Untold Stories: Bobby Lee The Crypto OG on China and Ballet Wallet

Bobby Lee, Genuine Bitcoin OG and Founder of Bitcoin China Introduces Ballet Wallet, the first non-electric wallet for the tech novices to geeks. He talks to Charlie about

  • It's unique features and functionality

  • Diving into China’s unique and evolving relationship with Bitcoin

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Charlie Shrem
Hey everyone, this is Charlie Shrem, and you're listening to Untold Stories.

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When you hear the words Bitcoin, crypto currency and China, it brings about confusion for most English speaking countries. Just because it seems like there's a lot that we don't know, there's a lot going on under the layers, and things move and act differently in China and in a lot of the not English speaking countries. There's no better person to help us understand what went on in the early days then my good friend Bobby Lee, who truly is a trailblazer when it comes to bringing Bitcoin and bringing crypto currency to such a global stage. Bobby, welcome to the show.

Bobby Lee
Thank you Charlie. Thank you for having me. Glad to be here.

Charlie Shrem
I want to ... It's so great to talk to you now because, even a few years ago, you were so busy every single day, and there was such craziness going on that you would wake up in the morning, I'm assuming, and say what now.

Bobby Lee
Yeah, it was. It was a crazy few years.

Charlie Shrem
I'm very excited to talk about a new company that you just launched, Ballet. I have honestly no idea what it is. I got an email from you last week asking if I'd like to participate in a beta program, and I was just very excited because, to hear that you were doing something when you were the CEO of BTC China, BTCC, such a crazy time. So now you're launching this new company and I'd like to hear. Please tell me about it.

Bobby Lee
Yeah. So we just launched last week. Ballet, we were in stealth mode for a while. We've been working on this since January of this year 2019, and Ballet is essentially ... So brief history, I co founded BTC China in 2013, I joined two other co founders. The site started in 2011. We were the very first Bitcoin exchange in China. In fact, for a while, we were the longest running exchange all over the world.

Charlie Shrem
Not only that, but you were one of the largest exchanges by volume in the whole world itself.

Bobby Lee
Yeah, that's right. So, I remember distinctly in the peak of 2013, that would be in the Q4 in the November, December time frame… was still running, but at that time we peaked out aged out in terms of trading volume. So, for a while, we were the worlds largest trading exchange by volume. So obviously China has had its fair share of excitement and adoption for Bitcoin. In China, Bitcoin has always been more about the speculation, the trading aspect of it, and less about the payments or the store value. The frenzy was all over the trading the high volatility, the prices and all that.

Then fast forward. Of course, the short history is that, in December of 2013, China government came out with regulation policy and that scared people. People thought Bitcoin was banned in China, and then we had a few years of the bear market, the Bitcoin winter 2014 and 15. Then, by end of 16, things picked up again. That's when Donald Trump got elected. Around the election time, prices went up again. Then by early 17, by early 2017, that's when the government came cracking down again. So quick anecdote is that they were upset that Bitcoin prices came back up above $1000. So they came to our office-

Charlie Shrem
What do you mean they were upset?

Bobby Lee
I guess it's maybe typical of Chinese government perspective that they want to control things. They think they're in control of everything. So the fact that Bitcoin prices went up without their approval or without their proposal, it was against their rules. So they came to us and said, hey what's going on, why are the prices going up again? Why don't you guys do something about it? Not exactly in those words, but it was weird.

Charlie Shrem
So I want to hear how this played out. Who calls you?

Bobby Lee
It would be-

Charlie Shrem
Do they just show up?

Bobby Lee
Yeah, it would be the PBOC, that's the People's Bank of China. That would be the central bank here. So they have been essentially the so called regulators overseeing the Bitcoin substance since 2013. So prior to 2013, no one was paying attention. But by December, they took the lead, or they were pointed the lead by the central government to oversee anything to do with Bitcoin regulation. So again, because of the bear market, the winter, and the subsequent two three years from 14, 15, and 16, there was no action. They were no where to be found. But by early 2017, January, it was the first week of January. They called us on a Sunday. They said, we're coming in tomorrow morning on a Monday. Actually, they called us on a Friday. So they called us on a Friday. Our company was out on a ... we all went to see a movie. I think it was a Starwars movie, Rebel One, and in the middle of the movie they called us, they want to come in on Monday.

They brought like 12 or 15 people, lawyers and PBOC staff and all that. So, that was the first surprise. Why all of the sudden you guys are caring about this again. Well, apparently it was because the Bitcoin price had just topped $1000. So it got their attention again. So the rest of the year, if you know the history, the rest of 2017 was quite awkward. The exchange in China self censored and we stopped withdraws. Then there was ICO boom. At one time, we were going to do the regulations thing where they…licenses. We got a preview of the licensing document and all that. That was in the late spring.

Charlie Shrem
What was the plan with that, and what happened?

Bobby Lee
Well the plan was they were going to do licenses to the top three exchanges.

Charlie Shrem
I remember it was you, Wilby and…right?

Bobby Lee
That's right. That's right. That was the intention. Of course, they were going to open the licensing requirements to everyone, but I think they had it in mind, essentially if three won't qualify, the rest won't qualify, kind of like that. Now that's just based on situation I guess.

Charlie Shrem
Sure, I think that was the assumption of everyone.

Bobby Lee
Yeah, yeah. But nonetheless, we were working hard to satisfy the requirements in that long document that was in late spring, early summer. We talked to our investors and all that. We got support. June came around, May, June, July came around and then there was no word. So apparently we think the leaders in China had a change of heart. Either that, or there's always two opposing forces. Maybe the other side got more credibility and credentials.

Charlie Shrem
So you think within the party and within the powers that be there were always conflicting sides of what they would want, like an overall crack down.

