WBD707 Audio Transcription

Valuing Bitcoin with Peter Dunworth

Release date: Friday 8th September

Note: the following is a transcription of my interview with Peter Dunworth. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Peter Dunworth runs a multi-family office for high-net-worth families. In this interview, we discuss Bitcoin in Australia, and the reluctance of banks to embrace it despite it being the world’s most undervalued collateral. We also talk about the negative impact of state expenditure and taxation on inflation and the economy, and how markets are going to form around Bitcoin.

“The first valuation framework is simple in that there’s $6.3 trillion of global trade that happens on a daily basis, and if you divide $6.3 trillion by the 900 BTC that are minted on the day you get to $7 billion a coin.”

— Peter Dunworth

Interview Transcription

Peter McCormack: All right, Peter Dunworth, it's our first ever podcast in Australia.  Bring the mic up.

Peter Dunworth: How's that?

Peter McCormack: That's good, man. this is our first ever podcast Down Under.

Peter Dunworth: It's a pleasure to make you.

Peter McCormack: My first trip to Australia. 

Peter Dunworth: How are you finding it? 

Peter McCormack: Mate, I'm sitting with someone from the esteemed Dunworth family.  So, your brother, are we going to see your brother? 

Peter Dunworth: Yeah, tomorrow night. 

Peter McCormack: Right, so I've met a lot of people with this job.  I mean, obviously you probably get called the same; Dunny!  Michael's my favourite person I've ever met in Bitcoin.  Hands down, no competition. 

Peter Dunworth: Thanks, mate. 

Peter McCormack: Sorry, but you're different now, you're like my best friend in Bitcoin!  You know what I mean?  Firstly, we don't really talk about Bitcoin, when I hang out with him, it's like hanging out with a mate, and he's always happy. 

Peter Dunworth: Yeah.

Peter McCormack: Always happy

Peter Dunworth: Scarily so, right?

Peter McCormack: Yeah, I can't wait to see him.  I hope he doesn't get an ego off this, but I love your brother.

Peter Dunworth: Everyone does.

Peter McCormack: He doesn't talk about you!

Peter Dunworth: Why would you!

Peter McCormack: I didn't know he had a brother!  But thank you for having us here in Australia. 

Peter Dunworth: We're thrilled you're here, literally. 

Peter McCormack: And Danny was last night, he's like, "I need to get Peter to tell you a story but I can't tell you what it's about", and then I've got my notes, it's like, "Shark story"! 

Danny Knowles: You told us when we were playing golf.  It's too crazy, you've got to share it.

Peter Dunworth: It is, it sounds unbelievable.  So I'll tell you the full story.  Many moons ago, in what feels like another life, I was training for a paddleboard race in Hawaii, which was a 52k race between islands on one of those boards that you paddle on your knees with your hands digging in.  So, one of the training runs that I'd do for that race was jumping off North Bondi, probably our most famous beach, and it faces dead south and there's a point about 8 kilometres in the distance.  And so, I'd paddle down there, paddle back and it'd take about three hours to do. 

But one morning, mid-May morning, I'd do it by myself, just straight offshore and be about 2 kilometres offshore at some points in this journey.  And I got down to the point, Malabar Point, and I'm about 1 kilometre off the beach sitting there by myself.  It's probably 7.30 in the morning at the time, and sitting on the board having a water before I turn around and head back, and probably no more than maybe a metre further back than you are now, so three metres in front of me, I see this little, well a big fish about a foot long, like scampering across the top of the water.  And I'm like, "That's odd".  And then from underneath it, I just see this probably 12 foot to 13 foot great white come up and smash it, just eat it straight in front of me.  It throws water in the air, I'm sitting on my board, the water that its fin throws in the air lands on my board in front of me.  I get goosebumps telling this story.  And I basically shit myself. 

Peter McCormack: Yeah, of course! 

Peter Dunworth: And the advice is, "If you see a shark out there, just don't move, it won't eat you".  And it's like, pardon the French, but fuck that!  So, I'm going to shore, I don't care if it eats me.  So, I turn straight for shore, and the problem is I know my distances and how fast I paddle.  And I know I've got a six-minute paddle to the beach, going flat stick.  So I'm like, if it wants me, I'm gone.  So, I start paddling to the beach, the adrenaline's going, it's going now actually telling the story, and I start paddling and I see this shimmer of wind come across from maybe 30 metres across.  And just as it gets me, I look down under the board and there is like this enormous shark swimming at pace about 20 foot underneath me and I'm like, "Oh my God, just pretend it's not there, pretend it's not there". 

So, three minutes in, I'm halfway to the beach, that's how far off I am.  And adrenaline doesn't last more than three minutes.  So basically, I'm not that fit to keep going, so I reassess things.  And when the adrenaline wears off, you're prone to making really dumb choices.  So, I'm presented with getting out, keep going, get out at the beach, but that's going to upset the whole day that I've got planned in front of me.  So I'm like, you know what, I'm just going to turn around.  The quickest thing to do is just paddle back.  Maybe I didn't see what I thought I did.  So I turn right, start paddling north again and I'm paddling for 45 minutes in the water.  And as I'm paddling, I get to Coogee and then there's an island about a kilometre off Coogee, and to put this into perspective, I'm nearly another kilometre outside that.  So I'm now 2 kilometres from shore, not 500 metres. 

As I'm paddling along, I have this awful sensation of when I pull through the water, it stops feeling like water and it starts feeling like concrete.  The water turns hard and it feels like the water's being pushed forwards.  And I'm like, that's hopefully not what I think it is, basically a big shark coming up to look at me and turning around.  So, I felt this maybe three or four times in the space of five minutes.  And then I thought, we're all good and I'm still paddling and focused and I'm still trying to get back to Bondi, when literally probably close to a 30 to 40 centimetre dorsal fin pops up within a metre and a half next to me. 

Peter McCormack: You were stalked? 

Peter Dunworth: Literally stalked.  I am just literally looking at this thing and my immediate response is, "Oh, this is a prank one of my mates has played on me.  They've swum out with a fin on the back", because it looks so ridiculously huge.  And then I looked around, I'm like 2 kilometres offshore, my friends aren't up for that for a prank.  So I'm immediately going to meltdown.  I literally piss myself, I do a deal with God like, "You let me out of this one and I promise to be a better person".  I watch this thing, literally the fin just slowly, slowly come down under the water as I stop paddling and I watch it go away.  There's an immediate sigh of relief that, "Okay, this is no longer here", but then the realisation dawns on you that now you don't know where it is. 

So having seen that for the second time, I took the hint and then I proceeded to go straight into shore; no looking, no stopping, just a 20-minute paddle straight back to the beach and I haven't been offshore since. 

Peter McCormack: Oh really?  You're done with the water? 

Peter Dunworth: I did the race in Hawaii, but no more.  I don't surf anymore.  Yeah, done with all of it. 

Peter McCormack: I mean, me and Danny talk about this a lot, because you how often do you go surfing? 

Danny Knowles: Two or three times a week probably.

Peter McCormack: Yeah, and every time I hope he gets eaten by a shark.  No, I'm joking!  Every time I see about a shark attack in Australia, which isn't -- I mean, It's more than once a year, I feel like.

Danny Knowles: Yeah, it's more than once a year.

Peter McCormack: I'm always like, "Shit, are you all right, Danny?"  

Danny Knowles: There's a lot of people that surf here though. 

Peter McCormack: I don't care about the odds.  There's zero chance I'm getting in the water off Australia at all.  I'll go in a swimming pool, that's fine.  But you do it, you don't worry at all?

Danny Knowles: No, I don't think I've ever, well, I don't know if I've ever seen a shark.  There was one time, because you do question it, don't you? 

Peter Dunworth: Totally. 

Danny Knowles: And there was one time I was surfing and I was paddling out, and I duck dived a wave and I thought I saw a shadow kind of go across the wave.  And it can play tricks on you, so I'm not convinced it was a shark, but it was enough to make me think, "Fuck, that might have been".  I paddled in, went to the lifeguard, and because I thought there's a load of people out there surfing, I'll just say, "I think I might have seen this, I don't know"  I was trying to play it down, I was like, "I don't know if I saw it, but I think I may have done".  And he's like, "It is the ocean"!  Brilliant, cheers, and I feel like a dickhead!

Peter McCormack: But that's my take; surely they're there all the time?

Peter Dunworth: Yeah.

Peter McCormack: And the great whites are quite regular? 

Danny Knowles: Yeah, more down here than where I am.  You get bull sharks where I am, I don't think there's as many great whites as here.

Peter Dunworth: No. 

Peter McCormack: The great white will happily eat a human, right? 

Danny Knowles: Oh yeah, in one bite. 

Peter Dunworth: Or at least put a big dent on you.  So, to be sort of -- 

Peter McCormack: I still can't believe you went back out! 

Peter Dunworth: Yeah, that was crazy and in hindsight, I just put it down to the adrenaline making bad decisions.  That's just bad risk management.  But the reason why I was so doubtful of seeing it, you know, we talk about in Bitcoin black swan events.  Prior to that, there hadn't been a shark attack in Sydney in 73 years.

Peter McCormack: Oh, is that true?

Peter Dunworth: So I'm thinking, "Well, that didn't happen, it never did".  And then that was in May, probably 15 years ago nearly, and then in September, there was a shark attack in Bondi.  Then there was another one in November in Avalon, and then Woolloomooloo was in between that.  So, six months after that happened to me personally, we then saw three shark attacks in Sydney within 30 kilometres of each other.

Peter McCormack: Is there a reason why they're becoming more regular?

Danny Knowles: There's loads of theories, I don't know. 

Peter McCormack: Global warming! 

Danny Knowles: Well, I mean, that is what some people say, depleting fish stocks, driving them closer to shore and all that sort of stuff.  Where I am in Queensland, there's been one shark attack again, I don't know, it's like since the 1970s or something, which was really recently actually.  But just south, so where I surf on the Gold Coast, maybe 40 minutes south, maybe a little further, there's a place called Ballina, so it's only just over the border that is probably shark attack capital of Australia now, and for whatever reason they just don't like Queensland. 

Peter McCormack: Do you get crocodiles in the sea here as well? 

Danny Knowles: Yeah, way further north though, not really where anyone surfs. 

Peter McCormack: No.  But that's also weird, crocodiles in the ocean. 

Danny Knowles: Yeah. 

Peter McCormack: Crocs and sharks.  This country's weird, you've got a lot of weird shit here. 

Danny Knowles: Drop bears. 

Peter Dunworth: Yeah. 

Peter McCormack: What's a drop bear? 

Peter Dunworth: Be careful of them.  Danger. 

Peter McCormack: Oh, is that the koalas with chlamydia? 

Danny Knowles: I mean, they do all have chlamydia, yeah! 

