How to think about bitcoin’s value proposition

Kane McGukin: In this episode of Navigating the Noise, I am joined by Trey Sellers of Unchained Capital. We discuss what bitcoin teaches us about what money is, inflation and trust. Trey explains the importance of managing your own private keys with cold storage, multisig and some of the solutions that Unchained has to help individuals make self custody less complicated. If you’re looking to better understand bitcoin’s past and its future potential as an economic network, then join us and listen in.

All right, everybody excited to have with me today Trey Sellers, who is in business development with Unchained Capital in exciting new firm, new space. And Trey, why don’t you tell us a little bit about what you do and your background of how you got into bitcoin and more about yourself.

Trey Sellers: Yeah. Thanks, Kane. Excited to be here with you. So I got into bitcoin around the 2014 time frame, but I had first heard about it in 2011, and, you know, it took a few years to move from that. Hearing about it, figuring out that this is something I should allocate some capital to. And then beyond 2014 when it became easy to actually acquire some, actually going down that rabbit hole and figuring out why it’s actually important, why should you be more committed? Why that conviction level demands more capital allocation from that personal portfolio. And so there’s a journey there. But I came from the traditional finance world, with a broad experience in consulting, finance, technology, banking. I came to Unchained Capital from SunTrust, which became Truist after a merger with BB&T, and have some pretty deep experience in capital markets, sitting on the trading floor, working with traders, understanding trade flows and positions and risk management and that kind of thing. And so between that and a bit of a libertarian background, I was very well primed to see bitcoin for what it is, see how important it actually will be in the world. And we can dig into exactly the way that I view that if you’d like. But that’s the general overview from my background.

Kane: Cool. And I think one of the most interesting things with your background, there early, obviously you mentioned libertarian views, which helps a lot from the bitcoin perspective. But most important or most interesting is coming through SunTrust, now Truist , and kind of very, very traditional regional banking. What was it like inside that organization before you made the switch over to Unchained? And then what made you ultimately say, okay, this is the path, I’m going to switch gears to this new system and make that jump?

Trey: Yeah, traditional finance is exactly what it sounds, right? It’s traditional. There’s a slow way of going about things. It’s very conservative. And while within the organizations there are certain people who have a proclivity for being interested in something like bitcoin, actually getting an organization to pay attention to something like that takes a little bit more work, takes a little more time, and there’s a timing aspect to it as well. Right? I was at SunTrust and then Truist for close to six years coming on the 2019 time frame. I was deep down the bitcoin rabbit hole, as I said. I started to really understand why this thing was important and where we were going and started to get an inkling for what was going to happen in 2020 and 2021, what we’ve seen in terms of the bitcoin price, market adoption, and larger players coming into the space. And so in anticipation of that, I started thinking, well, people are going to have questions about bitcoin, people are going to have questions about this whole space, and who better than me to be the person that is that subject matter expert that people can come to with those questions? Why shouldn’t I be the guy to answer those? And so I started developing a presentation that I called Bitcoin for Bankers, and it’s geared toward exactly that, explaining bitcoin in a way that comes at it from the angle of what a banking institution would care about. Explaining what bitcoin is, why it’s important and why, most importantly, a company like Truist or any other large institutional finance organization should care about it, which is that their clients are going to care about it. And we’ve started to see that. You see headlines all the time about Goldman Sachs and JP Morgan, and their clients are asking private wealth people about how they can get exposure to bitcoin. And rightly so. Right. They know that they need to get some allocation there. The proper allocation to bitcoin is definitely not zero – different for everybody, of course. And as people start to realize that, they want to go to the people that they already have relationships with, that they already trust and get some advice there. Right. And so my thinking was, we can be in a position to guide people who have those questions. And in order to do that, we have to educate ourselves. Me being in a position where I already understand this allows me to make the case there. And so one thing led to another, started presenting to different groups around the bank, and eventually worked into a position of talking to some pretty senior people who were asking all those same questions. Right. And it becomes pretty clear that there’s an understanding that this thing is not going away, that it’s important, and people need to be paying attention to it. But the question is, how should they engage? What is the strategy for which a large financial institution should actually be looking at being involved? To what extent and where do they focus their efforts first and where do they focus their capital first? And so from there, you can imagine how those conversations start to develop.

Kane: And I think that for you and I, the way we met through a mutual connection, somebody I’ve known in the past, somebody you worked with in the past and kind of hooked us up. And we had a couple of meetings, a couple of conversations, and we share that same view, that process. Just listening to you walk through that is very much how I came to bitcoin, how I came to the crypto ecosystem. And what I decided kind of in that same window of you sort of decided in 2018, you get greater confidence in 2019 and then by 2020, your, like, if this isn’t done within the traditional space on my side, the wealth management space, you will at some point be last to the party, and you don’t really want to be that for your clients, for your business model, and just for the future of wherever this thing goes. I can definitely relate on a lot of levels of what you just said.

