Dr. Muneeb Ali - Unleashing the Bitcoin Beast: Smart Contracts Will Create A More Decentralised Internet

Full transcript: Dr. Muneeb Ali on London Real

2:37 This is London Real. I am Brian Rose. My guest today is Dr. Muneeb Ali, the computer scientist, technology entrepreneur and Bitcoin evangelist.

2:56 You are the co-founder of Stacks, a three billion dollar market cap open source blockchain network that leverages the security and capital of Bitcoin for decentralized apps and smart contracts. Stacks’ mission is to create a better, more decentralized internet that is controlled by the users. You are also the CEO of Hiro Systems, where your team builds developer tools for the Stacks blockchain and have raised over 75 million dollars in funding from Union Square Ventures, Y Combinator and Winklevoss Capital.

3:25 You believe that by unlocking the potential of Bitcoin, we can build a new, truly decentralized and user-owned internet. Muneeb, welcome to London Real. Thanks for having me. It’s great to have you here. You know so many interesting things, so many impressive people that you’ve worked with over the years.

3:42 I wanted to start and maybe go back to your TED Talk in 2016, which is a great view. It’s only about 10 minutes. I encourage a lot of people to watch it. But you know, you put a logo on the screen, not a logo, a tagline, that said “Don’t be evil,” and I think we all know that this was kind of the unofficial tagline of maybe one of the companies we’re streaming on right now, maybe Google, that is now known as Alphabet. And you ask the audience about that phrase, “Don’t be evil,” and you ask them what shouldn’t it be: “Can’t be evil.”

4:12 And I thought it was a really interesting way to maybe begin talking about the way that you look at the internet, the way you look at blockchain, the way you look at Stacks, as maybe a way to make sure that we keep the power out of a few hands and more back to the people. And so maybe this is also a way to talk about how Web 2.0 transitions to 3.0, but maybe I’ll ask you instead, what were you trying to say on that TED Talk where you moved that phrase from “Don’t be evil” to “Can’t be evil,” and did I get it right with what you were talking about? Yeah, I think you did.

4:45 I feel like that phrase is actually cashing on a lot now. Like, you know, a lot of people use it. They would basically say it, like, “Can’t be evil” is better than “Don’t be evil.” And I think it kind of, like, in many ways captures the essence of what’s the difference between Web3 versus Web 2, right? Like, in that sense that in the previous versions of the internet or the web, there was no concept of ownership, right?

5:12 Like, you’re kind of, like, implicitly trusting large companies. And I actually grew up in Pakistan, and there are some areas in that country that are still under a feudal system, right? Like where people, they don’t own any land, and it’s actually, like, it’s a big bottleneck to economic prosperity because they don’t have any ownership, right? So they’re just working for whoever the feudal lord is, and it’s only the feudal lord that is actually reaping all the benefits.

5:42 And in many ways that’s kind of, like, what’s happening with Facebook and Google. Like, every everyone’s, like, just giving them our data for free, really, and they’re making all the money and they have all the power and control, right? And we almost want to change that to “Can’t be evil,” where there are these internet protocols that basically no one has to trust them. Everyone, it basically levels the playing field for everybody. Everyone has to play with the same rules, and I think that that thing is captured in the phrase like “Can’t be evil.”

6:15 It’s the same thing applies to Bitcoin as well. Like, think of it this way: Bitcoin is a monetary system where the rules are transparent. Everyone knows, like, what is the supply of Bitcoin, and it’s not going to change, so it levels the playing field for everybody. It’s not that, “Hey, if you lose your Bitcoin, you can go and get a bailout from the protocol.” Like, that’s never going to happen, right?

6:35 So the rules are actually the same for everybody, so it’s actually a much more fair system to work with. And then similarly, if you apply that concept to the internet, it becomes a much more fairer internet. Like, everyone has ownership, everyone has kind of, like, their own property rights and their own, and the rules are transparent to everybody, right? Which was just never there before on the internet. And I think that’s why I keep coming back to this feeling that the jump of, like, not having the internet and then having the internet was huge, but the jump of, like, defining digital property might be, like, 100x or a thousand x bigger, because I think I think that that is a fundamental shift in society.

7:17 I think it’s also fundamentally very difficult for people to understand. I mean, I was talking to Yat Siu of Animoca Brands and he called it digital colonialism. You know, we’ve been basically given our data up and it’s being sold back to us and we don’t know any better. Like you said, maybe, like you said, parts in Pakistan still, and parts of our own human brains, we, we can’t even see what we, what we should be doing. And again, maybe you talk to some of these people and say, “You could own your own land and be entrepreneurial,” and they’re just like, “What are you talking about?

7:47 I just farm the crops and I get paid a little bit of rent, and I’m just happy to have my kids and…” And I, you must, you must have a hard time, and I know I do, trying to tell people why Web 3.0 is better than 2.0, because they say, “Well, YouTube’s great, and Facebook has all my pictures and my friends, so what’s the problem?” How do you start to have this conversation with people that maybe aren’t as enlightened as some of the people in the blockchain space?

8:13 Yeah, I think interestingly, the one of the big differences between Web3 and Web 2 is monetary incentives as well, right? So usually you can start that conversation by talking about money, like in the sense that, let me, let me backtrack a little bit. Let’s, let’s go back to even earlier times when you know humans used to live in tribes, like in any, any area or civilization that you study, you’ll notice that humans will very quickly figure out ways to trade with each other, and they would very quickly figure out, you know, concepts of property rights or some sort of rules and regulations, right?

8:49 Because trading actually increases economic prosperity, and they would come up with, like, seashells or some sort of a currency, or, you know, gold, off of basically representing strong value, and trading makes everyone, everyone everyone better, right? It kind of, like, expands the economic pie for everybody. So that’s a fundamental principle. And now imagine that we have computers and we have the internet and most of the work in the world now actually happens digitally, right?

9:21 Like we’re mostly doing work on our computers. No matter what profession you’re in, like, slowly, like, all the jobs are actually, you know, being done online. And what Web3 is really doing is it’s defining how you can trade and make money online, right? And those rules are very transparent, and that’s actually, like, a fundamental shift, because think of this way, that, you know, if you were living in a tribe, you could only trade with people in your physical proximity, right?

9:49 And it’s a very limited economy. So now you as a digital citizen of the world are actually getting plugged into the world economy, and the world economy is going to be huge, right? It’s everyone, it’s everyone on the planet, and these protocols are actually defining the rules for how these trades are going to happen and how people are going to make money, right? And this is this is so fundamental that it goes down all the way to, like, defining even what money is, right?

10:16 That’s where Bitcoin comes in, or some other protocols that are trying to do that. Like, what is money? How do we, how do we agree on a store of value and a medium of exchange? But then also, imagine that, you know, like I don’t know, three, four centuries ago, there wasn’t a good concept of a company, right? Like, where you could have equity in a company.

10:36 What is equity? Equity is, like, a part of economic ownership of an entity, right? And it’s represented in this thing called equity, and then these equities can trade on public markets, and those markets are huge. But imagine in these new types of systems, there are new ways of defining your ownership or your economic pie in a project, and those things are much more programmable, they’re much more easily tradable than even equities, right? And everyone has access to it.

11:04 Like, you could be a 16-year-old kid growing up in India and you have the same amount of access to this economic opportunity as anyone else on the planet, and I think that’s fundamentally game changing, and that’s the thing that I’m the most excited about, that now people can actually come together, form, like, it’s not even a company, right? Because it’s not really incorporated, you don’t really have equity in it, but you do have economic stake in the success of that project, which is humans just working together, right? So at the at the fundamental level, that’s basically humans just working together and trading and earning money, right?

11:40 But it is a global, truly global economy, and it is being defined by the tree. Yeah, so many things that you just said there, I’ll try to unpack a few of them. First of all, like you said, as humans we trade, it’s almost a way we communicate with each other in some strange way. And you know, strangely enough, I was talking to Roger Ver, one of the early Bitcoin players, a couple of months ago, and he actually famously went to federal prison for a little while, and he said, he said, “Brian, in there I saw trade blossom.”

12:07 He’s like, “We weren’t supposed to be trading, but everybody was trading for cigarettes or, I think it was like phone minutes or something with family,” and he said all these little economies were springing up. People could fix your, you know, your Walkman or do this. So he said he saw it happen right in front of him, probably inspired some of his later work. I spent my career in the ’90s on Wall Street, so I got to see the financial markets, but I also got to see financial markets that only a few institutions had access to.

12:37 And you know, then we saw Silicon Valley open up, and I always like to ask my students in my DeFi Academy, I say, “Raise your hand if you were invited to the Series A round of Facebook back in 2005,” and nobody raises their hand, and yet Peter Thiel and a few other people got the phone call, not many probably, and they got to invest in that round. Imagine if the whole world had been able to go get a piece of that, you know, on Uniswap, for example. So the advances in capital markets and access and the way that empowers people and allows them to have a piece of these protocols now, like you said, not just equities, there’s a lot of things going on here at the same time, right?

