It's not just bigger than Ethereum, it's not just bigger than Solana, it's bigger than all of them combined. And if D Phi could ever be a lock there, this would be the biggest opportunity ever to exist in crypto. There's a really big proposal called OP Cat that's gotten a lot of momentum, the Bitcoin community in the block size wars. What we all agreed on was that Bitcoin was going to scale in layers.
If that happens, we need to allow for trustless bridging in a much more rigorous architecture of these L twos connected to Bitcoins L1 and right now we don't have that. You basically have to convince everyone to change their node software to run your version of Bitcoin. And so, you know, different proposals. Hard forks are extremely difficult and Bitcoin doesn't upgrade through hard forks and upgrades through soft forks.
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Gnosis leads innovation with Circles, Gnosis Pay and Metri reshaping open banking and money. With Hashi and Gnosis VPN, they're building a more resilient, privacy focused Internet. If you're looking for an L1 to launch your project, Gnosis Chain offers the same development environment as Ethereum with lower transaction fees. It's supported by over 200,000 ballot errors, making Gnosis Chain a reliable and credibly neutral foundation for your
applications. Gnosis Dow drives Gnosis governance, where every voice matters. Join the Gnosis community in the Gnosis Dow forum today. Deploy on the EVM compatible Gnosis Chain or secure the network with just one GNO and affordable hardware. Start your decentralization journey today at gnosis dot IO. Welcome to Epsom of the show, which talks about the technologies, projects and people driving decentralization
and the blocs and revolution. I'm today with Dan Held, who's the general partner at Asymmetric, which is a new Bitcoin focus fund, and he's been in the space for a very long time. I've also known Dan for a very long time and I'm sure many of you will know him because I think he's certainly one of the biggest, maybe the biggest sort of, you know, influencer, communicator, educator around Bitcoin. So really excited to have Dan on. Cool. Well, thanks so much for coming on Dan.
It's actually, this is like way overdue. I think we I think we've talked a bunch of times about having your own epicenter. So yeah, I'm glad it finally happens and that you're coming on. I. Appreciate the invite. Let's start at the beginning. How did you get into crypto? Yeah, so back in 2011, my buddy paid. I was in Dallas, TX and my my friend was an engineer and he paid me back for a beer and a cassetius coin, you know, those
physical gold coins. And of course, the first thing I do is I figure out how to try to sell it. You know, everyone back then, I think you know, so it was so new. There was almost no content out there to describe how Bitcoin worked or how it functioned. It was basically just a bunch of very developer focused folks.
So he paid me back for a beer through that started to look into it a little bit and saw that Silk Road was AI think good testament to the resiliency of Bitcoin as a currency where I'm like, I don't know how this thing works, but if the government can't shut down this payment method, that's something powerful. That's something, you know, that has, I was for me, I, I was a libertarian. So this sort of message resonated with me.
And so in seeing the resiliency of Silk Road that encouraged me further to explore. I found out about the 21 million hard cap. And for me, that was the, I think kind of the Holy Grail moment of this is a breakthrough of monetary policy. For me, that's the most important thing here. It's the credibility of the monetary policy of being the best sound money in the world of being a goal 2 point O. And that really is what kind of kind of woke me up to the opportunity.
And so 2012 and 2013 is when I started to really accumulate. And then in 2013, I built my first product in the crypto space. So are you interested in kind of central bank money, gold, things like that before Bitcoin or was it sort of Bitcoin that got into got into this? Yeah, good question. So I was studying finance during
the 2008 financial crisis. That moment definitely radicalized me as I realized the central banks were wrong, the government was wrong, and all the banks were, you know, every bank noticed at central banks, but all the banks were wrong. So for me, that was kind of like a radicalization moment, as I put it. And I was looking for alternatives and that's where like gold was an alternative.
And hearing about Bitcoin a little bit later, that's what really resonated for me as like this is the this is the solution to our problem of trust with our money. And then you said you started the company. What was the company you started? Actually I I remember I remember being a user of of your app so. You're definitely OG if you remember 0 block, which is the the company I built. So there's an app that was a black and white color scheme, really slick.
It was real time market data, news feeds and charts, which no mobile app tracking bitcoins price had that at the at the time doesn't sound that revolutionary because we've had a lot more builders come in and build great mobile products. But at that time it was is quite rare. We ranked number one for the keyword Bitcoin in the App Store, which I figured out how to hack the App Store ranking
algorithm to get us there. Granted, it doesn't matter if you ranked number one if you're not the most relevant and good product for people to download. But that was our kind of growth hacking strategy. And that launched my career in marketing in tech because through figuring that out, that was my specialization was SEO and conversion rate optimization. So in finding users for the first app I built, I learned that I'm a good marketer.
I'm a good user acquisition. That is very interesting because yeah, I think today, right, I guess you're especially known, I think as I mean among other things, but also as a marketer right now as a really brilliant marketer in Big on End. And you also worked on that right later at Kraken and stuff. But that was really you sort of developed the skills just in marketing your own product and. Yeah, we, we tried a lot of
different things. So 1, you know, I, I went to the San Jose Bitcoin conference in 2013 and I went around and, and met as many people as I could. And I said, what, what app do you use to check the price of Bitcoin on your phone? And they'd show me. And I'm like, well, I built this one. It's free. It's better. So that doesn't scale though. I think I got like 100 users through that method. I tried all sorts of other methods as well. And what we landed, you know, we got press.
I was in Wired, Wall Street Journal, Forbes, Fortune. That didn't move the needle either. We didn't have time to do SEO and and we didn't have really any resources at all as me and my Co founder. So App Store search was a really lucrative channel and that's where a lot of people found apps that they wanted to go download.
