 In Silicon Valley, if you said I like Bitcoin, you were ostracized as a conservative closed-minded individual, which is absurd. I've seen my net worth go up multiples and drop 80% three times, which is more than almost anyone alive unless you're a really bad investor. Satoshi purpose-built blockchain tech to build Bitcoin. Blockchain tech sucks. It's terrible. It makes so many trade-offs to build Bitcoin that it is basically ineffective for almost anything else. What's up, YouTube? My name is Giovanni. Welcome to our show. Today with us, Dan Held, Head of Business Development at Kraken. How are you doing today, Dan? Doing well. Thanks for having me on. You have been in crypto since the very early days. So you said since 2012, and you were hanging out in the very first crypto community in San Francisco in early 2013. So for me, it's very interesting to know how was the atmosphere, the environment back then, and how you compare it to the situation in the crypto industry today? Yeah. So back in 2013 in San Francisco, San Francisco is the tech hub of the world. And even in San Francisco, the Bitcoin community was only like a dozen people. So it was at 20th and Mission Street was the building where we all met. Very rundown, a lot of graffiti on the outside. That's where all the Bitcoiners met in San Francisco once a month. And there was like Charlie Lee, Brian and Fred from Coinbase, Jed McCaleb from Ripple and Stellar. And there was like a 12 of us, including these individuals, and a cooler of PBRs, which are a very cheap beer in America. And it was super exciting because in March 2013, that group was 12 and it went to 120. So 10 X and that people forget that there's two bubbles in 2013. There was the March 2013 bubble and the December 2013 bubble. So that was an incredibly exciting time to be part of Bitcoin. For sure. And I also know that you were using the very infrastructure available at the time, like you were sending money to Mt. Gox, for example, which was, I guess, one of the few exchanges available at the time. And you were using the very first wallets available at the time. So how was the experience in using that infrastructure compared to the infrastructure we are available right now? Yeah, that's kind of a fun walk down memory lane where, you know, I'm not a technical guy, I've been in a product role, but I'm not an engineer. But back when I got into Bitcoin in 2012, it was almost all the engineers. And so Bitcoin QT was the first wallet that I had, which was a full, it's the software that Bitcoin Core produces to be the default Bitcoin Core wallet. It's also a full node. So, so I'm, you know, I'm using Bitcoin for the first time. And I'm like, why do I have to wait for this thing called the blockchain to sink? So it was extremely onerous back when I used it. It was really complex. I didn't know what public private keys were. There was no really good documentation on how to explain what they were, how to store them. People forget as well that mnemonics, the 12 to 24 word seed that you write down is actually a new technology that didn't exist back in the 12 and 13. So, you know, when you print it off your private key that was on paper, you know, do you delete the file on your printer to make sure that there's no other copy of it? You know, writing down the private key is kind of dangerous because it was so lengthy. And there's so many different characters versus like the 12 to 24 word mnemonic, which is much more human readable. And so, yeah, it was really, I mean, a lot of people back in that time lost their bitcoins due to private key management issues. You know, the mantra, not your keys, not your coins is a great mantra if people know what they're doing. And I've seen a lot of instances where people didn't know what they were doing. And so, you know, it was pretty hard not to lose your Bitcoin. Yeah, it was really difficult because it was so hard to hold on to it. There were so many different scams, you know, Mt. Gox collapsed, there's Cripsy, there's tons of other scams that went down. I mean, it's one of the most scammy spaces out there, right? So, trying to just hold your bitcoins, not invest in anything, not trust anyone else with your private key, but also not trust anyone, you know, not fully trusting your own storage method was kind of a source for a lot of anxiety. So, you know, that was kind of a huge issue. And then, I mean, there's, there's definitely another type of future alternative reality where some things didn't go to plan and Bitcoin actually died. And, and, you know, maybe the exchange infrastructure got shut down, and there was another black swan event and never came back. So I think like now we're so robust and so strong that it would take, I'm not sure if you can really kill Bitcoin. I mean, to kill Bitcoin, you really have to kill the perception of belief in Bitcoin and all of our minds. But, you know, it's become so strong with all the liquidity infrastructure, all the nodes being run, the understanding of how Bitcoin works, you know, with the Segwit 2x event. A lot of people thought miners were in control of the protocol, which doesn't make much sense. They're more of the hired guards. So people are much more