Bobby Lee
Correct. Yeah.

Charlie Shrem
Isn't it within Chinese culture? One of the things that I kind of like about Chinese culture, it's like, we're going to regulate, and then there's going to be a loop hole, and we're going to regulate the loopholes. Kind of like the junket system of money in Macau. Can you explain for my listeners how that junket system works and what it's all about?

Bobby Lee
Are you talking about the Macau junket system?

Charlie Shrem
Yes.

Bobby Lee
I don't have a whole lot of perspective on that. The junket system-

Charlie Shrem
From what I understand, and it's very rudimentary here because, again, my understanding is probably not even close to as good as yours. But from what I understand, because I've been to Macau, is there's a limit to how much money Chinese citizens-

Bobby Lee
Oh, I see what you're saying.

Charlie Shrem
... can move into Macau.

Bobby Lee
Yeah. So Chinese citizens, because China is a ... The economy is state controlled. So it's a communist country. There's one party system, and the other factor is that there are capital controls, meaning that money and capital is not freely movable across borders. So citizens and foreigners have a quota of how much foreign money you can exchange into the local Chinese running B currency, the C&Y currency. There's a limit on how much you convert in, and there's a limit on how much you can convert out. It works out to about 50 thousand US dollars on an annual basis. So Chinese citizens, if they leave China for vacation or whatever, they can only convert up to $50 thousand worth of foreign currency.

Macau is considered outside of China's borders for capital controls purposes. So you can only bring the $50 thousand worth of money to go gamble in Macau. So I believe you're talking about the junket system, the money, the so called money tunnels where gamblers would deposit the local currency with junket operators in China mainland, and then they can essentially draw on that credit when they get to the casino in Macau.

Charlie Shrem
Yeah, exactly.

Bobby Lee
Yeah.

Charlie Shrem
I remember walking around in Shenzhen, and there were these shops that sold watches and very expensive things for hundreds of thousands of dollars, and I was asking my friend, who would buy this stuff? Who's walking to a shop and buying something for ... He's like, we'll actually, the way it works is you walk in, you buy something for, let's just say $100 thousand. You don't actually take it. You then go to Macau and then it's the same store owner. So then you basically borrow against whatever you bought in China, and then you can use that money for gambling. Once you're done, you give them back the money you ... you get your money back, however it works.

So that seems like, wow, it's such an apparent loophole. The loophole, people have storefronts in China. Basically, he was explaining to me that the Chinese government actually regulates the loophole. So they know about it and it's regulated. So I thought basically ... the way I thought things were going to play out, and I was very surprised it didn't, was that you would have ... because you were having to do some crazy things, and I had to do things like this when I was running Bit Instant. I read somewhere, and tell me if I'm wrong, that for example they would ban you from using your corporate bank accounts. So what you would do is you would create accounts for each customer individually, and then move the money into their own accounts before you allow them to actually trade.

These were all basically loopholes that the government would allow you to do them in a way.

Bobby Lee
Yeah, exactly. Yeah, it's very common. It's not so much that they would allow us to do the loophole. It's more like basically the regulation was not very air tight. So the issue is in regulation, but the enforcement was very, what I call, inconsistent. So if there's inconsistent enforcement, people find workarounds. So what you term as loophole can be more positively described as workarounds.

Charlie Shrem
What's wrong with the term loophole? I think it's a pretty positive word.

Bobby Lee
Yeah, so there's a well known saying in Chinese where they say, when the government issues regulation, the people will come back with counter regulation to counter all the regulations. So there's workarounds and loopholes and so on. So it's very common. And sometimes they come back and they tighten the regulation, the rules, and then of course there's other workarounds around that. It's just a back and forth system.

Charlie Shrem
You mentioned something earlier about in the Chinese culture of gambling and speculating. Well you said speculating, but I associate that with gambling. I've heard that. In US, we have Los Vegas. You frequently travel there, but gambling is not so ingrained in our culture, but it seems like speculating and gambling is a lot more ingrained in the culture of China. Why is that, and what does that actually mean?

Bobby Lee
I sort of see that. I've seen evidence, I've heard stories. I don't know why that is. I don't know it it's ... I doubt it's-

Charlie Shrem
Is that just a stigma?

Bobby Lee
I doubt its genetics, but it is true that people in Southeast Asia, or Chinese in particular, I think they're more likely to fall in love, if you will, to like taking these risks, these measured gambling risks by speculating. Maybe it's in the blood, quote unquote.

Charlie Shrem
You know what's interesting?

Bobby Lee
It's cultural maybe.

Charlie Shrem
You just said the word risk, right? So I notice a big difference. I notice a big difference. I think that ... Now, I'm totally overgeneralizing here, so I'm not being politically correct here, but I feel like in the US, and this is just a feeling, gamblers in the US are not aware of risks when it comes to gambling and speculating. We're not as informed, so it's just more for the fun of it. Then people lose a lot money, things like that. But I feel like, in Southeast Asia like you were saying, I feel like you're more aware of the risks. So gambling is more of, because we're aware that it's risky and we're aware of the odds, and we're aware of the edge, but it's still worth it to do it.

But then you have a lot of people who are just completely not well informed at all, and that's where the government has to step in. Am I wrong? Am I totally wrong on that, or is there some truth to that?

Bobby Lee
It's hard to say. There's some truth there. I think, generally speaking, I have found that people in Asia, in China, have more of a propensity for mathematics, for learning arithmetic and all that. So they're better with numbers. That's a very overlized generalization.

Charlie Shrem
I know what you mean.

Bobby Lee
But certainly, that could explain why they're more eager to calculate the odds and stuff like that. But overall, if you go to Macau, I wouldn't say that people are overall statistical or mathematics withegers. Otherwise…It's sort of a little bit of both.

