July 1, 2025 • 22 mins
Welcome to theONE CA Podcast. I’m LTC Brian Hancock, and I will be your host for thissession. Today, we have Lee Bratcher with us to discuss the importance ofblockchain technology and cryptocurrency.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:08):
Welcome to One Civil Affairs Podcast.
I'm Lieutenant Colonel Brian Hancock, and I will be your host
for this session. Today we have with us Lee
Bratcher to discuss the importance of blockchain
technology and cryptocurrency. For those of you who don't know
Lee Bratcher, he's the presidentand founder of the Texas
Blockchain Council, an industrial association with more
than 100 member companies and hundreds of individuals that
(00:31):
seek to make Texas the jurisdiction of choice for
Bitcoin and blockchain innovation.
Formerly, Lee was a political science professor teaching the
international relations with a research emphasis on property
rights. Lee also served as an ROTC
instructor and civil affairs officer during his time in the
US Army Reserves. Mr. Bratcher, welcome to the
(00:53):
show. Thanks for having me, Brian.
Looking forward to the conversation.
Quick disclaimer, a reminder to the audience that our remarks
are solely those of the presenters and do not
necessarily represent the views of the United States Army or the
Department of Defense. Now, Lee, I want to thank our
mutual frame, Major Giancarlo Newsome, for introducing us.
(01:14):
He is a very interesting individual.
I've gotten to work with him on a couple projects.
Have you been able to work with Major Newsome on anything
recently? I sure have.
Several years ago, he encouragedme to join the 75th Innovation
Command, which is an Army Reserve unit supporting Army
Futures Command. And so I got to serve on his
team as innovation officers in in Austin.
(01:37):
Now, what was this? One of the defense innovation
units? I know we have one in Silicon
Valley. Was this a branch that was out
there? You know, we're building kind of
an equivalent of Silicon Valley,I think in Austin.
That's what I'm seeing unfold. It was that one of these defense
innovation units. I think not directly affiliated,
but certainly in the same line of effort.
(01:57):
OK, super. Well, we're here to talk about
another important future of the world, which also has military
implications, and that's blockchain technology.
Now, how does 1 become an expertin blockchain technology?
There are no degree plans necessary that there's no major
in cryptocurrency. It is interdisciplinary by its
(02:18):
very nature. So there's a bit of economics in
blockchain and Bitcoin crypto. There's certainly computer
science and cryptography, and there's a little bit of
philosophy in there as well. So you're going from the
humanities, from business and from computer science, which
makes it so interesting, makes it very difficult for anyone to
(02:38):
be an expert in all facets of the technology.
I would say I'm more attuned to the policy side, to the
Economics and Business side. I'd understand.
And the way technology and programming languages move, I'm
not sure anyone is an expert to for long Now when we think of
blockchain technology, we have words like Merkel trees and
(03:02):
things like that popping up. It's all kind of mysterious to
me. So I'm going to read on the air
a basic definition of blockchaintechnology for the audience.
A blockchain is a distributed Ledger with growing lists of
records that are securely linkedtogether via cryptographic
hashes. Now I'll be honest, after
(03:24):
reading this definition I have no idea what blockchain is.
In your own words, can you simplify this and explain it to
the audience? What is a blockchain and why do
blockchains matter? Yeah, that's a great question.
It's a decentralized distributedLedger, as the definition said.
But the way that I look at it, it's the next iteration of
double entry accounting. And we've had double entry
(03:45):
accounting for 500 years, developed by Luca Pacioli
Renaissance, so that the Mediciscould trade across time and
space and with actors that they didn't necessarily trust.
And that served us really well as a society for many centuries.
Block chains are the next iteration of that.
They are triple entry counting, if you will, and they're really
triple entry counting. There are nodes running the
(04:07):
Ledger of value transfer all over.
So the Bitcoin block chain, there are thousands of nodes
across the world. They're decentralized.
There's no central authority or honeypot of data.
The transactions all live updated every 10 minutes on the
Bitcoin blockchain. And there's other blockchains,
there's the Etherium blockchain.But the most important thing to
know is that any blockchain is securing a Ledger of who owns
(04:30):
what and the what is dependent on what the chain is.
So in the Bitcoin blockchain, it's Bitcoin, you're securing
the Ledger of who owns what Bitcoin.
And there's other ledgers that are, there's people that are
tokenizing real estate and they may do that on the Etherium
blockchain or on other blockchains.
And it's really tokenizing the ownership of an asset like real
(04:51):
estate and allowing that to trade in a liquid fashion rather
than sort of a syndicated fashion like a private equity,
general partner, limited partnerstructure like most real estate
is consumed and traded today. So it's just a more efficient
version of value transfer, and it uses the rails of the
Internet, and it avoids expensive intermediaries.
