Episode Transcript
[00:00:00] Speaker A: The best, simplest, ultimate form of collateral is something that can instantly be claimed and sold at any time when the debtor fails to make their payments. A house can take months, even years to sell. Stocks too, have time restrictions, but bitcoin doesn't. Bitcoin is always in motion.
The best in bitcoin made Audible.
I am Guy Swan and this is Bitcoin Audible.
[00:00:45] Speaker B: What is up guys? Welcome back to Bitcoin Audible. I am Guy Swan, the guy who.
[00:00:50] Speaker A: Has read more about bitcoin than anybody else.
[00:00:53] Speaker B: You know, and we have got a, we're gonna do a read today. I thought about doing a guys take episode on this, but.
So Brains, I've been working with the Brains guys for a little bit and I'm. We're trying to wrap up a project because they have a couple, they have a handful of actually just fantastic resources.
[00:01:13] Speaker A: They've, they've written a bunch of little.
[00:01:15] Speaker B: Books on like the Bitcoin Miners Handbook.
[00:01:17] Speaker A: Bitcoin the Ultimate or Bitcoin is the.
[00:01:20] Speaker B: Ultimate Collateral and a couple of others that I've been working on in audio. These will be basically my final closeout audiobooks before I just kind of stop dedicating a ton of time specifically to that. But this one, which we have finished and I think it will be, it'll be available really soon, but I wanted.
[00:01:39] Speaker A: To give a little bit of a preview.
[00:01:41] Speaker B: And this, I just thought this, this one article, this is chapter four of the book, but it's called the Ultimate Collateral.
[00:01:49] Speaker A: And I just think this hits on the core argument or the major pieces for an insanely underappreciated aspect of bitcoin.
[00:02:02] Speaker B: As a fundamental money, as a sound, as a reserve asset, basically. And what you can actually pull off, what you can actually do with this.
[00:02:12] Speaker A: That is not possible with anything else.
[00:02:15] Speaker B: And out of everything that I've read on this, I thought this was probably the best breakdown of just that one idea. Not only from the whole, because the whole book is about this, but this one chapter I just thought broke down all the main elements and kind of like desirable characteristics and how bitcoin fits into that or how bitcoin fundamentally changes that in a way that is almost impossible to portray how valuable it is in that context.
Shout out to Leden I.O. for supporting my work and this show and also for their bitcoin backed loans. This is a way to get fiat out of your bitcoin without actually having.
[00:02:55] Speaker A: To sell it if the timing is.
[00:02:56] Speaker B: Wrong or you find yourself in a tight spot and you just need fiat and you don't want to have to sell your bitcoin and you know you can get it back or the investment is going to pay off better than an interest rate but you can't guarantee it will be better than your bitcoin. Using a company like Leden is a great way to hedge that and buy.
[00:03:12] Speaker A: Yourself a little time.
[00:03:13] Speaker B: Also PubKey app that's P u b k y app and I'll actually give.
[00:03:18] Speaker A: You the same thing I did in.
[00:03:19] Speaker B: The last episode is I want you.
[00:03:21] Speaker A: To download pubkey ring their app, make an ID real quick and then go and log in with pubkey app because.
[00:03:28] Speaker B: This is one of a set of.
[00:03:29] Speaker A: Tools that they have created to re decentralize the web.
[00:03:33] Speaker B: Then get yourself a pair of nightshades from Chroma they are at getchroma co you got a 10% discount with code. Bitcoin audible nightshades are blue light blocking and green light blocking glasses so that if you're working on screens late at night.
[00:03:47] Speaker A: Oh man, again, again I'm working on.
[00:03:49] Speaker B: It and I need to have them on. I'm telling you, this slot reminds me to put these on about half the time. And then lastly, the HRF and Their Financial Freedom Report is one of my go to newsletters for staying up to date on not only the financial oppression.
[00:04:03] Speaker A: And the fight from a legal and jurisdictional standpoint, but the tools the tools.
[00:04:09] Speaker B: To Fight for Financial freedom. I constantly hear about things that I had not run into in any other situation and I find it on the Freedom Report. They are an incredible resource and also a awesome organization. They do great work and I hugely appreciate their support.
With that, it's time to get into today's read. Again, we are reading this will be.
[00:04:31] Speaker A: Chapter four pulled from Bitcoin the Ultimate Collateral, and it is titled Bitcoin is the Ultimate Collateral.
Lenders Want security.
Lenders prefer to have something behind their loans. It adds a security blanket that protects the agreement. Basically, any type of legal agreement will carry some type of guarantee. Anything with value can serve as collateral.
