Podcast Transcript: Zac Prince on Earning Interest on Bitcoin and the Future of Crypto Finance

This is an edited transcript of our podcast episode with Zac Prince, where we discussed uses of crypto, defi, hedging and regulatory trends in crypto finance. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

Zac’s Background and Career Path

Bilal Hafeez (01:41):

It’s good to have you on. I guess, the first thing I always like to ask my guests is how they ended up where they are now. What did you study at university, or school as you Americans call it? And then was it obvious that you we’re going to end up in the crypto space when you left school, and so how did you end up where you are now?

Zac Prince (01:58):

Yeah, sure. I had an interesting school experience. In my senior year in high school, we had started a guy’s poker night every Wednesday and I got really into poker. When I went to university (I was getting an international business degree), during my first semester, I took the debit card that my parents gave me, which was the first time I’d ever had a debit card, and I put some money in an online poker website. During the first semester of school, I did really well. But I also started spending a lot of time playing poker and doing really well. And so my second semester, I basically played poker.

Bilal Hafeez (02:40):

It sounds like it’s not going to end well. I mean, debit card from your parents, playing poker, that combination doesn’t sound too healthy.

Zac Prince (02:47):

It actually ended up great. It took me five years to finish my degree instead of four, but I came out of school with no debt, had a great time as a semi-professional online poker player for a few years and I just learned a lot. I think poker is such a phenomenal game for teaching things about risk management and understanding human psychology in a nuanced way. I graduated in May of 2009 with an international business degree, and I always expected that I would work in the financial sector, but that was the tail-end or middle of the financial crisis, depending on how you look at it. So, it wasn’t a great time to get jobs in the financial sector for entry-level folks fresh out of school.

I ended up working at a start-up that was in the online advertising world. It was, I would say semi-financial in the advertising category, because we were one of the first online advertising exchanges where in the technology that supports internet ads had advanced to a place where you could, instead of calling up the New York Times and saying, “I want to buy an ad for the next week,” instead say, “I want to buy this profile of consumers, or even specifically this person who is attached to this cookie.” And there were exchange infrastructure companies like AdMeld, the one that I worked at, building in the background to facilitate that real-time advertising targeting and the auctioning off of those ad spaces. And so, I joined that startup, I was employee number like 15. It was a phenomenal experience. Fast forward three years, we were like 250 people. We got acquired by Google.

At the time, it was the sixth largest Google acquisition. Now it’s probably not even in the top 20. I mean, it was a while ago. But then we got acquired by Google and transitioned to becoming Google employees, and I hated it. I was like, “This is miserable. It’s a huge organization, I don’t have an impact. I’m not doing anything.” And so I lasted about six months at Google and left Google with some of my colleagues from AdMeld, which was the name of that first company. We ended up launching the US version of a German-based ad-tech start-up, and that went really well. About two years later that got acquired.

After that second acquisition, prior to starting BlockFi, and more relevantly for what BlockFi is doing, I moved into the online lending ecosystem space and worked at two different companies. One was a company called Orchard. We were the largest provider of data and technology solutions to institutional investors that were either buying loans or directly financing the largest online lending platforms, like Lending Club, SoFi, Prosper, Lending Circle etc. And so, if you were a private credit fund or a bank or a family office that was active in that market in the early days of its development, there was a really good chance that you were either using Orchard’s data to compare what lending platform you wanted to participate on, or the technology needed to participate in those lending platform’s marketplaces.

During my time at Orchard, I was getting just so much really valuable exposure to all of these different lending business models and saw what worked and what didn’t, as well as to a lot of different FinTech business models. And so I started writing a little personal finance blog on the side, because I just thought there’s so much cool stuff happening. I’ve got to put this out there a little bit. I was writing about whether you should be investing in consumer loans on the internet or commercial real estate, or whether you should be using a robo-advisor etc. Then, writing that blog led me to discover Bitcoin.

