COIN TALK is produced in partnership with Medium and hosted by Aaron Lammer and Jay Caspian Kang. Press “Listen to the story” above to play the episode. (You can also subscribe on Apple Podcasts, Google Play, download the MP3, or email us at hi@cointalk.show)

Show Notes

  • Coinbase’s volume is in the toilet and maybe we don’t really need exchanges?
  • When your choice of bank is Apple (er, Goldman Sachs) vs. Bitcoin
  • Satoshis are pretty cool


Aaron Lammer: The exchanges are all broke.

Jay Kang: Yeah.

Aaron Lammer: Maybe not broke but on a broke path.

Jay Kang: Yeah, it really does feel like the things that people would suspect are happening. This past week, the curtain was pulled back on all of them, and we all saw that they’re just people shuffling a very small amount of money around. It’s like an M.C. Escher drawing where you just have [inaudible 00:02:27] people running off to different places and try to pay out people, and yeah, it was a little distressing.

Aaron Lammer: Well I think generally we’ve attributed a lot of the broke ass-ness of exchanges to either fraud or hacking, and that’s been the historical narrative of exchanges, but … Okay, I want to call out things that we’ve gotten wrong on previous episodes [crosstalk 00:02:54] so that we can correct the record.

So I think early on I said, “If I could sit at any of these chairs at the table, I would want to be a miner or an exchange because these people are making money when Bitcoin’s high, they’re making money when Bitcoin’s low. They’re just printing money, basically. They’re bear market proof.” That was totally wrong and a stupid thing to think, and what I didn’t realize was that with Bitcoin is low, not only has everyone lost their shirt, but no one’s really buying or selling. There’s no volume. There’s no real need for an exchange in a situation like this.

Exchanges thrive on new customers and existing customers trading, and it seems like neither of those things are really happening right now.

Jay Kang: Yeah, okay, so let’s look back and think about other types of exchanges where the thing that you said is true where the price and the public interest doesn’t really affect the margins, so that is probably true in some way in the stock market, right? Like where a place like E-Trade that charges some commission per trade. If the stock market tanks and people are selling their stocks, they still get that commission, and then some people will be coming back in when it’s low to try and catch a wave up, right?

So, you would assume that given that that is true, and I’m sure that there is some fluctuation in outcome and in volume in the stock market, I don’t think it would be anywhere close to what has happened in crypto though.

Aaron Lammer: Well, I think there’s a huge fundamental difference about like an E-Trade stock kind of thing, and it maybe speaks to the difference between the historical legacy financial system and the new world order here which is people have had a pretty strong track record of not really abandoning the stock market. People abandon specific stocks, and people move from more risky investments to safer investments, but generally people are parking their money somewhere in the E-Trade universe.

Jay Kang: Sure because either you say, “Wow, General Electric is dead. However, people will always need a microwave, and people will always watch NBC or whatever, and this is a low price, and I want to buy back in,” or you say, “Hey, the next General Electric is Amazon or something like that, and Amazon has basically made everybody else capitulate, so I’m going to buy Amazon.”

There’s always some narrative that you can follow, and Bitcoin, that was true for a little while, right, because you could say, “Man, Bitcoin’s price is kind of static, and this Ethereum thing is going crazy, and I kind of like smart contracts, so I’m going to buy Ethereum. Oh, wow, Ripple is 12 cents. I’m going to buy Ripple.”

Aaron Lammer: Yeah. Someone’s loss is someone else’s gain.

Jay Kang: Sure. But what doesn’t happen in the stock market really outside of massive, massive crashes is where the whole thing gets wiped out and everyone loses faith in everything and there’s nowhere to go.

Aaron Lammer: I mean, that may have happened. I’m not a historian. This maybe happened in like 1929 or something that people pulled a lot of money just out of the system. Generally the narrative we hear in America at least is that there’s more money trying to get into the system than the system even can really deal with. People are inventing these new forms of investments, trenches of real estate like loans, all these crazy financial instruments, literally because people will buy anything within this market.

I thought that that would be true about crypto, but I think right now we’re experiencing the true crypto winter, which is the no one gives a shit winter, where no one’s buying, no new people are showing up, and anyone who’s an existing customer is like, “Uh, I’m just going to hold.” Check. Check, check, check, check, check.

Jay Kang: Mt. Gox started as a, as we all know, it started as an exchange to trade Magic: The Gathering cards, right?

Aaron Lammer: Yes, which will be our pivot with this show at the bottom.

Jay Kang: Like I said, there are a lot of people who were into Magic: The Gathering, but its real peak I would say was probably when we were in high school in the late ’90s, early 2000s.

Aaron Lammer: I think that was the peak of mainstream acceptance, and then after that it became gamers playing it.

Jay Kang: I agree, but in terms of random people playing and buying packs, that was it.

Aaron Lammer: Yeah, my parents were aware of Magic: The Gathering [crosstalk 00:07:13].

Jay Kang: Yeah, like you could go to Target and buy Magic cards for example.

Aaron Lammer: They were reaching baseball cards in cultural ubiquity.

Jay Kang: Exactly. Sure. Baseball cards are a great example, too, where it’s just like at some point nobody gave a shit anymore.

Aaron Lammer: Yeah, except people who are like professional dealers.

Jay Kang: Yeah. And I think that’s sort of what crypto is facing right now in terms of this where it’s not like there are a bunch of people who are still trying to think about ways to make money in the crypto space and they’re speculating on something new. It’s just that nobody cares anymore, which is not good for this podcast. However …

Aaron Lammer: It’s okay. We can downgrade our own mag.

Jay Kang: Of course the exchanges are going to get hurt by that because-

Aaron Lammer: It’s not our fault.

Jay Kang: It’s not our fault. No. Although, we did start this podcast right at the beginning of the winter.

Aaron Lammer: Yeah. I mean, sometimes our friend Ledger Status talks about bottom things, like this is what happens at the bottom. I feel like us starting this podcast is top things.

Jay Kang: Top things, yeah.

The only thought I have about this really is that what crypto needs to do to get out of this is show some sort of value, and it’s not about the public getting really excited about it. You only really need a handful of people to get excited about it to try, at least keep it constant so it doesn’t completely disappear. And I think that that will probably happen, but at this point, I think most people, if you ask people on the street who have maybe read three articles about crypto, they would say that it’s a fad that’s over now, and it turned out to be totally worthless. I don’t think they would be like, “Oh, it got pumped up too much and then it crashed, and it was too much too soon.” They just wouldn’t have that level of explanation about it, and that’s what I think is bad.

Aaron Lammer: Well, I see it more through the user experience lens, which is where I see a lot of this stuff, which is it doesn’t seem like it can grow until it has some sort of a user experience that’s fun and useful and interesting and viral, and [crosstalk 00:09:17].

Jay Kang: That’s what I’m saying in terms of some worth.

Aaron Lammer: Same. Same. Yeah.

Jay Kang: Some worth, you know?

Aaron Lammer: The interesting thing here is that there’s a bunch of competing forces that are all heating up right now that you would actually think would bring the Bitcoin kettle to a simmer. Payments, right? We have a … Did you watch the Apple hoo-ha yesterday?

Jay Kang: No.

Aaron Lammer: I don’t know. Why did I even ask that?

Jay Kang: Why would I watch that?

Aaron Lammer: Have you ever watched an Apple Keynote? No.

Jay Kang: No.

Aaron Lammer: No.