Charlie Shrem
You're an avid poker player. I'm actually a terrible poker player, but I still find myself playing poker. But I like playing Baccarat a lot, and I read that Baccarat was actually a British game that got really popular in Macau, and that's why it's so big now. You can almost find Baccarat in every casino in the world. But it's one of those games that has no strategy, there's no chance at all. It's literally 50/50, but you-

Bobby Lee
It's more like 51/49.

Charlie Shrem
Yeah, but you'll see people there with their number cards, calculating plus or minus, all these different things. When I was trying to figure out the game, I would sit there looking at the screen. For those who have seen Baccarat tables, you know what I'm talking about. It doesn't help you ... it's all chance.

Bobby Lee
Yeah, it's all chance, but there's a lot of superstition. People will take the cards, they'll peel them, they'll show one corner, show the other corner. It's amazing what rituals they go through. I totally see through it. It's a numbers game. It's 49/51, whatever the actual percentages are. The point is the house has the advantage and there's nothing you can do about it. But yet, people are very superstitious. They try to pick trends and pick red and black, house and player, bank and player.

Charlie Shrem
How does superstition play into the Chinese or Asian crypto industry? For example, exchanges having red as their color scheme or calling 8BTC is one company, or numbers and colors? How does that play into it?

Bobby Lee
Well, I don't think superstition plays into the industry specifically, but it does play into the Chinese culture. I think Chinese culture, especially in Honk Kong…province, there is a strong bent towards numbers, lucky numbers and so on.

Charlie Shrem
Are you following what's going on in Hong Kong right now as it relates to the crypto industry?

Bobby Lee
No, not specifically. Any specific events you're referring to? Hong Kong-

Charlie Shrem
No, it seems like Hong Kong has grown so much in the crypto space. There's so many companies based out of, not only China, but Hong Kong too. Even going places like Singapore, it seems like that's grown and that's still growing. I'm just curious. I follow a lot of companies on Twitter, like Bitspark, and a lot of different companies that are based out of Hong Kong. It seems like they're still growing, they're still operating, they're still doing business in spite of the protest because the Western media portrays what's going on in Hong Kong right now as a virtual shutdown of the whole city.

Bobby Lee
I see. I see. Yeah, I'm not too familiar with the crypto scene in Hong Kong specifically. I've been in Shanghai for the last, what it is, 13 years now. So I go back and forth between the US and Shanghai.

Charlie Shrem
So tell me about Ballet. Very exciting. You were in stealth for a long time. I want to hear everything about it, what you've been doing.

Bobby Lee
Yeah. So Ballet is a culmination of my experience in crypto. I've been in crypto for over eight years now, eight and a half years almost. Time flies. I remember just like yesterday, eight years went by in a flash and I started mining Bitcoin myself in 2011.

Charlie Shrem
Do you feel old? Eight years.

Bobby Lee
Yeah, time flies. It's almost a decade in epoch.

Charlie Shrem
I know.

Bobby Lee
In Bitcoin time. Ballet is a culmination of my experience for many years. The reason I say that is I've dedicated myself full-time to Bitcoin in terms of my career since 2013, longer than most people. What I have to say is that I ran an exchange, we ran a mining pool, we've done mobile wallets, which was a custody wallet. We've launched physically Bitcoins under the BTCC brand. So I've been there done that for many aspects. This time, Ballet, what we're doing is we developed a really innovative solution to what we think is the world's easiest and simplest, most reliable hardware wallet.

It's actually, we think it's the world's first hardware wallet that is not electronic, yet has multicurrency support.

Charlie Shrem
Tell me about that. How does that work?

Bobby Lee
Yeah, so think about that. Why do people go to hardware wallets? Well, first of all, why do people go to wallets at all? Wallets are needed for you to store and manage your crypto currency. In the old days, it was just Bitcoin. Now it's Bitcoin, Ethereum, Litecoin, XRP and a whole bunch, because that's how people store and manage their assets. Of course, there's a certain population who use crypto for trading and speculative purposes, but I realized that, for me, the single most valuable use case for Bitcoin is actually the investment aspect, to use it as a store value. You invest in Bitcoin so the value goes up, sort of a hedge against fiat currency. Do you follow me?

Charlie Shrem
Yeah, I actually agree with you on that. I think it's definitely in one of the top utilities for Bitcoin today and crypto in general.

Bobby Lee
Yeah. I've done my fair share of buying things online with Bitcoin, but of all those purchases, in hindsight, they were all regrettable in a sense that I spent so many Bitcoins back in the early years.

Charlie Shrem
That's why no one wants to spend Bitcoin anymore.

Bobby Lee
Yeah, but of course you can also have your fair share of selling Bitcoin to diversify and to profit take. So, that's also fair. But my point is that the global market ... The earth, we have that seven or eight billion people now. How soon will they adopt Bitcoin? The seven, eight billion people probably don't need Bitcoin to buy EPN service or to buy whatever online shopping they can do, but it's a great way to have real money in their hands without relying on banks. So the notion that you can also against inflation and currency's loss of value.

Charlie Shrem
That's what's going to happen in the future too more. I think we're going to see the Bitcoin as a safe haven, but also as-

Bobby Lee
Exactly.

Charlie Shrem
I agree.

Bobby Lee
As a safe haven. So Ballet, back to my company, what did we do? Well, we said ... we started from the outset. We want to enable global adoption, mass adoption of Bitcoin. But to do that, you really have to make it simple. We really have to make the storage and wallet management of crypto currencies and Bitcoin very simple. It has to be brain dead. It has to be so easy that a child, a nine year old child to a grandfather or grandmother who is 99 years old, that they can use it. Today's class of wallets ... I don't care if it's a mobile wallet, a hardware wallet, are great from a technical geek perspective, but they're way, way, way too hard.

