Will Cole, CPO of Unchained Capital joins me to talk about:

Learning about bitcoin and austrian economics

Bitcoin meet ups and the shifts over time

Getting ready for a bull run

Bitcoin and allodial title

Wyoming Blockchain taskforce

Unchained Capital vaults and loans

Bitcoin as collateral

Will Cole links:

Sponsor links:

Stephan Livera links:

Podcast Transcript:

Stephan Livera: Will, welcome to the show.

Will Cole: Stephan, good to be here. Thanks for having me.

Stephan Livera: Of course. Will, look, I know a bit about you obviously, but just for the listeners, can you just tell us a little bit about yourself and how you got into all this?

Will Cole: Yeah, so a bit about myself here. Yeah, I think that I’ve been… My Bitcoin story, as it were, starts in 2011 and it’s really all due to my older brother Napoleon. I think the earliest evidence I have in our email conversations is around April of 2011. Someone can correct me out there if I’ve said otherwise, but I think that’s about right. Really, it starts in New York City, sitting on the 36th floor of an apartment that overlooked the Federal Reserve building.

Will Cole: We are in the throes of hearing about QE and the financial crisis and getting out of it a little bit, but we’re seeing all the repercussions of the policies that have been happening. We’re sort of on the back end of a tough election in the United States and we start hearing about Bitcoin. I had an economics background in college and then a technical background from being in a family of programmers.I felt like there were- I had a lot of the prerequisite ingredients to understand it early. Even with that, it took me a while after.

Stephan Livera: Yeah. On that, Will, give us a little bit of background on your economics. Were you already an Austrian or were you learning about that as well?

Will Cole: In retrospect, I was a fake Austrian at that point.

Stephan Livera: Go on, what’s a fake Austrian?

Will Cole: I was an economics major in college and figured that there was just economics. I didn’t know that there were multiple brands and theories out there and I got a very classic Keynesian education and figured that was it. It wasn’t until around 2008 that I started learning that there was a little bit of different stuff and it mostly came through Ron Paul groups, things like that. I read a little bit of Hayek and I read a little bit of Rothbard and those types of things and I thought I was pretty damn cool.

Will Cole: It would’ve been- fast forward a little bit past 2011, past Bitcoin, I meet Saifedean and I realized that’s what a fake Austrian is, is that when I met him, I realized that I had not even begun to scratch the surface and that I was a little bit of a phony. That led me down another rabbit hole and made me appreciate even more and strengthened my convictions and my knowledge, test myself a little bit and it has definitely been a fun journey outside of just Bitcoin.

Stephan Livera: Yeah. I mean, it’s a good point you make that many people come to learning Austrian economics, even though they didn’t learn economics at university. They just took it on and then they’re like a doctor or a lawyer, like Dr. Ron Paul, right? Then they just go and learn Austrian economics because they find it makes so much more sense to them. So what was that experience like for you?

Will Cole: It was actually disappointing in the sense that I felt like I had been robbed in my education. I found it odd that, out of all those classes I took, after all those things I had learned, I’d never heard the name Mises.

Stephan Livera: Right.

Will Cole: Four year education. Never heard the name. Didn’t even know he existed. Now, that could be saying something about myself and my own intellectual curiosity and going out and making something of it myself. It made me a little bit bitter. I was just like, “Why did I waste all that time and money for?” But it didn’t really start there. I mean, it starts with reading Hayek for the first time. It’s very accessible. At least for me, it was a good introduction into the Austrian thought and then going beyond that into praxeology and sort of understanding human action.

Will Cole: It was a long journey. It was a hell of a lot shorter than a four year education, but I guess at first I just felt let down. Then mixing that with Bitcoin and my tech background, it sort of changed me, changed my personality, changed my interests, made me an obsessive person but was definitely a fun journey to go down.

Stephan Livera: Then, so between you and your brother, Napoleon got it first, right, and then he got you into it?

Will Cole: Absolutely. Yeah. Napoleon definitely… There’s a world out there where there are very few people that have secrets. I’ve thought about that. That’s in Peter Thiel Zero to One book. He talks about people that actually have secrets and building knowledge and companies and things off the basis of these secrets.

Will Cole: I only know one person in my life that has real secrets, and that’s my brother. Bitcoin was one of those secrets that he brought to me and it opened up a whole new world for me. A whole new obsession for, going on 10 years now or 9 years now. Yeah.

Stephan Livera: We’ve also got to talk about the story with Parker, right? Now, Parker is also at Unchained and he was at Unchained before you were. Let’s hear a bit of that story. As I understand, you got Parker in.

Will Cole: Oh yeah. I mean, Parker’s Johnny come lately here, he’s getting all the glory right now because he’s such a fabulous writer and such an original first principles thinker. For a long time there he was working at hedge funds, investment banks, not thinking about the Austrian viewpoint at all.

Will Cole: He was, I wouldn’t say dismissive, but at least uninterested in my many attempts throughout the early teens to convert him into the Bitcoin world. Parker and I would do… We have this yearly tradition where we go skiing together and our house is about an hour from the ski slopes. We’d drive and listen to podcasts and then we talk about them afterwards. A lot of the podcasts that I was interested in listening to in 2014, 2015, 2016 were all about Bitcoin. He started to sort of catch on a little bit there and I would say that I started the fire over a three year period there, and then Saif was the closer.

Stephan Livera: That’s right. Now, Saifedean was known in the gold world before all this Bitcoin stuff. How did you get to meet Saifedean and get to know a little bit more about that perspective on Bitcoin?

Will Cole: Yeah, it was… I can’t remember the exact year. I think it was around 2015 actually, but it would’ve been through Pierre Rochard and Michael Goldstein that I met Saifedean online. We talked about Bitcoin for the most part and I knew that he was, of all of the people that I knew, he was the gold guy.

