor in. We were like trying to figure out like a good name . And the domain was available and I just pounced on it immediately. 

[00:08:14] Becca Rubenfeld: They called and we did a threeway call. So it was Rob and HODL and me, and they were like, okay, we think we have a name. And the domain is available and they described it and it’s like insurance is we want people to be safe. You know, there’s a long history and insurance, insurance started as shipment maritime. It was a maritime industry.

[00:08:35] Preston Pysh: Yeah, that makes sense.

[00:08:35] Becca Rubenfeld: Like in 16 hundreds here , in the 17 hundreds. So that’s the history of it. So nautical stock, you see a lot of nautical and insurance kind of old, stodgy. That was okay. Like we want people to just feel secure and safe. And then just the way that, like while at Anchor, that was just like, that’s cold storage. That’s like, we have got to protect the Bitcoin while it’s safe and sound. It’s there. It’s locked up. We’re going to look out for it.

[00:08:59] Preston Pysh: Becca, I’m impressed because this is before the AI thing was really hot and heavy, so he came. It’s a huge props to him.

[00:09:06] Becca Rubenfeld: From the brain of American HODL.

[00:09:07] Rob Hamilton: Yeah, yeah, yeah. And so there’s a like a lot of pieces here, right On the insurance side and the tech side, the very compressed version, just for how it technically works, we leverage a tech stack called Minis Script, which originally came out of Blockstream as free open source software in 2018 and 2019.

[00:09:24] And then without getting too much in the mechanical details, it allows you to express more of the feature set of Bitcoin. And the main things we’re leveraging it for are a multisig of multi SIGs, right? So for the start of the policy. You as the customer have a two of three. We have a two of three we both have to sign, right?

[00:09:41] And instantly you can think about that from a security mindset AnchorWatch cannot unilaterally move the funds. And which means that you have to kind of like MedStar be able to authorize it. And then inevitably the questions would come, would be like, well, if I lose more keys, we then leverage another property of Miniscript, which is time locks.

[00:09:57] But this is just a fascinating trivia fact of how Bitcoin actually works. Bitcoin is an entirely endogenous system. It’s self-referential. Preston, if I send you Bitcoin, it’s only because someone previously sent me Bitcoin or I mind a block. Right? Everything is like, this is the whole blockchain concept of that.

[00:10:13] You have this entire canonical history that’s all within the system. The one thing that exists outside of Bitcoin that enters the Bitcoin protocol. Is the timestamp. The miners put in the block header when they find a new block.

[00:10:27] And think about this. This is how the difficulty adjustment works. How does the Bitcoin network know that two weeks passed or more than two weeks? Right? And for those at home to understand the difficulty adjustment every two weeks and you have 144 blocks a day on average, because it’s every 10 minutes, every 2016 blocks, the Bitcoin network says, okay, we’ve mined what should have been two weeks of work. How long did it take? Did it take three weeks?

[00:10:51] Okay, it’s too difficult. Let’s decrease the difficulty adjustment. Did it happen in 10 days? Okay, we’re finding blocks too quickly. Let’s increase the difficulty adjustment. So what we are able to do is we’re able to leverage that timestamp that the miners put into the block as a means for the time locks.

[00:11:06] So some people may be familiar that you can time lock based on what the current block height is. We do time locks based on the calendar date and because this is one of the interesting innovations when we were designing the product, realizing is if you have an insurance contract and it’s dated for a year, you need to know , a year from now that the conditions will change in how you can spend the money. Right?

[00:11:25] And so we leverage those Bitcoin native time locks in the security of the vault itself, leveraging the same exact mechanics that the Bitcoin network uses for the difficulty adjustment. And the really interesting part of our tech is after your insurance contract expires, you don’t have a relationship with us anymore.

[00:11:40] You unilaterally can take the money yourself and walk away. So unlike any other custodian you’re getting on the phone and be like, Hey, I’d like my money back, please. Are you going in the UI and sending in a Bitcoin address on chain? It natively settles just to you at the end of the day. 

[00:11:52] Preston Pysh: The way I describe this when I’m talking to like family and friends with the time lock. I tell them, imagine you have a safe in front of you and there’s two keys, and I’m going to give you one key. You go to your house, you put it wherever. I have the other key. And as we come there, we both, if we’re going to open the lock while there’s two key holes, both of those keys have to be there.

[00:12:12] But after, let’s say a year, the safe through magic will change to just the one key, which would be mine. And it helps the person kind of wrap their head around how it can conceptually though. That’s right, ally. 

[00:12:25] Becca Rubenfeld: Yeah, yeah, yeah. Sometimes even kind of experience Bitcoiners, just because time locks haven’t been used a lot in kind of general custody. It’s been used in lightning, but sometimes there’s confusion that a time lock means that your money, your Bitcoin is locked until X. And you certainly can use time locks that way, but I think it’s better to think of it as a unlock. 

[00:12:47] Preston Pysh: Yeah. 

[00:12:48] Becca Rubenfeld: Because really what happens at the time unlock and it says when X amount of time is passed, a new way to spend Bitcoin becomes available.

[00:12:57] And so then what we can do is we can stack these conditions and have more or less multiple spending rules that it’s all checking against. So first it’s checking, did the keys turn right? So in your safe example, did the keys turn yes or no? If they didn’t turn, it’s not going to unlock.

[00:13:14] Preston Pysh: Yeah. 

[00:13:15] Becca Rubenfeld: It’s also been checking the time. Did one year pass? The keys may have turned, but if one year passed, you didn’t meet the rule. Right. So at the same time, we can, for example, have two layers at the same time. We can say, okay, the first one is, did the key sign and no time pass.

[00:13:32] Then we’re using a time lock to say, look effective immediately you can sign. And then at the same time we have a different rule that says it behaves differently after a year. So after a year it unlocks an additional way because once a time lock is available based on the way it works, how Rob was describing it, it’s once it’s available, it’s always available. So you’re not locked out. Actually, it’s like another way is becoming available. The original way was still there. 

[00:13:59] Preston Pysh: So for me, the first time I saw this demoed by Rob was up at Bitcoin Park and I was walking around and Rob, you know, tapped me on the shoulder. He is like, Hey, I want to show you something.

[00:14:10] This is really neat. And I was like, oh, okay. So we, I think we were upstairs or wherever. Yeah. And he pulled out his laptop, he’s like, check this out. And he’s showing me this graphical user interface and he’s showing me like the if and then statements of Yeah, like an institution. He’d be like, what if you wanted your CFO to be one of the signatures?

[00:14:28] But for him to sign, he also needed the CEO or whoever. This was the moment where I’d heard countless times, Bitcoin’s not programmable, you can’t do any, like what we’re describing here. You can’t do that on Bitcoin. And Rob was like, I forget who you said the source was Rob that was talking about mini script.

[00:14:45] And then you were like, oh, well let me play around with this mini script thing. And then you go in there and you’re building like all of these things. So what I want to do is, Rob, can you pull it up on your, I’ll make sure I’m sharing. And for people that are listening to this and not seeing it on YouTube, I would highly encourage you go pull up the YouTube video of this discussion.

