What are the considerations for your business in holding bitcoin? Should you self custody with multi signature for improved security and control? Joe Kelly and Dhruv Bansal, CEO and CSO of Unchained Capital join me to chat.
We talk:
- What business owners have to consider
- How to custody bitcoin
- Unchained Capital’s solution
- Coldcard
- Financialisation of computer networks
- Challenges of being a bitcoin company founder
Joe and Dhruv Links:
- Twitter: @josephkelly
- Twitter: @dhruvbansal
- Unchained Capital
Prior episodes:
Sponsors:
Stephan Livera links:
- Show notes and website
- Follow me on twitter @stephanlivera
- Subscribe to the podcast
- Patreon @stephanlivera
Podcast Transcript:
Stephan Livera:
Joe and Dhruv , welcome to the show.
Joe Kelly:
Thanks. Excited to be here.
Stephan Livera:
Dhruv you’ve been on the show a couple of times, but Joe, let’s hear a little bit from you. How did you get into Bitcoin and starting Unchained Capital?
Joe Kelly:
Cool. So yeah, I guess it makes sense to rewind a little bit. When I first got to Austin for school I guess over a decade ago and knew, I knew I wanted to be an entrepreneur, I dropped out. But thanks to hanging around UT’s campus, I happened to meet Dhruv who was in the grad school there getting his feet, working on his physics PhD at the time. And I was really interested in data and the technology around data. And he had started a side project with another person on big data. And so I basically just befriended him and we decided to start our first company together called info chimps. We ran that for four years and it was like success. And by 2013 we sold the business and I basically Dhruv kind of dragged me into Bitcoin. He learned about it.
Joe Kelly:
During our time at info chimps, I had been too busy running the company and he decided to kind of pay enough attention to it, to be smart on it. And then once we sold an input chimps for the first time in our lives, we had a little money we could afford to lose. We bought some Bitcoin and the more I learned about it, I was already interested in investing and finance and money, how the world works. And Bitcoin is a great prism for all those kinds of questions. So Dhruv was kind of my sherpa and like my early guide to, Hey, how’s this thing work and really helping correct. A lot of the easy misunderstandings one can have with Bitcoin. And so it was just something that resonated with me. I’ve been a traveler all my life, somebody who really values independence and you know, living in a way that isn’t, you know, controlled or dominated by a government or other people. And Bitcoin is just a tool for freedom and like nothing else. So, you know, when it came time to work on a new company and start something else with Dhruv there wasn’t any other space we’d rather work in than Bitcoin. So we really, in 2016 to focus in on Unchained and build a company, build a suite of products that we would use as Bitcoin holders. As we felt, there were just not enough financial services for people like us. Yeah.
Stephan Livera:
Fantastic. And yeah, you guys know I’m a fan of your work. I like the approach you guys have. And it’s really, I think it’s going to start to really bear a lot of fruit over these next few years, as we see a lot more people come into Bitcoin and they’re looking for ways to do it in the true Bitcoiner ethos way of holding their own keys and all that. So look, we’ve got this recent news and we’re seeing companies starting to hold Bitcoin. So thought I’d start off with some of that around, just to get your thoughts. What are some of your reflections around companies holding Bitcoin?
Joe Kelly:
It’s really great, obviously for Bitcoin. I think it’s really smart moves by these companies. Michael Saylor said it best. They were looking at a melting ice cube. I mean, there’s no reason if you’re trying to hold wealth or for an extended period of time and want it to still be there. And there’s no reason dollars have to be that default choice. And so I think for these companies to come out or announce it publicly in that, that list, that’s maintained now, Bitcoin treasuries.org maintained by Rodolfo. Yes basically is I think a really great Testament to what’s what’s going to take shape in the next few years. And that, there’s just going to be, that list is going to get only longer.
Dhruv Bansal:
People kind of laugh about Bitcoin being adopted inside out, maybe from other monetary assets or other financial instruments that historically, and in this case, I think there’s a lot of companies where individuals, executives, employees hold Bitcoin and are interested in Bitcoin, but the company itself doesn’t have a stance. Maybe there’s a regulatory concern. Maybe there’s some other worry. Over time, there’s just, you know the longer Bitcoin lasts the safer it continues to prove itself, to be the more clear regulations become. And I do think maybe some of the recent clarity in the US for business or for banks around being able to custody Bitcoin, those are all sort of feedback on each other and make it so that now businesses can enter this kind of wave of buying and holding Bitcoin and not just transacting with it, not just accepting it and then selling it immediately, but like choosing to hold it for a longer term period. And I think we love it at Unchained because then it brings them into, you know, our domain and suddenly they’re hopefully asking questions around how to keep that stuff safe over the time that they planned to hope.
Stephan Livera:
It’s also interesting that many Bitcoin businesses have just natively been doing this for a while. And I know even for you guys at Unchained, you’ve been working with other Bitcoin companies on how to help them secure their Bitcoins. So tell us a little bit about that progression and how it’s kind of started with Bitcoin businesses doing this, and now it’s progressing to non Bitcoin companies doing this.
Joe Kelly:
It’s true. Yeah. With Bitcoin, and sometimes the choice to hold Bitcoin, you can involve a complex set of ideas that you not, everyone is just really writing to appreciate on the surface. So Bitcoin, operating companies in Bitcoin are definitely going to be the first that are most comfortable with those set of ideas and kind of bucking the status quo around people tending to hold wealth and dollars or other Fiat currencies. So yeah, I guess I, I think I just view it’s an idea dissemination problem, and getting people to rethink how to store wealth. And so that’s inside the Bitcoin industry, are probably best positioned to act on those ideas. I suppose.
Stephan Livera:
Also it’d be interesting to chat about some of the considerations for business leaders and CEOs. I mean, there’s custody, there’s taxation, there’s reporting there’s how do you secure it? How would you try and explain that to someone? So let’s say someone is a business holder they’re not a Bitcoiner or maybe they’re just starting to get interested in Bitcoin and but they’re thinking about this idea. How would you walk them through that process of starting to think about these different concepts and how to work it into part of their business?
