Raoul Pal & Michael Saylor: BTC, Regulation & The SEC

michael good to get back my friend

thanks for having me you know it's been

quite a tumultuous time since we both

first spoke i know we've spoken again i

think at the

crypto gathering but on the platform we

haven't spoken for a long time and that

kind of interview changed a lot of

people's lives i think

yeah it was interesting time then

yeah what was bitcoin like fifteen

thousand or something it was like

teens then yeah that was that was before

we started to see all of the advances

and the buys by the other companies so

what i'd love to dig in to start with uh

since then what are your learnings what

have you learned about the whole space

because as we all know this is a kind of

hugely evolving situation and we kind of

are figuring things out as we go so what

didn't you know then that you kind of

know now

well i i mean i think in every month for

the past 13 months there have been

positive developments uh

that give us more confidence in bitcoin

the the result of the election was a

positive development

the regulatory regime i think it's a

i think uh we we had zero public

companies holding bitcoin before

microstrategy and now there's like 25

maybe by the end of this year we'll have

about a dozen bitcoin miners that have

come public

and if you look at uh if you look at the

success of the miners like uh marathon

and riots and i think i just read

a few days ago that hud 8 is doing a

secondary offering

you've got uh you know you've got spacks

on the work from terawolf you've got

core scientific coming public

um

you've had coinbase come public right

since we last spoke

you've seen coinbase not just come

public in a billion dollar ipo

coinbase also brought a billion dollar

convertible offering to the market

and then just a couple of days ago they

brought a 1.5 billion dollar junk bond

offering to the market

and they upsized it to 2 billion

and they raised that money

at

3 and a half you know a blended rate of

three and a half percent interest

so you know what i've i've said from the

beginning is

it's important that we carve a channel

between

the ocean of traditional assets

and the crypto pond

right

and the ocean of traditional assets is a

hundred trillion dollars worth of of

debt

which is yielding nothing on a real

basis

and um and it's it's whatever 50

trillion 80 trillion dollars worth of

global equity

and it's hundreds of trillions of

dollars worth of uh commercial property

and residential property

and it's 80 trillion dollars worth of

cash and cash equivalents and things

like that

and the key to carving that channel is

the public markets

and so in a world where there are no

publicly traded companies no listed

registered companies

um

that can actually

cross the chasm

then the flow of capital into the entire

industry is just retail

and what we've seen is a rotation

right i mean if you'd ask who's driving

the industry

a year ago you would have said retail

investors with 10 20 30 125 x leverage

on an offshore exchange

and if you'd ask the question who's

driving the industry today

well it's a it's a hodgepodge of a lot

of different players i mean you've still

got you know the offshore exchanges but

now

they've allowed that they will back down

to 20x leverage

you know to be more conservative

so they're i mean they're

there's no doubt that offshore

crypto leverage money is is in the

system i think it drives volatility

in my opinion more than it drives

sustainability

if you want to see bitcoin go to 10

million dollars a coin

then it won't come from

125x or 20x offshore levered

contracts and traders it will come from

insurance companies

and uh and macro hedge funds that have

capital a hundred billion dollars of

capital and they just allocate five

percent of it to bitcoin forever

and when you start getting five percent

allocations forever

then uh then you'll start to build a

monetary base

and a capital base that will drive the

industry so

i i think in general

the the bullish developments of the past

12 months

have been institutional adoption of

bitcoin and uh and that has come in the

form of the companies the the squares

the teslas the micro strategies the

marathons the riots of the world that

are actually in the space

i i think that

the second thing that's that i've been a

big

a big proponent of a big cheerleader of

is if you're gonna be in the bitcoin

mining business

then you're naturally long bitcoin and

if you're naturally long bitcoin

you it's inconsistent to ever sell it so

if you're a bitcoin miner and bitcoin

goes to zero your business is worth zero

and if bitcoin goes up

and you sold your bitcoin your business

is worth 20 of what it would have been

worth

so if you really are bitcoin miner

you're long bitcoin which means you

huddle all the bitcoin and so at this

point i think you see

uh uh an emerging consensus in the past

12 months that if you're a bitcoin miner

you should never sell it

okay now that's only consistent with the

idea of bitcoin miners all coming public

in the north american markets

if you're a chinese bitcoin miner you

didn't have the capital markets to not

sell it you have to dump it on the

