WEBVTT - Is Crypto B******t? 0:00:15.396 --> 0:00:23.916 Pushkin from Pushkin Industries. This is Deep Background, the show 0:00:23.956 --> 0:00:27.036 where we explored the stories behind the stories in the news. 0:00:27.476 --> 0:00:31.956 I'm Noah Feldman. This week marked an important watershed in 0:00:31.996 --> 0:00:36.636 the history of crypto and cryptocurrencies. Coin Base, one of 0:00:36.636 --> 0:00:41.236 the leading exchanges for buying and selling crypto, went public, 0:00:41.556 --> 0:00:45.276 and although appropriately enough, its share price was a little volatile, 0:00:45.556 --> 0:00:50.556 it has achieved a very substantial valuation above the eighty 0:00:50.596 --> 0:00:56.076 five billion dollar mark where it first launched. Simultaneously, Bitcoin, 0:00:56.276 --> 0:01:00.876 the most popularly traded of the different crypto assets, remains, 0:01:01.196 --> 0:01:06.036 notwithstanding its own volatility, at a price higher by almost 0:01:06.076 --> 0:01:11.036 four times than what it was just a few months ago. Bitcoin, 0:01:11.236 --> 0:01:16.076 the most popularly traded of the cryptocurrencies, retains a price 0:01:16.756 --> 0:01:20.916 much much higher than it was just a few short 0:01:21.036 --> 0:01:25.636 months ago. I am thoroughly fascinated by the phenomenon that 0:01:25.756 --> 0:01:29.516 is crypto. For one thing. Among my friends, opinions seems 0:01:29.516 --> 0:01:35.076 to be very deeply divided. On the one hand, are economists, investors, 0:01:35.636 --> 0:01:39.316 capitalists of all kinds who tend themselves to be highly 0:01:39.396 --> 0:01:43.356 skeptical of the idea that there's something of enduring value 0:01:43.476 --> 0:01:48.116 or meaning in this new asset class. On the other hand, 0:01:48.316 --> 0:01:52.676 are enthusiasts, open minded, creative tech people, many of whom 0:01:52.716 --> 0:01:58.036 have themselves invested heavily in crypto, who are wildly optimistic 0:01:58.236 --> 0:02:01.396 about the possibility of this asset class not only to endure, 0:02:01.716 --> 0:02:06.396 but to grow and to develop and to spread. Alongside 0:02:06.476 --> 0:02:10.716 this fascinating debate is a further question about the nature 0:02:10.836 --> 0:02:16.116 of power. Who has power over finances? Is it individuals? 0:02:16.516 --> 0:02:20.076 Is it the nation state? Is it a distributed international 0:02:20.156 --> 0:02:23.716 network of the kind that, via the blockchain, is sought 0:02:23.716 --> 0:02:27.596 to be created by the cryptocurrencies? A few questions could 0:02:27.636 --> 0:02:31.036 be more relevant for this year's theme on deep background 0:02:31.276 --> 0:02:35.516 the theme of power. To discuss all of these issues 0:02:35.516 --> 0:02:39.796 with me, I'm joined today by a pioneer in crypto, 0:02:40.436 --> 0:02:44.676 Bobby Lee. Bobby was the co founder and former CEO 0:02:44.876 --> 0:02:49.316 of China's first bitcoin exchange. Right now, he's founder and 0:02:49.436 --> 0:02:53.836 CEO of Ballet, a startup that helps people securely store 0:02:53.956 --> 0:02:58.156 their digital assets in its own unique wallet. On top 0:02:58.236 --> 0:03:01.236 of that, he's a member of the Bitcoin Foundation's Board 0:03:01.236 --> 0:03:05.316 of Directors, and he's the author of a forthcoming book, 0:03:05.636 --> 0:03:10.356 The Promise of Bitcoin. All in all, a perfect person 0:03:10.636 --> 0:03:21.676 to answer my persistent crypto questions, Bobby thank you so 0:03:21.756 --> 0:03:25.076 much for joining me. Let me start with the most 0:03:25.116 --> 0:03:30.996 basic question, which is what exactly do you think crypto is? 0:03:30.996 --> 0:03:34.876 Is it a currency or is it something else? Yeah, 0:03:34.956 --> 0:03:37.556 this is a great way to start. So colloquially we 0:03:37.556 --> 0:03:41.036 call a cryptocurrency, and bitcoin was the first to come 0:03:41.076 --> 0:03:43.836 to market as a es central secryptocurrency in two thousand 0:03:43.876 --> 0:03:47.116 and nine, and even the white paper called it peer 0:03:47.116 --> 0:03:49.916 to peer electronic Cash's I think that's how it got 0:03:49.916 --> 0:03:54.996 the name cryptocurrency. This year marks my ten year involvement 0:03:54.996 --> 0:03:58.716 with bitcoin, and through my ten year journey I have 0:03:58.796 --> 0:04:02.556 come to the current understanding is that cryptocurrency should be 0:04:02.636 --> 0:04:06.676 more considered as a digital asset class rather than currency. 