Chasing Yield: Bitcoin Is Money, Everything Else Is Credit

Hey Internet, welcome to another episode of the Bitcoin for Businesses podcast. I'm joined in studio for episode 2 with Liam Nelson, Matt Ball and Michael Tanguma. We kind of represent the early riders portfolio on Ramp and Acropolis and we're all builders in the Bitcoin space. And this podcast is for operators and builders and executives and finance teams that are looking at how to integrate Bitcoin into the various aspects of their business. So the way this works is we kind of kick around some of the interesting news in the business and Bitcoin world and then get into kind of best practices around implementation and how we would see these types of activities. And so the four of us and the broader on ramp and Acropolis teams did just get back from the Bitcoin Park Bitcoins treasury custody Summit in Nashville. We heard a lot of interesting things. MIC multi institution custody came up a few times, but definitely not as much as it should have a Liam you I know had some some thoughts to kind of kick us off. Yeah, I was also at a event here in New York called The Signal by Two Prime, their institutional lender and asset manager focused on Bitcoin in particular. There was a number of, you know, more institutional typefacing names in the industry. I thought there was some interesting commentary on a yield generation which we can get to in the future. But really it's just like the basis or base level has a lot of education left to do. It was interesting. I think the President a Bitwise said, you know, the best that you could do is look to 20 different custodians in order to diversify your assets if you are in a treasury company in the space as well as continue to monitor and make sure that they upgrade their solutions over time. It's we're, we're pretty early that it was very obvious that many people were uncomfortable with their custody. And we're trying to outsource some of that to many of the Bitcoin treasury companies in order to try to just make sure that they did the due diligence themselves. Because many people were on a or individuals were unable to do the due diligence right for custodians. And then even the treasury companies, it was pretty clear that they weren't able to be super comfortable with just one custodian or or how they are managing their Bitcoin, which ties in pretty directly to the other events that we were just at of the Bitcoin treasury and custody Summit in Nashville. And then imagine if right after till. Yeah. And we, we were in Nashville and I think one of the panels, Parker Lewis specifically came out and said if you're not pretty candidly, he said if you're not worried about your your custody solution or how you're holding your Bitcoin in some way to some extent, you're probably lacking some knowledge, which is, which is an interesting take. But I think it kind of just goes to show that there's just a lack of understanding even on the MIC side and really seeing the opportunity there for Peace of Mind and kind of offsetting that stress of just the custody solution and holding your Bitcoin. It's a good point, but often important to consider MIC in that context and just that sort of ability for it to give that Peace of Mind, which again, I think Liam touched on it wasn't nearly talked enough, talked about enough in Nashville, although a little bit. It's an interesting take. I didn't realize he said it in that framing, but makes complete sense because the the core pillar or the core idea to think about is the majority of the world doesn't use Bitcoin as a savings technology or money. They look at it as an investment. An investment, you know, naturally would be an investment into something to trade back for a common denominator, which would be dollars. And so to the point where I believe he was making is if you're not worried about it, well then ultimately you're either don't have enough exposure because if you have enough exposure, once anyone gets to a position of material size, whether it's a personal or corporate balance sheet, well, you naturally have to think about, well, what would happen if that, you know, counterparty that you're custodying that went away, whether it's self custody or third party custody. And then there's the other side, if you just have heavy exposure, but you're not thinking about custody when you have another problem. This comes up very often when you talk to like CIOs, where they'll often say, I can get the thesis wrong on investment. I can't get the custodian where I place it wrong. And it's still just so widely underappreciated and understood. And then to Liam's point, the most quote UN quote sophisticated people in this industry just literally parked their assets all over the place hoping to God that if one goes away, they only lose 20 to 40% of their assets, which is kind of comical when you think about it. But that's where we're at, how big the opportunity is. And then as it relates to businesses, well, again, it's a, it's a weird substrate or subconscious version into how people look at Bitcoin as speculative at best or Ponzi at worst, in the sense that all they hear all day long is that people fail and the assets evaporate, right? The thread that I always pull on is if you ask somebody that's not deeply involved in the space, they probably heard of Bitcoin and they assume that it ends up in a hard drive in the United Kingdom or it ends up in servers in North Korea. Because what they hear every cycle is FTX Celsius blocked by Mount Box Quadra go, you can go down the laundry list. And so they just forces them to not look at it. But it ultimately that's where the custody comes into because the notion I, I like to say is think about how great product market fit