How Bitcoin Is Changing the Financial System | Mauricio Di Bartolomeo - What Bitcoin Did

Episode Transcript
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(00:00):
We've gone from, you know, governments didn't even pay attention to what we did, to now both

(00:11):
things are happening.
A, they are showing up at our conferences, and we're showing up at the Capitol.
And so I think it's a pretty clear sign that Bitcoin's growing up.
I've seen what it can do.
Because of that, I don't think there's a price you can put on it.
There is no top.
because what it can do has no price.

(00:32):
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Bitcoin is absolutely ripping and in every bull market,
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But if you've been around long enough, you've seen how this story ends for a lot of them.

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Mauricio, thank you for coming back on the show, man.
It's a real pleasure.
First time on the new What Bitcoin Did.
It is.
I think this completes my triple crown of What Bitcoin Did.

(01:59):
I did the OG one with Peter.
I did Mr. Obnoxious.
And now we get to do the new What Bitcoin Did.
I think you're the only person that's done them all.
No way.
Oh, no, no.
There is others.
Matthew Pines has been on them all.
Okay.
I think David Zell has been on them all.
It's a small crew, though.
It's good company.
It is good company.
especially considering we're here in DC for those guys.

(02:22):
You know what's funny?
I hadn't been to DC in my life before.
I hadn't been ever.
This year, I've been twice already,
scheduled to be back another two times
for what's left of the year.
And I think that speaks volumes
to where the Bitcoin attention or narrative

(02:42):
has moved to or is going to.
Totally.
we've gone from
you know governments
didn't even pay attention to what we did
to now
both things are happening
A, they are showing up at our conferences
and we're showing up at the capital
and so I think it's
a pretty clear sign that

(03:04):
Bitcoin's growing up
It's pretty amazing, I was having a conversation today
with someone, I don't know if he'd want me to dox him
so I'll just be very vague, but someone who works
for the government about the whole
operator knots versus core thing. And like, he really knows what he's talking about. And so
there's people like that inside the government now. It's wild. I love hearing that. And it's

(03:25):
funny. When I was in Vegas, I spoke with, I think it was a representative out of New Hampshire.
And I just, there's a chance encounter in the press section and we just got talking.
And I was really surprised at how much they know and how much they understand
And for a politician, right?
And this guy was like early, you know, maybe late 50s.

(03:49):
That's kind of what I would think his age is.
But he knew, you know, the challenges and the benefits, the potential risks from a regulatory perspective.
But I've been pretty happily surprised at how quickly they seem to be getting up to speed.
And not just in the government.
I think there's also really smart people like that in some big corporations, right?

(04:09):
They are ultimately the champions that are putting forward these ideas, whether it's,
you know, for buying Bitcoin for treasury or for supporting Bitcoin for rails of payments,
Steak and Shake, you know, probably the champion in there.
So these champions are starting to pop up everywhere.
And I think it bodes well for the future of Bitcoin.

(04:29):
It totally does.
I mean, it has any of the kind of regulatory stuff that's going through at the moment.
Does it have any impact on what you're doing at Leaden?
things like the Genius Act maybe in particular?
So the Genius Act is very stablecoin specific.
We do support stablecoins.
So I think in that sense,
the Genius Act is making people around the globe
more comfortable interacting with these instruments.

(04:53):
So to the extent that it's going to make more people
want to try this technology or these rails
to access financial services like the ones we offer,
then yes, I think it will make it,
it will remove one friction point from people considering these types of instruments.
So in that sense, it helps.
I think the other one that I would say, which was behind the scenes,

(05:14):
there haven't been per se direct implications as far as regulation on the lending markets.
For the benefit of people listening, lending markets are regulated on a state-by-state level.
In the US, there's no federal lending requirements.
I don't know if I actually knew that.
Yeah.
So in the US, it's a state-by-state.
And so that's also why you see that Letit is available in some states and not in others.
And so it really varies from state to state.

(05:37):
Some countries have different ways of structuring this, but that's how it works in the U.S.
So no lending specific law around crypto has been passed to date.
There's been states that have passed sort of overarching regulation for crypto.
So examples of that would be places like California.
And so the licensing regime or requirement for a company like us in a state like California is different than, say, the state of Florida.

(06:05):
And so no legislation has had direct implications to lending as far as this administration goes to date.
But the one that has had an impact indirect was the repeal of SAB 121 and the change in guidance from the Federal Reserve recently,
which is basically greenlighting banks for or allowing them to participate in this space.

(06:27):
So not surprisingly, you saw the announcement recently, JP Morgan saying,
we're now going to start considering lending against ETFs and a few other things around that note or around that front.
But the other one is, forget this name, Pulte is his Twitter handle.
He's the head of the federal housing financing.

(06:49):
I saw this just recently.
Or agency, sorry.
And they said they were going to consider taking Bitcoin as collateral for housing.
Yes.
Or look into it at least.
Exactly.
And mind you, it's not a done deal.
It's just a statement.
Yeah.
But I think it just signals the desire of the United States to embrace this technology.
Yeah.
And I think that they finally understand that they stand to benefit tremendously.

(07:14):
Absolutely.
Not just from stable coins.
The narrative around why they benefit from stable coins is pretty clear now.
They buy the U.S. debt.
They perpetuate the use of the dollar internationally.
Everybody gets that.
What I think they're also understanding now is that the way I like to think of the world,
and more so maybe in an overly simplistic way because I grew up in Venezuela,

(07:36):
there's when you're in a place like Venezuela and you make money, right?
But similar to a place like China, similar to a place like, you know, the Middle East or other places around the world where property rights are not historically not been great.
Yeah. Right. So I like to think of when people make money, they want to send money to what they consider to be their happy place.

(08:00):
And in many cases, their happy place is in the United States. Right.
But these governments, China, Venezuela, and others, put these arbitrary restrictions to prevent people from taking the money they've made and taking it out of the country.
So they try to force people to reinvest locally, even though they never protect people's property rights locally.

(08:20):
And there's always this tension between people saying, I want money to be in my happy place, and the government saying, no, I want you to keep it.
I want to force you to keep it here.
And I think what the U.S. understands is that Bitcoin enables money to go to its happy place.
And to understand what the happy place is, you can think of the happy place as where are these wealthy individuals sending their kids to go to school?

(08:44):
Usually, that's where they want their money to be, too.
If you look at Venezuela, wealthy people want to encourage their kids to go to school in the US or parts of Europe or other places where property rights are historically been stronger.
And so I think the US gets the benefit of stable coins, gets the benefit of Bitcoin, and they're trying to become the go-to market for anyone wanting to build or keep their Bitcoin safe.

(09:15):
they're trying to become a safe haven for this industry,
which I think is very strategically smart on their part.
I totally agree.
And I think one of the biggest risks to this
is that it becomes a partisan issue,
which obviously the BPI folks here
are working really hard to make sure that's not the case.
But in everything you said there,
there's loads I want to get into,

(09:35):
but let's start with Ledin.
You guys are absolutely crushing it.
Are you now the biggest lenders in the space?
We are, as per the Galaxy report,
and not by a small amount.
which I still get pleasantly surprised when I see that.
But yes, we are today, as per the report, the second largest lender in CeFi.
That said, that report includes institutional and consumer lenders, both in the same chart.

(09:58):
If you separate the institutional lenders like Tether, Coinbase, 2Prime, and a few others,
Lennon is by and far the largest consumer lending by market share.
I think, in fact, if you add up every other consumer lender in that report,
it doesn't come up to let us market share.
So you really are crushing.
So we are doing very, very well.

(10:20):
But I think that speaks again to the way
or what people value from a company
when they're looking to put their Bitcoin as collateral,
which is history has shown us
that not every lender is created equally
or operates equally.
And I think people have seen
seven years of trajectory from us,
always standing right by our clients.

(10:42):
We were the first ones to do perverser.
We were the first ones to do what we did, Canada's first Bitcoin-back loan.
And I think that a lot of the simplicity and transparency that we built over the years
and our discipline, as far as like the assets we support and the things we offer,
is what a lot of people are looking for from a lender, right?

(11:04):
And so, yeah, I mean, we are, I guess, to answer your question, as per the report, yes,
we are the biggest lender in the consumer world today. And we want to keep that lead. And this is
why we are doubling down on what we do best, which is Bitcoin-backed loans. I think it's incredible.
And like one of your recent announcements, I think in Vegas, was that you're getting rid of

(11:27):
all rehypothecation. Yes. And you've got rid of the Ethereum products, which, so full disclosure,
by the time this episode goes out, hopefully you guys are going to be a sponsor of the podcast.
And like, I've been really conscious about the companies you bring on as sponsors for this
podcast because obviously we've got a history where like blockfi sponsored for a long time they
didn't sponsor when they collapsed but they were a sponsor for a long time and like it's something

(11:49):
that i take really seriously and so when you told me that this was happening i was like let's fucking
go this is the product that i can like now like fully stand behind i use like it's i think they
like the time has come now for bitcoin lending and i want to kind of maybe we should set the stage a
little bit here where there's obviously a lot of ptsd around it because of things like blockfi and
Celsius and that whole collapse.

(12:11):
You were operational through that whole thing.
And you were one of the only, if not the only company
that actually survived who were operating in the space then.
So like what's changed from the BlockFi Celsius days?
Yeah, it's a great question.
And I like to break it down in a way
that people can understand the real,
because it's a very nuanced comparison

(12:34):
in the sense that on the surface,
A lot of these companies look like they did the same thing.
Yeah.
But the thing with lending is that it's not really about the app and the rate you get and the LTV, right?
A lot of it comes down to how are you funding those loans?
What are you doing with the collateral?

(12:55):
And very importantly, what other products are you offering alongside the loan?
Yeah.
Because what brought down Celsius, Voyager, BlockFi, and a bunch of others were not their over collateralized Bitcoin-backed loans.
It was their unsecured loans for their yield products.

(13:17):
All with three hours capital.
Voyager had about 67% of all loans out to three hours when three hours collapsed.
That was an insurmountable hole for them.
Keep in mind, they got no collateral from three hours.
But let me explain how that flow works, right? Most of these companies, in fact, all of them, BlockFi, Celsius, Genesis, and Voyager, all four firms offered loans and also offered yield.

(13:46):
And they offered loans backed by a plethora of digital assets and yield on a plethora of digital assets.
In order to generate the yield, they would have to take deposits from people and then lend them out to institutions.
Most of these loans, if not all of these loans, were done uncollateralized.
So effectively, you were taking a million dollars from Bill, lending it to Three Arrows, and hoping Three Arrows was good for it when Bill wanted to come and withdraw his money.

(14:16):
It was the yield product that generated the majority of the losses for these firms.
The over-collateralized loan products, short of them having re-hypothecated the collateral to the nth degree, which they were also guilty of doing, by the way, that product has risk when you're doing things with the collateral.

(14:39):
There's always risk when you're lending the collateral.
Because a lot of that collateral was also being lent partially collateralized or uncollateralized.
Right. So if there is a loss on the yield product and you don't have the proper ring fencing of the legal entities, it's like you have a ship that has no compartments in the bottom.

(14:59):
And no matter when or where water starts coming into the ship, the boat, the entire boat sinks.
You don't have the option to shut off this compartment and save the rest of the boat.
Right. None of these firms have that legal separation.
What does that look like?
I'll give you an example, right?
You know, there's companies like 3iQ or other firms like Fidelity, et cetera, that offer ETFs, right?