(05:14):
One of the things that immediately strikes me is that
it's less inflationary. Since governments can't just
turn on the printing presses andmake a whole bunch more of these
tokenized assets. I would imagine they hold their
value a little bit better. Well, not all crypto is created
equal. There are some meme coins out
there that are just kind of crazy and founder can just mint
(05:36):
more of them. And the reason why they don't
have as much value as Bitcoin orEthereum or some of the more
prominent ones is because the very reason the founder can mint
more and generate inflation causes them to be nearly
worthless. So I'd say 90% of crypto assets,
digital assets or cryptocurrencies will trim
towards 0 and 5% of them will trend towards massive market
(06:00):
caps in the many trillions of dollars.
So very much a divergent that's going to happen there.
OK, that makes sense. Let's go back to your statement
earlier that blockchain technology for securing finance
is like triple entry books as opposed to double entry
accounting. Now, in double entry accounting,
you separate intentionally your payables from your receivables
(06:23):
to prevent collusion and conflict of interest.
That can lead to cooking the books.
Right now, in triple entry accounting through a blockchain,
what happens if, say, a group ofhackers get together and they're
able to suborn roughly 51% of the chain for an asset?
(06:43):
Right. So if they're able to take
control of 51% of the network and order the mining compute
that is forming the next blocks,they can create false
transactions or what I'll call fraudulent transactions in that
they can devil splint. You have a physical asset.
You can't devil spin it because it's physical.
(07:04):
If you give it to someone in a broader system, you can also
give it to someone else because it's physical.
They don't have it right. Conservation of masks.
Got it. In digital assets, you can
replicate things that are digital.
Napster showed that pretty quickly.
The thing against that is you'renot allowed to devil spin.
So I'll have one Bitcoin in my wallet and I try to send you one
Bitcoin, but simultaneously I also try to send that Bitcoin to
(07:27):
someone else. But first transaction will go
through, the second one will be cancelled.
The nodes will not verify the second transaction because I
don't have enough unspent transaction output to make 2
transactions of one Bitcoin eachbecause I just had one Bitcoin.
That is fantastic. I think we saw an example of
some hacking groups in South America actually take control of
(07:48):
51% of the entries for one type of crypto coin.
And the coins didn't get spent multiple times, but they changed
the ownership registry. So an enormous number of them
were no longer owned by their owners, they were owned by these
hacking groups. How do we protect against
something like that? Yeah.
So the smaller the blockchain recommendation is to just kind
(08:12):
of avoid the long tail of smaller assets.
You're not yet mature. And there's a lot of education
to be done on self custody as well.
Because when we hear about like the Lazarus Group, which is the
North Korean hacking group stealing a billion dollars of
Etherium from buy bits, if I remember correctly, that
happened just a few months ago. That was not the Etherium
blockchain getting hacked. Those hackers didn't change the
(08:35):
Ethereum Ledger. They were able to fishing and
social engineering, get into theexchange and change the address
to their own. That was moving a billion
dollars worth of Ethereum internally.
It's incredibly impressive what those hackers did.
Obviously tragic as well. They were able to steal that
much. So very, very important to
(08:56):
educate folks on the importance of custody and key management
and things of that nature. Yeah, but the same is true of
our electronic front systems today, right?
So hishing and hacking to get folks access and verification
information can be used to drainaccounts.
So it sounds to me the Bitcoin isn't more susceptible to any of
(09:19):
those types of human engineeringploys and the actual validation
of the asset is actually more secure.
So I think that might address one set of fears that some folks
have that somehow these blockchain based assets are more
susceptible to electronic theft.That does not seem to be the
(09:40):
case. That's accurate.
I mean, there's a lot of wire fraud out there and ACH fraud
and and other kinds of fraud. It's really tragic.
What I will say though, is irreversible.
Once you send crypto to a wallet, that transaction is on
the blockchain and I'll be reversed, which is kind of part
of the beauty of it. It's not censorable.
(10:00):
I think that's important for theCA world to know is you guys
operate internationally and sending transactions across
borders seamlessly and with no fees.
Pretty interesting, except, and we understand it so that we can
use it to the strategic advantage of the West and also
be able to stymie bad actors. Firms like Chain Analysis and
(10:24):
TRM and some of these other really, really adept digital
forensics firms. Their biggest customers are the
DODIRS and the Justice Department and FBI doing digital
forensics for the US government all the time.
And I think we got to lean into that level of knowledge the same
way we leaned into the era of sanctions where the United
(10:44):
States was able to kind of control global monetary policy
in that way. Yeah, and many things are are
changing. It seems to me that digital
currencies are inevitable. Printing hard currencies is kind
of like dropping leaflets for SIOP.
Great. At one point in time still has
some applications, but the future's moved on.