Some examples might be a house, a car, a boat, cash, shares of stock, precious metals, art, jewelry, anything that may require a significant amount of money to purchase.
If the lender sees you have something valuable, they'll be more trusting that you can repay your loan. They may even offer better terms too.
Obviously, the big risk here is that if the loan is defaulted, the collateral goes with it.
Generally speaking, the lender would rather have their loan paid back in full, so they'll make several attempts to receive their payments prior to seizing any collateral. As discussed last chapter, it can be quite frustrating to physically collect collateral, especially when a bad debtor knows it's going to be claimed. There are downsides to every one of those options for collateral. A house again can be damaged, difficult to maintain, difficult to resell, and obviously cannot be moved. A car's most reliable feature is its ability to drastically lose its original value. A car also can be difficult to track down in the event of a default. A boat similarly loses value at a rapid pace. They can also be damaged, even sunk, further adding risk as a collateral. When out on the water, the only constant is unpredictability.
Boats are certainly not the best form of collateral.
Boats are dangerous too. I actually lost my Bitcoin private keys.
[00:06:29] Speaker B: In a boating accident.
[00:06:30] Speaker A: Feel free to join me at the next Braiins Boating Accident Support meeting held Tuesday nights at 7pm CET. Christian Chepsar, Brains Chief of Propaganda, tragically suffered a boating accident with the video posted on X Cash seems like a simple, reliable option, but also it will constantly lose its value over time.
Inflation wrecks the value of cash, especially when the inflation rate grows. The more inflation grows, the less purchasing power you have over time, so a small percentage difference actually makes a drastic impact over an extended period of time.
Cash always becomes less and less valuable over time due to inflation, a key factor in our society.
Loss of collateral value paired with interest rates are not a good match.
Shares of stock seem like a great option, however, when a famous CEO has a public liquidation price, that may lead to price manipulation and in turn a lack of market faith in the future price growth.
Precious metals like gold or silver are a common option, though they are not very portable due to their weight and size. They are also easily hidden, which could lead to some problems when collecting on the collateral. These are historically strong stores of value, so in the right setting they are probably the best option of the ones listed.
Art and jewelry are easily lost or damaged and are subject to the risk of price volatility.
[00:08:00] Speaker B: A painting is only worth how much.
[00:08:02] Speaker A: Someone will pay for it. Centuries of art and jewelry theft may also weaken their viability as collateral.
The best, simplest, ultimate form of collateral is something that can instantly be claimed and sold at any time when the debtor fails to make their payments. A house can take months, even years to sell. Stocks too have time restrictions, but bitcoin doesn't. Bitcoin is always in motion.
In his Post, X user orybates1895 points out with the graphic on the last page that bitcoin has had more trading hours than the stock market since President Nixon took the US off the gold standard. Bitcoin is convertible into cash at any time, on any date.
Bitcoin is a Technology in the first chapter, we discussed how Bitcoin is the best asset ever created.
Remember, Bitcoin is Bitcoin is also a technology.
Anybody can use it anywhere at any time. It is digital, fungible, portable and verifiable. If it's properly used as collateral on a loan, it is remarkably easy to liquidate. It's impossible to damage a Bitcoin when dealing with collateral. It requires trust. First, you trust that the debtor will pay back the loan in full, and you'll never have to worry about liquidating them in the event that happens. You trust that the defaulted debtor will freely give up their collateral if it was not already secured before the loan started.
Finally, if you do end up securing the collateral and claiming it, you have to trust that it will retain the value it originally had.
Don't trust Verify When Bitcoin is secured in escrow in a multisig wallet, it functions as the greatest collateral ever.
It will not need to be claimed, and there is no worry that what you receive won't be what you agreed to collateralize in the first place.
Additionally, there is no concern that the Bitcoin will be spent, changed, or anything since it can't be moved.
What is a multisig wallet though?
Origins of Multisig Written by Brian Kubelis, Chief Strategy Officer at Onramp Bitcoin Onramp Bitcoin specializes in multi institutional multisig custody for individuals, institutions and companies that hold Bitcoin.
Multisig, or short for multi signature, is a foundational feature of the Bitcoin protocol that requires multiple private keys to authorize a transaction rather than relying on a single key.
Simply put, if you send your Bitcoin to a friend from your mobile app wallet, you just need one approval, your own. For more security. There are setups where you need approval of two or more friends in order to send funds from your wallet. This setup is ideal for those with massive amounts of Bitcoin, typically large companies who want their funds to be as secure as possible.