Dhruv Bansal:
I think there was a little bit it parallels maybe the way that individuals approach their own Bitcoin journeys. I think sometimes we call ourselves Bitcoiners and certainly, you know Stephan you’re a great bitcoiner. And so many of the folks that come on this show are Bitcoiners, but before we became Bitcoiners, we were just people who bought Bitcoin maybe the first time. And we were curious about it before we were that we were something else. We were technologists, we were investors, we were entrepreneurs. We were suspicious people, maybe there’s all sorts of motivations to get started. And the more time you spend, the more Bitcoin can become for some people, if they’re lucky like Joe and I, it can become part of what you do every day and it can start to increasingly become part of your identity.
Dhruv Bansal:
And you can become comfortable with that phrase Bitcoiner and I think there’s like that process for companies to it’s, it’s like micro strategies in a Bitcoin company, per se. And as far as I know, other than this move, they haven’t like started a foray into like a huge bitcoin product integration or anything else like that. They’ve just become a company that’s decided to hold Bitcoin. So they’re not a Bitcoin company, they just hold Bitcoin. And I think that’s a really important distinction that it’s important that that category of companies be kind of identified and labeled. And so people can put themselves in that box and say, Oh yeah, I don’t have to be a Bitcoin company in order to be able to own Bitcoin, because that’s a bit too much. Just like for individuals, that’s a bit too much to say I’m a Bitcoin.
Dhruv Bansal:
That’s why I bought this, you know, first $10 a Bitcoin. Now it starts out as an experiment. It starts out as something that you do to learn more about how to do it. I mean, I think that becomes maybe the interesting part is once you open that threshold and you say, okay, we, you know, we don’t have to be a Bitcoin company to do this. We just are a company that wants to hold Bitcoin. Then what are the next questions that you should be asking? Right.
Joe Kelly:
I think a lot of these questions do get are while there are still challenges with Bitcoin’s novelty and interesting accounting questions. There’s a lot of precedent to rely upon with just foreign currencies and any business that has any multinational operation or has to hold pesos and dollars. The ways you think about taxation reporting and accounting across those different currencies that there’s going to be a lot of already established principles that one can rely upon. It is ultimately important also to consider custody. Of course , that’s something we’re in the business of. We do believe that best serves a company if they hold their own keys and something like multisig is the best way to see that the company can affect that. Not company will be in a position to do that.
Joe Kelly:
It’s better that they’re in Bitcoin, whether they hold their own keys or not. But it is the best way to fully kind of own your wealth. And as there are more financial services like Unchained and the kinds of products we offer it’s the best way for the company to be fully guaranteed as to, you know, their ultimate rights and claim on the Bitcoin that they say they have, and they represented investors and management that they do truly have. So it’s really where from a property in that way, of course. And I think the more businesses that get involved at that level that layer the more advantage they’re going to be in terms of taking advantage of future innovations in Bitcoin, whether it’s around lightning network or other means and ways someone could get a return if they’d like to get a Bitcoin on Bitcoin turn, which does require putting at risk. But it’s one way that corporations like to manage their treasury is, you know, finding safe, investible assets for them too.
Stephan Livera:
Do you guys think we will see the, this story faster in the developing world where perhaps the currencies are weaker and there is more of an appreciation for the melting ice cube factor.
Joe Kelly:
I think on the I think you also have to just look at the size of the amount of cash on actual US balance sheets that, I think that’s just where there’s the biggest hoard of cash that has the potential to convert into Bitcoin while in other countries, I think it’s definitely possible. I think there’s probably still more education to have happen. We do have the advantage in the US of an, I guess, countries everywhere this past year, the amount of money creation and the kinds of people that are now paying more and more attention to that idea and the idea of Bitcoin the number of fund managers and sharp wall street, people that take it more seriously now, it’s it’s almost at least tracked the the size of the inaudible money supply.
Dhruv Bansal:
I think it’s an important point about it’s those who have the money that they’re been sitting on that really we should expect to move first, perhaps. It’s kind, again, parallels the individual adoption curve where we didn’t see Bitcoin first adopted by lots of people in the third world. We saw Bitcoin first adopted by first-world technologists and people who were close to it because they have computers and can understand it when it first came out and had you know, spare dollars put into it, as Joe said you know, even if it wasn’t until we had sold the company, he had a little bit of money that we felt we could make you making risky speculative investments. That’s when we first acquired Bitcoin. So similarly it’s like, I see it more likely that the US companies with fat stacks of cash that they’d been waiting to make investments in or looking for good opportunities, or they’ve been nervous about maybe it perhaps a perceptive of an overvalued, you know, equities market in the United States or whatever, whatever their concerns are.
Dhruv Bansal:
If they’re sitting on a lot of cash, this is a reasonable thing to do with it. Right. And that’s exactly what a lot of individuals did. And you sort of see that I think it’s related to expectations in a big way because something that, you know, individuals ask themselves when they buy Bitcoin is like why are they buying it and over what timeframe and what are their expectations for what will happen to this asset class? I think when I bought it personally I expected it to be extremely volatile, maybe go up though I thought that was unlikely. And I expected with high probability that probably it would go to zero and that, that was a risk I was taking by buying early. And I think it’s later in the adoption curve, the risk of it going to zero is increasingly less, but it’s still going to be volatile.
Dhruv Bansal:
I mean, we’re going to have 50% down days. And so I think companies need to be comfortable, like if they’re going to put whatever percentage of their cash on hand or reserves or investment portfolio into Bitcoin to expect that kind of volatility. And that’s hard to do if you don’t have a lot of other cash or other resources that are perhaps less volatile or don’t produce income as well. So I’m not surprised that we’re seeing us companies do it. I’m also I’m personally was kind of surprised by MicroStrategy in particular. I didn’t know too much about them as a company, and I didn’t know too much about their CEO who now of course is everywhere in the Bitcoin space. And it’s fun to watch him learn and be so popular and so good at becoming a bitcoiner. But Square doesn’t surprise me at all. That feels like much more predictable. Right. And that, that, that they would make a move like that. I think hopefully other businesses in the United States and globally that are close to Bitcoin already and have been trading with it, or enabling, you know trade with it start to make moves like this, that’d be really exciting to see.