(11:05):
And I think most transactions today already digital, whether
it's through a credit card, through a bank, through an EFT,
a Zell, whatever. I suspect that people have
become more and more comfortablewith digital transactions.
I suspect, you know, probably over 90% of all of our
transactions are digital today. So it seems inevitable that at
(11:26):
some point before the Star Trek era, we're going to have digital
currency. What needs to happen for us to
effectively replace cash with digital currency?
And what are the implications when that happens?
Right. I would not be in favor of
eliminating cash altogether, butI think what we will see is most
(11:47):
transactions will move to stablecoins.
And stable coins, we haven't really talked about yet, but
those are just U.S. dollars thatrun on blockchain rails.
So it's an asset that represents$1.00.
And that dollar is held in a bank like Bank of New York now
and holds a lot of the stable coin dollars, and it's always
redeemable for a dollar. So a dollar's worth of stable
coin is always redeemable for U.S. dollar.
(12:10):
It doesn't change in value. It's always worth $1.00.
Just out of curiosity, are therecryptocurrencies like stable
dollar that if you wanted to buya basket of currencies crypto
format, are there investments like that?
Not that I'm aware of. 99% of stable coins are denominated in
U.S. dollars, which is actually really good for U.S. dollar
dominance and the dollar remaining the world reserve
(12:31):
currency because you know, that's the asset that backs most
of these is like short term T Bros.
There are a few like gold backedstable coins and make a very,
very small percentage of euro backed stable coins, but I'm not
really aware of one that's like a basket currencies.
But what I would say is Paul Ryan, the former speaker of the
House ruble good op-ed in the Wall Street Journal about a year
ago about how dollars backed stable coins are being used all
(12:55):
around the world. And it's a very good thing for
AUS dollar dominance, the dollarand the world reserve currency.
There's about 200 Durham dollarsworth of stable coins that are
currently circulating globally. Why don't we hear about that?
I'll admit, I feel like I'm a reasonably educated person, but
this is the first time I'm hearing about that.
That is a lot of money we're talking about right there.
(13:17):
No, it would, but it's not in terms of like the amount of M2
money supply. It's not huge.
I think there's a lot of room togrow.
I think 200 billion sounds like a lot, but I think stable coins
will eventually be a trillion, multiple trillions.
And most of the stable coin activity is actually demand from
everyone outside the US who wants dollars.
(13:39):
In most developing nations, there are more stable coin
volume than there is like creditcard volume.
And even including the United States, stablecoins cleared
value last month than Visa actually then then Visa and
MasterCard combined. And so if they're really
quickly, but you know, a lot of Americans don't hear about it
because we don't necessarily need it because we had the
(14:00):
luxury of using the US dollar and having really sophisticated
payment rails already. And so I don't necessarily use
stablecoins, groceries or buy a a meal in a restaurant, but
people all around the world are and that's because of the US
dollar. They won dollar back stablecoins
and it's the best way to get it.And that makes sense.
We've heard politically the current administration
(14:21):
discussing potentially backing some of the US dollar with
digital assets along this futuristic view that we've been
describing. What I just heard you say,
though, is that, well, that kindof has already happened, at
least to the tune of $200 billion.
So maybe this isn't such a radical departure from what's
already happening in the economy.
(14:42):
Yeah, I think that's right. The stable coin piece is very
important because stable coins were the 7th largest buyer of
U.S. Treasuries last year if it was a
sovereign. So they bought more Treasuries
in Saudi Arabia and more Treasuries in France.
There's only a few countries in the world that bought more U.S.
Treasuries than stable coin issuers.
And stable coin issuers are private companies, by the way.
(15:04):
So as that grows, essentially that's going to be financing our
debt. And then the debt is of course
in U.S. dollars. So it directly addresses that.
Now you recently co-authored a book, I believe the title was
National Security in the DigitalAge.
And in this book you advance a thesis that Bitcoin is in fact
or should be a tool for modern statecraft.
(15:25):
Can you walk us through your thesis there and what the
evidence is to present that as aviable way forward for modern
statecraft? Absolutely.
So I would never submit that it would be the primary tool of
modern statecraft. I just that it would be 1 of
many kind of a basket of tools, most of which we already
(15:47):
possessed, which is economic might leading to technological
might leading the military might.
The whole of Dime is driven. Around energy as well.
And so Bitcoin is interesting because it touches on two of
those things. It touches on economic might and
energy. Bitcoin mining is the energy
intensive process as everyone has heard about in the news and
essentially allows you to createvalue with this computational
(16:10):
process with these data centers.And a lot of these data centers
also house AIGPUS as well. And so see that when someone
says what is Bitcoin maxed by, Iusually say it's backed by two
things. One, it's backed by energy and
thankfully 4% of Bitcoin mining and the energy used to consume
it is in the US. The second thing that bitcoins
backed by is scarcity. That's principles like we talked
(16:32):
about earlier in Austrian economics.