Bitcoin got to from a personal or corporate balance sheet, which this is what we're discussing is it got to $2 trillion in asset market cap with nobody really feeling fully confident for the next day. It won't go evaporate and go up and smoke, whether it's because a wildfire burns down your setup, you get hit by a bus or the third party custodian goes away. That's like how early we are, but how asymmetric the opportunity is as well for people that understand deeply the stuff we talk about. I think it's a great point, Michael, because what you're kind of saying there is that many people are still seeing Bitcoin as an investment and therefore a trade and therefore a short term or a short time horizon. And so thinking about kind of a permanent long term custody solution is not top of mind because they're really ultimately planning on taking that single counterparty risk with a custodian for only a limited amount of time until they plan to sell back into Fiat. And then I think it's also fair that the space in general is kind of learning about what a decentralized bearer asset is, right? Because if I think a lot of companies in the space are treating it like gold, where they're like, OK, I get it, it's a bare asset. So how do I diversify? Well, I send 20% of the gold to five different custodians. But obviously we here in this group understand that the true way to diversify that risk is to diversify away from us, any single counterparty. Instead of taking complete single counterparty risk with 20% chunks of your Bitcoin holdings, you can actually decentralize that risk, delegate it to kind of a two of three custodial quorum and you've removed all single counterparty risk altogether. And and that seems to just be an education game that even the folks that all came together at Nashville still seem to need to get educated a bit more on themselves. Yeah. We'll have to set this up on a future podcast, but we can talk about and go deeper on sophisticated quote, UN quote again, sophisticated holders that have 50 to 100,000 BTC that know first hand have 5 to 6 different relationships, 5 to 6 different whitelist, 5 to 6 different trade accounts. And everyone generally knows that's looked at the space for any length of time. Complexity is the enemy of security. So we don't do it on this pod, but I do think that'll be a good exercise to walk through. And then exercising some of that simplicity and controls start to make more sense for a business. And it really maps to how individuals naturally manage their balance sheet when it comes to unified experience where you're able to aggregate and simplify the back office process around Capital Management, treasury management. Yeah. And I think double tapping on what Liam brought up with the signal at 2 prime is that there still seems to be this strong desire out there to generate cash flow or fixed income or yield on your Bitcoin, as if the compound annual growth rate of the asset itself is not enough. And I think part of why we're seeing that is that treasury companies who are holding this Bitcoin need to justify a premium above their NAV. And so they need to kind of be able to signal that you can do things with your Bitcoin, you can generate new revenue streams with your Bitcoin. I'm curious how this group thinks about just Bitcoin yield in general. Are there areas that are safe and reasonable to pursue, or is this just a fool's errand? Yeah, it was interesting to see at the conference there were they pretty much identified or or majority of people said that, you know, it's been very difficult in the past, but now there are abilities to offer, you know, 3% denominated Bitcoin yield through unsecured lending, which seems insanely risky to me. You just naturally don't know your counterparty and your Bitcoin isn't on your balance sheet if you do something like that and it just kind of it comes and goes with every single cycle is the price runs. There are new people who come and say, hey, I'm new to Bitcoin, I know how to finally solve this problem with the asset and it just naturally introduces so many levels of counterparty risk. There are in addition to that, there were other people who are saying everything under the sun related to, you know, selling covered calls, etcetera, just options trading around the asset in order to try to get more Bitcoin. And that's not necessarily just a bad thing in itself. If you understand that, you know you're going to go out very far on the risk curve and you know allocate to a hedge fund type strategy. But I think that's fundamentally different from an operating business in which you have a core strategy in which you are planning to deliver value to the world and through goods and services that people really want and need versus outperforming through trading. And I would just say give extreme amount of caution to anybody who's thinking about allocating to those types of yield generating strategies just because of how many bodies that have been buried in the past through thinking that they are immune. And, and you know, even now there are more professional people who perhaps have a more sophisticated financial background who are, are going to pitch this story. And it's, it's a great story for people who haven't been in space for a while. But I would just caution to anybody who's allocating to the strategy to, you know, think about this very conservatively and perhaps just think about it very conservatively. Yeah, I think it's well said. I think we have to isolate, you know, from an individual or corporation that has Bitcoin exposure. We're trying to generate incremental yield versus the digital asset treasury strategy and focusing on the forward, not the latter. To Liam's point, it's a great story. It's the story of