S5 E1: Bobby Lee on Ballet Cold Storage & Returning to the Real Bitcoin
Bobby Lee has been around the Bitcoin space since 2011. And with the exception of a two-year exodus in the big blocker camp during which he supported SegWit2X and spoke in favor of BCH, his line of work has constantly sought to increase Bitcoin adoption.
Lee is responsible for popularizing BTC in China as the CEO of BTCChina (BTCC, which he co-founded) and running one of the oldest exchanges in the space. During his time at BTCC, he has also experimented with Casascius-style physical bitcoins which he called BTCC Mint.
After having had these experiences, Bobby Lee has decided to return to the real Bitcoin and launch a product which aims to be the Casascius of nocoiners – or a practical and elegant way of offering friends and family members some BTC without trusting in their ability to take care of mobile wallets. Be careful though, it’s only the PRO version of the Ballet wallet that this show recommends.
In this episode, Bobby Lee talks about returning to the real Bitcoin, how and why he designed the Ballet, why the PRO version respects the “don’t trust, verify” principle thanks to BIP38, and what it felt like to meet Bruce Willis and debate Nouriel Roubini.
Also, here’s a notable Bobby Lee quote for the Twitter haters: “If you already own BTC, then Ballet is not for you and you should keep managing your coins as well as you can. […] the most important thing is to have the private keys for your BTC. And then if you wanna give bitcoins to friends and family who don’t own any, I think Ballet is the best way to offer them a gift. So we hope people can take a look at that.”
00:50 – Introduction
2:00 – How Ballet was created
3:16 – Ballet REAL vs PRO
4:55 – BIP 38 in Ballet PRO
7:30 – How Charlie Lee gifted Bobby a Casascius physical coin
9:27 – Skewmorphisms for nocoiners (a physical card is easy to understand)
11:20 – How does the Ballet app work and how does it improve on the Casascius and BTC Mint model?
15:41 – Ballet is not for experienced bitcoiners, but nocoiners who had no previous exposure with BTC and need to learn how it works
19:37 – Ballet PRO as a gift where the giver is the trusted third party
21:00 – The Bruce Willis story (and how his daughters received BTC)
23:40 – How did Bruce Willis react?
24:40 – What Adam Back, Trace Mayer, and Tone Vays thought about the Ballet wallet
28:40 – What is the maximum amount that should be stored on a Ballet Wallet? After which threshold should users look into more sophisticated storage solutions?
30:53 – Can Ballet help incentivize more people to run Bitcoin nodes?
34:30 – Which competitors does Ballet have?
36:55 – Bitcoin onboarding and full nodes
38:48 – Does Ballet compete with mobile wallets?
41:31 – Does the Ballet come in a 3-pack?
42:40 – How did Bobby Lee come up with the name “Ballet”?
45:10 – Bobby Lee’s comeback from the big blocker camp and why he returned to the real Bitcoin
46:37 – BTC actually has bigger blocks on average
47:05 – The network effect of Bitcoin
47:30 – Why the Ballet was created and Bitcoin’s use case
49:39 – Bobby Lee’s debate with Nouriel Roubini
50:40 – Nouriel Roubini is a Bitcoin maximalist
52:10 – Closing comments
Bobby Lee and Ballet Wallet
Ballet (named after the art form, but meant to be a juxtaposition of the words “Bitcoin” and “wallet”) is a cold storage device that’s shaped like a credit card and is made from stainless steel. Yet contrary to some erroneous claims made by Coindesk and Twitter users, the Ballet is not a hardware wallet. If anything, it’s a fancy paper wallet which comes in two versions.
First of all, there’s the Ballet REAL series which relies on a more trusted setup which is similar with BTCC Mint and Casascius. It costs $35 and it has the two halves of the private key printed in two different sides of the world: one in the USA and one in China.
Secondly, there’s the Ballet PRO version which fixes the trusted setup by making users generate their own BIP38 hash. This means that whoever orders the card is also the only person to ever see the seed phrase and private key, and Ballet only gets to see an encrypted code that gets printed on the card.
Surprisingly, the Ballet PRO is discounted 50% and sells for $65 for a 3-pack. It’s definitely the best version of them all, and the only one I’d personally recommend because it eliminates the need to trust in the issuer.
If you want to give away some BTC at birthday parties and don’t want to look cheap with your printed QR codes, you can get a Ballet and start someone’s journey down the rabbit hole. You can even save a backup of the passphrase for a year or two to make sure that they don’t lose the coins, then help them move to a Trezor when they’re ready. Essentially, you become the trusted third party. The scenario is very similar with the one Jameson Lopp described in this tweet.
Users can interact with it by using a mobile app, and the experience is meant to be as simple and basic as can be. Anyone who’s ever used a mobile banking platform and a credit card should know what to do, and this may be a great for newbies who need some time to learn how Bitcoin works.
Ballet is an instrument to onboard nocoiners, not a cold storage solution for seasoned Bitcoiners
During this interview, Bobby Lee says it himself: you shouldn’t HODL more than $5000 on a Ballet Wallet. If you get to that point, you should probably start looking into more sophisticated ways of securing your bitcoins (with a full node, hardware wallet, and other advanced setups).
Also, the best way to avoid the trusted setup (which received hostile reviews on Twitter) of the REAL model is to go for the PRO version. It offers all the convenience and ease of use, but in an environment where you control every aspect of key generation. However, the BIP38 passphrase creation process (described above in the video) is overkill for a newbie.
So it’s better that you do it for someone else and either hand them the keys or hold a backup just in case they mess up. It’s still more cautious than making them install a mobile wallet, and classier than using paper wallets or improvised systems. The skewmorphic form factor also helps nocoiners understand how the device functions.