market right and the narrative was

always oh the miners are dumping they

have to sell their bitcoin right watch

the miners and if you're a bitcoin miner

ral in

europe

or you know if you were trading on the

canadian stock exchange or the european

stock exchange if you dig a little bit

deeper you'll find that those companies

had liquidity of like 2 million dollars

a day

a million dollars of trading a day 5

million a day on a good day

if you look at the liquidity and

marathon and riot

400 million a day

250 million a day incredible okay so

wake up call

you know you move from a cash business

to a you know to a small uh to the to

the secondary public markets

to the primary public markets when you

move to the primary public markets let's

take microstrategy microstrategies

microstrategy had a full market

capitalization of a billion dollars uh

before we you know in august of last

year with 500 million in cash

and uh

we've had days where we traded a billion

dollars worth of equity

now we have 500 million in liquidity a

day

okay so

what is that telling you

right the answer is

is as the companies in the space come

public and as they migrate

to the to the capital markets with the

greatest amount of capital

you know if you can raise equity capital

you know at a high multiple that's uh

that's cheap capital if you can raise

convertible debt

you know since we talked microstrategy

did a 650 million dollar debt offering

and paid 75 basis points but

then we followed up with a 1 billion 50

million dollar debt offering and paid

zero

interest

and then we followed up with a senior

debt offering

and we paid six and an eighth

on just junk debt there's nobody in the

space that thinks that bitcoin isn't

going up six percent a year no

nobody

so i you know the issue is

do you know how much i've actually how

much capital i've invested in bitcoin at

this point well no

three billion

three hundred

thirty five million dollars

that's pretty much okay so

one person yeah

but i didn't have 3 billion 335 million

dollars in my piggy bank when we last

spoke yeah

now

what happens if more than one person

does this row

how many people does it take right and

the answer is you need public entities

and they need to be credit worthy and

they need to be

able to file a registration statement

you know if you can file a registration

statement you can tap the fixed income

markets you can tap the convertible debt

market

you can tap

the the equity markets

and

and as you do that that capital becomes

permanent capital

right because

by the way there there are some

companies that can't own uh digital

property they can't own the underlying

property that is bitcoin

like if i if i have 10 billion dollars

in a um in a fixed income fund took me

30 years to establish my relationships

with my limited partners i've got a

charter i have a charge i can go and buy

fixed income right now my fixed income

instruments are yielding two percent or

two and a half or three percent

or i can buy micro strategy yielding six

percent it looks like a pretty fat

coupon to me

well we yeah we had lots of firms that

gave us 50 million dollar orders

after one conference call rel

you know we did that entire deal in one

day

one day

no one on ones

one conference call 130 firms on the

phone

okay i'll give you a 50 million dollar

order i'll give you a 25 million dollar

order i'll give you a 100 million dollar

order

and um

why do they do that well i mean you get

the moody's credit rating you get the s

p credit rating you're a public company

you package a security right a

derivative

of of a crypto asset called bitcoin it's

a bitcoin bond

and you put it out there and and they

can buy that thing

so

what what we've seen over the past 12

months is we've seen the creation of

public securities

a lot of people can buy you know 500

million dollars worth of marathon stock

or hundred million dollars worth of a

bitcoin mining stock but they can't buy

the bitcoin yeah they can buy the

convert they can buy the equity they can

buy the junk debt

they can but they can't buy the bitcoin

and of course people in the crypto

industry the crypto traders they don't

understand why right now like there's

still a group of people that think oh

well you need to buy it and and put it

in cold storage and keep your keys which

is

it's it's uh

you know what what i call it an

ideologically pure

approach

to the industry which works for a subset

of people

but when i'm talking to a guy that runs

a two billion dollar portfolio

if he went to his boss and said i want

to buy 25 million dollars worth of

bitcoin and hold my private keys he

would get you know between laughed and

fired right that's not happening in a

thousand years no matter how hard on the

other hand the guy can go like

okay so yeah this is good so what was

the interest rate again six percent okay

i'll take 25 million of that next he's

got another deal did the next day

so

i think that what we're seeing is the

maturing

of the industry the maturing of the

asset class

when jp morgan and morgan stanley start

started offering uh bitcoin funds like

the nydig back funds and the galaxy

