How BTCS built an Ethereum treasury strategy

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show where Ethereum is that X that got hot again and now you're trying to get back in. I'm your host Kyrie Dead. Today we're joined by Charles Allen, the CEO and executive chairman of BTCS Inc., a publicly traded blockchain infrastructure company. Now, I believe they're one of the longest standing publicly traded crypto companies to date. Uh, and they have added a new service to their company, which is buying ETH and putting it into DeFi and generating yield for public markets. So today we are going to discuss all about BTCS and its journey to where it sits today. How Charles and his team think about using DeFi as a public company and the flywheel that they've actually created um with their operating company plus ETH Treasury playbook. It's a little bit different than a lot of the

other ETH Treasury plays out there. So very interested to unpack all of that. Um but as you guys know, we've got a team of researchers who live and breathe crypto. Each week they drop a sharp no fluff report on what actually matters in the crypto space. Tune in this Saturday. We'll release a pro report all about ETH Treasury companies. So very timely. Today's episode is brought to you by Definitive, the leading multi-chain trading terminal, trusted by funds, Dows, and Protraders. Uh, and letin get cash without selling your Bitcoin. Without further ado, let's bring Charles to the stage. Charles, how you doing, my man?

Kyle, thanks so much for having me. Yeah, well, we're excited. I mean, we've been talking a ton about ETH Treasury companies here on Milk Road. Uh, and we're excited to bring you guys on because I think um, you guys have a little bit of a a unique story, I would say. Um, and so I'm excited to kind of learn about how this all works and and how you kind of see the future of this. Um, because I think you you bring a good perspective here. Let's start with just kind of a background of BTCS, which by the way everyone, that doesn't stand for Bitcoin. Uh, it has a different uh um uh, you know, it stands for I think it's blockchain technology. What is it? You tell.

Consensus solutions. Consensus solutions. Right. So it's not it's not Bitcoin. I know a lot of people are complaining like they need to switch their name to something to do with ETH. Uh but it actually does make sense. So it's been around for a long time though and I'd love for you to just maybe walk me through the journey of BTCS and kind of like how you guys got here and feel free to take us back to to the very beginning if you can. Yeah, I mean it's we only have like 45 minutes. So we've been we've been we've been public uh since 20 February 2014 and the company started in I think June 2013. So, we're like hands down the oldest public crypto company in the world and we've probably done we've probably had the first and most things that have been done in the public markets with

crypto. So, w with that I won't I mean I could I could have so much fun talking about this for like hours. Um it's been it's been a long long journey but I I'll give you kind of the the the highlevel bullet points I guess to start like my background. I was an engineer, mechanical engineer, worked in semiconductors, you know, survived the inter internet bubble bursting, went back, got an MBA, got into finance. And so what a lot of what we're doing is kind of the crossroads of technology, which I love, finance and creativity, right? That third one's like super important if you look at like what we do as a company. So back to the history, uh 2014 we went public. We had an e-commerce site.

Wasn't was never a good business. Never really, you know, we had a you know, wasn't what I created. It was it was what was there when I joined the company. So nothing to do with crypto at this point. The e-commerce company was it was Bitcoin shop. It was the first place. It was the first it back in 2013 if you wanted to actually buy something with Bitcoin, you came to Bitcoin shop or you went to Bitcoin store and Bitcoin store was Roger Beer's e-commerce company. He actually tried to sell it to us and we were like now we're getting out of this business. It's a bad business. And it was really just as used as a way to acquire and accumulate Bitcoin. So, we went public as Bitcoin shop. We changed our name to BTCS. Uh, two reasons. Banks were shutting our uh we're having

trouble keeping our bank accounts open. So, you did not want Bitcoin in your name. Uh, you know, we had been given the the the ticker BTCS. So, we bought the domain BTCS and we changed the name to BTCS for, you know, blockchain technology consensus solutions. And at the time, we became the first public Bitcoin miner. So, in 2014, we were the first public company to mine Bitcoin. We had an operation. You know, this is kind of, you know, pre pre- Ethereum even existing. Yeah. And, you know, we got flushed out of that market when, this is crazy to say, when Bitcoin crashed from like 800 to like 200ish, right? Like that's a hard thing to swallow. And we had like 1500 Bitcoin at the time.

But, but, you know, got flushed out of the mining space, had to kind of pivot. And, you know, there've been a lot of pivots since then, but all within crypto. We've always been a a blockchain infrastructure company and u focused on regulatory light uh revenue generating uh endeavors within crypto. And so you know from there after the mining stopped we looked at what to do and we said we should have just bought Bitcoin. We actually mined Ethereum as a side note. We were mining Ethereum in the early days uh on GPUs very small scale. So that was, you know, that was our first uh fora into Ethereum. And then in I think it was around like 2017, we kind of looked at ourselves and said, "We're

fools. Why did we bother mining Bitcoin and spending all this money on capital equipment to buy hardware that's a depreciating asset? It's just going to be a paper weight." And so we basically had the first digital asset treasury strategy back in like 2017, 2018. We were buying Ethereum, Bitcoin, we had a bunch of others. The SEC questioned if those were securities. So, it got rid of everything except Bitcoin, Ethereum. They still spent a lot of time, you know, hammering us on whether Bitcoin was a security, whether Ethereum was a security. I I could spend hours on on on on, you know, the SEC interactions, but that's not that's kind of when we we started where we we realized we should just buy the tokens.