Why not go directly for a hardware wallet? Because it’s more expensive (around $100) and it’s an electronic device which requires an extra learning curve. Just giving them a card and the passphrase is nicer at birthdays or family events. If anything, the Ballet is the more practical and secure way of saying “install his wallet on your phone so I can send you some bitcoins, and write these 24 words on the napkin”.
On a personal note, if you’re a fan of the “don’t trust, verify” motto, stay away from the Ballet REAL model and use the PRO. It will help everyone sleep better at night.
The Bruce Willis story
There are four major figures who got a hands-on experience with the Ballet: Bruce Willis, Adam Back, Trace Mayer, and Tone Vays. They all get mentioned and Bobby Lee offers some details behind the Twitter stories, but it’s the “Die Hard” action hero who steals the spotlight.
The Ballet founder explains how he encountered Bruce Willis, how the movie star reacted, and how his two daughters ended up receiving their first bitcoins. He also offers insights on why Willis looked grumpy in the picture and we never got any kind of response afterwards to further consolidate Bitcoin’s takeover.
However, Bruce Willis’ daughters might come out later to express their gratitude. If they HODL until they’re 18 or 21, they should be able to support themselves through college or start a business without needing money from their movie star father.
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Vlad Costea: Hi there, and welcome to season 5 episode 1 of the Bitcoin Takeover Podcast. I am Vlad and the topic of this season is Bitcoin security. Since in season 4 we have talked mostly about hardware wallets, I feel like it’s only natural to explore more of this exciting field of keeping your bitcoins in cold storage or mobile wallets.
This episode’s guest is Bobby Lee, who is the CEO and founder of Ballet Crypto. He is designing, promoting and selling a wallet which contrary to common criticism, is not a hardware wallet but a cold storage solution. And sir, I’m gonna allow you to talk more about it.
Bobby Lee: Great. Hi Vlad. Thank you for having me on your show. Very excited to, to get a chance to talk to your audience as Vlad has stated. So I created, this is a, this is a very new, innovative solution. It’s essentially a new physical approach to cold storage. What Ballet has created. I started this company last year, one year ago. I sold as, as, as you may know I’m previously I was the co founder and CEO of BTC China BTCC. So I’ve been in Bitcoin since 2011 and I ran BTC China for five years and I sold it in 2018. And then a year later I started the company ballet, a ballet crypto. We make physical cold storage wallets for Bitcoin and cryptocurrency and Vlad. I think you you’ve tried it out yourself, right? So essentially it’s a new approach where we give people their own private keys. They manage their own private keys. And this is a, non-custodial a, a proprietary hardware device that is non electronic. So it’s, non-proprietary non-custodial and it’s non electronic. And the idea is to make it very and resilient safe for people to store their cryptocurrency without having to rely on a central authority. So that’s a background that’s called the real Bitcoin wallet, you know, back to you Vlad.
Vlad Costea: So I know that you have two versions of the wallet: one of them is called the Real Ballet series and it relies on a more trusted setup in which the private key gets printed in two separate geographic regions of the world. And then you have the PRO version which allows you to generate your own private key with the BIP38 standard.
All you have to do is generate an encrypted hash from your seed phrase, send it to Ballet, and from there it gets printed on your card. You’re going to be in charge of your own seed phrase. Did I get that right?
Bobby Lee: Yes, that’s right. So we have, we have the version that’s called the Real version. The Real Ballet Bitcoin is for, we call ordinary people. We really are catering this device to normal people who are not computer science experts. We’re not cryptography experts, normal people like my family members who I work, you know, people in traditional industries. And then we have a pro version, a Pro series where it’s where we allow the user to pick their own path. And we just announced that product just a few weeks ago.
Vlad Costea: Yes, actually I find the PRO version more interesting because it’s truly trustless and there is no way anyone can decrypt that hash that you’re generating and gets printed on your card. Now let me ask your about the REAL version’s trusted setup: is there any way to associate the two pieces of the private key that get printed in the United States and in China?
Bobby Lee: Let me, let me walk you through. So the Pro Series implements the BIP 38 standard as it was designed by Mike Caldwell, you know, many, many years ago, he was famous for creating the Casascius coins the physical loaded Bitcoins and what BIP 38 does, it’s a standard that’s been around for many years, but unfortunately not a lot of people understand it. Clearly it allows for a notion of an encrypted private key. And the special thing about encrypted private key is traditionally an encrypted text is usually encrypted on the fly using a passphrase. So, so the encryption passphrase and the text have to come together on a single computer processor to actually be the encryption. However BIP 38 actually does a different way where the, where the private keys, I should encrypted to a passphrase, but the two pieces of information never come together.
So what I’m trying to say is that the customer will first choose their own passphrase. And then from the pass phrase is kept secret by the customer. They do, they does the protocol, creates an intermediate code. Think of it like a hash of the passphrase. I go one way hash, it has random information in it. Then there should be hash of the passphrase. And to me, the code is what’s gets sent to the creator of the coin or the wallet and using the intermediate code. We then randomly then generate a encrypted pass for encrypted private key. Okay, so now we have a new private key that’s created based off of the encrypted start based off of the intermediate code, which is tied to the original passphrase. So now the encrypted private key can only be unlocked by the original passphrase and can not be unlocked by anything else. So this is what’s ingenious. What’s really special about this method. And by having that encrypted private key, you can now have generate also a set of addresses. So the ballet pro series wallet supports multi currencies. So now people can now deposit multiple currencies into this wallet, this physical wallet and it’s all tied to the encrypted private key, which is behind the sticker on the wallet and also locked and secured by the passphrase, which was set by the creator of the wallet, the person who custom orders it does it help. Yeah.