Fiat that you're a sucker if you hold the underlying, so you need to go generate some nominal yield. And it's something we talked about on a lot of the other pauses. There's a lot of great truths in every lie, and then there's a lot of lies in every truth, the lie and the truth. And that analogy is like peer-to-peer cash or whatever. It's like people look at it and it's like, well, this needs to, you know, be on chain for everything's like that's obviously not true. But then the truths in the lie are that today at scale, there really isn't a credible way, a risk free rate to generate any kind of material yield in Bitcoin. Now, it's not to say that somebody in a small hedge fund shop can do that, but the reality is that scale it's not possible. And so for for large holdings and then the other side of that is on a long enough time horizon as Bitcoin financializes, there will be opportunities. And if you squint, you can see them when it comes to whether it's second and third layers needing liquidity and generating some, but there's still risk and you have to manage the channel. Somebody has to, you know, make sure they're managed, not exited. But the point being is this all will occur. But today there's still so much opportunity in bitcoins growth that it goes back to the first thing we talked about. If you just treat it as a savings technology and money, you've already earned it. You already went out on the risk curve. If we're talking to businesses to go and operate and go through everything and all the risk it takes to run a business, you found the money, why would you put it back at risk for something that is there's no credible way yet to fully do it. And to Liam's point is, for 15 years, we've seen that nobody's actually been able to, you know, be naked with a Bitcoin and come back and return more on a long enough time horizon. So, yeah, I think it's it's definitely the problem is that such a small percentage of the world is in Bitcoin. And what that means is such a small percentage of the world has learned what we're talking about here. This is where hopefully the education research, because very few people remember 2022. It's kind of crazy how many people were around in 2022 that think like things have changed because SPFS in jail, like the market structure still exist the same. There's still single counterparties that manage and hold the underline and there's still people out there selling that they can generate A yield. And so if all the things have stayed the same, but more liquidity is going to come in to the system, well, that kind of, you know, paints a picture that there's going to be more and more counterpart heroes. Michael, how much of this is just that there's an entire industry of money managers and middle men who after 16 years have to acknowledge that Bitcoin is a high performing asset that has a place in a portfolio. But if they simply say, yeah, go buy Bitcoin, they're not making money on that because individuals, investors, family offices, etcetera can self custody. They don't actually need that person once they've kind of gotten that recommendation. And so these middle men, these these money managers kind of need to come up with some kind of a way to outperform or promise to outperform Bitcoin through tricks that only they have access to or understand in order to still make their payday. So I usually don't like to talk about digital asset treasury companies that way, but it sounds like that's you're the rag you're taking. And so, yeah, I mean, this is the tale of financial products, right? Whether it's rent seeking, inserting, you know, financial products, you see this, I love the Bitwise guys because you know, they'll say these things, they'll say they're sophisticated, but they'll also have no idea what they're doing. I remember you can still go back. There was a multi coin top five top ten index of NFTS that they partner with and it got completely scrubbed from their website. And you know, they sold this to institutional people. But point being is that the game is because we got so far away. And this is ultimately, I think what I hope this podcast really speaks to is businesses that are producing real value in the real world, trying to preserve, protect their capital and then take more and more market share, right? What a business ultimately is meant to do finds the signal of OK, well, I want this asset. I can, you know, we talked about in the first podcast margin compression, all the things inflation, you know, the insidious part of it can get from it and then realize, OK, well, the value is custody, being able to buy, lend against it if you need operating capital. But we got so far away from people delivering value that the way that people monetize is by inserting themselves in the middle of the asset. And so this is where the top 10 cryptocurrency basket, to your point, the digital asset treasury company, I'm going to generate more yield or other financial products because if they don't have any differentiated way to custody, well then we already seen this distribution go to Fidelity and Coinbase. So they're not going to be able to custody and get really scale there, especially for their investors. Execution is another example. Sure, they'll get some execution, but that's already starting to go to best in class market makers. So you have to be able to develop a different position. And to Liam's point, it's a great story to say, well, we can generate nominal yield because who doesn't want additional interest on the underlying? But it all stems back from they just forgot how to deliver value. And so this is how you can do it is by effectively inserting yourself your asset management fees. But when you go and look at the back testing and all these