Inside Bitcoin’s Early Days | Pete Rizzo and Charlie Shrem

Transcript

Back then, the idea of disrupting money was still you'd be laughed out of the room. There was only the incumbents, which were PayPal basically, and then you had the banks. So, that picture that you see there was the first Money 2020 conference, which took place in May 2012. That room was all incumbents. It was no one knew you couldn't disrupt money at all. There was no the concept of sending money from person to person didn't exist. Hey everyone, if you have been listening to Empire, you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that make the on-chain experience basically unusable. So, the Arbitrum team reached

out and they showed us the platform. They showed us what you can do on Arbitrum. Whatever you're doing, you can experience frictionless transactions at lightning speed on Arbitrum. So, head over to portal.arbitrum.io and check it out. What's up everyone? Before we jump into today's episode, I'm excited to share Empire's first ever security partner. Harpie is the best tool to prevent your wallet from theft in real time. Harpie is not just a security solution, they are a piece of mind solution. But, don't just take our word for it. Harpie is the only wallet security solution that protected 100% of its users from attacks like the Ledger one in Q4, which was an off-chain signature attack. To learn more about Harpie, click the link in the show notes or visit harpie.io/empire.

This episode is brought to you by Monad, which has not only the highest performance EVM L1 architecture ever built, but also the wildest and craziest community in crypto. Monad's internal devnet is live and public testnet comes out soon. So, make sure you join the Monad community today at discord.gg/monad, m o n a d, Monad. All right, everyone, welcome back to another episode of Empire. Uh, this is uh this is not your typical Empire pod talking about uh you know, paralyzing the EVM and uh the the the news of the the topic du jour, I would say of the week. And uh this is

this is actually a look into kind of the earlier days of of crypto and actually um when I started to get into the industry, it wasn't really even called crypto. It was just called It was just Bitcoin. I was just I was just interested in Bitcoin and that was really it. Um and so we have uh two uh two close friends who have been in the industry for a while. We have Pete Rizzo who um helped build CoinDesk in the early days. I think you could say did build CoinDesk. Um came into the industry in 2013. Rizzo controversial topic, I know there, but uh that's all right. And then uh And much lower as you asked for sure, yeah. Yeah, exactly. Exactly. And then we have Charlie Shrem. Um And uh Charlie came into the industry in I don't know, either 2010 or 2011. Built

BitInstant, which we're going to hear about. And as he uh went off to jail, which we'll eventually hear about. If you're okay talking about it, Charlie, then Rizzo will uh step in and talk about the kind of 2013 2014 to 2017 days. So yeah welcome guys. It's good to be here. Oh, and we have Court. Court, Charlie, can you put the camera on Court? What's up? Hi. Hi, everybody. She's been through it all since day one as well. So, it's been uh 2013. A lot of times like I we were just sitting in a story the other day and uh forgot we we were and Courtney goes, "Remember when we were sitting there in the park and Vitalik was eating grass?"

And I totally forgot that whole story. I was like, "Thank you for being there." Cuz like uh for the book and everything, I forgot to write that uh that story down and everything like that. So, I don't know. Yeah, so Like literally eating grass? Yeah, what happened? Do you remember that situation? I Uh we were at Ulysses for the um for crabs. Oh, you were getting lobster at Ulysses's. were hanging out with um Nick Nick from the Bitcoin Center when the Bitcoin Center was around.

And And we were sitting on the ground and waiting for the food or something and he was just like sitting there eating grass and convincing us that But yeah, he was like telling us this whole story that it's like good for you. It's like all this protein and Like that we used to have the ability to digest grass and if humans could digest this he got into this whole thing. If humans can digest grass then we could like this is like a superpower. The grass is all The grass is right there. It's everywhere. And then cows can Cows can completely It can live off of grass. This is a great Vitalik story by the way. And there are many there were My favorite thing about Vitalik is there was a phases of Vitalik. There's like different eras of Vitalik. But yeah, his This was the nice school boy kind of

Bitcoin magazine writer who was just like really chipper and and happy to be there. I'm I'm I think I'm if I'm correctly right, he was he was the good student. So maybe we can maybe we can start there. I We can start with like what the space looked like in Charlie, I'll throw this one to you, like 2011 to 2013? Like I just paint paint a picture for us. Like who were the players? Like who were the people? Where were they located? Was it San Francisco? Was it New York? Was it New Hampshire cuz of the talk show? Like paint a picture for us of like what the industry looked like in 2011 and 2012? A lot of these Satoshi emails just came out actually, which is really interesting and I know Pete has dissected them a lot more than I have. I just read a kind of a few off of your

thread, so thank you for for constantly putting that out there. Um And so starting with those with with the Satoshi email days, this was like the era of 2009 to 2000 I would say I think he disappeared in April or like March or something like that of 2011. Uh he disappeared or April There you go, April 2011. And so to give context, I joined the forum I was around lurking, but I joined the forum May of 2011, like 1 month after Satoshi disappeared. So, this is the top This is the Bitcoin Talk forum, and how many people were So, you joined 2 weeks after would have been the top of the 2011 bubble, too. It would have been like he would have been following it. That's where I lost all my money originally.

Cuz I bought Bitcoin at like $30, and it went up to 36, and I was like, "I found gold." And then it dumped to like $2, and I'm like, "All right, I need to work in this industry and figure out a way to make this price go up again." So, I found this great great uh thing that you posted December 28th, 2011, Charlie. You said, "With digital currency like Bitcoin, being broke is merely a technical issue." December 28th, 2011. So, what was um Yeah, what Take me into the mind of like December 2011. You had the pre-Satoshi So, you had those like that's kind of like the era like pause point of when Satoshi disappeared. Everything pre that Satoshi was kind of like running the community.

Everyone can everyone was on uh forum.bitcoin.org, and it was a website that him and Theymos started, and and uh there was um an IRC network, which was like Bitcoin #bitcoin on freenode, #bitcoindev, #bitcoino TC, and then a couple of other ones. And that's kind of like where more of the technical discussion started, and that's where they still actually take place. And that's where I originally connected with Bitcoin was in the IRC, cuz I was hanging out in some different IRC rooms at the time.

And that's how I originally connected to Bitcoin. But um once Satoshi disappeared, uh it was a very it was a society based on what contribution the the the the what people respect you had within the community on the the forums of Bitcoin was what contribution are you uh giving. It like was very anti-rent seekers. So, it was like, "What contribution are you giving towards the larger Bitcoin community? People who are like buying and selling things on the forums, only taking money, you know, pro for products in Bitcoin. You have people running little websites. Like, there was a little GLBSE, which was like a website where you can go public Bitcoin only, which is how ShapeShift

and Erik Voorhees took He made a lot of money. Like, dude, they did like thousands of Bitcoin and some other ones. Like, this guy actually passed away. It was this Romanian guy. He kind of ran that, too. And there's a lot of these little like historical connection points. But, it was a lot of like misfits. There was a lot of people who were kind of like on the fringes of society in some way or another, but who were highly technical. And um there's a word. Is it merit merit merit meritocracy meritocracy. Was it very like Was that the right like accurate way of describing it where like Yeah, I mean, I can add mostly from my recollection. Well, I wasn't You know, I joined in 2013. So, I've kind of mostly know this era from doing archival research and things. But, yeah, it's

very different to than today, right? Today, you have the idea that Bitcoin is this like secure investment. It's where you'll keep like long-term savings. And back then, it was the opposite, right? Bitcoin was just as Charlie's tweet showed, it was like a funny internet money. And people sort of believed that their value that they were giving to the network was actually supporting it, right? Like, they thought that the value of Bitcoin was based on the users. of people accepting it. So, there was this huge cultural uh you know, uh pressure or not for but force to, you know, reward people who are doing good for the network. Expanding the number of merchants, convincing people to accept Bitcoins, spending Bitcoin, right? It was about going forth and spreading the message, right? And that was the tone I think, you know, post-Satoshi leaving as Gavin Andresen kind of takes over as lead

developer. And you know, he was the one who he uh invented this uh website program where you could go and you could just claim Bitcoin for free, right? So, he was even just giving away Bitcoin. So, you know, the culture is very different from what you think of today, where it's more like, "Oh, you don't want to spend your Bitcoin. Bitcoin's is valuable." Back then, it was, "Hey, like no, we need to build and get more people into this industry by any means necessary and that you know, came and kind of incubated a wave of startup businesses that you know, by 2013 when I when I kind of joined and started reporting, you know, it felt like a maturing industry, right?

It felt like a zeitgeist thing that was happening because in the early days of you know, the two 2010s, you know, Facebook had just gone from a frat house to a billion dollar company. Uh you know, a Skype had gone from a protocol that like was kind of niche to like people were using for conversations. You had Google Hangouts, right? So there was this whole like tech explosion, right? Tech was kind of like eating the whole world and Bitcoin was a part of that story. And so like you asked like well, it was just a four-year-old currency, you know, why did everyone have such sky-high expectations? It's because well, that was the mode of the times, right? Like that's like that was really the era where in like the late-stage social media, you could be like a dorm room company that then was on the S&P

500 in like two years, right? So there was this, you know, when Bitcoin really kind of crystallized in early 2013 early startups like Charlie's, I mean they were like a rock band, right? Like BitInstant was like you know, I remember seeing the early pictures of like Charlie and Erik Voorhees and Roger Ver and the people Ira Miller who was also involved, right? But they looked like t-shirts, scraggly guys, you know, product that's like eating, you know, hundreds of users, making millions of dollars off of nothing. Um so it felt really just like something that was happening. Like by the time I joined in May 2013 you know, you really had Bitcoin as several hundred dollars.

Cyprus, this current country that was kind of hands. Yeah, they they stole a bunch of people well they conducted a bail-in, so the government, you know, sort of seized money from the populace. This was kind of like a big macro moment of the time, right? So you really had this idea that Bitcoin was going mainstream. They had a couple like the whole country's assets. Like everyone had money in a in a Cypriot bank account like lost like 10 or 20% of all their money. They like did a bail-in like you said. It was crazy. So, Argentina was going through hyperinflation. So, it was mainstream like in the way like where you think about today like, you know, CNN was talking about it like Charlie was on CNN. I remember seeing like Bloomberg was talking about it. Like it was, you know, it it permeated internet culture.

I don't think it was mainstream in the way Bitcoin today is like mainstream. It's, you know, people on Wall Street are talking about it, but it was very much it went from like the fringes kind of the early days where where Charlie kind of joyed into being a part of this internet story, you know, in the 2013 era. It definitely like fell into the internet part of the internet history by by that time, 2013, 2014, for sure. Charlie, what about 2012? So, when I I think about 2013 is a very defining year because you have a lot of like these YC companies, the first I think it was blockchain.com, you have Coinbase, you have the whole Peter Smith and Brian Armstrong and Fred and like they come into the scene in like 2013. But there's like this 2011, 2012 where they're still like I found this um

fundraising announcement. Brooklyn-based Bitcoin startup BitInstant raises seed round. A startup that provides temporary credit in order to make Bitcoin transactions faster raised an undisclosed sum of seed funding from an angel investor. We sold 15% of our company to Roger Ver, CEO of MemoryDealers, which is probably the largest used computer part site on the West Coast, co-founder Charlie Shrem said. Yeah, that's a crazy That's when things start got real for the first time because I met Roger and he basically forced Erik Voorhees to join the company too.

