BTC Sessions - Pre-Halving Hashrate/Fees Up, Treasury Borrows $3T, BTC on Billions EP052

Starting point is 00:00:10 Wasabi wallet and fairly private. What's up everyone? I'm Ben with the BTC sessions and this is your daily session. Before we dive in, I just want to give a shout out to sponsors of the show, leaden.io. This is where you can use your Bitcoin for a few different things. They've got Bitcoin savings accounts where you can earn interest on your Bitcoin. They've got Bitcoin back loans, which was the first thing I ever used with them. This is where you can use your Bitcoin as collateral to get a Canadian or U.S. dollar loan. So in my case, I was in a pinch, needed dollars.

Starting point is 00:00:54 I was able to park my Bitcoin in a dedicated address and audit it 24-7. I got a loan within 24 hours, and when I paid it back, I got back all my Bitcoin. And then finally, they've got B2X. This is where you can use the same loan mechanism to instiby more Bitcoin, doubling your Bitcoin on the spot. So if you want to check out any of that, there's a link in the show notes down below. And secondly, shout out to Wasabi Wallet. This is a great desktop wallet that can help you with your Bitcoin privacy. I've done videos on it.

Starting point is 00:01:24 It's great. I like to use it in concert with my cold card as well. They just added support for multi-wallets so you can have multiple wallets open at the same time. Highly encourage you to check them out. Great for your Bitcoin privacy. And with that, let's dive into the news. So we are basically a week out from the Bitcoin having. And it's been a hell of a ride so far this year.

Starting point is 00:01:49 We started the year off below 7K. Then we had a wild ride up to above 10,000 for a brief time. Then that started to get whittled away. And then we saw the massive crash in mid-March all the way down to below $4,000. And believe it or not, we completely rebounded from that all the way back up into around the $9,000 range. sitting just shy of that now. At the time of recording this, we're around the $88 to $8,900 range, although I've seen it's peaking up a little bit higher than that. So in short, it's been all over the map. And interest is growing with the halving this close. We've had two other halvings

Starting point is 00:02:37 before. This is the third. So the issuance of newly created Bitcoin will be cut in half in just over seven days, so it'll go from 12.5 Bitcoin every 10 minutes down to 6.25 Bitcoin every 10 minutes. Now, this will have long-lasting implications because miners tend to be one of the largest sellers in the Bitcoin space because they need to cover their overhead expenses. And automatically, right off the bat, that number that they are able to sell is cut in half. Now, a lot of these companies will have treasuries, whether or not that's in held Bitcoin or whether it's in dollars can depend on the company. But regardless, there will be less new Bitcoin to be sold onto the market, a market that at current prices is used to gobbling up all of those new coins every single day. So with that new interest and that renewed interest, and you're starting to see mentions in a lot more mainstream media with the event coming up,

Starting point is 00:03:44 There's a couple things happening. One of them is that miners have again piled in. We've just hit a new all-time high for the Bitcoin hash rate. So after the mid-March price crash, I'm just reading here from Coin Telegraph, that led to a brief exodus of miners operating older hardware. And the hash rate did drop quite a bit. It went from it went from 123XHHHHag. all the way down to 75 x a hash.

Starting point is 00:04:16 However, we have now surpassed 142 Xa-hashes per second, which is just absolutely massive. So my inclination is to believe that some of the miners that shut off during that price dip, because it just was not profitable to keep the machines on, have returned to try and eke out their soon-to-be-obsolete, mining equipment the last, you know, week that they can while it's still profitable to do so. I do think that we will see a drop in hash rate after the Bitcoin having. Again, it just won't be profitable for some of the old machines. But over time, over the course of the year, I do think