0:04:07.076 --> 0:04:10.116 And the reason is that in society, when we think 0:04:10.116 --> 0:04:13.076 of currency, we think of the money we use in 0:04:13.156 --> 0:04:15.796 day to day, whether it's a paper notes, the coins 0:04:15.796 --> 0:04:18.916 and bills, whether it's a forigm currency like the euro 0:04:19.116 --> 0:04:22.676 or the Canadian dollar. And even though cryptocurrency in Bitcoin 0:04:22.996 --> 0:04:26.156 have used the term currency in cryptocurrency digital currency over 0:04:26.196 --> 0:04:29.076 the last ten to twelve years, I'm more and more 0:04:29.636 --> 0:04:33.396 am a believer that fundamentally the power and the strength 0:04:33.436 --> 0:04:38.476 of bitcoin is in its usefulness as a digital asset. 0:04:38.716 --> 0:04:42.356 As a sort of a global reserve asset class. So 0:04:42.396 --> 0:04:45.076 to answer your question promptly, it's more of an asset 0:04:45.396 --> 0:04:49.436 than the currency that people are used to. That's really 0:04:49.436 --> 0:04:53.956 helpful and it's totally reasonable. But most assets are either 0:04:54.236 --> 0:05:00.276 a promise of future payment in some currency or form, 0:05:00.596 --> 0:05:05.916 or an ownership stake in some legally constructed entity in 0:05:05.996 --> 0:05:10.596 some form, or they're tangible, right. I mean, that's I 0:05:10.636 --> 0:05:11.956 think if you know, we had to sort of do 0:05:11.996 --> 0:05:14.636 assets one O one, we probably say, at least before 0:05:14.676 --> 0:05:18.436 the emergence of crypto, that those are three classes of 0:05:18.476 --> 0:05:21.716 what assets could be. Crypto doesn't seem to be any 0:05:21.756 --> 0:05:25.196 of those three things. So I'm wondering what does it 0:05:25.236 --> 0:05:29.756 mean to call it a digital asset class. Yeah, that's 0:05:29.796 --> 0:05:34.116 a that's a great point. Basically, the tributional asset classes 0:05:34.116 --> 0:05:36.836 people are most familiar with are the ones you talked about, 0:05:36.876 --> 0:05:42.396 like stocks. Stocks fundamentally represent ownership in a company, which 0:05:42.436 --> 0:05:45.596 is an entity that can make money through sales, revenue 0:05:45.636 --> 0:05:48.836 through providing products and services to the community. So that's 0:05:48.876 --> 0:05:52.396 the notion of a stock in a company. Bonds are 0:05:52.436 --> 0:05:55.436 also an asset class. That's a notion of debt you're 0:05:55.556 --> 0:05:57.796 lending your money to someone else, in this case the 0:05:57.876 --> 0:06:01.636 United States government or any other foreign government, or even 0:06:01.676 --> 0:06:06.276 a corporation like corporate debt, corporate bonds, and the ideas 0:06:06.316 --> 0:06:08.316 that you lend it to them with a notion that 0:06:08.596 --> 0:06:10.956 they're taking a risk to make the money, and then 0:06:10.996 --> 0:06:13.796 you get rewarded with an interest rate. And the third 0:06:13.796 --> 0:06:17.156 class is real estate, which, as you pointed out, it's 0:06:17.196 --> 0:06:19.836 something very tangible. It's like a home, a plot of 0:06:19.956 --> 0:06:23.596 land where you have title to it, and then it 0:06:23.636 --> 0:06:26.516 gives you the government, society gives you the right to 0:06:27.436 --> 0:06:29.996 stay in that or stay on that property. You own 0:06:30.036 --> 0:06:34.036 that property and derive income, rental income, or whatever business 0:06:34.036 --> 0:06:36.516 you do. And then the other asset class, the major 0:06:36.556 --> 0:06:42.116 ast classes precious metals. So these are commodities. Most people 0:06:42.236 --> 0:06:44.556 know them as gold and silver, but if you want 0:06:44.556 --> 0:06:47.596 to just expend that, we also have things like diamond, jewelry, 0:06:47.956 --> 0:06:50.796 and if you expend that further even fine art, more 0:06:50.836 --> 0:06:54.916 tangible goods. The value of those kind of tangible assets 0:06:54.956 --> 0:06:57.356 is in the eye to beholder. Why is that worth 