[00:03:02] Preston Pysh: Yeah. So it, it almost seems like that it’s a necessity because it’s every single person is talking about, like, what’s the best way to preserve my treasury.

[00:03:10] Preston Pysh: Is that pretty much the essence of the conversations?

[00:03:13] Alex Leishman: Yes, and there’s a, there’s a number of parameters, right? There’s sort of what legal jurisdictions are you exposed to, the smaller companies can get away with just kind of having cash under a mattress, the bigger companies have to, are under more scrutiny, and there’s very strict laws there and capital controls, and so they kind of have to do you know, what we would consider wacky things just to not lose their treasury, like buying dollar denominated debt from another big Argentinian company to hold in their treasury because holding dollars itself would be too complicated.

[00:03:43] Alex Leishman: Like it’s just all this wacky stuff. And, you know, people there, you know, often stored Argentinians, I think are the third largest holder of physical bills, a hundred dollar dollar bills in the world. Lots of companies and individuals there save in literal physical cash. Often in their home or often in vaults that aren’t at banks, like there’s like vault facilities that people just put their cash in.

[00:04:07] Alex Leishman: It’s pretty wild.

[00:04:07] Preston Pysh: And when you say, you’re talking U. S. dollar cash.

[00:04:10] Alex Leishman: Literal paper U. S. dollar cash, yes. Yeah. The country’s actually dollarized. Basically, like, everyone really just wants dollars for savings. The peso is purely transactional, or the saves in pesos. It’s impossible.

[00:04:23] Preston Pysh: And as far as Bitcoin goes, did you feel like you were still kind of in your own little microcosm within the populace there?

[00:04:31] Preston Pysh: Or is, is it a topic that everybody in the country is talking about?

[00:04:35] Alex Leishman: People know what Bitcoin is. In fact, the apps there are very interesting and very widely used. The crypto apps, the apps there are built for transactional use cases. And so, for example, Belo is a very popular app in Argentina. Manuel, the CEO is Argentinian and awesome guy and you know, their app is not just an exchange for Bitcoin and stable coins, but it’s also transactional.

[00:04:59] Alex Leishman: You can buy things, you can make Mercado Pago is a very common payment rail down there. It’s like a, you can go to a store, scan a QR code and just pay the merchant with pesos. And so you can have your, your Belo app, you have your Bitcoin balance. You can, you know, on the fly, sell Bitcoin for pesos and then make your payment in pesos from your app.

[00:05:19] Alex Leishman: So, the crypto apps down there are not purely for trading and speculative use cases, they’re, they’re often deeply inter, they’re often actually serving as somebody’s primary wallet.

[00:05:28] Preston Pysh: Wow. What’s been the consensus on Malay since he was elected? Because it seems like I guess maybe this is a US talking point.

[00:05:38] Preston Pysh: People saw him go over to the WEF and give the presentation and I think it just was like sending off alarm bells like, Hey, everything that we maybe thought about this guy has just been flipped on its head. So like, what are they saying down there with the local population?

[00:05:52] Alex Leishman: I don’t know that that was something that upset Argentinians.

[00:05:55] Alex Leishman: Cause if you, I think if you actually listen to his speech at the left, it was very critical of their average audience member there. So I think that if I had to guess, that probably actually made him look good to Argentinians. But overall, the sense I get is. There’s, there’s a little bit of unrest here and there from sort of the, like the elements on the left, but by and large, the majority of the country is very much like, let’s try and get this to work.

[00:06:19] Alex Leishman: We just want things to be better. And so there were some protests and, and strikes while I was there, but, but it actually was turned out to be very minimal, which is a sign that I think people are like, this stuff hasn’t been working for us in the past. We have to try this new thing.

[00:06:33] Preston Pysh: I listened to an interview with Whitney Webb and she was talking about like one of the prime objectives of the WEF is this idea of public private partnerships and how what he’s doing is actually kind of in harmony with what the WEF objective of public private partnerships are And so he, here he is killing a lot of these government entities, but what he is doing is he’s pushing them into the hands of like private businesses and entities and people that are controlling these private entities that are now taking on the responsibility of the government.

[00:07:06] Preston Pysh: And it’s still just more of the same. It’s just looking like it’s not in government hands, but it, it might as well be because of the people that he pushed it into in the private sector, which is an interesting talking point. I have no clue, but-

[00:07:18] Alex Leishman: I mean, privatization is always a, how do you do that? Right.

[00:07:22] Alex Leishman: Um, you know, like it should have never probably been part of the government to begin with, but you now have this like distribution of resources, fairness issue. It is quite complex, but I think an interesting takeaway for me was, A lot of business people were not pro Millet because a lot of business people in Argentina were actually benefiting from the corruption.

[00:07:42] Alex Leishman: Like, there’s a whole swath of the business landscape in Argentina that was benefiting from all the corruption and the capital controls. And they had that access to the central bank where they could basically pull the funny business and it was draining the country. And so, anyone who was on the winning side of those things, you know, wasn’t necessarily a fan either.

[00:07:58] Alex Leishman: So, it’s quite complicated and I honestly, I don’t know how it’s all going to play out.

[00:08:03] Preston Pysh: Well, I think you see the same things here. Like, just not at the, at the scale that you’re seeing it down there, but we can see the same thing playing out all over the world right now with respect to the, the string poolers and their vicinity to the, to the money printer.

[00:08:17] Alex Leishman: Absolutely. I mean, just look at the defense companies in the United States. I mean, it’s. Yeah. Oh, it’s, it’s nuts. It’s totally. Some of the big financial companies. I mean, they’re, they’re distinguishing line between government private and public in the United States is also quite unclear in those kinds of industries.

[00:08:31] Alex Leishman: So, but yeah.