Starting point is 00:05:04 the hash rate is going to surpass previous all-time highs in hash rate and that it will far surpass that in the year to a year and a half after this having. Now, the other thing that comes with new interest and spikes in price and miners coming in and out and just in general, kind of a buzz around Bitcoin right now is that the fees have gone up. Now, I think that this article that I'm looking at from DeCrypt kind of overstates it a little bit. It says Bitcoin fees are skyrocketing ahead of the Bitcoin having. Now, the average fee for a transaction on the Bitcoin Network on April 30th, just a few days ago, was $2.94, which was the highest in 10 months. The men pool was backed up fairly far. It did take quite a bit to clear out before you could

Starting point is 00:05:59 easily get through a transaction very, very quickly for not that high of a fee. But again, as the network is congested, then Bitcoin users do have to pay higher fees to get transactions through in a reasonable amount of time. And this is to prevent from the blockchain being spammed with transactions because that is an attack vector. If you were able to load up the Bitcoin blockchain with just every single transaction you wanted for free, that amount of data storage can become very expensive very quickly. And one of the main points of Bitcoin is that anybody should be able to verify the base protocol rules running something called a Bitcoin node, where you run a copy of the entire Bitcoin blockchain, which encapsulates every single Bitcoin

Starting point is 00:06:50 transaction that has ever happened. So you can verify the funds are indeed there, that there's no inflation, that transactions are adhering to the protocol rules. So it's very important that we don't let blockchain bloat or a growth in the size of the base-lar blockchain become to a point where it becomes inhibitively expensive to run a node if you choose to do it. So that is part of the point. Now, what can you do when it gets to a point where on-chain fees become expensive? well, that's what the Lightning Network was built for. And I've done a walkthrough video on one Lightning Wallet that I think is quite easy to utilize

Starting point is 00:07:39 is Phoenix Wallet. Now, I did this a little while back, but these guys have abstracted away a lot of the difficulties of maintaining lightning channels and connecting it to a local wallet. and there's a lot of complexities that, again, have been abstracted away with Phoenix wallet, which is why I like it so much. It also has a lot of cool features that are seamlessly integrated that make it easy to swap between regular Bitcoin and Lightning without really having to think too much. It'll give you a little notification of what's happening in the background, but you do not really

Starting point is 00:08:18 need to understand what's happening. You can accept regular Bitcoin transactions into this Lightning. wallet and you can send a lightning transaction out to a regular bitcoin address and it will perform a swap into and out of those networks for you without really having to overthink it. So I highly recommend you check that out if you have not been on Lightning yet. And in relation to Lightning Network, my friend Gustavo over at Verify did drop us a nice little article on the Bitsy Academy where I work running content management. And so this article on Lightning Network, it's titled Lightning Network, The Road to Billions of Bitcoin Users.

Starting point is 00:09:02 And it talks a lot about what the Lightning Network is, what it enables and allows us to do the earliest iterations of trying to execute transactions via Bitcoin but off chain, which Satoshi himself actually did start to kind of tinker with early on. not a lot of people know that. It goes into how Bitcoin Lightning Network channels work. It talks about routing through the Lightning Network. And then it also talks about how a lot of the Bitcoin can't do this, so I need Chitcoin X narratives, are being destroyed by things like Lightning. Not a lot of people know that you can build other things with the Lightning network, like messaging, decentralized messaging.

Starting point is 00:09:50 you can also build programmable scripts and things like that where you can actually use it as a programmable version of Bitcoin doing away with some of the applications that you might find on something like Ethereum. So I highly recommend you check out this article from Gustavo. It's over on the Bitsy Academy. I will link that down below. Now, in the same vein of ways to interact with Bitcoin that, save you from some of the on-chain fees if it becomes difficult, while liquid is one such

Starting point is 00:10:27 instance. And so this is a side chain of Bitcoin. It allows you to kind of peg in and out and utilize liquid Bitcoin. And it is essentially a blockchain linked to Bitcoin's blockchain. So a side chain, as I said. Now, they've just integrated support for liquid Bitcoin and liquid-based assets on the ledger nano s. So this is a hardware wallet. I utilize the ledger nanoS. I also have a ledger X, which is a Bluetooth model. I don't believe it's enabled on that yet, but I've got to imagine it will be coming down the road soon, even if you do maybe need to actually plug that device in to utilize it initially. We'll see. But regardless, kind of cool to see that this is playing out. Now, Liquid allows you to not only utilize Bitcoin.