You know, fast forward, we pivoted and I guess I pivot is probably the wrong word. We we got rid of all of our Bitcoin. This is maybe like six years ago. Um, you know, it's the dates are a little little vague because it's it's been some time. And we actually paid and and in doing that, we actually paid the first dividend in Bitcoin. So, we we if investors wanted to get their dividend in Bitcoin, they could do it. I think it was Bitcoin was like 40,000 at the time. So, I took my dividend in Bitcoin, which I'm pretty excited about right now. And, you know, that kind of put us on a track to focusing on Ethereum. We we really looked at, you know, we don't want to do both. We want to give direct exposure to one. And this is pre premerge, like just when Ethereum forked

into the beacon chain. So, it was still proof of work. And so, we started, I think we we couldn't start right when it when it initially forked because we weren't ready. We had to there's a lot of audit work to do. It's not easy to be fast in the public markets. I think it's like early 2021 we started staking Ethereum on the beacon chain which was a you know pretty pretty risky move at the time but yeah and so fast forward today we're the model really hasn't changed much we can talk about that a little bit more we've just kind of changed how we describe it so for the last five years we've been Ethereum focused you know primarily Ethereum focused company uh at heart um with infrastructure kind of in the bones so what is the operating so we understand the ETH treasury side I think

people get that you guys are now raising capital buying ETH putting DeFi getting more ETH etc. What's the operating business today? Because there is an operating business that generates real revenue. Walk me through that. Help me understand that part first. It's been the same thing for the last I mean it's evolved a little bit and and so in 2021 the the revenue generation was all from staking Ethereum. It was all staking yields. So the difference is if you look at every other treasury company on the market today, they buy ETH. they go to like Galaxy or they go to some thirdparty custodian that's going to hold their ETH and stake it for them and charge a fee. We don't do that.

We buy the ETH, we take it, we run our own validator nodes. So, we run solo val validator nodes and we also run validator nodes for Rocket Pool, right? Because that gives us about a 40% increase on the on the earnings. And so, you know, that that's the validation part. We're calling that node ops. So, that's like the operating business. So, there is no cash revenue. all of our revenue is in Ethereum. So the operating, you know, like the whole digital asset treasury strategy in my mind, it it's just marketing, right? Like we were it's a byproduct of what we've been doing for five years, right?

We've just kind of said, "Okay, we'll explain it better. We're finally get doing a good job of explaining it better." And so we've got node ops, which is the validator operations. It's just stake your yield to the nodes we run. So it's it's should be higher yield than if you were paying a third party to do it for you. And then we are a block builder. So right now I think we're the fifth largest block builder. We we account for anywhere between one and 3% of all transactions on Ethereum. Okay. And that that's been a huge driver of revenue. That was um I think 80% of our revenue in Q1. And we see that as you know those two things, the node ops, the block builder plus is what we've named it. The block building, it's all on Ethereum. It's all just generating at the end of the day. All of these our

operations are just to generate more Ethereum than you otherwise would. Um, same with the with the staking. We don't use third parties and so wherever we can partner on the infrastructure side and that's we initially, you know, pitched ourselves as a blockchain infrastructure company, but no one understands what you do. So, it's much easier to say we're an Ethereum, you know, digital asset treasury play, but we've got like five years of experience doing multiple technical things that are going to increase our, you know, yield over what the others would do.

Right. Okay. Okay. So, you've been doing this for a lot longer than everyone else. The main difference I would say outside of marketing and just calling each treasury company is also, you know, the financial engineering side of it too, right? Like I don't think I assume you guys weren't really doing that previously. That's more of kind of a newer phenomenon. Or had you guys already been been doing that before? We had been doing not on the DeFi side. That's relatively new. We had been doing you know by way of I mean I spent 10 years as a investment banker doing you know small cap deals. So I know investment banking as well as I know crypto. um probably you know better in some in some regards. So we've been doing you know convertible notes to kind of lever up in the past. Right now we we

did you know it's kind of a mix of ATM sales which we've we've had our ATM since 2021. So that's a great financing structure extremely low cost of capital and we've kind of married that with above market convertible notes. We just closed a $10 million deal this past Friday at you know converts at $13 a share. So it's a it's a healthy premium. We did one in May that was 2.8 times the stock price was two. You know, our stock was two and we did that at 580. 585 was a conversion price. So, just drag the stock right up. And then, and this is what I think is really exciting is marrying that with DeFi.

So, I think we're probably the only ones doing that. We're also probably the only ones self-custodying the crypto, you know, running nodes, block building. And so on the DeFi side, we're using A to, you know, which is for for those that aren't aware, it's a it's a decentralized lending and borrowing platform where you can post collateral and borrow against it. So we're posting our Ethereum there, borrowing USDT, basically b borrowing dollars, and then we're able to take the borrow uh buy Ethereum and then we'll go stake that on um either solo or or rocket poolool nodes to kind of maximize yield. And what it does and it's actually really like right now the math is crazy on this because all the digital asset treasury plays are buying up the Ethereum. So

there's you know like winter meet was like our OTC desks out like okay so by kind of posting ours as collateral it means we're actually earning interest on that. So I think it was like two days ago the interest we were earning on our posted collateral was 14%. obviously didn't hold like now it's down to 2% it's up to four or five right and so if we're and I'm going to use round numbers these aren't the actual numbers of crypto we have but I'll just use round numbers if we have a 100red million posted as collateral and we're earning 10% on that it's not going to hold but even if it's five and we're borrowing let's say 30 million at a 5% interest our net yield is high plus you know we're actually making money we're not net we're not like paying interest on the borrow so we're actually making

money and then you take the borrow borrow and you stake that and we got interest we got we got yield there and then you look at it on an exposure level you've got in that example of 100 million and 30 million borrow you got 1.3 you know 130 million of of kind of or 1.3 times leverage on your position so you know if you look at to your question if you look at the other digital asset treasury plays you know the simplest is go go buy an ETF onetoone coverage you know you buy an ETF you get exposure to Ethereum on a 1 to1 with a management fee you want to step above that, you know, there's uh ESBAT, there's Tom Lee's deal, which are great companies, but really what you get is you get Ethereum plus staking through a third party with

fees, which is great, you know, and I'm thrilled like that, you know, they they've done an amazing job of telling the Ethereum story. And I think that's, you know, we're all here. All of us that are buying Ethereum believe in it, right? how we kind of maximize our own yield is kind of I think a smaller point into the the potential that Ethereum has to change the rails. But but going back to that point, you add BTS on top of that, it's you have, you know, that ETF exposure plus the staking yield with no fees plus the block building plus the the rocket pool plus the this plus the that like you know there's a lot of like you can just start tacking these things on. Um which is what I'm excited about.