like performance, everything is basically outside of like MSTR and even MSTR on a long time horizon has it. But outside of MSTR in the past five years, like nothing's outperformed just holding spot BTC. Yeah, Yeah. I think that's a great point. Like I think to our audience here in this podcast, Bitcoin for businesses, I think like when you, when you adopt Bitcoin, when you build that Bitcoin treasury, you're, you're, you're hedging against that Fiat debasement. And, and often I would, I would maybe challenge that if you're sort of chasing yield or want to, to find the yield there with that allocation, you're, I would kind of challenge like, well, why would you, why would you want to have yield on that when you can just protect the asset that you have that will protect against Fiat debasement and, and have that opportunity to, to really leverage Bitcoin in that way. Because if you're a business, like ultimately that's your goal. And I think not losing sight of that is is very important. Yeah. And so at the end of the day to generate that yield you, you are kind of having to give up your access, your control over the underlying that Bitcoin is probably being re hypothecated in some way. And so it kind of ties into the next topic, which is credit risk, right, Liam, I'm going to kind of kick it over to you. There's we're seeing some turmoil regarding auto loans and and we've seen kind of in many industries, a lot of businesses writing credit to folks who don't have great credit scores and maybe are are kind of unreliable repairs of those loans. Why don't you kick us off there and then we can get into the conversation of kind of money versus credit? Thanks, Jace. Yeah. Well, Tricolor Credit Party, which is a very large auto lender in the used auto market, they essentially just went bankrupt due to fraud as well as underwriting customers who had pretty much no credit scores. These loans were then secured and sold by the biggest banks in the space, JP Morgan's, a few others. And then, you know, the entire used auto market is, you know, kind of crashing a little bit. So Carmack stock dropped like 20%, etcetera, but it's, it's just kind of goes back to the understanding that the consumer is under pressure. And we've seen a lot of challenges with underwriting correctly in areas of the market where consumers are challenged. And you know, we've seen everything from, you know, all the payday loan shops and used auto market now is the prices of those just absolutely skyrocketed in 2021. And thinking that money was going to grow on trees forever, which we all know is just like a complete fallacy. And many of these companies are just kind of now, despite the fact that they would write loans to anybody under the sun back in the day when the cost of credit was essentially 0. Now a lending standards are a bit more tighter just given the lack of income for lower income consumers and everything that we've talked about there, there's a decent amount of defaults in the space. And so it's just kind of a cascading effect where you generally, if you're a auto dealer who has other, you necessarily like pretty much have to go to outsourced lenders in order to sell your vehicles. Because otherwise, if your customer can't have credit, they're just not, you're not going to be able to compete with others who can buy on credit. But that's a massive risk to understanding what you are, what you're actually going to get in terms of your revenue when it's going to come to you, as well as if it's going to be done tranched off and sold from those lenders back to somebody else. It's it's essentially just a massive Ponzi. And the take away is just you need to store your money in Bitcoin because you never know if your counterparty who says that they're going to be able to pay you is going to be good on their money. And you know, the big ones will get bailed out. But on a long enough time horizon, you're going to be defaulted, either implicitly through them not having the credit or just needing bailouts from the necessity of governments printing more money in order to make those lenders whole. Yeah. I think the way I interpret that is from a holistic perspective. There is AI mean almost every business, but there is a acute level of businesses that are tied to interest rates and we've seen this happen as interest rates have risen. The one that was a great example was Open Store I believe. Which had a billion dollar valuation at its peak. Now they just recently raised it like a 5050 million valuation, you know, a very big down round. They were like an aggregator of Shopify, D2C companies. And then they ultimately like end up just going to a singular Shopify like selling shoes or something. But the point being is that if you do not what's the Texas slim is like you can either engineer your suffering or the market will. It's like if your company and your whole business and livelihood has been, you know, you didn't know it because it's the water you swam in, but is predicated on lower interest rates. Well, it's out of your control. And if you recognize you're in that you can play that game, but it'll ultimately be at your demise because it'll inevitably crash. Because whether the prices go back up and down, it's no way to build a solid foundation. I think we're Liam's driving ad is ultimately, once you recognize this, you can start to insulate yourself not only by holding better form of capital, but you can start to rethink your business model to protect yourself. Whether it's if you have a larger Bitcoin balance sheet, you can lend against that and you can have an actual underlying collateral, you can restructure how your business built. You know, obviously you can't do this to every business, but I think that's a core