Peter McCormack: And so, what, they just jump out of the trees at you? 

Danny Knowles: Yeah.

Peter McCormack: Have you had that happen? 

Danny Knowles: No. 

Peter McCormack: Is this a wind-up?  Is a drop bear a wind-up? 

Danny Knowles: Yeah, it's what all the Australians tell tourists! 

Peter McCormack: I believed you last night!  Well, I'm glad to be here.  I'm pretty sure I'm not going to see a spider in my hotel room.  Safe.  Really?

Danny Knowles: I mean, yeah, it's a spider.

Peter McCormack: No, but like, not the --

Peter Dunworth: Not the ones that'll kill you?

Peter McCormack: Yeah.

Peter McCormack: Yeah, no, there's none of that.  They do a good job with fumigating.  

Peter McCormack: Do you have any weird stuff here in Sydney?

Danny Knowles: Oh, there's snakes.

Peter Dunworth: Funnel-web spiders.  They're the most dangerous spider on earth.  They can kill you if you don't get it treated.  But you'll know it, they'll jump on you.  They can jump about a foot.

Danny Knowles: That's a true story, that one's real!

Peter McCormack: Could there be one in here, realistically?  Screw you, you're a windup!  Should I be checking under my toilet? 

Danny Knowles: Yeah.

Peter McCormack: And in my boots?

Danny Knowles: Yeah, check your shoes, check under the bed. 

Peter McCormack: You're a wind-up, you can fuck off!  Weird country, I'm not coming back.  But no, I'm glad to be here.  I'm looking forward to seeing your brother, glad to talk to you, look forward to getting some good food in.  Before we start, tell me about Bitcoin here in Australia, like how active is it, how big is the scene?  I've got no concept.  I can conceptualise it in other places, but Australia I can't, it's too far away. 

Peter Dunworth: Well, I think it's difficult to get a grasp of even being here, because it's such a geographically dispersed country.  We've got the equivalent of Sydney to Perth, which is the width of the country, is the equivalent of driving from London to Moscow just about. 

Peter McCormack: Right, okay.

Peter Dunworth: And we're not a big country.  There's only 25 million of us, so there's not a lot of people here to start with.  And typically, geographically dispersed across that size, you just don't really know, but there are some really great communities that we're all a part of, which I think bring a lot of bitcoiners together.  Because a common theme I see with bitcoiners, probably across the globe and maybe more so here, is there's a sense of isolation, because to be in Bitcoin, you have to be maybe a little bit --

Peter McCormack: Mental! 

Peter Dunworth: Or on the spectrum, or God knows what, but you're not traditional thinking to get into this space.  So, there's that sense of isolation, but there are some really great communities that I've been fortunate to be a part of.  There's a great initiative called the Bitcoin Bush Bash, which Wiz and Sir William basically put on, and maybe 80 to 100 bitcoiners from all over the country converge on a quiet little country town and have three days of talking about Bitcoin, which seems so surreal. 

Peter McCormack: Out in the bush? 

Peter Dunworth: Literally, out in the bush, little community town hall, usually next to a church, and there'll be 80 to 100 adults sitting down listening to Bitcoin presentations.  And then afterwards, we go to the pub and have a steak dinner and basically chat all night about Bitcoin, and then we go back to our lives two or three days later. 

Peter McCormack: By the way, Danny, there's a bit of fluff up there in the office ceiling.  I just had a moment out of the corner of my eye where I was like, "What the fuck's that?"  I hate bugs!  What's the government treatment of Bitcoin here? 

Peter Dunworth: There have been mixed messages, to tell you the truth.  We just had recent legislation, well a proposed bill pushed down, so basically got kiboshed, and that was going to put Bitcoin and crypto into the same bucket and make it a financial product.  But ASIC, which is our regulator, or the equivalent of the SEC, has deemed that Bitcoin is not a financial product.  So, there is no regulatory requirement or licensing required to talk about or give advice on Bitcoin in Australia.  So, I think that's probably a good thing.  The more people that are aware of it, the better.  And I think obviously the news with BlackRock, that will then push Bitcoin into that financial mainstream.  So, I'll be curious to see how the regulators and the government responds to it. 

But the ATO as well, they've been pretty fair with it.  They deem that it's a property, so it's the same tax treatment as buying and selling shares or --

Peter McCormack: ATO?

Peter Dunworth: The Australian Tax Office, sorry.

Peter McCormack: I was like, "Alcohol, tobacco, liquor…"  Okay.

Peter Dunworth: So, our tax office has a pretty fair treatment of it.

Peter Dunworth: Okay, so it sounds similar-ish to the UK.

Peter Dunworth: Yeah.

Peter McCormack: What about the banks?  Are the banks allowing people to send money to exchanges to buy Bitcoin, because that's the big issue we have in the UK.  The banks are just routinely closing down people's accounts if they're trying to buy Bitcoin. 

Peter Dunworth: I have got a lot of war stories on this and I've seen it get progressively worse in the last, say, three to six months.  So, we've been doing this for a number of years now and it's only the last sort of two to three months I've seen just how difficult it is to get money into banks.  We've seen our major bank, the Commonwealth Bank of Australia, which is a large bank even on global terms, they've limited the amount of money that you can transfer to the exchange to the tune of $10,000 a month, which is a big hit.  So, they don't want to see money moved to the bank or out of the system, and I've got a theory on why they don't want this.

Maybe a bit of background of this is after the GFC, the global banks basically put together a regulatory framework, called the Basel III Accords, which were put together, and it was basically to ensure that the banks had sufficient capital to fulfil all of their liquidity obligations.  And this meant from a lending perspective, if you wanted to lend out $1 million on the home loan front, you had to have 5% in cash on the balance sheet.  That basically worked into a $50,000 amount, which in Australian terms, that's roughly 1 Bitcoin, give or take 20%.  Now, if you take that $50,000 out of the banking system to send it to the exchange to buy a Bitcoin and then that money is outside the system, that $50,000 can't be rehypothecated 20 times to produce a million dollar loan.  And that million dollar loan from a bank's perspective, if they're working on a 2% margin, generates $20,000 of revenue for the bank per annum.  And this is an ongoing annuity for the bank. 

So, they look at this and they think, "Wow, if we're going to see this flight of capital out of our system into the Bitcoin world, this is a huge event from a credit deflation perspective", because it inhibits their ability to lend money. 

Peter McCormack: They should just sell the Bitcoin. 

Peter Dunworth: They should and then they should bring that into the system, and then all of a sudden -- and this is the world's converging that I think what will happen over the next sort of six to seven years.  But at the moment, they're very anti-Bitcoin, but I think they'll soon embrace it and put that on the balance sheet, because once it's on the balance sheet, then they can 20X leverage it and you can see where that lending goes.

Peter McCormack: You see, I'm not sure if that's the reason or it's a similar reason that's happening in the UK.  One thing I do know, which is a problem for the banks, and one of the reasons they don't want to touch Bitcoin or Bitcoin exchanges, is that the UK Government essentially outsourced financial surveillance to the banks.  They essentially went, "Well, you can just do this job for us.  You can handle all your KYC, AML, etc".  And because there have historically been issues with, and we just have to say broad crypto, because even if you regulate Bitcoin as a commodity and crypto as financial products, people are buying them from similar places.  So, the actual AML, KYC situation is very similar.  But because they have to handle all of the financial surveillance of the government, I think a lot of them are like, "There's just too many headaches with this, we don't need this headache in our world, we're just we're just going to ban it".

It's even worse.  I was speaking to, I don't if you were there when we had the conversation with Danny from CoinCorner.

Danny Knowles: In London?

Peter McCormack: It might have been after that.  So, Danny Scott, who runs CoinCorner, which is an Isle of Man, essentially UK exchange, he was now saying that something along the lines of, if there is a criminal transaction or a transaction that's got through your KYC AML checks, you are liable up to one hop or maybe two hops, something along the lines of this.  Therefore, it's just making the banks go, "Well, we don't make any money from this, it's high risk, and we have a liability if this is a criminal transaction.  Why do it?" 

Peter Dunworth: Correct, there's nothing in it for them. 

Peter McCormack: There's nothing in it for them. 

Peter Dunworth: Show me the incentive, I'll show you the outcome. 

Peter McCormack: Exactly. 

Peter Dunworth: "We're earning no money.  In fact, when we see the money leave, we really earn no money on that, and there's no outcome for us other than liability".  So, it's really a risk mitigation.

Peter McCormack: Yeah, I don't think it's like this weird conspiracy where the banks have got together and said, "You know what, this Bitcoin stuff, this is a threat to us, we need to get together and agree to this", I think it's purely the incentives.  Because we do have, like Revolut are pretty good.  Revolut said, "We're going to be the modern bank, we're going to allow this", and I've had zero issues moving money in and out of exchanges from Revolut.  But I do know, across the major banks, NatWest, Barclays, I don't want to name more in case I get some of them wrong, I'm not so sure of Lloyds, but most of them are basically, "You can't", and they won't allow it and some will close down your bank accounts. 

I actually, weirdly enough, I had a bank account closed down because I got a sponsor payment from a crypto exchange, from Gemini.  This is where it gets super-weird.  So, send them an invoice, Gemini go to pay the invoice, the payment gets blocked, and I'm asked to provide a copy of, I don't know if I've told you this, the invoice and the contract.  So, I'm thinking, "What the fuck?  What do you mean you want the contract?"  So, I have to send it, they've seen the contract and they immediately froze my personal and business accounts, froze my money and then closed the accounts and said, "Your money's frozen for this period of time", and I hadn't broken a rule.  Their rule said you cannot transfer money to exchanges, but they banned me because I had a relationship with the exchange, which is super-weird. 

Peter Dunworth: This is the problem I think that's not just a problem with our banking system, but it feels like broader society.  There is an overreach for government at all points.  And the thing I love about British law is that you gave us the presumption of innocence until proven guilty, but in that instance and many more there is not that ability to do that, and I think that is a massive overreach that is a step too far.  And this is one of the things that excites me about Bitcoin, is that self-sovereignty, that you can have full control and ownership over your movements and what you want to do with it.  Now, that's not an endorsement to flaunt the rules and the rest of it, it's anything but, but I do like the idea that I don't have to ask anyone what I want to do with my money, because I find it highly intrusive, if not offensive. 

Peter McCormack: Well, again, that's what happened to me with Lloyds.  So, I'd been with Lloyds for 25 years.  I'd had multiple products from them, mortgages, loans, everything paid off.  I wasn't in my overdraft, I was a good customer.  I get a phone call one day from somebody in a call centre, which by the way, let me dig out this email.  This will be interesting for you, Danny, because this backs up what happened to me. 