[00:08:32] Preston Pysh: Did anybody have any talking points on why they were seeing the housing prices get crushed? They were going down, but yet food prices were going up. I think this is something that people are struggling with here or anywhere you go that, you know, G7 fiat currency, you name it, right, is just creating these perturbations that are all just in the economy, where sometimes the housing prices are ripping and then sometimes they’re down and the food prices are ripping.

[00:08:57] Preston Pysh: It’s just like, it seems like everything’s kind of losing sense of reality, like what to expect next. You just don’t know if more volatility, what were the talking points down there?

[00:09:08] Alex Leishman: In my understanding. And, you know, I’m not by any means an expert on this stuff, but. There’s a large omnibus bill that Millet is trying to get passed and I’m unclear of the status of it at this point.

[00:09:20] Alex Leishman: The goal is to delete something like 200 or so laws and massive and sort of a massive omnibus deregulation. My understanding is that that may have like prematurely sort of like eased restrictions without passing on real estate stuff. And so people are already sort of behaving differently because of that.

[00:09:38] Alex Leishman: And so regulations on real estate, I think, were decreased and that changed the prices, but I think on the food side, and I could be wrong about this, but some of the regulations were actually artificially depressing food prices because of export controls and tariffs and things like that. Other deregulatory measures may have driven demand for things like beef and wheat and soy and other agricultural products in Argentina by potentially opening up international demand.

[00:10:05] Preston Pysh: Yeah, it’s just wild. And I think that this is just one of many examples. I think you could go to many other countries around the world that are struggling with similar dynamics to what you saw while you were there. Hey, so before we started this conversation, I’m literally watching Lyn Alden and Mike Green go to battle over your lightning report that you published more than a year and a half ago.

[00:10:25] Preston Pysh: What’s been, I mean, there’s, I, I can’t even tell you how many times people have referenced this report. Has anything changed in the year and a half? I mean, I think you guys published this in October of 22. So it’s not been quite a year and a half, but we’re coming up on it. Has there been anything that’s changed in the way that you’re viewing this?

[00:10:43] Preston Pysh: Is it just as strong as it was back when you wrote it? What’s your general thoughts?

[00:10:49] Alex Leishman: That lightning report really does make its way around. I know that even sort of banking executives at large banks in other countries have seen this thing. And so kudos to Sam on our research team who writes that every year.

[00:11:00] Alex Leishman: The short answer is our position on Lightning hasn’t changed. In terms of what we’ve seen on Lightning since the report, while we haven’t done the deep analysis, Sam is actually about to put out just a follow up because I think we launched that last October in 2023. Lightning transaction numbers have been relatively flat the last few months.

[00:11:18] Alex Leishman: There hasn’t been sort of some parabolic growth recently. We’re seeing steady usage. And I think some of the early growth was driven by things like Nostr, Zapps, stuff like that. That’s sort of, we’ve seen some of that plateau. And I mean, the current reality more generally is Bitcoin really hasn’t found product market fit as a medium of exchange.

[00:11:40] Alex Leishman: Sending lightning transactions is interesting. It’s cool. It has its use cases today. And our, my take is that this is going to continue to grow as Bitcoin becomes increasingly adopted as a medium of exchange, which isn’t going to happen overnight. And it’s going to take many, many years. People at the end of the day, mostly want to, would prefer to transact with dollars.

[00:12:00] Alex Leishman: What we’re seeing is a lot of the Lightning Network development activity is being focused on bringing stable coins to the Lightning Network or facilitating fiat transactions over the Lightning Network by using the Lightning Network as an instant settlement rail between two custodial exchanges. So there’s two different approaches basically being taken to make Lightning suitable for transacting in fiat, which is still what the vast majority of people in the world want to do.

[00:12:26] Preston Pysh: So when you say that, what’s the reason why? Why do people want to still transact in that?

[00:12:34] Alex Leishman: Because it is the world unit of account, the dollar, the U. S. dollar. Fiat is everyone’s unit of account still. And it is a much more predictable price. And it’s just an, it’s a, it’s a sticky protocol. You are a merchant in some country.

[00:12:50] Alex Leishman: Your goods aren’t priced in Bitcoin.

[00:12:52] Preston Pysh: Argentina. Argentina, they’re in dollars.

[00:12:54] Alex Leishman: Yeah. They’re in dollars. At the end of the day, everything’s kind of just priced in dollars in the U. S. and then more broadly around the world because even though the U. S. dollar has inflation itself, it is far more stable than basically every other, you know, any, any developing world currency.

[00:13:08] Alex Leishman: So that’s why, you know, it has a hundred plus years of being this brand and having this dominance and this stickiness and network effect. So what we’re seeing is, you know, Lightning is winning as a second layer of payment rail for Bitcoin. But the growth in demand for Bitcoin as a medium of exchange, it’s, you know, it’s still, it’s a slow growth sort of thing.

[00:13:29] Alex Leishman: So Lightning Labs working on bringing stable coins to the Lightning Network directly. And then you have companies like LightSpark working on things like the Universal Money Address, which allows two exchanges to, which allows a user of one exchange to send fiat to somebody on another exchange or app.

[00:13:45] Alex Leishman: And Lightning Network is the connector between those two exchanges and they’re settling the trade instantly. So for example, you could have, you know, a river user. In the US sent us somebody using a Mexican exchange and we would talk to the Mexican exchange, get, get an all in USD peso exchange rate, and then send the, send the bitcoin, the, the, the, our user would pay US dollars.

[00:14:08] Alex Leishman: We would send Bitcoin immediately to the Mexican exchange, and then the Mexican exchange would immediately convert it to pesos for the recipient. So you would have this international TRA Fiat transaction powered by Bitcoin behind the scenes. Without the user really knowing or caring.

