Speaker 1: So the big question is this, how do investors like
Speaker 1: us get access to the ideas, information, and most importantly,
Speaker 1: the right people that give us the tools and information
Speaker 1: we need to make informed and educated decisions to have success.
Speaker 1: That is the question, and this podcast will give us
Speaker 1: the answers. This is Mark Moss, your host. Let's get
Speaker 1: this started, all right, everyone, Welcome to another episode of
Speaker 1: the Market Disruptors podcast. Today I am with Dan Held.
Speaker 1: He's the co founder of Interchange, and he writes a
Speaker 1: lot about bitcoin, bitcoin security, bitcoin as a store of value,
Speaker 1: a lot of really good stuff on medium that's caught
Speaker 1: my eye and so I wanted to dive in deeper
Speaker 1: with him today. So, Dan, welcome to the show. Thanks
Speaker 1: for having me excited. Yeah, I'm excited to jump into
Speaker 1: some of these topics. Now. Um, I've read a lot
Speaker 1: of your stuff, as I just said, but maybe for
Speaker 1: those that haven't, why don't you just kind of tell
Speaker 1: us who you are, what you're doing, and kind of
Speaker 1: how you got here to this space right now? Yeah,
Speaker 1: that sounds like good place to start. So I got
Speaker 1: involved in the crypto space, or specifically bitcoin, because bitcoin
Speaker 1: was the only thing and when I got in back
Speaker 1: in and I had a friend paid me back for
Speaker 1: a beer with a capacious coin and for those who
Speaker 1: don't know what that is, that's the physical bitcoins that
Speaker 1: you see in all the news articles and that they're
Speaker 1: using different b roll footage on TV TV programs, And
Speaker 1: so that was a good way for me to kind
Speaker 1: of bridge that analog to digital world. And after I
Speaker 1: got that, I googled what is bitcoin? Read a little
Speaker 1: bit into it found that it had a really really
Speaker 1: cool monetary policy that was rooted in Austrian economics, and
Speaker 1: for me, as a libertarian and you know, Austrian economics guy,
Speaker 1: that's what really attracted me to bitcoin. And January I
Speaker 1: was relocated to San Francisco worked at a small investment firm.
Speaker 1: They relocated me out here, and while out here, I
Speaker 1: got plugged into the bitcoin meetup scene, which at the
Speaker 1: time was only a dozen people including Jesse pal Crack
Speaker 1: and Charlie Lee from light Coin, Jed Michaelo from Riple Stellar,
Speaker 1: Fred and Brian from coin Base, and there's basically all
Speaker 1: of us and a cooler PBRs and then March hits
Speaker 1: and that's when the people forget that two specul of
Speaker 1: the bubbles March when it went from ten to sixty,
Speaker 1: and then like November December when I went from a
Speaker 1: hundred to twelve hundred. So and then at first run in,
Speaker 1: everyone had a problem in terms of checking the price,
Speaker 1: the real time price of bitcoin, and so I saw
Speaker 1: that as a potential opportunity. And while I didn't know
Speaker 1: what the hell I was doing building products, I found
Speaker 1: an engineering buddy of mine and I said, hey, let's
Speaker 1: let's go build this. So I spent a bunch of
Speaker 1: time looking at different other doing the research and other
Speaker 1: mobile products, and I knew enough in photoshop that I
Speaker 1: could design it. The dirty secret there being that I
Speaker 1: couldn't design anything more complex. So people really liked the sleek,
Speaker 1: simple aesthetics of the product, but truth be told, I
Speaker 1: couldn't design anything anything with more complexity than that. So
Speaker 1: that turned out to be a great thing because people
Speaker 1: found value in the product right away. It was simple
Speaker 1: and easy to use, and it became the most popular
Speaker 1: crypto mobile product. Was that it's called zero block. Zero
Speaker 1: block okay, yeah, and zero block had acquired by blockchain
Speaker 1: dot Com in December and I came on board. There
Speaker 1: was the first product manager, Zooming Forward, a bit to
Speaker 1: keep the keep it kind of short. It was another
Speaker 1: product as a product manager at another crypto company called
Speaker 1: change Tip, which is micropayments over social media. After that,
Speaker 1: I went to Uber where I worked on Writer Growth,
Speaker 1: which is the Writer product team, Writer being the app
Speaker 1: that we all called Uber. And then UM went after
Speaker 1: that to come back to the crypto space where I
Speaker 1: go found out a company called Interchange and we build
Speaker 1: particuliar reconciliation tools for institutional traders and infrastructure. Cool. Well,
Speaker 1: that's that's quite a history, UM looking back now today,
Speaker 1: I mean, imagine how cool that is to sit around
Speaker 1: with a case of PBS with with those with those
Speaker 1: industry uh industry people. Was was probably pretty cool. You
Speaker 1: probably didn't realize at the time, right what you had. Yeah,
Speaker 1: I don't. At the time, I was I thought it
Speaker 1: was just cool that people might up and talked about
Speaker 1: bitcoin in person. Yeah, because that there was more than
Speaker 1: like me and my my one buddy, you know, So
Speaker 1: that was that was pretty cool. Yeah, that's interesting. I UM,
Speaker 1: I have been an online pioneer. I started online business
Speaker 1: in two thousand one at the bottom of the dot
Speaker 1: com crash, which was a horrible time, but did did
Speaker 1: really well. I've been kind of a professional investor for
Speaker 1: twenty years as well. UM and I and being on
Speaker 1: the online space, I had heard of bitcoin. I remember
Speaker 1: specifically the bubbles as you're talking about, UM, but it
Speaker 1: wasn't really until when I decided to jump in. And
Speaker 1: and as you talk about with your kind of monetary
Speaker 1: theory or your your ideologies that you have, I kind
Speaker 1: of have the same. Where I grew up in a
Speaker 1: really conservative home. UM. In high school, my parents sent
Speaker 1: me to John Birch Camp. If you know what that is, um,
Speaker 1: you'll know how you don't know how libertarian and right
Speaker 1: wing I I was. And yeah, I was following a
Speaker 1: newsletter from from called Sovereign Man. If you know about
Speaker 1: that Simon Black, and uh, he's all about like having
Speaker 1: the sovereign life and uh who's you know talks about
Speaker 1: the importance of having secondary passports and off shore bank
Speaker 1: accounts and and uh. Then I was like, well, bitcoin
Speaker 1: is the same thing. Like I can have my sovereign
Speaker 1: life with bitcoin, and so that's that's kind of I
Speaker 1: was like, man, I gotta jump all in. So anyway, Uh,
Speaker 1: same ideologies, but that brought us there. But that's cool.
Speaker 1: So you've been around the space for quite a while. Um,
Speaker 1: you've seen bitcoin rise in fall many times. Uh. One
Speaker 1: of the things that you've been talking about that caught
Speaker 1: my eye was the bitcoin security model. And I know,
Speaker 1: when we just went through this bear market, the price
Speaker 1: of bitcoin, you know, crashed too, then crashed again, and
Speaker 1: there was a lot of talk about this this death spiral,
Speaker 1: right because the prices would drop so far that the
Speaker 1: security of the network would would be in jeopardy. And
Speaker 1: I think maybe that's what kind of led to some
Speaker 1: of these articles that you wrote. Yeah, you're talking about
Speaker 1: the mining death spiral, right, Well, yeah, because if the
Speaker 1: mining death bar goes down, the security of the network
Speaker 1: is then affected. Yeah. Well, you know, It's the reason
Speaker 1: why I wrote this article is that there's a certain
Speaker 1: group of individuals of another prominent cryptocurrency, Um, and they
Speaker 1: like to use, uh, the potential issues with Bitcoin's long
Speaker 1: term security as a way to try to undermine confidence
Speaker 1: to Bitcoin, which I find hilarious considering this currency, by
Speaker 1: the way, it's called Ethereum. I find it hilarious that
Speaker 1: the ethereum community looks at a hundred year potential issues
Speaker 1: with Bitcoin while their own existing monetary policy is totally garbage.