Trey: Yeah. And that’s the way that those conversations started to develop as well. Right. Like, I was putting together an email list internally. People were coming to me and asking to be updated on what was going on. And as we saw the huge growth in early 2021 of bitcoin in the market, and we’re making new all time highs, and Tesla is buying it, and MicroStrategy is doing its thing, and Square is buying it, and there’s just headline after headline, the market is really heating up. Obviously, that drives more interest. Right? And so the question is, how can you parlay that into a more deeper understanding of what bitcoin is and why it’s valuable and why people should care as opposed to the surface level. Hey, this thing’s going up in value, maybe I should be paying attention.

Kane: Yeah. And I think what we’re seeing now, and it’s sort of the driver behind this podcast, the intention of this podcast is exactly kind of what you faced at SunTrust and Truist was the initial driver and then the secondary driver for these types of conversations. And what I hope to provide value for listeners is, it seems just the masses are coming to that same realization because of all that transpired in 2019, 2020 and 2021 so far. And what is the general thought of what’s likely to continue with inflation and all these other supply chain issues and all these issues around the monetary system? I don’t really want to go down that rabbit hole because it can get negative. But I think the big thing is the average person is doing what most bitcoiners did in 2013, ’14, ’15 or before, but definitely by ’17, ’18, ’19, where they connected the dots and they’re like, what is money? And people are starting to philosophically ask that question that we’ve ignored for 50 years, because to most people, money was the ability to just swipe at a store and go. And so maybe you can help relay or relate to that experience, and then what you guys do at Unchained and kind of the way you think about that question and the importance of just understanding that money is more than the ability to buy or sell something.

Trey: Yeah, and people talk about that medium of exchange functionality versus a store of value and all that. Really, money is a communication protocol, right? It’s a way that we communicate value to one another and a way that we can do that when we don’t trust each other as well. The market provides signals constantly, billions and billions of signals every single day to tell people where there’s scarcity, where there’s abundance. And you make those decisions on a daily basis as to how you are going to allocate the scarce time that you have and the scarce capital that you’ve been able to accumulate such that you’re going to be better off tomorrow, the next week, the next month, the next year. One of the key themes in the Bitcoin Standard from Saifedean Ammous is this concept of the tradeoff with your future self and lowering of time preference. And bitcoin, really, it hits you over the head with that because there’s such an opportunity cost for making the wrong decisions with your capital that could have gone toward acquiring this asset that is designed to pump forever, right? It’s designed to go up in value every year, every five years, every ten years. And that’s what we’ve seen. And the more people start to realize that there’s an opportunity cost that they could build a strong foundation for their financial future, the more they start to realize they need some exposure here, right? And as that understanding happens, there’s a natural proclivity to change your habits, to support that savings mentality. When you’re dealing with fiat, it’s the exact opposite. Right? The natural proclivity is I know this thing is going to lose value if I sit on it. So I need to search for something that I want to buy or some investment that’s going to be able to keep up with the rate of this inflation in the traditional sense of the word, meaning the rate of growth of the money supply that is really just eating away at your capital allocation if you don’t do something about it.

Kane: Yeah, a couple of things. Just because I wondered that you made a couple of critical points. Just want to hop in there that money is a communication tool. It is not a thing, it has no value. It changes numerous times throughout history. I believe. You believe we’re at one of those inflection point where what is money changes. But the understanding that to me, money is a belief system. And when most people believe that something is money, it becomes a communication tool no different than what the Internet has allowed. The structure of bitcoin looks just like the Internet, acts just like the Internet. And we will see on this new network these different communication tools, like social media, like peer to peer networking, like e-commerce, that allow us to better communicate value across the Internet. And you mentioned the Bitcoin Standard. I think a lot of people maybe overlook that book because they see bitcoin, and “I just don’t want to get into that tribal mentality”. But the fact is, you touched on it. It’s more about what you do with your time and having a low time preference versus a short time preference, which we all have in today’s world and driven by social media. And really, the book is not about bitcoin at all. I think it’s not until the end that even starts to mention bitcoin. It’s more about Austrian economics, more about economics that align with biblical perspectives of do good, be good, work, be productive, multiply. And then Andreas Antonopoulos, he was the original, or one of the original, bitcoin evangelists, who really does a phenomenal job of connecting money as a communication tool. And it was one of the first places I heard it. And maybe you have a different story on that, but maybe you could dive a little bit deeper on what that means to you. I think that’s a big point that today, as we sit in 2021, in the past five decades, as the US dollar has been the reserve currency of the world, it seems the average person views money as this thing that’s going to get them something. And we’ve seen that exponential loss of value. And so now people, we live in this world where it’s cash or not, cash. And so we got to have that cash that we do things with daily. But our non-cash needs to be invested in ways that allow us to communicate value into the future. 

