When the Bitcoin blockchain paper was published, this was 2009.
That was the first time in history where you could transfer value on the rails of the internet,
have the ledger updated in real time. Without any intermediaries,
to travel evolutionary about this technology, it is value transfer at its very core, whether
that's transferring Bitcoin, stablecoins, the tokenization of real-world assets, even money market funds.
We're using stranded power. We don't want to go into a major metropolitan area and use
expensive power because that power was high in demand. We would see tokenization in the real-esick sector
and other real-world assets on the business side. And so what I mean by that is in the structuring
of these financial instruments that people syndicate in order to buy property. I think what's
here now and what people can use to learn to get up to speed on how the asset transfer mechanisms
work in the digital asset world is to open a wallet. I think...
Welcome to the Executive Connect podcast. I'm Alyssa Arskog and today I'm excited to welcome
Lee Bratcher, founder and president of Texas Blockchain Council. Welcome Lee and thank you for
being here today. Thanks for having me, Melissa. Looking forward to the conversation.
I'm so excited to talk to you. You built the Texas Blockchain Council into a powerhouse
for blockchain advocacy. What inspired you to focus on making Texas a hub for blockchain
and Bitcoin? And how has this vision evolved? Yeah, several years ago, 2019, I saw a
report from the Brookings Institute that said that Texas was reactionary and eloquit and
unprepared in the realm of blockchain policy. And so there were other states that were leading the
charge that were a winning business, that were winning entrepreneurs and capital allocators to move
to those states. And I was disappointed that Texas hadn't taken a lead because Texas is a jurisdiction
that prides itself in being pretty business-friendly and also being at the forefront of innovation,
right? And especially now with DFW earning the moniker, Y'all Street, there's more finance
professionals in Texas on a per capita basis than anywhere else in the world or anywhere else in
the United States except for New York City. And I think the digital asset and crypto ecosystem is
realizing that over the last couple years and starting to make their home in places like Houston, Dallas
and Austin. I love it. I'm so excited to talk about this today. Now let's start with the basics and
the essentials for those that are new to blockchain. Can you share a little bit about what it is
and some foundational knowledge before we get started? Sure. Yeah, it is at its core just a ledger.
So, Debellinger Accounting, it's the way that we tracked value transfer for centuries since the
1500s. Debellinger Accounting is a great system but it doesn't work without a significant
structure of intermediaries and databases and ledgers. And so when the Bitcoin blockchain paper
was published, it's the first time in history, this was 2009. The white paper was published in
just Nate, the first Bitcoin transaction was 2009. That was the first time in history where you could
transfer value on the rails of the internet, have the ledger updated in real time without any
intermediaries and the counter parties did not necessarily need to be to know each other or be in the
same geographic area. And so that's really what's revolutionary about this technology. It is value
transfer at its very core. So whether that's transferring Bitcoin, stablecoins, the tokenization
of real-world assets, even money market funds, are being tokenized by BlackRock and other large
behemoths of the French services industry. Pretty much all assets will run on the rails of blockchain
just like all information today runs on the rails of the internet. So 30 years ago, very little of the
information that we had ran on the rails of the internet. It still was in encyclopedias and in
the brains of very intelligent figures, thought leaders. But over the last couple several decades,
pretty much all of that information has migrated to the internet and culminating now in this A-AGMUM,
where that information is being able to be aggregated and queried at an increasingly rapid pace.
The same is happening with asset transfer. So anytime we're recording asset ownership, asset transfer,
updating ledgers about who owns what, whether that's, you know, any asset really from stocks to bonds
to real estate, that will all one day happen on on blockchain rails.
I'm curious, what are some of the misconceptions about blockchain that you've encountered
and how can we kind of reframe those concerns?
Yeah, I'll start with the terminology. It's pretty complicated because, you know, when we use
the term blockchain, it's a very broad overarching term, similar to the term Web3,
there's a lot of things that fall under it. Of course, the biggest bucket under blockchain is Bitcoin.
Bitcoin is the premier digital asset is the first instance of of blockchain technology.
And there are other verticals of digital assets within the blockchain,
kind of digital asset umbrella. You also have other cryptocurrencies like Ethereum and Solana.
You know, those are considered to be more of the programmable blockchain, like smart contract
platforms where you can program business logic into the chains.