(15:25):
And when you buy the ETF, you're told, hey, this is a gold miner ETF.
Here's the four companies that are in it.
You're taking the risk.
If any one of these four firms goes down, the ETF units gets priced, you know, accordingly or proportionally.
When that happens, you don't go and say, oh, my God, Fidelity, right?
Like, why did you do that?
Right?
They were very upfront.

(15:46):
They told you this product has nothing to do with every other service we provide via the Fidelity umbrella.
This is an ETF that we're putting out in the market with these components.
The risk is on you, and the risk is contained to this vehicle.
Right?
None of the firms had that in the previous life.
Lennon discontinued its yield product, importantly.
And that's a big part of the changes that we announced.

(16:07):
But even before we discontinued the yield product, we did have that proper ring fencing.
We're getting rid of it because we want to focus debt square on over collateralized dollar loans backed by Bitcoin.
So even when you had the yield product, it was like a segregated thing that couldn't cause a systemic issue.
But let's talk about, because they're not there anymore.
These products are gone.
So why?
Why have you gone back to just the core product of non-rehypothecated Bitcoin lending?

(16:32):
Why?
We believe Bitcoin backed loans are a multi-billion dollar opportunity today.
We believe that if done responsibly, this product triggers a virtuous cycle for the lender and for the borrower.
Because for the lender, it's amazing collateral.
And for the borrower, it opens you to global financial services regardless of where you are in the world.

(16:54):
And given the relationship between holding a hard asset as collateral and taking a loan in a structurally debasing currency, there's a tailwind to your debt because of the devaluation of the currency you're taking the debt in.
We've seen our clients do incredibly well when they use their products responsibly from 2018 to today.

(17:19):
We believe that is going to continue, and we believe that it's only going to become cheaper and more accessible to people.
We need to win at that.
We want to win at that.
We have the leading position in the market today.
We have the longest track record, if not the longest track record.
We have built the things that we believe Bitcoiners want to see.

(17:40):
And we want to remove any and all distractions possible for us to be solely focused on that goal.
So the changes, just to recap, we have moved to a exclusively custody loan model. So at all times, the collateral of Leiden sits in custody of either Leiden or one of our partners. There is no relending of that collateral at any time. It sits in a segregated address. And when we pledge it to our counterparts to draw liquidity from, we pledge it in trust for Leiden.

(18:12):
So it does not form part of the bank's assets in case of an unlikely bankruptcy.
But it's also held at a segregated address that we can see at all times.
So that's the type of loan we want to do.
It's fully transparent.
It is, in our view, the safest way to offer this in a scalable way.
We're going to keep getting even better at proof of reserves.

(18:34):
So I can't really share too much on that, but that's coming.
Okay.
And so that's the first change is no more rehypothecation or no more re-lending of any Bitcoin place as collateral for Lennon.
We used to offer two loans, standard loans and custody loans.
Standard loans have gone away as of July 1st, only custody loans going forward.

(18:54):
The second one is we are getting rid of support for ETH.
Love to see it.
For Ethereum.
So maybe it's worth actually talking about that because while I think Ethereum is the biggest of all shit coins,
like technically you could do the same thing with Ethereum
in the sense that you could do
non-rehypothecated loans with them.
So what's the reasoning to get rid of that?

(19:14):
Is it because there's just not that much demand?
Yes.
So number one is, it's a nuanced answer,
but basically to walk you through it,
we offered Ethereum for about a year and a half.
And largely we brought it on
to help bring Celsius clients out of bankruptcy
because the bankruptcy court determined
that Celsius victims to roll their loans into a new lender,

(19:38):
and they would do this for many tax benefits primarily.
But a lot of these guys, and particularly the large guys,
wanted an option to refinance their loan out of the bankruptcy
into a new lender instead of taking this set-off treatment.
And we can get into the details of why they would do that.
But the point is they really wanted to do it.
A lot of these guys were also clients of Ledin when Celsius went down

(19:59):
because many people used to be diversified.
across lenders.
So they had loans at BlockFi,
loans at Celsius,
loans at Leiden.
And obviously-
Where really all that diversification was
was like Leiden and everyone else.
Basically.
There's a comment from some,
Tim Copeland actually,
and this is a public tweet,
so I don't mind referencing it.
But he says, you know,
my worst mistake in 2021 was

(20:21):
I withdrew funds from Leiden
and took them to FTX.
Oh damn.
That's a mess.
And so, yeah.
But anyway,
people were diversified
across these other lenders.
And obviously, the only thing remaining was their loan loans, right?
And when they were getting pitched to refi their loans out of bankruptcy, they had offers
from a bunch of lenders they had never heard of.

(20:42):
Some of them didn't even have a big comeback loan product.
They just wanted to scoop up the assets from the bankruptcy.
And one of the guys that was one of the key claimants from Celsius came to me, asked for
a call.
He says, can you help us?
And anyway, long story short, we worked with them.
We understood that if we didn't have Ethereum, they wouldn't be able to come to us.

(21:02):
And we thought that was a really great opportunity to bring these people and showed them that these things can be done right.
Also, selfishly, it was in a way of increasing our book.
And so we said, OK, well, let's give this a go and try to support it to bring these guys over and see how it pans out.
We also had supported Ethereum Rails for a long time because we use them for stable coins.

(21:23):
So we were familiar with the pipes and basically our custodian already supported it.
So it wasn't that huge of a lift to support it for the purposes of this refinancing.
So that was done.
We got 70% of all Celsius loans came to us.
The other ones that couldn't was because there were jurisdictions we couldn't service.
So primarily, that worked in that we brought on a lot of them.

(21:46):
They were immensely grateful.
Many of them sold their ETH and went to Bitcoin immediately.
Some of them stayed in ETH, but very small minority.
over the course of a year and a half after that at its peak ETH made up five percent of our loan
book when we made the announcement ETH was down to two percent of our loan book wow and when you
so really it's just a distraction at that point absolutely you nailed it and so it was something

(22:07):
that whenever you want to build a new feature a new thing that we want to add to the Bitcoin
back loan product we always have to go back and basically include that in to the ETH product but
But it was basically, you know, that marginal effort wasn't delivering on the volume side
or on the business side.
And another funny point is we used to do these things.

(22:28):
I think we still do them every Friday.
We put a feature Friday.
So we say, what do you want to see you let in build?
And the funny thing is the most common request of what they want to see us build is to get
rid of ETH.
That's so good.
And that happened time after time after time.
So we listened to our clients and we made the change.
We got rid of ETH because again, the other additional consideration is that

(22:51):
ETH has a native programmability aspect to it where people can easily go and stake it somewhere
and pledge it somewhere on some DeFi contract to get a loan Many times with no KYC Now there don get me wrong there many many risks that we can get into by doing that But the point is it doesn have that friction

(23:13):
that Bitcoin has when you want to access a loan. Even if you wanted to use DeFi with Bitcoin,
you have to wrap it. So you're taking wrapping risk plus DeFi risk plus, plus, plus. And so
with Bitcoin, and also Bitcoin has a pretty clear regulatory posture. It's not trying to be
a place where people can make complex financial transactions. It's just a settlement layer to

(23:34):
move value around the world. So for those reasons, we wanted to, again, focus on Bitcoin back loans.
And that was the sort of overarching thinking on the decision to get rid of these.
Yeah, it makes total sense. And I truly think these are really important products. It's a product
that I use. And now that you guys are a sponsor of the show, I think what quite a cool thing to do

(23:58):
would be to kind of lay out who should be using this, how they should be using it and what the
risks are. Because these things aren't without risk. And like there's going to be people that
use them in a dumb way and end up fucking things up. So let's go through it kind of from the start.
How do you look at these loans and how do you think people should be approaching them?
them? Just your average Bitcoiner? Yeah. So I look at these loans as a way to live on a Bitcoin

(24:22):
standard, but still be able to take some of that digital wealth and port it into your real life
experience. So I'll give you examples. I have clients that have been buying Bitcoin since
2015, 2014, sometimes earlier. And that stack went from 10K to 100K to now a million bucks,

(24:43):
to a couple million bucks, right?
They are now entering their late 30s, early 40s.
A lot of them are married.
A lot of them have growing families with two kids.
And now they've come into some digital wealth, right?
Then the conversation happens with your wife and says,
hey, I want to buy a bigger home.
You know, we want the extra space.
Can we sell some of that Bitcoin, right?

(25:04):
That we've worked so hard to get.
And the husband basically says, oh, baby,
but it's what got us here.
That's how we built this million dollars.
That's what's changed our stars.
you know, I don't want to part with it. And that starts this exploration to see, can I have my cake
and eat it too? Can I keep my Bitcoin and buy the house? Can I find some structure or a solution
for this, right? And eventually they find loans, Bitcoin back loans. The genesis of this product

(25:29):
was solving our own problem. And I'll tell you where I was coming from. I was mining Bitcoin in
Venezuela with my family. Then every time we had to upgrade equipment, I had to send my Bitcoin to
Bitmain or, you know, payment to Bitmain.
It took a year to get the machines and I lost all the upside on the Bitcoin.
That happened to me once.
Oh man, that happened to me twice.

(25:51):
By the third time I said, I never want this to happen to me again.
So it was built for businesses, people, anyone that's living on a Bitcoin standard where you
have Bitcoin income and you live in a fiat world and you don't want to spend.
Because also, our tax system is not built for using Bitcoin as money.

(26:12):
Our tax system is built to use Bitcoin as an asset and then draw the money from it.
And a lot of those reasons was or were there really we came at it from we want to solve our own problem.
So who would use it?
I'm not suggesting anyone go take a loan if they have no need for a loan.
If you have fiat cash flows from your life and you're putting away a little bit of Bitcoin every month and you don't really need a loan,

(26:35):
I'm not encouraging you to go take one for speculative purposes, right?
But if you're a person that wants to buy a new house, wants to start a business, you know, you've built some Bitcoin.
Usually you build your Bitcoin stack as a way of, it's like your rocket ship to take you from the life you have to the life you want.
Yeah.
Right.
And eventually the rocket gets filled up with fuel and you're like, okay, well, the rocket's here.

(26:57):
And then you're saying to yourself, well, now if I blow all the fuel in the rocket, then, you know, I might not land where I want it.
I might have to get another rocket.
And so I don't want to let go of it.
So you try to.
And the rockets constantly get harder and harder to fill up.
Correct.
Correct.
And so the idea here is that if you have some Bitcoin, if you're in a Bitcoin standard and
you come across an investment opportunity, a way of upgrade your life experience by way

(27:22):
of a house, by way of a car, by way of school, a trip, whatever it is that you want to do,
you can do so now without having to sell your Bitcoin and in a potentially much more efficient
tax structure.
which is a loan versus selling. So who should use this? If you're in a Bitcoin standard,
if you have Bitcoin, life happens. I've had people use these loans to pay for emergency surgery.

