Crypto Valley Association and Сointelegraph — Bitcoin halving conversations & party | «Half is More»

First, I'd like to give the chance to Jerome to say a few words. Jerome is the executive director of the Crypto Valley Association. To you, Jerome.

Super.

Thank you, Emily. Thank you for this intro. Thank you for everybody joining today attending the third online event of the Crypto Valley conference. We called it the Crypto Valley Virtual Series. So Today, more than 500 people registered from 50 different countries. And yeah, I just want to explain you a little story behind this event. So five months ago, together with Emily and Emily, we had this idea of organizing a bitcoin, I think eventually. So we wanted to do it in a bar, we wanted to do it in Geneva, we wanted to have it live. But that was before. That was before the COVID of course. So one month ago we decided to do it, but to switch to an online event. And that's what we did. Maybe you see it now. Some people told me that we were not a bit too slow. Okay. So we decided to do this event online, but we really wanted to keep it as a celebration. Celebration of bitcoin, Celebration of our main cryptocurrency. Celebration of the Crypto Valley association member. So that's why after this event, as Emily said, our members and all the registered participants are welcome to join us. An online party at 9pm Swiss time. So you should have all received by email the access and the different zoom rooms. So if we, if you do not have received it, we will share and in the chat letter. So first of all, thank you to our speakers. Amazing lineup tonight gathered by Amy Lawrence. Amy, she's our new board member who's been very actively involved in this event organization and tonight she will be the moderator of the final side chat. Also, thank you to our presenting partner, Signum Bank. Thank you for supporting our association. Thank you to our media partner, cointelegraph. And by the way, hi to all the viewers who are now following this event from the Cointelegraph YouTube channel. And yes, thank you of course, to all the CVA team involved. Again, more than 10 people, 10 volunteers helped to make it happen today. So thank you very much for that. So just a few words about Crypto Valley for all the people who don't know us already. So we are an independent nonprofit association based in Switzerland. Our mission is to build the world's leading ecosystem for blockchain and cryptographic technology and businesses. So we gather around 600 members, including more than 150 corporate members like Signum or Ledger tonight. So we started three years ago from Zug in Switzerland. We now have local chapters covering Old Switzerland and are now expanding our ecosystem worldwide. We have already more than 30% of our members outside of Switzerland and I'm sure that after this event we have more. So why joining us? First of all, the benefits to join us is to be actively involved as a member and to join working groups to join chapters where we create the contents, where we, we work together to produce studies or organize these events. For example, another benefit is to have access to our private members portal and interact with all members directly. And of course get invited to speak for example to our next online event. So you could get of course the full benefit list on our website. But the most important things is by becoming a crypto ballet association member, you will get part of a large and strong community to learn, connect, advocate and innovate. So membership starts from 100 Swiss francs. So $100 for one year and you can journal online of course on cryptovale Swiss. Okay, so that was my intros and now let's the event start. So to you Emily, for the next part and see you later for the networking in the crypto ballet room and see you in the party. Bye bye.

Thank you. Okay, so. Well, thank you, Jerome. Okay, start my video.

Perfect.

Technical difficulties, but I guess we're here now. Perfect.

Bad assistant.

So thank you so much, Jerome. So now it's going to be time for our first session, a keynote from our partner Signum. So we will welcome now the head of brokerage, Dominique Lebergue. Dominique, the floor is yours.

Yes, thank you, Emily.

Hello everyone.

Let me share my screen here. So can you see it?

Yes.

Fantastic. Right, so good evening everyone. Well, at least it's evening here in Switzerland. So thank you Amy, Emily and Jerome for having me and also for giving me the opportunity to introduce you to Signum and our view on the market and the halving tonight here. So I'll start by introducing you to Signum and we'll then have a closer look at some of the key facts around the halving to get everyone on the same page before we dive a bit deeper in some of the market dynamics that we see around the halving and their impact on future halvings and the months to come. So Signum, we are the world's first digital asset bank and we claim that title having received a banking license by the Swiss regulator FINMA in summer last year. So we're operational since about nine months now. We are 80 people both in Zurich and in Singapore combined. And our mission really is to give institutionals and private qualified investors access to digital asset economy and this whole ecosystem that we all care about with complete trust and peace of mind. And we're doing that through a range of services from asset management where we have an alpha and a beta product, to accounts in custody where clients can safekeep the digital assets as well as their fiat currencies. With us we have a lending facilities where clients can draw fiat loans against digital asset collateral. That's all also offered on a B2B basis. And I think everyone at Signum is a fundamental believer in the potential of the blockchain technology to revolutionize the financial industry, which is why we're engaging in a number of asset tokenization projects as well. Then last but not least, we have our trading desk which allows clients to trade the digital assets against a range of the major fiat currencies on a 24, 7 basis. So enough from Signum, let's focus on the topic of this evening, which is the halving. And that's maybe set the stage with some key facts around this particular halving here. So it's halving number three of 33 and as we all know, one is about to occur every four years. So the last one in 2016, the one before in 2012. And the halving is essentially Bitcoin's built in disinflation function, ensuring that we have a finite supply of 21 million bitcoin. Ultimately for this particular halving, the block Rewards dropped from 12.5 to 6.25 BTC, which leads to a monetary inflation rate of about 1.8%. And that's actually for the first time below the Fed's 2% target inflation rate. And if we scan the Bitcoin source code for the, for the halving, we can actually find this function here. It's very interesting to see that in the source code the halving is Nothing but those 10 lines of code here. So very simple and very elegantly coded by Satoshi. Now with the stage set, let's go a bit deeper into two topics that in our view have shaped the market environment around the halving. We'll continue to shape it in the months and years to come. So we'll start with a deep dive into those two topics before then zooming out again and assessing the impact on the market these days. The first topic that we're going to cover is the growing importance of the derivatives market. And then I'll share some of Signum's insights into the institutionalization of the crypto space. So starting with the growing importance of the derivatives market here represented by futures, I think there's one very interesting way to visualize this impressively, and that's if we plot the market share of the bitcoin futures market against the spot market. Right? Assuming that the sum of the two is 100%. If we do that and go back into the early days of crypto, we can really see that 100% of the market was on the spot side for quite a while until Bitmex came along, which started to increase volumes in the futures. So we paused here at the second halving and we can see that at this time around, the futures market was about 10% of the overall volume. So there wasn't really enough liquidity around for some of the larger miners and hedge funds in the market to hedge all their exposure ahead of such an impactful event. Right. Then we go into 2017, the bull market. We see the importance of the futures market growing, cme, CBOE joining the game, along with a range of other providers like Deribit and Binance and many more that would have been just too many to listen to mention here. So right now, just ahead of the third halving, we're at a point where the futures market is significantly larger than the spot market and there's really enough liquidity around for some of the larger players in the market to hedge their price uncertainty. So I think that's one very nice way of visualizing this. And then that's maybe the next question that arises is then why is this so important? Why is the derivatives market so important in crypto or basically in any market, actually? And one important role of the derivatives market is actually supporting the efficient price discovery in any market. And it does that by adding the time dimension to the spot market, which in itself is very one dimensional. Right. It's just the current price and it's actually hard to distinguish how much of a future prediction is actually priced in this market. So the future market adds that time axis and allows for events and guaranteed in certain events like a halving to be priced in very efficiently in the bitcoin price. So let's move to one of the subtopics of derivatives, which I think is very interesting to have a look at also in the context of the halving, and that's mining derivatives. Let's visualize this with this very obviously simplified diagram of how a mining operation would look like. We have operating costs that assuming here occur in US dollars, so electricity, rent and a lot of other factors. They are contractually agreed with their suppliers and they serve as the input to the mining operation together with the hardware and the software, obviously the output of such a mining operation then is btc, which is the revenue stream. So now we have a mismatch between the currency in which the revenues occur and the currency in which the expenses occur. Right. And this is exactly where the futures market comes in very handy because it allows the miner to hedge that particular price risk, the BTC USD risk, with a future or an option. But there's one stream of, there's one revenue stream that is actually left unhedged here, and that is the number of bitcoins that you receive out of your mining operation, which is very much also a factor of mining difficulty. So holding all factors constant, a rise in the mining difficulty level would obviously lead to less income for the same amount of input, and vice versa. So in that sense, miners are actually very much inherently short the difficulty level because they profit from a lower difficulty level if all other factors are held constant. And up to a few years ago, miners weren't really able to hedge that particular risk very well. But we now see that there's a demand for this and that more and more instruments start to arise and we see futures on the mining difficulty level. We see options on mining difficulty level, obviously in a very bespoke offering, usually because it is a naturally, it is naturally very hard to offer such a derivative as an issuer, just given the fact that this product is almost impossible to hedge unless you are yourself very active in the mining space. So as a consequence, a lot of the issuers of such derivatives are themselves very reactive in the mining space. Then we have a second topic to dive a bit deeper into, and that is the institutionalization of the digital asset ecosystem. And we at Signum really see a growing number of traditional asset managers entering the space and really adding digital assets to their portfolio, obviously also driven by the current low yield environment for sure. But the second dynamic at play here is also the loss of market share from some of the retail exchanges to OTC brokers. And that is a direct function of institutionalization to some extent, because OTC brokers at the end of the day offer a more bespoke and more tailored service. And it's also no coincidence that some of those retail exchanges have acquired OTC desks in the past to just compensate for that outflow that they have seen. So OTC brokers can act also as a sponge to soften the impact of of large orders with their principal books, if they have such a book. Not all do, or some claim, and not all do. And thirdly, we have also the emergence of algorithmic and high frequency trading as a sign of institutionalization. Whereas actually algorithmic trading has been around since very early days of crypto because the community has always been very developer friendly and embraced an open API culture. But throughout the last years, a number of prop trading shops have joined the game and leveraged their high frequency trading infrastructure from traditional asset classes and ventured into crypto. We also see the supply side catering for that with some exchanges offering low latency infrastructure and virtual collocation services, for example. But it's really an industry that is still in its infancy, but growing obviously at the very fast pace right now. So if we summarize this, we can say that the growing importance of the derivatives market as well as the institutionalization of the ecosystem lead ultimately to more institutional flow and more hedging products and liquidity. And if we put that into an equation and conclude those findings, we can probably say that the more hedging products and liquidity there is and the more institutional flow we have on top of that, because this is not necessarily the case. If we were in a retail driven market, the less uncertainty and volatility there is in the market as a lot of these institutional players act as an absorb act as a layer that absorbs that volatility and the price shocks. And as a result of that, we can expect less and less impact of future halvings on the BTC price around the halving date. Not talking about the long term implications here, but really around the days before and after the halving date as this market becomes more mature and more important. So for us as investors in digital assets, that should really give us more peace of mind and hopefully leave us with some good nights of sleep that we're safe when future halvings come along. So thank you everyone at the Crypto Valley association, and yeah, looking forward to see you at the party later tonight.