So, I got this phone call from somebody in a call centre who said, "Hi, Mr McCormack, we're just doing an account review and we just want to run through some of your transactions with you".  I was like, "Okay, what's that?"  They said, "This money on this day, you sent it here, what's it for?"  And I was like, "Do I have to tell you?"  They said, "No", I said, "Well, I'm not going to tell you.  Have I done something wrong?  If you're suspicious, should you not call the police; should you not investigate me?  I'm an adult with two kids and three businesses.  I'm okay, I've not complained about this transaction".  Anyway, two days later I get a letter in the post, "Your account's being closed down". 

My big issue, well, there's two issues with this.  Firstly is the fact that they're being nosy, they're asking me private information.  The second point is, who is this person that I'm sharing this information with?  I got this email, Danny.  I want to dig it out, I bet I won't find it now.  This guy, he was working for a UK bank and he was working on essentially the team that phoned me, "I heard your story with Lloyds.  I worked in that team".  He said, "I was a junior".  I think he said he was something like in his early 20s and he was having to make these phone calls and he was given the authority and responsibility to close down people's accounts, and he was a junior. 

Danny Knowles: Crazy. 

Peter McCormack: Yeah, it's like, "What is going on here?" 

Peter Dunworth: Yeah, we've had similar things here.  I've been forwarded from clients, one of our major banks, top four bank here, probably similar to Lloyds in status from an Australian perspective, there were 14 different questions that their banker asked them on a $200,000 transfer to one of our exchanges here, and the transfer wasn't anything out of the ordinary.  There were millions of dollars of transfer to this exchange prior and there was a list of 14 questions.  Basically, where is this money going; who is the intended recipient; what is the purpose of this; what is the purpose of your business?  I am talking a list, and a client forwarded it to me and said, "Oh, can you have a look at this?  By the way, we're not going to get you to respond to it, we've asked our accountant to do it". 

But it was a proper list that you have a choice, you don't have to comply, in which case they'll do what happened to you; or alternatively, you have a response which probably takes you close to an hour to answer the questions in full to a fairly meaningless, by way of percentage terms, transaction for this client.  So, there's an hour of an accountant's time to basically respond to this request.  So, the overreach is basically across all areas I think.

Peter McCormack: Yeah.  Well, did you hear my interview with Nigel Farage? 

Peter Dunworth: Yes. 

Peter McCormack: Yeah, what did he say?  He thinks a million bank accounts in the UK have been closed down arbitrarily, which to me is a huge scandal, because it's coercive pressure to comply with -- I mean, it kind of feels like you don't want to say it without sounding like a conspiracy theorist, but at the same time you're like, "This is kind of quacking like China a little bit".

Peter Dunworth: Worse so.  At least you know what the rules are over there and everyone's really clear on it, but it feels like our rules may be a little more subjective.  And I'm not sure if Danny may have shared with you, but in the last week or two we've had now the banks can filter your social media to determine whether or not they want to continue to provide service to you. 

Peter McCormack: Shut the fuck up!

Danny Knowles: I didn't even know that happened.

Peter Dunworth: Well, that's in the throes of coming, and I've got to say that probably is going to be shitcanned pretty quickly, I would have thought, because it feels like reading the room, that is a no-go now.  But maybe 12 months ago, that was something that they wanted to institute and the rest of it.  And big companies move very slowly, so it takes just a long time to get through things.  But one of the last maybe two weeks, I saw something about, I won't mention the major bank, but it's literally one of our top four banks, suggesting that they can rescind their service to you if they're not happy with how you're presenting yourself socially or on social media. 

Peter McCormack: That's so screwed up.

Peter Dunworth: Yes.  Yeah, it's horrible. 

Peter McCormack: I think I would lose my account!  I mean it's weird, because coming into Australia, you're very conscious of the fact that if you have any criminal record, you might not be allowed in the country.  They're ironically strict about that, seeing as you're an island of convicts! 

Peter Dunworth: The whole purpose of this place, bar Adelaide, was to look after the riffraff from Britain! 

Peter McCormack: You were meant to be a safe space for British convicts, but I was really conscious of that.  I was sitting there thinking, "Have I ever actually?  I've never been arrested, no criminal record, I'm a law-abiding, tax-paying citizen, and I constantly feel like I'm guilty of something".  And I'm like, what is the end goal here?

Peter Dunworth: Yeah, I don't know.  Just sew that seed of doubt, it feels like that's where we're moving to across all society.  And that there's some interesting societal things happening in Australia where, you know, we have a National Sorry Day --

Peter McCormack: What?!

Peter Dunworth: Yeah, a National Sorry Day to apologise to the indigenous community. 

Peter McCormack: I mean, it's a weird way of doing it.  My cousin, she lives out in New Zealand and she's a professor and she studied, whatever it is, indigenous communities, Australia, New Zealand, America, South America, and she's rightly disgusted and pointed out some of the horrendous treatment to indigenous communities around the world.  But at the same time, a National Sorry Day, what's the purpose? 

Peter Dunworth: I don't know and this is what I, without getting political, because don't need that, I genuinely don't know, but I think obviously it's about awareness.  For me personally, I find given the fact that 20% of our population are first-generation immigrants, what are they sorry for?  They just got here off a boat.  Why should they be saying sorry for the treatment of people who weren't here previously, which it's tough to do, but at the same time it's really important to acknowledge that some people have been given a really tough time. 

Peter McCormack: But you can do that with action rather than words. 

Peter Dunworth: It's just a very fine line and this is where, if there's a sense of someone who's being a victim in a situation, it's important to appease their concerns.  So, maybe that is what they wanted.  So, I'm not sure where we got to on this, but I do know it's a very strange situation, where in my world I say sorry for things that I've done and I do my very best to make good on it.  And if someone asks me to say sorry for something I haven't done, it's very swiftly dealt with, with a, "Good luck with that"!  But at the same time, we've got this situation where we want to live in a harmonious community, and it's important that we acknowledge that some people were treated very badly.

Peter McCormack: I think these weird societal issues, I think there's a lot of parallels in a lot of western liberal democracy.  And I think a lot of what you're probably going through here is very similar to the UK, very similar to the US, where government has got way too big, way too inefficient, there's too much corruption in government, there is a breaking financial system.  I don't know what inflation is like here, but it's been pretty bad in the UK.  Everything's starting to fray around, I don't want to say around the edges now, it's creeping in towards the middle.  But I am starting to feel the pushback has a voice.

So, where the pushback before was historically, you sound like some crazy conspiracy theorist pushing back, I feel like the pushback has got some legs.  I think a really good example was that, we talked about it a few times, that Rich Man of North Virginia song in the US, which I think resonates with a lot of people at the right time, and what I think is going to happen is we're going to start to see pockets of this, whether it's Canada, the UK, Australia, the US where people are starting to realise, "What the fuck is going on here?  I'm getting taxed here, and then I've got inflation here, I'm left with a very, very small bit of what I've earned and I can't afford anything".

Peter Dunworth: Yes, and it's getting smaller and smaller, and the thing that terrifies me is for better or worse, we take our economic direction typically from the US, as does Britain and Australia, the rest of it, we're all hinged to that boat or hooked to it.  The problem I see coming down the road is we've got a forecast that by, well before 2050, but could be 2035 which is 12 years away, 50% of US GDP is going to be generated by the government, which I find to be an oxymoron because how can a government generate GDP?  All they do is take taxes and then distribute.  So, I mean you're sitting here scratching your head thinking, "That's how big the government's going to get, that 50% of all expenditure in the economy is going to be from a government?"  Surely there is a better way, it needs to be more efficient.  So, sadly I think this thing is going to get a lot worse before it gets better.

This is where, if you look at historically the tax rates that we've had to endure across western democracies, Australia is not isolated here, but we've had just after wartime and the rest of it, tax rates up to close to 90%.  So, I mean can you imagine in Australia, we're sort of running around at 50% tax rates, but then we also have sales tax and a whole host of things.  And here's probably the most egregious example I know of, is that a litre of petrol in Australia, which for our American friends would be a quarter of a gallon roughly, is AU$2 at the pump.  But if you're on the highest tax rate, that AU$2 of petrol, how much is actually going to tax and how much is going to you personally in the form of petrol?  Breaking down those taxes, once you strip all the taxes out of it, including your income tax from this, you end up with 35 cents' worth of petrol out of that AU$2. 

Peter McCormack: Alistair Milne, I think it was Alistair, did a really good tweet recently, he said, "You start a business and you pay corporation tax; and then you pay yourself and you pay income tax; and then what you're left with, you buy stuff and you pay sales tax; and then you die and you pay death tax".  It was a much longer list, but he went through and you try and figure out, you go, "Well, what am I actually left with here?  This is fucking ridiculous".  And look, I'm not an anti-tax person, I'm not a no-government person, but I am anti-big government and anti-high tax and this -- can you try and dig out that Lenin quote, which it wasn't actually from Lenin, but it's that place between taxation and inflation?

Danny Knowles: Yeah.

Peter McCormack: I think it came out from an interview he did with Mises.  Is it with Mises?

Danny Knowles: I don't know who it was with.  I don't think it was even him.

Peter McCormack: He didn't even say it, but it's great, "The way to crush the bourgeoisie is to grind them between the millstone of taxation and inflation".  That's happening now. 

Peter Dunworth: As we speak?

Peter McCormack: Yeah, that is happening now.

Peter Dunworth: Like in Britain, you guys are dealing with inflation, which is horrible.  In addition to that, your interest rates are probably well below where they really should be.  So, when you're the grill and the missiles, like in the middle of that, you're just getting ground down to the day. 

Peter McCormack: Yeah, it's not good and nobody seems to be -- it's funny, when they discuss, "How do we solve this?  Let's raise interest rates".  There's no part of the conversation which is, "Maybe we should just reduce government expenditure?" 

Peter Dunworth: Not even in the question, is it?

Peter McCormack: Well, I mean in fairness to, what was her name? 

Danny Knowles: Who do you mean? 

Peter McCormack: The Prime Minister, she lasted about 30 days. 

Danny Knowles: Oh, Liz Truss.

Peter McCormack: Liz Truss.  She actually tried to stimulate the economy, she wanted to reduce tax and she got destroyed.  But I would be quite the fan, I'm not going to vote in the next election because they're all fucking idiots, but I'd be quite the fan of somebody to come and say, "Yeah, we're going to reduce government by half, and we're going to reduce taxation, and we're going to put more money into your pockets to invest and create jobs".  I'd be quite a fan of that. 