[00:15:05] Rob Hamilton: So I have it live here. This is our dashboard of tried and bolt, right? I just put in. Now for those at home, this is running on Bitcoin’s test network. I’m not casually moving around two, three Bitcoin at a time, just on a hot wallet in my house.

[00:15:18] And the only difference is one, it’s on the test network and two, for the sake of expediating demos. We have hot keys just to show conceptually how it works, rather than making everyone could pull out their, either their cold card or their ledger and try and get all of these things. Just at the start, you know, at the high level, one, one half step back, you actually can have multiple vaults for different, maybe different levels of control or just your own accounting.

[00:15:39] You want to have segmentations of funds, but within the dashboard itself, just a cumulative view of like what your holdings are, your transaction history, pretty straightforward. Your address book of previously used addresses where your money is currently sitting on chain with your labels. And then we would have like policy details for like your insurance policy payments you’ve made.

[00:15:58] But this right here is actually where I would want to take the attention to. This is how our vault works out of the box today. And quickly looking through this when the policy gets bound. It’s a two of three from the customer key set and then there’s an AnchorWatch key set which operates as a two of three as well.

[00:16:15] So at first, if you want to move your money day, one of the policy that two of three from you as the customer and the two of three from us at AnchorWatch, this enables several just security things of one, hypothetically of someone broken into your house and, and your places where you’re storing your keys and starting making you forcefully sign things.

[00:16:31] The money can’t move because we haven’t signed yet, right? That allows us to have an opportunity to step in and make sure everything is above board. It’s kind of within your policy expectations. There are certain things that we enable already as security features of one whitelisted addresses, and two, your velocity control.

[00:16:47] So a majority of our customers actually opt into something we call the HODL discount, where after you set up your vault, you do a test transaction, we disable the send button. People are like, this is my long-term cold storage. I just want to be able to look at it. Maybe at renewal I’ll update something, right?

[00:17:01] But I don’t have to worry about it. This is the then the next use of what it actually looks like to leverage time locks. 180 days, six months into the policy, we go from a customer, two of three, to a customer one of three, which gives you extended flexibility. In the event two of your keys have gone missing, we’re able to, with one of your keys and two of our keys, be able to step in. Right?

[00:17:23] The next layer is like in the last month of the policy, day 3 35. This is an interesting, it has several properties. We call this our recovery layer. It’s a two of three from AnchorWatch, and it’s one key from our recovery partner. And today we have CoinCorner based out of the Isle of Man.

[00:17:38] They’ve been a Bitcoin exchange in business for 10 years. They have a long track record of keeping customer funds safe. It is us plus them who are able to move the funds. And then finally, day three 80, after your policy has expired and the tail has expired, and your policy’s over, it goes to your sole control.

[00:17:54] Now, to take a half step back up to layer three, just to explain what, how this actually operates under the hood. When be, and I initially designed this, we were thinking about, okay, if someone breaks into your house and stole all of your keys, this is a new concept in Bitcoin where your keys can be lost.

[00:18:08] But the Bitcoin isn’t lost yet, right? You could lose all of your keys and then we can have contingency availability. For our ability to recover your funds for you. This is a really powerful concept as we were building out the product, is understanding that the distribution of fees as distribution of risk to be able to unlock traditional insurance players like at Lloyd’s of London, to feel comfortable underwriting this risk.

[00:18:30] Huh? We’re able to underwrite a policy up to $100 million per customer out of the box today, right? Wow. That’s for each individual that we have the writing line capacity to go up to, and we can even go higher. It’s just more of a manual process, right? So I could throw it over to Becca shortly, talk about the insurance, but technically what we have here, this also turns into a really great inheritance protocol.

[00:18:49] We can actually have your funds be recoverable, where if you have a beneficiary, you have a spouse, or you have children in the event you were to pass and your keys are now gone, right? because effectively, like no one knows where they are, you can actually enable inheritance protocols. Where your air doesn’t need to know anything about how Bitcoin works. To be able to recover those funds for you. And this is on the technical side, how it all gets executed. 

[00:19:14] Preston Pysh: There’s a lot of people that just paused.

[00:19:15] Becca Rubenfeld: Yeah, totally. You said totally. I want to pause the tape. We’ll talk more about that.

[00:19:20] Preston Pysh: I know my family has no clue how to do this, and that would be really important.

[00:19:25] Rob Hamilton: Yeah.

[00:19:25] Becca Rubenfeld: Yeah. Super important.

[00:19:26] Rob Hamilton: The one last thing I’ll show is it just trustfully settles on chain. I’ll save the audience for this call, but this is actually what a Bitcoin native smart contract looks like on channel for those that are listening audio-wise, I’m pulling up the transaction on mental space, and these are all of the different spending conditions dusted, and it’s all natively settled on Bitcoin, right?

[00:19:43] This is not, trust me, like you can independently verify the execution of how this all runs and manages in a way where you don’t have to worry about that. Right. So it’s just an interesting concept of taking a traditional financial contract and also just extending the programmability of Bitcoin to offer new kinds of financial services.

[00:20:00] Preston, will you scroll back down or Rob, I guess it’s your screen. Yeah. Will you scroll back down to the bottom of the vault configuration? Because the one thing that I just want to make sure is crystal clear is at the very, very end when your insurance policy ends. If you don’t renew with us for any reason, it becomes pure self custody. So the final time walk says right after your insurance policy ends AnchorWatch and Lloyd’s of London no longer have liability. It becomes, and it acts like a pure self custody multisig. 

[00:20:29] Becca Rubenfeld: And you’re able to control that even without us. So if you tried to log in one day, the website is gone, your like AnchorWatch is gone. As long as you still have your signing devices on the output descriptor, which we make sure you do, you would be able to use either Bitcoin core or Rob has built a recovery wallet that he can speak to, but that long and short of it, it becomes self custody.  It’s self custody and so you need to hold those private keys.

[00:20:55] That recovery layer. And just to then go back to the inheritance thing, that recovery layer, that multi-institutional recovery layer one I want to call out that is while you in are insured. Sure. Yeah. Because a lot of Bitcoiners, rightfully question any custody model where they are not in control. And transparently, here in this layer, you can see that the recovery layer is multi-institutional.

[00:21:17] So it’s AnchorWatch and our recovery partner. And it’s there for a reason, right? It’s there to enable inheritance, it’s there to protect you if you got your keys stolen or lost for any reason. But it is also insured. So very specifically in our insurance contract, it says that if AnchorWatch misuses, that layer, if we use that layer to effectively abscond with the customer funds, that’s covered by insurance.

[00:21:42] And so you’re either protected by the tech or you’re protected by the insurance, where the tech kind of itself can’t protect you. And what we think we’ve put together is this holistic solution where you’re really protected not just from like one point of failure, but from many points of failure.