Vlad Costea: Right. So to which extent is the Ballet wallet inspired by the coin that Charlie Lee gave you many years ago?
Bobby Lee: Yeah, it’s great. You’re absolutely right. So Charlie, so one of the first one of the early Bitcoins I got was a gift from Charlie. So Charlie gave me a gift of 10 Bitcoins in Casascius coin. This was made by Mike Caldwell at the time. Those coins were not encrypted by BIP 38. Those are just regular private keys that were on behind the sticker behind the holographic sticker evidence sticker on the, on the coin itself. So Charlie, Charlie gave me that coin, I think it was 2014, I think thereabouts. And then of course after that at BTCC, we made a, we made a series of physical Bitcoins called BTCC mint. And that was from 2016 to 2018. So, so Casascius stopped making Bitcoins, physical Bitcoins, I think in, in 2014 or something like that, like that.
And then my company at BTCC at the time we continued on and use the same sort of technology to make physical Bitcoins called the BTCC mints. So I was appointed maker for that. I’ve been trusted for many years for making that I was making it from 2016 for three years until 2018 and just sold the company. And we made over, I think it was over 20,000, 30,000 coins with a total value of around 8,000 or more in BTC value. So today, you know, there’s, there’s tens of millions of dollars of BTC value that are on those coins that have never been breached that have never been stolen. So people, people trust this.
Vlad Costea: So did you ever think that you’re applying the principles of skewmorphism onto Bitcoin devices? Because you are replicating regular financial devices that people know and use in their daily lives: something like coins and credit cards. So when they put their hands on a device, they understand how it should work.
Bobby Lee: Yeah, that’s a great, that’s a great example, actually. We, so, so, so to say Casascius’ Mike Caldwell, was the first make the physical Bitcoins. Okay. He was the first big hit. It was a really great invention allows for Bitcoin to be to be carried physically oops, the headset. Okay. Yeah. Allows Bitcoin to be carried physically and now allows for gifting a Bitcoin. It was only because of the physical, it was only because of the physical coin that Charlie that Mike Caldwell made that Charlie was able to give to Bitcoin, to me and my, and our other family members because it becomes a bearer instrument with an electronic wallet that has a backup. It’s very hard to have a bearer instrument to prove that you don’t have the private keys, right. So by me, by thinking of third party device, then you can give it away. But back to your original question, the Bally wallet is actually a different concept than the original physical Bitcoin with, with the wallet. Now we’re supporting direct deposits into the wallet and we also have multicurrency support. So it’s innovative in those two ways, which was never possible before.
Vlad Costea: Right. And could you please tell the audience how it works with the Ballet wallet when you scan the code with your phone camera after you download an app? Also, it is a watch-only wallet or can you also move your coins?
Bobby Lee: Yeah. So let me talk about that. So, so again, if your audience that people are familiar with the physical Bitcoins, like the conditions coins, like the BTCC mint coins. So, so I created this company ballet as a, as a evolution from the physical Bitcoins. Okay. So I, like I said, I was point maker for three years, making physical Bitcoins. And then at the end of 2018, I was like, Hmm, can I, you know, utilize my expertise and utilize this technology to create a better wallet solution for the rest of the world. That was a challenge I gave myself. And finally after brainstorming with several colleagues who worked on this with me at BTCC, we realized we could do it, let’s give it a shot. Let’s try to create a company that will, that will make wallets that are so easy for regular people use that.
We hope to increase adoption globally. Okay. So essentially this wallet is a, if you haven’t seen it, the Ballet Real Bitcoin wallet is a stainless steel card. It’s it has a QR code sticker on it, on the front. What’s very important is the QR code sticker on there already has a pre-generated Bitcoin deposit address. And the purpose is that we want something that’s so simple that does not require any setup. Okay. Every wallet out there requires set up, requires backing up, requires, you know, logging in creating accounts, you know, typing in passwords. All of these steps are very, very complicated for normal people. And what I challenged myself as a create a wallet that has no setup whatsoever. There’s no accounts, no passwords to memorize, no pin codes, no SMS verification, no identity checks. It’s non-custodial, you have your private keys and best of all, as soon as you open the package, you can deposit Bitcoin and use it to store your Bitcoins in a cold wallet, fashion, where you actually have the private keys.
So that’s what we have here. So the Casascius steel card has a sticker on there with a QR code. And it’s self contained that Walnut you even technically, you don’t even need the app, right? If you’re storing Bitcoin, just scan it. Anyone can send you Bitcoin it’s print. The Bitcoin address is both printed in text format, which is human readable as well as in QR code, which is machine-readable it’s contrast font you know, colors. So people can use it right away without even using any apps. And then once it Bitcoins are stored in there, this wallet is very durable there. New electronic stainless steel the only thing it’s dangerous fire, of course, don’t let it burn up in a fire, but other than that, it’s waterproof. You could keep it in a time capsule for 10 years, 20 years, and then you can come out and get the private keys and move the coins.
But in addition, what we have different from the Casascius coins and other physical Bitcoins is that we have a very nice we have a very nice mobile app. It’s called Ballet crypto it’s in the app store on Google, Android as well. Google play as well as an iOS and allows for you to essentially use the app to scan the wallet. It recognizes the wallet and right away you can it’s watch only. So you can see all the addresses. You can see how did the politics do all the balances checks the blockchain for the latest balances. It has USD price for all the coins has multi coin support. So really allows you to manage your portfolio in a watch, only fashion. So if you want, it can be locked away in the safe, but you can bring your mobile app anywhere you go.
And when have you had the mobile app, because we see all the coins you want, people can send you money, but in order to, for you to send out money, you need to go back to your physical wallet card. You need to peel sticker to look at the encrypted private key. And then the password is actually on the card itself. It’s scratch it off. There’s a scratch off later where you can reveal the passphrase. So that’s how it’s done. And you can send any amounts you want, you can send the full amounts and partial amounts, you know, use it however you like. Makes sense.