You can also program business logic into Bitcoin, but it's less frequently used for that.
Bitcoin is kind of the asset, the currency, the store of value, whereas Ethereum, Solana,
and some of these other chains are serving different purposes. And then you've got other
components within digital assets like tokenization of real-world assets.
That could be the tokenization of dollars, that's stablecoins. You know, stablecoins did more
transaction volume last year globally than the Visa credit card network. And we're just...
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Getting started. So I think Visa actually has a dashboard that tracks this. Visa, a master card,
or both getting a baldened stablecoins because they realize that money should move at the speed
of the internet, not at the speed of 3% transaction fees, and, you know, T+2 transaction time,
and lack of finality. You know, ACH transactions can be clawed back 90 days after the transaction
has been made. So we're getting there, I think, in a lot of ways in the traditional finance world,
but blockchain and digital assets is going to get us there a lot faster.
Yeah, that's unbelievable. They hear with Visa and master card, and I'm excited to see what's
going to happen in Texas. Now we hear research on blockchain and land registries. How can
businesses and individuals benefit long term? Yeah, my PhD research was on the property rights,
blockchain for land administration. My thesis was essentially the technology is there to do this,
but the institutions and particularly like the land registry offices, the county clerks offices,
they have very, very little incentive to innovate. So I predicted that it would lag from a
records land administration standpoint because that is a function administered by
the government, but that we would see tokenization in the real estate sector and other real world
assets on the business side. And so what I mean by that is in the structuring of these financial
instruments that people syndicate in order to buy properties. So take the typical structure, Melissa,
that you guys are very familiar with, like the general partner, limited partner structure.
That is where you can tokenize some of that limited partner ownership and even general partner
ownership doesn't matter. And those assets can trade with greater liquidity 24/7, should there,
right now, they're not 24/7 because you have to trade them on, alternative trading systems,
ATSs, which are regulated securities exchanges for these kinds of assets. But I think in the future,
we'll see those trade like crypto trades 24/7. Now there has to be an amalgamation of that. You have
to have a marketplace with clear information, enough liquidity, enough buyers and sellers. And so,
you may not see one individual building being tokenized and trading with that kind of liquidity
in the near term. But I think all of that is coming. And it goes back to the original conversation we
had at the top of the call, which is we're transferring, we're democratizing asset ownership,
and we're making it faster and cheaper for the asset owners to acquire more of the asset, sell the asset
and do whatever they want, exercise their property rights over the asset.
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Act. Seems a lot easier, right, than historically in other areas. And so I love first,
you know, I've had a lot of these conversations recently with people that are learning about it,
are, you know, concerned about it, but they're watching from afar. So from some of it's looking to
invest in or adopt blockchain, what is one kind of practical first step that they can take
from your experience? I think the easiest way to get into it, you know, there are real estate assets
that are trading that are tokenized right now. And you can go find those. But that use case has
got a few more years left in it before it's ubiquitous and before like all real estate deals are
syndicated in that way. I think that's several more years away. I think what's here now and what people
can use to learn to get up to speed on how the asset transfer mechanisms work in the digital asset
world is just to open a wallet and buy Bitcoin. By Bitcoin, you stablecoins anytime you have to
send money overseas or send money where you are going to have $30 wire transfer fee, just use
stablecoins and Bitcoin. I mean, stablecoins, you can send a million dollar to stablecoins for
just a few cents transaction fee and it'll clear in moments, right? And then opening a Bitcoin
wallet and buying some Bitcoin Ethereum or some other digital asset and playing around with that
and understanding how the custody works, understand the difference between self-custody and
institutional custody. I think that's the best way to get into it right now. I love it. Now in Texas,
shifting to a really hot topic right now is Bitcoin mining and their regulatory environments are
trending right now in Texas. With your focus in this area, what's your take on where we're headed
from a regulatory standpoint? Yeah, we've got some great things happening both at Texas and at
the federal level. Obviously, federally, we expect to see market structure legislation and
stablecoin legislation this year. I think that's not a foregone conclusion, but extremely likely
is what I would say. In Texas, we are, in fact, just yesterday, Senate Bill 21, the Texas strategic
reserve bill, just one that we've been working on for a long time, passed the Senate Business and
Commerce Committee unanimously. It will be through the four of the Senate soon and over to the Texas
House. We expect over the next 45 days it will move through the House in pass, maybe not unanimously,
but it will pass. It's likely that the governor will sign that in the law in the coming months.
