Bitcoin Flows at River with Alex Leishman

23:50And that's how I view it. That's how I think most financial apps will integrate with stablecoins. But I'm pretty excited for them to continue to proliferate because I would love to see them disrupt Visa and MasterCard. It would be better for everybody.

24:04Alex Thorn:Yeah, I agree. I feel like it's mostly to the extent you are aware that they are even there. It's mostly maybe competes with debit cards. Maybe people start getting paid in – again, if they're getting paid in dollars, I think most people are going to use their bank website or app or fintech app and just honestly may not know whether they're stables or not. And it really shouldn't matter. No. But you might – what I'm excited about just one of the things is that you will maybe for the first time be able to actually hold a digital dollar that is like widely accepted and considered fungible with cash without – like you might be able to hold that finally in a non-custodial manner, which is kind of interesting.

24:46Correct. Because like cash in a Venmo account is not like cash in your – you don't really have it. Yeah, and there's all these horror stories about people getting their PayPal accounts locked and they lose$10 ,000. And now there will be a whole other class of issues with self-custody. But nonetheless, I think it's going to be a big win.

25:05Alex Thorn:Yeah, and I agree with your point. I think in terms of like day-to-day Americans using it as opposed to businesses and other uses for digital dollars, Americans are well-served for the most part, right? You can cash app Venmo and other Zelle, right? I mean, you've got plenty of ways, I think, for most Americans, and maybe not all, but abroad, the story isn't so good, right? I think that's generally true. Although the card networks have been making big plays, I think really the value internationally is not as much the payment rail as it is being able to just have dollars, right, instead of your crappy local currency.

25:43I think that's really the product market fit there is saving. Transacting is easy. I mean, it's often better in developing countries. Like, for example, in Brazil, right? Brazilian Hei is not a good currency. But PIX, the payment rail for Brazilian Hei is amazing. It's just instant, right? Better than stable coins. And Visa internationally is also amazing. I was on the border of Brazil and Paraguay and bought a coconut for a dollar with Apple Pay.

26:10Alex Thorn:Wow. And it took a second. So I'm not as convinced that these are going to unlock amazing consumer payments experiences in the near term. Maybe online payments or something like that. Maybe merchants will start using this because they don't have to pay credit card fees, but we'll see. Yeah, I tend to agree with that. I think there are some big unlocks, but the ones that I gravitate towards are not mostly consumer payments. It's things like big giant retailers having to pay like 2%, 3 % of the card networks. And like if they could get their consumers to use stable coins or their supply chain to use stable coins, then perhaps they save a lot of money, right?

26:50And I also view it more as like a dollar dominance, like a geopolitical macroeconomic legislation.

26:57Alex Thorn:Yes. Right? It's what Scott Besson said that the government and the treasury intend to preserve and grow U.S. dollar dominance and plans to use stable coins to do that. Yes. So it seems more of like a U.S., like an upgrade for the dollar that is helpful for American power than something day-to-day we may use. I think it's a useful way to dollarize the rest of the world. And what we might end up seeing is that trickling into the consumer payments domestically eventually. I think someone else described it as sort of the WhatsApp effect, right? You know, it's like Americans never use WhatsApp until the last few years.

27:32Whereas all of a sudden, like you have that European friend who, you know, or who messaged you on WhatsApp and you have it now and then you start using it more and more and more. And so I think that's right. That might be what happens.

27:45Alex Thorn:Yeah, it just becomes really popular and then just eventually trickles in. Is there like a particular one of the things people ask is like, is the growth of stable coins like bullish or bearish for Bitcoin? I think it's mostly neutral in my opinion. But I don't know. Do you have a view on that, the interplay between the two assets? I think if anything, it's bullish because stable coins aren't going to stop inflation. Right. Yeah, they're still just the U.S. dollar. They're still just the U.S. dollar. Yeah. Now, I do think that if a KYC-free dollar or like e-cash – if PayPal could have built a KYC-free e-cash server when they first started, would Bitcoin have been built?

28:30Maybe not. Right. But that doesn't solve the inflation problem. And now that Bitcoin does exist to solve the inflation problem, I think that just accelerates growth. Because now anyone who has stable coins can easily convert it to Bitcoin once they realize their purchasing power is still eroding.