Peter Dunworth: This is the problem we have when 50% of GDP is from the government.  You can't vote for that because you'll never get in, because 75% of the population is on the teat of government, and so we are fast approaching that precipitous cliff that we don't get a choice in that.  And I would be a fan of that because I think what's so far removed from society at the moment is positive incentive structures.  And this is where, show me the incentive, I'll show you the outcome.  Well, of course you're incentivised to do a whole host of things, like not work, take the dole, get government benefits, that gives you cheap housing, you don't have to work.  An example in Australia here is you don't have to work, you can get government housing, you can get government payment on a weekly basis.  And you can get that from the age of 16 or 18 upwards.  And if you have a child young, you'll have potentially a AU$5,000 baby bonus for having a child.  So, you're incentivised to then create those outcomes in the economy. 

Peter McCormack: I love how they will say thought, "The government is giving you this AU$5,000".

Peter Dunworth: It's not.

Peter McCormack: "Oh, the government's so nice".  The government don't fucking generate any money.

Peter Dunworth: Correct, and then you contrast that type of incentive structure to say Orbán -- is it Orbán in Hungary? 

Peter McCormack: Yeah, Orbán, yeah. 

Peter Dunworth: Where he said, "You have four kids, you're tax-free for life".  I'm like, if Rupert Murdoch was a resident in Hungary, I'm pretty sure he'd find a young wife and he'd be having four kids to meet whatever his tax rate requirement is for the rest of his life.  So, it's just that's probably such a horrible conversation, but at every level the incentives are misaligned, and it's so critical.  And this is one of the things I love about Bitcoin, is it feels like in that environment everyone's incentives are aligned.  And this is where, say to Bitcoin's point, I haven't seen anything that has the ability to align 8 billion people's incentives other than Bitcoin. 

Peter McCormack: Well, we're going to come to that because Danny said you're the most bullish guy in Bitcoin!  We're going to come to that.  I just want to end, though, that point is like 50% of GDP generated by the government, which is bullshit, but we know how this plays out.  We have case study after case study.  We see what Chávez did to Venezuela.  I think they ended up with 70% of the people working for government.  I've just seen it now, I've just been to Argentina.  We've seen it, we've seen how this plays again, government just gets bigger and bigger.  We saw it during COVID.  As they closed businesses down, as they locked everyone down and businesses were failing, actually the UK government expanded by 90,000 employees during COVID.  We've seen how this all works, we've seen this over and over again.  They're not generating any money.  They only get money by taking it from us, the productive part of society.  And when they push too hard, there isn't any more they can take from us, then they print and they crush us with inflation. 

It's like, look, I'm not a libertarian, but I have huge sympathies with libertarians right now, because we know what's going to happen, we know how this plays out, we've seen it again and again through history, yet they keep doing it.

Peter Dunworth: Yeah, that's the problem, there's no accountability for the decision-making.  And this is where if people had to sit with the decisions that they were responsible for, we'd have very different outcomes, and sadly that's not the case.  We live in a democracy where you can make bad decisions for four years and beat it with no consequence. 

Peter McCormack: Well, there's that time lag of what happens.  I got off the plane here and got a news alert from Sky, which was Birmingham City Council is effectively bankrupt.  And a lot of it was based on that equal pay fine.  Well actually, I saw a tweet from that Maria I really like.  She was saying they spent £100 million on a computer system upgrade that was meant to cost £19 million. 

Peter Dunworth: How much did they spend, sorry?

Peter McCormack: £100 million on a computer system upgrade.  The amount of these things that happens, it's like the NHS systems, all these systems that they end up doing, they cost too much money and waste money.  But the point is that effectively, it's a bankrupt council now.  And I just think we're going to see a lot more of this, but the thing is they can bankrupt the council, because what happens?  The government's going to bail them out or...

Danny Knowles: For context as well though, this is Birmingham, it's the second biggest city in the UK. 

Peter McCormack: I thought it was the third?

Danny Knowles: It's bigger than Manchester, I think.  So, it's not like a small council, this is like a really big one. 

Peter Dunworth: It's not like you can just relocate Birmingham residents to the next city. 

Danny Knowles: That's the problem.  It's crazy. 

Peter McCormack: Yeah and I think we talked about this a long time ago, I think I was saying, why can't government have a budget and if the government exceeds the budget, it triggers a referendum?  Why can't that happen?  If they have to print or borrow money, because they're not really borrowing it from the central bank, they're borrowing it from our future, we all know that; if people understood that, if the electorate understood, "By the way, we've got an economic crisis, the government wants to borrow money, you're all going to pay for this", and everyone understood how much they were going to pay and who it affects the worst, because it actually affects the poorest the most. 

Peter Dunworth: Correct.

Peter McCormack: They're the ones who are killed most by inflation.  You know, if people really understood, and then that would trigger a referendum where we could vote on it, wouldn't that be a better form of democracy? 

Peter Dunworth: I like Warren Buffett's solution to this.  Did you see his solution to it?  Basically, if there's a budget deficit, every politician who voted for it is out, and the problem would be solved in five minutes.  So, you have a budget, if you're over and you vote for it, you're out.

Peter McCormack: Or fine them.  If the budget deficit is 10%, you lose 10% of your salary.

Peter Dunworth: Fair enough, but a lot of their incomes aren't --

Danny Knowles: Or reverse incentive.  If they stay under it, give them a bonus.

Peter Dunworth: Yeah, that creates a lot of grift though because we're starting from such high mismanagement, so it would create a perverse incentive that you'd get people getting exceedingly rich off the back of saving money for people.

Danny Knowles: I see, yeah.

Peter Dunworth: I think it would end up being like an African dictator type scenario, but it would be our local governments that would be benefiting from it. 

Danny Knowles: Yeah, that makes sense.

Peter Dunworth: I think that would lead to guillotining and riots in the streets, that people who are living with these people who are creating the grift… 

Peter McCormack: Dominic Frisby, he's not anti-taxation, I think he said about 15% feels about right. 

Peter Dunworth: And you look at the most successful countries on earth with that, Hong Kong, Singapore.  What Singapore's done in the last say 60 or 70 years, they've taken it from a backwater of Asia to a financial hub that's bigger than Switzerland.  So now, tiny little island off Malaysia basically was a free port and that's how they generated a lot of their income and incentives to get people there, and then they've got a flat tax rate across all, similar to what Hong Kong was previously.  And now, literally, it is a thriving hub up there.  And so I look at this and I think, why can't we model what success looks like from a government perspective, but it's very difficult to do that when there are incentives out there and you can effectively vote for getting payment? 

One thing that was sort of scary from an Australian perspective, I'm not sure what it was like globally, but in the heart of COVID, 75% of our population was a net recipient from the government. 

Peter McCormack: Yeah, the maths doesn't work. 

Peter Dunworth: Correct.  So, that's a very short window of, well, that's a short timeline if you want to run a successful government or society. 

Peter McCormack: But it is all breaking.  I mean, like I say, Birmingham City Council is effectively bankrupt, and I'm sure there are probably other councils in the UK that are approaching a similar situation.  We've now got a school crisis at the moment.  I don't know the full details of this, but essentially the concrete that has been used in the construction of not just schools, a number of buildings in the UK, is found to be defective and I don't know if it's like a time thing, over time it degrades, but to the point it's dangerous now, these buildings could collapse.  So, something like 100 schools now, it might even be more, Danny can perhaps find out, are not opening this week because it's dangerous.  My kids' school, their school's now been closed and my daughter won't be going to school this week, they're going to remote learning and Teams. 

Danny Knowles: More than 150. 

Peter McCormack: More than 150. 

Peter Dunworth: Wow! 

Peter McCormack: But they're having to check buildings all across, it's not just that. 

Peter Dunworth: So, they'll find more. 

Peter McCormack: Yeah, it could be law courts, it could be anything, but they're in a situation now the government needs to find money to fix these schools, money they don't have.  I can already tell you, because I've talked about a million times on the show thanks to Dan Tubb, the government spends more on debt interest than it spends on education in the UK.  Everything is breaking, and it's all breaking because government's too big.  We should get to Bitcoin, because Danny said to me, you think Bitcoin will reach $20 billion a coin and you think it should be $7 billion a coin now?

Peter Dunworth: Today, yes.

Peter McCormack: Today, yeah, alright!

Peter Dunworth: That's a conservative figure!  Come on, Pete! 

Peter McCormack: The thing is, we try not to bait with our show titles.  We want a good show title that engages people and their interest in it, but we don't want to bait them.

Danny Knowles: This one's going to be pure bait!

Peter McCormack: This could be pure bait!  Danny was like, "This one's going to be about valuing Bitcoin.  So, we could put out, 'Valuing Bitcoin with Peter Dunworth', or we could be, 'Bitcoin to Reach $20 billion a Coin with Peter Dunworth"'.  People are going to want to know, come on, is there logic to this or are you just being --

Peter Dunworth: Yeah, and that's the conservative one.

Peter McCormack: The $20 billion is conservative?

Peter Dunworth: I'll give you the two and so we can basically work together on how that looks. 

Peter McCormack: The conservative one!  What's the what's the bullish one? 

Peter Dunworth: It's a number you just can't figure out, literally, and this is where like if I look at say, "Who's had the best crack at valuing Bitcoin?" I look at it from a consciousness perspective.  I think our friend Jeff Booth.

Peter McCormack: Yeah, love Jeff.

Peter Dunworth: Yeah, and everyone does, right?  He says, "You can't value Bitcoin from within a system, you can't value the new paradigm", and I agree wholeheartedly with that.  And then we have Knut with, "Everything divided by 21 million", and I agree with both of those.  And sadly, I'm stuck in this financial situation where we are now that my day-to-day is basically helping people make smart choices with their money. 

Peter McCormack: Yeah, give the background, just so people know who you are, what you do, the day-to-day work. 

Peter Dunworth: Great.  So, for the last 25 years, I've been in and around finance.  I started off with BT Funds Management, which was a very successful funds management business.  Left that to go into credit and mortgage broking, so spent a decade in credit and mortgages, understanding and assessing risk and mitigating it.  Pre-GFC, I was advised by one of my dad's great mates and advisor, who happened to be a chairman of one of our biggest banks here, "Peter, you're on the wrong side of the balance sheet, you need to get back to the other side, there's going to be a big blow up in debt".  So, I moved back to the advice space and for the last, say, 15 years, been working on financial advice.  Now, that covers a whole range of things, but in short it helps people make smart choices with their money around property, stocks, bonds, and ensures and has a background in making sure that all the structures are set up correctly so that you don't lose it.  So, I come at this with close to three decades in and around finance. 

Peter McCormack: Yeah, you've earned your stripes.

Peter Dunworth: There is rationale, I've spent a lot of time, and this is the problem that I think discussing Bitcoin with traditional finance has a huge problem with.  Firstly, the first lesson we get when we're children, "If it sounds too good to be true, it probably is".  So, you hear that and you think Bitcoin, it's going to be worth X, Y, or Z, and it's like little red flag, I've already dismissed it, I don't need to listen to it anymore because my dad told me when I was 4 that too good to be true, it probably is, or there's no such thing as a free lunch.  And traditional measurement in finance terms typically revolves around the risk-free rate, which is typically the ten-year in the US.  And so, that sets basically the risk-free rate of the world.  And then every other financial instrument is effectively a derivative of that or rated or valued based on that. 