Well, what was BitInstant? Let's start Let's start there. What Tell me about founding BitInstant Like what what was this company? So, prior to this to this article, BitInstant was a company that I founded in in my basement with uh a co-investor, like this guy I met on the Bitcoin Talk forums, Gareth Nelson, uh who was this autistic guy, spoke with a very well heavy Welsh accent. Never met him in real life and he He's He came over with this idea. Buying Bitcoin at the time was very hard. You have to like wire money into one of these very few exchanges. You have these exchanges modern day that we know now you can connect your your ACH or you can your debit card, your credit card, or Apple Pay, but you couldn't do any of that back then. You have to wire money. You'd You'd register for an account and they

give you like wire details and you have to wire money to there and then place like a market order and it wasn't like retail friendly. So, we saw a way to connect all the Bitcoin companies and all these exchanges to retail users and started company called BitInstant and it allowed a lot of people to like walk into their local bank, whether it was like a Bank of America, Wells Fargo, Chase, or walk into like a 7-Eleven, a Walmart, a CVS in the US and the UK. Um and a couple of other countries. And the process was a little bit like cumbersome. You had to go to the website first. We didn't have an app. There was no web app. Like this was early internet time still cuz it was like 2011. Yeah.

No smartphone saturation with it. Yeah, there's no smartphone saturation. You'd go to the website, you'd you'd type in your information, you'd you'd get like a a barcode, not even a QR code, like a barcode. And you'd go to the location and they'd scan it, you'd give them the money. But you'd have like this was pretty quick. That's what it looked like. You'd have the money or you can choose to actually buy Bitcoin from the website directly, like Bitcoin sent to your email address. So, you'd get in 20 minutes, you'd get an email saying you have 1.3 Bitcoin for your $20 purchase or whatever it was. Or some people bought 2,000 Bitcoin for a couple of hundred dollars. Yeah. And we also offer offered arbitrage between all the exchanges, which I'm surprised isn't a

business today. No one offers that. Like be able to hold balances on all the crypto exchanges at once and do some sort of arbitrage. Like no one like that's Tether's business, isn't it though? Yeah, I guess you can tether in and out of it, but there's still like, you know, it takes time. Mhm. To send to send transactions and get it confirmed in a in a exchange. You can front run a lot of different type of trades if you can have instant balances ever. So, Charlie, anyone anyone watching on YouTube, I guess can see this and podcast people are just going to have to listen, but I we've got the BitInstant website pulled up here. So, you basically go to the site, you've got pay from Mount Gox coupon, VouchX coupon, or BTC-e coupon. Pay to Mount Gox, Bitcoin to email, PayPal is on here, Bitstamp, VirWox, I don't know

what that is, or Bitcoin address. So, this was basically BitInstant was essentially the best and easiest way to get bit to get Bitcoin back then. Yeah, most people did the cash deposit option and would go to like a physical location and famously use like a red phone and they'd uh by able to buy Bitcoin, it would go into their wallet within like 20 minutes. And that was a good day. I would just add that it was super hard even when I joined by May 2013. People were like, "Oh, you know, why didn't you buy Bitcoin when it was $50?" Uh it was it was difficult. I mean, you know, the only other options like I think other than BitInstant was like people you would meet people on the street, you'd go to LocalBitcoins, you know, you could find some local dealer. I remember going like Yeah, Bitcoin meetups. These were

like local meetups where people would sell you coins. Coinbase was a a wallet then, right? Like they weren't even selling Bitcoin till late in 2013. They had a waitlist, you know, so and then if you were using one of these exchanges like the alternative to BitInstant would have been like you know, I remember funding BTC-e. So, like I would have gone onto this website, had this like sketchy third-party Russian payment processor, and it's like, "Oh, I'm going to send 5,000 bucks to like a website that I can't even read and like hope that it ends up on a financial exchange in Japan so I can buy this internet money." Like there's just, you know, You're lucky you didn't lose money on BTC-e. BTC-e was a crazy exchange that came back from the That's another story. That's a whole other thing, but yeah, that was uh Talking about an

exchange where like on the main homepage there was just a chat box where people were just like Yeah the troll box. That's another thing that that all exchanges had and I really truly miss the troll box cuz you can get really good trading alpha from the troll box. Every exchange had it. You had to have an account there and people would just post and it would just be like a rolling chat of like Yeah. I mean it sounds janky as all hell like right now like like saying it or calling it but So what were people Okay, so you get the Bitcoin, what were people doing with the Bitcoin? Did people want to cuz I would assume there's kind of two buckets of people with the Bitcoin or maybe three buckets. There's the like um there's the very technophile people who

just like want to participate in this like funky network that's kind of taking off. That's one bucket. There's another bucket maybe who could who wanted to do this for an investment purpose. And then there's another bucket who wanted to actually spend it on um uh That's a whole 'nother bucket of what they want to spend it on. There was a big narrative at the time. Maybe this digs a little bit into the Satoshi emails, right? Essentially because the network was small, it was it was free to send transactions. They basically free, right? So this this idea really kind of took hold of the payments were free, right? took fees seriously till later on. Well, yeah, it's funny actually from the emails that came out, the new Satoshi emails, you know, you can kind of see him in the background and he actually even takes steps to like reduce, you

know, the presence of fees within the app. So you know, we have this idea now that fees are super important for Bitcoin and that they're super important for the health of the network. I think that's all well reasoned, won't rehash that, but you know, essentially people the network was free and you know, there was this idea that Bitcoin would be competitive against credit cards. So you know essentially you know, where there was industries like porn or gambling, this idea that like, you know, Bitcoin could be electronic cash, right? You could go to these websites I pushed that narrative heavily. Every speech I gave pushed that narrative. I went to all all the conferences. You asked what 2012 was traveling to Europe, to China, gambling conferences, constantly traveling with Eric and Roger and all these different people. Like you said, Pete, the narrative was like we were going to

compete with the alternative financial system. It was free. Bitcoin was free. It always was free. It's still for the value that you get it's still kind of free cuz now you get a crazy secure network. Huh. Yeah, it was just a different mode of thought, right? So like the this is like something that I talk a lot about and like why I write about the history is I think people who come in as you were saying like who are new to Bitcoin or new to crypto, you know, every era sort of has a different flavor, you know, and I think like as we're learning about Bitcoin and cryptocurrencies as a whole, what you'll find is that every era sort of like has their own thesis and like they're kind of right about some things and they're kind of off about other things, right? And so the 2013 era was

really this idea that like you know, people thought Bitcoin was a payments network. They viewed it as essentially being a decentralized PayPal. That's kind of how it was colloquially referred to. That wasn't really how Satoshi referred to it, but again this was sort of came from people using it that way, right? That is how people were using it. And so the culture really was focused on merchant adoption. It was focused on people buying and selling goods. And so the bullish things like if you think about today like people would retweet like ETFs being bought, right? Like that's bullish today. You know, bullish back then would have been like Charlie standing in his Bitcoin booth next to the PayPal booth and like kind of giving them the finger because, you know, they were being the disruptive thing, right? So like there was a whole kind of culture around we're

going to outcompete the banks, we're going to outcompete PayPal, we're going to be the way commerce is conducted on the internet. And there was a huge other element to that which was like the Silk Road where essentially like, you know, not even like you know, gray market payments but straight up black market payments in a lot of respects of, you know people selling guns and weed and psychedelics. You know, this was really also the era of the internet with like WikiLeaks and you know, the Arab Spring and there was this idea the internet was really kind of like a political force. And I think Silk Road was like kind of Oh, that was a big narrative too. Great point. So, there was the Arab Spring happened in like it started in 2012, I think. And that was a big part of the narrative too because

the internet was being targeted by these countries and being shut down and bloggers were back then bloggers were the only way to, you know, bloggers and an early version of Twitter was the only way to get things out from what was happening in some of these places with the protests. They were shutting down the internet. The idea of that Bitcoin couldn't be differentiated from any other type of tra- traffic. And Pete, it's really good that you you brought that up because that was the first time we thought, "Hey, could Bitcoin be used for other things? Maybe data? Like maybe if you can't differentiate Bitcoin traffic, maybe you can't differentiate block Bitcoin data bit message, something. There was like things that were being worked on that

were trying to like already start to use Bitcoin for other things other than money. It was still very early. Yeah, I think like you have to remember like I always like to think about like the number of people in the network, right? So, like in 2010, 2009, if you're reading the Satoshi emails, like there's like 100 people there, right? So, by the time Charlie's in, like, you know, there's basically Bitcoin's like $30 or some businesses, it's maybe like 10,000 people. 2013, now we're talking about, you know, you that doubles and triples and you're at probably somewhere in the hundreds of thousands of Bitcoin users around the globe, right? Whereas today we're in the millions. So, there is this interesting kind of effect that I think we still see in Bitcoin and crypto where it's like the number of new participants come in and it it increases above the

level, you know, so the the the new people outnumber the old people. And they come with like a different idea and sometimes they're given a certain message about what Bitcoin or cryptocurrency should be and they sort of kind of define the narrative. So, there's this interesting kind of yin and yang between the cultures and I do think there's always like a friction, right? Like there are like things that we've learned in different eras and it's uh you know, that becomes messaging and And certain people get stuck on that messaging and they don't want to kind of learn about how things are progressing. So, that's the danger that I think about. It's It's definitely minority now. Like, what what mattered in the history A lot of people don't care as much as they used to. I think it's still so early though, man. I still think that we're

still learning like foundational stuff about what's happening. I feel like we're only like 3 or 4 years in, really, when you think about like the having cycle sort of being like, you know, epochs like our 1 year. I don't know. I sometimes I think though like How much have we really learned cumulatively? Charlie, take me into um I want to bring it back to BitInstant. So, Rizzo said uh you know, the exciting thing would be Charlie kind of giving the giving the bird to the to the PayPal booth. And I found this picture of you I think this is Erik Voorhees and um and Roger Ver with your BitInstant booth right next to a PayPal booth. So, maybe use this picture to tee off a conversation around like, okay, so Bit- BitInstant you started with this guy who you've never

met on the internet. And then somehow there's the Winklevoss twins get involved. Back then, the idea of disrupting money was still you'd be laughed out of the room. There was only the incumbents, which were PayPal, basically, and then you had the banks. So, that picture that you see there was the first Money 20/20 conference, which took place in May 2012. And the idea was like, okay, we're going to talk about what money's going to look like in 2020, called Money 2020. And it was just that room was all incumbents. It was no one knew. You couldn't disrupt money at all. There was no The concept of sending money from person to person didn't exist. It was so new. Even

sending wire transfers, sending your friend's money, you had to register for a PayPal account, add money to that, and then your other friends did too, and it was like a week to get money on and off that. You guys remember? So, it was like just no one no one else was disrupting money and I don't even know what PayPal was doing there. And um the idea was PayPal I think had just canceled our relationship with them. At the time they were allowing us to let people sell Bitcoin and withdraw into PayPal. And uh we were really pissed off. So Roger wrote an email and he said, "Look at this big money conference going on in Las Vegas.

Let's let's get a booth. Like let's tell them we want a booth right next to PayPal." And I was like, we looked at the prices and it was like ridiculously expensive. And I was like, "No way can we afford this. Roger, you're my only investor, so I don't think the Winklevoss twins were were involved yet at that time. I don't remember. That would have been like October 2012 probably, so maybe they would have just been in the conversation. Yeah. And so we could kind of like we're more advocating for for Bitcoin. Like you said, all the positive narratives that we were advocating for. And um all we could afford was that little like lamp post as you see. It had no chairs, no behind area. It was just that little

like desk. It was like a like an information desk. And it it had our logo BitInstant was super small, but it was all about Bitcoin. What was cool about it is I remember that day I met Jesse Powell came over uh who created Kraken. He came over. Jed McCaleb came over in his sweatpants. Uh I met him for the first time. And there were some other people. Actually met this famous lawyer. She's a very uh she's very well known and and hired all over the the Bitcoin community now. She's uh she came over me for the first time cuz I was on stage there and I was very firebrand.