thing I take from that is that all these different systems are insanely fragile. And if your business is predicated on the cost of capital being low, whether it's SAS or any other, you know, we'll talk about AI later, that ties into this that you're right for whether it's competition to come in and do things cheaper or ultimately for the Fed to change the interest rate and then ultimately change your clientele demand for it, or also your cost of services, which will ultimately compressed prices, margins and, and put you out of business on a long enough time, right? Yeah, I think the age-old JP Morgan kind of quote for the modern days, Bitcoin is money, everything else is credit. We've heard it thrown around a lot. I think a lot of business owners don't realize that their revenue streams if they're making dollars and storing and kind of Fiat based treasuries that they are taking credit risk. They don't often think about it. They think, oh, cash is liquid, cash is value, but they are taking credit risk in some ways to the United States government and their ability to just print your treasury and debase your treasury away. And so Bitcoin really has that no credit risk. That's what makes it money versus dollars, which are some form of credit. And I think what we're kind of saying here is that these credit based revenue streams got themselves into trouble, not just because it's a flawed revenue stream on the surface, but it's almost like a credit squared situation where they're also earning in Fiat and taking credit risk with their treasury and their revenue stream. And so we would all here encourage companies to either accept Bitcoin as payment or convert those dollars into Bitcoin treasuries as quickly as possible and start to think about your business on a Bitcoin standard. Any final thoughts on that? Matt, did you have any thoughts? No, I think you bring up a good point on even accepting the Bitcoin payments like the using tools like the Lightning Network are just gonna create that increased opportunity for businesses to really increase their margins and have more survivability in the business competition. And so we should keep an eye on that. And especially with things coming out like cashew and cashew mints and all of these mints, I think it's a it's a really big opportunity for businesses to accept payments and just increase their competition and their power of of doing business in such a competitive marketplace. Yeah. I mean, I didn't, I was going to go here with a different topic, but I'll share it here is I do think the sweeping becoming a Bitcoin business, the different types of sophisticated payments will will come. But I think for at least a portion of this podcast, hoping it goes in this direction that people share it is there is a very pragmatic reason. While every business like that will make sense because a lot of people don't know what cashier's. But there's a pragmatic reason where every business should not only have like 1 to 3% of capital in Bitcoin today and also have flow of payments. And the first one is Silicon Valley Bank 2022 goes out of business or goes, goes, goes belly up over the weekend at least. And a bunch of people were worried about making payroll. So from a business continuity perspective, whether you need good services, food, payroll, you should have something that's outside the system. That's just like the prudent thing to do. Doesn't matter how much you don't like Bitcoin unless you're going to part gold somewhere. And I don't know how many employees are going to take gold or you're going to be able to switch it into dollars on Monday morning to get payroll. And then on the other side, which I've always really appreciated, what Zaprite has done is they don't force you to have to accept Bitcoin. They just put Bitcoin next to it. So they connect the rails from any core business to anybody that wants to pay. And the reason why you would want to start thinking about that is ultimately in different places, whether it's interchange fees or just ultimately where, again, it goes back to continuity for whatever reason, if somebody wants to pay in something that has no intermediary, it's available while everyone else can still pay via credit card. ACH and all the other things like these are just core tenants of a world that is increasingly looking volatile that you would want and not have to understand any of this, just that your business needs to be anti fragile. I think every business owner would want that. So I do think it's important. We'll talk about innovation as well, but just from like a holistic experience like any personal planet Earth would. Ideally, if they're pragmatic, want both of those too. It doesn't even require them having to understand Bitcoin from a store value long term perspective. Yeah, one of the pieces you're getting at is just the speed at which you can teleport money in the digital age. And that kind of leads into the next topic we wanted to cover. So cloud Fair, they're coming out with what you would I guess call their own native token for their AI agents. And I'll read off a quote from the press release. The AI driven Internet will need money that is instant, global and secure so that AI agents, developers and creators can transact instantly, automatically, and reliably. End of quote. So obviously the folks on this call would expect Bitcoin to play that role. But I'm curious if this is a situation where kind of early Internet, we saw intranet versus Internet and that the open protocol eventually won out the day. Because when I look at this, I think, OK, great, your AI is transacting with someone else or some other entity. Are they really going to want this net dollar as they've termed it? Or are those businesses and those