Vlad Costea: Yeah. And I think you have mentioned something important there, as when people on Twitter hear about Ballet or they read about it, they say “Why should I get this instead of a hardware wallet which generates the private key on the device? Because it’s unique and the manufacturer will never know it”. But the product is really not for them. Ballet is not for seasoned bitcoiners who have been around for a few years and know how to properly secure their private keys. It’s for gifting to new bitcoiners and onboarding nocoiners.
Bobby Lee: Exactly. You’re absolutely right. We are targeting the nocoiners and the precoiners. We’re targeting people who want to give Bitcoin. I think, I think Bitcoin is the best gift ever. Charlie gave me my first big point Christmas gift in 2014. And he told me at the time is a gift that keeps on giving because the gift will increase in value. At the time the 10 Bitcoins was worth like $60, 50 us dollars. Now it’s worth, you know, a, what is it? 60,000 us dollars, right? So it’s gone up a factor of a thousand and just a matter of a few years. So we, you know, I, myself am pretty technical and Charlie went to MIT. I went to Stanford, I studied computer science at Stanford. I have undergrad bachelor’s degree and also master’s degree in computer science. So I’m pretty hands on.
I started programming at Yahoo, you know, 20 years ago almost. And so the point is that it actually takes a lot of technology to make something really similar. If you think about all the wallets up until this time, they have all been very complicated for the normal person. Like how do you, for example, the first thing they do is ask you to back up these th the latest wallets, you know, the HD hierarchical, definitive wallets HD multisig, and all that stuff. They asked you to backup the recovery seeds. You know, sometimes they have additional passwords passphrases on the other custodial solutions to set up an account online. And you have to type in your email address. It’s a verified email address, phone number, do SMS verification. Sometimes they even ask for address, address certification with driver’s license passport photos. So it gets very, very complicated.
You could get locked out if you’re online, data can get stolen, but even the hardware, wallets, electronic solutions … The problem is it’s all running on proprietary hardware anyways, right? It’s not open source, you know hardware, right? It’s it’s, these are proprietary hardware proprietary, what they call secure enclave chips in them with firmware updates. And have you ever done the firmware update on one of those devices? It’s really, really scary because you don’t know what’s going on. When you, when hardware wallet maker asks you to download an update, a firmware, you just have to trust them and just do it. Like there’s that you’re not going to go verify the code. You’re not going to go decompile it or compile it from like yourself, right? So there’s always trust involved. And I, I realize that there’s always trust involved.
That’s not a good thing or bad thing. It’s just a trade off between how to make it easy and simple versus a level of complexity where people grew up. I have many friends who’ve screwed up using their hardware, wallets, and other solutions custodial solutions. And they’ve lost Bitcoins. You know, the big ones have been stolen, or they probably have loss of Bitcoin because they can no longer access retrieve the private keys. So you don’t want a solution that’s so secure. You get, you get locked out yourself, which is why for the Ballet Real Bitcoin solution. It’s simple enough that the private keys and the private keys that are printed on there give it to you. And it’s supposed to be secure like that.
Vlad Costea: Right, so here’s a thought that I had while looking at the specs of the Ballet PRO. It’s the kind of gift that I would give to my father if I wanted to simplify his understanding of Bitcoin. It would probably be a bad idea because he seems to be against the concept of non-governmental money, but if I were to give him his first satoshis I would get the PRO version, generate the BIP 38 cryptographic hash from the seed phrase, and then keep a backup for myself just in case he goes something stupid. A year later I’d check on him to see if he has learned how to handle his own coins, and if he didn’t I still have the backup to make sure nothing was lost.
I think doing this setup where I am the trusted third party of my friends and family is less risky than setting up a mobile wallet for them. It’s likely that they will lose everything.
Bobby Lee: That’s exactly it. So we designed the two versions for the regular audience and for people that would be, I think you slipped out of the use case so that you could give your father’s a big point and also have people copy yourself. So that in case he screws it up, you can have access to it.
Vlad Costea: I think I have a few questions about the famous picture who got their hands on the Ballet wallet, because you have posted a lot of pictures on social media. So I gotta ask you: what is the Bruce Willis story?
Bobby Lee: The Bruce Willis story. So he was, so I was on the plane flying back from Los Angeles to Shanghai. I forgot. I think it was in maybe in December, in December, November, December. And so he came on, he came on the plane and so I was in business class and he came on before, right before the plane was about to leave the gate. He came on as one of the last passengers, him and his family. So at the time I, you know, he looked sorta familiar and I was like, could that be Bruce Willis? And I wasn’t wasn’t so sure. But after a few minutes, when the, when the flight attendant went to give him his drink she addressed the gentleman as Mr. Willis. So that’s when I realized, Oh, this must be approved for this because the flight attended to knows the passenger manifests the names of all the passengers.
So that’s when I approached so much, I talked to him a little bit about Bitcoin and then on the plane. So the best thing about the Ballet wallet was I had a few with me. So obviously you need a internet connection to transfer Bitcoin to it. So the plane was taking off and after the plane took off in mid air, I turned on the wifi, the plane had wifi hotspot, and I was able to don’t use my wallet on my computer and transfer some Bitcoins onto the physical Valley. We will require a lot of cards. I had some gold edition cards with me, and then I was able to give that to Bruce Willis to his two children, two daughters. He has two young daughters from the, I guess, second marriage. So I gave them each a, I think it was a hundred dollars worth of Bitcoin.
