Senior Advisor at Coinme, a leading blockchain fintech company headquartered in Seattle Brent Lyman informs us about cryptocurrency, and blockchain and Coinme has the world's largest bitcoin kiosk network.
We have some late breaking news here dial, don't we? Oh some big-time news. This is just definitely tech news
It's just popped up on the cast here
Go ahead man. Let's break it for us. Who added this. I didn't add this. Don't dump it on me. It was Brent's news actually
Yeah, I'll throw him on the spot Larry King Larry King, you know seventh wife. He's gonna divorce. Oh my god, man
I'm heartbroken. How old was this one?
How much did she get?
Welcome everybody to episode 46 of the Coffee and Codecast.
We are a tech podcast where we talk about neither coffee or code.
I'm Kyle Johnson.
I'm Mike Sheehan.
I'm very excited to welcome a guest on the show today.
He's the senior advisor at CoinMe,
leading blockchain fintech company,
headquartered here in Seattle, Washington.
CoinMe has the world's largest Bitcoin kiosk network in the world,
and their services make it simple to buy and sell cryptocurrency.
Sharing his thoughts on crypto and why you should consider an investment,
Please welcome to the cast Brent Lyman. Welcome Brent. Welcome. Thank you guys. How you doing buddy? I'm doing well
Awesome really nice to have you here man. We've been talking about this for a few months now. So I don't know
We had a few people asking us about
Crypto and Bitcoin and I said well, it's a good time to bring on the Lyman. I love it
Let's get started. Let's do it. We have some late-breaking news here. Don't we? Oh
Some big-time news. This is just this is definitely tech news. It's just popped up on the cast here
Go ahead man. Look break it for us. Who added this I didn't have this don't dump it on me. It was Brent's news actually
Yeah, throw him on the spot Larry King Larry King, you know seventh wife. He's gonna divorce. Oh my god, man
I'm heartbroken. How old was this one?
Well, he's got me running out of money now man, I don't know
He's gambling in the wind all the time. So yeah practically lives there. Yeah ran into him quite a few years
Just going to sports books. Is he really there a lot? Oh, yeah, he rolls in
Kane in hand crutching down Wow, he's got front row seat
He's got all the games on NFL Sunday. Damn who knows what he's betting, but
Loves him some sport book. Well, you know, he probably needs to do all he can really keep that alimony going
I don't know. I mean children. He has does he have a lot of kids?
I don't know no idea not a Larry King a fishy and auto over here
I don't pay too much attention to Larry King these days. It's been a while
Well, we wish him and really not about coffee or code is it not at all
That's that's the whole premise of our show here the coffee code cast we reel them in thinking
We're gonna talk about these fascinating topics and we relate as copycat whatever's on CNN comm. Yeah
Hang on we refresh the page here. I think we got some new news coming in right now
Breaking news on the cast. Yeah, Donald Trump not going to Denmark
Yeah, let's talk about that. That sounds great
Well, we're recording a little early tonight, right? Because I'm gonna be leaving town. So another Tuesday edition of the yeah
Yeah, we're doing a day earlier. We have some travel conflicts a lot of travel conflicts lately
but hey, we were able to get Brent to reschedule with us on Tuesday and so I think
We're gonna roll with it. So 46 episodes here. We are and
Yeah, we have some follow-up you want to talk about here Larry has five kids. Thanks Lester that the old bagels on the
Chat chat box over here five kids five kids. Yeah, that's a lot child support. I'd be going to the casino too
So you mean he's got more alimony than Charlesport. Yeah, that's true
I mean, it's just a big fucking number. He probably just doesn't even get he probably gets like 20 bucks to go to the casino
Like they give him an allowance like they've got a credit line for yeah, here you go Larry
Like don't spend it all in one place, dude
These are really good by the way we decided to
Step out a little bit of our comfort zone and crack open some Rubens Pilsner today. Yeah, I apologize to Coors
Who's normally not a sponsor of the show, but yeah, but it's free upstairs in the tech lounge
So, you know, we drink what we can get our hands on but we didn't have any somebody that I I won't mention names
Dustin Fletcher has been slacking off on the reorder of the bear up there
So now we have to go down the store and buy our own it's kind of a little sad. It's disappointing for sure
Well, let's get right into the news show where we have a little bit of follow-up on the capital one hacker
Yeah, your friend. Yeah, my friend. Yeah, tried to be friend this person and wasn't such a good friend. You heard about this story, right?
I know well. Yeah, I know that story. Yeah, yeah, yeah. So I crypto land pretty good. Oh, I want to hear more about that, I guess.
Well, it's all about privacy. You know, we don't have any
Period. I mean if you look at information that is stolen over the years, Equifax,
you know, comes to mind and they're they're trying to pay that back and most likely the court settlement they're not even gonna pay back.
you know they've they allocated $125 per person but so many people jumped on
that $125 that they don't even have the money allocated for it so we'll see
what happens there but here's another hack here's another you know your
information your password your who knows what because you used at Capital One as
a credit card is out there I mean your spending habits etc so we can continue
to go on and on I mean these have been redundant over the past years and this
This is why, in my opinion, decentralization is an important topic that we need to look
at and examine and see if we can better.
And that's a piece of what Bitcoin is.
It's a decentralized entity and it's a trust and a value on top of it.
It's a lot of things and it's hard to, you know, I can't just sum it up in one sentence
by any means, but more importantly, it's about privacy and how can we advance out of society
and make that better for humanity going forward.
Because right now, we are at the mercy
of these centralized corporations
and how they securitize our data
and what we do about that moving forward.
- Yeah, and I know just like from a security standpoint,
even with, in general technology,
you always assume the worst.
You always assume that there's a vulnerability
or that it could be accessed.
And when you have 800 million records
or however many hundreds of millions of records in a vault,
You have to assume that that's only so secure that it's going to get breached at some point not a matter of if but when right?
