TRANSCRIPTION

Peter McCormack: Hi Daniel, how are you?

Dan Held: Doing well Pete!

Peter McCormack: Back on the show, second appearance man. Is the second or third?

Dan Held: It's the second, should've been the third by now.

Peter McCormack: Yeah, well do you know what it was? You know I like doing them in person and your first one was remote.

Dan Held: Yeah unfortunately we're on different sides of the Earth!

Peter McCormack: Although we've met up a lot of times. How long have I known you, like six months?

Dan Held: I think I've probably seen you at least six or seven times in that timeframe.

Peter McCormack: We see each other monthly in Europe and here in America! Anyway, welcome back. So firstly, because we're going to get into the UX and the design stuff that I've been talking about, maybe talk about Nodegate, but you've had some changes so let's talk about that.

Dan Held: Yeah, some pretty big changes. So for those who don't know, I co-founded a company called Interchange, which was a company that helped institutional trading and infrastructure reconcile their trade activity. So most retail traders understand that their taxes are very complex when it comes to getting together all their on-chain data and exchange data.

So we essentially did that same thing for institutional traders and we were recently acquired as if a month ago by Kraken. So I'm coming on board as director of business development across multiple Kraken products and Interchange will still exist and will continue to service those institutional traders who we think is a really good fit for Kraken's other suite of products.

Peter McCormack: And I like Kraken!

Dan Held: I think Kraken's a pretty awesome company.

Peter McCormack: Pretty fucking awesome company. If you're not trading on Kraken, what are you doing? They're the best website for buying and selling Bitcoin, it's like my ads!

Dan Held: I think this might be an entire Kraken ad, the whole episode.

Peter McCormack: They'll be like, "fuck you Pete, you're such a shill! You're only doing this because you're a paid shill." But no it is a cool company.

Dan Held: I've known Jesse for almost seven years now. When I first moved to San Francisco, I met him and others at the Bitcoin meetup and that was really, really cool back then, because back then it was only like Jesse, Jered Kenna from Trade Hill, he owns 20Mission. The meetups were actually hosted at 20Mission and there was a Jed McCaleb, Brian and Fred from Coinbase, Charlie Lee, it was a very, very small knit community and that's where I first met Jesse.

The reason why I really like Kraken is Jesse ploughed a lot of his own money into it and he really believed in it and not many Silicon Valley founders do that. Most Silicon Valley founders take a lot of VC capital, but Jesse kind of did this all on his own, which I really, really admire him for that and he also has those original cypherpunk values of being more libertarian and that really resonates with me. So I couldn't have picked a better spot for my product to end up at.

Peter McCormack: Yeah and Jesse's just a fucking badass, let's be honest!

Dan Held: I think that's the TLDR.

Peter McCormack: Everything he did where he was like standing up to New York and Ben Lawsky's absolutely bullshit, it was a good thing.

Dan Held: The way that I put it is that Jessie's principled and I think we see that inside the company and externally.

Peter McCormack: It's funny when I watch him tweet, I'm like, "God, I need to behave more like that." I need to be more responsible, grown up, just come in and cut like a knife.

Dan Held: Yeah, he's got a great perspective on the space. I think being in the trenches so early teaches you a lot of things and I think that's a quality that he likes to see in others. I think that's also why we were a good fit for Kraken and Jesse, was that Clark Moody and I have both been in this space for a long time and we've gone through some of the same struggles that he has. Not the same exact ones, but they kind of rhymed. We've gone through a lot of peaks and troughs.

Peter McCormack: Yeah I mean I've experienced it myself dude. I had a lovely bull run in 2017 and then lost most of it, got to a point where I honestly didn't know what I was going to do with my life. I had the podcast, it wasn't making any money and my little investment portfolio was dying. That's taught me a lot.

Dan Held: What was your peak to trough again? It was a pretty intense one?

Peter McCormack: It may have been like $1.2 million to, I'm not going to say how low it went, but it got pretty ropey, pretty scary, but it taught me a lot. Actually it taught me a lot about saving and the value of money as well. One of the best things that going Bitcoin only, is that ever since then, my Bitcoin stack has only grown, its only gone up because I follow the stack sats. Every month I acquire more Bitcoin than I let go. I'm very conscious about not letting go of Bitcoin and when I do, it has to be the right decision. I convert part of my invoice bills into Bitcoin, I'm really conscious about that now.

Dan Held: Yeah it's funny because a lot of people in our Keynesian inflationary environment, we're not taught to save and we see this reflected in consumer credit, whether it be auto credit cards or student loans and Bitcoin kind of forces you to think about saving.

It teaches you how to save through the most tumultuous waters out there because hodling Bitcoin through massive price appreciation and huge decreases in value, teaches you to really believe in an asset and really stick to your guns in terms of, let's say you buy a piece of real estate when you get older and that piece of real estate immediately loses 20% of its value. If you're a Bitcoiner, "well ok, I've lost 20% in a day before. Losing 20% in a year is nothing."

Peter McCormack: Yeah it does, you're absolutely right. I reckon amongst a lot of my friends, most of them are living month to month. Most people are, everywhere you see, people are living month to month. You know what you earn, so you start with your house or your rent or your mortgage and then you add a car and then you add your bills and then what have I got left? All right, that's my clothes and holiday and everything. Very few people save. Most people if they lost their job, if they don't get a job within a month or two months, they're pretty fucked.

Dan Held: My age group spends all their money on avocado toast, so we don't have a lot left after that!

Peter McCormack: Yeah that $13 avocado toast or when I stayed in San Francisco recently I wanted to get some dry cleaning done and it killed me. It was like $8 for a pair of boxer shorts. I was like, "I can buy new shorts for that!"

Dan Held: Yeah, you might as well just keep buying new ones.

Peter McCormack: Whereas in Vietnam, I tweeted about this, I did a week and a half of washing of mine and my kids, were talking about like a whole big sack of clothes, I think it was like $12 or something. It all came fresh, clean and pressed.

Dan Held: It's a strategy that a lot of Bitcoiners do, which is during the trough cycles, they go hang out in Vietnam or Korea or Thailand and just live really cheaply for a while.

Peter McCormack: Hey, those early days though, you talk about that. I've heard about these early days, Charlie Lee told me about them. How was it different? Because obviously it wasn't like this global currency that everyone was using. We didn't have derivatives, we didn't have fidelities, it was a grass roots thing. It was just this idea that a lot of people would have seen and said, "yeah whatever" and laughed it off.

Dan Held: Most did!

Peter McCormack: But there's like what I did in 2013, I laughed it off. I bought some to buy some products online and bought and traded and then forgot about it until about 2016, I thought it was nonsense, but like that core group of you, you believed in something. What was it like?

Dan Held: It was a really tight knit group of, I think believers is the best way to put it, not just enthusiasts but believers. I was one of the first non-technical people to be into it. I'm sure there's many others across the world, but in San Francisco I was one of the first non-engineers or non-Wall Street sort of guys like to really dive in and be like, "oh this is interesting." I think in that time it was very heavily engineer focused because a lot of people said, "how can I trust this?"

And engineers at least could go look at the code if they wanted to, they could play around with it. I mean my first wallet was the Bitcoin QT wallet, which I don't know if any of you all listening to this have interacted with that wallet, but it's the core developer wallet that is provided to consumers and the interface is pretty damn terrible. I love the core devs out there, but they're not UX designers. So you had to overcome huge amounts of friction back in the day, having to wire money to Mt Gox.

I didn't have a lot of disposable income, I was a few years out of college, so wiring money to Japan, taking a couple of days to get there and then I didn't know what an order book was, so going and placing an order on an order book, I'm like, "what's a market versus limit order?" This is back in 2012 and then I'm like, "okay, so on-chain what is confirmed or unconfirmed mean?" And then I'm like, "private keys, what are those?"