Initially, I started buying Bitcoin in 2014. When I was learning about these FinTech business models and working in that industry, it felt like the early days of crypto. There was this rallying cry of, “we’re going to take over the world. Technology is gonna disrupt the banks, everything’s going to be different.” But I pretty quickly learned that in the FinTech context, a lot of what FinTech companies do is just innovating on the front-end, so you’re taking something that banks or other financial companies have done for a long time, and you’re just putting it on a mobile app or making it more automated or reducing the fees etc. But ultimately, you’re still using that same infrastructure, and the products aren’t necessarily innovative – like, the unsecured consumer loan isn’t a new invention.

And so when I learned about Bitcoin, I was just really excited by the fact that it seemed like it was something completely new, both in terms of the asset Bitcoin that you could own and use, and in terms of the technology that underpinned it, which was basically in my mind like a payment network that was fully digital, peer-to-peer, and global by design. That meant you could send money from point A to point B 24/7, regardless of what country someone’s in, without going through an intermediary. And I was like, “All right, that could be a pretty big.” And so, I bought some. Bitcoin was like 150 bucks or 200 bucks at the time. And I doubled my money in a month or two.” And then I sold it all. And I was just like, “Look at you, trading Bitcoin like a total genius.” And then I bought back in at a higher price, but that’s when my trip down to what people refer to as “the crypto rabbit hole” started.

And then, in 2016, I learned about Ethereum and I made this analogy in my head that Ethereum was like the iPhone and Bitcoin was like the Blackberry. And so I bought a ton of Ethereum back before it was even on Coinbase. That was my first experience actually interacting outside of a centralized environment and it was really weird and scary. And Ethereum got hacked, and my Ethereum investment went down like 50% for a while, and I thought I was just a total moron, throwing my money away on these wild ideas. But then in late 2016 and early 2017, the price of Ethereum just started going up. I had started going to meet-ups in New York City, and the meet-ups shifted from being a few really early adopters or technologists in a dark grimy bar in Union Square, to big fancy law firm conference rooms with people on Wall Street and venture capitalists and entrepreneurs. And it felt like it was starting to get real. And it felt like the industry was going to experience a period of rapid growth. And I just had to get involved full time.

And given that I had been working in online lending and private debt and credit markets, that was the first place that my head went. I didn’t believe that banks were going to be particularly quick in terms of offering financing or providing products and services in this ecosystem, and that creates an opportunity for a company to build those products and services. And that was the original idea for BlockFi. We got started in the third quarter of 2017.

The three use case of crypto – store of value, new commerce, and new payments system

Bilal Hafeez (10:02):

Great. No, that’s good to hear. I mean, we’ll talk a lot more about BlockFi as we go through our conversation. I mean, the first thing I just wanted to get out of the way is, how do you think about cryptocurrency? And to narrow the conversation, we just focus on Bitcoin, say. On the one hand, you have the real cheerleaders who say it’s going to displace the US dollar and it will take over the fiat currency financial system. And then on the other side, you have people who say that it’s just basically a Ponzi scheme. The only reason it has some value is somebody else wants to buy it, and there’s enough mugs out there who will buy it, just like pets.com back in the .com craze. You have these kinds of polar extremes. Where do you sit on that spectrum? And then how do you philosophically look at say, Bitcoin?

Zac Prince (10:49):

Yeah. I mean, I think maybe a year ago it was acceptable to still hang on to that Ponzi scheme view or like, this is just weird, illegal stuff on the internet that you don’t need to pay attention to. I think we’re clearly past that point now. And I think that the events around COVID both in terms of the impact on people’s lives and in terms of the impact on the financial markets highlighted some of the reasons why Bitcoin is not only valuable, but also very buyable long-term, and not just a bubble or a Ponzi scheme or something.

But zooming out a bit just from the Bitcoin part of it – I think it’s important to understand how I think about Bitcoin and how I think about everything that’s happening in crypto. I have a mental model that I think is relatively simple which categorizes the different, big things that I think are happening in the crypto ecosystem. I think there are three big things that are happening. You have new emerging store of value assets. Bitcoin is the biggest and most successful one being created where it has the same use case as gold as an investment. Limited supply, store of value, hedge against inflation, so that’s bucket number one.