[00:14:23] Preston Pysh: And would that be using you said that that was light spark that was enabling some of that, but was it also using the taproot asset protocol or is it bypassing?

[00:14:32] Alex Leishman: It doesn’t need that. So those are separate things. They could technically interplay, but they’re basically two different approaches for transacting in fiat over the Lightning Network. The universal money address being kind of using just Bitcoin over Lightning to settle off Lightning Network fiat trades, whereas the Lightning Labs approach is to actually make the Lightning Network multi asset.

[00:14:55] Alex Leishman: You could have lightning nodes with actual dollar channels and, or, you know, the tether channel, for example, instead of just a Bitcoin channel.

[00:15:02] Preston Pysh: But on the, on the first one with the light spark, the, the custodians who’d like, let’s say it was you sending it to the Mexican bank, like the example that you used.

[00:15:10] Preston Pysh: You are having to receive dollars on your end and then, and then after you receive those dollars, then you’re using Bitcoin and then over on the Mexican bank side, they are converting that into pesos on the, on the other side. Okay.

[00:15:23] Alex Leishman: Exactly. There’s a trade on each end, you know, with the lightning labs approach, the taproot assets approach.

[00:15:28] Alex Leishman: That’s just saying, well, no, we’re just going to put dollars in lightning and it’ll be more like a, you know, a traditional stable coin experience that people are used to.

[00:15:37] Preston Pysh: Which one do you see becoming more popular? If, if at all.

[00:15:42] Alex Leishman: You know, I think if I had to bet right now, given Tether’s popularity, if Tether does, you know, create a taproot asset, I do think that’s going to be pretty interesting and compelling because Tether is huge.

[00:15:54] Alex Leishman: It’s already got, I think, 90 billion, maybe it’s close to 100 billion in, in you know, in tethered minted. I think if that happens, that would be pretty big.

[00:16:04] Preston Pysh: The thing that I think is lost on a lot is just the total lack of fee and the speed of settlement on Lightning relative to you name it, blockchain protocol that has optimized for scaling on layer one.

[00:16:19] Preston Pysh: The fees are, are much higher and it’s, it’s not going to be as fast. So I guess the question comes in, I see you nodding your head. So I think you agree with me. The question really comes down to the reliability of lightning. Is it something that you think large players are going to view as being the best solution with it being the most reliable, because I think the fees and the speed is self, I think it’s kind of speaks for itself, but it’s, it’s whether it can be relied upon for it to do it.

[00:16:48] Preston Pysh: Every single time is more of the concern at this point.

[00:16:52] Alex Leishman: Absolutely. And on the fee thing, I would say, yeah, for smaller transactions, absolutely. I mean, everything in this space is about trade offs, right? There’s no perfect silver bullet. On chain transactions have a high fixed cost, but they are, it doesn’t matter how much you’re sending.

[00:17:07] Alex Leishman: Sending an on chain transaction is you’re paying based on how much data you’re taking up in the blockchain, not how much money you’re sending. With Lightning, you’re paying a percentage based fee. So for, and that’s a very small percentage. So for smaller transactions, it’s much cheaper than a blockchain transaction for larger transactions.

[00:17:22] Alex Leishman: It may not be now on the reliability side. I think that lightning B2B sort of as a, as a way to move Bitcoin between all of these hubs. I think that’s quite reliable today and is going to become increasingly reliable as the tech continues to mature and the protocol continues to mature. I don’t think the, the, the jury’s still out on how reliable self custody lightning is going to be more for individuals.

[00:17:48] Alex Leishman: And so that’s where I would sort of kind of break the lightning network into two sides is B2B custodial to custodial hub to hub lightning, very reliable, very reliable self custody consumer lightning. introduces a whole new host of challenges because, you know, you’re, you’re trying to send to a cell phone that may or may not be online and how do you handle all of that?

[00:18:07] Alex Leishman: So that jury’s still out there.

[00:18:10] Preston Pysh: Yeah. And it seems like, cause you, you have this narrative that’s been going around as of recently that lightning doesn’t scale, lightning doesn’t do this. And it seems like there’s, there’s a lot of bashing from the developer community on lightning. Do you think that it’s because they’re taking a mantra from layer one, which is everybody’s got to be able to have their own custodial solution.

[00:18:32] Preston Pysh: And if they don’t, then it’s a fail, the whole thing’s a failure. And then they’re applying that mantra to layer two lightning and that it has to do that as well, when. I don’t know, necessarily know that it does have to, and I’m not trying to make a, an argument for it not being done or that people can’t do it at an individual level.

[00:18:47] Preston Pysh: I think people can do it if they really want to invest some time and technical skill to do it, but I don’t know that it’s a breakdown in the, in the Bitcoin experiment or whatever we want to call all of this, right? I don’t think that it leads to a failure because it’s solving a completely different thing, which is payments and not store a value replacement of money itself, right?

[00:19:11] Alex Leishman: Yeah, I think there’s a general, you know, I think it’s twofold. I do think that that sort of criticism is a reaction to lightning being oversold in some cases, right? I think, I think there’s like kind of two sides to this. I think that lightning was oversold by some people as maybe being the silver bullet.

[00:19:29] Alex Leishman: And of course people working on it knew that wasn’t the case. And so then you have these people sort of criticizing it, flagging the actual challenges with lightning and saying, Oh, it’s not a silver bullet. And so at the end of the day, the core people building lightning stuff always sort of understood these nuances and things.

[00:19:43] Alex Leishman: I think it’s just been sort of a shift in perception and branding of the lightning network. What it’s actually capable of in the real people just actually starting to realize because it’s actually being used now. And so I think actually all this criticism is, is a byproduct of people actually using lightning now and lightning’s increasing, increasing adoption.