Starting point is 00:11:18 just as a pegged asset, but it enables confidential transactions. So you can see that a transaction has happened, but you cannot tell for what amount, and you also cannot tell what asset. And what I mean by that is you can actually issue other assets on the liquid side chain, utilizing this as opposed to having to go to something like Ethereum. So again, brings into question the viability

Starting point is 00:11:44 of some of these other projects, if all this shit can just be built at top Bitcoin the first place as a solid immutable base layer. So right now you're seeing some stable coins issued on the liquid network. I'm I'm kind of indifferent to stable coins. Again, it's a coin that's pegged to Fiat and we're in this to get out of Fiat, but I do recognize that people do when it comes to day-to-day expenses need some stability when it comes to knowing that they're not going to take a huge chunk out of their net worth paying their bills when they're holding onto Bitcoin because it still is very early. And obviously, as we've just seen in the past couple

Starting point is 00:12:25 months, Bitcoin is incredibly volatile and not always to the upside. So anyways, I think it's really cool to see this implemented on the Ledger NanoS, hopefully soon the Ledger NanoX. If you want to check them out, I'll link down below. You can check out Ledger. I do have some videos on them as well. And yeah, yeah, check it out. Anyways, moving on. Now, this is where things get interesting. So I was talking about liquid and how it's pegged Bitcoin. And there is some inherent risk in pegging Bitcoin because the token that you're holding is not Bitcoin itself. It is in a way cryptographically proven that the Bitcoin is there and you can check that. But to peg out, you also need to go through what is a more or less

Starting point is 00:13:12 say consortium, so they've got a whole bunch of different exchanges that have come together, and they validate and allow you to peg out. Or you can just trade liquid Bitcoin for Bitcoin. But there is a definite tradeoff there in the... Oh, and I forgot to mention that liquid block times are only one minute, as opposed to Bitcoin's 10 minutes, so transactions are faster and tend to be cheaper. So it's just kind of a release valve to relieve yourself from potential fee issues on the main chain. But again, lightning can serve that purpose as well in a more decentralized, less trusted manner.

Starting point is 00:13:56 Now, diving down the trusted rabbit hole, I'd say further from what Liquid is doing, given that it is actually pegged into the Bitcoin blockchain, there is Ethereum. And just recently, over this past month, they've launched TBTC, which is, again, a token that is on the Ethereum blockchain, but locks up Bitcoin. Now, I'm very torn with this. Number one, I would never use this. The reason being is the track record of a lot of stuff on Ethereum isn't fantastic. when it comes to actually securing your funds. And so the idea here is you'll be able to lock up your Bitcoin, receive this tokenized Bitcoin on the Ethereum blockchain,

Starting point is 00:14:47 and then utilize it in their decentralized finance apps. And there's so much to unpack there. Number one, the defy stuff, decentralized finance, that's what it stands for. Is it really decentralized? I would say no, because as we've seen in a lot of these instances, a lot of these mechanisms have kill switches and pause buttons and aren't as decentralized as could be.

Starting point is 00:15:15 You'll also see instances of even early on in Ethereum when a lot of these decentralized ideas, they had the Dow, which was a decentralized autonomous organization where a ton of people pulled a ton of Ethereum into it very early on. they didn't realize that there was a loophole and somebody managed to siphon out 150 million dollars with Ethereum, which at the time was, I think it was, I want to say one tenth or maybe one, maybe even more. Two tenths, like 10 to 20 percent of the entire monetary base of Ethereum was stolen. And that resulted in a hard fork in which they reversed that from ever happening. And that resulted in what is Ethereum today, which is the fork of the reversal of them saying that that never happened. And then Ethereum Classic, which is the chain that said, no, we should be immutable. It sucks that this got stolen.