Will Cole: When Parker actually was working at a hedge fund and needed to do diligence on a gold company, we had connected him with Saifedean and I had an opportunity to talk to him more. He started writing The Bitcoin Standard. We did some notes back and forth, a lot of us did, in his circle of friends but he was definitely someone who constantly was pushing my understanding of Bitcoin, why it mattered, what the eventuality of Bitcoin looked like by having a good basis and understanding of Austrian economics and the competition of monies and what makes good sound salable money.

Stephan Livera: Right. Yeah, and I think much of what is in The Bitcoin Standard, there was a lot of hammering out of these ideas in, say, the 2012 and 2013 and 2014 times when people like, say, Konrad Graf or people like, back then, Tuur Demeester, Peter Surda, and then obviously the Nakamoto Institute, right? Many of the articles that Daniel Krawisz, Michael Goldstein and Pierre were writing that… I think many of those helped form that understanding, and I think The Bitcoin Standard is almost like a summation of many of those ideas, right?

Will Cole: Yeah, I think so. I would say that I see a lot of original thinking in there as well from Saif. I also see a little bit of Nick Szabos or the- what is it?

Stephan Livera: Shelling out.

Will Cole: The shelling out. Yeah, the origins of money story. I see a lot of that in it and I’d been reading a lot of Szabo’s stuff prior to meeting Saif. It definitely expanded upon those short blog posts and things that Szabo was putting out, and I found it extremely compelling, yeah, to say the least.

Stephan Livera: Certainly, and not to take anything away from Saifedean, absolutely.

Will Cole: Yeah, of course. Yeah.

Stephan Livera: The way he would spin it, or the way he would tell the story, was also very instructive for many of us, even though we had had been thinking along similar lines at the time. I think his particular focus obviously on stock to flow as well, which is probably the big, not necessarily new contribution, but it was like he took that idea from the gold world and applied it to Bitcoin in a way that just makes so much more sense and now everyone’s thinking about it, right?

Will Cole: The stock to flow part of the book, to me, is really funny because I remember reading it for the first time and thinking like, “Huh, I never heard about that before.” That’s interesting. Passing it off and just going on to the next bit. I remember it was probably a couple of years later, it’s before Plan B, you know all that stuff. I’m thinking back on that and saying like, “Have I ever heard of this before or is there any prior-” I found a couple in the gold world, but it wasn’t even a big deal in that world. I think that that got everything started here, that we’re going through over the past year, a year, year and a half when it comes to understanding stock to flow or thinking that we understand stock to flow. We’ll see if we do. Yeah, that was a really interesting part of the book that, at first, I dismiss it has shown to be prescient now.

Stephan Livera: Yeah. Right. I think the other thing with that is, I saw inklings of that in some of Saifedean’s prior work as well, because he was writing some blog posts and he would show things like, “Oh, here’s what the inflation rate is for US dollar versus gold versus Bitcoin.” Just another way to frame that is just to stock to flow, right? It’s the inverse of the inflation rate?

Will Cole: Yeah.

Stephan Livera: From the person who’s into Austrian economics and you’re into Bitcoin and just saying, “Well, look, the inflation rate for Bitcoin is just going to go so low. It’s just going to go so much lower than anything else in this world that it just has an appeal.”

Will Cole: Yeah. Along with many other appeals, it’s one of the things that matters most about Bitcoin is that it is finite. That there will only ever be 21 million and that that inflation schedule eventually reaches zero and then it’s zero forever. In fact, I would argue that there are many things they have to combine to make Bitcoin great and interesting and probable to succeed, but if I had to pick one thing, it’s that, right? It’s that it is finite and that the inflation schedule gets to zero.

Stephan Livera: Right, yeah. Look, let’s talk a bit about some of the earlier days, like Bitcoin meetups.

Will Cole: Oh.

Stephan Livera: Right? So they’ve moved and shifted over time and you’ve moved around a little bit as well, I think. As I understand, you were born and raised in Austin, but then you were living and working in New York as well. Can you tell us a little bit about how the Bitcoin meet up scene has been in that time?

Will Cole: Yeah, absolutely. It’s great here in Austin today. When I first started learning about Bitcoin, it just looks so different. At least the groups that I was aware of at the time, BitDevs hadn’t really started in New York, or if it had, I wasn’t aware of it. It might’ve been much smaller. It was more politically based. Right? It was very libertarian. It was, again, going back to the Ron Paul groups that were in New York.

Will Cole: The thing that people would talk about the most wasn’t a limited supply. It was censorship resistance. Right? That was the cool thing about it.

Stephan Livera: Yeah, buying drugs and whatever.

Will Cole: Yeah.

Stephan Livera: Not that that- you should not do that, but that was the focus, you know?

Will Cole: I was never buying drugs. I mean, I would never voluntarily trade my valuable Bitcoin for something like drugs. But yeah, I mean, you could tell that that was the ethos around it in New York at the time. When I started coming to Austin, you could start to see the fracturing happening. I came in 2014, but I started visiting the meetups here late 2013, early 2014.

Will Cole: You could start to see a little bit of the shitcoining happening, a little bit of the fracture of Bitcoin is special in these very obvious ways, versus we have the beginnings of this with blockchain and we’re going to build off of that blockchain, not Bitcoin. You could see that fracturing happening. By the time I got here and later in 2014 and was involved in those a lot, there was a split in the meetups and it was interesting to see how that happened where you had, I guess, a more corporate focus of, “How do we capitalize on this blockchain thing that’s going nuts,” and you had more of the technical and economic focus of, “How do we make sure Bitcoin is battle tested and-“

Stephan Livera: Resilient.

Will Cole: -And resilient and understood, really, and not get distracted by shiny things over here that don’t really matter.

Stephan Livera: Right. Yeah. Then there was a bit of a fracturing in the groups and I guess you would say some of the groups were more… They were just really more focused on the technical aspects of it, right? Like how does Bitcoin work at a technical level and you can go and learn more. I’ve mentioned this before as well, I would love to have a Socratic seminar in Sydney, but we just don’t have that level yet. I’d love to get us there, though. Tell us about your experience going to some of those meetups.