0:06:57.396 --> 0:07:00.596 something when when the only when it's only pretty right, 0:07:00.676 --> 0:07:02.596 you can't eat it. I think that's a really good 0:07:02.596 --> 0:07:07.316 clarifying question and I think we can direct it straight 0:07:07.316 --> 0:07:10.796 at crypto because yeah, I think everyone can buy that. 0:07:10.836 --> 0:07:13.916 There's something arbitrary about saying we value gold, or we 0:07:14.036 --> 0:07:17.596 value silver, or we value diamonds. The question is whether, 0:07:17.956 --> 0:07:22.116 if that's what crypto is going to be, is it 0:07:22.316 --> 0:07:26.516 in some meaningful sense comparable to those assets. And I 0:07:26.556 --> 0:07:30.156 think maybe that's a good place to then focus. Yeah, 0:07:30.196 --> 0:07:32.876 so looking at gold and silver I think is very 0:07:32.956 --> 0:07:37.636 insightful in terms of helping people understand why crypto, especially bitcoin, 0:07:37.996 --> 0:07:40.276 can be valuable even as something that's sort of in 0:07:40.316 --> 0:07:42.836 the ether. You can't touch it, you can't see it. Right, 0:07:42.916 --> 0:07:44.556 For a lot of people, the virtual aspect of it 0:07:44.636 --> 0:07:47.116 scares people. Imagine something like my mother who has never 0:07:47.156 --> 0:07:49.556 seen or touched her. You know, she doesn't understand what 0:07:49.556 --> 0:07:52.836 bitcoin really is is just a stream of numbers. Right. So, 0:07:52.996 --> 0:07:56.556 going back to gold and silver, the reason why multiple 0:07:56.636 --> 0:08:00.356 societies and multiple regions all around the world all ended 0:08:00.436 --> 0:08:03.876 up using gold and silver as a monetary instrument, there's 0:08:03.916 --> 0:08:06.036 a fundamental reason to it. It wasn't like there was 0:08:06.116 --> 0:08:09.036 one king we said the whole earth shall use gold 0:08:09.236 --> 0:08:12.716 and silver as money. Gold and silver evolved to become 0:08:12.796 --> 0:08:17.556 money as instruments of monetary transfer independently in different, many 0:08:17.596 --> 0:08:20.996 different regions all around the Earth. Okay, And I think 0:08:21.436 --> 0:08:24.316 to crack that sort of mystery is to look at 0:08:24.316 --> 0:08:27.596 the properties. It turns out that it's really fungible, it's 0:08:27.596 --> 0:08:31.876 got this shiny look. But the really interesting thing about 0:08:31.916 --> 0:08:35.836 gold is really dense. It means that for every similar 0:08:35.956 --> 0:08:38.596 unit of volume where there's cubic inch or cubic centimeter, 0:08:38.996 --> 0:08:43.476 it's very very heavy. And it turns out something dense 0:08:43.836 --> 0:08:48.076 cannot it cannot be counterfeited using something lighter, whereas something 0:08:48.196 --> 0:08:51.836 lighter can be can be counterfeited using something heavier. So 0:08:51.956 --> 0:08:55.076 for that reason, I think, now certainly gold is not 0:08:55.116 --> 0:08:57.436 the most heaviest element. But the fact that I was 0:08:57.476 --> 0:08:59.076 just gonna I was just gonna say, Bobby, I mean, 0:08:59.116 --> 0:09:01.076 I think what I naturally would say in response to 0:09:01.116 --> 0:09:03.836 that is sure. One of the features that gold had 0:09:03.996 --> 0:09:06.196 that made it useful was that because it's dense, it's 0:09:06.236 --> 0:09:09.476 harder to fake. Of course, history is literally with people 0:09:09.476 --> 0:09:11.476 who try to fake gold, and people try to use 0:09:11.556 --> 0:09:14.676 lead and a whole range of other dense metals. Silver 0:09:14.836 --> 0:09:16.996 was a little less dense, but it also managed to 0:09:17.036 --> 0:09:19.556 become an effective exchange of value. But what I really 0:09:19.556 --> 0:09:22.636 want to press us on is what are the features 0:09:22.636 --> 0:09:26.756 of bitcoin that would be comparable and also why we 0:09:26.876 --> 0:09:30.116 need another assets that's comparable to a gold and silver. 