Trey: As I was saying, people just know that if they hold on to their cash, it’s going to lose value. They may not understand why that is the case. But when we have events like we had in March 2020 and through the next few months, where central bankers are on TV every single day talking about the next stimulus program, the next money printing episode, it starts to become very apparent that not only can you take kind of a passive approach to, “Yes, I know. Cash is trash and I need to be invested.” But you need to be very much thinking about the opportunity cost and whether or not the inflation rate that you have for yourself actually aligns to what you’re being told in financial media and from the government and that kind of thing. Right. Michael Saylor has made this point beautifully, which is that inflation is a vector. Everybody has a different cost of living and different aspirations for what they want to do with their lives. And when you are able to plan for that because you have a strong foundation in terms of a solid, sound money principle underlying the economy, it becomes so much easier to make those decisions as to, how can I get this life that I want to get in the future? When the purchasing power that you’ve already earned continually is eroded by somebody else. And it’s not you, right? Somebody else controls that printer, and it’s definitely not you. You’re constantly fighting that battle back to even, back to break even, before you can even think about building that capital stock for yourself, for your family, for those future generations, for the lifestyle that you want to live, you’ve got to just get back to even. And that hurdle rate becomes greater and greater the more interventions that are coming. Right? And so I bring this back around a little bit to Unchained and some of the work that Parker Lewis has done. Parker is Head of Business Development there. He’s well known for his Gradually Then Suddenly series. But recently he’s been talking about bitcoin in one lesson, right? And that one lesson is that bitcoin and the success of the network and of this new money, it hinges on this scarcity function and the fact that there’s only 21 million, right? And if the bitcoin network can credibly enforce that fixed supply of 21 million, it will become a global reserve asset, a global reserve currency. And if it cannot credibly enforce that, then it won’t. Right? It’s this binary decision tree and the journey for understanding why it’s able to credibly enforce that 21 million, that takes time. 

Kane: And I’d like to say a lot of time, and I think that’s in my personal opinion, how bitcoin has stood in plain sight for the better part of a decade without anyone noticing. Because most people today, if we’re honest, aren’t as willing to put in a lot of time if they can’t see very near-term results.

Trey: That’s right. And it’s time, it’s effort, it’s work. It’s intellectual labor to really understand what’s going on under the hood of how bitcoin works. And most people are not going to dig into that work unless they understand why they should care. Right. And for a long time, while the dollar’s purchasing power is more slowly eroding, and we’ve got these crises that come up, you know, every seven to ten years or so. Yeah, people kind of know that there’s an issue out there, but it’s not like slapping them right in the face. But as these interventions start to accelerate, as they grow exponentially, it becomes more and more clear that there is a problem. And I know we don’t want to go down this rabbit hole, but once you recognize that there’s a problem, then it becomes more apparent why you should be spending some time and effort and work to really understand what bitcoin is and why it provides that alternative.

Kane: I totally agree, and we’ve talked about it a number of times, as we can easily get stuck in that dollar is bad, bitcoin is going to take over. And who knows, maybe that happens. But I do think there’s a lot of positive things in this transition. Whether that happens or not, the positive is that people are understanding. And the digital tools that are starting to be used around money and these API-like connections and integrations will, in my opinion, allow something brighter on the other side. It’s just getting from A to B, just like in 2007 and eight, the larger problem that wasn’t economic was you had two large generations jockeying for position, higher level positions inside corporate organizations. And so you had 50-60 year olds with all the experience that didn’t do the things the same way that the 35 and under crowd did it. And they both wanted the same role and to be able to call the shots. And ten years later, or five years later, once the crowds kind of moved and progressed on an age, you saw that leap. So from 2012 to 2020, we actually had a lot of good things happen, even though economically, stuff was still kind of bad. So Ross Stevens, president of NYDIG and Stone Ridge, he had a great quote this past year in a video he did, podcasts he did, and he talked about. One thing that struck me, and I agree with it, but I just like to share, is that people don’t want dollars. They don’t want bitcoin. They don’t want this monetary unit. What they want is, as you alluded to their work, their sweat, and their equity that they put in today that got value to maintain its value and increase in value over time. What they want is something out in the future when they’re ready to spend whatever that money unit is, to have more value then than it does today when they did the hard work.