And so as a tool for modern statecraft, you have two things.
You have the energy component where AI and Bitcoin mining and
having those resources and thosedata centers.
You know, data is the new oil certainly.
And so compute is also kind of the new oil and that's at the
intersection of turning hydrocarbons in the energy and
(16:55):
electricity or renewable sourcesinto electricity.
I don't really care. Move a little grade 2, right,
All the above. We just need more energy and and
that's one piece of national security.
The other is to do kind of the lowest bet in the woods world.
It would be nice if the wet in the woods era lasted for another
century. But that's not going to.
Happen. It's unlikely you and I both
(17:16):
agree. So in that post Bretton Woods
world, we want the dollar to be the reserve currency for several
more decades. We've already talked about that
quite a bit. Bitcoin is going to overtake
gold by market cap. The nation that has the most
Bitcoin on their balance sheet will be that central bank.
The other central banks will want to hold that currency and
(17:39):
it will prove to be as influential for us as the Petro
dollar has been in the last 50-60 years is to say massively
influential on the global stage.Talking about civil affairs,
even though you're in the IRR, you're still in our branch, so
you're still a civil affairs officer and we have a very
(18:00):
important mission both at home and abroad.
You've mentioned throughout the show a couple of examples where
blockchain could be used for civil affairs application.
What other use cases, particularly perhaps novel or
exotic use cases, can you think of where our civil affairs
professionals could utilize blockchain technologies to to
(18:24):
make the world a better place? Yeah, I'll shout out my 75th
Innovation Command colleagues because there was recently a
press release from the 75th Innovation Command related to
blockchain based tracking for sensitive items and foreign
military sales. And this is all public
information out of the live pilot sounds like.
(18:45):
I mean, a couple years ago when I was working with them, they
were really doing good work on the foreign military sales front
and excited. They're tracking sensitive
items, tracking things from through the logistics process,
through the handover process to foreign militaries.
That is a really, really cool use case and you can't do it
with like every piece of munition, but you can prioritize
(19:07):
certain items that are quite sensitive.
Yeah, absolutely. Or a certain price point.
I think about some of the concerns as we deliver munitions
to struggling countries, using Ukraine as an example.
Where there's concerns, well, maybe they're not always being
handled in the way that we intend as as the giver.
(19:28):
But with these zero knowledge capabilities you're describing,
it seems like we could have someextra low cost checks on the
system that will inspire confidence for everyone
involved. I agree.
And and just to shout out, MajorGaudiat of the 75th was the one
who really spearheaded that program.
(19:48):
And you can look at the press release, the headline of 75th
Usurrex Serger develops a blockchain solution to
revolutionize the military supply chain.
So. Wow, brilliant.
Pretty cool stuff. That is very cool.
Let me ask you one final question.
We've talked about a couple of hypothetical future scenarios
(20:09):
kind of led that process. I'm going to turn it over to
you. What do you, as an expert in
this field see as the future of blockchain technology?
Where do we go from here? I think it's so broad that
there's different categories, ifyou will, buckets that I put
this in. You've got Bitcoin, which we
talked about quite a bit on the show, which is the most
(20:29):
important of stable coins, whichis another extremely important
bucket from the national security perspective with
maintaining dollar dominance. And then you've got business
applications for blockchain. You've got people building
decentralized applications and all sorts of innovative
financial services products, tokenizing money market funds
(20:50):
and real estate and all kinds ofbusiness operations.
And then you have kind of what I'll call like the enterprise
blockchain side where you're tracking sensitive supply chain
items or proving the provenance of different maybe carbon
credits or something like that. There's four buckets just in
that alone where I could see each one of them taking out a
life of their own and really transforming the world.
(21:14):
That's that's really exciting. I'm going to have to think about
this quite a bit and probably listen to our own podcast a few
times to absorb it all. I really appreciate you coming
on the show, Lee. This was fantastic and I know
the listeners are going to appreciate it as well.
Any final parting thoughts? Just so I appreciate your
service Brian and and all of those who are are listening and
(21:37):
just hoping and praying that they're are safe.
And yeah, just wanted to make sure that they can know happy to
for them to reach out to me. I can be connected to them to
answer any questions about blockchain that they have them.
Thank you, Lee. I really appreciate your time.
Thanks for listening. If you get a chance, please like
and subscribe and rate the show on your favorite podcast
(21:59):
platform. Also, if you're interested in
coming on the show or hosting anepisode, e-mail us at
ca.podcasting@gmail.com. I'll have the e-mail and CA
Association website in the show notes.
And now, most importantly, to those currently out in the
field, working with a partner nation's people or leadership to
forward US relations. Thank you all for what you're
(22:21):
doing. This is Jack, your host.