0:09:30.476 --> 0:09:33.836 So bitcoin being a digital sort of ascid digital good, 0:09:33.876 --> 0:09:36.876 digital currency, it shares none of the physical attributes or 0:09:36.916 --> 0:09:40.956 properties of gold and silver. However, what it does share 0:09:41.396 --> 0:09:45.156 is in terms of digital form, it is fungible. Okay, 0:09:45.356 --> 0:09:47.036 So unlike a house. For example, if you have a 0:09:47.156 --> 0:09:50.436 large house and now you want to retire, you can't 0:09:50.516 --> 0:09:53.996 just say I want to sell off my unused garage 0:09:54.556 --> 0:09:57.116 and go on a vacation with that money. Right the house, 0:09:57.156 --> 0:09:59.916 You either sell the whole body. You were saying those 0:09:59.916 --> 0:10:01.916 are arguments for a bitcoin as a currency, But as 0:10:01.956 --> 0:10:04.196 you were saying, that's probably not the right way to 0:10:04.236 --> 0:10:06.356 think about it. Now, I think we need more conceptual 0:10:06.396 --> 0:10:11.316 clarity here, because assets can be translated into currencies. Right, 0:10:11.356 --> 0:10:14.556 So if I'm owning, you know, pork belly futures, that's 0:10:14.556 --> 0:10:17.636 an asset, an intangible asset. The pork bellies are still 0:10:17.636 --> 0:10:21.116 on the pig, but I can trade them because there 0:10:21.236 --> 0:10:26.876 is agreed upon mechanism that makes them fungible. A measure 0:10:26.876 --> 0:10:29.476 of how much pork we're talking about accepted by a market, 0:10:29.996 --> 0:10:33.476 and because I can translate them into currencies, so they 0:10:33.516 --> 0:10:35.756 are salable assets. But no one would say that they 0:10:35.756 --> 0:10:38.156 are currencies. You know, you bring up a good point. 0:10:38.156 --> 0:10:41.756 So pork belly, technically the pork bellies you're talking about it, 0:10:41.836 --> 0:10:44.996 it's probably the traded form, the commodity's futures former version. 0:10:45.156 --> 0:10:47.636 These are future contracts. You're not literally talking about pork 0:10:47.676 --> 0:10:50.036 belly that's on a live pig, right, So that's it's 0:10:50.076 --> 0:10:52.276 what fantasy terms. It's like a derivative. So when you 0:10:52.356 --> 0:10:55.156 say you want to then convert that to something else, 0:10:55.316 --> 0:10:58.676 like like a supermarket, you know, grocery shopping, you really 0:10:58.716 --> 0:11:01.396 need an into medium. And this is where the word 0:11:01.436 --> 0:11:04.716 money comes in. That's why money was invented in a society. 0:11:04.756 --> 0:11:06.916 So before money came about, it was all barter. As 0:11:06.956 --> 0:11:08.956 you know, back then we didn't have pork belly contracts. 0:11:08.956 --> 0:11:11.796 But if we did have prop valuy contracts, the contract 0:11:11.916 --> 0:11:14.636 is worth this much value and you can only exchange 0:11:14.636 --> 0:11:16.596 it for something else that's worth that much value because 0:11:16.596 --> 0:11:19.476 there's no intermediate money to break it down and allow 0:11:19.476 --> 0:11:21.956 you to spend smaller amounts. So money was a human 0:11:21.996 --> 0:11:27.516 invention allowing people to exchange different valuable things, items and 0:11:27.556 --> 0:11:30.956 promises so that they can save their value and use 0:11:30.996 --> 0:11:35.156 it across time. Money is what transports value through time. 0:11:35.876 --> 0:11:38.716 I'll drop the what's the difference between currency and money 0:11:38.796 --> 0:11:42.916 as to philosophical a question? So I do understand that 0:11:42.956 --> 0:11:47.516 the genius of the creation of crypto was to draw 0:11:47.556 --> 0:11:50.516 on the metaphor of gold and silver, Right, why do 0:11:50.596 --> 0:11:53.276 we need this new set of things? Let's say in 0:11:53.316 --> 0:11:56.556 the best case scenario, crypto goes alongside gold and silver 0:11:56.716 --> 0:11:58.396 and is treated sort of like the way gold and 0:11:58.436 --> 0:12:02.156 silver are. Why do we need another asset class like this? 0:12:03.436 --> 0:12:06.636 So technology has progressed really fast, and the Internet has 0:12:06.676 --> 0:12:12.716 fundamentally changed how society operates, and up until bitcoin, how 0:12:12.756 --> 0:12:15.596 does value transfer on the Internet. It's always through a 0:12:15.676 --> 0:12:18.116 third party, meaning if you and I were to do business, 0:12:18.276 --> 0:12:20.076 if I owe you money, I could send it to 0:12:20.116 --> 0:12:24.116 you by PayPal, Venmo, or a bank transfer, Swift, wire transfer, 0:12:24.276 --> 0:12:27.116 and so on so forth. It always involves a third party. 