So the incite was, what if we make a physical hardware wallet that was super easy? To make it super easy, you purposely decided to make it non-electronic. So, as you can see from our website, Charlie, the Ballet wallet is a steel card, stainless steel, with the private key embedded inside underneath a temper evident sticker. Then of course, on top of the sticker, we have the public address, the actual Bitcoin address if you will. What this allows for is it allows people to easily scan the barcode. By the way, the address is also printed on the top of the card so that people can verify it and type it in if they want to. But they can quickly deposit Bitcoins to it. So that way, if you bring it up to a Bitcoin ATM at a store, at a vending machine, or just a friend has a Bitcoin wallet, they can just scan it with…and just send Bitcoins over. So it's very easy to receive the Bitcoin.

Once you receive the Bitcoin, this wallet, this stainless steel card, is now the actual barrel instrument. If has your Bitcoin. You don't need to remember any passwords. There are no accounts to open, there's no KWC process, there's no login, no passwords, no true factor or codes to remember. There's no 2FA, there's no SMS verification, so you don't have to worry about SIM hijacking. There's no account names and stuff like that at all. Everything's on that card, so it's a private key on the card and with a decryption password. There's a wallet password as well that's etched onto the card.

Charlie Shrem
How does that work?

Bobby Lee
Well, in terms of what? In terms of retrieving the funds, or in terms of storing?

Charlie Shrem
So I understand how you would ... Can you physically ... you can verify how much crypto is on the card. Then you're using the actual card as a bearer instrument, then you verify.

Bobby Lee
Correct. That's right.

Charlie Shrem
So then the card is meant to potentially be passed from person to person.

Bobby Lee
That's exactly it.

Charlie Shrem
Instead of having to transfer offline.

Bobby Lee
Yeah. I'll tell you about that. For example, let's say you have the card, and let's say you're nice enough to load one Bitcoin on there. So by scanning the QR code on top, anyone can verify that this address actually has one Bitcoin according to the blockchain. By the way, we support Bitcoin, different cash, anything, any other crypto currency, including Litecoin, Ethereum and all that. So you can scan it, and then you can quickly check the blockchain it has on Bitcoin. Well, so if you trust the card and the person giving it to you, you just keep it. You can keep it in the space or at home. So it's great for gifting.

So finally, you can give out these as gifts for birthdays, for bar mitzvah, for Christmas, for weddings, for graduations, any sort of celebration you give it out. Even if you want to propose to your girlfriend, you can give it out as a gift. Now, what happens is the cards ... because the card has a private key for your Bitcoin account that's on the blockchain, if you want to move Bitcoins out, you would peel that temper evident sticker. It will reveal the private key, another QR code underneath it, and you can scratch off the wallet passphrase scratch off and it will reveal the passphrase.

So those two components together, using a mobile app, you can then send the Bitcoins anywhere in the world. You can send to Coinbase, you can send it to an exchange, you can send it to another friend, you can send it to your other wallet. Make sense?

Charlie Shrem
It makes sense.

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So do you see people ever redeeming and not using the cards, or do you think eventually the cards can become a collectible item where it'll be used for actual transactional or longterm savings?

Bobby Lee
We think it'll be used for actual…savings. It's actually very affordable, so the cards ... there's not going to be a premium on it. It's not ... it can be collectible if you like it, but they'll be cheap enough that people can buy and give away. So it will be used on a daily basis. We've think a lot of people will be using them for gifts, a lot of people will be using them to manage their assets. The great thing about this is you hear stories of people losing the Bitcoin because they forgot a password or they get locked out of accounts, or even if someone gets hit by a bus. The rest of the family or the children will have no access to the Bitcoins because it's all locked up in the passphrase held by the owner.

But with this, if your coin is on these cards, as long as they're safe, it's great for what we call inheritance or estate planning. You can give it out, you can pass it down to your children and your grandchildren. So we really think we have an innovative solution that's really for the mass market.

Charlie Shrem
Would you be selling them preloaded?

Bobby Lee
Unfortunately we will not be. That's a great question, Charlie. Due to ... and again, this is due to my experience. In the past, I ran an exchange, I ran a custody wallet. We've researched all over the world in terms of regulation, licensing and all that. In many countries, including the United States, strictly restricts that, if we're transmitting money where if I sell you a wallet with money on it or if I offer you a custody wallet service, whether it's in the state of New York or in other states, according to…it falls under money transmission guidelines. So we're required a money transmitter license, or what they call a MTL or MSB, money service business. So if you get a license, that's a state by state thing.

Then in New York, there's even more complex, the Bit license. So, in our case, we're not selling any wallets that have money in it. So these are empty wallets. No different then selling a physical leather wallet where you put US dollars in it. We're just giving you a container that, instead of storing US dollars, you can store crypto currency. So, in that case, we purposely designed our business model around the fact that we're offering a really useful product for the mass market that will not be regulated. So you don't need to tell us your name, you don't need to use your ID, there's no KYC at all. Even though mobile app has no log in, no passwords, no KYC. So our app is just ... you just download it and run it.

Charlie Shrem
I think you'll see potential additions, because I have two sets of your ... full sets of your BTCC chips, full sets of them.

Bobby Lee
Yeah, great.

Charlie Shrem
They're hidden away somewhere in undisclosed locations. You actually signed both sets.

Bobby Lee
That's great. Yeah.

Charlie Shrem
They're dear to my heart. I'll hold them forever. Do you anticipate launching something like that for this where you have specific versions, maybe a rose gold or a titanium version, or something that people can give?

Bobby Lee
Yeah.