Stay tuned for more great episodes. 1 California podcast.
Welcome to One Civil Affairs Podcast.
I'm Lieutenant Colonel Brian Hancock, and I will be your host
for this session. Today we have with us Lee
Bratcher to discuss the importance of blockchain
technology and cryptocurrency. For those of you who don't know
Lee Bratcher, he's the presidentand founder of the Texas
Blockchain Council, an industrial association with more
than 100 member companies and hundreds of individuals that
(00:31):
seek to make Texas the jurisdiction of choice for
Bitcoin and blockchain innovation.
Formerly, Lee was a political science professor teaching the
international relations with a research emphasis on property
rights. Lee also served as an ROTC
instructor and civil affairs officer during his time in the
US Army Reserves. Mr. Bratcher, welcome to the
(00:53):
show. Thanks for having me, Brian.
Looking forward to the conversation.
Quick disclaimer, a reminder to the audience that our remarks
are solely those of the presenters and do not
necessarily represent the views of the United States Army or the
Department of Defense. Now, Lee, I want to thank our
mutual frame, Major Giancarlo Newsome, for introducing us.
(01:14):
He is a very interesting individual.
I've gotten to work with him on a couple projects.
Have you been able to work with Major Newsome on anything
recently? I sure have.
Several years ago, he encouragedme to join the 75th Innovation
Command, which is an Army Reserve unit supporting Army
Futures Command. And so I got to serve on his
team as innovation officers in in Austin.
(01:37):
Now, what was this? One of the defense innovation
units? I know we have one in Silicon
Valley. Was this a branch that was out
there? You know, we're building kind of
an equivalent of Silicon Valley,I think in Austin.
That's what I'm seeing unfold. It was that one of these defense
innovation units. I think not directly affiliated,
but certainly in the same line of effort.
(01:57):
OK, super. Well, we're here to talk about
another important future of the world, which also has military
implications, and that's blockchain technology.
Now, how does 1 become an expertin blockchain technology?
There are no degree plans necessary that there's no major
in cryptocurrency. It is interdisciplinary by its
(02:18):
very nature. So there's a bit of economics in
blockchain and Bitcoin crypto. There's certainly computer
science and cryptography, and there's a little bit of
philosophy in there as well. So you're going from the
humanities, from business and from computer science, which
makes it so interesting, makes it very difficult for anyone to
(02:38):
be an expert in all facets of the technology.
I would say I'm more attuned to the policy side, to the
Economics and Business side. I'd understand.
And the way technology and programming languages move, I'm
not sure anyone is an expert to for long Now when we think of
blockchain technology, we have words like Merkel trees and
(03:02):
things like that popping up. It's all kind of mysterious to
me. So I'm going to read on the air
a basic definition of blockchaintechnology for the audience.
A blockchain is a distributed Ledger with growing lists of
records that are securely linkedtogether via cryptographic
hashes. Now I'll be honest, after
(03:24):
reading this definition I have no idea what blockchain is.
In your own words, can you simplify this and explain it to
the audience? What is a blockchain and why do
blockchains matter? Yeah, that's a great question.
It's a decentralized distributedLedger, as the definition said.
But the way that I look at it, it's the next iteration of
double entry accounting. And we've had double entry
(03:45):
accounting for 500 years, developed by Luca Pacioli
Renaissance, so that the Mediciscould trade across time and
space and with actors that they didn't necessarily trust.
And that served us really well as a society for many centuries.
Block chains are the next iteration of that.
They are triple entry counting, if you will, and they're really
triple entry counting. There are nodes running the
(04:07):
Ledger of value transfer all over.
So the Bitcoin block chain, there are thousands of nodes
across the world. They're decentralized.
There's no central authority or honeypot of data.
The transactions all live updated every 10 minutes on the
Bitcoin blockchain. And there's other blockchains,
there's the Etherium blockchain.But the most important thing to
know is that any blockchain is securing a Ledger of who owns
(04:30):
what and the what is dependent on what the chain is.
So in the Bitcoin blockchain, it's Bitcoin, you're securing
the Ledger of who owns what Bitcoin.
And there's other ledgers that are, there's people that are
tokenizing real estate and they may do that on the Etherium
blockchain or on other blockchains.
And it's really tokenizing the ownership of an asset like real
(04:51):
estate and allowing that to trade in a liquid fashion rather
than sort of a syndicated fashion like a private equity,
general partner, limited partnerstructure like most real estate
is consumed and traded today. So it's just a more efficient
version of value transfer, and it uses the rails of the
Internet, and it avoids expensive intermediaries.