Starting point is 00:16:15 But that's just those are the breaks. We shouldn't have put that much money in it anyways. Anyways, a lot of Ethereum founders and people on the Ethereum Foundation were in the Dow. And so they went along with the fork, which is now Ethereum, which is not a. especially immutable. Anyway, so I know I went down a little bit of a tangent there, but the idea is that how decentralized is this stuff and how immutable is it, and what is the track record for these very complex smart contracts

Starting point is 00:16:47 locking up large amounts of money, and then do I want to trust that locking up my Bitcoin in something like that? And the answer for me is a resounding no. And so I'll just read a little bit from Bloomberg here. So this, the idea is to let Bitcoin users turn their coins to TBT, a token that can run on the Ethereum blockchain, allowing them to use TBT as collateral to earn interest, trade, using leverage or access enhanced financial privacy applications, all without having to sell their Bitcoin. Then the TBT can be changed back into Bitcoin. So this has has now launched. There's a ton of DFI apps that are ready for it.

Starting point is 00:17:28 Now, I will play devil's advocate in that if people want to and dare lock up their Bitcoin with this, I mean, that's fine. I guess it just adds to the scarcity of Bitcoin. Again, not for me. But I can see that the Ethereum people, they've been trumpeting the idea recently. that that Ethereum is money and is hard money, but the amount of interest in TBTC and being able to actually have exposure to the price

Starting point is 00:18:12 and the hard money of Bitcoin on the Ethereum blockchain just kind of goes to show how many people actually want, want this exposure and recognize Bitcoin as a sound money that has value and could be potentially worth more. So I do find some, what's the word I'm looking for here? I do find some irony in the idea of Ethereum people saying that Ethereum is good money while at the same time funneling their Ethereum into Bitcoin to lock it up to then access the Ethereum platform. them. Anyways, in that same vein, Ethereum 2.0, this was a post by Bitmex research. They were looking at

Starting point is 00:19:06 Ethereum 2.0, which, by the way, if you didn't know, Ethereum 1.0, total garbage. They knew it wasn't going to scale from the start, apparently, as was said in an interview with some of the developers. But anyways, Ethereum 2.0 is apparently on the horizon at this point. And so they're going to need to transition into this entirely new blockchain. And during that transition, let me just read a little bit here about coin issuance that will happen as they peg from one blockchain to the other. It says, as explained above, there will be two perilous systems existing simultaneously. ETH1, which is the original Ethereum, well, not original Ethereum anymore, I guess, but what everybody calls Ethereum, ETH1, will continue as a proof of work chain, meaning that you can mine it with specialized machines, while ETH2 will operate under a new proof of stake system. During this period, both sets of consensus agents, the miners and the stakers, require incentives. Therefore, the Ethereum inflation rate will increase, at least temporarily, Until the two systems eventually merge, this may be considered a disadvantage, but it may be a price worth paying to ensure the successful transition from ETH II.

Starting point is 00:20:25 So what they're saying is that inflation is about to go up for how long is anybody's guess. But what they need is they need miners to keep on mining so that the old Ethereum will function so that they can actually transition and send their coins to contracts to get their tokens on ETH2. But they also need people to be staking on Ethereum 2, which means locking up your coins to not only validate transactions, but create newly. You're incentivized to do this to create new Ethereum and have it rewarded to you instead of mining. So they need to have both of those things happening at the same time, meaning that you're having inflation on both chains. Also, it should be noted that neither chain has a cap on the total number of Ethereum, even though early on when Ethereum was first started, they said that there would likely be a cap of $100 million. Well, that has long since passed, and we're at about $110 million.