Like Bitcoin's going to take over the world and Bitcoin's going to like end you know end the Fed and we're going to like completely take monetary policy out of the hands of the government and put it back in the hands of the people. You know, and there were obvious like government people on that stage. And she came over to me and she's like, you know, you need to tone down your rhetoric, young man. You're going to go to jail. Your rhetoric. And she was right. Like, I got arrested maybe like a year later or something, so. So, um okay, so tell me how Eric Voorhies got involved with BitInstant.

Roger Cuz Eric wasn't Eric a real estate sales guy in Dubai? Yeah, Eric was selling real estate in Dubai. He was like this brilliant person that just was the in doing the wrong thing because what he was brilliant in wasn't there was no money in it. There's no money in libertarianism, you know, uh writing back before Bitcoin. There were no there was no influencers. There were no followers, you know, you couldn't really monetize that. Podcasts didn't exist yet. So, Eric was kind of like just uh out there, and Roger met him. He had Roger had this knack of meeting of of some really brilliant people and bringing them all together.

And Roger um told me, you need you need some help. Hire this guy Eric. And I was like, you can't tell me what I can do with my company's budget. And he's like, well, I'm going to pay for him, and I'm going to he's going to be the chief marketing officer of BitInstant. So, then we ended up hiring So, he flew to New York, and we instantly became best friends. Like, instantly. We were more than just people that we worked together. We were we became best friends. He got an apartment in New York City. He introduced me to another one of his friends, Ira Miller, who became like another developer at BitInstant, like a number two, we badly needed. So, Roger was really instrumental in that. But, Eric started that pull away from me.

That he Eric and Roger used to joke that I was a statist. You know, cuz I grew up in a very conservative type of Jewish community. And uh Your your family was you guys grew up Orthodox, right? Very Orthodox, very like like in you know like and that means kind of like like they they believe that their way of of thinking or they their way of of following the religion is is only way. Anyone who doesn't follow their way is kind of like not on their level. It's not really a a good way to live. And Bitcoin, the community was like the anti that. It was a again, going back to like your contribution to the Bitcoin community is what your what your status is in the Bitcoin community. And uh so it was very easy to weed out the fake people and stuff like

that. Yeah. Uh it was actually kind of around the same months that I that I met Courtney at EVR. So, um going back to New York City. So, now we have New York City 2013, you had the BitInstant offices. It was the only place that that Bitcoin you could hang out. Uh Eric was there. We had like Bitcoin poker stuff going on. You got You guys started this club, right, Charlie? You guys started this My my friends from high school started this night club. And Eric and I and I think the got the got what my my friend from high school, Alex, who started it was looking to buy some Bitcoin. So, I told him, "I'll trade you some Bitcoin for like equity in the club." And then I made it I struck a good deal. And Eric Voorhees was like, "Well, I'll join in

on that deal." And Yifu Guo, who founded the first ASIC, was like, "Well, I'll join in on that deal, too." So, we all became night club owners like overnight of EVR. And the cool thing about it was that we got EVR to accept Bitcoin. That's that's probably like in the another if there's another picture you have of the New York Post. Uh there's a picture of the New York Post Bitcoin accepting at EVR. And that's actually Courtney doing the transaction. She did the first ever transaction at the And that's how we met. Uh she was doing that transaction at EVR right there.

There it is. you Is this you, Court? Oh, no. Oh my god. Yeah, I so my I I know I never went to EVR. I heard EVR was like all the Bitcoiners were hanging out there. Fred Wilson from Union Square Ventures I think that's David Waxman in that picture. It does look Is that Is that David Waxman? And that's Pinzi. Pinzi is the one that was doing the transaction. I Wow. So Okay so Blockchain info wallet, that was a wallet back then. It was the only wallet. long ago. Roger was like an owner in that wallet and those are kind of like like people like you were saying it was it was transactional. Like people would come in and spend like 10,000 Bitcoin on like a glass of, you know, like a bottle of champagne and it was beautiful because BitPay facilitated that transaction.

BitPay took almost no fees. Uh like less than 1%. Uh and then they instantly converted into dollars. But we you know, the club kept the Bitcoin and there were no chargebacks. Yeah, this says, "The fluctuations don't concern us because we're not holding it anyways. We're just using it as currency. I still get the same amount of money either way." Staff at E11even used tablets to pull up a service called BitPay, which functions like a credit card processor. All these people mentioned in this article like they were like you you just everyone's converted. That guy Gabe Sukenic. I don't know if you know Gabe. He works still works for for Ira Coin Vaults, which it's a Bitcoin company. You know, there are some of these Bitcoin companies that are dormant now. They just have Bitcoin

on their balance sheet. That's how they survived over the years. Like BitPay went out of business. So Roger Ver invested. He gets Eric Voorhees to come in. Did Barry Silbert Did you guys ever talk to Barry? Cuz I know Barry was also kind of getting things off the ground then. Did Barry ever invest? Did he Did you ever talk to back to New York. Yeah, so it's like if you were to imagine like Eric was the the the Jesus or Roger was the Jesus, but Eric was more was the more on the ground in New York. And then I was the this is how we're you're going to make money from it person.

And we would just go and orange pill these people. Uh Barry Silbert, the Winklevoss twins. And we would hand each other off like in the email threads. Like they would write these long-winded questions and I'd be like, "Eric, you handle these." Like and he would say, "Charlie, you handle these." And we would kind of tag team it. And um and there were all sorts of questions, from technology questions, which and then we're at the he handled more of the economic questions. And, um, we, you know, we had the guys like Matthew Mellon, who passed away, who was an early investor in Ripple and board member. Um, and, uh, and Barry Silbert, never forget, there was a coffee shop downstairs from our office in Flatiron District, and we would meet them meet him there every week.

And Barry doesn't, you know, for whatever, like, let's put everything that happened is happening now a completely aside, cuz that's crazy stuff. But what Barry did back then was really legitimize Bitcoin as an investment and asset class to a lot of VCs, like First Mark Capital and a lot of these early like people, he, you know, he had Second Market. And he was the first one doing this, like, you know, token like Yeah, Barry would've been a big deal, right? Like Barry would've been someone who was already on the cover of Bloomberg.

the first institutional player though. I've already seen this. Yeah, he was already like a well-known guy, cuz Second Market was essentially taught going back to like that internet narrative, right? Like his claim to fame was he, you know, Facebook was an illiquid stock for a long time. He created a market where people could essentially sell, like employees could sell stock on a secondary market. So, yeah, he was already like, you know, he had his Bloomberg cover, he had he had made his millions, established person, right? Very different than like kind of some of the other folks. And then the and then the Winklevoss twins come into this, and my my understanding is, Charlie, that, uh, they're on the beach in Ibiza. You have like a friend or family friend who's a dentist. He sees them on the beach in Ibiza, and he could This is the rumor story. I don't know if

it's true or not, but he he His dad was my His dad was my dentist. He gives them his chairs, basically. He gives them his chairs and says, "But wait, I'll give you my chairs in Ibiza if you take this call with my buddy back in New York, who's going to tell you about this thing called Bitcoin." And the Winklevoss twins are like, "I'll I'll take the call cuz I want the chairs in in Ibiza, cuz you can't get chairs in Ibiza." Is that Ben Mezrich did not have to elaborate on that story one bit. That is it is exactly the truth. Wow. David literally just called me out of the blue one day and I knew he was he was already David was committed to investing. Like in at the 1.5 million already. Along with Roger. Roger's going to put a little more money in. David's dad was my

dentist. We met at some like New York City tech fair. So it was already like a relationship there. We were part of the same Jewish community and like a couple of weeks later and he was on his honeymoon in Ibiza. Like he got married, went on his honeymoon. Called me and was like, "Why is David calling me?" He's like, "Charlie, I have Remember the Winklevoss like talk like slow. Remember the Remember the Winklevoss twins from from Facebook movie?" I'm like, "Yeah." He goes, "They're here with me right now convincing Bitcoin is the future." I was like, "All right." It's like, "Eric, get [ __ ] the office."

And like I got to put them on speaker and Eric was right there and we like fielded They came with very good questions. I think they may have heard about Bitcoin already to be honest. Or maybe I don't remember but they didn't They They're very smart. And then you and then you partied with them in New York and then they invested. They came to New York. Uh they came to New York. Uh they came to the office one night. I like I was like I'll never I don't know if we'll ever meet them ever again. So let's just straight like strategically have them meet us on like a Friday night at the office at like 5:00 so maybe we'll like whatever they're doing on a Friday night we'll hang out with them cuz they were celebrities. Yeah. They would have been in a different position than than Barry

though cuz I think like Barry was someone who had legitimacy as well whereas the Winklevoss were really trying to break in, right? Like Facebook was a big black eye for them in a lot of respects. Like they were, you know, trying They were looking for a way to get back into the, you know, glitz and glamour of the VC world, right? Cuz Mark They were kind of the villains in Mark Zuckerberg's story. The rift The rift between Barry and and Cameron and Tyler really started then actually. Like in the early days. It's going on right now, but it's that rift started over but instant actually because the Barry and and those guys wanted to invest in Cameron and Tyler just kind of came in at the last minute and it was a whole thing.

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That's harpie, h a r p i e .io/empire. You want it to be even easier, just click the link in the show notes. This episode is brought to you by Monad. Monad's thesis is simple. The EVM is here to stay, similar to JavaScript in web 2, but unfortunately, today's EVM lacks the high performance and the scalability that developers need to make certain applications possible. Monad addresses these concerns and these bottlenecks while preserving seamless EVM composability for application developers. There's a seamless transition to Monad as the Ethereum RPC API allows for really easy portability.

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Yeah, yeah. So, what um maybe switching gears for a second from BitInstant, what was the like kind of state of mining here? Um like was there a was there a mining industry? Like were there institute was there were there any companies doing mining? Like did were you guys mining? What did what did this look like? P knows better you know better than that. take the mining question. Um yeah, mining then was very much like a home affair, right? Like most people were mining with they hadn't really made the jump to ASICs yet, so this would be the specialized hardware that you have now. So, people were mining with GPUs and like there was essentially, you know, you people within their garages, people who had like extra rooms in their apartments. There's a great video of like Marshall Long like showing you how to make milk crate miners.

Uh there's actually a post that I dug up recently where like some guy, he had so many miners in his room that his mom found him cuz like he fainted, he had a heat stroke. Like he had to go to the hospital. It was so hot in his room, there were so many miners. And then he quit and sold all of his equipment on the internet. Uh so yeah, it was very much like a hobbyist effort. So, Yifu Guo, who I think, you know, I'm glad Charlie brought up cuz I think he's a unfortunately kind of forgotten kind of you know, mythic figure from that era. You know, he's the first one who commercializes the ASIC, right? And so I think Satoshi has some writings on this.