So, and being obsessed with that Channel, with being obsessed with how the App Store worked, I figured out flaws in the, in the algorithm where I was able to game that and get our app ranked very highly for the ranked number one for the keyword Bitcoin, which it wasn't rocket science, but you had to go experiment and you had to try your luck and you had to be really obsessed over it to go find that, that, you know, sort of hacker mentality, I think is really fun for me to find little
things that are, are, are ways I can have an advantage versus versus other channels. I, I also applied that with my own personal brand as well. My, you know, I, I, I had written a series of, of long form pieces of content and if you write it and no one reads it does, it doesn't really matter. And I had to go get that content out there. This is in 2019. This is the development of my
personal brand. In trying to find out how to distribute my content or get in front of more eyeballs, I had to figure out how to build a social media presence. It wasn't entirely by chance that I'd built on my audience. There are formulaic and calculate calculated ways to build an audience where I could definitely do it again in like another category. But it's it's it's a marketing skill in in conjunction with the message you want to deliver.
But how to leverage your content on social media is a whole different skill. But anyways, yeah. I'm actually maybe just briefly, yeah, I mean, we're not going to go into like a lot of details there, but I'm curious, what are the for people who are interested in this, right And they want to kind of amplify their own their own reach, what are some of the best simplest tapes or lessons?
I'll tell you the secret, but no one who listened to who listens to this is going to do it. You have to post every single day and never, ever miss your dog dies. You got to post. Have a bad day, You got a hangover, you got to post. That is the number one factor of success. And it sounds easy, right? You're like, tweet a day. I can do that. Try doing it for seven years. It's, it's not that easy.
And the reason why that's important is that the engagement algorithm, what it does is, you know, 99% of people are consumers of content, 1% of folks produce content. So the algorithm for the consumers of content, when they session in the app, say it's Twitter, the, the algorithm has to go fetch content that they think this person will like to read or, or digest. And if they like it, they'll stick around and keep doom scrolling. That's what we all do on social, right?
So how does it pick which content to show you first? Well, the only way to pick content to show you first is content that from content creators that you've previously engaged with. So if you've liked a Dan Helltweet the last 15 days in a row, if the algorithm's like, let's give him a Dan Helltweet, he's probably like that. And so that's how that sticky habit gets built with you and
your audience. And if you're not there, if your content isn't there that day, it has to go find someone else. And that's where you lose that engagement loop. Posting in the morning, your audience is awake. There's so many times where I see people tweet out at like 10:00 PM, you know, like US time. And I'm like, cool. Well, maybe like a fraction of your audience is awake. So the chance of this going and, and gaining traction and going viral's like almost zero.
Now, of course, if it's timely or topical, sometimes you have to. But posting in the morning gives it the greatest shot to get the most engagement possible. And then, you know, I think a lot of this isn't rocket science. It's create content that people want to consume. I think a lot of people get really stuck on like producing incredibly high quality content or content they think is good. And all that really matters is what your audience wants. What content does your audience
want? And if you want to do it to such a degree that it dilutes your message or you're not posting what you believe in, but at the same time you should be humble enough to be like, OK, maybe my joke wasn't as funny as I thought. You know what I mean? So, yeah, that's where I feel like there's, yeah, a lot of people approach it with their own subjective version of what they think the market might want versus versus like what their audience will like. Great.
So basically I, I love it. Yeah. Like, well, it's supposed to every single day. And then I guess it's just a lot of you also looking at data sort of what, what's popular do more of that. And I, I guess then it becomes kind of a bit similar to the way you approach to hacking the the App Store right where you just running experiments. Yeah, I mean, some fun, fun things to give people some tactical insights here you can use, there's all sorts of different tools.
One of them is called Social social Blade. On Social Blade, you can look at other people's new follower count metrics. And so I looked at some of the top influencers in crypto and I looked at their spiky moments when they got a lot of followers. And then I went on and I used Twitter advanced search to go look at which tweets they put out on the day where they got the most followers. It's really not rocket science, but I, I, I have gone down the rabbit hole pretty extensively.
So yeah, Twitter Advanced Search and Socialblade 2 free tools that are great. Twitter Advanced search as well. You can look for every single tweet that mentions Bitcoin mining. And I'm just coming up with random words here and Trump. And you could look for the top performing tweets ever or between a certain date range or from a certain influencer with those keywords. So Twitter advanced search is built into Twitter.
I used to go to the toolbar, type in a a query into the in the Twitter search bar and then tap the three little dots that'll open up the the Twitter advanced search. Almost no one uses that. It's, it's pretty funny too, because you know, my professional capacity, and we'll touch on this in a second is, is in marketing where I used to leave marketing when I Kraken and now I do fractional CMO work and marketing advisory work alongside my fund.
What's funny is I interview social media managers and I'm the rare CMO that understands social to a degree that is extremely proficient, right? Most CMOS don't have a huge social media presence. So for me, I, you know, if they don't use Twitter advanced search, I'm, I'm definitely not, not going to hire them. I'm like, this is one of the
easiest ways to find alpha. So it's funny though, most most people don't pull open Twitter advanced search or they won't have much insights into like how they think through optimizing their content for conversion or for like maximum engagement. Great No, I love this and I really appreciate it. I think it's I'm going to I'm going to aim to be one of the people defying your rule of nobody ever follows you single lessons. So. I hope to see some Brian tweets 2 years from now.
Let's let's, let's do it. Yeah, yeah. OK. So and then you mentioned, so 0 block was acquired right, that was required by Kraken or? So block blockchain.com acquired A0 Block back in December 2013 and I came on board blockchain.com as the first product manager, which is quite some time ago. And to be honest, I was a very mediocre product manager, but none of us really knew what we were doing at the time. So it's just what it was in crypto back then.