Starting point is 00:21:30 What I found particularly interesting here was the inflation rate, and this chart in particular, Ethereum 2.0 inflation rate based on the number of coins that are being staked. So they wanted to incentivize people to come over early and start staking right away. So the people that are over early are going to be rewarded handsomely, especially if not a lot of people start staking right away. Now, I'm guessing that a good chunk of people will probably switch over because Ethereum being not super decentralized tends to take these transitions quite quickly. they just kind of follow along with whatever whatever is told. But regardless, 65,000 eth, if that's how many were staked, the max annual issuance of new Ethereum would be 46,151,

Starting point is 00:22:23 which amounts to a 71% annual inflation rate on Ethereum 2. Keep in mind, inflation would still be happening on the other Ethereum 1 chain, and those people could peg over one way whenever they chose to do so. So, now, as it goes up, the inflation rate comes down. So 100,000 eth-staked would be 57% annual inflation. A million-eath-staked would be 18% annual inflation. 10 million would still be just under 6% annual inflation. And 100 million Ethereum staked would be 1.8% inflation.

Starting point is 00:23:02 134 million would be 1.6. Now, one thing I wanted to point out here is, 100 million Ethereum is around 90% of the entire monetary base to achieve just under 2% inflation. So in order, if I'm reading this right, in order to obtain an inflation rate around that of the Federal Reserve and around that of gold, they need to lock up at its current number of coins. They need to lock up in staking 90%.

Starting point is 00:23:38 of the entire monetary base just to obtain a reasonable inflation rate that isn't above what the dollar is. And to me, that, I don't know, I find that kind of funny. I hope I'm not reading this wrong, but that's what it seems like to me as I'm looking at this. So I'll link to this down below, give a look through. Let me know what you see and what you think. Speaking of terrible monetary, policy moving on here. From CNBC, the U.S. Treasury is seeking to borrow a record $3 trillion this quarter. So a few points. Treasury Department announced Monday it is borrowing $3 trillion this quarter. The money is being used in large part to subsidize economic rescue efforts in the wake of the pandemic. Total U.S. government debt is now near $25 trillion, and the current

Starting point is 00:24:36 fiscal year's deficit is running at $744 billion deficit in a single fiscal year just right now so far in the fiscal year. And so at the bottom of this article as well, it says just since March 1st, the national debt has grown by $1.5 trillion to $24.9 trillion. That's a 6.4% increase in the national debt in two months. The budget deficit through March or the first six months of the fiscal year totaled 744 billion on pace to easily eclipse the biggest shortfall in U.S. history. Unbelievable. And that's not all in the monetary insanity that is happening.

Starting point is 00:25:31 Negative interest rates. I swear to God, we're going to see these. easily before the end of the year, if not sooner. But quick cliff's notes of this on decrypt. The U.S. Federal Reserve may resort to negative interest rates, says the former president of the Federal Reserve Bank of Minneapolis. In this case, customers will have to pay banks' interest on their savings, and this could theoretically incentivize spending helping to revitalize the economy. So yeah, the idea with negative interest rates is that if you put money in savings and that money just sits there, instead of you having lent money to the bank in order to save and maybe make 1%, well, nobody gets 1% interest anyways anymore.

Starting point is 00:26:23 But normally you think of a savings account and you put it in savings and you earn interest on that. not the case anymore in this age of again monetary insanity you would put money in your savings account and you would pay the bank to hold it for you even as they lend it out yes that is correct that you would pay to give somebody your money to lend it out

Starting point is 00:26:48 now this is commonplace in Europe in a few different countries already as they try to deal with just the terrible economy as is again just a function of the underlying currency and the issues with it. But this is very real. You could see negative interest rates.

Starting point is 00:27:09 And it blows my mind in contrast to the way that Bitcoin is going and that we're going to be doing fiscal tightening soon. And everything's insane. They're printing trillions and trillions of dollars. The deficits are hundreds and hundreds of billions on in line. for the largest deficit ever, and they're looking at negative interest rates and charging you to save. It's really unprecedented. Same thing in Canada. We have the new Bank of Canada governor explaining why we haven't yet seen negative interest rates, but wanted to let us know that it definitely has been explored, which, once again, it kind of leads me to believe that all of this