individuals eventually going to demand Bitcoin? So I think this is important that I think individuals at least early stage of this pod and us here would be like, yes, of course it's going to be Bitcoin, but it makes complete sense that it starts with stable coins. Because if for better or worse, more people are interested today, whether it's a bank or an enterprise in stable coins and what are they going to do to get dollars into stable coins? What are they going to do to help companies hold stable coins? There's a lot more value, to be honest, to administer stable coins from a cross-border. There's like the, the, the, the number is Stripe only powers 1% of the total B to B payment flows. So like when you think about if you're a company sending company to where what other specifically internationally, they're only at 1% of that. So it's a huge opportunity. And from volatility to education, people are just not going to adopt Bitcoin today, they're going to adopt dollars. And so if you take that same lens and go into if they already understand that will the logical progression is if they're using AI and they already have access to the unit of account that is used globally in dollars and stable coins are understood, that is going to be the first step. But I think the natural progression because the same problems that exist with interchange and ACH and centralization and debasement occur with or going to occur in a different form with stable coins via a genetic AI. Because you'll still have whether it's micro or just other factors that programmability in a unified or a non unified like global decentralized asset versus all these different stable coins have their own kind of permissioning will naturally take place of, oh, this is just better. But I don't think it's going to happen like right off the bat. And this is where I think it makes sense that you're seeing cloud for do their thing. I think USDC came out last week. I think it was USDC with Google. So I think that's just like the call and it's a natural thing to be like we want it to be Bitcoin. But the reality is it's a lot easier to meet them with a stable coin because that's already kind of pretty disruptive and radical in those wall, in the walls of that organization. Agreed, there's just so much that's going to go into swapping for whichever other stable coin that they want to pay another agent getting it into actual dollars. Or I assume that they're not going to be massive cross-border payments within the cloud fair token and that people will naturally just want to have different tokens for different use cases at 1st. And it doesn't necessarily make sense to have a ton of different monies. It's just not something you want interoperable money. Now the US dollar has the biggest market cap, Lindy of people are just going to naturally use that. And so it's, it's really exciting to see everybody kind of come into this space. But naturally it's, it's kind of like just what we talked about lending on your Bitcoin originally and trying to essentially be a casino just like people who naturally, and this isn't naturally one that's pernicious, but they just think that they have finally solved the problem for the industry. But naturally money converges into one. People want to use just the same money as everybody else. So it's either going to be 1 stable point is going to win or and eventually there are issues with that whether it comes to censorship resistant circles talking about potentially reversing some of their transactions to have the same type of payments like credit cards. There can be fraud with that. And then just the issues of, you know, censorship resistant are just going to naturally make Bitcoin become more adopted as well as just the fact that there's only 21 million. So naturally that will grow over time with adoption and get more of the market cap that will take away for share from the dollar and stable coins. Hey guys, a quick word from Early Riders. If you like concepts like Bitcoin is a hurdle rate as well as following along with everything across Bitcoin infrastructure, Bitcoin startups today, I highly recommend you check out Early Riders and everything that we're doing there. We're putting out a ton of research. So please subscribe at earlyriders.com/research and please reach out if you're ever interested in how to get involved. Thanks. Yeah, ultimately these are value transfer protocols and whether we like it or not, the majority of the world still sees the dollar as perhaps the best store of value, especially in non-us jurisdictions. And you know, it's a long uphill battle until the world sees Bitcoin as the premier store of value. So to be continued and as expected there. So one other piece on this AI front, Elon Musk came out with some comments that I know, Michael, you wanted to touch on basically saying that if you're going to define artificial general intelligence as AI that is smarter than the smartest human on Earth, that we could be there within months, but definitely within the next two years. I guess I know how they would quantify that from the AI standpoint. But Michael, when they're testing against the AI and the smartest human, are they plugging you into a server? Is it a neural link? How are they running those tests with you? I don't know if it's with me particular, I think I think the core notion of the AI stuff ties back to what Liam was sharing that it will naturally converge in the sense that, and this is a big business opportunity and it ties also to the very beginning about it's just a savings technology. So if you have dollars and you're bringing them in, eventually you're just going to realize one goes down in value, one goes up and it's going to be very nice to seamlessly switch into