Stephan Livera:
Yeah. And from a balance sheet perspective it might also be interesting to discuss, perhaps it makes sense for a company with big cash balance, obviously, as you mentioned in fiat cash. And perhaps if they have a high, if they have a large amount of Fiat debt, then that perhaps helps them a little bit, because even though their cash balance is going down in real terms, they’ve got a loan as well. And so that loan is also going down, but perhaps the scenario where it makes even more sense is where they have a cash balance and they have low debt. What are you guys seeing from a business perspective?
Joe Kelly:
Tough to say, yeah not, not sitting in the CFO seat at the company and knowing exactly how they need allocate their cash you know, having a us dollar denominated debt, or if you have to nominate debt just as one way of being short, that currency. And so if you know, I could see it kind of going the other way to hold, you know, still in Bitcoin expecting that currency to over time, you know, underperform Bitcoin. So I could see it going.
Stephan Livera:
Yeah, that’s a fair point. So let’s say the business now is thinking, okay, I want to hold some Bitcoin. And I’ve got these different options. So let’s talk about some of those different options. So I guess just listing a few of those out so they could use a custodial solution. They could just naively just kind of just do one single signature, right. Trusting one person to hold the case. They could try to do multisignature DIY, right. Everything all on their own with multisignature, or they can go with a provider like yourselves who are providing a multisignature business accounts. Can you just talk through a little bit how you’re thinking on some of those different options and why, you know, why would some of those options make sense versus other ones?
Dhruv Bansal:
I can speak definitely a little bit towards that. I mean, we work faced with something of the same decision years ago when we started Unchained, we were contemplating at that time, you know, lending to people against the value of their Bitcoin that would be held as collateral. Originally we weren’t sure how that would look from a custody perspective. But there were all sorts of questions that we have and we started to explore the simplest thing to do would’ve been to get a Coinbase or Gemini account and just, you know, manually direct customers to deposit their funds into it. And that would be where we would hold our collateral. But it made us uncomfortable. I think as individuals we’d already moved our own Bitcoin holdings to hardware, wallets, and cold storage, and I felt odd, I suppose, asking customers to accept what we felt was a less safe, ultimately method.
Dhruv Bansal:
That’s the reason that we had moved to hardware wallets as individuals, it felt weird to ask customers to accept that as where things will be custody. And you remember this is around 2016 and that we’re thinking about this stuff. So it’s a while back, it’s early and we’re really worried about legitimacy, right. We really want to make sure that this new product that we’re kind of bringing to market the idea to lend against Bitcoin held as collateral is not gonna blow up with regulations or some, you know, hack or something like that. Right. this is before there was any ICO’s around the space or anything like that. And so we were nervous about using a third-party custodians, like Coinbase or Gemini. Not just because of like, what happens if someone gets to our not just because of like the marketing perception of like, we don’t do that ourselves.
Dhruv Bansal:
So how can we do that in our product, but also like what if someone got to our you know, password, where would we store the password in a shared password manager? What about the 2FA codes? It’s really hard to share it 2FA codes across the team. There wasn’t like necessarily LDAP or active directory or other kinds of enterprise integrations that we could rely upon, or that we could find at the time with these services. But moreover, we also had a lot of questions around, well, what if Coinbase, if we say we do this, and even let’s say a secure, and we even figure out how to make access, where we secure, what if they just decided they don’t like our business that were somehow a risk and they want to shut our account down. Now, suddenly we’re on the hook.
Dhruv Bansal:
Like all this stuff that we thought was collateral is not accessible to us anymore. And meanwhile, we’ve given all these loans and we’ve made all these representations. It just felt like a tower of cards that we couldn’t rely upon it. And now we’re maybe pretty conservative guys when it comes to risk here, but like, that’s, I think the right way to build long-term robust financial services. So all, a lot of those pushed us in the direction of self and then finally multisig custody, but we’re also in position at the time to be able to contemplate building all that stuff. I think without the option, I’m not sure what we would’ve done. We probably would have just, you know, used a single hardware wallet or something and tried to make do with that as bad of a solution as that is.
Dhruv Bansal:
One of the things that I’m really happy about with the recent launch of Unchained business product is that it’s exactly the kind of thing that we would have been used. We would have loved to use at a time when we built on chain, if we could have maintained one or two or different private keys and then had a, you know, professional custodial partner helping us craft vaults and stuff for each of the loans that we were giving each of the clients that we were managing, that would be a great way for us to get started. We wouldn’t have had to write a lot of code and we could’ve just started our financial services we had planned to do. I think for businesses that are thinking about some of the same stuff, the big question is like, what, like what are your expectations and what are your inaudible, your representations around the Bitcoin for us, it wasn’t our Bitcoin.
Dhruv Bansal:
So we felt we had to really, you know, up level the level of security. Some businesses may be comfortable since it’s their own Bitcoin and that the business owns taking a certain risks. They may be comfortable, you know, using a third party custodian that, and just trusting and relying on their reputation and their technology to keep the Bitcoin safe. I don’t think there’s a one size fits all choice yet, but my hope at Unchained and is to build out services that make it easier for businesses to make the choice that we’re making, which is to hold keys, to have transparency, to be able to audit stuff, right. To be able to do things on the chain, to do proof of reserves. These are the unique and awesome aspects of Bitcoin and businesses that don’t engage at this level. I think sometimes we’ll kind of miss the point of, of what this asset class is all about. And I think as Joe was saying, if that puts them in a position to miss out on a lot of innovation downstream.
Joe Kelly:
Yeah. At least where, I mean, Bitcoin is kind of a, it’s an asset that’s meant to sort of live outside of the realm of the state and state controlled monetary policies. And so for folks that kind of get into it and then use like a fully regulated custodian that might you control in and outbound type transactions to the corporate treasury. It does really kind of miss seem to miss the point of why you’d want to hold this in the first place. And so the more native you are is, is one way we put it the closer you are to the protocol. The more you can take advantage of that supra National set of features that Bitcoin can give you and able to transact globally without any intermediaries. And I do think that it’ll kind of over time as more businesses own and operate Bitcoin.