So there was almost... I mean the only data or research or user guides back then were on Bitcointalk. So the Bitcoin subreddit really wasn't popular back in 2012, it was the Bitcointalk forums. Later in 2013 the subreddit became popular and then CoinDesk was created in 2013. I created one of the first newsfeed aggregators in 2013 and that's where I actually read almost every single mainstream article that was published and was really keen on finding new blogs that were popping up in the space.

Peter McCormack: Right okay! It was funny you should talk about that UX thing because that's what I want to talk to you about today. Do you know what a good starting point is? Let's talk about nodes. Are you running a node Dan?

Dan Held: I've got my Casa node.

Peter McCormack: Did you have a node before that?

Dan Held: I did not.

Peter McCormack: Wow, so that's a confession! So you've been in this space since 2011 and your first node was a Casa node?

Dan Held: I am somewhat of a controversial Bitcoiner, I prioritize user experience more than almost anything else.

Peter McCormack: Alright, but let's get into this. So why had you never set up a node until that point?

Dan Held: Well to be frank, there's not much of an economic incentive for people to set up a node.

Peter McCormack: But you're meant to be a good Bitcoiner?

Dan Held: A good Bitcoiner would yes. But I think the hardware device, like the Casa node indicates an inflection point in the space where we're still humans at the end of the day, we like to feel things that are in the real world that we can touch. We have to trust in mathematics, we have to trust in things, but when we can touch them it makes it a little bit more real and I think the Casa node was nice because it prioritized user experience for setting up a full node and I had a fantastic time setting it up. I mean certainly there were still some hurdles, but it was pretty easy, kind of a plug and go sort of thing or plug and play. I think Jeremy's vision for the product is that this is kind of the hardware device to enable you to be sovereign.

Peter McCormack: It's the cypherpunk box.

Dan Held: It's the cypherpunk box and so I think that's really cool. When you combine a hardware node with many other things, I think that really unlocks its value in an awesome way.

Peter McCormack: Alright, well let's talk about what happened with me specifically because I was talking to a dude, I can't remember his name on Twitter, we were having a conversation about it and I was like, "look, I've never actually sat my node up." So I downloaded Core and I sync the Blockchain and then I never really did anything with it and then my daughter needed a laptop, so I wiped it and gave her the laptop. Then my Casa node came and it just sat there on my shelf, I didn't do anything with it.

Then I said to this guy that I just never really got around to it. I said, "do what, I'm going to be honest about this and I'm just going to go out there and be transparent about it" and I've been trolled relentlessly for it, like called an idiot, you're this, you're that blah, blah, blah. Which is fine, I can take it on the chin. But what I will say is, there are definitely more people who are now operating nodes now than before when I did it, because of talking about it and doing a show about it. I'm not an idiot, creating a node isn't hard

Dan Held: No, you're a sharp guy, setting up a node, it seems daunting. They've got this like 30 step process and Casa node really shrunk that down and made it real, made it more tangible. If we look at any early technology, there's usually like this litany of steps that you'd have to do to use the first iteration of the product. So I think these are easily obfuscated sort of friction moments, to get a node set up, where in the future it should be pretty easy. I mean, so easy that your mom could do it.

Peter McCormack: Yeah, I mean it will be like switching on a computer. It'd be installing, it'd be like switching on a phone, it would just work. But the point I'm trying to get to is that there's almost this... Like I'm a marketing guy as you know. I've worked in advertising for 20 years, I'm a UX guy, I did 4 years UX design.

So design, marketing, UX are really important to me, but in approaching it, sometimes it feels like it's almost a little bit scary for some Bitcoiners, like “take your marketing bullshit, take your UX, go away. This is a grassroots movement, this is cypherpunk, we don't need this, we don't need a beautiful interface!”

But also those same people, I expect they want Bitcoin to moon. If we want to take Bitcoin from millions to tens of millions of people, everything has to get a bit easier. Everything has to get a bit easier to use. We've got to look at design and UX and look Casa are doing this, BlockFi are doing it, but not many are.

Dan Held: I mean back in 2014 I said some pretty controversial stuff that kind of stirred up the community.

Peter McCormack: Oooh, what did you say?

Dan Held: I said, we shouldn't teach people how Bitcoin works and we should teach them what buttons to press. That back in 2014 was an egregious breach of Bitcoin standards.

Peter McCormack: Well it might be now!

Dan Held: I think so too. I think a lot of Bitcoiners want people to understand how the core protocol works and the incentive models, but you notice 99% of people aren't going to get there. I've written a series of articles trying to reduce the gap.

It took me seven years to understand the space as I do now and I started writing because I felt like I had an obligation to make that ladder a little bit shorter for everyone else. But it's still not a very short ladder and at a minimum we're talking months and we're talking months of researching or keeping your mind open enough to ingest this new information to change it.

So yeah, I think we should build interfaces that are intuitive in that delight. This is classic Silicon Valley product thinking and I think we can port that to Bitcoin in a healthy way. I'm also somewhat controversial in my feelings around private key management. If the risk of you losing your private key is higher than someone stealing it, then maybe you shouldn't manage your own private key, AKA grandma. Grandma should probably not manage her private key now. We have an obligation to go build better interfaces to where she could someday. But it is still very hard to manage a private key.

Peter McCormack: Yeah, I totally agree. I'm going to tell you something controversial. I purposely don't go and study Bitcoin in absolute detail. I purposely don't put myself in a position where I understand everything maybe to a level you will on incentive models and I don't do it on a tech level. The reason I do that is I've always wanted this show to be for beginners or people who don't have much time and I want to be confused.

I want to look at something and go, "I don't know how that works" or I want to look at something and go, "why are we doing that?" So I can question it and create content that helps people understand. If you understand everything you, bypass that, you'll get into deeper conversations about Bitcoin. Stephan does that brilliantly already. Marty and Matt do that already. I want to look at things and go, "I don't understand that."

So for example, I know the node comes with a wallet, but trying to think in terms of UX, I was like, "is a node a wallet? Does a node have a wallet? What does this mean? Should I use that wallet instead of my hardware wallet? If so, is there any opsec issues with someone coming into my house or knowing the fact that I've got a node? Is all my Bitcoin on that node? Can I have multisig with that?" I want to ask those questions but I'm not going to ask those questions subjectively if I know everything.

Dan Held: Right, I think UX has been woefully undervalued in this space. I'm pretty close with Dan Elitzer, the head of the Blockchain research done over at IDEO and Dan is pretty phenomenal. I don't know if listeners here know what IDEO is, but IDEO is like the premier design consultancy. So Dan a couple of years ago, him and I have stayed in touch since we first met a few years ago, he actually introduced me to my co-founder, Matt Galligan.

Dan and I put together a working group that only existed for a brief period of time, but it included the head of design at a few very major crypto companies that I'd like to keep private for their confidentiality, but we came together to work on design standards. For example, what does a confirmed versus an unconfirmed transaction mean to a layman?

I mean unconfirmed is a scary word, "wait, so did it not work at all?" "Propagating" might be a better way to put it or "waiting for confirmation" and then "one confirmation", two confirmation" or is it one, two, three or four? Which one is the proper...

Peter McCormack: It's really too much, that's already too much.

Dan Held: Yeah, that's already going to blow most people's minds in terms of what they're capable of comprehending.

Peter McCormack: In some ways, it's almost like, "is this a cleared payment or uncleared."

Dan Held: That's what the consumer wants to know, that's what the layman wants to know, is did it work?

Peter McCormack: But Dan, if you want to be a self-sovereign individual, you've got to go down the rabbit hole and you have to learn all this. That's what I got told. I got told anyone can figure out how to set up a node just by going on Google and I think they missed the point. If you want maximum throughput, stop thinking "can people", how do you make more people?