Of course, you also have Bitcoin mining in Texas, about 45% of all, US Bitcoin mining takes place in
Texas. There are a couple of bills that we're watching closely like Senate Bill 6 related to
energy consumption, data centers, large loads, like Bitcoin mining and AI data centers,
and we do a lot of advocacy on the policy front, but I don't want to bore your audience too much
with the nuances of grid policy and data center policy, but we're happy to dive into that offline.
Yeah, that's a good point. Is there anything that they should be aware of and
for what's coming or just let it flow as it comes out?
I think it's interesting for people to realize that the state of Texas is actually going to put
Bitcoin in the balance sheet. The comptroller's office is going to have Bitcoin in a strategic
Bitcoin reserve likely this year. This is exciting and I think people, when they see that Texas is
moving in this direction, of course, we have the Texas Stock Exchange. It's opening up here in Dallas.
The New York Stock Exchange just announced that it's moving all their
like Chicago sub-exchange is to Texas. Really Texas is the place to be for financial services,
and we're already a powerhouse in energy. We produce more energy than any other state,
more energy than California by a long shot even though they have about 30% more people than we do.
And we're also going to be a leader in financial services. And innovation too,
I think innovators are pouring out of California and into Texas by the day.
And so Austin is a little bit stronger than Dallas and Houston on that front, I think, it's known as
Silicon Hills versus Silicon Valley. So we're excited about all those developments.
It's so true. With South by Southwest coming up here, I'm excited to see how things shake out with
that. There is a ton of us on YouTube about sustainable mining practices. I'm curious from your
perspective, how does Texas Block Chain Council promote eco-friendly solutions?
Sure. Yeah, mining does use a lot of energy. And depending on the day, on a nice, beautiful day
like today, it would use about 5% of all power produced in the state of Texas. And other data centers
are using, you know, double that probably about 10%. And that could be a scary number if someone
doesn't understand the way in which the power is used, right? So the first thing that I'd say is
we're using stranded power. We don't want to go into a major metropolitan area and use expensive
power because that means that that power is high in demand. If power is expensive, it's in high
demand. And if power is cheap, it's in low demand. So we go into the rural areas using excess wind and
solar excess power that was never going to make it to a population center. Anyways, there wasn't
enough transmission capacity to get it there. I think what a lot of people don't know is a good bit
of the power that we produce globally is actually unused and wasted. Just because you can't get that
power to the point of use, there's not a transmission and it's not the right time of day. You have to use
produce power and use it within the same few seconds of time. And so that's just how the game goes.
So we locate the industry locates Bitcoin mining operations far from population centers using
excess and stranded, typically renewable energy in West Texas. And another thing that we have
worked on is a piece of legislation that clarifies that flared gas. So gas that is, this is natural gas
what's called associated gas that comes up out of the ground when you're drilling for oil,
typically in order to not vent that gas in the environment, which is much worse for the atmosphere,
they burn it, producing CO2, but that's way less than the methane that was just venting.
So they'll flare it, they call that flaring. So we actually authored some legislation that clarified
that it is not a taxable event, not a severance taxable event, to redirect that flared stack from
the flared to a generator for onsite production for a mobile data center in Bitcoin mining AI or
otherwise. And so what that does is actually create a 67% reduction in the carbon footprint of a
a flare that was previously just flaring that gas into the environment. So a couple of different
ways where Bitcoin is really driving clean energy innovation, driving investments in renewables
and nuclear power, and also reducing some flared gas. That's great to hear. I'm, you know, I know
global interest in cryptocurrency. There's so much interest around the world to invest in
cryptocurrency. How do you, I'm curious, how do you think Texas policies and legislation changes
are going to affect the other states or other countries around the world?
Well, it is a concept called game theory that I think many of your listeners will be familiar with
that if there's no jurisdictions or sovereign entities that are giving an industry any time of day
or any interest, then there is no game theory pressure for other jurisdictions or sovereigns to
take interest. But the theory goes or kind of the process or the logic goes that as countries do
start taking interest in passing things like strategic Bitcoin reserves and realizing that digital
assets are the future of value transfer and the future of finance.