13:16 And it’s really empowering, and just the tokenization of that is bringing a lot of power. Like you said, I mean, anybody can buy Bitcoin now no matter where you are in the world, and you can own a piece of this protocol that’s, you know, fully decentralized, which is something I’m sure we’ll talk about a little bit later. That concept in itself is quite new. So you clearly kind of went down this rabbit hole and fell in love with this technology. I know you fell in love with computers when you were back in Pakistan, and that also kept you away from that state-controlled media, which was again kind of this monopoly.

13:50 Where do you want to start, back then or back in 2013? Yeah, I think maybe we can mix it a little bit. So I feel like I have a tendency to get attracted to cutting-edge technology, really. If I look back at my life, like when I got on a computer, it was literally like, you know, someone has just cast a spell on me. Like I would literally be up every single night, all night, because I just couldn’t go to sleep because it was such a fascinating thing, and this is a computer that was not even connected to the internet, right?

14:22 It was just a box, right? And I’m like messing around with it, and my my my parents, they actually were really worried about me. They thought that I started taking drugs or something because my eyes would be red every morning because I’m not sleeping. And then imagine when I got connected to the internet, that’s like almost like, you know, plugging a fire hose of information into somebody who’s just like fascinated with that world and gets attracted towards, like, new types of technologies.

14:49 And I’ve noticed that trend even recently in my personality, like, before crypto, like I was in computer science, I was pretty plugged into Silicon Valley, and Silicon Valley felt like a place where the free spirits and the entrepreneurs are kind of like flocking to, right? And a lot of innovation is happening here. But interestingly, when I discovered crypto, it just felt like this is the future, and Silicon Valley started feeling like the past. And I think I was pretty early in jumping into the crypto technology, like 2013 or so, right?

15:24 And at that time, and I think we’re seeing that friction even today, where Silicon Valley, I don’t think they were able to adapt to crypto. Like, most of the investments that have happened, they’ve happened from new funds. Like, there are some exceptions, like, you know, Union Square Ventures or Andreessen Horowitz. Yeah, who have been able to kind of capture this new world of crypto, but most of the funds are actually new. Like, the old funds were not able to adapt to the crypto world.

15:56 Even Silicon Valley did not emerge as a hub for crypto. There is no single big hub, right? Like, but Silicon Valley is definitely not one of them, and people are actually leaving the Valley because they know that they can work from anywhere. Capital flow is much more fluid. So it’s a little bit like, imagine this thing is so new that even Silicon Valley can’t keep up with it.

16:18 And even recently, a lot of Web 2 founders are actually having a hard time understanding crypto. Like, they’re having a little bit of a basically, they’re going through this process of, “This thing could potentially disrupt everything that we have done over the last 10 years,” right? And there’s a natural kind of, like, resistance to that feeling, whereas I think there’s a very famous quote that, he says that imagine that you’re climbing up a hill and you’re more than halfway through, and then you realize that the only way to go any further is to first come down, right?

16:59 And that’s very hard to do. Like, it’s very hard for people to give up on everything that they’ve done in life and basically start over. And I think you almost, like, need to have that ability to be able to do that over and over and over again. Like, I feel like I’ve definitely gone through those moments in my life where at one point I was completely surrounded in academia and wanted to kind of climb those ladders and, you know, publish at the best conferences and thought that this is the cutting edge of kind of, like, research and technology, and then realized that, no, there’s a better path, right?

17:36 And there’s a faster, bigger economy, and you can actually make a bigger impact if you join that community instead. But you actually have to unlearn everything you’ve learned over the past five, six years being a grad student and being in academia and kind of, like, trying to be really good at something that is completely different and convincing yourself out of, like, “Hey, this was actually a sub-optimal system, and now I’m running towards something that is actually much better.” And I think Silicon Valley is kind of, like, there, that they need to realize that their way of operating, investing in companies and building these centralized services is actually sub-optimal, and they need to, like, wake themselves out of that way of thinking and go learn, like, what’s happening in the new world to stay competitive.

18:22 Otherwise it’s just, like, slowly you are going to become irrelevant. Yeah, it’s something that’s come up on this show quite a few times, because I’ve had, you know, Stani Kulechov in this studio, and we had this conversation, and I’m like, “Well, what do you, what do you have next planned for Aave? What’s the direction?” And he’s like, “Well, Brian, my job is to get up every day and write code that’s good enough that people want to use it. It’s like I don’t actually form the direction of this company.

18:49 That’s actually controlled by the people that own this blockchain.” And I was like, “Wow, that’s such a non-VC way of thinking,” because the VCs would be dictating, and they would be championing the Steve Jobs and the Elon Musks, and, you know, we, like you said, we put the capital in, we centralize it, we own the upside, we control the direction, we set the trends, and doing that very successfully for 50, 60 years, right? And now you’re going to tell them that, guess what, the community is going to tell you what to do next.

19:20 It’s going to be a DAO. You’re not going to own it. You’ve got to give up control in order for it to become bigger. I don’t know, that’s a real fundamental shift, like you said, in the human ego and how even capitalism has worked for hundreds of years, you know, where the victor, to the victor belongs the spoils, right? You put the capital up, you get the big wins, and this Web 3.0 is a so real shift in human paradigm.

19:46 Does any of that stuff resonate with you? Yeah, but I think if you look at some of the disruptions that the internet has caused before, there is a trend like that. Like, for example, imagine when Wikipedia came up, people were like, “This is just ridiculous. Like, random people on the internet cannot write articles that would compare to information coming from sophisticated places where there’s a hierarchy, right?” And in the hierarchy, people definitely were qualified, right?

20:20 And they would be a chief editor or something, and they would kind of, like, publish a encyclopedia, and people would trust that information. But imagine that the power of the community on the internet is so such a force, right, that they will self-correct their information, and because it’s fluid, so many people can participate there, that eventually that organic system ends up being much better than the centrally controlled type of information sources. We’ve seen the same thing happen over and over again, even with open source software.

20:55 Like, imagine that there would be open source projects initially, like, they’re small, they’re clunky, people are working on them, like, in their free time, but because they’re open, anyone in the world can actually contribute to them and can audit them, can actually improve the code quality. Even companies like Google or Facebook that have all the money in the world, all the resources in the world, still can’t compete with open source projects. So open source projects would become so much better over time because every everyone in the world could actually contribute to them, right?

21:27 So it’s a little bit of the same thing going on here, that instead of a CEO and a board, no matter how qualified they are, trying to make the best decision for a project, you’re basically letting a thousand experiments happen, and organically better ideas are emerging in an open ecosystem, and it’s very hard to compete with that, right? Because almost by definition, the smartest people in the world are not in the room with you. Like, they’re actually out there somewhere in the world, and your job is to, so I think your people’s jobs in crypto protocols actually becomes, how open can you be to your communities?

22:02 And it’s a little bit like you’re more present, and you’re trying to help good things that are happening, right? You’re actually not trying to dictate that, “Here are the good things that should happen.” So you become not the driver, but you actually become one of the people who are helping everyone going in an organic direction, right? So it’s not that you don’t have a role anymore, I think, but you have to just have a very different role. Yeah, yeah, and I’ve noticed that with even the different use of language by a lot of the founders that have come on the show in the last six months, you know, in comparison with, you know, things that I saw in the dot-com boom in the ’90s, etc.

22:45 I mean, it is, it’s the, “We listen, you know, we we try to create tools to help our developers, we try to provide, you know, more help to the community.” It’s this whole listening thing, and not the famous Steve Jobs line, right, “My customers will know what they want when I give it to them” type line. And again, maybe at that time there was a place for that, you know, when there was no way of that mass communication or tokenization, but like you said, clearly it seems like the speed of innovation happens faster in this open source way.

23:16 And I guess the internet itself was almost a little version of that, right, of no one controlling those protocols, and we saw how that flourished, and I guess we’re seeing, you know, another example here. Tell me about your story, kind of in 2013 when you finally got hooked and you also saw how Bitcoin could really work into Stacks. You know, you were hanging, I think, in the East Village, strangely enough, with Ethereum co-founders and Chainlink founders.

23:41 What was going on there? It was a very small world back then, right? Then and I’m pretty sure we would be saying the same thing 10 years from now when you’re looking back at 2022, that, “Oh, my God, it was such a small world back then.” But obviously this is an order of magnitude of a difference here. So Bitcoin, you know, was trading under a hundred dollars at that time.

24:06 It kept coming up in some of the conversations around people around me, and I was like, I’m a computer scientist, I did a PhD in distributed systems, I was actually still enrolled at Princeton but really trying to get into startups. I’d decided that academia is not for me, and at that time, like, I wasn’t that interested in the monetary aspects of Bitcoin, right? But I was interested in the in the peer-to-peer system and basically the internal workings of how this protocol is working.