I think there was always foreseen that someone would make a chip that was just actually specialized for Bitcoin hash calculation. Yeah, what did Satoshi say about it? I didn't So, there's a post where uh if you're, you know, so now we're getting to the the lore of like the Laszlo's emails where, you know, essentially um you know, Satoshi Laszlo was the first one to mine with a GPU, right? So, he he figured out that rather than mine with his PC, he can actually take a graphics card, which is a bit of a higher processing capability and then actually retrofit it to mine uh Bitcoin and uh at that point uh Satoshi reached out to Laszlo and said, "Hey, you know, glad you're doing this, but you know, there's this gentleman's agreement now for people that like, you know, we should have as many people be able to join the

network, so you know, Satoshi kind of put the kibosh on that a little bit or at least like tried at him. Um but yeah, that was the first real step advance in mining. And then this would have been the next step advance, right? So, you would have had Now you had a dedicated machine. I think I tweeted about this machine recently where it was the first uh ASIC ever. And you know, at that point, that single machine probably could have mined one Bitcoin a day. So, sorry, one Bitcoin block. So, you would have had 25 Bitcoin per day that that machine was minting when it was added to the network cuz that's how powerful it was. Comparable to the GPUs, right? Cuz GPUs are essentially chips that were made for video gaming, they weren't made for hash calculations. And so, you know, Yifu found himself in an interesting

scenario. I'm actually wondering what color Charlie has on this because, you know, essentially he has the most powerful machine in the world for like mining. And then he had to figure out what what to do with it. Because, you know, he could have just sat there with his one machine and just dominated the network. But he he I think from what I recall from talking to him, like he wanted to decentralize Bitcoin. He like kind of felt this pressure to, you know, get these out there before the bad guys get them because, you know, essentially like had there been some malicious, you know, force that found it, there could have been something that happened. Yeah, Yifu sat in that corner in the office every day. He grew up like a couple blocks away from me in Brooklyn.

Like just so crazy coincidence that we shared, you know, instead of taking we should we would take the train to the city to the office every other day, but sometimes we would share like I would drive him. And that's the only reason I had that that first ASIC that you're showing in that video there is because I had a car. And uh he I don't know, what a crazy Was this Yifu in this video, Charlie? Yeah, he's right there in the beginning of it holding up his And and you guys were young. He he was like 23 at this time right? kid, my age. Exactly the same age. have been dropped out of college, I think, too. He was at NYU, maybe. And what And what happened to him now? So he Or or we skip.

Uh well, no, he did the right thing. Like I think Yifu is one of those guys who like um I don't know, Charlie, do you want to tell the story or I can No, no, go for it cuz I a lot of things happened and a lot of ends got closed while I was sitting in prison in like 2014 2015. Yeah, Yifu stayed around and contributed for a long time. I'd say probably until like '18 or '19, you know, he helped host the Bitcoin mailing list for a long time. Like he was a, you know, great contributor. But he while right too? What you say? He worked for a Yeah, he was at Kraken for a while, yep, yep. Uh but yeah, his So, you know, he basically again he found he created this miner, right? It was super powerful. And he had to figure out how to

commercialize it, right? So, we didn't know we didn't have the mining model you have now where essentially there's companies that make machines, they sell to other large vendors, or they mine with themselves. So, what you had in 2013, and Yifu really started this, was the direct-to-consumer mining rig model where you could like go to his website, you would pre-order like one to 10 rigs, like however you wanted. And there was this idea that like there would be like home mining or garage-based mining, right? So, his goal was to decentralize the network and to make a business off of that. The model proved absolutely horrible, and basically anyone who did it was totally destroyed cuz what would happen you'd have people, you know, when the ASIC went on sale, they spent like 75 to 90 Bitcoin like on the ASIC. And then, but

they're just pre-ordering it. And so, now like 2013 happens, the price goes from like $10 like up to $1,000, and you have people waiting for months, like, you know, 6 months, 7 months. And they were pre-mining all the machines, too. After companies were getting the machines in, and [ __ ] were setting up warehouses and Like the forums were just, you know, the forums were just You talk about like, you know, people want to talk about scams today. Yeah, like people were livid. Like you had class action lawsuits. And this is This is when it really started to get crazy. Scams were were a muck. Like you You're If you just stuck around, you had credibility. If you just didn't scam people and and just had a like a or involved in a circular economy of Bitcoin, you were a good person.

Well, but here's the thing as Yifu Well, like I would just add like an addendum on him is like, so where the other miners sort of failed and they went to bankruptcy court because they basically tried to like, you know, when this once they were failing, spread it out for as long as possible, Yifu saw it a bit early and he ensured that customers were refunded. They were actually refunded. And it was like such a controversial thing that he basically pressed his other founders, like, we need to get people back their Bitcoin, like, not their dollars. We need to give them their Bitcoin. He refunded the the customers, but through that, he was basically kicked out of Avalon. So, like, you know, Canaan is now a public company and he doesn't he never got like his share of those royalties.

story. Yeah, that's the sad part of the story, but like, you know, and I think it's interesting where it's like he really did the right thing if you think about people who like managed that situation like 20-year-old kid, huge company, you know, tons of irate customers. Breaks my [ __ ] heart because breaks my heart because he used to sit in the corner of that office and shake his head every VC meeting I had. The Winklevoss twins, uh David, Barry would come in. All these people, you know, our eventual investors.

Even like everyone except for Roger. Loved Roger, loved Eric. But anyone who wasn't a true Bitcoiner, and he could tell the difference. He he manly hated. And he was like, "Never take money from VCs." He's like, "Never take money from VCs. We we never do it. We should never do it. We do it all on our own." And he loved like Eric, you know, doing the the GLBSC with Satoshi Dice. And it was such an unfortunate thing that like doing the good thing by refunding people in their Bitcoin, he would be forced out of of the company and ended up Republican. He has no credit for that. It's like the saddest story because he saw it happen. And that's the tragedy.

He saw it happening and he couldn't was the most powerful Bitcoin miner in the world at that point that the photo was taken. Like he would have been single-handedly representing at least, you know, 5% of the network like in terms of hashing capacity. Like that one. these things away for free. The first dozen machines he he let us mine in the office, right? He didn't charge us for it. He Okay, actually he did. He I have a I actually found this email the other day. I'll save it for my book, but uh he charged us 608 Bitcoin. And it just covered the shipping cost.

god. From China. From China. So okay, so take us take us maybe a little Rizzo, maybe you can pull us into um All right, so that's like 2011, 2012, 2013. So, we've got like uh Peter Smith and I still don't fully understand the story where like Brian starts Coinbase looking for a co-founder. Originally, it's Peter Smith. Free speech covers this all. Uh so, no, that's uh so, that would have been a different founder. Yeah, Peter Smith was blockchain, which was later. This would have been uh Ben Reeves is the main name you're looking for. Sorry, I think you're talking about Peter Vestness, sorry. No, so okay, so take take us into 2013 cuz when I take it when I think about 2013, then you've got like okay, Bitstamp was like already there for like a year, Kraken was kind of already there for a year. Then you've got Coinbase

comes on the market. Yeah, BitPay was already there. Memory Dealers was also kind of selling some Bitcoin. Yeah, they give you your first big wave of uh sorry. It's the first wave of of like venture-backed companies as I think of it because YC does these deals with I think Coinbase and maybe blockchain.com, but then they was like the first YC guy who did the first Bitcoin in 2013. They had access. Yeah, so you really have Silicon Valley come in in 2013 and I would say like this around the my team Bitcoin clubs you know, this would have been like Bitcoin 2013, the conference in in San Jose. There's this kind of big mainstream moment where like Bitcoin really crosses over into like Silicon Valley and it's the hot Silicon Valley secret. So, you have like Balaji Srinivasan, Marc Andreessen, Chris Dixon,

you know, people who are now associated more with like kind of the general crypto movement today who kind of like, you know, uh start getting interested in Bitcoin and they start funding startups pretty aggressively, right? So, Bit Instant would have been funded at that point, but then Coinbase comes out and makes a $5 million round and then Ripple Labs comes out and gets $5 million to do, you know, to take Bitcoin's invention even further, quote unquote. I'm using quotes there, you can't see. Uh but yeah, there would have been essentially this culture clash, right? And it's interesting cuz like I would have joined CoinDesk in 2013. CoinDesk was itself like a Silicon Valley backed startup and essentially it was the first, you know, news outlet for we were then calling digital currency.

Uh and you know, the mode of the time really was and like this I don't think I've ever really maybe talked about this, but there was like a tacit like, "Hey, you should cover these new like Silicon Valley folks." and like kind of the old guard libertarian type people, you know, were sort of kind of quieted down a bit, right? Like there was kind of this idea that oh the ecosystem was like moving past, you know, this kind of early stage of like very heavy libertarianism, very heavy on like the anti-war stuff, very heavy on Silk Road and like the VCs were sort of coming in, but there was like a bit of a tacit sort of like, "Oh, well, let's we're going to clean this up, right? Like the we're now here and we're going to take everything."

The anarchist like VC like started to to hit butt heads right there. And it's funny cuz I was just showing this video of um this uh of Bitcoin 2013 and it it's it's a lot of it's what's striking to me is there's a lot of button-down shirts in the room and it it Okay, so this is the Coinbase booth and then the camera's going to turn a little. So get 0.01 Bitcoin for free. And that's Brian Armstrong Those are the CoinDesk those are the CoinDesk lanyards because that was the that was the launch of CoinDesk, yeah. And so Brian's in but Brian's in a suit here. Like Brian this is not the So you see Stefan who started We Use Coins, he's at the he's at the Ripple booth right now manning that. That's who that guy is.

Right there. Yep. Oh, yeah. Yeah, Stefan, yeah. So this is the start of CoinDesk here. So So CoinDesk going to mark the start of like CoinDesk, Coinbase, Ripple. There's this kind of like The Instant was there and Cameron and Tyler were manning my booth. So they were like the celebrities of the of the conference. And like for 6 months my single life task was putting on that conference. What you don't see is how small it was. We only took up like a corner of that whole [ __ ] room. It was like the size of a gymnasium. So it was just a large swath that was just like empty.

Well, I would add one point to that. That's interesting now given like the historical revisionism. Like is that there wasn't like a Bitcoin and crypto? Like there wasn't enough people for there to be like different cultures. Like there wasn't enough people to like hang out with. Sorry. Yeah. Look at the tagline. Sorry, I I just found a tweet that I posted in 2021 that says Yeah, there was no Bitcoin or crypto because everything that you can build on Bitcoin that no one really talked about yet. None of those company Even Coin Lab was kind of talking about butter coin.

It was all It was all like building with the blockchain. I think I don't even know if I would say that yet, but there was this like idea that there was people doing other experiments. Like I think like peak blockchain mania was like 15, like late 14 where I remember cuz I remember the first time I heard someone give a speech about blockchain was Vitalik Buterin in 14 when he launched Ethereum and he was like, "No, like it's the ball about the blockchain." I was like, "The blockchain? Like what is like Yeah, cuz we were writing about Bitcoin for payments, like companies were like writing things. Like the original model for CoinDesk was just like, "Oh, we're going to be TechCrunch for Bitcoin."

That's it. There wasn't like a greater, you know, we're going to like analyze all these like scientific proposals. Like you know, by 2017 I was like knee-deep in like, you know, reading 10 research uh you know, dissertations every [ __ ] week. But like back then it was like, "No, we're going to have a simple model. We're going to be TechCrunch for Bitcoin. We're just going to cover Bitcoin startups." And that sort of like complexity to the industry I think like really came later, right? Like I think 2013 it was still, you know, Bitcoin was mainstreaming for payments. And then some other people had interesting like experiments, but they weren't like maligned. Like you weren't like an outcast for like sort of experimenting with something else. It was just like that they were around, but they were like, you know, like Ripple was doing anything, yeah.