Dan Held: I get their perspective, which is that if you don't want to go through the minimal amount of friction to go set up a node or learn how wallets work, then maybe you shouldn't own Bitcoin.

Peter McCormack: You don't deserve Bitcoin!

Dan Held: Kind of like that. I kind of disagree with that.

Peter McCormack: I do.

Dan Held: I think we don't have that threshold for anything else that we use in life. So there's no reason why... I think there's so much more complexity in the world, that we could probably halt innovation right now, no new technology could be developed and we would only just build better interfaces and we would probably have our work cut out for us for a hundred years.

Peter McCormack: Yeah, we've got enough cool shit now. Like what are you missing that you need?

Dan Held: Well, I'm still waiting for my jet pack and my teleporter and my meal pill. I'm going to be cryopreserved when I die, so we got to get that technology a little bit better!

Peter McCormack: But that's the point Dan, people often say "Bitcoin is the best form of money we've ever had." It's not going to be the best form of money if most people can't use it, if they don't understand it. It might be the hardest, "I buy the hardest", but it's not going to be the best if people just choose not to use it because they find it too difficult or they don't understand it.

Dan Held: Yeah, I mean Bitcoin was made as an antidote to bad central banking policy. So we have I think a moral objective as Bitcoiners to make it as easy as possible and we're not there to play education police and force people to learn about it if they don't want to. We should encourage them to at every step, we should reduce the friction in the interfaces, we should build the best educational resources out there for them and just hope that they hope that they like it and hope that they read it.

Peter McCormack: All right, well let's start with UX, let's cover UX. We'll do marketing, we do design, we'll do them all separately, we'll talking about growth and growth marketing as well we'll talk about. I love the term "growth marketing" because it triggers people, they think of some kind of evil shit. I actually wrote about marketing because I think there's good and bad marketing and there is moral and unethical marketing. But marketing itself isn't bad.

Dan Held: Sure, but everything's on a spectrum, there's no black and white.

Peter McCormack: Marketing is useful as long as you're not misleading people and lying to people. Marketing is actually useful for putting products in front of people

Dan Held: And I think people forget that before performance marketing, where you could really track an ad through different applications and you can track someone's behavior on other apps and customize those ads for them, you were inundated with non-relevant ads all the time. Just billboards on billboards and newspapers with ads that were made for the entire population and now the ads are much more tailored to you, which means that in a perfect world, a perfect world where ads work as they should, you're told what you want before you want it. Is that such a bad thing?

Peter McCormack: It's like Minority Report.

Dan Held: A little bit, but maybe you really do need that item. I'm a big fan of saving obviously being a Bitcoiner for this long, it takes a lot of discipline to save and I think saving's admirable, but we are human after all, we do have to consume eventually. Consuming means we have to buy things and it would be nice if we didn't have to spend 10 hours researching what the best pillowcase is and instead were surfaced an option that's a pretty damn good option.

Peter McCormack: Well look, we're going off on a tangent here and I've got interesting views on advertising. I think right now we've peaked now in terms of the opportunities for advertisers to direct the perfect ads to people, to actually serve them the most perfect ads. It's actually going to go backwards again now because we're going into the world of better forms of privacy. I had Daniel Buchnar from Microsoft on to talk about private identities. We've got Apple bringing out their privacy option for logins.

Dan Held: They have a huge billboard in downtown LA that talks about privacy, it's an entire building.

Peter McCormack: Wow! Well look, so these companies are going to be losing access to data. Google are going to lose access to data, Facebook are going to lose access to data. So we've peaked now, so we're coming backwards. I personally never had a problem with ads being targeted to me based on things I've searched for or based on things I've said on Facebook, it doesn't bother me. What I do have a problem is, is having Siri listen to me and have all my emails read, to target ads to me because I don't want people accessing things which are private.

Dan Held: Life is always about expectations and I think our expectations were that, that that sort of thing wasn't happening. Then when we found out it was, we were like, "oh my God, this is terrible." So I think given that you... I'm a libertarian, so if you opt into something and it's explicit and you really understand what you opt into, then that's fine. If people are kind of being manipulative and tricking you, then that's not okay, kind of like bitcoin.com with them intentionally misleading noobs to buy Bitcoin Cash.

Peter McCormack: Yes, of course.

Dan Held: That's definitely unethical.

Peter McCormack: Yeah, fuck you Roger!

Dan Held: I believe in doing good business and good business means you're not trying to trick someone.

Peter McCormack: Yeah, I agree with you on that point and one of the funny things was there's that guy, I forget his name, Matthew Green? He wrote a really interesting article about Google Chrome when it was integrating directly with your mobile version of Chrome and the data it was storing. I was like, "this is terrible!" I ended up doing a show with Lopp about op-sec and I was like, "you know what, I need to sort this out. I need to sort my privacy out."

So I deleted Chrome, I deleted all my data on Google and I switched off my location services. I ended up being in San Francisco and having no location services on your Google search is actually annoying. I want you to know where I am because as I'm searching, I want you to know I'm in San Francisco. So in some ways, privacy actually needs usability. I want to be able to have like a menu of things that you can have to make my life easy. You can know my location because that's useful, but you can't tell anyone else my location.

Dan Held: Apple has geared a lot of their marketing around privacy now, which is really interesting because Apple is one of the most legendary brands in human history and they have some of the most genius people working on that brand. So for them to switch their narrative to privacy is big.

It means that they must have done a ton of research and really dug in deep on what matters to people and now that they're advertising privacy, I feel really good about that, because before their marketing wasn't ever on privacy, it was more of just like "iPhone's a lifestyle", but privacy making that their big go-to as "this is who we are", is really encouraging.

Peter McCormack: Well you think about these big Silicon Valley behemoths, let's say Facebook, Google, Amazon, Apple, Microsoft. What is the downside to Facebook offering much higher levels of privacy? They're going to have less data to sell ads.

Dan Held: You're going to have like an 80% drop in the revenue.

Peter McCormack: What's the downside for Google?

Dan Held: Same thing.

Peter McCormack: What's the downside for Apple?

Dan Held: Not much of a downside, it's good differentiation for Apple too.

Peter McCormack: I can't even spot the downside! So there's no real downside because their revenue is based on eCommerce sales and hardware sales. So I guess they use a bit of data within the App Store. but not a lot. There's no real downside, but look at the upside.

Dan Held: I wouldn't know about the App Store... I mean I wouldn't say that definitively around the App Store because I used to do App Store optimization at Uber and I used to have to work with the App Store team directly and let's say it's probably more private than you think, because we had a hard time getting some data that we needed to best target our users, for example like landing page optimization.

So when you land on an App Store page, that page is configured based on your device localization settings, your address and your lat/long. So we struggled with Apple to get enough information to enable us to craft the right messaging on those pages for our users. So I don't think they have as much data as you think.

Peter McCormack: But they do have this upside and I had a Fluffy Pony on my podcast a long time ago when I wanted to do a show about Monero. So we had a long chat about privacy and he was very right in that show. He said to me, "this will be led by a company. Companies will do this.

A massive company like Apple will put privacy at the front of their business and that's where it will make a difference." Because look, I can do a show with Lopp, we can talk about privacy and a handful of people might go and change some of their settings, remove a browser. But with someone like Apple doing it, they're actually going to make it mainstream.

Dan Held: You have to build it in. You could maybe make it explicitly opt in, but you really have to build it into the hardware. For example, I always use this as kind of an estimate of how many people really care about privacy is, are you running a VPN on your mobile device?

Peter McCormack: Do you know what, I have one!

Dan Held: I know you have one, but do you run it all the time?