0:12:27.396 --> 0:12:30.876 Over the last twelve years of Bitcoin's existence, it turns 0:12:30.876 --> 0:12:33.636 out more and more people agree that what bitcoin can 0:12:33.676 --> 0:12:37.956 provide society on the Internet in terms of payments is useful. 0:12:38.676 --> 0:12:41.636 The evidence speaks for itself. Over the last twelve years, 0:12:41.636 --> 0:12:44.996 we've seen more and more dollars worth of bitcoin being 0:12:45.036 --> 0:12:48.356 transacted on the so called public blockchain, and I think 0:12:48.396 --> 0:12:51.036 that trend will continue. So the only way to do 0:12:51.156 --> 0:12:53.396 that transfer value through the Internet and the direct peer 0:12:53.436 --> 0:12:56.636 to peer fashion. Today, at least the market degrees, bitcoin 0:12:56.876 --> 0:12:58.436 is the most popular way to do that. From a 0:12:58.516 --> 0:13:03.236 market capitalization and a sort of brute amount of volume 0:13:03.276 --> 0:13:07.796 that goes on for bitcoin. I've a lot of people say, 0:13:08.076 --> 0:13:10.596 you know, it doesn't make sense, but I'm a little 0:13:10.596 --> 0:13:12.196 confused by it still because I've heard a lot of 0:13:12.236 --> 0:13:15.876 people say that the original idea of crypto was just 0:13:15.916 --> 0:13:18.956 what you said. It would be the online currency that 0:13:18.996 --> 0:13:21.676 we would use to transact business on the Internet, and 0:13:21.796 --> 0:13:23.756 for that reason, there was a logic to it, and 0:13:23.756 --> 0:13:26.596 I think that made a good deal of sense. And yet, 0:13:27.476 --> 0:13:30.236 because it turns out so far, at least that the 0:13:30.316 --> 0:13:34.556 value of crypto, including bitcoin, has been extraordinarily volatile, that 0:13:34.636 --> 0:13:37.556 has made people pretty skeptical of the idea or some 0:13:37.556 --> 0:13:39.236 people at least that this will be the means of 0:13:39.276 --> 0:13:41.996 exchange on the Internet. Add to that the fact that 0:13:42.236 --> 0:13:45.036 there are governments out there in the world that don't 0:13:45.076 --> 0:13:48.036 love the idea of their currencies over which they have 0:13:48.036 --> 0:13:50.716 a certain amount of regulatory control, not total, but some 0:13:50.756 --> 0:13:55.436 regulatory control being displaced, and who are also worried about 0:13:55.716 --> 0:13:59.996 unregulated uses of currency transfer over the Internet. If that's 0:14:00.036 --> 0:14:05.116 the case, then the argument for the value of crypto 0:14:05.196 --> 0:14:07.196 then shouldn't be based on it as a means of 0:14:07.236 --> 0:14:11.156 exchange on the internet, as something else, some store of value. 0:14:11.156 --> 0:14:13.396 And I took that to be behind your initial statement 0:14:13.436 --> 0:14:16.676 that it's too simple to think to think of crypto 0:14:16.836 --> 0:14:19.436 as just a currency. It sounds like the arguments are 0:14:19.516 --> 0:14:22.836 kind of constantly in motion. You know. If someone says, well, 0:14:22.916 --> 0:14:24.756 is it a store of value? People say, no, no, 0:14:24.796 --> 0:14:27.196 it's not a store of value. Primarily it's a mechanism 0:14:27.236 --> 0:14:28.996 for doing business on the internet. Then someone says, well, 0:14:28.996 --> 0:14:30.556 it's kind of hard to do that. People say, well, 0:14:30.836 --> 0:14:33.556 it's a store of value, and it hedges against inflation 0:14:33.596 --> 0:14:35.596 in the same way that holding gold might heade you 0:14:35.636 --> 0:14:38.196 against inflation. And so that's the part that I'm just 0:14:38.236 --> 0:14:42.956 a teeny bit confused by. Yeah, here's how I would 0:14:42.956 --> 0:14:48.236 approach it. Okay, So bitcoin fundamentally is money, So let 0:14:48.236 --> 0:14:51.116 me make that statement loud and clear. Bitcoin is money. 0:14:51.716 --> 0:14:54.916 The usefulness is of money doesn't mean it has to 0:14:55.116 --> 0:14:59.276 only be used for payments. Money has to hold its value. 