I mean that that's kind of where we're looking at is our operating business is not some we're not a healthcare you know company or biotech company to pivot in like a we got Ethereum on the balance sheet like we've been working on this for half a decade right so you know and and we're finally getting noticed I it's a really hard business to do unless you're at scale so we've been doing this with you know between a like around 40 million market cap you know between 30 and 45 million in in ETH for the last five years and now I can't give you the numbers but we're I think last reported was 200 million. I I'd like to see that get a lot bigger, but we definitely are doing this uh we want to get to scale because the business works our business works really well at scale.

I mean as as does the others, but I think those you know plus this plus that like the builder plus the node ops that's what really differentiates us. Yeah, no doubt. I I think when I first started hearing about the ETH treasury companies, my mind first went to oh my god, what happens if they use DeFi? That's the greatest thing ever, right? It means more yield. It also means just more education on public markets to teach Wall Street about DeFi which like really excited me. Um and and then you know very soon after all of a sudden we started hearing about you guys and you were already doing that and I was like there it is. They're using a perfect this is exactly what I was thinking was going to happen and so you guys got to jump out of that because I don't know if

you were already doing it before um before like Espec and all that came along but obviously it you already did it before. Yeah. Which is you know super cool. Um, and I guess you know it's a net positive for all these different companies to be doing this because I'm sure it's driven a lot more demand for you guys too, right? Joe Lub and Espec coming along. Oh my god. Like so grateful that Joe's here, Tom Lee's here, the Ethereum machine. It's validation that what we've been working on for the last half decade is a viable business model, right? Like usually the first companies out always fail. I mean, we've been here 12 years.

Like we just don't go out of business, you know? That's more a testament to the team, but it it you know, for these guys to come along and do it at the scale of billions, it they just proved out our model. And then when you actually look under the hood, it's like, okay, what they're doing and and I love what they're doing, but like if you look at what we're doing, we've got a lot more under the hood that now people are noticing. So, yeah, I couldn't be happier that that that they're they're, you know, out there doing it, spreading the word. We would, if they hadn't done it, we would have been sitting here at a 50 million market cap grinding, pounding the pavement, trying to explain to Wall Street what we're doing, why it matters, the power of Ethereum.

Now that that part's done for us and we get we get to reap the benefits and hopefully investors come see the, you know, the value prop, right, that that we've been building for the last half decade that kind of goes into BTCS. Yeah. So, I I want to I do want to dive into the DeFi thing a lot actually, but before we do that, I wanted to step back a second. you used to be more in the Bitcoin world. You switched I mean a long time way before anyone else into into the ETH world. Was that because you saw the benefit of like DeFi and this whole ability to to to do this or at the time was it just it was kind of costly the hardware of of you know running a Bitcoin miner didn't really make sense proof of stake made a lot more sense.

Like why why make that switch? Um and was it like was it because of Bitcoin or Ethereum or was it because of like the the ETH is a better treasury asset? like what was your kind of reasoning or maybe it was a bunch of them I don't know but I just want to hear your kind of thought procs um we started that that we were out of bitcoin mining for a while we we came to that conclusion that mining is a really expensive business and not one I don't want to be in anymore so then we were just holding Bitcoin and holding Ethereum and there there was you know why did we decide to get rid of Bitcoin and why did we go all in on Ethereum and I remember that I remember my partner I'm like we're getting rid of Bitcoin he's like why I love Bitcoin

like just we're doing it okay And you know the the the there was a couple thought processes. One, I mean, I I love Bitcoin, but it doesn't do anything, right? It's a it's a treasury asset. It sits there. It's got a limited supply. We could go through the whole narrative. Ethereum has the power to change how real world assets or how assets move around the world, right? There's so many assets that are going to get tokenized and Ethereum is going to be the rails that those move around the world on without banks, intermediaries. It's going to open up new business models. It effectively is the backbone like the internet was for moving information allin-one. And when you start once once you come to that realization, it like how can you not go all in on it? And and

then it was a question of well what's the best way to do that? And so I don't know exactly when that I mean that was probably was it five over over over half a dec decade ago that we made that that you know kind of decision to go all in. It's not like yesterday we woke up. It's like, do you know, okay, market's hot, they love Ethereum. Let's go buy some, right? Um, I'm a cookie company and I want to uh I want some Ethereum on my balance sheet. It was it was a conscious decision of, you know, like I truly believe Ethereum is going to change the fundamentals of how assets move. And, you know, we actually put like an analyst primer and probably should rename the thing, but we put a primer on our website of it's really more about Ethereum than us of what can you do with

it. I think you know a and defi is a use case. Securities markets I mean like you know as a banker I know the security markets as well as I know crypto and they're just they're broken. Uh I'd love to see the backend rails of securities markets move on to you know onto Ethereum and stable coins. I mean that's a you know that's a huge use case and at least for me using the technology and seeing how it it benefits and then seeing where it could be used is kind of like the aha moment. And I think this, you know, it was around COVID or I think it was in COVID. I had to I invested in a deal. I it was I don't know if it's going to work out like a startup company, but they were out of Dubai and I had to send money, you know, and it