The problem with Bitcoin is when you come from a framework perspective is, you don't have the ability to use those tools because there's no risk-free rate with Bitcoin, you don't get a free lunch with Bitcoin.  There's no interest rate, so there's no carry.  So, how do you apply traditional finance metrics to this thing that most people like to call a pet rock?  And it doesn't compute in people's heads.  So, there are two valuation frameworks that I go through.  The first is basically about as simple as I can get, that if you believe Bitcoin is the best form of money --

Peter McCormack: I do.

Peter Dunworth: -- we're going to get to a point where people will no longer accept anything else other than Bitcoin for their goods and services, and so that will be the required payment.  Now, there may be people listening to this who think there's no way we're going to get to that.

Peter McCormack: Well, the people are already there with that.  So, Max Hillebrand, Wasabi, he openly said he lives on a Bitcoin standard, he's fully in.  And I don't know what that means realistically for day-to-day living, because sometimes you need fiat.  And I said, why?  And he said, "Well, every four years you say to yourself, 'I wish I'd bought more Bitcoin'.  So, why put yourself in that position?  Just always be in Bitcoin".  And you know what?  I'm not far off it. 

Peter Dunworth: Yeah, and that's probably a function of time and understanding.

Peter McCormack: And I love a gamble. 

Peter Dunworth: Yeah.

Peter McCormack: Did Mikey get you into Bitcoin?

Peter Dunworth: Absolutely!

Peter McCormack: It was him. 

Peter Dunworth: Yeah, totally.  He told me about when it was $3.  I went, "That'll never work, you're a fool"! 

Peter McCormack: $3!

Peter Dunworth: Not a day goes by that I don't sit there and go, "Oh, damn, maybe I should have just bought $1,000 worth".

Peter McCormack: Yeah, you'd have more Bitcoin than 99% of people.  $1,000 worth at $3, fuck me!

Peter Dunworth: But you know what Michael's like, he's so softly spoken.  I said, "I work in finance, I know what money is", etc, and could run through the list of things why I told him it'd never work.  And rather than him pushing me, he just said, "Okay"! 

Peter McCormack: He probably said it in a way that sounded like it was a joke, with a big grin on his face.

Peter Dunworth: No, he was sincere, but I just didn't know and there weren't the resources.  And where were you?  You should have been podcasting so I could have learned back in 2011. 

Peter McCormack: Mate, listen, I bought my first Bitcoin at £80 and it was a medium of an exchange for me, I used it quite regularly!  And I wish I'd have bought £10,000 worth at that point and I didn't. 

Peter Dunworth: And that's the learning right?  You just wish you'd get there. 

Peter McCormack: Do you know what the thing is?  I've got a view on this.  Bitcoin always seems expensive.  

Peter Dunworth: Yes. 

Peter McCormack: At every single price you buy it, it seems expensive.  So, when I first bought it at £80, and I was explained, "It's this digital money.  You can use it to buy some things on the internet".  I was like, "£80?  This seems expensive".  Even though I was using it straight away, I didn't think.  And then when I got back in and it was like £600, I was like, "God, this is expensive because it was £80".  And now it's like £20,000, it seems expensive.  There's never a time; have you ever bought Bitcoin, Danny, and thought, "That's cheap"?

Danny Knowles: I mean, when you get the 50% drawdown, you think, "Okay, Bitcoin's on sale", but no, I get the point.

Peter McCormack: Even then, does it seem cheap?

Danny Knowles: No.

Peter McCormack: Yeah, so when people are up on Twitter and they're like, "Bitcoin's on sale, Bitcoin's cheap", it's like, "None of you are thinking that, and probably most you tweeting that, I bet you haven't fucking bought any today.  You're just saying that, you're just parroting the shit".

Peter Dunworth: So, back to the valuation framework. 

Peter McCormack: Yeah, sorry!

Peter Dunworth: This is where my hope in putting these numbers together is to put a logical framework around it, most importantly to help people understand that although it's really expensive today, in terms of the future, it is chronically undervalued and people really have no idea how valuable this thing is going to be into the future.  So, thinking about this as the best form of money, very simply, the first valuation framework is simple in that there's $6.3 trillion worth of global trade that happens on a daily basis.  And if you divide $6.3 trillion by the 900 Bitcoin that are minted on the day, you get to $7 billion a coin.  Now, that's assuming that we've got a functioning credit market and stablecoin attached to it, that you don't have to sell your Bitcoin.  You just do what wealthy families do all over the world, whether it's using property as collateral to go and borrow from the bank, or you use your shares as collateral to borrow from the investment banks. 

Look at Jeff Bezos.  Yes, he sold some down recently, but on that ascension, he never sold any because he was basically using a margin facility provided by the bank to just take some out.  Now, if we get a --

Peter McCormack: We have that with Bitcoin essentially.

Peter Dunworth: Correct.  And this is where Bitcoin's the most undervalued collateral in the world right now.  And once people understand that Bitcoin's the best form of collateral we've ever seen, then that gets used for borrowing.  So, to those people out there who think that, "Oh, Bitcoin's going to ruin debt markets and the rest of it", I agree.  But in the short term, what's going to happen is it is going to explode debt markets up dramatically.  And when you think about it, to give you an example of this, we've got two competing thoughts on Bitcoin at the moment, in that one's currency in the form of Bukele, that's his argument, and he says it's currency.  And then you've got Saylor who says it's property, both of which are correct.  But when you take your property to the bank and borrow on that, that bank cannot rehypothecate that 20 times to lend it out to monetise it. 

However, as currency, that goes on their balance sheet.  That is now back to one of their -- that solves their capital adequacy requirements and they can 20X leverage that.  So, they can then basically on $10 million worth of Bitcoin, they can lend out $200 million worth of home loans on the back of it.  They can make circa $4 million, still lend you $1 million, and then actually pay you an interest rate on that borrowing, and rehypothecate.

Peter McCormack: Only if in a world where there is a fiat currency that sits alongside it.

Peter Dunworth: Correct. 

Peter McCormack: They can't do that if there is only Bitcoin. 

Peter Dunworth: Correct.  And so this is where, in that hyperbitcoinisation, we're going to have that little hump along the way where everyone will do that and then everyone will come to the realisation that we don't want to accept fiat for our time, for our energy, for our goods and services that we're doing, in the same way that in Britain, there's no way on earth you'd accept a Venezuelan bolivar for any good that you're selling over there, or in Australia, we wouldn't accept a, what is it, a Zimbabwe rand, or whatever they call it.  At some point in time, people will figure out, "I'm not going to accept any of this arbitrary stuff that can be inflated or deflated, it's completely subjective.  I want the objective money.  I want the firm money that can't be messed with and so I'll take payment in that. 

So, that's how we get to, in my eyes, I think it's a $7 billion Bitcoin today.  So, if you look at fair market value, when you get to buy it for US$25,000, well, it's not expensive, I think it's relatively cheap.

Peter McCormack: Well, mate, I'll sell you one for $5 billion today!

Peter Dunworth: I'm sure there's a government out there silly enough to do it.  Do you accept Venezuelan bolivar? 

Peter McCormack: Yeah, I mean if I can get rid of it quickly. 

Peter Dunworth: What about that Lebanese, what are they working with?

Peter McCormack: Well, that's, I don't know, will this go out before we get to Lebanon? 

Danny Knowles: Yes. 

Peter McCormack: Yeah, I mean that's going to be a fascinating story in itself, in that the entire economy's rebuilding itself outside of government.  I cannot wait to go and find out how that's happening.  But this is where I think Unchained are ahead of everyone, Unchained Capital.  Do you know them?

Peter Dunworth: Yeah, I know them well. 

Peter McCormack: I mean, what's their loan rate at the moment?  I mean, it's high, but --

Peter Dunworth: It's 14%, last time I checked.

Peter McCormack: Yeah.  But you hold one of the keys, so they can't rehypothecate it, they can't fuck about with it. 

Peter Dunworth: Correct. 

Peter McCormack: So, they are just using it purely as collateral, and I think that's the model we're trying to get to.  And yes, you're going to have to pay higher interest rates, but there should be a cost to capital.

Peter Dunworth: Well, that is exactly right.  And this is where, as I say, I've had experience with Unchained and I love those guys and think they're phenomenal.  But that's using Bitcoin as a property.  And you look at alternate lending solutions in the Bitcoin space that if I look at the other end of the spectrum, you've got Unchained at 14% and you've got Abra at 0% if you borrow less than 15%.

Peter McCormack: Yeah, it depends on your LVR.

Peter Dunworth: Limited Value Ratio, yeah. 

Peter McCormack: Because I had a look at theirs once and I was like, "Huh, 0%?"  I was like, "Well, hold on, I have to leave a lot of Bitcoin with them". 

Peter Dunworth: Correct, and you understand counterparty risk.  They're basically taking that, they're lending it out, they're making a margin on it, and that's why that happens.  And so, one thing I talk about with clients quite a lot is that you think, or I think basically, in time, Bitcoin, you'll be paid to borrow money from the banks, because Abra is proof that that is the way it's going.  Abra can't rehypothecate 20X like the banks can, but the banks could, so why wouldn't they give you a little bit of the upside of the interest margin that they'd make?

Peter McCormack: Yeah, I mean I don't think people are fully prepared for this new paradigm.  And I think we, as bitcoiners, are going to be ahead of the game.  Because the only way now, like after the experiences of the likes of BlockFi, not that it was me that it affected, it affected my listeners.  Seeing people go through that kind of experience, I now know from myself and my Bitcoin, for me to take it out of my cold storage and put it somewhere else, I'm going to be very careful.  Now Unchained, I trust implicitly, because they're a proper Bitcoin company, proper people, and I know my Bitcoin is there, I've got my key, I can see it, I can protect it.  And I'm like, okay, that is a scenario now that will build trust for me.  None of these other ones would I have the trust in.  I guess the trust is scaled, right?  There's a spectrum of trust.

Peter Dunworth: Yeah.  And this is where I went through the same process you did, that if I'm ever going to borrow money on my Bitcoin, I would look to a service like Unchained.  Why is that?  And when I discussed this with clients, I said, "Hey, I can get it for zero if I do a wrapped Bitcoin or 1.5% with wrapped Bitcoin on MakerDAO" and all sorts, right?  And then you can get Celsius at 8%, BlockFi at 8%, and I told clients at the time, it was 12%.  I said, "I borrowed from Unchained at 12%".  Now most people were like, "Why would you do that?"  And I'm like, "Well, think about it from a risk management perspective.  I've got one of the three keys.  I can see what's in there at all times. 

