Dan Held on Bitcoin’s Immaculate Conception


Peter McCormack: Hi Dan. How are you?

Dan Held: Doing well. How about yourself?

Peter McCormack: I’m pretty good, thanks. So you’ve just got back from Vegas. You were at Money 20/20?

Dan Held: That’s right. I’ve survived four days in Vegas. Yes.

Peter McCormack: And it was good? It was a successful trip for you?

Dan Held: Yeah. My co-founder Matt and I went and there was a good crypto contingency there. We had a lot of, I think, really intimate good meetings with some people that we’ve been meaning to meet. So overall, very productive for us. You know, I think it also gives you a good perspective of how small crypto is relative to the larger Fintech landscape. It’s good to zoom out sometimes.

Peter McCormack: And did you feel like the outliers at Money 20/20? Was there an interest from other people from the wider financial community?

Dan Held: Well yeah, I think I heard the word “blockchain” about 10,000 times. You know, I think blockchain has become the shelling point for all tech innovation. So obviously, that’s kind of, first and foremost, I think kind of the most popular word at the conference. You know, I was attracted to Bitcoin back in the day, because I’m the rebel, so I kind of like being the weird cryptocurrency, or the weird start-up sort of focused in this more niche market.

Peter McCormack: And I don’t normally do the origin stories, because they usually exist somewhere else and I’ll share them out in the show notes, but I don’t really know yours that well. So it would be great to know your background, how you came into Bitcoin and crypto. That’d be really useful for me to hear.

Dan Held: Yeah, absolutely. So, back in 2012, when I lived in Dallas … I’m originally from Texas.

Peter McCormack: I’ve been to Dallas.

Dan Held: Oh really? Nice.

Peter McCormack: Yes, very cool place. When I went to South by Southwest, I flew into Dallas and decided to have a night there.

Dan Held: Oh cool.

Peter McCormack: And it’s probably one of my favourite places I’ve been to.

Dan Held: I grew up in Uptown, which is kind of the fun, kind of younger place to go hang out and live.

Peter McCormack: I went out on … is it Elm Street? Elam Street?

Dan Held: There’s McKinney Avenue.

Peter McCormack: McKinney Avenue.

Dan Held: There’s a couple spots, but McKinney’s kind of the main one over there. Yeah, growing up in Dallas is a great place. I think, in Texas, there’s a very strong libertarian culture of … Texas is a very funny place. So in Texas, in high school, you pledge allegiance to the American flag and the Texas flag, and a lot of people consider Texas was its own country for 50 years, and a lot of Texans consider themselves as their own country.

Dan Held: So it has a very, very fierce libertarian culture kind of baked in from school to where, I think, a lot of people really respect freedom. You know, I think of Texas, as a whole, as a rather conservative state, but I think there are kind of those really cool tenants of libertarianism that exist there.

Peter McCormack: Right.

Dan Held: And so, that gives you a little bit of background on where I grew up. And so I got interested in Bitcoin in 2012. I worked at a small investment firm in Dallas as an analyst, and for me, going through finance school during the 2008 financial crisis really kind of rocked my perspective of the leaders, both in political parties and in the economy. It really kind of shook my fundamental belief or trust in them, because I saw that everything I had read in my textbooks, and all of the professors, and all of the leaders had no idea what they were doing.

Dan Held: And so that kind of fundamentally shook my belief in Keynesian economics, and I had turned to Austrian school of economics as kind of the, I think, alternative or better source of truth. And so, in Texas, while working at the small investment firm, a buddy of mine introduced me to Bitcoin in the form of a Casascius coin. So after we went out for a night out at the bars, he paid me back in two Casascius coins. And so that was my first Bitcoin. It was a Casascius coin. The obnoxiously shiny physical gold coin that we’d see in all those articles.

Dan Held: And of course, I didn’t immediately go buy as much as I could. I think I’d lost one of them and I’m not sure what happened to the other one. I think I redeemed one of them. And what made me most interested was that while I didn’t understand how it worked, because I wasn’t in tech and I wasn’t technical, I did know, if it facilitated uncensorable payments, that this was going to be something incredibly big.

Dan Held: That if a marketplace for certain types of illicit activity could be facilitated by this currency, that it was onto something really, really powerful. And so, through a serendipitous role of the dice, my company relocated me out to San Francisco. This was January 2013. I went out there, and went to the Bitcoin meetup. And at that time, this was when Bitcoin was $10, so there was only 15 of us at that meetup and it was Brian and Fred from Coinbase, Charlie Lee, you had Ryan Singer, Jared Kenna from Trade Hill which was the first U.S. exchange. Jed McCaleb was there, and there’s just a cooler of PBRs and a whole field of dreams.

Dan Held: It was exciting to finally, if you equate Bitcoin to a religion, it was exciting to finally go to a church meeting where I met other believers in what I believed in. March 2013 hit and the price spiked to $260 and then, there was like 150 people there. There’s VCs almost making it rain business cards. Honestly, I think I remember one moment where they just walked around handing them out. That kind of sparked my interest, at that moment, to go build something in this space.

Dan Held: In May 2013, my co-founder Kevin Johnson and I built the first real-time market data and newsfeed aggregator on mobile, called ZeroBlock. So, ZeroBlock is like the Blockfolio equivalent of 2013 and later that year we got acquired by BlockChain.info and I came on board at BlockChain as the first employee outside of Nick Cary, the original CEO and the two support staff.

Dan Held: So, joined there December 2013 and was a product manager there for the next year, left there to go to Change Tip, Change Tip was a micro-payments company that tried to facilitate Bitcoin micro-payments over social media and then after that, went to Uber where I was on the writer growth team led by Andrew Chen and the global data team, where we piped in external data to colour in certain competitive landscapes.

Dan Held: So, last fall, I decided I wanted to return to my first love, crypto, and decided to go build Picks and Shovels, which is the company I co-founded. We’re building something called Interchange, which is a portfolio managed bit-tool for institutional crypto traders. We take all of their complex trade and transaction history, pull it all together, sanitise it, standardise it and then calculate different complex portfolio metrics which enables fund managers which were previously flying blind to now have visibility. That’s the full A-Z story of me.

Peter McCormack: That’s a great name, Picks and Shovels. I really like it.

Dan Held: It’s very cutsie.