[00:21:58] On the inheritance thing, like let’s go back to it. Because I think like the way you reacted is the way we hear everybody react too, which is like, wait, so the treasure map that my wife is supposed to follow and like the scavenger hunt that I put her on that I’m just. Sweetie, I hope, I hope this makes sense, right? Like that’s gone. That’s gone. 

[00:22:19] Preston Pysh: Yeah. 

[00:22:19] Becca Rubenfeld: What I say is that the only thing that I hope that I would really prefer is that she knows that you’re a customer. Because then she would know to reach out to us. 

[00:22:27] Preston Pysh: Yeah. 

[00:22:28] Becca Rubenfeld: Even if she doesn’t know you’re a customer, we would still be able to recover the assets because we will collect from you, let’s just use you as an example. We would collect your primary beneficiary. And contact information and the secondary beneficiary.

[00:22:42] And when we’re getting to the end of the year where we’re like, Hey Preston, it’s time to renew your insurance contracts. Yeah. We want to turn over the time locks, let’s get together. We don’t hear from you. Right? 

[00:22:52] So then we start emailing more. We’re trying to get in touch with you. We’re not hearing back from you. Your policy then lapses. It goes to self custody, which is okay.  Right. And we’d be sending out notes being like, Preston, it’s okay if you don’t want to continue with AnchorWatch, but just keep in mind next week your vault is going to be to your self custody. We want to make sure you have your keys in a safe location.

[00:23:13] Best of luck. But like just one last warning, right, that you’re going into self custody three months. So 90 days after your policy has ended, if we didn’t ever hear from you, we will actually start looking for your beneficiaries. So we will be reaching out to her. We never take ownership. Like we never claim that because we haven’t found her yet that it’s ours.

[00:23:34] And we’re looking for your beneficiary, your secondary beneficiary, and eventually your estate with probate. And we’re looking for the rightful honor, and when we find that rightful owner, the Bitcoin will be returned and we would help them.

[00:23:46] If she wanted to continue huddling and wanted to be our customer, we would educate her. We’d get her set up on a brand new vault, we would take that on. No additional fees for that. No additional recovery fee if we do end up helping somebody after passing away. That’s all just a service for being our customers.

[00:24:03] If she needs to liquidate it to deal with family things, we would just assist. Yeah. And so what we like to say is that you’re protected from the rent attacks, you’ve got the insurance from all these different failures, but man, inheritance is scary. Yeah. And that treasure mat is scary. And we have just removed that fear, that confusion, that trust.

[00:24:22] I give the story of before our platform was built, doing my own treasure map. And I tell this story that I think I did a good job. It was clear and I went through with my son and other family members and said, okay, all you have to do is start in this one location. If you start here, you’ll be fine.

[00:24:41] It’s all written out. It’s very clear. It’s got helpers. Just can you start in this one location? Yes. Absolutely. About four to six months later, I checked in with all the different people, three different sets of family. None of them knew what I was talking about at the location.

[00:24:58] Preston Pysh: I’m not surprised. Yeah.

[00:24:59] Becca Rubenfeld: One of the three I was able to like, yeah, get them there, but it was very troubling and so I think, that was always top of mind when we were designing the inheritance protocol.

[00:25:09] Preston Pysh: I think everybody has the same family dynamic for a Bitcoin.

[00:25:13] Becca Rubenfeld: Scary. 

[00:25:14] Preston Pysh: Yeah. 

[00:25:15] Becca Rubenfeld: Rob has been helping, like people have reached out to Rob. And I mean, Rob, if you want to, briefly, yeah. 

[00:25:21] Rob Hamilton: I mean, people get to this place in Bitcoin where you’re the Bitcoin guy and so I’ve had to deal with grieving widows. Parents of kids. And it’s not a place you really want to be in, right? And so independent of, you know what we’re talking about with our product, just like make sure you have an understanding and you’ve actually tested your backups and your recovery process. You could have it just be like, pretend you don’t exist, and tell your loved ones to make sure that they can access your Bitcoin, right?

[00:25:45] Like these are just things that are just part of your ongoing hygiene. I like what we’ve built as a way to kind of clean that up and make it very, have a trusted person who’s able to step in and help you out, but independent of however you choose to hold your Bitcoin. I think it’s an important factor.

[00:25:58] Preston Pysh: Something that I think is really important for a listener of this, especially somebody who isn’t self custodying, their coins, and maybe they’re just having ibit in their stock ticker. Yep, sure. They’re listening to us talk about all of this, and I imagine what they’re thinking in their head, and this is probably a lot of the people in our audience, they’re thinking, why would I go through all this?

[00:26:19] Why wouldn’t I just own Ibit? Like I guess my answer for the person is they’re, I suspect, and I think you guys both agree that there’s tremendous value, especially in the coming 10 years, for people that actually have control and custody of their coin. As an example, we have the director of Fannie Mae, Freddie Mac, that just came out recently and is saying that your credit worthiness for a loan can be actually tied to your Bitcoin holdings.

[00:26:50] And so if you actually have control of the Bitcoin and you are willing to put it on the deposit at an institution, you can now use this as collateral to go out and get a loan or going and buying a house. If you’ve got a hundred thousand dollars of an ibit ETF or whatever, that may not be the same setup or same scenario.

[00:27:10] The fact that you actually hold the keys comes with, I mean, it’s just, this is just human nature folks. Like if there’s something hard to do, usually there’s a reward associated with that hard thing that you’re doing, which is custody your own coins. So for you guys, as you’re looking at this, help people wrap their head around some of the, maybe get into this story that just happened with the Fannie Freddie Mae, and just kind of like how you see a lot of this kind of transpiring in the future and why self custody is so important.

[00:27:39] Becca Rubenfeld: Well, I think what we’re seeing a lot of this year in particular in 2025 in particular, is actually bringing Bitcoin up to match. So before there were actually some pretty, not from a Bitcoin’s perspective, but as like a trad fi normy perspective, there were some downsides to self custody.  You couldn’t borrow against it.

[00:27:59] It wasn’t to what you’re talking about. It wasn’t considered part of your assets when you were trying to buy property. There were all these kind of limitations to self custody. There were positives too, right?  Like that we’ll talk about, but all those limitations this year are being removed.

[00:28:16] There’s plenty of ways you can borrow against your Bitcoin, right?  There’s lots of providers coming on, and then most recently, this FH FA guidance from Fannie and Freddie, what it’s saying is that. Now if you own Bitcoin, unlike a month ago, the bank is allowed to take your ownership of Bitcoin into account when they determine if you are eligible for a mortgage.

[00:28:40] So it’s not going so far as saying they will accept Bitcoin as collateral for a mortgage. I think there are providers, there’s a couple of providers in the Bitcoin space starting to, yeah, starting to look into that. But the guidance is saying, look, bank officer guy, assessing this particular risk. 

[00:28:56] Preston Pysh: Yeah.