Peter McCormack: No I don't, and do you know what, I don't know why. I had one for a strange reason. So I've got Sky Sports, which is like HBO.

Dan Held: Ah, content restrictions!

Peter McCormack: So I come out to the US, I can't bloody watch the football!

Dan Held: Even though you've already paid for it.

Peter McCormack: They won't let me because I'm out here and it's content gated. So I used to have a VPN, but it doesn't even work with a VPN now. That's the only reason I've got it. I don't even know why I should have a VPN and this is the problem. Most people, they're working hard, they're busting the hours, they might have kids, they've got very little free time and most people don't have the skills or the time to get to this level of privacy.

Dan Held: It's the same thing where if you have an issue with your car, you're going to go to a mechanic, not read a hundred pages of manuals and then do it yourself.

Peter McCormack: No, but there's like the odd one guy who would. There's like a Lopp mechanic, who's in his car and he's tuning it!

Dan Held: It's the specialization of labor. We aren't experts in everything, so we rely on others to tell us what to do and or we rely on them to build products where it's baked in.

Peter McCormack: You can summarize all of this by saying "UX sells". There's a reason why people invest in UX. There's a reason why, and by the way, everybody who says an Android is better than an iPhone, is a liar, they're just a liar and I don't believe them! Three or four times, I've tried to use an Android and I'm like, "this is hard." Did you go to Android?

Dan Held: No, I'm on iPhone. I've had an iPhone since the iPhone 3G.

Peter McCormack: Okay, have you tried to play with an Android?

Dan Held: Yeah, I've got a Nexus Five.

Peter McCormack: What do you think?

Dan Held: It's all right, it's just not as snappy. I don't know if we're going to want to anger all of your Android listeners! But certainly Apple over indexes on user experience.

Peter McCormack: But they changed the game with mobile phones. I can't remember the phone I had before I had an iPhone.

Dan Held: I had a flip phone, with a color screen and I could browse the internet.

Peter McCormack: Do you remember your first phone?

Dan Held: I do, it was a Sprint!

Peter McCormack: I had a Motorola StarTac, which was a flip phone and I tell you how shit the UX on that was, like there was no games, this is pre-games. When you wanted to send a text message, you couldn't select somebody from the address book. So you had to go in and get their number from the address book and write it down. So back then I knew all my friends' phone numbers, all my best friends because I kept doing it over and over again.

Dan Held: Back when we actually remembered phone numbers!

Peter McCormack: Yeah you did, you remembered phone numbers! I think the phone I had before my first iPhone, I had a Sony Ericsson P900 or P1000, I can't remember what it was. Then whatever it was, like when Apple first announced they were doing a phone, it was kind of exciting and they just changed the game because of UX.

Dan Held: Well let's see, I don't really wash my clothes by hand for fun. I use a washing machine and I use a dryer. There are these kind of monumental leaps forward in user experience to where I'm never going back. I'm not going back to a flip phone, I'm not going back to washing my clothes by hand and I think we need to be empathetic towards the average person and build things for them because they're ultimately the user of Bitcoin.

Peter McCormack: Brilliantly done, I was thinking I've got to bring this back to Bitcoin and you've done it for me! So bringing it back to Bitcoin, is there any risk by making it too easy, that we take away some of the security benefits?

Dan Held: Also when I worked at blockchain.com, I was the first product manager at Blockchain, we thought about, how do we educate people around private key management. I mean we even thought about skull and crossbones, like if you lose this, it's death for your Bitcoin!

This is a serious issue, private key management and that's where I have that controversial stance on it, is because I worked at blockchain.com and saw so many people not ready to be their own bank. Certainly some people are, and I liked that messaging, but we should remove my own personal feelings towards what people should do and look at what they will do and a lot of them will forget their password.

Peter McCormack: But can you simplify private key management? In the end does it have to be a set of words that's going to be written down in three places?

Dan Held: I'm really bullish on multisig. Now not two out of three, I think that's really risky, but more three out of five or larger key sets to where you could have many, many signatures. There you have a good balance between trust minimization and also user experience and making sure you don't have a sort of a catastrophic key failure event.

Peter McCormack: So I'll tell you my problem with multisig. I don't actually fundamentally have a problem with multisig. This is going to be my next confession where I'm going to get another battering, but I've never used multisig. That was my next thing I'm going to do. I've got all these things I've not done that I should have done, so I'll get savaged for weeks and Bcashers will savage me on Reddit.

Dan Held: r/BTC is pretty funny to go to. I think you and I pop up over there quite a few times.

Peter McCormack: I just go in there and troll them. They're like, "who listens to this moron?" And I'm like, "yeah, who listens to this moron? Why are you listening to me?" They're like, "he's not technical!" I'm like, "yeah, I'm not technical!"

Dan Held: Did they come up with a conspiracy theory that you're an alien now?

Peter McCormack: No, the conspiracy theory is that I am paid off by Blockstream and I actually tried to get Blockstream to become a sponsor and they were like, "no." They wouldn't do it! But now when they troll me, I'm like, "I'm just doing it for my Blockstream cheques!" But the point being is that the thing about multisig is, for me multisig is for the Bitcoin rich. So if we go into the world of hyperbitcoinization, we still might have people living month to month on their Bitcoin. I don't think they need multisig.

Dan Held: Yeah, I think there's an old concept in this space as well, that you would have your checking account and your savings account. In hyperbitcoinization where Bitcoin is a unit of account, you'll do the same thing. So maybe your savings account is a nice strong multisig setup, whereas your checking account is this hot wallet on your phone with like $200. You certainly don't want to walk around in person with $100,000 in cash.

Similarly, you wouldn't want to do the same with Bitcoin, but you can easily go to an ATM and do other authentication measures, to then withdraw more money or you have certain credit lines open like credit cards. I think we'll see some of that still remain in hyperbitcoinization, Bitcoin fundamentally changes everything about money or the core store value, essentially that money that is the glue between everything in the economy.

Peter McCormack: So I guess what you're saying is it's almost like a checking account and a savings account. In some ways, there are like forms of security in place for your bank accounts. So I have it over here, if I spent say $3,000 on my card, if I tried to buy something, it's not going to go through. I get a text message come through or something or I get a call...

Dan Held: Anti-fraud measures.

Peter McCormack: Yeah anti-fraud measures. So essentially multisig is kind of like your anti-fraud measure.

Dan Held: Sure, you can build in velocity, to where like maybe one key doesn't sign if there's a weird velocity. So velocity means like the percentage of coins moving relative to the rest. A hundred percent draining of the wallet, it's going to be like "well I don't know, this seems a little fishy."

Peter McCormack: "Are you sure you want to do that dude?"

Dan Held: The user probably would be happy with you flagging it versus letting it go through, because maybe they have to jump over a few more hurdles to make that happen. But I assume if they're going to move that much money, the program essentially assumes if they're moving that much money, they'll be fine with the additional friction.

Peter McCormack: All right, well listen look, if we try to consider a world where there are more Bitcoiners, we want it to moon of course, but we want tens of millions of people coming in. We want Bitcoin to grow, not just for our personal wealth because we want to get rid of the central banks and change all the bullshit that we talk about over and over. But if we want to get tens, if not hundreds of millions of people in, what do you think are the biggest UX challenges that need to be dealt with?

Dan Held: Private key management. Private key management is the most critical fundamental, I think misunderstood part for newbies. It takes a long time to understand what a private key is. We come up with analogies like keys and vaults or safes, but it's kind of tricky to really build education around that to enable people to grok what's going on. I think not a lot of people are used to these circumstance of, "oh I lose my password, I lose all my money." That's where we semi-serious joked around at Blockchain putting like a skull and crossbones over, "if you do this, it's gone."