0:14:59.356 --> 0:15:02.716 So to clarify, for example, look at gold is money, 0:15:02.836 --> 0:15:05.236 right traditionally people who leave gold is money, And the 0:15:05.316 --> 0:15:08.196 same thing with the US dollars. We know for fact 0:15:08.396 --> 0:15:10.516 that in a gift day, in a giving twenty four 0:15:10.556 --> 0:15:15.636 hour period, this much gold goes around being exchanged for 0:15:15.636 --> 0:15:19.516 people to buy and sell, okay, meaning trading hands. Okay, 0:15:19.636 --> 0:15:21.316 now it turns out for gold and sober people don't 0:15:21.316 --> 0:15:24.076 do that anymore much. Okay. However, for the US dollar, 0:15:24.156 --> 0:15:27.876 we know how much US dollars traded is exchanged from 0:15:27.876 --> 0:15:30.036 person to business and so on in a given day. Okay, 0:15:30.076 --> 0:15:34.516 that's a large number. However, more US dollars stays put 0:15:34.596 --> 0:15:36.716 in a given day than the amount of US dollar 0:15:36.756 --> 0:15:39.596 that moves around. So my point is both of those 0:15:39.756 --> 0:15:43.036 are valid and legitimate use cases of the US dollar, 0:15:43.316 --> 0:15:45.836 meaning the US dollar as money is not just valuable 0:15:45.876 --> 0:15:48.916 because it's changing hands to pay for coffee or grocery shopping, 0:15:49.036 --> 0:15:51.796 but it's also extremely valuable the fact that staying put 0:15:52.036 --> 0:15:53.956 sitting in the bank account, so this is what happens 0:15:53.956 --> 0:15:58.236 with bitcoin as well. So Bitcoin today is valuable as 0:15:58.236 --> 0:16:02.276 a digital asset, as digital cryptocurrency because of its two features. 0:16:02.276 --> 0:16:05.316 One is it can be used to send as payment 0:16:05.356 --> 0:16:09.636 of value between two individuals directly on the internet, or 0:16:09.676 --> 0:16:12.876 it can also be used just staying put holding value. 0:16:13.036 --> 0:16:14.956 Now to your point about what about the fact that 0:16:14.996 --> 0:16:18.276 bitcoin prices fluctuate so much, And my explanation for that 0:16:18.356 --> 0:16:21.076 is simple. One, Bitcoin is still young. We are in 0:16:21.116 --> 0:16:24.516 the thirteenth year of bitcoin. Bitcoin is only twelve years old. 0:16:24.556 --> 0:16:27.476 It hasn't even become a teenager yet. In my opinion, 0:16:27.556 --> 0:16:30.436 bitcoin deserves to be in the greatest of all asset classes, 0:16:30.476 --> 0:16:35.476 like housing, real estate, stocks, like bonds, like derivatives, and 0:16:35.556 --> 0:16:48.756 like precious metals. We'll be back in a moment. One 0:16:48.756 --> 0:16:50.396 thing you know a ton about, and I'd love to 0:16:50.436 --> 0:16:54.556 get your thoughts on, is how the Chinese government has, 0:16:54.636 --> 0:16:56.876 in the past and will in the future attempt to 0:16:56.956 --> 0:16:59.716 regulate or engage bitcoin. And I'd really love to hear 0:16:59.756 --> 0:17:03.036 your thoughts about that. And here's why. Sometimes one hears 0:17:03.476 --> 0:17:06.036 big bitcoin optimists talking about how one of the huge 0:17:06.036 --> 0:17:08.516 benefits of bitcoin as an asset class is that you 0:17:08.556 --> 0:17:13.556 can sort of view the individual owner can evade central 0:17:13.636 --> 0:17:17.556 governmental scrutiny. And what it makes me wonder is can 0:17:17.556 --> 0:17:20.356 the Chinese government, using the regulatory tools that has available 0:17:20.396 --> 0:17:27.356 to it, really substantially regulate the use of cryptocurrencies. Does 0:17:27.476 --> 0:17:31.036 China suggest that other governments, even governments that are more 0:17:31.036 --> 0:17:35.116 concerned about individual liberties like property rights, will also be 0:17:35.196 --> 0:17:38.076 able in the long run to engage in pretty aggressive 0:17:38.156 --> 0:17:41.356 regulation of bitcoins such that it's not really going to 0:17:41.356 --> 0:17:45.916 be an asset that's in some way free of government regulation. Yeah, 0:17:45.996 --> 0:17:48.196 that's a great question. I think there's a very important topic. 