Jay Kang: No. I watched … My viewing habits have really, really, really degenerated into a strange place. I watch people play-

Aaron Lammer: You’re just watching people play Stardew Valley all day.

Jay Kang: Not Stardew Valley, but yeah, I just watch people play video games all day on Twitch.

Aaron Lammer: Right. So, while you were watching Twitch, I was watching the Apple Keynote.

Jay Kang: I was definitely watching Twitch while the Apple Keynote was going on.

Aaron Lammer: And they announced three things. They announced a subscription news service, which we should just not talk about because it’ll just turn on our terrible media critic hats.

Jay Kang: I don’t know anything about it.

Aaron Lammer: They announced a subscription video game service that actually seems pretty fun and maybe would get rid of some of these free to play-

Jay Kang: Is it through Apple TV?

Aaron Lammer: Through iOS, so it’ll be on like everything.

Jay Kang: Okay.

Aaron Lammer: Called Apple Arcade, and they announced a payments system in which you’ll be able to actually have a credit card with Apple Pay, and I think it’s backed by Goldman Sachs.

Jay Kang: What is Apple going to do about … How are they going to do these games because you can’t really play first person shooters on Macs because the [crosstalk 00:10:50].

Aaron Lammer: It’s a totally … It’s not like servicing the hardcore PC gaming market. It’s for like casual iPhone games.

Jay Kang: But those things are generally free.

Aaron Lammer: They’re competing against the freemium free to play market.

Jay Kang: Good luck. Okay. I mean, I guess I could just [crosstalk 00:11:06].

Aaron Lammer: I would like it. [crosstalk 00:11:07]. If they would just have a bunch of exclusive, cool games I could play on my phone, and I don’t have to deal with like, “Oh, you hit the point where you have to pay more money to make it go faster.” I think we were trying to short the market for those kind of games because they’re terrible and people are not happy about them.

Jay Kang: Yeah, I guess. I don’t know. As someone who is deeply ensconced in the PC gaming world … Blizzard tried to make Overwatch, which is a massive, massive game, they tried to make it for the Apple, and they couldn’t. They were just like, “These computers can’t handle it.”

Aaron Lammer: This is not even for the desktop. These are like … It’s called Apple Arcade. It’s for arcade games.

Jay Kang: Why would you pay a $10 monthly fee for that though?

Aaron Lammer: Well, they haven’t announced the price yet.

Jay Kang: Oh. I’d pay $3 a month for that.

Aaron Lammer: What I think is more likely is you’d pay like $10 or $20 a month for their TV, game and music service.

Jay Kang: Oh, they’d bundle it.

Aaron Lammer: That’s where I see it going.

Jay Kang: So, their innovation is to basically just be like the cable company.

Aaron Lammer: Pretty much. Yeah. So, their payment thing, I’m not going to say their payment thing is revolutionary, but clearly everyone is circling around maybe you don’t need a bank account, maybe you don’t need a credit card; it could all live in your phone. And that’s kind of where we thought Bitcoin was going to check in, and I do think that Bitcoin and Lightning will be competitors there, but that version of Bitcoin is the least dependent on exchanges. That is the version of Bitcoin that eventually I think the exchanges just fall by the wayside.

In the future where you’re frictionlessly using Bitcoin on your phone, I don’t think you log on to like what used to be known as GDAX and put in bid orders and that kind of thing. I think your Bitcoin comes to you a lot more like it does in the Cash App, which doesn’t really feel like an exchange.

Jay Kang: Okay, I have a question for you.

Aaron Lammer: Yeah.

Jay Kang: You and I have gotten some tips, thank you very much, through our-

Aaron Lammer: Oh, shout outs to the tippers out there.

Jay Kang: Tip me. Right?

Aaron Lammer: We have literally hundreds of thousands of Satoshis.

Jay Kang: It’s about $25, so thank you.

Aaron Lammer: Yeah.

Jay Kang: So, that’s what we have. It was very easy to get, right?

Aaron Lammer: Well, it wasn’t that easy because I gave the wrong address out on the show actually.

Jay Kang: Okay, but either way, outside of our own incompetence, it’s not a hard system.

Aaron Lammer: Can I give the correct address now?

Jay Kang: Yes.

Aaron Lammer: It’s tippin, T-I-P-P-I-N, .me/@CoinTalkShow.

Jay Kang: Okay, great.

Aaron Lammer: Send us a tip.

Jay Kang: Did we get any questions?

Aaron Lammer: I think there’s some messages in the message field. I’ll read those.

Jay Kang: Okay. So, that wasn’t hard, right? And you and I know how to do a few things in crypto. How do you think the Bitcoin community will educate the public on these types of things and that they’re not that hard anymore? Like that it can work. What is the best way for them to put that message out to the public because right now … I think this is your view as a crypto moderate, that that type of stuff is really important and that they should get off some of the messaging about the Bitcoin standard and hyperbitcoinization and Ludwig von Mises. How would you do it?

Aaron Lammer: All taxes are slavery.

Jay Kang: Yeah, exactly. Madeleine Albright would not exist if Bitcoin happened. How would you do it? What do you think the first step is here?

Aaron Lammer: Well, I think the first step is to create an experience that’s so desirable that people are sharing it with other people and people are like, “Oh, I want to go to that party,” and it’s like, “Oh, you have to do this one little thing, but it’s actually really simple.” I think creating something where you have to have it, right? That was how the iPhone felt at a certain point in time where it was like there was things you could only do-

Jay Kang: Venmo.

Aaron Lammer: … on the iPhone. Venmo, right?

Jay Kang: I remember the first six months where my friends had Venmo, and this was back in the time when I would go to dinner with them, and it made it a lot easier. I mean, I’m not really like a split the check guy. I’m always just like, “I’ll pick it up, or you pick it up,” but that’s a choice. Some people split the check and it’s fine, but it made it so much easier to do all that stuff, and people were treating it like a fun social network.

Aaron Lammer: And everyone encounters a situation eventually where they need to settle up some money, even if you pick up the check usually. It’s like you rent a house on Airbnb or something like that. It comes up.

Jay Kang: Or you bet $200 on Tottenham.

Aaron Lammer: Jay demands that you bet him in a pitch and putt golf game.

Yeah, so it comes up, right? And I don’t know what that killer feature is for Bitcoin. Tippin.me, certainly cool. Me and you were talking about doing a Patreon last week. I saw some company is doing crypto Patreons. That’s one I could see potentially working, like a cyclical payment or something like that, but I think it’s more likely that you will get an app for some other purpose, and it will have a crypto tab that you want to unlock.

That’s how the Cash App feels right now. You use the Cash App, great with US dollars, but it also has a Bitcoin wallet inside it, and basically it’s nothing to move money from the US dollar side to the Bitcoin side.

Jay Kang: So, okay, the fun of crypto so far is all locked in memes and speculation, right? This is me totally spit balling here, but what if you have one of these things where you can choose to pay with crypto or you can choose to pay with US dollars, but it’s all pegged to the US dollar? And so you have a Bitcoin wallet, and you have to make the choice between whether or not to pay with Bitcoin or to pay with a US dollar, and you can be like, “Wow, I got a real discount back then because I paid with crypto, or I don’t want to pay with crypto because I think it’s going to go up.”

That’s one step, right? Outside of that, I just don’t know what we’re talking about because you and I have discussed this to death but video game purchasing systems. It’s just swapping out money for crypto. It’s not something that deals with the fun of crypto, so what is something that you think could actually trigger that?