Peter McCormack: Yeah, and also, I think you have the best name in crypto.

Dan Held: Thank you. We vehemently removed the words “coin” or “bit” as part of the name. I refused to have “coin” or “bit” as part of our name.

Peter McCormack: So, when you first came up on my radar, I assumed your surname was…you were like an anon account, like “Dan Held” the Held bit was just like a joke.

Dan Held: Yeah, Held’s my real name.

Peter McCormack: I know, it’s brilliant. Okay, is Interchange out in the market now, is it being used?

Dan Held: We have been building this over the last year. We’re getting close to releasing it with a few select clients. Portfolio management is a particularly tricky problem to tackle because it’s only useful in its entirety.

Peter McCormack: Right.

Dan Held: So, if a fund has data from five exchanges and we only have four, it’s not exactly useful for them so, it’s a slow long tail process of adding all of those disparate data sets.

Peter McCormack: Right.

Dan Held: Yes, we are launching soon, functionality is somewhat more limited but exciting to get this in the hands of customers. We’ve incorporated them throughout the process but excited to be taking the next leap with the Alpha.

Peter McCormack: Which exchanges are you interfacing with?

Dan Held: When we launch we’ll have the top five U.S. exchanges.

Peter McCormack: Crypto exchanges.

Dan Held: Correct, yes, sorry the product is for only crypto assets.

Peter McCormack: Therefore, will you also then be interfacing with ICE?

Dan Held: We haven’t engaged in dialog with them but ideally yes, whether it be backed or any of these other professional trading platforms that are popping up that, if they have a fixed API, we could pull in this data which, I’m assuming all of them will. But we haven’t talked to them yet.

Peter McCormack: So, looking at the current news landscape, your timing is quite good really.

Dan Held: We’re hoping so, I mean the bet of the company is that, as pomp says, the virus is spreading or Novogratz “the herd is coming”. We think we’re well positioned to where if we build this tool and iterate with the smaller funds, because right now a lot of these funds are pretty small, iterate with the smaller funds, we’ll be ready for that institutional herd when they come in. We think the timing’s on point. We’ll see what the market gods play out.

Peter McCormack: Looking at the Picks and Shovels website, I get the feeling you’re going to be working on a suite of products?

Dan Held: Yeah, we’re hoping so, we’re hoping that Interchange will find a strong product market fit and we wanted the flexibility of being able to brand other products differently. We’re not sure yet, but that was kind of the idea behind the dual branding of Picks and Shovels. Picks and Shovels the company and Interchange the product.

Peter McCormack: Okay, well I will share some links to that out in the show notes, so people can find out more information about Picks and Shovels. I do though want to talk to you about some of your content. You’ve been writing like a maniac recently.

Dan Held: I have, I have.

Peter McCormack: We’ve got the upcoming 10-year anniversary of Satoshi releasing the White Paper, which I told you is on my 40th birthday. It’ll be a double celebration, but yes, you’ve been writing like a maniac. Very interesting stuff actually. What triggered this, all this writing?

Dan Held: Well, it’s actually a distinct moment. So, Jo Carlson, Melton and I were skiing in Tahoe earlier this year and on the car ride back, Jo and I are jamming, just talking constantly in the front seat on the way back about a wide variety of things, and Jo goes, she goes “You know Satoshi was really brilliant right? In coding up Bitcoin and writing up the White Paper but,” she goes, “it’s very underappreciated how precise his timing was, that his go to market strategy was equally as brilliant as the code itself.”

Dan Held: That just kind of blew my mind, I’ve been in this space for six years but I hadn’t really thought about it that way and that idea was incepted and I couldn’t get it out of my head. So I sat down and I started to compile, I started to read a bunch of Medium posts. I had already, Twitter is kind of my favourite channel, so I already had a bunch of content on Twitter that I had previously flagged and so, I just started to ingest all this information around Bitcoin’s origin story, and other aspects of Bitcoin. And, it ballooned into this giant Google Doc.

Dan Held: I was like, “Okay. This is going to take a little while.” So I started to chunkify each piece and then, they kind of coalesced into planting Bitcoin, which the first article was released yesterday on CoinDesk, so it’s part of CoinDesk’s 10 year anniversary content section. So, planting Bitcoin is kind of the major piece that came out of all of this research, which is essentially Bitcoin’s origin story that Satoshi’s brilliance wasn’t just in this species of tree that he chose to plant, the Bitcoin code, it was the season, the soil, and the gardening techniques that were equally as important.

Peter McCormack: Where did that come from? Was that like your own brainwave?

Dan Held: I think I made it up.

Peter McCormack: But it works really well.

Dan Held: Oh, thank you. Thank you. I’ve been bouncing it off, I’d like to call out that I stand on the shoulders of giants. My job, I think, is in the … My value that I bring is in the connectivity of all of everyone else’s thoughts and the kind of stitching together that more easy to read narrative. To the best of my knowledge, I think I made up planting Bitcoin.

Dan Held: But, it’s certainly an idea that I bounced off of a lot of other people before I went public with it.

Peter McCormack: I also quite liked, when we were chatting on Twitter beforehand, I think you refer to it as Bitcoin’s immaculate conception. Was that Nic Carter who came up with that?

Dan Held: You know it’s funny. Nic and I were chatting about the origination of that phrase. So, Nick I think popularised it, but we found a reference to it, I think from a few years ago on Reddit. So, I’m not sure if we can claim origination for that phrase, but Nicc has certainly been popularising it recently.

Peter McCormack: I really liked it. It kind of … it helps you put into context so many other alt coins and other alternative projects and how you compare them quite interestingly, actually, before we delve into this article, how much of a Bitcoin Maximalist are you? Are you like fully there? You sell me the …

Dan Held: I’m a Bitcoin realist. Look, I’ve been in this space for six years. I lived through the first 2014 alt coin boom bust cycle. I think going to Uber and working at Uber was great because I’m one of the few crypto people that actually went to go outside of crypto in between and went to see how product and marketing works at 100 million monthly active user scale. I’ve seen the next wave. I’ve seen what it takes to scale what we’re doing here.

Dan Held: So, I have, I think, a good rational reason to kind of push back on some of this … I’d say irrational exuberance. That’s why I call myself a realist. I think Bitcoin was always designed to do what it did, which was to be sound money. And, it’s achieving that purpose. It’s incredibly exciting what that means.