understanding of the political dynamics of how Bitcoin and blockchains work governance-wise. So I'm super thrilled. I'm surprised. I was frequently surprised that Bitcoin survived. It went through a lot, but it did survive, and that makes me more bullish than ever. I know that you sold ZeroBlock, the company that you created, for Bitcoin at the price peak in 2013 when Bitcoin was worth $1,200. Then two years later, Bitcoin was only worth $200. So a lot of people after an event like this would have been so disartinent that they would have walked away from Bitcoin forever, I think. What went in your mind when you saw Bitcoin price gradually collapsing to that bottom? And what gave you the motivation to stick around? Yeah, I mean, to be frank, it was very depressing to see something you built and you sold for this new currency. Bitcoin, to see that fall 85% in value and still hodl required a immense amount of belief. That's where my belief was somewhat irrational. It was this pure belief that, hey, we're trying to do something here that's like the importance of it is huge. And I knew that all it took was like another speculative bubble for this all to be reinvigorated and to be rebuilt again. And a new 2008 financial crisis macro backdrop like COVID would also be a catalyst as well. So I hodled on and saw it through. Yeah, I guess that you got hard skin now to face the following crashes. You already got through the worst part probably. I've seen my net worth go up multiples and drop 80% three times, which is more than almost anyone alive unless you're a really bad investor. So yeah, I think I have sort of the, I feel like a battle hardened troop. So, you know, I think after Bitcoin will be so battle hardened that any other investment after this will just feel very, very, I think very easy to handle. Listening to a recent interview, you disclose that you have 90% of your net worth in Bitcoin. So that's even more risky than Anthony Pompliano's portfolio of 50% of his net worth in Bitcoin. And a lot of people consider that to be madness. Don't you think that this kind of investment is a bit too risky? And what are your thoughts in general about portfolio construction? Oh, yeah, I definitely wouldn't recommend my portfolio construction for most people. I think it is a very risky setup. If Bitcoin were ever to completely fail or the every Bitcoin across the world started stopped believing in it, the value would drop down tremendously and my net worth would drop tremendously as well. I think people also forget that, you know, I haven't been buying nearly as many Bitcoin as I bought in the early days, because that would only add very small incrementality to my Bitcoin stack. So, you know, I still have traditional investments. It's just the value of my Bitcoin has grown so much in relation to my traditional investments that it's still, you know, it's a very high percentage, but it's not like, you know, I'm still contributing and investing in other things. Everyone has their own risk profile, whatever you decide to allocate, I think is largely dependent on how much risk you could stomach. If you go so into Bitcoin that, you know, you're in debt and you're eating ramen noodles and you're super stressed out all the time, then I'm not sure if that's you ready for that yet. You know, but if you're 22 years old and 25 years old, you only put in 1%, I also think that's a little low for your age group in the risk that you're taking. Bitcoin has very asymmetric returns. So, you know, risking 10% of your portfolio when you're young is easier, because if you have a loss, like, say Bitcoin goes to zero, which I find very improbable. Let's say it goes to zero, then you've only lost 10% of your portfolio, but if it 10Xs, you've now doubled your portfolio, basically. So I think the risk is very much dependent on the person. There's very much personal risk, very much goal oriented. So when you enter any investment, you should have an investment thesis. Mine was that Bitcoin could be a contender for goal 2.0. And if that occurs, then Bitcoin's market capitalization should be something massive, and the trillions or tens of trillions. And so Bitcoin is much smaller than that. And so I entered with that investment thesis in 2012. And we have not seen Bitcoin achieve that yet. It is getting closer and closer. And then, you know, when you achieve that sort of objective, that investment thesis that you said, you should decide how much money you want to take off the table. But essentially, you enter the investment with the idea of I'm entering this because of this reason, I'm going to hold it for X amount of time. After that X amount of time, if it reaches that value, I will take X% off. So it's about having a structured approach to any investment strategy is the right way to go. Always thinking about what risk you could stomach. Bitcoin has a high amount of volatility, a lot of risk, a lot of reward. Yeah, and talking about this volatility of Bitcoin, which is what most people are attracted by. So you also said that volatility is probably one of the main reason why people got massively into Bitcoin. So don't you think that for Bitcoin to succeed in the long term, probably reaching this