Speaker 1: So um or or lack of policy maybe right, precisely, right, yeah,
Speaker 1: the lack of monetary policy of a laughable um sort
Speaker 1: of way they go about choosing an inflation rate. And
Speaker 1: so for them to criticize Bitcoin, this is like the
Speaker 1: lost ditch effort to try to undermine confidence in bitcoin,
Speaker 1: because if you undermine confidence in bitcoin's long term security,
Speaker 1: it brings into question bitcoins twenty one million hardcap because
Speaker 1: some hypothesize that you would need to have tail emission
Speaker 1: essentially a low level of inflation passed the twenty one
Speaker 1: million hardcap, and that violates, I think, from the core
Speaker 1: tent of bitcoin. And after doing my research, I found
Speaker 1: it's totally unwarranted. And when you say and when you
Speaker 1: say that the tele emission you're talking about, so after
Speaker 1: the miners stop earning rewards, meaning they don't make any
Speaker 1: money anymore, what would be the point of them continuing too?
Speaker 1: Mind blocks, that's what you're referring to it. Essentially, so
Speaker 1: miners are they sink capex and opex, So capex being
Speaker 1: the by bitcoin mining equipment, and opex is the electricity
Speaker 1: miners expend that that expense Um too then earn a
Speaker 1: percentage of block rewards going into the future, and a
Speaker 1: block reward is every ten minutes a new block is
Speaker 1: created in Bitcoin, and that block contains newly minted bitcoins,
Speaker 1: which is called the block subsidy, and then it contains
Speaker 1: transaction fees. The block subsidi decreases over time, and that
Speaker 1: eventually produces twenty one million bitcoins. And some people worry
Speaker 1: after the block subsidiy ceases to exist or after all
Speaker 1: the bitcoins have been minted, which is in the year approximately,
Speaker 1: that um that transaction fees won't compensate the miners enough
Speaker 1: to protect the network, right, and so um, you've basically
Speaker 1: kind of uncovered that may not be the case. I mean,
Speaker 1: after that, those still have plenty of incentives. After that,
Speaker 1: those rewards go away totally. Well a lot of this
Speaker 1: So the ethereum crowd like to like to poke at
Speaker 1: this because they felt like it would undermine the confidence
Speaker 1: in bitcoin and the confidences that the twenty one million
Speaker 1: hardcap would would potentially be manipulated, which is a pretty
Speaker 1: good social attack factor. And so I felt like this
Speaker 1: needed to be comprehensively addressed. And once I dug In deep.
Speaker 1: I found that most of their thoughts behind this being
Speaker 1: an initiative, we're predicated on a few papers from Ivy
Speaker 1: League schools like Princeton and Harvard. And I read some
Speaker 1: of these papers and after reading, you know, you read
Speaker 1: a page or two in and you go, what the
Speaker 1: hell because these papers essentially made ridiculous assumptions um absolutely
Speaker 1: ridiculous assumptions. So for example, they assume the coins price
Speaker 1: never increases. It's like, oh, of course the security is
Speaker 1: going to be a problem if it never increases, right right, um?
Speaker 1: Which also, if the price net for increases, that means
Speaker 1: that the shared illusion of the number of participants in
Speaker 1: the bitcoin network never grew. So bitcoin net grew beyond
Speaker 1: ten or twenty million people, which means I think it
Speaker 1: kind of failed. And the reason why the price increases important,
Speaker 1: I'm guessing, is because of the of the blocks that
Speaker 1: the happening that's coming, right, So the block reward is
Speaker 1: getting cut in half, and it continues to get cut
Speaker 1: in half, and so therefore the amount of bitcoin they
Speaker 1: get goes down, but the value of that bitcoin should
Speaker 1: be going up at the same time. That's right, And
Speaker 1: that's what we've seen the last two happening in cycles.
Speaker 1: Is that after the happening cycle, the price increases exponentially.
Speaker 1: The increase in price brings around greater awareness and speculation,
Speaker 1: which thereby draws in more users who thereby transact. So
Speaker 1: the happening events create a supply shock. That supply shock
Speaker 1: kick starts a new bowl run, and then that bowl
Speaker 1: run brings the new people to transact, and those transaction
Speaker 1: fees are place the decreased blocks up speak, got it.
Speaker 1: I really liked your point about the miners. I mean
Speaker 1: they're buying the equipment, which is a long term investment
Speaker 1: that they have to recoup their their investment on, and
Speaker 1: then they have their electricity investment as well. So, um,
Speaker 1: I think that aligns them to the network right there.
Speaker 1: They need to be good actors. They need to see
Speaker 1: their their investments returned to them over a long period
Speaker 1: of time, right Yeah. And so this I think is
Speaker 1: a good good segue into how bitcoin security model works. Essentially,
Speaker 1: bitcoin security works based on game theoretic um game since
Speaker 1: you game three where the elements are around bitcoin mining
Speaker 1: and revenue, so miners are compensated to protect the network. Um.
Speaker 1: They think that that up from costs to be of
Speaker 1: the machines, and then they have the continuing cost of
Speaker 1: the offex of electricity, and then they get a certain
Speaker 1: percentage of the block rewordpoint in the future, and the
Speaker 1: percentage is determined based on how many other people are mining,
Speaker 1: So what what percentage of the hashway they have? Essentially
Speaker 1: and um what what has to happen is that bitcoin
Speaker 1: miners are incentivized to behave properly because they're given a
Speaker 1: block reward when they do. So. When they're given the
Speaker 1: block reward, they've already sunk in cost, remember, so they're
Speaker 1: just recouping their cost and they're hoping that they make
Speaker 1: the profits. So the confidence and stability of the protocol
Speaker 1: is paramount for them because they already have up front
Speaker 1: costs and they're trying to make their money back. So
Speaker 1: the game throoretic element here is that bitcoin miners will
Speaker 1: largely not try to amenitbulue the network. We're engaging fifty
Speaker 1: one percent attacks even if they had the hash rate,
Speaker 1: because they would damage the confidence of the protocol, which
Speaker 1: would damage their future cash flows. So that's the game
Speaker 1: through retic element. UM. Now, the attack factor that most
Speaker 1: people are worried about is a government attack factor where
Speaker 1: they don't care about burning the money. So governments may
Speaker 1: not care about buying billions of dollars of money equipment
Speaker 1: and then that mining equipment becoming useless after they attack
Speaker 1: the network. So that's what this covers is, you know,
Speaker 1: what's the first of all, what's an appropriate um? It's
Speaker 1: an appropriate level of security spend that makes the network secure?
Speaker 1: How bad is an attack? Um? You know, will transaction
Speaker 1: fees replace the box ups the over time? What have
Speaker 1: we seen historically? What we see that, what does that
Speaker 1: look like projected into the future, and then some modeling
Speaker 1: around okay, what what does what do transaction fees look like?
Speaker 1: And we'll we'll consumers and will businesses pay that transaction
Speaker 1: fee to transact on the bitcoin network Because a lot
Speaker 1: of people now a lot of the old bee cash
Speaker 1: or crowd or the bitcoin is made for payments crowd,
Speaker 1: they feel really strongly around how much it costs to
Speaker 1: send a bitcoin transaction. And so I kind of comprehensively
Speaker 1: cover the price elasticity of a on chain transactor transactor
Speaker 1: that's using a block space, not just bitcoins, but any
Speaker 1: block space, and then other real world comps as to
Speaker 1: what they'd be willing to spend on the transaction. So
Speaker 1: let's try to break this down for the average person
Speaker 1: that's that's kind of listening to this. And and as
Speaker 1: you said, right, that's one of the big attack vectors
Speaker 1: that when when I hear people say, you know, what
Speaker 1: could go wrong with bitcoin? Kind of that The two
Speaker 1: maybe are ones that you've already addressed. One like as
Speaker 1: you said, a nation state of sovereign trying to attack
Speaker 1: it or to changing the hardcap. And so going back
Speaker 1: to what you just said, with like a sovereign doing
Speaker 1: an attack, they don't care about their investment. Um, people
Speaker 1: think that's a risk. They think, oh, well, all the
Speaker 1: mining is consolidated in China, so China could just take
Speaker 1: over all the miners right there and do it. Um,
Speaker 1: how big of a risk do you think that is? Um?