So private key management is fundamental because from there, I mean with the Bitcoin private key, you can sign other things as well. That's kind of your base layer for being a sovereign individual, is managing your private key correctly. From there, I guess you could say maybe before that is awareness. So user experience around just building great educational tools. That's why I started writing as I felt like I had an obligation and when I first got into Bitcoin, there's just Bitcointalk. Now we've got awesome Medium articles, we have videos, there's a ton of YouTubers, there's podcasters, I don't even think podcasting was a thing when I got into Bitcoin in 2012!

Peter McCormack: Maybe?

Dan Held: There was like talk show radio like Howard stern and stuff.

Peter McCormack: But like even with that, brand new person, say my friend Justin, he knows about Bitcoin, but just say he doesn't, we have a conversation with him afterwards and we say, "Bitcoin is this new money, you should hedge yourself, you should buy a bit. Go on Kraken, buy a $100, $500 worth and put it away" and it's like cool, but what you need to do is you need to understand private keys.

He's going to say, "well, what are private keys?" Well then you're going to have to start explaining what private keys are, what public keys are, what happens if you lose them, where you need to keep them. These are big steps! Do you think there's any way to even abstract away or do you think by abstracting away private keys, you are decreasing security?

Dan Held: That's a great question. I certainly think it's more of a spectrum to where you lose some of that sovereign individual spirit, the easier you make it to a certain point. People get too comfortable storing their coins on Coinbase. If that happens and everyday that Coinbase doesn't have a hack, people get more and more comfortable and that leads to a bad situation. I think that's why a lot of Bitcoiners are so vehemently against trusting someone else with your private keys is they've seen all these other exchanges fail.

So have I, but I wasn't stupid enough to fucking leave money on Mt. Gox! So I actually worked with Wired and Wall Street Journal on this, which they didn't publish until it was too late, but I still have the old emails from it, to where I calculated the spread between Gox and Bitstamp and the only way to explain the spread, was the going concern risk combined with their banking issues, because you couldn't withdraw fiat unless you had a Japanese bank account. Despite no matter how much I screamed about it six months before it happened, they didn't publish it.

Then later we all found out they did have issues and it was pretty transparently obvious to me. So I didn't have any money in Gox. I didn't invest any money into investment schemes. Yeah I mean I dabbled in a couple of other currencies just to play around with, but I largely avoided getting rekd from a hack or from mal-investment and don't think it took a genius to do that. Just took someone who had a due diligence mindset of just being practical about it! Now that we have companies like... You know I think we see this push back as well with BlockFi. I did a tweet storm...

Peter McCormack: Yeah you got some shit for that!

Dan Held: I got a lot of shit for that!

Peter McCormack: Do you know what, it's funny. I don't have a problem with BlockFi, I've done my research. I know some people do and some people don't. It's like, it polarizes people right? Some people are like, "this is the future, this is financial services. You're selling risk, it's cool." Others are like, "this is encouraging people to not manage their private keys."

Dan Held: Yeah, a lot of people are worried and there are very justifiable reasons why they're worried. It is risky.

Peter McCormack: Of course, but financial services are risk. It was different for me than you. I knew I could have put out my referral code as part of my ads. I can't cross that line as a somebody who's reading sponsorship ads. But I know if I'd had done it though, that I would've made a shitload of referrals, but I didn't. But you did and you should explain yourself because you're welcome to do that.

Dan Held: Yeah, well I've known the BlockFi guys for quite some time now. I think lending and borrowing is a critical market function that will always exist, whether or not we're in hyperbitcoinization or not. I spent some time researching it and I thought it was a really cool way to earn incremental return on your Bitcoin. Now I wrote up a tweet storm about it and shared my referral code. What I did there was a couple of different things that I felt was the only ethical way that I could shill something.

So I've only shilled a few products, one is Kraken, because obviously I love kraken, BlockFi, Lolli and Pay. They are only things that I use and or work at and or really, really liked the leaders and what they're building. But as well with BlockFi I wanted to take an extra step to show that I wasn't just shilling the shill, that I actually believed in it. So I put 10 Bitcoin on it, for a minimum of a year. So I'll probably leave it there for longer, but I'm not sure many other influencers in the space were willing to risk $100,000 because they believe in something so much.

So I put a $100,000 dollars down when I wrote up my tweet storm, there's three times in all caps where I say, "this is risky." I don't really push people that hard and go "basically this is my journey. If you want to join that journey, cool. If not, you don't have to." As well I sacrificed my own referral fee for about a year and gave that to people that use the promo code.

Peter McCormack: I put 20% of my Bitcoin in.

Dan Held: 20%, that's a lot!

Peter McCormack: Yeah, but that was the risk I was willing to take. I looked at it and I was like, "okay, I'm willing to risk 20%." If I lost that, obviously it would be devastating. But I did my own research, I got to know Zack very well. This isn't Bitconnect, this is a guy who's not going to suddenly run off one day with your Bitcoin and go and live in Panama.

Dan Held: And that's a good distinction because I think Bitcoiners especially have PTSD from Havelock investments and all these old scams. So I think people still have that PTSD and so when legitimate companies come around, they're like, "whoa, I don't know about this" which is good. You should have, "don't trust, verify" sort of attitude.

However, if you keep that attitude perpetually, you're going to lose out in a lot of opportunities in the future. But I'm not telling you to part from your Bitcoin, I'm just saying these are more legitimate companies that we've ever had before. There'll be a continual development of more and more mature companies with better risk management systems and more qualified individuals to run them. So we shouldn't be afraid, we should be cautious.

Peter McCormack: Alright, well listen look, you know I'm working on my beginner's guide right?

Dan Held: Yup.

Peter McCormack: By the way, I think it was because of you, lesson one has actually changed.

Dan Held: Oh really?

Peter McCormack: Yeah, so originally episode one was going to be "what is money?" It's gone now. But that's staying in there actually episode one is now...

Dan Held: That's my section right?

Peter McCormack: No you are the monetary policy. More like the way Szabo talks about what is money, but episode one is now "why Bitcoin."

Dan Held: Oh nice!

Peter McCormack: Because didn't you tweet the other day and said, "this is the first thing we need you tell people, why Bitcoin?"

Dan Held: Yeah well actually the way that I like to phrase it, is it reminds me of a scene in Inception. In Inception you've got Leo DiCaprio trying to convince Tom Hardy to join his Inception team to incept this idea and this young, about to become a billionaire's mind that he should break up his father's empire once he inherits all that fortune. So you've got Leo and Tom sitting there at a cafe and Leo goes, "I've got a crazy idea. It's called Inception." Tom goes, "well, it's a bloody crazy idea.

But yes, it's doable though." He goes, "but you have to start with the most primitive version of the idea, which means that you don't start by intercepting the idea in his head of breaking up his father's empire, you start with the relationship with his father." So for Bitcoin, we don't start with "why you should like Bitcoin", we should start with your relationship with your government. Once people start to question that, then Bitcoin becomes obvious. We must first tell them the problem before they find the solution.

Peter McCormack: Okay, well we're going to go episode one, "why Bitcoin?" We're then going to go, "what is money?" We're going to go into the origins of Bitcoin, the pre-history, but at some point we've got to tell people to buy Bitcoin and at that point therefore, the time we're telling them to buy Bitcoin, we need to teach them firstly about private keys.

Dan Held: I wouldn't say that's the first thing you want to teach them, but you want to teach them kind of a binary approach to it, which is that if you trust someone else, bad things could happen. If you manage your own, bad things could happen too. Just to be kind of be cognizant of it at first. There's depths to private key management. It's not like we expect you to be etching your pneumonic in titanium day one, which is what I do.

Peter McCormack: Well to me, I think Stephan Livera put it in like four steps and he did it really well. It's like, you're going to buy your Bitcoin and it's going to be on the exchange.