Dan Held: Even if Bitcoin’s the only thing that we make here, that would still be immensely, immensely important. So, put it this way. I’m most excited about Bitcoin. I’m still excited about the other things as well.

Peter McCormack: So, before we go in. What other things excite you? What other projects?

Dan Held: You know, I think if we look at cryptocurrency or crypto assets as a species of money, what are the parameters or traits that we could kind of use as a rough guideline to see what type of organism might survive in this new paradigm. You know, certainly some of … I’m an old school crypto guy, so I like some of the more edgy stuff. I think like certain marketplaces that help certain types of activities, having a completely decentralised marketplace would be cool. Whether that be an Augur or a Silk Road. I think those are pretty interesting.

Dan Held: I think blockchains, or at least the Bitcoin blockchain, other blockchains, they’re not that valuable until you store data that has a high value per byte on it, so there has to be financial data. I don’t see many use cases outside of ones that focus on the high value per byte and that are solving a problem that inherently doesn’t make someone happy.

Dan Held: Because if you’re doing everything above board, I don’t see why you can’t just use a centralised system. So, TBD on what those things that emerge, what things emerge that I find that will be compelling, but what I hope it is something that isn’t something that asks for permission.

Dan Held: That’s not why we came here. We came here to go build a new world. And, that’s also why I liked working at Uber is Uber was illegal in every single city it launched it. Uber was fiercely libertarian. So, I like that sort of mentality. I think the world becomes a better place when we stop asking for permission and we start building.

Peter McCormack: Did Uber accept Bitcoin at one point?

Dan Held: It did not. I know there was that news around Argentina, but I’m pretty sure that Uber had no payment reels lined up for Bitcoin.

Peter McCormack: Okay. Fine. Okay, so, back to the article.

Dan Held: Yep.

Peter McCormack: And like you say, Satoshi got so much right, and what’s quite interesting, I thought was recently with the change in the Ethereum inflation policy.

Dan Held: Yeah.

Peter McCormack: I thought that was quite interesting because that’s never had to happen with Bitcoin and it always feels like alt coins are trying to replicate what’s been achieved at Bitcoin. They’re trying to achieve the same success, but they’re unable to get certain parts of their algorithm set apart, certain cogs in their system to work correctly.

Peter McCormack: Yet Bitcoin hasn’t ever had to change its inflation policy. And it has worked. It does appear that Satoshi got so much right early on. And what I also found was quite interesting was, you put in the quote into the article, “I had to write all the code before I could convince myself that I could solve every problem. Then I wrote the paper.”

Peter McCormack: I thought that was very interesting.

Dan Held: Well, you know Satoshi there is kind of, that’s a nod of appreciation to the cipher punks, because the Cypherpunks manifesto starts with “Cypherpunks write code.” So, Satoshi is giving a nod to that community, which by the way, that’s the soil section. And, in my four part series, it was the perfect soil to then go plant the seed. It was the only group that would give a shit about Bitcoin.

Dan Held: And, the way that he wrote the White Paper was purposely made to resonate with his target audience, the Cypherpunks. And it’s pretty fascinating. Satoshi, going further and further down this rabbit hole has made me appreciate Satoshi’s brilliance even more and more. That immaculate conception was not just an incredible amount of intelligence, but also, just a really lucky roll of the dice. Bitcoin was a random operation. It was like the first form of life where it was a random mix of soup of different atoms and energy and something emerged from that.

Dan Held: So, it was super fascinating to see how many … He was a polymath. He had all these different disciplines and the more I read into it, the more I realised the breadth of those different knowledge based. Pulling all that together was incredible.

Peter McCormack: So, looking back at your article then, what do you think are the most important things within Bitcoin’s design that Satoshi got right. Obviously, decentralised is important and proof of work, but for you, when you went through it, what do you think of those things that are critical to Bitcoin having worked?

Dan Held: So, I’ll go back to the first thing that made me most excited too, which was the 21 million hard cap. That is by far, I think the most exciting thing about this. One, it was the first provably scarce digital good. Two, we had, what’s incredible about it is that it’s a complete rejection of Keynesian economics. And, what’s interesting, I’ve got an article about deflation coming out, after I take a brief hiatus from planting Bitcoin, because that took a lot of energy to write and put out there.

Dan Held: Satoshi has commented in the early forums where he goes, in his early forum posts where he goes, “You know, I would have picked an inflation rate if we could’ve trusted a third party.” Which I think he’s kind of being sarcastic in that moment, when he’s saying essentially, choosing an inflation rate is impossible. And that’s where I have an article coming out called deflation is good, where it goes into the idea that it’s not that I disagree that inflation might be useful, it’s the idea that picking an inflation rate is mathematically impossible.

Dan Held: And it’s because of that that I think Satoshi realised in his infinite brilliance that not choosing an inflation rate or just having a 21 million hard cap was the way to do it. That required no external data to be piped into the blockchain, the Bitcoin blockchain, in order to have it have a response to certain fluctuations in demand and in combination of it being a data problem.

Dan Held: Satoshi, brilliantly, aligned these incentives to where he primed it to pump. Because there’s no supply response, when demand increases, if gold became three X more valuable there’d be a lot more gold being mined out of the ground. If there’s no … Bitcoin are mined on a fixed issuance schedule. That fluctuation in demand causes the prices to pump and when those prices pump, everyone who bought in early brags about it to their friends. Their friends go buy and some will buy in and now they become Bitcoiners.

Dan Held: So, it was a brilliant viral loop system built by Satoshi. And, he actually references that. He goes, “You know, it might make sense to buy a little bit when people buy it, and it goes up. It’s a net benefit for the system.” And he goes, “It’s basically this feedback loop that happens.” He’s publicly commented how he designed it that way.

Dan Held: I thought that was brilliant.

Peter McCormack: Have you seen Ryan Selkis recently commenting on the fact that there is no inflation, because it feels like there is still another big test come in Bitcoin. There’ll always be tests, but one of the big tests is what happens when the inflation rate drops. Maybe not in the next halving, maybe even not the one after that, but at some point, they’re going to be, the probables are going to be potentially so small that it’s going to have to rely on the fee market.