And I think that's an interesting piece that we should really talk about is that with with Bitcoin you that problem doesn't even exist really like you
Don't have that
No, so cash pile. Yeah, so when you look at Bitcoin and look it gets explained a lot of ways. It's gonna attack fiat
It's a better currency. It's an asset. It's a store of value. It's a medium of exchange. It's a lot of things. It's a network
It's a lot of things and that's that's why it's really hard to get your head around what is Bitcoin
But if you understand that Bitcoin is an invention and
What it did is it that there's something called a
I'm gonna say this wrong visiting general's problem
And that's what it solved and the fact is that that Mike and I can exchange value
Without a central party between us
Verifying that transaction. It's just code literally what you your podcast is about coffee and cook the second half is the code
Verifies it the miners in the system verify that transaction
So now we no longer need a centralized authority like a credit card company capital one a bank bank of America
Whatever whoever it is. We don't need that centralized authority to verify that transaction. We don't have to use PayPal
We don't have to use Venmo. Oh, you're on PayPal. I'm on Venmo great. How do we get exchange money?
We have to both the on that central entity if we have the same asset
We can exchange it and let the computer or the code do the actual
Transaction settlement piece of it and that's that's the key is is by solving that now
We've created a trust and we've created trust through code. Yeah, so how far can we take this over the next?
You know, it's it's Bitcoin's been in existence for 10 years just over 10 years
What is the next 10 years 20 years 30 years look like beyond the price speculation? You know be you know basically you know
There's a lot of numbers that you know Draper throws out 250,000 no Grats throws out
You know a million dollars you've got pump throwing out a hundred thousand dollars by the end of you know
There's a lot of people that throw up big numbers
Draper is very bullish on it because I've seen him at the FinTech conference just going nuts man. He's huge huge
- He was a investor on it too.
- Yeah, huge early supporter, huge.
I mean, he was around in like 12 or 13.
And a lot of these guys were.
But creating that trust, using code as trust,
and now changing value,
and that value could be privacy-oriented,
it could be information that I wanna send to Mike,
this is my pertinent information or whatever it is,
and I can send it over to Mike
and the code can verify that,
and that's no longer a central entity in the middle.
And that's where we can take that.
That's what crypto is about.
And it gets a bad rap because, yes, it was born in a bad place.
And it was attached.
There's been a lot of fraud attached to it.
We see fraud at CoinMe, and we battle that on a daily basis.
You had the Silk Road.
That's how they used Bitcoin to exchange things.
Well, the funny part is--
Yeah, underground market, the black market.
The black market.
the US government has stepped in and said criminals, please use Bitcoin, because they
can actually track. If you go from address to address, they can track your IP and they
can basically get an idea of where you're operating at and then come up with outside
solutions to find out who you are. So if you're a criminal and you're using Bitcoin, dumb
choice. Because the fundamental benefit to using crypto and the blockchain is that it's
It's an uneditable footprint, right?
I mean, is that a fair way to put it?
Can't be changed.
You can't go back in time.
Once the transaction's been settled,
it's been settled for good.
You can't reverse the blockchain, so to speak.
Well, that's awesome.
I mean, I think there's a lot to uncover here
in the next hour, so I'm excited to kind of dive in
a little bit more.
What did you want to say in relation to the hacker here?
What is the new update?
I think it's just that we kind of alluded to this even in the episode that we talked about that hacker
And I gave that story there's far more companies involved here as many as 30 more companies
Data were breached in addition to the Capital One data that was there. They found basically additional
Pieces of information on her personal server that she had in her home
And that was just announced here recently so a little bit of an update to that we kind of knew
I know Ford was involved for instance in addition to Capital One and a number of other pretty big name
companies. So just a quick update on that. Yeah and I think what's really
interesting too when you talk about just the decentralization, this wasn't a
very sophisticated hack. I mean this is somebody that had access to Amazon
servers that it wasn't really a hack necessarily, it was just that it was kind
of like a Trojan horse kind of thing, right? Like access from inside. It
It wasn't a big, sophisticated security breach.
- Yeah, I don't know the details.
I'm not the technical person to look to how was it done
or even give insight to that,
but I can say that when my piece is,
when I look at the financial world,
if you look at Amazon, Microsoft, and Google
and some of their profits and earning statements lately,
they've been through the roof
because the margins on their cloud business is big time.
I mean, it's huge, it's huge, in excess of 30%.
Amazon doesn't make a whole lot of money selling goods.
Right now they're making more money
through their cloud services.
And if all these companies are using these cloud services
and they have vulnerabilities, wow.
The Trevor Trove of information for hackers,
I can't even imagine.
And hopefully, the good of me says, well, I help Microsoft
and Google and all these data centers
are doing the right thing and implementing
the right security.
But obviously, we can see that somebody that actually worked--
and I think she worked in and around Amazon at some point
or in the cloud business.
And she had access to those right points
to go get that Trevor Trove information so that she could
do whatever she wanted with it.
That's the problem.
And I have to say, cloud is the most secure way.
I mean, it is scary to think that it is so centralized.
But I know just from our own experience here
and with various compliances that we are subject to--
I mean, we even have, like, just on some of our most basic
software systems, we only have rights
to do certain things that are right in our purview.
Like, I can't go in and view transactional tables anymore
and do all these things.
And so I think it's completely secure.
I mean, it's way more secure than you
would have if you're trying to maintain it on your own.
But it's scary because of the sheer volume of what's out there.
And so if there is a vulnerability,
even if it's a very minute one or a very small one,
it's still a pretty impactful one.
That's the scary part about it, I feel.
And I think the outside hackers are
less of a concern for these big cloud companies.
I think that if they can do something, they're going to do it.
They're going to protect it in the best possible way.
I mean, they have tons of security experts
that are dealing with this constantly.
It's exactly the situation where you have somebody
who has some sort of inside access,
it's the insider hacks that are very, very scary
to these companies.
'Cause yeah, once you're in, now you're in big trouble.
- But the good thing I would say though,
is I feel like just from our experience
the last six months here, is that there's a big effort
underway right now to even make that more difficult.
It's not like now if you're in, you're in wholesale,
it's like, if you're in, you might have one corner
of one pocket of something, right?