backed funds that was a big

uh endorsement a big step forward and i

think we got what wells fargo

we've got morgan stanley we've got jp

morgan

they've all moved to offer those funds

that was a big deal and then i think

that when the etf comes

you know right now we've got etfs in

canada right i don't know if you saw

fidelity just went before the sec

this is fidelity this is fidelity for

the last 60 years they have like 10

trillion dollars of assets under

management and there are companies

that have been doing business with them

for 50 years or 30 years fidelity goes

in front of the sec

and they give a 20-page presentation on

why bitcoin is mature and why it's time

to approve a bitcoin etp in the united

states

and there's you know there's a lot of

institutions that they will take 10

million chunks and 50 million dollar

chunks of this stuff once there is an

etp of sorts

and uh roll the clock back 18 months

none of this the other thing that you

have championed is talking to the

corporates

and it's not been as easy

as we thought you know because of

accounting rules talk people through a

bit about that learning because you've

spoken to a ton you've helped them

you've given them all of the information

that they could possibly need but it's

still a slow process right

you know to be clear i think there are

two structural catalysts that will drive

an acceleration of the industry and a

bitcoin in particular one will be uh the

the availability of broad-based etps and

the u.s capital markets that will be a

big one

and we're watching that right now it's a

process the second will be the

normalization

of uh of accounting for bitcoin as a

financial asset

right now bitcoin is uh an indefinite

intangible asset um

when uh when we roll the clock back 24

months you couldn't find a publicly

traded company that had two million

dollars of this stuff on their balance

sheet so if you're a bunch of

accountants sitting around analyzing it

you would say there's there's no

compelling need

right to normalize this that no one's

got a hundred million dollars of this

stuff

right

there's a hundred trillion dollars of of

credit instruments and there's two

million dollars of bitcoin so i don't

think we're gonna

focus on this and i understand that but

indefinite intangible accounting

treatment says

you have you can mark it down and you

and you have to mark it down to the

lowest bid you can find on on the

exchange at any minute of the day since

the beginning of when you own the asset

and you can never mark it up again

so that's a negative right it's a

one-way ratchet function but it's it's

worse than a one-way ratchet function

it's like i bought a collection of

baseball cards for a million bucks and i

have to go to everybody i see at a party

for the rest of my life and ask them if

they'll buy my baseball card collection

for a number and if they tell me they'll

give me a thousand dollars i have to

mark the baseball card collection down

from a million dollars to a thousand

dollars

and if someone else if bill gates offers

me a billion dollars for the baseball

card collection i'm still carrying it on

my books as a thousand dollars

so it's it's prejudicial hostile you

know

accounting treatment and um

that of course is sub-optimal there's

another sub-optimal thing about it

which is when you do mark it down you

have to run it through your p l as an

operating loss

it's not even a below the line uh

you know it's a non-cash you know it's a

non-cash investment cost in theory but

not

per indefinite and intangible per

indefinite intangible

if facebook buys 50 billion of bitcoin

and it trades down ten percent and then

it trades up a hundred percent instead

of holding a hundred billion dollars of

assets they're showing 40

and then in the next you know quarter

they have a 10 billion dollar operating

loss against their 10 billion dollar you

know gain so they make no money in the

year

even though they made

50 billion dollars in the year okay so

what does that mean well

look if you're a pure play like

microstrategy and your investors

understand we have 114 000 bitcoin

you ignore all the rest you multiply 114

000

by 47 000 and change you're like oh they

have five and a half billion dollars

worth of bitcoin

okay and if it doubles they'll have 11

billion

and you divide the number of shares into

that and you come to a conclusion about

what you think the company's worth

okay that's that's wonderful but if

you're running apple computer or

facebook or google and you've got a

pristine p l

and you've got a pristine balance sheet

and if you're a conventional cfo

you would think well like i've i have a

perfect piano and a perfect balance

sheet and if i put this on the balance

sheet it's going to obscure the p l and

i'm secret pro formas

and it's going to obscure the balance

sheet and now it's another set of pro

formas and now i'm going to go from

telling everyone that i made 37 billion

last year with 120 billion in assets

to something hyper complicated it takes

a half an hour to parse

and most of them are conventional

traditional investors they don't want to

spend the time on it

so

the warren buffets of the world by the