Trey: That’s right. Fiat money doesn’t respect you and it doesn’t respect your time. Right? It is constantly there, eroding the work that you’ve already put in. Bitcoin respects your time. You cannot be debased when you’re holding bitcoin. Nobody can come in and say, “Look, I’m going to create a whole bunch of new bitcoin and give it to my friends.” That can’t happen, right? You know, when you hold one bitcoin, that you hold one 21 millionth of the total supply, and that will never change. It will never change. And in so doing, as the economy continues to grow apace over the years, globally, we have new technology, we become more productive. We expect that our purchasing power in terms of the money that we hold, becomes more valuable and allows us to truly save for that future scenario where we want to be able to take care of our family and provide, you know, capital stock available for future generations. And all of the work that you do throughout your career should be able to add up to something without you having to earn it a second time, right? You shouldn’t have to work for years and years and then also do this second order work to build upon that wealth that you’ve taken in in order to keep up with a constant debasement, right? You shouldn’t have to earn your money twice.

Kane: You shouldn’t have to work to worry. In this system, we spend this like, I’m going to work for 35 years and then worry if what I was able to put back is going to make it the next 40 years. To come back to something you said a minute ago about inflation. I wrote a few months ago an article on that Archetype Wealth Partners blog about inflation, and I made that exact point. Inflation is not what the central bank tells us it is. My inflation is not your inflation is not my clients’ inflation, it’s not my peers’ inflation. Our inflation probably looks like our closest six friends because we’re going to do the same things, we’re going to be interested in the same things in those groups that we hang out with. But by and large, your inflation is whatever your monthly bills are, whatever the things you like to do on a monthly annual basis are. And if those prices go up, that’s inflation. Even if CPI goes down. If those prices go down and CPI goes up, it’s deflation, which is actually good because your life got cheaper even though the things that you do stay the same. Or maybe you can do more of the things you like to do because those costs went down. And that’s one of the principles about the math behind bitcoin, allows that deflationary aspect to take hold, whereas the math behind fiat reserve currencies, or fiat global currencies around the world because the supply is inflated, that math works against you. For me, it was living in this traditional financial system, trading markets inside of 2007, eight, nine through twelve, I started to realize that there was a problem, but too young to really like, understand what it was. And then kind of ’14, ’15, ’16, developed some personal thesis and started to really recognize the goods that I most commonly purchase, McDonald’s hamburgers, major league fitted hats, and I use those examples because they’re very common goods. There are things that a lot of people…those prices were doubling and almost tripling over the period of time that I commonly was purchasing. And so I’m sitting here looking around thinking, “We’ve got a problem.” Regardless of who’s going to step up to the mic and say there is or isn’t inflation, like, my budget tells me there is.

Trey: Yeah. And that’s certainly one aspect of it, right? But you can’t retire on a stockpile of hats. Right? What most people are looking for, and the inflation index and the key inputs into that for that particular person, are how expensive is it for me to send my kid to college? Right? How expensive is it for me to potentially buy a vacation home somewhere or to upgrade my home in a way that provides my kids with a backyard and a place to play and friends that have similar interests to me, and I want to live in a certain place in the country or a different country or whatever. These consumer goods, and Netflix subscriptions is always something people talk about…Yeah, that’s not really going up that much in price. But again, bitcoin forces you to think about the long term. Those are the big expenses that you need to be thinking of. Those are the hurdle rate that you need to be using to justify where you allocate your capital in terms of investments. And if education, higher education, is going up by 20% per year, on average, over a 15 year period, when your kids are five and six years old, that’s very significant in terms of what opportunities are available to them and how hard you have to work and how much you have to earn, be it by working and earning a buck or investing that money and generating some yield on that capital that you’ve already worked for in order to stay ahead of the curve to send your kid to college, right? And who knows what college will look like in 20 years? I personally think, you know, there’s not as much value there as what people have put onto it in the past. I’m certainly hoping that trend turns out to be true, but that’s not the point, right? The point is that there’s a long term view of your life, and you want to be able to know and plan for and have it be attainable. That if you work hard, you put in the work, you put in your time, you make good decisions, you take responsibility for that, that you’re not going to have your wealth pulled from underneath you by forces that are completely beyond your control.