Joe Kelly:
It can create a new layer of trust that businesses can accomplish cross border contracts and agreements in ways that, you know, maybe you wouldn’t trust, you know, engaging with a business in Venezuela right now, because depending on how you’re to lock up, you know, maybe some collateral to an agreement it might require adjudication down there it might require using Venezuelan bank. You’re not, you’re not willing to trust but you know, set up a multisig with them and now to establish the right key holders. And now maybe you’re, you’re entering into new business arrangements that you wouldn’t have otherwise because you can use Bitcoin as it’s really the backbone. So I do really think it’s important for businesses to consider over the long run that it’s in their best interest to be as close to the protocol as possible.
Stephan Livera:
That’s great. And so let’s chat a little bit about the Unchained offering here. So you’ve recently launched the business account. So can you just give us an overview? What’s the offering there?
Joe Kelly:
Sure. So business accounts are really a set of features that bring a really married this, this idea of multisig with corporate governance. And we have a really a basic business offering that’s meant to look just like our most, for the most part, just like our standard accounts look like for individuals. That means it’s free to sign up free to create an account. We do charge a fee to set up a vault. We do charge for any signs on chain is requested to sign in general, you know, our client that they hold two keys and the business would hold two keys as well. And two keys are necessary to sign, to move the funds. And so the business can always transact someone will, they possess those two keys and have access to them in a way that’s free of charge.
Joe Kelly:
Should they ask us to back them up or sign a co-sign transaction for any reasons we do charge $125 a signing fee for that basic business account. And then we have a more advanced business account, which is where a business beyond usually a sole proprietor or somebody that’s more appropriate for the basic business account. And so as you start to have to add extra users are there now starts to be more of a monthly pricing model that kicks in as their resource to the other team inside the CFO’s office or inside of you know, across officers at the company that want to hold keys or have access to different views and permissions inside of the corporate account with Unchained, that’s more that falls under our advanced business account. It also has a signing fee, but otherwise the monthly fee is most of what’s included.
Stephan Livera:
So the business owner let’s say even in the basic business case, they’re a single user, but they’ve got two different hardware wallets. And what they can do is keep those in two separate locations. And then when they want to sign, they can basically take their laptop around to the different locations and use the Trezor or the Ledger or now recently the Coldcard as the signature. So maybe you want to tell us just a little bit around the education process of that. I mean, without doxing individual customers and things, but just what’s the journey been like for some of your customers who have been trying to learn to use multisig in that way?
Joe Kelly:
It’s been great. You know, we have our director of product marketing, Phil Geiger and now we have actually growing kind of a sales team as well, that faces clients as they come in. We offer a concierge onboarding package that many clients have taken advantage of that is where we really help hold their hands through the process of setting up hardware wallets. And then at the end, we didn’t help you to deposit some Bitcoin into their vault for them. It’s been really impressive that, really the broad range of clients that have come through that you know, we’re talking, you know, some clients, they didn’t even need inuadible. It was just about getting the Bitcoin at the end. Plenty of other clients it’s or on the other end of the spectrum, you know, we might spend two or three hours with the client, getting their wallet, helping them get their wallets set up and get going with our platform.
Joe Kelly:
And so, yeah, really a multi-generational set of clients and folks who have come in for either individual vaults. And now these business accounts as well. People running businesses between a liquor store, a roofing company you know, of course the Bitcoin operating businesses that we’ve talked about. But yeah, definitely a mix. And while there is you know, some education usually at that point, people are talking to us and serious enough about these accounts that they have the motivation and they’re throwing the believers and know they need to hold some Bitcoin and they want to hold it this way. So it’s pretty easy to overcome all the conceptual challenges along the way. And it’s, you know, for all of us Bitcoiners, it’s always fun to help open others eyes and illuminate this path for them.
Dhruv Bansal:
I mean, there definitely are some challenges though, I think with what we’re trying to do here, just almost conceptually, there’s like these two competing masters of like we want to limit, with this feature set, we’re talking about your different roles that users can have within your account within your business. And so they can see or have different levels of access to be able to control or do different things in the platform with the Bitcoin that that the business owns. But at the same time, Bitcoin is very dismissive of who’s doing what, right. Like if you have the private keys, if you know the redeem scripts if you have the xPubs, you can do stuff on your own with opensource software, some of which we’ve released. Right. And that’s an interesting contrast because we still want to preserve that. We’re not trying to build like a walled garden where, you know, you’re buying into some like private security solution or like a side chain or or a database. And then you’re getting all this awesome, like business account management stuff for your business, because that,
Dhruv Bansal:
That exchange of trust, this is like you’re preserving the, this is the Unchained, multi-sig collaborative custody product that we already have. You’re just within our platform getting to have a little bit more fine grained control about who can see what and that’s pretty cool actually, because there are some interesting now options that businesses can set up for themselves. And you know, things like being able to sign for a key but not being able to see all the information for other vaults or other products that key may protect. Right. So being able to split up access is pretty important. And that’s the kind of thing that we’re helping you businesses to do here.
Stephan Livera:
Yep. And let’s talk a little bit about the multi-user aspect. So how does it work with the different users? Like let’s talk in in the advanced business accounts context what’s the deal with the multi-user is there?
Dhruv Bansal:
It’s a kind of a membership model that’s similar to a lot of other accounts or products or SaaS companies that sell accounts that are designed to be used by groups, organizations, or businesses. So anybody who signs up for a normal account unchained can create a new business account. And it’s just another entity within our platform that can hold keys, can have profile data, can build vault and loans. And, you know as a first class kind of client object for us and having created this, the user created it, they’re the owner, and they can invite other people to join this account just via email. You get an invitation you opt in. And then, so you can build up, you know, your staff or whatever. You can invite them all to join the same account, and then you can set different access permissions.
Dhruv Bansal:
We currently have two levels of access, basically admins who can do everything and viewers who can only see the information that’s available, that can’t take any actions so they can’t offer transactions or build fault or do anything like that over time. We’re going to create more and more fine-grained ways to split up access control, but that’s what we shipped with last month. And the idea now is that this makes it a lot easier for businesses to coordinate the kind of different stakeholders that might be present in a realistic and scalable approach to custody Bitcoins. There may be folks who, you know, hold keys. There may be controllers who offer transactions and who are approving and verifying external addresses. There may be billing or administrative folks who you know, pay for the service or want to have control over that.