Charlie Shrem
If you make a rose gold one, I'd love to give one to my wife or something.

Bobby Lee
Yeah, that's a great point. So let me just recap for your audience. Several years ago, I think it was three years ago at BTCC at the time, we launched a series of principle Bitcoins. So we started with the one Bitcoin. It was a titanium coin. It was loaded with one BTC at the time. It was before the Bitcoin cash and all that of course. So it was one full BTC, and then we later launched the poker chips. We had a five BTC as well, titanium. We had the blocks, which were full block rewards. We had the poker chips with the denominations. Half a Bitcoin, a tenth of a Bitcoin, a quarter, and so on, so forth. So you got the color set. We had limited editions of those.

So those are all so loaded with currency and there's a lot of logistical nightmares, shipping internationally and also money transmission stuff. In the end, that model was a little bit flawed. It was hard to scale because of the loaded nature. It was very expensive.

Charlie Shrem
But they were fun.

Bobby Lee
They were fun. They were great fun. There's insurance aspects. They're a lot of fun. Collectors loved it. They're also about ... Now they sell for a premium. Do you have the five color set or the six color set?

Charlie Shrem
I have the six color set I believe.

Bobby Lee
Oh wow, awesome. So there were only 200 of those made worldwide, the six color signature set. They sell for over two Bitcoins today. So the set you have has six colored chips in it and the nominal value is only 0.641 Bitcoins. Of course, with the four coins and all that. But today, they sell that chip set ... That chip set will probably sell for over two BTC today. So over $22 thousand.

Charlie Shrem
The five chip set, what's the total denomination value of that?

Bobby Lee
The five chip set is missing the purple half a Bitcoin, so it only has 0.141. So it has a black chip, green chip, blue chip, red chip and a white chip. That's the five colored chips. Yeah.

Charlie Shrem
Wow.

Bobby Lee
So nonetheless, those were the physical Bitcoins sold by BTC too.

Charlie Shrem
Yeah.

Bobby Lee
They have business stock.

Charlie Shrem
I just checked my list, and each set has 0.641, so I have the six chips.

Bobby Lee
Six colored chips, yeah there you go, congratulations.

Charlie Shrem
Wow. I'm holding those forever.

Bobby Lee
Yeah, absolutely. By they way, they were great for gifts. You buy a Bitcoin, you give it to your friends. Now, with Ballet, we're not making round chips. We're making these credit card sized stainless steel cards. You mentioned the rose gold. We will eventually release a high end product under a different banner. The version today is a series called Real, R-E-A-L. The idea is I'm giving you a real Bitcoin. I'm giving you a real Bitcoin, real Ethereum, real Litecoin, and this is real crypto currency.

Charlie Shrem
So you know why I like this? So I'm a big hardware wallet geek. I am. I think i own one of everything. Anything physically manifestation of Bitcoin, I own. So I literally have a drawer filled with every single hardware wallet that exists, and I'm telling you you could name me one right now, I own one.

Bobby Lee
Awesome.

Charlie Shrem
And I own multiple, and I give them away because I just like to geek out and nerd out on them and play with them and stuff.

Bobby Lee
That's exactly it. That's why they're so well respected, Charlie. You're such an early pioneer. That's awesome.

Charlie Shrem
Thank you. I appreciate that, and I believe you are as well. So what I like about this though is because, in my pocket currently, I don't have anything. So what you're saying is basically it will be the same size and metallic feel as my American Express card. So, if I can carry one-

Bobby Lee
That's exactly it. The titanium, yeah exactly, the platinum card. So it'll be the same size as that and you can carry that. You might even want to carry two or three because you carry them, either empty or whatever, and then when you meet a friend at a coffee shop or at a dinner, they say hey what do you do, what are your interests, hobbies, Bitcoin, would you like to buy some or give as a small gift, you can immediately load it with whatever amount you want, $10, $50, $100, and hand it to that person, and they will now be a proud owner of Bitcoin.

Charlie Shrem
What will it cost? What does it cost now for an empty one?

Bobby Lee
So I don't want to talk about it on the podcast. It's all on the website. You can go pre order now.

Charlie Shrem
Amazing.

Bobby Lee
So we've opened up a beta program. You can download the app. You can apply for the beta program. We're sending these cards out to all the industry leaders. So Charlie, it's on the way to you in the mail, so hopefully you'll receive it in the next few days. We're very excited. We just launched it last week, and the reason ... By the way, you know I sold my company last year. I sold BTCC last year in early January 2018.

Charlie Shrem
Tell me about that because I heard rumors about that, but I wasn't 100% sure.

Bobby Lee
Yeah.

Charlie Shrem
Congratulations.

Bobby Lee
Yeah. Thank you. We didn't do a big press core. Essentially, we had a buyer from Hong Kong, a financial company, who was interested in our business. They decided to buy the whole business out, the international business. That was in January 2018. The domestic Chinese business, we wound that down, closed it off, but the international business got sold, the BTCC. That included the exchange, the mobi wallet, as well as the mining pool. So they run that business…so the point was I made some good money selling the company. In hindsight, the timing was quite good, but it wasn't exactly timed like that.

Charlie Shrem
Are you funding Ballet yourself?

Bobby Lee
Yeah, I'm funding it. We have some investors as well.

Charlie Shrem
Isn't that the best?

Bobby Lee
It's very exciting. Yeah. So the point is that I've made some money in both selling the company and also from my early Bitcoin investing. So the point is I don't need to work. I don't need to be an entrepreneur again, but the idea for Ballet was so compelling. So, at the end of last year, I finally decided, hey this idea is so awesome, I need to go do it myself. I don't think anyone else will do it. They had 10 years and no one's done it yet. I might as well go do it myself. So I launched a new startup right away in January of this year, got a team together. A lot of people came from my old company, from BTCC, and we had a lot of experience doing this because we had experience building the physical Bitcoin and selling that.