(05:14):
One of the things that immediately strikes me is that
it's less inflationary. Since governments can't just
turn on the printing presses andmake a whole bunch more of these
tokenized assets. I would imagine they hold their
value a little bit better. Well, not all crypto is created
equal. There are some meme coins out
there that are just kind of crazy and founder can just mint
(05:36):
more of them. And the reason why they don't
have as much value as Bitcoin orEthereum or some of the more
prominent ones is because the very reason the founder can mint
more and generate inflation causes them to be nearly
worthless. So I'd say 90% of crypto assets,
digital assets or cryptocurrencies will trim
towards 0 and 5% of them will trend towards massive market
(06:00):
caps in the many trillions of dollars.
So very much a divergent that's going to happen there.
OK, that makes sense. Let's go back to your statement
earlier that blockchain technology for securing finance
is like triple entry books as opposed to double entry
accounting. Now, in double entry accounting,
you separate intentionally your payables from your receivables
(06:23):
to prevent collusion and conflict of interest.
That can lead to cooking the books.
Right now, in triple entry accounting through a blockchain,
what happens if, say, a group ofhackers get together and they're
able to suborn roughly 51% of the chain for an asset?
(06:43):
Right. So if they're able to take
control of 51% of the network and order the mining compute
that is forming the next blocks,they can create false
transactions or what I'll call fraudulent transactions in that
they can devil splint. You have a physical asset.
You can't devil spin it because it's physical.
(07:04):
If you give it to someone in a broader system, you can also
give it to someone else because it's physical.
They don't have it right. Conservation of masks.
Got it. In digital assets, you can
replicate things that are digital.
Napster showed that pretty quickly.
The thing against that is you'renot allowed to devil spin.
So I'll have one Bitcoin in my wallet and I try to send you one
Bitcoin, but simultaneously I also try to send that Bitcoin to
(07:27):
someone else. But first transaction will go
through, the second one will be cancelled.
The nodes will not verify the second transaction because I
don't have enough unspent transaction output to make 2
transactions of one Bitcoin eachbecause I just had one Bitcoin.
That is fantastic. I think we saw an example of
some hacking groups in South America actually take control of
(07:48):
51% of the entries for one type of crypto coin.
And the coins didn't get spent multiple times, but they changed
the ownership registry. So an enormous number of them
were no longer owned by their owners, they were owned by these
hacking groups. How do we protect against
something like that? Yeah.
So the smaller the blockchain recommendation is to just kind
(08:12):
of avoid the long tail of smaller assets.
You're not yet mature. And there's a lot of education
to be done on self custody as well.
Because when we hear about like the Lazarus Group, which is the
North Korean hacking group stealing a billion dollars of
Etherium from buy bits, if I remember correctly, that
happened just a few months ago. That was not the Etherium
blockchain getting hacked. Those hackers didn't change the
(08:35):
Ethereum Ledger. They were able to fishing and
social engineering, get into theexchange and change the address
to their own. That was moving a billion
dollars worth of Ethereum internally.
It's incredibly impressive what those hackers did.
Obviously tragic as well. They were able to steal that
much. So very, very important to
(08:56):
educate folks on the importance of custody and key management
and things of that nature. Yeah, but the same is true of
our electronic front systems today, right?
So hishing and hacking to get folks access and verification
information can be used to drainaccounts.
So it sounds to me the Bitcoin isn't more susceptible to any of
(09:19):
those types of human engineeringploys and the actual validation
of the asset is actually more secure.
So I think that might address one set of fears that some folks
have that somehow these blockchain based assets are more
susceptible to electronic theft.That does not seem to be the
(09:40):
case. That's accurate.
I mean, there's a lot of wire fraud out there and ACH fraud
and and other kinds of fraud. It's really tragic.
What I will say though, is irreversible.
Once you send crypto to a wallet, that transaction is on
the blockchain and I'll be reversed, which is kind of part
of the beauty of it. It's not censorable.
(10:00):
I think that's important for theCA world to know is you guys
operate internationally and sending transactions across
borders seamlessly and with no fees.
Pretty interesting, except, and we understand it so that we can
use it to the strategic advantage of the West and also
be able to stymie bad actors. Firms like Chain Analysis and
(10:24):
TRM and some of these other really, really adept digital
forensics firms. Their biggest customers are the
DODIRS and the Justice Department and FBI doing digital
forensics for the US government all the time.
And I think we got to lean into that level of knowledge the same
way we leaned into the era of sanctions where the United
(10:44):
States was able to kind of control global monetary policy
in that way. Yeah, and many things are are
changing. It seems to me that digital
currencies are inevitable. Printing hard currencies is kind
of like dropping leaflets for SIOP.
Great. At one point in time still has
some applications, but the future's moved on.
(11:05):
And I think most transactions today already digital, whether
it's through a credit card, through a bank, through an EFT,
a Zell, whatever. I suspect that people have
become more and more comfortablewith digital transactions.