Kane: And that’s a really good summary of kind of some of the things we mentioned but didn’t dive into, the “What is money?” question. It’s not just swipe and go, swipe and go, swipe and go. It’s, what do I want my life to look like in ten years? Do I want ten houses on the beach and multiple cars? Do I want no houses and one car, or do I want to it forces you to rethink about money because, like I said, it’s not that thing that you just swipe and go. It’s what are all the parts of my life now, intermediate term and long term, that I need? And Americans, by and large, haven’t done, on a mass level, done a phenomenal job of thinking about how do I want my life to look like in ten years, 20 or 30 years. And that’s a lot of what we help at my firm, we help people map that out. And then you say, okay, I have this capital. And the importance is and what bitcoin teaches you is how to allocate that capital. Not just a one thing or two things, but maybe five or six things. Because if you go all in on one or two things, probabilities tell you you’re either going to get lucky and it hits, or you’re going to get unlucky and it doesn’t, or somewhere in between. So having it a little bit spread out, but in a way that matches the things that you’ve decided you want your life to look like how you want it to go. So one of the big challenges that you’ve come across, I’ve come across personally, you probably came across personally…Everybody that enters the space is once you get past what is money, what is bitcoin? And you’re like, okay, cool, I get it. But these private keys, I’m just scared because right now I can go to my bank and if something happens, they’re going to give me my money back.

Trey: You hope so!

Kane: Contractually they don’t have to because it’s written that way. But historically they have. But you guys help individuals with multisig wallets and handling of those keys so that if they’re lost, maybe just talk a little bit about that.

Trey: Yeah, you say historically they have, and that’s true to some extent, but historically there have been a lot of issues as well. Bitcoin is global and there are global considerations around who’s impacted by what banks going under and bail ins like we saw in Cyprus back in the day and that kind of thing.

Kane: We saw them here.

Trey: Yeah, exactly right. Bitcoin provides an opportunity for you to truly own your wealth. You can truly own it in a way that does not depend on anybody else. You do not have to rely on a bank to hold your money. You do not have to rely on a bank to allow you to spend those funds in the manner that you see fit. You have complete control over your bitcoin if you choose to use the features that are available to it. Right? And one of the things that we do at Unchained Capital is to make it easy for people to take advantage of that, eliminate any single points of failure when it comes to actually securing bitcoin private keys and then help just educate people on what this stuff is. So you alluded to, yes, it’s a little bit daunting and a little bit difficult for people to start to wrap their heads around how bitcoin works, how you actually control the asset and what the pitfalls are there of potentially losing that private key and therefore completely losing access to your bitcoin. So let’s dive in a little bit, right? A few fundamentals: bitcoin is always associated with an address. And that address you can validate for yourself if you’re running a bitcoin node or look at somebody else’s node to see the balance of bitcoin that is there and is associated with it. And that address and that bitcoin always has associated with it a private key. That private key controls the bitcoin. It allows you to spend it. And really what we’re talking about is just information. It’s in reality just a big number, like a huge number. Very difficult for people to work with traditionally, but software helps with doing that. But the key point is that if somebody gets a hold of the private keys to your bitcoin, they can spend it. Right? And so there’s a different mental model that you have to start working with in order to protect this secret information that is the key to your wealth.

Kane: One thing there, in my presentations that I use with clients, prospects and just people that talk, is that sounds scary. Oh, my gosh, this key, if I lose it, I lose all my wealth. Well, what happens if you give someone a key to your house? What happens in the 1760s if you gave somebody a key to the lockbox that’s held at the bank, that the bank robber is always robbed? Banking will not go away. The way that banking has happened has changed thousands of years, and we’re in one of those times where we are seeing change and new financial rails which are running off bitcoin and other crypto networks, and it’s another form of a key. So maybe to suppress a little bit of those fears with banking, until somebody figures out a way to do it without a key, there’s always been a key, and I kind of expect that there probably always will be some sort of key. But the medium of that key and with which it’s held is what changes to fit how we live.

Trey: Maybe a point of distinction here is that for bitcoin, the key is the asset in a very real sense. Bitcoin is a digital bearer instrument. It’s akin to holding a gold bar in your hand, akin to holding a bag of cash on your person. And the key difference there, though, is that it’s scalable. If you want to hold a billion dollars in gold, you need armored guards and 24 hours security and six foot thick walls.

Kane: That’s before we even get to how it gets to the wall.