Bucket number two is you have applications using the technology getting built that facilitate new ways of conducting commerce or consumer applications. And most of this is happening on Ethereum right now. The two biggest things currently are DeFi, which is referred to as “decentralized finance”, and that ties in with the first big thing that happened, which was ICOs. And the second is what’s being referred to as NFTs, which stands for non-fungible tokens. Artists and the NBA now are issuing these digital collectibles and marketplaces are getting built around them. But there’ll be a lot of other applications. I think there’ll be applications in gaming, I think there’ll be applications in identity verification and probably other areas that we’re not thinking of yet. And that’s the second bucket of what’s happening in crypto. You’ve got applications being built on this new technology stack, and because it’s a new technology stack, it enables folks to do things in certain areas maybe a little differently or more efficiently than they could using traditional database technology.

And then the third bucket is you have traditional assets migrating onto these new payment rails, and right now the big thing happening there is referred to as stablecoins. And the idea behind stablecoins is that you put a dollar in a bank account, you issue a digital token or a Euro or whatever, but dollar is where most of the action is right now. You put a dollar in a bank account, you issue a digital token one-to-one backed by that dollar, and now you can move that dollar around on this new payment network, which has really big implications for global accessibility to dollars and the speed and cost of global commerce. In the traditional system, it can be really clunky to send money from one country to another, and doing that with Bitcoin is cool, but that it’s really volatile.

And so if we were transacting for some good in two different countries, do we really want to denominate that transaction in Bitcoin? Probably not. We’d rather do it in something more stable – dollars being the default option, given that it’s the reserve currency. Stablecoins in my mind doesn’t get nearly as much attention as it should. And I’ve been a contrarian maybe in the cryptocurrency community, because I’ve for a while been saying, “I think stablecoins moving around on these payment networks is ultimately going to be driving more activity than Bitcoin.”

Stablecoins are underappreciated

Bilal Hafeez (14:46):

And what underlying system do stablecoins typically use, or which ones do you favor?

Zac Prince (14:52):

There’s a few different flavors of stablecoins. You’ve got the most popular ones in developing markets or emerging markets, which is Tether. Tether is used heavily in China and Russia. Tether is slightly less regulated and slightly less verifiably backed by dollars in the bank account, but it’s also the stablecoin with the largest share of the total market today. I personally prefer the other bucket of stablecoins, which are domiciled in the US market and very clearly and audit-ably backed one-to-one by dollars in a bank account. And the biggest one out there is USDC, which is created in a partnership between Circle and Coinbase, but that part of this market is growing really quickly, too. At the end of 2019 there was around 3 billion in total stablecoins. At the end of last year, it was around 20 billion and today it’s 40 to 50 billion.

Bilal Hafeez (15:55):

Okay, so really quite big growth there.

Zac Prince (15:56):

It’s grown really quickly. And given that that’s my view, you can understand why I think the presumption that some people have in the crypto community that Bitcoin is going to overtake the dollar is not at all what I think will happen. What I think is that Bitcoin is the market leader in that first category of store of value, collectible-type assets. It’s got roughly a $1 trillion market cap today, gold is 10 trillion. And why shouldn’t the digital version of something that has some advantages versus the physical analog counterpart be worth more? I think there’s a lot of room to run in all of these categories, and I think there are really interesting implications for the future of financial services and global commerce from all of them, but I’m not the hardcore Bitcoin cheerleader that yells, “the dollar is going down.”

Bilal Hafeez (16:54):

I have a bit of a currency background, so I’ve spent a long time, most of my career analyzing the dollar, and it’s always interesting hearing crypto people talk about currencies and the dollar and can see that. They’re newcomers to how financial systems work and how the dollar works and things. It’s not so clear for people who are more familiar with currencies to believe that.

Zac Prince (17:16):

One quick last point there though, I would also say you have people that are a bit too extremist on the other end of the spectrum saying, “Oh, Bitcoin could never work because it’s not set up like a fiat currency.” And I think these tokens suffer a lot from the term cryptocurrency, which I don’t think is a good word to describe the use case of an asset like Bitcoin, especially for folks in developed markets where we don’t have issues with payments or the stability of currencies. And so, usually, when you see haters calling it a Ponzi scheme or whatever, their arguments are rooted in this idea that it can never be a currency because it’s not better than the dollar for that. And my response is, well, that’s not the point. It’s a store of value type asset.