it. And then over time, you're going to wonder why you're not just doing everything else with it. And that's where, you know, part of the convergence with Agentic, yeah, using Bitcoin, there'll be also better programmability. Where this ties into all of that is the notion is coming. We know it. I don't think it's fully understood how asymmetric and fast a lot of these tool, the tooling will be from robotics to just software. And it's naturally like going to converge on as it increases in the usage, meaning the ability to whether it's back office, we see it with legal, we see it with all these different programs. But then also that's going to in a vacuum, if everything was like fine and there was no inflation, there wasn't a focus with interest rates, whip sign and margin compression where people were fine, it would be probably a slower adoption. Or companies have to cut and they have a mandate to cut. And it's almost becoming like a thematic version of how are you getting rid of people for AI? They're going to be forced to figure it out. And that's really what gets crazy. And the topic I brought it for businesses is because if you're not doing this or have this on your radar, that AI is going to be inherently deflationary to your business. And the cost you're able to derive from goods and services, you will get out competed on that side. And then the other side is if you're not protecting yourself from it, because if you're able to do both, if you're able to leverage the tools that are exists so you can compete at the highest level while also storing money in the best form of savings technology, well, you're going to be really good moving forward. But if you do one or the other, you're probably still going to make it. But if you're doing neither, which is most people, you're in a very bad place. And I think if that's the essence, at least why I'm most excited about this podcast and these discussions is because this isn't on people's radar yet. And it's going to just, like, hit him across the head to the point where they're going to knock him out for good. Yeah, well, this is another good one. We should talk about more and figure out a segment to dive into use cases, whether it's at the companies we're building. The one I always like to talk about is the podcast and the number of pods. And when we first started, we would go and talk to traditional producers and they'd say it's $1000 an episode to produce. And that's historically what it would cost. And, you know, now we know for 2999 and, you know, Riverside and some AI tools that will cut up and make the shorts and programmatically distribute, you can do that for 2999 a month. Like that's the kind of stuff. So where does that guy go now? And a lot of businesses still spend that money on production. And so you Add all of that fat in a traditional company, while others are just going to leverage the tooling, their cost to deliver the services. They'll pass that through the consumer if they're a good business, which will lower the cost of the product and then you'll take more market share. And that's just a reflexive flywheel that historically had been there, but with inflation and the fat we see in the market. So anyway, I think this is part of like a different topic, but another one we should go into is why the digital asset treasury company kind of thematic version of like we can aggregate a war chest and allocate it. Unless that's widely understood on how do you adopt like anything you acquire or go and build, you have to deeply understand where what you're buying and how they built it by being a builder or that it just because you can allocate money doesn't make it necessarily a productive use of that capital. And that's really the kind of notion that I think still isn't understood by the market is that it goes back to the yield generation point. If you don't know how they're generated because you've never developed how to generate yield, you won't know where the risk lies and you're ultimately throwing good money after bad effectively all. Right, one last topic that we wanted to cover with the last few minutes of the podcast. Here is this interesting story that 90% of Y Combinator B to B companies have 50% of their revenue generation coming from other YC companies. It's very interesting. I wonder how sustainable it is. Perhaps YC would argue that it's one of the benefits of joining their program is that you get kind of these network effects and you get easy sales into the other YC companies. And but curious what you guys think about this dynamic, Is this healthy? Yeah, I'll share it quickly and then I'm going to jump for you guys to wrap. I experienced this first hand at We Work when I saw everyone in the we Work was DoorDash, Uber and there was a very like fly. It was a flex, a flywheel to the upside and then it unwound. It's very similar to like, you know, yield generation in this space where the leverage gets built in via 0 interest rate and SoftBank in A16Z and these other firms, you naturally have that incentive pricing up rounds, getting more users. You have the network effect of, you know, why see companies making the introductions. But again, it all ties back to the lacking of fundamentals because if their capital actually 50% of it is predicated on somebody else, that's tied into the same ecosystem because those companies are funded. They're also pre revenue, generally startups. Well, if your company has 50% of its revenue coming from companies that are unprofitable, that's generally not a sound business structure to start from. And it's also distorts the pricing mechanism because those companies inherently are going to go out of business because it's startups in Silicon Valley. So they're not going to bat probably