0:17:48.236 --> 0:17:53.476 It's very timely as well. So here's my perspective. There's 0:17:53.516 --> 0:17:58.356 a lot of confusion about the term regulating bitcoin. So 0:17:58.436 --> 0:18:01.876 each country's government certainly has a right to regulate and 0:18:01.956 --> 0:18:08.516 allow or disallow business activities. That said, today China openly 0:18:09.116 --> 0:18:15.636 does not allow banks, exchanges, restaurants, and others to circulate 0:18:15.676 --> 0:18:19.516 and transact in bitcoin. That's just a hard rule. It 0:18:19.556 --> 0:18:22.076 may not be written in law, but all the implementation 0:18:22.236 --> 0:18:26.276 is such that even in private, banks and exchanges are 0:18:26.316 --> 0:18:29.956 told you cannot through this business relate to bitcoin. However, 0:18:30.116 --> 0:18:34.836 bitcoin itself as as a pure commodity that cannot be 0:18:34.876 --> 0:18:38.836 touched because it is decentralized, meaning no matter how the 0:18:38.916 --> 0:18:42.596 Chinese government might hate bitcoin, might disallow it to circulate 0:18:42.636 --> 0:18:46.316 in China, bitcoin itself can still exist and will still 0:18:46.316 --> 0:18:49.636 exist and will not be squashed by Chinese government. Does 0:18:49.676 --> 0:18:53.556 that make sense? So's there's a very minor distinction there. 0:18:53.716 --> 0:18:56.476 It's a very important, it's a very subtle distinction that 0:18:56.516 --> 0:18:59.636 people need to understand that bitcoin itself cannot be squashed 0:18:59.716 --> 0:19:02.396 due to the decentralized nature. Let me ask you another 0:19:02.476 --> 0:19:05.636 question about the creation of this asset class. The metaphor 0:19:05.676 --> 0:19:09.996 of mining was used by the creators of crypto, and unfortunately, 0:19:09.996 --> 0:19:12.996 it turns out that much like literal mining, which is 0:19:13.156 --> 0:19:16.236 terribly destructive to the environment, and which people will do 0:19:16.316 --> 0:19:18.956 anyway because they really want the gold and the silver 0:19:19.076 --> 0:19:22.156 or the diamonds that they can get out of the earth, similarly, 0:19:22.796 --> 0:19:28.876 mining crypto is detrimental to the environment, potentially extremely so. 0:19:29.196 --> 0:19:32.716 I read recently that the amount of energy that's currently 0:19:32.756 --> 0:19:36.036 being used in mining bitcoin is comparable to that used 0:19:36.036 --> 0:19:38.676 by the country of Argentina in a year. In some 0:19:38.716 --> 0:19:41.036 parts of the United States and of the world, it's 0:19:41.276 --> 0:19:44.956 as high as ten percent of total energy use, and 0:19:45.196 --> 0:19:48.916 we're already starting to hear environmentalist voices saying this is 0:19:48.956 --> 0:19:53.196 a disaster, you know, much like mining was originally. Does 0:19:53.196 --> 0:19:55.556 that seem to you to put a damper on the 0:19:55.556 --> 0:20:00.716 possibilities of crypto? In other words, does sustainability effectively become 0:20:00.756 --> 0:20:06.076 a limitation on the capacity of crypto in the long run. So, 0:20:06.236 --> 0:20:09.876 unfortunately I don't share that perspective, And let me explain 0:20:09.916 --> 0:20:13.956 to why. So, as you pointed out correctly, traditional mining 0:20:14.076 --> 0:20:17.116 is very destructive, is very energy intensive. Any sort of 0:20:17.236 --> 0:20:20.956 industry where they pull natural resources its destructive to the 0:20:20.996 --> 0:20:23.676 earth if you look at it more holistically, any action 0:20:23.756 --> 0:20:27.956 we do, when done to the excessive damages the earth 0:20:28.036 --> 0:20:31.796 and the environment. So it's all about moderation, whether it's 0:20:31.836 --> 0:20:37.276 fishing in the North Sea, whether it's it's mining. Forgive me, 0:20:37.396 --> 0:20:40.756 humans have never been very moderate when it comes to mining, 0:20:40.796 --> 0:20:42.436 you know. I mean the whole idea of a gold 0:20:42.516 --> 0:20:45.236 rush is to embody the idea that people are not 0:20:45.316 --> 0:20:47.076 moderate when it comes to mining, and so I don't 0:20:47.076 --> 0:20:51.276 expect that people will be moderate when it's absolutely So 0:20:51.476 --> 0:20:54.556 my point is, this is a government problem, it's a 0:20:54.596 --> 0:20:57.476 regulation problem, it's a society problem. It's not a problem 0:20:57.516 --> 0:21:00.316 unique with bitcoin. So even before bitcoin came around, if 0:21:00.316 --> 0:21:04.356 you look at the petroleum oil industry, I mean, that's 0:21:04.436 --> 0:21:06.916 hugely destructive. You know, if you want to pick on 0:21:06.996 --> 0:21:10.516 we should pick on the energy industry self. Right, Why 0:21:10.556 --> 0:21:13.076 do we rely on fossil fuels. We can criticize the 0:21:13.156 --> 0:21:15.276 energy industry, and I'm very happy I do so on 0:21:15.276 --> 0:21:17.596 my show, and I think it's totally legitimate to criticize it. 0:21:17.716 --> 0:21:21.396 But what we're talking about here is not energy that's 0:21:21.436 --> 0:21:25.156 being used for some necessary function to drive the economy. 