Will Cole: Yeah, I mean recently in Austin, Justin Moon has sort of kickstarted the BitDevs group here. Really, I think, takes a lot from the bit devs group in New York that’s been wildly successful. Doing the Socratic seminars, having the topics laid out, having a lot of experts that can talk to each topic. Austin has a huge wealth of technical talent of business savvy around Bitcoin. Having those things meet here has been… It’s just very different from the early days where every day you showed up to a meetup and it was, “Who are the 10 new people that you need to explain what a UTXO is?”

Will Cole: Now that’s okay. There’s nothing wrong with that, but it’s nice to see that some of these venues have advanced to where we can get into deeper and deeper topics and a place where someone who’s been around for nine years thinking about this stuff can still learn more and humble themselves and figure out that they’re not as smart as they thought they were, like myself.

Stephan Livera: Right. Yeah. That’s certainly a… If you’re not a developer yourself, it can be intimidating, but at the same time if you just go there and just soak up the knowledge, it’s incredible.

Will Cole: Oh yeah. Yeah, absolutely. Yeah, it’s really important in these types of groups to have at least a couple of people that can really talk intelligently to each one of these topics that’s coming up and lead the discussion. Once you have those one or two people, you’ll find out that there are a lot of technical people that might not be into Bitcoin today that will come and can soak that in pretty quickly and start contributing. I’ve seen that happen in Austin. It’s kind of exploded.

Will Cole: I think Justin wouldn’t mind me saying, the first BitDevs was… It was kind of bleak. It was three or four people, we were in the library. We were fumbling our way through it and now it’s a force. There’s new people showing up every single month. It’s well organized. The topics are great, we have a lot of expertise in the room. It’s not just one person that has to drive it. Yeah, it’s one of those things that I hope gets replicated in other places and I’m pretty sure it will. I mean, it happened here, it can happen anywhere,

Stephan Livera: Right, yeah. Let’s talk a bit about, then, the different structure. So you might have maybe one meetup that’s more of a technical focus and then maybe one that’s a little bit more softer. Right? What has your experience been like there?

Will Cole: What I like about the way Austin’s setup right now is we have different venues for… We keep our venues very segregated in the sense that there’s a technical venue, there are venues for more newcomers and more basic things. There are venues for friendship and building relationships and things like that. I think that it’s nice to be able to go to one venue and not have to have that discussion of, “What is a UTXO?” for the 900th time, right? Then also go and give your expertise to those more beginner places.

Will Cole: Having the more advanced venues, at least for me, has been helpful in making this my career. Where I’d previously been working at Stack Overflow. Love the place, it’s great product. I felt like I was contributing a lot to the world there. As I got deeper and I was exposed to more of the advanced topics in Bitcoin, the advanced engineering that was happening around the space, it gave me more and more interest of actually making this my career instead of just a side thing or as an investor.

Stephan Livera: Yeah, let’s go into that. You were a VP at Stack Overflow, right? You were in a senior role there and obviously you had this passion for Bitcoin and you had to make that decision. Right? I think many people do of, do I try to work in Bitcoin or do I just basically mine as much fiat as I can and convert it into Bitcoin, right? What was your thought process?

Will Cole: Yeah, I had that thought process all the way back, that I remember, in 2012 when I first started at Stack Overflow was that, “Do I want to take the entrepreneurial route with Bitcoin and start a company?” Exchanges were popping up all over the place. I could start one and I know how to do this stuff. Or I could just earn dollars and turn that into Bitcoin. I think the Winklevoss twins had a good quote on this, which was they went through a similar thing. It’s like, “Do we invest in Bitcoin companies or do we invest in Bitcoin?” They kind of just split it and said, “We’ll do both. We’ll take half our money, buy Bitcoin, take half our money, give it to Bitcoin companies and invest in them.” I took the approach, at the time, where I wasn’t really sure what Bitcoin entrepreneurship looked like.

Will Cole: I knew that the on ramp was important, that getting people Bitcoin was important. I didn’t think I was uniquely qualified to provide that service in any way. After that I thought, well, there is no other product. It’s just Bitcoin. It’s a protocol unless I’m working on the protocol and I did make some overtures to try to figure out, how does, excuse me, someone with my skillset contribute to the Bitcoin core process. I had talked to Steve Lee and John Newbery and some people over the time. I was kidding myself. There wasn’t much I could do there and also I didn’t have the time. I had a full time job and it was very demanding. For me it was earn Fiat, buy Bitcoin, get involved in it as much as I can.

Will Cole: I did find one outlet before I left Stack Overflow and joined Unchained, which was going to Wyoming and being involved in the blockchain task force, working on passing legislation that would essentially create the most competitive jurisdiction for companies that were dealing with Bitcoin and having trouble maybe with the US banking system or something like that.

Will Cole: I had found some avenues for it, but very quickly Parker got me back, which was a… I helped him out at the very beginning, but he fast forward and figured out what Bitcoin entrepreneurship look like. He had met Joe and Dhruv here at Unchained, the two founders of Unchained Capital and just like one day my explanations of Bitcoin clicked for Parker, it clicked for me that if Bitcoin is money, what is the product of money? That’s financial services. I could go up on a whiteboard and say here’s a bank in the Fiat world and here’s Bitcoin. What things, what services that banks provide does Bitcoin negate?

Will Cole: It does a few, it certainly negates several business models like the re-hypothecation, everything’s built off of that, but the services themselves, a lot of them are still going to be needed. I looked at that and it just clicked for me. It’s like, yeah, financial services, this is where entrepreneurship and Bitcoin sort of collide and where I do have some abilities that are where I can contribute back to the ecosystem. That was what clicked for me there.

Stephan Livera: When people first come into Bitcoin, sometimes they get it twisted a little bit. They think, “Oh, Bitcoin is anti banking.” Whereas I think it’s more correct to say Bitcoin is anti central banking. What’s your view there?