I mean, the access is very restrictive.
But nonetheless, like I think it makes a case for decentralization anyway,
because that's the most secure way.
Because if you do get something, you might get ones or twos, but you're not
going to get millions.
And in this case, I think she had access to a, like a bucket of data.
And so whatever was in that bucket, she had access to.
And so Ford and Capital One and whomever were in that particular bucket,
that's what she got access to.
We got a good crew on Facebook today.
I want to give a shout out to everybody.
We've had double digit viewers on right now.
I can't see everybody that joined, but we've got some coworkers.
I've got some of my homies from the Midwest,
Charlotte to Columbus, Nebraska.
There's Cepers online, so that's cool.
And if you have any questions about Bitcoin, fire them away,
and we'll get them answered here.
Jump on the chat.
This is our Bitcoin crypto episode with our guest, Brent Liman,
Why don't you just tell us a little bit about the company
and what you do?
I'd be curious to know a little bit about that.
Yeah, sure. So let me start out with the company first.
It was founded by Michael Smires and Neil Burquist in 2014.
Neil was working for an incubator here in Seattle,
and Michael was actually one of the lead tech guys at Zipwhip.
And basically Michael, instead of buying a Tesla,
went out and bought a couple Bitcoin ATM machines.
Oh, I disagree with that decision.
Oh, yeah, that would offend Mr. Tesla over here.
You could have been the Bitcoin guy, man.
But you had to buy a fucking model 3 instead. Wow, that's a whole different discussion because I'm definitely short Tesla right now
Oh, man, we're gonna have to get into that some point. I'll leave a little window for that. It's gonna be another episode
But yeah, you know Michael bought these machines on a whim and and you know
Took him to obviously realized when he had these three machines
He didn't he knew the technical beast
But he didn't know the rest of it and one of the things that they wanted to do from the cat goes do it right well to do
do things right in the United States, you need to start at the state level.
So what Neil did is he had good connections down in Olympia, and went down to Olympia
and basically updated the 1980 money transmitter laws to include virtual currency and helped
them write a virtual currency license here in the state of Washington.
We were--CoinMe was actually the second company to get a virtual currency license right behind
Coinbase, literally two days after Coinbase.
So once they had the license, they put the ATM machines out in the wild, so to speak.
The first one was in Vancouver, Washington.
And the point of the ATM machines, one of the ways they grew is they wanted to focus
on actual safe retail environments.
So if you look at a lot of Bitcoin ATM companies, especially I would say skeptical companies
at best, is there in some dingy, nasty gas station or maybe it's a strip club or something
and they're way in the back and it's like, "I gotta stick my ID in this, it's gonna
take a picture, my ID gonna come out."
It's kind of intimidating because you're putting your property in this machine.
So one of the things that Neil focused on was actually putting the ATMs in basically
leasing mall space, you know, South Center's a good mall right here south of Seattle, big
time mall, high end stores, and sticking to that kind of philosophy, basically you've
got a lot of customers in a place that you feel safe in an environment to put money in
your ID and go through the KYC process so that basically you can put in 100 bucks in
a machine and get Bitcoin out of it, that simplest fact.
The other piece of the ATM is that's how we're familiar with money if you think about it.
You know, we've, I remember a time when ATMs were a little sketchy, but now they're absolutely
accepted and everybody really knows how to use one.
They'll even deposit money on them and withdraw and do a lot of banking in general on them,
even transfer between accounts.
So now you can actually use this ATM type of model to stick money in it and actually get
your Bitcoin and it's on a receipt and you're directed to your wallet and your wallet is
your ability to interact, basically interact with the blockchain and that's where your Bitcoin
is stored. It started as that. We grew the network to about 100 machines. And then right
as I came on the company in 2018, they were focused on how do we scale this company? How
do we really get a lot of machines out there? And right across the quote-unquote "lickwashing"
into their pond, I call it, is Bellevue.
And that's where Coinstar is located.
Well, we all know Coinstar.
A lot of us have grown up with that machine.
We've all thrown change in it at some point
and gone to the retailer and gotten our dollars worth,
or $15, or if you're like me,
you saved every penny for five years
and got about a hundred bucks worth,
and we're pretty proud of yourself.
- I go and get my Amazon gift cards out of those things, man.
That's what you should do, yeah?
- So in '18, they brought on Amazon gift cards,
but the board was pushing for Coinstar to get in
the crypto business and offer Bitcoin.
Well, we were local, we forged that relationship.
After about a year of discussions,
we ended up partnering with them this year in January.
And what's great is when we roll out a machine now,
we don't have a physical unit, we've got a buy,
we've got to basically make sure that everything's
up and running in it, ship it to a mall
or ship it to a retailer and install the unit ourselves.
Instead, we just click a button.
And when we click a button, we can click 300 at a time, 400
at a time, 500 at a time.
So we went from 100 units.
Now we're up to about 2,600 Bitcoin ATMs
across the United States.
And CoinStar has about 20,000 machines across the globe.
They've got a good--
I think it's like 8,000 to 10,000 in the United States.
And so our goal is to build out the rest of the United States
to where 95% of Americans have a Bitcoin ATM machine
within five miles of them.
- Yeah, any Safeway or any grocery store you can find one.
- Safeway and Progers, Giant, Albertsons, QFC,
again, Safe Places.
Safe Places to go buy your Bitcoin.
It's very easy.
The transaction's very easy.
You walk up, you put your money in it.
It spits out the Bitcoins, which are basically a receipt
to where you're directed to your CoinMe wallet.
From there, you go in the wallet.
You do have, if it's your first time user,
you do have to go through a KYC AML,
because again, we did things first,
we're a licensed company.
We've gotta basically do a background check
real quick on you to make sure you're a good actor.
And once we establish your good actor,
you go redeem those bitcoins
and they're sitting in your wallet,
and you can send them anywhere in the world.
You can do anything you want with them.
You can put them in cold storage.
You can sit on them and invest in them.
You can do just about anything you want with them.
And it's an easy transaction method,
And it's really just an easy, what it's called an on ramp in the business.