[00:28:56] Becca Rubenfeld: You are allowed to look at that. And I think that is a huge, huge bullish indicator. I think it’s huge. Yeah. Like Bitcoiners have a really hard time getting mortgages if their net worth is in Bitcoin.  And so just to say, look, you can at least like take my income into account and then yeah, take my Bitcoin holdings into account and give me credit for that.

[00:29:18] On the limitation side, or why, I think it’s like a great first step, but we have got to, we have got to keep really educating the regulators and I think AnchorWatch is, is in the right direction. Here is the current guidance from, that was in Ty’s letter to bank officers. It specifically words the guidance as you can use the Bitcoin in, in your assessment if it’s held at a regulated exchange.

[00:29:43]  So that was the specific words used. And I tend to think that that is more just a particular wording, and we as an industry have the opportunity to educate them because why would they do that? They would say like, what the spirits of what we’re trying to get at for the bank’s purposes is what we’re trying to get at is assuring the bank that if they claim to have this Bitcoin, it’s real, it’s somewhere it can be verified. And so I would just say like, okay, that’s. It’s a start. 

[00:30:12] Preston Pysh: Yeah. It’s a start to start. Well that’s reasonable. 

[00:30:14] Becca Rubenfeld: The banks, the bank should be healthy. Right? 

[00:30:16] Preston Pysh: Well Rob, let me, let me just say this. From a risk standpoint, your model is way less riskier because it’s not funds on the exchange. 

[00:30:24] Rob Hamilton: This was actually what I was exactly on that point. The risk, yeah. Pull this back to the insurance. because we’ve been going into the tech side of this. The reason I’ve been self custodying Bitcoin for over a decade. The reason why I do is this understanding of managing my own risk. Yeah. Right. And that the reason why I wouldn’t want to hold an IBIT versus spot Bitcoin personally, it has like.

[00:30:46] For me, it ultimately comes down to understanding and in control of my own assets and risk management around that. To tie this into the insurance and the risk piece, the ETFs largely use Coinbase. A lot of the treasury companies use Coinbase. There’s maybe three, four players out there of where these funds are currently sitting today.

[00:31:04] And for me, I view this as an aggregation of risk. Yeah. And the insurance coverage that exists at these players is fractions of a penny on the dollar.  I think it’s public that Coinbase has somewhere like three to $350 million.  Of cover for their assets. One, they have like tens of billion, hundreds of billions.

[00:31:22] I think it’s like in assets. I think what the number back at like 300 billion between Bitcoin sounds like it. All of the long tail crypto assets, $400 billion. Yeah. Yeah. So you’re talking like a fraction of a percent of coverage. You don’t know as an individual retail customer, if people have seniority in the debt claims, typically larger account holders get seniority in debt claims.

[00:31:41] In the event that you’re an unsecured creditor and something goes wrong, you’re at the back of the line. You’re not named in the insurance policy directly. What we did was the bundling of this tech, of securing your coins and tying them to your insurance policy gives you that full risk transfer. Risk transfer and buying and selling insurance is a whole segment of risk management that has been entirely non-existent.

[00:32:00]  When it comes into the market for Bitcoin today, what we’ve had is risk distribution. Like you could have a multisig, all of your eggs aren’t in one basket, but actual the financial contract of risk, Ferring has been non-existent. And so on that insurance side, and even taking, we’ve been talking about like the individual with like inheritance.

[00:32:17] I view this as just like corporate governance and control. Why would you not want to have your money secured somewhere? Where maybe you have a trusted person who’s able to step in kind of in a role that we’re sitting in, but also know that baseline, that money can’t move unless you explicitly authorize it cryptographically.

[00:32:34] Right. And I think that’s like kind of the big leap of what we’ve built out here. We can have multiple users, right? You can have your CFO and your CLO and your CEO all have different accounts, each holding keys, being able to abstract this out. And if your business is managing Bitcoin, I think fundamentally the biggest risk of these treasury companies in aggregate is something were to happen to the coins being custom somewhere else.

[00:32:56] Preston Pysh: Absolutely.

[00:32:57] Rob Hamilton: That has to be the foundation risk.

[00:32:59] Becca Rubenfeld: There’s disclosure in the bottom of every ETF that says, by the way, this is uninsured. If the actual Bitcoin that under like that underpins the ETF is compromised. The ETF becomes worthless. 

[00:33:14] Rob Hamilton: What I’ll say, actually, for those that are more interested in holding ETFs, I always throw this out as an interesting consideration. Fidelity self custodies. So if you’re actually thinking through a risk distribution lens and you want to hold Bitcoin ETFs have exposure to FBTC because they’re at least not correlated with this entire segment of risk. And this is like, this is something in insurance and in gambling, I used to play poker, this concept of risk of ruin.

[00:33:37] You never want to be in a position where one assumption falls apart and it has this larger cascading effect.  Of like irreparable law, like irreparable loss. That is what we’re mitigating around these different keys, these different setups. You having a named policy being able to have this comprehensive set of coverage.

[00:33:53] I think this is just an obvious step as the ecosystem and capital formation matures. Like with all of these treasury companies I’ve talked about, like it’s almost like the initial capitalization of Bitcoin banks. Like I just view it as like you have these, like you have these corporate entities that are accumulating massive amounts of Bitcoin.

[00:34:09] And it’s going to get to a place of maturation where they’re going to want to do things with that Bitcoin eventually, as the arbitrage opportunity closes, and they now have a large Bitcoin position, they’re going to want to do other things. You’re going to want, I think foundational to all of these is the custody of the asset itself.

[00:34:23] Preston Pysh: Yes. 

[00:34:23] Rob Hamilton: Your entire asset of what your company is worth is sitting somewhere else. It’s like if I was Apple and all of my proprietary tech in my asset was sitting in Amazon servers somewhere else. Yeah, yeah, right. It’s sitting somewhere else. Right. And you’re at the mercy of them, and I think that’s just viewing Bitcoin, and this is kind of like the evolution of the ecosystem. Bitcoin has been viewed up to this point largely as a software technology play, and that’s why people charge it like a SaaS model where you walk in the door, you, it’s a SaaS model, but we charge you based off bips of like how much the money is worth, even though like at a certain scale, it doesn’t cost like you understand Bitcoin.

[00:34:59] Yeah, yeah. To be able to send one Bitcoin to it versus 10,000 Bitcoin to a single address, it’s the same amount of security and overhead to be able to manage that. Right? Yeah. Yeah. So it’s a great business where you get to accrete all of this right, to your bottom line as a SaaS business. But if you view Bitcoin as a capital asset, the actual fix to this is a risk transfer in insurance market of Bitcoin actually being treated as such, like as a capital asset. 

[00:35:22] Preston Pysh: It’s amazing because at the core of what banking was like, you go back 500 years ago, banking was, Hey, you give me a gold bar, I will give you a paper receipt. I’m not going to issue more paper receipts than what’s in the vault. And then I’m going to do a really, really good job at making sure nobody can get the gold in the vault.