There weren't there were many a players in the space and I was, I was doing, we were all doing our best. So yeah, blockchain.com was one of the hottest companies back in 2013. Nowadays, no one really talks about them. They kind of they very much faded from relevancy. But back in 2013, blockchain.com was the most popular non custodial wallet. There weren't hardware wallets back then, or at least not that
I can remember. And before BIP 39, we didn't have, we didn't have mnemonics, 12 to 24 word backups. So you still have to print out your private key. Watching a COM was the first non custodial wallet that you know, they, they had the wallet that basically they had the wallet file and they would deliver, you know, the wallet file down to the browser and you would decrypt it in your browser, you know, entering your your password.
So it was a pretty huge user experience breakthrough and it was the most popular wallet at that time. So that was a really cool experience. But yeah, if we want to kind of round out the court, the career side did that did change tip? You probably remember change tip but we did micro payments. Yeah, yeah, on Twitter where you
could. Yeah, you could send someone a beer and the beer would represent $2.00 worth of Bitcoin or yeah, which is a pretty fun dynamic, you know, because Twitter eventually came out with like the ability to tip each other in, like Satoshi's so explored that. That company failed though, unfortunately. So I was just an employee there, but that company failed. Then I worked at Uber headquarters on Ryder Gross and growth marketing. Worked for some legendary folks
there. That was very formulative to building out a kind of my my more formalized career in marketing. Uber was a really fun company, a very libertarian company where Uber, people forget Uber was illegal in every single city it launched. And like, there's not many tech companies who are like, yeah, fuck the laws, we're just going to go full illegal. You know, Uber was a very fun culture of like high intensity, but like, and, but very polite. But also the idea that there are
no rules. Like there's consequences to breaking a rule, but don't let these rules define you and, and stop you from building something amazing. You know, same with like Elon Musk and other companies where they kind of break all these barriers of what people thought was never possible. You know, laws are laws. But like, are, are taxi laws moral? Not really. You know, I don't think there's any morality there. That was just a cabal.
So we broke up that taxi cabal and then left there, did another startup called Interchange. We got bought by Kraken and I came over. I came on board at Kraken and eventually built out the marketing team from 2 to 30. That was from 2019 through 2022. What was the experience like doing marketing at Kraken? Krakens intense, we had a lot of catch up to do. I think to be I think this is like both pretty obvious with our our website and other marketing materials. We had done very little
marketing. The previous CMO had just been let go and I had brought in Jeremy Welch, the Chief Product Officer And so I pitched Jeremy and and Jesse, I said, hey, I think I could take this team from 2 and scale it out to be in a real marketing org. The previous CMO didn't really have that crypto sort of mindset and they just weren't a good fit. And so it was a pretty strenuous intense process of like marketing hadn't really been represented well in the company. We hadn't redesigned our
homepage in four years. I mean this, you can use the Wayback Machine to look at this. So this isn't sharing sensitive information, but there were a lot of things that we hadn't done before that were brass tacks for marketing org. So we had a lot of catch up to do, a lot of work to take it over what marketing did to some degree. So I had to claw back that territory.
So clawing back that territory and building up the analytics infrastructure, building up trust, which is, you know, takes a very long time to do, especially when you're looking at budgets of Kraken and and coin basis size. When you go start to spend and you're allocating, you know, millions of dollars per different marketing channels. So there's two things in marketing that are kind of define the success of marketing, right?
It's incrementality. Did US spending money on marketing lead to incremental revenue, right, which is actually quite difficult to to to determine. And then oftentimes the way to calculate that is turning all the ads off and then turning them back on again. So there's which at Uber we did that called an incrementality test incrementality. So did the additional, the marketing dollars that we spent at it increase additional income
or or revenue? And then calculating the lifetime value of a customer, that's really difficult because we know what it costs to acquire a customer, but predicting how much money they're going to make us, that is, you know, that is a complex future cash flows calculation, which are what requires a lot of assumptions. So Long story short, those conversations are really nuanced and took a long time to develop, I would say a rigorous framework that we all agreed, agreed upon.
So yeah, building, I'm working at crack. It was a very strenuous, very intense role. I worked at about 100 hours a week for three years. So it was not sustainable long term. That's where I left crack. And I wanted to go do something a little bit more, a little bit better work life balance. And also three years at an exchange, three years in crypto at any companies, a long time. And I wanted to go to like, go, go get my arms around the next challenge.
So let's talk about your fund should also disclose here. I actually talked about your fund with you at the Situation Roundtable earlier this year and then ended up investing in your fund as well. So I want to disclose that here. But yeah, so you, you launched a Bitcoin focused one called Asymmetric. Why did you decide to do that? Yeah, great question. So when I was at Kraken, I was in, you know, I was putting out content around Bitcoin and I started to look into Bitcoin Defy.
Now at this time, that was like lightning coin joins, stacks, liquid really wasn't a lot going on there. But I saw a glimmer of something that could happen. And if Defy could happen on top of Bitcoin, which Bitcoin is the biggest chain out there in terms of like like market cap, it's bigger than everything else combined. It's not just bigger than Ethereum, It's not just bigger than Solana, it's bigger than all of them combined.
And if Defy could ever be a lock there, this would be the biggest opportunity ever to exist in crypto. So when I was leaving Kraken, this is where I identified where I wanted to spend the rest of my career was in Bitcoin Defy. So this is 20/22. Remember, this is before Ordinals came out. Ordinals very much popularized Defy on top of Bitcoin. But before that, this was a very weird thing to do. Most people didn't believe this
could happen. This belief was attacked by both the Bitcoin Maxis and the other other crypto folks. Everyone's like, that's impossible. That's never going to happen. And so TechCrunch actually wrote up my departure from Kraken where I lay out my thesis in July of 2022 for Bitcoin Defy, which is fun to read back on, read back on because it's it's kind of prophetic.