was enough that that you you know I if I went to the bank, I needed a manager and I couldn't you know it was co I couldn't get uh you know you had to make an appointment had to be with a man it was like three days and then it's a it was going to take five days and I looked I'm like this is just so stupid. I was like, and so I I just I took some of my ETH. I probably shouldn't have, right? um you know got got us got got some USDT and in under like three minutes I had moved you know real money to the other side of the world in like two clicks and they had it and it was done and and so once you realize what you like that's that's like the most basic use case you you look at a and it's like oh my god

you can like we can borrow and we're borrowing at scale and someone else that wants to lend their USDT and get better interest than they would at a bank can do that. And you can do it with $5 or $10. I mean, think about how much of a hassle it is to get a mortgage on your house or get an equity line of credit from the bank. The paperwork, the title insurance, the this, the that. I mean, it's just crazy. So, I I could talk for a while on this. I I think to the decision of moving to Ethereum, Ethereum provides a utility that Bitcoin just doesn't. I know there's efforts to make that happen. I just don't see that happening. I see it happening on Ethereum. Yes, there could be other chains that come up, but they don't have the same, you know, attention multiple

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Right. Okay. So, it really was around I mean Ethereum or ETH I guess is is a utility asset, right? Like you can't you can't do anything with Bitcoin. You can do things with ETH and a lot more is going to happen on Ethereum obviously than than you know than something like Bitcoin today anyway. Um which makes sense. You know that was kind of my when I first learned about Ethereum I thought the same thing. I was like well Bitcoin's cool. I love Bitcoin but ETH is way cooler. You know what I mean? You can do so much more with it. And for the strategy that you're trying to play it makes way more sense now. So right now the way you can raise capital is basically on public markets you can raise capital and then you can take that you can buy ETH with it. The other thing

you can do is as you've said you can um you can post collateral in a you can get more ETH from that way as well. Why did you guys choose a when you think about the DeFi landscape on Ethereum like what else is out there for you? Is it just lend and borrow? Is there more things that you think about doing? Like obviously you're staking that's the other thing in DeFi but like take me further into DeFi and is there more you can do? Do you have to wait until these things are robust enough or have enough TVL or like how do you think about that as as a public company who obviously has to keep a lot of risk in mind? You can't just go punt the next, you know, DeFi.

Yeah. And I I think I'd start with just the risk. And I remember this is before FTX blew up. Um I I had one one of my boarders like we should we should look at getting debt and we should we should go to like the you know like an FTX and borrow against our crypto. I was like I was just so worried about counterparty risk. I was like no. And at that point I was because we were looking at DeFi and a pretty hard. I'm like I don't know about this. This is like you know um these protocols are untested. They haven't been around a while. We could lose all our money. And so for us it's been something we've been watching for years and years. And I I trust in terms of protocol. I trust a more than I trust uh you know uh you know qualified

custodian or you know someone with human beings behind it. Right. People make mistakes. If the code's right and it's been running for for as long as it's been running on Jav, like I'm good. Like I, you know, I know it worked. The protocol makes sense. It's not And people have compared it to like, well, it's like Terra. It's uh you know, it's a which is a um programmically pegged um stable coin stable. I'm like, that's completely different, right? So, we're pretty comfortable with DeFi protocol-wise. to your question of why we went to a it's the biggest I don't want to be on we don't want to be testing out new unproven protocol not with real money right like it's one thing if we want to just go play around and one of the things we do actually do which is pretty cool uh here is and this is actually

brought by we we uh Ben Hunter our VP of engineering came over from block route and and it was his idea he's like we should do a we do a crypto stipen so all of our employees get a a little stipen in crypto so they actually everybody's encouraged to go and interact. It's their money. They can't You're not allowed to use it for other things, but go do something crazy in crypto and come back and report. We've been a bit we'll lose it. Like, you know, when one guy like levered up and leveled up and leveled up on AI and then you got liquid with it like good, now you learned something. So, you lost 50 bucks, right?

And it's it's actually we structures like a competition um where we we get together like once a month and everybody talks about what they what what they what they did and what they learned. And it's really good because if you have a crypto company and people are not building products for the end customer, right? They're building their own stuff. Like like if our if our team is out there using stuff, trying stuff, and they don't have to pay for it, and they're not taking real risk, we're we're going to discover new things. And so, you know, that's been a really cool program we put in for for our employees. Uh, and it forces everybody like everybody's everybody's doing it. um you know there's you know so it means we're we're trying different things like we use cow swap to buy ethereum now we use unis swap as well but like cow swap's a

solver I think uh unis swap's added a solver but you know so we're looking at all these things you for us the the biggest issue we have is auditability obviously risk we're not going to take unnecessary risk but like things need to be auditable and you know I that's probably the the big one right like if it is if we've checked the risk box, are we going to do something that our auditors are going to be able to sign off on or is it going to be so, you know, esoteric or so out there that they're we'll be unauditable? And so that that's where that's where it gets a little tricky.

Do you have any restrictions as a public company or do they even know what's going on? Like can you go and restake if you wanted? Could you go and use some whatever in DeFi or is like are they watching and there's like or maybe they were before when it was Gary Gensler and now they don't care. But is there any specific rules or you guys kind of have freedom to do what you want with your own capital? We pretty much have whatever the board approves we can do. Um, okay. With that said, if if you can't audit it, it mean like if an auditor can't say I can follow the money. You need to account for every single dollar. Right.

Right. Okay. So, if you can't account for the do dollar, your auditor won't sign off. And if you don't file financial reports on time, you get delisted. Right. Okay. then you can't raise any capital, then you're on the bullet. Like then things start to unfold really really quickly. You also have to be careful of um how things look. Like when we got into block building, we're I mean we're probably the first to do many things, right? First public company, first first um minor, first dividend, first staker, first digital asset treasury strategy, first one block building. But when we got into the block building, you know what was revenue, right? So is it the gas fees you get from the block?