Will Cole: I couldn’t have said it better myself, right? Is that I think it’s Pomp’s… Tagline, “Long Bitcoin, short the bankers.” I get the ethos of it and it’s funny, but really Bitcoin replaces a bank. The central bank or many central banks around the world, the issuance of currency, the monetary policy. Banking is still going to exist in some form for institutions, even for individuals. I do think that… Now, that doesn’t mean it will look the same. There are a lot of things that banks do today that they can’t do with Bitcoin, or that if you wanted to be successful as a bank in Bitcoin, that you would necessarily want to build more Bitcoin native solutions to things that look… The things that look like they do in the Fiat world.

Will Cole: To that matter, a good example of that would be one of the things that we do at Unchained is you give us Bitcoin as collateral and we give you dollars, right? One of the cool things is that when you take in Bitcoin as collateral, there’s a lot of different ways you could do it. If you want it to mimic the Fiat world, you would take that Bitcoin as collateral and you’d start lending it out to try to create interest on top of it. If you did it in a Bitcoin native way, one of the things that you could do is allow the person giving you collateral to share in the quorum of keys. Now, they can’t have control. It is collateral, so you know it’s not your keys anymore, but you can have a key so you can see proof of reserves.

Will Cole: You can actually do that with Bitcoin where it’s harder to do in a Fiat world, proof of reserves on chain. You can see that we’re not doing any funny business with your money. That’s a really interesting relationship to have with your client, where you can do that with Bitcoin, where you couldn’t do it in the Fiat world, and where I think that clients are going to demand the- your sort of posture, your financial services posture towards them. Your relationship with them is going to have to be different. Everything I think about now, with the Bitcoin entrepreneurship and the types of products that you build here is how do you do it in a Bitcoin native way? Because if you could do it the same… If you could do the same thing with Fiat, I’m not that interested. I want to do it in the way that where Bitcoin’s unique.

Stephan Livera: Right, and it’s not just a numbers on a screen, right? With gold, whereas many libertarian people, maybe someone like Peter Schiff might say, “Yeah, go buy gold and just trust the gold vault.” Right? That they’ve allocated it for you, right?

Will Cole: Yeah.

Stephan Livera: Maybe there are some ways to, okay, you might have a third party auditor or whatever, but it might not be the same thing. It’s just not the same when you hold one of the keys. That’s one thing I actually quite like about Unchained, just that it’s respecting the ethos of Bitcoin, that you are still participating, even if you’re not the majority in that quorum, right? In this example, let’s say I’m the customer, I’m putting some Bitcoin up with you. I still hold one of those keys.Then the other two keys are held by- one by Unchained, one by the third party agent. That’s respecting the ethos of Bitcoin and I think there will be some strong benefits for customers in this Bitcoin collateral world.

Will Cole: Yeah, absolutely. Yeah. Bitcoin makes great collateral, right? It’s a good financial service for the holders of Bitcoin who… It could be any reason, right? You could be Bitcoin rich and cash poor. You could have debt denominated in dollars that you want to take care of. You could want to buy more Bitcoin. There are lots of reasons to want to do this, but Bitcoin makes really good collateral.

Will Cole: We enter into a relationship with our client that is unlike most banking relationships where they get to… We have greater accountability towards them. Right? They get more information about our relationship because we’ve built this in a very specific way, where they get to look at the address, see if the Bitcoin’s moving, see if it’s being re-hypothecated. Not that re-hypothecation of all time will be necessarily a terrible thing, but at least right now I don’t know how to do it well. This is the type of relationship that I really value with our customers. It puts them in the driver’s seat of understanding what is happening with their asset.

Stephan Livera: Yeah. Right. I think I like this theme of Bitcoin as collateral. Other people who have spoken about it, guys like Tuur Demeester has spoken about it. Trace Mayer has spoken about it. One thing that we could try to… This is a new thing that we’re dealing with, right? If we believe that Bitcoin is like an allodial money, it’s like a claim on which nobody else can override that. There’s a case that Bitcoin will be the best collateral. In that world, maybe from a credit perspective, people will prefer to hold Bitcoin as collateral. Because of that, all of the things considered they might charge a lower interest rate potentially. What’s your view there, longer term?

Will Cole: I think eventually that’s true. Right now it might not be true, but we’re still in the early days, is that eventually, yeah, I mean I think of it in terms of liquidity is that Bitcoin. It is liquid. Your house sa collateral isn’t necessarily a very liquid asset. You see this in foreclosures and the inability to sell or recoup your investment foreclosing on a house. I have friends that work in commercial real estate or industrial real estate, which right now in the United States is very, very hot.

Will Cole: In an economic downturn, you own a building in a desert in New Mexico. Like shoot, that’s not very liquid in that case but Bitcoin is. I think that it has those properties that make it fantastic collateral and because of its liquidity, it’s going to be something that institutions are more and more comfortable with holding on their balance sheet or otherwise. Yeah,

Stephan Livera: It is, on some part, speculative in that way we believe in the future, we believe it’s going to be moving on that pathway to being global money and the best collateral. Then if you believe that, well then that’s the natural corollary is, it becomes the more demanded thing as opposed to, let’s say, we’ve been through a big speculative bubble and let’s say dotcom or housing, then at the time, at the precise time that all the banks are trying to sell the underlying… Sell that collateral to make themselves whole is often the worst time for that asset because everyone’s trying to sell at the same time.

Will Cole: Yeah.

Stephan Livera: Right? In a ideal world there, where if people are moving towards Bitcoin, then that’s a different story because it’s just money.

Will Cole: Certainly. Yeah. Right now you could say that Bitcoin is volatile to the extent where it’s not the best collateral literally today. But yeah, I mean if we’re right, then we’re not that far from Bitcoin’s volatility smoothing out over time. It starts to get those properties of, yeah, the best collateral that you could hope for. Yeah.

Stephan Livera: Right. Yeah. So let’s talk a bit about the Unchained offering then. Obviously sponsor of the pod, I advertise for you guys, but let’s talk about the vault model and what the interface of that looks like so that people get a feel of what does that look like compared to a normal banking thing that they would use.