Dhruv Bansal:
And, you know, those are pretty standard features for accounts for businesses, for other financial products and services. And that’s kind of what we’re kind of adding as our platform increasingly targets that costs customers, but what’s unique is that we’re not letting go again of the underlying, this is just happening on the blockchain, it’s public keys and redeem scripts. It’s private, and you can always opt out of our entire platform. And I think that’s one of the scary aspects of, of stuff like this is that the administrators and the folks who have the highest level of access, of course, they can see and do everything, but they can also get the data that lets them do this stuff off the platform shouldn’t be viewed as a security hole that should be viewed as an important you know, wallet, recovery tool. But educating businesses about how to think about like this kind of freedom and orient themselves so that they have the right amount of freedom that they feel like they can control. That’s kind of one of the challenges.
Stephan Livera:
Yeah. So as a quick example, then I guess the customer can export some of the key information out of the unchained platform and take that over to caravan, right. The open-source side and still spend using that. Right. So that’s probably an example there.
Dhruv Bansal:
And to be clear, I think, I think you meant this, but just in case any listeners might be confused, like when we’re talking about public key information there, and they of course still have to additionally have the private keys that are associated with those public keys, but yes, that’s our goal. Yeah. We want customers to be able to like, if our website went down or if there was a court action against us and we couldn’t do anything or if somehow we decided that we can’t support their business and we wanted to close their account down or, or whatever horrific outcome you as a customer of ours might imagine. We want you to feel that no matter what, as long as you have your keys and you’ve got your xPub config files, you can use open-source tools ours, other people’s to continue to operate with your funds. That gives us it’s that’s in the spirit of, it’s both in the spirit of Bitcoin. And it also, I think, grants a lot of advantages to our team from a regulations perspective as well.
Stephan Livera:
Yeah, for sure. And I think the other important part is not everyone has the time to go become a professional multisig operator themselves. And so part of that is that’s what they’re offloading to you guys, right? Your managing, you’re helping manage that. You’re kind of doing that process of making sure that the hardware wallets are still compatible and all working with the platform. And I know recently you did some work in terms of Trezor as well, right. Was it with the Trezor bridge to make sure it all still works with the Unchained platform Dhruv, do you want to just chat about that a little bit?
Dhruv Bansal:
Yeah. It was just like, it means small issues. Like there was, it was just, you know, integration is tricky, right? There’s these, these devices don’t yet all speak the same language. And so nor have the same set of functionalities. And a lot of them are supporting many different currencies and they have many layers and the particular case, our latest collaboration with Trezor a few months back was indeed just getting this really amazing feature of being able to confirm your membership or ownership of a multisig address through a web browser on your Trezor. And it was just some small stuff that was miss wired along the way. Right. And getting that fixed. And it’s kind of an exercise in coordination between different companies to even notice and then get these bugs patched and fixed. But it’s cool because, you know, it shows that in that particular case, at least it shows that this is who she laps team was really values kind of multisig usage with their product.
Dhruv Bansal:
And they designed things to work and they expect them to work. And when they don’t, they put out fixes, I think not every wallet makers like that Coldcard is great because, you know, they really push standards like PSBT and other things onto those who want to use them. And that kind of helps level everybody up too. So just the more devices that are out there, the better our security gets, but it takes work. Right. And I think that’s one of the things that we as a business spend a lot of our time on ultimately right now is making sure that all these devices can work together seamlessly. So that users and businesses who rely on them don’t really have to do that because for better or worse, they’re not super motivated to do that with each other today. Like the device manufacturers don’t spend a lot of time ensuring that they are able to knit into each other as quorums and multisig. Right.
Joe Kelly:
We intend to push on further and with other multi-sig providers and folks that have same kind of concerns we do because yeah, that there should, there should be, there needs to be more standards. There’s a big hole in our space, in our industry of standards around hardware wallet interfaces and multisig.
Dhruv Bansal:
Yeah. Yeah. I mean, multiSig we’ll how we’re going to scale Bitcoin in a lot of ways. And so it’s important that we get good at it.
Stephan Livera:
From the business person’s perspective, like the customer, they might be thinking, well, what about when staff rotate in and out of positions or someone retires? Like how do you sort of manage that process when I’m doing an Unchained business account?
Dhruv Bansal:
I think it depends again on like the scale and the way that you’ve designed your whole your keys and bolts with let’s take the most simple example of you have two keys in your business and you use a two out of three vault at Unchained and unchained holds the third key. You have two co-founders in your business and each of you holds a key. Maybe that’s a really great way to start out and build your first vault together. But as you point out, you’re rapidly going to run into this, rotate, this key rotation problem, right. Staff go in and out of the company, what do you do with their keys? So there’s a lot of imperfect solutions to this problem. I don’t think there are any really super perfect solutions generally to this problem across Bitcoin.
Dhruv Bansal:
I think it requires a little bit more lifting and some things like taproot and others, I think really help with this. But in short today, at Unchained like the strategies that we would recommend are use more keys, right? You’re free to upload as many keys as you like into the platform that lets you segment the bitcoin you own across different groups of key holders. So you can kind of have pods that, you know, make it easier to rotate out. The platform already has a robust, like key rotation facility built in. You can say, Hey, this key right here, we’re not gonna be using that anymore. And we want to replace that everywhere in the system with this other key. So that’s the onboard new key holders and then, you know, fairly quickly sign the necessary transactions required, but that’s actually moving Bitcoin around more sophisticated customers.
Dhruv Bansal:
Since this is Bitcoin and its of protocol we don’t know for sure that you’re necessarily even using hardware wallets when you’re interacting with our site. As long as you are able to provide xPubs and signatures you know, we’re all speaking Bitcoin, right? And so some folks are able to shard their keys internally and split them up. And now there’s even another layer, you know, below the single key, participating in the multisig that key itself, you know, maybe it’s Shamir Sharing or maybe there’s something else going on. There’s a lot of there’s a lot of strategies here, but they’re all going to, they all suffer from, from some awkwardness in some way or another, like this general problem of someone has a lot of privilege and knowledge into Bitcoin and where it is and how it moves, how to rotate them out. It’s a hard problem.