Aaron Lammer: Well, I do think that that’s a little bit of US dollar privilege there, which is like-

Jay Kang: US dollar privilege. Aaron, don’t turn this is into a social justice warrior podcast.

Aaron Lammer: Which is to say the US dollar is one of the best currencies out there, so the incentive for us to go off the US dollar is low. It’s accepted all over the world pretty easily, it’s easy to trade, it’s not subject to hyperinflation. In some ways I think the bigger decision isn’t what you use to spend your money, but it’s what you use to save your money, and I think that mass bitcoinization will happen when people start looking at their savings accounts and going, “I’m going to go half in Bitcoin and half in my native currency.”

Jay Kang: But why would they? That’s a huge step.

Aaron Lammer: Because Bitcoin is safer.

Jay Kang: Oh, you mean like in other countries.

Aaron Lammer: In other countries, yeah. Yeah. And people living within America who have roots in multiple countries. Someone who is an immigrant who still has ties to their native country, right? Sending money back home to their family; that’s a great use case for Bitcoin. Maybe for them the dollar’s fine, but Bitcoin makes more sense to send home because their home currency is not stable.

Jay Kang: What is the-

Aaron Lammer: And it’s also anonymous if you’re avoiding taxes.

Jay Kang: What’s the stability it needs to reach for that to be true?

Aaron Lammer: That’s … I mean, these are really hard questions. I feel like almost every point there’s a counterpoint. The counterpoint of if that happens Bitcoin’s going to go way up, well then you shouldn’t spend Bitcoin. Some of these weird contradictions almost feel like they’re maybe cooked into the design of Bitcoin.

Jay Kang: I think that … So, Joe Weisenthal, our friend at Bloomberg, did an interview with a guy, and he was essentially arguing against Bitcoin because it’s corruption free and censorship proof form of currency, and he said that’s bad. I still think that the pathway is not necessarily through fun but through paranoia or justified paranoia about privacy and that if you right now could tell me or you that instead of using American Express and having every single transaction tracked and where our credit card company knows where we are at all parts of the world, where our phone knows where we are at all parts of the world, if we could swap that out for an Ethereum-based phone, like a cryptocurrency payment system that was not traceable, what percentage of your money would you put into that?

Aaron Lammer: I would think about putting a lot of my money into something like that. I mean, when you think about these alternatives, it’s like, “Oh, Venmo, Apple Goldman Sachs Pay.”

Jay Kang: It’s all the same fucking thing.

Aaron Lammer: It’s all … You’re not going to get out of the American technological industrial complex. [crosstalk 00:20:40]. I’m going to tell you right now, I have a cash card for Square Cash, I have an Amazon credit card, and I have Apple Pay, which will soon be an Apple credit card.

Jay Kang: Good OPSEC.

Aaron Lammer: Yeah. What I’m seeing out there is that the big technology companies realize that anonymous mobile payments are the next frontier, it’s the next product for … Can you believe … I thought my title for the last episode, Marktoshi Zuckermoto, I thought I would get some laughs with that. Nothing. Just crickets.

Jay Kang: It’s pretty funny.

Aaron Lammer: Okay, thank you.

Jay Kang: Yeah, I enjoyed it.

Aaron Lammer: I thought maybe my radar was off on that one.

So, everyone’s realizing that the last thing to steal was Snapchat, the next thing to steal is KakaoTalk with crypto payments or a WhatsApp payment layer or whatever, and all that stuff, I take it seriously. I think we made clear in the last episode that we actually take Facebook Coin pretty seriously. I think that the emerging decision since people spend all of their money online already is going to be like do you want to do that in Apple, Amazon, Facebook world or do you want to do it in some sort of an autonomous way? And I don’t believe that some other startup is going to come up and undermine Apple, Amazon and Google. They would just buy it. Venmo was bought by PayPal. Anyone who gets a real user base is going to get bought.

Jay Kang: WhatsApp was bought by Facebook.

Aaron Lammer: Yeah, so and especially in the payment space where you can just tack it on an existing product, I just don’t see the way out of this surveillance panopticon without something that’s not a company.

Jay Kang: Yeah. No, and I think that’s what they need to focus on. I mean they being the decentralized whatever.

Aaron Lammer: Okay, so where does that leave the exchanges though. I was looking at Coinbase. I’m sorry if these figures are wrong, but I read that Coinbase, at its low during this winter, is doing 6% of the volume it did at the top.

So, Coinbase was talking about an IPO definitely less than a year ago or people [crosstalk 00:22:55]. For people who are familiar with the growth dynamics, the startup, going from 100% to 6% is not a strong move directly before an IPO.

Jay Kang: Do you think like even Napster is down 94% from the peak?

Aaron Lammer: I mean, all the altcoins are, so it makes sense.

Jay Kang: So, I mean like Napster, the music service.

Aaron Lammer: Oh, I think it’s down permanently.

Jay Kang: All right. But I would not be surprised if there was still like 1% of people who are still downloading MP3s in some foreign country.

Aaron Lammer: This is a contradiction also between Bitcoin orthodoxy, which is don’t panic and HODL, and the needs of being a growth startup are like panic! Don’t HODL! Just do something! Buy! Sell! Come on Coinbase!

Bithumb, our favorite Korean exchange, just laid off 50% of its staff. Kraken laid off a bunch of their staff. I can also just sense a feeling of boredom from the exchanges. Like Jesse Powell from Kraken, who we’ve criticized on this show, and Brian Armstrong from Coinbase, who we’ve criticized on this show, both of them were getting deep into the analytics of the Quadriga fraud. They’re both … Like I think Jesse Powell did a six part podcast series talking about it, and they’ve both extended significant resources into researching. I think Jesse Powell offered $100,000 as a bounty for something. That sounds to me like two bored people who are not about to like IPO.

Jay Kang: They’re all pivoting their companies to Bitcoin podcast companies.

Aaron Lammer: Yo, stay off our corner.

Jay Kang: Yeah, or buy Coin Talk.

Aaron Lammer: So, I guess what I’m feeling like is I don’t know if there’s a road out for this, and I don’t know as much about the mining side because it’s shadowy-er, and you don’t have to publicize when you lay people off of a Chinese Bitcoin mining factory, but I do know that Bitmain canceled its IPO and is reconsidering.

All of these feel like companies that are themselves top things.

Jay Kang: Okay, well, all right. Here’s my counter to that. They were all preparing to go to IPO, right?

Aaron Lammer: Yeah.

Jay Kang: And obviously you can’t go to IPO in this market.

Aaron Lammer: No.

Jay Kang: Most of their employees were there to IPO, right? So, they have huge marketing teams. I bet they had a guy making videos for their Twitter feed and stuff like that, right?

Aaron Lammer: Sure.

Jay Kang: They have like new business people who are just on the payroll to help them IPO. They have to … I mean, I have some experience with this with Vice, and Vice was trying to sell, and they built a cable channel, and it wasn’t because they thought that the cable channel was a great idea. It’s an asset that they hired people to do that they could go to Disney and be like, “Hey, we have real estate in the cable market, and we have these shows.” That’s what they were all doing going IPO.

Aaron Lammer: And probably a lot of engineers who were scaling the exchanges to handle massive traffic, which they failed when they actually had that traffic.

Jay Kang: Yeah, but those people at least serve some function on the actual exchange, right?

Aaron Lammer: Sure.

Jay Kang: They have-

Aaron Lammer: Although they’re trying to do things that they don’t need to do anymore because they’re not getting that kind of traffic on the exchange.