And then what I was brought in to help build was private clients services.
So what we do is larger transactions.
So we'll do anything north of 25,000 up to shoot we've done about $10 million transaction.
So it's, you know, there's different levels of investing.
We also have a custody solution.
So if you want to say, hey, Brent, I want you to custody my Bitcoin.
I want you to take care of it.
I want you to make sure it stays safe.
Great, I've got a solution for that.
Maybe you're a miner in the ecosystem.
And what miners do is they get awarded
bitcoins on a daily basis.
But the problem is they can't pay their lease.
They can't pay their property.
They can't buy more machines a lot of times.
Sometimes they can, sometimes they can't.
They can't pay payroll.
They can't pay for all the copper tubing
or the electrical work that they need.
They can't pay for any of those things,
usually with bitcoin.
they've actually got to use dollars.
So we help them convert it to dollars so that they can put
that on the profit loss statement and actually put
those dollars to work as a cap, expender, or whatever they're
going to use it on.
And then there's just the--
in 2017, we saw ICOs big time in the space.
Basically, you create a company, you create an idea, you
write a white paper, and you put it out there.
and you say instead of going after VC money
or traditional private money,
you actually go out to a public crowd across the globe
and how they invest in your company
is actually through coins, Bitcoin, Ethereum
with the top coins that usually you got.
And for that, you actually issued a coin of yourself.
And a lot of these ICOs ended up scams,
but some of the ICOs that are in the market
are good companies.
Brave is a great company that's in the market.
- There's a lot out there, right?
'Cause I know there's like XRP is a big one
that I've heard of.
- Yeah, XRP, which is, yeah, it's called Ripple.
They have a technology where basically they're enhancing
that the quote unquote SWIFT system
that the banking system uses.
So when you go do a wire, you're actually going through SWIFT.
I don't remember exactly what SWIFT stands for,
but it was written back in the 1970s.
And all it is is, all it is is really a message
to another bank that says, hey, Mike is sending X amount of dollars to Brent's bank, is all
But it's a protocol that's accepted by all the banks.
I mean, that's like the international standard for...
Yeah, and it's really just a messaging system at the end of the day.
But yeah, so all these companies raise all these funds, well, they need to turn them
into US dollars at some point.
Again, it goes back to payroll, office space, paper, pens, computers.
can't pay for it, really a lot of it in Bitcoin. So what they needed to do was turn them into
US dollars. So that's kind of one the private clients said what we help out with. We help
out token founders, we help out miners, we help out high-deaf wealth investors. And then
there's a good portion of the business in the United States that actually uses Bitcoin
as a payment rail. A lot of people don't realize that is, you know, if you want to buy goods
from Japan, China, Canada, anywhere across the globe,
Bitcoin's a really easy way to buy those goods
and basically create that commerce or that transaction
with that company that's across the water.
- 'Cause it's accepted now in many countries.
- Well, it's transaction cost.
- Yeah, they don't pay that fee, right?
- If the company's willing to accept Bitcoin
or maybe it's a stable coin or whatever it is,
the transaction cost is minimal.
You can send hundreds of millions of dollars worth of Bitcoin for 39 cents.
If you do that through a banking system, it's going to cost you upwards of $20,000, $30,000.
So huge savings there if you're doing it that way.
So that's the currency part.
The ability to exchange value between two parties, whether they're companies or individuals,
and not only do it and have computers verify the transaction,
not a central authority at all,
but more importantly, the transaction cost is minimal.
- And it's instantaneous on top of that.
There's no delay.
- Well, they've generally, right?
- Well, the blockchain has to verify the transaction.
So there is a slight delay,
depending on what cryptocurrency you're using,
some are faster than others.
Like for instance, Litecoin is considered
the silver of cryptocurrency world.
That's the nickname it's been given.
It's got a faster transaction rate than Bitcoin does.
But Bitcoin is obviously the one everybody knows
and it's more accepted.
- Interesting, man.
So, great, thanks for the intro on that.
That's really cool, man.
I know we've talked about it a lot
and I just thought like there's, even at work,
you know, in our group here, I feel like that,
even as technologists and as tech people,
I think that there's just a lot of misinformation
and just people aren't really sure
like what it is or how it works, you know?
- Yeah, we've built kind of a unique model.
There's the coin bases to geminize,
the binance of the world, they've built platforms.
And those platforms are mostly just exchanges.
You can go out and sign up with them
and the signup process is usually pretty arduous.
Takes a little while.
You'll send them money, they'll wait two or three days
to credit your account.
If you wanna make a transaction today,
and for instance, there's a gentleman
that runs the ThinkSpace right downtown.
He needed a transaction today.
We got him, he entered his information with us.
We got him onboarded, we got him enrolled.
His money was sent to us,
and we had him in the Bitcoin by the end of the day.
So we really can do practically same day service.
And that's the unique piece of this is,
you have somebody, if you call me,
you have my direct number, you can text me,
you can email me, you wanna talk Bitcoin,
You want to ask questions?
Is this a good idea?
Is this a bad idea?
Should I go to BlockFi and give them some of my bitcoins
so I can earn an interest rate?
What's this coin all about?
You've actually got somebody now that you can call up
and have a discussion around cryptocurrency or bitcoin.
And I'm just going to give you the facts
as I know them.
I don't know everything.
This space is-- it's open source.
All the technology is open source.
So it's almost like a Cambrian effect that's going on.
And it's developing so fast.
And the talent is dropping into the space so fast.
You know, a lot of people running from banks
and current financial institutions right into the space
to develop all kinds of crazy new technologies.
And because what we have here is programmable money
and really the who knows where we end up
in 10 to 20 years, but the ability that you have
with CoinMe is, and especially the private client side,
is you got somebody you can call.
And very simply, we consider it human touch
in a digital world.
- It reminds me very much of the original Tech Boon
because you had people that were talking about internet.
And I think very much in the same way,
people didn't really grasp what it was.
And they were trying to compare it to something
that didn't really exist.
It doesn't exist in the same way
anything else did previously.