goal that you were talking about, this volatility will have eventually to disappear? Gradually? Yeah, I mean, Satoshi hypothesized that Bitcoin, that the volatility of Bitcoin would bring in more people. He even says before Bitcoin ever had a price, Satoshi hypothesized that as the price increases, more people become aware of it and buy in anticipation of that value increasing. He's describing FOMO. Volatility is a good thing for Bitcoin. Every asset is volatile out there, this whole misnomer of volatility. Have you ever heard of something called markets? Like everything fluctuates. Bitcoin's going to fluctuate quite a bit because it's going from $0 to a World Reserve currency with no central bank, no investment bank and no institutions buying, essentially buying into it for most of that journey so far. As Bitcoin matures and becomes larger and larger, and becomes more and more liquid, we should see that volatility slowly drop over time. Now, a lot of people perceive a good store of value as being price stable. It's actually antithetical to that. So gold, the world recognized 4,000-year-old store of value, does not have a stable purchasing power because it is not centrally controlled. There's something to have a stable purchasing power requires it to be centrally controlled. So inevitably, gold and Bitcoin will always have some amount of volatility that is higher than one type of asset that has artificially dampened volatility. But what you see with that artificially dampened volatility is you have like 2008 and COVID where the dampen it, the dampen it, and then it explodes. So Bitcoin, in its final stages where it hits, let's say, who knows what it is, but $5 trillion to $100 trillion of value, at those sort of stages, Bitcoin becomes something very, very boring. Again, it's a safe haven asset. It's a gold 2.0. No one buys gold because they're like, oh dude, gold, totally that's going to 10x. No one does that because gold is very stable. It's old. It's a safe haven asset. Bitcoin in its final stages, decades from now, will be something very boring where like our grandkids will go, grandpa, grandma, I don't want to hear about Bitcoin. Everyone's got Bitcoin. Who cares? It's a boring investment. It's like holding cash. Like cash doesn't earn you much. It just stays there. So I think that's what Bitcoin will evolve into as it becomes the moving from a store value exclusively to a medium exchange and unit of account. So those final stages of money, it'll stabilize and become very, I would consider very, very boring from an investment perspective. Talking about future scenarios, you often say that price is very important for Bitcoin to succeed. While a lot of people usually say, oh, don't pay attention to the price, it's important to pay attention on fundamentals and adoption, etc. Don't look at the price. So why do you think that actually the price of Bitcoin is so crucial for it to succeed? Yeah, this is a great question. A lot of people, as you mentioned, see that, oh, don't worry about this. The price is just this sort of fluctuation that is somewhat immaterial. But when you look at how Bitcoin is constructed, the price is everything. It breeds life into Bitcoin. So Satoshi, like I said earlier, hypothesized that FOMO would essentially create more adoption for Bitcoin. The price plays a very important factor. Not only is it a signal for relevancy and attention, so as the price goes up, more people become aware of it. That also increases liquidity. So there's deeper and deeper pools of buyers and sellers, which then enable more participants to come in. Also, as the price goes up, you have a largeable, total addressable market so people can build more products and services to service Bitcoiners like wallets and full nodes and block explorers, etc. And then finally, Bitcoin's long-term security or Bitcoin security model, so Bitcoin proof of work, the miners expend capex and op-ex, so they buy mining equipment and they consume energy, and then they're rewarded with something called the block reward. And that block reward is comprised of newly minted Bitcoins and transaction fees. So the price very much influences both of those, essentially the value of the reward that miners are getting to secure the network. So as the price goes up, the value that is given to the miners and the block reward and the form of the block reward goes up as well. And so what that means in layman's terms is that as Bitcoin's price increases, its security increases too. So this is very important because as Bitcoin's network effect gets larger, as the price attracts more and more people, it will further threaten governments and it will further threaten existing institutions and their complete control over money. So as it grows larger and poses more of a threat, it becomes more secure. And this is all a function of the price. So the price is I would say the singular most important thing to pay attention to. Does it matter if it fluctuates 10% a week? That's kind of a whatever, you know, we should zoom out and look at how it's trending over months and years. That's kind of the important thing to think about. And I think now is still a great time. Bitcoin has only like 160 to 180 