Speaker 1: And I guess so, how big of a risk do
Speaker 1: you think that really is? And and uh, yeah, that's
Speaker 1: a great question. So you know, when I when I
Speaker 1: store my bitcoin and the bitcoin ledger, I essentially have
Speaker 1: ownership over x amount of coin that's represented in the ledger, right,
Speaker 1: and bitcoin miners what they do is through proof of work,
Speaker 1: so through the mining equipment plus electricity, they are producing
Speaker 1: new coins, and then they are essentially validating and permanently
Speaker 1: etching transactions into the recorded ledger via those new blocks.
Speaker 1: So you can kind of think about it as uh,
Speaker 1: you know, with the electricity spent by the miners to
Speaker 1: mental bitcoin to protect the into validate transactions in that block.
Speaker 1: It's essentially like layers and layers and layers of energy,
Speaker 1: right that are that are continually pressing down upon all
Speaker 1: the blocks previous before it. And and so when it
Speaker 1: comes to when it when it comes to like essentially
Speaker 1: the security the network, um, you know, when when these
Speaker 1: transactions are validated. What people worry about is if you
Speaker 1: had a entity that had the hash rate, they could
Speaker 1: try to double spend or try to manipulate the tip
Speaker 1: of the chain. Even even if that happened, though, it
Speaker 1: still takes a tremendous more amount of energy to unwind
Speaker 1: the chain. And even if someone tried to do that,
Speaker 1: each individual who stored their money into the bitcoin ledger,
Speaker 1: we all agreed upon a certain set of rules, and
Speaker 1: those rules didn't have someone going, hey, I'd like to
Speaker 1: unwind all of these transactions. So in the event that happens,
Speaker 1: Bitcoin still don't die because all of the participants in
Speaker 1: the network have their ledger balances and they can all
Speaker 1: simply say, Okay, this malicious actor started to try to
Speaker 1: unwind everything at point A, let's just start over at
Speaker 1: point A. Um, so the chain, yeah, and for the chain,
Speaker 1: which is an extreme case, right, this is a non
Speaker 1: none advantageous sort of sort of environment. Right. But even
Speaker 1: if a government did successfully try to influence the ledger
Speaker 1: through a talk, they still would have a difficult time
Speaker 1: on winding transactions because bitcoin, like every other money, is
Speaker 1: merely a social insensus. We all believe in it and
Speaker 1: that gives it value. So people aren't going to just
Speaker 1: abandon the bitcoin blockchain and join another one, which would
Speaker 1: all those other chances with people grew by the way.
Speaker 1: People are going to say, hey, let's start over from
Speaker 1: this point before these militilation has happened and change it
Speaker 1: or figure out ways to protect it. So that's kind
Speaker 1: of like a last resort. That's like a worst case scenario. Um.
Speaker 1: But how resilient would it be to fending off an attack? So? Um,
Speaker 1: I think the longer that an attack doesn't happen, the
Speaker 1: harder it gets. I would guess, right, So, um, a
Speaker 1: year from now, the attack would be harder than it
Speaker 1: would be today, and then secondary which would mean it
Speaker 1: would cost more money. But and also could the other
Speaker 1: non bad actors, the other miners work to fight that off. Yeah,
Speaker 1: that's right. I mean good actors could throw more hash
Speaker 1: rate onto the network and that might super that might
Speaker 1: become bigger than the malicious attacker. And so yeah, that's
Speaker 1: a lot less to ch effort. There's many other I
Speaker 1: think steps in between them that kind of make the
Speaker 1: sort of attack not realistic. One even purchasing that much
Speaker 1: equipment when everyone would notice it. You can't just you
Speaker 1: can just jump onto the network with that much equipment
Speaker 1: and no one would know that you even made that,
Speaker 1: or that you tried to buy that equipment or by
Speaker 1: the raw materials. Right, we'd all know that the Yeah,
Speaker 1: we'd all known advance. Um, and if and if China
Speaker 1: was moving their military to take over every single center,
Speaker 1: we would know about we'd probably hear about that in
Speaker 1: advance as well. Yeah, let's put it this way. In
Speaker 1: a connected internet world, I don't think anything stays secret
Speaker 1: for that long. And so you know, you know one,
Speaker 1: it's you know, like, one, it's really hard to buy
Speaker 1: all that equipment without anyone noticing. Two, you have to
Speaker 1: be willing to burn the money, which you have to
Speaker 1: go to your tax base and go, hey, by the way,
Speaker 1: we decided to burn right now, that's five billion dollars,
Speaker 1: but in the next bowl run, it might be a
Speaker 1: hundred or a hundred billion dollars a year on mining revenue.
Speaker 1: So hey, we're willing to burn fifty billion dollars to
Speaker 1: attack on network that you all use. We have to
Speaker 1: remember that citizens of these countries participated in decoin network,
Speaker 1: and allies of it of this country participate in the network.
Speaker 1: So if a country like the United States were to
Speaker 1: attack Bitcoin, they would be attacking themselves and other countries.
Speaker 1: So this isn't still cut and dry as to like, hey,
Speaker 1: bitcoin is the enemy. Bitcoin is every one of us. Right,
Speaker 1: were your friends, family, military members owned bitcoin? So when
Speaker 1: you do that, you're permanently you're permanently attacking them. So
Speaker 1: it's and you have to explain why you wanted to
Speaker 1: burn fifty to a billion fifty billion dollars to the
Speaker 1: people who don't even care about bitcoin, like, hey, I
Speaker 1: don't even care about bitcoin? Why did we waste that
Speaker 1: much money on this and you're not even guaranteed success
Speaker 1: to destroy it? Yeah, exactly. So the biggest fear that
Speaker 1: most people have as of a sovereign wanted to destroy it.
Speaker 1: And the reality of it is pretty slim. I mean,
Speaker 1: anything's possible, but the reality is pretty slim. And we
Speaker 1: all know in advance. I think that's the biggest thing, right,
Speaker 1: we all know advance, we'd have the ability to figure
Speaker 1: something else out. And then the changing the hard cap,
Speaker 1: that's another one I hear all the time. Um, but
Speaker 1: again that would I mean, we saw how long SeGW
Speaker 1: it took to get through, right, Um, imagine how hard
Speaker 1: it would be to change the hardcap. So again we'd
Speaker 1: know about that way in advance, which would all give
Speaker 1: us a chance to make adjustments. Right. Well, yeah, you know,
Speaker 1: to kind of finish out at the first part there. Um,
Speaker 1: you know, as Bitcoin and the next bowl run, the
Speaker 1: spend on mining annually and the revenue on mining annually
Speaker 1: will be so large that it basically makes an attack
Speaker 1: not feasible. Right now, Bitcoin with five billion dollars in
Speaker 1: mining revenue annually is still somewhat weak. Um, but I
Speaker 1: don't think governments really care about it at this moment,
Speaker 1: so bitcoin is fortunate to have governments kind of look
Speaker 1: the other way. UM the next bull run, I think
Speaker 1: it becomes strong enough from a threshold security model, threshold
Speaker 1: being like how much spend annually is is bitcoin bitcoin mining?
Speaker 1: Or like how much revenue and generating UM. So I
Speaker 1: think I think bitcoin is still a little weak right now,
Speaker 1: but it's the strongest of any other cryptocurrency UM. But
Speaker 1: in the next bull run, I think it will be
Speaker 1: resistant to any attack by even the largest of countries.
Speaker 1: Now switching gears back over to the twenty one million
Speaker 1: hardcap essentially with the ethereum side, and some of these
Speaker 1: intellectually dishonest researchers from those Ivy League schools hypothesizes that
Speaker 1: Bitcoin's long term security is either not adequate or unstable,
Speaker 1: which they use ridiculous assumptions to make that up. One
Speaker 1: is that bitcoin's price and for increases. The other is
Speaker 1: that there is no Layer one efficiency gains. For example,
Speaker 1: they hypothesize that Layer one will never be more efficient
Speaker 1: in terms of white size for transactions, which we have
Speaker 1: smaller signatures coming up in the next year or two.