Peter McCormack: Is it one of three, or one of two? 

Peter Dunworth: I hold one of three in the Unchained setup, and I've got full view of what's happening in that vault.  So, I know they're not rehypothecating.  The only concern I need to manage or mitigate is a spike down in price where they liquidate me.  That's another concern.  So, I have very conservative LVR ratios, but most clients couldn't comprehend why I'd go and pay 12% v 1%.  I'm like, "You don't understand counterparty risk". 

Danny Knowles: You ended up paying 100% with those other services. 

Peter Dunworth: Thank you, exactly. 

Peter McCormack: Worse, because you're still liable for your loan as well. 

Peter Dunworth: Yes, a horrible situation to be in. 

Peter McCormack: But this is the weird world we've been conditioned to with very low interest rates.  So, even though interest rates in the UK are 6.5%, and I was discussing with Danny the interest rate I've got in my house, and in a year-and-a-half, I'm going to go into a variable rate if I don't get a new one negotiated; my mortgage will essentially double when that happens.  But actually, these are the interest rates we should be having.  We shouldn't be conditioned to 1% or 0% interest rates, because if there's no cost to capital, it skews markets.

Peter Dunworth: Correct.  All of a sudden, there's an incentive to borrow and there's no incentive to save.  And if you want to build a capitalistic market, it's imperative you have the incentive to save.  And this is the major problem with the incentives that we've got in our financial system now.  You are highly incentivised to take risk and borrow as hard as you can, and you're probably penalised for saving.  And this is where another sort of thing that Bitcoin totally breaks is, for the first time in at least the last sort of 15 to 20 years, probably 40 years, you are highly incentivised to save as opposed to borrow. 

Peter McCormack: Yes.

Peter Dunworth: And it completely changes things. 

Peter McCormack: Well, even now, even with the higher interest rates where you would think, "Well, if I leave some money in the bank now, I am incentivised to save because I'm getting a..."  I remember my interest rate with Revolut when I first got with them was something like 0.1%.  I was like, "There's fucking no point!" but there are now decent interest rates out there.  The problem is, the incentive isn't to save because you get hit by inflation.

Peter Dunworth: Correct.

Peter McCormack: So, all right, have a look at something like Lloyds or NatWest, what they're offering on interest rates now.  But it's all very well and good getting 4% or 5% interest rate with your savings, but if you pay if you've got 10% inflation there's still no incentive to save. 

Peter Dunworth: Correct.  Negative real rates. 

Peter McCormack: Yeah, so where do you put your money?

Danny Knowles: Yeah, 5%.

Peter McCormack: 5%?  Okay.  And where's inflation in the UK? 

Danny Knowles: 6.3%, or something?

Peter McCormack: Oh, is it down that low?  Okay.

Danny Knowles: But still, you're losing on inflation.

Peter McCormack: Well, 6.3% is the lowest they can get it to.

Danny Knowles: 6.8%, sorry.

Peter McCormack: Yeah.  This is what I've been talking to my son about, because he's now working, earning money, and I've been saying to him, just put a little bit by each month, just put it in Bitcoin, just a little bit every month.  That's where you want to put it.  There's no point putting it in the bank, because like I say, because the inflation, yeah.  So, what we're basically saying is Bitcoin is almost forcing markets to get back into the shape they should be in.

Peter Dunworth: Correct.  And it's funny, it's unwieldy.  It will not bend at anyone's whim or will.  Bitcoin will just keep marching on forward and all of a sudden, what I'm looking at from a financial perspective is that markets are going to form around this thing that just doesn't move.  It cannot be bent, it cannot be broken and touch wood, I'm not the technical guy, but that's what I see. 

Peter McCormack: When did it click for you? 

Peter Dunworth: It's a slow progress.  So, it has started with, okay, well this thing isn't a scam and isn't a Ponzi and can't be broken.  And you just build conviction over time.  I think there's no shortcuts.  I wish I had the orange pill literally to give someone to understand all of the learnings I've been through.  But sadly, it's a choose your own adventure with Bitcoin to choose how fast or how slow you want to learn about it.  But I think everyone will learn about it in time and you're highly incentivised to learn about it as quickly as possible.

Peter McCormack: Yeah.

Danny Knowles: Can it be simple enough to divide global trade by the number of Bitcoin produced every day?  Because then, it's just exponential and becomes worth infinity at some point.

Peter Dunworth: Correct.  So, I think it can if you've got a functioning credit market and a stablecoin on it.  Yes, literally.  Because over time, coins will get lost and coins will move to the people who have the biggest stack, like a game of poker, right?  That's what happens in poker.  You've got a big stack, it's highly likely that you can push around the others and you can end up with all of it.  That's kind of what happens, I think. 

Peter McCormack: Michael Saylor!

Peter Dunworth: Yeah.  You sort of look at the other markets, though, and say the other framework for valuing Bitcoin, which I think is even more out there, which actually comes with a lot more sense is, if you look at the functions of money, store of value, medium of exchange, unit of account, and you apply the technological improvements that Bitcoin brings, or the tech innovations that Bitcoin has to those three functions, I look at the four key functions are absolute digital scarcity, we've talked about that to no end; seizure resistance, we all know what that is, you can't seize it; censorship resistant is a big deal too; and then the final one, which probably doesn't get much credit, but sort of credit Darin Feinstein for talking about this, is the immutable ledger, supply and issuance.  This is a big deal.  Because it's accounting, no one wants to talk about it because it is dead boring, but this has the biggest impact on price and value. 

So, if you look at those four functions of tech innovation and how they apply with the functions of money, absolute digital scarcity is a big improvement on store of value, what we've got with gold.  That's a $10 trillion market cap.  When you cap or include seizure resistance to that, and what happened with the Russian foreign reserves, $500 billion captured overnight, I bet Putin had his time again, so he could just dump it all into Bitcoin and then it's the only asset that can't be touched.  So, it improves the function of store of value.  If you look at medium of exchange, and this is where I don't get into the debate about medium of exchange, I don't think it's a big deal right now while we can transfer fiat to it, but it will become a big deal if we can't.  But medium of exchange is a $100 trillion market maxed out or dominated by the US dollar.  But censorship resistance is a big deal and a big improvement on that US dollar, and being able to transfer digitally globally in real-time settlement is a big deal that no one really is aware of. 

But the sleeping giant in those functions of money, which I think holds the majority of the value, is the unit of account.  And by my reckoning, unit of account is close to a $2,000 trillion market, which dwarfs medium of exchange and unit of account.  And that market is basically calculated by or looked after by a double-entry ledger system, which hasn't evolved since the Renaissance.  Now we have a triple-entry ledger system; that's the first immutable ledger that we've ever seen.  This is a huge accounting upgrade that when people realise that we are getting hoodwinked at everywhere in life, they realise, "Hang on, there's one thing that we can trust or rely on more so than anything else.  This is an immutable ledger coupled with immutable supply and issuance", all of a sudden, that's a huge upgrade on our unit of account. 

Now, this is where it gets really silly from a numbers' perspective, because Bitcoin represents what I call the first triple-point asset.  So, it's the first asset that's ever been invented that is in all three states at the one time.  So, we've had gold for store of value and that's gold.  Once fiat was invented, it never really crossed into medium of exchange.  Once double-entry ledger systems were created, that never went into medium exchange.  So, they've all been isolated in silos.  But with the tech innovations that have happened, what we've now got is we've got Bitcoin is the best store of value, it's better than gold; we now have Bitcoin is the best medium of exchange, it's better than the US dollar; and we have Bitcoin is the best unit of account, which is better than our existing unit of account that we work with. 

So, I look at this and think, just purely from an economics perspective, we now have three functions of money competing for one use case.  So, it's like a free-for-all and if you've ever been to a property auction, you'll see that if there's no one bidding on a property, that the property passes in for what the reserve is.  But when you have 8 billion people competing for each of those three use cases personally for one single asset with only 21 million units, this is going to be a free-for-all like we've never seen.  So, this is where I think it becomes the first exponential asset when the broader population understands what that is, because in my thinking, where I think we've been limited in thinking about the value or potential value of Bitcoin, is people look at it and think, "If it's the best store of value, medium of exchange, unit of account, you add those numbers together to get the total addressable market for Bitcoin". 

But if it's the best of all three at the one time, you don't add those market caps together, you probably multiply them together.  So, you end up with a number that is too stupid to talk about. 

Peter McCormack: Yet we still struggle to communicate this to the wider public. 

Peter Dunworth: Correct. 

Peter McCormack: We still don't have anywhere near mass adoption.  We have mass awareness, we've had it for years.  There's no scenario where you meet somebody and you mention the word "Bitcoin", they're like, "Well, what is that?  I've never heard of that".  Everyone's heard of it now.  Maybe some far out tribes in a South American, Brazilian rainforest haven't heard of it yet, but pretty much anywhere I travel in the world with this job, and I've been to 50, what did we count in the last one, 52 countries, every single time they've heard of Bitcoin.  I don't ever meet anyone now who says, "I've not heard of Bitcoin".  But of the percentage of the heard of it, that then understand it and then own it, it's tiny. 

Peter Dunworth: Correct. 

Peter McCormack: It's tiny; you cannot get people to cross into becoming a bitcoiner. 

Peter Dunworth: Correct, it's really hard. 

Peter McCormack: It's hard.  And I think it's part of this kind of chicken and egg.  Come for the gains, stay for the revolution, that traditional meme.  And yeah, that does happen.  And most people when they're looking at it, my friends, they say to me, "Is now a good time to buy?" the first thing on their mind is, "Is it going to go up?" not defensive, not long term; I mean, you help people with asset planning, but not long-term planning.  I tell them the same.  I'm like, "No it's not a good time to buy it, it's a good time to learn about it, and then it's always a good time to buy it". 

Peter Dunworth: That's smart because I think we have, at this point in time, a very small microcosm of society that understands Bitcoin and I would put that at less than 0.1%.  And where I spend a lot of my time is in normie land, not in Bitcoin land.  And I look at the services that are offered at this point in time, they don't service normie land, they service bitcoiners, that's 0.1% that's being looked after.  And as unpopular as this opinion is, I think there needs to be a broad range of services that can appeal to the masses if we want to get them in. 

So, that's where I look at and spend my time, and a lot of my day-to-day now is literally working on a business called the Bitcoin Adviser to get collaborative custody up and running to move them into collaborative custody.  It doesn't appease the 0.1% who are here already with the "not your keys, not your coins".  But clients get a 2-of-3 multisig where, say, Unchained hold a key, the client holds a key, it's their account, and we hold a default backup key for them.  So, my promise to the clients is they can walk out the door with zero Bitcoin knowledge.  They can totally muck up everything we do for them, and we can still recover their coins. 