Dan Held: Yeah. I originally started writing deflation is good and I had the decreasing block reward as a section in there but found that to be a big enough piece on its own, so I’ve actually charted that out into its own piece. And, essentially, I don’t think the decreasing … Satoshi also, it’s funny. You’ll read …

Dan Held: First of all, I don’t like to use everything that Satoshi said and just claim that as doctrine and perfectly sort of, “Hey, we should follow this to the T.” I think if people want to use his quotes or they want to use his mindset as a point of debate, then I’m going to use those quotes. So, that’s what I like to do here. That’s why I’m bringing this up, is a lot of people like to use this origination, the original intent as a method of attack on Bitcoin or method of fighting.

Dan Held: So, if they want to use that as a data point, I’m going to use it as a data point. But Satoshi, he commented around the decreasing block reward and essentially said, “Well, either a lot of people are going to be using it or no one’s going to be using it.”

Dan Held: So, he had already thought about a fee market. He had already thought about transaction fees paying for the security of the network. And so, when we look at it empirically, we see, there’s a really cool chart, it basically showed that transaction fees as a percentage of money revenue have slowly increased over time. And, there’s a couple other factors we can look at. I don’t want to get deep into this, but, essentially, since Bitcoin’s monetary policy is transparent, all future concerns around the block reward destabilising, the security of the network have been factored into the current price.

Dan Held: If it was really that big of a concern, we’d all be freaking out and selling our Bitcoin, but, we’re not because one, it’s a very far off circumstance, and two, we don’t … It’s more of … I would actually bucket it more as concern trolling rather than legitimate feedback because we’re talking about a date at 2140. It’s a really far ways from now. I guess we’re going to see the impact of that here sooner with the halvening, but, again Satoshi thought about this.

Dan Held: We empirically seen transaction fees as a percentage of mining revenue slowly tick up. I have a really … There’s a fun quote that I like to use, which is, nobody goes there. It’s too crowded.

Dan Held: If Bitcoin is going to be the backbone of the world’s financial system, there’s going to be a ton of transactions on chain, and some people have thrown in lightening concerns here where they’re like, “Will lightening suck up all on train transaction volume until you’re two,” and there’s Jevon’s paradox, I think would be a good rule to apply here which is that as things become more and more efficient, they’re used more and more, which there’s a good equivalent which is cars miles per hour, cars fuel efficiency, not decreasing the amount of miles travelled with cars, but actually increasing it.

Dan Held: So, I don’t see lightening negatively impacting layer one fees. And, yeah, essentially we also saw that in circumstances with high congestion that the fee market does work. And, the fee market essentially enabled us to better predict future transaction fee revenue.

Peter McCormack: Right. Okay. So, we have the 21 million. Great design.

Dan Held: Yep.

Peter McCormack: We also have a decentralised chain of blocks, which is quite interesting. So, before I interviewed Nick Carter, I read his article about blockchain and it hadn’t crossed my mind or I hadn’t thought about it in depth, that the design of the blockchain was purely to create something which governments couldn’t switch off or shut down or amend.

Peter McCormack: I hadn’t thought about it in that way. It might actually been Jimmy Song who wrote that. I can’t remember which of the two. But clearly the design of a decentralised blockchain was very clever.

Dan Held: Oh totally. It was … And this is where I’d like to make sure the record is clear. Satoshi built this for one purpose, one purpose only. He didn’t come up with blockchain tech and shit out Bitcoin as he first application. No, this was precisely crafted. The DNA was exactly crafted to be censorship resistant. This organism needed to survive in a highly adversarial environment.

Dan Held: And so, I think one of my favourite quotes from Satoshi would be, the root problem with conventional currency is that it’s all trust that’s required to make it work. The central bank must be trusted not to debase the currency. But the history of these currencies is full of breeches of that trust.

Dan Held: I think he lays it out pretty clear what he’s building here. And he goes, it’s essentially like, “Hey, I’m building a nuclear resistant protocol.”

Peter McCormack: Yeah, because if a nuclear war destroyed half of our planet, it would continue to live uncorrupted, Ralph Merkle, right? From your article.

Dan Held: Yeah. Yeah, Ralph. You know, it’s funny I actually grabbed lunch with him two months ago. Merkle trees are named after him. He co-invented public private key cryptography. He’s a really nice guy. Really, really cool character. Very humble. Very friendly. Kind of a grandfatherly sort of figure.

Dan Held: But grandfather with a brilliant, brilliant grandfather sort of feel.

Peter McCormack: And then the other third really important part of the design was proof of work. And, this definitely was from my interview with Jimmy Song where Jimmy Song talked about, it needs to be expensive to rewrite history. It has to be very, very expensive to rewrite history, so you can’t do it.

Dan Held: Totally. And this originates with Nick Szabo’s writing around unforgeable costliness that the gold that you mine out of the ground isn’t nearly the same cost as the gold you would buy in the wholesale markets. Or at least the refined gold that I would buy, each person who’s touched it along the way to refine it, of course takes a small, small premium, but essentially that the cost to mine it is somewhat close to the revenue you would get from selling it.

Dan Held: So, the marginal cost means marginal revenue, but with a very small, small spread and proof of work does that. The cost to mine follows the price of Bitcoin. It does not lead it, it follows it. And it follows it to be that level of unforgeable costliness. And I wrote a piece of work called Proof of Work is Efficient around kind of the basics of proof of work, and that’s where people when they look at proof of mistake, they forget that proof of work isn’t about code.

Dan Held: It’s about physics. It’s the idea that I can provably burn energy in the real world to go then build a digital wall around something I want to protect, which is the Bitcoin blockchain. And, the cost is exactly efficient because it’s a provable, digital wall that proves how much energy it would take to then go try to destroy the network. It’s the proof of work. It’s the proof of the energy and time spent to build that digital wall and so we know exactly it would cost to tear down the digital wall.

Dan Held: And we intuitively know that to build walls and walls around things that we care about in the real world is a good thing. So, this is simply doing the same thing, and no one would tell you in the real world, they wouldn’t be like, “Hey, that castle you built in 1500, that’s such a waste of money.” It was a very good use of money back then because it protected people. And it protected things that they cared about and we’re just doing the same with digital walls around the Bitcoin blockchain.

Peter McCormack: And were there any other parts of the design, intrinsic parts of the design that you think were critically important?