24:38 Like, that was fascinating to me, and I was basically trying to poke around that. And interestingly, it just so happened, like, I was living in East Village and the apartment on top of me, I knew the neighbors, and they rented out on Airbnb their apartment for some months to one of the Ethereum co-founders, and which one is, basically he likes to be more private, because one of the six people, but he was basically telling me about why Ethereum and fully expressive smart contracts are really important. And I, coming more from academia, was very scared of fully expressive smart contracts.

25:21 I’m like, this is like, you know, running untrusted code on other people’s computers, right? Like, a lot of horrible things can happen if you do that, right? I was actually very resistant to the idea, and this is one of the lessons that I’ve learned over the years, that I think the power of fully expressive smart contracts is much, much stronger than any potential downsides, right? And then the work that we did was actually trying to limit the potential downsides by inventing this programming language called Clarity, where it is very expressive, you can pretty much build anything you can build with Solidity or a fully expressive smart contract, but it limits the potential downsides, right?

26:04 So I wouldn’t get too much into that, but interestingly, you know, there was a small co-working space where we used to work from, and the Chainlink founder Sergey was working out of there, right? So, like, what’s the probability of, you know, like three kind of, like, big projects in crypto pretty much on the same two-block radius, right, and working together? And then when Bitcoin, I think I would buy Bitcoin when it was below 100. Every time it would cross 100, I’d feel like it’s too expensive, I’m not gonna buy.

26:35 And at some point, you know, I think there was a Bitcoin crash, it went to, like, 200 and then it dropped, and there was a trading and mining community forming in New York at that time as well. And when Bitcoin dropped, if you go back and look at the charts, there was a floor of 72, right? It never came down below 72 and never again saw those levels. We actually knew the party who had the buy order at 70-ish, right? And it was they they wanted to buy a ton of Bitcoin and just did the calculation that this is the right number where they’re basically buying.

27:09 So it was like such a small world that Bitcoin is crashing, and the bottom call that sent the number, that’s 72, we actually knew who is doing that, right? Like, and it was a fascinating world. There’s no way you can do that in Bitcoin today, right? Like, it is such a decentralized organic international market that there are so many players. I don’t think now you could, you could be able to basically know through word of mouth that, like, what’s going on in the market.

27:39 Yeah, I actually bought some Bitcoin at 85 pounds in 2013 around the same time, because Max Keiser came on my show back in 2013, he was screaming about Bitcoin and Bernanke, and but also Max is incredibly smart, and we were both lamenting the fact that there were no market makers in Bitcoin, and so it was just this order-driven system, and I was frustrated by the lack of liquidity. I was used to trading US bond, you know, Treasury markets, where there’s a lot of liquidity in the 30-year bond and foreign exchange, and then going into Bitcoin. And it’s funny to watch that video back now and to see, you know, how much things have evolved, you know, in just the centralized change space, but I remember those times.

28:20 I remember it was still quite cliquey, it was still scammy, it was still Silk Road-y, and you know, for many years it like you said, a real pioneer if you’re around in that space, especially developing code. And so initially you weren’t convinced that that smart contract, which again is basically a small computer program based on the code, it’s not a smart or a contract, some people have told me, right? But I had Professor Sylvia McCauley on here. I know you’ve done some work with as well, and it’s great to see computer scientists looking at this, because sometimes you bring a different angle to it because you understand coding kind of in your DNA.

28:57 When did the, then when did you then see that this was going to be part of your life’s work with Stacks? Yeah, so I think in the early days, like, it was a little bit like, you know, we didn’t have any funding, we were just like hacking on these things for the fun of it, right? and we were fascinated by the technology, and I was always interested in what can you do with this technology, right, other than the monetary aspect, like Bitcoin, yes, the hard cap.

29:27 I unders- I think I realized the importance of sound money more now after spending so many years in the Bitcoin community, and there are some people who are in it only for the sound money, right? Like Max is probably like one of those people. Like, they’re like, “I don’t care about any other use cases, right? Like, I’m here only for the sound money and only for Bitcoin.” I think I realized the importance of that a lot more now, but I’ve always been more interested in, like, what else can you do with the technology, because that is to me, it’s just much more fascinating, because I see that as fundamental new infrastructure, and people can basically build all sorts of new things on top, right?

30:03 So we were really interested in what can you build on top, and the best way to do that is actually trying out, building things yourself, right? So we tried building some really initial blockchain applications on top of Bitcoin. The first system, it was called One Name, it lived for like around three years between 2014 to 2016, and it was really like the first username-based, you know, profile page built on a blockchain, right? So think of that as, like, an early version of, like, you know, your Facebook page or Twitter profile, but it’s built directly on a blockchain, the Bitcoin blockchain.

30:40 And then that helped us, like, discover some of the underlying scalability challenges or the lack of programmability. I think it became very clear to us by actually trying to build applications that the fully expressive smart contract approach that Ethereum had was way superior, right? And I think that has now been accepted in the industry. Like, every other blockchain project that has really launched, be it Solana, have launched, Avalanche and others, almost everyone has expressive smart contracts in there.

31:11 And so this is, so I would say 2017 is the year when a bunch of different L1 protocols basically started getting funding. So 2017 and 2018 are the two years Cosmos got funded, Filecoin, so we were a couple of months after Filecoin, so the Stacks project basically got their funding in 2017, and then typically, you know, building a high-quality layer one blockchain basically takes you at least two to three years. And so we’ve seen, you know, the projects that got funding in 2017-2018, they really launched in, like, 2020 time frame, more or less.

31:46 Same with us, right? So our mainnet launch was January of last year, so the system has only been live for one year. And I think the one of the drastic ways in which we are very different from a lot of the blockchain projects out there is that we’re firmly in the camp of Bitcoin, right? Like, we think that it is possible to bring expressive smart contracts to Bitcoin instead of having a separate blockchain, and then you benefit from the security of Bitcoin, from the durability of Bitcoin, from the immutability of Bitcoin, and then you can also make Bitcoin capital productive, right?

32:20 So Bitcoin is already a trillion dollars of crypto capital, and it’s just sitting there, right? It’s very different from Ethereum, where, you know, up to 25% of the Ethereum supply is deployed into smart contracts. It’s productive capital, people are actually earning more money on that. Bitcoin is a passive asset. So I think the Max school of thought and a lot of other early bitcoiners, like, you know, if you look at the blockchain people, at Adam and Back and others, they’re all in the camp of, like, Bitcoin is sound money and hold it, right, and we don’t need any applications around it, right?

32:58 So even within the Bitcoin circles, I feel like there’s almost like a different school of thought, and people in our community are like, “No, Bitcoin is actually much more valuable if you make it productive,” right? And instead of turning a blind eye to competition out there, like from Ethereum or other systems, you need to look at the interesting things that they’ve done. They have actually made systems where their assets are productive, and there are so many use cases and smart contracts in which they’re deploying, and deploying ETH, and their trading markets, their marketplaces, and that’s just like such a much kind of, like, vibrant system of developers with cutting-edge use cases, and it’s like really exciting to be part of something like that, and we want to see that in the Bitcoin community.

33:47 And I think that’s what happened last year with the growth of Stacks, like people started building, like, all sorts of, like, stablecoins, lending markets, NFT marketplaces, and so on. And I think that’s, that’s, I think for me, like, that’s kind of like the biggest hope for Bitcoin, that it’s not just like this passive just hold Bitcoin and talk about the 21 million capital Bitcoin all day, but we can actually truly be a part of the Web3 movement by bringing all these use cases to Bitcoin. Yeah, I’ve been a little frustrated with the maximalists, I won’t lie, including Max Keiser, if you’re watching, Max, I’m on you, because he’s just like, “Brian, Bitcoin won, end of story, everything else is a coin,” or whatever Max says.

34:32 And again, much respect to Max for all the work he’s done over the past 10 years. You can’t give it up, you know, you have to give it up for the man. But you know, I’m an engineer by design, you’re a computer scientist, we want to create things to make the world better, and we don’t want to just sit around and revel in, you know, the perfect asset, and you know, that gets old after a while in my opinion. So it’s great to see the innovations, and again, you cannot, here, you can’t not see what Ethereum has done.

35:00 You know, they’ve done some incredible innovations. You know, I’m in this space for the past eight months because I looked at the DeFi summer after I was busy running for mayor of London and fighting for freedom of speech, and I looked at it and said, “Oh, my gosh, this is real, and this is impressive, and this is decentralized, and this is the future.” And if it wasn’t for that, I wouldn’t probably be in this space, and so you know, to just completely ignore that frustrates me by the maximalists and gets me to tune out a little bit.

35:27 And so I appreciate you doing that, and again, you guys are clearly delivering something that has value. You’re in the top 50, 60 market cap coins. I don’t think many of those protocols are Bitcoin-based, and Bitcoin is screaming out for that need. And someone recently said to me, I think it was Tyler Spalding of Flexa Networks, he said, “Brian, he’s like, I don’t know if you’re a Bitcoin maximalist, I don’t know what you talk about.” He’s like, “There’s nothing to talk about, because all you do is talk about how great it is, but there’s no innovation, there’s no what’s next.”