Will Cole: Oh yeah. It’s so different. I guess I’ll start with this, which is the way Unchained is set up right now is, at the heart of it is multisig native Bitcoin multisig. We employ something that we’re calling collaborative custody in order to define the sharing of keys in a multisig quorum. What makes it so special is that right now, today, some people might have a couple hundred dollars worth of Bitcoin. They’re fine storing that in a custodial sense on Coinbase or Gemini or Xapo or Anchorage or something like that, or they have a Trezor or a single sig hardware device.

Will Cole: As many people have gone through in the past, those low holdings turn into big holdings eventually. What is the next logical step for people to take when all of a sudden there are a couple hundred dollars or thousands of dollars or whether there’s thousands of dollars or hundreds of thousands of dollars or hundreds, thousands, millions and so on?

Will Cole: I firmly believe that multisig is that path forward. The way that we’re doing it right now is, when you become an Unchained customer, a vault customer with us, is we do two of three multisig. You have two different options. One option is a self-sovereign option where you hold two keys and we hold one as a backup. A backup, or as a co-signer, and in this scenario you’re completely sovereign. What you’re giving up is that we know the balance of your vault. However, we can’t move funds unilaterally. We only have one key in a two of three multisig. You have both other keys so you can move, spend, do whatever you want there. However, you might want to use that in different ways. You might want to sign yourself every time, keep both of your keys geographically near each other so that you can do transactions daily, weekly, monthly, or you could put one key in deep storage and use us as a co-signer whenever you want to do a transaction.

Will Cole: If you lose one of your keys, you can get us to co-sign, sweep your funds, create a new vault with a new two of three quorum, so there’s some redundancy there. There’s some services that come with that as well, with us as a co-signer, and it is a, in my view, a much safer way to store especially large quantities of Bitcoin than, say, in a fully custodied manner or in a single sig situation.

Will Cole: I would elaborate on this to say there’s a lot of… It just depends on how much you have and how many secure physical locations you have access to. There are a lot of different ways to do this, but the best case scenario I can think of is if you’re doing the self-sovereign option and you have two keys and we have one, then you would have four secure locations, one for each of your hardware devices, one for each of the backups. We would be another backup or a co-signer for you and you would be in a much, much safer position for a lot of the attack vectors.

Will Cole: Whether that’s plunder, if someone steals one key of yours or it gets access to one key of yours, they can’t move funds. We have time to recover and move it into another safer quorum for loss. We’re always there to back up or for advice that you would like from experts at our company or for co-signing, where you want to keep something in deep, deep cold storage and just have one of your devices ready to sign.

Will Cole: I think that’s a really attractive thing. It attracted me to this company. The other way, the other thing I’d like to explain about our system is that we also want to make sure that you’re successful and sovereign without us. We’ve spent a lot of time investing in open source. We built a product called Caravan that allows you to do spends outside of our system. For any reason, maybe you don’t have access to our website, maybe we’re down, for whatever reason we’re not available. You can always take your information, your keys, go to something like Caravan. You can also use Electrum or something like that. But we wanted to contribute to that space and built Caravan specifically for this so you could spend outside of our ecosystem.

Stephan Livera: In practice that will look like, I guess, just walking that through for just an individual. They’ll have their two hardware vaults and they might have like a crypto steel or a billfodl or a Cypherwheel or one of those kinds of metal backups, right?

Will Cole: Yeah.

Stephan Livera: They might say they might do one Trezor, one Ledger and like those the steel backup type devices, right?

Will Cole: Yeah.

Stephan Livera: They could keep maybe one device at home, but then keep the other device in like a safe or in a vault somewhere and the metal backups can be kept in, again, different safety deposit boxes wherever you would like. Or maybe you’d keep one with a family member or something like that. Then that’s their model, and then their day to day operation is logging in on the Unchained site and then they can choose to withdraw, to have a new address to receive to, and so on.

Stephan Livera: Or if you’re spending out of it, although obviously this is to do more with your long term holding stacks. Theoretically you aren’t doing too many transactions, but it’s more of a, this is how you can monitor and manage your longterm holding in a more secure way. I think the other point that you were touching on is interesting as well is, look, right now as we record this today, the price is what, 9,000 USD? Something like that.

Will Cole: Somewhere around there.

Stephan Livera: Let’s say we hit another bull run. We don’t know, it could five times, it could ten times. How should people think through their security as that occurs?

Will Cole: Yeah, I mean, it hits you like a ton of bricks, right? All of a sudden what you’re holding onto is, Hey, PlanB, 100 trillion. $100,000 Bitcoin is a very, very different world that we’re living in and everyone’s security posture that they have to second guess what they’re doing. Whether that’s that they’re on a fully custodied model with Coinbase or they have a single sig Trezor or something like that. You have to start thinking, “Am I doing as much as I can to secure what is now an incredible amount of money and value?” Yeah, I think that when that hits people, what I want them to at least know is an option for them, is that multisig is something that is battle tested. It is something that has good thought and reasoning behind it.

Will Cole: Why you will be in a safer position, but also why you don’t have to give up some of the Bitcoin native things that make it great. Not your keys, not your Bitcoin. Multisig, you can still hold the keys. It’s still possible to do. It’s not very hard, right? Instead of one Trezor, you have two, right? It’s something that I think would make people sleep better at night knowing that their Bitcoin is safe and I want to build products that make it easier for people to do that.

Will Cole: I firmly believe that, whether we see a huge bull run now or later, that people should be considering what they’ll do when they reach certain thresholds where they are no longer comfortable having third parties custody their Bitcoin or where they’re no longer comfortable having it just one hardware device in a safe in their house or something like that. Right? We want to help those individuals, those institutions, that are going to, I think, inevitably run into this problem.

Stephan Livera: I think another key benefit that I see from the Unchained suite is the collateralized loan option and the tax benefit. I think there’s a big benefit there because many countries have capital gains tax laws. Meaning, when you sell you must incur that gain and pay tax on that. This model of using a collateralized loan now, yes, you’re paying interest and there are certain conditions on that, but can you elaborate a little bit on what that process looks like and what are some of the benefits?