So in doing that, I left Kraken and started to do fractional CMO work where I helped out companies like Taproot Wizards and Trust Machines. These are really popular, really well known companies in the Bitcoin Defy world. I was boots on the ground at seeing what they were building and seeing what they were capable of doing with whether it be ordinals or Bitcoin layer two tech like stacks in seeing how
those could be built. For me, this was kind of a breakthrough where I'm like, this is going to be a thing. This is this. I'm an early product builder, early marketer and I I can see this category being huge. So I started to cut Angel checks into the space.
And then in earlier part of this year, I decided to formalize this into a fund called the Asymmetric Bitcoin D5 Venture Fund. It's a fund within the firm called Asymmetric. Asymmetric has another fund, another two funds in the firm I run the Bitcoin D5 intra fund. We invest in the early stage Bitcoin D5 projects that are focused on like protocols. So this could be a Bitcoin L2A meta protocol or a DAP. And so we've already cut 6 checks into the category one of the mean fractal Bitcoin.
I don't know if you've been paying attention to that fractal Bitcoin. They've already debuted. So they've already had their initial token off their initial token generation event and they have like $20 million a day in trading volume at like a $3 billion market cap. So I'm not sure if you even knew that yet. I'm I'm sort of delivered. Actually, no, I, I I fractal is is one I'm not I mean, I follow a bit the this space. It's also something where you know, it primarily run course 1
staking company. So we are also spending a fair bit of time, you know, starting to run infrastructure for some of these Bitcoin site, Bitcoin connected associated protocols. But this is not one I I actually didn't follow this one. I think a connected connected is an easier way to phrase it. It's hard to what what is the definition of an L2 these days? It's a little bit subjective. So yeah, connected to Bitcoin in
some sort of way. I think that's a fair way to associate it. But yeah, we, we already made six investments. The fund started in February. We came out of the gate storming because this was the right time, right opportunity. So for us, it's been, it's been a very exciting six months. It's been a very exhausting 6 months. Raising and deploying at the same time was, was quite intense. But we got into some really good deals. I've spent a ton of time as a founder, almost a decade as a
founder. So I know what founders look like, what founders are going to, you know, really hustle for seven to 10 years to make this happen. I look for people that are in it for the log haul. So it's been it's been cool to see and been been really fun to be on the other side of the table as an investor. Cool, amazing. So let's maybe let's talk a little bit about sort of Bitcoin history because in a way this is an interesting thing that has happened.
And I think it's sort of surprised many people, including me, you know, because I mean, I got into interesting big on 2013. You know, it was we excited about Bitcoin. I was always very excited about interested in other things as well, like non Bitcoin. I mean, of course, back then we already had some protocols that were, you know, there was a protocol called Counterparty. There was one called Master coin.
Later we branded the Omni that were basically looking to build things on top of Bitcoin like, you know, issuing different assets, stuff like that. And then of course, Ethereum came and I would say all of that activity kind of, you know, moved to Ethereum and then to other blockchains. And, and now, of course, there's a bit of, well, it's not fair to say all of it, right? I think there's a good little bit that remained on, on Bitcoin.
I mean, lightning, right, was very early on and I think some work started there and I think kept going. And then I remember there was also a big a big moment right in the Bitcoin history was this block size debate, which probably most listeners do not remember, but some of you will, right where there was a huge controversy around sort of should the block size be increased.
But I think it was also a more a deeper controversy about, you know, how should we think about protocol changes to Bitcoin. So how do you see that kind of like history of Bitcoin and how it LED now to this new emergence of these new protocols and this innovation? Yeah, that's a really good
question. I appreciate that you brought it up. When we look at what what the, the short take on this is that a lot of these things started on Bitcoin, Ethereum popularized them, and now they're coming back to Bitcoin. For example, NFTS started on Bitcoin with Counterparty, Rare Pepes. Rare Pepes are the first NFTS ever created. And so it wasn't crypto kitties that were the first NFTS who was actually on a Bitcoin called Rare Pepes Ethereum.
Though, of course, I think the architecture of the Ethereum protocol is much more advantageous for the blossoming of, of NFTS in the 17 through 2023 era. NFTS have come back to Bitcoin in the form of ordinals and actually think it's a better way to do NFTS on a blockchain cause the graphic assets exist on chain. There's a lot of elements of that that I think are a little bit more congruent with what we really want an NFT to be. We also don't want a contract for NFTS to be changed.
Or you could, you could add or remove items from a collection, whereas like they can't happen with ordinals. So there. And there's a costliness factor as well. Like with other chains, you can spin up NFTS, 10s of thousands of them almost for free. Versus on Bitcoin, you have to inscribe them, which is very costly because you have to pay for that block space like anyone else does, like any other transactor.
So there's some, I think kind of really interesting game dynamics that appear here where these are very costly to inscribe, which reduces the number of collections and I think increases the quality of the output. That's one example. We also have things like, you know, layer twos like Bitcoin experimented with lightning and liquid being in rootstock, being in stacks, but liquid has no activity. Same with rootstock and lightning has minimal activity. I mean, I'm still bullish on, on
all these. I, I want to see all these L twos succeed, but that's just kind of like I'm just laying down the facts of what's going on today. But on Ethereum, you saw this hugely emergent blossoming L2 ecosystem. And I think we're going to see that come back to Bitcoin in this cycle. And that's why we're investing in that category.