Stephan Livera:
Sure. Yeah. And I know Unchained also has some open source stuff like hermit, which we spoke about last time you were on the shared roof. Do you have any thoughts on whether that could be worked into part of the unchanged business account solution as well?
Dhruv Bansal:
Yep. Yeah. Hermit is compatible with our platform. I mean, it’s a piece of software that we support and it’s designed to give businesses like a degree of freedom within a key, so they can split it up exactly. As I was talking about it was it’s funny today. I was reading the tweets about taproot being merged in to, I guess Bitcoin core, but its not activated yet. And people were, you know, going on about all the amazing stuff that we’ll be able to do in the future. And I think that’s the kind of stuff that Hermit is trying to do right now, but not on the chain, not through more complicated and capable contracts or signatures skims but just through using Shamir sharing. And so for customers who are interested in pursuing that option, that’s a thing that we can help them onboard into and they can use something like that with our platform, so they can internally have multiple keys and each key can be itself split up in in a variety of ways for Herman in particular. What’s kinda cool about it. It was another collaboration with some of the folks at the satoshi labs and many other places as well as well is that it’s not just regular Shamir sharing. It’s kind of like that multi-sig SLIP 39 sharing, which I think is extremely flexible for like scalable business deployments.
Stephan Livera:
And also wondering if you’ve got anything you could share with us in terms of future ideas around what, what direction you might take the business accounts platform with things like key level permissions or transaction level permissions and what worked, what could be built in there,
Dhruv Bansal:
Revealing that on the backend, we’ve already have a very fine-grained permission system that like almost every action and set of related actions is, is a separated out into its own atomic permission, which is then assigned to various roles and targeted against various groups. It’s kind of a pretty if you’d like standard access control list inspiring kind of security model. And we liked that because it kind of makes it really easy for us to then do fun things like share access to different balls through, across different providers, share access to keys and allow our app to become a little bit more social over time, which is a direction that we’re at, which is part of the direction that we’re headed in. What we’ve launched so far is a core screen version of that. Partly just to get this out the door and get in front of customers, who’ve been asking for it for a long time, but also we really want to move carefully through the design space for how to be able to assign and administer these more fine grain permissions. As I said before having access to you know, the most Holy information in these vaults things like the xPubs that comprise them, it gives you a lot of information about the assets. And so it’s important that, you know, customers are walked through very carefully in our user interface, like how to do that stuff. And so we’re pretty simple today, but as we move towards exposing the fine-grained permissions that we’ve already created that’ll create a lot of flexibility for businesses.
Stephan Livera:
Also recently very recently Coldcard has come to the platform. So do you want to tell us a little bit about your journey there? I know you had to do some work on the backend to get PSBT working. Can you tell us about that?
Dhruv Bansal:
Yeah, it’s exciting. I mean, it’s sort of like sometimes something that breaks a symmetry kind of forces your action. I think we, we, weren’t confident maybe up until the last year about what standard we would like for a transaction or for standardizing transactions as they move through our system. Sometimes you use things like Jason, where it’s convenient when you’re talking to a library that accepts that, other places you might use something else. Different tools just have different, you know, ways that they like to represent transaction data in Bitcoin. But PSBT as a sort of, you know, rough standard for what we’re going to use to represent transactions to each other, as we pass them around is something that we were almost forced into by deciding that we wanted to really adopt Coldcard. And it’s part of what took a little while to get here.
Dhruv Bansal:
It wasn’t just plugging in the Coldcard and a hack to kind of talk to it. We really wanted to invest in moving more towards PSBT everywhere in our stack and driving other wallets or attempting to drive them as much as they can understand. PSBT and you know, I think PSBT is a pretty imperfect standard in a lot of ways, but on some level it breaks the symmetry, right? Coldcard using it, other wallets are using it. It feels like it’s kind of got some momentum and traction behind it, so, okay, good enough. Like we’re going to standardize on it and move towards that for ourselves. And I think part of what makes PSBT challenging to support is it’s not just packaging your transaction data in a particular serialization format that’s pretty easy.
Dhruv Bansal:
It’s like moving from JSON to XML or something. It’s more than that. The demands that PSBT does make of what has to be in there require you to think about organizing your addresses using xPubs, like using sequences and in multisig, there’s some kind of open questions about what was the right way to do that and the right structures to use for that. A lot of the reason that PSBT is useful in multisig is because you’re really passing transactions back and forth a lot. Right? You have, there’s something that generates an unsigned transaction and there are some multiple number of signers that, you know, get past that. And then they come together and that’s a bit of a different process maybe than a person who’s just signing, you know, with their one Trezor right there on their laptop.
Dhruv Bansal:
And so in general, like the multisig community I feel is and partly the hardware wallet community, since they’re innovating around passing transactions and aircraft weighs and all sorts of other stuff back and forth from computers and into wallets, that’s where the innovation and transaction handling is happening. And so, you know, that we sort of had to go through both those things, like both conceptualizing inside of our platform to be a little bit more multisig standards based and, you know, releasing Caravan was a big part of our journey there. And then adopting PSBT finally as a standard for how we want to talk about transactions internally. And that was the combination is really what helped us get to Coldcard. And then of course we got open-source stuff, right? That’s how we think about this. Like we want other people, you know, checking our code. We want other people using coldcard and multiSig applications that just makes it more likely that more Bitcoin lands in multiSig, which is what we want.
Stephan Livera:
And also it seems like the awareness around what other main attacks and ways to mitigate them in the multisig world are slowly improving as well. So I think you, I think you touched on this earlier around registering the other participants in your quorum and having the device actually recognize that. So I think now Coldcard allows that, and that’s something that I’m like from an overall perspective, security in the space is improving, right.
Dhruv Bansal:
It’s also just I think a maturity thing, you know, like a little bit what’s happening there is Coldcard is deciding that I’m not going to be as if you’d like dumb. And I don’t mean that in a derogatory way. I’m going to decide to be smarter. I’m going to hold data. I’m going to have state that lives on me. That helps me contextualize things that talk to me more. And that is smart, but it’s also, you know, more tightly coupled, right. So there’s a trade off that’s happening there earlier generation wallets if you’d like that, aren’t thinking about multisig in the same way are saying, well, give me a transaction and I can sign and I’m going to sign it. And they don’t really know they’re not storing for themselves separately that transaction the context of quote unquote, a known multisig wallet.