Speaker 1: So that's pretty ridiculous um. They also they also hypothesize
Speaker 1: that minors, instead of being focused on long term revenue
Speaker 1: potential of their mining equipment, so focused on the you know,
Speaker 1: so as as mining equipment essentially reaches the limits of physics.
Speaker 1: So miners the ASICs that they purchased, the chip sizes
Speaker 1: get smaller and smaller and smaller, but eventually they can't
Speaker 1: get smaller than that because of physics. Once that happens,
Speaker 1: Bitcoin mining equipment will be built for a very very
Speaker 1: long period of time, So the mining equipment will be
Speaker 1: built to run forward decades, and the next scenario, the
Speaker 1: long term cash flows become super stretched out and the
Speaker 1: security of the network or the stability of the network
Speaker 1: is paramount or recoup your cash to recoup yourself cost.
Speaker 1: So these researchers or I don't even if I don't
Speaker 1: even know if you could call them researchers. It was
Speaker 1: so bad. The researchers claimed that and a fee only environment,
Speaker 1: miners would play short term games trying to reorb or
Speaker 1: manipulate transactions based on the size of the transaction, which
Speaker 1: would mean that miners are willing to shoot them. Miners
Speaker 1: are willing to take a small reward now to shoot
Speaker 1: themselves in the foot where they're long term cash flows,
Speaker 1: which to be makes no sense. Um, And all of
Speaker 1: this leads to the moment of people going Okay, So
Speaker 1: then all of these papers suggest, oh, well, you know,
Speaker 1: bit quick and solve this non existent problem. They can
Speaker 1: solve this non existent problem by violating the number one
Speaker 1: rule a bitcoin, which is the twenty one million hardcare
Speaker 1: by enabling a tail emission long term. So the hypothesis
Speaker 1: is that transaction fees wouldn't be enough to compensate miners,
Speaker 1: So what you'd have to do is have a long
Speaker 1: perpetual inflation rate of one percent. Yeah, we see that,
Speaker 1: I guess all through life. But really we see it
Speaker 1: in this space specifically where people think that all these
Speaker 1: potential problems that could happen somewhere way out in the
Speaker 1: future have to be solved today and that's just not
Speaker 1: the case. That's not how technology evolves, right, and so
Speaker 1: UM to think that we have to figure that out
Speaker 1: and solve that today, this seems yeah, I mean, and
Speaker 1: it's also academic versus versus execution. You know, cipher Punk's
Speaker 1: right code Satoshia was essentially an academic that broke production
Speaker 1: code and published working models and environment you know, first
Speaker 1: focusing on practical implications versus sitting in there and they're
Speaker 1: well pedigreed office and hypothesizing and adding ridiculous assumptions into
Speaker 1: a model and then loudly proclaiming it's broken. Right it's
Speaker 1: uh yeah. Now, um, as as you started talking about
Speaker 1: the security, and then it goes into the high cost security. Um,
Speaker 1: then I think some of that and goes into why
Speaker 1: it's such a good store of value because of that security? Um?
Speaker 1: Does that Does that kind of lead into that segue
Speaker 1: there a little bit? Yeah, I think we can make
Speaker 1: that segue if the bitcoin because if the securities, if
Speaker 1: the security is high, well, I guess we'd have to
Speaker 1: make the use case as to why bitcoin is a
Speaker 1: good store value. But obviously having my store of value
Speaker 1: somewhere where it's secure is going to be one of
Speaker 1: the primary things I would look for, and so the
Speaker 1: security of the network would have to be considered. Yeah,
Speaker 1: bitcoin is the most secure cryptocurrency network due to the
Speaker 1: total a commulative energy, and that creates a market for
Speaker 1: high value, highly secure transactions in bitcoin, which would be
Speaker 1: central banks, governments, inter banks, corporate and other large value payments.
Speaker 1: So essentially it's got the largest energy wall built around
Speaker 1: its ledger, which attracts more and more liquidity, which makes
Speaker 1: it bigger and bigger and bigger. Right now, one thing,
Speaker 1: um that we hear a lot about is is with
Speaker 1: Bitcoin and even all the other protocols that have been
Speaker 1: released over the last couple of years, is speed speed
Speaker 1: speed speed right Um? To me, I don't know if
Speaker 1: that's really an argument anymore. It seems like we've kind
Speaker 1: of figured out scaling. Um, what do you think about that? Yeah,
Speaker 1: So when any cryptocurrency proclaims that they're faster or cheaper
Speaker 1: than Bitcoin, that is a complete lie. There's much more
Speaker 1: nuanced to it. So how proof of work works is
Speaker 1: that proof of work isn't final, There is no technical finality.
Speaker 1: Proof of work is increasing levels of finality. Like I
Speaker 1: said before, bitcoin miners expand energy to do proof of work,
Speaker 1: and through that, essentially through each new block, we have
Speaker 1: more and more energy that's been used to mind that
Speaker 1: those blocks, which means there's more and more through mon
Speaker 1: dynamic guarantees that your transaction will be first, And that's
Speaker 1: why exchanges make you wait x amount of confirmations before
Speaker 1: they give you your bitcoints on their side, and those
Speaker 1: X amounts of confirmations is the degree of confidence they
Speaker 1: have in the finality of the payment. So, to be clear,
Speaker 1: all proof of work systems are um degrees of finality
Speaker 1: to where the longer it's been confirmed and they're more
Speaker 1: blocks that have been confirmed after it, the more confidence
Speaker 1: you have it will never be on wound. And after
Speaker 1: a certain point that becomes so confident that you don't
Speaker 1: need really any more guarantees. So when people talk about
Speaker 1: confirmation times, so people will be like, oh, you know
Speaker 1: bitcoin has ten minute blocks and lightcoin has I forget,
Speaker 1: let's just say one minute blocks. Those blocks are somewhat meaningless.
Speaker 1: That's not faster than bitcoin. It's just a less of
Speaker 1: a degree of confidence because bitcoin or because lightcoin has
Speaker 1: less proof of work. Um, it means that it takes
Speaker 1: more blocks to have the same degree of confidence that
Speaker 1: you would have bitcoin. So there is no such thing
Speaker 1: as a faster cryptocurrency. You're just talking about a less
Speaker 1: of a thermodynamic guarantee, and so you're essentially it's it's
Speaker 1: visually feels that it's faster, but it's not because of
Speaker 1: the guarantee is less, right, So to put that into
Speaker 1: a little bit easier to explain. Basically, the finality means
Speaker 1: that bitcoin can't be reversed. When you pay with your bank,
Speaker 1: they can always pull those charges back. Your credit card
Speaker 1: can pull those back for like six months. But with
Speaker 1: with bitcoin, it's finality. I mean, it's final can't be
Speaker 1: pulled back, and it's the amount of time it takes
Speaker 1: for that finality to be confirmed. Um And so to
Speaker 1: reach that you're saying is still fast, Yeah, well, you know,
Speaker 1: and if you have layers on top of Bitcoin, like Lightning,
Speaker 1: you have what would be perceived by the consumer to
Speaker 1: be instantaneous, right, And that's what I was kind of
Speaker 1: alluding to. With the scaling solutions that we have today,
Speaker 1: with layer two um options and you know, set side
Speaker 1: chains and all those things, it seems like we've kind
Speaker 1: of we have the path to scaling that we need now. Yeah,
Speaker 1: I think lightning is more more Lightning than side chains.