There's a lot of Bitcoin L twos here that I think are have looked at how the Ethereum L twos launched the last bull run taking those playbooks and bringing them back to Bitcoin. So I think we're going to see a Bitcoin L2 renaissance happen this cycle. We we've seen some early glimmers of this with like STAX, for example, has a 3 billion market cap. And so STAX, I think the STAX is
almost 10 years old now. The protocol didn't launch until a few years ago, but they've been working on it for almost a decade. I think that they're sort of leading the way of of expectations of like what this cycle is going to look like. But yeah, we are just so again, to mimic the NFT route, but started on Bitcoin, Ethereum popularized them or did them at scale. Now it's coming back to Bitcoin in a certain fashion.
So there's that. Now going back to your question around block size, Bitcoin protocol upgrades, kind of community and political split. So there definitely is a riff in the community politics wise of folks who want this activity to happen on Bitcoin versus those who don't.
Most of the people who do not want this activity to happen on Bitcoin are very new Bitcoiners. They weren't around for the block size, whereas they also weren't around for any of the early Bitcoin discussions where in the 2013 through 2016 cycle, we would often say, well, let's let the other alt experiment on stuff and we'll bring what works back to Bitcoin.
Well, we clearly saw this worked on Ethereum and Solana and we're bringing it back to Bitcoin. So, you know, those folks aren't Ogs. They're not, they haven't been around a long time and they don't really rock why Bitcoin's valuable. They're also really obsessed. These kind of newer Bitcoins are, which is very bizarre, kind of like the B cashiers. They're obsessed with payments, like using Bitcoin to pay for coffee and stuff, which again,
does not solve the problem. I mean, you're OG enough to remember this. We've gone through three waves of this. We made a serious attempt at that, I mean, but that just did not work at all and it's not going to work. For a very simple product reason. What problem is it solving? It's not solving a problem. Bitcoin solves other problems. It solves the problem of storing your money in a way that's hard
to be hard to seized. So like Bitcoin is extremely hard to seize if you if you store them on a private key that you control like you, you, you control your private key. It has a monetary policy that is the best monetary policy on the planet amongst crypto assets and traditional Fiat and gold. And then you look at it the other factor which is it's immutability. You can't censor it. That's great, but I don't need it. Censorship resistant nuclear grade payments for my cup of
coffee. And so in, you know, to sacrifice the user experience. It's also more costly to ask a consumer to do that. I think it's a grossly negligent way to approach product building. And if we look at the last 12 years have been in the space, we've seen hundreds of payment startups fail hundreds. I mean, there's no, there's no reason why a consumer would want this. And they consistently bring up talking points like, well, merchants like it.
I'm like, that's great. I'm sure merchants love it, but that doesn't solve the other part of the equation of people wanting to pay. And so I feel like I'm taking crazy pills after all this time. ANYWAYS, I, I, I'm going off on a tangent. There's A2 categories of Bitcoiners is like the OG ones who understand all the nuances of how Bitcoin development has occurred so far, which by the way, Bitcoin has changed a number of times.
Not materially though, but these are like some more small upgrades and they understand that Bitcoin has to change a little bit in the future to sort things like bugs and and some things that allow for more expressibility. So there's a really big proposal called OP Cat that's gotten a lot of momentum, the Bitcoin community and the block size wars. What we all agreed on was that Bitcoin was going to scale in layers.
Then not all the activity was going to happen on the Bitcoin base layer because we couldn't just keep keep increasing the block size for forever. We had to scale Bitcoin in layers as part of that. That means we have to push user activity to the Bitcoin layers as transaction fees. It could be more expensive on L1.
People can only transact on L twos and maybe occasionally transact on the L1. If that happens, we need to allow for trustless bridging in a much more the rigorous architecture of these L twos connected to Bitcoins L1.
And right now we don't have that things like OP cat or covenants allow us to, I would say, deliver on our original compromise and promise of Bitcoin scaling and layers to a level that I think really supports that user activity in a way where people don't have to make all these trade-offs when they're on this L2. They can use this L2 with almost the same security assumptions as Bitcoin L1. I think that's that I think is extremely important for the
future of the protocol. I know this is also something that I think there's been discussions for for many years, right, where people were like, hey, let us add a bit of functionality to Bitcoin that basic then allows, you know, verification much more easily or things happening elsewhere. So I remember I think there was also, you know, snarks or there was a bunch of stuff that was discussed here. Can you just explain what OP cat like how it works and what
exactly it is? Yeah. So OP cat was originally in Bitcoin. Satoshi put it in Bitcoin and then removed it because he wasn't sure if there might be a bug introduced. He also, there was a lot of other OP codes. That's where OP stands for OP code. There's a lot of other OP codes that he disabled as well. Some of those were RE enabled, some of those weren't.
When we look at OP Cat, cat stands for concatenation, which means combining and so it allows you to combine code and through that you are able to build things like trestles, bridges. I am not technical enough to dive into the details of exactly code wise how that works, but this works with eight lines of code. That's it. It's an extremely tiny upgrade. And what's nice too is it's not a, it's not a hard fork, it's a soft fork. So with that, what that means is that we don't have to.