Jay Kang: Yeah, exactly. Like, “Man, if we ever hit X capacity again,” be like, “I don’t think that’s going to be problem. Good luck in the job market. You’re a great employee.” That’s not … All those people are gone now. I bet that’s what it is, and I don’t know if that means the exchanges themselves are financially struggling or if they just don’t need to have those people on board.

Now, does that fundamentally change your point? No, obviously not. I’m just saying I don’t know if the layoffs are a big indication.

Aaron Lammer: I don’t think that the layoffs mean that they’re about to close up shop, but the 6% of the volume-

Jay Kang: No, that’s the problem.

Aaron Lammer: Yeah. It feels a little bit to me like someone was running a nightclub and they were like, “Man, this place used to be packed! What’s wrong? Is the music not as good? Are the drinks not as good?” And it’s just like people aren’t nightclubbing.

Jay Kang: I bet MySpace is down about that. Don’t you think? Down 94%.

Aaron Lammer: Probably more than that.

Jay Kang: You think?

Aaron Lammer: Yeah. Probably more than that I would think. From the top? From its peak?

Jay Kang: Well, from its peak, yeah. But still, it is that type of fall.

Aaron Lammer: Well, look, startups are based on this idea of hockey stick growth where you start snowballing, you hit a point where you’re just growing exponentially, and they have to be based on how they raise money because you can’t live forever on VC money. You have to IPO or make money or do something eventually, and I think that some of those dynamics work both directions, which is once the hockey stick growth stops, the minute you’re not growing that face, you’re falling very quickly.

Jay Kang: What do you think … You know more about this world than I do.

Aaron Lammer: Not really, but I do purport to.

Jay Kang: You’re the one that we say knows more about this world than I do. How do you think Coinbase investors are feeling right now?

Aaron Lammer: I think that they would project everything as good. They’re like, “No problem.” [crosstalk 00:28:16]. How do I think they really feel?

Jay Kang: In their hearts.

Aaron Lammer: I think that they still feel like they have a pretty good hand insofar as I think they’re more or less like Bitcoin HODLers. Look, a Bitcoin HODLer believes that Bitcoin will be a world-changing invention and will reach new highs, will go above $20,000, and if either of those things happen, Coinbase investors are fine.

It feels more to me like exchanges are really rocky business and maybe could become antiquated fairly easily. I just look at what Coinbase does or what Bithumb does. It’s a massive regulatory challenge, it’s a bit of an engineering challenge, but it’s not particularly unique or defendable. You know what I mean? People are like, “Oh, Bitcoin. They can just fork, and now there’s 15 Bitcoins.” Well, you can also have like 15 exchanges, and a lot of the work these exchanges are doing, being the first people out and being at the tip of the spear, just makes it easier for someone else to go and clone them and do lower fees or no fees or make a better user experience.

Jay Kang: Binance is probably doing okay though.

Aaron Lammer: Binance seems to be doing extremely well, and I think Binance feels a little bit more modern in that it’s got this whole Binance Coin, which is like top 20 coin now I think.

Jay Kang: Yeah, but they also … You and I both were on Bittrex, which was the Binance before Binance, right?

Aaron Lammer: I’m still on it.

Jay Kang: Okay. And then we went on Binance.

Aaron Lammer: Yep.

Jay Kang: I think I went on Binance way before you did, and I would just say from an experience as a user that Bittrex sucked. Sucks. It sucked. I always was like, “What is this?” It feels like a website from 2007.

Aaron Lammer: I think that’s why I like it.

Jay Kang: Yeah, I know. It’s your indie site. It’s also how you like our podcast to sound like. But Binance was much more fun. There are more charts. It felt more like you were on Wall Street in front of some Bloomberg terminal, and they had more coins more importantly. They had more relevant coins. The reason why I went on Binance was because everyone was talking about 0x, and Bittrex just didn’t have it, and Binance had all the fun coins and-

Aaron Lammer: ZRX is on Bittrex now, just for any of you traders out there.

Jay Kang: Sure. Do you think that what has happened essentially is that maybe instead of the exchange business being a fundamentally bad one that it’s just a winner take all thing and that Binance just won?

Aaron Lammer: I think that’s definitely possible. I don’t think Binance just won. I don’t think Binance’s position is that great. I look at all the stuff that Coinbase was getting into when we started this show. Toshi. Remember Toshi?

Jay Kang: Yeah.

Aaron Lammer: Earn.com is one of their new ones where you can earn crypto by learning about crypto. All of their forays into-

Jay Kang: So he’s really doing it then because that was his idea when he launched Toshi was that you could earn cryptocurrency by taking classes at Khan Academy, right?

Aaron Lammer: There’s very, very elementary steps towards these goals happening, and all of those goals feel like ways to get people into crypto who are not currently into crypto, to seed people with a few coins without having them put in their hard earned US dollars and generally kind of ham-fisted attempts to up the new user base of Coinbase, and that might not have been a bad strategy. I don’t think that feudalism was exactly the way to go with it. I think they maybe had the right idea and the wrong implementation of that idea. The idea of getting new people, the classic Super Airdrop Festival question, is the real question. I just think all the things they think people would be into like learning about crypto and getting paid, and it’s like come on guys. Come the fuck on. This is insulting. You’re insulting new users with Earn.com right now. It’s embarrassing.

Jay Kang: Earn.com. I wonder how much that URL cost.

Aaron Lammer: Earn.com has already been like three different things, also, right?

Jay Kang: Sure.

Aaron Lammer: And I think the only reason Earn.com is part of Coinbase is because they wanted to hire Balaji as part of their executive team, and he was like, “You gotta buy my fucking shitbags over here if you want to get me onboard.”

But in a larger sense, I just don’t see why new people need exchanges really. Now that I’m using Square, I don’t know why I need to use Coinbase.

Jay Kang: If you’re not trading shitcoins.

Aaron Lammer: If you’re not trading shitcoins, but Coinbase isn’t really … I mean, they’re making forays into the shitcoin world, but if you’re-

Jay Kang: They’re making large steps into the shitcoin world.

Aaron Lammer: Large steps. But if you really want to trade shitcoins right now, you do it on Binance.

Jay Kang: Here’s the tie up thing I’ll say about all of this, which is just that if we were in the future that we talked about where people just have a certain amount of money parked in one cryptocurrency that’s relatively stable, and let’s say they’re traveling abroad or they’re going to, let’s say, Las Vegas and they don’t want their wives or anyone to know how much money they’ve taken out-

Aaron Lammer: Purely hypothetical.

Jay Kang: … or they’re on a family vacation and they don’t want to bring their credit cards because they’re afraid to put their debit card into an ATM there, you don’t need to trade for that. You just buy it once, and you’re right, I don’t think you need these hyper exchanges where people are setting sell limit orders because the number of people who can really do that profitably and want to keep doing that because it’s kind of boring and takes up a lot of your time is very small. It’s a small number of people. And when crypto was booming, it was a lot of people, but that period seems over, and I just don’t ever think that that’s going to happen again. I think the price of crypto will go up, but I don’t think we’re going to have this thing where people are trading like 40 different coins all day, you know? Do you? I just have a hard time believing that that’s ever going to come back.

Aaron Lammer: Yeah, it feels like last year’s fad or whatever. It’s a little like the MySpace to Facebook transition. I do think people will be trading shitcoins again, but it’ll be under different colored lights, and it won’t be called shitcoin trading; it’ll be a different take on it.

Jay Kang: You think they need to rebrand from shitcoin?