Trey: Exactly. Right. And how do you know that the gold that you are receiving is real gold? And that’s a very expensive to assay and all of that, right? And so the marginal cost of holding bitcoin in $100 increments versus a billion dollar increments is negligible, if any at all. Right? And so it’s this scalable way of using a money and storing value for the long term and then being able to send it across the world instantaneously. Try that with gold, right? And so all of these properties are great, but you don’t get the advantage of them if you are not holding your own keys. Before we go to how to mitigate that, let me scare people a little bit more, which is that, as we mentioned, bitcoin is always associated with an address, that bitcoin always has a private key. And he who controls that private key controls the bitcoin. What that means is that if you have bought bitcoin on an exchange, like a Coinbase, you do not have bitcoin, you don’t own it. You have an IOU to that bitcoin. And you’ve got to hope that Coinbase or whoever it is, is going to allow you to access your money when you want to access it. And there are a lot of reasons why they may not be able to honor that or might not want to, right? As the value of bitcoin continues to increase, goes up 10x, 20x, 30x, it’s designed to pump forever, it’s going to continue to increase. And that makes it that much more valuable for these platforms to keep the assets with them, right? They don’t want to see them leave and they can put up limits to what you can withdraw and what you can do with your money. And they might not have a choice either, right? As bitcoin continues to grow in adoption, it becomes more valuable, more people plug into the network, which makes it even more valuable. But there’s a world where the government comes in and says, “Hey, bitcoin is way too big, way too valuable, and so many people are plugged into it. We believe it is a systemic risk to the financial infrastructure in the US or in the world, and therefore we need to take a heavier hand in terms of regulating it. We’re not going to allow people to withdraw their bitcoin, to take advantage of all of those key aspects of what makes it valuable in the first place.” And if you’re in that scenario, it’s too late, right? You need to take custody of that bitcoin before we get to that scenario.

Kane: And the beauty there is that can be good or bad, but it’s a choice. It’s a choice the individual makes. That’s the one thing I think that is different, that is a good thing about bitcoin, is the current financial system, there is no choice. There was not any choice until you got Venmo and you got Square and you got Cash App and you got all these other apps because they took dollars out of those institutions. Now, they’re very similar, but they gave you the freedom to choose who and when and where and how you sent money. Bitcoin does that to somebody on additional level because you own the key, so you control the money. And that’s, I think, the hardest part for the traditional clientele of wealth management, of banking, because most people like the ability to say, “You hold it. If something goes wrong, I’m going to point the finger at you.” But I think from a societal level, we’ve kind of reached peak, “I’m going to sue somebody if a decision I made goes wrong.” And bitcoin is that pendulum swinging back. Like, look, to be successful in life, you have to take risks and you can’t always just point the finger at somebody else’s fault because of a decision you made. And so bitcoin is giving that population that want to truly own it the right to take control of that. And with that right does come the responsibility. If you mess it up, if you lose your keys, if whatever happens with those keys, you lose your funds. Now, for some people, that’s just too scary, and they would rather take the risk of being in a sort of centralized institution. And I don’t know the right answer to that because there are 7 billion people, which means there’s hypothetically 7 billion different choices. To each zone in that regard. But the beauty of it is there’s now more optionality from a “banking perspective” than in decades prior.

Trey: Yeah, that’s right. And again, to get some of the current value out of owning bitcoin, you need to hold your own keys. But let’s not forget, as the network grows and there are more applications that are built and connected to it, there are a larger user base, more adoption, there’s going to be a huge amount of innovation that is taking place over the next few years, over the next ten years, that will only be accessible to people who do control their own keys. And to not have the ability to take advantage of what that could do for your life? I don’t want to speculate on what that might look like. But the fact that it is this bearer instrument and the fact that you can control it opens up the possibility for a lot of new and exciting things. And if you are totally reliant on a third party there, you may not be able to experience that. You may not be able to add value to your life in that way as it’s going.

Kane: And on that point, that’s to relate it to things we know, that’s exactly what the internet…it gave us the information to do as we choose. And it was a fairly open architecture that allowed innovators to come in and build things to give us other choices.

Trey: Yeah, that’s exactly right. In order to take advantage of that, we need to be using bitcoin the way it was designed. Right. It’s not designed to rely on other people. It’s designed specifically so that you don’t have to rely on other people. You can verify everything yourself. You can know for sure that nobody else can stop you from making a transaction and that your money is not being debased. Bitcoin is money that cannot be manipulated. What does that mean? It means the supply cannot be manipulated, the issuance schedule cannot be manipulated, the transactions cannot be stopped from happening, and past transactions cannot be changed. And being able to take on that type of empowerment does come with some responsibility. But the good news is that it’s not so scary and not so difficult as it sounds, so we can talk a little bit more about that and how Unchained helps people to do that. It’s not as difficult as it sounds. There’s definitely a learning curve involved and a different way of thinking about it, but that’s exactly what we help people to do.

Kane: One point on that: my kids, your kids, their kids, private keys, wallet, addresses and all those things aren’t going to be as scary because they’re going to have grown up with it. Just like half my life was no Internet, the other half was the evolution of internet. So I’m, like, on the fence of if this is hard along the way or not. My parents and their parents were like, oh, my gosh, sending an email is so hard. So we have to keep in mind with that fear of, what are these keys? What if I lose them? Generations that grow up with this. It’ll just be like social media to an 18 year old today.