35:54 And so and he said, actually, that’s not what Bitcoin was even about. It was never, it wasn’t created in the spirit of maximalism, it was actually created to create more opportunities. So I appreciate what you’re doing, and it’s fascinating. And you’ll probably agree with me, we need to look at the top 50 market caps right now, look at those layer one protocols, look at what they were doing back in ’17 and ’18 and building them, and you see the Avaxes, we’ve had both founders on, the Algorands, the Trons, you know, obviously Ethereum working way back, the Solanas, and they’ve all, like you said, embraced that form of a smart contract, and now they’re, you know, real players in this space.

36:32 And I always used to joke we’re running out of Ethereum co-founders because I only think there’s a finite number of plays right now, and we’re seeing them played out right now because they were built a few years ago during the bear market, and it’s exciting to see what you’re bringing to the table. So first of all, do you agree with my assessment of those things, and next of all, I want to go deep on what you’re doing with Stacks. Yeah, no, I think I absolutely agree, right?

36:57 So a lot of people tell me that one of your biggest weaknesses is that you’re just too humble, right? Like, I think Coindesk did a piece on me in like 2019, they had some list of like top 10 people and whatnot, and literally the tagline they used was “the humble engineer,” right? So, when, so I think I’m trying to work on that, like just to, like, share more information with people. Like, it’s not the case that we are one of the bigger projects in Bitcoin.

37:26 I think, like, we are actually, we actually dwarf anything else, like, in the sense that when you talked about the top 50 projects, I think Stacks is now in top, like, number 50 or something, and it’s only been live for a year, right? There’s zero other Bitcoin projects in front of us. We are by far, by far the largest Bitcoin project. Like, there is more than a billion dollars locked up in a smart contract in our ecosystem. I think people, there’s one smart contract where people can actually earn a Bitcoin yield, right?

37:58 Like pure Bitcoin yield, like you’re actually receiving Bitcoin in your wallet, and something like 60, 70 million dollars in Bitcoin has been transferred, right? Like, if you start comparing, like, these stats to even Lightning Network, which is great, you know, I’m friends with Elizabeth Stark, big fan of the work that they’re doing, the total liquidity and available in the Lightning Network, like there’s much more economic activity happening in Stacks already than some of these projects. And if you compare to things like Liquid or others, like, there’s basically like no comparison, right?

38:28 Like, Stacks blockchain is running at full capacity. There are like 30-plus startups that are building on it, and there’s just a thriving community. So in many ways, like, this is, like, the best response from the Bitcoin ecosystem to all the innovation that’s happening. And I think it is a little bit surprising that the maxi community is not fully behind it yet, but I’m noticing that people are slowly converting over, right? Like they see the benefits, they see everything, everything that’s happening over here, and they can see how this is good for Bitcoin.

39:06 And I think that’s the kind of, like, the key understanding. Like, for example, as you mentioned, that, you know, what do you even talk about if you are a maximalist and you’re just talking about a Bitcoin asset? But even some of the values that the Bitcoin community has, like, for example, Bitcoin currently gets traded on centralized exchanges, like most of the trading activities on Binance and Coinbase and some other places. Ethereum people have decentralized options.

39:33 They can go and trade on Uniswap, right? They can go and take a loan out in a stablecoin in a completely decentralized fashion. People in Bitcoin would love to do that, right? Like in theory, but they are kind of, like, stuck on this idea of, like, why is there a different gas asset? Why is there a governance token?

39:52 Right, I think they really need to move past that, because you should look at is this application useful to you, right? So a Uniswap-like system where you could go without any KYC in a completely decentralized manner trade is a better system than BlockFi, which is a centralized exchange, according to the values of the Bitcoin people who believe in decentralization, who believe in freedom, right? And a lot of bitcoiners would say that, “I would love to use a decentralized alternative to BlockFi,” and we are giving it to them, right?

40:27 It’s a little bit like, this is in line with your own values. But I think there has been such a negative reaction in the Bitcoin community to all the innovation that was happening outside that they always point out the failures, right? They would point out, like, some sort of scam that happened, right, and then basically be like, “Hey, everything is a scam,” just that’s unsaturated, like, or they would point out, like, some sort of engineering mishap that happens in a protocol and not look at everything that’s going right.

41:01 You can’t, you can’t cherry-pick your information sources and then be like, “Look, we we’re not going to engage in all the innovation that’s happening,” even though the products that are being built, they are in line with the values of being a bitcoiner. So I think I really respect people like Erik Voorhees who are early bitcoiners, and they’ve completely accepted that all these decentralized protocols are actually good for Bitcoin, right? Like, they increase decentralization, they provide a platform where many experiments can happen and then some of the best ideas can actually come to Bitcoin.

41:39 And this is a theory that, you know, a lot of bitcoiners actually agree to, that you know, let the experiments happen and then some of the best ideas would eventually get implemented in Bitcoin, and Stacks is literally doing that, right? Like, it is literally bringing all of those best applications to the Bitcoin ecosystem. And I think I think slowly we’re seeing more and more bitcoiners getting really, really excited about it. Yeah, I think you need to talk more because as I’m learning about this whole marketplace, and again I spent six months running to be the next mayor of London, so I got a little taste of politics, first in my life, maybe last ever, but I realized that, you know, Bitcoin’s a combination of politics, marketing and technology, right?

42:19 Having the best tech doesn’t mean you’re going to win, right? And that’s never been the case really in technology, back to Betamax versus VHS, and even look at Microsoft Office, for example, or even you know, Apple’s fight with some of the, you know, Dell computers over the years. So it is about messaging for sure, and again, look at the history of capitalism, it all comes down to capital markets, right? If you can get free liquid capital markets, you see growth in places like London and New York and Hong Kong, and again, you’ve got all these bitcoiners, that’s kind of a, you know, it’s a technology wrapped up in cults, wrapped up in a belief, and yet they’re almost staying away from those capital markets that are going to help it grow because Ethereum did it, and like you said, there was the one problem there, or they’re doing it wrong there, or you know, we just want to HODL and do this.

43:09 And so it’s important what you’re saying right now, and I think a lot of bitcoiners would love to use their Bitcoin in a productive manner, like you said, you know, earn yield on it, etc. And this is how you unlock the capital, and the DeFi summer of 2020 has been, you know, called out as one of the biggest factors in empowering NFTs. And again, Yat Siu from Animoca Brands said on this show, he said, “Brian, if it wasn’t for the DeFi summer of 2020, we wouldn’t see the gaming accelerate so fast, because now we see liquidity in the tokens.”

43:45 And that was a real, you know, really a hat tip to the fact that the capital markets are important in the expansion. So I think it’s important that bitcoiners can see what you’re doing is important, and glad you mentioned Lightning, because I hear about it sometimes, but I never know what’s actually happening, and so I’d love to go a little bit deeper into Stacks, because you’re trying to provide potentially DeFi in this Bitcoin protocol and potentially even NFTs and metaverse plays, I’m guessing. If that’s what’s here, what does the future potentially look like for Stacks?

44:20 Yep, let me go over these topics. So I think I had some recent tweet threads that got a fair amount of attention, which were really addressing this topic of maximalism, and I was actually pointing out some logical flaws in the thinking of maximalism. Like, let me let me bring out a few of them, because I think it’ll be interesting for the audience. So a lot of a lot of the thinking in the maximalist crowd is that Bitcoin is going to become the reserve currency of the world.

44:48 It’s like almost like everyone’s like, on board, “Yes, Bitcoin is going to become the reserve currency of the world.” The interesting thing about reserve currency is that that’s the asset against which other things trade. US dollar is the reserve currency because everything trades against that, right? And bitcoiners are, they don’t even like to have other assets, right? Like, you need to have other assets so that those assets can actually trade against Bitcoin.

45:17 It actually helps Bitcoin if there are a lot of liquid markets and trading happening against Bitcoin, because that’s how you become a reserve currency of anything, right? So it’s a little bit of a logical fallacy when you’re like, “I want Bitcoin to be the reserve currency,” and at the same time, “I want Bitcoin to be the only asset.” How can it be both, right? You have to pick one, and if you have to pick, Bitcoin is far more valuable as the reserve currency than as the only asset, because then you’re trying to shrink the economic pie if you’re saying that other types of assets should not exist.

45:52 I think there should be a ton of different types of assets, but they should trade against Bitcoin, which is not the direction the world is heading, because if you look at the early stages of crypto, most of the trading activity used to happen against the BTC pair. Slowly that has actually started shifting to stablecoins like Tether and even other systems like, you know, ETH and others, and I think that’s like a missed opportunity for Bitcoin. You were already the number one trading player and you’re actually losing market share.