They were Yeah, they weren't commercial. They hadn't launched. Yeah, there wasn't really an idea that there would be this kind of like cryptocurrency ecosystem, like this is whole kind of expansion. I think there's two more phases from that. It's like the 15 to 16 private blockchain era and then there's the like 2017 like crypto explosion where like everything is a cryptocurrency and everybody and a dog has like an ICO. Yeah. I can't remember. Well, so here I'm going to I'm going to guide us back into this into this into the story for a second. So, take us into Okay, so 2013 market runs up from like 60 bucks to like a thousand dollars. 1,300. It was actually in 2013. You're right. Like even Mastercoin and Omni wasn't until late 2013. Yeah, I'm sure. Like after

that conference. So, Ted like forget Tether, but like the the the the first protocol that were colored coins that you have colored coins wasn't even proposed till after that that video that you showed. Like that's how early that stuff kind of was. Wow. Yeah. So, then 204 So, 2013 is a great year, right? Bitcoin rips from Like Well, there was a tremendous amount of pressure on the industry because you know, essentially like this is where like the regulatory conversation really enters the floor. Like so, there was a little bit in 2011 where you really have like the first kind of lawmakers come out and say like we need to regulate this. Like Silk Road is bad.

Well, it coincides with the with the price going up, right? Cuz so, the bit the Bitcoin price starts January 2013 at like $13 and runs up to 1,300. would say at that point like the industry is sort of like overwhelmed and ultimately kind of fails with Mt. Gox. Like where cash Yeah, our website was the everybody is offline. Like there's Right, industry is overwhelmed. Like the boat capsizes, right? Like by 2014 Yeah, what happened was Mt. Gox was the was the 99% source of liquidity. Every exchange was also getting their liquidity from Mt. Gox. I was getting my liquidity from Mt.

Gox and we were failing. And we were our website broke down. We shut down in in May of or June of 2013 because what happened was the the couple of things happened. FinCEN came out with this guidance. It was the first time the federal government, couple months after that conference, said Bitcoin is now not like airline miles or gift cards that you guys think it is. It's now money and you're going to be governed under money transmission, money service businesses. This is real now. All you Coinbase, you can't you're selling airline miles BitInstant, you're you're selling money.

And that fundamentally like overnight, my lawyers emailed and were like you got to shut down BitInstant. Cuz we were trying to like get the states at that point to give us these no action letters based on that we were selling gift cards type airline miles. So we were trying to like get the opposite of like a money transmitter license like a no action letter like you're you're kosher. And uh So not only that, but Mt. Gox was rehypothecating their Bitcoin. They were always running at a fractional reserve. So as demand was growing, Mt. Gox didn't have enough real Bitcoin as people want People started to realize that Mt. Gox was having withdrawal delays and people couldn't get Bitcoin. They started to withdraw. And the whole thing imploded by I would say like

Yeah, mid-2014 like April or 2014 Mt. Gox uh fully collapsed. Well, I would say like that one adding thing like that's kind of been scrubbed out is like there would have been like an extreme like lack of confidence even in the Bitcoin price high. So you went up to 1,300 but then Mt. Gox crashed. And the the real question I think of the time was like how much of that trading volume was even real because what we learned was essentially that Mt. Gox was like manipulating their own exchange in order to So essentially the story of Mt. Gox is like you know, they were really hacked back in like 2011. They essentially ran this fractional reserve exchange for years, kind of hid this and obfuscated it from users, and then eventually like you know, they basically were called on this. They had to shut down. Um so yeah, I think it's

interesting um uh that was really the moment where I think like the infrastructure was like so overwhelmed, but the question was like is Bitcoin even legit? Because like how can you trust this price history? How do you trust this price discovery? Or was it all fake? Like was it all Was it really, you know, 10 people and a dog like using a cell There was There was a bot in Mt. Gox that was buying Bitcoin. Buying Bitcoin on behalf of the company to try to slowly recover the gap. And the gap was like 400,000 Bitcoin. Yeah, it was like a significant amount.

As like the price of Bitcoin was going up, it was also buying up more Bitcoin. And this was the Willy This was the Willy bot, right? It's called the Willy bot or something. Yeah. And who uncov- Was it Did Selkis uncover it then? it, yeah. No, that's a So, the guy who uncovered Willy bot would have been the guy out of Japan. What's the guy who did like the background research on it? I can't remember. Wiz, yeah, Wiz. Okay. Yeah, Ryan Yeah, Ryan uh that's a He did break the Mt. Gox story. That is a thing that Ryan did. Ryan tweeted Why do you Why do you laugh at that, Reza? Uh because the way that that story was released has also been like kind of like scrubbed out, but it's like very important to understand cuz like Ryan didn't break the news, right? Like so,

what Ryan really did is that And again, we worked at I was one of the uh I was one of his um certifiers or whatever. Oh, really? Okay. Yeah, I remember I think I talked to you that night. I think I called you. Yeah, we did we talked that night. That was a crazy night. But anyway, like so, what Ryan did Hold on, this is important to understand cuz I also I often say that like the crash was like Ryan's fault. So, like so, I'm just going to push this out there. Yeah, in this situation it was. So, like at 6:00 p.m., he writes a blog and then he's And it what that blog says is like he's like I have evidence to like talking insolvent and I have sold all my Bitcoins. So, like So, he doesn't publish He doesn't publish the actual evidence. What he does is he just blogs

about it. So, it's like 6:00 p.m. I'm like trying to leave for work and I'm like oh my god like I've lost all my faith in Bitcoin. I sold all my Bitcoins. Yeah, he's done. And then so then the market just starts like teetering and like crashing. And people are like what's going on? Is like this real? Whatever. And then it isn't until like I want to say that I was up until like 1:00 in the morning where then he posted the real documents. And then the documents, and then there was the reporting. So, there wasn't like there was this like 7 hours of just like market in free fall cuz there wasn't any information. Like it was just like he's like, "Yeah, I found something bad. I've sold everything. [ __ ] all you. Like I'm out." He wanted he he wanted to confirm

the documents, I think. I mean And but they were real, and no one can get anyone in Mount Gox. I I saw that post. I sent him a tweet cuz he was anonymous at the time under two was a name. Yeah, he would two two bit idiot. Yeah, yeah. I messaged him and and and and he's publishing under Ryan Gold, I think. Ryan Gold, yeah. Maybe, but he was just two bit idiot. And he was um that was his name, two bit idiot. And he I sent him a message. I said, "Send me this document, and I have someone in Mount Gox." He sent me the document. And I I knew this guy Gonzaga gave Boucherie.

yeah, gave Boucherie, yeah. Uh was like like Mark's number two, and he sent me like two words. He goes, "It's real." [ __ ] I was [ __ ] Yeah, and then basically the market just cratered. I mean, I think it went back to like 400 bucks, and then that maybe it bounced up to like 600, but it was just yeah, it was pretty much carnage from there. And '14 was basically just like, you know, regulators basically coming out. You had like, you know, Karpeles is arrested, and he's like paraded in front of Japanese authorities, and he's just like He had to publicly apologize on national TV, and that was like rebroadcasted, and it was like the only news that like But then the the the the VCs basically at that point like dropped Bitcoin. Like it was like, you know, the overnight like the air was just sucked out of the room.

There was like no institutional support. Like, you know, you have guys like Chamath who before like, you know, they're in in coin SDMs on Twitter every day, just gone, ghosts, like never heard from again. Uh you know, there was this Ross got arrested around that time. Yeah, Ross was arrested. He was arrested. And weren't Charlie weren't you arrested around that time for later. Six months later. So, January 1st, 2014. you sharing that story? Yeah, absolutely. But by the I want to By the time I got it like the same day I got arrested was also the day that Vitalik got on stage and announced the Ethereum for the first time. So, to give like kind of historical context.

Uh The day you get arrested is when Ethereum announces Yeah, but there's no launch yet. It's just like a theoretical announcement. This is what we're going to build over the next couple of years. My name is Vitalik. I'm a writer for Bitcoin Magazine. This is what we're going to do. type of thing. But that like what Pete's talking about that was kind of the start like Ross getting arrested is Silk Road the the the implosion of Mt. Gox the the government FinCEN thing which basically effectively was a blanket ban on all American global Bitcoin businesses. And then you got China banning Bitcoin which was happening at the time.

couple months So, that started the bear market. That was the official start of the bear market. I shut down BitInstant, too. So, there was no way to support the Bitcoin price. I think it's funny when people ask you like how big was it back then? Like, you know, were they like there's this kind of idea that the new markets are somehow bigger, but like like think about some of these things. You had like geopolitical entry with like Bitcoin in Cyprus in the conversation. You had, you know, the an all-time high that was like very obscene at $1,000. You had, you know, major market failures like Mt. Gox would have been on the par of something like a Luna, you know, just like unthinkable, unheard of. Yeah. Uh so, there's a lot of analogies here and it's and it's and especially the backlash is like you know, very similar to like

maybe how people were feeling like after FTX, right? Like I think Mt. Gox and FTX the same feeling. Yeah, there was a lot of things, right? And you have like a mysterious kind of goofy like I don't know, shitty CEO guy who like doesn't seem like he should be doing this as a job, you know, and like there's sort of like the, you know, negative effects that take hold in the industry. But it was all consolidated, right? Cuz there was only one big there was only Bitcoin really that was the story, right? And so What it did was it reset Bitcoin a little bit back into it threw Bitcoin back into the crypto anarchy area era again.

I remember traveling to like Buenos Aires for La Bitcoin, La Bit Conf, which was a huge thing. It kind of pushed Bitcoin outside of the US in a way. Yeah. You would have had like an Amir Taaki and like Peter Todd would have been like a big force at that time, yeah. London, Amir Taaki, I saw him in London, is a great example. Uh there was a lot more like Bitcoin positive like it was the hangover. It was a hangover. It was a lot like what went wrong, what did we do wrong? There was a lot of like Well, and that really starts the block the block size wars really start at the end of 2014 with, you know, sort of Gavin kind of trying to, you know, Gavin really I think tries to start like a new forward direction for Bitcoin around this idea that we'll scale Bitcoin and

we'll work we'll work collaboratively to improve the technology and that that sort of really I think is the opening guns like the next era. Wait, before we go cuz that's a really crucial part of this. So before we go there, maybe close out this last year with Charlie your I'd love to Yeah. I mean, what if someone showed up at your house and they knock on your door and they're like, Charlie Shrem, Bitcoin guy, going to jail. So Bitcoin Bitcoin was was starting to like the price was going down, but there was still a lot of like leftover positive media attention. It was growing. Um there were some like good metrics and I was I got paid a lot of money to travel to uh to Amsterdam for a a Bitcoin conference.

It's traveling around, man. It was great. Just doing Bitcoin Foundation stuff full-time. I shut down BitInstant because the government made me, but we were like trying to get some money transmitter licenses and trying to get things going again. And um there was like positive I felt like there was some positivity, maybe. There was that first Bitcoin like 2014 conference that was taking place in early January 2014. So like to start off 2014 just right we're in this big Bitcoin conference the first major Bitcoin conference after in the US after Bitcoin 2013. So we were going to travel to that event and everything and we were traveling home from Amsterdam speaking Courtney and I were just dating

actually at the time and I got home I was at a I was doing my customs with my passport when you come back into the US at JFK Airport. And when I came back like as they were doing my passport like tons of federal agents like all surrounded me and everything and they like all escorted me over to both of us to like a back kind of jail within the airport and they put me in like a holding cell and they read me like you know my rights and everything and then they gave me my arrest warrant and I read what I was being arrested for and it was like crazy like five charges it was really crazy stuff like a lot of like money laundering, failure to file, like all these crazy suspicious activity reports and not having a money transmitter license, all these things.