[00:35:40] Like that’s the job of a bank. And we have under this fiat fractional reserve like monster that has existed over the last hundred years, we’ve just gone so far away from what it is banks do, which is secure and custody and don’t issue more paper on top of it. And you guys are like demonstrating what banking is and why it, because at the end of the day, people, if you got a billion dollars.

[00:36:12] You don’t want to just like secure that in your bedroom in a safe, right? Like you, that’s a lot of value. You need to do something that actually has real security and safety associated with it.

[00:36:25] Becca Rubenfeld: Yeah, well, I’ll be, let’s say more advanced financial products that will be coming out that are built on top of Bitcoin.

[00:36:34] I think at least the first step or the, the required step is to ensure that whatever the supposed amount of Bitcoin is that’s underpinning the financial products. At least we can start by saying. If there’s paper Bitcoin being created, it’s clear and the amount of real Bitcoin that’s underpinning the paper is here is clear.

[00:36:57] Yeah. So proof of reserves. Yes. The Bitcoin is where like this is all provable, right? So you actually, there never needs in Bitcoin, there never needs to be a question about where the Bitcoin is. And so I think what we bill. Is just something that we built with that premise from the very start, which is like the tech, the custody, like it enables lending, it enables escrow.

[00:37:20] You can use it for so many different financial products, that’s fine. But at the core of it, at the base layer of it, there’s x amount of Bitcoin. It’s held in these locations. It’s verifiable. We can do proof of assets, we can do proof of reserve, like proof.

[00:37:34] Preston Pysh: To your point here, Becca. One of the issues that a lot of the talking point that a lot of people have had with proof of reserves is there’s no proof of liabilities. Correct. Okay. This is, this is a really interesting dynamic with the Bitcoin treasury companies. Because in order to do the the sailor move, the strategy move, you have to have access to public markets.

[00:37:57] You can’t do this in private market. You can’t go out and get the liquidity in a private market to issue more common stock or to go out and issue more preferred stock on the day and raise capital and do this thing that they’re doing. And what I find so fascinating about all of this, almost like it’s intended to go in this direction, is with a publicly traded company now, the proof of liabilities is really kind of being solved for you, kind of, right?

[00:38:25] Rob Hamilton: Yeah.

[00:38:26] Becca Rubenfeld: It’s really crazy. The other big four really are doing a solid on that. Yeah. The accountants are actually hoping to solidify. 

[00:38:33] Rob Hamilton: I also just love the juxtaposition to crypto where the whole critique the whole time was that you were doing unregistered fly-by-night securities and it turns out doing a registered security and just going through traditional disclosure processes and running an honest operation and doing that, yeah.

[00:38:48] Is actually the capital unlock. Well, like who would’ve thought that like doing your audits and doing your quarterly filings and doing all of these things and just running an aboveboard business is actually the way you unlock the next tranche of institutional capital. Yeah. It’s massive. 

[00:39:03] Preston Pysh: Yeah. And it’s just, it’s not lost on anybody that’s watching this very closely is you’re looking at how much MicroStrategy is growing and how much they’re able to compound by implementing this strategy.

[00:39:17] And you’re comparing it to a traditional bank that, for all intents and purposes, is just fully engaged in the Ponzi scheme.  And of fractional reserve banking. Right. And micro strategies eating their lunch by being full, not just backed one to one, but like backed five to one. Yeah. And you would think that that would be impossible because they’re playing the game in a very fair way in which all participants in that system are winning. Whereas the other one is one team is clearly winning. And everybody else else on the other side is losing.

[00:39:50] Rob Hamilton: And really interesting, the intersection of this too is the convertible debt notes, which was sailor’s first move. Yes. I’m going to take my cash move by Bitcoin. On the convertible debt side, the largest buyer of the convertible debt is Allianz, the insurance company. And the reason why is that, because if you are familiar with, remember with the FASB accounting rules, there was a certain statutory standard on how you would do all of this gap accounting for Bitcoin. And it would be very, you would have to mark to market at the lowest price.

[00:40:15] In insurance at a very high level, the health and strength of your insurance company is how big your surplus is. And that gives you leverage to write more and more policies the more you have in reserve. Today in the United States, insurance is a state by state regulated industry. And there is a self-directed, like a self-regulatory body called the National Association of Insurance Commissioners. So every state and territory sends their own insurance commissioner and there’s this loose governing body.

[00:40:41] Bitcoin is an un admitted asset, meaning if you have a billion dollars of Bitcoin on your balance sheet for your insurance company accounting, you get $0 and 0 cents credit on it. Yeah. But these convertible bonds don’t fall under that. Oh, interesting. It’s a registered bond of a publicly traded company, and so now you can get the Bitcoin call option in the upside and not blow up your balance sheet in the process.

[00:41:02] Wow. 

[00:41:03] Preston Pysh: Yeah. Yeah. 

[00:41:03] Rob Hamilton: So this is a massive piece of like the understanding of like there’s so much capital sitting out there that is looking to get Bitcoin exposure and they are statutorily blocked from doing it. So you walk in and they’re like, yeah, I’ll take a 0% coupon to get the call option on Bitcoin all day with a portion of my balance sheet.

[00:41:21] And it’s a perfect thing too, when you think about it, insurance companies have a massive duration problem. Yeah. Where they have liabilities that extend really far out. It’s just structurally a better way to get that exposure. And the nature of how our product works is also a nice yin and yang because let’s say Preston, if you’re a customer and you had an issue, that doesn’t impact the rest of our book.

[00:41:39] Whereas if I’m just insuring Coinbase, the likelihood that an incident for a filed claim happens just at Coinbase and it’s only going to be for $20 million and not like all of the money is like you have a high concentration in a couple key players. Whereas for us, we’re enabling that risk distribution.

[00:41:53] So you have more than just the big four or five custodians to help managing this stuff. So this would be like, I’m looking to get exposure on both ends on the capital side and the buying and the selling of insurance. 

[00:42:03] Preston Pysh: In the physical space, this would almost be like you’re a bank, you’re custodying customer deposits, right?

[00:42:09]  But you’ve put a thousand different lock boxes and a thousand different places all over the world that  If you go to, if you go to the front door and knock on the door to, to rob the bank, it’s not there. Right. It’s all spread out because you’re in cyberspace. 

[00:42:24] Rob Hamilton: Exactly. Right. And this is the asymmetry and what we’re able to offer and why we were able to get the underwriting authority we did.

[00:42:30] Yeah. At a hundred million dollars is because if it was just, let’s just say it was just AnchorWatch and it was just us managing keys for other people, we’d be the same exact position as all of the incumbents. All of the risk is sitting in one spot. 

[00:42:41] Becca Rubenfeld: And to be clear, like companies like Allianz and others, they will use this market and these treasury codes to get exposure to Bitcoin . So remember, insurance companies, big ones, make money two ways. They sell insurance. Right. So they make money off premiums and hopefully their profit stats are enough to cover their losses, right? 

[00:43:02] Preston Pysh: Yeah. 