(27:46):
I've had people use these loans to buy property. A lot of people use these loans to start businesses.
Many people use these loans to buy more Bitcoin or to buy things like MSDY or do some type of
arbitrage between two instruments that are Bitcoin denominated or Bitcoin related.
And so it really varies how people use the product.
What I would suggest, of course, as always is,

(28:10):
and this goes back to the risks of these products,
is you never want to put your full stack on a product like this.
Exactly.
Because all of those different things that you can spend the money on once you borrow against your Bitcoin
all carry different amounts of risk.
And so if you're going to go and do it to speculate on some Bitcoin treasury company,
that's probably higher risk.
To buy more Bitcoin, less risk than that, but maybe higher risk than buying a home or whatever.

(28:34):
Just in terms of the volatility.
So if you're talking to someone who's trying to figure out what the right loan is for them,
what kind of percentage of your stack do you tend to think is reasonable?
So the first thing that I suggest to somebody is before they decide on the stack or anything like that,
is to run a test loan.
Test loans start at $500.
bucks. You can use a thousand dollars to Bitcoin, test the pipes, understand how long it takes,

(28:59):
what the process looks like, what the repayments are like, what the flows are like.
Once you're there and you're comfortable, you can decide on how much of your stack to put.
Generally, I would say to people, again, it depends on your situation,
not financial advice and all this stuff. Typically, I would say to people between 30 to 50% of the stack
is okay. But there's people that might want to go a little higher than that. There's people

(29:24):
that might want to go a little lower than that. And a lot of that comes back down to the risks.
So what are the risks? I think the two major risks are number one, counterparty risk. So
something happens to your counterparty. And number two, liquidation risk. Market volatility can result
in your Bitcoin having to get sold. So there's two primary risks, and then there's ways to

(29:46):
optimize around either one of those. For example, if you are a person that is looking to minimize
counterparty risk, right? You want to minimize how much assets you have on a third party.
So you're going to be looking at a loan that wants to start at a potentially higher LTV.
So you're going to basically max out the LTV of dollars relative to the Bitcoin you're putting in

(30:08):
trust or you're putting as collateral. And you're constantly going to be trying to redeem excess
collateral as the loan becomes over collateralized. So you're going to try to always keep the bare
minimum assets on the platform. The counter to doing that is that by only having always the
minimum required amount in the event of market volatility, you may have to react fast. And so

(30:31):
if that's you and you're okay with reacting fast, that's a way of structuring yourself.
But the opposite of that is, on the other side of that, is I'm okay with the platform. I don't
necessarily think that's the biggest risk.
I think my biggest risk is a sudden market move.
So people that believe that or wanna optimize for that,
a lot of them over collateralize their loans proactively.

(30:53):
So my starting LTV is 50%,
but we don't stop you from sending more
if you wanna be more comfortable.
I have guys that have single digit LTVs
because they just don't wanna ever think
about a liquidation, right?
And so that happens,
but those guys are very comfortable with us
as a platform and how we operate.
So to them, the major risk is a sudden market move.

(31:16):
To others, the major risk is counterparty risk.
So they try to minimize that,
but there's trade-offs for each one,
depending on what you're trying to optimize.
And just to clarify for any listening,
the reason you say they have to move faster
is because they obviously have to then add extra collateral
to that loan product.
Correct.
And it's not to scare people away

(31:37):
from using a product like this.
To give you some data around this,
This year, we've had Bitcoin go to 110, then down to 70.
That's about 35% top to bottom move.
Mathematically, that would have impacted a lot, no,
decent amount of our clients.
What we saw was actually less than 50 basis points.

(31:58):
So less than half of 1% of our loan book was impacted by liquidations.
Wow, that's cool.
On a 35% down move.
And I think that's a testament to how much smarter our clients are getting.
People understand this product a lot better now.
They know where the goalposts are, right?

(32:18):
And so they are now planning, okay, I'm going to be, you know, if this happens, then I'm sending this.
They have the safe listed addresses.
A lot of them have turned on auto top up, which is another feature we've created to protect against sudden down moves.
which is if you don't want to have the Bitcoin be part of your loan right away,
you can put it in your transaction account, which just sits in cold storage,

(32:40):
and you turn on this thing called AutoTopUp.
And all AutoTopUp does is if the market moves and your loan needs more Bitcoin,
it sweeps it from the transaction account into the loan automatically
without you having to do anything.
And we built this because a lot of times we had loans and clients going on,
you know, one-month hiking trips, or I'm going to go on a sailing adventure for a month.
I'm not bringing my ledger or I'm not bringing my cold device.

(33:03):
And so they wanted to have an option to respond.
So we built that.
Just like out of interest,
when say we have like a super volatile down move,
what happens if your loan is getting close to being liquidated?
Yes, great question.
So loans start at 50% loan to value.
As the price drops, that LTV starts rising.

(33:24):
So at 70%, our system starts sending you notifications to say,
hey, Danny, you need to send more Bitcoin to your loan.
those notifications continue all the way up to 80 percent if and when the loan gets to 80 percent
the system automatically sells however much bitcoin it needs to repay the loan and returns
the difference to the client now in my experience or you know in the in the times that we've been

(33:48):
in business the only um there's been like i would i would argue there's been one or two times where
that move from 70 to 80 happens in a matter of hours and that was really the one that comes to
was COVID. COVID was a 50% drawdown in 24 hours, which is again why there's a reason letting this

(34:09):
build the way it's built. And there's a reason our margin call system is designed the way it's
designed. It's really for the benefit of everybody because it's how we believe the operation can
become anti-fragile. You can't in a market like Bitcoin tell somebody you have this much time,
Because we know now how much Bitcoin can move in this much time.

(34:30):
So at Lennon, it's not a time-based requirement.
It's a price-based requirement.
Also, we don't ask you, when you get these notifications,
we don't ask you to bring it all the way back to 50 or to 40
or to any particular amount.
All we ask you to do is don't let it get to 80.
At 80, we don't have a choice.

(34:50):
So just don't let it get to 80.
And so that's sort of how, that's the process that happens as Bitcoin market drops.
Now, importantly, the same way we ask you for more Bitcoin on the price going down, if Bitcoin recovers and goes in your direction, you can take excess Bitcoin off the loan.
And that's something that we do that I don't believe many others do.

(35:13):
And people don't necessarily think about this, but that is a huge benefit that Ledin has.
in 2024 alone over a thousand bitcoins were recalled from our clients from excess loan
collateral to take back to self-custody so that makes us super proud and it's not it's something
that's super easy you just go on the loan and you'll see the button that lights up when when

(35:33):
it's eligible it just says redeem excess collateral and you just click it and it goes to your
transaction account and from there you can do whatever you want with it um but that's also to
to let no to signal to people we don't want any more your bitcoin than we need right like when
we're asking you to top it up.
It's just because we want to protect the loan.
If it recovers and when it recovers,
that's your Bitcoin still.
So that's how that process works.

(35:55):
And maybe we should talk a little bit
about how the repayments work on Ledin.
Sure.
So maybe explain like the different options
that people have.
Yes.
So at Ledin,
you can always make a repayment partial or full
at any time with no penalties, right?
There's three primary ways of repaying your loan.
You can repay it with a wire transfer or cash.
you can repay it with stable coins or you can use bitcoin uh collateral you can sell part of

(36:22):
the bitcoin collateral to repay the loan importantly that option to repay with bitcoin
is available it's not available in every market it's available in most markets but not every
market it's just a regulatory thing it's a regulatory thing yeah yeah but the primary
ways through which people repay the loans most often uh is cash and bitcoin right um now stable

(36:42):
I use stable coins in cash sort of inter-exchange.
Yeah.
But partial repayments are very easy to do directly on the platform, especially with stable coins.
Because with stable coins, they're in your transaction account, we deduct them, we apply
it to the loan right away.
With wires, you have to notify us that you've sent the wire, we have to wait till the wire
arrives.
Once it arrives, it gets booked, and then it flows to your loan numbers.

(37:04):
So stable coins are really becoming, I would say, a material rail for disbursements and
repayments.
That said, the most popular way to repay the loans is through Bitcoin.
And people use that when Bitcoin rips.
People take profits, right?
Like a lot of our guys took loans when Bitcoin was at 50.

(37:24):
They see Bitcoin at 120.
They have to sell a fraction of what they put initially to repay it, and they just want to be done.
And we see people close loans when market goes higher, right?
And we also see people open them when markets go lower.
So those are the three ways that most people repay.
Yeah, that makes sense.
And then in terms of rates, like what do you see happening with rates in this market?
Because like historically, rates against Bitcoin have been relatively high.

(37:49):
There's obviously kind of a flaw set by the quote unquote risk-free rate.
Like how low do you think they can drop?
So.
And maybe it's worth also saying what they're at at the moment.
Yeah.
So our rates right now are, by the time this show goes out, it'll be 12.4 for custody loans,
which we're very happy.
We have the most competitive rate in the market for no monthly interest payment loans,

(38:10):
which by the way is the only type of loans we do,
we don't even give you the option to make,
and you can make them,
but there's no contract like a letter
that forces you to do them
and that punishes you if you don't.
You can make them voluntarily.
No one's going to stop you from doing that.
But you're coming to us because you want cash
and not sell your Bitcoin.
The worst thing we can do is ask you for cash
to make those payments.

(38:31):
Now, some companies do this
because it allows them to show a much lower APR
because you don't have to include the cost
of financing those monthly interest payments
into the loan.
So they try to like, you know, tuck the fee over here or give you this option over there to make it look like it's cheaper than Letton.
But in fact, when you add all the bells and whistles, it actually works out.
99% of the time, Letton is the best cost for that type of product.

(38:54):
So that's something that's for anyone looking, you know, run the numbers, right?
Like if you run the numbers, most often you wound up with Letton or at least you have to get asked questions and read the fine print.
It's very important for you to read the fine print.
So where do these rates, where can they go?
I think they're higher than I would like them to be right now, because I think there's an information gap between how lending against Bitcoin is perceived by big institutions and how lending against Bitcoin is perceived by the Bitcoiners, right?

(39:27):
Bitcoiners are saying it's the world's best collateral.
You know, you ever collateralize.
It can be sold at any time.
Like, we get it.
Yeah.
That's why we built that.
It's a great product.
But now that said, you have to get the banks equally comfortable with that.
And they haven't been doing this for seven years, right?
They're leaning on us.
We talk to a lot of these banks and we actually borrow from banks.

(39:50):
And so when they're talking to us and we tell them, they ask, what's your default rate?
And we're like, zero.
And they're like, what?
Zero percent default rate?
You've never had somebody not pay a Bitcoin back loan?
No, we've never had someone not pay a Bitcoin back loan.
Like the liquidation engine has worked when it has had to, and everyone else has paid the loans because they want their bank went back.
This is natural.

(40:11):
So to them, they're very interested, and they're trying to price the risk around this.
And I'll give you another interesting analogy.
So my business partner, Adam, co-founder of Leran, he's the CEO, I'm chief sales officer.
He comes from renewable energy financing.
So he was financing big solar projects when they were basically pretty new.

(40:32):
And some of the questions that these big pensions are asking were, how do we know the solar panel is going to last 10 years?
How do we know it's going to generate this much energy?
How do we know these pieces aren't going to break?
Because they're just getting, they don't know the flow.
They haven't been around.
They haven't seen how these things are built, what they do in the wild.
And so there's always this learning curve when you're trying to bring capital in to price a particular risk.