Dan Held: Yeah, so proof of work and 21 million hard cap were kind of the biggest. I would also say I think … Those two, I would consider kind of the most enamouring. I think the, I made a good … I think I made kind of a fun reference to the block time being like the metabolic rate. And this is where … This is probably a good time to highlight the really annoying heart in the cryptocurrency world where people claim they have faster transactions than Bitcoin.

Dan Held: I’m like, “You don’t have faster. You simply have … You’re less confident that it’ll be … You require more confirmations, which essentially ends up more confirmations with the network with less hashing power, which means essentially you’re less confident in the finality of that result.”

Dan Held: But yeah, Satoshi I think early on realized, to build this nuclear grade protocol, things are going to take a while to come to consensus. And, it’s about those layers or those blocks. Every 10 minutes there’d be like a new layer of amber. I think Andreas coined the term originally. Andreas Antonopoulos. And so, 10 minutes is sort of an arbitrary time, but it is an interesting one chosen because it’s sort of like the metabolic rate of the Bitcoin organism.

Peter McCormack: I remember once when Charlie Lee put out a tweet once, they put out a question. He said, “If a block was found five minutes ago, how long will it be until the next block is found?”

Dan Held: It’s sort of a distribution. We can have a probabilistic waiting of when we think that next block might be found.

Peter McCormack: So, I ask you in five minutes, right? Because it’s meant to be every 10 minutes. But actually, it doesn’t matter what point it is, it’s always 10 minutes.

Dan Held: Right. Yep. Yeah. I don’t know if you … how meta you want to get here, but, there was a really cool article about how Bitcoin is a universal clock, which we all think is silly because you just had a good reference of one block being found in five minutes. But due to the laws of relativity, all time is localized.

Dan Held: So, with Bitcoin, by burning that energy to generate these blocks, we sort of provably use the random energy of the universe to then create a time stamping function, to where we could use a time stamping function as the not localized time, but universal time, since that time is the same time everywhere.

Peter McCormack: Wow. That’s insane. I think you would enjoy the podcast Ask a Spaceman. Do you know it?

Dan Held: I don’t.

Peter McCormack: You should check it out. I’ll send you a link afterwards.

Dan Held: Okay, cool.

Peter McCormack: So, what was quite interesting in the article as well is where you had the comparison table between Bitcoin, fiat, and gold and it’s only negative is its established history. It’s 10 years old whereas fiat money and gold for years, centuries I guess. That was the only real negative factor.

Dan Held: That’s right. I think when we look at the genetic code of Bitcoin, how that was purposefully, delicately crafted, that Bitcoin would then have … that genetic code would then be manifested into traits or traits that give it survivability and competitive, a competitive edge against the other species of money.

Dan Held: It’s incredible. It’s an apex predator of money. It’s a ruthless, ruthless organism. Sort of a … This didn’t make it into the final article but, a buddy of mine was like, “Hey, it’s kind of like the alien in the Aliens movies. It’s got acid for blood. It’s almost impossible to kill.” And I thought that was funny. I didn’t include it in the final piece, but it is kind of … And it’s a new type of life form to where all previous life forms will likely go extinct due to one, their lack of the proper traits necessary to be competitive, and two, yeah, you’re right, the established history is the only thing that Bitcoin doesn’t have.

Dan Held: But that is changing and due to its genetic sequencing, it’s been primed to pump and it’s been primed to grow as fast as possible. If we think about what’s happened in 10 years, it’s magnificent. Actually, the last five are the ones that really had the growth, and maybe last two actually, if you really want to go down to the metal. But, yeah, I think it’s incredible to see how far it’s come.

Dan Held: And this may be, the established issue is probably a good segway into, money isn’t just numbers in your bank account. Money isn’t … It’s not just paper in your hand or shiny gold. Money more importantly is a representation of energy and time. To have earned that money, energy and time had to be used. And so, the ledger which in that value, that money is stored. It’s incredibly important that that record stay true and accurate because it’s a sort of Thermodynamics issue here.

Dan Held: It’s we need to accurately preserve that state change of energy and time being used and it’s about the efficient allocation of that stored energy and time. So, I think the established history is sort of the continuity of that ledger or that score book of all of that energy and time being written down and I think Bitcoin’s inherently, is in a really cool spot because Nick Szabo says this is the …

Dan Held: Nick Szabo essentially had, this it the social re-scalable solution. Because, anyone can participate. There are no restrictions. And inherently I think that gives it an awesome start of, it didn’t have an established history, but it can really grow rapidly to have one because anyone can participate.

Peter McCormack: And it’s interesting because everybody seems to go on a very similar journey with it. You first hear about it and you’re like, “Kind of sounds a bit weird. But, made up money. Like that’s going to be worth anything.” And then you buy a little bit and you send a bit and you’re like, “Okay, that was kind of cool.” Then you start going down the rabbit hole and start reading about it and then about politics and philosophy and you really start to see … I don’t know, you just go so far down the rabbit hole you start to realize, how big and important thing it is.

Peter McCormack: I don’t think anyone can get to that point quickly.

Dan Held: No. No, they can’t. And part of the reason why I wrote some of this, so one, planting Bitcoin was kind of the key, the inception moment and was kind of key, and then all of these other pieces were basically written to counter a lot of the fud that I’d been hearing in this space. Just because I got really annoyed after a while. At Uber and being early in crypto, I’ve experimented with a lot of this. At working at blockchain and Change Tip. I’ve tried micropayments, okay?

Dan Held: I mean, out of all the people who know what work or may not work, I’ve got a pretty good idea of like, “Hey, maybe we should go focus on this versus this and” …

Peter McCormack: My favourite question I get from people, like friends who don’t know much. They’re like, “Are you still doing that Bitcoin thing? Hasn’t it died? Hasn’t it stopped working?” People just don’t understand and you can’t even … It’s probably for you similar with no coin, as with people have no experience.

Peter McCormack: It’s a common conversation at the dinner table. People want to know about it, but you can’t explain it in one sitting. People have to … You have to go down this kind of multi month rabbit hole to fully get your head around it, and even still now, I’m two years in, Dan. I’m still learning.

Dan Held: Oh. I think everyone’s still learning, right? And what’s exciting recently is the complete deluge of content. There’s so many people writing. So many people putting together their thoughts and kind of distilling these narratives more and more simply. In fact, I’m really excited about the iteration of narratives. I’ve not talked with Nathaniel Whitmore, I’ve been on his podcast a few times.