I suspect, you know, probably over 90% of all of our
transactions are digital today. So it seems inevitable that at
(11:26):
some point before the Star Trek era, we're going to have digital
currency. What needs to happen for us to
effectively replace cash with digital currency?
And what are the implications when that happens?
Right. I would not be in favor of
eliminating cash altogether, butI think what we will see is most
(11:47):
transactions will move to stablecoins.
And stable coins, we haven't really talked about yet, but
those are just U.S. dollars thatrun on blockchain rails.
So it's an asset that represents$1.00.
And that dollar is held in a bank like Bank of New York now
and holds a lot of the stable coin dollars, and it's always
redeemable for a dollar. So a dollar's worth of stable
coin is always redeemable for U.S. dollar.
(12:10):
It doesn't change in value. It's always worth $1.00.
Just out of curiosity, are therecryptocurrencies like stable
dollar that if you wanted to buya basket of currencies crypto
format, are there investments like that?
Not that I'm aware of. 99% of stable coins are denominated in
U.S. dollars, which is actually really good for U.S. dollar
dominance and the dollar remaining the world reserve
(12:31):
currency because you know, that's the asset that backs most
of these is like short term T Bros.
There are a few like gold backedstable coins and make a very,
very small percentage of euro backed stable coins, but I'm not
really aware of one that's like a basket currencies.
But what I would say is Paul Ryan, the former speaker of the
House ruble good op-ed in the Wall Street Journal about a year
ago about how dollars backed stable coins are being used all
(12:55):
around the world. And it's a very good thing for
AUS dollar dominance, the dollarand the world reserve currency.
There's about 200 Durham dollarsworth of stable coins that are
currently circulating globally. Why don't we hear about that?
I'll admit, I feel like I'm a reasonably educated person, but
this is the first time I'm hearing about that.
That is a lot of money we're talking about right there.
(13:17):
No, it would, but it's not in terms of like the amount of M2
money supply. It's not huge.
I think there's a lot of room togrow.
I think 200 billion sounds like a lot, but I think stable coins
will eventually be a trillion, multiple trillions.
And most of the stable coin activity is actually demand from
everyone outside the US who wants dollars.
(13:39):
In most developing nations, there are more stable coin
volume than there is like creditcard volume.
And even including the United States, stablecoins cleared
value last month than Visa actually then then Visa and
MasterCard combined. And so if they're really
quickly, but you know, a lot of Americans don't hear about it
because we don't necessarily need it because we had the
(14:00):
luxury of using the US dollar and having really sophisticated
payment rails already. And so I don't necessarily use
stablecoins, groceries or buy a a meal in a restaurant, but
people all around the world are and that's because of the US
dollar. They won dollar back stablecoins
and it's the best way to get it.And that makes sense.
We've heard politically the current administration
(14:21):
discussing potentially backing some of the US dollar with
digital assets along this futuristic view that we've been
describing. What I just heard you say,
though, is that, well, that kindof has already happened, at
least to the tune of $200 billion.
So maybe this isn't such a radical departure from what's
already happening in the economy.
(14:42):
Yeah, I think that's right. The stable coin piece is very
important because stable coins were the 7th largest buyer of
U.S. Treasuries last year if it was a
sovereign. So they bought more Treasuries
in Saudi Arabia and more Treasuries in France.
There's only a few countries in the world that bought more U.S.
Treasuries than stable coin issuers.
And stable coin issuers are private companies, by the way.
(15:04):
So as that grows, essentially that's going to be financing our
debt. And then the debt is of course
in U.S. dollars. So it directly addresses that.
Now you recently co-authored a book, I believe the title was
National Security in the DigitalAge.
And in this book you advance a thesis that Bitcoin is in fact
or should be a tool for modern statecraft.
(15:25):
Can you walk us through your thesis there and what the
evidence is to present that as aviable way forward for modern
statecraft? Absolutely.
So I would never submit that it would be the primary tool of
modern statecraft. I just that it would be 1 of
many kind of a basket of tools, most of which we already
(15:47):
possessed, which is economic might leading to technological
might leading the military might.
The whole of Dime is driven. Around energy as well.
And so Bitcoin is interesting because it touches on two of
those things. It touches on economic might and
energy. Bitcoin mining is the energy
intensive process as everyone has heard about in the news and
essentially allows you to createvalue with this computational
(16:10):
process with these data centers.And a lot of these data centers
also house AIGPUS as well. And so see that when someone
says what is Bitcoin maxed by, Iusually say it's backed by two
things. One, it's backed by energy and
thankfully 4% of Bitcoin mining and the energy used to consume
it is in the US. The second thing that bitcoins
backed by is scarcity. That's principles like we talked
(16:32):
about earlier in Austrian economics.