All right, thank you so much, Dominique. Thank you, thank you very much. Very, very interesting presentation. Just a note to the attendees. So if you have questions, feel free to write them in the Q and A and then later on during the live Q and maybe we can select your question and Dominique can answer what questions you have. So thank you so much, Dominique. Now we're going to move on to the second session, our fireside chats. So as I said before, so we brought five renowned experts in their respective fields, which is mining, security, investing, scalability and research. So now I'm going to give the floor to Emmy, who is going to be moderating these sessions.

Hi everyone, this is Emmy. I can't start my video. So please really help me in letting my video go live. Oh, okay. Now, hello. So nice to see some familiar faces and very happy to kick off the fireside part. We will be talking about mining first, as Emily said. And mining is that part of the bitcoin network. And also leading up to the halving mining metrics are the ones which gave us metrics which helps us see what is really happening so we can measure the development of the network. And we managed to secure Alejandro de la Torre from pulling in order to walk us through what really happened. And where are we now? Past the halving and Alejandro, hi, Are you there?

I'm here. Hi, how are you?

Really well.

So nice to see you. So Alejandro has been in the space since 2013. First he founded Block Trail, which is a block explorer which made an exit later on. And then he worked for BTC.com and then later he worked for pulling. So he really specialized. He still works for pulling. He specialized in looking at mining and what really happens in mining. Alejandro, do you want to tell us more and please also explain what mining is for the attendees who don't. Who are not familiar with that.

Sure. Thanks for the introduction, Emmy. My name is Alejandro de la Torre. I'm currently vice president of Pooling.com It's a mining pool, one of the largest mining pools in the industry, specialized in the major coins of the industry. And yeah, I've been around for a couple years mainly focused on the mining side of business. So yeah, I think I can explain a little bit what mining is. So mining, basically, it's actually a very ingenious design. What it does is basically maintains the security of your network and it actually confirms the transactions of the network. So it's a double. There's double work there. Now the miner for doing this effort is rewarded in bitcoin and that's how bitcoin actually enters the market as well through the mining industry. So yeah, that's basically maintains security and it verifies transactions of the network. So it's actually a very vital, if not the most vital part of the bitcoin network and system.

Thanks, Alejandro for that explanation. And you have had a very busy week monitoring closely what is happening. Can you tell us a bit more about the metrics, as in how the hash rate was developing or was increasing before the halving. And also can we talk about the difficulty and also tell us a bit more please about how the halving did affect the miners?

Sure. So I'm going to go ahead and share the screen Where I have some little bit of data here. Can you guys see that?

Yeah, we do.

Okay, so quickly, this is what Poulin mines, we're one of the biggest miners and these coins we have a pretty big amount of, of the network. This is actually a couple of weeks before the halving, but I'll explain what's happening now. So let's get into the halving now. We expected a drop. What? Why did we expect the drop? Because there is a lot of mining machines still in the network that are from the older generation. And these older generation mining machines are competing against this reward, against these better and stronger and newer machines. Now what happens is that over time the network difficulty increases and these machines become less profitable. Now when then, now you add the 50% reduction of the Bitcoin block reward and it basically makes the mining machine unprofitable. So we expected around 15 to 20% of the network to basically shut off. And as we see in this metric here, in this chart here, that actually we have seen around a 15, 20% drop from around 130, 135 to now around 195 somewhere on. There's a lot of variance, but it's around a 20% drop. We expect this drop to continue at least until the next difficulty adjustment where the Bitcoin network recalculate how much hash power, how much mining machines are connected to the network in order to find a constant of 10 minutes. This is, this is, this is. So after this next difficulty adjustment, we might see again an increase in hash rate. But eventually over time, when newer machines are coming into the network, these old machines will eventually have to shut off. But there's nothing to worry about because there's all these new machines are coming in that are very strong, very good in terms of mining Bitcoin. So the hash rate will continue its upward trend like it has been doing for the last four or five years. The network difficulty is also, has been increasing incredibly as we see in this chart over here by blockchain.com, which Garrick is, you know, works there. Yeah. So this is basically a calculation of all the hash power that comes into the network and it tries to find a constant of 10 minutes. That is the underlying reason for the difficulty, to find a 10 minute block constant. As we can see, there's been an increase exponentially over the last couple of years. We have seen sort of a dip before the halving because of the price decrease on the 13, the sort of the Black Thursday as it's called now, which really goes to show you that a lot of mining machines are actually some at least this percentage that we see this drop here, this percentage around 10 to 15% are mining at a very slim marginal. Like they make a very slim profit. As soon as the price decreased they had to shut off. Moving on to Sorry, yeah, that's the rest of the slide. But I can go ahead.

Emmy, you touched base on the mining machines and it's so exciting that mining would not exist as of it is today if BTC would have not been invented. And the evolution of the machines like how in size and also in capacity, it's just fascinating. So could you talk a bit more about the rigs and then the different type of machines?

Sure. So I'll go ahead and share another my screen again and I'll share this time a tool that we provide@poulin.com what this tool basically shows is the new generation of miners. It gives a calculation according to how much it costs for electricity. As you can see here we have energy or electricity cost of $0.05 per kilowatt hour which is really cheap. It can only be found in very, you know, in some regions of the world. But that is more or less where what mining operators are trying to aim for. Around $0.05, $0.06. Of course lower is better. Now we can see that here you see the break even price of the cost of one of these, the what's miner M30 which is one of the best machines in the network. Now after calculating of course the cost of electricity, the cost of how much it's waste per day, then you can see that it actually makes around a profit of $5.71 per day. And here you see here break even price. Now if you go down, we look at the older generation of machines and you see as we go down the profits and the cost of break even price increases exponentially. So this is, this, this goes back to what I was saying earlier. Now these machines over here, let's say the what's minor M10 or, or the you know, NMiner S11 are no longer profitable and these are the ones that have been shutting off in the last couple days.