[00:20:01] Alex Leishman: You know, people don’t criticize things that aren’t, that aren’t getting attention.

[00:20:05] Preston Pysh: I think this is such a great point. And I think that you add to this in that not everybody can, let’s say you’re a person who has very humble net worth and like it’s, it’s pretty de minimis or you’re in certain parts of the world where there’s no way you could have a hundred thousand dollars worth of Bitcoin.

[00:20:22] Preston Pysh: And it’s a much smaller net worth for this individual. They’re almost going to be forced into a layer two solution. And I think many people in the community are saying. They can’t custody their Bitcoin because they’re forced into this layer two solution. And that’s not right. And I think that that’s where a lot of the pushback is coming from, which I do have empathy for that talking point and that point of view, but, and I hate to use the word, but after all of that, I don’t think that it’s that it prevents.

[00:20:51] Preston Pysh: When I look at all the issues in the world, the clown world, right, that we’re dealing with today, the thing that really solves clown world is forcing all these central banks to be pegged to something, right? They’re not pegged to anything. They’re not responsible to anything. In layer one Bitcoin, even if it’s for people with a higher net worth because of the fees and all the other stuff that we’ve already kind of covered, that still helps.

[00:21:15] Preston Pysh: That solves clown world, right? It really does like, I think the layer two stuff is, is more of the icing on the cake from what Bitcoin is truly deeply solving, which is, You know, central bankers run amok that just print themselves into oblivion. I’m assuming you see it the same way and just kind of curious.

[00:21:35] Preston Pysh: Any other point of view that you might have? Sorry I talked so much.

[00:21:39] Alex Leishman: No, I completely agree. So, you know, at the end of the day, do we want every human in the world to be able to self custody their Bitcoin in a censorship resistant way? Absolutely. Should we be paralyzing ourselves or criticizing ourselves into Endlessly, because we can’t support that today?

[00:21:58] Alex Leishman: No. Lightning, the Lightning Network is a part of that future. It is not going to solve that future completely. There’s going to be other things that step in. Some of those will be custodial solutions. In fact, the vast majority of people will probably use custodial solutions because, you know, unless society completely deteriorates, people want to be able to trust institutions.

[00:22:17] Alex Leishman: What’s what matters is that you can exit if you really need to. And, you know, I think other technical solutions will come along to help people for whom it’s very important to be able to self custody who don’t have much money. We’re just, you know, we, there’s just no silver bullet for that. It’s a very challenging technical and economic problem.

[00:22:35] Alex Leishman: And a lot of the criticisms of lightning are somewhat unfair because they’re saying, well, you know, lightning doesn’t solve this, but what does, I mean, people used to point to tether on Tron as being this cheap and instant rail, but now it’s like a dollar per transaction. You can’t have a global decentralized, no one’s figured out how to have a global decentralized censorship resistant payment system.

[00:22:55] Alex Leishman: That’s incredibly cheap to use. It just hasn’t been, it’s not a solved problem.

[00:23:00] Preston Pysh: Do you think that Tether is going to issue something on top of Lightning? Because I hear rumors, and one of the things I heard is that Paulo does not like Lightning. I don’t know if it’s true or not. It’s just a rumor I heard.

[00:23:14] Alex Leishman: I don’t know. I have no information. I don’t know the Tether folks. I think it’s totally up to them. I do think the Tether folks, from what I’ve heard, they’re big Bitcoin believers. And, I don’t know Apollo’s specific opinions on the Lightning Network, but, you know, I’m hopeful. We’ll see. The Tethers is in an interesting position.

[00:23:32] Alex Leishman: They’re kind of like the kingmaker of Layer 2s. Like a layer two now. Now the Lightning Network has been able to be successful with without a stablecoin to date, but every other layer to all these EV Ethereum layer twos aren’t very useful unless there’s Tether. Tether can basically make it L two big or not.

[00:23:50] Preston Pysh: The other thing with Tether, and when you’re looking at the sheer size, and I’m looking at who. From a traditional financial standpoint, who’s going to buy all this? Who’s going to buy all this issuance? And when I’m looking around and I’m looking at people that are very smart and can understand where this is all going very quickly because they can do the math and the math leads to just an unprecedented amount of additional printing and treasury issuance on the very near future. And I’m saying, who will buy this? And the only person, or the only entity that I can see out there that’s going to buy it are stable coins. Tether being.

[00:24:32] Alex Leishman: You mean who will buy the debt issuance from the US government? Yes. Well, I mean, and that’s where we’re sort of in this interesting position, Preston, because we can see that now if the US government wants to continue to spend as they have, they should welcome Tether with open arms.

[00:24:48] Alex Leishman: I mean, this is like the best thing that’s ever happened. Now, but, but what’s funny is sort of, it’s unclear because the government isn’t this one entity, right? You have the, you have sort of like the OFAC, AML people who care about money laundering, but at the end of the day, you have treasury knowing, you know, doing the math too, and knowing that, hmm, okay, Tether’s got 100 billion in, in treasuries.

[00:25:08] Alex Leishman: Okay. Interesting. I think that it depends on who wins. Tether’s plate has been playing along with the feds and shutting down Tether addresses that are, that the U. S. government doesn’t want.

[00:25:20] Preston Pysh: I guess where I’m going is, how can’t they become co op by the government at this point?

[00:25:26] Alex Leishman: Well, I mean, I think, sort of, if Tether is going to succeed and not get shut down, it is going to be because the U. S. government wants them to. Yes. Absolutely. But I think it’s easy for Americans to underestimate demand for dollars. I mean, most people in the world to date have not had access to dollars. And they’ve only had access to some really crappy fiat currency in their own country. So instead of holding dollars, they have to put all their life savings into like a condo or something.