[00:43:02] Becca Rubenfeld: And then with that pile of reserve capital, they invest it for a secondary revenue stream, which is investment returns. And so what Allianz and others are saying is like, Hey, okay, I’m allowed to invest a portion of my giant pile of bajillions of dollars. I’d like some exposure to Bitcoin, I can’t have it because I’m impaired if I have it. But now there are these bonds and so do I have Bitcoin? I don’t, and that’s too bad.

[00:43:32] But what I do have is some exposure now and so that I’m allowed to do, and so smart insurers, allian leading the way are saying. That’s a really good way to juice my, my investment right now. Yeah. And remember the investment, sorry, the insurance industry, there’s $7 trillion. That’s how much money is sitting there.

[00:43:53] And Allianz has made a little, A little sprinkle, right? Yeah. It’s huge. And that is just in today. So that’s something that can start happening today. And then the future, the flywheel that gets turned on is where then those insurance commissioners that Rob mentioned and the NAIC say, you know what, just like the FHAFA letter that we talked about a few minutes ago, just like that, we are advocating to those insurance commissioners to say, you know what?

[00:44:22] At this point in Bitcoin’s maturity in this asset class, we’re not going to say that it is an admitted asset and you get zero credit, we’ll give you 50% credit.  We’ll give you 75% credit. Maybe we’ll just give you credit. Right. Maybe we’ll make it admitted asset and we’ll just treat it like it should be treated in its dollar value and it’s marked to market.

[00:44:43] When that happens, then we start denominating Bitcoin in, or sorry, denominating insurance in Bitcoin. Bitcoin, right? Watch out. And so there’s, there’s pros and cons. Actually, in today’s world, we’re not on a Bitcoin standard. Companies are not on a Bitcoin standard for the most part. So they have to do their books in dollars.

[00:45:02] So there’s reasons that the dollar denominated makes sense. It makes their insurance expenses predictable in dollars. Right? It gives them access to the current market, the A rated, a plus rated current market. They want that. They need it. Sometimes it’s required, so there’s reasons to do denominated in dollar policies, but Bitcoin denominated is where we’re headed.

[00:45:22] We certainly believe as an industry. What that looks like is something a little different. That’s where Allianz and the other insurers out there, they actually have Bitcoin in that pool of capital. That’s what the transition is.

[00:45:36] Preston Pysh: This is such a big deal. This what you’re talking is such a big deal.

[00:45:39] Becca Rubenfeld: This is such a big deal. 

[00:45:41] Rob Hamilton: This is the original idea. Becca and I got really excited about building AnchorWatch and we realized we had sequentially build out steps to get there. Yeah. 

[00:45:48] Becca Rubenfeld: And so now they have this pool of capital. A lot of it is still fiat, but now there’s Bitcoin in it too. And the Bitcoin can underwrite Bitcoin denominate insurance.

[00:45:57] So instead of always having to be like, okay, well my Bitcoin is fairly worth a million and I bought a million dollars insurance, but then the price is fluctuating and I’m always having to do that. When we go to Bitcoin denominated, first of all, that’s abstracted away. So now there’s, now you also don’t necessarily know how much your insurance bill is going to cost in fiat, so there’s trade offs, but.

[00:46:18] You certainly know what your coverage is. You are maximally protected on the Bitcoin side and now that Bitcoin and those reserve fools, that is a yield generation machine. Yeah, that is a new way, an additional way to take what historically has been a relatively unproductive asset in terms of generation, right?

[00:46:38]  The value went up excellently, but in terms of using it as a productive asset, now we can do that with insurance and so now an investor can say, you know what? I actually want to put my Bitcoin in that pool of capital because I understand it’s not risk free yield, because I’m literally underwriting insurance risk.

[00:46:57] So it’s not risk-free, but it is very predictable risk. There’s a prospectus. There’s historical lost information because AnchorWatch has been running this policy on Fiat side for a while. So we know how safe their custody platform is. 

[00:47:11] Preston Pysh: And that’s going to be a huge part for you guys, long term of people wanting to make the deposits on your platform as you have the history and know how’s.

[00:47:20] Becca Rubenfeld: Yeah. And so now, wow, we are raising Bitcoin, we and others, like this is where the whole industry will head, I believe. 

[00:47:27] Preston Pysh: Yeah. 

[00:47:28] Becca Rubenfeld: We raise Bitcoin, we say, okay, investors, whether you’re a Treasury co, or yeah, a whale or a bank, or whomever. Okay, you’ve got Bitcoin that you want to deploy. We will take that Bitcoin.

[00:47:42] It’s going to sit safe and sound in cold storage. It’s going to serve to underwrite insurance risks, and we will deliver you a annualized return on that capital of X percent. It can be debt-based or equity base. And ultimately it allows them to put their Bitcoin in a productive place where we’re paying them yield, but it’s still relatively safe, meaning that the losses are predictable and you are doing so, not only gets you that yield, but it actually encourages continued ongoing investment into Bitcoin because it lowers the cost of lending, it lowers the cost of capital. It makes capital allocators in tradify feel comfortable, feel safe. Okay, there’s price, volatility, risk, but now I don’t have losing the end. 

[00:48:28] Rob Hamilton: What’s fascinating about this too, and a small path, step back into time locking Bitcoin. The 5,000 or so Bitcoin on the Lightning network are time locked. Most Bitcoin isn’t. You can leverage this tech and you can actually start locking up the float of supply of coins floating out there into these kind of financial contracts and arrangements. And we could build that out where like this is your insurance pool.

[00:48:46] We have certain tranches of being able to pay out. Maybe you have a coupon clip from a share the premiums that gets time locked and earned to you over time, and you’re starting to take coins off the market again. Like literally the coins cannot move until like these certain covenants or certain restrictions are open and available. 

[00:49:01] Preston Pysh: That idea, of people taking their Bitcoin to put in the vault to back up insurance policies. They’re getting paid yield. All I can keep thinking is we’re locking up massive amounts of Bitcoin. Like what in the world does this do to the underlying price? Like holy, we moly. 

[00:49:20] Rob Hamilton: We live in a world where no one really uses time locks except for the Lightning network right now. And if you could start thinking about this, like we started with insurance because it’s so foundational to like the custody and the safety of it.

[00:49:28] Any financial product, a Bitcoin bond, if you want to do coupon clippings and locking up the, the principle and like over time, it’s also almost like an on chain native yield curve too. Like sailors doing it with all of its different preferred offerings. Yeah. On the financialization side. Yeah. You can mirror that on the technical side and just start taking coins out of the circulating supply.

[00:49:47] And it’s very safe. Understood. Tech time locks have been in Bitcoin for over a decade. It’s how the Lightning Network works. This is not, I did not in my basement discover or implement time locks. This is something that’s very just codified into how Bitcoin operates and runs.

[00:49:59] Preston Pysh: What do you think that that would pay? And I know this is really far. Yeah. 

[00:50:04] Becca Rubenfeld: Here’s what I’ll just say for some context. 