Dan Held: Oh yeah, he definitely tweeted about this.

Peter McCormack: Yeah and the next step is then to get them to have a hardware wallet. Then, I can't remember what step three or four is, but having a node was in there as well and also having, I think multisig was in there as well. But the point is you've got to go through those steps.

Dan Held: Yeah, maybe everyone doesn't want to jump into the pool right away. Maybe they want to dip into their toes and so I think that that approach is attractive to a lot of people.

Peter McCormack: Okay, so we've covered private keys. Do you think people need to understand and learn about how the protocol works?

Dan Held: No, you should just know that X amount of confirmations is necessary. That's it.

Peter McCormack: But how many confirmations are necessary?

Dan Held: Well that's a good question.

Peter McCormack: And different coins, like when I went Bitcoin only, I went to sell all my shitcoins. Some of them needed like 200 confirmations!

Dan Held: Which is a couple of days sometimes. Yeah, a lot of people don't understand the nuance that there's no finality with proof of work, it's just kind of the accumulated proof of work since the transaction occurred, that essentially indicate that it's highly likely to stay cemented in that ledger.

So I don't think a lot of people understand that nuance, but I do think there's a practical level of confirmations, like three to five is what people would typically say is okay. It slides based on like the amount of value that you're sending. For most consumers, one to two is fine because they're not sending $100 million on-chain, that's a very rare transaction. I don't think many people see $1 million in one time in their whole lifetime.

Peter McCormack: I did for a few days, it was 14 days!

Dan Held: You did! Maybe when you buy your first house, but you technically don't really see that money, you just use it and essentially you're given a loan and then it's immediately used to buy the house.

Peter McCormack: I'll tell you where I think there's another big UX problem, is with Lightning, because you're almost learning in some ways another cryptocurrency. It's almost like Lightning is different from Bitcoin. Even though Lightning is Bitcoin, it is almost different from Bitcoin as well, it's a different experience.

Dan Held: Yeah I think that's a good thing to bring up, which is that I also agree that Lightning UX is very, very hard. However, we should baseline our sort of perspective of what hard is, to the mainstream consumer. So from a Bitcoiner or another person who transacts across layer one, yes Lightning seems harder than transacting on layer one. But if we go all the way back to the consumer, who's never transacted on layer one or layer two, they're both equally pretty damn hard.

Peter McCormack: They are. I just find Lightning is next level hard because one of the great things about Bitcoin is when you do your first send. So say I educate a friend, I'm like, "you need to get into Bitcoin." They go on Kraken, they buy $500 bucks and I say, "also you've got to buy a hardware wallet" and they go by a Ledger or Trezor and I'm like "now transfer it." That process of pasting in the code and sending, it's a really amazing experience, the first time you do it.

Dan Held: In the product world, they call it the "make magic moment."

Peter McCormack: And it is because the transaction, even though it's not confirmed, pops up straight away almost immediately and you can see it there in your ledger or your Trezor and it's unconfirmed, but you see it and I think that's a really cool experience. It's like, "oh, so basically the way to send Bitcoin is you give me an address, I paste it in, I put a set amount, I click submit and it's gone, great!"

Dan Held: I think that if we were to dig into that make magic moment, it's more around the permissionless, there's no ID, there's no phone calls you have to make, there's no limits, it's whatever you want to do.

Peter McCormack: But with Lightning it's a bit harder.

Dan Held: It is.

Peter McCormack: I mean, firstly in most instances of Lightning, you have to create an invoice first.

Dan Held: Yeah Lightning's a little tricky. The way that I look at it in the future is that layer one transaction fees will increase on Bitcoin, which will eliminate its usability for coffee payments, which it wasn't really made for, so I think that's fine. Essentially Bitcoin was meant as this easy to transfer store of value that is immensely powerful because it disrupts all other stores of value and it rips out the money from the hands of governments, which is an altruistic thing. Just like we had the separation of church and State, we have the separation of church and money or we will.

Now people are like, "oh, well if transaction fees are $100, I can't transact on layer one for my coffee" and they're right. I like to use that quip, which is that gold is worth $8 trillion but you can't spend it anywhere. Similarly, Bitcoin layer one is kind of the same thing. Now layer two unlocks a whole wide spectrum of use cases, which would be the kind of what some people would view as the kind of Bcasher side of using it for payments, using it for the coffee or micropayments and such.

So I think most consumers would likely interact with Lightning through a custodial service, they manage those channels of liquidity, so they're not going to really have to worry about invoices or channel openings or anything like that. That will reduce on chain volume by like 90%. Imagine if two exchanges had a Lightning channel open between each other

Peter McCormack: Yeah I agree, but this is where we get into a tricky area in terms of my personal level of understanding, but also a tricky area in terms of "how Bitcoin is this". So say transaction fees are $100 and say I want to load up a $100 of Bitcoin stats on my Lightning wallet, can I do that in a non-custodial way?

Dan Held: No.

Peter McCormack: You can't? But isn't that potentially getting into a world therefore that's kind of little bit anti-what Bitcoin is?

Dan Held: Bitcoin's purpose was to remove the power of money from governments and that is a enormously powerful thing because that changes the whole dynamic of between citizens and government.

Peter McCormack: Can I challenge that? Not saying, is that right or wrong, but how do we know that was the purpose? We don't actually know. I don't want to get into a world where I trigger Bcashers to go, "yeah, look, Peter agrees with us" or whatever, but it was also money.

Dan Held: Well Satoshi wrote the white paper for the cypherpunks and he published it on a cryptographer mailing list, because he needed someone to come help him build it. Satoshi can't talk about sound money and Austrian economics to a bunch of engineers who couldn't give a shit less. That's why he phrased it in the terms of "payments", which is privacy and finality, which is what the cypherpunks cared about.

Adam Back has tweeted a lot about this, which is essentially "what does cash mean" in terms of cypherpunks? And it doesn't mean cash in your pocket, it means finality because cash is referred to as like a push payment. It's not a push and pull, it's a push. It's a one way irreversible payment.

Peter McCormack: Okay, so if I'm buying my Lightning sats and it's a custodial service, is it still trustless?

Dan Held: It's trust minimized. Nothing is completely trustless, it's on a spectrum of trustless and trusted. So it's as trust minimized as you need to be for that level of payment.

Peter McCormack: Right, so in this world, Bitcoin is taking out the central banks, we have a better, either alternative or we have a separate financial system, which is Bitcoin powered and which we can trust it more, it's better money, it's harder money. But in that system, we've got people who are fully, maybe got in early, maybe have a bunch of Bitcoin, they're self-sovereign and then we have a bunch of people who just benefit from a better money. But in some ways... I don't know, they've got a different Bitcoin maybe from you and me Dan, if we've got in early, they've got a different experience.

Dan Held: I'm not sure about earlier, it's more around their price elasticity to pay layer one transaction fees or their net worth.

Peter McCormack: Why would these people care about Bitcoin? Or will they just not have an alternative?

Dan Held: They won't really have an alternative and it's just sort of a new paradigm. It's like the gold standard, you don't have to like gold or not, it's just useful as it is. As I think Saife posted, it doesn't have to be friendly, gunpowder is as useful as gunpowder! There's not like this marketing campaign for the ethical consideration of gunpowder, it's just used as gunpowder. Same with Bitcoin.

Peter McCormack: But these people aren't really in the, "not your keys, not your Bitcoin" world because they've got a custodial service and they are just using their Lightning Bitcoin as a currency.

Dan Held: Well yeah, they're going to notice their tax rates dropping as it becomes harder and harder collect taxes. I'm not advocating for people not to pay their taxes, I'm just saying that it will become harder.

Peter McCormack: I am!