way like he's totally fine owning apple

stock and coke stock on his p l but he

marks at the market every quarter

right whereas uh in this particular case

bitcoin critics you never hear a critic

say i spent 100 hours studying this and

let me break down my 13 concerns

and you never hear a critic say i spent

a thousand hours studying all this and i

looked at i took the course and i read

all the books and i listened to what

ralph said i looked listen to what

sailor said and here's my 92 point

rebuttal you never hear that what you

hear is somebody asked me what i thought

and

i didn't really know much so i said well

i don't understand it tulips i don't you

know whatever quick response

so uninformed pushback now

investors normally take the path to

least resistance

so i i think the current and definite

intangible accounting treatment is an

overhang

if bitcoin would go it'll probably go to

500 000 regardless

but if you wanted to go to 5 million a

coin or 10 million a coin

right the way you get to millions of

dollars of bitcoin is is you start to

market the market and you and you

treat it

at least at parity withholding

apple stock or coca-cola stock

and i think that i think that that

consensus is building in the marketplace

even amongst uh if you look right now

what's going on we have briefed the

regulators

right uh multiple times

we've also

we've gone in front of

uh i think 18 different entities have

gone in front of fasb this has become an

issue

they're in the pro they're in a review

process right now

they've actually asking for comment from

the community i think i'll probably

tweet something out on that in the next

couple of days if not if not in the next

day or two asking people to opine

and uh i think they've been they've

received briefings from institutional

investors from corporations from from

other accounting firms the like

and i'm confident at some point they'll

normalize it as a

as a financial asset i don't i can't

tell you whether it's a this year thing

or in two years or three years but

but you know that there's no real

compelling reason

to treat it

worse than you would treat baseball if i

bought baseball cards ralph it would be

better accounting treatment

if i just went and i bought like a bunch

of artwork and picassos

at an auction

it would be better accounting treatment

than buying bitcoin so so

irony is when the actual is the opposite

of the literal

and in actuality bitcoin is more

transparent

right as collateral as you've said

than

than uh blocks of stock and and

certainly it's a lot more transparent

than a lot of other illiquid assets

like buying timberland or a building

or or the like

so

at some point i think people will start

to realize that there's a rational way

to account for on a p l

on a balance sheet and

at the end of the period you probably

should market the market and if you're

up it's an investment gain and if you're

down it's an investment loss yeah and

you've been championing this by just

using the word property more trying to

anchor people on thinking of it as a as

a digital property is that what you're

trying to do there to get people to

start thinking of it in those terms

i i think that there's three metaphors

for bitcoin and i think one metaphor is

digital property

um

we're demonetizing the monetary premium

and your commercial real estate your

residential real estate your gold your

silver your commodities

there's a lot of things that have been

monetized right i mean in canada they've

got the current example where the prime

minister thinks the foreigners have

monetized

all the houses in canada so they cost so

much that nobody can afford a house

so

and the monetary inflationary regime

that we've seen for the past who knows

how many years uh you've seen monetary

premiums flow to all sorts of other

properties it's pretty obvious people

monetized da vinci's and picassos right

like artwork has become

monetary instruments as well

and um

the problem with monetizing

uh things with utility value

is if i monetize houses in tokyo no mere

mortal can ever afford to buy a house in

tokyo and that happened back in the 90s

right starting in 1990 the bank of japan

pumped so much money in the economy that

tokyo real estate was

obscene the same thing happened in new

york city where you know 10 million

dollars will buy you 4 000 square foot

apartment

well how does somebody making 300 000 a

year or 100 000 a year

live right you've monetized that uh that

asset so

so there's a problem with monetizing

those things the ideal thing to monetize

is is an instrument that has no utility

value which is what bitcoin is so

digital property is is the ideal

property it's the most desirable

property in space and time bitcoin is

the dominant digital property network

it's the most secure it has the most

durability it has the it's the most

decentralized

so therefore if you said to me where do

i put my billion dollars

such that any rich person on earth will

want it

and any rich person in the next hundred

years will want it bitcoin

if you buy a billion dollars of

buildings in new york city billionaires

in beijing can't use them

and and when the mayor of new york city