Is it net? Is it gross? So, we to we came out with a position, but we decided, let's go ask the SEC and this is under the old administration. So, we knew they're going to come they're going to come look at it anyway and give us a bunch of questions. So, we might as well be proactive and go say this is this is how we think it could be done. It could be done an alternative way. We think it's this way. What do you think? And they came back and they disagreed with us. And so, it was actually really negative reporting. It was misleading and was actually very misleading. but correct the way they interpreted under accounting and we appealed it because they were actually wrong. They and we spent this took nine months. It went all the way to the chief accountant at the SEC of how to account

for block building. And so now we know and I don't think you know the new administr administration obviously isn't going to challenge it because we went through a nine-month process where the senior guy senior most accountant at the at the commission you know basically blessed it. But to your question of can we do anything like yes but not really in that if we go do something really wacky it's a process and that process takes time and so if we if it's if it's meaningful we'll do it if it's something that's small it's just like we we've got a lot of people come to us ideas like that's really cool but that's a nightmare like we're not it's not worth the money we would make off it like to figure out how to do this funky thing in the public markets is like go

go do it yourself and your, you know, privately, right? Okay. How do you guys think about managing risk? Is it, do you have a full team that does this? Is it the board that decides this? Uh, do you have someone that that's just like their their job? And more specifically, I mean, risks like inside of DeFi like what is the leverage or collateral amount that you guys want? Like do you guys have specific kind of rules around that that you guys do internally or how do you guys think through that? We do. And it's funny when you when you think about like like our process to get into a was actually frankly much slower than I would have liked. Um I had been watching for five years. We have we have you know couple board members relatively new. We actually have Charlie Lee on the

board so he kind of got it instantly right because he sort of Litecoin but it was you know I think we started with like the first borrow was like $300,000. I mean it was it was teeny and that was like okay you know and then we kind of kept upping it and upping it. It was a slow process but even as we've upped it you know initially we you know every initial the board approves what what management can do and so initially was we can do 300,000 like well okay this is this is just a test right um with a I think we had a threshold of no more than a 40% loan to value and so we since then we've we've basically removed the limit now so management can do whatever they want in terms of amount but we've kept the because that otherwise it's just stupid

right and we thought that we're like a $50 million company we're a billion dollar company can only borrow like a teeny bit. Um, you know, to cap that at like, you know, 2 million or something just didn't make sense. So, now there's no limit on how much, but there is we still have a a loan to value ratio and right now that's maxed at 40%. We don't go, you know, we're we're below that. I don't give the exact amount, but we're below that. And, you know, between that and we also have the other ETH, right? So that's that's just on a but then we have if you look at that on a blended basis because we have all this other staked ETH we can obviously post more or so so the the the total blended like debt to equity I forget what we put in our last public

disclosure was under 25% leverage like like across the board of the company between convertible debt uh you know in the in the traditional markets and a right do you guys think that you'll expand to other ecosystems so like obviously there's salana treasure companies now. There's hyperlquid ones. There's I don't know. There's going to be a million of them. I think there's a Litecoin one which you just mentioned, Charlie Lee's on the on the board. Um, will you stay in Ethereum? Will you look for more opportunities elsewhere? Like when how do you think through that? Well, it's funny because we actually had a lot of tokens. If you if you look back in 2021, Ethereum was always the dominant one, like 60 70%. But we never staked it. We we staked Ethereum, but we could never get it's uh we could never

get other people to stake to our nodes because it's not delegated proof of stake. It's just proof of stake. So, if you're familiar with delegated proof of stake, if you run a node, other people can delegate their crypto to your node without you taking custody of the asset and you earn a reward on their reward. So, light a rocket pool basically for those. Exactly. Like like I mean it's li rocket pool but it's protocol based. So like Cosmos is one like that. Avalanche there's a ton like that. So we owned a bunch of those tokens because our thought was well if we own a bunch of these we run the nodes other people stake. It doesn't matter if we're really huge believers in the tokens. As long as we pick like the top 10 or 20, you know, we won't we won't turn the the crap coins, but if we

get the top the top coins that are delegated proof of stake, other people delegate to them. We'll just drive more revenue, earn more money. Why not, right? It was a no-brainer. Uh we we've subsequently exited that and we're really focused now on Ethereum. We still own probably a couple million bucks of Salana and we have a little bit of BN uh BNB and so like when talking about other tokens on the blockchain infrastructure side we will look at other tokens if they're money-making opportunities and and the the way we look at that is like how we got into BNB you know if we're running an Ethereum block builder BNB is a fork of Ethereum so like why wouldn't

We take our code base for Ethereum and just it's run it on BNB. I mean, it needs a couple little tweaks. We actually bought TX boost was an existing what's called B&B block builder for very little amount of money. We bought that just to kind of speed things up, but like why wouldn't we do that? It drives revenue. It it you know improves, you know, uh you drives shareholder value, but we don't have any we have very little B&B on the balance sheet. So, we'll opportunistically look at like, hey, if if our tech here, I mean, think of as like like if you had a a computer or something, if you had something that runs on 110 volts that like a revenue generating box that runs on 110 volts and you can build a little converter to plug it into 220 and it and it and it's

making, you know, you're making, you know, double the revenue. Why wouldn't you do that, right? So, of course, like we we do we will look at other chain it's changed. It's not really a core focus now. It was it was kind of opportunistic with BNB. You don't really have it as a as a digital as like a treasury on the balance sheet. We're not doing that. I think I think the messaging gets very hard for investors to understand if you're like, well, I'm Ethereum and I'm Salana and I'm this and I'm that. Like, what are you? So, we're we're we're Ethereum. Uh, but we're going to make money if we can use our software that runs Ethereum stuff and run it on another chain and just start printing money because, right, why wouldn't we?