[00:25:55] Preston Pysh: Which that, that in and of itself. The more capital intensive physical things become because the currency is melting down further perpetuates this deep desire and need for more dollars in the system. Right. And so like, I’m just looking at all of this and I’m saying like the government desperately needs a tether like entity, whether they like it or not.

[00:26:19] Preston Pysh: And I just. I don’t know. It’s just getting a little crazy when you’re looking at the math and you’re looking at how big some of the, and I can only imagine where they’re going to be within two years. I mean, I’m looking at the issuance, the treasury issuance that’s coming up here in the coming year, two years and like, and the demand globally for dollars.

[00:26:35] Preston Pysh: And you’re just like, okay, so like this is, this is getting a little wild. Let’s change gears. Cause we talked about that way more than I wanted to. Unless you, you want to keep going down that path.

[00:26:47] Alex Leishman: Okay.

[00:26:48] Preston Pysh: You are so technically competent, Alex, that I have to bring up this bit VM and roll ups and all this other stuff that I’m hearing about right now.

[00:26:58] Preston Pysh: What’s your like general take on this? Is this cause for, for a lot of people that are in the space, they hear this and it’s just like more and more jargon just keeps flowing into this space to try to wrap your head around and keep it all straight. But like you’re 50, 000 foot view of some of these ideas.

[00:27:17] Alex Leishman: It really fits well into this L2 conversation we’re having, and by L2 I mean Layer 2. You know, at the end of the day, all of these projects are working towards a future where you can transact and do things with Bitcoin off of the main Bitcoin blockchain. Trustlessly move Bitcoin from the Bitcoin blockchain to these layer twos and back.

[00:27:41] Alex Leishman: And these layer twos are, you know, the general sort of direction these new layer two projects that aren’t lightning are taking is basically looking a lot like Ethereum layer twos. but using Bitcoin as the base currency instead of Ethereum. For those people who know the ETH space, right? They’re basically trying to build like the polygons of Bitcoin.

[00:28:00] Alex Leishman: And so the general idea there is that, you know, using some clever cryptography and a lot of these guys at the end of the day probably want a soft fork and a new opcode in the Bitcoin blockchain, which, you know, obviously may or may not ever happen. And that would, that’s kind of needed to make it purely trustless to move the coins back and forth.

[00:28:21] Alex Leishman: The idea is to have these layer 2 blockchains, kind of the sidechains vision from, from Blockstream basically, that can do all sorts of other stuff with smart contracts and DeFi, but instead of ETH as the main currency, it’s Bitcoin. I think that, sort of, for the average Bitcoin user, who’s not into DeFi or stuff like that, These things are only interesting in the sense that if they are to succeed, their impact, you know, my, my gut tells me the impact is overall positive and that it pulls.

[00:28:50] Alex Leishman: It probably ends up pulling a lot of that development away from all the other altcoins. You know, it basically gets to a point where you don’t need any other chain. If you want to do all the degen gambling stuff, you can just use a Bitcoin L2. And the reality of the world is there are a lot of people who want to do the degen gambling stuff.

[00:29:08] Alex Leishman: And so I think the approach of these projects is basically, why not do this but drive demand for Bitcoin off of the base chain? And that’s the general idea.

[00:29:17] Preston Pysh: But as far as adding any type of functionality to all the stuff that we talked prior to this point, you really don’t need it for any of that.

[00:29:25] Alex Leishman: Correct.

[00:29:26] Preston Pysh: Like taproot asset protocol. Like you don’t need the, you don’t need bit VM and roll-ups for that, right?

[00:29:31] Alex Leishman: No, but you could argue, right? It does. So depending on how the, the the, the layer two is built, it could be another way to transact Bitcoin or a stable coin using Bitcoin to pay the fees.

[00:29:45] Alex Leishman: Because they might build it more like a polygon instead of a lightning. So you wouldn’t need to worry about liquidity and things like that. There is a future where these things are potentially how we help scale self custody Bitcoin to the rest of the world cheaply, but the jury’s still out.

[00:30:00] Preston Pysh: Got it. Got it.

[00:30:02] Preston Pysh: I think that that last point was important. Let’s talk, and boy, it’s brutal saying the ETF word because it has just been so talked about. It’s just been endless. I’m curious, just your general thoughts on You know, the big thing that many are talking about right now is just the honeypot that ETFs are and will likely become if the success and the inflows continue to come the way that they have in the coming year, two years, like This is about to get really, really interesting.

[00:30:34] Preston Pysh: So what are your thoughts on the ETFs self custody? I think I know your opinion on that, but I want to hear it. And the 6102 attack.

[00:30:42] Alex Leishman: Yeah, the ETFs definitely make a 6102 attack much easier to accomplish. And by 6102, we mean the government confiscating Bitcoin, like they did gold back in the thirties. You know, that’s a major downside of the ETFs, you know, to the average person, I would always recommend just buying the actual Bitcoin.

[00:30:58] Alex Leishman: It’s a lot. Why not have that optionality? It’s just as easy and you pay no custody fees. It’s kind of a no brainer if you’re just the average person, if you’re an institution or you’re a, you have a private bank and you need all sorts of extra financial, you need to be able to like leverage trade options, borrow cheaply against it with the rest of your assets.

[00:31:18] Alex Leishman: You’re running a hedge fund, like things like that. The ETF makes sense. It fits into sort of the existing protocol of the financial system. That’s sort of the two different paths from a honeypot perspective. I mean, You know, there’s already been this kind of big open question. Coinbase has already been a pretty big honeypot, right?