enjoins you or impairs you from evicting

your tenants

or taxes you're building

you can't pick it up and move it

to monaco or singapore so a billion

dollars of property in new york

or a billion dollars of land in kansas

or a billion dollars of houses in

vancouver

don't represent as high a quality

property as a billion dollars of virtual

bitcoin

because bitcoin can be moved at the

speed of light anywhere on earth that's

the first check the second check is

uh

if you have to hold it a hundred years a

building doesn't have a hundred year

life span

the rockefeller centers it's get or

another way to say it's got a

maintenance charge you have to reinvest

you know three to five percent a year

every year for a hundred years in order

to maintain a building and even if you

do that name one building in new york

city that's 150 years old it's

commercially viable today

the the useful life of a of a building

not that great how about the land

underneath the building better

buy blocks of new york city and that

that'll be good for a while but you've

got a property tax on it

the property tax you know and and you've

got the risk of uh seizure by eminent

domain

so

and you've got

you've got the meddling of the

neighborhood zoning board they can zone

your you know your 10 blocks to be

low density

yeah or they can zone it to be high

density and high density makes it worth

50 million dollars a block and low

density makes it worth a million dollars

a block

so imagine having the neighborhood the

mayor the governor every regulator in

the united states the white house

and congress all deciding whether or not

they will impair

your asset or your property

every year for the next hundred years

that's the problem with all with all

these properties but could they impair

bitcoin the same way to give it a carry

cost so there's a holding tax that you

have to pay every year or three percent

in line with property i mean that's

likely to happen right over time the the

basic principle is this raul

bitcoin is the apex property of the

human race

it's the hardest to impair

it's the hardest to seize

it's the hardest

to tax it's the easiest to move

it's the easiest to keep confidential

you can you can subdivide it

take your take your 10 acres of property

in new york city or 10 city blocks in

new york city divided into 97 000 pieces

and then rented out to 97 000 people

that live somewhere outside of new york

city

every hour

you understand what i'm getting which is

i can oscillate the property

at 60 megahertz

i i can move it at any frequency i can

subdivide it you know in any partition

and

if new york wanted to tax it i can move

it to wyoming or florida you see

yeah certainly the you know politicians

are going to attack stuff with tax when

you have a billion dollars of property

in beverly hills and when the governor

of california decides to tax it

how are you going to move that to miami

right so so my point is not that there

won't be taxes and there won't be

attempts to tax it but let's coming back

come back to the theory of like stolen

cars

a car thief can steal any car so why do

you bother to lock your door

you lock your door because

you know you figure you might as well

make your car just like 37 seconds more

difficult to steal than the car in front

of you or behind you

so they'll steal that car

and i think if you come back to bitcoin

as digital property

you can move it

unlike land

yeah

how do you move the domicile of apple

headquarters

you've seen the apple headquarters

that's not moving right so you can't

move the domicile of corporation you

can't move a factory you can't move land

in kansas you can't move a city block in

new york you can't move the rockefeller

center

okay can you move a billion dollars of

gold

at you know theoretically but

practically no right pretty it would

take you six months try smuggling a

billion dollars with the gold through

the airport think it's not easy maybe in

theory but you know they can pass a law

making it difficult to move the gold

can you move a billion dollars worth of

artwork

well sort of but you know you're still

you're dependent upon sotheby's and

christie's to value the artwork and it's

kind of esoteric you might get the crown

prince to buy your artwork but there are

a lot of people in the world that don't

really need your artwork try subdividing

a picasso by 97 000 into 97 000 pieces

lending it out on the weekend and then

recombine combining again on monday

morning not gonna happen

so

bitcoin

i can move it it's hard to confiscate

it's hard to tax but let's say well

let's come back to this tax issue i'm an

american citizen and you know no state's

going to get it no municipality is going

to be able to tax it miami taxes my

property two percent you know or florida

does i can't move my house

but i can move my bitcoin out of florida

but let's say that you know you're

really focused right and congress passes

a law saying every american must pay

two percent a year

to own bitcoin wealth tax yeah okay well

i mean let's get to the extreme well

they're going to tax everything else

first right i mean

that wealth tax is gonna they've already