Makes sense. What is next for these for you guys or ETH treasury companies in general? I think when when it first started or at least it first started catching wind. I guess you guys actually first started this many many many years ago. People just didn't realize it. You know, it was obvious that okay, we're going to raise capital in public markets. We're going to buy ETH with it. Then it was like, okay, the next step is we're going to stake it. The next step is we're going to put it in a or we're going to put it into DeFi. You guys have done all that. So, you guys have kind of nailed that. That flywheel, that loop is sort of rolling. Of course, there's just like let's just keep doing more of the same. maybe that's the focus and that's what's next or is there something

different that that you can think of or like something more that these kind kind of companies can grow into as you think about what BTCS could be I don't know in a year from now or three years from now or five years from now like what do you envision? So I have I mean there's three special projects that I have on my to-do list that I'm super excited about but I'm not going to tell you about those. So, uh, you know, there's some things that that, you know, I we just don't, you know, we're not we're not giving away, you know, the special sauce on the, you know, as as opposed to like your question, where where are we in a couple years? Like, I don't know. The market will somewhat dictate that, right? I mean, if ETH is at 10,000 and that could be it easily at

the end of the year, uh, with it with, you know, Wall Street finally catching wind of like how powerful Ethereum is, you know, if it what happened to it, Bitcoin happens to Ethereum, it's it's 10K pretty easily in my opinion, which puts us at, you know, now we're at real scale, which would be frankly amazing. Um, and I got to give my my hats off to to Joe and Tom and, you know, those guys for for, you know, helping tell the story. Um, so I think when we get big, we're obviously going to do all the things we're currently doing. Why why wouldn't we do stop? Why would we stop doing those if they're working? And then it's a question of what are we going to do in addition to that? I mean, I have three really cool projects I'm that I want to be be launching, but then

there's a bunch of stuff on the tech side we're doing. So, um, there's a lot of integrations, you know, bisdev on the on the block building, you know, working with like we could do sequencing for L2s. There's just a lot of there's a lot of things that we could do that you maybe these other treasury companies will do. Um I I don't know. We're looking at doing them because they're just going to increase our revenue and drive more growth than you otherwise would just kind of sitting idle saying I'm just going to stake you know and that's it. Um so you know like for example one of the things we did I think this was the beginning of the year we invested not a lot of money but we did a kind of a token investment in ETH gas. So, they're basically building a um

a gas marketplace where validators can sell their block space and it's kind of like pre-confirmations. I don't know if you're familiar with that. It's like a pre it's basically a pre-mp solution where you can buy top of block, bottom of the block, chop up the block. And so, it kind of creates like a like a marketplace for block space, either full block, partial blocks, which is really interesting because if now you have a pre-confirmation, you can separate settlement from trade or trade from settlement, right? which kind of like how the equity markets work, you can make Ethereum like a hundred times faster. Like it'd be fashioned Salana because even though it's not ending up on chain, you have a pre-confirmation.

You you you pre- purchase from a validator that it will get put on chain. So it's just like the equity markets. You buy your stock on Robin Hood, you don't really own it. Settlements, it's T+1. It's a day later you actually own your stock. But you could sell it the next second and you didn't even know that it never it never settled either way. They just netted on the back end. So, you know, that's something we're doing and we're um a priority builder for block building on ETHA. So, there's we have more projects than than we have like developers to tackle. So, right now it it's it's really more of a um you know prioritization of what we want to put on the road map and right now we're working through you know what that road map looks like but it is much

greater than we're going to buy some more ETH. I mean we're going to do that either way but like you know like what we're going to do from a development side and I think that's what makes us a really exciting story is you know five plus years at doing this we're actually building solutions we don't we don't outsource it and you know it's there's a lot on the road map. So, it feels like um part of your guys mission is not just like let's let's be an ETH treasury company, but it's also like let's push Ethereum the protocol forward, it sounds like, right? Let's let's try and make this this blockchain faster and better and more performant, etc. And you guys kind of want to be a part of that. Would that be safe to say?

100%. I mean, if we're not and this is and I've had some exposts on this, if we have all these public companies raise 10, I mean, right now, what is it? Um, I think ESB's got what a $2 billion shelf or they had five. I mean, I can't even keep up with how fast everyone's filing these shelves, but let's just say there's tens of billions. It's going to flow into Ethereum. Like, put it to work. Build something because Ethereum is 10 times more powerful or people are going to actually build solutions on it. We're going to be more fur uh focused on the infrastructure side. Yeah. But if you're actually building and Ethereum becomes more valuable, it means everything in your your treasury has the potential to be magnitudes bigger. So that's what like I think there's actually kind of almost a

responsibility if you're a public company just buying ETH like build hire some developers and build something. Whether that's frontend facing, backend facing, like hire some develop if you don't have any developers on your team and you're raising billions of Ethereum, like what is what is what's wrong with you, right? like like it it's uh crazy. And I guess the way you guys want to position yourselves, the way you differentiate yourself, I guess, from the others is like you're not going to be the biggest probably, right? There's there's Bit Mine, Esped, and and Ether Machine that are like they're racing for that. Um I don't know, maybe you guys are going to try and do that. Uh but it feels like your guys goal is can we get the best like ETH per share or ETH concentration is what the ASP team calls it because you guys are doing so much

more and kind of first to do it. So you can you have a lot less fees. You can do it more efficiently. It feels like you guys can kind of optimize your stack of like generating more ETH versus the others who are a little bit like let's say slower or not trying to be as efficient. They're just trying to go for to be as large as possible. Yeah. I mean I would love to be the largest but clearly that's not going to happen. Um you know if we tried we would destroy the stock price and and you destroy shareholder value. I I think our our first goal is, you know, as a public company, it is, you know, our goal is to create shareholder value. And the way I'd like to create shareholder value is, you know, one, we need to get to scale, but two, I want to do that through, you