For example, most of the bridged Bitcoin today is protected through a Federated model, which means multi sig. There are multiple folks who control this Bitcoin in a in a pot and we have to trust that they won't collude with each other to take that Bitcoin away from us, which that's an OK security assumption, but it's not great with OP cat. We can have trustless bridging where we don't trust this cabal,
we don't trust this group. We can use Bitcoin on these L twos in a way that we don't have to trust the L2 or any other group. We can use that Bitcoin in a almost purely trustless manner. I had, I feel like I had a podcast or I had the conversation just recently where, you know, there's also discussion around the ZK and you know, whether you could like verify or bring in the future make them change for Bitcoin so you could verify ZK proofs Is OP
cat, would it enable that? Or do you think this is going to be sort of like the only and last change that's needed? Or are there some other things that would also be powerful to
have in the future? Yeah, I mean, there's been discussions of bringing back almost all these these OP codes or kind of like the it's called like the great script restoration process where like we would it would be OP CAT and a bunch of other ones, Covenants, CTV, these other proposals have a lot of energy behind them, a lot of political momentum. Some of these allow for verification of like CK Starks, like what you mentioned. You know, I would say it's TBD on on if one or multiple get a
get sort of through consensus. But I would say like CTV and OPCAD have the highest momentum behind them. And and so I mean, I also remember actually at this block size, when this block size debate happened years ago, of course, one of the big challenges was that or one of the big challenges, But you know, it's also a feature of Bitcoin to some extent is that there's no governance process, right? So we basic or no official like
governance process. So you basically had, you know, on the one hand, Bitcoin Co developer who controlled the bit GitHub repo, there was some sort of governance on that. Who has access, who gets kicked off? And then of course, you have the miner ultimately who decide what software they run, who are like really the ultimate arbiters. How do you see this kind of governance process playing out around around OP Cat? And when do you hope this is going to be part of the Bitcoin protocol?
Yeah. So you know, when we look at the, the biggest thing in the box has was there was two things. One, technically the protocol can't just scale in larger and larger block sizes for forever. Now is the Bitcoin current block size perfect? No, but we don't know what the perfect block size should be. But what we do know is that you would eventually want to have some sort of cap on the block size.
And you want a cap because the bigger it is, the harder it is to run a node, the less number of nodes you have and the less amount of people who can connect directly to the Bitcoin network. Bitcoin network prizes itself prides itself in the ability for people to connect directly with it and make that semi easy to run. This is different than a lot of the other block chains which are much more complex to run a node or much more costly to run a node. That were some of the considerations.
The reason why you know, So what is the right what's the right block size? No one knows what the right block size should be. But what we did know is that the process to make changes in Bitcoin, there were a group of businesses that wanted to push a a block size increase and the Bitcoin community revolted against that.
And so that's where Bitcoin Cash was, the hard fork that was resulted from this kind of cabal coming together and trying to push changes in Bitcoin. The outcome of this basically showed that the Bitcoin network isn't owned or controlled by companies. It's controlled by everyone in the process of getting something upgraded. And Bitcoin is extremely complicated. You basically have to convince everyone to change their node software to run your version of Bitcoin.
And so, you know, different proposals. Hard forks are extremely difficult and Bitcoin doesn't upgrade through hard forks. It upgrades through soft forks, primarily through soft forks. So with soft forks, you know that that's a much easier upgrade process. But essentially you have to get, you know, miners, node runners, economic actors and the community all on board. And so that process is extremely convoluted.
But if you go to Qantas, so Tappert Wizards, one of my clients, they built out something called BIP land, VIP land. BIP land is a comic strip that shows you how a BIP or Bitcoin, you know, improvement proposal gets implemented, which is any sort of upgrade to Bitcoin, what process it goes through to be evaluated. Most of these of course have a multi year evaluation period where it's talked about, theorized, analyzed by some of the top brightest minded cryptography.
And then people make it, it's given a BIP and the BIP is a proposal and eventually there's enough political buy in from all those parties I mentioned earlier to where that BIP gets implemented. But yeah, it's a it's a convoluted and very lengthy and laborious political process,
which is good. You don't want changes to be easy to be added to the protocol because if they could malicious actors like states like governments or people who've paid off certain individuals, they could push proposals forward with little. If there's little resistance, then all of a sudden you've got a lot of changes in the protocol that could be hazardous. Yeah, for sure. I mean, I, I was in the time in favor of the block size increase as I think a lot, a lot of people were right in the
community. Now, I do feel that in retrospect, and I felt like the arguments against increasing it, it didn't make like a ton of sense to me, except one that I actually feel like wasn't really made a lot during that debate. But I feel like later I was like, that's actually a really big benefit that it sort of the heartful didn't happen, which is
exactly your point, right? It's basically just about, you know, the difficulty of changing a Bitcoin protocol also gives you, you know, a huge amount of resilience against, yeah state actors or others that will end up wanting to disrupt the network. And when when we look at bitcoins purpose, right, like what problem does it solve? A lot of the block size increase folks were like, oh, it's meant for payments and we did never really saw the payments use case
take off. So not only was a technical, the, the technical knowledge was off because you can't just keep scaling for forever. You have to eventually have a limit. 2 is that they didn't even understand bitcoins value prop like why Bitcoin is valuable? What problem was it solving? And it's not cheap payments. And then finally, you know, the process to upgrade Bitcoin.
Yeah, that it had to be this really laborious process, because otherwise you would introduce easy political changes that would be kind of done out of whim. Do you hope, OP Cat's going to happen like this year, next year? I mean, this year probably not, no. Next year or like what's the sort of timeline that you hope? I think we're looking at probably one to two years. I think other folks are more optimistic. I'm also throwing out a
prediction that had OP cat. If it does get implemented sooner, it'll mark the top of the cycle. So, so the top of the cycle being it gets implemented. We, we saw a little bit of this in previous cycles where protocol updates are highly anticipated and a lot is traded as people think, OK, upgrade to the protocol. That's a good thing, which almost always is. So I think it would trade really well and that would probably mark kind of the peak fervor and peak FOMO of the market.
You're doing this Bitcoin D5 fund. Why is Bitcoin D5 so important? What what do you hope are the kind of like use cases, utilities, user experiences that Bitcoin D5 will enable? Yeah. Well, we've seen all these use cases over in Ethereum and Solana. So I think it's pretty well established, but easy ones to pick out lending and borrowing other types of assets. You have NFTS and governance tokens, which are unique types of assets that do not compete
with Bitcoin as a money. They're very distinctly different. Like we wouldn't say that Bitcoin competes with Apple stock. It's not the same thing. I mean, some Bitcoiners might, they could claim that like people park their wealth in S&P just to like make sure that their money doesn't get inflated away. But for all the intents and purposes, like a money doesn't compete with other asset types. There's multiple types of assets. And so NFTS and governance tokens I think are really key.