So in this case, we're not selling physical Bitcoins, but we are selling physical hardware wallets. So the innovation here is the empty wallets, they're non electronic. The reason they're non electronic, Charlie, is that looking back, all electronic wallets are cumbersome and prone to electronic failure. They're prone to security hacking, they're prone to battery power issues, they're prone to firmware upgrade issues, all the ledgers and treasures that they go through firmware upgrades. A lot of times that can be a scary moment. Sometimes, some of them have NFC shifts, Bluetooth, pairing issues and all that stuff.

So I think they're great for geeks like me and you maybe, but certainly the hardware wallets that are electronic in nature are not necessarily suitable for the everyday person.

Charlie Shrem
I agree.

Bobby Lee
So we purposely made Ballet wallets non electronic and they're resilient. Literally, you can put in the time capsule 20, 30 years later, you can come back and funds will be there.

Charlie Shrem
I heard a great quote from someone and I like that you keep saying wallet, because someone said, wallets are for one thing, but vaults are for more complicated ... I forget the exact quote, but it kind of makes sense. The tresor ledger ... all those hardware wallets are great, but they're not for everyday use. They're not for ... You don't carry a tresor in your pocket to show people and to promote advocacy for Bitcoin or any crypto currency, but this is something that I literally ... as I said, I'm excited about it because I literally will carry one in my wallet, and then it'll be fun to show people.

Bobby Lee
Absolutely. Exactly.

Charlie Shrem
God forbid ... and you've probably experienced it. I've traveled over 40 countries, and you've probably traveled to more.

Bobby Lee
Wow.

Charlie Shrem
There have been times when I've been in a pinch. There have been times where credit card doesn't work and what do you do? If you simply carry a card with one Bitcoin on it, you could literally be in Mongolia, anywhere in the world, in Africa, in Morocco, anywhere in the world you can be. You can find someone willing to buy your Bitcoin. It's like gold.

Bobby Lee
Absolutely, or buy a fraction of it.

Charlie Shrem
Yeah.

Bobby Lee
Buy a fraction of it. Not just the whole thing.

Charlie Shrem
That's why it's-

Bobby Lee
That's exactly it. We will enable that.

Charlie Shrem
That's why this is so important. I'm very excited for it. How did you design it?

Bobby Lee
I think it will really enable more mobile adoption. I think, if we're successful and if you catch the bull market well with timing-wise, I think this can make a dent in increasing global adoption of Bitcoin, people holding it. So the design is this, the principle was we wanted to borrow from the physical Bitcoin, the notion that the private key is on the device itself. It becomes a bare instrument. Just think about it. Normal people, not computer science geeks like myself, normal people, they don't know how to do digital security. They don't know how to do passwords. They don't know how to keep passwords safe. They don't know how to do two factor authentication. They don't know how to do shifts in firmware and security updates, and patches and all that stuff. They barely know how to log in, and they don't want to do password resets and 2SA and SMS verification.

So normal people actually know how to keep things safe. They keep it safe because they lock it at home. They lock it in the drawer, they keep it in the bank safe. You keep it in your pockets, don't lose it. So the notion is we want to bring crypto currency, which is so virtual, bring it back to the physical world, make it into a physical instance where we hand it to you, you hold it, you keep it safe. That's as simple as it gets. Again, children can use it, a grandparent and great grandparent can use it as well, because you don't need any apps with it. We have a great mobile app as a companion tool, but it's not necessary because, as soon as you load the Bitcoin onto it, your card is loaded. It has value. You don't need to use the app at all unless you want to check the value. Does that make sense?

Charlie Shrem
It makes complete sense.

Bobby Lee
So we designed it from that basic principle to be non-electronic. Then we post a really strong material, stainless steel, we made in the size of a credit card to be compatible. But the card itself, there's nothing on it. There's no pin and chip. There's nothing like that. There's no magnetic strip. There's nothing. All it has is a sticker with a QR code underneath it, and it has the passphrase. Oh, I want to tell you something really cool, Charlie.

Charlie Shrem
Yeah.

Bobby Lee
With physical Bitcoins, people are really worried about the creator having-

Charlie Shrem
That's literally what I was going ask next.

Bobby Lee
Oh yeah. We have the most awesome solution. We are the worlds first to do this. Here's the awesome thing. You may have heard of BIP38. BIP38 is an industry standard that's been around for five, six, whatever years. It allows for the creation of encrypted private keys. Think about that. It's a private key that has an additional password. What we've done is we've separated those two components. We've created a Ballet wallet from two locations geographically. The private key sticker is manufactured in China because that's where it's supply chain is for the stickers and the steel cards.

In the password, the wallet's passphrase is actually manufactured and created in the United States, in our headquarters in Las Vegas. So what I'm saying is you need both components to decrypt the wallet. Do you follow me?

Charlie Shrem
I do.

Bobby Lee
There's an encrypted private key, and then there's a passphrase, a wallet passphrase. You need both components. The way we do it is these two components are generated offline using ... we're rolling dice to generate...to create these passphrases and encrypt for private use. But done separately in different countries, thousands of miles apart, on offline computers that never touch the internet, on rotating hard drives, which we can delete and hammer out. So it's not stored on some SSD that's never erasable. So the two data never come together. They're never sent electronically. They're never send on USB drives. They're never sent over email or internet, and they're literally thousands of miles apart. They never come together.

After the product is made, the data is deleted, deleted on both sides. So our company is not a custody wallet. We don't keep the private keys. We don't want to keep the private keys. If I had one particular private keys, I would have lost your custody wallet, which is what we did at BTCC.