Speaker 1: That's more than enough scaling that we need for the
Speaker 1: next decade. They're not going to onboard three billion people
Speaker 1: into bitcoin. I mean, I'm a I'm a permeable bitcoin guy,
Speaker 1: but that's pretty unrealistic. I think we're going to see it,
Speaker 1: you know, exponentially increasing the number of users that use it,
Speaker 1: whether that be government, governments, banks, or people. But I
Speaker 1: don't think we're gonna see three billion people get on
Speaker 1: boarded right away, although it does seem like it does
Speaker 1: seem like all the world governments are doing their best
Speaker 1: to push people to bitcoin right now. Yeah, I think
Speaker 1: I think it will happen pretty fast. I think the
Speaker 1: regular adoption curve that we've seen with the specled of
Speaker 1: bubble cycles, I think we're going to see a supercycle
Speaker 1: happen because never before during bitcoins existence, other than the beginning,
Speaker 1: that we've seen people lose faith in their governments in
Speaker 1: mass across the world. When that happens. Bitcoin is a
Speaker 1: special purpose built to be an excellent store of value.
Speaker 1: So we could very well see you know, two hundred
Speaker 1: million move over in a bitcoin over the course of
Speaker 1: six months because they're trying to flee terrible central banking policies.
Speaker 1: I want to get into the store of value stuff
Speaker 1: because there was some stuff I heard you say that
Speaker 1: really caught my eye. But before we just dip right
Speaker 1: into that, um, we're talking about kind of the speed,
Speaker 1: and we're talking about lightning and whatnot. And I know
Speaker 1: you had kind of poked the poke the bear poked
Speaker 1: the hornets nest a little bit with your talk about
Speaker 1: so Toshi's original vision of venus s O V versus
Speaker 1: a cash system. Um. And it does seem that the
Speaker 1: narrative today really is store of value. Um. Obviously he
Speaker 1: talked about cash cash system. You've talked about you know
Speaker 1: why that may not be the case. Um. So do
Speaker 1: you think it's it's better as a store of value.
Speaker 1: They don't o hand in hand necessarily. Yeah, it's not
Speaker 1: that they're mutually exclusive. It's that Bitcoin as a money
Speaker 1: has to adopt in certain sort of its evolution. Is
Speaker 1: to becoming money, it has to first start as a
Speaker 1: store of value and then become the medium of exchange
Speaker 1: and unit of account. The unit of account means like
Speaker 1: your groceries are priced in dollers. Bitcoin won't be the
Speaker 1: pricing mechanism for things because the purchasing power of the
Speaker 1: bitcoin fluctuates so often that is not very realistic. The
Speaker 1: fluctuation of the volatility and bitcoin's price relative to your
Speaker 1: local fiat. Bitcoin has to become has to have a
Speaker 1: lower volatility than your local fiat to become a medium
Speaker 1: of exchange and unit of account, and that's a long
Speaker 1: ways off. This is a we've never seen the evolution
Speaker 1: of a new money in real time, you know. Gold.
Speaker 1: Gold was a very long process that we don't have
Speaker 1: a lot of visibility into, but we do. This point
Speaker 1: is happening much much faster with bitcoin. And it's very
Speaker 1: intuitive as well. It has to start out as a
Speaker 1: store of value before it can be these other functions.
Speaker 1: And so that's where think I understand the evolution of money,
Speaker 1: and it kind of starts as a collectible then moves
Speaker 1: to a store of value. Um, do you think we've
Speaker 1: made it past the collectible into a store value already?
Speaker 1: Are we still working through that stage? Well, that's a
Speaker 1: great question. I would say we're in between the collectible
Speaker 1: and a speculative store of value, which actually was confirmed
Speaker 1: by the Fed yesterday drum hell, which was really really
Speaker 1: cool to see that come from the FED. That definitely
Speaker 1: shows that they know what's going on because it is
Speaker 1: very much a speculative store of value, but it was
Speaker 1: special purpose built to be that store of value, and
Speaker 1: right now people are speculating that it will be adopted
Speaker 1: worldwide from the government's banks and citizens across the world
Speaker 1: as a recognized store of value. And he even he
Speaker 1: even said like gold, right, that's right, Like that was
Speaker 1: pretty wild. That was pretty wild to hear him say that,
Speaker 1: and also really cool to see recently that the bitcoin
Speaker 1: becoming a risk off trade or a safe haven asset.
Speaker 1: That meme is also perpetuated in the investment banking space,
Speaker 1: where we had like invest Co and other other big
Speaker 1: players go hey and in bar plays as well saying
Speaker 1: that bitcoin is goal two point oh. And so this
Speaker 1: is a huge, huge turning point because most of these
Speaker 1: banks were i think, really didn't understand what bitcoin is about,
Speaker 1: and they talked about, oh, it's it's a it's a
Speaker 1: cheap Pisa, cheap PayPal, And now they're all coming to realize,
Speaker 1: now it's a goal two point it's a store of value,
Speaker 1: it's a risk off trade, it's a safe haven asset.
Speaker 1: And that's incredible because that's what a special purpose built
Speaker 1: to be. And if more and more of the existing
Speaker 1: institutions start to believe that, the more likelihood they're gonna
Speaker 1: start moving billions or trillions of dollars into bitcoin. Yeah,
Speaker 1: it's a self fulfilling prophecy at that point. So so
Speaker 1: we we're seeing it evolved. It's going from collectible to
Speaker 1: a store value. You believe that in line with Satoshi's
Speaker 1: original vision. Um, the security is good because that's what
Speaker 1: we want our store value to be. Um. There's a
Speaker 1: lot of people that think that Peter Shift comes to mind, right,
Speaker 1: that that that bitcoin has no value. And I would
Speaker 1: argue that that's maybe you don't see the value that
Speaker 1: other people do. And we do see, uh, this store
Speaker 1: of value taking place in these other countries, you know,
Speaker 1: in Iran or China or Venezuela. Right, so we do
Speaker 1: see there's there's value there. Um, But I think you
Speaker 1: have a case why you believe bitcoin is not just
Speaker 1: a store of value, but is really the best store
Speaker 1: of value. That's right. Yeah, So why is it better
Speaker 1: you I know, you outline several different uh, you know,
Speaker 1: stores of value that people would use today. How does
Speaker 1: bitcoin stack up? Why is it the best option that
Speaker 1: we have? Yeah, that's a that's a great question. So
Speaker 1: if we look at you know, if we think about
Speaker 1: money as different or store values, if we think of
Speaker 1: money or store values as different species. Um, you know,
Speaker 1: what is what is the genetic code that each of
Speaker 1: those species has as a species of money, and what
Speaker 1: are the traits that are surfaced from the genetic code.
Speaker 1: And so if we look at the different types of
Speaker 1: species of money, bitcoin has the most desirable genetic code
Speaker 1: and that manifests itself via traits. So the closest equivalent
Speaker 1: to bitcoin is gold gold, and that's why people call
Speaker 1: it gold to point o or digital gold. Because bitcoin
Speaker 1: isn't controlled by centralized entity. Bitcoin similarly uses proof of
Speaker 1: work gold mining. You can't just mint gold via via
Speaker 1: out of thin air. You have to go find it
Speaker 1: and that requires resources um and bitcoin replicates that resource
Speaker 1: consumption with the difficulty adjustments. So as the price of
Speaker 1: gold increases, miners are willing to dig deeper and deeper
Speaker 1: and expend more energy or costs to go find that gold.
Speaker 1: And bitcoin has a similar function. As the price of
Speaker 1: bitcoin goes up, the costiness to produce it goes up
Speaker 1: as well. This is good for a lot of reasons,
Speaker 1: one one being that the costiness of money gives it
Speaker 1: some of its value in terms of the alley doesn't
Speaker 1: come from the costliness, but the costliness ensures that there
Speaker 1: is no free lunch. That the cost money money has
Speaker 1: to have a true cost of capital. That's right. Otherwise
Speaker 1: you could just print as much as you'd like. And
Speaker 1: so the house rate or cost follows price. So as
Speaker 1: the price increases, the cost of mind and bitcoin increases
Speaker 1: as well, and that ensures the unforgeable costiness of the currency. Um,
Speaker 1: you've got the scarcity element, which scarcity was a big
Speaker 1: thing that's Atoshi focused on. I don't think a lot
Speaker 1: of people really understand how much he focused on that.