Dan Held: And he does an expert master weaving of what narratives are and how they emerge and dissipate in this space and I think we’re going to see a moment and I’d like to kind of call this out now, we’re going to see a moment where the narrative gets really, really good. It’s sort of the moment where people wake up. It’s the moment where Andreas Antonopoulos was an amazing speaker.

Dan Held: And now we see this new wave of Nick Carters and BJs. And then we’re going to see one more wave where the narrative gets so simple that everyone gets it. And that narrative will be broadcast at just the right moment when people are starting to lose faith in their governments to where it’ll finally hit that cord.

Dan Held: It’ll finally hit that resonance frequency and I think we get there through people writing about different topics and trying to distil that narrative and make that narrative even simpler to understand. And then someone takes that and then they write and they build on the shoulders of giants and write narratives on top of that.

Dan Held: I’m calling it now. I think there’s going to be a moment where there’s some text published that will become immensely popular among the no coiners or the non Bitcoiners, non-crypto people. I don’t know when that’s going to happen, but I think there’s going to be sort of an awakening moment.

Peter McCormack: What a time to be alive.

Dan Held: Oh yeah. I’m excited for it.

Peter McCormack: But it is exciting, as well. I mean, I would be lying if I didn’t say when prices are shooting up, that’s exciting, because one of the things that Bitcoin has brought to my life is freedom, a certain amount of freedom. I used to have an office job and restricted, now I travel the world, I do interviews, it’s given me that freedom, which is unbelievable. It’s truly a gift and a blessing.

Peter McCormack: If the price goes up, it’s going to give me more freedom to travel more and continue this Bitcoin journey and to continue this. That is exciting, but it is also exciting just to see something … Like you said, like an organism, create, grow, that nobody can stop. The governments really can’t do much about. I think it’s so exciting.

Dan Held: It’s super exciting. I mean, the way that I’ve been pitching Bitcoin recently, which has actually worked quite well considering I’ve been pitching it for six years to random people, friends, families, dates. Not sure how many times that’s worked. But, you know, Bitcoin more than anything is a vote for freedom. It’s a vote for you in a world full of volatility, of politicians that you don’t like, of government policies that you find unsavoury. Bitcoin is your vote out of the system, and it’s a vote for freedom.

Dan Held: That’s what it really is, if you boil all this down to its essence, that’s what this is all about. And never before in human history have we had such an easy vote for freedom. Before a vote for freedom might have meant migrating out of your country or grabbing a gun and being a revolutionary, but now, this is a passive movement. This is an opt in, non-violent passive movement to opt out of a system and it’s incredible. I think when people wake up and they realize the opportunity in front of them, I think they’ll only realize an opportunity when the environment has shifted to where they can see it.

Dan Held: I’m super excited for that moment. I think this will be the most important invention of mankind’s history, which we can get really meta with it. I make an argument that proof of work pushes us forward to a type on energy civilization sooner due to our harnessing of disparate energy resources and fully utilizing all of the energy on the planet since proof of work is, Bitcoin’s proof of work is the buyers last resort.

Dan Held: So, I think, not only does it push us forward to a type one civilization, type one energy civilization, but a type one economic system. If Bitcoin does become that sound money, then the entire world’s economy is centred around one unital account and that’s super, super efficient.

Peter McCormack: I like your narrative. The one I always use, slightly different. Do you know John Pfeffer?

Dan Held: Yeah. Yeah.

Peter McCormack: Have you met him?

Dan Held: No, we’ve conversed on the internet.

Peter McCormack: He’s a great guy. I met with him in London last year, and he said to me, he said, “Do you think in 200 years’ time when we’re all flying around in our millennium falcons we’re going to be sending lumps of yellow metal to each other?”

Dan Held: You know, that’s a really good soft pitch you gave me there. My co-founder at Picks and Shovels Clark Moody, he’s got a PhD in aerospace engineering and he’s OGOG. He’s from 2011 in crypto. He was the first guy to visualize [Mt.Gox trading data into charts.

Dan Held: So, Clark has been around a long time. He just wrote something about Bitcoin in space, because he has a PhD in aerospace engineering, he’s calculated how sending Bitcoin transactions in space would work between planets.

Peter McCormack: Man, this is … Yeah, you’re blowing my mind here a bit now, Dan. Okay. But I’m going to get you back to the content.

Dan Held: Okay.

Peter McCormack: Because I’ve got a question for you actually.

Dan Held: Yeah.

Peter McCormack: A quite specific one, because you also talk about evolution, right? The future of Bitcoin. Some people still refer to it as an experiment. I don’t consider it an experiment anymore. I think it’s proven itself. It works. Nothing’s guaranteed forever, right? I think you said it in one of your articles. The average fiat currency has a 27 year lifespan. So, nothing’s guaranteed forever. Something better might come along. But I think it’s proved itself as a technology.

Peter McCormack: I think it’s proved itself as a form of value transfer. But, talking about the future, there are some important things to think about. Where do you stand on fungibility? Because, I noticed you wrote about that and you said, “There is no price model for tainted Bitcoin, so they are highly fungible.” And also, Tim Draper bought this whole road, Bitcoin, right?

Dan Held: Right. Yeah. I think fungibility is an argument that’s going to be coming up over the next couple of years. I think smartly, the Bitcoin community as a whole has decided not to engage in it, because I think we just survived the civil war with Bitcoin cash. I think we’re done with wars for now. So, yeah. I think fungibility is going to be an important question as the network matures.

Dan Held: A lot of people have been kind of talking about it recently though. A lot of people outside of Bitcoin have been talking about it recently, people who are more enthusiastic about other protocols. And, I kind of, and that’s where I had that realization, there is no market for other coins. If there is one, let me know, because I will buy … If they’re at a discount, I will buy a bunch. I will buy it and then bounce it off to addresses and now it’ll be … and then someone’s else.

Dan Held: The whole … Two hops is a general way that a lot of companies have been flagging tainted coins, is if it’s clean for the last two hops then it’s okay. And so, it’s pretty impossible to go and point to certain coins and say, “Those are bad coins and those are good coins.” And we haven’t seen a market bifurcate and have different pricing for those two. I don’t think it’s an issue right now.