0:21:25.196 --> 0:21:28.276 We're talking about the inventions brand as you were saying, 0:21:28.276 --> 0:21:30.996 of a brand new asset class, and that brand new 0:21:31.036 --> 0:21:34.156 asset class doesn't need to exist, right. We could go 0:21:34.196 --> 0:21:36.556 back to the drawing board like the clever people who 0:21:36.636 --> 0:21:40.556 created cryptocurrencies did, and say, let's do something new. Let's 0:21:40.556 --> 0:21:43.516 come up with a new asset class where mining it 0:21:43.556 --> 0:21:47.356 does not require the destruction of the environment, and then 0:21:47.396 --> 0:21:49.556 perhaps we could come up with some alternative. And I 0:21:49.556 --> 0:21:51.716 think it is reasonable at this stage. As you were saying, 0:21:52.156 --> 0:21:55.356 crypto is brand new, and if we look at something 0:21:55.396 --> 0:21:58.116 that's brand new and is harming the environment, it seems 0:21:58.156 --> 0:22:01.356 as a regulatory matter entirely plausible to say, let's ban 0:22:01.676 --> 0:22:04.196 mining it, and if you ban the mining of it, 0:22:04.556 --> 0:22:08.996 you will have greater protection for the environment. I disagree. 0:22:09.116 --> 0:22:11.916 I very much disagree. The reason people mind bitcoin is 0:22:11.916 --> 0:22:15.596 because the market forces convince people to want to mind bitcoin. 0:22:15.636 --> 0:22:19.276 There's no directive by some evil empire that says thou 0:22:19.316 --> 0:22:21.636 shalt mind bitcoin at the at the detriment of the 0:22:22.636 --> 0:22:24.276 Wait wait wait wait wait wait wait wait a minute, 0:22:24.316 --> 0:22:26.716 Wait a minute. The free market doesn't care at all 0:22:26.716 --> 0:22:29.756 about the environment, right. The very definition of why you 0:22:29.796 --> 0:22:34.276 have environmental regulation is that, left unregulated, the free market 0:22:34.316 --> 0:22:36.876 would destroy the earth. As in fact, I agree with you, 0:22:37.196 --> 0:22:38.836 so think about it. If you want to regulate, you 0:22:38.836 --> 0:22:41.956 should regulate the energy. If we bann fossil fuel, if 0:22:41.996 --> 0:22:46.036 we banned coal production power plants, then bitcoin mining will 0:22:46.036 --> 0:22:49.396 be all renewable energy and solar energy, wind energy, geo 0:22:49.436 --> 0:22:52.996 thermal energy. If we ban all fossil fuel by regulation, 0:22:53.116 --> 0:22:55.796 then by definition, bitcoin mining will still continue to be 0:22:55.876 --> 0:22:59.996 unrenewable energy. I don't agree because although I strongly support 0:23:00.156 --> 0:23:03.676 the limitations on the use of fossil fuels for energy, 0:23:03.996 --> 0:23:06.876 the reason it's taking us a long time to get there, 0:23:07.076 --> 0:23:11.436 as human societies. Is so much of our economy is 0:23:11.596 --> 0:23:19.156 already bound up in useful methods of consuming those fossil fuels, 0:23:19.196 --> 0:23:22.636 and it's taking There's a long transition period in historical terms, 0:23:22.876 --> 0:23:26.436 as you transition economies to new forms of energy production, 0:23:26.476 --> 0:23:32.276 and so adding in a new massive energy suck raises 0:23:32.316 --> 0:23:35.636 the question of costs and benefits. So that's really the issue. 0:23:35.796 --> 0:23:40.196 To me, you'd have to let me just finish. You'd 0:23:40.196 --> 0:23:43.996 have to convince me that the benefits of crypto outweigh 0:23:43.996 --> 0:23:46.716 its costs, and that to me, would be the regulatory question, 0:23:46.756 --> 0:23:48.876 the same way it would be for any other a 0:23:48.996 --> 0:23:52.276 human activity that takes up a lot of energy. No, 0:23:52.636 --> 0:23:55.076 it's all subjective. Okay, here's what I mean by that. 0:23:55.756 --> 0:23:58.956