Speaker 1: Santoshi had a really great example that he wrote about
Speaker 1: on the Bitcoin forums, which he said, essentially, you know,
Speaker 1: imagine like a base medal, as scarce as gold, but
Speaker 1: with the following properties of not being a good conductor
Speaker 1: of electricity, not being strong, not being malleable, being boring
Speaker 1: gray in color, and not being practical for any other purpose.
Speaker 1: But it's one magical property was that it could be
Speaker 1: transport transported over communications channel. And so essentially the TLDR
Speaker 1: of that, as he goes, if there was nothing in
Speaker 1: the world with intrinsic value that could be used as money,
Speaker 1: only scarce but no intrinsic value, I think people would
Speaker 1: still take up something and scarce here means limited potential supply.
Speaker 1: And that's the brilliance of bitcoin and that's what makes it,
Speaker 1: I think, more attractive than gold is you know, a
Speaker 1: couple of different reasons. One, it's digital. You can't really
Speaker 1: move gold around or around very easily. Bitcoin is more
Speaker 1: divisible than gold. Um, I would argue, I would argue this,
Speaker 1: let's see what else it's uh. And as far as
Speaker 1: the scarcity, what I'd like to say on that is that, um,
Speaker 1: you know, we have all these pH ds in economics
Speaker 1: or finance and they're in these think tanks and they're
Speaker 1: trying to control you know, the markets and whatnot. Um,
Speaker 1: And a lot of times maybe they've gotten too smart
Speaker 1: for their own good. But when you talk about scarcity, right,
Speaker 1: we learned, I mean, every kid knows supply and demand. Right,
Speaker 1: It's like pretty basic, uh, supplying demand, and that's where
Speaker 1: that scarcity falls in. And Yeah, sometimes just going back
Speaker 1: to those those core basic princes will seem so simple
Speaker 1: but but so solid at the same time. Yeah, this,
Speaker 1: you know, the twenty one million hardcap is an incredibly
Speaker 1: important monetary policy. And that's what makes it much more
Speaker 1: interesting than gold as well, is that gold is not
Speaker 1: finite in this world. It is in somewhat finite qualities. However,
Speaker 1: we could find a bunch of gold tomorrow, We could
Speaker 1: find a huge, huge amount of goal tomorrow, which would
Speaker 1: totally undermine confidence in the being used as a store
Speaker 1: of value. And actually we know for certain that eventually,
Speaker 1: when we make it to space, that some asteroids have
Speaker 1: trillions of dollars worth of gold. So we know that
Speaker 1: gold's lifetime is finite. As a species of money, It's
Speaker 1: genetic code and traits are inherently um subpar, and bitcoin,
Speaker 1: being the apex predator of money, will will consume it too.
Speaker 1: Over time, the best store of value will always win. Right.
Speaker 1: Gold is a remnants of our physical bodies and physical world,
Speaker 1: but we're moving into a digital one. And the digital world,
Speaker 1: combined with the lack of confidence over the supply, completely
Speaker 1: undermines gold use cases a store value. And and really,
Speaker 1: at the end of the day, you know, gold bugs,
Speaker 1: and I'm a gold bug. I mean I've I've been
Speaker 1: I've been a big believer in gold for a long time. Um,
Speaker 1: you know, I thought we should have gone back to
Speaker 1: the gold standard, and I still own gold today, so
Speaker 1: not to not to uh not to come down on them.
Speaker 1: I do agree with you that bitcoin makes a better
Speaker 1: case for being a store value because of the digital properties.
Speaker 1: As you've said, um, but you know, they want to
Speaker 1: say that it has value, it has intrinsic value. I
Speaker 1: like to say that. You know, my dad taught me
Speaker 1: when I was a kid that something's only worthless someone
Speaker 1: is willing to pay for it. So value subjective, And
Speaker 1: that's exactly right. It's a it's a shared belief system.
Speaker 1: And in gold, by the way, you know, a lot
Speaker 1: of people go, oh, well, gold has utility. It's been
Speaker 1: used in electronics, it's been used for jewelry. You know.
Speaker 1: One gold had no other utility other than a store
Speaker 1: of value for thousands of years, and only very recently
Speaker 1: when we started to make electric electronics did it also
Speaker 1: have additional value for that um right, which isn't necessarily
Speaker 1: a good thing, because that means that its purpose is
Speaker 1: split between a store of value and some raw utility,
Speaker 1: which actually undermines its value as a store of value
Speaker 1: because then the demand for it fluctuates, whereas demand simply
Speaker 1: distilled as a store of value, demand is much more
Speaker 1: pure and allows it to behave properly as a money Yeah,
Speaker 1: what I what I liked about? Um, what I was
Speaker 1: hearing you talk with Stephan Lavera. Also is you know
Speaker 1: besides gold, which is what is the big talk. And
Speaker 1: everybody knows about gold and the store value, but there's
Speaker 1: also a lot of other places that people store value
Speaker 1: or park their value. Right, So real estate is a
Speaker 1: big one, which which has caused all types of problems
Speaker 1: in the real estate market. Um, offshore banking is a
Speaker 1: big one. Trillions of dollars ten tens of trillions of
Speaker 1: dollars in each of those those categories, right, Yeah, hundreds
Speaker 1: of trillions, agrees. And I live in San Francisco, and
Speaker 1: we see this as a as a huge, huge problem
Speaker 1: when the store value asset is not used for its original,
Speaker 1: huge tility purpose to where you know, an average apartment
Speaker 1: in San Francisco is at least a million dollars and
Speaker 1: that's kind of like a really shitty one bedroom. Um,
Speaker 1: if you wanted something nice, you're looking at two to
Speaker 1: three million at a minimum. And so that's happening because
Speaker 1: supply is constrained. Existing homeowners won't allow nobilions to be built,
Speaker 1: and so people are starting to park their wealth increasingly
Speaker 1: more and more into this real estate. But the real
Speaker 1: estate isn't getting better. These are old, really crappy apartments.
Speaker 1: These aren't brand new buildings. These are from nineteen thirties. Um,
Speaker 1: they're terrible insulation, terrible plumbing, really bad layouts, no electronics support,
Speaker 1: and you're just seeing you know, in terms of like
Speaker 1: there's no cable routed through it. You're seeing these assets
Speaker 1: being used as a store of value really damage the
Speaker 1: social fabric of the community because because they're not being
Speaker 1: allowed to be used for the utility that's a place
Speaker 1: to live. Instead, they're being using used it as a
Speaker 1: place to park money. It's totally changing who can live
Speaker 1: in the city, how much is realistic to even pay
Speaker 1: to live. And we see this problem as well in
Speaker 1: New York and Vancouver where other people across the world,
Speaker 1: like Russians and Chinese or parking their value in a
Speaker 1: different store of value real estate assets. It's kind of
Speaker 1: crazy when you start to see, um, the amount of
Speaker 1: problems that really stem from having a poor store value
Speaker 1: or no no store of value today. Right, so, um,
Speaker 1: everyone's scrambling to store value somewhere and some go to stocks.
Speaker 1: We've seen what's happened there. Some go to real estate
Speaker 1: and look at all the problems that spiral from that totally.
Speaker 1: And that's where you know, if we look at I
Speaker 1: think one of bitcoin's best features is the immutability of
Speaker 1: the transaction and the hard disease nature of the asset.
Speaker 1: So with real estate, that's extremely easy to seize. So
Speaker 1: hundreds of trillions of dollars at a snap of a
Speaker 1: finger could be seized from you by your government across
Speaker 1: the world. That is by far the easiest asset disease um.
Speaker 1: And you look at gold. Gold's nice, but you have
Speaker 1: to carry it, you have to validate it, you have
Speaker 1: to store it. It's a little bit clunk here. Especially
Speaker 1: in the digital world. Bitcoin is much much more efficient.