(40:56):
Something that's relatively new.
Correct.
So I see banks coming in.
They are already here.
like they're not coming they're here um banks are slow because every time they want to launch a new
product it's just a committee after committee after committee and red tape but they're working
on it and i think they're going to get to a point where they're going to understand that lending

(41:18):
against bitcoin is better than lending against real estate it's better than lending against
stocks because it just is like we know it is it is yeah and so it's really just a matter of time
right and so i do think that these things can can tighten the spread against fed funds so like i
what i look at is all interest rate markets dance to the beat of the fed funds right yeah right so

(41:40):
there's always fed funds rate a structure of an interest rate is the fed funds rate plus premium
right or the premium for that particular asset so for us for leaden you're sitting at around
you know 600 basis points over fed funds right but interestingly the spread over fed funds today
is around 600, right?
When we started lending,

(42:00):
we started lending in 2018.
Rates back then,
I believe were in like
the 2% range.
Our rates when we came out,
I remember still,
was 16%.
So we had a 1,400
base point spread,
basically 14% spread
over Fed funds
because that was what
our lenders demanded from us

(42:22):
to fund those types of loans.
Today, that spread is down
to 600 basis points.
So it's been cut by more than half.
More than half.
So I expect the next two years,
that cuts by half again.
And where does it land?
You know, there's people...
If we assume that we continue living
in this duality of fiat and Bitcoin,

(42:43):
I don't think Fed funds goes away
as a benchmark to price rates.
I think that survives
for probably another decade or so.
And so we're always going to be looking
at Fed funds plus.
Where that sits in the plus,
you know, I would say anywhere between
100 basis points to 300 basis points,
that's probably where it lands.
I do wonder if it's almost like
it needs to go through another bear market

(43:03):
to prove that the Celsius, BlockFi, FTX thing
was a black swan event,
not what happened in a bear market.
It's a really good point you make.
And when you are going through a bear market
and you're just an observer,
you have many questions,
because all you can make is assumptions.
You don't know what was happening behind the scenes.

(43:24):
But when you go through a bear market
as an operator, what we saw, in fact, was the opposite.
For us, you had a collapse in the asset prices.
Ledin had zero defaults.
The collateral did what the collateral is supposed to do.
So for me, for us, it actually reinforced our view that Bitcoin is the future of asset-backed

(43:47):
lending.
But for others that don't have the nuance and the vantage point that we have, it can
can be perceived as, no, you don't lend against this thing.
One of the most challenging things
about rebuilding trust in lending industry
was the fact that there were so few survivors,
because it was a really difficult conversation
every time we sat down with whoever,

(44:10):
whether you're a prospective client or someone else,
and they said, what did Lend do differently?
And we're like, not that much.
But they weren't doing what we were doing.
They had no risk management.
We actually were doing what we said we were doing.
They were just saying things that they weren't doing.
Yeah, it was just fraud.
It was fraud.
So when you look at that and you say, you know, we were doing things right, but one, two, three, four, five, six guys weren't.

(44:35):
And so it's really hard to make this narrative that it's not that the apple is bad.
It's like there were six bad apples and the rest were good.
But people say, well, there's got to be something wrong with apples, right?
And so it took years to build back to where we are today.
And was that on both the borrower and the lender side of it?
Or was it particularly on the lending side?

(44:56):
As in the people that are giving you the dollars?
I would say it was more the borrowers because the lenders always understood that we, you
know, they either had the Bitcoin that we would pledge.
It was in their custody.
They never felt at risk per se because they always had the option to liquidate the dollars.
Right.
They might have asked us for a higher interest rate, you know, because they could.

(45:19):
because there was a lot of liquidity that left the system.
So it just got repriced higher.
So they could make better returns at the same risk.
So they did for a while.
So it wasn't necessarily from the lender's perspective
because the lender was secured,
but it was from the borrower's perspective
because they wanted to understand how did Leden survive?
Because don't forget, we were seen as the little guys.
Yeah.

(45:39):
We were seen as the, you know, the smaller lender, right?
The guys that did a Bitcoin only,
the boring Canadians they would call us, right?
We didn't have stadiums or credit cards
or big sponsorships.
So it was always, why did these Wall Street,

(46:03):
where was it, Sequoia-backed firms going under
and you guys didn't?
Well because they were being wildly irresponsible They took a very basic business model and they just put it on steroids and started adding risk to it
And then they blew up.
But collateralized lending has been done for centuries.

(46:23):
Well, it can be done responsibly.
So it wasn't an issue with Bitcoin-backed loans.
It was an issue with poor risk management
and excessive risk-taking and fraud,
straight-up fraud in many cases, lies.
Right. So that that was a challenge to kind of build back out of because it took time.

(46:45):
It took proof of work. It took being in the market. Right.
And now when we're now now the trust has been rebuilt and there's this new sort of convergence around the idea that you don't sell your Bitcoin can be done responsibly.
You can borrow from a company like Ledin. You have groups like Cantor saying they're coming in.
And so it gives people this air of, okay, you know, the kids have left the room.

(47:07):
The adults are now offering loans.
We can, these are responsible people that aren't putting themselves in the position
that the last guys did.
God, why would they ever do that?
Right?
And so people have now, you know, regained trust in this asset or in this product.
And also on the idea that you don't sell your Bitcoin.
Yeah.

(47:28):
And not surprisingly, you're seeing a lot of people jump on to try to offer these lending products now that there's, you know, the product market fit has been clearly validated.
And companies like us have been doing this for seven years, trying to build trust and that this can be done responsibly.
So a lot of people are not trying to enter.
I'm not saying that it's, you know, I'm not trying to say everyone's going to be a bad actor, but I'm starting to see a lot of the things that we saw in the early days, like token launches, lack of proof of reserves.

(47:53):
And so I encourage people to ask the right questions, to demand proof reserves as a basic
standard, and to stay far away from anything with a token.
I mean, we've seen this movie too many times.
A hundred percent.
And so-
It reminds me of a conversation I was having with Alex Leishman from River just while we're

(48:15):
at the conference before.
And he was like, we were talking about the important things for him at River and what
they've done.
And he's like, it all just comes down to just don't fuck it up.
Like just the one thing you have to do is make sure customers are secure, safe.
Bitcoin doesn't get lost.
Like these are the things.
And it's like, it's another story.
Like I think in Bitcoin more than almost anything, slow and steady often wins the race.

(48:35):
And rather than just trying to kind of snatch the market when it's not necessarily there,
which I think what kind of BlockFi and Celsius did by just trying to pump their numbers with
everything that happened at 3Rs Capital, lies and fraud, everything mixed in, like they fucked up.
And you just kept going and didn't fuck it up.
I remember now that you say that, a funny story.
So when we were going through the collapse of all these lenders, right?

(48:58):
Like we had people at LetIn, you know, obviously they were being hurt by BlockFi.
They had assets in all these other places that weren't being allowed to withdraw.
And so we had people withdrawing from LetIn.
And when people asked me, at times I remember people would call me and say,
Mao, you know, are you guys okay?
You know, do I have to withdraw my Bitcoin?
my answer was always withdraw your bitcoin and bring it back yeah just do it just just do it

(49:23):
yeah just do it we can do we will process your withdrawal once you're comfortable bring it back
we'll be here we're not going anywhere so just do what makes you feel comfortable yeah and people
was like i appreciate it many of them actually didn't withdraw um a few did just hearing that's
probably enough yeah a few did but the point is when i was going through this i remember you know
everything's on fire. You know, clients are calling me, you know, worried. I'm talking to my parents.

(49:48):
My dad's my mentor and I talk to my dad quite often. And so I called him and I was basically
laying out what was happening. And he goes, so let me get this straight. He goes, the five guys
that were always ahead of you because they were bigger and louder and printing money are dead.
And I'm like, yes. He's like, you're the only one that survived. I'm like, yes. He's like, son,

(50:12):
you're going to go to the top all you gotta do is not fuck this up just don't fuck this up
you you've been given a massive gift right and to your point all we need to do is do one thing
and do it right and not over complicate what it is that we do the more bells and whistles we add

(50:38):
to the product, the hardest for me to explain the risks to you, to an investor, to a regulator,
to whoever you are. So we're making our business deliberately that simple because that simple is
easy to understand and easy to understand things make you feel comfortable, right? Our clients are
brilliant people. The more transparent we are with them on how everything operates and where

(51:02):
we see the risks and the things that we've built to protect against them and tell them,
listen, the risk here with you is liquidation at 80%,
like plan for it.
The more upfront and transparent you can be
with the clients, investors, regulators, everyone,
it's gonna land better.
It's gonna make you move faster.
Yeah.

(51:23):
And the coolest thing is like,
this is a product that rich people have been using forever.
It's just now you can do it with Bitcoin.
And then the coolest thing about that is
there's no credit checks.
There's no, it doesn't matter where you live.
Well, as long as you're operational at jurisdiction,
doesn't matter what color you are,
doesn't matter what gender you are,
doesn't matter what religion you are.
Like this is just a completely agnostic thing.
People talk about financial inclusion

(51:44):
and this is abstract term that Bitcoin,
some people in the Bitcoin circles love,
but most people don't really attach it
to any concrete things.
It's financial inclusion, it's warm, fuzzy feelings,
but you don't really know what it means.
At Latin, it means that Miguel from Lima in Peru
can get a loan at the same rates as Miguel in Lisboa,

(52:06):
In the past, issuing loans was very uneven and unfair because I couldn't underwrite your
assets in Peru the way I could underwrite assets in Portugal versus the US.
It was just very different.
Even gold in a vault in Venezuela, it's very different than gold in a vault in Switzerland.
So there was no real uniform asset that would allow me as a lender to treat you the same.

(52:31):
Bitcoin does.
And one of the things we're very proud of at Leten is we offer the same rates to everyone
we service.
And that goes for loans from $500 to hundreds of thousands of dollars.
And that makes people feel incredibly empowered to be able to say, I can use a product and

(52:56):
I know I'm getting the same rates as someone in the US or as someone in Europe.
Not only that, it's a product that is being used by people like Michael Saylor or it's
being used by very wealthy individuals and these treasury companies, et cetera.
It's the same structure, not the same terms always, but it's the same principle, which

(53:17):
is long, hard, short, weak.
You're long a hard asset, you're short or borrowing a weak asset.
And I think it's no different than a mortgage.
A mortgage is a lever short on the dollar.
And it's made people a lot of money.
So it's just bringing technology, financial technology
that's existed for every other asset into Bitcoin.

(53:39):
It's-
It allows the guy in Bangladesh
to do the Michael Saylor playbook with his own Bitcoin.
Exactly.
And he's not got the capital markets to tap into,
but he has got his Bitcoin.
Exactly.
And obviously, like I mentioned,
like obviously the terms and the scale
that Michael can access is, you know, God bless him.
It's awesome.
But other people have the same need
and they don't have a publicly traded company

(53:59):
that can issue a convertible bond, right?
They have the Bitcoin, which is their credit worthiness now,
and they can post it to a place like that
and get world-class service, world-class rates.
They can't do that with their local home.
They can't do that with their car.
They can't do that with their local business.
And so I think that Bitcoin is going to become

(54:21):
the cornerstone asset of most portfolios,
particularly outside the US,
because most people outside the US
don't trust their local banking system.
They don't want to use local banks.
They want to use something international.
And Bitcoin allows you to do that with a lot,
with a very little friction
versus what had to happen before,

(54:41):
which was you have to fly to the US,
open up an LLC, buy a property, deal with the US bank.
That was very cumbersome.
That's going to cost you more than 12%.
That's going to cost you a lot more than 12%.
You know, I joke with my, like, I say this myself too.
Like my job doesn't feel like a job, right?
Like I do what I love and I never really feel like I'm working.