Dan Held: It will become harder for agencies to collect that money since you can't just call five banks in the US and seize 90% of the money or essentially be able to seize that in any fashion. With private keys distributed in a manner that are decentralized enough, if you have multisig and maybe there's only one entity in Vietnam and there's four others across the world, then even if the Vietnamese government comes to that one Vietnam entity with one private key or one of the shards of that private key, then they're not able to seize that money. So do they benefit from it is the question that you're asking?

They do because it forces their government to steal less of their life. It forces their government to be more altruistic and be more focused on their wellbeing. It kind of switches the pattern from governments using their military and their force and using that violence to extract value from their citizens, to where it reverses that and now the citizens are like, "wait, we don't have to do something unless we want to." So it reverses that cycle.

Peter McCormack: Okay, this is a very different Bitcoin world for different people as I just said. But we're probably going like 10, 20 years ahead.

Dan Held: It's very far away from now.

Peter McCormack: Yeah, but I guess for these people, Lightning will just be another way of interacting with Bitcoin. But Bitcoin for them will just be a different currency from what they're using now. It's not going to be like you or I considering about investing for the future, it might not be saving, it just is the currency they might end up using.

Dan Held: They might open up an app and see Bitcoin balances and have no idea how it's being routed, which is how we interact with everything. Most people don't understand how their data packets are routed on their computer. I'm not going to pretend that I understand that whole stack.

Peter McCormack: Yeah and we don't want people to do that. But right now Lightning is hard, Lightning isn't in this place. So we're in that place now with Lightning where I do think...

Dan Held: Custodial Lightning is easy.

Peter McCormack: Custodial Lightning is better, I would say. I've got BlueWallet and I use Lightning very limited right now. I use it for two purposes, people just tip me...

Dan Held: We were both in Munich and we used the Lightning beer.

Peter McCormack: God I got savaged again with that! So I use it for tips because I get tips for the podcast from it, from people who like what I do and that's cool and I withdraw to my BlueWallet, it's instant. I also use it as some people will pay for a subscription to the podcast with Lightning, I've had three people do that. So I've got some experience and I still think the experience is harder than base chain Bitcoin.

Dan Held: Agreed, but we should always make that experience relative to not interacting with Bitcoin ever.

Peter McCormack: But the fact that certain people, yourself, myself, think the custodial version of Lightning is better than not the custodial, that triggers people and pisses them off. So for example, Jack Mallers, if he hears this, he's going to lose his shit with me!

Dan Held: We're going to have a lot of people hating on us.

Peter McCormack: But they are going to and in some ways rightly so, because there are valid arguments to say, a custodial version of any form of Bitcoin, is not as good as a non-custodial.

Dan Held: And I see it more as a spectrum and that's where we see a lot of people use centralized services because it's easier. Now ultimately we want to convert them into managing their own private key.

Peter McCormack: Yeah of course. I've said to people, "look, I would never have more than like $100, maybe $200 in a custodial Lightning wallet." I never would and if I did go over that, I then would withdraw it out and put it into my base chain Bitcoin.

Dan Held: But I don't view that as that material of an issue. If we trust the entity with $100 per person, it's not that big of a deal.

Peter McCormack: Well it might have to change though Dan. So you said about on chain fees being $100, if on chain fees are $100 and you wanted to withdraw into Lightning and you had to open a new channel to do it, you're not going to withdraw $200 and pay $100 on chain fee, you're going to have to withdraw... Even $1,000, you're going to leave a 10%. We are in a tricky world here that I still think some Bitcoiners haven't properly answered.

Dan Held: So I did model out transaction fees in a post subsidy environment. So that's the environment in which in the block reward, there are no new coins minted and of course I plugged in some assumptions, which you can download my sheet and plug in your own, but I don't think we see transaction fees really go over $100 in the future for a sustainable amount of time. This is over a hundred years, by the way.

Peter McCormack: But the point I'm getting too, is even if it was at $100, if you wanted to withdraw and you had to open up a channel, you're going to have an on chain fee. Well actually, there's potentially two fees.

Dan Held: To be frank, a large portion of the world won't be interacting on layer one, but also their income and their GDP is miniscule compared to the rest of the world. So they're not necessarily material when it comes to the world economy, which sounds harsh, but it's the cold, harsh reality of it.

Peter McCormack: The point is still the same, which is like if you were drawing $1,000, you wouldn't want to spend 10% on your fee. You want to spend 1%. Then you've got to withdraw $10,000 and you have to have $10,000 in Lightning.

Dan Held: I mean the price elasticity of a layer one transactor is very, very high. So we see people regularly paying wire fees of $30 to $100 in the US.

Peter McCormack: Of course.

Dan Held: We see people paying a lot of money for physical gold delivery, including $5 million by Bundesbank just to deliver their own gold, which is crazy, it's bananas. If we look at where a majority of the wealth in the world is stored, it's stored in large amounts. It's not stored in these tiny, tiny wallets of $50 to $100.

So if that's protected by Bitcoin because people have stored their value into the Bitcoin ledger and they have to pay a higher transaction fee to move those large amounts of money, that's still a very good thing for Bitcoin and for the world. It's not going to support your average rice farmer in Vietnam, they're not going to be able to up some of these channels because it's unaffordable.

But also they're in the lowest income sort of tranche of the world and we can't build products that are usable and are directly serviceable for everyone in the world. Not everyone in the world can enjoy an iPhone.

Peter McCormack: So you see that future world then whereby 90%, 95%, maybe 99% of people are interacting with Bitcoin on Lightning and the few people who are going to be interacting with the base chain are the central banks, maybe the liquidity providers and maybe the Bitcoin rich?

Dan Held: No, it'd be like any large payment you want to do. You want to buy a house? You use the layer one. You want to buy a car? Layer one. You want to do a transaction? Essentially there's a tradeoff because transaction fees in layer one are based on bites, but that's fixed. So you can have any value and it's the same amount of cost, because it's cost per bites, not cost per value.

Lightning is cost per value, so when you transact on layer two, your transaction fees based on how much money you're moving, so there's a natural organic tradeoff between layer one and layer two, where it'll just be a decision of like, "do I transaction layer one or layer two."

Peter McCormack: The funny thing talking about this is that whilst I think Bcash is trash and I cannot stand the BSVers, I can see how people are sold on a different vision. It's very easy to see how they've heard a different vision, a different argument and gone "oh, that makes more sense." I think we should be more empathetic to that.

Dan Held: Yeah, I do see why people have fallen for that narrative of cheap payments, but I was there with Roger when he tried to pitch those different restaurant owners. He pestered them, they were not wanting to use Bitcoin, he pestered them until they accepted it. We'd go back there a week later, they wouldn't be accepting it anymore.

Peter McCormack: Because nobody uses it.

Dan Held: Roger's built his own illusion, his own world, his magical world or Bitcoin cash or his former version of Bitcoin was this payment mechanism, but if you looked at the data, if you looked at how many of the restaurants who he went and pestered, I bet 99% still don't accept it.

So they don't, because while it's good for merchants, it's not good for consumers because it's harder to use, more expensive, which by the way, expensive isn't just transaction fees, it's the volatility fee and the exchange fee that you pay, which has a nasty, nasty effect of scaling with the value of transaction, because your transaction fee is fixed. Now your volatility fee, if you have $100 and it moves 10%, it's a $10 fee. So if Bcash drops 10%, you're not only paying $10, you're also paying the transaction fee and the BIPS that you got charged on that exchange to buy it.

Peter McCormack: We've gone so rogue on this interview!

Dan Held: We've gone off on a bit of a tangent!

Peter McCormack: Do you know what, it's the problem where I started doing more interviews now where I don't have questions, I just want to sit and talk to you. The natural evolution of this is it's taken me to a place where these conversations go a bit rogue.

Dan Held: We're still under the UX umbrella.