46:26 And if you basically embrace decentralized exchanges, if you embrace this idea of trading against Bitcoin is actually a good thing and actually actively work towards it, that would be good for Bitcoin, right? Yeah, there’s a, that’s a really good point. And just on that same note, you know, we saw El Salvador, you know, make Bitcoin an official currency, but you know, the common thing has been said, the problem is no one wants to sell their Bitcoin, you know, and so you’ve got a mentality around this kind of HODL till we die, and like you said, but we also want to be the reserve currency, but those philosophies don’t mix, as you said.

47:00 And so until you get someone that’s comfortable buying and selling this currency, then something else will step in, like you said, USDT, USDC, and these will become the more liquid pairs, and now you’ve, like you said, missed this opportunity because you’re stuck in maybe this old school, you know, Satoshi-era mentality. So I’m really glad you called that out. Yeah, and I think similarly this idea of, like, yeah, Bitcoin is valuable obviously as well. I don’t want to sell my Bitcoin, but at the same time, I would love to draw loans against my Bitcoin, or I would love to lend my Bitcoin in a secure manner and actually earn a yield on it, right?

47:38 And this is something that bitcoiners are aligned with, the idea that, “Oh, wouldn’t it be great if, you know, instead of selling my Bitcoin, I could just get a loan against it, and then basically my Bitcoin keeps going up in value and I can repay the loan, or I lend it to somebody and I earn a yield on it.” You have to embrace technologies like Stacks for this to happen, because people are literally devs are literally building these things on Stacks. Like there are decent lending applications, there is already a decent-sized stablecoin where you could do a native Bitcoin swap and you can put BTC collateral and mint a stablecoin, right?

48:17 This is like exactly what we have built. And I think that’s where, again, this is a little bit of a fallacy, that you cannot be both, using these ideas and then hit the technologies that are giving you literally those applications, right? So you have to pick one. And I think that’s where, I feel like that’s the reason why so many bitcoiners are converting over, because I think they’re intelligent people. At some point they realize that they’ve just been stuck in a thought bubble, and they’ve been almost like in some ways hearing the same arguments over and over again.

48:51 It’s like at some point it becomes like a religious cult, right? Because they go to every, every podcast is a little bit like going to church. Like, they’re just hearing the same thing over and over again, and what you want is independent thinking, what you want is truth seeking, that here is logically what makes sense regardless of whatever thought bubble ideas you’ve been exposed to over the past two, three years. And I I feel very confident that a lot of people will be able to break out of it, because we are seeing evidence that people are doing that.

49:19 I think an important strategic you know, proponent of yours will be Michael Saylor, is what I think, because obviously smart guy, MIT trained, he owns a lot of Bitcoin, and deep into my conversation with him, he he acknowledged that there was a need for a digital currency, i.e. like a stablecoin, in addition to digital property, which he said was Bitcoin. He said, “Brian, nobody wants to use digital property for transactions, they need a currency.” And I was like, “But Michael, the currencies are now all smart contract based, currently on Ethereum.”

49:52 And you know, we didn’t really go there, but he definitely acknowledged the fact that we need something like that. Clearly he’s got a lot of Bitcoin that he could be earning yield on. He also told me, “Brian, I like Bitcoin because it has low aspirations,” and I like the fact that he’s understanding that, probably flies under the regulation radar, and I know we’ll talk about that later with you. So I understand what he wants and needs, but I feel like he’s the guy that can stand between potentially the maximalists and what you guys are doing.

50:23 Thoughts on that, or maybe you know something I don’t? No, I think I think absolutely right. Like, for example, the idea of a Bitcoin backed stablecoin is something a lot of bitcoiners would get behind, and this is literally, it’s a little bit like the future is already here, it’s just not widely distributed yet. And there’s a protocol called Arkadiko where you can literally have a Bitcoin-backed stablecoin and people are already minting it, and it’s amazing, right?

50:49 It’s a little bit like we need to basically tell more people and I’m a computer scientist, right? Like, I feel like we need more people who are good at marketing, good at messaging, like simplifying con- like someone like Pomp. Like, Pomp is a big fan of Stacks, so he’s like hosted me many times. Someone like that, or Dan Held is another example, he’s again, you know, a friend of the project who can simplify the technology that we have built and take it to the masses of Bitcoin.

51:18 I think that’s a very logical next step, and I’m very confident that it’s just going to happen with that. Like, I feel like we want to get into a little bit of the insides of Stacks and what exactly it is and how it works, and the way to think about that is that Bitcoin is valuable because it’s immutable, it doesn’t change, right? And that is what a lot of bitcoiners would say, that, “Hey, look, Ethereum keeps changing, I can’t trust it. I don’t know what the monetary policy is going to be, I don’t know what the consensus algorithm is going to be like in two years, three years and so on.”

51:53 I agree, Bitcoin is durable, right? Like, we know that it’s going to be this thing like 20 years from now, 50 years from now and so on, and I feel more secure keeping my money as Bitcoin because I know I can come back 10 years from now or my kids can come back later down the line and Bitcoin will still be Bitcoin. But at the same time, you know, it is a limitation because Bitcoin doesn’t have smart contracts, so that is the problem that we’ve effectively solved, right?

52:25 And this is technically a much harder problem to solve, because it’s easier for me to go off and build a separate new blockchain because then I’m in control of everything. I can just build a new system however I want to build it. But we wanted to work with Bitcoin, so you have to interoperate with Bitcoin, you basically have to almost like extend Bitcoin without changing it, which is very technically hard. So what we ended up building, Stacks is a programming layer for Bitcoin.

52:49 So it is separate, it’s a separate layer. It’s the way to compare this with Ethereum, is Ethereum is a single layer solution, even though now they are working on L2s for scalability. Bitcoin plus Stacks is a two layer solution, which for people who are familiar with Lightning, they would instantly get it, right? Bitcoin is the base layer and Lightning is the faster payments. So similarly, Stacks is basically the programming layer where you can get faster smart contracts and then they settle on Bitcoin, and because the Stacks layer is independent, we can have fully expressive smart contracts there, and these contracts can respond to Bitcoin transactions, meaning that you can build Bitcoin applications where, let’s say, I’m doing a Bitcoin transaction to do lending and the collateral is living in a smart contract on the Stacks layer, right?

53:39 So it’s actually enabling native Bitcoin applications, that I could just do a native Bitcoin transaction and trade into some asset, like do a native swap, right? Again, like, instead of going through Binance or some other centralized exchange, I can directly trade into a stablecoin just by doing a Bitcoin transaction, which is huge. Like, most people don’t realize that this can be done with Bitcoin. They know that this can be done with Ethereum, but they don’t realize that it can be done with Bitcoin.

54:06 So this is the technology that we have enabled, and then it launched January of last year, actually less than a year, the launch was on January 14th last year, and it has just exploded. Like, I think there’s so much developer interest, community interest. There are Bitcoin NFTs now, I think there are seven, eight different marketplaces for NFTs that came up. And one interesting thing I started noticing was, like, the Bitcoin community definitely has a culture, like just like, you know, the Ethereum community has a culture and so on, but for the Bitcoin community there was no way to express that culture.

54:39 So once we started seeing Bitcoin NFTs through Stacks, we started seeing, like, you know, Citadels as NFTs, like Bitcoin pizzas NFTs, like faces of Satoshi as an NFT, and that was like such a almost like a breakthrough, that suddenly these bitcoiners had a way to express themselves and form communities, because that’s what a lot of Web3 is about. Like, it’s people connecting with other people directly, and if these have a huge, like, community element, and big and the Bitcoin community was lacking the tools. Like, it is much more exciting to be part of a community that is exploring the frontier together, right?

55:24 Like, “Oh, here’s a new idea that I’m excited about,” “This developer is building this thing on top,” right, or, “Here’s a new NFT collection that came out,” and they’re having, like, all these really energetic conversations, which was completely lacking in the broader Bitcoin ecosystem before. So I think that has been a very, very positive change for me. Like, I consider myself a somewhat of an OG bitcoiner, and even I’m excited that now there are fellow people like us, right?

55:52 And they’re only becoming bigger. Like, I have this little habit of basically saying good morning on Twitter every morning, and over time the amount of people who have, like, Bitcoin NFTs as their profile picture, or they have a .btc in their Twitter handle, right, because it’s a .btc is a domain name, like dot, dot dot, it’s just growing. Like, it used to be 100 people, now it’s like 200,300, 500 people who are just like excited about this direction that we are going in, and I think I feel the power of the community here.

56:28 Yeah, it’s important you kind of give those people an outlet, because as we alluded to earlier, if you’re a maximalist, you know, you can only say 21 million so many times, right? I mean, you could always talk about Satoshi so many times. I mean, yeah, you need to continue to create. I guess that’s probably the evolution of any network is that they do that. So it’s interesting that you’re noticing kind of nuances in the Bitcoin community, you know, in NFTs as opposed to the others, and that makes a lot of sense.