They asked Courtney to like check go go get my bags for me and I had to claim his luggage off the conveyor belt. Yeah, they did that it was crazy and then so I got arrested I went through like a couple of days in the same place that Sam Bankman-Fried was in so when I saw that picture it kind of gave me the heebie-jeebies and then I did house arrest for um a couple of months actually a couple of months like a year right like solid eight months almost of house arrest from like the time that I get arrested to the time that I could actually go to prison. I plead guilty um but during the year of house arrest New York City was like a Bitcoin Mecca. It

was still awesome. There were so many proof of stake dinners. They were like things happening like the bear market was still happening but there were still things going on. There were still you know like businesses being built and investments happening and Ripple had launched like by this time when I was going to prison I didn't think I I really thought that the Bitcoin markets would come back. But from the time of the my arrest and even before, from the time of like Mount Gox imploding to the day I walked into jail, all the price did was just go down. From a high of 1,200 or 1,300 to when I walked in, it was like $158.

Like it was going to zero when I walked in. I I just about gave up on Bitcoin as a future for me walking in there. I was like, "All right, Charlie, just get through Actually made life easier in prison cuz I was just like, "I don't have to think about Bitcoin on the outside." And um Unless I'm telling you it's $200. So yeah, so later on as I'm in, Courtney's like telling me what the Bitcoin price, keeping me updated with all the news. A lot of people are like printing out the front page of like r/bitcoin, which was on Reddit, the place where everyone had hung out on Bitcoin pre-block size war.

You know, the block size war kind of broke that up. But um people were There was this guy Max Raskin who worked for the Wall Street Journal. Thankfully for him, he would like mail me like copies like of the Wall Street Journal once a month like every past 30-day copies of every month. I didn't know that story. Yeah, cuz a lot of people like people would send me money. Like I you know, cuz in prison you have to live on donations. So I Contrary to popular belief, I when I left prison, I had almost no money to my name. I had like $16,000 worth of Bitcoin the day I walked out, you know, so I had to restart from from scratch. I had no money between my lawyers and the $950,000 civil forfeiture that I had to pay back

to the government, which I paid, by the way, within the first 2 years of getting out because thanks to the 2017 bull market. Um but I had to restart from scratch everything again. Um but prison was was a complete bear market. But what was interesting was it was like I still have a box of stuff and I haven't reopened the box. We call my prison box. When Pete helps me write my book, finish this thing, then maybe we can open the box. But there's like letters of white papers in there. People who wrote like handwritten stuff like I remember when you came out, we did the first interview at CoinDesk. It was the upstairs loft, yeah. Oh, so that was so let's go back to you and Ryan. So you and Ryan were like the first people that really took me seriously and gave me a platform to

reestablish myself When when Charlie, when was this? In like March 2017 maybe. I'm I think it was earlier than that. I think it was 2015. Really? I think it was like late 20 It was like I was just out, so it was like 2016 maybe. 2016 maybe. 2016. 2016 we moved here, so. Yeah, cuz I think Oh, yeah, that would have been like New York CoinDesk office, so 16 maybe actually. And you went through a CoinDesk bear market, too. You were driving around a van for 2 years during that time when I was You went through your own proverbial prison kind of.

Uh not a prison, but uh yeah, I mean I was uh well, that was more of like a work remotely, you know, I was taking advantage of that. Me and my buddy bought an RV, we drove around. And you were like keeping CoinDesk running. Rizzo, how did um Rizzo, can we hear that story? Like how did So everyone Okay, everyone thinks of Today there's a big media space in crypto and there's all these podcasts and BlockWorks and CoinDesk and everyone else, but you know, back then it was really just uh our the our Bitcoin channel and then you guys were came up with Yeah, CoinDesk, I mean basically the whole industry like whittled down to nothing. Like I mean as Charlie was sort of saying, I would say by 15 it was like died. Yeah, everybody was out of business.

Everybody left or they like did something else. So you know, if you were in Bitcoin in 20 I I always say like the real bear market was like 15 and 16. Yeah. Like if you stuck through that, that was the worst of it cuz it was like you couldn't even say Bitcoin publicly. Like I remember going to like blockchain events in like New York and like Patrick Byrne would be the one the CEO of Overstock would be like the one guy who said Bitcoin and it would be like hushed in the room. And like if you were still involved in Bitcoin or crypto stuff it was like you had to wonder like what you were doing with your life. Like you know, it's like there people were there because like maybe you were still getting paid, but it's like you know, the primary like kind of narrative the industry was

really just like, you know, you had the block size war start. So like Bitcoin is just contention. It's just like warring factions. You know, it's like all these debates and they're like super esoteric. So you go from like covering you know, fun stuff like about startups raising money and that's like parties and then like, you know, nerds in a room like fighting over like whether, you know, the latency of like sending blocks like over the firewall in China means that the network will be less decentralized. And like the other thing is that like there's been this like post 17 era whitewashing around the the block size wars that it was this great like moral controversy, but like at the time it was not fought on moral grounds. Like the

Bitcoin core developers again were making arguments about like, oh well, internet bandwidth like is it going to be enough and we have to think about bandwidth and nodes have to be small. There wasn't any of this like stuff that we saw in 17 where there really is kind of like a you know, the UASF and like people running nodes and they're anti-startups. There's all these sort of like political things that are grafting on it. Like back then it's like a boring technical debate. Like you know, you're in a room with like 30 neckbeards that look like Jameson Lopp. Yeah, there was no there was no fanaticism. There was no like sides. I remember like reading about in prison in a prison email Roger Ver who was keeping me updated was like telling me, yeah, I'm going to Hong Kong about this New York agreement that we're going to have

about like I'm like, sounds great. I didn't know we had a problem with the tech of Bitcoin. Bitcoin wasn't even growing. There was no issue yet. It was like a foreseeable, you know, issue that ended up coming. But it didn't come yet. Yeah, it was pretty tough and like for me at CoinDesk like you know like CoinDesk would have been like me and another guy. Like I said like the entire state of like was it you and Stan? journalism. It was me and Stan, Mike McSweeney. He was editor of The Block, a Blockworks fine publication. Uh but yeah, so yeah, it was me and him and like essentially like I had moved out of New York. I moved down to like the Caribbean basically.

Like I I had spent most of 2014 driving around. I ended up moving down to like St. Thomas, like just rented an apartment. I remember like being like you know like essentially like the old CoinDesk entity was shutting down. We had done Consensus, which is a very famous conference. We went all in on this conference. We were going to make this big conference. It was going to be like the blockchain thing. We were going to like bring the businesses back together. We were going to restart things. We did it in New York. Jun Li and Wang, like you know, who's the architect of that, like forced the company to like you know do this big event. We all went pot committed on it. It was a huge success.

And then we turned around and we're like, "Oh [ __ ] we don't have the money to keep running CoinDesk. We have to shut down." So like Our original founder was this guy named Shakil Khan. He was this UK like VC investor. He was the one who kind of orange filled Silicon Valley. Got everybody in. And he's like, "Look, I don't want to run anymore. I'll give it to you guys if you want to run it or we can find a buyer." He's like, "If you don't want to continue it, I'll just shut it down." And I remember market selling like like with my CEO we like market sold 300 Bitcoin at like 200 bucks. Like just like a disgustingly low price. Like I liquidated the rest of the Bitcoin that the company had. And like yeah, basically like I remember being in uh you know, that and being in St.

Thomas. Like I was going out swimming in the ocean every morning. I was looking out at this amazing beach. And I remember, you know, I was writing about like Ripple white papers and lightning white papers. And I was like, "I can't do this. I got to do something with my life." And Ryan Selkis calls me up and he's like, "Hey bud, how you doing?" And I was like, "Well, not sure about my life." And he's like, "Well, look, DCG wants to buy CoinDesk. We're going to do it legit. You're going to come back to New York." Like I'm I'm at this like beautiful vista. And I'm like, "All right." It's like it was sort of like all right, one of those are you in or out or like you just fade away and you just end up like on a, you know, being a rum runner on

some like sort of weird Caribbean island. That was the fork in the road. So, then of course I went back to New York, you know, I met with Barry and those guys and like, you know, they essentially you know, they wanted to take over CoinDesk. They were going to do it legit. You know, we had a few other offers. There were other, you know, suitors at the time, Trace Mayer as well. But, you know, essentially this was like the recapitalization of CoinDesk into something that, you know, it is today. Yeah, Trace was rude. He's kind of dropped off, but yeah, that was and now, you know, like the cryptocurrency journalism space is, you know, vibrant and thriving and pretty necessary, but I think back then it was, you know, kept alive by just the will of

a couple people like Anthony. CoinDesk almost died because of the bear market and because of the event. I mean, effectively was insolvent, right? So, it did it did formally fail. You know, it was like a bit as a business. Um, and has failed since, right? And it was recently acquired by Bullish, right? So, I think um Oh, that's I remember that. Yeah. Yeah, so you know, it's been interesting to see it pass through the ages, but yeah, back then I mean, CoinDesk was super necessary, right? I mean, we were like during the block size wars one of the focal points for coverage. Like we were kind of I remember being in the meeting where like we had to decide whether we were going to cover Ethereum.

I actually made the argument that we had to cover People were mailing CoinDesk articles to me in prison. I probably have some printed out in that box. So, there's there might be some for me in there. Let's get into Let's get into the block size wars, Rizz. Can you kind of tee up this um I have to use the restroom when you tee that up really quick. I'm sorry. If we're going to talk It'll be a it'll be a nice analogous to what really happened where Charlie was away for the Yeah, so I mean, again, like the industry just kind of collapses and then Silicon Valley just kind of tunes out, right? It like Bitcoin is in, it's this hot thing, and then it's out. And then it's out in the way that Silicon Valley things are out where it's like you're like the Segway, You know, you're not a

thing that people talk about anymore. Uh so, you know, I think that the block size wars are really essentially, I think, the defining moment of Bitcoin history. And I think like to the extent that they've pretty much shaped the extent that you have a novel opinion about Bitcoin or cryptocurrencies as technologies, it was pretty much shaped by 2017. And 2017 is like probably the pivotal year, I would say, in the whole story where essentially Bitcoin goes through this great schism. There's this like intense clash about, you know, what Bitcoin should be, how should development should be prioritized, like what is the point and ethos of Bitcoin, uh and how should that be expressed in technology. And then the other side, you have really the free-for-all kind of cryptocurrency explosion where like it is literally like if you have a cat and a white

paper, you could have raised $100 million like, you know, money really just is falling from the skies for like every two-bit stupid project that you could even imagine. Uh and like that era, I think, is like it's uh hard to condense into any like meaningful um you know, uh you know, summary other than to say like two pretty expressly different cultures emerged. There was like a group of people who rallied around Bitcoin who basically, you know, had this idea that Bitcoin was launched in a certain way, it had certain properties by virtue of the way it was created, and those properties were unlikely to be recreated in any other cryptocurrencies. And then there was this other group that just wanted the freedom of expression and experimentation. And I I said something recently, I don't know if it'll resonate

with anybody, but I'll say it here, it's that I think it's interesting that like the cryptocurrency culture, I view them more as a culture, but they're often like misunderstood as like a technology sort of revolution, whereas I think Bitcoin is like more inherently a technology revolution that is like misunderstood as like a cultural group. Like there's a there's a disconnect there like where I think that the genesis of a lot of cryptocurrency projects, like I'd say Ethereum like pretty much in particular, it's like they really just wanted the space to do new things, and they didn't really much care about what those things were. So, like a good example would be that like, you know, why is Ethereum proof of stake? Well, Bitcoin was proof of work, so they picked something else to like experiment on it, right? There wasn't like a grand hierarchy of like, you

know, sophisticated ideas. Like, they were a cultural group that wanted separation. It wasn't until later that they even said like proof of stake, right? It was originally even proof of work for a long time. it was in the road map that there would be a switch. But, I think my point was essentially that like, the genesis of the crypto If you can think of the modern crypto movement is essentially this idea to like recreate or improve Bitcoin, you know, they essentially first established like a cultural separation. That happened. And then those two groups like began working on different technologies. So, I don't know. I I I think that if there is a Bitcoin and crypto currently, and though I I have serious questions about that cuz I think they're probably going to converge again in the not-too-distant future, like that was the genesis of the

and, right? Like, Bitcoin went one direction, crypto went the other direction. Uh and I think since then you've really had a balkanization. You have entirely two entirely different groups that don't understand each other in any real significant way. They are converging in a really big way. It's faster than you thought because there's a huge identity crisis happening with the Bitcoin VC funds. I work with a lot of them, and they don't even know how like they don't even know what their line is anymore because there's no such thing as a Bitcoin-only company now. Every All these Bitcoin L2s are building for ways to like scale and do different things and connect with other EVMs. And, you know, I look at dozens of pitches a day.