Dan Held: I think the Bitcoin network needs to stay transparent and identifiable to get big banks on board. I think that’s a good thing. I think they’re going to want that transparent ledger and that easily trackable history or origin of these coins. I think that’s … This is what we need to do right now to get institutions in. But the protocol may be five years from now, goes dark.

Dan Held: And so …

Peter McCormack: Yeah. It’s come up on a couple of my podcasts recently. I almost want to do a specific show on it. So, I brought up with Saifedean Ammous and Caitlin Long when I was talking to them and that a private base chain, fully anonymised base chain would make fractional reserve Bitcoin a lot easier because you could not verify the wallets of the people who are operating a fractional reserve.

Peter McCormack: And it also came up in my interview with Jimmy Song, and I think more importantly with the CVE bug, which was inflation bug, right? With a fully private base chain, you might not be able to detect where the coins have been inflated and that was probably the most concerning for me. I had originally wanted a private Bitcoin, but actually, I think now I don’t. I think I am happy … I think I have a preference for it to be an open ledger. And if it can be achieved on side chains cool.

Peter McCormack: I actually like Monaro. I’m actually happy if you use Monaro, if I have a need for private transactions. But, the inflation bug coupled with a private base chain scared the crap out of me.

Dan Held: That’s a great point that I hadn’t previously considered, which is, if you’re fully private and there’s an issue with the protocol, it’s going to be really hard to verify that certain coins belong to certain individuals and that more haven’t been printed or minted. And the idea that … Well, I think there are … This is getting a bit beyond my depth of understanding in terms of encryption and protocol tech. But I think there are technologies, like Zk SNARKS, which are kind of an in between, which can validate you have something or it exists, but you don’t necessarily have to show it.

Dan Held: So, I’m not sure if there’s novel encryption techniques that enable us to have both. Because I agree with you. Anything that would threaten the security of the protocol or the trust in it, that’s paramount. I don’t know what’s going to come out. If there’s a way to walk the fine line between those two, that’d be cool. If not, I kind of agree, I would side more with you of being concerned around that being a critical flaw.

Peter McCormack: What else do you think is important for Bitcoin coming up?

Dan Held: Well, man, Bitcoin is like a cockroach that survived three nuclear bomb blasts. It’s … I’m pretty excited because, back in the day it was a much more fragile ecosystem. So I’m just excited to see how far it’s gotten to here. Man. When Mt Gox got shut down, when Silk Road got shut down, those were critical moments with Silk Road, we weren’t sure what the demand was for Bitcoin and we hypothesized that dark markets or black markets were a really big significant demand side pressure.

Dan Held: Or at least a lot of individuals would be interested in purchasing Bitcoin to then use it on there and that would buoy the price. And then when Silk Road got shut down that was 90% of trading volume. Now, these are all kind of healthy things that the market needed. And this is where I have an analogy where a lot of people look at Bitcoin as being volatile. Bitcoin has a 99.9927% uptime, which is greater than the US dollar and greater than almost any other software in the world.

Dan Held: And, Bitcoin is stable. The price of fiat to Bitcoin is the instability of the world flowing into the stability of the Bitcoin protocol in ebbs and flows.

Peter McCormack: Yeah, it’s kind of like its anti-fragility is like its immune system.

Dan Held: Yeah. Yeah, exactly. And that’s where I think people see Bitcoin Maximalists and they get … I don’t know why people get up in arms about them. A group of individuals to believe in what they want to believe in, vehemently. That’s up to them to opt in. I think that strong Bitcoin community is a bonus, not a negative. It makes it super, super resilient.

Peter McCormack: After these, kind of nuclear moments, Mt. Gox, Silk Road, potential of SegWit to works the New York agreement, China, these are all … it’s almost like these are good that it happened because it is a test on the network and it does build up its immune system.

Dan Held: The way that I like to phrase it is that Bitcoin is my stable coin. And, inherently, a stable coin must absorb volatility rather than reject it. It’s the only way for it to ultimately become one is if it becomes more anti fragile with the increasing amounts of volatility that it ingests, that it eats and absorbs.

Dan Held: Bitcoin has been through so much. I mean, you really couldn’t pick worse narratives for Bitcoin. My CPA dad thought I was getting into money laundering and drugs in 2013, because that’s all he read in the mainstream press, right? I get it.

Dan Held: And so, this Bitcoin, despite Mt. Gox, Silk Road, terrible, terrible negatives despite blockchain not Bitcoin, despite 10s of 1000s of other currencies being created, despite a civil war, despite itself, the biggest threat to itself was itself, its own community. And it survived that. So, I’m incredibly bullish. There’s a lot … There’re some big, big battles that are going to come, but I think we’ve survived so much now that a lot has been de-risked.

Peter McCormack: Yeah, it’s so super interesting looking at everything that has happened to it over time. And it’s also interesting you mention stable coins. I’m just going to talk a little bit about stable coins. I don’t want to get into detail. But, specifically related to Bitcoin.

Peter McCormack: They, I think stable coins prove that people will print money if they can in the amount that have been created now.

Dan Held: It’s irresistible.

Peter McCormack: Yeah. And, there was a time, a few months ago, I thought stable coins would be a good thing. I was thinking ICOs that were for legitimate projects, would benefit from a stable coin because a stable coin would reduce risk of price volatility when making the investment within the different periods.

Peter McCormack: You don’t want to buy something, invest 10 million and then suddenly realize you have eight million a week later or something else. But, what I’ve come to think and one of the things I’ve been theorizing over the last week is that government will probably like stable coins because stable coins are essentially an attack on Bitcoin.

Peter McCormack: Because, Bitcoin for me was like the base layer cryptocurrency and any stable coin … Like Richard Heart put out a great tweet the other day listing all the things it isn’t. I’d have to dig up, but all the things it isn’t. And the fact that also, like the USDC has a black list, this openly in FAQ on the Circle website. Like, this is everything that Bitcoin isn’t.

Peter McCormack: For me, therefore, it is an attack on Bitcoin.

Dan Held: Yeah. I’m kind of split on my opinion with stable coins. Well, with the construction of them I’m not super bullish. One, you have 100% fiat backed stable coins, which will be stable. You can’t have speculative attacks on that. But you will have those black lists because they’re going to need a tier to KYCMAL and that inherently will limit their social scalability because there will be certain types of transactions that are muted or are censored because of certain government beliefs.