Trey: That’s right. And the user experience today is way better than it was four or five years ago.

Kane: Three years ago. 

Trey: Two years ago. I mean, it’s it’s incredible the amount of progress we’ve made there. I can only imagine how much easier and better it’s going to get over the next ten years. And to your point about your kids, my kids have a lightning wallet that I help manage for them. And we talk about sats and bitcoin and all this stuff, and when they come across some pocket change that they found in the in the couch, they ask me, “Hey, Daddy, can I trade this in for some sats?” And the answer is always, “Yes, you should always be buying more bitcoin.”

Kane: So I’ve taught mine to believe that if they do their homework, their bitcoin goes up.

Trey: Exactly right. And over the long term, that’s definitely true. The way I like to think about it and the way I kind of communicate it is like, look, your financial score in life in the future is how many stats do you control? Right? How much Bitcoin do you actually have? So I’m speaking a little bit in jest. We’re in this transition period where it’s not overly easy yet to be able to use bitcoin, and there’s so much stuff that’s still being built. But the flip side of that is the asymmetry that’s built into the fact that we are that early. Right? Yeah. By the time that Google was ubiquitous, the opportunity was largely gone, in terms of an investment thesis and that kind of thing. And so when you’re thinking about allocating capital, there’s certainly going to be volatility, there’s certainly going to be learning and growing pains as part of that. But the fact that we are so early and we’re looking at less than 1% of the world actually adopting bitcoin and having any meaningful exposure to it just highlights what that opportunity looks like in the future.

Kane: And in my 15 years of being in financial services, wealth management…one point I’d like to make on something that you just astutely said about it being easy…anything related to finances and money that was easy more often than not led to credit card debt or financial ruin. Winning the lottery for the winner was easy. They just pick some numbers, they scratch a ticket. But most lottery winners go into debt. Athletes, historically…it’s hard work to be an athlete, but they get paid large sums of money to play a game. I’m jealous of them, but many of them historically have had financial issues because the money “came easy” for something they love to do, and they just spent. So in a lot of cases you see an inheritance get blown because that money just shows up and you didn’t have to do that work, and so back again, that’s the one thing that bitcoin and this crypto ecosystem has taught us, that easy is not always good when it comes to money.

Trey: Yeah, that’s exactly right. It goes back to that time preference, it goes back to that personal responsibility. And bitcoin brings responsibility and thoughtfulness and planning back to the world. You have to plan and you have to be thoughtful about your capital. You can’t be willy nilly with it anymore because the opportunity cost is just too strong. Because bitcoin is designed to pump forever, and it’s been going up at 100 plus percent per year over the last ten to twelve years…that trajectory does not seem to be slowing down. And in fact, there’s a good case to be made that it’s going to increase as that adoption curve begins to steepen, as more and more people realize that they should be storing their wealth, their life force, their financial life force, in something that cannot be eroded, cannot be taken away from them, and that they can fully control. Right? It’s about taking full control over your life and being able to think about what you want your life to develop into and then having the tools that can allow for that without having to always try to fight back to get to zero.

Kane: And I think that’s important. Those points are very important in these times where we’re seeing a lot of people that just want their freedoms. They want to be able to make choices. They don’t want to be able to be told what to do. And in a positive light, even though it’s challenging, kind of getting through these years of uncertainty as the system changes, on a go forward when your money is easily connected to other things and you have the responsibilities and understand the responsibilities in place to make good decisions, to plan, it just makes it that much easier to do and go and be the things you really want to be to me. But it starts with that philosophical journey of understanding, that core “What is money? What does that mean for me? What does my capital need to do for me, my family, my future generations that follow?”