I think I read was it coin metrics that 23% of the machines are the oauth generation machines. What concern does that raise in your book and also for what is bitcoin miners. Mining on the bitcoin blockchain is not profitable anymore. Do you think they are moving onto other chains?

Yeah, well that's a good question. I think we're not concerned with the drop in the hash rate, 23%, whatever it is, because we see this as a momentary drop and we see a lot of investment in the mining industry coming in to buy all these new machines which will eventually down the line increase the total hash rate and the total network security of Bitcoin. So we only see this as a momentary blip in the grand scheme of things. So that's nothing to be concerned about. Now your next question about mining machines that have been moving to other coins. Yes, we have seen some increases in the other shock to 56 or the same algorithms. So basically you can only mine the same algorithm per machine. And we have seen an increase in BCH and BSV mining that basically suggests that a lot of the older machines that are no longer profitable in Bitcoin have been moving to the other coins. At the end of the day, the mining operator wants to maintain profitability. That's their business, that's the end of the line. And if they can switch to another coin to make money, then they will.

Great. How about the global hash rate distribution? Because of course most of the mining happens in China as of today. But how do you see the development in the coming years?

Yeah, sure. So I have one last thing to share here. I'm going to go ahead. It's actually a very interesting development or study by the Cambridge center for Alternative Finance. What they did is they took data from three of the major mining pools. One of them was us. And they looked into the ranking or the amount of hash rate that is across the globe. As we can see, this is September of 2019. And we see that 75% of the whole entire of the mining hash rate from these three pools was in China. Now if we click on April, we see that it actually has decreased by 10% in China. And we also see a new entrant as United States. Malaysia is also pretty interesting addition to this chart. So the charts show what I'm about to say. We've seen. We've seen a trend that the global hash rate is spreading across the globe. It's no longer just all in China, which is a good thing because you can't have. I mean it's always a risk to have all the hash rate in one particular region, be it wherever it is. So it's a good thing for the network, good thing for Bitcoin that is expanding globally. And that's one of the reasons why pulling is also expanding globally. We have office now in Berlin to take advantage and to be there, grow with the network.

Thanks so much, Alejandro. I have two More questions. If you. You think back and you take a look back at the evolution of bitcoin, is there any memorable moment in your career or any event in bitcoin, what you would like to highlight and what was very surprising to you?

That's a difficult question to answer, but I think I got into Bitcoin 2013 and when it was, when 2013, early 2013, it was only really just hobbyists and die hard cyberpunks and these type of guys. So for me, it's been an awesome ride seeing the development of the industry from just being everything about, you know, very, very nerdy stuff, I'd say is the best word to put it, to becoming a worldwide, global industry. And I think we're just getting started. I still think we're in the very beginning, but it's been a beautiful thing to witness, to grow with the bitcoin industry itself.

Yeah. And this halving has been. Has gotten so much attention, like so much coverage, not only in our ecosystem, but also in other areas. Okay, the last closing question is, you're in your living room in Berlin now. Where will you be in 2024?

Well, in 2024, I hope to be maybe in some islands somewhere having a good time. I don't know. We're building a big office here and a big team, so I'll probably working somewhere in some office for pulling.

Wonderful. Thank you so much. Thank you.

Thank you.

Emmy, you will be able to ask Alejandro further questions in the Q and A and also in the networking room. And with that, we transition over to Emily because our next topic is security.

Thank you very much, Emmy. All right, so now our next guest is going to be Pascal Gauthier, the CEO of Ledger, which is one of the leading providers of secure crypto storage solutions. Pascal, can you connect?

I am connected.

Ah, perfect. Hi, Pascal. Good to see you.

Nice engagement.

I like your office.

That's where I'll be in 2024.

Nice. All right. So Basquiat, when we were preparing this event, in this conversation, you told me kind of a weird story about someone who thought was an expert in the space and tried to give you advice, but it ended very badly for him. Can you maybe share the story with the audience?

Yeah, sure. So, very short story. So in 2014, I was trying to figure out what my next move would be in terms of building business. And I spoke to that guy and he said, don't go in crypto because there is nothing to do there. It's too complex. And I started something. I failed. And you probably Fail. I said, okay. Well, I didn't take him up on his advice, but a few years after, when I was working with Ledger and Kaiko and had done my thing, he told me the second story, which is that he had lost $500,000 worth of Ethereum because he had the Ethereum on a computer and he wiped his hard drive and so therefore lost the private keys of the Ethereum. So not only he didn't give me a very good advice, and I'm glad that didn't follow it, but also, it seemed that it didn't really pay attention to his security much. And so that whole story combined is sort of why I'm CEO at Ledger today.

Very interesting. All right. Is this okay now? Okay, cool. All right. No, it's a very interesting story. And, you know, I think maybe the problem was in crypto, maybe it was with him, and I'm happy he didn't listen to his advice. So when we were discussing, you told me that there is something that is very important, it's endpoint security, and that it's often overlooked. Can you maybe explain to the audience what it is and why it is so important?

Sure. I mean, I'm sure that the audience is probably more educated than me on the matter. But, you know, the endpoint security means that in order to own a Bitcoin or any form of cryptocurrency, you need to have a secret and be the sole owner of that secret. And that's the private key, the crypto private key. And so therefore, you know, when you sign a transaction, you have to sort of show that you are the owner of the secret, and so you have to show the private key. And so it's at the moment of transaction, it's when you come in and out of a blockchain, that actually there is a vector of attack to steal the private key. And so that's what we call the security. That's what is called the security endpoint. The endpoint security, which means that when you use one of our products, for example, at Ledger, we protect private key at any moment. So even when you do the transaction, the private key never leaves the enclave in your Ledger nano. And so therefore, you never reveal the entire private key to anyone. So therefore the private key cannot be hacked, and so therefore you cannot lose your Bitcoins. And so the endpoint security is really the key challenge for the industry, when you think about it, because whenever it's in the blockchain, it's safe, but when it's coming in and out of the Blockchain that is unsafe at the moment of transaction. And of course, when you have that private key, then where do you put it? Like those 24 words and the private key? So the private key can be on the ledger, but then you need to worry about the 24 words. So the security of the endpoint is.

Really.

One of the big challenge of this industry, for sure.

Yeah, definitely. And as usual, the risk is more on the human side than on the technical side, actually. So I think this is also one of the things that makes crypto kind of hard to approach as a newcomer, as a newbie. You know, you have these private keys and all these numbers to remember, and it's really complicated. How do you at ledger? So you provide solutions that are easy to use for anyone. Can you tell us a bit more about how you help people solve that problem?

Yeah, sure. I mean, first of all, I think there is a big shift in terms of technology. We come from a world where, if you think about data in general and your digital life, you don't own anything. And the way that we set up our digital life today is whenever we download a program or an application or whatever product we use, we click yes, yes, yes, yes, yes. And then you can use the products. And that's how we use the Internet today. That's how we use our phones and stove. If you understand what you're doing with your phone, you know that you're giving everything to a third party. Google knows more about your life than you probably do. They know where you've been, how many seconds you stayed, who you exchange email with, etc. Etc. So de facto, your data is not yours. And you've given your digital life to third parties. And that might be okay. I mean, most people don't care, but it is what it is. With Bitcoin, it was an invention where suddenly you could own your digital assets. You can own a Bitcoin, and it's unique. So that's very interesting. But then with this power comes also great responsibilities. Suddenly you're in charge of your security because it's not a problem of clicking yes, yes, yes, yes, yes. Because the problem is, if you've done anything wrong, you can always call someone, you can always reset the account, you can always do something to recover your data, either fully or partially. With Bitcoin, when you don't call the hotline, when your private key is gone, it's gone. And so therefore suddenly you have to be in charge of your own money. But that's actually okay because people feel that it's a change because we're coming from that yes, yes, yes world. But it's not so much a change because for centuries, humans know how to protect their own money. And by the way, we're talking about money, we're talking about value, we're talking about wealth. If you think about our grandparents, I mean, my grandparents had gold, diamonds, like, there are many things at home that they were keeping at home. They had a safe. They really had their own security to protect value. They had jewelry, they had those type of things in a cash society. In most cash societies, people have cash on them. They trade with cash, and so they have their wealth with them. So it is not so uncommon that people have to worry about their. The security when it comes to value. And so therefore. But in order to do so, they need the tools. What people cannot do is to develop their own safe. I mean, very smart people can maybe do it, but in general, you buy a safe from a safe manufacturer. So what we do as Ledger is just to help people build their digital life, protect their digital value, and by giving them the tools that they need in order to do what we've been doing for centuries, but that we have to do again now if you want to keep the value with you.