Starting point is 00:27:55 talk from these central bank leaders are just softening up North America for the impending imposition of negative interest rates on everybody. It's just a matter of time. So I don't know. I don't know this. This is what Bitcoin was built for, but it's still no less crazy to see it actually happen. Moving on, I wanted to just touch on a couple other things. Wasabi Wallet, which again, partner of the show helps with your Bitcoin privacy. They, they are implementing pay to endpoint, which is a version of coin join to enhance your privacy, but it is indiscernible from a regular transaction. The way that it works is if you're paying somebody, instead of you just pulling from your Bitcoin and sending it to them and then getting back some change, they actually contribute

Starting point is 00:28:47 coins to the transaction so that you can't tell whose coins were who and the, the first place and then you both take back what you needed out of that so you would take back your rightful change and that person would take back their original money as well as the money that you've given them for the good or service and so nowhere in there do you actually see the real amount transacted for the good but you get to actually you get to actually help in obfuscating who owns what and at the same time the merchant is consolidating UTXOs, which are the pieces of Bitcoin in their wallet, to help contribute to lower fees when they go to spend them in the future, which is great. So yeah,

Starting point is 00:29:36 this is now this has been merged into the code. It's not yet in the, the regular UX for, if you just download the desktop client yet. But when they do the update, that will start to be available to everybody. I've seen some demos of this. Pretty cool. Blue wallet has also implemented it and the big one was BTC pay server which merchants can use by default and yeah so even just a little bit of this implemented a small amount of this across the bitcoin ecosystem just totally screws with any blockchain analytics company that are trying to feasibly say who owns what which is fantastic um yeah and then the last thing i wanted to touch on uh bitcoin was just mentioned in the show billions if you haven't seen it.

Starting point is 00:30:22 Again, kind of like a, I don't know, thriller-type show. Deals a lot with the economy and smuggling money. And yeah, it's pretty good. But they did mention, they give Bitcoin a mention in the season 5 premiere. I won't spoil it for you, but cool to see it hitting the mainstream yet again. And just to wrap up, if anybody wants to give this a share, this would be a huge help to me. But I've put together, I put this together last summer, but I've put this together last summer. I've been adding to it again and again.

Starting point is 00:30:53 So it's an article on my website, BTCsessions.ca, which is how to buy, sell, and use Bitcoin in Canada. And what I've done is I've kind of aggregated a lot of the more important videos I feel for onboarding new people. And it starts from the basics all the way up to some of the more advanced. So I go through, okay, where you can grab Bitcoin, things like CoinBerry and Bull Bitcoin. I talk about wallets, blue wallet and green wallets. I go into cold card. I talk about paying your bills, I talk about Leden, I talk about Wasabi and Samurai and Phoenix

Starting point is 00:31:27 wallets and building nodes. There's just, there's a lot on here. So yeah, I'll link it down below, but if you want to give it a share, then please do. And hopefully it will be helpful to some people. I'm going to wrap up, you guys. Thank you so much for watching and or listening. If you're here on YouTube, do hit like, subscribe, and share. But also if you're on YouTube, do go and do go and.

Starting point is 00:31:49 check on some of the other platforms I'm on. I did have a bit of a debacle. I feel like I can't quite trust YouTube all the time now. So hit me up, whether it be on Facebook, whether it be on Twitter, I do live streams there as well, whether it be on D-Live, Library. There's a ton of different video platforms I'm on on Twitch as well. But also, if you're into audio only, I'm on pretty much any podcast platform you want to check out, but the big ones being Apple Podcasts, Google Podcast, You go check me out there. There's a link in the show notes down below. If you want to help out the show in another way,

Starting point is 00:32:24 you can hit up with the sponsors that I mentioned, Leden and Wasabi Wallet. Those are both in show notes. Or you can drop me a lightning network tip at my tippin.combe page. That's tippin.combe slash at BTC Sessions. And with that, I'm out. Have yourselves a wonderful rest of the day

Starting point is 00:32:40 and I'll see you next time for your daily session.

BTC Sessions - Pre-Halving Hashrate/Fees Up, Treasury Borrows $3T, BTC on Billions EP052

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