It was, it was essentially like an early Christmas gift that they’re going to visit Shanghai on vacation. I think so. Yeah. That’s a great, it’s a great example of, of, of people using the real wallet to get a gift Bitcoin as a gift. And it’s a bearer instrument, right? I think some of your people may understand that bearer instrument means that once I give it to you, the holder of the wallet is the owner of it. There’s no account. There’s no, it’s not tied down to the account name. Whoever holds it has the private keys, as long as the private keys have not been tempered with, as long as I have looked at it ahead of time and they have it. And so it’s great as a gift. And I told them to keep them safe. So when the children grow up, it could be worth some money.
Vlad Costea: So how did Bruce Willis react? Because in that picture he did not seem happy. Or did you just take the picture at the wrong time?
Bobby Lee: Yeah, so that pic, I just took of him when he was walking, walking up and down the aisle. He didn’t want any selfies, so he didn’t, he didn’t offer any selfie photographs, but but they accepted it. His wife accepted the Bitcoin wallets for the children.
Vlad Costea: I’m actually curious to see if any of his children pop up on Twitter a few years from now and say “Hey, I’m that person who received some bitcoins on an airplane 5 years ago, and now I can pay off my college tuition with this money”.
Bobby Lee: We’ll see. We’ll see. We’ll see. Yeah. Maybe keep it a few years. Maybe when they turned 18 years old, when they get a, when they get on social media account in 10, 15 years.
Vlad Costea: Some well-known bitcoiners who have received the Ballet wallet from you are Adam Back, Trace Mayer and Tone Vays. How did they react?
Bobby Lee: So they they’re, they’re very supportive. I think Adam, Adam Back, let’s, let’s talk about Dr. Back, he’s a very smart person, very experienced. And he mentioned, you know, that this is this is good because we can’t have a one size fit all solution for the whole world. And this is something we have to understand. We cannot have a one size fit, all solution because the reason is different people in the world have different technical capabilities. So people who are very, very technical think of computer science, PhDs crypto cryptography experts, you know, like, like Dr. Adam Back himself like you like me we, we want a solution that is very, very technical with backup redundancy and you know, good entropy key generation, you know, on good hardware, reliable with stuff like that. So the solution we use has to be different.
It has to be much more higher end. Okay. Whereas a normal person, if you think about people, you meet on the street at the supermarket, at the coffee shop even though at the car with the coroner virus, now we don’t go out much, but the reality, you know, but the normal will. So you meet in the taxi driver, the taxi driver, the Starbucks barista, some of the supermarket, or just a regular office worker or an artist, right. A painter or a musician, right? Normal people don’t have computer science skillsets. And, and for them, if you give them a very, very highly technical solution, they’re not going to be able to handle it. They’re going to screw up. Right. And it’s what we call maximum achievable security, right? So someone who is very technical can achieve a higher level of security, whereas that same solution, if you give it to a less technical person, they’re gonna screw it up.
If you buy a very fancy hardware wallet and give it to my mother, she’s going to screw it up. Cause she screws it up. She’s going to lose Bitcoins and that’s terrible. Okay. So that’s why we designed the Ballet series. So Dr. Adam Back, he recognized that right. Adam recognizes it. And I think he, he agrees with me that this is a very good solution for the, what we call the newcoiners, today’s nocoiners for the rest of the world. Right. and then Trace Mayer, same thing, right. He, he’s a big he created the idea of, you know, proof of keys. Right. Which is very important to me. Right. I’m a big supporter of Proof of Keys. That’s why even from the early days, I tell my friends, don’t store your Bitcoins on a Bitcoin exchange. Even though I myself was running an exchange.
Okay. Especially after I sold my exchange, I reminded people, Hey, make sure you, if you want to, you can withdraw a Bitcoins because, because I don’t run BTC China, I don’t want it to be right. So there’s nothing I can help you with, you know, some bad habits to those exchanges. So proof of keys is important. I, myself, I don’t store my coins online. I store it, I store it offline with my own private keys. And that’s what I asked for everyone else to do. And however, it’s very difficult, which is why a Trace Mayer realizes that, you know, for something, if you just throwing a hundred dollars with a Bitcoin, even a thousand dollars with Bitcoin, that you don’t need a truly sophisticated solution to spend three hours figuring out how to use it, right? So maybe just hit pay $40 and buy the Real Bitcoin wallet from Ballet. Then you can store historically up to a thousand dollars or $5,000 with a Bitcoin. But obviously if you have a million dollars worth of Bitcoin, you probably want a more sophisticated solution. And in that case, it’s worth your time to go learn about a more sophisticated solution, spent eight hours or even two days setting that up. If you have over a billion dollars, it’s all about how much you want to store, how sophisticated you are and it’s the right compromise.
Vlad Costea: What is the maximum amount that you would recommend users to store on Ballet wallets? is there an amount from where they should learn more about key management?
Yeah, I think, I think if you, you know, if you store $5,000 on a Ballet. Well, I think, I think that’s fine, but obviously if you store a lot more than you should, if you own a lot more Bitcoin than dollar amount, then you should probably spend more time to learn about the more sophisticated solutions. Okay. So Ballet is really meant to, to target the entry level market. It’s the regular people with people who receive Bitcoin as a gift, it’s made for gifting. I think of a birthday gift, a graduation gift, someone getting married. You only give them Bitcoins for their wedding. You know, it’s like that, but you’re not going to give them a million dollars for birthday or for a wedding. Right. So, so don’t worry, you know, for small gifts, I think it’s a great solution.