(55:01):
Even when you're up at midnight still grinding away, it's not work.
My wife sometimes, I remember she told me about the beginning,
in early days of Leiden, which we were six guys
and I was very obsessive about my work.
And I would spend my weekends, all my weekends, all my nights,

(55:22):
just grinding away for Leiden.
and I would use my weekends to write the newsletters.
And my wife was, you know, one day she's like,
pulls me aside.
She's like, baby, I'm a little worried.
She's like, you used to have hobbies.
You used to have friends.
Like now you're just sitting here and you just write.
And I'm like, you know, what do you do for fun these days?

(55:44):
And I was like, what do you mean?
The newsletter.
I love writing the newsletter.
Honestly, I'm in the same boat.
Before I, well, I've had a kid as well,
which changes things.
but congrats.
Thank you, man.
But like I was, I would go surfing three or four times a week.
I think since I started the podcast
and obviously with the kid, I've been like once
in the last six months, those hobbies just go.

(56:06):
I didn't know you served.
You need to come, you need to come to Cayman.
I used to have a surfboard company.
Did you?
Yeah, yeah, yeah.
Way before my fiat life.
Like making surfboards?
Yeah, I brought them in.
Well, I used to make it, manufacture them in China
and would bring them into Venezuela.
I've done some, I'll try and find a picture.
I went through a period where I was like hand shaping a load of boards.
No way.
Yeah.
This was way back.

(56:26):
I don't actually know if I'll even have it on the phone.
Let's see.
I don't know.
You guys are blessed with amazing surf.
Totally.
That's, we're like 40 minutes from the Gold Coast, like an hour from the Sunshine Coast.
Nice.
Insanely good waves.
Where were we at?
Oh, I want to talk to you about the banks.
Sure.
Because like you said, they're not coming.

(56:48):
They're here.
They're all going to look at doing this stuff.
I think they're going to make a lot of mistakes in sort of the early days of these loan products
that they'll inevitably offer.
Like, I'm sure they'll all be rehypothecated.
Maybe they'll do that in a way that they can cover.
Who knows?
But like, what do you think that's going to do for the lending market in Bitcoin?
I think it's going to open optionality for people.

(57:08):
I think it's going to, the main benefit of this whole thing is going to be driving the
cost of these loans down.
Okay.
Driving the cost of these loans down makes them exponentially more attractive because
your hurdle rate for what you want to do with that cash, the bar that you have to clear drops
significantly, right? Like if I tell you a borrowing against your Bitcoin costs you 12%,

(57:33):
you know, are you going to do it to start a business that has some uncertainty to it? You
may not know. But if I tell you the cost of borrowing against your Bitcoin is going to be
five or three, then that risk becomes a lot lower because you might have enough saved up to cover
of the interest in the repayments and you might feel comfortable and you might want to do that.
But the drop of the cost of these loans is going to be, it's going to make them exponentially more

(57:57):
attractive and more useful for people. And they will be able to use these loans for more things,
right? That's, I think, the first thing. Second, I do think that there's going to be a world where
you're going to have the option to borrow with the rehypothecation option. You're going to have
the option probably to generate Bitcoin yield as well, which we used to offer at Lettend.

(58:19):
And there's going to be the people like us that just want to focus on keeping your Bitcoin safe
in custody at all times and lend you on that. And that's going to open the swat of options for
people. Adults can make their own decisions. I 100% like this is something I had Jet Miles on
the show, I don't know, a month or so ago, and he was talking about what they're doing at Strike.

(58:41):
And one of the things I said in that show, which I firmly stand behind, is I don't even have a problem with rehypothecation.
As long as everyone is entering an agreement knowing what the product they are entering is, I don't particularly care.
People can do what they want with their money.
I wouldn't use it.
I want to use a service like Ledin for this.
But I don't care that that exists, and I'm sure it will come back at some point.

(59:01):
Yeah, I'll give you a couple of funny anecdotes.
It's like the thing where one of the challenges I see with these types of products is that even though you were very upfront about the risks with people,
and I say this because when Lennon started offering the two options, custody and standard loans, where it was basically non-rehapothecated and rehypothecated loans, we offer both.

(59:25):
I thought, as a Bitcoin company, no one would touch the rehypothecator loan because now that
this option is available, everybody should flock to this one.
Naturally, my non-rehpothecator loan has a higher interest rate than the one where I
was able to lend some of the collateral.
Danny, it was incredible to see how many people just flock.

(59:49):
They just see the 2% lower rate, whatever it is.
You see the delta on the interest rate, and it doesn't matter how much you try to hammer the difference and highlight the risks to them, they will go for the lower rate.
That's one also, I mean, that plays into the fact of why we're getting rid of it all together is because even though people will tell you a lot of times they understand, yes, don't worry, in the back of their minds, they're basically saying, but that's never going to happen, right?

(01:00:16):
Like there's no scenario in which this would happen.
Like even though we've been through BlockFi, even though we've been through Celsius, even though we've been through Voyager, there are still people out there that say, ah, I'll take the risk with the extra 2%.
And frankly, I think that those options, again, will pop up again.
And with people like the banks and maybe not necessarily.

(01:00:39):
Maybe some banks will.
Maybe some other lenders that are crypto native will try to offer this too.
there's a lot of risk when you are lending Bitcoin in any way of shape or form.
That's why we got rid of all Bitcoin lending at Leten, one of the big reasons.
Because, you know, you're lending an asset that can't be reprinted, right?

(01:01:02):
They can't be FDIC insured.
You can't make a backup of the NAR.
There's no backstop to somebody if you lose Bitcoin, right?
And so I think there will continue to be these types of yield products.
There will continue to be these types of rehypothecated products.
There will be losses in these products, again, down the line.

(01:01:23):
That's why we want to have no role and no participation in any of those.
But I think it's inevitable, right?
I guess it's an inevitable part of a free market, right?
Like people will put that option out.
Some will use it.
And eventually, I don't know when or how or how bad it's going to be,
but there will be an event where some people took too much risk and that gets reset.

(01:01:45):
It's just like growing and pruning and growing and pruning.
It's just a boom bus cycle.
It's just part of the fiat system we live in, right?
And you can't have the booms without the pruning process, right?
And I would argue that lending is an example, right?
Like we had the first boom with,

(01:02:06):
the first boom of any lenders at all,
which was the right around the time
our sales and chain BlockFi sales,
he was like, we were the first batch, right?
Of lenders.
And there was product market fit.
It was clear.
We all skyrocketed.
Then there was a massive pruning down, right?
Now we're starting to see the next wave of growth.
And now it's not BlockFi.
The characters have changed.

(01:02:27):
Some of the characters have removed
and the new people are coming into this part two
of the movie, but we're going to see that too.
We're going to see a bunch of a tide lifting all boats.
Then oceans will retrace again.
You'll find out who was swimming naked, who was taking too much risk.
So I think that we're going to see this pattern again.

(01:02:49):
And that said, I think these products will continue to find a reason to exist.
Like, you know, how many people have won the lottery?
There are a few.
How many people still play the lottery?
a lot of them like it's it's you know they it's just because the trade has historically failed
doesn't mean there's not going to be people trying to line up to do it again what if you

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Well, I'm really glad though
with the direction you guys have gone.
I'm really glad you guys are a sponsor.

(01:05:44):
I fully support what you're doing.
I think it's very cool.
Thanks, man.
I'm now a customer of Ledin, which is very cool.
Cheers.
No, I think it's 100% the right direction to go, which I'm pumped about, man.
But the other thing I wanted to talk to you about,
last time you were on What Bitcoin Did, not Mr. Obnoxious,
we were talking about the elections in Venezuela.

(01:06:05):
Yes.
And it was right around the time.
I think it was like the week before the elections actually happened,
if I remember right.
Majuro obviously won again.
Well, won again. Obviously rigged unfair elections. But give me the update. What's kind of happened since? Because in fact, let's start with you should tell the story of running away from Venezuela or your brother running away from Venezuela because that's crazy.

(01:06:26):
Yeah, no, happy to. So I'll give you the background. So I am born and raised in Venezuela. That's where I found Bitcoin. And that's where, well, that's where I experienced hyperinflation and authoritarianism.
And my family, it wasn't really me, it was my youngest brother, and my dad found Bitcoin in late 2014, early 2015.

(01:06:47):
And we started mining Bitcoin.
And in Venezuela, back then, there were these very horrible capital controls.
It was illegal to buy dollars.
People tried to store their wealth in non-perishables, like cans of tuna, car, tires.
But then the government started coming out with these hoarding rules.

(01:07:11):
So you couldn't have more than four extra tires per car.
You couldn't have more than two cars to your name.
You couldn't have more than, you know, if you were found to have too many plastic chairs, believe it or not,
people stacked plastic chairs, they would consider to be hoarding.
They would be seized.
Don't tell Pierre Richard.
So it was this really dark moment.

(01:07:37):
Also, Chavez had just died and we had lost the, well, the regime had determined that they weren't going to allow democracy to thrive in Venezuela again.
So maybe just to give you the sequence of events, Chavez dies in 2013.
That triggers a new presidential election, early 2014.
that's the election that a lot of us went to vote.

(01:08:00):
I've told this story a few times
and apologies if anyone's heard it before.
But when I flew down with my now wife,
a lot of the planes that were coming into my Katia,
which is our main airport,
were guys all wearing the freedom hat,
which is a Venezuelan flag,
and everybody wearing white,
which was the color of that movement at that time.
So everyone was coming from anywhere.

(01:08:21):
So that was a period of hope.
Yes, you could feel the hope, honestly.
You could sense it in the air.
Like, if it had been a fair system, we would have won.
The numbers were there.
Like, I saw it, at least in my hometown,
where I had seen the previous elections, by the way.
In the past, I will admit, the first few elections that Chavez won,

(01:08:42):
he won them democratically.
He was popular.
Yeah, I'm not going to say the guy took him.
The first few were democratic, 100%.
This one, though, was not.
And you could see it.
It was in your face.
They made a point to show us that they didn't want us there anymore.
And after that election, that night when they announced that they were going to keep the reins, that they weren't going to basically allow for a recount, a lot of people that started a series of protests, which I partook in.

(01:09:14):
And that was a protest where they were Well it wasn the first time but one of the few times that Maduro brought real guns to shoot down protesters
And they were trying to make a point.
So, you know, people I know went down on that protest.
And that was the moment that triggered hyperinflation, that triggered the wave of mass migration, because people basically gave up.

(01:09:39):
They lost hope.
They said that they were holding on for the election.
When the election went the wrong way, everybody was just for selling everything and liquidating
everything.
And so that's the context in which my family finds Bitcoin, like six months after that
event.
And it was because my youngest brother was reluctant to leave the country.

(01:10:00):
And so he wanted to stay and do something in the country.
So he pitched my dad on mining Bitcoin.
My dad sends me the white paper.
I said, subsidize energy, subsidize internet.
The output is globally sellable.
Seems like a good idea.
So my brother gets the mine, starts doing very well.
We start helping a bunch of other people mine in Venezuela.
And 2017 rolls around.