28:47Alex Thorn:Yeah, and the stable coins, as designed surely in the Genius Act and in general the big ones, they're not immutable. They're not really censorship resistant, right? Like government can serve a due process of some kind, legal process on Circle or Tether, and they will freeze and seize those dollars. So there is a use case that they don't solve. I mean that's not – so it really is that like for dollars like physical cash is like the only bearer version still. Yeah, still. Yeah. Now, I do think that it will just be more censorship resistant than electronic accounts because they're only going to go after the big guys with that kind of thing.

29:28Yeah. Right? Joe Schmoe won't have his bank account locked. Almost certainly not. Won't have his stable coins frozen most likely.

29:33Alex Thorn:I mean this is why the Republican Party has been very opposed to the CBDC, which is I think one of the reasons. The bill in the House that prohibits the creation of a CBDC is called the Anti-CBDC Surveillance Act. They're very concerned about the centralizing power that if it was the government as the issuer, they might not even need legal process. They could just go around. And I do think the act of just like you do need to like serve like some kind of like a subpoena or a freeze order or something from a judge. Exactly. In order to get – not necessarily a judge. I mean, I guess OFAC can just send a letter saying, hey, like, that's a terrorist.

30:11Alex Thorn:Could you please freeze it? But, like, that extra step alone does provide some censorship or resistance. But it is so fascinating that in 2025, still pretty much really the only uncensorable digital money is Bitcoin. Yeah, totally. Because, I mean, at the end of the day, a dollar will roll up to the Fed, roll up to the U.S. government. A fiat currency always has a choke point. It's a liability on the government. It always has a choke point. Yeah. And that's the genius of Bitcoin. And that's why that's, I think, the end state. But dollars are going to be around for a very long time. I think so, too.

30:42Alex Thorn:I think it is possible. I think that we're in the twilight of the American – I would say it's likely that we're in the sort of twilight of the American power, that it's possible that we – America's relative power to the rest of the world has already seen its peak. I think that is possible. but that doesn't mean that it's going to like that there's some suddenly event that's going to happen that is very unlikely. Like because other countries and their monies, for example, are not better than the United States really. They're not more powerful. But, you know, I guess it's that like 92 to 2001 was like Pax Americana for power.

31:19Alex Thorn:But I do think also the dollarization of the world with stable coins, as you mentioned, And that does probably grow and extend the dollar's life and reach and power. So it's quite interesting what they're trying to do with that. And also I've been thinking a lot about – you mentioned the card networks. Like who does this help and who does it hurt? I mean surely it helps the existing stablecoin issuers. Yeah. But also may they be about to face unprecedented levels of competition. Right. Like I mean does JP Morgan get in the game? I think they have to. I would assume that all the big banks are going to.

31:55Alex Thorn:They're explicitly authorized to do so by this bill. And also, I think the bill prohibits the stable coins from issuing interest to the holders of the stable coins. It does. Now there's like backdoors with like, you know, rewards. Surely there's some way they can figure it out. Yes. But so, you know, I do think that I have a hard time seeing the big guys totally disrupted by this. But you never know. Like it could be like in 20 years Visa is like, oh crap. Yeah, I think it could. It could. Or 10. I mean it will be one of the most interesting innovation disruptions for like traditional dollar payments in decades or I don't know since when.

32:36Alex Thorn:It's an interesting one to watch. I wanted to ask you also, Alex, about River's use of Bitcoin Core. There's been some debates about some changes to Bitcoin Core, the software that are being made that have resulted in a debate with particularly supporters of Bitcoin Knots, which is an alternate implementation of Bitcoin software client. I would say ultimately emanating from the Bitcoin Core client's handling of non-financial transaction data, so arbitrary data transactions. But – and so some have been arguing for people to use Bitcoin Nots instead, which is I think fine. But you said that River uses it proudly and for interesting reasons uses Bitcoin Core.

33:22Alex Thorn:Could you elaborate on why River uses Bitcoin Core and plans to in the future? Yeah. And I believe everyone has the right to run their own Bitcoin node software, whatever they want it to be, whether it's not, whether it's their own custom written – Bitcoin or other – I don't know which other ones there are. I mean there used to be all sorts of versions and I've played with them. Like there were ones written in JavaScript or ones written in Haskell. And I think that's great experiments. For forever, we're a financial institution and we need a node implementation that is very heavily audited and has strict controls around the code written and the release cycle.