[00:31:34] Alex Leishman: Like, we’re already at a point where, before the ETF, if Coinbase was hacked, right, it would be bad news for everybody. And, we’re just sort of cementing that, too big to fail, you know, custodian. So, it’ll be interesting to see how that plays out, and how that impacts the political dynamics of consensus decisions and forks and things like that.

[00:31:54] Alex Leishman: I hope it doesn’t, but we just don’t know, but it has been interesting to see, you know, the, the competitors in the ETF space. I mean, I really like the Bitwise guys. They said, you know what, we’re going to make our addresses at Coinbase custody public. We’re going to push them to support Segwit instead of legacy addresses.

[00:32:09] Alex Leishman: We’re going to donate 10 percent of our revenues to core development. So they’re really pushing the needle, you know, pushing things forward. I’m a big fan of the Bitwise team. I think we’re entering a new era for, for Bitcoin. And so we’ll see how it plays out.

[00:32:23] Preston Pysh: Any thoughts on the American Banking Association that wrote the letter to the SEC last week about seeking the accounting changes to facilitate custodying?

[00:32:33] Alex Leishman: This is crazy, right? Yeah, it is interesting because in many ways those guys are not on our side and have worked, worked against the industry in some capacity on the regulatory front. I think it’s maybe good. I think it’s a good thing that the banks are going, Hmm, you know, maybe we should not be totally averse to this stuff.

[00:32:53] Alex Leishman: And I think what’s happening, I think really like the big change here is that before the banks had an excuse to not support buying Bitcoin for their customers. I said, it’s not a regulated asset. We don’t have the infrastructure, et cetera, et cetera. But now all their customers have a very legitimate reason to say, you know, we want this ETF.

[00:33:10] Alex Leishman: You better support that or we’re going to take our business elsewhere. And I think that’s probably what’s behind some of these dynamics.

[00:33:17] Preston Pysh: The thing that’s blown my mind is since the ETFs were approved, you’ve had the largest inflows by a significant margin of like any ETF product launch that we’ve seen to date.

[00:33:29] Preston Pysh: And I think, I don’t think Wall Street was anticipating the demand for this. And I personally wasn’t anticipating that. A lot of the estimates of like what people thought were going to flow into this in the first couple months have been off by a massive margin. So I think that the ABA announcement last week was a result of them just kind of like having their hair blown back of, Hey, this is insane.

[00:33:53] Preston Pysh: Like there’s something here that we’re missing. We need to be a part of this or we’re going to get left in the dust. Seems like you agree with that.

[00:34:00] Alex Leishman: 100 percent there are many other demographics too. All of these banks know you have to get young people in the doors and anyone under the age of 45 now wants to be able to access Bitcoin.

[00:34:10] Alex Leishman: And if you don’t support that, you’re going to lose their business. It’s just the market at work.

[00:34:15] Preston Pysh: On the Bitwise custody solution, there was some, there was a little bit that we were able to see because they made the announcement, Hey, this is where all of our coins are at. And we’re able to see the, the behind the scenes.

[00:34:26] Preston Pysh: Is there some behind the scenes that you can tell us as somebody that has very keen insights as to what’s happening? And just maybe some of the things that you’ve seen over the last couple of months that you, that you’re able to share with us.

[00:34:39] Alex Leishman: Yeah, so I, you know, I think that one of the unappreciated aspects of why Coinbase is the, by far the biggest selected custodian for all these ETFs is you can kind of just get everything in one place.

[00:34:50] Alex Leishman: You have this battle tested custody, you have all the prime brokerage and order execution, you have the most liquid US regulated exchange all in one place. So the operations are simpler if you go with Coinbase. Now My guess is what happens over time is more people as they get, as the ETFs get smarter and used to the operations of buying and selling Bitcoin, custodying it, you know, all of those things, my guess is they probably start to split up their custody a bit.

[00:35:22] Alex Leishman: I do think if I was running one of them, I would be splitting it up between a number of institutions just in case, but that does add complexity to your operations. But I think, I think that we’ll see more of that. I think we’ll see more custodian diversification. So yeah.

[00:35:39] Preston Pysh: Yeah. I think that’s so important right now.

[00:35:42] Alex Leishman: Custody is hard. It’s, it’s a hard thing to get perfect. You’re constantly trying to defend against the longest tail risks you can think of, and there’s no such thing as zero risk. And with Bitcoin, unlike pretty much every asset that the financial industry is used to. One hack and it’s all gone.

[00:35:59] Alex Leishman: There’s no recourse. There’s no government. There’s no money printer to bail you out. Like the Bitcoin’s gone every other ETF It’s a security. It’s a centralized ledger. So that there’s a hack. They just revert it And so it’s actually the first time we actually have something like this I mean the most the most comparable thing is like a gold ETF And you’re trying to defend against someone stealing the gold, but, you know, humans are pretty good at securing physical things at this point.

[00:36:23] Alex Leishman: That’s a multi thousand, we have thousands of years of knowledge for securing physical things. So, securing physical gold is kind of relatively straightforward, and it’s also kind of hard to steal a lot of it. With Bitcoin, I mean, humans only have like, really, 30 years of any real experience trying to secure something digital.

[00:36:41] Alex Leishman: We’re still very new to this. So it’s a, it’s a, it’s an interesting dynamic.

[00:36:47] Preston Pysh: One of the things that I’m seeing a lot online as well is just this, the amount of coins being soaked up by the ETFs being 10 times the amount that’s coming, that’s being mined on a daily basis, just for the ETFs alone, not even talking about the other marketplaces.

[00:37:04] Preston Pysh: And then I’m seeing charts of OTC balances and the OTC balances being drained. Is there anything that you can talk to us about here or that you’re seeing that, that you’re able to, to talk about?