And so you're making these comparisons,
but people were just like,
"I know I need to sell shit online.
"I don't know what I'm gonna do or how I'm gonna do it,
"but I'm gonna sell shit online."
So let's get going.
- Everything had to go online.
And I lived through that.
I traded through that.
I remember when every single thing had a dot-com after it.
This is the thing, dot-com, dot-com is, pets.com.
We know that what happened to that IPO, it crashed.
And now we've got Chewy.com, which was the old Pest.com,
doing the same thing this year, it's just IPO'd.
Is that mean we're at a top?
Again, I don't know.
But the problem with crypto, and this is one of my arguments,
is we are always trying to compare it to what we knew,
which is the internet and how it is bloated.
- That's right.
- I don't think we can.
I think it's gonna go faster and farther
than anybody can really put any great thought to.
And that's because it's open source,
that Cambrian effect that I'm talking about.
But more importantly, we're not now changing,
we changed communication.
We can out text, email, Slack, Telegram.
How many other channels do we need?
I can think of a million of them.
- Telepathy, we're gonna get chipped.
We're gonna get chipped.
Yeah, we're just gonna read each other's minds.
Walkie-talkie on your watch.
Yeah, yeah, that's right.
Walkie-talkie mode on the watch.
We were using that earlier.
Rain's on Facebook, but he hasn't accepted my request yet.
So really much, I very much appreciate that.
So now you got with the internet, you changed information.
I can be in a discussion with my boy Slayer, and if I don't like what he's saying, I can
Google fact, fact check him real quick.
This we basically what my first laptop was is now sitting in my pocket
Yes with a camera on top of it amazing awesome. So now we're into Bitcoin and trust
So now in my opinion what we're doing is building another internet layer that we're gonna change the way we
Transfer value and the way we trust
Technology now how that ends up. I have no idea. Yeah wrote about a little bit of my newsletter today
I don't know how we end up, but we are going to change things. That is a fact.
So can we pull this back up just like a higher level just because like I know for instance my mom listens
She's probably on here. My sister's on
People that may not be as familiar with with Bitcoin or any of these coins because we're throwing out a lot of terms
And we're throwing on a lot of acronyms and different companies and that sort of thing
But like at a very very very high level
Can you give an explanation of what Bitcoin is and why it is that you might want to use it?
So at a very high level
So this I wrote about this today. It's it's it's about impossible to talk about it
Right, but Bitcoin is an invention. So think of it like the internal combustion of engine engine
When the internal combustion engine came around we were riding around in horses and carriages and
And when people saw the first car with wood wheels,
and it got stuck on the side of the road,
and the horse had to pull it out, they thought,
this will never work.
Now, 100 years later, where are we at?
Actually, over 100 years later.
There's a car on every road, just about everybody
owns one, uses one in some way, shape, or form.
We've got airplanes running through the air.
We've got motorcycles.
Just about everything runs in some way, shape, or form,
an internal combustion engine, including generators.
Bitcoin is an invention.
Bitcoin, that going back to that Byzantine general's problem,
it's changing the way we trust how we move value.
And so it's an invention.
It's an asset.
It's a currency.
It's a philosophy.
It's game theory.
It's a network.
And this is where the problem gets real complex
of what is Bitcoin?
Because Bitcoin is a lot of things to different people.
So for instance, Hong Kong right now is,
there's a lot of chaos in Hong Kong.
We've seen a lot of protests, we've seen them on news a lot.
Well, what's the best way to get your money
out of Hong Kong right now, if you needed to?
- Right now, it would be a cryptocurrency.
It would be converting your quote unquote fiat.
When I say fiat, fiat is a government backed currency,
very much like the US dollar.
Over there they have the yen.
So if we take the yen and we convert it to Bitcoin,
now I can move that around the globe however I want.
I can stick $100 million in a USB device,
put it in my pocket and I can jump on an airplane.
I can't do that with dollars.
I can't do that with gold.
I can't do that with any other asset.
And that's where some of the power,
and so this is where Bitcoin can go off in various tangents,
but to keep it at a high level,
to understand Bitcoin as an invention.
Now, when the internal combustion engine came around,
or when the email came around,
or when the internet came around,
these inventions, we didn't really know
how they were gonna impact society as a whole.
We knew they were gonna impact,
but we didn't know what exactly.
A lot of people had a lot of speculation.
And now we've seen what the internet's done.
We've seen what email's done.
We've seen what the internal combustion engine has done.
Bitcoin is going to do something very similar.
It's just a matter of what it does.
- Part of the challenge too around that.
- The one thing I wanna add to this real quick
is the difference between Bitcoin
and those other inventions that I'm talking about.
You couldn't really invest in internal combustion engines.
I mean, you can invest in Ford when they came along
or the manufacturers, et cetera.
Email, unless you were Draper and you invested
in one of the first email companies or like Netscape,
you could have taken advantage of that,
or maybe jumped on Google
'cause you knew what they were gonna do.
Internet, you could buy it, but you couldn't really invest
Bitcoin is a protocol that you can actually invest in.
You can own a part of the network.
And that's the key piece of this,
is that this trust piece that I'm talking about,
this invention that I'm talking about,
if you want to, you can go out
and just own a little piece of it.
And I'm not an advocate to saying,
"You need to put 50% of your wealth in Bitcoin."
But I am an advocate of saying,
"Take a few dollars that you don't care if you lose
and go own a part of the network because at the end of the day, it's like a vote for the
network. It's saying, you know what, we've created something. I don't know who created
it, but they've created something pretty darn cool. And I'm just going to put a little money
in here and let it sit. And I'm going to own part of that network.