And so as a tool for modern statecraft, you have two things.
You have the energy component where AI and Bitcoin mining and
having those resources and thosedata centers.
You know, data is the new oil certainly.
And so compute is also kind of the new oil and that's at the
intersection of turning hydrocarbons in the energy and
(16:55):
electricity or renewable sourcesinto electricity.
I don't really care. Move a little grade 2, right,
All the above. We just need more energy and and
that's one piece of national security.
The other is to do kind of the lowest bet in the woods world.
It would be nice if the wet in the woods era lasted for another
century. But that's not going to.
Happen. It's unlikely you and I both
(17:16):
agree. So in that post Bretton Woods
world, we want the dollar to be the reserve currency for several
more decades. We've already talked about that
quite a bit. Bitcoin is going to overtake
gold by market cap. The nation that has the most
Bitcoin on their balance sheet will be that central bank.
The other central banks will want to hold that currency and
(17:39):
it will prove to be as influential for us as the Petro
dollar has been in the last 50-60 years is to say massively
influential on the global stage.Talking about civil affairs,
even though you're in the IRR, you're still in our branch, so
you're still a civil affairs officer and we have a very
(18:00):
important mission both at home and abroad.
You've mentioned throughout the show a couple of examples where
blockchain could be used for civil affairs application.
What other use cases, particularly perhaps novel or
exotic use cases, can you think of where our civil affairs
professionals could utilize blockchain technologies to to
(18:24):
make the world a better place? Yeah, I'll shout out my 75th
Innovation Command colleagues because there was recently a
press release from the 75th Innovation Command related to
blockchain based tracking for sensitive items and foreign
military sales. And this is all public
information out of the live pilot sounds like.
(18:45):
I mean, a couple years ago when I was working with them, they
were really doing good work on the foreign military sales front
and excited. They're tracking sensitive
items, tracking things from through the logistics process,
through the handover process to foreign militaries.
That is a really, really cool use case and you can't do it
with like every piece of munition, but you can prioritize
(19:07):
certain items that are quite sensitive.
Yeah, absolutely. Or a certain price point.
I think about some of the concerns as we deliver munitions
to struggling countries, using Ukraine as an example.
Where there's concerns, well, maybe they're not always being
handled in the way that we intend as as the giver.
(19:28):
But with these zero knowledge capabilities you're describing,
it seems like we could have someextra low cost checks on the
system that will inspire confidence for everyone
involved. I agree.
And and just to shout out, MajorGaudiat of the 75th was the one
who really spearheaded that program.
(19:48):
And you can look at the press release, the headline of 75th
Usurrex Serger develops a blockchain solution to
revolutionize the military supply chain.
So. Wow, brilliant.
Pretty cool stuff. That is very cool.
Let me ask you one final question.
We've talked about a couple of hypothetical future scenarios
(20:09):
kind of led that process. I'm going to turn it over to
you. What do you, as an expert in
this field see as the future of blockchain technology?
Where do we go from here? I think it's so broad that
there's different categories, ifyou will, buckets that I put
this in. You've got Bitcoin, which we
talked about quite a bit on the show, which is the most
(20:29):
important of stable coins, whichis another extremely important
bucket from the national security perspective with
maintaining dollar dominance. And then you've got business
applications for blockchain. You've got people building
decentralized applications and all sorts of innovative
financial services products, tokenizing money market funds
(20:50):
and real estate and all kinds ofbusiness operations.
And then you have kind of what I'll call like the enterprise
blockchain side where you're tracking sensitive supply chain
items or proving the provenance of different maybe carbon
credits or something like that. There's four buckets just in
that alone where I could see each one of them taking out a
life of their own and really transforming the world.
(21:14):
That's that's really exciting. I'm going to have to think about
this quite a bit and probably listen to our own podcast a few
times to absorb it all. I really appreciate you coming
on the show, Lee. This was fantastic and I know
the listeners are going to appreciate it as well.
Any final parting thoughts? Just so I appreciate your
service Brian and and all of those who are are listening and
(21:37):
just hoping and praying that they're are safe.
And yeah, just wanted to make sure that they can know happy to
for them to reach out to me. I can be connected to them to
answer any questions about blockchain that they have them.
Thank you, Lee. I really appreciate your time.
Thanks for listening. If you get a chance, please like
and subscribe and rate the show on your favorite podcast
(21:59):
platform. Also, if you're interested in
coming on the show or hosting anepisode, e-mail us at
ca.podcasting@gmail.com. I'll have the e-mail and CA
Association website in the show notes.
And now, most importantly, to those currently out in the
field, working with a partner nation's people or leadership to
forward US relations. Thank you all for what you're
(22:21):
doing. This is Jack, your host.
Stay tuned for more great episodes. 1 California podcast.
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