[00:50:06] Preston Pysh: Double digits or single digits?

[00:50:09] Becca Rubenfeld: Here’s what I’ll say. We know that Bitcoin owners, investors were willing to hand over the keys to their Bitcoin to earn yield in the block buys and others of the world.

[00:50:19] They were willing to take on relatively not relatively very high risk trading strategies. First for 8%, and then they were willing to do it for 6%, then 4%, then 2%. So Bitcoin investors have shown an incredible risk tolerance for relatively low yield.

[00:50:42] I think this product, to be a long-term viable product is something where both sides will be taken into account. On one side, we know what the market investors are willing to accept.  And so we will be looking to offer competitive rates, meaning attractive, right?  And it’s important to have long-term aligned investors who understand what we’re doing so, and who are going to do it for a long time, right?

[00:51:09]  Because insurance needs to be very stable, so we’ll be looking to offer yields that certainly work well for us. Maybe it is more. Affordable than Fiat insurance. Yeah. Right. Because we maybe have to pay less for the capital than we would in fiat side. 

[00:51:27] Preston Pysh: Yeah. 

[00:51:27] Becca Rubenfeld: But it will be attractive. It will be attractive because we are trying to attract investors to them.

[00:51:33] Rob Hamilton: There are two things I’ll say. One, it’s ultimately a market force, right? When everyone thinks of insurance, they’re usually viewing it as the customer buying insurance for someone. And there’s a certain rate of cost to get the insurance. The other side of the desk though is I have this massive pool of capital as an insurer or a reinsurer, and I need to deploy this risk into different buckets.

[00:51:49] And each of those get me different kinds of returns. Property and casualty, which is kind of like one half of the insurance bucket, but the other half being life and health insurance. So property and casualty, which is kind of the world we live in, reinsurers, are earning low teens, mid-teens as their average return on equity and capital for this stuff.

[00:52:07] And that’s just like how that works, how it’s going to work in our market. It’s a new market. So who’s to say, right? But. It’s going to be a supply and demand dynamic of what are people willing to pay for their insured custody. And then balancing the supply and demand curves on both sides and finding out what that market clearing rate is.

[00:52:21] But what I find so fascinating about it is that insurance gets its leverage, not through kind of lending and borrowing, but through risk distribution. And the fact that you can get for every, you know, no insurance carrier is dollar to dollar or Bitcoin to Bitcoin backed. because then the unit economics don’t scale.

[00:52:38] But if you can prove over a long enough time period with your actuarials and your provable like loss rates, how scalable and kind of like the expected rate of returns, you’re able to start modeling that out and you can offer that. And different t tranches too. Like this is where the entire world of insurance comes in, where you have, maybe the first dollar loss has a much higher yield because you’re more likely to have some loss versus no loss.

[00:52:58] And then you actually have a whole yield curve. It’s called a risk tower in insurance, right? Let’s say if the losses are over a billion dollars, then my tranche of capital starts paying and that has a lower yield because it’s safer, because up to a billion dollars, you don’t have to pay out a penny, but if it’s over a billion dollars, you have to start paying, right?

[00:53:15] So this is like the many layers of financialization to be kind of built out and discovered and kind of like fleshed through. But I also, at the end of the day, I view this as like. Structurally, this is where Bitcoin custody is going to go. And that’s why I talk about these treasury companies becoming the new version of Bitcoin banks.

[00:53:31] because they will have a pool of Bitcoin be able to underwrite this risk. They’ll be safely understood. It’s aligned for them. They want the additional income. Yeah. And additional income stream. And also it’s distributing the risks. So all of the treasury companies aren’t using the same three players. Yeah.

[00:53:47] And the nature of like how our tech is being leveraged, you can have the best of both worlds. You can have an enterprise level security solution that has to co-sign but they can’t abscond with the funds without you coordinating. 

[00:53:57] Preston Pysh: The thing I love about it though, Rob, at the core is you are incentivizing the person who does custody. The safest, right? It has the best way to actually do this thing called banking and security, right? Yeah. That’s where these treasury companies are going to want to stick the Bitcoin. They’re not going to want to go stick it on some exchange that has a black box of just trust us, bro. It’s safe. 

[00:54:22] Becca Rubenfeld: Yeah. We call it fiduciary flight. When you’re a fiduciary and you have responsibility for these massive, this massive amounts of wealth, where are you going to put it? Are you going to put it with the honeypot, the uninsured honey pot? Are you going to do it in the most advanced way to distribute risk backed by the additional protection layer of traditional insurance?

[00:54:43] And we think because these two options are quite comparably priced, right? So there’s not like a massive delta right now in the marketplace between uninsured and insured custody. There’s a delta, but it’s not massive. And so given that as fiduciaries become educated and being like way. Full insurance is available and it’s only bips.

[00:55:07] More than uninsured. Yeah. Yeah. How can I do that or how can I go with the honey puck? So, you know, we’re out here, we’re building our name, we’re building comfort in the commercial space and make, getting them comfortable with us and the platform and love opportunities to show off the security model and everything like, but it’s going to be really big.

[00:55:26] Preston Pysh: While you guys were talking there at, in this last 15 minutes, I didn’t usually I wait till we’re done recording to write down the title of like what the show’s going to be, but like it is so crystal clear, the future of insurance. Oh wow. This is the future of in good Lord, this is future of insurance. It’s crazy. 

[00:55:44] Becca Rubenfeld: Yeah. And you might ask like, why not already. So why did AnchorWatch start with fiat denominated policy? So one reason is. Is what we described about the regulators and not admitted assets. Yeah. The other reason is that to have this future, like there just needs to be sufficient volume. 

[00:56:01] Right. Because there are hundreds of AnchorWatch already has been offered casually, hundreds of thousands of Bitcoin  To put towards this. Every company that has Bitcoin is like, yeah, that’s a great story.  I, I want to put Bitcoin into that collateral pool. Yeah. In order to pay all these investors yield on their Bitcoin, the insurance has to be sold.

[00:56:26] So, right. You actually need, the flywheel needs to be on. Yeah. Right. And so we’re in our first year of operations, there’s other insurance players trying to figure out how to enter this space. Right. And so we need to get the volume up. To just support the volume of investors. 

[00:56:44] Preston Pysh: Yeah.

[00:56:44] Becca Rubenfeld: I would love to be like, yes, send, that’s all 200,000, but it’s not, I think it’s coming.

[00:56:49] Preston Pysh: Yeah. I think everything that’s happening from an admin policy standpoint, now that the floodgates are being turned on, this is all going to start going quickly. It’s going to very quickly.

[00:56:59] Rob Hamilton: What I love about this whole story is not, is it just a massive capital opportunity? It’s an actual alignment of actors. Where I can custody my fund somewhere and it’s insured, like you’re talking about consumer protection. Right. Like we’re, how it’s being managed today is not it. It is a slide. We’re in the wild West days of the early formation of just Bitcoin as an industry and it’s gone because there was no better option.