Aaron Lammer: Well I do think that the idea of everyone going on exchanges … Look, we had a great time on exchanges.

Jay Kang: Oh, it was great.

Aaron Lammer: I learned a lot about … Actually, I learned a lot about legacy markets by trading shitcoins, and it was probably not worth how much money I lost, but it was not a terrible experience. I don’t think everyone needs to undergo that experience. In fact, I think very few people need to. I think, fundamentally, if you have your savings in an account, there’s no reason you can’t just say, “Hold 10% of my money in Bitcoin at all times,” and just let a fucking computer handle it. Trade advantageously for me.

Jay Kang: I guess I’m just thinking if I was running one of these places that I would not … And this just goes to the exchange question. I would not try to build an exchange at all. The product I would try and build would be something that really ensures privacy. That’s it. Like I would try and build Silk Road and try and make it actually secure. I am not going to build a drug market, but something like that where you could buy things, Craigslist for example, and you’d just use crypto. You could buy like a Nintendo Switch or you could buy Magna-Tiles or you could buy a keyboard if you wanted, and that-

Aaron Lammer: For people who are listening that don’t have small children, Magna-Tiles are like the high demand children’s toy of last year.

Jay Kang: Oh, they’re great. They’re great. Of the last five years I think.

Aaron Lammer: I love how every parent whose kids have Magna-Tiles are like, “My kid is a Magna-Tile genius.”

Jay Kang: My kid is an actual Magna-Tile genius, Aaron.

Aaron Lammer: One of those people is Jay.

Jay Kang: Yeah.

Aaron Lammer: One of those people is not me because I don’t have any Magna-Tiles.

Jay Kang: You don’t have Magna-Tiles?

Aaron Lammer: No.

Jay Kang: Why?

Aaron Lammer: I thought they were all sold out.

Jay Kang: You can get the bootleg PicassoTiles. They’re a lot cheaper, and they’re the exact same thing.

Aaron Lammer: Bitcoin cash in the Magna-Tile world.

Jay Kang: Okay, so do you remember … I forget what this coin was, but there was a coin like this, and it was in Asia, and they had as part of the website, you would go there and they would have a marketplace there. Something like that, I think those types of ideas are interesting, especially if you’re doing international transfers or you’re trying to buy something like you know how if you want to buy something like a t-shirt in China or something like that or if you want to buy a bootleg jersey and it’s in Korea or Thailand or something like that, that makes sense to me, and I would actually probably use Bitcoin to do those transactions now even though I kind of hate Bitcoin. I think I would rather do that than send my credit card all over the place. Wouldn’t you?

Aaron Lammer: Yeah, I mean, in general, I think we’ve always been like if you could make all of your transactions anonymous would you? Absolutely.

Jay Kang: Of course.

Aaron Lammer: Of course I would. Why would I not?

Jay Kang: What’s the downside?

Aaron Lammer: So, we’re kind of circling around that issue of anonymity, but I don’t see anyone who … Like is there any please track me market out there?

Jay Kang: No.

Aaron Lammer: I think this is probably what’s going to bring Bitcoin-

Jay Kang: Oh, I have a good idea. Go ahead though.

Aaron Lammer: What’s going to bring Bitcoin to the market is privacy. It’s the biggest issue in technology right now, and I don’t think it’s a good position for the exchanges because the exchanges are basically the ones who are being tasked with enforcing non-privacy. So therefore, someone who does what the exchange does but anonymously, and probably that means not even being a company. It probably means being some kind of a protocol, some kind of an online LocalBitcoins kind of thing. That’s the next area that’s interesting to me.

It’s also interesting to me how people work around these things without crypto. Like I was reading … Shouts out to my friend Kevin Kelly and his Recomendo newsletter. He gives recommendations, and one of them is when … This is good advice actually. When you’re leaving a country … He travels all the time. He’s like, “You end up with 20, 50 bucks in the local currency. Well you go and you put it in a shoebox at the end. Then you have all this [crosstalk 00:38:54].”

Jay Kang: I’ve got a bag filled with different currencies.

Aaron Lammer: He was like, “At the airport, you go to the Starbucks and buy a Starbucks gift card with your leftover currency. They’ll put an exact amount to the cent on a gift card, and then you can just use that gift card in America.”

Jay Kang: Oh, that’s interesting. Yeah, that’s a good idea.

Aaron Lammer: So it’s like shape shift via Starbucks.

Jay Kang: Yeah. Yeah.

Aaron Lammer: These kinds of little things are … Like billions of dollars are moving through these. Not literally Starbucks gift cards, but little bits of currency here and there sending out. People are running into these problems all the time. Not us because we don’t go anywhere or do anything, but I think the world has a lot more problems with money than we might realize as New Yorkers.

Jay Kang: No, I agree. I agree, and that’s where I think … By the way, the person I know who needed to transfer out a lot of Bitcoin, he used LocalBitcoin and it worked.

Aaron Lammer: Oh really?

Jay Kang: Yeah, and he saved a ton of money [crosstalk 00:39:50].

Aaron Lammer: Where did they meet? I’m curious where [crosstalk 00:39:53].

Jay Kang: No, they just did it electronically.

Aaron Lammer: Oh, it was an electronic like with a wire transfer.

Jay Kang: Yeah, and it was so much cheaper than doing it through Coinbase, and he’s not going to get a tax notice sent out from Coinbase. I mean, I think he’ll pay the taxes on it, but it’s not a compelled thing like it is through Coinbase.

So, I just think that there’s probably … As those types of things gain in reputation, I agree with you, I don’t understand why you would need the exchange at all, especially if the fees are so high.

The idea I had, Aaron, maybe we should move on after this, is we should start like Ashley Madison with Monero, like untraceable currency.

Aaron Lammer: So, it’s like an untraceable sugar daddy site?

Jay Kang: Like the cheating husbands and wives. So, the problem with Ashley Madison, obviously, was they got hacked. [crosstalk 00:40:44].

Aaron Lammer: Because they had everyone’s credit card.

Jay Kang: Yeah, yeah, yeah.

Aaron Lammer: Well, look, this is what Satoshi was talking about in the first place. Satoshi did not say, “Oh, hyperbitcoinization is going to cause people to put their National Reserves into Bitcoin.” He was like, “Here’s some dudes who don’t want to put their credit cards into porn sites.” This is the use cases that Satoshi was thinking about. I don’t know if that’s because of a personal experience Satoshi had with a porn site and a credit card. We definitely have ascertained that Satoshi was involved in some kind of a PayPal transaction gone wrong, so maybe he also got overcharged by a porn site or something like that.

Jay Kang: That, by the way, is the best proof that Dorian Nakamoto was actually Satoshi Nakamoto. It was like you could picture that guy trying to order some model trains off eBay and then get really mad off of it.

I don’t know. If the history of the internet is anything and publishing also, basically every form of media, the people who will figure this out first are the porn vendors, right? They’ll be the ones to figure it out before anyone else.

Aaron Lammer: I always think that the porn thing is kind of like a dead end. I just don’t think them … Porn is always this thing people think that people spend a lot of money online because people look at a lot of porn, but porn as a business is not a really big thing.

Jay Kang: Yeah, except that a lot of the innovations on the internet did come from porn.

Aaron Lammer: Give me an example.

Jay Kang: Like basically the need to have video on the internet.

Aaron Lammer: I mean, video compression is a good example.

Jay Kang: Sure, and like what percentage of the internet is video at this point that uses video compression, stuff that was made necessary by porn?