(01:10:23):
And in late 2017, I'll give you the story.
Actually, I don't think I've broken this down before, but to give you the context.
Maduro and the cronies had a system whereby the people that were doing the bad deeds, right?
The guys that were going out with the real guns at the protests, the guys that were, you know, doing his dirty work on his behalf.

(01:10:47):
He needed to get them paid.
He needed to pay them and they needed to earn well.
So in some cases, and this is known, I mean, don't take it from me, fact check it.
But the Venezuelan army basically is a drug trafficking ring, right?
And so some generals have rights to some border crossings.
That doesn't seem hard to believe.
Well, there you go.
So that trade keeps some fed, but it wasn't enough.

(01:11:12):
He needed to basically get more things.
So I think in 20, the first one was El Dacaso.
If you Google, anyone listening can Google El Dacaso, D-A-K-A-Z-O.
El Dacaso was in December, which is when things start getting heated because Christmas comes along.
You have money for gifts for your kids.
You have crappy Christmas.
So Maduro every Christmas would basically get a private company that had a bunch of inventory or that had been getting dollars from the government to import things and would say, oh, this company is, we're granting them dollars at a preferential rate.

(01:11:47):
They're bringing the goods and they're selling them at the fair market rate.
So they're basically arbitraging the exchange rate we give them to bring the goods with the real market of dollars.
So to paint a picture, the government says a dollar is two bolivres.
The real market says a dollar is 10 bolivres.
So these guys were buying dollars for two, bring the goods, and then price the goods at 10 bolivres per dollar.

(01:12:13):
So Maduro would say, and everybody was doing this, by the way.
It wasn't just that.
Of course, yeah.
Maduro wanted to make an example.
And not only just make an example, he wanted to satisfy his cronies.
So this was a national chain.
They had stores in a bunch of countries.
So he basically goes and says, on December 20th, there's going to be a fire sale in all of these stores priced at the dollar rates that we gave to them.

(01:12:39):
Basically like 90% off everything. Flat screens, fridges, microwaves.
Denny, it was party.
You could see people walking around with flat screens and their things and radios over here, washing machines.
Because presumably they know they can sell it a week later.
Of course.
This was really just taking a private company and basically making a piñata out of it and just banging through their inventory to populism.

(01:13:07):
Populism through and through.
So that was 2014.
2015, he did this with a shoe company.
And so everybody got free shoes.
2016, I think he brought pig from Brazil.
He brought a bunch of pork and gave people pork.
2017 rolled around.
nobody had brought shit because they knew what was going to happen.

(01:13:28):
So you make sure your shop's empty around Christmas.
So basically, 2017 rolls around and he's basically thinking,
okay, I'm sanctioned.
You know, I can't tap into the bond market.
Hyperinflation is running wild.
So everything I print just makes my life a lot more horrible.
So I need to find a way to get some money or some free things

(01:13:51):
that I can then give to my cronies, right?
December 2017, Bitcoin was ripping, remember?
So everybody was talking about Bitcoin.
And now all these tokens were starting to take a hold.
So Malura comes out with two great ideas.
He looks at the import records for 2017.
He's like, who's Bitmain?

(01:14:12):
Because it's keep coming, right?
It's like Bitmain, Bitmain, Bitmain.
Like myself, a bunch of other people
were ordering miners after miners
so you could see in the invoices,
on the packing lists, you know, this machine or this company was sending a lot of things
to Venezuela.
So he's like, what's this Bitmain thing?
It's like, oh, it's Bitcoin mining equipment.
So wait, wait, is that the uncensorable thing?

(01:14:32):
And I was like, yeah.
And they're here?
Yeah.
It's like, okay, we're going to get some Bitcoin.
So he said he gets two grandiose ideas.
First one is I'm going to create the Petro.
Yeah.
Which was backed by Venezuelan oil.
Did you read the fine print?
Of course not.
So the fine print says, the fine print says, the petrol is backed by a barrel of oil, some

(01:14:57):
grams of gold, which is another natural mineral we want, or we have in Venezuela.
And the last but most important one was, or any other currency or commodity the Venezuelan
government deems appropriate.
That's where they got you.
Of course, he knew this was going to fail spectacularly, but that he still tried to trade mirrors

(01:15:18):
for gold with people saying, hey, I'm going to sell you this.
Are you dumb enough to give me your Bitcoin?
That failed.
But his other great idea was to create a miner registry so that people could voluntarily
register and tell him, mine a Bitcoin.
In 2018, he starts, obviously, the mining registry failed spectacularly too, because

(01:15:38):
nobody in their right minds would go and tell the guy that's trying to kill you.
Of course not.
What you're doing.
But he knew these things.
He knew both of these were going to fail.
In late 2017, early 2018, he starts making a Petro roadshow.
So he starts making this sequence of events across the country.
And the sequence of events across the country, he's parading ASICs.

(01:15:59):
He's parading ASICs and GPU rigs, even though the Petro was proof of stake.
The Petro was never meant to be mined, but he was bringing ASICs around the country.
And every time he would stop at a different city, he would say,
did you see this?
This is what an ASIC is.
This is what it sounds like.
This is how much Bitcoin it makes.
This is how much electricity it uses.
This is its heat print.
This is its sound print.
By the way, did you know that if you disconnect it

(01:16:19):
and put your wallet, you can start making Bitcoin?
It's a brilliant device.
And then he's like, this over here is a GPU rig.
This one has graphics cards and it's quieter,
but still uses this much energy.
This is how much this one makes.
Similarly, take it off, put your address, off you go.
He was giving people a blueprint to come after the miners.

(01:16:42):
Not surprisingly, weeks after,
we start getting some surprise visits in the facilities,
myself and a bunch of people in the industry.
They were utility reps, they were municipal reps.
And we all knew, we had suspicions.
Weeks after they start coming with guns
and demanding machines and demanding money.

(01:17:02):
And January 18, I think it was,
they get to my brother's facility.
They bust through the door,
like a SWAT-like team with like long guns.
There's a picture.
I can send it to you so you can link it in the show.
Yeah, absolutely.
But they basically show like two guys with guns
standing next to 17A6 and two fans.

(01:17:22):
You know, like it was a massive drug bust.
And so they start trying to extort my brother.
My brother wasn't at the site,
but they quickly got a hold of his contact information,
basically start calling him and saying,
you give us the money and the machines
and we don't throw you in jail.
Jail for what?
We're not doing anything illegal.
Well, let's start making up these charges, these fake charges.

(01:17:44):
So it's 8 p.m.
These guys are hounding my brother.
And they start threatening him, saying, hey, listen, we know where you live.
We know where your kids go to school.
We know where your business is.
Like, you have until tonight to come up with the money.
And my brother, with his wife and two kids, late at night, makes the decision to escape

(01:18:08):
and go to the border and use the Bitcoin he has in exchanges and in his ledger to basically leave
and build a new life. And now to do this, we live dead in the center of the country. To do this,
we have to get to the Colombian border, which is nine hours away. It's a very treacherous road
in the most dangerous country in the world. There's no fuel. So it was a huge family effort.

(01:18:30):
We had family that lived along the way in San Cristobal and Merida, and they drove to the
highway with fuel so that he could they could fuel up his tank with pimpinas this is a true story
without him having to leave the highway because he didn't have much time the guys the extortionists
were calling my dad saying we know you're going to make a run for it tonight we're going to shoot
we're going to basically send out a warrant so you can't leave the country holy shit so my brother

(01:18:54):
has against the clock in fact he went to a border crossing point that is so remote in the jungle
that is not connected physically to the infrastructure.
So the point was that even if they did try to get a message out that night,
it wouldn't have been fetched by the time he got there.
So he got there.
He crossed.

(01:19:15):
I remember because I had to pay with my – we didn't want to use any of his cards.
So I used my Canadian card to pay for his hotel night in Cucuta,
which is the border town.
I still remember the call he made when he was about to go through the border crossing
because that was like you got there, but-
That was the crucial moment.
That was the crucial moment.

(01:19:36):
I mean, I still get goosebumps because he was crying.
And I was with, like, I couldn't understand why.
He's like, I'm taking my wife and two kids
and I might not get out.
So he goes.
Luckily, 20 minutes later, he calls me from the other side.
He's like, I made it.
We're good.
We brought the Bitcoin with us.

(01:19:57):
The ASICs, they took.
the Bitcoin they could never touch.
And from there, my family was my brother,
my family, my parents,
because we were all Bitcoiners at the time.
A lot of us, most of our wealth wasn't Bitcoin.
From there, we were able to rebuild our lives.
I had already had started Ledin at the time.
Ledin was just off the ground.

(01:20:17):
Actually, my family was one of my first clients, actually.
So shout out to my dad and my brothers.
And a bunch of my friends, actually.
They were my first clients.
And I remember some VCs at the beginning.
They would ask us, do you guys have any clients that are not mouse friends?
So that was always like a thing that I had to work through because I spent a lot of time mining and a lot of our first clients were like friends and family.

(01:20:40):
And but anyway, that's how my brother was able to get out.
And that's why I had understood the value of Bitcoin before when I was in this capital control environment.
My brother was selling it at the free market rate.
To me, that was like my big unlock is, oh my God, this thing allows money to go to its happy place.

(01:21:02):
This thing allows people to keep their savings, the value of their savings in a political asset.
That was to me the biggest thing.
Then I saw it work in the most extreme circumstance I think I've ever experienced with my family.
after that man danny like there's no speech you can tell me about bitcoin that's gonna make me

(01:21:25):
think that it's not gonna work you've lived it there is no argument you can give to me today
outside of some quantum thing or perhaps something that's outside of my spec my my specialty in the
technical realm as it's designed today with no any with any other changes no more changes needed

(01:21:46):
to the protocol it did the most important thing we've ever demanded from it or wanted from it it
worked to me that's that's when people ask me for about other assets and like what do you think
about this? What do you think about that? Should I buy this? Should I buy that? I'm like, I don't

(01:22:09):
have an opinion. I don't want to have an opinion. I have an opinion on Bitcoin. I've seen what it
can do. Because of that, I don't think there's a price you can put on it. There is no top,
because what it can do has no price, right? And so that to me was the, once that happened,

(01:22:30):
I mean, I already loved Bitcoin, but when that happened, I knew I wasn't going to be able to
do anything else with my life. That was the sort of escape story that in many ways shaped
a lot of my views today. I mean, we can talk about Venezuela today, but that was how we got out.
I think it's hard for anyone who's not been through that. I've certainly not been through

(01:22:53):
anything like that to, like, I get it. Like, I know that's what Bitcoin can do, but to live
through that is insane.
It was the biggest test of fire.
Now, mind you, it was still early days.
It was very unlikely for them to say,

(01:23:16):
do you have Bitcoin on you?
As he was trying to leave.
It was more so, is there a warrant out?
Will they try to take him unfairly?
I wasn't really worried that they were going to find the Bitcoin and take the Bitcoin from him because that just wasn't in anyone's radar at the time.
Yeah.
But the fact that they knew he was mining Bitcoin, like it must have been at least somewhat on the radar.

(01:23:39):
Oh, if they had fired the warrant, like him and the Bitcoin were going.
Yeah.
Right?
Like it wasn't, it was a binary outcome.
Yeah.
But that said, it wasn't just the fact that he was able to cross.
it was because Bitcoin was the only thing
that allowed him to make the decision to leave.
Because he knew he could rebuild his life elsewhere.