All right, very interesting. I like your quote. I'll quote you on this. With great power comes great responsibility. I think it's a great way to sum this up.

From Spider Man. Okay, so don't quote me, Spider Man.

I'm happy I got my assistant there. All right, so there's another question I wanted to ask you. So right now we're in this kind of weird period, right? With the coronavirus, with the lockdown. You know, it's a very uncertain times. And, you know, economically it's a very uncertain time. But on the other hand, we have the bitcoin halving, which is a very bullish event. You know, usually it leads to huge price increases. So you, your company, Ledger, how is it affected by this? I mean, do you have one counterbalancing the other? Or were you touched negatively by the coronavirus or. Can you tell us about your situation now?

Sure. Are you guys hearing me okay?

Yeah, I hear you fine.

Okay. I would say that everything has been to us in the past. We, you know, we. There is a huge influx of new users in crypto. And is it okay?

I think.

Is your connection okay, or is my connection that has a problem? It's kind of like.

Could be both. Let me see if I can switch. Okay, well, keep it like that. And if it's not. Okay, I'll try to switch connection. Maybe give me one second.

Sure.

All right, so just a reminder, if you have questions, you can write them in the Q and A.

Okay.

And then we will select them later and we can ask them to the speakers. Pascal, back to you.

Okay, sorry, I switched connection. Maybe this one is better. But. So what was the question, actually?

So coronavirus, negative impact, how does it work for you?

Sure. So so far it looks like a perfect storm for several reasons. One, Bitcoin has died 380 times. And so crypto businesses have been built to be very resilient to catastrophes. And the same way that we were waiting for Bitcoin to die, I mean, whether it's bitcoin dying or coronavirus coming, we were sort of ready for any event of that magnitude that we would say. But so that's number one. Number two, what happened is while coronavirus was happening and people were getting confined, we've seen an increase of new people coming into the market. And so therefore new people coming into the market, we sell more products. And so continuously we've sold more products. You know, February was better than January, March was better than February, April is better than March, and May is better than April. And it's a very significant upward trend from where we look at it. And so therefore, what we had to do during the coronavirus crisis is to ensure business continuity and to make sure that we could keep on shipping the products to our customers, which we have done. And we think that a few things happening at the same time. You have the perfect storm. Of course, bitcoin halving is here and that gets everyone very excited. And people might think that it's going to have a positive impact on price. So they invest now. But also equally, you probably have a huge economic crisis coming our way. And so people are probably trying to combine the two. Interestingly, I've also talked to people that are involved in online trading. So we're talking about securities and just buying stock online. And apparently that activity has gone up also very drastically. So it feels that because of the halving and because of anything that is happening, people are investing in Bitcoin in the same way that we invest in Apple stock or Amazon stock in terms of value protection, wealth protection, diversification of investments, all of these good things. But what we can say is there is definitely a lot of people coming in the space. It doesn't always reflect on price because price is under 10,000. So it's good, but it's not crazy. But the behavior that we see right now is the same that we saw in the previous bull run, which is you have a large influx of retail investors coming into the game, and that precedes usually the bull run. But so for us, right now, it feels like it's the bull run that started.

Okay.

Interesting.

Yeah.

And how would you. You know, you've been in the space for quite some time. How would you compare this halving versus the previous one? And how do you think the next halvings are going to look like? Can you give us a bit of perspective on this?

Sure. I mean, I think, you know, the housing is just. I mean, it's an event, but it's a. It's a date. Like, you know, and so I think what has changed is, you know, just the industry has changed, you know, less having. And now is just, you know, four years have passed, and in four years, the industry has built tremendously. And so there are many companies that are much stronger today than they were before. There are many new companies when it comes to us. To give you just an example, I don't think that we knew what we were doing in 2017. We had no strategy. We were just riding the wave or riding the bull like everyone, but not really knowing where we were going, which I hated at the time because I knew that we're doing great in terms of revenues, but I also knew that we had no idea where we were going and how to control that. And so what has changed is now, in 2020, as we start riding this bull, we are in control. We know exactly what we do. We have better products. We have better delivery. We have more engineers. We control everything. So it's a much better fitting. So right now, we're ready for the real bull run. We're ready for the plus 600% rise. And we've built the company in the past four years. What we've done is to be ready for that. And so this is why it's very exciting now. Many, many big companies in the space. And so, you know, that's why it's exciting, because we can ride that bull with more class this time, maybe.

All right. Very bullish message.

I love that.

Thank you very much, Pascal. So now, thank you very much for joining us. I'm going to give the floor back to Emmy now. Emmy.

Thank you, Emily. In the next fireside, we're going to talk about investments, and we have someone amazing, someone fabulous who is going to lead us into the nitty gritty of this aspect and of this field, and she is Mateem Demirs. And I met Matem in Boston in 2018 where she gave a talk about the evolution of money, or what money really is. And that was already her fourth or fifth year in crypto. And then since she has been working hard every day and advancing the development of Bitcoin, she. She's the chief strategic officer of Coinshares and she has been testifying last year at the congress in July. Matem, are you there?

I am here. Can you hear me?

Hi, Matam, welcome. We hear you.

Hi, how are you? Good. Can you turn on my video as well? Okay, here we go. Hey, everyone.

Hi.

Nice to see you.

Nice to see you all. And happy Halving.

Happy halving, exactly.

Tell us a bit more about yourself and what have you been busy with at Coinshares and how did you find this halving?

Yeah, so I was just listening to Pascal chat and it's funny because I've known Pascal since around the last halving. I think we first met in May of 2016. And so, you know, it's just interesting to think back on where we were four years ago. I recall I actually threw a halving party in New York. It was not well attended. There were a small handful of people there, but I made a prediction at that halving, which I revisited at this halving. And my prediction was that bitcoin would be at $10,000. And mind you, the last having it was at 600 on the nose. So my prediction was Bitcoin at $10,000 as well as the advent of Fedcoin. And so, you know, it's not too far off given all the interest we've seen in central bank digital currencies. And so there are a lot of things that are still the same. There are a lot of things that are very different. I mean, the great thing about bitcoin is the halving was programmed into the protocol. And so there is this aspect of bitcoin that's beautiful. It's unemotional. It doesn't depend on individuals or people to make decisions. The protocol keeps running as was intended. And anyone can view the Bitcoin source code to sort of understand what's going to happen. What's really different this time. When we talk about investing in just the shape of the market around Bitcoin is in 2016, you could really only be fundamentally long bitcoin, meaning you were holding it believing the price would go up. There weren't really ways to go short bitcoin, not in scale, not in size, and definitely not in a way that traders and institutional investors and institutional trading firms could access. And today that's very different. Last year alone, the bitcoin derivatives market traded over $3 trillion in notional value. There's a huge number of platforms that are available to trade on. There are a number of different contracts that now exist beyond just the perpetual swap that was pioneered by the team over at Bitmex. I think, again, just looking at what still drives the market to Pascal's Point, I think a lot of the market is still largely retail investors. And we see that thanks to platforms like Square's Cash app and Robinhood and Sofi and Etoro, and all of these retail platforms being really accessible and giving people price exposure to bitcoin, particularly retail. We see it with a growing trust in platforms like blockchain.com, in platforms like Coinbase, but also a whole host of new platforms that have popped up since 2016 that have accrued a lot of retail users. But we also see it in the institutional market. And I think this is an area where we've been spending a lot of time. Last week we announced the rebranding and sort of integration of our trading business, which was formerly known as Gabi Trading, into Coinshares. In the first quarter of this year alone, they traded $1.5 billion of cryptocurrency. That's a lot of volume. And the landscape on the trading side, in terms of both technology, types of players and integrations, continues to grow. We recently did a whole series on the future of capital markets and all the advances we see in both the market venues that exist in Bitcoin, but also the structure of those venues also being more software driven and less custody driven, like traditional trading venues. And then just what that's enabling in terms of new players who are participating in the market, ranging all the way from speculators to trading firms who are deploying statistical arbitrage models, could care less about whether it's bitcoin or potatoes they're trading. They're just looking for volume abilities to arb, and they can do that in bitcoin to really ideologically motivated individuals as well as funds who have a philosophical thesis around bitcoin. So it's very, very different. It's very exciting. Some of it is extremely positive. Some of it, I think, is less positive and a little more dystopian, particularly large banks looking for ways to take on crypto capital and custody bitcoin and give people synthetic bitcoin to trade. But look very different world. A lot more money, a lot more people, a lot more Opinions and the conversation has moved from the very small meeting room that I rented out in 2016 where we had about 40 people, to now the global stage where we have some of the most respected fund managers in the world talking about Bitcoin, where we have celebrities talking about bitcoin, and where we have 150 people taking time out of their evening to be on a video chat talking about bitcoin. So different world.