It’s a great solution. People who buy the first bitcoins, not a whole BTC but fractional amount, they can store it on there and then they can start using it. And it had process multicurrency support. So it’s really easy for them to also store altcoins, like Ethereum, Litecoin, Dogecoin, whatever point you want and ERC20 tokens. And then when you get, when you get, when you get more familiar with it, then you’re going to graduate and sort of upgrade to more other solutions such as mobile wallets and other hardware wallets. Right? So, so I, I will be very happy if all my ballet customers upgrade to more sophisticated solutions. That means we’ve successfully brought them on board to the crypto industry. Does that make sense?
Vlad Costea: Yeah, I agree with you to this extent because most people who are already into Bitcoin don’t really need to get a Ballet. They most likely have more complicated setups. But when it comes to giving a nocoiner a small amount of Bitcoin, it’s safer to give them something that is held in cold storage, allows access to the private keys, and is very simple to use and understand. It’s tangible, it’s easy to check your balance… and by the way, I’m thinking about ways of incentivising new bitcoiners to run a node. Do you think that Ballet can do anything about it? Even having an “advanced user” button in the app which redirects Ballet users to the Bitcoin Core website can help more people run a node.
Bobby Lee: Yeah. Before we talk about the node, one more point earlier. So people who store their own Bitcoins they don’t need to use valet because they already have a way to store the only ones. However, there are many people who own Bitcoin on exchanges and hold them in custodial wallets, and that’s where it’s dangerous because I want to point this out because I ran an exchange, so I know how hard it is. I’ve seen first hand experienced people getting hacked. So there’s two big, but someone, can you be old? They don’t store themselves and leave it on the exchange. There’s two primary things. One is that the exchange that has the change, you said, this happened with Mt. Gox. You seem to happen with a variety of other exchanges, some changes that have, but they don’t go out of business. So if they manage to stay about being that’s great, but the point is there’s always risk for the execution.
And so that’s, that’s the second risk with online exchanges, there’s always identity fraud. There’s, there’s always, there’s always a, there’s always online hacking. What I mean by that is if you have an account on an exchange or a custodial wallet, someone else can use your credentials, they can steal your phone, they can hijack your sin card. They can steal your email account. They can maybe even steal your two factor authentication and then they can go into your account and then withdrawal all the coins. So that’s a very real risk, okay. People don’t realize. So that’s why we’re in favor of proof of keys. You have to store your Bitcoins. You have to have your private keys. This is very, very important. And ballet allows you to achieve that. Okay. And one more thing is we, as a company, do not store your private keys on a seat for the right that we don’t do it.
It’s not in my business model. We have no reason to do it. If people are afraid of me storing their private keys or keeping the backup copy, I’m even more paranoid. Why would I open up myself for liability for the company to have a backup copy? Okay. And the other reason is that as you mentioned, we have, we call two factor key generation. So we created private key components to countries in China, in the United States. And these two components never come together to their other physical card in the tamper evident form. Okay. So just to just, I already know, is that the sense, clearly the private key Ballet company never actually had the private key private key can only be unlocked by having encrypted private key and the passphrase. So we’ve never put those two pieces of data together. Does that make sense? But the two electronic pieces of data for the past phrase and the private key, they have never, ever come together in digital form on the same computer. The closer they come together is like, you know, three centimeters apart, you know, two or three sentences apart on the physical form on the wallet card itself.
Vlad Costea: Right, so which companies or products do you think are the competitors for Ballet and what do you think about their products?
Bobby Lee: Yeah, so, so to be honest with you, Ballet today does not have any direct competitors because all of these so called wallet makers of physical hardware wallet makers, they are making a solution for a much more sophisticated audience for people who want to download their own firmware. It compile it for people who want to want to read their old, you know, read the old open source software, people who can configure, you know, recover, seeds and store X amount of steel plates and put them away. The safe, those are very versed into solutions. So we don’t target the same audits. We target newbies. Like I challenge any wallet maker out there to make a wallet that it’s easier to use the valet. And so far, I have not seen one. Some are pretty easy, but they’re not as reliable anything. That’s electronics as electronics, in my opinion, not very reliable, right?
Because electronics fail, you have a conductivity issues. Something can break off the chip could break off. Do you have solar flares? You can have all sorts of things where electronics components fail. Right? We purposely make our wallet. Non-Electronic, it’s really human readable. And it’s machine-readable so there’s no future compatibility issue. The QR code will not go out of business, even if it goes out of business. By 10 years later, that the text is always there in human readable text. So that’s always a fallback. That’s why the quick, the private key, the passwords, everything is human readable. We emphasize on that, make it very resilient to make it very reliable. I don’t think we have any direct competitors in that sense, right? The only, the only competitors that are easy to use are the so-called custodian wallet, the online exchanges. But for that, you know missed that third party has your, has your Bitcoins. It control it. Right. You cannot withdraw it at whenever you want. So that’s a problem. So back to your question about the nodes, right? You had a question for me about full nodes.
“I challenge every wallet maker out there to make a wallet that’s easier to use than Ballet. So far I haven’t seen one”
Vlad Costea: Yes, I did mention something about full nodes and how Ballet would encourage users to become more advanced and run a full node. Have you thought about ways of doing this?
Bobby Lee: Yeah, so, so unfortunately I don’t have a, a direct answer for that. We, today Ballet is bringing new people on board to Bitcoin. That’s a primary focus. We’re trying to get a wallet out there, help people who want to buy and own Bitcoin and all the Bitcoin to use Balet. You know, in a few years when we’re successful, we can talk about how to upgrade our users to running full books. At this point, our user base is not capable of, okay, now there are many people who do run full knows I myself, I want a full boat at home, but it’s not something that’s feasible for. The customers are valid. So we’ll just have to, it’s a, it’s a slow education game. So hopefully when more people use Bitcoin, more people will eventually get get the technology ability to own their full nodes. And I support that.