Aaron Lammer: Yeah. Okay. I’ll buy it. I’ll buy it. I’m buying what you’re selling.

Jay Kang: All right.

Aaron Lammer: This is a topic that I feel like both of us just shrug our shoulders, but it’s been big this week, which is all the stuff about fake volume on the exchanges. Big study coming out that says basically that a lot of the historical volume and present day volume is in some ways faked, manipulated, et cetera. A bunch of pushback from crypto people. I feel like this is the least area of our expertise just because I’m like I just have to accept whatever someone tells me. I can’t independently verify the volume.

Jay Kang: Yeah, we don’t have access to the books, and we also don’t know what we’d be looking at. Like where are they saying the fake volume was? Everywhere?

Aaron Lammer: Well, part of the fake … I mean, there’s all sorts of different forms of fake volume. One of them is just UTXOs on the Bitcoin chain presently, like how many transactions are happening, and I guess there’s an insinuation that half of the transactions on the Bitcoin chain are actually this … Ledger was talking about this, like this way to secure some shitcoin chains is that they use the Bitcoin chain, and that creates transactions on the chain. Wash trading can result in transactions on the chain. I don’t think it’s an accusation that some exchange itself is particularly a fraud but that a huge, huge amount of “trading” may be phantom.

Jay Kang: Oh. Is that something we didn’t expect though?

Aaron Lammer: I would say you expected it because you’ve been like price is manipulated from the jump, so I guess you’re experiencing some vindication right now?

Jay Kang: No, but I mean, I just … Whether it’s wash trading or money laundering or shitcoin manipulation, none of us ever thought that there are a ton of real Bitcoin transactions happening, right?

Aaron Lammer: Well, here’s why I think it matters. Someone said in our chat like, “Who cares if there’s a bunch of fake trading? Does that really affect price?” And a TA person says it doesn’t really affect price if there’s a bunch of fake trading. What I do think it affects is, and I’m sure someone is going to write in and say that it does affect price, and I wouldn’t be able to talk about that. It fakes what the monthly active users of crypto as a whole is, and it fakes the idea that a bunch of people are participating in the ecosystem.

Jay Kang: It’s another version of the Super Airdrop Festival.

Aaron Lammer: Yeah, it’s Super Airdrop world in a way. Instead of put butts in seats, it’s a way to put robot butts in robot seats, and there remains this lingering … Like if you were like, “What’s your number one skepticism about crypto?” my number one skepticism is that there’s actually only like 700 people who are involved in crypto, and we’re all just creating various Wizard of Oz facades to hide the fact that there’s just not that many people into this shit.

Jay Kang: Yeah. I have that fear, too. Like all those accounts with tons of followers that we used to follow and get really excited about when they would make trades, a lot of them bought their followers. It just kind of feels like at this point nothing would surprise me in that realm. It wouldn’t surprise me if I walked into Coinbase’s offices and it was like Brian Armstrong playing ping pong with Satoshi Nakamoto and there’s nobody else in there.

Aaron Lammer: That wouldn’t surprise you?

I think the companies are real. I believe that Coinbase is really a company that employs a bunch of people and has made a bunch of money, but what I see from like Joe Lubin at ConsenSys or really anyone who has a big stake in crypto, whether it’s a big bag or a company that is itself riding the bag wave, is everyone’s like, “Come to the parties! Cardi’s going to be great! Blah blah blah!” And I just haven’t seen the rush of people, and also when there was a rush of people, I think we’re learning that a lot of that rush was a little bit fake, so I’m going to be more skeptical next time there’s a bull run that there’s actually some sort of a mass wave of people who are coming in to trade crypto.

We don’t have any way to know. It’s like Netflix. It’s like we used to have … Like when there’s real volume, that’s like TV ratings, which are themselves bullshit, but we’re even going … Or actually maybe TV ratings are manipulated volume, and then I think eventually we’re going to reach a Netflix state where it’s just going to be like no one knows anything. No one knows how many people watch this.

Jay Kang: Yeah, yeah.

Aaron Lammer: We’re going to keep listening to people like Coinbase who are always going to tell us, “Oh, there’s a bunch of people who want in.”

Remember when … Dude, talk about top things. Remember when we were thinking about selling some of our altcoin exchange accounts? Like you could actually get money because there was so many people coming in who wanted to trade that there weren’t enough user signups.

Jay Kang: I remember I tried doing the math here where it was like how much … because you could sell your Bittrex account for a reasonable amount of money, but there’s no way where that number was going to match the amount that I thought I was going to make from having a Bittrex account. Good lord.

Aaron Lammer: So, a lot of that stuff looks, I’m not going to say there weren’t a bunch of people into it during the bull run, but all of these bullshit metrics work both ways where they’re just establishing a baseline to fall from, and if some of that baseline was fake, we’re just going to have further to fall.

Jay Kang: Yeah. I know, so why don’t you sell?

Aaron Lammer: All of this stuff I think is good for Bitcoin.

Jay Kang: Do you trust thought that you’ll be … If there’s like, let’s say there’s a 1929 situation, right?

Aaron Lammer: In crypto?

Jay Kang: Yeah.

Aaron Lammer: It already happened.

Jay Kang: No, no. Let’s say there’s like a huge run on the existing banks.

Aaron Lammer: Like people are trying to withdraw from exchanges you mean?

Jay Kang: Yeah or just trying to get their Bitcoin off of it.

Aaron Lammer: I think at this point-

Jay Kang: Do you think you can do that? Do you fully trust that you can do that?

Aaron Lammer: No, I don’t fully trust that I can get it off. I fully trust that in a pot stake situation, I have more money in the pot to try to win on the rebound.

Jay Kang: You’re committed.

Aaron Lammer: Yeah, I’m committed. It’s like, what, I’m going to pull it out now? I don’t see the point.

Jay Kang: No but even pull your Bitcoin out.

Aaron Lammer: What’s that?

Jay Kang: Like pull your Bitcoin out.

Aaron Lammer: Oh, oh, like take them off the exchanges?

Jay Kang: Yeah.

Aaron Lammer: Yeah, yeah, yeah. I would do that. Sure. Put it on a hardware wallet. Yeah, sure. I mean, I don’t have that much money on any exchange because none of it’s worth very much anymore, but I have it spread across a few places. I’ve got some in Square, some here, some there. I just in general feel like if the current crop of crypto companies die off and Bitcoin just remains a protocol, that is bullish for Bitcoin. You don’t think so?

Jay Kang: No.

Aaron Lammer: Particularly because I think most of these companies have realized the future in which Bitcoin wins is not actually very good for them, and they need a weird mix of Ethereum-based shitcoins to win for them to truly reach that vaunted unicorn status. So, I guess I’m feeling like, at least within the mix of crypto, all the stuff is tipping the pool towards Bitcoin.

Jay Kang: Yeah, well I think that’s true. I don’t see the contender right now.

Okay, should we read our tippin.me messages?

Aaron Lammer: Oh, sure.

Jay Kang: Just to remind people, it is tippin.me/@CoinTalk, right?

Aaron Lammer: @CoinTalkShow.

Jay Kang: @CoinTalkShow. If you send us some small amount of Bitcoin, we don’t really care how much it is, and you write a good question or if you want to write a funny comment, we will read it on the show.

Aaron Lammer: You can send a shout out. The way this works, you send us a tip, we read. This time you’re getting a real show covered. Probably this will be in the credits from now on. That means even for a very, very tiny one Satoshi donation we will read your thing for fractions of a cent.

Jay Kang: Yeah.