Yeah, absolutely. Thank you so much for that recap. What is what you're most excited about in the space? And also earlier this week, one of the hedge fund managers, a billion dollar hedge fund manager, Paul Tudor Jones, who was a skeptic of bitcoin, announced that he uses bitcoin as a hedge and 2% of his net worth is in bitcoin. So we have been always wondering when the institutionals are coming finally to the space and when will they invest more and more. You think that we will see this trend picking up?

Yeah. So let's start with the institutions first and foremost. Look, at the end of the day, institutions have one job and one job only. It's to make money. Right. So as an investor, my responsibility is not just to find interesting themes and trends that are sort of dictating where the market's going. It's not just to find interesting investment ideas. It's to make money. And as the crypto asset class grows, as the opportunities in this asset class grow beyond just spot buying and holding Bitcoin and waiting for more people to come into that trade, the number of institutions that see opportunities to make money in Bitcoin is also going to grow. What I loved about Paul Tudor Jones entry, public entry, I should say, into Bitcoin is the paper he wrote which added context around his conviction. And again, just people's ability to grasp the value proposition of Bitcoin in such nuanced terms is really impressive. Again, we saw this last year during the Libra hearings when Jerome Powell talked about bitcoin. He had this whole three minute talk about bitcoin where he called it digital gold, a store of value. And he nailed all of these really important points about bitcoin on the national stage. We see it again and just more and more people as a result of what's happened over the last few months with this global pandemic which has led to global economic crisis, but also forced people to recognize that the system we are in is completely unsustainable and is completely, you know, the incentives are misaligned. I think people are being forced to confront the Reality that we're going to need to see some pretty drastic change. And so in a way, bitcoin was a product of the last financial crisis. And I think it's really come into prominence during this financial crisis as people are looking at the world and saying, well, what else? Because clearly the way that risk has changed, the things I used to invest in, the things I used to do, are no longer necessarily profitable, nor are they sustainable. But at the end of the day, let's not forget it's about money. In one way, I think it's kind of funny that everyone in the bitcoin industry, which at its core is a bit anti establishment, it's about building a new financial system. It's about building kind of this new vision that we're all obsessed over. What someone who's very much a product of the old financial system and has become successful and prominent as a result of the system that's collapsing, that this person is our hero in a way. It's sort of funny, but it is, it is interesting. And then I think the other great sign is, you know, JP Morgan, which for a long time Jamie Dimon, you know, spoke very negatively about Bitcoin. They're publicly now wanting to work with ultra high net worth clients and institutional custody clients because they see the opportunity to accrue a, um, they realize that they have to change. And so instead of fighting bitcoin, they're now embracing it. Although arguably, you know, in my view, pushing more people into, to take their bitcoin and deposit it with a financial institution is kind of the opposite direction of where I'd like to see this go at the end of the day for trying to create the systemic hedge, we can't really do that effectively if we're relying on financial institutions to hold our coins. The way I articulated is Bitcoin can't be a systemic hedge of holders of Bitcoin are beholden to large financial institutions, institutions. So I think there's still some ideological tensions there that need to be worked out and I think regulation is going to play a big role. Already in the US we see some very draconian regulation that will make it very difficult for bitcoin companies to service clients. We see this in the uk, we see this in other jurisdictions. But I'm of the belief that bitcoin is money for the people, not just for institutions, large asset managers and large banks. So we're going to have a fight ahead to preserve that.

Absolutely. This reminds me of one of the reports what Coinshares shared last Year. And you guys stated that there should be a shift also in generations. And as in when the assets of or as in when the new generations will inherit the assets of their parents, then they are digital native, they are very familiar with Bitcoin. And yeah, so that shift has to happen. What do you think? What products are missing to help a greater adoption? Because you guys have the ETPs and the tracker products and wonder if you have a view on this.

Yeah, so again, I think in contrast to the last having, there's now a lot more ways for people to get exposure to Bitcoin. And what I think is so great about it is there's a really wide spectrum. Right. So for us, the tracker product, XBT provider, which trades throughout Europe, the motivation for that product is getting exposure to Bitcoin should be easy and simple and people should be able to do it in the same way they would buy a share of Apple.

Right.

So the idea is you go to whatever brokerage platform you're on, you type in the ticker and boom, you can buy Bitcoin. Unlike other exchange traded products that are out there, our product has no premium. Shares are created and redeemed on a daily basis. And so our product tracks the net asset value or the underlying value of the Bitcoin one to one. There's no big markup and the fees are quite minimal at 2.5% whereas the largest product has fees of 4% per year. And so I think again, you know, our view is, is that there's going to be this wide range, you know, what Pascal and the team at Ledger are doing, and I'm a Ledger user myself, is they're enabling people to buy Bitcoin and custody themselves. If they like, they can go through third party like a Coinbase or a Gemini or you know, a bit wallow where they can buy their Bitcoin, hold it on the platform, transfer it to, to a wallet themselves. I'm also a client and user of casa. I'm an investor in that business personally as well, which is a multisig solution. So it's a piece of software that works with Ledger hardware and Trezor hardware, but it allows you to basically use multisig custody to secure your coins and create some effective inheritance solutions so you can make sure that if something happens to you, there's a way for your, your loved ones to recover your coins. And so look, there's this really wide range of options. Some people have nothing but a crypto steal or maybe they've memorized their seed phrase and that's their strategy. But what I think is really beautiful is what this technology allows for is for companies to create products and services that cater to a really wide range of preferences. I believe it's my job, and sort of our job as the bitcoin community to educate users of these products and services about the risk, reward, trade offs between these strategies. And so it's important for people when they custody their coins to someone to understand that, you know, there is a risk associated with that. And the risk is not just a counterparty risk, but there is also regulatory risk. Particularly, you know, the IRS has been fishing over at Coinbase to get the information of their users so that they can review their taxes and make sure they're claiming crypto on their taxes. So I think again, you know, there are going to be different trade offs and people have different preferences. They should have lots of choices. But I want to make sure that people have choices that empower them to be their own bank, to, to be their own custodian and to really make decisions with information, to be empowered with education so that they can make decisions that fit with what they want to do.

Wonderful. Yeah, we all should take that as an assignment. And what you have done last year in July at the Congress, it just blew my mind as in that five minutes, if you guys. This is to all the attendees who have not seen that, the testimony of Maltem where she talks about bitcoin in five minutes. That's fabulous. I mean, a huge super thanks in the name of everyone. That was phenomenal.

I mean, the great thing is nobody speaks for bitcoin. Nobody represents bitcoin. Like bitcoin does not have a CEO, it doesn't have a leader. That's, that's what's so great about this that I think whenever we're given opportunities to communicate about bitcoin to larger audience, I think it's very important for me personally just to remember why I was attracted to bitcoin and why I spent the last six years of my life, not just my career, but my life in this industry. It was to change certain things in our world. And I think as more and more of the banking industry and the hedge fund industry and the asset management industry comes into bitcoin, some of the incentives and the aspirations start to change. But I think it's important to remember the intention that we all started with along the way.

So, Martin, where will you be in 2014? At the force or it's not 14, 20, 24 at the forest Halving?

Who knows? I'm in my living room in Brooklyn, New York right now. Who knows? I'm sure wherever I am, it will be exactly the right place. But I'll definitely be online talking about bitcoin with all of you.

Thank you so much. We will have the chance to ask more questions in the Q and A and also in the networking session. Thanks, Martin.

Yeah, of course.

With that, now we transition to building on bitcoin. And back to you, Emily.

Thank you very much, Emmy. All right, thank you, Emmy and Bentham. All right, so now our next speaker is Elizabeth Stark, the CEO of Lightning Labs. Elizabeth, how are you there?

Hi, can you guys hear me?

Yeah, perfectly, perfectly. Welcome, Elizabeth.

Okay, awesome.

So Elizabeth is joining us by phone. You are now on the west coast of the U.S. is that right?

Indeed. Yeah. It's been quite a crazy few months, but I am currently on the west coast of the U.S. all right, well.