33:56And so we're very conservative. We won't even run a new version of Bitcoin Core unless it's been out there a little bit of time. And as for the spam problem, that this debate about mempool filtering, should a Bitcoin node filter out transactions that are kind of abusing Bitcoin script to store data? I think if it was up to me, if I was running Bitcoin Core, I'd make it a flag that made it optional. Like, what do you want to do with your node? I do think at the end of the day, what matters is the consensus rules and the blockchain. The mempool rules are important for various things, but at the end of the day, what are the blockchain rules and what are the consensus rules and that's really where the important conversation should be.

34:41And I do think that it is a little bit of a moot point at the moment because the mempool is empty and has been empty for quite some time. It doesn't mean that it won't ever be an important thing to have got made the right decisions on, but I do kind of wonder why it's such a big debate because nobody is even, the fees are as close to zero as they can be right now.

35:01Alex Thorn:Yeah, I mean I think you've got some people getting like sub one sat per V by transactions mind, which those are not relayed by Bitcoin core, right? So it's kind of an example. I guess this has been a little bit of like a demonstration that different in that spam versus like, or saying that arbitrary data is spam and the other side that says that, I don't think they say it's not really spam. They just say it's mostly not possible to stop. And one of the ways they've been trying to show this is by getting these sub, like, 0.1 sat per V byte transactions mined. How are they getting those mined if they're not getting relayed by Bitcoin Core?

35:40I don't know the details of that, but presumably submitting it directly to a mining pool.

35:43Alex Thorn:Yeah. And that's another sort of unintended consequence of having too much sort of, too many rules at the mempool relay layer that differ from consensus rules. Because if there is a big enough economic incentive for these transactions to get mined, someone will find a way to get the mind they'll just pay miners directly and now you're creating the system where people are routing around the peer-to-peer network and going straight to miners which maybe actually is even worse um than than having transactions you don't want floating around in the mempool yeah that's been one of the arguments against adding more filters right i think concretely one of the sides i think matt corallo has been one of the people who's expressed this eloquently was that you really want transaction relay policy to be as close to consensus policy as possible.

36:34Alex Thorn:Yes. Right. Because otherwise you end up with like flashbots like Ethereum. Basically, there is no public mempool that's worth anything on Ethereum at this point. Yep. I agree. And that means when you have something like that, you run the risk that deep pocketed actors have better access to the blockchain than everyday folks. Right. Because Bitcoin's mempool is still quite good and robust. And arguably, you could argue that the most, you know, Bitcoin core, by trying to make the mempool as close to mempool policy as close to consensus policy as possible, is the most sort of decentralized, decentralizing decision to be making, right?

37:10If Bitcoin core can unilaterally, you know, restrict mempool policy away from consensus policy, you could argue that's actually centralization of power, right? So if you want to change a rule, like let's get the consensus rules changed.

37:24Alex Thorn:I agree with that take. Another interesting one happening in sort of the discussion happening in the Bitcoin development world relates to quantum computing. And I guess the general threat is to cryptography in general, sort of a classical cryptography, right? Asymmetric public private key cryptography. And the idea, I believe, and maybe I don't know if you've looked into this. I've been hearing about this question for years, and it's been mostly FUD, as they say, fear, uncertainty, and doubt. But it does seem like, not just in Bitcoin world, in quantum world, there's a lot of improvements and new research happening that makes it seem like it might be finally getting closer.

38:06Alex Thorn:Are you worried about the risk to Bitcoin's cryptography from quantum? Yeah. So, you know, I have a decent academic background in cryptography. Quantum is like a whole other world. so I'm not like in super deep in the quantum space but I think one of the issues is no one is. Yeah. Like very few people are and so one of the issues with the quantum computing thing is everyone who knows enough about quantum computing to know really what the risks are are economically incentivized to tell you the risks are high because they're probably working at a quantum computer company that's raised a bunch of money and needs to like convince investors this is going to be a big deal.

38:41That's true. So it's kind of like crypto where you get this like small insider group with somewhat perverse incentives. And so I'm actually really skeptical that quantum computing is a threat to ECDSA, the signature algorithm used in Bitcoin in the foreseeable future. It could be famous last words, right? Now that said, you know, the chance that I'm wrong is non-zero. And so just simply because of that, right, we should have a plan. And so I do think the right move is to be working towards a plan to get ahead of this if and when it does become viable to crack ECDSA. And I do think, though, it's really important to really get some people inside the quantum industry to really actually understand what the risks are.

39:32Because I'm still not convinced people really know.