what's known as 10 to 20% success rate, meaning you don't even know who actually needs your product or not. And so, yeah, it was an interesting, the main reason I called it out was because it was a tweet that was looking back at NVIDIA and NVIDIA. And it's not Oracle. It's the other firm that's heavily like, there's another, what was the other? Yeah, open AI and NVIDIA, it's like you give 100 million and they invest 300 million. And there's something also going on with a similar loop with Oracle. And the point being is that this is just a product of again, too much capital, misaligned incentives and really getting back to the studs of the fundamentals will inherently come about. I don't think know if there's anything necessarily actionable here except for if you're going to build a business, you naturally want to make sure that your users, you have not necessarily a Moat, but your acquisition of clients have not only stickiness, but they're not, they are not prone to fluctuations in the market that will effectively put them insolvent and then you won't have a business with that. Yeah, I think it's, I think it's a good point. And specifically on the Y Combinator front, I mean living in the Bay Area, seeing many of my friends that would have start-ups that are in the classes for Y Combinator. I think they often comment on the fact that those start-ups that they're working within, they often serve as each other's initial customers. And they kind of use that as like a testing grounds for how kind of work and go to market, which is interesting. I think something like 4% of the Y Combinator companies drive like over like almost 90% of the realized gains coming out of Y Combinator. So it's, it's definitely something that should be talked about. And I think Michael spoke about it about that just misallocation of capital and the potential for them to kind of lean out and potentially even combined companies. But at the end of the day, there's a lot of ego in those environments and those customers and those companies want to kind of build out into in creating those Airbnb is those coin bases that have come out of Y Combinator. So the competition is certainly interesting. And then also layer on the fact that a lot of those companies are there their own customers within that ecosystem. It's quite an interesting sort of dichotomy that's going on in the in the Y Combinator bubble. Yeah, exactly. This kind of goes back to what we touched on last week too. You want your entire supply chain to be sound for the long term of wanting your just like at home. You want your family to adopt Bitcoin, you want your neighbors to adopt Bitcoin so you can have a strong community. And there's a lot of people doing great things on that. And we saw how that it's working out at Bitcoin Park in a positive way. But just like that, you want all of your suppliers and customers to operate under a Bitcoin standard as well. Do we have a negative impact if a Bitcoin does go down 80% again, and not saying that'll never happened, but everything that Michael talked about from having enough working capital in both dollars and Bitcoin, being able to sweep a reasonable amount of your free cash flow into Bitcoin in order to sustain your business for a long term and operate with sound fundamentals. To not just having essentially big deep pockets fund you for a short amount of time in which you're you necessarily need to lose cash and. Be burning it and have your customers losing cash, it means just you're extremely susceptible to any changes in the market and would rather kind of fortify yourself and your customers and suppliers with Bitcoin rather than short Y Combinator or any other venture backed. Yeah. Ultimately, to run a sound business, you need to store your retained earnings in sound capital. But you also have a financial or moral duty to become profitable as quickly as possible. And too many companies today rely on the next round of investor cash, building out products and services that may or may not have product market fit, may or may not reach those economies of scale that allow them to flip into profitability. But with tools like AI that are naturally deflationary and allow for smaller teams and tools like Bitcoin as savings technology on the balance sheet that can give you infinite runway to some degree, as long as you're not tapping it too frequently, we really are seeing a moment in time where business operators need to lean into both technologies. Consider it a moral duty to become profitable so that, again, you're not selling the Bitcoin, you're not relying on investor cash. That's dilutive, and you can really own your own future. I think this been another great episode, episode number 2 of Bitcoin for businesses. Give us some feedback in the comments if we're touching on the topics that you're interested in. Are we two in the weeds? Are we not in the weeds enough? We really want this to be actionable insights as well as mixing in some relevant news of the week. So give us that feedback. Give us the like, subscribe and a share to a business owner that you think needs to start integrating Bitcoin into various areas of their business. And of course, reach out to the early Riders on Ramp or Acropolis team if you'd like to do more than just listen to podcasts and you're ready to take action. Thank you so much for joining me again today. Thanks so much, Chase. Thanks, Chase. Every business will hold Bitcoin. Some already do. Others are developing a plan. Acropolis is how smart companies take action today. Built on multi Institution Custody, Acropolis delivers a turnkey Bitcoin treasury solution designed specifically for businesses. Here's why that matters. 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