Thank you very much for joining. Could we maybe start off. Could you tell us a bit, what is Lightning Labs? What are you guys trying to achieve? What is building on bitcoin? Can you explain a little bit for the audience?

Sure. But before I get started, I just heard Meltem's discussion and I have to say that Meltem and I actually both spoke at this event in February, February 18th. It was for Sofi and Milton was talking about human gloom and the whole economy was going to crash. And I was trying to be more optimistic and positive about all the great use cases of bitcoin and lightning. And people were like, thought we were crazy. And then everything kind of happened. So I think we can name Meltham the Oracle of Bitcoin now because she predicted the price and you know, CBDCs and then she kind of knew what was coming next. So good work, Melvin.

We need to be expert for next predictions.

Yeah, exactly. Whatever Melton says is going to happen in four years, let's bank on that. So, yeah, so I'm CEO and co founder of a company called Lightning Labs and we are building the leading lightning infrastructure called LNG and a variety of products around that. And for those that aren't familiar, lightning is a layer 2 solution on top of Bitcoin for instant high volume transactions. And it's really been a wild ride within the community over the last four years. Lightning itself is a protocol, so you can think of it as kind of like the World Wide Web. And there are different implementations we built lnd there's one called T Lightning, one called Eclair, and a variety of other people working on lightning implementations out there. So in 2017 we released the testnet version. So for use with fake Bitcoin or test Bitcoin. And then in 2018 we released the beta of our LND implementation for Bitcoin mainnet. So it's been about two years that lending has been on mainnet, but it's still definitely in the beta early version that's out there. And since then we've seen this incredible evolution of startups. Right now we have probably 50 or so companies that have built on L and D and Meldum has actually invested in a bunch of them. We have a huge developer community, over 4000 devs on the L and D flack. We have a very vibrant group of people that are building and participating and contributing in the Lightning ecosystem. Just last fall in Berlin we had the first ever Lightning Conference with 500 community members, developers, entrepreneurs, investors and all of that. That was an incredible in person event. Back when we did those and actually shout out to. There were some great Swiss devs there who made the Lightning beer tap where you could actually pay with Lightning, you didn't have to deal with a human and you automatically got beer in your cup. So that was clearly very popular. We had almost 1,000 beers sold with the Lightning beer tap.

Well, actually, I'm kind of curious. So you have 50 companies building on your protocol. Can you tell us some examples of prominent use cases of what can be built on Bitcoin?

Totally, yeah. So the goal of Lightning is really to be the API for Bitcoin, if you will. It's not super easy to build on the base chain, but Also you have 10 minute confirmation times, you know, you have fees that can spike, you know, somewhat unexpectedly. And then of course you have the scalability limits. I know one of our subjects is scalability, so you have around five, you know, maybe 10 with SegWit transactions per second. So building on layer two and building on Lightning, the goal is really to get you a better user experience and to make it more seamless. So we've actually seen, I mean there are a wide variety of interesting companies. Some of them are involving things like paying with Lightning, you have bit refill and fold as great examples of that. But there's three emerging areas that we've seen as of late that I'm really excited about. So the first is gaming. So you can actually pay in game with Lightning you can earn Sats. And by the way, in the Lightning community, SaaS is our unit of account. So Satoshi, the lowest denomination of bitcoin, so stacking sats and all of that has become a part and earning sats of the Lightning community. So you've got the gaming world, companies like dvd, Donner Labs, Sochi's games and a variety of other ones. People even using Lightning via live Twitch streams. There's a weekly event now called Mount Gox. Weekly or monthly. Anyway, check out Mount Gox. I'm sorry, Mint Gox, not Mount Gox. So that has been the community online. Yeah, it's a little confusing because it sounds like Mount Gox, my NTGox. Then you've got. The second area is actually Lightning Chat, which people thought, okay, Lightning is useful for payments, which of course it is, and that's the main use case in transactions. But people are actually now sending messages over Lightning and they're attaching payments. So in order to send a message, you actually have to have a payment. So for example, you said one sat and it's like, okay. Interestingly, back in the day with Hashcash, if folks are familiar, you know, Adam Back's work, that satoshi integrated into Lightning, which was integrated into proof of work, the goal was anti spam for email. So this is actually. We've come full circle with anti spam with Lightning, where somebody's not going to spam you. I know a variety of people are on the Sphinx chat app. There's a new one called Juggernaut. One of our devs on our team built out something called WhatsApp, not to be confused with WhatsApp. So there are a variety of these chat apps where you actually send one satoshi for message or maybe a couple of satoshis. So it's harder for people to spam you because they actually have to pay if they want to spam you. So that's the second. And then the third is what I think is now being called lifi. Although. So the Lightning finance side of things. Yeah, it's a new meme, it's emerging. So there's for example, a company called Ellen Markets. In nine days, their volume went from 1 million to 3 million total. And they let you do things like derivatives using Lightning, where you have transient custody. You've got River.com here in the US that enables people to withdraw and deposit. You have a variety of people working on new types of, say, assets on Lightning using what's called discrete log contracts. So that's a new emerging use case as well. I'm really excited to see that evolve.

Okay, very, very interesting. So basically a lot of use case, you know when people say that Bitcoin isn't scalable, et Cetera, your protocol actually kind of allows people to build use cases to build projects that can actually have a higher throughput. So it's very interesting. Thank you very much and congratulations. So you seem to be very early, kind of a veteran of the space that you got there pretty early. Can you tell us a bit what got you into Bitcoin and what it means to you?

Yeah, so I actually got involved and interested in Bitcoin more from the technical side. I was never like a finance person. And I'm actually, it's been really interesting to learn a lot more about that world and about that space because I feel like I'm like the tech geek that's coming in and saying, you know, here's. Here's what the Internet is. But, you know, I'm. Yeah, so from my standpoint, it was much more about open source technology and decentralization. And having been interested in areas like encryption, my background is at the intersection of law and technology. But for example, I actually taught at universities at Yale and Stanford. And I first found out about Bitcoin because the TA of the course I was teaching sent an article in 2010 about Bitcoin and my initial reaction was, oh, this is open source money. And okay, it's using encryption. And so for me, I actually got interested in it from. There's a privacy element as well. So part of it from the cyberpunk standpoint, but really from the open source technology side of things and also the dangers that come with centralization. In the classes that I taught, we would discuss the dangers of, okay, what if you have one platform or one entity that controls, say, all of ether data? What if they go out of business? What if a government compels them to do a variety of things? There are all those dangers there. So clearly bitcoin encapsulates that quite well. So I mean, it's really been amazing to see the technology and the community evolve. And in fact, years ago, and we actually at Lightning Labs announced our series a fundraise in Feb this year and there was a blog post I wrote about it and I noted that in 2014 I wrote Bitcoin is like the HTTP, but nobody's really built the world Wide Web yet of Bitcoin. And I think that's what we're doing with Lightning. We're building kind of the easy way for developers to build on top of it and for you to really have that Internet of money.

Excellent, excellent. And I think your company has been hugely successful and I hope that it continues like this for you. Can you tell us a bit? So how did the previous halving and this halving, how does that affect your company? How does that affect the Lightning Labs?

Well, yeah, so I know Melvin talked about her conference room party back at the last having. But actually last time I was Bitgo, you know, the prominent company in our space, through a halving party and there were actually a lot of bitcoin devs. I've always been very involved in the technical community there. So we were having fun outside. They had a really cool courtyard. But that was really in the early days in terms of lightning development and protocol development. At that point there hadn't been any releases yet. There was a bit of code out there, but it wasn't a full fledged release. Actually, it's interesting because the halving kind of coincided with at the last halving, lightning development was really in its infancy. Building up protocols takes time and there are only a small number of devs working on it. And we've seen just the evolution of the community to many thousands of devs, all these startups building on it, all these people contributing to the code base, variety of implementations. So it's been really cool to see what's happened between the last halving and this having. I would say that this current halving, I think it's been fascinating to see that happen with the very unfortunate global pandemic and situation and then also the economic climate, obviously the money printer going brrr, but you know, the international implications of what's going on from a macroeconomic standpoint. And to me, I think there's a really interesting timing right now where we have the PTJs and the large hedge fund folks getting interested. But I think we're also seeing a lot of international attention to bitcoin, especially as a variety of currencies face issues vis a vis the US dollar in that they're weakening. So to me, I see bitcoin as playing a major role and as lightning increasing the usability for this. So I know Pascal mentioned we're seeing a lot of retail interest. I know there are a lot of, say, boomers getting interested in bitcoin and reading up on everything that's going on in the macro climate. So to me I see lightning as really making bitcoin more usable and playing a substantial role coming out of this halving.