We've got L twos. L twos love Bitcoin to scale. And what's really interesting about Bitcoin L twos versus Ethereum L twos is that Bitcoin L twos are more expressive. Ethereum L twos are just cheaper and faster. Bitcoin L twos are cheaper, faster and more expressive because these Bitcoin L twos can be like EVM or SVM, which means that you can get all of these really cool D fi things that you want to go build on this Bitcoin L2. That's an amazing thing to happen.
And I think that that will pull a lot of TVL up from Bitcoin L1, bring it to L2. And I think that the we're going to see huge amounts of TVL, much higher than Etherium L twos. Because again, the Ethereum L twos don't allow you to do more things. They just allow you to do it
cheaper and faster. Whereas there's a very strong reason you should use a Bitcoin L2 because you can do all the cool defy stuff with it. So what's your prediction like what percentage of Bitcoin do you think ends up getting used in, you know, whether it's staking or some sort of protocols or even just move to to some L2, but. Good question. I mean if you look at the relative like TVL lock of of Bitcoin versus Ethereum L2's currently it's like a tiny fraction like .01% or .1%.
I mean, I think we'll see Bitcoin let's let's just talk about D5 locked up in Bitcoin, locked up in Bitcoin D5, whether that be L2's meta protocols, you got things as well like Babylon, which is restaking where Bitcoin is being used as proof of stake assets for other block chains. I think as a percentage of Bitcoins market cap, probably 10%, which is enormous. You know, like that's still gigantic. I think Ethereum is closer to 20 to 30%.
But I think this cycle that's what we'll see, which 10% is still enormous. And by the next cycle, then we eclipse Ethereum TBL in terms of as a percentage of our market cap. Yeah, that's interesting.
I mean, my my expectations definitely mean that it it will, it will sort of remain lower because just because I think Ethereum people are more used to like, you know, that kind of from the beginning, those kind of things are like a part of the Ethereum vision or as I think for Bitcoin, it's a sort of new
thing. So I imagine there's like maybe more people who are not or it's going to take more time, right, for people to really sort of wrap their head around, oh, I can do something with my Bitcoin and now I can earn, you know, some kind of yield. Well what's cool is that 87% of Bitcoin owners hold them to the crypto asset. So it's not like these are just a giant group of Bitcoin Maxis.
The Bitcoin holders all along have been multi coiners, so they're, I think they're very willing and ready to do that with their Bitcoin. I think that they've been doing this with their Ethereum and Solana, and if they could do that with their Bitcoin, they definitely will.
And do you think the timeline this is kind of like starting to happen now and you know, sort of you, you expect we're going to see a lot of protocols go live in 2025 or like what's, what's sort of the expectation on the pace of which this, this sort of wave unfolds? Yeah, we've already had some go live. I would say most of them are targeting late Q4 or early Q1 for like going live with that.
You know, there's so much there that you know we're we're we're about to see kind of an explosion of activity. I think people, I think folks will definitely time their launches based on market conditions. So I think you're going to see a lot of these be contingent based on the bull run happening. Yeah, yeah.
And what, what are you mentioned for a fractal earlier or like what, what are the some of the projects that you think you're most excited about and that you think will have the biggest impact? Yeah, we invested in Bob Mezzo and Bitlayer. Those are all Bitcoin L twos, really great builders, love the go to market strategy. We think that the go to market strategy is the most important
element of this. When you look at Bitcoin L twos, there's, it's really hard to differentiate the different L twos. And so brand positioning go to market strategy is going to be critical. We believe that these founders at those, those 3L twos have that specific capability. Outside of that, we've got Fractal, which Fractal is a meta protocol. So it's not a Bitcoin L2, it's it's more of interacting with a
Bitcoin base layer. And it's sort of like meta protocols are really interesting because essentially activities happening on Bitcoin L1 and there's a another network that interprets the activity happening on the Bitcoin L1 and that kind of lock smart contracts and other other sort of event based kind of financial primitives.
So then outside of Fractal, the two Daps we've invested in are Liquidium. Liquidium allows you to borrow Bitcoin using your ordinal as collateral and that uses discrete law contracts in the Bitcoin base layer to do that. Really cool piece of tech. I've been looking at DLCS for a long time. I think it's super interesting. So we've got DLCS powering, powering Liquidium, and then SAP Flow is a MEV visualization tool.
A lot of the Dexes that are the Dexes that work on Bitcoin currently use partially assigned Bitcoin transactions, and with that, those transactions can be sniped. So they built the first MEV visualization tool and with that they allow for people to snipe those transactions. They're using that to go build out something bigger. I can't talk about it now, but they've got a really cool strategy to go become a much bigger player in the space.
And they're utilizing their, I think, unique visualization of Bitcoin mem pool to leverage that to something for something that's I think a really, really cool bigger, bigger concept. Yeah. I mean, I think that's of course something that is also going to be very interesting to see, right? I mean, on Ethereum, we've had a huge amount of interesting activity around MEV and I think it's also on some other ecosystems like Solana. There's a lot happening right now.