Speaker 1: And then you look at like offshore banking. You know
Speaker 1: that works until the US government really leads on that
Speaker 1: offshore banking country like Switzerland where essentially the I R
Speaker 1: S destroyed centuries worth of privacy and Switzerland, and so
Speaker 1: we we've seen these other store value assets be kind
Speaker 1: of hunted down over time and really not represents there
Speaker 1: you know, true true ownership or true you know property
Speaker 1: rights that you would have, and bitcoin gives you property rights. Yeah,
Speaker 1: the censorship resistant and the immutable are the two really
Speaker 1: big factors that make them jump out across all those,
Speaker 1: like you said, offshore bank accounts. We've seen in Switzerland
Speaker 1: they're taking the Russians money. Now, hundreds of millions of
Speaker 1: dollars in accounts are gone real estate for sure. Um. Now,
Speaker 1: So so we can see it's pretty easy from those
Speaker 1: perspective censorship, resistance and mutability, portability. How it's how it's better.
Speaker 1: One more thing just to touch on real quick would
Speaker 1: just be the cost difference. So bitcoin is so expensive
Speaker 1: and it costs so much money to transfer, and it's
Speaker 1: never gonna work because of the high fees. But I
Speaker 1: think you would argue that it's way cheaper than any
Speaker 1: of those other stores of value. Yeah, that's right. A
Speaker 1: lot of people, a lot of the old be cash
Speaker 1: or crowd of a lot of the crowd that felt
Speaker 1: that bitcoin is a cheap PayPal or a cheap visa,
Speaker 1: which was totally incorrective. Is purpose built to be a
Speaker 1: store value. Um. Hence twice a tocia. There's a bunch
Speaker 1: of different reasons, but tocia refers to bitcoin as as
Speaker 1: as as a precious metal. Five times. It also writes
Speaker 1: in the first block in the blockchain, UK chancer on
Speaker 1: the verge of second bailout for banks, which is the
Speaker 1: only message of sociator writes into the blockchain, not Visa
Speaker 1: on the verge rasing processing piece. So the original crowd
Speaker 1: that felt that bitcoin was best best made for Visa
Speaker 1: a cheap PayPal, they were really concerned a round bitcoins
Speaker 1: transaction fees because as if they got too high, it
Speaker 1: makes it not practical for day to day transactions. So firstly,
Speaker 1: paying anything being any transaction fee is more expensive than
Speaker 1: traditional payment methods, just to be clear, because yes, there
Speaker 1: is a processing fee for my credit card, but I
Speaker 1: don't feel it as a consumer, and same with my cash.
Speaker 1: So people are like, oh, you know, technically you're paying
Speaker 1: a transaction fee as a consumer, but I'm like, I
Speaker 1: don't feel it, I don't hear it, I don't see it.
Speaker 1: And so with bitcoin bitcoins like, hey, pay this transaction fee,
Speaker 1: and a consumer who never had an upfront transaction fee
Speaker 1: before it goes, what the hell is this especially for
Speaker 1: a retail payment, um, you know, and then you know,
Speaker 1: before we dive into you know, looking at bitcoins transaction fees,
Speaker 1: relative to other types of store value transaction fees. We
Speaker 1: must also remember that the cost to send any sort
Speaker 1: of crypto asset is not just the transaction fee, but
Speaker 1: it's also the exchange fee. How much money did you
Speaker 1: have to spend to buy it, because typically that's between
Speaker 1: ten ten BIPs and a hundred bibs at that's basis points,
Speaker 1: So that scales with the size of your transaction, which
Speaker 1: is a really nasty, nasty sort of a fee. And
Speaker 1: then then you have volatility fee as well, because crypto
Speaker 1: assets are very volatile. So but when you buy the asset,
Speaker 1: between then and when you sell it to purchase whatever
Speaker 1: item you'd like to purchase, you have a volatility fee,
Speaker 1: and that as well scales with the size of the transaction,
Speaker 1: which makes it super nasty. So for example, let's say
Speaker 1: you have a light coin transaction that the transaction fee
Speaker 1: is a penny, much cheaper than bitcoin, but it fluctuated
Speaker 1: ten percent between when you bought it and when you
Speaker 1: sold it, so you have on a ten dollar transaction,
Speaker 1: you have a dollar fee on top of the penny fee,
Speaker 1: and then as well, you had to pay you know,
Speaker 1: maybe one percent to purchase it. So that's ten cents
Speaker 1: on top of that too, and so uh, that's the
Speaker 1: full cost of a transaction. So I just wanted to
Speaker 1: highlight that before we dive into the into other story
Speaker 1: value assets, because people don't really consider that when they
Speaker 1: look at trans action fees for crypto assets. You just
Speaker 1: look at the transaction for itself and they go, oh, man,
Speaker 1: bitcoin is so much higher, and it's like, no, there's
Speaker 1: other posts that are incurred when you transact across a
Speaker 1: block space. I mean, and I think I think, you know,
Speaker 1: it would be fair to compare it against other crypto assets,
Speaker 1: but when you compare it against other stores of value,
Speaker 1: I think it's no, no, no comparison. How cheap it is.
Speaker 1: I mean, I own physical gold. If I want to
Speaker 1: turn that into cash, I have to physically mail that
Speaker 1: back to somewhere that it's expensive to mail gold across
Speaker 1: the country, and uh, they charge me a hefty fee
Speaker 1: to convert that for me, So totally totally. So you know,
Speaker 1: gold is one of those that's that's immensely costly to send.
Speaker 1: You have to have insurance for it, you know, if
Speaker 1: you're doing bigger physical to gold delivery, like like the
Speaker 1: New York Fed Transfer of three hundred metric times to
Speaker 1: the Bundesbank, the German German Central Bank. That cost four
Speaker 1: point eight million dollars and it took three years um.
Speaker 1: You know, if you look at the average feed that
Speaker 1: people paid a wire fiat money in the US, that's
Speaker 1: between thirty and eighty dollars. If you look at the
Speaker 1: cost to set up an offshore bank account, that's between
Speaker 1: two and four thousand dollars plus the wiring fiat fee
Speaker 1: that you incur every single time. And then you look
Speaker 1: at real estate people are and by the way, real
Speaker 1: estate is the most sensorible asset and the most seizable
Speaker 1: asset out there. Chinese are buying thirty billion dollars of
Speaker 1: US real estate annually, and they spend on on aferage
Speaker 1: four hundred and thirty thousand dollars on these transactions. And
Speaker 1: when they do that, they are paying closing costs, they're
Speaker 1: paying maintenance costs, they're paying taxes like property taxes, all
Speaker 1: of that money just to store their value into real estate.
Speaker 1: And they're doing that at thirty billion dollars a year.
Speaker 1: So bitcoin transaction fees are very cheap compared to something
Speaker 1: I thought. I think we've made a very compelling case
Speaker 1: as to why bitcoin is the best store of value,
Speaker 1: especially compared to where the stores of value are today,
Speaker 1: Like you said, with hundreds of trillions of dollars sitting
Speaker 1: there that eventually will be sucked into what I you know,
Speaker 1: the best store of value. UM, We're kind of running
Speaker 1: short on time now, but I'd like to just ask
Speaker 1: like a little bit of maybe forward thinking looking into
Speaker 1: the future, if you will. Um. You mentioned that, Um,
Speaker 1: there's an evolution right where it goes from collectible store
Speaker 1: value eventually to a medium of exchange and then maybe
Speaker 1: to a unit account. Um, do you see this going?
Speaker 1: You know that? Do you see this evolution taking place
Speaker 1: over a long period of time or do you think
Speaker 1: there might be ways to uh speed this up complemented
Speaker 1: by using bitcoin as an s o V. But then um,
Speaker 1: having like a stable coin or something else that could
Speaker 1: be used as that kind of cash mechanism. Yeah, interesting,
Speaker 1: interesting poth process. Yeah, it's it's you know, I think
Speaker 1: the problem at bitcoin is solving if we look at bitcoins,
Speaker 1: you know, kind of like product market fit or protocol
Speaker 1: market fit. Is to solve the problem with central banking
Speaker 1: and to solve the problem of story in your assets
Speaker 1: in a place that governments can't seeze it or a
Speaker 1: more powerful adversary can't seaze it. And so to use
Speaker 1: to use that super secure story value for payments, I
Speaker 1: think is a multi tech paid process. As bitcoins volatility
Speaker 1: slowly subsides over time as it absorbs more and more
Speaker 1: market cap and becomes larger and larger and more liquid.