Interesting. So you talked about the previous halving, this halving. So do you have kind of an idea of what the future is going to look like? How do you think, what are we going to be talking about at the next halving.

Yeah. I mean, it's funny because right now in the world, there's so much uncertainty. But if there's one thing that's certain that on average, bitcoin will, you know, there will be a block mined every 10 minutes. Right. So to me, bitcoin is kind of this rock of certainty in a world of uncertainty. Right. So, you know, I don't. I'm not like the type to make, like, you know, price predictions. Melton can do that, and he'll probably be quite accurate, but I see that. So a lot of people have said with the pandemic and the macro situation, we've seen years of change happening or even a decade in weeks. And to me, I'm thinking, well, if it was possible in weeks, then it's really weeks of change. But I see this really big opportunity for bitcoin right now, and I do think we'll see acceleration of growth and adoption because there's the global climate demand and, you know, there's just going to be more demand and more people out there Also, you know, I know you're asking around where people will be for the next halving. Very hard to say. But I really hope that there's a dance party with Melsom in person in four years. So I'm excited for that.

Same, Elizabeth.

Same exactly. You know, maybe we can be outside and who knows? Good music, hopefully.

Well, thank you very much, Elizabeth. I really like your quote that bitcoin is a rock of certainty in a world of uncertainty. I think this is really untweetable right there. Thank you for joining us today. And, guys, if you have questions for Elizabeth, you can post them in the Q and A and we will cover them later. Emmy, back to you.

Thank you, Emily.

Thanks a little.

That was so good. So energetic. Loved it. With that, we go to our fifth fireside and look closer at the halving from the research angle with Gary. Hi, Gary. How are you?

I'm doing well. How are you, Emmy?

I'm good. So good to see you. So just let me. Let me give you this short intro about Garrick. He has been researching bitcoin, is. It grew into becoming a lending company and so many other products you have. It's just fascinating how you're at the forefront of all the companies out there.

Thank you for that very kind introduction and it's a real pleasure to be here. I'm pretty boring, so I would rather talk about the company than myself. But, yes, the company has been here since 2011. I joined two years ago in 2018, came over from the University of Cambridge where I started at the Judge Business School, the blockchain and cryptocurrency research program. And blockchain.info originally now blockchain.com as we're known, has been a really important resource for researchers like myself from the early days who were trying to get a hold of data on how big is this network and how is it growing and what are the key metrics so we can understand the health of bitcoin and the crypto asset ecosystem. And so it's been great for me as a research to join a very data driven data first company that has grown into a major wallet platform, has an exchange now lending desk and all sorts of other nice things to come that we'll be talking more about, I believe next week with some announcements. Hash rate was a term that I just learned that we coined back in 2011. We created a very widely used hash rate chart to help track the effects of things like the halving on the security of the network is driven by the computing infrastructure, of course, and power. I'm looking at our hash rate chart here now and it's showing about a 30% drop in computing power since the halving. I think it's really important for people who are new to bitcoin to not necessarily freak out by that number because it's just an estimate. First of all, it's impossible to know the actual hash rate. We just estimate it using a formula, but we really don't know with 100% precision the amount of computing power actually being applied to secure the bitcoin network. So this is an estimate, but it does show as not unexpected a decline with the reward being cut in half from earlier this week.

What are the major differences when you look at all the metrics between the first two halvings and this one? When we talked, you mentioned the Panthera slide. I don't know if you want to show that now. And also I would love to know that. What do you think? Isn't it weird that some people call it the halving halving and then some halvening? And if we really want to bring clarity in the space, then why do we have two names for this event?

I'm so glad you reminded me of that topic because I think it just is really illustrative of how early days it is in the crypto asset space. Yes, bitcoin's been around for over a decade. Yes, a lot of people have been working on this now for a decade almost. But yeah, we can't even agree on the same taxonomy, the same language to describe this super bowl as we Americans call the halving of crypto. This is the big enchilada. Every four years we have this kind of celebration and this amazing, predictable, anti climatic in some ways but incredibly important event and we have two different words to describe it. That means people doing research on Google trends are getting an incomplete picture of how much interest there is in this event. I think we ran a poll, I think blockchain social media team ran a poll this week asking if there was a preference for one of these two terms. I think for the next halving, I hope we pick one term to describe this event so we can all get alignment around it. But I think it's also just, I think an important point about education and how much we still need to do in terms of introducing people to bitcoin and cryptocurrency and educating them on what it is, what things like the halving is. Some 85% of Americans, of Canadians, Australians, based on survey data, have heard of bitcoin, have heard of cryptocurrency. But I suspect that a much, much smaller percentage actually understand things like the halving or a lot of the other details around this space.

Thank you so much. So what do you think that overseeing research and you have been analyzing the years and months living up to the halving? We talked about this, that there are certain similar trends and also the stock to flow, like based on stock to flow. Panthera's partner said last year that he believes that bitcoin could be worth 115k in 2021. Do you have any feedback on this?

Yeah, no. I expect the journalist to always put me on the spot for price predictions, but like Elizabeth, I'm a little more cautious around making any forecasts. I think all other things being equal, if we see sustainable amount of demand for bitcoin and you have a declining rate of new supply coming to market, that should be certainly bullish. But it's no guarantee. We don't know just to come back to the hash rate, we don't know what the optimal amount of security is needed for bitcoin. What we know is it hasn't been successfully attacked at the network level in over 11 years. So we've had enough security, but you'll only know probably if you don't have enough security after the fact. A lot of the focus is on price. Price is very exciting. It's an exciting time with regards to price. I'd love to talk more about some of the positive things that have happened. J.P. morgan, some very important news this week, obviously, our Paul Tudor Jones. Other things that are happening on both the regulatory side and also the market investor side are very exciting. But all of that price action kind of sits atop security. If we don't have a secure network, we would not be talking about price, we wouldn't be talking about Bitcoin. There are open questions as we go way out into the future that people in the research space, in the computer science space, economics arena, lots of different disciplines, are looking into the future and wondering About Bitcoin security 10, 20, 30 years down the road. It is an open question about how much hash rate bitcoin really needs to remain secure and how that hash rate is going to be paid for through fees, through subsidies, through other things. It's a really, really interesting topic, but there are just. I think I've now twice dodged your question about what's different about the market from prior having. So I do want to briefly at least touch on that. And our friends at Cryptocompare and other places have done a nice job. You can look at our May monthly outlook we just published on Blockchain.com's blog, where we kind of go through what's different about the 2020 halving from prior years. Derivatives are a much bigger part of the market. The ability to speculate on price declines is much easier than it was in 20, in 2012. I like to describe the investment landscape back then as a bit lopsided. It was very tilted towards going long. There just weren't many ways to go short. There are now some very easy ways to go short and borrow a lot of bitcoin through lending desks like the blockchain.com one to put a short bet on. So that's a big, huge difference. Miners are becoming a relatively smaller and smaller kind of part of the trading and investment landscape as their share of coins gets cut. With each of these halvings, we've got some real interesting investors coming to the table. Renaissance, Paul Tudor Jones, others. Some of these folks may. Renaissance might be a good example here. The most successful hedge fund arguably in history. They may not care about whether or not bitcoin's price goes up, you know, or down. They're just in it for the money. You know, it's not totally clear, you know, that they're, they're here for the tech. So that's, that's another, I think, angle. Whereas a lot of the early participants in the bitcoin ecosystem who owned a lot of coins were, you know, here for the tech or here for political reasons or censorship, resistance, or really believed in much more than just price go up.

Right.

So that's a huge, huge difference.

Absolutely. And how do you see. Now I'm going to make a sharp shift here and ask you, how do you see the development of web wallets? Because you guys were one of the first web wallets and one of the most popular software wallets, how do you see the development when we compare web wallets to hardware wallets, do you still think that software wallets and hardware wallets will play an important role side by side?