Dhruv Bansal:
So it’s an interesting kind of trade of space on the device and tight, tighter coupling for potentially greater security for a class of users. I think you also see things like that develop over time when you imagine, you know, wallets having cookies for particular applications. So it’s not just that, you know, some application is talking to the Coldcard or the Trezor, but in particular, the application that I use to initialize the wallet is the one talking to it and having those kinds of bits of state stored on the wallet as well. Like I’m not necessarily advocating for that as the right strategy. I’m just pointing out that I love seeing the industry sample this space and try different strategies and letting people decide which one they think is more secure. So for us, people were clamoring for Coldcard and so we were eager to support it. And it helped us get better at Bitcoin. So I’m excited. That’s exciting too.
Stephan Livera:
Yeah, that’s really cool. And I think definitely the Coldcard support really adds to the offering there as seeing, as it’s such a popular option amongst particularly amongst the hardcore Bitcoiners. And so, yeah, I think that’s really great development to see. Yeah, really enthusiastic. So I guess we are now starting to see like a financialization of Bitcoin. So what are some of the implications of this idea that we’re, financializing a computer network perhaps Joe, you want to start here?
Joe Kelly:
Well, sure. I think i just gets at you have things like the lightning network you have, you know, our product was started as a Bitcoin secured US dollar loan. But I think, you know, based on some of the things we’re working on and the ways multisig helps you construct networks of Bitcoin olders, or people might have some claim to Bitcoin that’s in the multisig. I think you’re goinna start to see more financial products that start to build on top of Bitcoin and the Bitcoin the multisig excuse me, the multisig construct, just something you see in a generalizable pattern across the idea of just, Hey, let’s lock up Bitcoin. And then we’re going to trust that Bitcoin is only going to escape that locked up mechanism through certain conditions in a contract. And so that starts to look like other insurance funds or sometimes Bitcoin that’s on loan in a particular fashion.
Joe Kelly:
And so it’s an interesting area that we’re exploring and actually Dhruv a lot of thoughts on this as well.
Dhruv Bansal:
I think one way, Joe, I think about it is like, it’s sometimes said that any company as it becomes larger, kind of just becomes like a money managing company. You know I don’t know, remember the company that everyone says it, but like that you make these things, but really your company makes money off the pension fund for all the employees that make the thing. And that’s somehow the real business. And I’m not sure if this is a good example of what a business should be or a sort of inevitable example of as businesses get larger, this financial aspect of into integration and, and money management becomes even more important for them. I’m not sure. I’m not sure, but I see a parallel kind of idea happening in Bitcoin, but it’s kind of like the financialization is happening upwards through the networks that are connecting the participants.
Dhruv Bansal:
So like the networks, as Joe was saying, like through multisig in particular, we’re connecting to each other in network. Lightning is a network of multisig channels and we’re selling each other liquidity and we’re selling each other the ability to push payments through. And so that incentivizes us to get connected into this network. And you kind of imagine a world in which there are millions and hundreds of millions of people using such a network. These devices are in everyone’s pockets, suddenly this like financial network for Bitcoin payments is now capable of doing other things and data maybe starts to move through it. And with data’s moving through it, then how much content and applications, and you sort of begin to see that. And all of that is still ultimately being moved as you know in a way that’s priced, you know, Satoshi provides.
Dhruv Bansal:
And it’s an interesting kind of parallel like companies grow larger and become more financialized these networks grow larger because they sort of are financial networks that are eating like the networks that are, that they might otherwise be used to transport data or energy or other things across our society. And I think these big moves of, of players in their industry buying Bitcoin, taking a position, imagine if that position does grow by a factor of 10 or a hundred over the next decade, suddenly they have a lot of Bitcoin or relative to the world. They have a lot of Bitcoin and they are asking, how do we make more suddenly that Bitcoin becomes one of the more interesting aspects perhaps of what their business is or does. And now they’re invested in these networks and now they’re going to make further investments to continue to have them grow and to continue to have that Bitcoin continue to earn. So it’s kind of just as interesting you know, markets for Bitcoin financial services kind of eat the world as they grow larger and consume, you know, adjacent marketplaces that they’re next to.
Stephan Livera:
Yeah. And I think it really starts with the whole treasury reserve aspect or idea of just, just holding it. And then companies will look at ways to either try and earn Bitcoin, whether that’s, you know, lightning network. I mean, lightning network is still very early. But certainly there’ll be, it starts with this process of holding some Bitcoin and then that entrepreneur might be thinking, well, how can I earn some? And maybe it makes sense to try and earn some once enough other people also hold it too. So that’s probably an important part about growing the network, right.
Dhruv Bansal:
I sometimes think and again, MicroStrategy is not a business that I know a huge amount about, but I think about their total Bitcoin holdings, their total yearly revenues. If again, if Bitcoin does go up by factors of 10 over the next decade or two as big as, as micro strategy. And if micro strategy succeeds in continuing to hold it, like how much is their business thinking about that Bitcoin reserve as their new macro strategy, if you like, I’m not sure.
Stephan Livera:
Yeah, suddenly a funny, a funny one there. So being a Bitcoin company there’s probably some unique challenges that Bitcoin founders face. What are some of the challenges that you guys face?
Joe Kelly:
One of the, definitely you were really proud to build what we consider a, a Bitcoin native company. And so I think there’s kind of interesting ways that a lot of our challenges, either culturally and in education and in risk and uncertainty tend to kind of mirror Bitcoin in a really interesting way. And so we’re, we’re Bitcoin is a saying that, you know, it was able to be adopted by a certain subset of individuals and radically, so who are radically passionate about it, but it’s taken a lot of time for the idea to spread. It takes a lot of time for people to really believe that like, ah, yeah, it’s I guess it’s here to stay. I’ll invest a little in it. And so, yeah in some ways building on the back of something that has that social problem it’s somewhat, sometimes the social problem for Unchained.