Well, I think in general, and this is not financial advice, but you always look at portfolio
balance and you figure out some percentage I want a little higher risk and so whatever
that allocation is like this could be a part of that what 510 15% of your portfolio that
you're not going to miss it if you lose it but you could also have a lot of upside if
it goes well there's a ton of upside and that a lot of people they get caught up well you
know bitcoin ran to 20,000 and and you know it's never going back there again we're almost
there right now we're sitting in I think just shy of 11 just earlier today yeah 11
11.7, I mean
It's still super early in this asset class the SEC
Securities and Exchange Commission the US government has come out and said this is a brand new asset class
They've deemed it property
So here's a brand new class. It's digital. It's 100% digital
It's not an electronic record like your bank account where you've got a bank moving around
ones and zeros. This is a completely digitized asset and all I impose or try to ask on people
is if you're truly open, go out and own part of that network because it's right now we're
$200 billion. If a company were to like Amazon or Microsoft or Google or anybody were to
go out and build this type of network, it would take hundreds of billions of dollars.
And we're already at $200 billion.
It will be a multi-trillion dollar network someday.
In my opinion.
Well, and I think you made a pretty good case for it as far as going to your local grocery
store and depositing some coins into a coin store machine.
I mean, it's very low risk, very low barrier to entry there just to have some percentage
It's very easy to accomplish that.
You've got to look at it as an ownership and a network and a network that humanity can
trust outside the banking system outside of government sponsored money which is
what the US dollar is outside of carrying around a rock in your pocket
like gold it's just part of what is that the next form of and probably the
hardest money ever invented because you can't Bitcoin they can't take away from
you because only you own it, only you have it, only you know where it is and as long
as you have the public address and you have the private key, nobody can take that from
They can't, for instance, I'll give you for instance, many, many, many times over the
term of history governments have come in and said, we're at a deficit, we need money, they
go raid bank accounts, they tax you in some way, shape, or form.
We fortunately live in the United States, amazing system, inflation levels about 2%,
but if you woke up in Argentina literally two weeks ago, you're 25% poorer than you
were the previous day, and that's because you own the Argentina peso, which literally
lost 25% of its value in one day.
That's a risk that you take in that country.
Those people accept that, they know it.
It's also a reason that they try to convert a lot of their pesos into US dollars and literally bury them in the backyard.
Now, kind of, again, going back to Bitcoin, it's if you own a piece of that network and if everybody owns a little piece of that network,
ideally demand is going to go up.
And when you get these crazy price increases in Bitcoin,
it's because you need to look at the economic model of Bitcoin.
It's built in the code.
It's already pre-written.
So next year, we've got a huge event coming up, May of 2020.
Bitcoin will have what's called a having event.
And that means the miners, they're out basically completing
a math problem or an algorithm
to verify transactions on the network.
And when they verify all the transactions on a block,
they get awarded Bitcoin.
Well, they're gonna get their award
is gonna be cut in half.
So that means the supply that's awarded
on a daily basis is going to be cut in half in May 2020.
- Yeah, it's interesting.
I went on that note because it's unlike other things.
Like we talk about fiat currency
and how it in a recession will print more money,
but Bitcoin's the opposite.
Like you start out in the beginning with the most available right up front and then it's
logarithmic so over time the amount that's available decreases increasing the actual
value of the currency.
Yeah, the amazing piece of Bitcoin is it actually went from 30 cents to a dollar.
The fragility in the start, the fact that it got going out of nowhere, that it started
with just two people and exploded, not really exploded but grew from there.
That was the fragile part.
Now it's 10 years old.
Every 10 minutes, as we've been speaking,
another 10 minutes, there's another block
that's been awarded to somebody.
It's 10, you know, basically, it's--
it's 10 minutes older is what it is.
So every 10 minutes, it grows stronger.
So what does the next 20 years look like?
And again, this is the most secure network in the world.
We were talking about hacks through Capital One.
The Bitcoin network itself has never been hacked, ever.
Now what has been hacked,
and you hear about hacks and crypto all the time,
are the exchanges because those are centralized entities
where you're holding your coin on an exchange
where your coin's vulnerable to the attacker.
- Yeah, it's on a central server somewhere
that's accessible over the internet.
- But the network, the Bitcoin network itself
is made up a bunch of independent computers.
It could be Mike in his basement with four or five minors.
It could be Brent who owns a small farm
in Central Washington.
It could be a lot of things.
And there's some big companies in China
and there's some big companies in the United States
and there's big companies all over the world.
But they're independent of each other.
- I wanna get to something 'cause we've got,
what, about 15 minutes left-ish, 20?
- Yeah, it smokes up and ramblin'.
You're doing great, man. I this has been very informative for us
So don't feel bad about that at all, but I just have other things
I wanted to ask you about and what there's a couple a couple points
I think one is just that like I think you've done a really good job of establishing how
the decentralization of this technology the value of that and and how
secure it is
And to challenge that a little bit like I just wonder oh, this is this is interesting
I do want to get to Dave's question here too. So I got two things the first question
I want to ask is just how do you
The Bitcoin clearly has its own fidelity and I think it's it that's fine
But what do you do when you want to go to fiat like what if there was a recession or what if the US government and the banking system somehow said like
Well, we reject Bitcoin and we don't give a shit and we're not gonna exchange your Bitcoin for fiat
Like what do you do in that case? Like do you go to other go to Mexico?
I mean, how do you get how money out of it? Well, a couple things are in decline there
The government doesn't have that choice the companies that are operating in that space have that choice
Okay, so if you want to change it to fiat you're dealing with a company like Chase or or you guys
Yeah, you're dealing with a company. You're not dealing with US government
So unless the US government comes in and shuts down all the fiat on ramps slash off ramps
Which I highly doubt they do because they the federal system hasn't even laid out regulation for this yet
Most companies are regulating under state legislation right now. Okay, their money transmitter laws
The other piece of that would be just regulatory arbitrage which goes are which is going on across the globe right now
So there are anywhere from Malta as a small island Vietnam is embracing it
Singapore is embracing it
So if the United States decides not to embrace it, they are going to be light years behind in,
I would say, just technological innovation as a whole when it comes to the finance side
and the finance innovations because the Asian community as a whole is embracing it.
Except for China a little bit, most of the Asian community, if you look at Vietnam,
Singapore as two of the biggest ones, they're embracing it.
Their regulators want it.
They understand that it can do a lot.