Trey: That’s absolutely correct. So I was going to bring it back a little bit more toward that bitcoin and the practical application of using bitcoin and being able to take advantage of what makes it valuable, which is the ability to hold it, the ability to control it. The way that most people have done this for any large sums of money, if they’re not willing to rely on a third party, is by using a device called a hardware wallet, which is really great at generating those private keys, securing them on the device. In order to hack this thing, you have to have physical access to it. It’s extremely difficult to do even with the appropriate equipment and it’s stored in cold storage, which is completely offline. Right? And that’s great. And that’s a much better security posture than is the reliance on a third party and having that counterparty risk. But again, now you’ve taken full, complete responsibility for that bitcoin wealth. And if somebody gets a hold of that private key, either from accessing the device or more reasonably, accessing the backup to it, which is just twelve words written down in a specific order in clear text if somebody gets a hold of that and they know what it is, and they know what to do with it, they can spend your bitcoin. Right? And so the key question is how do we address these trade offs when we’ve decided we know we need to allocate the bitcoin and we’re trying to figure out how to hold it ourselves so that we can take full advantage of it versus counterparty risk. And then this single point of failure that is associated with the way that most people hold bitcoin. And that is exactly where Unchained Capital shines and excels, is providing what we call “collaborative custody”, which uses some functionality that’s built into bitcoin called multi-signature. It’s native to the protocol. It’s not anything that we’ve developed. We’re just leveraging this functionality to provide a platform that’s really easy for people to use to secure their bitcoin in the best possible way and in a way that’s extremely resilient, not only to you making a mistake, but also to some external attacker coming to your house, putting a gun to your head and saying, give me all of your bitcoin. We help you get that scenario set up where that’s not…not that it’s not possible…It’s just extremely expensive and extremely risky for somebody to actually do that. So we’re eliminating this single point of failure while also providing the ability for you to operate independently from any other third party counterparty.

Kane: And it’s kind of in between the do it yourself single wallet and put it on a Coinbase, Gemini, Kraken, something like that, where it’s honestly, it’s a centralized single point of failure for that institution.

Trey: Exactly right, yeah. In that scenario, you’ve got three different single points of failure and three different counterparty risk scenarios there that you have to think about. When we think about bitcoin as well, something we didn’t mention before is that when you’re holding cash, when you’re holding gold, when you’re holding bitcoin, there is no counterparty risk. When I go think back to my banking days, one of the key risks on that capital markets trading floor, and the way that we think about servicing clients there and sourcing liquidity is that counterparty risk question. And there’s huge amounts of capital and processes and procedures and monitoring and risk assessment that goes into making sure that we have a handle on what that counterparty risk is, how to quantify it and all that, as opposed to holding bitcoin on your own keys, which has no counterparty risk. Now, you do have the responsibility for taking care of that. And again, that’s where this collaborative custody model that we employ Unchained via our platform is really, really nice. You can have a setup where you don’t have that counterparty risk, where you’ve got full, unadulterated, permissionless access to your bitcoin the way that Satoshi intended it, but you don’t have a single point of failure and you don’t have to do it yourself. Unchained can be a part of that collaborative custody setup such that if anything happens to the private keys that you are controlling, we can step in and help you to recover your bitcoin in almost every single scenario that you can think of to move it out of that compromised situation and into an uncompromised new vault. We call our collaborative custody product a “vault”, just to give that connotation of exactly what it is, the most secure, most resilient way that you can hold bitcoin while still retaining full, complete control of it.

Kane: Right. No, and that’s awesome. So that kind of, I think, running on an hour. Most people kind of 40 minutes or so love to check out after that if they’re really into it. So why don’t we just use that as an opportunity to wrap up? And maybe you can tell the audience where they can find you, where they can find out more about Unchained Capital and anything important in your mind, that whether it’s people you think they should follow or books they should read or just materials, maybe you can give us some insight there.

Trey: Yeah, well, I’ll start with Unchained, unchained.com. We’ve got that great domain name. Feel free to go check out the website, check out the products services that we’re offering. And there’s a button right on that website where you can schedule a consultation. You’ll be in touch with myself or somebody who’s in my group to help walk you through what that process looks like. What does the platform look like? Help you understand some of the other financial services that we offer, which is really above and beyond that core custody product that we have there around bitcoin-backed loans and being able to buy bitcoin in larger amounts and have it settled directly into that vault that you’ve got created. We have bitcoin IRAs as well. And so we’re really building this private bank that’s bitcoin native. As bitcoin becomes globally adopted, it doesn’t obviate the need for people to have access to certain financial services. And so we are well positioned to be that one stop shop for people who understand the importance of self custody first and foremost, and then want to have access to some of those financial services. I’m on Twitter at @ts_hodl. You can find me on LinkedIn, Trey Sellers. And then in terms of resources, I would say go check out on our website, go to the blog and read the Gradually Then Suddenly series by Parker Lewis. Go to our YouTube channel and check out Bitcoin In One Lesson, which we mentioned before. You’re going to get a really great primer there in terms of how to think about bitcoin in terms of its value proposition, why it can’t be copied, why there’s no other real competitor to it as a money, and why it’s going to be the next global reserve asset. So we’ll leave it there.

Kane: Yeah, no, awesome. Thanks for joining today, Trey, and look forward to catching up with you in the future.

Trey: Sounds good. Thanks, Kane. I appreciate it.