Vlad Cotea: I think I agree to some extent, even though running a full node only requires downloading Bitcoin Core and installing it on your computer. And you can make a guide that’s 1-page long with all the steps, which has explanations with every detail of what you have to do to make it work. I don’t think Bitcoin Core is hard to use, even if it has some advanced features that you need to understand, such as UTXO management or generating different types of addresses that are either legacy or native SegWit. But even if they are advanced features, you don’t have to understand how they work to use them in your full node.
Bobby Lee: Yeah. So let me talk about that. So you, you bring up a good point about mobile wallets. There’s two categories, there’s custodial non-custodial. So the custodial mobile wallets are, are covered in the, my earlier conversation about custodial exchanges, mobile wallets can get hacked. They cannot, they cannot, your counts can get hacked, or the company has come a long way. In fact, at BTCC my last company, we actually built two different wallets. So I have experienced building Ballet as my third wallet company, if you will. Our first wallet was a web wallet that could be used just to pay. So that was a custodial web wallet. And my second wallet, which I built for BTCC, was called Mobi. Mobi was a mobile wallet that offers a great user experience. However, it was also custodial one.
Okay. So, so you’re absolutely right. That the issue for Ballet is that Ballet’s a physical product. So you can’t use it if you don’t have it right there. The fastest is if you order, you know, in the United States, you are Amazon, you can get it next day delivery. But other than that, if you don’t have it, you can’t use it. So what most people do is they end up using a mobile wallet from the app store, right? Either a non-custodial one. And the issue there is if back up the 24 words, sometimes 12 words, and that’s 24 words. And if you lose it, you’re screwed. And the other thing is that most people will eventually upgrade their phones. Some people change their phone every year, some who changed it for every two years. And a lot of times we change a phone, we upgrade the one that does not copy over. So that’s very dangerous issue. There’s also people who use their phones. If you lose your phones, if you don’t have the backup, that’s also very dangerous because you lost all of the coins. Okay? And the third thing is your phone can get hacked or can get stolen from you. Right? So for all these reasons having keys on the mobile phone is quite dangerous, which is why for ballet, for our mobile app, we purposely do not store the keys in the mobile app. It’s a watch only wallet on purpose. Yeah.
Vlad Costea: But back to my earlier point that I made about competition, I think one could argue that Ballet is competing with all the mobile wallets that don’t necessarily let you hold your keys. And I think of blockchain.com right now, as it has been around for a long time and if you look for a BTC wallet in the app store, blockchain.com is going to be in the top 3. And I would argue that there is this niche of new bitcoiners who look for a very simple to use wallet and I think Ballet is more secure than a hot wallet on your mobile phone.
Vlad Costea: Right, so I have another question because you offered to send me some wallets before this interview and I noticed that I got a batch of 3. Is this a regular practice to encourage storing and spreading around multiple copies of the private key, or was it just a nice gift?
Bobby Lee: So we we sell the Ballet Real wallets one at a time, some people can buy a three pack. Some people can buy a five-pack. So you buy one at a time through it. And then five at a time in your case, I think we sent you three for your testing.
Vlad Costea: Yeah, and right now I am much more interested in the Ballet Pro version. I’m in contact with Jessie who works for Ballet. I’ve generated my own BIP 38 hash and sent it to him, and I’ve also posted a video on YouTube to show people how to do it. I might also do some unboxing videos after this interview gets published. But anyway, I feel like I’ve missed the most obvious of questions: how did you come up with the name Ballet? It’s not very Bitcoiny.
Bobby Lee: Yes. Oh, that’s great. That’s a great point. We you’re absolutely right. Bally is not a very standard name for the Bitcoin crypto world. Right. I think we remember I’ve been playing for one of the nine years now and we’ve seen all the names of the early days. All the names had the word coin in it, right? Like coin base, a lot of names have coins in it. And then not a lot, a lot of names have BIT. So the bit pay bit stamp, you know, all these names. So for in the early days, all the names are big and coins. And then later on, we have a variety of names on the wall. So what I’ve realized is I try to make, I’m trying to build a consumer friendly company, making consumer friendly products. Okay. So for us, the name is very important.
We want a name that is really simple. That is not technical. Okay. Because what I want is to address the whole world, the rest of the world, the 5 billion people who don’t own parts today. So they have men, they have women, they have children, they have old age people. So we want a name that is really familiar to them. So we picked it in ballet. Some people can say, Oh, ballet is a, is a nice way to be a combined Bitcoin and wallet fee for Bitcoin wallet sorta like that. But that’s not the real reason. The real reason we liked the name. Ballet’s because it’s a, it’s a casual name that evokes a sense of simplicity and delegates the idea of simplicity and elegance. And it’s easy to understand it’s pronounced the same way in many different languages, all around the world. So all over the world, people have heard the term ballet, the dance, the art form, and people pronounce it the same way. I don’t care if it’s Chinese, Japanese, you know, European, you know, South America, English, no French. So it’s all pronounced the same way. So wonderful. That’s very friendly like that. Don’t want to find a name. That’s very geeky, you know, too many names out there are very leaky. I don’t even want to mention that the, our audience will not understand those names. That’s why we picked ballet.
Vlad Costea: So right now I know that it’s supposed to be pronounced “Ballot”, so it sounds like “Bitcoin Wallet”.
Bobby Lee: No. So it’s pronounced Ballet. Ballet as in the dance, as in the art form, people, dance. Ballet the performance art, but not ballot. So it’s not, it does not. What I’m doing is prominently meant to be a casual, make people understand. Okay.
Vlad Costea: Okay, so I think I’m pleased with what I’m hearing. Considering that a couple of years ago you were a big blocker on the BCH side, I think that you’ve made quite an interesting comeback.
Bobby Lee: Thank you. Thank you. Yeah. Thank you for that.