billion market cap in the day. I mean, that's still tiny compared to gold, which is 10 trillion. So you know, it's still very young and the price very much reflects the aggregate belief, aggregate belief, security and aggregate number of hollers in Bitcoin. Talking about other projects. So apart from Bitcoin in the crypto space, you consider, I mean, you have a pretty Bitcoin maximalist position as far as I understand. And you also said that it's time now to stop to stop experimenting with with altcoins. Why do you think it's time to stop developing altcoins? Yeah, so I would define myself as a Bitcoin minimalist. I think a maximalist is a maximalist was a term created by Vitalik Buterin, the founder of Ethereum to marginalize Bitcoiners. So I don't really prefer that term. I prefer Bitcoin minimalist, which means I very much prefer the most minimal amount of architecture and the most minimal number of chains in order to solve the problem of having to sound money. So when we look at Bitcoin, a lot of people go, oh, how about this thing called blockchain? You know, couldn't we take this tech called blockchain and repurpose it for everything? We'll put a blockchain on the moon, we'll put a blockchain on food, we'll put a blockchain on industrial stuff, even to sprinkle it like a salt like salt bay sprinkle some blockchain dust on it and it'll magically give off some efficiencies. Satoshi purpose built blockchain tech to build Bitcoin. Blockchain tech sucks. It's terrible. It makes so many tradeoffs to build Bitcoin that it is basically ineffective for almost anything else. A good analogy is like if Satoshi built a tank, yes, you could take that tank and you could pick up passengers and drop them off. You use it as an Uber. You could take that tank and you could use it as a tractor to plant gardens. Did you special purpose build that vehicle to do that? Not really, so you could, but it would do it really poorly. And so Bitcoin, the blockchain tech was special purpose built to build a new sound money, Bitcoin. When you look at the security model of how Bitcoin and every other blockchain works, which is the block reward function, you'll quickly notice that anyone who's ever dug into this more than 10 minutes quickly notices that as the subsidy, so the newly minted coins of any new blockchain, as the newly minted coins decrease over time, transaction fees have to replace the subsidy. That's why it's called the subsidy. It subsidizes that future transactional volume on chain that will drive the fee revenue that will incentivize miners properly. There's only two chains that have any meaningful transaction fee volume. That's Bitcoin and Ethereum. And those are the only two trending at all in the right direction. I mean, we're talking like in magnitudes of like 100x or 1000x. The other chains simply won't have any security at the end of the day because no one's really using it. And so to move value, to move large chunks of value, to be a settlement layer. And so when you look at that, you're like, wait, so it was only been like, so really money is the only thing that's been validated as a use case after 10,000 experiments over eight years and tens of billions of dollars being deployed and hundreds of thousands of developers. I mean, we don't need to run more experiments. We've already invalidated that hypothesis that could be used for other things. So many times, what is running another 100,000 or 10,000 experiments going to do? So talking about Ethereum, you seem to be a very big critic of Ethereum and the defy space around it. Even if you admit that Ethereum along Bitcoin is one of the few examples of successful altcoin, you still say that Ethereum has might have not protocol market fit. So can you explain why are you so critical towards Ethereum and the defy space? Yeah, so I mean, the community has actively tried to kill Bitcoin. Vitalik came with the word Bitcoin Maximalist and marginalized Bitcoiners. I live in Silicon Valley, and the Ethereum narrative was so strong that Bitcoin was old and conservative, like you were a Trump supporter, and that Ethereum was hot and new, that dichotomy was so strong out here that you were persecuted to believe in Bitcoin. In Silicon Valley, if you said I like Bitcoin, you were ostracized as a conservative, closed-minded individual, which is absurd. I mean, to be honest. When exactly was that? 2016, 2017, 2018. 2019, as Ethereum dropped massively in value, that narrative finally unwound as people realized Ethereum wasn't going to be able to achieve these things, and Bitcoiners were fully justified in their right to fight against being persecuted, and also Bitcoin being goal 2.0 is the primary use case for blockchain tech. So they actively tried to destroy the Bitcoin community, they actively tried to attack it, so I view it as a large distraction. I'm very cool with, look, I fly drones for fun, I'm getting cryo-preserved when I die, and I'm a weird libertarian type living in San Francisco, formerly Texan. I have a lot of different things, I'm not this closed-minded, and I also mined Prime Coin, day-traded Litecoin, I've bought and sold Ethereum before. I'm not this guy who just sat in a hole and emerged and was like, I only