know, stock price appreciation versus, hey, we got to $5 billion because we raised $5 billion at today's price, and like three years later, you're like a Bitcoin miner that your your stock maybe doubled or tripled. Your market cap went up like sixfold, but your stock only doubled, right? I would much rather have our market cap grow because we're crushing revenue. Um, you know, the business is growing and we're, you know, the the market, you know, the the share count didn't quadruple compared to the stock price. So, that's kind of the goal. Um, in terms of getting big, I mean, I I view, you know, I think we're what top 10 right now in terms of if you look at the list that, you know, strategic, what is it? Strategic ETH reserve.xyz the new like benchmark. amount their data is

it's good, but it's it's it's evolving. These things are happening faster than they can keep up. Yeah, you're 11th overall, just behind the US government, in fact. Okay, we're going to fix that. This is of all the This is not just Treasury companies. This is of like every company that's holding ETH. So, this is like on the full thing. Yeah. The US government is is uh 4,000 ahead of you. 4,000 ETH ahead of you as of when, right? Um, so yeah, I mean I I'd like to be I there's no reason why if you know if things go, you know, kind of according to plan that we couldn't be, you know, and this is obviously no guarantees or promises or um without giving specific guidance. Like I could easily see us being, you know, top five.

I I I there's just no way we're going to we're not catching ESPAD. Um their their volume in their stock is is huge. I mean, maybe we could in the long run. I mean, that's kind of why uh you know, we we we've we came up with um the turtle corn. I don't know if you've seen that. We're kind of having some fun with that. Um but we've been around forever, right? What is that, by the way? I see that. That's just more you're talking about being slow, but uh wins the race. Yeah. It was kind of like uh you know the um the old story of like the uh the tortoise in the hair, right? The turtle wins, right? Yeah.

And so you're a unicorn if you're a billion dollar company, right? Right. So, if you're a turtle and a unicorn, you're a turtle corn. Gotcha. What's behind you? Is that what's behind you over your shoulders? I just noticed those. I didn't notice those this entire conversation till you said that. Yeah. Know, I designed those on uh with AI and 3D print them. They're pretty cool. Um Okay nice. But yeah, so though, you know, that was kind of we were going to launch it as a fun thing when we hit a billion and I kind of it' been sitting in the back of my mind for a couple years now. And I told, you know, finally told like let's just do it now. Uh, so we're having some fun with it, right? And and honestly, hopefully it drives, you know, the attention multiple. Like if you look at

why why does why is Micro Strategy the biggest, right? Obviously, they were the first and they're buying a bunch of Bitcoin, but Michael Sailor does a great job of getting out in front of people. He never talks about his company. He just talks about Bitcoin and he's got a high attention multiple. Joe Luben's got a high attention multiple. So we, you know, we've been sitting here for, you know, 12 years unnoticed trying to get noticed. So we thought, why not? Let's, let's, you know, we're we're a turtle, slow enough. If we're going to get to a billion turtle corn, why why wait why why wait till it happens, right? What is So what what's crazy to me is I continue to think like this just started really going crazy and people hearing about this like it's only been like two months, right? Uh, and we're

already at, you know, I don't know, these companies are raising billions and billions. And I'm just curious, you know, January of this year for you or even not even January, you could probably do like April, right? What was it like talking to investors or to Wall Street or anyone about your company versus today? Like how has the like tune changed? How has their understanding changed? If it has yet, maybe it's t it takes more time. Like what are what are those conversations like then versus now? Well, it's actually really interesting because of our size. Like we were primarily a retail company, right? Like $50 million companies institutions don't invest in. Why? Because if they want to write a $50 million check, you're going to buy the whole thing, right? Or you're going to you're going to send the price to the moon. So,

um most the institutions that would approach us were toxic pipe funds. And I would just tell them to pound pavement. We're not interested. Uh literally, it happens all the time. Uh so like I'm not going to blow up the company so they can get we're not doing a bad deal. But what what I think it was towards the end of last year, we finally got like an institutional player came in the open market and picked up a like a 499%. So they don't have to disclose it. I was like, "Okay, this is we're starting to get noticed." And they were out of Asia. Uh which is really cool to see. Over the last month or so where we've really seen, you know, our stock do well. We were prepared, right? We filed a $250 million shelf a year and a half ago. It took us a year to get through the SEC.

Um we, I mean, they were awful. they were breaking the rules. Uh but we wanted to be prepared for when the day came. And that's the big thing like we didn't have to go wait for the SEC for, you know, to go through that registration process. We've been we've been waiting for this this this day for a decade, right? Or this these two months for a decade. And you know, luckily Joe and Tom kind of brought it to us and brought you know kind of shine the light on our model. And now we are having those conversations with investors. Like I'm having a lot of not just retail investors because you know if you email IR I'm responding to you and I've been doing that for 10 years.

I'll respond to people. Hopefully we we'll have someone else to do that. But like now I'm seeing institutions are calling up and taking meetings and and they're really interested and it and it's funny the smart money like I had a call yesterday. They're like wow I just thought you were a treasury play. They're like, you know, they were really, you know, it was kind of like eye opening for for them to learn all the other things that we've been doing and how long we've been doing them. So, yeah, it's like night and day compared to to January. And we're also at scale like our business, right? It it didn't we were chipping away at it, trying to be trying to be like so like so conservative on every dollar we spent, but it it never would work until we got to scale. Until we had volume in

the stock, we couldn't raise money without blowing up the company. And so now like like we can prove out that like our model works at scale. We're not at like ESBET scale, but like we're getting to the point where we're going to be able to prove like this is going to work. It's going to work well, right? The uh 12 year overnight success. Congrats on that, right? Uh okay, we gota we got to talk about risks a little bit here because I think um a lot of people are euphoric on these ETH treasury companies. They're loving what's happening because I don't know, they all hold ETH and they're like their bags are getting bought for the first time in a couple years. So, people are excited. Um, do you see there like look, I don't know if you see this, but I think there's going to be tons of these