basically put a property tax on every

piece of property in every state in the

country so

eventually let's say they get to that

point

and let's say that they combine that

with that you have to like give up your

passport pay an exit tax and live out of

the country for a decade before you

conduct that

okay fair enough

right that was yeah you you kind of got

me there but having said it

i can sell the property

okay so if i hold bitcoin in the us as a

us citizen at two percent a year for 50

years

okay i'm gonna pay a hundred percent of

the asset value to bitcoin

having said all that there's a person in

singapore that still will want to own a

billion dollars of

bitcoin you know

sell your billion dollar building in

manhattan to the person in singapore

when they put a two percent tax on the

building in manhattan the point is you

don't have the option to sell it it you

know it's not going to be that useful

and uh and then let's come back to the

other point which is

bitcoin you could think of it as digital

property

but you can also think of it as digital

energy

and if you think of it as digital energy

right all

all energy becomes matter all matter can

become energy there's conservation of

them you can either create nor destroy

that right

uh i could take money a billion dollars

of money turn into a billion dollars of

energy turn into a billion dollars of

products and services turned into a

billion dollars of property all of these

things are fungible in a socio-economic

system

and bitcoin is digital energy

then what's special about it is

let's take a million dollar let's take a

megawatt of power i if i have a megawatt

of power and i sell it on a commercial

grid at 11 cents a kilowatt hour it

works out to be about a million dollars

that's what it's worth

store a megawatt of power for for a

hundred years can't do it no

okay you lose two percent of the energy

and the best battery every month so your

half-life of electrical energy is three

years you can't store it can you move it

six percent is the transaction fee to

move at 500 miles

can you and you need a line build a

power line move it 500 miles past six

percent each time move it ten times okay

pay sixty percent move to tokyo can't do

it

store it for a hundred years can't do it

what happens if i mine bitcoin take an

s19 miner put it on a megawatt of power

convert it to bitcoin i've converted

electrical energy into digital energy

it's worth four million dollars of

bitcoin on an s19 miner an s19 miner

will spit out about a million dollars

worth of

of bitcoin

now what happens after i've digitized

the energy

it'll last forever

can i move uh you know four million

dollars worth of bitcoin move it to

tokyo

well two days ago someone moved two

billion dollars of bitcoin for like 78

cents row

78 cents to move 2 billion dollars of

digital energy anywhere on earth

people are like well it's slow

it takes an hour or half an hour on the

main chain that's hardly slight try

moving a billion dollars of gold or a

billion dollars of electricity 10 000

miles yeah okay build yourself the

pipeline to move a billion dollars of

natural gas 10 000 miles

can't move it at all chemical energy

doesn't move

we had contango in the oil market when

when petroleum prices went negative why

because you can't store oil

right store a billion dollars of oil as

an individual can't do it you can store

a billion dollars of bitcoin on an

android phone that cost 50 bucks

you can move it at the speed of light

they're discovering that in el salvador

right now by the lightning network we're

now moving

we're moving digital energy at the speed

of light at a transaction cost of one

satoshi

one two thousandth of a cent is the

price

now

it's a big idea but here's the idea

humanity has advanced via

via harnessing chemical energy

wind energy

right potential energy hydro energy

thermal energy

electrical energy

nuclear energy

and what's the end of it digital energy

if you convert those forms of energy

into digital energy

that energy has three properties that

are critical and people don't get this

the first property is the digital energy

has a half-life of forever

i can hold it for a hundred years

right the second property is digital

energy can be moved

at anywhere on earth for free

teleported

that's a big idea the third idea is you

can subdivide and oscillate the energy

any frequency at any scale

so what do i mean by that

or i'll i'll give you an illustration

i have 50 million dollars and i buy a

hotel in dallas texas

and it's got a hundred hotel rooms

now

i want to generate yield on the hotel

so

i let people book the rooms whatever the

prevailing rate is 100 a night

the average utilization in dallas texas

is going to be like 62

and my fixed costs are such that i get

about a 10 margin and if we fall below

62

i'm losing money i'm not getting any

yield in that

okay that's physical property now

convert that to energy pure energy i buy

bitcoin it's a it's a energy hotel what

does that mean

well now i can actually move the hotel

or or take the rooms of the hotel that

where there's no demand in dallas texas

and i can send them

somewhere else in space to get to a