It has the chance to do a lot of things.
Now I will go beyond that and say that regulatory bodies,
like if you look at the CCP in China,
they're looking at creating their own digital currency.
So that says a lot of validation right there.
If you look at, and top of it,
you're looking at corporations
that are looking at creating their own digital currencies.
- Facebook and--
- Facebook with Libra and Kaliibra,
the wallet that they're gonna create.
Walmart has been awarded a patent on a stable coin.
I fully expect Amazon to come out with something.
Matter of fact, that when they first came out,
I think it was like 10 or 15 years ago,
they tried something.
I fully expect them to come out with something.
And to go into their ecosystem,
you'll exchange one cryptocurrency for the other.
And at some point you're gonna do it
and you're not gonna realize it.
It's just gonna be the technicals
or the back end of the piece.
You really won't know it.
You're gonna buy that thing on Amazon
realizing you're not even using cryptocurrency.
And it's all about transaction cost.
That's what it's gonna reduce.
- And I think that's huge because yeah,
you think about it now, like you said,
if you're doing a transaction of a certain magnitude,
$20,000, $30,000 is a lot of money, even though it--
- Well, all we have to do is look at the financials
for Walmart or Amazon and think about,
and they probably got better deals than 3%,
But let's say let's just talk about the 3% merchant fee
that most small businesses pay.
What are Amazon and Walmart paying?
That's a lot of dead money.
And if you look at that dead money,
it's over $200 billion a year are spent on just--
- Just transacting it. - Fees, transaction fees.
- So Dave had his question here.
He wanted to know, can they ever increase the number
of coins in the ecosystem?
- No, no, it's written into the code,
21 million is going to be the most amount.
It's a deflationary asset right now.
And what's funny is on top of that 21 million,
right now it's estimated 4 million are lost.
- And because people are frankly,
we all know people are stupid and they lose things.
I know I've lost things in the past.
- You must be key with a million bucks, man.
- But that's happened.
You lose that private key.
You can't access you can't just you can't there's no going back. There's not calling nobody calling up bank America saying oh man
I lost my password. What do I do? I need to get access my bank account. No, it's gone
Yeah, you don't have it you can't recover it. You cannot go get it
It's not like we were talking last week where you can bring your dirty bills that the dog
You know pooped on or whatever like house burned down
They have a whole division in the in the Treasury to like reconstruct bills and reissue bills
Not so much with Bitcoin you lose that you lose that wallet you lose that USB you're done your host your toast
How you doing man? You have any questions over there? I'm good
There's another question on here that like basically asking should you treat treat this as like an investment say like your 401k or
Or any other type of investment 100% and the way I look at it from an investment standpoint. It's like portfolio insurance
So here's a fun fact if you had
Five years ago, and you've got a hundred thousand dollars in your 401k, and I'm just using numbers and you kept
90% of in cash
90% in cash and you just put 10% in Bitcoin
You'd have a better return over the last five years than if you would have put a hundred percent of that in the SMP
Wow, which is the benchmark. Yeah
10% which is not a so there's something called alpha and beta in the finance world and
Alpha is basically your returns and beta is your risk. So you would have lowered your beta because 90% of your money would have been in cash
So your risk would have gone down and your return actually would have been better. Yeah
That's impressive and that's really I mean that yeah, that is pretty low risk when you think about 10% of your portfolio
And if you have IRAs, there are
Options on investing in Bitcoin
There's there's there's GBTC that you can look into you can also if you've got a self-directed IRA or you've got
Qualified funds you can put them in a self-directed IRA and actually by the asset itself
You know feel free to contact me if you want more information, but I can help you guide through that
But it's it's yeah, it's it's not really about like owning a lot. It's about just owning a little bit
Yeah, and so what are you personally doing? Can you speak a little bit to that? I mean you're pretty bullish on this
I know just from talking to you, but I'm super
bullish so I you know from a percentage standpoint I own a good chunk yeah but I
also think it's the trade of my lifetime I just understanding the economics
behind it the fact there's the 21 million coins it's a deflationary asset
or you know I talked about the having event when demand basically when supply
goes down and demand goes up we know what it should happen to the price the
The other piece that I'm part, you know, there's many pieces of my thesis, but institutional
investors are coming.
Some of the slowest adopters to this technology is going to be pension funds.
It's going to be just large institutions that gain access, and that's starting to come on
These institutional infrastructure are starting to come on.
BACT announced, BACT is a company that was created from the owners of the NYSE.
They're coming out with a Bitcoin-settled futures market.
It's extremely exciting because at the end of the day, if you ride the contract out,
you're going to be settled in not cash, but you're going to be settled in Bitcoin, which
means it's going to drive demand at the end of the day.
But the institutions, they're freaked out over custody.
How do we custody this?
If I want to buy and sell every day, I don't want to have to take out a USB and plug it
in and have three of us get together and figure out the key and have to do all that.
Because that's what an institution is.
It's usually three or four people that are making the investment decisions over hundreds
of millions of dollars.
Many, many accounts.
So what's happening is institutional products are being developed to basically allow institutional
type of trading of large, large, large dollars.
And that's coming.
It's not here.
It's not been done.
The earliest adopters were technologists and what I would say fraud, people that used
things in Silk Road.
And it's slowly moving itself from the outer edges of society right into the middle.
And we are far from the middle right now.
We're getting closer, but we're far from the middle.
And that middle is going to be some of that wealth.
And if we have a recession coming up, we had-- we saw the yield curve invert last week on
on Wednesday and saw the huge sell-off
and the reaction to that.
If we have negative rates across the globe,
you've seen bonds go from a negative yielding debt
go from $6 trillion to $16 trillion this year.
Most likely United States by the end of the year
or early next year, we're gonna see close to negative rates.
We could see a two-year rate at 0.5 right now or 1.5.
By the way, that started out the year,
I think it was a right around 3%.
So we've already cut in half.
- Wow, 50, yeah.
- Yeah, so we're seeing rates come down.
We're seeing a lot of craziness going around the globe
and big high net wealth investors
are going to look at quote unquote safe havens.