Dan Held: Also, there’s an issue that there that I don’t think a lot of people talked about around malicious tainting. Since I don’t think USDC or any of these newer stable coins, 100% fiat backed stable coins, I don’t think they have a function where you have to accept a payment. I think you can send any payment to any address, which means, if I wanted to, I could go taint everyone’s wallet.

Dan Held: And then what happens then? Government doesn’t care if it limits the social skill building a protocol because you freeze 10 million accounts, they just care about freezing the accounts.

Peter McCormack: Right.

Dan Held: So, I haven’t heard anyone talk about that yet, like a purposefully … Which I think back in the days of early Bitcoin, people did that where they purposefully tainted other wallets. Like dust transactions across all these wallets and Bitcoin don’t care. So, I think … One, the fiat constructed ones limit the social scalability and then the ones that are an algorithmic central bank or ones that have, they’re backed by crypto assets, I think those are inherently flawed from a thermodynamics perspective.

Dan Held: Like I said before, they’re rejecting volatility rather than absorbing it. And, as we’ve seen with the bank of England and George Soros, let’s see what happens when someone has 10s or 100s of billions of dollars and is willing to stress test your new central bank algorithm. I think it also highlights, I live in Silicon Valley, I’m in San Francisco and I’m like, “Hey guys, there’s a lot of brilliant people out here. There’s a lot of brilliant people working on stable coins.”

Dan Held: But I think we need a good healthy perspective of the traditional financial world and incorporating that into the construction of these stable coins and I think there’s kind of been this perspective that Silicon … that all this is just code, that this isn’t about human behaviour, this isn’t about a tail risk movement. But it’s all about that. It’s all about psychology, human behaviour, tail risk movements, and so, we’ll see if those stable coins with algorithmic central banking that are crypto collateralized, if they’re capable of surviving.

Dan Held: I think they will be stable short term. Short term as in years. But I think in decades, we’ll see moments where they lose 80% of their value, which is what we’ve also seen empirically with government currencies. It’s possible to sacrifice long term stability for short term stability, but it’s also like sacrificing … If you jump off of a wall and you jump 10 feet, you’re probably not going to break anything or hurt anything.

Dan Held: It doesn’t feel good, but you did it. Instead, there’s sacrificing those 10 foot wall leaps for 100 foot wall leap and then you get crushed. So, I think that’s what we’re going to see with some of the crypto collateralized ones. There’s a lot smarter people than I am working on these, maybe they’ve figured out a way, but, I’m sceptical.

Peter McCormack: Yeah. We’ve done our hour already, man.

Dan Held: Nice. Nice. That went by fast.

Peter McCormack: It would be good to wrap up with you telling me kind of some final thought on Bitcoin, what it means to you, what do you think it means to the world, and where do you think we’re going with it?

Dan Held: Yeah, no. I had a fantastic time. Thank you for having me and I think we could probably talk for the next 10 hours if time wasn’t a constraint. You know, I think … Like I said before, I think Bitcoin inherently is about freedom. It’s about the ability to take your vote and put it somewhere else that’s outside of the current government structure of your governments or economy and I’ve never been more excited than now in terms of the amount of money that’s coming into this space, the amount of A players that are building things in this space.

Dan Held: I think that we’re building … I can see it now. I can see that we’re building the infrastructure that’s necessary for the next move up, next move up in price. And, that’s incredibly exciting for me because I’ve seen the shaky infrastructure that we had previously and it just wasn’t capable of carrying the weight of that new wave of adoption.

Dan Held: I’m super excited to see these just amazing people build awesome products and the amount of institutional pipes that have been plugged into this space to where we haven’t had a bull market in crypto with institutional money. The biggest amount of money there is out there in terms of retail versus institutional, institutional dominates. And so, we’re about to see a very, very interesting next boom bust cycle.

Dan Held: I think this is also probably maybe a note of caution, we’ve engineered viruses and that’s why Bitcoin was engineered the way it was, was to survive, to be really, really rugged. But that also means, we do have a responsibility with these other protocols, I think people should look back and think about their moral responsibility when you have a coin like Dogecoin, that is still alive and has a couple billion market cap, even though code hasn’t been released in two years.

Dan Held: They’re really, really, really hard to kill, but it’s the idea that, I think people need to really heavily consider what they’re building here.

Peter McCormack: Wow. Okay. All right man. That was pretty amazing. Can you tell me what’s coming up for you and tell people how they can stay in touch and when’s the next part of the article coming out?

Dan Held: Yeah, so, really excited that I could hop on the show today to talk about it, because you’re the first podcast I talked about planting Bitcoin on, or I think post releasing the article, the first podcast I talked about it.

Dan Held: You can find me on Twitter, which is @DanHeld. My name on Twitter is Dan Hedl but the handle is Dan Held. Held is my real last name. It’s a German name. And, I switched it around to Hedl here because I think it’s a little more appropriate. But, you can find me there or on Medium, just Dan Held. And those are probably the best two places if you want to learn more or if you want to read more about what I’ve been talking about, those are the two places to go.

Peter McCormack: Right. Well, listen, look. It’s funny sometimes doing this. Sometimes an interview doesn’t … it isn’t what you expected. But this has been utterly fascinating. I’ve really enjoyed it.

Dan Held: Me too.

Peter McCormack: I really want to do it again with you sometime. I think you’re right. We could talk for hours. I also think you would be really good on Marty Bents show. I think Marty Bent would draw out an amazing interview with you. I think he is a master interviewer and I think I would like to hear that.

Dan Held: Yeah, I definitely think we need to do another show. Maybe … There’s an infinite number of topics we could cover so, yeah, just let me know and we’ll pop on again.

Peter McCormack: Okay man, well, listen. Good luck. It was great to talk to you and hopefully we can meet in person someday and grab a beer as well.

Dan Held: You ever make it out to the states?

Peter McCormack: I come all the time, probably 10–15 times a year. There’s a chance I might even be going … Well, there was a chance I was going to be going to San Francisco this weekend, but I’m going to Vegas this weekend. I’m always in the states. I’m always in California. We’ll make it happen.

Dan Held: Cool. Yeah, if you’re ever in the states, hit me up and we’ll definitely go grab a beer.

Peter McCormack: Anyway, thanks Dan. That was amazing. I’ll catch up with you soon.

Dan Held: All right. Sounds good. See you Peter.