But of course that kind of thing coming to Bitcoin and then interacting with the mining is going to be interesting too. I'm curious. So one of the concerns that people both the had around Bitcoin is also concerned that I think was always felt like a really legitimate one to me. Is that OK with time, the block rewards go down, the security budget goes down, you know, hopefully the Bitcoin market cap goes up So like as a percentage of the value at stake attacking
it becomes cheaper. Now, of course, the one thing to encounter act that is if if we do see significant transaction fees. And so I guess it seems pretty obvious that all of this Bitcoin L2D5 meta protocol can result in that. Is that also one of the things you see or? Yeah, it's a huge benefit. What I've written extensively on the Bitcoin block subsidy, our block Bitcoin's long term security model based on the
declining subsidy over time. For those who don't know the Bitcoin, each block has a block reward. The block reward is comprised of newly minted Bitcoin, called the subsidy and transaction fees. Given that at every single halving we have the amount of Bitcoin subsidy per block, that means that the number of Bitcoin being issued over time is decreasing exponentially. That means that transaction fees over time need to compensate for the reduction in subsidy. That's why it's called a subsidy.
After all. There are a couple different components here that a lot of people gloss over. 1 is that despite the halvings, the dollar value of the Bitcoin block reward has gone up exponentially over time because Bitcoin's value has gone up. So if Bitcoin's value goes up, then the subsidy decrease doesn't matter that much because the Bitcoin's value has got up so much.
The US dollar value, which is a much better way for us to evaluate long term security model is using something more stable than Bitcoin's price to evaluate security. So the dollar is typically used for that of dollar value of the block size reward and that's going up over time due to Bitcoin's value increasing relative to the dollar, which
makes sense. Transaction fees ultimately though need to replace the subsidy and with ordinals we saw a glimmer of that where transaction fees are extended periods of non bull run time periods where transaction fees went higher and much higher and sustained for a good amount of
time. I think in this next bull run, due to meta protocols like ordinals becoming even more popular, we'll see very long term sustained high fee markets, which is indicative that bitcoins long term security budget problem is going to be solved. Now on the Ethereum side, there's been some incredibly intellectually dishonest folks not going to call out names, but I think we know those types that constantly whine about bitcoins long term security budget problem.
And the common question I asked them what they all refuse to answer is I tell that I asked them what is an appropriate level of security budget. No one knows no one knows how much is necessary. And so to say that it's flawed and bitcoins going to have to change a 21 million hard cap to keep the subsidy going because we, because the security will
fall so low. I find that incredibly dishonest and just like just a really weird way to debate because they won't even come up with a level that they find appropriate. I'll be the cool, what's the number? What's, what's an appropriate level of security spend? And they're like, I don't know, but it's going down. And it, I, I think that since the Bitcoin and the per block is going down and the transaction fees aren't going up, then then
it for sure will fail. And I'm like, well, what if there's an inflection moment like Ordinals where all of a sudden there's huge demand for Bitcoin block space, which is what we're seeing with Bitcoin Defy. There's going to be huge demand for Bitcoin block space because people want to use this immutable Ledger that is is incredibly secure. So through that demand for that block space, we'll see transaction fees rise.
And here's another fun one. You know, we have had much lower security budgets in the past, but Bitcoin hasn't been destroyed. Yeah, absolutely. Right. Like, so, you know, you could have destroyed it much easier previously. And it's becoming much harder as Bitcoin gets more and larger, larger in value and it has more and more transaction fees. So, yeah, A, the the critics don't know what an appropriate level of security spend because it's entirely subjective.
B, Bitcoin security spend has been increasing in dollar value, not decreasing. Yeah. That's true. I mean, although of course, it's also the case that as Bitcoin becomes more valuable, sort of the the potential gain or incentive someone has to attack it and willing to suspend to attack, you know, you'd expect that to also go up. I agree that's a, that's a good counter to that where you'd expect the security spend.
So pushing that question back on them, I'm like, cool, what percentage of market cap do you find as an appropriate level of security spend, which again introduces the topic of like subjectively, what's an appropriate level as a percentage of market cap? Is it one percent, 2%? You know, you could use comps, but comps are really hard. There's no such thing as before Bitcoin. There's never a thing like a blockchain. So you could look at defense spending as a percentage of GDP.
Like it's really tough to come up with a number that makes sense. You could also look at what's the maximum burnable amount that a government could deploy to attack the network, like the US government. I mean, you know, they would attack their own citizens in this in this sort of circumstance. But you know, maybe they're willing to spend 200 billion just to burn it because, you know, in order to take the to attack the Bitcoin network, the game theory is that essentially
you have to burn the money. If you want to attack Bitcoin, you would have to buy the miners and those miners can only print Bitcoin. And if you attack Bitcoin, you would make the output of the miners Bitcoin worthless. So you'd have to be willing to burn the money. So the only actors that can do that are state actors with a huge budget. And you're talking about like US, China, Russia, and it's mainly China, China, US that could go burn that amount of capital.
So that would be I think a fairway for them to argue like what an appropriate level of security spend should be. But then if they use that argument too, then you look at Ethereum and it has minuscule amount compared to that, like 200 billion as well. So that would also be an issue. But I think that would be the intellectually honest way to talk about this is a percentage of market cap.
And then we can look at comps or we could come up with some sort of framework to evaluate what that spin should be. Yeah. I mean, I think one thing that is for sure is that, you know, if we do see, you know, a lot of activity that you know, then is, is is sort of accurate in, in Bitcoin and leads to higher transaction fees that that is certainly going to be extremely positive for the long term security of the network. For sure. Cool. Well, thanks so much, Dan.
It was really great to have you on and I really enjoyed talking a bit about, you know, sort of state of Bitcoin and something's happening and yeah, hopefully we can do it again sometime and excited to see how it's going to develop in the next years and where you're going to take asymmetric, too. Yeah, thanks for the support of the fund. It's been too long since we caught up and I hope everyone found this entertaining. Absolutely. Thanks so much, Dan. Cheers all.
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