Vlad Costea: So do you have any reason why you decided that 1MB blocks can scale?
Bobby Lee: So I I’ve been a Bitcoin BTC fan all my life. I don’t, I don’t think I was ever ever a favorite BCH just to set the record straight. So I think, I think I agree with the principles that want to make sure this is decentralized. I think the most important part about Bitcoin beside right now is to make sure it continues to be decentralized and the way to make it decentralized is to make it, like you said, people allowing people to run a lot of [nodes], I think, no, for example, the BSV camp, we’ve seen the crazy Blas with bites. I think that is not skilled. So for that reason, I think I think it’s, it’s more prudent to be conservative and to just use the current methods of BTC.
Vlad Costea: Yeah, it’s also interesting that, on average, the blocks on the BCH and BSV blockchains are smaller than the BTC ones. There is just more demand for real Bitcoin blocks.
Bobby Lee: Oh yeah. So I would say, I think it’s just the reason the other blockchains are not full is because they’re not very popular at this time, the BCH and so on. They’re not very popular. Whereas big PTC Bitcoin is the real Bitcoin. I think it’s because it’s very, very popular.
Vlad Costea: Oh yeah, so you acknowledge the network effect of BTC.
Bobby Lee: Absolutely. Network effect is very important.
Vlad Costea: Oh man, I wish Roger was listening to this… even though I suppose he’s aware that he’s running a sinking ship.
Bobby Lee: Well, let, let me tell you about the, what we’re going to talk about that. So, so this is the, what’s a case for a big one. I, to address this as well, if you think about why I created Ballet is because I want people it’s not about spending it at a coffee shop by the restaurant because today, even in 2020, even 10 years after the creation of Bitcoin we have is we have this cryptocurrency, but it’s still not usable very much for spending purposes for purchasing purposes in in society. And the reason is that for payments, there are many other better ways to pay, right? Whether it’s credit card, whether it’s paid with cash there’s more online pay that PayPal, Wechat pay, and I’m sure there’s similar payment system all around the world, sort of payment for casual sort of retail payments.
48:51 – Right, so I feel like I put you on the spot there because you did not expect me to mention your past as a big blocker. So to make up for that, I just want to let you know that I have watched your debate with Nouriel Roubini and I think you were the only person I have ever seen who silenced him when you asked him “Would you rather have the kind of economy that’s based on assets, or an economy that is based on debt?”. And his answer was “That’s nonsense, it’s crazy, I’m not going to answer that!”
That solution has solved. Okay. What we need is for large national, across different regions. So big corn is good for that. And the other thing is good for is good for as a high as well, but it’s a good investment. So I want to allow all my friends and family to invest in Bitcoin for the longterm for five years, 10 years. So to me, the investment asset Bitcoin has the best use case for now. Does that make sense? Like if you think about, I don’t have to be content years ago, nine years ago, what has been more valuable for? It has been the longterm investment once in a while. I make payments for breakfast, people, coffee, but those cases in hindsight, they’re necessary, I should have just paid them. Cash transfers sometimes is not needed. So my point is, yes, we cannot stop people for paid Bitcoin. We don’t need to, but for normal people, I think the best use case for big one is as investment. So I encourage all the people to invest a few hundred dollars in Bitcoin and hold it for a few years. And maybe that becomes sense about the dollars and Valley allows it to do that.
Vlad Costea: I feel like of all the people who have debated him over the years, and some of the most prolific bitcoiners have tried to put him in his place and present to him an impactful argument, that was the best of them all. He was made to question the values that he’s promoting, but I’m pretty sure that Nouriel is a “bitcoiner in the closer” or something. He’s sort of a Bitcoin maximalist, but he doesn’t want to acknowledge it because he gets paid by the other side. I think he gets it, but he’s not allowed to say anything about it.
Bobby Lee: Exactly. Exactly. Yeah, he gets it. He does. And he does make a good point. That shit coins are worthless. Right? He does make a point that shit coins are worth it, which I agree with him. But he’s confusing the fact that she points you’re worthless with the fact that Bitcoin is worthless, right though, those are two different things. Bitcoins and shitcoins are different things.
Vlad Costea: Yeah, but he gets paid to play his role. And he has gotten better over the years, I think. Since he started going to conferences, every bitcoiner he has debated against has taught him something new. His arguments got better over time. In the beginning it was all about “it’s a Ponzi, it’s a scam, it’s the mother of all bubbles”. But right now Nouriel can acknowledge that Bitcoin is innovative and has some value, but he doesn’t want to acknowledge that it can be good money for the future.
Bobby Lee: Yeah. That’s all right. We’ll see. In five years I should debate them again in five years. 10 years.
Vlad Costea: Yes you should debate him again in the future. That was entertaining, I would watch a reprise.
Bobby Lee: Thank you.
Vlad Costea: I’m not sure that I have anything more to say at this time, is there anything else that you want to mention?
Bobby Lee: That’s it for now? I hope people, you know, people you know, everyone in your audience for your podcast already owns Bitcoin. So for the people who own Bitcoin who manage their own Bitcoin wallets, that’s great. You know, Ballet is not for you. You should already keep manage it well for people who have owned Bitcoin, but have you Bitcoins and custodial wallets, custodial exchanges, I highly recommend for you to take those Bitcoins out, manage your own Bitcoins. If you want an easy solution. We think that ballet real Bitcoin is a good wallet for that. Of course, you’re welcome to use other wallet. The most important thing is to actually have the private keys for your own Bitcoin. And then if you want to give Bitcoin to newcomers, to people who are friends and family who don’t own any Bitcoin, we think ballet is the best way for the low Bitcoins onto it. And they give it the way I give it away as a gift. So we hope people can take a look at that.