56:57 I mean, the real question, I guess, is can you keep up with the rate of growth of NFTs on Solana or stablecoins on Tron? Because these are growing super rapidly, and I guess that’s ultimately your challenge, right, is to try to keep up with these networks over the next 24 months. Yes, so I think to be fully realized, that, you know, some of these networks are bigger in terms of the amount of capital locked in in DeFi or the amount of NFT activity and so on, but we feel like we bring something very unique to the table, like in the sense that for any blockchain system, your total size of the economy is approximately limited by the market cap of that project, right?

57:44 Because in Ethereum, you know, you’re locking up ETH mostly in DeFi, yes, you can lock up stablecoins as well and they can add to the capital, but on a first approximation it’s kind of like the market cap of that ecosystem. And for a new ecosystem, like relatively new, let’s say if you’re in the single digit billion dollar market caps, like there’s a reason why you know the biggest smart contract on Stacks right now has a billion dollar locked, because most of the capital right now is STX capital. STX is gas for smart contracts, so we have a two layer system.

58:16 Bitcoin is sound money and STX is gas, whereas in Ethereum, Ethereum has a little bit of tension of, like, is it sound money or is it gas, right? Because they have both on the same system, and that is a fundamental tension, because the smart contract component asks for more complexity in the Ethereum base layer, whereas the sound money aspect wants it to not change and be predictable, right? So in my mind the two layer system is more cleaner, so Bitcoin can remain to be sound money, not change, and Stacks could be the gas for smart contracts.

58:50 But the big unlock for us is really, there’s work in the pipeline for this year where we directly unlock a lot of Bitcoin capital to pour into DeFi and NFTs directly, and then your theoretical limit goes from, like, a few billion dollars to a trillion dollars, right? There’s a ton of, most of the Bitcoin capital is passive. Right, only one percent of Bitcoin is wrapped as wrapped BTC on Ethereum right now, 99% of it is not, and I think those are the floodgates, right?

59:19 Like, where suddenly you know the stablecoin collateral could be in BTC, and then you could have a much larger market cap for this ecosystem. And it’s a little bit like there’s a flywheel effect that happens, because, and this happened with Ethereum as well, where people were deploying ETH capital into smart contracts, and that was helping kind of like grow the value of Ethereum because it was becoming a productive asset, and as ETH becomes more valuable, you can attract more developers and build more smart contracts, and it’s like a flywheel, right? Like, it keeps becoming more valuable and you have more capital to deploy.

59:55 And interestingly, Bitcoin doesn’t have that today, but we are kind of like sparking it right now, right? Like, as people would be able to deploy BTC and start earning yields there, Bitcoin will become more valuable because Bitcoin will be perceived as a productive asset at that point. And so many big players, like you mentioned, like Michael Saylor, or companies who have Bitcoin on their balance sheets, would be able to actually earn money on BTC, so they’re much more likely to hold the BTC, they’re much more likely to acquire more Bitcoin, and then the flywheel effect starts then, and that developers would be like, “Look, there’s a trillion dollars of capital available and I can actually go and build an application for it,” right?

1:00:34 So I feel like Bitcoin is at a very unique spot right now. It is still the number one cryptocurrency, and there is already technology now, Stacks, that can help it jump start into the smart contract world. And I almost feel like, and I want to inspire the Bitcoin community, I don’t want to scare them, but part of me does feel that if they don’t do this, there is a pretty significant chance that you’re going to get left behind, right? Because I do think that the market for smart contracts could be much, much bigger, because you’re talking about the whole internet economy, right?

1:01:13 And that is much bigger than just gold. That’s already the case. Like, the entire market cap of gold is much smaller than the market cap of the internet economy. Yeah, yeah, and that’s an important point to consider. I mean, if prices continue to go up and appreciate, you know, it’s hard not to argue that Ethereum won’t flip Bitcoin, you know, at some point in the next few years, because this is a technology play, it’s got the smart contracts play.

1:01:39 No one’s taking anything away from Bitcoin, it is an incredible asset play, it’s digital gold. Keiser, you won, it’s all good. But if you don’t innovate over the course of, like, I said two years, five years, ten years, it’d be very hard for anybody to argue that, you know, it isn’t going to flip, and these other blockchains aren’t going to be more valuable. And like you said, then you get into a tricky situation where you’re still holding on to your old baseball cards, and yeah, they’re worth a lot of money, but they’re not doing anything, and so they’re not part of the capital markets.

1:02:11 And so yes, people will always hold some of it in their portfolio, like Grandpa holds some of his portfolio in gold, but it’s not necessarily that money that’s really growing and working. So yeah, on the Ethereum side, right, like last time when a lot of people were talking about Ethereum potentially flipping the coin in 2017, at that time I was fairly in the camp of, “No, it’s not going to happen.” Ethereum, there were too many question marks on the technology of Ethereum, kind of, deliver.

1:02:40 And interestingly, 2017 was the year when a lot of really sophisticated engineers and computer scientists started moving into crypto, right? Right. And a bunch of them have gone into Ethereum, like, I can, like for example, Gün Sirer decided to start Avalanche, right, but Ed Felten, who’s a Princeton professor, started to, he built the Ethereum L2 Arbitrum, right? So they’re really sophisticated computer scientists. Some of them actually went into the Ethereum ecosystem, some of them started their own, like Silvio Micali started a separate blockchain system.

1:03:14 But it is no longer the case where, you know, back in 2016, 2017, sometimes I would feel that, you know, there aren’t a lot of sophisticated engineers in that ecosystem. Can they really actually build these consensus algorithms and scale that out and so on? No longer the case. I think they have a lot of really good talent, they’re shipping, right? They, and interestingly, the productive asset versus non-productive asset thing is much more pronounced now, right?

1:03:40 Back in 2017 it was a theoretical idea, now people can actually see that, look, they if anything, they’re coming after these scarce quality of Bitcoin, right? They’re saying that Ethereum now actually burns gas fees, so Ethereum is going to start becoming more scarce. These are real things, these are, they have real economic implications. If there is a lot of demand for Ethereum and the supply of Ethereum is going down, you can just do basic supply and demand calculation to be like, “No, this thing might actually become more valuable,” right?

1:04:12 I think I’m at that point now where I don’t think I would take the bet that Ethereum would flip Bitcoin, but I am definitely at a place where it’s like, it’s a possibility, right? And I think this is something that any bitcoiner that is actually trying to seek the truth and not sitting in their own thought bubble, I think they should just logically come to that conclusion, that yes, like, this is a possibility, and there is very hard data behind it. And in many ways I feel like sometimes the Bitcoin community would have a very negative reaction to this idea of, “You need to upgrade,” because they take it to mean that we need to change I think that is something that I want to make very clear there, that I’ve spent enough time in the Bitcoin community to know that that’s never going to fly.

1:05:04 Like, people are not going to start messing around with Bitcoin and trying to change that. It’s actually not a very good technical thing to do anyway. Bitcoin is elegant as a simple base layer, so whenever I say that you need to innovate, I’m asking for zero changes from Bitcoin. Like, you need to do nothing different at the Bitcoin layer. What I’m talking about is things more things like Lightning, right?

1:05:27 Lightning has a ton of support in the Bitcoin ecosystem because they think that Lightning doesn’t require changes to Bitcoin. Lightning just adds more value to Bitcoin. More things like Lightning, more use cases, more applications, more developers. I think it’s very hard to argue that if the number of developers who are building in the Bitcoin ecosystem goes up, that’s a bad thing for Bitcoin. I think, like, it would be very hard to argue that that’s a bad thing for Bitcoin, or if there are tons of applications around Bitcoin that’s a bad thing for Bitcoin.

1:05:57 That’s the only thing I’m pushing for, that we need more developers, we need more applications, and we as a community need to be supportive of developers, of people who are entrepreneurs who are coming and trying to build new businesses around Bitcoin instead of really pushing them away to other ecosystems. Yeah, it’s a great message. Bitcoin, I agree, needs to innovate, and again, if you look at a lot of, you know, old school brands and companies, they still innovate really to stay relevant, you know, over 50 years, you know, even Disney innovates, right?

1:06:29 You know, you know, a lot of these companies that have these, you know, old school philosophies, they know you can’t just ride that out, you know, till the end of time. You’ve got to still have a layer of innovation and stay true to your principles and they’re going to need to do that. And you know, you drop some of the talent that’s in the space, I mean, I’ve had, you know, Gün Sirer and Micali on the show, and they talk about these consensus, you know, mechanisms and these new protocols and what they’re doing, and you know, it’s, you know, you put 10 of those in a room and some of them are going to be successful.

1:07:00 There’s some real great innovation going on here, and so it’s just important to be aware that there’s a real, you know, battle going on here. and that bitcoiners need to be aware of that and can’t just kind of put your head in the sand and celebrate when the markets sell off and, you know, etc. And so this is a really good message. What would you say if you were running Ethereum right now, what would you do differently? What can you learn from a network like that?