hundred percent utilization

and when i get to a hundred percent

utilization obviously my profitability

jumps from ten percent to sixty percent

my yield goes through the roof

now having said all that

if every single room in the hotel was

booked every single day

then obviously the hotel's generating

higher yield

but

even if i booked every room in the hotel

every day people are only using eight to

ten hours a day of the rooms what if i

could subdivide the hotel down into room

hours

and if i could reclaim the 62 percent of

the room hours when the hotel is still

idle

now that's interesting now i get to 300

percent utilization

now here's a bigger idea

300 percent utilization at a hundred

dollars a room night turns my

profitability from 10 percent to

200 percent

what if i could actually sell room hours

anywhere on earth and i could go chase

after the highest marginal value of the

room hour so during the super bowl i put

the hotel where the super bowl is and

during the venice film festival i move

it to where the venice film festival is

and and if there's an inaugural event in

dc i moved the hotel there and then i

could double the room rate to twenty

dollars you know two hundred dollars a

day instead of one hundred dollars a day

what i have done is i've i've vibrated

that the energy or i've moved energy at

a higher frequency and i've captured a

higher marginal utility

and i've done it by dematerializing the

property to pure energy on a network and

i kind of just described the

the promise of d5

which could be c5 or d5 but this idea of

dematerialized finance but it's also

the collateral thing that i've been

talking about

because basically what you've got is a

piece of collateral that somebody's

going to want at some point

and therefore you can charge accordingly

for your collateral which you don't do

with treasuries because yields actually

go down when everybody wants collateral

it's kind of weird

but here you're getting the piece of

classroom that somebody wants so if

somebody's in financial stress they need

something they need collateral you can

lend it out instantaneously anywhere in

the world

and the classroom's never impaired

because it's on the blockchain it's kind

of it's a really fascinating concept

it's like tesla's concept of understand

frequency understand frequency and what

does that mean

high frequency high fidelity collateral

or high frequency high fidelity

energy in this particular case

if i have a billion dollars of gold i

put it in a vault what's the what's the

monetary velocity on that once every

decade yeah

yeah i can't lend i can't divide the

gold into a million pieces and lend it

every hour

the velocity you know the boy the best

way to get velocity on gold

is coin it right if i converted the gold

into coinage and we're trading the coins

like i can kind of move to a higher

velocity money bullion is low velocity

money if i go to the fiat system with

credit cards

a billion dollars spent by the credit

card system it takes 30 to 60 days to

settle

right when i give you a thousand dollars

you have to wait 30 days before you know

that the credit card company's not going

to claw back the money yeah so it's it's

a little bit tricky as a retailer

there's a two and a half percent fee to

every single time it changes hands

and the velocity is five

per year okay

now let's go to uh to digital energy

and then and the entire crypto space you

see what's going on the velocity you

know the final settlement is in an hour

well what if the final settlement is in

a second

let's just keep it at an hour you know

final settlements in an hour there's 8

700 hours in a year

so now i take my billion dollar block of

energy and i subdivided a thousand ways

and i move it back and forth every hour

and i chase after the person want to

give me the highest marginal yield on

the energy

and i you know how do you do that well

one computer talks to a hundred thousand

other computers a thousand times a

second a million times a second

while you're sleeping

and what you have is a financial system

that's continually

yield seeking looking for someone that

needs that loan

maybe it's a loan for a month

it's you know and you're either

borrowing or you're lending one or the

other right i mean i can lend it and

generate yield off it or i'm borrowing

i'm i'm seeking the person willing to

give me the lowest cost

loan

if you have um if you have a certain

amount of bitcoin let's say i have a

million dollars and i expected to

appreciate it 10 a year if my expense

ratio is less than my

appreciation rate i can borrow against

it forever with my

loan to value falling right my debt to

equity ratio will keep falling

i can spend five percent of my money

every year forever

as long as it appreciates that six

percent a year

assuming i've got a a bank that i trust

right

an effective banking system

so i i think that this idea of digital

energy is a very important one

it's important one because it makes it

the most disruptive force in the entire

energy industry

right you're converting every form of

energy into digital energy and and the

world's full of stranded energy that

what's the problem with energy you can't