Uh and so, the only like Bitcoin-only Like, I if you look at some of these Bitcoin-only VC funds, I mean, Blockstream doesn't do anything. They only All these companies just hold Bitcoin on their balance sheet. That's really the only like Bitcoin-only would take the other side of that, Charlie. We're going to talk more about this with ordinals, but um which it will come at the That's not Bitcoin-only though because every ordinal project BRC-20 No, no, no. I I think there's actually a crisis happening with them. There's a crisis happening with crypto, what I'd call crypto VCs, because a lot of them refuse to invest in Bitcoin things.

They're basically, yeah. Yeah. A lot of them are basically saying like, Bitcoin is dead. I know dozens of these VC funds. I don't Anyways, let's I'm going to I'm going to punt. We're going to We're just going to save this conversation until the till the end of this. Um Rizzo, can you just like one more piece of info about the block size wars? Like, who versus like who versus who? What was the argument? What was like the argument on both sides? Like, why did the the team the team put quotes around the team? The team that won, why did they win? I don't know. That's tough. I don't think you can do that, and I think attempts to do that are pretty unhelpful. I think that there is a lot of historical revisionism around that. Why can't you do that? Why can't you say like big blockers versus

small blockers? Because the end result of the block size war was that the block size was increased. Like, so they calling the big blockers like the enemies of Bitcoin is like rather bizarre. There's a lot of these like very stupid like things that have like metastasized So, who's arguing So, what were the two There was nothing to do with even the block. Like, the whole even the word block size war came from like Jonathan Bier's book, maybe, from All right. So, if you Okay, if you are an employee of You're an employee of Blockstream, and you've never heard of the block size wars. You have no idea what we're talking about. Rizzo, give us the context here. Uh well, the context is that, you know, since the invention of Bitcoin in 2009, it's been unclear how Bitcoin would scale to handle a significant transaction volume, volume.

And therefore, it's unclear that any that any cryptocurrency can reach the sufficient scale to essentially handle like the entire global populace of transactions, right? So, initially like Bitcoin, you go back to reading the first responses to Satoshi. Like, some of the people are saying like, look, interesting that it works on a small scale, but we actually can't scale this up to handle millions and millions of participants. And I would say like very loosely, there was this one group that kind of wanted to scale the the and change and continue tinkering with the base layer of the Bitcoin protocol. And there was this other group that wanted to quote build extensive technologies that extend Bitcoin in other ways like the lightning network layer twos that would be built on top of Bitcoin. Loosely that was the schism.

And I think it's interesting that you've you've kind of seen a lot of the other cryptocurrency projects like pivot to the same kind of nomenclature. Like I I went to the ethereum.org the other day and I was like I read a sentence that like honestly shocked me. Like you know, I hadn't been on ethereum in like, you know, five years. And it was like we need to like keep the block size, you know, or keep our our network bandwidth small so that the network can be sufficiently decentralized. And I honestly I was I was shocked to actually even hear that because everything every technology choice that they have made should have made that abundantly clear that like that discussion was had five years ago by another group of people.

Anyways, so like you know there's this idea that essentially like we as a holistic group and this is what I think makes the unity, right? It's like everyone is working on the same problem. The problem is that none of these things in their current form scale the adequate size. Bitcoin has different properties than these other cryptocurrencies, Solana, Ethereum especially. That doesn't mean it can't have those properties. Right now it doesn't and maybe it won't ever and that's essentially the current that is the current debate. It's like what how those things will play out. I don't know how to summarize it other than And who was arguing for um So basically okay, so you the big blockers who wanted to modify Bitcoin to tell me what if I what I get right and what I get wrong here. You had the big

blockers who wanted to kind of modify the Bitcoin protocol to increase block capacity which would then allow you to process more transactions and the theory here is that they believe that you could essentially have cheaper and faster transactions which would make Bitcoin more scalable and which would um it would basically allow Bitcoin to compete on a global stage as maybe like an alternative payment system. And it was like again this payments narrative and stuff like that. So that was the big blockers. Small blockers wanted to kind of fight to keep the one what is it 1 megabyte size limit to kind of prioritize the the priority of the fundamental principles, right? But that that that categorization implies that both sides wanted the same thing, the same end result like he was saying.

And also there's a lot more to it, multiple layers. Yeah, I think there was actually three groups. I actually don't think there was really two groups. So wait, the story starts like you were saying you were saying with Gavin. The story starts with Gavin with He's the one who runs the thing he said. Satoshi when he walked when he left there was this alert key that is not doesn't have any power over anything, but it allows people to like send an alert an alert over the the Bitcoin software if there's a You could push a push a message to every client. And also the GitHub which was the the the place where all the code was kept at the time Satoshi maintained all the Bitcoin code and allowed for like Satoshi never used GitHub. That was

Gavin migrated it. And so like Satoshi allowed Gavin to like be this maintainer and and passed over. So kind of like, you know, handed the keys to to Gavin. But that should have never been the way it was really formulated and like like the Gavin was like this like accidental leader Well, okay, maybe I maybe I'll offer something else like open source like open source development has certain like cultural mores and expectations and one of them is essentially that like if you're the leader of an open source project, you can be like the benevolent dictator, right? So Linux was like kind of the original big open source project and it's led by a single and he directs other developers to like manage other repos, but essentially what he says goes and that's how the project moves

forward. We modeled it after that. We modeled it after that. Huh? We modeled it after that. We modeled like the way Bitcoin Right, and I would say the the interesting the the question that I think the block size wars really asked is like is could you be a non-government currency if there was some form of formal governance around Bitcoin up to and including any previous form of governance that has been established for an open source project. That is like probably the closest I could get to distilling like what the block size wars were actually about. Uh they were less about anything with technology and more about how would this thing be governed and how can you create a non-government money without creating a government? And I think this is still the big narrative with the other cryptocurrencies where a lot of them are functioning governments. Like they've

obfuscated in a lot of ways, but like, you know, uh Solana and Ethereum are for all intents and purposes functioning non-state governmental entities, you know. they have their own processes and they have their own Yeah mhm. But the So go So Gavin, he going back to that they they were all these proposals to like increase Well, going back to that, so there was also Craig Wright starting to come into the mix at this point trying to convince everyone that he was Satoshi, and he convinced Gavin that he was Satoshi falsely, which is another story for another time. And so Gavin then came out saying that he was convinced wrong. But at the time, people were scared that Gavin was compromised,

and they used that as an as a reason to remove Gavin's ability to work on Bitcoin altogether. So Gavin, who was handed off the keys, was effectively kicked out This this happened. Kicked out of Bitcoin. probably dispute that, but I'll I'll let you I'll He was the chief scientist of the foundation, like started the foundation, set up the whole system in which like BIPs were done and like how Bitcoin is run today. Whatever, that all happened, but the more layers to that was there were the the miners in China that wanted to put ASIC Boost and some other softwares to give themselves an edge, and they wanted to what they saw as was they If they took

the top off, and if they increased know if I believe that story. Do you believe that story? I don't even know Oh yeah, I would have I was I spoke to Jihan Wu himself. I I in the mix of Weren't they just Weren't they just commercializing like a product where you could just essentially pay to get like an extra efficiency from the miner? Like wasn't that like They were They were running ASIC Boost and making sure they wanted to prevent an update that allowed anyone to see which miners were running ASIC Boost. They were trying to run ASIC Boost covertly. All we were trying to do was say we want to make ASIC Boost over and you can research that part. That's where Bitmain and Jihan it all fell apart with them and he was the leader of the big blockers. There was a point where Jihan,

Bitmain, Roger, uh Craig Wright, Bitcoin Cash, Bitcoin Cash was one unit running Bitcoin Cash subreddit as the team on one side and everyone else on the other side. And that's where like and then they had like And their fundamental there was like a whole battle of like removing who's running the access of Bitcoin. And then it came down to like miners versus nodes. That's what really the argument was about. Who's more in charge? Miners versus nodes and it came down to like signaling for SegWit which was this whole technology and then there was all this crazy signaling done like miners started to signal where they would go.

Big block or this new technology that allowed for an increase in block weight instead of block size. And again it was all technology like arguments but it became political and I remember Greg Maxwell perfectly said to me, "Charlie, they're creating a political problem out of a tech political solution out of a technical problem." And he was so right. It was It was all politics and it was about the future of the governance and perceived power and control of Bitcoin with miners versus nodes because what happened was everyone had to plant a flag. Every single person. Every exchange said they're going to support this Bitcoin or they're going to support that Bitcoin software. And there was an a coming fork in the Bitcoin software that people were

signaling for and it almost like completely split Bitcoin but thankfully at the last minute everyone came together and it the whole thing. It's crazy stuff. There's so much to that story. It's I think there might be there might be too much for this one episode, but that's a good It's a good I think it's a good summation. I think I it really cuts to just how wild that time was and and why the cryptocurrency industry I would encourage people to go read about the block size. I think is there a book about the block size war? There is. Johnny Behr has written a book called the block size wars. Yeah. I would encourage people to go if uh to go read about the block size wars if they haven't. All right, so Rizzo, I'm going to we're we're going to skip we're going to skip 2017

until 2023 because I think a lot of people in the industry have lived through this. And actually I want Rizzo you to take us into the future. Um starting with basically your take around ordinals and um ordinals in the context of like this division between the Bitcoin crowd and the crypto crowd. And there's like two there's like two divisions here. There's the Bitcoin crowd and the crypto crowd. Then there's the old Bitcoin crowd and the new Bitcoin crowd. And you gave this I thought beautiful summation of what's happening on uh on the What Bitcoin Did podcast. I'd love to hear your I mean not to make you repeat yourself.

there's another tough one. Yeah, I mean I think for onset's of purposes there's currently a a divide between Bitcoin and cryptocurrency Bitcoin and crypto that is somewhat artificial and it somewhat rests on somewhat fictitious premises, right? And I think that you know, the big thing that ordinals and why it was so significant and this was a protocol that was released last January by this developer named Casey Rodarmor, but essentially allowed you to kind of embed arbitrary data uh on Bitcoin in different ways. Um essentially this multi-million dollar NFC market's springing up on the Bitcoin base chain. Uh I think that um you know, essentially that exposed uh you know, something that I think the cryptocurrency post-2017 people really hadn't been exposed to, which is that Bitcoin, you know, is a emergent software system. Uh

while it does have rules uh and those rules are enforced in certain way, there's nothing that prohibits you as an individual from inventing something new that would basically invalidate how those rules are perceived, right? So, I think that we saw this again late last year and now there's been like kind of a string of these advances where people who, you know, maybe are familiar with the what's going on in cryptocurrency land and they're finding new creative ways like previously like thought impossible to do previously thought impossible things on Bitcoin. And the two one of those were, you know, the first one was the ordinals and the second one would be BitVM, which is uh pretty new white paper that basically proved that uh you know, Turing completes complete smart contracts are possible on the Bitcoin base layer and

then from that the commercial application seems to be that we're headed towards this wave of kind of second layer uh type rollups uh that are going to be built on Bitcoin. So, that's the kind of the big VC chase right now is to commercialize that. But, I think the broader thing here is essentially like we've kind of schismed into two cultures working on two different things and I think ordinals and BitVM combined have sort of ruptured that. And essentially the disturbance in the force here is that it is really true that you know, anything is possible on Bitcoin provided that you have enough inventiveness in order to actually achieve it. That seems to be the new reality that people are pricing in and I think there's still a good amount of people in crypto land that have their head in the sand on this and there's a

good amount of people in the Bitcoin land uh that want to pretend that it hasn't happened. I think that's kind of the new to get left behind. I we'll we'll see, right? I think that you both are in the camp of ordinals, L2s on Bitcoin, put it putting putting things on Bitcoin is a good idea. My VC fund has made Well, again, we don't have any say, right? So, this is the thing is like Bitcoin is a permissionless system. So, it is an immaterial like what my view on it is. All I'm saying is this this is happening. This is act This is reality.