Will Cole: Oh yeah, we’ve got it down here. It’s really simple actually, right? If you’re looking to get dollars for any reason we lend out dollars, US dollars. We basically do a two to one collateral to dollars issued. If you give us, if it’s $9,000 right now and you gave us 10 Bitcoin, we could loan you up to $45,000, give or take a little bit.

Will Cole: For that type of loan, what would happen is you would send a transfer to us, we would store it in a multisig multi-institution environment where you have a key, we have a key, and a third party institution has a key that we talk to you about. There’s an interest rate where you’re paying your interest in Fiat to us that we have a contract between us where, at certain levels of collateral to loan value, there are margin calls and things like that, but if it’s staying steady, there are no margin calls. If it’s going up, you can take out some of your over-collateralized deposits and it’s a really good way for a lot of people to get Fiat liquidity without those tax repercussions.

Will Cole: It’s one of our biggest businesses right now. It’s actually the foundation of Unchained and one of the things that really attracted me to Unchanined was when I found out how they built that, right? They didn’t do loans where you just send it to us and we took full custody over it. It was just us, or just Unchained that had access to that. They did it in multisig. They did it with third parties involved. They did it where the person taking out the loan could continue to monitor that address and their funds.

Will Cole: I looked at that and thought like, “These guys get it.” Dhruv and Joe who started this business, where the loans were the first product. It was really impressive to me and it was also because they did it the right way, in my mind, in the Bitcoin native way that we were able to branch out into the vaults project pretty naturally. Right? The loans are a vault, with a different quorum of key holders and then contracts between us because of the nature of lending out the dollars.

Will Cole: But when you go into the vault, it’s the same thing, right? It’s who has the keys, who has the majority control of the keys or does anyone have the majority control of the keys? Because they did it the right way, we were able to expand into other services for people really naturally. That was a huge turn on for me to see that someone was doing this in a way that really connected to me as a long time Bitcoin holder that really cared that someone was doing this in a way that didn’t mimic the banking system that we have now, but really respected what the Bitcoin holder would want out of a financial services company.

Stephan Livera: Yeah, I’m a big believer in that approach as well. Let’s talk a little bit about… One thing I find interesting is big Bitcoin holders might, they might not actually have to sell their Bitcoin, right? They can literally just borrow against it and let’s say they’ve got a profitable business idea, right? You could borrow against your Bitcoin, generate a return out of that business, use that to pay off the interest and then basically in doing so, not actually sell your Bitcoin but still get some of the benefit out of having that Bitcoin. Right. It’s just a big benefit to that holder. Right?

Will Cole: Absolutely. We have this whole tagline that’s on some of our tee shirts, says, “Friends don’t let friends sell Bitcoin.” Right? While that’s a little bit silly and everything, look, I want to build services where you don’t have to sell your Bitcoin. I mean that’s a big step to take and if we can avoid that and we can help people avoid that any way, I want to be able to do that. It could be investing into a new company, it could be paying down other debts that you have, it could be buying more… The reason, there are going to be many, many reasons to do that. If you’re Bitcoin rich and cash poor for any reason at any point in time, that’s a really good option to have, to not have to forfeit, permanently, your ownership of that Bitcoin.

Stephan Livera: Look, let’s bring it down. You mentioned ownership of your Bitcoin and I think that is really what people come to Bitcoin for. It’s ownership, right? So allodial title, as we were referring to before. Now I want to touch on what you were talking about earlier with Wyoming and having certainty over our ownership and our property right. Give us a bit of a background. What were you doing at Wyoming and the blockchain task force?

Will Cole: Yeah, that was a really interesting time. I joined in 2019. It existed before 2018 so as I talk about this, I want everyone to know that all credit goes to Caitlin Long and Tyler Lindholm and the other legislators there. Tyler had the vision for what they wanted to do in Wyoming and Caitlin really helped with the execution and a lot of the expertise in Bitcoin to make it happen. I was a late joiner to that, but hopefully contributed, but what they did was phenomenal. I actually went in as a skeptic, thinking that I had seen a bill that they had passed and gotten a little bit prickly about it and was thinking like, “Oh no, this isn’t how it’s supposed to work.”

Will Cole: I wrote a letter to the secretary of state and said, “There’s no way you can comply with this bill.” One thing led to another and they actually named me to the task force and I got there and I realized, “Oh shit, foot in mouth. These guys are doing phenomenal stuff.” They rewrote that bill that I got all prickly about and it was fine. What I learned there was that they had a certain mission, which was to help the economic growth in Wyoming to make a attractive jurisdiction for companies to start their business. They were going to focus on this Bitcoin blockchain world in order to attract a growing industry.

Will Cole: I think they’ve been very successful to date. They’ve set the groundwork for this and my contributions were really bringing in some of my expertise and knowledge just over years of being involved in Bitcoin and also making sure that while we weren’t looking for the regulatory capture in any way, making sure that we weren’t doing anything that I thought could harm Bitcoin and the growth of the industry in any way.

Will Cole: It was amazing. Again, I give so much credit to the legislators in the state there. I mean, what they’re doing is they’re selling sovereignty. They’re trying to create this environment that out competes every other jurisdiction that says, “If you are uncertain in the state of New York, if you’re uncertain in Switzerland or in the UK, there’s a place for you here.” We did some really cool things. I think, just to pick on probably the most prominent one, the passage of the SPDI Bill, the special purpose depository institution, which we all know, watching this space for a long time, that a lot of Bitcoin companies have difficulty dealing with the Fiat world, with the banking system. They get cut off from banks, their customers go through all sorts of hoops or lose access to their banking relationships. Not just the company loses access, but individuals that use some Bitcoin companies would lose their relationship with their bank.