Yeah, it's a great question and probably one that our product team would be probably better positioned to comment on than myself. I certainly just to talk about web wallets, I'm a big believer in the importance of the web wallet company is some companies have come out recently with an app only wallet model. And when you go down that path of not giving people a web option, I think you are really potentially putting yourself in a position where you're giving users a lot less flexibility to access your product under a variety of scenarios. So, for example, the blockchain.com wallet is not available in Chinese app stores, but the web interface, if you know how to navigate with a VPN and whatnot, is something that can be accessed in markets where apps are cut off. So we're a big believer in the importance of maintaining a really good web wallet. We think that's the most open way to provide access to the blockchain.com wallet. And it's something that I hope more and more wallet companies continue to prioritize, even with the rise of mobile and the continued popularity of apps and using crypto on mobile devices.

Thanks for the very elegant response. We didn't have Pascal on any longer. Hardware wallet part. If you could pick just one event since 2019, up until today, 2009, up until today, what. What would that be? What surprised you or what, what was a highlight to you? Garrick?

Good, good question. Surprise or highlight? Boy, what. What's been the biggest, biggest highlight? Boy, that's, you know, that's a tough one. That is a really, really tough question. I mean, you know, it's, it's funny, you know, I don't know that we'll know the answer to these kinds of questions, you know, until we're 10, 20 years down the road. To be honest. Some things that may have happened already, we may be discounting their importance. We may look back and say, whoa, that was a real inflection point. That was a real turning Point. I think it's safe enough to say now that in terms of kind of legitimization and kind of really clearing an important regulatory hurdle, the Chicago's futures markets in December 2017 were a pretty big deal. I feel pretty comfortable saying that at this point. I think the fact that that's the way that Paul Tudor Jones is choosing to go long Bitcoin is a real validation of that. I think regulation is something that we have to continue to think carefully about in this space and how we bring regulators and kind of policymakers along with cryptocurrency. I worry a little bit about excessive exuberance, spend a lot of time around regulators. They worry about this, too. They worry about the little guy getting hurt, rightfully so that happens. And I do worry about the risk of another big, albeit very exciting kind of bubble leading to a big speculative crash and a regulatory crackdown. I think it is a risk factor. And so I often tell people I get a lot more nervous when I see the price going up rapidly and on days where it drops 50%, having seen a few of those, gotten kind of used to a 50% drop. Hey. But it actually makes me a little more uncomfortable when the price starts kind of moving up too quickly maybe, which is, I think, interesting.

Thanks so much, Garrick. The closing question, where will you be in 2024?

You know, I've gotten interested in a lot of things throughout my life. I've been researching crypto since, as you mentioned, 2011, and I'm just as excited about researching it today as I was when I first discovered bitcoin, which I think is unbelievable that it's that fascinating. It's the only thing that's kept my interest from a research perspective for that long. So I expect to be still kind of researching it and exploring where it can all go four years from now.

Fabulous. Thank you so much. That's a beautiful closing and putting my hands together. And with that, we transition back to Emily for one question and then to the breakout rooms.

All right, one question. Okay. So we have received a question from Ahmad Tarek. So, Ahmed, if that's okay with you, we are going to allow you to unmute your microphone and then you can ask your question yourself. So your question was for Alejandro de la Torre. Ahmad, are you there?

Can you.

Is your microphone on?

Yes.

Perfect. I see you.

How's it going?

Hello? Hello. Where are you calling in from?

I'm in London right now.

All right, amazing. Thank you very much.

Thank you.

I just had a question to Alejandro.

What's the Impact of the volatility in bitcoin prices on the appreciation. Does it hurt? Does it help? Bitcoin going forward?

Thank you, Ahmed. Alejandro, I don't know if you're speaking, but personally I cannot hear you. Is Alejandro still connected?

He is now. He's unmuted himself. Hola, Alejandro. Raleigh, is his mic enabled?

Thanks for bearing with us, guys.

Hello. Hello. Hello. Hello.

Perfect.

Hey, guys.

Hey.

Did you hear the question, Alejandro?

Well, I think Alexander might have some connection issues.

Hello.

Hello.

Hello.

Hello.

Hello.

Sorry. Yeah, sorry about that, guys. I don't know what's going on. Sorry. The question was about the hash rate volatility and if it affects the price. Correct.

The bitcoin price volatility and its impact on price appreciation, does it hurt or does it help?

Well, you know, at the end of the day, I'm part of the mining side of things and what I can say is that the price does indeed give miners, you know, like the impromptu to start mining. It is definitely a very strong reason why most miners get into the industry or why most people get into become miners. So that's what I can say. You know, at the end of the day, I'm just a minor.

Do we.

Emmy, do we have time for another question? We have three more questions. Do we have time for them? And then we have one more.

And then let's transition. So we still have 15 minutes in the networking rooms.

Okay. All right. All right. So then. Okay, so I have to choose which question is the best question. Okay, so I'm going to take a bit of a controversial question, but I think it's a question that it's in a lot of mine. So Sean Murphy asked to Alejandro, what is the annual carbon footprint of your mining activity? How much of pulling's hash rates is linked to fossil fuel power stations? What is pulling doing to offset its carbon footprint? I'm sorry for the controversial question, but I think a lot of people are wondering the same thing. So maybe. Alexandro, would you comment?

I get this question every single, basically every single day. Well, look, a lot of the mining, as I showed earlier in my presentation, is taking place in China. And exactly where in China is in the Sichuan region, at least most of the year. And that region is 100% hydroelectric. So if you, if you, if you then take, if you look at the numbers or the average or excuse me, the percentage that is mining in China is around 65%. And if most of that is in the Sichuan region, if not all, I think then you, you can come to the conclusion that 65% of at least 65% of the, of the mining is hydroelectric. Now if, now let's, let me, let me add a little bit to add to, to that answer. A lot of miners are also based in Iceland which is geothermal. Love miners based in Norway, Sweden, which are hydro and Canada, northern United States are also hydro. So I'd say that, I'd say that around 70, 75% of the electricity used for, for bitcoin mining is of a green source. So already this whole notion that it's very bad for the environment is, is incorrect because a lot of this, the reason why miners are in these regions is because there's a surplus of energy used by these green or hydroelectric power plants, geothermal. So miners connect to them at a cheap price. I suspect the future is going to be the same. This trend is going to continue.

All right, thank you very much. Just very quickly before we move on to the networking meltem, can you connect us again? You posted a very interesting comment. Maybe you'd like to say this out loud so our audience can hear it.

Sure, yeah. So we do a lot of research on the state of the bitcoin network at Coinshares partially because we want to understand the CAPEX and OPEX that goes into producing Bitcoin so that we can do both a supply and demand driven model, but also cost production driven pricing model for Bitcoin. So we have done this research now four times in a row. We're about to publish our newest report. I linked it in the chat. But according to our research, which is very consistent with what Alejandro expressed, as of last December, 75% of all Bitcoin mining was done with renewable energy that would otherwise not be utilized. And big topic I've been writing about and speaking about is the ability for places where there is power generation that can't be brought to market in an economic sort of way. A lot of people are using bitcoin mining, but also data centers, GPU processing capabilities for rendering, protein folding and other compute intensive sort of processes using this trapped energy as a way to convert energy into monetary value. In a way, Bitcoin is actually a money battery, which is pretty cool. And as a result, many countries and regions that are energy rich but not necessarily able to monetize that energy, for example, Morocco, Kyrgyzstan, Azerbaijan, are looking at bitcoin mining as a way to convert natural resources and natural sources of power into monetary value. So in a way, there's a really dorky phrase I like to use, like Bitcoin is a continuation of the laws of thermodynamics which state that energy can neither be created nor destroyed. And so by converting energy into money, which is another form of energy, effectively, we're just continuing that cycle.

Very, very interesting. And also the point that you were making that some sources of energy wouldn't be used. So maybe with a lot of people needing this energy, increasing the demand might make these technologies more efficient, actually. So maybe in one sense, bitcoin could be environmentally friendly to make us develop more clean energies.

Well, I mean, look, we're rapidly approaching a state where compute is becoming cheaper. Data storage is almost effectively free at this point. And pretty soon in our lifetimes, I think of one terabyte hard drive used to cost $1000, then it cost $100, now it costs $10. In the near future, terabyte of data storage will cost next to nothing. So as we look at the declining cost economics around both compute and connectivity, which are big drivers, I think the next thing we need to think about is the power that goes into it. And ultimately we are looking at different sort of transitions in terms of how energy intensive human activity is. As things become increasingly virtualized, you need increasingly more computer. And so I think there is this natural tipping point where you have to find different ways of using different low cost efficient sources of energy. So I think in a way, actually, bitcoin might accelerate the growth of alternative fuel sources, but also potentially accelerate the use of nuclear sources of energy.