[00:37:18] Alex Leishman: Yeah, I saw, I saw that chart about OTC balances and I kind of don’t know how that was calculated. ’cause it’s not like OTC desks are all just, they have a sack of coins and they’re just selling them, you know, over the course of, you know, years.

[00:37:31] Alex Leishman: They’re buying them here and selling them here. So I don’t really know sort of what was behind that calculation.

[00:37:37] Preston Pysh: The one I saw was a glass, no chart. And there was a lot of people kind of up in arms about the glass. No, there’s like, there’s no way this is the number. And it was like a really small number of coins, but the trend on that particular chart, if let’s say that they do have access to that one source and there’s probably many, many more.

[00:37:54] Preston Pysh: The trend was definitely down and to the right with respect to the, of the balance on hand. So kind of maybe the trend could, could you talk to the trend?

[00:38:02] Alex Leishman: Yeah. And that seems to have been a year long trend or so, which I think correlates to just an upward tick in price as well. But I mean, it is interesting, you know, I, at the end of the day, I can say with confidence, I mean, what we’re seeing at River is.

[00:38:15] Alex Leishman: People are just generally buying and holding. There are days where we see a good chunk of sellers there. As the price goes up, right? Some people sell, right? Some people in institutions need cash for one reason or another. Sometimes they’re, you know, I’ve done well enough. I kind of want some dollars now. I want to buy a house.

[00:38:29] Alex Leishman: I want to take my principal out and now just let the rest ride. There’s always more sellers as the price goes up, but I do get the general sense that we’re coming to a point where people are kind of like, I’m not selling anytime soon. Right. We’re going to, we’re going to see where this goes. So I don’t know how much supply is going to be there if these inflows continue like they do.

[00:38:47] Alex Leishman: I think you’re right.

[00:38:48] Preston Pysh: I think this last cycle most were not satisfied with the price action that they got. I think the conviction of the long term holders after this last cycle is way stronger than anything I saw on previous cycles. What do you think about institutions now being able to allocate to Bitcoin because of the ETF approval?

[00:39:10] Preston Pysh: Is this just a talking point or do you think that there’s some validity to that?

[00:39:14] Alex Leishman: I think it’s valid. I think it’s also, I think the pipeline fully hasn’t been opened yet. From what I know, we’re still in the early days of the ETF being sold, right? These financial institutions at the end of the day are often like selling products to their customers.

[00:39:29] Alex Leishman: So they’re the people they’re managing wealth for. And so The ETF is still very new for most of the big, most of the big private banks and, and, and institutions. They can’t yet sort of the advisors can’t go tell people, Hey, you should buy this ETF. It’s not yet part of any real model portfolio in the United States.

[00:39:46] Alex Leishman: I think we’re still in the very early days of, you know, this institutional pipe and it’s going to continue to, to get bigger. Micro strategy is an interesting thing because that, you know, if that hits the 500. You know, then what, right? Like, that’s an interesting dynamic as well. MicroStrategy is an interesting company in contrast to an ETF because unlike an ETF, which has to follow these very strict rules, MicroStrategy is basically, you know, running itself as a smarter ETF.

[00:40:13] Alex Leishman: They’re opportunistically borrowing against their cash flows and issuing shares to buy more Bitcoin. They’re sort of, and then they’ve actually outperformed Bitcoin in the last year alone.

[00:40:22] Preston Pysh: So, that’s another interesting, you know, argument. The speculators alone on MicroStrategy from a derivative standpoint are providing tons of alpha for them to take advantage of.

[00:40:35] Preston Pysh: So, like. A couple of weeks ago, the price, the price of the common stock got down to parody and actually went below the treasury value of the Bitcoin. And you had tons of short sellers that stepped into the market, sold the stock short only for the price of Bitcoin to recover with the ETF. Like once GBTC stopped selling off, the price recovered.

[00:40:58] Preston Pysh: And what you saw was this blow up from the derivatives traders that were selling it short. which then put a 200 per share premium on the treasury above the treasury value, which I have no idea what MicroStrategy did, but I know if I was sitting in the seat, if I was the CFO and I’m sitting there in the seat, I know exactly what I’d be doing in that scenario, which is take advantage of the people that sold it short and issue common stock and buy Bitcoin with the, with the proceeds and rinse and repeat until they do it all over again and sell it short again, I guess. It’s wild.

[00:41:36] Alex Leishman: Yeah. Things are changing quickly. I don’t know how it all plays out, but I’m, I’m quite bullish, but you know, Bitcoin always surprises us.

[00:41:45] Preston Pysh: Yeah. It’s wild. Hey, I know from following your account, you talk about AI recently, you had a post about Google kind of, needing a leadership change. And I got a smirk cause I figured you’re, you’re saying that in reference to the struggles that they’re having from an AI standpoint, but I’m kind of curious to hear your thoughts on this.

[00:42:04] Preston Pysh: I know this is a little bit off topic, but I love picking your brain on anything happening out in the Valley.

[00:42:10] Alex Leishman: You know, just as a CEO, as I’ve sort of built the chops, I also get better at sort of pattern matching effective leadership at other, at other companies. Not to say that I’m really the best judge of things, but from what I can tell, Google is just, doesn’t have strong leadership.

[00:42:22] Alex Leishman: It seems to be a culture of multiple competing factions and a very messy, and that shows in their product strategy and in their marketing, their AI strategy is. In my opinion, sort of unforgivably fractured and crippled, they have lots of different AI products. Every time they have a blog post announcing something new, it’s like, is this real?

[00:42:46] Alex Leishman: Does this exist? Can I use it? It has a new name, and now there’s like five different AI things at Google to keep track of. The blog post is written by like three people at Google. It’s like, who’s running the show here? And like, what’s happening? Whereas in contrast, you have AI, you have one leader. They ship a product and it’s very clear what it is.