What is decentralized finance (defi)?

Bilal Hafeez (18:03):

Yeah. No, that’s true. Yeah. Yeah. And at some level, the whole system financial system is based on confidence. And it’s the question of who can establish credibility around a given market, either through scarcity or through showing that they aren’t going to exploit the printing press that they have. So, gold has scarcity, whereas the dollar, the Fed, has some credibility that they’re not going to go wild and create excessive inflation. And so a lot of it goes down to credibility, but I did want to ask you about DeFi, because I think a lot of people are fairly familiar with obviously Bitcoin and even stablecoin, but DeFi, I mean, how do you define that? I mean, and what is special about it?

Zac Prince (18:46):

Yeah, so what’s special about it is that they have created some financial products that everyone in the world can access without having to go through KYC. And they’ve done it in a way where everything is completely transparent down to the source code of whatever this platform is doing. That’s really, really cool and exciting. And I’m personally a huge fan of the idea of DeFi and a lot of the work that’s happening in that space. My view is that it’s going to be interesting to see how much of DeFi drives real adoption for the express purpose of using the financial products that the platform is trying to create, versus how much DeFi is used as a derivative of speculation on crypto tokens that are created by the protocols, which is just a different flavor of the ICO boom that we created in 2017.

And the reason I say that is that the reality today is that if you’re someone who wants to buy and sell cryptocurrencies at high velocity or large scale or low costs, you’re much better served by centralized non-DeFi exchanges in terms of the user experience, in terms of the cost and speed and everything. And then similarly on the lending side, if you’re someone that wants to earn a yield on your Bitcoin or get a loan secured by the value of your cryptocurrency portfolio, the rates and value proposition and ease of use from centralized lenders, like BlockFi is dramatically better than DeFi. Now, some people don’t have access to those centralized, as Coinbase and BlockFi don’t accept clients from certain parts of the world due to the US regulatory regime that we operate under. But if you’re someone that does have access to Coinbase or BlockFi and doesn’t want to speculate on the value of a DeFi protocol token, you’re much better served by the centralized options today.

Bilal Hafeez (20:59):

I guess DeFi or decentralized finance would be the crypto equivalent of P2P or peer-to-peer lending, I guess. Is that the way to think about it?

Zac Prince (21:08):

Yeah, with definitely some innovation on the margin, because peer-to-peer lending was still regulated and we had to check everyone’s ID at the front door. Peer-to-peer lending was not transparent all the way down to the source code of literally everything that was happening on the platform.

How you can earn interest on crypto assets

Bilal Hafeez (21:25):

Yeah, understood. Okay, now let’s talk a bit more about BlockFi and, and how it works. One thing that I think people who aren’t that familiar with the crypto space will be surprised to hear is that you can earn interest with crypto assets, which sounds a bit odd because it doesn’t have a yield, so maybe you can talk a bit more about this idea of earning interest on crypto and how BlockFi works.

Zac Prince (21:51):

Sure, so maybe I’ll start with just a description of what an individual or corporation that wants to use BlockFi’s products could do on our platform. Using our mobile app or our web app, folks can earn a yield at really attractive grades – 6% on Bitcoin, 8.6% on stablecoins (which are dollar-equivalent). They can buy and sell the assets that are supported on our platform, and they can get a low cost loan secured by the value of the portfolio that they hold on BlockFi. Those are the products we have today.

In the second quarter of this year, we’re launching our fourth product on that side of BlockFi, which is a Bitcoin Rewards credit card. You spend dollars, but instead of getting airline miles or hotel points or regular cash back, the rewards currency on the card is Bitcoin.

And in terms of how we’re able to generate the yield, a lot of that comes from activity that happens on the institutional side of BlockFi’s platform. On the institutional side of BlockFi’s platform, we’re basically a prime broker for this asset class. And so, market-making firms, trading firms, hedge funds who are very active in the crypto market but can’t finance that activity with their traditional prime broker relationships, use BlockFi to conduct or help facilitate their activities in this market. And we lend dollars and cryptocurrencies to them, which either helps make them more capital efficient or enables them to express whatever view they want to express – potentially having a short position or just a multi-leg arbitrage transaction. In arbitrage, you still have pretty attractive opportunities in the crypto space, because it’s a nascent market with fragmented liquidity and doesn’t have access to traditional financing.