Aaron Lammer: This is the power of micro tipping, Jay.

Jay Kang: Well, it’s also the power of having a currency that is infinitely divisible.

Aaron Lammer: And I think that matters.

Jay Kang: Yeah, you can be like, “I don’t want to send them one cent, but what if I send them a quarter of a cent?”

Aaron Lammer: I mean, you can imagine a situation where we’re playing a first person shooter and I blast you, and you know like when Sonic the Hedgehog, all of the coins come out of him? Those are each like one Satoshi. I like blast money out of you, and then I just run around grabbing it.

Jay Kang: That would be fun. Having any amount of money on something does make it a lot more fun.

Aaron Lammer: Anytime there was real money on the floor in a video game, I think that’d be pretty fun.

Jay Kang: I still think the most fun I’ve ever had in my life, and this is sad for me to admit, was in calculus in high school playing Tonk, which is like a southern card game, for like 25 cents basically, and if you had a good day, you could go to the Taco Bell in our cafeteria at school and buy two tacos. Most fun I’ve ever had in my life.

Aaron Lammer: Okay. Here’s the first message we got in our tip pool. Craig Wright is the real Satoshi.

Jay Kang: Wow. Amazing that these are all trolls.

Aaron Lammer: From Craig Wright.

You only said what the title was once. I don’t know what they’re talking about.

Jay Kang: Oh, the book maybe.

Aaron Lammer: You talked about that movie for over six minutes. Sorry.

It’s tippin.me not tip.me, dumb ass.

Jay Kang: Okay, that one’s good. That one’s fair.

Aaron Lammer: That one’s fair. I accept that. I accept that.

What does a fish say when it runs into a wall? Dam. That one’s a large one, so I won’t make fun of sending a bad joke to us.

Jay Kang: The joke’s not so bad. Yeah.

Aaron Lammer: Cheers from Peter.

This is for the biggest one. This person put some serious Satoshi in [crosstalk 00:53:05], and yes, we don’t announce the amounts, but we do give you more coverage if you send a lot.

Jay Kang: Yeah, yeah. I’ll do a drum roll.

Aaron Lammer: Love your podcast, guys. Has Jay watched the Fyre Fest documentary yet?

Jay Kang: No.

Aaron Lammer: Let me ask you another question. Have you watched the Theranos documentary?

Jay Kang: I did watch Theranos. I broke my, I guess my self-imposed edict of never watching anything that people talk about on Twitter. I did watch it.

Aaron Lammer: I feel like the Theranos documentary confirmed our fundamental viewpoint of crypto, which is you’re only in trouble if you actually try to make a product. It’s much safer to just talk about something forever. Maybe these aren’t like really crypto things but fraud things.

Jay Kang: Did she really try and make a … I guess she did. I mean, like-

Aaron Lammer: She did! There’s that whole part where the blood is exploding in the machine. It’s the grossest shit ever.

Jay Kang: That show is … She would’ve been better off doing what the Bloomberg Terminal people did-

Aaron Lammer: Absolutely.

Jay Kang: … and basically just making something that was a box. The Edison basically looked, as far as I could tell, like an inkjet printer, you know?

Aaron Lammer: Yeah.

Jay Kang: And she could literally have just taken an inkjet printer and slapped a sticker on that thing and just set it up and be like, “The future,” and it would’ve been the same thing, you know? And she could’ve just hired people that she knew or people off the street to pretend to be biologists. Nobody would’ve noticed.

Aaron Lammer: Can I ask you what your read on something is? So, they were saying for the first eight years … Jay is picking a scab, and it’s actually bleeding right now as we speak. Put that in your Edison.

Jay Kang: Yeah.

Aaron Lammer: So, she said for the first eight years of Theranos, they were just doing Pentagon contracts. That’s bullshit, right?

Jay Kang: I don’t know because I know that-

Aaron Lammer: They didn’t have any technology. What were they doing for the Pentagon?

Jay Kang: I have an anecdote about this which is that I have a friend who is involved in construction work in the Bay area. I remember when Theranos built that office, they were up for the bid, and he was telling us, he was like, “Oh this company … “ You know, he’s just some guy, so it’s not like … I mean, she duped everybody, so I’m not saying he’s dumb for being duped, but he was just like-

Aaron Lammer: No, Kissinger fell for it.

Jay Kang: Yeah. Right. He also fell for a lot of other things. He was saying that this is a defense thing, and this was many, many years ago, and then he told us who was on the board, and so at the beginning, that was the sell of it was that it wasn’t a bunch of other VC people in San Francisco, that it was real because it was like the Pentagon was involved in it.

So, I don’t doubt that all of the contracts that she did were for future blood testing for DoD stuff.

Aaron Lammer: For eight years? How do you keep doing future for eight years? Here’s my read. During that whole time, they weren’t doing anything. They were just going out and selling, and that was the glory years before they actually had to show the product to anyone.

Jay Kang: Well, they never had to show a product. Yeah, exactly. Do you know how much money is floating around the DoD that they just earmark for different things and then they don’t check up on? It was a good mark for them.

Aaron Lammer: The final years of Theranos were the mistake, which was ever showing their hand. If they had just kept kicking the can down the line and been like, “It’s coming, it’s coming, it’s coming.” It was that stupid Walgreens trial that broke them.

Jay Kang: Yeah. Yeah. How long do you think they could’ve gotten away with it though?

Aaron Lammer: I think that if they had managed it as a fraud, they could’ve gone a lot longer. It was the actual attempt to go legit, it was to like take the Corleone family totally legit and actually make a product because actually making a product is not twice as hard as pulling off a fraud; it’s like 100 times as hard as pulling off a fraud, and it’s so crazy. They weren’t even close to pulling it off. They couldn’t handle the volume of two Walgreens in Arizona.

Jay Kang: I’m not going to say anything about the documentary quality good or bad just because I didn’t really have an opinion on it.

Aaron Lammer: Lot of graphics.

Jay Kang: The thing that I didn’t quite understand was … People pointed this out on Twitter, so I’m not the first person to say it, but did you feel like this was some sort of extraordinary story?

Aaron Lammer: Yes.

Jay Kang: Why?

Aaron Lammer: Just how extreme it was. Like how much money they raised, how prestigious the board was, and how far they went to try to keep the scam alive. I mean, that’s the part that’s extraordinary to me. It’s not that she raised a bunch of money under false pretenses. The part that’s extraordinary to me is to commit multiple health-related felonies to try to keep the whole thing alive.

Jay Kang: Okay. Followup question. When do you think Elizabeth Holmes started to realize that things were going bad?

Aaron Lammer: Never.

Jay Kang: Me too.

Aaron Lammer: I believe-

Jay Kang: I think she still thinks that the Edison is a good idea and that-

Aaron Lammer: So did a bunch of the investors after they reviewed.

Jay Kang: … that a bunch of meddling journalists destroyed it, you know?

Aaron Lammer: I need to pause this entire show because I can’t believe it hasn’t … We need to send a shout out to Tim Draper’s Bitcoin tie.

Jay Kang: Oh, yeah. Amazing. Amazing.

Aaron Lammer: Amazing. Amazing. Also amazing to be appearing in a movie about fraud basically still kind of saying, “I have a boner for this person,” while wearing a Bitcoin tie.

Jay Kang: The thing that struck me the most about Elizabeth Holmes wasn’t … First of all, I didn’t really see any clear evidence that that was a fake voice. I know that there have been blog posts about it and stuff, but I just didn’t see it. I was just like, “She talks like that. That’s just her voice.” You know?