When multisig was introduced in Bitcoin's original protocol design through its native scripting language, this functionality was not easily accessible in early implementations.
The breakthrough for practical use came through several key BIP's or Bitcoin improvement proposals. BIP 11 in 2011 proposed the formalization of multisig transactions, specifying how multiple private keys can be used in combination to authorize a transaction. This created a framework for enhanced security, but its implementation remained complex.
BIP 13 from 2012 introduced pay to script hash, or P2SH, an innovation that abstracted away the complexities of multisig by allowing users to send funds to a script hash rather than a more cumbersome multisig address.
BIP16 in 2012 refined P2SH, further enabling users to create multisig wallets without the need to manually interact with complex scripts, thereby broadening its usability.
These BIPs collectively transformed multisig into a widely accessible and practical security tool, allowing for enhanced control, risk distribution, and asset protection in Bitcoin ownership. At the core of multisig's functionality is the M structure, which requires a subset m of a total number of private keys n to authorize a transaction.
For example, in a two of three multisig wallet, three private keys are distributed, but only two are needed to approve a transaction. This structure enhances both security and usability, providing redundancy in the case of key loss while preventing any single party from gaining unilateral control over the funds.
It supports various configurations such as corporate governance, shared custody arrangements, and decentralized escrow systems, making it adaptable for diverse Bitcoin custody needs.
Bitcoin's Unique custodial Properties As a digital bearer instrument, Bitcoin presents both opportunities and challenges in terms of asset custody. Unlike traditional financial assets, where transaction reversals.
[00:13:40] Speaker B: Or error corrections are possible through financial.
[00:13:43] Speaker A: Intermediaries, Bitcoin transactions are immutable once confirmed on the blockchain.
This makes effective custody a critical issue. If Bitcoins are lost or stolen due to mismanagement or security breaches, there is no recourse for recovery.
This immutability distinguishes Bitcoin from physical bearer assets like gold, which rely on physical security measures such as safes or vaults. Bitcoin being digital requires cryptographic security to protect private keys and prevent unauthorized access.
Effective private key management, whether through hardware, wallets, software wallets, or multisig configurations, is essential for safeguarding Bitcoin from theft or loss.
Eliminating single points of failure Single signature wallets concentrate risk by relying on one private key. If that key is compromised or lost, the entire Bitcoin balance is at risk.
Multisig, by contrast, introduces fault tolerance by requiring multiple keys to authorize a transaction, thus reducing the risk of theft or loss due to a single point of failure.
Multisig allows for the distribution of control among multiple parties, requiring agreement from a quorum of signers before a transaction can be executed this model is particularly effective in reducing the risks posed by a single entity's security failure or malfeasance.
Furthermore, Bitcoin's digital nature uniquely allows for a level of collaborative oversight and security that physical assets cannot achieve. Reflecting the decentralized ethos embedded in the protocol, Multisig represents a powerful tool for distributing counterparty risk and increasing security.
Its open source interoperable standard allows users to configure multisig in different ways, whether holding all keys themselves, sharing keys with trusted parties, or distributing keys across institutions. This flexibility enables Bitcoin holders to implement customized security models tailored to their specific needs.
Onramp's Multi Institution Custody Model at my firm Onramp, we've pioneered a multi institution, multisig custody model that builds upon Bitcoin's native security features. Our model distributes keys across three independent entities chosen by the clients, including different geolocations and jurisdictions, minimizing counterparty risk while eliminating any single point of failure. No single institution has a unilateral control over the client's assets, ensuring a balanced distribution of authority and responsibility.
This structure is designed to protect client assets while significantly reducing the risk of key mismanagement or loss.
In this model, clients are freed from the complexities of managing private keys themselves, thus reducing their technical burden and eliminating a single point of failure. At the same time, they retain ultimate control over their funds, as the institutions in the multisig quorum cannot move assets without the client's explicit direction.
This innovative approach balances security with usability, aligning the interests of all parties while safeguarding client assets.
Our multi institution, multisig solution marks a significant advancement in Bitcoin custody, expanding the power and accessibility of multisig arrangements. By distributing control across independent entities, we align incentives for security, transparency, and fiduciary responsibility.
Bitcoin's auditable nature ensures that all custodial actions are transparent, fostering trust while discouraging malpractice.
This security is important in making Bitcoin the ultimate collateral. Without it, there is considerably more risk and trust in the collateral process.
When it is locked, there is no way it can be sent to someone else, spent or lost.
Brian Cubellas, Chief Strategy Officer on Ramp Bitcoin When Bitcoiners call Bitcoin the most secure asset ever, multisig is one of the key reasons a Bitcoin recipient does not even need to verify when a transaction goes through. The miners and nodes do that for us.