Peter McCormack: I know, but dude we've done like an hour and we're in LA, so we want to go and get a beer right? But there's two things we haven't touched on, which I did want to touch on and maybe we will do another day. But I wanted to talk about design and marketing as well, because marketing is definitely my area. I understand marketing, I get it and I'm a marketer at heart. I have no problem with marketing at all, as long as, like I said before to you, as long as you're not unethical, don't lie.

I struggle when people call someone a shill when they're doing marketing. A shill for me is an unknown, an undeclared promotion. But I think marketing is good and marketing is important. I always have said, and I've been shot down for this, but Bitcoin has benefited from marketing. It's benefited from word of mouth marketing, but it is still a form of marketing, people tell people. There is still an aversion to marketing in Bitcoin. People seem a little bit like, "what are you doing?"

Dan Held: Well, maybe we should remind them that Satoshi understood marketing from its most fundamental level.

Peter McCormack: You're going to tell me about now, you've talked about this before. This is the hype cycle, right? It's a marketing thing.

Dan Held: Yes, the volatility of Bitcoin is its number one and the volatility is essentially a viral loop, it's the number one channel to acquire users. So what happens with Bitcoin is due to the 21 million hard cap, you've got a fixed amount of coins and you have variable demand.

During halvening events you have a reduction in supply and because of that, we have these cycles where we see the price appreciate 10x or a 100x and it's through those cycles to where that draws in more and more people and Satoshi hypothesized this would happen. He said "as the price increases, more and more people buy in, which increases the awareness of the protocol."

So Satoshi essentially saw that volatility would be a good thing for Bitcoin because more and more people would hear about it. That's actually how I got in. I heard about it during the 2011 price bubble. I didn't get in until 2012, but I think you mentioned that 2013 was the first year that you became aware of it.

Peter McCormack: Yeah, but for a different reason though, it was Silk Road.

Dan Held: Silk Road was a good validation of protocol market fit or a take on product market fit, which is that, "well, I saw if governments can't shut down Silk Road very easily, then Bitcoin must be really robust." That's what made me interested in it.

Peter McCormack: Yeah and it wasn't the ball runs that brought me in, but I recognize what you're saying because whenever the Bitcoin price starts shooting up, I get people getting in touch, "Pete is this the time to buy?"

Dan Held: It's your old buddy from elementary school popping up!

Peter McCormack: Yeah, "Pete, you know Bitcoin, should I buy it?"

Dan Held: "Should I buy Ripple?"

Peter McCormack: "What about this other Bitcoin? There's two Bitcoins!" I do get that, but is there something we as Bitcoiners can be doing that's better for Bitcoin in terms of marketing? Should we be open to marketing? Should we talk about it? Should we talk about it as a brand or is all this too dirty?

Dan Held: Well what's kind of cool is when we all market it individually by word of mouth or the content that we write, whether that'd be on Twitter or Medium or podcast or YouTube series, we all essentially craft our own narrative and if you craft that narrative in a fashion that's popular and brings in more adherence into Bitcoin, then you'll be financially rewarded for it, just from advertising revenue, such as you've done.

Peter McCormack: That pisses people off though.

Dan Held: Advertising is just a normal part of business and I think you advertise great products.

Peter McCormack: Well yeah, I have to be very careful about the ones I pick as well. I don't think some people realize the amount I turn down, all the money I turn down. For every sponsor I work with, I've probably turned down 5 to 10.

Dan Held: I think you've told me about a couple.

Peter McCormack: And big numbers, like one wanted to do an interview on the show and I can't remember whether it was like 25 grand or 50 grand they offered me and it was a long time ago. This was like about a year ago, but it was a token based project and I was like, "I can't do this. One it's an advertorial, two I never sell the shows." It was very odd brand and I couldn't do it, but it's big money. But I do have to pick very carefully, like Kraken I picked very carefully. I know you can buy shitcoins on Kraken, you can buy them on most exchanges, but it wasn't Kraken coming to me, I spotted them and I went to them.

I said to Jesse, "you're a Bitcoiner, I want to work with you." BlockFi again, I've had their competitors want to work with me, but some of their competitors have got tokens, I don't want to work with them. I wanted to work with BlockFi. If I went Bitcoin pure, I couldn't afford to do this the way it is. I couldn't travel, I couldn't do the interviews in person, I couldn't get the interviews I get. But you have to be very, very careful.

Dan Held: Yeah, so each individual Bitcoiner markets Bitcoin to all their friends and family, as you said before, word of mouth. That's the best conversion mechanism because each individual, once they catch they Bitcoin bug, I think we've all been there, you can't get it out of your head and then you go pester your parents and your siblings and you're like, "hey, I got to tell you about this thing. It's the good news of Bitcoin!" I think the job that you and I play and others, is that we generate content that they can then share with their family and friends.

That's why I wrote "proof of work is efficient", is because I had heard the "Bitcoin's bad because it uses energy" FUD for so long, I wanted to give Bitcoiners that one stop shop resource to where, if your uncle is complaining about its energy usage at dinner, after he reads my article, that's it, you should be convinced, unless he's really, really stubborn.

Peter McCormack: Bitcoin has got this decentralized marketing, everyone is doing their own thing. I do what I do, you do what you do, everyone does what they do!

Dan Held: And whoever makes the message that resonates the most, makes the most money, which also brings in more people in Bitcoin. So it's a virtuous cycle.

Peter McCormack: So we should celebrate it and we should support people who want to.

Dan Held: Exactly, content creators in this space are really critical.

Peter McCormack: This is why I defend Pomp so much. I don't have to agree with Pomp, but he's a great marketeer and he will have brought more people into... It's a bit like the node thing.

More people now are going to be running a node than were previous to when I did the show, because I seen the YouTube comments, I've seen the DMs, people got in touch and they've agreed with me and said that they've looked into this and they are now doing a node. More people are going to be buying Bitcoin or involved in Bitcoin or care about Bitcoin because of Pomp, than if he had done nothing.

Dan Held: Agreed and I have defended Pomp publicly as well where, I think there's a core group of Bitcoiners who really dislike him and I think he's a net positive, I've said that.

Peter McCormack: You've got to look at that. I think sometimes this Bitcoin purity is a bit too hard. It's a bit too hard to please everyone.

Dan Held: I'm a pretty pure Bitcoiner, but I'm also somewhat practical, people have to make a living. At Kraken we have a lot of different coins that we have available, which I think is fine. People should be able to buy and sell what they'd like and I encourage them to. So I think some Bitcoiners are a bit harsh when it comes to what's morally acceptable in that group. I've been in the space for a long time and I think I've tread a very good moral direction in this space. Nothing I've been associated with I don't think has been spammy or scammy.

Peter McCormack: I'm glad you've become my friend as well buddy!

Dan Held: Thanks dude!

Peter McCormack: It's been good to get to know you and watch your journey and just hang out with you. Speaking of that, I could probably talk to you for fucking hours...

Dan Held: But we've got a beautiful view out here, get a couple of beers, it's pretty hard not to just keep talking for the next couple of hours.

Peter McCormack: But we have got to go and have a beer. We've got to go and prep for Okung's Bitcoin Is. So listen, thanks for coming on Dan, I always appreciate it. You're always welcome on the show. Just tell people, because you're creating some cool content now, so tell people where to find you, keep up to date with what you're doing and then we'll go and grab a beer.

Dan Held: Cool! Well thanks for having me on Peter, I know we've been trying to get this on the books and couldn't have picked a better spot. To find what I'm writing about, follow me on Twitter @danheld, my name on there will be Dan Hedl, but the handle itself is @danheld or danheld.com where I have my blog content.

Peter McCormack: All right man, take care. See you soon!

Dan Held: Thanks for having me, cheers!