Gold is an obvious one.
Bonds are an obvious one.
Bitcoin though could be that new piece
or that new technology, that new quote unquote digital gold
even though I don't like to use digital gold
I don't think you can compare it to gold at all.
But it's that new store of value that's come along.
And if institutions like it, if millennials like it,
if high net wealth investors come to it,
who knows what the demand is gonna be like,
especially in a recession.
We haven't seen Bitcoin perform in a recession yet.
It was born in 2008, so.
- You had a term that you used,
This was a conversation you and I had maybe a week or two ago.
And I can't think of it right now.
It's on the tip of my tongue.
But effectively, what you were talking about is that,
unlike other things that react in the market,
like certain stocks and that sort of thing,
like Bitcoin is not correlated in the market the same way.
- Yep, let's see, I'm glad you reminded me of that.
It's non-correlated and it's asymmetric.
So it's kind of like the holy grail of investments.
And what non-correlated means is if the market goes down
and Bitcoin goes up, it's non-correlated.
And if you look at Bitcoin over time,
and there's a metric that you can put against that
to figure out how correlated it is with the metric
with the market in general, it's at 15%.
And that's 15% out of 100.
So most of assets, except for gold and bonds,
they're a little bit higher, but most assets around 70, 80%
where Bitcoin's 15%.
So not only is it non-correlated, it's asymmetrical.
And as an institutional investor,
if you've got hundreds of million dollars
and whatever wrapped up in a pension
and you wanna find a non-correlated asset
that can help you drive returns
and help offset maybe a recession,
you're going to look at alternative,
non-correlated asymmetric assets.
and Bitcoin just happens to be one of them.
At the same time that all these institutional type
of products or solutions are coming online
to enable those same organizations to buy in to Bitcoin.
So, I mean, I'm not trying to predict the future
but there's a reason that a lot of smart people
have thrown out huge price projections.
McPhee throws out a million dollars every time chance he gets matter of fact
He says he's gonna eat his dick if he doesn't wow
Have a little follow-up on that one. Uh Kyle that we'll put a little bleep in on that one
We got the explicit rating. We're fine. That's fine. We told people up front
I'm not a final note, but on a follow-up note to that. What would you say to the naysayers?
They would say something like - like just looking at this year, you know like
Bitcoin compared to S&P this year alone not looking very favorable. I mean there was a it was very volatile this year
So you started out the year at like what 20?
Where do we start 25 and then went down to like three well it's down to three in December
Yeah, it had a pretty a pretty epic fall. It had a volatile 12 months
But so this year I think it was pretty low. So if you want to look at 2019, it's up well over 200% this year
With the S&Ps up I think 15% right now. So just looking like you're not here today
Just like from the beginning of the year. Yeah. Yeah, maybe year to date
You did it and what I think what you're speaking to is did I have a drawdown last year? Absolutely. Yeah, is it a volatile asset?
Yes, it's only 10 years old. Yeah. Yeah volatility is good. Yeah
You a lot of people can't stomach that they can't understand it because they're focused on
Tomorrow or next month or next quarter
You can't focus on that you if you look at Bitcoin again over the last five years just to the last five years
Let's cut it. Let's cut time in half. It's been around for ten years, but let's cut time in half to five years
Yeah, it's a best-performing asset in the market period
with an explanation mark
That's what I just started at like three cents or something like that
Share well, I'm not going back ten years. I'm only going five years. I'm only going back to 2014
Yeah, it's still the best performing asset and you compare it against gold you compare it to SMP you compare it to any bond
You compare to any yield any dividend stock Berkshire Hathaway, whatever you want mm-hmm. It outperformed it over the last five years. Yeah
Also, yes, but volatile volatility is good
Believe it or not. It is good
It imagine gold when it first came around
What its volatility would look like when nobody knew really what it was
Bitcoin's kind of going through the same phase
But the biggest thing you need to understand is it's got a network effect. It's called the lindy effect
So if you've ever seen the lindy effect, it's just the s-curve, right?
So it's kind of like how Facebook and Amazon a lot of these companies take off
Bitcoin's going through the same
effect basically and when you take a
Over that s-curve
They're pretty darn correlated
interesting, okay, so
Well, we're I know we're out here. I know we're out of time, but that's what that looks like
Bitcoins vow now this is a chart we could if we can get a copy of that maybe yeah
We could put post that on our show. Absolutely. Yeah, yeah
And they effectively what you've got here is bitcoins value rises with adoption in time
And so you have yeah, and that is a logarithmic curve and you do see some volatility in there
But it does climb it does follow the curve pretty much the whole way
I mean there's not a really huge bottom on there
No, and it's it's it's on the same path this year
Well, and I think what you're advocating for is a long-term asset not a short-term
Yeah, type gain right like you could you could try to play the market and you may win
But you can you can trade all you want
Yeah, you know some of the best in the business try to do but at the end of the day
If you look at any trading strategy versus just what they called the hodl strategy, which is hold on for dear life
It's hodls worked
10 out of 10 times
Well, we're coming up to about the end of the hour. I want to point out a couple things first of all
Thanks so much for coming on
I feel like we could have done another hour because we just really scratch the surface
So who knows maybe we can schedule a follow-up session at some point here down the road
Just to talk more about it. I mean this was kind of a high level. Thanks for letting me gap just getting into it
Thanks for let me you know, I'm pretty passionate about it
I've been in Iran like I said trading for a long time and I just think it's one of the greatest assets that I've ever seen and and
You know beyond that it's just it can do so much more. We're gonna make sure that we get your information out there
I know that you're on Twitter. You've got a newsletter. I'm all that information
We've got and we're gonna post that online when the when the feed so this is the live episode
when we get the, what do you want to say?
When we get the recording posted,
we'll make sure we include all your information
so people have a way to reach out to you.
So anyway, thanks so much for joining us Brent.
And that's a quick wrap.
I can't believe we're through the hour already.
I wish we had a little more time.
Anyway, Kyle, bring us home buddy.
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Thanks everybody have it have a good week