like Bitcoin, but that's how they're painted, is that Bitcoiners are these conservative individuals, but in fact Bitcoiners are the most rational heads in the room, just going, hey guys, I don't think this is going to work, and I think it's kind of unethical to have tens or hundreds of billions of dollars behind you when you know it won't work. So Ethereum started out and marketed on the Ethereum.org webpage as a how to run unstoppable programs or unstoppable applications or a world computer was how it was marketed. That eventually manifested into a DAP platform, which very much fit the Silicon Valley understanding of app and platform. Boom, what if this is the decentralized version of that? And so Ethereum was perfectly marketed towards the Silicon Valley community. Vitalik is a genius, genius marketer, one of the best marketers I would say in like this century, absolutely brilliant, because he marginalized Bitcoin, polished Ethereum to be this perfect narrative for Silicon Valley. And so Ethereum has gone through a couple different narratives, world computer, DAP platform, fundraising platform. We saw all those decay over time as none of them found protocol market fit. I mean, you don't need the experiments, the experiments to be in such high number and length and value behind it to, to reject this hypothesis that all three of those narratives are incorrect. So we're then left with what is it? Well, what does Ethereum do? And we've seen the Ethereum community pivot to Ethereum is money, which is pretty bizarre because they've called it oil and DAP platform, fundraising platform, everything else. But as those narratives collapsed, they then pivoted to sound money. That Ethereum is also a money. Ethereum is a goal 2.0. And so they're trying to pivot to take advantage and ride on top of Bitcoin's narrative, which is very, very perfect and very much aligned with the current macro backdrop with COVID and Bitcoin going, you know, just completing the halving, now about to go through another bull run, they need to append themselves to Bitcoin's narrative in order to write it as these other narratives have decayed and fall apart. So if we can just conclude on a positive note, I will just ask you very quickly what you think, what do you see Bitcoin in 10 years from now? So you've been in the space since 2012, and you have been seeing the whole space evolving like this. Do you expect the same curve to continue at the same pace in the next 10 years, or you expect a more slow growth or a faster growth? That's a great question. I think we're poised for another bull run. If we look at historical markets, we look at how the historical cycles, if we look at post halving, what typically occurs, you know, if you take that combined with the macro backdrop of COVID, the highest unemployment like a century, you know, this is a very fertile ground for Bitcoin to have a very tremendous bull run. In this bull run, you know, where does the price land? Does it continue upon a normal cycle? Is it a super cycle, where it goes much higher and larger than usual? I'm not sure. I think this one versus other cycles will be much stronger, I think, because we will have institutional money flowing in. We'll have much more developed architecture, much better marketing. Bitcoin was largely a very, very niche community up until this last bull run in 2017. You know, I think that this is a much, much, much different scenario where we're about to see what happens when the whole world wakes up to Bitcoin and all the institutional money, hundreds of trillions of dollars. And if they become afraid that they will be able to preserve wealth over time, then that hundreds of trillions will flow into Bitcoin. And so I very much think that, you know, Bitcoin has gone through a couple of cycles during largely one of the largest bull, you know, during one of the largest bull runs in the macro environment. So now we're seeing a moment that Bitcoin is built for, you know, when the markets aren't doing so well. And when we have all the institutional pipes plugged in, so we could very much see Bitcoin go through what I would call like a super cycle. So a lot of people are predicting Bitcoin goes from 10,000 to 100 to 200, 300. What happens when the whole world wakes up to Bitcoin's value crop, being this decentralized store of value that's not seasonable? You know, socialism rises, if taxes rise, I could see tons of people flowing trillions and tens of trillions of dollars in Bitcoin. So Bitcoin might not just stop there, it could go to a million. But look, who knows where the price is going to go? Like I said, when it was $10, we weren't sure how long it was going to take. But I do think that Bitcoin was a special purpose built for this moment. And that everything is lined up, everything's in place. That it's, I think, you know, it's the best chance it's ever had at achieving that goal, 2.0 status over the next, you know, four to five years. Awesome. Thanks a lot, Dan. That was cool. That was an interesting conversation. Yeah. That was Dan Held, head of business development at Kraken. And you guys, if you enjoyed the interview with Dan, don't forget to smash the like button and subscribe to our channel.