39:37Alex Thorn:Yeah. It's hard to get good information, too, because in my mind, the two questions, whether it's Bitcoin or any other system that uses cryptography, which Newsflash is almost every system. The two questions are, when is it a threat? If you assume it is a threat, when is it a threat? And how do we mitigate or fix it, right? And there's so much debate about when. And I think part of the reason is that, like, I think these are basically classified national secrets, because even if you're a private company working on it, say, like Google, which is doing plenty on quantum like surely the united states government has an interest in containing knowing competing with china for example yes so like no one's really very straightforward about how far along they are no and you know if if if quantum if this first successful constant computer is a government project and that government is not north korea then probably what they'll be using it for is not stealing bitcoin it's probably for you know cracking internet traffic that they've observed and saved.

40:44But I do actually think that if someone wants to use a quantum computer to make money, Bitcoin is the first target. I think that the argument's like, oh, well, what about all these big companies that haven't secured their system? I actually don't buy that argument. I think those things are much harder to hack with a quantum computer because you need to still man in the middle things. You have to, you know, Bitcoin is literally like, here is a piece of data. If you have a quantum computer, you have billions of dollars. There's no other work required. And so because of that, right, I do think Bitcoin will be the first economic target of a quantum computer if we don't get ahead of it.

41:19But the thing is, like, that could be in 50 to 100 years or never. Like, this stuff could actually still not be viable.

41:24Alex Thorn:Yeah, we don't know that it is for sure. And also, like, there aren't going to be, let's say it is viable. There aren't going to be, like, hundreds and thousands of quantum computers. So I was thinking about this. There is an interesting point where it's like, OK, let's say like Google, what's called DeepMind or HiveMind or something like that. Let's say it does get to the point where it could brute force attack classical cryptography, public keys to drive the private key. I mean, it's going to be like one or two of them that have it. If it is in the U.S. At first. That's all I mean. And they're going to know.

41:56Alex Thorn:Let's say they lease it out for businesses to do something with. They're going to see if a business is trying to compute on Shor's algorithm and use it for breaking passwords. So there is even a little – but that doesn't resolve the bigger problem. But there is a little bit of a line of defense there that's interesting. The best I know of on when, the most aggressive and somewhat confident number is that the U.S. government, I think NIST, recommends that all government agencies be off classical cryptography by 2030. And that is only four and a half years away. Doesn't mean that – I don't think that means they know that it's going to be viable by then.

42:35Alex Thorn:But it does feel like something we need to plan for. There are a couple of plans that I've seen. hunter beast has a bitcoin improvement proposal for it um project 11 has got their own vision of how it should be mitigated i saw jameson lopp has sort of just released uh him and several others have just released a new bip also um it does feel like something we should be talking about by the way i should point out that most bitcoins are currently probably in a quantum resistant address because they're hashed public keys or hash scripts or and most people think As long as it hasn't been spent from.

43:07Alex Thorn:Well, that's right. Because this is the other interesting tricky problem here because a hashed address, you'd have to reverse the one-way hash function in order to just see the public key. Right. But when you spend from any address type in Bitcoin, you reveal the public key, right? So if you reuse any address type, then the public key is known. Yeah. So that's actually, to me, one of the trickiest parts about this problem because it's not, it shouldn't just be that you have to upgrade to a new quantum-resistant address type or add one in and encourage people to use it, you'd have to change potentially the way the signature algorithm works, signature mechanism works because if we assume that you get to a quantum, post-quantum world where classical cryptography can be broken, it's not that far from like one, it takes one year to it takes one month to it takes one week to it takes one minute.

43:53Alex Thorn:And then you'd be at risk in the mempool before your transaction's even confirmed. Well, yeah, that's why we have to upgrade to a quantum secure signature scheme. Yeah. And now what I think people might start doing to be very conservative is when they spend from an address, give it direct to a miner so that it's never even in the mempool to crack. But that's a whole other can of worms. Yeah, you'd have to overhaul. It kind of goes back to the mempool destruction thing. That makes it a big enough question. The mitigation would be complicated enough that it doesn't, in my mind, make sense to start working on it now.

44:26Yeah, I think give people a quantum secure signature algorithm before they need it so they can start migrating. That's the bigger political question is what to do with all the coins that don't move.