Aaron Lammer: You’re definitely wrong.

Jay Kang: You think I’m wrong? You think that she has-

Aaron Lammer: But there’s a bunch of videos of her talking before with a totally different voice.

Jay Kang: It’s not that different.

Aaron Lammer: It’s pretty different.

Jay Kang: All right. And the other thing I’ll just say is, okay, as someone who was on television for two years who has a completely flat affect voice, there is training that they make you do, and for women generally, and I do think it’s sexist, they basically tell you that you have to make your voice deeper to be [inaudible 00:59:16], so I think she just went to a voice coach if nothing else and that I don’t think it was some psychotic thing that she did. I just think that that’s basically what sucks about trying to be a woman in a position of authority is that they teach you how to do this voice, and if you’re bad at it, you sound crazy. And some people are just good at it.

Aaron Lammer: Yeah. I guess I would say there is something a little, maybe not psychotic, but a little diabolical about spending your time trying to change your voice and not trying to figure out how to do the blood testing that you are performing for actual, live patients in the present tense.

Jay Kang: Yeah. No, no, I-

Aaron Lammer: If you have time for both, it’s great.

Jay Kang: I’m not trying to sympathize with … I mean, I guess I am a little bit here, but the voice thing didn’t bother me as much as the constant fraud and the obvious megalomania.

Aaron Lammer: So we’ve covered crypto topic which is don’t ever actually try to make anything. That’s when the whole thing comes down. We’ve covered that she actually believed this would succeed, which is I would say true of 90% plus of the crypto frauds that we’ve talked about on this show.

Jay Kang: No. No way. You think that the guy that started Sumokoin was like, “Maybe this will work”? Come on.

Aaron Lammer: Yeah.

Jay Kang: No way.

Aaron Lammer: Okay, maybe not the little ones, but the mid and top tier caps, I think that was the conclusion we came to with Tezos-

Jay Kang: Yeah, the people who worked on the Ethereum project, they thought about it. Yeah. Tezos, yeah.

Aaron Lammer: Yeah. Tezos still thinks they’re going to succeed, and those people are all, I think we described them as the well-intentioned failures rather than the outright frauds. She’s right on the line between well-intentioned failure and outright fraud, much closer to the outside fraud part.

Jay Kang: I don’t think she’s on the line. I think her whole turtleneck and everything is in the fucking fraud [crosstalk 01:00:59].

Aaron Lammer: I think it’s all pretty fraud-y, but I do think she deserves consideration for the well-intentioned failure category simply because of what you said. I do think she thought she was going to pull it out in the end.

Jay Kang: Okay, so, this is my last question about this, and then we do have to go. My job in a lot of ways as a journalist is to size people up and figure out if they’re lying to me, right?

Aaron Lammer: Yeah.

Jay Kang: And I think that of the journalism skills that I have, which are, I don’t know, not great, that one I’m actually pretty good at. If somebody who is 24 years old wearing Steve Jobs’s fucking turtleneck walked into the room to me and was like, “I’m going to revolutionize blood testing,” like why did these people all fall for it? She doesn’t have a background that would prove that she can do any of this, you know? Did they just want to believe it? I just don’t understand, and that was something that the documentary doesn’t go into, and I do think that’s something that the book, which is actually supposed to be quite good, that I would like to read, I think they do go into it.

Aaron Lammer: Correct.

Jay Kang: But it’s like a cartoon character of a fake inventor. She’s coming in wearing a black turtleneck and has that voice. Why would you trust that person?

Aaron Lammer: I think you would trust that person because Silicon Valley had taught you that that’s what someone’s going to look like when they come in-

Jay Kang: Wearing the exact same thing? It’s like if-

Aaron Lammer: It’s not a classy area.

Jay Kang: … if I was a basketball GM and somebody came in dressed in a full Michael Jordan Bulls uniform and was like, “I’m the next Michael Jordan,” I’d be like, “You’re insane. Please get out of my office.”

Aaron Lammer: But I feel like the difference is … Paul Graham has talked about this extensively in YCombinator. He’s like, “I’m looking for the next Mark Zuckerberg.” I think that people think that startups are a replicatable formula. Now, impersonating Steve Jobs is maybe the wrong person-

Jay Kang: No, but that’s what I mean. If Mark Zuckerberg came into my office and he was wearing a hoodie and he was like a dick-

Aaron Lammer: That’s who most of Silicon Valley’s founders are.

Jay Kang: I’d be like, “Oh, that’s fine.” I’m just saying that wearing the exact same outfit as Steve Jobs would be a red flag for me.

Aaron Lammer: My biggest takeaway from the whole thing, I think the most salient point of the whole thing is how did they talk about Quest Diagnostics in that?

Jay Kang: Yeah, yeah, yeah. Quest Diagnostics is a terrible antiquated system.

Aaron Lammer: Where they all did a group fuck you to Quest Diagnostics, that is how people … This is something we see in Bitcoin all the time. The problem is the Wall Street Journal. The problem is this. It’s always someone from the outside who’s trying to thwart us is the problem, not the fact that we can’t actually deliver the thing that we were supposed to do, and so whether it’s Quest Diagnostics-

Jay Kang: Big blood diagnostics.

Aaron Lammer: … or John Carreyrou, the Wall Street Journal reporter, it’s always someone else who is the problem. It’s always that someone’s trying to undermine you. It’s always that there’s an organized conspiracy against you, and that is a great breeding ground for a fraud because you can just write off any criticism as, “Oh, that was underhanded.” I see the exact same things in Bitcoin right now. Any time a mainstream journalist publishes something negative about crypto, it’s because of some gigantic agenda against them.

Jay Kang: That’s how everything is post Gamergate. You know?

Aaron Lammer: Yeah.

Jay Kang: It’s just like basically journalism now is just a cudgel to make excuses for your own failures. If it’s ever reported on, you just say it’s the journalists, and it’s a very short step from antisemitists or old or even current antisemitic thinking that’s just like, “Oh, it’s the global banking system, or it’s the media because it’s all controlled by Jews.” You know? It’s just not so far from saying that.

The only other thing that I had to say about the whole Theranos thing is that the only way where I understand it is as somebody who has to get their blood tested every six months and really should get it tested every three months, Quest Diagnostics, it sucks.

Aaron Lammer: Yeah, I’m sure.

Jay Kang: It absolutely sucks. You go into a random ass office somewhere in Williamsburg or wherever, it’s never convenient, and then you have to sit in this awful waiting room for like 40 minutes, and then some person who doesn’t seem particularly well trained takes your blood, and then that’s it. If you could go into a Walgreens and they just prick your finger and it worked, it would be great. It would make my life way easier, but-

Aaron Lammer: Everything about medicine in this country sucks.

Jay Kang: I know. My-

Aaron Lammer: The reason it sucks is because it’s unprofitable and it’s all fucking corrupted and frauded the fuck out.

Jay Kang: My favorite part of that documentary, I will say my favorite interview was the guy just being like, “I tried to tell her that this is against the laws of physics and she wouldn’t listen.” It was like, yeah. The reason why Quest Diagnostics sucks as an experience for me is everything around Quest Diagnostics. I don’t mind having some of my blood taken out to have it analyzed correctly, and it’s weird that instead of trying to make that process better, she tried to revolutionize everything, and then that I guess is the Silicon Valley thinking, right?

Aaron Lammer: Yes. And it’s also okay to sacrifice a few labs along the way. That’s also part of it.