1:07:29 You know, compliments and criticisms. Obviously the biggest complaint I get from my students in my DeFi Academy is the gas fees. They all complain about the gas fees. I tell them these are their tuition fees for now. Put the trade on, because that way you’ll understand yield farming, you’ll understand liquidity pools, you’ll understand options trading, so you’ll understand your wallet.

1:07:48 So just do it, and I’m promising them that in the future there’ll be a layer 2 solution or a layer one solution that will make it cheaper and faster, thanks to the people at AVAX. I’m actually not promising them ETH 2.0 anytime soon, because even Stani said when he was here, sometime in the next decade is what he said to me. So just your thoughts on Ethereum for where it is now and where it needs to go in the future. Yeah, so I think for Ethereum I would say that I was very skeptical of the ETH2 designs from day one.

1:08:19 Like, I think this entire idea of sharding, like we can get into the details of it, but is this problem hard, right? And in many ways, like, I back then my kind of like unsolicited feedback to the Ethereum community was to focus on L2s. Like, layer twos are a much more practical, much more elegant solution than creating, like, Ethereum is complex as a base layer and you’re basically trying to solve your problems by adding a ton of more complexity to the base layer, and then sharding is going to, you know, end up having these issues where one shard is actually where all the interesting applications are, and then everyone wants to be in that shard, and it has, like, all sorts of, like, really complicated type of processes going on in there.

1:09:07 So I’m still skeptical there. I think that design has changed so many times that I honestly can no longer keep track of it. They made some progress, like, over the years, clearly. Even Ethereum people at this point admit that, you know, it has taken way too long and it has actually left that room for opportunity for systems like Solana, Avalanche and others to come in and fill that gap. And I do think that, you know, when they will look back, like I would say even nine to 12 months ago, a lot of the consensus in the crypto industry was that Ethereum has won because it has the most amount of developers and use cases, and they have a moat around it, and it was a question mark that would other L1s be able to take some of that traffic in the interesting way, right?

1:09:58 I was in the camp of, like, “No, it’s going to be a multi-chain world,” right? But it’s hard to kind of like stick with your convictions for years without seeing real world data, right? Like, logically it made sense, like we’ve taken that bet, but it was only last year, I think, when we started seeing real traction come to the other L1s, like the rise of Solana, the rise of Avalanche. Like, I think their stats like there are so many users of MetaMask, like maybe even more than 50% that are not even using Ethereum, they’re actually using the Binance Smart Chain or something else, right?

1:10:34 So it’s a little bit like, clearly we saw some of the blue chip Ethereum projects that launched on Avalanche. Okay, so we’re seeing that migration and how easy that migration is. So I think after last year it’s pretty clear that the moat that Ethereum has is actually pretty weak and it’s very easy to migrate away from it, right? And I think, and at the same time, I think ETH2 designs remain complicated. So if I was in Ethereum, and they’re also taking a pretty big bet of shifting to proof of stake, where I stand today is that I think proof of stake can work for smart contract systems, but I wouldn’t trust a proof of stake system as sound money, right?

1:11:18 Because it’s self-referential. You’re trying to define the properties of the system by using money that is defined within the system, right? And I think you need a proof of work base sound money there, but for smart contracts maybe that’s fine, right? Because they are different beasts. So Ethereum is trying to still be both sound money and a smart contract system while moving to proof of stake, and I would pick a lane, right?

1:11:47 I would basically be like, you might want to be a really, really good smart contract system, or if you really want to give Bitcoin a hard time on being sound money, then you need to question the kind of decisions that are being made, and in terms of the complexity being introduced or changes being made, and the entire shift to proof of stake, right? So with that said, I do think that Ethereum is still the by far the biggest leader. It has an enthusiastic community, a brand name, like a lot of kind of like young people who are discovering crypto, I think they would end up writing a Solidity program first, and I do think that they’re, I don’t think Ethereum is going away, right?

1:12:30 It’s a question of like how much of the market share do they lose out to the other ones, and I think they can try to make better decisions to defend a lot more of their market cap as this grows, and also, like, you know, don’t repeat the mistakes that the Bitcoin maximalists did, right? There is already an ETH maximalist community that is kind of like, you can see play the story play itself over, right? Like they’re creating their thought bubbles, they’re kind of like saying these new things are, they’re only looking at the bad things happening with the new systems instead of like really looking at all the innovation that’s happening with the new world ones.

1:13:18 And I think you kind of like don’t want to become a maxi, right? A neat vaccine in this case, where you’re turning a blind eye to what’s actually happening out in the market. Yeah, that’s a good observation. I was talking to Justin Sun of Tron live here a couple weeks ago, and Justin’s, you know, pretty interesting guy in himself, definitely knows how to do some great marketing, and he suggested that Ethereum stick to their proof of work mechanism, which is clearly functional, and they don’t ever even attempt to go to proof of stake, because it’s an unknown on a massive, massive smart contract network, that’s potential downside, and he just said, just leave it alone, keep doing what it does quite uniquely, and leave proof of stake to the Trons and the Algorands and the Avaxes of the world.

1:14:03 Do you agree with, do you agree with Justin? I didn’t know that Justin said that, but I independently said that on Bankless, which is an Ethereum podcast. I basically said if I was designing this, what I would do is try to start making the Ethereum base layer simpler, even like disable certain types of applications that can run at the base layer, like maybe you only want to do Arbitrum style fraud proofs at the base layer, remain a proof of work network.

1:14:32 You’re already the world’s second largest proof of work network, right? And with the proof of work network you have a shot at being sound money, right? Especially with the new economic policy that you have been successfully able to roll out. Just just send all of the smart contract traffic to the L2s and make that the default experience, right? Like, there’s no point in my mind in trying to run smart contracts both on the base layer and on L2s.

1:14:59 That’s basically causing more confusion. If a user is onboarded to an L2 first, right, that’s a better UX for that user, and they know that these are cheap gas fees and Ethereum main base layer is basically used for fraud proofs or basically for settling any of the stuff that happens on L2s, and it is not trying to make life more complicated by introducing untested new consensus algorithms on a 500 billion dollar network. Yeah. Yeah, well, it’s nice to see you independently confirm that, and they’re great points.

1:15:36 That being said, if you’re Vitalik, of course you wouldn’t listen, because you know you’ve constantly been trying to deliver and over-deliver, and so we’ll see what they do and how they play out from here. These are great conversations to have. Wanted to finish maybe on talking about regulation a little bit. You know, strangely enough, I just finished Gary Gensler’s 2018 course at Sloan School of Management, which I spent some time at a long time ago, where he teaches blockchain, and unfortunately I’m really starting to get to like Gary, because he’s a really smart guy, really understands the tech, and this is before he was appointed SEC chairman, where he called stablecoins the you know, the poker chips of the Wild West.

1:16:16 And I understand part of his job is now as politician, but you know, he constantly refers to the incredible work being done in cryptography at MIT. He’s obviously talking about Silvio Micali, who you worked with. Your thoughts on regulation? I know you’ve been successful in putting some things through with SEC regulation, maybe because it’s on Bitcoin, which of course is flying under the radar of the SEC. How do you think we move forward, how do you think we approach regulation, how do you see Gary Gensler in his role?

1:16:44 Again, I’ve got to give it up, the guy is incredibly smart. I also understand he’s got a tough, tough role in an underfunded institution, which is the SEC. He’s got a blunt instrument that he’s trying to use to keep everybody safe from bad protocols and scams, but also, unfortunately, that instrument stops innovation. Your thoughts? I think my thoughts are pretty much like, you know, obviously we’ve had some experience working with the SEC.

1:17:09 It was a very long process, but you know, the entire industry was surprised and celebrated the fact that they actually qualified or took an offering, and that was a sign of, like, we are willing to adapt, right? We are willing to adapt to the new world. But I don’t think we’ve seen a lot more from them since then. Like, this is like back in 2019, right? Like, there are so many people who are trying to get an ETF approved, it’s not happening.

1:17:36 Like, there were talks of, like, “Hey, maybe there would be some sort of an ATS approval,” hasn’t happened for many years. So I do think like people are starting to become first-headed. Like, if you look, if you do a general temperature check in the industry, like I think people would be like, you know, the regulators are kind of like cutting off the US market for crypto, and it results in a lot of like really funny scenarios as well, right? Like, for example, you would go to a website and it would say that if you are from Iran, North Korea or the US, like, you cannot use our services, right?

1:18:18 And that should really, like, I think it begs the question that, “Hey, what’s happening that the US is ending up in that list of countries?” Right? So with that said, I do think that Gary Gensler is doing his job, right? Like he’s saying that, “Here there are the laws and regulations, and we are basically enforcement,” and if you would try to engage with them, I haven’t had a one-on-one conversation with them or directly tried any of this, but my understanding from what I’ve learned in the industry is that Gary basically would point you to, “Why don’t you go to Congress and try to get some new laws?”