ETH treasury companies globally, similar to to what we saw with Bitcoin. Do you see risks? Do you think there's going to be some that blow up or they maybe they overdo it in DeFi? Not saying you guys will, of course, you guys have, you know, we've already talked about how you guys manage risk. Do you think that this could be a problem at some point in the future? Um, or does that not worry you so much? Oh, I mean, look, market goes through cycles. So, I mean, we've been at this 12 years, you know, prior to I think we've survived every crypto almost every crypto cycle except one because it was it was very early. But, yeah, the it will go up and it'll come down. I mean, I think the next cycle I think we are there's a lot of room to run. Ethereum

is just catching Wall Street's eye. I could easily see Ethereum going to, you know, 10,000 or 20,000, but if it does that, it's probably going to pull back, right? Like I mean it's once you get Wall Street involved in crypto, it trades like other Wall Street commodities stocks and they go through cycles and you know it's risk on risk off and you know the money flows and so there's going to be people that are going to overlever. U I mean I look at where we are. I don't I don't think we're overleveraged but we're definitely leveraged and if we see the market getting hot we'll probably dial it back, right? Um and we'll probably make sure we we have enough cash. I mean the nice thing at least for us is our operations.

We don't have a big team. We don't need a big team, right? Our our business doesn't scale on more people. For for the de dev side, we need more developers, but it's really getting the right people, but we're talking, you know, maybe hire, you know, two, three, four more people. It's not big. So, you need better AI. Yeah, AI actually helps a lot. I mean, yeah, in terms of coding, I mean, it's it's amazing. Um, I mean, you know, obviously second to crypto, AI is pretty cool, but uh yeah, I I there's going to be companies that blow up. It's a it's a graveyard of companies that I've seen over the last 12 years when I when I look around like the the number of people that aren't around that started some company that failed either they'll take risk I'm sure people even lose their crypto I mean less so now there's

so many you know non-custodial and custodial wallet solutions that have policy engines that allow you to protect against those risks they didn't used to exist you kind of had to like build them yourself but yeah I there'll definitely be companies that go out of business but that's normal Yeah. Yeah. Um, as we start to wrap up here, just curious, is there anything that we haven't touched on that's important for people to understand? Whether that's be about BTCS, whether it be about Ethereum, whether it be about these ETH Treasury companies, like what what do we not really hit on or, you know, you've been on a bunch of podcasts. What What's everyone missing?

That's a hard one. I I don't know what people are missing. I mean, they don't know about us, that's one. Um, so I don't know. I I think the big message on people is like like learn about Ethereum. Like whether it's our white paper, Fidelity put one out. I know Consensus was putting one out. I don't know if that's been distributed, but there there's like I think four or five really good articles, Etherealiz did one where you can really learn about why this matters. And I think if you can come to that conclusion that this is as powerful as the internet, it's just instead of the tokeniz or the instead of the digitization of information that can move globally, it is the tokenization of real world assets that allow the the

world economy to function better. And once you get your arms around that, it's more likely than not going to be built on Ethereum just because it's the oldest. And then it's like how like how can you not have exposure to that? Whether you want to go buy ETH itself, whether you want to be onchain doing stuff, whether you want to access that in an ETF, whether you want to access that in a, you know, ETF plus staking with like an SPE or something, or whether you want to, you know, look at a company like ours, like it's definitely an asset class that everybody should be looking at. And that's kind of the the the high level message I would leave people whether whether you you know, you're interested in BTCS or not, you should really have a look at Ethereum and and other, you know, there are other

blockchains, too, that are pretty cool. So, absolutely. Well, Charles, thanks so much for coming on. really appreciate you uh sharing the good word about Ethereum and explaining everything you guys are doing at BTS. Uh again, congrats on the 12-year overnight success. Uh we love we love to see it and uh yeah, keep crushing it. We love to see good players in the space that are doing really good things and trying to move this space forward. I think that's exactly who you guys are. Um so so thank you for that. Everyone, make sure to follow Charles on on Twitter. What is your your Twitter handle? It's It is should know off the top of my head. Uh here I can I can look it up if you don't have it on the spot.

It's uh charles_btc you want to follow. Uh he's been tweeting a lot about the journey here. So so check that out and of course check out BTCS. Um Charles again thank you. Just a quick disclosure. Uh this is a a friendly reminder here that the information we shared today is just for educational purposes. It's definitely not financial, legal or tax advice. the views and opinions expressed here are our own and don't represent professional advice. But again, thanks everyone for joining. Charles, appreciate you for coming on and we'll have to get you on again in the future.

Yeah, thanks so much, Kyle. And finally, I've got to give a shout out to our partners over at Nexo have just partnered with the DP World Tour, one of the leading golf tournaments in the world, 45 tournaments across four continents, and they're going to have the Nexo Championship debuting this August in Scotland. So keep an eye out for that because this is one of those things that feels very marketing talk, but I get super excited because when you think about sports and the crossover with the attention that it has and how many leading global brands are sponsoring massive sports tournaments, it's pretty exciting to see crypto brands sponsoring large sports

tournaments as well. So hat tip to Nexo, way to go, guys. Thanks as always for doing what you guys do in the space. Thanks for tuning in y'all. Have a wicked awesome day. We'll see you back again tomorrow. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh. And if you're willing to step up your crypto investing game, we're going to also leave a link for Milk Road Pro. You get access to our portfolio where you can see exactly what we are buying.

This is your number one resource to help you invest successfully in crypto. One final note, this show is for educational purposes only and nothing we say is financial advice. Investing in crypto or any asset is risky and you should never invest more than you can afford to lose. Thanks so much for listening in my friends. Have a wicked awesome