Will Cole: It was kind of nasty out there for a while. The SPDI bill gives companies, Bitcoin companies a seat at the table because what a special purpose depository institution is, and this is fucking huge- sorry, it’s huge, is that essentially you are a bank. You can get a membership into the Federal Reserve Group of banks and there are a hell of a lot of privileges that come with being a bank. Now, they are non lending institutions, right? So they are not under the jurisdiction of the FDIC, for instance, so it’s not FDIC insured and stuff like that.

Will Cole: But everything else, besides the lending part, you are a bank. Banks work with other banks and they don’t really question each other very much and that gives, whether you’re a custodian or a payment processor or an exchange, there are a lot of reasons why that type of corporate formation would be hugely advantageous next to being a different type of corporation in a jurisdiction where you didn’t know or you don’t know if next year they’re going to say, “Hey, what you’re doing is illegal and we’re going to cut you off.”

Will Cole: Wyoming’s sort of taken the stance of saying, “We’re going to write these laws with the input of the Bitcoin community,” and which I was really impressed with the… I don’t know how government works for the most part, and I watched this happen. We sit up there and I thought we were just going to debate amongst each other. You know, what type of bills we were going to write, but no, it’s a table. You’re looking out and we have an agenda and the public just comes up and testifies and says, “This is what we would like. This would make us move here. This would make us certain that we can build our business in the way that we want to.” Then we consider it and we draft legislation and then they get to talk about it, and then we show the public the legislation and they say, “Eh, you got this part wrong.” Right? Eh, this is going to be a little bit onerous for us. And then we change it and then they say, great and we put it up for a vote.

Will Cole: I’ve been really impressed with the way Wyoming worked through this process. I think they’ve had a lot of success and with SPDIs, I know that the applications for that type of formation are rolling in now, and that’s really impressive. It was fun to be a part of that.

Stephan Livera: Right, yeah. Have you winded down your involvement now or are you still involved?

Will Cole: It’s a little bit up in the air, but my understanding of this is that they’ve gotten a little bit too big for me and citizens to be involved. A task force is a little bit different. They can’t sponsor their own bills. We’d write legislation and then send it off to another committee that would then- I know it’s all crazy government stuff, but it’s the way it worked.

Will Cole: It’s been so successful that they’ve gotten, I believe, their own committee now which can sponsor their own legislation, which means that they can’t have citizens on it. I’ll still be going up to testify and be a part of the public commentary on it. We had a great group of people up there, great Bitcoin companies, people like Trace Mayer were up there, Kraken was up there a lot. There were just all sorts of people involved helping inform the process. We even took to Twitter. I remember one time when we’re working on the custody aspects of one of the bills, the Twitter world and Adam Back and people got involved saying, “If you write the law this way then there’s an attack vector on custodians.” I believe the way it was written was that by law you were going to have to give access to all forks within a certain amount of time.

Will Cole: Then there was a bunch of Twitter uproar. To the legislator’s credit and Caitlin’s credit, they took that feedback, they rewrote the bill and within a few months they had a new bill out there and it was fixed. It was great.

Stephan Livera: All right, well there you go. Look, I think the broader lesson and hope there is that we see that- as has been a theme on the podcast, is that competitive jurisdiction aspect.

Will Cole: Yeah.

Stephan Livera: Some other jurisdictions sees, “Okay, that’s well that’s working out really well for them. We’re going to try that as well.”

Will Cole: Yeah. Actually, I want to talk to one thing because you’d opened this up and I missed this point of we’re talking about ownership and the not your keys, not your Bitcoin that relates to Unchained and what we do. In Wyoming, one of the bills that’s actually up for a vote this month is around whether or not a court can compel you to disclose a private key. Our bill proposes that a court should not be able to compel you to disclose a private key.

Will Cole: That has a lot of implications that are really important. I remember Christopher Allen actually helped us a lot in drafting this legislation and the reason that that’s so important is that a private key could be holding a lot more than just Bitcoin, right? It could be holding more Bitcoin than someone needs access to and the disclosure of that private key could be devastating for… Especially if an institution was forced to, to disclose it.

Will Cole: Now it’s not an excuse to not let people have- if you’re going through a divorce and you’re just not trying to pay up your fair share, it’s not to say that there’s not still a claim on assets that a private key is protecting and that the court would have reason to demand those assets. Even in that case someone could just refuse to, to show their private key and then to be held in contempt.

Will Cole: The idea is that there is a process now on the books or at least proposed that there would be a different way to go through getting those assets than disclosure of a private key. That’s a really interesting and I think unique proposal that Wyoming’s taking on that I haven’t seen anywhere else and really does speak to, sorry. It speaks to, I think, a lot of people that hold Bitcoin and understand cryptography, but I also think that it speaks to the extent that Wyoming’s willing to understand what will be attractive to institutions and individuals in the space.

Stephan Livera: I think it’s one of those things where it may be like a story where we see some other country around the world want to also replicate that model and say, “Okay, well look, it worked out for them. We should do that too.” Then we can have real competition between the states of the world at least on a way that is better for us as individuals, as opposed to competing in the production of bads right now.

Will Cole: Yeah, and we see it happening already. Right? I’m glad that Wyoming is kicking everyone else’s ass right now because that’s part of our goal as the task force was to give us a head start. We’re not stupid. We’ve done some really good work and people are going to copy us and it’s happening. We hear from other states, we hear from other countries. The task force was always receiving these letters from, it could be Bermuda or it could be Nevada or it could be Alaska.

Will Cole: A lot of the stuff already has been copied. I think that it’s going to take a while. I think Wyoming was really aggressive here and so, for any jurisdiction to catch up, they’re going to have to do a lot of work but we’ve seen bits and pieces of it already seeping into other places. Yeah, there’s going to be a lot of competition, but I’ll put my money on Wyoming to outflank them. Once again, once they’ve caught up to this point. I don’t think they’re stopping. If you knew Tyler Lindholm, you’d know that they’re not done yet.

Stephan Livera: I think the other thing that comes to my mind is when we get more Bitcoin holders, we’re going to have a bigger voting base, if you will.

Will Cole: Oh, yeah.