1:19:01 I think that’s where his mind is at, that if you want change, get new laws approved, right? He views his job as like, “I am the enforcer of the existing laws, and that’s what we’re going to do.” I personally think that it’s going to be almost impossible for the regulators to keep up with this industry, because it’s like there’s a Cambrian explosion of innovation happening, right? Like, how many decentralized exchanges are you going to try and shut down? Like, there’s one popping up like every other day, right?

1:19:34 Like, you wouldn’t be able to even, like, even if you give the SEC like a thousand x more resources, they still wouldn’t be able to keep up with the pace of this industry. So something clearly needs to change, right? And there are some people like Hester Peirce who are putting up fairly reasonable proposals of, like, safe harbors, and some of the work that we have done, where we had an entire legal framework for decentralization, for example, that can fit in really well with these safe harbors.

1:20:07 Well, a safe harbor basically says that, you know, for the first three years after the launch of a project, you know, you’re kind of like in the safe harbor, but at the end of the period you need to be decentralized enough, and that’s really the core of the question, that how do you become decentralized enough? But you’re at least letting the entrepreneurs start, right? And you have a time period within the safe harbor, and I do think it’s one of the best proposals out there.

1:20:32 And then the really key question is the legal framework for decentralization, but people like us have already done work there, right? Like, we’ve already paid the legal fees, just like we paid the legal fees of coming up with a framework for how to do an SEC-qualified token offering. I don’t think a lot of people can still afford that. I think it’s still very, the costs are still very prohibitive and the entire process has too much overhead. But similarly, we have actually already done the work for, here’s a legal framework for how do you decentralize, and here’s how you can do the analysis, and here are the factors.

1:21:07 Someone can take that, maybe improve on it, and use that in a safe harbor-like approach, and I think that that could be a very practical good outcome for the US markets. Yeah, some good thoughts there. You know, I took my Series 63 and Series 7 exams in New York City in 1993. I was actually studying for them on my balcony on my apartment on 10th Street between Third and Fourth Avenue, I remember. And you know, these are laws that were created almost 100 years ago based on what happened in the Depression and the market crash, and they’re antiquated, especially for what’s happening now and, like you said, this Cambrian explosion, and in a new world where information, people have access to information where back then they didn’t.

1:21:54 And it’s it’s really going to hurt this market and probably not even be realistic. So Gary’s there saying, does it pass the, what is the Howey test? Is it a security? Is that even the conversation we should be having? Because you know, say it is a security, well then you’ve got to have all these laws that don’t even seem to make any fundamental sense with what you’re talking about, which is the exciting aspect of peer-to-peer capital transfer and tokenization.

1:22:19 So I agree we need to go much deeper, but then you’re talking Congress and laws and, you know, that takes even longer, so it’s going to be interesting to see how this plays out. I don’t think regulation can stop this. The US doesn’t want to lose, they’ve already lost a lot of ground when it comes to innovation. I mean, the US is no longer the lead innovator in this space as far as a location, which has probably never happened in tech in the last 50 years.

1:22:45 So real questions to be answered here. I’m sure Gary’s trying to deal with them, I know he’s underfunded, he’s always asking for more funding and he’s got a tough job. So we’ll see how this plays out. Appreciate your thoughts on that. Final question: your single biggest challenge for 2022, what is it?

1:23:03 Yeah, I think personally speaking, like, last year was kind of like the launch of Stacks and just getting some of those foundational things in, and 2022 is the growth of Stacks, right? Like, so I, Stacks is a decentralized ecosystem, right? There are 30-plus companies, independent miners and all of that, and I run a dev tooling company, and I think we are getting a ton of traction on our web tools and basically scaling that up, but keeping up with the growth and scaling that out, like that’s basically the number one thing, and then enjoying the ride, right?

1:23:34 Like, I’m as I said, like, this is not a company, this is a decentralized ecosystem. I’m not in the driving seat, I’m one of the passengers sitting with the community, I think, enjoying the ride and basically seeing where this goes, and then playing my part, like my company plays, like, you know, a role in the ecosystem, and we want to make sure we play our role to the best of our abilities. It it beats academia, doesn’t it? For sure. Like, I think this crypto was a rabbit hole I discovered in 2013, and this is like what, nine, nine years in, and it’s only getting deeper, it’s only getting more interesting, and I don’t think I could have ever asked for a more exciting area to work.

1:24:14 Yeah, I mean, look, big respect. You spent a lot of time at Princeton, what, ’03 ’11 to ’17, getting what, like, bachelor’s, Master’s, PhD in computer science? That probably does really help you in what you did, but at the same time, I think you also realized that the real world happens out there in the business place. Seems like you enjoy that quite a lot, maybe. So my undergrad was in Pakistan, but yeah, Master’s and PhD was at Princeton.

1:24:43 And I think like it was, I was always attracted by being at the cutting edge of research, but research that can be commercialized, right? Because I I find that to be the real test. If something actually has an impact on the real world and gets commercialized, that actually means that it was a breakthrough technology, right? If it stays in the research lab, then it was kind of like a theoretical idea. And I think grad school and universities I do think like 10, 20 years ago they were probably like a better place to do that, like, you know, it would, you would have like a Bell Labs kind of a feeling from there, but over time I think that the amount of capital available and the amount of talent available, just in the tech industry, is far greater than these universities at this point, right?

1:25:31 So you can have like a ton more capital much more quickly, you can hire the best people in the world and kind of like do the same thing. Like what we built, like or in between, like, raising capital in 2017 and launching it in early 2020, like what we did was basically like fundamental research. Like, we’re inventing a new programming language, we’re inventing new consensus algorithms, we are actually building out the public infrastructure, right? And then we got real users there.

1:25:57 That’s the thing, like, at a university we might have just invented the programming language and the consensus algorithm on a research paper with a prototype, but I think it’s much more exciting to actually build it out and actually get real users on it and have an impact on the real world. Yeah, and in the blockchain space it happened so fast, and you know I was talking to John Wu of AVAX a couple of weeks ago, and he said, he said, you know, “Brian, we’re cutting out the VCs, you come straight to us, we’ll give you the funding, we’ll give you the customers, we’ll give you the layer one, let’s go.” And again, I can see the people in Silicon Valley still trying to figure out, you know, what Web 3.0 is.

1:26:33 So it’s an interesting space, it’s exciting, it’s moving fast. I can tell by your smile that you’re enjoying being here, which is great. Final thoughts, just for anybody out there, on what you’re doing at Stacks or the future of Bitcoin, just anything that comes to mind? I would say that today, building on Bitcoin is the contrarian bet. Like, a lot of, they’re actually these consensus industry consensus, and, like, “Hey, look, Bitcoin is just kind of like digital gold and it’s going to do its own thing, and a lot more exciting things are going to happen elsewhere.”

1:27:06 And I think whenever something becomes generally accepted consensus, that means that people are wrong, and somewhere out there there are contrarians who are doing really interesting things that will be unexpected. And I would encourage people to be the contrarians and to actually do more independent thinking to see, like, “Hey, what exciting things are going to come out of Bitcoin that you’re not expecting?” And I think if you want to learn more about it, you should see what’s happening in the Stacks ecosystem.

1:27:34 Yeah, I couldn’t agree more, and you know, three billion dollar market cap gets a lot of people’s attention, it got my attention, and so it’s great to have you here, and like you said, you guys dwarf anything else out there, and that’s why I was super excited to talk to you and find out what you’re doing that’s different. I think a lot of bitcoiners will listen to this and think, “Wow, I didn’t know this was happening,” and hopefully they’ll dive in. Again, final thought, you know, I cut my teeth on Wall Street on a fixed-floating swap book.

1:27:59 It sounds really boring, but we did swaps of a fixed rate interest rate for a floating interest rate for as long as you wanted, for however much you wanted, to any maturity you wanted, and when I started in ’93 that was like a six-year-old innovation on Wall Street. But that innovation alone created probably projects to build dams around the school finance, school loans, they created all these things in the background because we created that little bit of financial technology in the capital markets. And there I was trading swaps as a 22-year-old kid and I didn’t realize what I was doing was creating massive scaling effects with markets.

1:28:35 And I think if you can tap into that trillion dollars of market cap of Bitcoin and put it to work, like you said, first of all that market cap is going to go up exponentially, and it’s also just going to pull in all sorts of great use cases. So it’s nice to see somebody working on this, especially who’s been in the space for a while, with some real brain power too. So appreciate what you do. I recommend everybody go check out Stacks, and again, the coins are out there and you can learn more about the protocols online, and wishing you guys all the best, wishing you guys a great 2022, and next time you’re in London, come see us here in the studio.

1:29:09 Absolutely, this was a lot of fun. Thank you so much, I appreciate you so much. Thanks so much. We’ll see you all next time on London Real. Take care.

1:29:15 Bye.