The reason these rates are high, 8.6% on dollars in an account that’s so liquid (you can take money in and out every day) exists because this is a hard to finance the crypto asset class and it hasn’t been adopted by traditional financial institutions with lower costs of capital. And so, in the same way that other emerging industries like cannabis or start-ups have to pay more when they’re borrowing money, the crypto industry writ large is in the same position. And so, BlockFi gathers deposits and leverages those balances to facilitate lending to both our retail clients and institutions, primarily to institutions and exclusively to institutions on the crypto side, And then we keep a spread and pass through the yield to our clients.

Bilal Hafeez (24:42):

Okay. Yeah. Yeah. And you mentioned yields currently around 6% on Bitcoin, 8% on stablecoin. Seems odd that the yield on Bitcoin is lower than stablecoin, or am I missing something here? I would have expected Bitcoin with its higher volatility or something would earn higher yield.

Zac Prince (25:00):

Yeah, it’s more function of supply and demand than volatility, so-

Bilal Hafeez (25:05):

That’s because a bigger market than stablecoin.

Zac Prince (25:07):

Yeah, so the dollar borrowing demand is much higher than the Bitcoin borrowing demand in terms of overall size of the market, and in terms of within the crypto market. There’s a lot of people who are interested in earning a yield on their Bitcoin that operate in the crypto world. There are limited opportunities to get a compelling and safe yield on Bitcoin as a lender, and that’s what BlockFi manages. Conversely, with dollars there’s a perpetual shortage of dollars in the crypto ecosystem relative to the size of the borrowing demand for dollars. And there’s a lot of reasons for that, but one of them is that a lot of people that are comfortable bringing dollars into the crypto ecosystem end up just wanting to go along Bitcoin. So that person might think, huh, yeah, I can get 8.6% on dollars, I could also buy Bitcoin and I’ve got an annual return of like 900% percent over the last decade or something, so that’s why the rates are higher on dollars versus Bitcoin.

How to manage crypto lending books

Bilal Hafeez (26:13):

And so, what’s the risk that you’re exposed to then? BlockFi. I mean, there’s some risk that you’re taking there, aren’t you, in terms of managing this interest rate exposure that you have?

Zac Prince (26:23):

Yeah, so there’s fundamentally two types of lending that we’re doing and that corresponds to different risks. One is analogous to securities lending where we could be lending them dollars Bitcoin and they’re posting liquid collateral above the value of the loan back to BlockFi. And in that scenario, it’s just that if the market moves a certain direction against the borrower at a certain point, you’ve got to give them a warning and then a margin call, and then before the value of the collateral is worth less than the value of the loan, you liquidate that position. It’s the same way it works if you were trading on margin in a brokerage account. The big difference is that this market operates 24/7 and liquidity is fragmented, so the system needed to effectively manage that risk is a little bit different. The system can’t just work Monday through Friday from 9 to 5:30 and then close re-open tomorrow. No, it has to always be running and you’ve got to be connected to all these liquidity venues. That’s the majority of what we’re doing.

And then, there’s another part of what we’re doing where we’re willing to take credit exposure to a limited number of institutional counterparties who are some of the largest and best capitalized market-making and trading firms in the world. Their crypto assets are less than 5% of their overall market activities but they want financing for it. And in those scenarios, we’re willing to make loans to them without necessarily over-collateralizing, and we’ll take some credit risk. And that gets underwritten the same way credit from a prime broker gets underwritten, or corporate, maybe with a pinch of corporate lending underwriting insurance as well. So those are the two things that we do.

Breakdown of market players

Bilal Hafeez (28:09):

Yeah. And in terms of the makeup of all the different players in this market, so you mentioned there’s institutional players, there’s retail players. I mean, so what are the different types of retail people and institutions involved in this all?