Charlie Shrem
Wow.

Bobby Lee
So for this startup, I purposely don't want to keep your private keys. It's none of my business how you use a wallet, how much money in it. We don't even keep track of how much you store in it. It's all up to you. We made this super, super easy. We call this two factor key generation. The key generation is…

Charlie Shrem
It's literally like two continent key generation.

Bobby Lee
Yeah. That's another way to call it, two continent key generation. We think of it as multinational fabricated, bilateral, whatever the nice words are. But it's a two factor key generation. We're the first to do that. Literally, it comes together for the first time on the card itself. But because of nature, once it's on the same card, if you wanted to peek at it, you have to peel the sticker or scratch off the laser thing. But by then, the card is already ruined. It's not sellable. It's no longer in new condition.

Charlie Shrem
So someone will be able to know if the card was tampered with or even peeked at.

Bobby Lee
Absolutely.

Charlie Shrem
And not accept that.

Bobby Lee
Absolutely. That's exactly it.

Charlie Shrem
How about long term? What about the paper or the seal? Will that last 20, 30 years?

Bobby Lee
We think it will. The only thing I want to be very honest and truthful is this is not 100% fireproof. Because there's a sticker on it, which can burn in a fire. So we think this is not fireproof. I don't want you to try the hard way, learn the hard way, but the point is that it's waterproof, it's weather proof to the elements. You can put it in a time capsule, 20 years, 30 years later, it'll still be there unless there's some quantum computer hack that'll break Bitcoin. But other than that, this is really just a longterm storage.

Charlie Shrem
Wow. I'm very excited, and congratulations.

Bobby Lee
Yeah, I'm super excited. The way I see it is we're doing something ... we've developed something really innovative. Now just throw it out to the market and see if it sticks. If it does, people love it, that's great. We're going to make some money selling it. If it doesn't, hey I've tried my best. I think that at least I've contributed to the society, to the industry.

Charlie Shrem
I think it'll be very successful.

Bobby Lee
I would use it myself, yeah.

Charlie Shrem
Who are some of the ... Going back for a second, who are some of the first crypto entrepreneurs or crypto leaders that you met when you got involved in the space? Because you got involved very early, 2011 it sounds like. So I guess people came and met you, not the other way around you meeting them. But what are some early stories, early things that you kind of remember that kind of shape now your views of this industry?

Bobby Lee
Yeah, so I started in 2011. I started mining. So my brother Charlie, the other Charlie, Charlie Lee, he introduced me to Bitcoin in early spring of 2011. I started mining Bitcoin using some of the GTUs I bought from him. So I was mining Bitcoin in China, in Shanghai, had to rig going with four Bitcoins…chugging along. I think I mined about 20 Bitcoins that summer. So it was just a few hundred dollars worth of Bitcoins, barely paid for electricity. And 2012 was a quiet year. I was working at Walmart China, so I didn't do too much with Bitcoin then. But by late 2012, by early 2013, that's when I got into it full-time. I left my job at Walmart and decided to dedicate my career to it.

So the first Bitcoin conference I went to was the one in the spring. I think it was April or May of 2013 in San Jose.

Charlie Shrem
Oh yeah, I was at that one too.

Bobby Lee
You were there. Yeah, you were there. Brian Armstrong was there…All of you guys, I'm great fans of all of you guys. You guys are the true OGs. Yeah, that was a lot of fun meeting you guys at the conference. My brother went. Yeah, it was awesome. Of course, we saw the booth with Bit Instant. You had the booth there I recall.

Charlie Shrem
I did. I joked to your brother on Twitter a few weeks ago. I said, what would we do without you.

Bobby Lee
Yeah, yeah.

Charlie Shrem
I forgot what he said. He's like, you'd be the only cool Charlie left, or something like that.

Bobby Lee
That's funny. What else? Mike Caldwell, he's the maker of casascius, the very famous, the very first physical Bitcoin.

Charlie Shrem
Yeah, we had him on the show.

Bobby Lee
Yep. Mike Caldwell, awesome guy. I met him there as well. I bought my first casascius coin off of him at that conference in person, so that was quite memorable.

Charlie Shrem
Hey, are you going to be ... Last year, I was in this poker tournament in October in Las Vegas, and your brother played. It was the worlds crypto con. Are you playing this year?

Bobby Lee
Yeah, how was that? I haven't signed up yet, but I'm interested. I'll be there for that time, at the end of October.

Charlie Shrem
You should. I'm running my own event that day, a trading event.

Bobby Lee
Oh cool.

Charlie Shrem
You should come to that event too.

Bobby Lee
Absolutely. Yeah, we'll try to go to world crypto con. Litecoin summit conference is also there.

Charlie Shrem
Yes, it'll be the same week.

Bobby Lee
So I'll be there for that.

Charlie Shrem
But I'm not going to be at the same table as you though, because I don't want to lose. They put me next to Scotty Win last year.

Bobby Lee
Oh really?

Charlie Shrem
Here, I've probably played poker three times in my whole life, and they put me next to Scotty Win, whose taken me all in every hand. For those that don't know, he's like top 10 poker players in the world.

Bobby Lee
Absolutely. Yeah, I've never met him, but I've seen him on TV.

Charlie Shrem
I'm never playing with him again.

Bobby Lee
Yeah, they're really aggressive, especially against new people.

Charlie Shrem
Thanks. That's what you do probably too.

Bobby Lee
No, I'm not that good. I did play in the world series of poker last year, 2018. That was a lot of fun. I did that for the first time ever.

Charlie Shrem
Share me some tips and secrets of how you play poker to make me a little bit better.