(01:24:00):
Correct.
Without it, you would not have made that decision.
I know many people-
You're then just a refugee.
That have been in that same situation
and their only solution is to sit down
and negotiate with some assholes
and to take whatever terms they're giving you.
And it never ends
because when an extortionist asks you for five
and you give them five,

(01:24:20):
they'll come back for 10, they'll come back for 15, they'll come back for 20. And so I know people
in these situations. In fact, in Venezuela, they're called, it's funny, I don't know if people know
this, but in Venezuela, they're called vaccines. Vaccines are referred to as the payments you give
to the mob or the gang, the local gang, because in Venezuela, there's no police, right? Police

(01:24:43):
doesn't protect you. So what will happen is you have these local rings of a tren de Aragua,
or, you know, you've heard of Trenderagua
as like the big sort of organized crime thing
that moved to the US.
But equally in Venezuela,
there's like, there's these gangs, right?
That control different parts of a city or a city.
And as a business person,

(01:25:04):
they come to your store and they say,
hey, Miguel, how's business going?
Great.
Okay, this month's vaccine is $1,000.
And what is the vaccine?
A vaccine is we will ensure nothing happens to you.
but what happens if I don't pay it?
Something will happen to you.
We don't know what happened to you, Miguel,

(01:25:25):
or to your store.
You wanna take that risk.
And so people live in this constant threat.
And not only that, like I have people where like,
they have to pay one gang, but then the next gang comes
and they're not demanding a vaccine.
But they're like, no, but I already paid these guys.
It's like, different groups.
We need one too.
They're not gonna protect you from us.

(01:25:46):
And so it becomes this bracket, right?
So even being able to leave the country, even being able to entertain the idea to go and rebuild somewhere else.
And by the way, it wasn't just Bitcoin, by the way.
I want to say this because I think it's important for everyone to know this.
Everyone listening to this show, if you already have Bitcoin, God bless you.

(01:26:09):
Go get a second passport.
Go get a second passport.
if and when your country goes to shit
the first people that close the borders
ironically are your neighbors
it becomes
and now once your country is tagged
as a failed state

(01:26:29):
forget visas
forget a visa
you're done
you're cooked
that passport
throw it away
I haven't used my Venezuelan passport
probably over a decade
it's shelved somewhere
it's useless so it's it's a combination of having bitcoin having passport maybe having some cash to

(01:26:53):
be able to move uh over that's your plan b right like but bitcoin is an integral part of that
decision and today i i still you know talk to a lot of my friends that are still there
A lot of them have Bitcoin, but they choose not to leave.
There's always many reasons why people choose not to leave.

(01:27:15):
Some people have older relatives that need them to be close by.
Some people inherited their dad's business.
They don't want to let it go.
There's many bells and whistles around that decision.
But that was our experience, or that was my family's journey leaving.
Luckily, myself and my other brother and my dad were all on vacation when they raided Danny's facility.

(01:27:36):
So we all just stayed out of the country.
We never went back.
But he was the only one that had to go through that grueling trip to get out.
It's an insane story.
I've heard it before, but even hearing it again, it's insane.
You say that obviously there's different reasons why people stay.
Is there any hope that there is a fight that can be fought there in terms of fixing things?

(01:28:02):
I really want to say yes.
I really want to say yes.
Like I really, really do.
I was asked this the first time I was ever on Peter's show.
I think it was 2018.
And it was about Venezuela.
And it was myself, Giancarlo, and Alejandro Machado talking about Venezuela.

(01:28:26):
And at the end of the show, he asked all of us what we thought would happen.
And I still remember what I said today.
I said, there won't be a democratic solution.
if ever there is a change
it's because guns were drawn
and there was a big fight
and the blood was spilled
and that's how change came about
I don't see

(01:28:49):
a democratic way out
for Venezuela
I don't
in the same way
I don't see a democratic way out
for a place like North Korea
and a place I don't see
a democratic way out
in a place like Cuba
I believe
this is probably going to get
like one of the spicy takes, but my spicy take is once you combine a communist regime

(01:29:14):
with the military, you can't get them out of power.
And I'll explain why.
It's a matter of incentives, right?
There's obviously cases of the militarized right, and there's cases of the militarized
left.
I would argue that the militarized left is much harder to remove from power.

(01:29:35):
And I'll explain why.
The militarized left is supporting things like free everything, free school, free house, free food, free gut, you name it.
It'll be free, even if it's shitty.
Yeah, exactly.
The quality is terrible, but it's free.
Nobody cares.
It's just fucking free.
Yeah.
Right?
Whereas the guys on the right are usually the guys that want to start a business, buy an asset, get educated, right?

(01:30:02):
outside of the public indoctrination centers
that they have, they call schools.
The right tends to think more optimistically
in their ability to build and effect change
and their options.
Whenever you have a cohort of the right
that starts gaining some strength,

(01:30:24):
the militarized left brings out the guns
and just go boop, boop, boop.
All you have to do is shoot three or four kids over here.
immediately what do you think their parents are going to say?
They're going to say, son, you're educated.
You speak two languages. We have some money.
Get out. You can literally go anywhere.
Just leave. Just leave. Just like my parents told me.

(01:30:48):
That's exactly what my parents told me.
And all my friends, a lot of my friends.
The right opts out because it can't.
the left cannot opt out.
So if you have militarized right,
even if you have the militarized right,

(01:31:09):
if these guys come out in numbers with guns,
the guys that aren't in the military on the right,
they're going to say, well, great.
I'll leave you guys fighting over here.
I'm going to go build in the free world
because I don't need any of this.
I don't want my kids getting shot.
So I'm out.
So the people that have the means to rebuild an economy
also have the means to opt out.

(01:31:30):
they're the first ones to do this because they can the left cannot opt out because they don't
have the same number of resources they don't have the same options they don't have the same
optionality all they have is fight all they have and then the reason they're willing to die
for change is because they have nothing to lose

(01:31:50):
the right typically has something to lose and so they choose to not fight
And that's why I think you have this dangerous cocktail
in a place like Cuba, North Korea, Venezuela.
These are militarized left of center governments.
These things are as immovable as a government can be

(01:32:15):
through democratic means.
There's just very, it's very hard.
So as like the makeup of the people
who are actually living in Venezuela now,
how many people are,
sort of semi-vocally opposed.
I know you can't be too vocally opposed
without getting shot,
but like how many people do they,
are unhappy with the current regime?

(01:32:35):
If you believe the polls
from the most recent election,
70% of the country.
Okay.
60 to 70% of the country
would change governments
if given the chance.
The problem is that
they are,
like I'll give you the example
of the most recent election,
Maria Corina Machado,
we were chatting about with peter maria corina won the numbers are there they're out in the open

(01:33:02):
what did he do so one of my uncles was sent to jail because he provided one of his pickup trucks
to assist in maria corina's campaign insane he was sent to jail he broke out like four months
after he got sent he broke out well he negotiated a way out and basically left the country he didn't

(01:33:23):
like escape. It was like a coordinated
escape. And
similar to like Leopoldo Lopez's escape
and a few other political prisoners, like there's
basically they're saying
we'll let you out. Never
set foot here again. Right?
And so people take the trade.
So the
I had friends, so this is another
it's just a story just to make an example.

(01:33:46):
Maracorina was doing these
stops across the country, these
rallies across the country, like any politician does.
In Barquisimento, which is my hometown, one of my friends invited them to come eat at the restaurant for free.
They came to the restaurant, they ate for free.
The next day, his restaurant was shut down for a month for some bullshit rule.

(01:34:08):
So they make it very clear to you that if you oppose us, we are going to come after you.
And even though, and this is one of the most frustrating things to me during this whole thing, which is going to exemplify what I'm telling you.
You might hear me say, yeah, no, Danny, 60%, 70% of the country is against them.

(01:34:29):
And you're like, but why, why would you hear anything?
Why, why, why aren't more people saying something?
The reason, while this, while this whole thing was happening after the most recent election, you know, I was flipping through all social media just to see what people were saying.
And you would hear tweets from people, or I would see posts from people, particularly in Instagram, because Twitter was quickly banned in Venezuela.

(01:34:54):
And people had these posts about, like, you know, let's go fight for a recount.
Let's go help Maria Corina.
This is unfair.
They're stealing our elections.
And I kept seeing a really interesting pattern, which is all these posts were done from Venezuelans outside the country.
I was looking at the accounts of my friends that I know are in the country.
Not a fucking peep.

(01:35:16):
Of course.
And so I went to them.
I couldn't hold it in.
I messaged a couple of them.
And I had this call.
And I told one of my buddies,
what the fuck?
Like, if anyone,
we are the ones that should be saying something.
Why are you quiet?
And he goes,

(01:35:37):
I have a restaurant.
They just shut down
Mariana's restaurant because she allowed them
to sit there for a month.
She's broke, man.
I don't want to lose my restaurant.
And the other guy was like, I don't want to lose my farm.
I don't want to lose my this.
So they're in it.

(01:35:57):
You all become part of this parasitic thing.
They govern through fear.
And that's the other thing that I think Bitcoiners kind of brush away
is this idea of the monopoly on violence that a government has and the fear that it will instill

(01:36:20):
on you if they want to decide you're a target i know a lot of people say it's like they're not
gonna come after my bitcoin i'm never gonna give them my bitcoin i'm like man have you ever had a
swat team put a gun to your face and i'm not talking here where there's like a sound legal
system where you're going to take you to court we don't have that if somebody pops you in front of

(01:36:44):
your house venezuela there's no recourse good luck yeah you're popped that's it so in a place like
that when you have somebody come to your door and say no do you have some bitcoin we heard you have
some bitcoin here's the proof you don't want to give it to us here come here sweetie is that your
daughter come here sweetie i'm giving that bitcoin straight away you're immediately i'm like give me

(01:37:08):
your address right away here it is here's my wallet i've been robbed at gunpoint i grew up in
of course i've been robbed at gunpoint several times and not once have i considered not giving
them what they want you mean my bitcoin means nothing if i'm not around what i don't know what

(01:37:30):
a lot of these people are watching, right?
And it's also pretty cool to say something like,
you're not gonna get my big one,
I gonna take you to court when you in a place like America None of us have that luxury outside America Nobody has that luxury outside America So you popped or you give them the Bitcoin
It's that simple.

(01:37:51):
That's why people die trying to come here.
It's a worthwhile trade.
It's a well worthwhile trade.
It's absolutely worthwhile.
So what is the potential path then?
Is the idea of the population rising up against the government in any way likely,
like military coup, or do you think this thing just drags out for another decade and keeps going?

(01:38:15):
I think the...
At the risk of speculating, I think the most likely outcome is a military uprising.
It is a change of the guard and the monopoly of violence.
right like it's not it's not democracy that's holding him there it's the monopoly of violence

(01:38:37):
that's holding him there so the most likely way i see this change is a military uprising
that shows that a significant fraction of the venezuelan army is willing to die to get them out
because don't forget what you're asking these guys to do by the way there's like
bounties on all these guys' heads in the US, right?