Zac Prince (28:23):

Yeah, on the retail side, interestingly, we have clients today from over a hundred countries. We’re primarily US-based in terms of our team at BlockFi. In terms of the client base. It’s about 65% US, but then there’s this big, long tail – we haven’t really done any marketing outside the US yet, but we have clients from every continent on the globe, except for Antarctica, in over a hundred countries. And last thing on the retail side, BlockFi clients tend to be a little bit higher net worth. They tend to skew younger. They tend to work in or at least be really familiar with technology and in finance. They skew male, which is something that we’re trying to work on, but that’s the retail side. And we’ve got over a quarter million clients now on the retail side of our platform with funded accounts. And then on the institutional side, it’s market-making firms, trading firms, hedge funds. That makes up the majority, then also some family offices and crypto native businesses like exchanges and miners and cryptocurrency ATM companies as well.

Regulatory trends in crypto finance

Bilal Hafeez (29:32):

Okay. Yeah. Yeah. Great. And in the crypto space, one has to consider all the various regulatory trends. What does regulation say about the type of business that you’re in at the moment and what’s the direction of travel?

Zac Prince (29:48):

Yeah, so right now we’re regulated like a FinTech company in the US, so we have what’s called an MSB, a money services business registration at the federal level. That governs KYC and AML and Bank Secrecy Act regulations. And then, we, at the state level in the US, we hold either lending and money transmission licenses. In some cases, we hold both of those licenses in a single state. The trajectory will likely be similar to other FinTech companies like Square and SoFi and others. They started the same way BlockFi started, but then over time they’ve added in either broker-dealers or state or federally chartered banks or trust companies. And so, we’re always looking for ways that we can consolidate and streamline our regulatory construct, but there’s nothing happening there imminently. And I would say overall, we’ve had great interactions with regulators at BlockFi. I think the regulatory environment for crypto in the US is being managed relatively well, and trending in a really solid direction.

We’re way past the days of 2017 when we first got started, where we would go to regulators and apply for a lending license, and they would say, “Sounds illegal.” Or, there was a big risk of Bitcoin potentially being outlawed completely. We’re way past that now. The CFTC has claimed jurisdiction. Bitcoin’s defined as a commodity, the tax rules are clear, the KYC and AML rules are clear, the way that you get licensed to conduct certain activities like letting people buy and sell cryptocurrency or make loans against it. That’s all very clear now, whereas, maybe three or four years ago, it was still a bit ambiguous. And folks like BlockFi are paving the trail in these different areas. We were the first company to get lending licenses to do this type of activity in the cryptocurrency markets, so it’ll continue to evolve over time. All in all, we’re past the days of the risk of something really weird and wild happening, like Bitcoin being outlawed. I think we’re moving in a very positive direction overall.

Bilal Hafeez (31:52):

And the same applies to Ethereum as well, presumably.

Zac Prince (31:54):

Yeah, definitely. And look, a lot of the issues that are being worked through in the US market, at least, are longstanding issues that have existed around things like jurisdiction between the SEC and the CFTC, or how FinTech companies should be regulated and what they’re allowed to do versus traditional banks. And crypto’s now a part of these issues that have constantly been playing tug of war and within the US regulatory regime over time.

Making a loan against your crypto assets

Bilal Hafeez (32:28):

Yeah. And one thing I didn’t ask you about in terms of the borrowing and lending, was if you have a retail person who holds Bitcoin, they can post the Bitcoin as collateral and borrow from BlockFi, so there’s a borrowing capability for a retailer.

Zac Prince (32:45):

Yeah, so the big use case is this: let’s say you bought Bitcoin a year ago, it was maybe 5,000 or 6,000 or 7,000 today. Bitcoin is 56,000, and let’s say you’re a woman that wants to buy your husband a new truck because he made so much money on Bitcoin trade, but you don’t like the idea of selling your Bitcoin to pay for the truck for your husband, because number one, you think Bitcoin’s going to a hundred thousand and number two, if you sell it, you have to pay taxes on a $50,000 gain. And so, rather than sell it, you can get a loan from BlockFi – we’ll let you borrow up to 50% of the value of your Bitcoin at interest rates as low as 4.5% per year. You use the proceeds from the loan to buy the truck or make an investment or something else that you want to do. And so, you’ll still have your long position on Bitcoin and you haven’t incurred the tax liability of selling it and owning the government their cut of your gains.