It is actually true that The most Rizz take I have ever I have ever heard. bullish on it. I We made like 17 investments in the last year and a half. We started in the in day one bear market realizing that this was the the the next narrative was going to be people building things to connect Bitcoin and crypto back together very simply. Rizz. super bullish on it. I think it's really happening in a positive way. I remember this hike that we went on. So, for listeners context, when we were um when we were So, So, COVID hits. Block 80% of Blockworks' revenue came from events and we you know we basically just had to figure out like how to pivot and what and what to do and we realized that there was this like missing need in the

market for better news. There was CoinDesk and The Block and Decrypt, but we thought we could do it better than any of them were doing and um So, I called Rizz. We didn't really know each other then and we went on this this like great hike in upstate New York and walked me through how to build a media company in crypto. Um and Uh you kind Yeah, you kind of laid out the whole model and you laid out how it works, but one of the takeaways from that conversation was you were into all of it. You were very like when you were building CoinDesk, you were into all of it and you got super burned out from the kind of VC VC chase for something new and you had like if there was anyone who left like uh not

disgusted with 2017, like 2017 was just like a disgusting thing to be a part of. Like I think if you were in the industry prior to that, you just watched people who like you know priorly had approached this like you know I I say I said this this summer. It's like uh you know Bitcoin was a science back then. It was a science. It was something we were doing. We were trying to learn about. And then it was just like you had this great rush of like people who came in and just like totally used that to exploit you know thousands of retail investors like on a level that like you know I think was gross. Like it was an objectively gross thing. Uh and I think that there is a lot of things that are objectively gross about the crypto apparatus like that has sprung out out

of that which is essentially, you know, you have VCs that kind of invest in projects uh for quick liquidity on on on exits and that they aren't really interested in actually adding to as I said like what is the great mystery here which is like how do we create a financial system that can scale to 8 billion people out of the tools that Satoshi left us. And I do think that there are people within the crypto space who can add to that. It's just that like you know, post '17 it was like the culture was like I mean again, you had people who like You need to be a VC because you've been telling me that also for a couple of years. And so what I did was I went out and I like out of this those 17 investments, only three are tokens. The

rest of them are pick and shovels building out the applications that will further this technology, the Satoshi roots. Like what's uh like what are the investments? Building out like uh tons of different like uh well, you go to Druid Ventures.com and and check out the portfolio. There's like They're all They're all listed there and everyone can check them out. Only three three are token decentralized like like hacker networks that allow people to do like real-time pen testing. Every question we ask is are like For example, you're seeing like this huge AI narrative and they're saying like you know, how do we build out technologies using the Satoshi tools to prevent AI from getting too centralized and not being able to like have a for example, proof of brain which Satoshi talked about, proof of

human verification. How do I know that I'm even talking to a human right now? I could be talking You could be my an AI bot. So there's there's a great applications. We ask ourselves but you're right. The only people that can do that are the purest, people like you and me. So we have to get back into the saddle and try to like help making sure the narratives are are being run the right way. So like writing that writing books, being a VC or doing everything to make sure things are being run. I mean I think there is something like about the token create arbitrary token creation though that like we went too far down that path. Like was a big scam. I think that and then what you're seeing on the Ethereum Solana side now, I think in a bit of their directionless is like this is like

how do you move forward when you know, essentially they aren't constrained by the same things that Bitcoin are that is, right? Bitcoin's constraints, I think, have been some of its biggest like, you know, its biggest advantages in many ways, right? You have this base layer that you know is sound and now we know is incorruptible despite you know, gross amounts of like human efforts to change it. Uh you don't have that level of assurance with other things. So, I think when you talk about ordinals or BVM, like it's like, "Okay, if you can build on Ethereum or you can build on Bitcoin." And now it's possible to build on Bitcoin, well, which which foundation are you going to choose? Are you going to build on something that you sure as [ __ ] is going to be there in a thousand years or you're going to build

on something that uh you know, maybe in two years or now they decide to change how the model works and it, you know, invalidates what you're doing or whatever, right? Like Bitcoin has this these certain qualities that I think are now appealing to the people in the crypto space and I think that's exciting. I don't Again, I don't know what percentage of the stuff that they're working on they can be ported over, right? Like there's certainly probably a lot of bad ideas that are going to get ported over, but I think we're again, if you look at it as like this is science, we're learning about it. I think this is like a important like thing to happen, which is these two groups coming together again.

Um I would maybe take a little bit of a different tack than Charlie where I'd say like I would like to see like, you know, I would not like to see arbitrary token creation come back in large volumes like on Bitcoin. I don't know if I can prevent that. That might actually just happen. going to be You're not going to see like token creation on Bitcoin. That's too soon. Well, you already are. Like the the You will, yeah. Let me take your back. ERC's are already here. Runes that. You're seeing like app crazy token projects that are launching connecting those things. You're You're definitely seeing a lot of that. But a lot of that is like short-term token crap.

The the stuff that's being built like with long-term VC investment, I think really is better than that. A lot of that that like short-term token crap, it still there. You're going to see that crap like BRC tokens that make no no matter no different. But there's some really cool things that allow for like revenue sharing tokens out there, security token potentially. Like there I think they'll be a huge if you look at RWA.XYZ real world assets.xyz already like couple of billion dollars is already locked up in these like, you know, between bonds, private credit, and and real estate being tokenized on the blockchain and there there's a huge

amount of that especially private credit. We've invested in a few different companies that are facilitating like private credit token issuance for accredited investor type things. There's a lot that you can do there. When it's you're right when it's not like token V you're talking about that time when like and it's still happening. have you seen bonds lately? I mean it's still like I don't know I would I would I mean the yeah the grift is alive and well. If you go to crypto rank, you can see it's it's crazy. how many doge coins like you know are still getting So zooming out zooming out for the from this and we'll start to kind of tie this whole conversation together and wrap this up is um when you guys think about you know, 10 Rizzo you've been in the industry for 11 years it sounds like and

Charlie 4 13 years um I guess what it like what are you guys happiest about and what do you got like when you look at how far we've come it must feel good to just see how far we've come and to play a role in that. Um and then what do you like man like this industry really really whiffed on this on this bucket. You want to go first or should I go? No, go for it. I don't even know my answer. I'm going to think about my answer. Yeah, I mean I think we really whiffed on the cultural divide. I think that's like something that I'm pretty adamant about. You know, it's probably outlived its usefulness, especially at a time I think where a lot of people are discovering Bitcoin.

did that though. It sucks. Uh, I don't know. That's a tough one. Um, what was the first question? What do I have What am I proud of? I mean, I think I'm glad that we uh well, I don't know. I don't know how much I feel like a participant in it, right? Like cuz I was essentially like on the sidelines as a journalist, right? I think that um I'm glad that we didn't ruin what Satoshi gave us and I'm hopeful that we will somehow figure out a way to, you know, uh ensure that like the people of the world can access the system in the way that he intended. I think that's that's something we have to kind of take forward with a a good degree of uh humility and like aspiration. Um, but I don't know. I don't think that we're essentially guaranteed that, right? I

think we've done a lot We've done a lot of very stupid things with what he gave us. So, I don't know. Expect more of that. The ETF is definitely scary with the ability to amass all the Bitcoin in the world and be able to just shut off liquidity overnight. Certainly eating a lot of stuff. Yeah, and I do think that that's that's an interesting schism, right? I think that the interest in the Bitcoin community like in some of the stuff the crypto-esque stuff that is self-custody, that is outside the state apparatus. There is, you know, I think if there was a critique of Bitcoin maximalism that I would allow is I think it became overly concerned with using the state to enforce its own ideology at some point.

And I think that was unhelpful and I'm glad we're moving past that. I don't think Satoshi predicted the Bitcoin price going up this fast as it did in short in short of a period of time. Do you think Do you think that's the case? Um, you know, I mean, one of the things with Satoshi is just that he was a project founder and I think project founders oftentimes are just trying to iterate towards success. Like I think the emails that came out last week are a great example of like how much Satoshi was willing to like kind of reposition or find different ways to get people interested in Bitcoin. I I like I kind of wonder how much he was really concerned with like the bigger picture stuff. Though, it's you know, as you look back, it's like there's so much he did in order to ensure that foundation.

Um but yeah, he had to act in order to like kind of get it launched. And I think that like, you know, what did he foresee? I mean, he says it pretty explicitly in the first, you know, email in the P2P foundation where he says, you know, all other ways of government currency operate this way. This is a new system. Right? Like, so I think he foresaw that the system could be that large for sure because, you know, his text suggests that, right? He didn't, you know, it's like not like he, you know, the chancellor on the bailout for banks, right? He could have just put like a you know, advertisement for McDonald's in the blockchain, you know. Yeah, true story.

Guys, good chat. Um Rizzo, I appreciate all the guidance over the years and Charlie, we didn't even talk about the our whole story working together with the Thank you for helping me start Thank you for essentially starting my podcast. Um I've been doing it now for 6 years, I guess almost 6 years this May. I got to tell Reed that we that you came on. Oh, how's he doing? Reed's doing great. He's our head of creative. He's been here He's long longest running employee of Blockworks. He's a good man. Yeah, he's a good man. All right.

But thank you so much for doing this show. It was a long one. It was good to see both of you. Yeah. It was fun and hopefully we'll toast to 100K soon, maybe. Indeed. Indeed. Thanks, Rizzo. Thanks, Charlie. Cort, good to see you. Everyone, Jason here. Thank you so much for watching today's episode. Wanted to take a quick second to thank today's title sponsor, Arbitrum. We know you are tired of on-chain experiences that have unaffordable fees and frustrating transaction speeds, and that's why we partnered with Arbitrum. You can experience frictionless trades, lightning speed, and lag-free transactions, all for pennies per transaction. Explore Arbitrum's expanding ecosystem at portal.arbitrum.io.

That's portal.arbitrum.io. See you for the next episode.