[00:57:21] And this linking of the capital markets, there’s a massive financialization and opportunities to make money and put Bitcoin to work as a productive asset. But it also just at the end of the day, protects consumers. So it’s a very virtuous like, alignment of this, of this piece of insurance. And just as the one piece like insurance started, like underwriting ships, doing spice trades all over the world, it underwrote the expansion to build the United States of America.

[00:57:44]  Like the financialization of capital markets for risk. And like the Lloyd’s, one of my favorite things is when people say that insurance is fiat is one, it predates fiat currency by hundreds of years. And two, it’s the I ability for you to be able to take risk in the world and being able to step forward and like take chances and not be totally destroyed if one thing goes wrong and it’s a massive capital on, for capitalism, it’s just a massive. 

[00:58:07] Entire vertical and industry that I think it’s a bad rep because you have state mandated health insurance and you have state mandated car insurance and all these things, but like foundationally, it’s such a beautiful way for just making Bitcoin a safer asset for people to hold and have all these other positive flywheel effects too on capital formation.

[00:58:24] Becca Rubenfeld: With all investment. All investment, right? It’s a risk reward calculation that somebody is making, and when you de-risk various aspects, their appetite for investment goes up. So lower risk, more investment, and where you can see that already happening is Bitcoin back loan.

[00:58:43] Really, every loan provider is talking to us like, Hey, both our liquidity providers and our borrowers, like both sides are both saying like, Hey, we would feel better if the collateral is insured.

[00:58:57] Banks are saying, Hey, we don’t let you have a mortgage on a house unless that house is insured. We’re just simply not willing to do this deal unless the collateral is insured the same premise. What we see is that everybody wants the collateral insured on Bitcoin backed loans. As it’s insured, more lenders are willing to come in, brings down the cost of capital. Right?

[00:59:21] Because we have eliminated a portion of the risks that we can, through technology, through cryptography, through distribution of fees, we have eliminated a portion of the risk. So banks, even though you don’t, maybe you’re not Bitcoin experts, but you can feel confident because it’s insured.

[00:59:37] You don’t have to understand the Bitcoin hurt, but you do understand insurance and, okay. All right. All that tech stuff you just explained that I’m nodding my head like I, like I understand blockchain, but really I understood none of it. But I do understand that at the end of the day, it’s insured. Okay.

[00:59:53] That’s interesting. And it’s insured by an a plus rate. Okay. Okay. All right. We’re willing to do this. Yeah, right. And we’re seeing that today, so I just, I think we’re going to see that, but on a macro level. Yeah. And I think the next three to five years is like when you say, yeah, it’s the future of insurance.

[01:00:08] Let’s put in, let’s put a notes on our calendars for three and five years from now and let’s see how insurance has changed because I’ll bet it’s going to have changed a lot to the benefit of Bitcoin. 

[01:00:17] Preston Pysh: Alright, do you guys want to hear the The stupid guard duty story. I’ll make this quick.

[01:00:23] I’ll make this quick. So this is my second year at West Point. And it was always the worst. When we’re out in the field, it’s, this is during the summer. This is obviously not during the school year. The summer you go out, they put you in the woods and you have to pull your guard duty. And sometimes your guard duty is like, oh, Preston, you got guard duty from 3:00 AM to 4:00 AM You have got to wake up, you have got to go out there, you have got to sit there.

[01:00:45] And because we had weapons with us out in the field, you’d have to sit there in the, at the arms room and make sure the weapons didn’t leave the arms room. And I was, I’m tired. You’re out there slugging around in the woods like all day. It’s miserable. You haven’t had a shower. You’re just like all of it.

[01:01:02] I remember I’m sitting there and I’m guarding, quiet, not a peep. And this skunk comes up. This skunk just starts boop boop. He’s just walking right up there like, Hey bro, how you doing? I’m sitting there and all I can think of my head is if that thing sprays you, you’re always going to be known as the guy that got sprayed by skunk during the summer camp while you were on guard duty.

[01:01:30] And I have never in my life stood so still, like didn’t move an inch for at least. And the thing didn’t move. It came trotting up there, sniffing around. He knew I was there. He was just kind of, he was like, yeah, I see you there. Like, are you going to freak out and I’m going to spray you or are you going to sit there and just like, let me do my thing?

[01:01:52] And he went up there. He took his sweet time, just meandering around. And thank God, I did not get sprayed by this thing and be known as the skunk guy or whatever.

[01:02:03] Becca Rubenfeld: You would’ve, absolutely. 

[01:02:06] Preston Pysh: If you could have seen my heart rate. Like it just went a million miles. I was like, oh my God. But anyway, that’s my guard duty. That’s my AnchorWatch.

[01:02:17] Rob Hamilton: There you go. The AnchorWatch. That’s right.

[01:02:19] Preston Pysh: Guys, if people want to learn more about you, more importantly, if you have somebody that’s listening to this from Wall Street or you have somebody that’s working at a large institution and they’re hearing, they’re hearing this conversation, they’re like, oh my God.

[01:02:32] Like this is going to change all of insurance. Who is that? What’s their call to action? How can they get in contact with you so we can start getting this thing going? 

[01:02:41] Rob Hamilton: Yeah, AnchorWatch.com. If you’re interested in a policy, you can sign up for our newsletter. You can reach out to agent A-G-E-N-T, agent@anchorwatch.com if you’re interested in a policy. If you’re on the commercial side, didn’t mention it, but everything I showed and demoed is totally white labelable.

[01:02:56] So if you want to run your own custody solution and kind of go tap it in and leverage our infrastructure so you don’t have to go figure out how the Bitcoin stuff works, you just want to run your own banking infrastructure. Like we’re in conversations with multiple people right now around that. You could reach out to myself at rob@anchorwatch.com and then becca@anchorwatch.com.

[01:03:13] Becca Rubenfeld: And the last thing I would add for that particular audience as well is we can also do custom policies and very large policies. 

[01:03:20] We can do billion plus Lloyd’s policies. For a given entity. It’s just going to be custom where we’re going to go through underwriting and write a formal business plan for Lloyd’s, and we’re going to advocate on their behalf to get them a policy that size.

[01:03:35] But we can also cover unique things that are not on our platform as well. We’re working with multiple commercial entities to write custom policies for Bitcoin being held in different ways, and we just have to assess each one of those individually. So if you’re an institutional player, what we’ve described today, you’re like, well, the concepts are really interesting, but it doesn’t exactly fit our business model.

[01:03:58] Definitely just reach out to us, hit us at Becca or Rob @anchorwatch.com, either one of us, and just let us know what you’re trying to do. We’d love to chat about it and chances are we’ll be able to help you out with anything Bitcoin insurance related.

[01:04:11] Preston Pysh: Guys. I love it. Thank you for your time to come on the show today.

[01:04:15] Becca and Rob, we’ll have links in the show notes if you guys want to reach out to them. Thank you so much. 

[01:04:20] Rob Hamilton: Thanks for having us. 

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