BlockFi’s growth strategy

Bilal Hafeez (33:56):

Yeah. Okay. That makes a lot of sense. Yeah. Yeah. I mean, it sounds like a really good business that you have. I mean, are there competitors in this space?

Zac Prince (34:06):

Yeah, tons. I mean, look the way we think about the competitive environment for BlockFi is as follows. A year ago, we were viewed as competing with DeFi and other crypto lending startups. Today, I think we’re viewed as the industry and category leader within that group, and we’re really more competing with the bigger cryptocurrency companies, primarily exchanges and FinTech companies like Square and PayPal and others who are coming into crypto. And then longer term, I think we’ll compete with banks, partially because banks are going to come to the crypto market and partially because we’re going to go into the traditional banking market.

Bilal Hafeez (34:46):

Yeah, so as you grow, your competitors will also grow and they’ll change the different categories part of the industry, so there’s no rest for you.

Zac Prince (34:56):

Yeah. And look, the North Star for us in terms of what we try and do to hopefully have a competitive advantage and defensibility is we stay super focused on building new products that add more value for our clients than the value that we already have. And then we stay really focused on providing great client service to people. I think we might literally be the only company in crypto that has a phone number.

Bilal Hafeez (35:20):

That seems to go against the ethos of the crypto space, ironically. Yeah.

Zac Prince (35:25):

Yeah, and we get phone calls all the time. And sometimes if someone has a question about sending Bitcoin from another account into BlockFi and they’ve never done that before, they’ll call. It could be that they want learn more about how the platform works, or they forgot their password. And they can talk to someone in the US who’s really smart, who knows about our platform, and they can talk to them about our platform, or sometimes people just call us to shoot Bitcoin. Maybe they don’t have anyone there in their immediate friend group that’s into it, and so they’ll call the BlockFi line and they’ll talk about where the price is going next week with someone on our team. Our client service team are all phenomenal folks. In general they’re young folks, early on in their career and they really like crypto and they love working at BlockFi, so they’re enthusiastic in those conversations and it’s a lot of fun.

Future of NFTs

Bilal Hafeez (36:18):

Yeah. No, that’s great. Now I have to ask you about NFTs. It’s a non-fungible token that you talked about earlier. I mean, what’s your view on them? We’re hearing about all of these digital art pieces and so on selling for millions and millions. Is this the new ICO fad, or is this something more than that?

Zac Prince (36:37):

Look, I think it’s here to stay, and I think that we’re probably in the early innings of seeing what it’s going to look like over time. I think it would be pretty exciting to use the technology and what’s starting to happen now within FTS. You’ve got these purely digital pieces of art and purely digital professional sports cards or clips of Stephan Curry nailing a three pointer that you can buy and it’s just yours. But I think it’s going to be really cool to tie the physical and the digital together at some point, so I envision a world where artists who are really good at making digital NFTs also create a physical version of it and physical collectibles have a NFT attached to them. And when you think about that latter use case, it could help with a lot of things like fraud and verification of a piece of art, or other collectible items.

Personally, I’m not particularly active in the market. My wife handles all of our aesthetics – the aesthetic choices. And I made a lot of money in college playing poker and lost a decent amount betting on sports, and that killed sports for me, personally. So, I’m not big into sports these days. There hasn’t been anything there that I’ve gotten really drawn into, but I think there’s a massive market for it and I think we’re going to continue to see it grow, and I think we’re going to continue to see innovation happen in that area.

Bilal Hafeez (38:06):

Yeah. Yeah. It’s interesting on Macro Hive side. I mean, we’re starting to write a lot more about all these different aspects of crypto and so on. We recently started to accept Bitcoin, Ethereum and Litecoin as payments for our subscriptions as well because we were getting some demand from different corners of the world where it’s hard for some people to pay with dollars or euros even, because… I don’t know. For whatever reason it’s easier for them to use a cryptocurrency. It’s interesting how things are just, with the invention of with these sorts of things, you start to discover new parts of the market you didn’t quite appreciate.

Zac Prince (38:43):

Yeah, so if someone pays you in Bitcoin, are you keeping it in Bitcoin?