Peter McCormack: You've got growing interest, you've got a growing level of inquiry into Bitcoin.  What's their starting point; why are they asking about Bitcoin? 

Peter Dunworth: I think the majority of my calls are based on greed like, "I want to get rich".  If I look at it from a psychological perspective, that's our primary driver.  Greed and fear, our most core essence, that's fundamentally the driver.  Now, because we're here for a longer time, we'd like to dress it up that we're here for the revolution, but we would never have been for the revolution if we didn't come for the gains. 

Peter McCormack: Yeah, of course. 

Peter Dunworth: So, that's where I think everyone starts and this is where, probably to the conversation we were joking about before, the click-bait-y title, this is where to get people in and have a look at it and think, "Well, does that logic work out?  Do I think that's something I can get behind?" hopefully people can realise that from a Bitcoin perspective, there's more gains in front of us than there are behind us, and they don't need to waste their time on altcoins, because there is a much higher probability of this happening than there is of them choosing the 1-in-the-50,000 token that goes up 1,000% in two days. 

Peter McCormack: Well L0la, L0la L33tz, she said she's the other way around, didn't she?  She came for the revolution. 

Danny Knowles: Yeah, but she'd be in the tiny fraction of people that actually go that way around. 

Peter McCormack: We think about this a lot, we talk about this a lot.  I'm kind of like, I need to break free of this bitcoiners talking to bitcoiners about Bitcoin, all patting each other on the back, "We got this right", "Yeah, we're right", "Yeah, Bitcoin is going to fix everything".  It's kind of like, I need to widen that net now.

Peter Dunworth: Well, you do the best job out of any one of that, I think. 

Peter McCormack: Why thank you, that's very kind of you to say.

Peter Dunworth: And you cop a lot of shit for it too.

Peter McCormack: I do.

Peter Dunworth: But I think one of the great initiatives that you took, which probably copped some unnecessary heat on, is trying to bring progressives into Bitcoin.  Your work with Jason Maier was excellent.  Troy Cross?

Peter McCormack: Troy Cross, yeah.

Peter Dunworth: Amazing, amazing Bitcoiner.  And Bitcoin's for everyone, so we should be finding out what people want and then trying to bring them into the pie, or into the circle.

Peter McCormack: Bitcoin's for anyone, not everyone.  That's what Mr HODL would say, wouldn't he? 

Peter Dunworth: Nice!

Peter McCormack: When I said it, when I said, "Bitcoin is for everyone", he said, "No, it's for anyone"!  I think that's correct.

Peter Dunworth: Touché, yeah, I agree.

Peter McCormack: Well, listen, I mean that was just what makes sense.  You know, if you look at, I don't know, top 100 bitcoiners, a lot of them are going to have an American Republican or Libertarian bent to them.  And naturally, they're going to communicate what's important to them and what's important in their world, but that's a fraction of a fraction of the world.  And a large percentage of the world is from the left, and even larger is from the left of US Republicans.  And so it makes sense that if we want to expand Bitcoin and get Bitcoin into more people's thought process, as well as their investment portfolio or consciousness, that you have to meet them where they're at.  I think it was a good decision; commercially it was a good decision as a podcast. 

Peter Dunworth: Did it work out that way? 

Peter McCormack: You can never truly know, you can never actually truly know, has this been good or bad for us in terms of, say, downloads.  And look, we don't hunt downloads, we make plenty of shows that we know won't do well.  But I think, if you think more like Harry says like, "Everything's good for Bitcoin", doing it is good for Bitcoin.  I think there is a progressive movement in Bitcoin that's been growing, I think it would have happened without us, we definitely don't to claim any credit for it.  Jason would have written his book without us, Troy would have been successful without us.  There's no world where we think we did this.  We just, at the same time, are happy to support a more balanced conversation.

But there is now this book by Jason and he's done exceptionally well.  I'm so fucking proud of him and that book is getting in people's hands, and it is a different book to show people.  You can't just give everyone The Bitcoin Standard, or you can't send everyone to certain podcasts.  Actually, the interesting thing is, when people do give us shit, I'm always like, "Well, stop listening", because there's so many podcasts out there and they're brilliant.  You can listen to Breedlove you can listen to us or Marty or Matt Odell or Natalie Brunell, or there's so many, find the one you like.  If you don't like one, just stop fucking listening to it.  Or if you disagree but you appreciate it, fine.  But if you don't, stop fucking listening.  You have two scarce assets in the world, Bitcoin and time; why are you wasting time listening to podcasts you don't like?  Stop complaining, or make the one that you think should exist.  And so, we think that's been good. 

I think our show will evolve beyond -- there will be a next level which will be, you know, we've talked to everyone in Bitcoin, it's to bring more people from wider circles.  Shows that do interestingly very well, Eric Weinstein, Michael Malice, they both do exceptionally well, and you wouldn't call them bitcoiners.  They're interested, but the majority of the interviews they will do in the world will not be about Bitcoin, they'll be about other topics.  I think we've got to get more of these people into Bitcoin, more conversations about that.

Peter Dunworth: With great power comes great responsibility, Pete.  You're responsible for widening the circle. 

Peter McCormack: No, do you know where the power is?  The power is there. 

Danny Knowles: I don't know if that's true. 

Peter McCormack: Danny holds all the power.  He picks the guests, he tells me who we have on.  I'm just basically Danny's puppet.

Peter Dunworth: Danny, you're doing a great job.

Danny Knowles: Thank you.

Peter McCormack: Danny's about to do his first interview.

Danny Knowles: Yeah, I am.

Peter Dunworth: Who's the guest?

Peter McCormack: He's going on a podcast as a guest.

Danny Knowles: Yeah, going on Blue Collar Bitcoin.

Peter Dunworth: Nice, I love those boys.  They seem like a good bunch of fellas.

Danny Knowles: Bit nervous.

Peter Dunworth: Bit nervous, please! 

Peter McCormack: And we're doing our conference next April in the UK, we'd love you to come if you can.  Danny's probably going to do one on the onstage interviews.  

Danny Knowles: I'm really looking forward to that.  I think we're going to try and do maybe up to, what, can we say how many people we're going for?

Peter McCormack: Yeah.

Danny Knowles: Between 600 and 1,000 people event.

Peter Dunworth: Oh, wow!

Peter McCormack: Well, so 1,000 would be great, but obviously we have to sell that.  It's hard, selling tickets are hard. 

Peter Dunworth: Is your ground big enough to look after 1,000 people, 1,000 bitcoiners?

Danny Knowles: That's a good point! 

Peter McCormack: Well, you can have 1,500 around the pitch.  So, look, that would be amazing.  The conference itself on the Friday, the venue I think seats 800.  And so I think we can go up to 1,000 people.

Danny Knowles: With some standing.

Peter McCormack: Yeah, and some fire safety rules broken!  But yeah, that's our goal for that.  I think you and Michael should come over for it.  But yeah, we're conference Friday, football Saturday.

Peter Dunworth: Nice.

Danny Knowles: We're going to be announcing it -- when are we announcing it?

Peter McCormack: Next week, a week or so.  Listen, we'll tell you all the confirmed guests afterwards.  Do you think we can pin, or should we save it? 

Danny Knowles: I just dropped one.  This will be going out a couple of days before we announce it anyway. 

Peter McCormack: No, let's save it.  We'll tell you afterwards.  But it's going to be -- we think it'll be good.  Again, it's different.  It's not going to have Bitcoin in the title of the conference, by design.  It will have conversations that aren't about Bitcoin.  You know we say all these societal issues?  We kind of just want to bring them all together, whether it's education, whether it's media, whether it's social media, whether it's money.  I think there's a Bitcoin lens to all of them.  And so that's essentially what we're going to try and do with our conference.  I can tell you what it's called.

Peter Dunworth: Do tell.

Peter McCormack: It's called Cheat Code.

Peter Dunworth: Nice!

Peter McCormack: Yeah.  And so that will be in Bedford, 12 April next year, come along if you can.

Peter Dunworth: 12 April?

Peter McCormack: Yeah, 12 April next year, followed by Real Bedford against Potton United on the Saturday.  Why are you laughing? 

Danny Knowles: It's just the names are ridiculous!

Peter McCormack: Potton United!  Do you think custody is a barrier for people to enter Bitcoin? 

Peter Dunworth: Yes, to do it properly.  And my concern is that if it's not done properly, I don't want to see people losing coins because that creates a despondent person who then kind of becomes a once-coiner, and there's only thing worse than a nocoiner and that's a once-coiner, because they're the saltiest of nocoiners.

Peter McCormack: But it makes Bitcoin scarcer!

Peter Dunworth: That's true, but you know, people put in hard work and money I want to see them benefit from it. 

Peter McCormack: Is it a barrier to the people that you're dealing with because you're probably dealing with higher-net-worth individuals who are going to be buying a lot of Bitcoin, as opposed to Joe Normal on the street?  Because I don't find people, when they come to me and ask me about buying Bitcoin, custody isn't even something they've thought of.  They haven't thought about it.  They don't know about wallets, they don't know about multisig, none of that's on their mind.  But I could see in a scenario, if you're thinking of buying, say, $10 million of Bitcoin or $1 million of Bitcoin, you're going to do a lot of research first, and then you're going to find out about custody.  And you're going to be thinking, "Shit, how do I do this?" 

Peter Dunworth: That's the hard part, because the "not your keys, not your coins" is a very important message, which I agree wholeheartedly with.  But to take someone from zero to understanding what a "not your keys, not your coins" is and having it on a single-sig wallet I think is terrifying, and it puts the majority of people off to start with.  And so, I think collaborative custody, and there's a lot of people working on this now, and we use Unchained with our collaborative custody, it's like when you go bowling and you put up the rails, the bumper rails? 

Peter McCormack: No, don't need it! 

Peter Dunworth: Well, some people do.

Peter McCormack: Do you?

Peter Dunworth: Probably actually, it's wild, I can't tell you the last time I bowled.  But yeah, this is where I think collaborative custody puts up bumpers for people. 

Peter McCormack: Yeah, I get it. 

Peter Dunworth: And rather than bowling a gutter ball and getting zero, you can work someone through that process in the hope that they graduate to "not your keys, not your coins".

Peter McCormack: So, on the collaborative, who holds the keys?

Peter Dunworth: Software provider.  So, I love Unchained.  We do a lot of work with Unchained, know that team relatively well, so refer a lot of clients there.  The client holds a key and then we hold a default backup key for them. 

Peter McCormack: So, how do they get rugged?  Is it you and Unchained?

Peter Dunworth: Yeah, that would be very difficult for us to do that, because we don't have access to their account, we don't have the 2FA.