They will start taking notice. And so the faster they start to pile in, the more pressure
there is on the ones that have yet to pile in. And so right now we're kind of still in that early
adoption phase. And we still probably have 20 more years to go before we get to the point where
where these assets are ubiquitous and used by all 8 billion people across the world. Right now,
only about 500 million people globally have have a wallet or transact in digital assets,
stablecoin, crypto or otherwise. So long ways to go, still early days.
That's interesting. That's not a lot, right? Given I'm curious how that stacks up against other
investments around the world, but 500,000 is not a lot. So get in early, 500 million. 500 million.
Oh, yeah, there we go. But still, that's only one 16th of a global population. It's less than 10%.
Yeah, that's so get in early, I hear. Get in before everybody's in.
We like to ask our listeners. I know Bitcoin has been something that has been of interest to our
listeners to submit questions about Bitcoin. So we have one, how do I start learning about Bitcoin
and Bitcoin mining? Do you have any recommendations on where to start?
Yeah, for Bitcoin and digital assets, I would go to one of the exchanges. They have really good
quality educational content, exchanges like river, Coinbase, Kraken, crypto.com, blockchain.com.
These are all great places that have really good content for folks to learn. And then on Bitcoin
mining, they can go to our website. The Texas watching council does a lot of education about Bitcoin
mining in particular. If they want to learn about sort of the, you know, the academic side of it,
like understanding how it interacts with the grid, you know, why it's good for the grid, why it's good
for the United States. If they actually want to mine Bitcoin, like they want to learn about them
actually purchasing a Bitcoin mining machine, we don't do that. But one of our member companies does
that for individuals, their compass mining is the name of that company. And so if they want to
actually purchase a mining machine, have it shipped to a warehouse, a data center, where it will
mine Bitcoin into their wallet, they can do that through companies like Compass.
I'm curious to know, how can listeners or people get involved or become a member of the Texas
blockchain council? Is there a way that they could connect with you and your team?
Yeah, just a Texas blockchain council.org, we have a page on membership. It's probably not for everybody
because it does have a cost to it. But for those that are in the industry or wanting to,
you know, network in the industry, have looking for clients in the industry, we're typically
well equipped to help there. If it's people who are really just wanting to learn more about it,
I suggest they just go to like our YouTube channel, YELL's YouTube channel.
There's so much free content out there for people who are just wanting to learn. I wouldn't pay
for anything that's just content. We give content away for free, y'all give content away for free,
and many other folks do as well. And there's a lot of great content out there. It does take about
some people say a thousand hours to really become, you know, deeply versed in this industry.
But I'd say, you know, if somebody spent 15, 20 hours reading and watching videos, they could get pretty
up to speed. You know, the best book I think that's only like 75 pages is called "Inventing Bitcoin
by Yance Pritzker." There's another book called "The Bitcoin Standard" by Safety and Amos.
It gets a little bit more theoretical. Safety is an academic like myself. He's an economist. So
it's a little bit more heady, but still a great read. And then there's similar ones for other assets.
I think if you understand Bitcoin first, then you can understand more easily, understand some of
the other assets like Ethereum. That's great. As we wrap up, I always like to look at the future.
Your teaching, experience, and summit hosting, you clearly have a passion for education.
How do you see blockchain evolving in the future?
You know, I think it will become like the internet where we don't all know how the internet works,
but we all use it every day. So when we educate people about it, we don't want to educate
everyone about the entire ecosystem. It's impossible to learn. I think specialization is key. I mean,
that's a principle that Adam Smith and the wealth of nations beautifully elucidated centuries ago
that we thrive as communities when we specialize. And to specialize in the digital assets ecosystem
means to go narrow and to understand, you know, if you're a finance person or maybe you're an accountant,
then you can specialize in the tracking, you know, understand the software mechanisms and understand
the reporting requirements and the FASB stuff. If you're in the energy industry, then of course,
you're going to go into data centers, Bitcoin, mining, AI, GPU, high performance compute.
If you're in real estate, you're probably going to want to learn about the tokenization of real estate.