Growth Collateralized Bitcoin more often than not appreciates in value since its start in 2009.
Nothing has gotten more valuable. In 2010, Bitcoin literally was worth pennies. The return on investment from holding Bitcoin in 2010 is roughly 90 million percent.
90 million percent with two commas, not every bitcoin holder can boast those types of gains. In fact, very few, if any, can.
Still, anybody who has held bitcoin for over four years is in profit.
This book does not offer inclinations of bitcoin surging that much anytime soon, but it sure would be nice. It may happen eventually, but it's impossible to predict.
Still, bitcoin has carried a compound annual growth rate of about 167% since its inception.
For comparison, Gold's CAGR is 5% since 2010.
The S&P 500's is 13%. A lender would love to use an asset that grows 13% a year as collateral. Imagine multiplying that number by over 10 and combining that result with a strict limit in supply.
Once they realize that, all they'll see is orange.
So there is an asset that performs better than any other, can be sent anywhere at any time, and has no risk of being damaged, stolen or hidden when serving as collateral.
How can you do it?
[00:20:09] Speaker B: All right, that's the end of the chapter. And like I said, I thought they hit like some really, really good points on this and this is absolutely something we're going to be unpacking in more depth.
And obviously the entire book will be available pretty soon and it's going to be available for free. I think you'll be able to purchase, donate or something with it as well. But the Brains team is pretty awesome. They've literally just put all this work together. They've written multiple books and are trying to make all of these resources available to everybody.
[00:20:38] Speaker A: And there will be an audiobook for it in full read by yours truly.
[00:20:42] Speaker B: So stay tuned. I'll actually update the description of this episode when we actually fully release it, so there will be a link right down in the description because I know it's going to be really soon. I'm not 100% sure on the the.
[00:20:54] Speaker A: Day that it will be available, but.
[00:20:56] Speaker B: I'm a bit rushed on time so I don't have I can't really get into a guy's take, but we will absolutely be revisiting this relatively soon and.
[00:21:07] Speaker A: Maybe even have the Brains Team on.
[00:21:08] Speaker B: And some of the authors who helped out with this book because I just love this idea and I think it is one of the most underappreciated aspects of just how Revolutionarily revolutionary. Bitcoin is from.
From a direction that is typically not the focus. Like everybody's like, it's going to be, you know, sound money for the world. It's going to be we've layers and payments and all of this stuff. And that's all great because there's a protocol and it's going to scale very.
[00:21:37] Speaker A: Similarly to the Internet.
[00:21:38] Speaker B: We're going to have layered and stacks and all this stuff.
[00:21:41] Speaker A: It's.
[00:21:41] Speaker B: I do agree and I love talking about that, but I just.
Sometimes all of that tends to take.
[00:21:49] Speaker A: Away from the conversation of what bitcoin.
[00:21:52] Speaker B: Is right now and how unbelievably valuable.
[00:21:56] Speaker A: And powerful it is and how unmatched it is by anything else in the market, simply in its current form. Exactly as designed before we have even completed all of these layers and all.
[00:22:10] Speaker B: Of the infrastructure and all of the.
[00:22:12] Speaker A: Liquidity needed to have a global peer.
[00:22:14] Speaker B: To peer cash and many layered payments and financial infrastructure. So again, we're coming back to this. A shout out to Leden IO to Synonym and their Pub key app, that's.
[00:22:26] Speaker A: P U B K Y dot app to Chroma for red light health and.
[00:22:31] Speaker B: My blue light blocking classes so I can sit here on the screen and not feel like I'm hurting myself. And the amazing HRF and their financial freedom newsletter for supporting this show.
[00:22:40] Speaker A: And thank you all for sharing this out, for leaving a review on Apple.
[00:22:45] Speaker B: Or Google podcasts, honestly, anywhere that actually makes a huge difference and you know, sharing this out with other people, that is the only way that this show has ever grown. You guys have shared it, talked about it, reviewed it. That's the only reason anybody knows about this. So thank you all, thank you so much. Shout out to the audionauts and all the boosters and sats streamers on Fountain. You guys are legends and I will catch you all on the next episode of Bitcoin Audible. Until then, everybody, that's my two cents.
There's always a story. It's all stories, really.
[00:23:35] Speaker A: The sun coming up every day is a story.
[00:23:38] Speaker B: Everything's got a story in it. Change the story, change the world.
[00:23:43] Speaker A: Terry Pratchett, A Hat full of sky.