Peter McCormack: So, you're essentially holding one for them.

Peter Dunworth: I don't look like a lot of people!

Peter McCormack: No, but you're essentially holding a backup key so they don't lose two.  So, the max they can lose is one and you can recover for them. 

Peter Dunworth: Correct. 

Peter McCormack: You're the insurance policy. 

Peter Dunworth: Correct.  And this is where some of the things, from a personal point of view, we've dealt with over the last seven years in doing this is, like we've been through three probates now where clients have passed away.  And if you're running a single-sig, you need to have a partner or know that your partner knows how to recover that.  And this is where a recent conversation with Vijay, the early bitcoiners have typically come from an engineering background who over-optimised for themselves, and they have their perfect security.  Nothing better for them.  But if they die, trying to recover that could potentially be a huge problem for their partner, and this is where in the work I do and see one of the major benefits, is that typically their partners aren't aware of anything.  And trying to educate a partner on how to use a hardware device is just eyes glazed over, you may as well be talking about accounting, right?  No one's interested in that. 

So, having a third party, a person they can see at the end of the line that, okay, if something happens, you call this person, they call that person and together we can recover things.  We've done that, haven't lost a Bitcoin yet.  So, we've been through three probates and I'm proud to say we haven't lost a Bitcoin yet, which is -- 

Peter McCormack: How do you confirm the death? 

Peter Dunworth: They just aren't there any more!  Pulse, death certificate. 

Peter McCormack: Danny's on the phone, "Yeah, hi, Pete's not here any more"!  There has to be a way to confirm. 

Peter Dunworth: Yeah, there is.  So, typically we've got relationships with all our clients, so we don't know them in isolation.

Peter McCormack: You don't have a picture of them! 

Peter Dunworth: Yeah, send a picture; that's quite morbid, isn't it?  Check their pulse! 

Peter McCormack: God, you could use AI for that now.

Peter Dunworth: On a serious note, notarised death certificate is typically how the first function gets done, then you need a notarised Will, you need notarised ID of the Executor, and then notarised ID of the Beneficiary.  So, there's a process to go through if the partner doesn't have access to the key. 

Peter McCormack: Yeah, I know that's a weakness in -- I bet it's a weakness in your setup, it's a weakness in my setup, is I've not properly death-planned.  I kind of have, I'm not going to say what I've done, like I've left a couple of secrets with a couple of people that they know they can do something with it, but they don't know what and they'll figure it out.  But I've definitely not solved it in the way I should have solved it. 

Peter Dunworth: You know what's interesting, and this is where I spend a lot of my time with clients on this is, so I focus on risk mitigation, right, preserving coins.  And this is an awful topic to think about, but the number one risk to coins is obviously losing it, from a numbers' perspective.  Secondly, which I don't think we've really got much insight onto at the moment, but the second way you lose Bitcoin is through divorce, so the one you sleep next to.  That's where the majority of Bitcoin gets lost.  And with estate planning and the rest of it, you basically work through and can put in structures in place to help avoid those sorts of things happening.

Danny Knowles: Why were you side-eyeing me then?!

Peter McCormack: I'm just saying!

Danny Knowles: I was actually thinking on the flight down to Sydney, I think with me sat next to my wife, if that plane went down, I think my Bitcoin's gone forever.  I think she's one of the keys to recover the Bitcoin and without her, I don't think anyone else, like whoever else, my parents or whoever else, could get access to it.

Peter McCormack: Have I shared secrets with you for mine?

Danny Knowles: I don't want to, don't think we should say for OPSEC reasons.

Peter McCormack: Well, no, because I think the secrets I was sharing, no one can do anything with it.

Danny Knowles: No, no one can do anything with mine.

Peter McCormack: The way I've shared secrets, like I have to die.

Danny Knowles: Yeah.

Peter McCormack: And then they have to go through the process, go, "Fuck, how do we figure this out?"  "Well, Pete said this.  Right, we use that there".  But I almost want to take it out of human hands.  Like, my lawyer hands would be better. 

Peter Dunworth: Well, this is where I think a lot of the innovations happening in multi-sig and timelocking, miniscript, are going to be wildly valuable to this moving forward.  You'll be able to set up a whole host of functions, and this is where I spend a lot of time looking at this, that my job is going to get so much better, so much easier, because of all of the functionality that could be functioned in.  So, you won't have to worry about that, you won't have to trust anyone, and this is the beauty of Bitcoin and the programmability of it. 

Peter McCormack: That divorce stuff's interesting, because obviously I am divorced and I've been through it and it's brutal and expensive, and I'm not in a place where I hold any resentment to my ex-wife, what she got, but it just was a brutal process of resetting my finances.  And yeah, she deserves everything she got, she bore me two kids, etc.  But I went on a date recently, and the girl was asking obvious questions like, "Would you ever get married again?"  I was like, "No", and she said, "Why?" and I said, "Well there's no prenups in the UK --"

Peter Dunworth: Same here.

Peter McCormack: "-- so if I get divorced, half of everything I have would go to you, which means my kids get a quarter each, which means you end up with more than my kids.  I'm just not going to get married", and she was disappointed.  She was like, "But that's so sad that you would go into a marriage worrying about divorce", and I was like, "No, that's rational.  It's rational and I'm never going to put myself in a situation where I halve my kids' inheritance, which can be halved for a day of marriage, it can be halved for".  So, there's no incentive to get married now. 

Peter Dunworth: In Australia, it's worse than that.  It's six months living with someone; in a six-month relationship. 

Peter McCormack: What? 

Danny Knowles: Similar in the UK.  In the UK, if you're in a relationship where you talk about your future together and you plan for your future together, and maybe you're the breadwinner and she stays home, if you have that set, you don't even have to be married, you just have to be in a long-term relationship. 

Peter Dunworth: De facto relationship. 

Peter McCormack: I don't think that's true. 

Danny Knowles: It's definitely true.

Peter Dunworth: 100% in Australia.

Peter McCormack: I'm still not sure that's true.

Peter Dunworth: So, this is where I think asset protection, estate planning, hold a critical component for bitcoiners moving forward, that there's a sophistication that comes with managing great wealth that I think every bitcoiner will come to that stage, and it's important to have those discussions sooner rather than later, because the later you do it, the more expensive it becomes.

Peter McCormack: Well, the sad thing is, I actually do want to get married again.  I'd love to meet a nice girl. 

Peter Dunworth: But you don't want to pay 50% of your net assets for it, right? 

Peter McCormack: It's not that I don't want to pay 50%, I don't want to take away from my children.  It's a bit like taxation.  I don't mind paying some tax. I think 50% is too high, I think 15% sounds about reasonable, I'm okay with that.  It's like I believe you go into marriage, I'm not in a scenario where I think you should get nothing, especially in a scenario where somebody has children and gives up a career.  I know if I get into another relationship, I just know realistically the amount I work, the amount of things I'm doing, whoever I'm with will probably end up having more of a responsibility on the house kind of thing.  So, I'd probably lean on that person to just deal with stuff like that.  So, that person is sacrificing time they could be working, earning to build the home for you.  I think there is a fair way of dealing with that in the future, but I don't think it's a 50%. 

Peter Dunworth: Yeah, and this is where maybe the incentives aren't aligned to a productive society again.

Peter McCormack: That word "incentives" keeps coming up. 

Peter Dunworth: Doesn't it? 

Peter McCormack: Well, I think the government incentives, the way they create divorce law is to do everything they can to ensure somebody takes less from the state, not for what's fair.

Peter Dunworth: That's actually a very good point, because typically, some of the things we've seen here, if you're in a relationship and you're a partner who's working, we've had a number of experiences where the partner who's not working typically might be the wife, ends up not in a 50/50 situation, they take 70% of the assets.  So, to your point, they don't want to be reliant on the state, so maybe that's one of the outcomes that comes with taking 70% of the family assets.

Peter McCormack: I think that's what happened with my house.  I think I lost 70% on the house.  And just, again, it's another thing that just needs rethinking to be realistic and fair.  There almost needs to be a set of rules which you arbitrate around.  Like 70%, if the assets between you are, say, £100,000 sounds about fair.  If you had £100 million, it might not be so fair.

Peter Dunworth: I think Eddie Murphy did a skit on this a long time ago.

Peter McCormack: Did he?  We'll have to dig that one out.

Peter Dunworth: It's definitely not for public consumption!

Peter McCormack: Did you find it?

Danny Knowles: No I can't find it. 

Peter McCormack: I still think you're wrong.  The reason I think you're wrong is I'm pretty sure the rules are such that if you, say, bought a house together and you separate, it's equally split.  But if you never get married, when you go into a divorce settlement and if you go to the courts, the time period, they consider the relationship not the length of the marriage.  So, say you were married for ten years, they don't go in and say, "Okay, they were together ten years, how do we arbitrate this?"  They then say, "How long were you together?" because if you were together 20 years before you got married, they'd consider you 30 years.  But if you never got married, it's zero.  They only look at the time if there's been a marriage.  I'm almost certain, I think you're wrong. 

Peter Dunworth: We have some very penal things in Australia that you don't even need to be married, there's no time limit on it.  You can just be in a relationship under the superannuation, which is our pension system here.  You just need to be in a relationship and you can lose half of your superannuation or pension balance. 

Peter McCormack: But is there like a certain period?

Peter Dunworth: No. 

Peter McCormack: What, so you go one day? 

Peter Dunworth: No time limit, literally one day.  And the person's dead, they can't even argue, "I wasn't in a relationship with you"!

Peter McCormack: Jesus Christ, one day? 

Peter Dunworth: Yeah. 

Peter McCormack: God, I just put my Tinder on while I was here.  I'm going to turn it back off!  I'm not going on any dates while I'm here!  Peter, anywhere you want to send people to go look, what do you want them to go and have a look at? 

Peter Dunworth: Maybe the website, if anyone's interested in collaborative custody, wants help with that, we've got a host of resources there.  We'd love to look after anyone.  And that is thebitcoinadvisor.com.  And I'm on Twitter with PeterBTCAdviser.

Peter McCormack: We will share that in the show notes and we're out to dinner tomorrow night.

Peter Dunworth: Tomorrow night.

Peter McCormack: Mikey's in town?

Peter Dunworth: He sure is, he's looking forward to it.

Peter McCormack: Does he live near here?

Peter Dunworth: About 15 minutes that way.

Peter McCormack: Oh really?

Peter Dunworth: Yeah.

Peter McCormack: All right, well, I'm looking forward to seeing him as well.  Yeah, look forward to it.  Thanks for coming on, man, really appreciate this.  Great first show in Australia.

Peter Dunworth: Appreciate it.  A lot of fun, guys.  Thank you. 

Peter McCormack: Cheers.