So there's all these different angles, and I wouldn't suggest anyone try to learn the whole
industry, just like no one's going to learn everything about the internet, right? Like, you're not
going to learn everything related to TCP/IP, Chrome protocols or email works and different packets
or sit over the internet. You're going to learn how the internet impacts your industry and your
business. And so that's what I would suggest to folks is just find that niche and,
you know, make sure that niche is adjacent to where you already are from a business perspective.
Yeah, that makes me think, with your research, your PhD research on blockchain, land registries,
I'm curious from my perspective, how this technology might change property rights in the next five
years. Do you have any thoughts on that? Yeah, I do think it gets people closer to property ownership.
It makes them better able to utilize assets that they own to provide
more value to them and their families, right? So what do I mean by that? I mean, if you,
so let's take a pretty simple example, like money market funds. Imagine if you could take, you know,
your money market funds that's earning like a kind of treasury, like a T-build rate of return
and use that as collateral to, and get some tokens with it, some stablecoin tokens or money market
tokens that are redeemable for that money market fund or a stablecoin or back to the US dollar
in kind of in the original sense. And you collateralize that and you use that to invest in real estate.
Or if you're able to kind of exercise your property rights over, you know, your rental houses that
you own or over an asset, maybe you own multiple cars and like, there's a decentralized
touro that comes up where you're able to exercise your property rights and ownership over those cars
by renting them out in a decentralized way where touro is not taking a cut. There's any number of
things, anything of any asset that you own, how do you put it to productive use? And there's probably
a more efficient way to do that with with in the digital asset realm because what you're doing is your
increasing speed, you're cutting out middlemen, you're cutting out fees and that means that you're
accruing more value to the asset owner. Yeah, that's great. I know, I've got all these questions. I'm curious
to ask you. I'm curious just looking back on your journey from professor to blockchain advocate.
What is one message that you hope that carries forward in this industry?
I think right now it's important to let people know that speculation is really not what this
industry exists for, although there is a lot of that going on right now. So I would caution people
against the meme coin frenzy. I would make sure to use reputable partners, do not get scammed. I mean,
it can happen to anyone, so be very vigilant. Not even with necessarily a crypto, just in general,
anytime you're dealing with financial services, you know, you want to use reputable service providers
and connect with reputable actors. And so I would just make sure people, you got to understand
the asset, right? You want to understand what a wallet is and how to send a transaction. And
even professionals get, you know, buybit was hacked for $1.5 billion just days ago. So even professionals
can fall, fall victim to some of this stuff. So education is the watchword of the day and using reputable
service providers. And, you know, if you want to play the lottery, you can buy meme coins. That's fine,
but it is like penny stocks. There is a, it is very similar. So meme coin behave like penny stocks,
and they behave like slot machines. And that's really good advice, paying attention to some of
these scams or these emails or click here for this or some of the, you know, bait that we have
and be smart. I think that's really good advice, be smart and wise and pay attention to it,
because it is your currency, it is your money and it can, you know, just be lost the same as any other
investment. I want to get in kind of closing any final thoughts or anything you want to share
with our listeners about the things we may or may not have covered today during our time.
You know, the last thought I have is said, we'd love to connect with your listeners in person.
Now, we have the North American blockchain summit that we host every year in the fall.
It will be at the Bush presidential center in Dallas, Texas next to SMU. Beautiful venue,
very high, high class. And it's not going to be 50,000 people. It's not like, you know, a huge
conference. We typically have anywhere from 700 to 1,000 people. But they're, but they're business
professionals. They're people that are on the kind of that institutional side of things. And
you know, it's a good place for folks to safely come and network with, you know,
traditional finance people who are interested in blockchain, digital assets, and also crypto folks who
are are native to the industry, but are a little bit less crypto bro-esque in their, you know,
the way they they carry themselves. That's great. What an insightful conversation.
Thank you so much. You're a busy busy man. I know you have a lot of places to be. We've
covered so much about blockchain, the future education. Lee, I want to thank you for sharing your
expertise and time. Where can listeners connect best with you? Sure. I mean, our website is one
we listed that earlier. I'm also on Twitter at Lee_Bratcher. Thank you so much for sharing that
to our listeners. Stay challenged. Make sure you like and connect with us. And until next time,
And that's the Executive Connect podcast.