44:36Alex Thorn:Yeah. Yeah. That's a whole. Yeah. Well, that makes it a fun thought experiment. And I wanted to also point out that the vast majority of other altcoins are at risk. And like, for example, all EVM chains use reused public keys. Yes. Those are going to be even harder. Yeah. It's almost like Satoshi kind of saw. It's just the beauty of the UTXO model. The UTXO model is like, it's pure. It's quite elegant. Yes. Before we wrap, I wanted to also ask you about something that you guys do, I think, more publicly and do better, but also more transparently than anyone that I think I know that does it, which is proof of reserves.

45:12Alex Thorn:You guys perform, I think, what, a monthly cryptographic proof of reserves, but also you release your own private financials. Tell us what you do. I think you had just started doing this right after we last spoke. Yeah, so everything we do at River boils up to our mission of building the world's most trusted financial institution. So we always ask ourselves, what can we do to be more trusted? And a big one was, well, we started custodying and increasing a growing number of Bitcoin for our clients. And so we said we should start doing proof of reserves. We should prove every month that every Bitcoin we say we have, we have in the vault.

45:46And so we do that. We do a proof of assets. So we show, hey, this is our cold storage address. We send a transaction from that with a random amount showing we control this Bitcoin. We also do a proof of liabilities, publishing an anonymous sort of fragmented list of liabilities so every client can verify that their account is included in that list. If it's not, it means we're trying to game it, right? We're trying to lower our liabilities.

46:09Alex Thorn:I see. So – and then we also have started publishing our annual financial statements. And we don't have to. We're a private company. But we're a financial institution. and how are you going to know we're safe and sound if you don't know what our financial situation is? And I kind of was like, why don't we do this? And we started doing it and people have been a fan. I think because – so the reserves, the assets and liabilities is saying, okay, you're saying we have 10 ,000 Bitcoin or 20 ,000 Bitcoin or 100 ,000, whatever the number is, and then you're telling the user, okay, but also like we owe X amount to our users and that's lining those two up.

46:49Alex Thorn:But then the financial statement is like, let's say you had all the Bitcoin that your users had, but what if you owe$10 billion to some other company separately for some other reason, right? Like that's where the asset, the financial statement really comes into play. Yes. Now, well, the good news is we actually don't put client assets on our balance sheet or we take the position that those assets belong to the client and the client alone. And so a river liability would not be, those clients' assets would not be subject to that. It's like a bankruptcy remoteness. Yes, exactly. That's our position and that's what we think of, you know, the position a judge would take based on legal precedent we've seen recently.

47:26But that said, right, it's like if we went bankrupt tomorrow or something and we just had to shut down operations, that'd still be extremely disruptive to our clients. Totally. Even if the Bitcoin's there. Like what if like the system couldn't run, right? Things like that. But also, you don't want to open an account and invest time and effort into using this platform if it's financially on the rocks. Totally. Like why would you do that? So yeah, I think it's important to be transparent as a financial institution. And so that's what we do.

47:54Alex Thorn:Yeah, it's quite interesting. Great products. I swear we don't have a relationship with River that I'm aware of and I'm not paid by River. But I use River. It's my favorite Bitcoin-only brokerage. It's a great company, Alex, that you built. and you have some great products, really great products that I really enjoy using. So just throwing that out there. If you need a Bitcoin brokerage, check it out. There are other good ones. It's been a fascinating conversation, Alex. Before we wrap, what gets you excited for River? Is there anything you can tell us about what you guys have coming in the future?

48:27Alex Thorn:Yes. What should people be looking out for? We have a lot of stuff in the works from leveling up features. People really love today, like recurring orders. We have some cool stuff coming there. And to bigger things, like our vision is that we're entering this dual money era in the United States where people will continue to spend and earn in dollars, but save in Bitcoin. And so we want to be more than just a Bitcoin brokerage for our clients. And so we're building a lot of stuff towards that direction. And you'll see more in the coming months. Alex Leishman, CEO and founder of River. Thank you so much.

49:01Thanks for having me on the show.

49:03Alex Thorn:That's it for this week's episode of Galaxy Brains. Thank you to our guest, Alex Leishman, founder and CEO of River, and our good friend, Bim Netabibi from Galaxy Trading. Everyone have a safe and happy weekend, and we will see you next week.

49:20Alex Thorn:Thanks for listening to Galaxy Brains, the weekly podcast from Galaxy Research. If you enjoy the show, please like, rate, review, and subscribe wherever you get your podcasts. To follow Galaxy Research, sign up for our weekly newsletter at gdr.email. Read our content at galaxy.com slash research and follow us on Twitter at GLXY research. See you next week.