[00:43:04] Alex Leishman: And so I think Google’s really dropping the ball here. My guess, if I was a betting man, I would bet that they don’t have to have a new CEO within a year or two. And if the board is smart, they bring in somebody who’s going to act like a founder, whether they’re a founder or not, they’re going to find their satya.

[00:43:20] Alex Leishman: Because they need it. Or it’s, in my opinion, kind of game over. It’s just going to be a slow, like I agree with you.

[00:43:26] Preston Pysh: Yeah. Okay, last random topic here just cause I’m curious. Apple Vision Pro. What are your thoughts?

[00:43:34] Alex Leishman: I think it’s gonna be a really big deal in five years.

[00:43:37] Preston Pysh: Okay, because of the form factor or what?

[00:43:40] Alex Leishman: The form factor, yeah. I think, I think this concept of spatial computing is gonna open up a whole new category of ways to plug in. I think it impacts business and remote work probably more than the consumer side initially. And then it kind of spreads into consumer world. I don’t know exactly what it looks like.

[00:44:00] Alex Leishman: I think that the devices have to get cheaper and slimmer and smaller and better. And what we haven’t seen yet is the creative army of developers shipping stuff for this. And so I think in the next few years we’ll get a sense of what these things can do once developers have time to build new software.

[00:44:17] Preston Pysh: Yeah, I think it’s that. And then I guess my concern with it, which I agree with you, I think you’re more years out, like it’s five years out from it becoming a thing. And I definitely think that this is going to be a product category. I’m just, I guess, concerned to how you get there on the hardware side, because I think you have to push the battery, you have to push the compute off the head, like they did, but, which means it has to be wired, and like, how do you do that?

[00:44:44] Preston Pysh: How do you get around that form factor not being that way? And I don’t know that you can. You see what I’m saying? And so like, if you get it down to a, like, Facebook has these glasses. I have not, I have no idea how, how they actually perform, but like the form factor on that seems way more viable, but I highly doubt that it’s even remotely as capable as what the Vision Pro went out because you need all this hardware and infrastructure in place to allow it to do what it’s doing.

[00:45:12] Preston Pysh: You agree?

[00:45:13] Alex Leishman: Yeah. I mean, I think this is something that’s going to be at people’s homes. And really for me and sort of the professional world, I think it has, if it makes, if it connects people better, if it allows people to unlock more creativity or feel like they’re in person together, or it truly does bridge those digital distances.

[00:45:33] Alex Leishman: And instead of talking to a screen, you’re immersed in, you’re, you’re with your colleagues, you’re with other people. If they’re able to accomplish that, even if it requires being plugged in and you need to wear this thing at your house, I mean, that’s pretty interesting. And instead of experiencing a 2D world, you can sort of experience a 3D world with this interface.

[00:45:52] Alex Leishman: I mean, it’s hard to predict how this plays out. Maybe it’s Apple’s Lisa again. Maybe it’s Lisa 2. We’ll see. I don’t have one, so I’m waiting. I’m going to wait a few generations, personally.

[00:46:03] Preston Pysh: Nothing was, it was earlier than Google glasses on this particular topic though. Yeah. All right, Alex. I don’t have anything else.

[00:46:09] Preston Pysh: Is there anything else that you wanted to talk about that you think is important happening right now or that you just want to highlight?

[00:46:16] Alex Leishman: I mean, I think overall Bitcoin is in this adolescent phase. Big changes are happening in its life. It’s trying to understand it all and figure out sort of what it is now.

[00:46:27] Alex Leishman: It’s not quite at maturity. It’s not quite sort of this beautiful, grown person who knows who they are. But it’s also not a child anymore. It’s not this baby little toy project. And so, you know, I really think we’re in the adolescent phases of Bitcoin and there’s going to be a lot more drama.

[00:46:48] Preston Pysh: So well put.

[00:46:49] Preston Pysh: Hey, for folks listening, you got to check out the all the articles that River puts out. They are phenomenal. I’ll have a link to that in the show notes if people want to dig into some of the reports. Any other things that you want them to check out on the website? We’ll have a link to your Twitter handle as well, Alex, and also the River Twitter.

[00:47:07] Preston Pysh: Anything else you want to highlight?

[00:47:09] Alex Leishman: No, I think, you know, the only last thing is, I think it’s important as new people come to Bitcoin, they always remember that at the end of the day, there’s this software project that, of Bitcoin Core, that is powering this whole thing. In many ways, it’s a thankless job.

[00:47:23] Alex Leishman: These developers are doing this because they love it, not because the pay is amazing. Always remember, remembering that this whole empire being built is being built on this open source project that people have worked on and put blood, sweat, and tears in for the love of it and, and not being afraid to sort of like dig into that, see what’s happening, see, you know, what’s, what’s really powering all of this.

[00:47:44] Preston Pysh: Love that shout out to the core developers and, oh my goodness, the amount of work and energy and thankless work and energy that they poured into this.

[00:47:54] Alex Leishman: It’s stressful, right? Especially now, like. Imagine you’ve worked on Bitcoin and it started as this project and you’ve worked on it for maybe years for free.

[00:48:02] Alex Leishman: And all of a sudden the biggest ETF launch ever is now betting you’re, you did a good job, right? It’s actually a pretty wild thing. So, yeah, it’s an interesting dynamic.

[00:48:16] Preston Pysh: Love that point. All right. Well, always a pleasure chatting with you, Alex. We definitely got to do it again. And thanks for all you do.

[00:48:23] Alex Leishman: Thank you, Preston.

[00:48:25] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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