Bobby Lee
Well, for poker, it's a game what they call of incomplete information because you have two cards, they have two cards, and then there's the common community cards, the flop, the turn, and the river. But in the end, maximum you see seven cards. There's five on the board, and you have the two hold cards, and there's actually 52 cards in the deck. You only have seven. You've only seen seven. So what cards can the other opponents have? It's a huge mystery. It's based on ... You have to deduce it based on how they've acted, how they've behaved. Are they truthful, were they trying to scam you, were they trying to overplay a hand, and so on so forth.

So one of the insights is that there's a concept called you don't play your cards until you play the person. You can essentially outplay someone just by out thinking, outmaneuvering them and making ... basically play as if you had a different hand, and they might fall for it and believe you have a different hand.

Charlie Shrem
Yeah, that's a good point. That's a good point. Sorry, you continue.

Bobby Lee
No, it's just that. When you said Scotty Win was going all in on you ... even for example, Charlie, you know he's a good player and you were thinking that he must have a good hand. He might just have Queens, three of suit.

Charlie Shrem
So how should I have played it differently then?

Bobby Lee
Well, I don't know. It depends on the circumstances.

Charlie Shrem
So I was playing-

Bobby Lee
Against what they call-

Charlie Shrem
I was playing a few weeks ago, just a fun game, and I noticed there was this guy at my table who just didn't like me for some reason. I guess because he was there all the time and here I'm a kid.

Bobby Lee
Yeah.

Charlie Shrem
It seemed like his goal was to beat me. So what I started doing was, I started playing heavy against him. Then, when I had a really, really good hand, I started backing down on purpose to make him think that he had me, and then he didn't, and I beat him. I think he had three of a kind, but I had a better hand. I may have had a flush or something, whatever it was.

Bobby Lee
Awesome.

Charlie Shrem
He left. That got him out and he was so angry.

Bobby Lee
I see, you took all his money.

Charlie Shrem
Took all ... well it was like $100.

Bobby Lee
Yeah.

Charlie Shrem
It wasn't a lot of money.

Bobby Lee
Yeah. That's a hard thing. When you have a good hand, it's not hard to win, but what's really hard is to win a lot of money, because not only do you want to win the hand, but you want them to feel, in a way, that they give you all their money. That's what's really hard about poker.

Charlie Shrem
Yeah, the worst feeling is having a good hand when everyone else already folded and it's you and another person or two.

Bobby Lee
Ah yeah.

Charlie Shrem
Because then you can't build a pot. What do you do?

Bobby Lee
Exactly, exactly. That's why they say pocket aces aren't that great, because pocket aces, you win outright, but you don't necessarily win a lot of money. The worst thing is sometimes you get really trapped and you lose a lot of money with pocket aces. Whereas a pseudo connector, like a 10, Jack suited, or a K Jack suited can win you a lot more money.

Charlie Shrem
That's a good point. Hey Bobby, so how can people follow what you're working on and what you're doing, your Twitter, your website, all that information?

Bobby Lee
Yeah, my Twitter is Bobbyclee. That's B-O-B-B-Y-C-L-E-E. On Twitter, our company Ballet is Balletcrypto. So it's B-A-L-L-E-T-C-R-Y-P-T-O.

Charlie Shrem
Where did you come up with that name?

Bobby Lee
People ask us why did you chose that name. The reason is it's really unconventional. We actually went through a lot of names and finally we settled on this. We liked it for a variety or reasons. The number one reason is it's so non standard for a crypto sort of finance company that what's great is, in terms of trademark purposes, there's no finance companies ever using the word ballet. The other amazing thing is that it nicely describes our product and our sort of vision. It evokes a sense of simplicity and elegance. You think our wallet is so simple and elegant that it really can reach all corners of the world. The word ballet is actually pronounced the same and spelled the same in multiple languages all over the world. It has instant recognition and people remember it, Ballet.

Charlie Shrem
Wow, that's a great point. I never thought about that.

Bobby Lee
Yeah. Which point?

Charlie Shrem
Well, that it's a universal word.

Bobby Lee
Yeah, it's a natural English word. It's universal. Ballet in French, in Spanish, in many languages, even in Chinese, it's pronounced ballet. Then also lastly, it starts with the letter B, which we stylized to look like the Bitcoin B. So we made our own version of Ballet, our own version of that B logo. So our app is called Ballet Crypto. Our Twitter account Ballet Crypto. You can go to our website. It's really exciting.

Charlie Shrem
Of course.

Bobby Lee
I hope your audience learns some more about Ballet wallet. They can find great use for themselves or for their friends, come to our website, pre order it of even apply to for a beta profile.

Charlie Shrem
Excellent. Thank you so much for coming on the show today. I really appreciate it.

Bobby Lee
Yeah. Thank you Charlie for having me.

Charlie Shrem
Thank you. I'll see you in October.

Bobby Lee
Yeah, let's meet up in Las Vegas in October.

Charlie Shrem
Sounds good. I'll talk to you later. Bye, bye.

Bobby Lee
Okay, thank you. Bye.

Charlie Shrem
Hey everyone, thanks for listening. This episode of Untold Stories is sponsored by Scott Offord, the creator of Crypto Mining. Scott's a broker or assik mining gear and helps people buy and sell their miners. He created a Bitcoin mining profitability calculator and an interactive assik hardware comparison chart that you can find at Cryptomining.tools. It's the only free online tool for calculating profitability and days to ROI. That includes the impact of the Bitcoin block reward having. The calculator lets you put in your estimated uptime to give you a more realistic profit projection. So check it out and find Scott on telegram and Twitter at O-F-F-O-R-D-S-C-O-T-T. New episodes go live every Tuesday at 7AM EST. Links to our Apple and Spotify channels are in the show notes. You can also follow me on Twitter, CharlieShrem, to continue the conversation. See you next week.