(01:39:00):
So what you're telling them to do is,
here, let's hold an election.
And if you lose, you're going to jail forever.
That's what's happening to them.
If they lose the election,
what do you think?
They're going to lose the election?
They're never going to lose the election.
So they're always going to find any trick in the book
to keep the control and not go to jail.
So that's why, to me,

(01:39:21):
the only feasible way out is armed conflict.
within, not externally, from within.
You know, you could argue, is it supported?
Is it enhanced?
It will always be supported inevitably,
but that doesn't really matter.
It's not the financial support as people die.
Yeah, and now the other part of that is

(01:39:43):
because the social fabric of the country is so broken,
like all of the productive class has left Venezuela.
Everything that's there now is either a parasite or brainwashed or somehow in cahoots.
So it's really, it's not just toppling.

(01:40:04):
It's keeping the democratic base that's smart enough to not bring them back.
But I assume a lot of people would go back to Venezuela if it looked like there was real change.
I used to think that.
I don't anymore.
Why do I say that?
when you leave venezuela there's there's two types of people that leave venezuela

(01:40:26):
there are the people that leave venezuela and say i'm gonna make it out i'm gonna make it outside
of this country regardless because i know being there is a dead end right and they make it work
they will grind until they live they build the life they want abroad i will include myself in
that camp and a few others there's also another group of people that will go to the u.s get a

(01:40:50):
start working away, realize how hard it is
to actually be self-sustaining adult
in a place that doesn't give you free things.
And then they'll say things like,
my quality of life here sucks.
I don't have time to go to the beach.
I don't have time to na-na-na-na.
And then they go back.
So the people that are gonna go back,

(01:41:11):
like I'll give you an example.
And the people that can't cut it.
You're right.
You may, exactly.
The people you really want to go back.
Are not going back.
made it out they made it abroad what are they gonna why are they gonna roll the dice again
i'll go visit you know like we'll go visit we'll go help the rebuilding but
we're gonna wait for some certainty before you won't bring a dollar or my daughter or my son

(01:41:35):
like i'm gonna wait to have to see a lot of change to make me feel comfortable that we can go back
and set roots again like yes i want to rebuild yes i want to take the country back a hundred percent
But I also know that a lot of what I miss is not what that is today.
I miss a moment in time.

(01:41:55):
It's nostalgia.
Yes.
I miss a moment in time.
The country that I left is not the same country that's there today.
And it's never coming back.
I mean, you can say that about England in the early 2000s when I was growing up.
That's never coming back.
Exactly.
It's just a way more extreme example of that.
Exactly.
And so now there's big trade-offs, right?

(01:42:18):
Like, what if I'm wrong?
Like, well, what if I'm right?
And then what if I'm wrong?
Like, what if I'm right is, oh, great, we rebuild.
I was able to build a country.
I get this new sense of purpose.
I love this place.
But what if I'm wrong?
I brought all my assets back after wasting my life abroad to build all of this,
just to have some lunatic in a sombrero take it again?

(01:42:39):
Like, I'm not going to let that happen.
And that mindset is true for many people that have been successful abroad.
The only guys that are going to be the first ones on the plane there are the guys that are just like aching for a change.
Being out there has been so grueling and hard for them. They just never found a way.
And again I consider myself incredibly fortunate because I did my university abroad I had a network of friends and contacts that I could lean on when I had to build my professional life

(01:43:09):
So it's easy for me to say or easier for me to say, oh, yay, you know, I made it out.
But that's also because my parents were very brilliant and, you know, invested in me to be able to go do all these things.
but that's not to say most people are equally as prepared to have the opportunities that i've had
and so the sad reality is that immigration happens top to bottom right like there's a saying in

(01:43:36):
venezuela when the immigration crisis started the saying will goes the saying went the first ones
to leave leave on a plane they leave with investment visas student visas you know they they
They leave at a top notch.
You know, they take their pick.
You know, they leave with means and purpose.
The second group to leave are, you know, you leave with a work offer, you know, a little bit more of a humble beginning.

(01:44:02):
You know, you might have to save up to pay for the flight.
And when you get there, you might have to stay with a relative to kind of get off your feet.
That's like the second batch.
The third batch can't even afford a suitcase.
They're walking across the border and demanding social services no matter where they go.
So the sad part is like these first guys will never likely come back.

(01:44:24):
A decent chunk of the second ones will come back.
All of the bottom of the pyramid is going to be coming back.
And so can you rebuild the country you have without the most productive guys that were at the top?
Absolutely not.
Absolutely not.
and like people in capital are very risk adverse right like if you've already built wealth if you're

(01:44:49):
already successful somewhere else are you really going to come back to like the maybe
it's just a risk that you wouldn't be willing to take it's a very hard proposition i'm not saying
maybe i would do it listen like i have to see how everything happens like and nobody wants this place
to change more than i do i i was just having a chat with leopoldo like you know i started to
close with like Alex Latz and the Polo and Maria Corina and their team and everyone doing

(01:45:11):
work changed this thing.
And I commend them because if there's something that takes courage in this world is to be
a Latin American politician.
You have to be not just courageous, almost delusional to be a Latin American politician.
Like people say, oh, entrepreneurs are crazy.
I'm like, talk to a Latin politician.
You know, like that's balls.

(01:45:33):
They inspire me.
every time there's a venezuela election i tell myself i'm not going to get excited this time
every time i get excited i support i chant i cry i fucking send money i do whatever i can to help
and it always ends in the same result i don't think i'll ever stop getting excited i don't
think i'll ever stop trying to support it but i also um i try to check myself with this because

(01:46:00):
it's also one thing it's like i can make that decision now maybe my wife's smart enough to
make the decision now what type of life am i going to give my kids they're not making the decision
they're falling on top of mine and they're fine now they're in a great place i bust my ass off to
get to where we are today what if we go down there and something happens like is that is that the

(01:46:22):
place i want to leave them at is that where i want their network to be forged there's a lot of stuff
play and that's why i think it's so hard to think about if we just change it it'll all come back
i'll give you the example of what's happening in new york like new york just like just had an
election last night a lot of people are shocked yeah i'm not that shocked frankly but what's

(01:46:44):
going to happen in new york now most likely it's not just new york it's just using an example is
the people that he's going after i.e the guys that he wants to raise taxes on are in right now if you
word to Google, like I would welcome you if you go to Google right now and look Google Trends,
Florida real estate in the state of New York, I can almost guarantee you that those searches are

(01:47:05):
up through the roof. When Petro won, and I track this, I track this actually every time an
authoritarian wins. So when Petro won in Colombia, Petro's like the crazy left or center guy that
won in Colombia a few years back. I immediately went a week after and I saw what are the search
interest or trends for real estate in miami from colombia through the roof yeah vertical so what's

(01:47:30):
going to happen is like people are going to say okay well great you guys pick this guy rich people
leave see ya i'm gonna go move to florida uh maybe maybe we'll come back but then they'll build the
life in florida their kids will have their friends in florida their house is beautiful in florida
The weather's nice.
Oh, you know, Bloomberg's back in New York.
Should we go back?

(01:47:52):
We're already here.
It's pretty nice.
It's so beautiful.
My kids don't want to go back.
Yeah.
So it's like, it's not, that's the other thing.
Moving isn't easy.
It looks cool.
It look, you know, people think it's fun.
It is.
I've moved many more and many more times
than I thought I would in my life.
It's never easy when you have to bring

(01:48:13):
the whole shabazz with you especially as your kids get older very very difficult People want predictability routines like you value that
And so I think to change Venezuela,
we need some type of,

(01:48:33):
they need to lose the monopoly on violence,
one way or another, that's number one.
And then once that happens,
There needs to be almost like a path to bring everyone back, the productive class back.
And in some ways, that may even be harder.
That might be harder.

(01:48:54):
A lot of it, I mean, life's beautiful and unpredictable in so many ways.
I think I still have hope that, I don't know when, but at some point in my life, in my later years,
I will be sitting in Venezuela, retired or whatever, you know, might be much older by then.
And I'll be looking around and all the money that I'm hopefully going to make with Bitcoin and all the business and everything that I'm building.

(01:49:23):
I couldn't think of a more worthy goal in life than to bring democracy back and to bring free markets back to Venezuela.
because I just, I feel like it's better for,

(01:49:44):
not just Venezuela, it's better for the world.
Like, if I hadn't been able to leave,
if my brother hadn't been able to leave,
maybe there, I don't know if there would be a leaded.
Like, would there be a leaded?
I don't know.
Would any lender have survived in 2021?
I don't know.
Maybe it would have been a total collapse
of all lenders in 2021, right?
And so life, I love this movie, The Butterfly Effect.

(01:50:07):
You know, like little change here has massive implications across.
I think if we were able to bring the smart people in Venezuela out of this authoritarian regime,
the same people in North Korea and same with people in places like Russia, Ukraine.
Like right now you have brilliant people in conflict areas that are just rotting away.

(01:50:28):
All that potential is just sitting there.
Why?
You know, and that's also why, I mean, again,
I'm not allergic to politics.
I think some Bitcoiners are sort of, no, politics.
We're going to end the Fed, end this, end the government.
I'm like, I don't think we end every form of government.
In fact, I think we need to lean into the government to change it.

(01:50:49):
I don't think, I think Bitcoin is used to make government fair and more transparent,
but I don't think it replaces it.
I don't think it ever can replace it.
So I think we need to be, that's why I love coming to DC.
Because to me, I'm like, first of all, we were never welcome here until this year.
Now they want to talk to us.
we'd be foolish not to take that opportunity.
Be foolish.

(01:51:10):
And so again,
people might disagree with my take.
It's informed by some of my life experience.
I mean, it's a massive shame what's happening there.
Fuck.
I don't know what to say.
I think maybe we end it there.
That was an amazing interview.
Thank you.
No, thank you, man.
Listen.
I got goosebumps more than once during that.
I'm going to give you,
I want to end this off with a positive note

(01:51:31):
because I know maybe some Venezuelans
are listening to this
and feeling discouraged by what I just said.
that's the last thing I want.
I would like to say to the people listening to this
that what happened to me and my family,
you can do this too.
You can opt out.

(01:51:52):
Right now, there might not be a path of change internally.
There is a path out.
I gave everyone, or not, I gave,
use my story or our story as a blueprint.
And if anyone's listening and has questions,
message me. My DMs are open. My email is open too. I would love to help you think through how to get
freedom. Bitcoin enables you to do that. You can do it. Si se puede. Yes, you can.

(01:52:21):
It's so refreshing to do an interview where Bitcoin is talked about as freedom money again.
Bitcoin is freedom money. And I'm so sick of all this, just people only want to talk about
the financialization of freedom.
This is what Bitcoin actually does.
Without this, number wouldn't go up.
Yeah.
Number goes up because of what it does.

(01:52:43):
When you understand that, the price becomes irrelevant.
Yeah.
And I think that's why I love the work Alex Gladstein is doing,
the work the Human Rights Foundation is doing.
They asked me what my favorite Bitcoin conference is,
the Human Rights Freedom Forum in Oslo,
because you get to hear from people doing things
they put me and my story to shame with some of their stories i feel embarrassed when i'm listening

(01:53:08):
to some of their stories you think this is hardcore go talk to roya like roya will make you feel
like you are the like you have no courage next to that woman yeah so i'm i'm thank you for bringing
these stories out the light um and yeah man let's you know let's keep building freedom money let's

(01:53:28):
fucking go thank you maricho i really appreciate it that was great yeah my pleasure man

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