Speaker 1: Then when it becomes less volatailed than your local fiat currency,
Speaker 1: you'll start to denominate items and in bigcoin ors to
Speaker 1: toss and use it as a medium of exchange. Um.
Speaker 1: But that is a very long process generations, because money
Speaker 1: is a shore belief system, and to change everyone's belief
Speaker 1: and money isn't going to happen overnight. I think we'll see,
Speaker 1: you know, leaps and bounds in terms of adoption, maybe
Speaker 1: during periods where people lose faith in the government. Although
Speaker 1: it is it is, it is somewhat surprising how fast, um,
Speaker 1: the loss of gold belief has happened. I think, to me,
Speaker 1: it's asked. I mean, you know, my kids, I mean
Speaker 1: even the millennials, I don't think whatever that they don't
Speaker 1: care about gold, don't even know about gold. Yeah, you know,
Speaker 1: I'm thirty one, so I'm in the millennial cohort. Okay,
Speaker 1: you know, I was originally attracted a gold back when
Speaker 1: I was a libertarian, and then once I found Big Point,
Speaker 1: I became pretty uninterested. Um, because yeah, I mean, it's
Speaker 1: it's a it's a physical thing. You know. My my age,
Speaker 1: the millennial age group, we were the first analog to
Speaker 1: digital cohort. So we went from the transition from cassette
Speaker 1: tapes two MP three's so into streaming. So we we
Speaker 1: I saw the whole thing happened at once during my youth,
Speaker 1: so I think our minds were a little bit more
Speaker 1: malleable for this new idea of digital money that's not
Speaker 1: controlled by a government. Definitely grew up on the Internet, definitely.
Speaker 1: But so back to the question, just real quick. So
Speaker 1: let's say, Um, let's say though in another country where
Speaker 1: you know, the capital controls are increasing, the money's crashing. Um,
Speaker 1: I want to get into bitcoin to store my value,
Speaker 1: but I also need to spend money on a regular basis.
Speaker 1: So I mean, do you see a temporary world over
Speaker 1: the next couple of decades while there while bitcoin makes
Speaker 1: its evolvement to where that could help, or you think,
Speaker 1: I mean, you think will be stuck with the bitcoin
Speaker 1: fiat system. Just future casting a little bit here. Yeah,
Speaker 1: local said, don't think it's going to be a long
Speaker 1: duration per local geo that you're in. If Bitcoin is
Speaker 1: more stable than you're, like, more stable in terms of
Speaker 1: price purchasing power than your local fiat currency, then I
Speaker 1: could see people using that on a geo specific basis. Um.
Speaker 1: I don't think it's gonna happen all at once. I
Speaker 1: think we're going to see countries that have really terrible
Speaker 1: monetary policies where the value of the purchasing power of
Speaker 1: the local fiat is worse or fluctuating and worse than bitcoin.
Speaker 1: Then Bitcoin will be used in the medium to exchange format,
Speaker 1: likely and like a lightning esque transaction, because that makes
Speaker 1: it a faster or cheaper, um a little bit easier
Speaker 1: and also preserves privacy in uh In in the Manger
Speaker 1: and the Manger theory, Manger is like one of the
Speaker 1: original for those listening. You know Dan, but you know
Speaker 1: he's one of the original guys in the Austrian school
Speaker 1: of thought, I think right, um, And in one of
Speaker 1: his papers, I can't quote it exactly top of my head,
Speaker 1: but he had talked about where like it would be
Speaker 1: almost impossible for new money to take uh, to take
Speaker 1: hold and to grow unless there was some huge event
Speaker 1: that caused people to do that. Um, And we're kind
Speaker 1: of seeing that stage being set right now. So while
Speaker 1: under normal circumstances it could take a really long time. Uh,
Speaker 1: there are some factors that are sitting out there in
Speaker 1: the world right now that could speed it up. That'd
Speaker 1: be interesting to see. But that's all just speculates. I mean,
Speaker 1: I've never been more bullish than all, you know, even
Speaker 1: I think that the return per unit of risk that
Speaker 1: you're taking a bitcoin right now is phenomenal. The fact
Speaker 1: that it survived this long and survived a civil war,
Speaker 1: survived long enough to get institutional adoption is fantastic. Um.
Speaker 1: I don't see a lot that can kill bitcoin. I
Speaker 1: think the risks are super minimal. I see an increasing
Speaker 1: amount of demand in the future as people flee socialists policies,
Speaker 1: as they flee bad central banking policies, as they flee
Speaker 1: governments that they don't like. You know, bitcoin is essentially
Speaker 1: a vote against any sort of risk in the mainstream world,
Speaker 1: and I think there's a lot of risk that people
Speaker 1: are seeing, whether it be political, um, you know, political,
Speaker 1: financial or social unrest. I think we're seeing it kind
Speaker 1: of bubbling up all across the world. And bitcoin is
Speaker 1: that one antidote, and it's it's something that you can
Speaker 1: make as a personal decision that gives you confidence in
Speaker 1: your future because you can store your money, which is
Speaker 1: your time, your store time and energy. You can store
Speaker 1: that into something that you don't have to tell anyone
Speaker 1: else about it, and that's a vote for you. It's
Speaker 1: a vote for your future. And I think across the
Speaker 1: world that's going to be an increasingly attractive option. Yeah. Wow,
Speaker 1: such such a good uh, such a good statement. And
Speaker 1: I guess that's a really good statement for us to
Speaker 1: wrap up on because I know we've exceeded our time
Speaker 1: limit here. I've been writing down things as we're talking,
Speaker 1: and so many things I wanted to come back to.
Speaker 1: But man, we could just go on forever, and we're
Speaker 1: not going to do that, so we'll have to circle
Speaker 1: back around and do it again at a at a
Speaker 1: later time. Uh. But man, you have so much good
Speaker 1: stuff to say, and like I said, I've gotten so
Speaker 1: much out of out of reading your your medium posts
Speaker 1: and whatnot. So for anybody that wants to follow along,
Speaker 1: I mean, the best place to keep up. What what
Speaker 1: is your Twitter? Yes, so my Twitter is at dan Held. Um,
Speaker 1: my name on there is Dan hedel Held is my
Speaker 1: real last name. It's a lot of people think I
Speaker 1: made it up, but it's actually my real last name. Um.
Speaker 1: I like to think that. You know, in the past
Speaker 1: renamed ourselves after what we did, like Baker or Smith. Right,
Speaker 1: I was born to be a huddler. It's Dan Held
Speaker 1: on Twitter or dan Held dot com. Is is where
Speaker 1: my blog is. If you want to read more long
Speaker 1: form content. Just so everyone knows, each each blog put,
Speaker 1: each blog post has a corresponding tweet storm, So if
Speaker 1: you ain't got time for that, go read the tweet storm.
Speaker 1: It's a lot easier, I know, and now we don't
Speaker 1: have a lot of time in our day. So if
Speaker 1: you want the quick hits, go read the tweet storm.
Speaker 1: If you want them to get a little bit further,
Speaker 1: the long form articles create. It also comes with the soundtrack,
Speaker 1: which makes it I think a little bit more engaging,
Speaker 1: So you get a little bit of a reward if
Speaker 1: you go read the long form. Cool and we'll definitely
Speaker 1: put links to the to those to those resources in
Speaker 1: the show notes to anybody that's listening can just check
Speaker 1: out the links and UH, with that will wrap it up.
Speaker 1: Thanks so much, Dan for your time. I appreciate it.
Speaker 1: Thanks for having me. Cheers. Hey, if you like this
Speaker 1: episode of the Market Disruptors Podcast, please help us take
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