Bilal Hafeez (38:46):

Yeah. Yeah. I guess we’ll be heartless then, we’d keep it, yeah. We’ll just keep it as an asset on our balance sheet for now, so…

Zac Prince (38:55):

You’re going to be very happy you did that.

Zac’s productivity hacks and book picks

Bilal Hafeez (38:58):

Yeah, fingers crossed. Now I wanted to wrap up our conversation with some personal questions I always like to ask my guests. The first one is, how do you manage your information flow? Because that’s something we think a lot about at Macro Hive. We’re really think a lot about how do you curate and synthesize and filter. How do you do that, because there’s so much in your space as well?

Zac Prince (39:21):

Yeah, I wouldn’t say I’m necessarily particularly strategic about it. I’ve just gravitated toward things that I see value in. I’m an early riser and I’m pretty active on Twitter, so I get a lot of information from Twitter, and then I have-

Bilal Hafeez (39:36):

Actually, on Twitter? I mean, I’m definitely a novice with Twitter.

Zac Prince (39:39):

You just have to follow good people, that’s it.

Bilal Hafeez (39:40):

Okay. Yeah, yeah, yeah. I think I need to. I need to be better with following and who I follow.

Zac Prince (39:44):

The way you curate Twitter is it’s all about who you follow. I mean, there’s all kinds of wacky stuff that happens on Twitter. You can be in celebrity gossip Twitter, you can be in sports Twitter, you can be in finance Twitter, you can be in crypto Twitter. I’m mainly in crypto and finance Twitter in terms of who I follow, but you get information really quick and you can see takes on the information from really smart people. I mean, it’s a phenomenal platform. You have to follow the right folks.

And then I have subscriptions to Bloomberg and the Wall Street Journal, and I listen to a couple of podcasts every week. I listened to the Animal Spirits podcast, which is like mainstream markets commentary. And then I listen to this podcast called On The Brink. They do a crypto weekly news roundup and crypto market activity roundup once a week. And then I get a lot of information through my day-to-day work at BlockFi with our clients and partners. We’re fortunate to work with some of the smartest and most influential market participants, not only in crypto, but in traditional markets. And so, I’ll be on the phone with folks from the biggest trading firms in the world every week, and 90% of the conversation will be about whatever business we’re doing together, but I always make sure to ask them what their view is on the current market cycle or other events or trends that we’re seeing in the markets, and so-

Bilal Hafeez (41:07):

Okay. Yeah, that sounds good. Yeah. And I love books, and so I always like to get new recommendations. Are there any books that have really influenced you over your career or something you read recently that you really liked?

Zac Prince (41:19):

I’d say the biggest ones that influenced me over my career have been The Hard Thing About Hard Things by Ben Horowitz, and then Zero to One by Peter Thiel. Books that I read recently: I read the Netflix book on culture recently, I thought that was pretty good. And yeah, every once in a while, I’ll slip in a fiction book. I read this book called Shantaram.

Bilal Hafeez (41:43):

Oh Shantaram. Yep. I’ve heard of that, yeah. Yeah.

Zac Prince (41:45):

But I’m more… I don’t read books that much like a lot of my long form content, so I read Bloomberg, Wall Street Journal and Twitter during the week. And then if given the time on the weekends, I’ll knock out a whole issue of The Economist, so it’s pretty dry.

Bilal Hafeez (42:02):

That’s great. No, those are good. They’re all great sources. Yeah. And if people wanted to learn more about BlockFi or follow you, or things like that, what’s the best way people can do that?

Zac Prince (42:13):

Yeah, Twitter is a great place to find me. My handle is BlockFizac. In terms of BlockFi, I would encourage folks to check out our website, blockfi.com or download our mobile app. And like I said earlier, we’ve got a phone number, we’ve got email. My DMS are open on Twitter, so we love hearing from folks, and don’t hesitate to reach out.

Bilal Hafeez (42:32):

That’s great. I’ll include all of those contact details and links to the site and everything on our show notes. So with that, I’d just like to thank you. That was an excellent conversation. I learned a lot and good luck with everything. Sounds like a fantastic business.

Zac Prince (42:44):

Thanks again for having me. This was a lot of fun. Time flew by.