Joe Kelly:
And we have really fortunate to have a really dedicated set of clients and customers dedicated set of investors and a community around us and great supporters like you Stephan and cause we enjoy working with you and your community. But yeah, there are just a lot of investors out there are willing to believe if they want to make, they want to invest in cryptocurrency. They want it to look like a multi coin, something they don’t, they don’t maybe want to trust investing in something that’s just going to custody Bitcoin for the foreseeable future and only work with Bitcoin.
Dhruv Bansal:
It seems like timescale problem.
Joe Kelly:
Yeah.
Dhruv Bansal:
It’s it feels like a lot of the tech, we think of ourselves as a bank, as a financial services company, as a tech company, but in a lot of ways, the investors that we interface with often maybe are confused or thinking about a different kind of timescale or different playbook. It feels like the traditional tech company is on some kind of like, there’s this like wave of adoption because of some new thing. And they’re like either too early or they’re like, just on the wave or they’re like too late. And then the way, you know, crescendos, and then it’s a huge big market and it stays like that for awhile. Then decades later, it gets superseded by the next wave. And that doesn’t, it’s not, that’s not the experience of being in Bitcoin, right? Like there’s been this like four yearly, like just cycle of adoption and retrenchment and mania.
Dhruv Bansal:
And it’s Buffetts companies, right? It hugely changes revenues from the high year to the next low year. It makes people really overzealous with how much risk they’re willing to take on. And as founders, like, we kind of negotiated that first cycle now, like we’ve been through the cycle, but as Bitcoiners, we were, it’s not the first one that we’ve seen. And we kind of always like, had a certain sense of like wanting to be longterm. Like this is our business. If we own a lot of this business, like we’re really invested personally and reputationally in what we’re doing here, our goal is not to like, have a quick win and run away. Like we want to build a really long-term bank for a long-term asset class. And we get so much flack from investors or folks in general, who are somewhere in this four year cycle.
Dhruv Bansal:
Right. And they’re not, and they’re just like, Oh, you should do the ICO. You should, rehypothecate the coins, you should be lending against, you know, this all coming over here. Like it’s the next big thing. Or and I think a lot of that’s just been such bad and distracting advice and we like, haven’t done it. And we sometimes look really stubborn or like contrary. But I hope that over time it will be proven out that we made the right choice in focusing and getting really good at like native Bitcoin financial services technology. So let’s wait and see.
Joe Kelly:
It is crazy. I mean, within the last month or so, we’ve gotten to celebrate our four years as a corporation. You know, we’ve only launched really publicly more in mid-summer 2017. So haven’t always been as public, but, and it’s crazy to think that we’re one of the longest going Bitcoin companies around at that point, it’s just, it’s very weird.
Stephan Livera:
You survived and look, I think it’s a really interesting thing that so many things in this space are just indexed to price, right? So as the number goes up, you see more users sign up on exchanges and wallets and everything, and a lot more transactions on chain. And then it becomes this kind of process where you have to kind of deal with a massive, massive influx of people. So certainly, I think that’s and to your point as well, it’s that people are coming from different levels of understanding, right? So probably many of my listeners are in the more hardcore Bitcoiner camp. So many of them are Bitcoin only and they’re like, die hards. But not everybody has got to that point. And it takes a bit of time.
Joe Kelly:
Yeah it’s careful if you can’t and, you know, people only get to these ideas themselves. So I’m on their own in some way, you can’t, you can lead the horse to water classically, right. Can’t make it drink.
Stephan Livera:
And what about the employee side? So finding, you know highly talented employees, what’s that been like for you guys?
Dhruv Bansal:
I think it’s been it’s in some ways we’ve gotten really lucky. I think we’ve hired some really incredible people. But there’s also been a lot of wash out. I think we’re sometimes not afraid to hire or contract with folks and try them out and see what they do. And we’ve often found that folks don’t get Bitcoin, like and I don’t mean like they’re not like believers in it or something. I mean, sometimes they may not even understand like basic aspects of how it works and that there’s so much fakery and nonsense in this space yet a lot of people want to work in it, especially during the peaks of each cycle. I think that’s a challenge. There’s also this like, idea that there are so many people who, especially, I think this is true in the coding side more engineering team. There are so many people who are incredible engineers and we would love to have them, but they feel.
Dhruv Bansal:
Like they can’t work here because they don’t know Bitcoin. And it definitely helps that, you know, if when Bitcoin people are coming in the door, you know, in an interview and they know a lot about Bitcoin, they own Bitcoin, they’re passionate about it. But a lot of our challenges as a company aren’t necessarily challenges with Bitcoin. They’re challenges with building software and scaling our systems, which are challenges that a lot of engineers, you know, have experience in. So sometimes like this idea of like we’re a Bitcoin company can be off putting to people that just want a really challenging technology problem. But I don’t know. Well, what would you add Joe?
Joe Kelly:
It also just, it’s really fortunate to be able to work in a space that people there is a broad swath of really innately, passionate people about Bitcoin, who are willing to leave very high paying jobs, very procedures, jobs, and roles for this Bitcoin startup. And we do have that going for us.
Stephan Livera:
Yeah. It cuts both ways. And I think for many of us, it feels like we’re really taking a chance, but it’s a new frontier. And if you go out to the West and you go out on the frontier that, you know, it’s high risk, but high reward, because as many of us who are bullish on this space, see it, like if you build a good product or build a good service in this space, you have incredible opportunities coming over the next, say 5 to 10 years.
Joe Kelly:
Oh yeah. And we feel like we’re in better position than ever. And it’s really feels validating that it feels like the world has kind of moved towards us. I think a lot of Bitcoiners get to feel this way too, not just us at Unchained. So it’s a great feeling. It’s a great feeling.
Stephan Livera:
All right. Well, I think those are probably the key points. If you guys had any closing thoughts for the listeners and of course tell them where they can find you online.
Joe Kelly:
Yeah. You can find us on unchained.com. You can find links at the top bar to our business accounts that we talked about today. Both Dhruv and I are on Twitter. I’m @josephkelly and @dhruvbansal or our corporate account @unchainedcap. It’s really a pleasure talking to you, Stephan.
Dhruv Bansal:
And always good to be on the show.
Stephan Livera:
Thanks guys.