Stephan Livera: There’s going to be more people out there basically pushing their local representative, pushing their local politician, whatever country they’re in, to have more Bitcoin favorable laws. What’s your view?

Will Cole: Yeah. I want to take a roundabout way at this, which is, I want to fully recognize that Bitcoin, at its core, is censorship resistant. It doesn’t need what Wyoming is doing. It doesn’t need what any of these jurisdictions are doing.

Will Cole: That doesn’t mean… I respect that fact. It doesn’t mean we shouldn’t try to make it easier and more friendly. It’s better for all of us, right? Yeah, I think that that’s a big part of this, is that as places like Wyoming… It’s such a big deal, it’s a sovereign state and it’s taking this very seriously, and it’s taking a very, I would say it’s not even non antagonistic, it’s welcoming and opening up the doors to this industry in a way that if they’re successful and the companies and the individuals are moving there, of course people are going to try to compete and that benefits all of us. It’s fun to be a part of that and I think that even though we know that Bitcoin doesn’t need it, it’s good to know that there are people out there like Tyler, like Caitlin, and like the Wyoming legislature that are out there fighting that fight because it makes our lives a lot better.

Stephan Livera: Yeah. Look, one other topic I think would be interesting and it’s kind of related. Right now there’s a big debate around Bitcoin privacy and so on, right? Like, should people use coin joining and so on and obviously that’s a whole debate. We don’t need to get into that today.

Stephan Livera: I think there might be some benefit just to consider, and this is going to sound silly, but just number go up, right? Like just the sheer number go up. Even if we don’t have privacy, just sheer number go up. I think that drives a big change in the way the governments work and law works and there’ll be so many more people who go and lobby their government and try and make sure that the government doesn’t make Bitcoin illegal and so on and self custody illegal.

Will Cole: Absolutely. Yeah. As number goes up and as… It does help that we have lots of prominent people that are connected to the government that actually hold Bitcoin. These things matter in human societies that have influence on how these things go. Not that we didn’t want to get into coin joins, I think that stuff’s inevitable anyway. We’re not going to lose the privacy wars and stuff like that. Bitcoin will be fine there and there’s lots of great plans. The after taproot and Schnorr, there’s the extensions of SegWit and stuff. We’re going to get some cool stuff there. I’m not willing to throw in the towel and say Bitcoin will never have any privacy, although I think you’re right that it doesn’t necessarily need to be that in order to succeed.

Will Cole: But yeah, number go up. I this is one of the things that I only half jokingly was thinking about as part of the Wyoming task force was, if the goal is to diversify the economy of Wyoming and be attractive to all these new companies and make- why doesn’t Wyoming, why doesn’t the treasurer’s office just buy Bitcoin? Right? Can we write a law like that? I’m so naive on this stuff.

Will Cole: I talked around with few people and it was like, “No, we can’t really force them to do that.” It is something that I’ve been talking actually, but now I’m serious. I’ve been talking to people that do have some influence in Wyoming about who’s the first sovereign to take a public position there and say, “Yeah, we’re going to hold Bitcoin on our balance sheet. Number go up. This is important to our future.” It’s going to happen. It’s going to happen soon.

Stephan Livera: Right, yeah.

Will Cole: If it hasn’t already, maybe it’s happened in some country that I’m ignorant of, but I think Wyoming could win that medal as well.

Stephan Livera: Right, yeah. You hear whispers about these things and I mean, you never really know, right? I saw some random article, but I mean, who knows, right? I think it just comes back to me that just, over this next few years, we’re just going to see a massive sucking in of people and talent and money and everything’s just going to come into this because it just… If you’re listening to this now and we’re recording this in January 2020 you might be listening in like February 2020, you’re early, right?

Will Cole: Oh yeah.

Stephan Livera: It’s just so hard for us to explain that and there’ll be so many more people to get sucked into this industry and start working in it and owning Bitcoin. For you as well, you had a great job in Stack Overflow, but you chose to leave to come to a Bitcoin company. What’s your take on seeing brain drain in the direction of Bitcoin companies?

Will Cole: I’ve been amazed by it. The more and more I’ve… Either through Wyoming or being a part of Unchained now and seeing the level of talent that’s here at this company, technical talent, business development, client services. There are some really great people moving into this space. I knew that on the protocol level for a long time. I could see the level of talent there, but in the industry now, I think it’s become so much more mature. There aren’t a lot of Mt Gox shops being built anymore. They can’t compete. Bitcoin’s more serious.

Will Cole: Everyone listening here, you are still early. There’s a lot that’s been de-risked for you over the last decade, right? The types of services you have access to, whether Unchained or otherwise, are immensely better than what we had access to in 2012, right, especially around security. What I’ve noticed is that when you put out a job listing for a company like Unchained, is that the flood of talent from traditional tech or traditional finance that will do just about anything to come work with a Bitcoin company because it’s so much more fun, more interesting and the promise is so much greater than what they’re doing right now, especially on the banking side. You know? Gosh, how depressing is that. Man, right now we get our pick of the litter. It’s really impressive. I’ve never seen anything quite like it.

Stephan Livera: Yeah. It really feels like this is just a new frontier and if you want to have a chance at big success and prosperity, then you want to come to the frontier and be here and be knowledgeable about it and be in this space.

Stephan Livera: Yeah. Look, I think that’s about all we’ve got the time for, but did you want to just make sure you let the listeners know where to find you online and where they can find Unchained Capital?

Will Cole: Oh yeah. You can find me at, @WillCole on Twitter. That’s probably the best place. No use going anywhere else. Twitter’s the greatest online product ever created. It is so great, and that’s where I spend my time. Then Unchained Capital is unchained-capital.com. You can find us there. If you’re wondering about multisig, we have a lot of good educational information there. If you’re wanting to go down the Bitcoin rabbit hole from first principles, check out Parker Lewis’s Gradually Then Suddenly series. It’s fantastic. Yeah.

Stephan Livera: Well, thanks for joining me.

Will Cole: Yeah, thank you, Stephan.