Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Daniel Krawisz: Nakamoto Institute – Bitcoin, Libertarianism and the Problem with Appcoins

Episode Date: December 8, 2014

We are joined by Daniel Krawisz, the Director of Research at the Satoshi Nakamoto Institute. Daniel co-founded that organization last year with Michael Goldstein and Pierre Rochard to educate the Bitcoin community on the foundational ideas that led to the creation of Bitcoin. The Satoshi Nakomoto Institute is dedicated to shedding light on the ideological history of Bitcoin and keeping its controversial roots from being marginalized. Topics covered in this episode: What it means to be a libertarian, crypto-anarchist The perception of Bitcoin and the future of the bitcoin ecosystem The viability of alternative currencies Episode links: The Satoshi Nakamoto Institute Bitcoinist.net Youtube channel This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/056

This episode of Epicenter Bitcoin is brought to you by Fairlay. Fairlay is a Bitcoin prediction market where you can place predictions on the likelihood of sporting events, the Bitcoin price, or current affairs. You earn money if your predictions are correct. Head over to Fairlay.com slash epicenter, that's F-A-R-L-A-Y dot com slash epicenter to place your first bet today. And by the GemS social messaging app. We believe Gems has a real potential to bring new users into the Bitcoin ecosystem and take adoption to the next. level. It's social messaging on cryptocurrency steroids. The Gems pre-sale is running now, and you too can benefit from becoming an early supporter. Head over to getgems.org to learn more. And by

Shapeshift.io. With no account or sign up required, it's the easiest way to buy and sell light coin, doche coin, dark coin, and other leading cryptocurrencies. Go to shapeshift.io to instantly convert all coins and to discover the future of cryptocurrency exchanges. Hello, welcome to Epistenter of Bitcoin, the show which talks about the technologies projects and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Kutu. And my name is Panne Fabin-Krain. So we're here today with Daniel Kravos, and he is the director of research of the Nakamoto Institute. So he's also libertarians. I'm particularly excited about that aspect because, you know, as we all know, there is a strong libertarian side in Bitcoin,

It's from a libertarian background. And we have sort of also deliberately chosen not to do an ideological show, not to do a political show. But at the same time, we totally realize this is an important part of it. So I'm excited that we sort of for the first time, perhaps, have some time to dive into a little bit of that side of Bitcoin. So thanks for joining us today, Daniel. Thank you. So perhaps let's get started. Do you want to introduce yourself briefly?

Tell us a bit about how you got into Bitcoin? Sure. Well, I first heard about Bitcoin from Ross Ulbricht, interestingly enough. This was before he was the Dread Pirate Roberts. But at the time, I don't quite remember the conversation, but I probably told him it was a stupid idea. So later I saw Bitcoin again during the... early part of the

2011 mania and you know a lot of people said oh you know bitcoin is a bubble and so on but actually this this manic behavior is really what convinced me

that Bitcoin is really viable because I couldn't really understand how I could explain it without saying that Bitcoin really could become money and that its value really was based on a network effect. And this is the Austrian economics theory about the value of money.

So that observation kind of convinced me that Bitcoin really was viable. So I decided I'd better get some just in case. And that was a good decision. So then in about 2012, that's when I sort of realized that I should be devoting myself to Bitcoin stuff full time. And so this started out in my university, the University of Texas at Austin, in some of our economics and politics discussion groups or student groups, I was telling people about Bitcoin and about cryptography and the cypherpunks there. And eventually, some friends and I from that group started the Satoshi Nakamoto Institute as a way of, kind of keeping the legacy of the

cypherpunks alive and preventing the anarchist side of the Bitcoin movement from being marginalized. There was quite a lot of talk around then about how Bitcoin needs to grow up and be serious and no more of this embarrassing anarchist stuff. So we started the Satoshi Nakamoto Institute in honor of our favorite. favorite cypherpunks, Satoshi Nakamoto. And we kind of have been, we've been hosting and promoting a lot of the original cypherpunk writings and then publishing articles of our own on the present Bitcoin movement

and on the economics of Bitcoin and where we think Bitcoin should. should be going. And of course, the other two members of the other two founders are Michael Goldstein, who is now the president and Pierre Rochard. So there has been some controversy over whether the Satoshi Nakamoto Institute is a troll organization. We are not a troll organization, but we do believe in trolling. And so Pierre is is one of the, the best trollers that I've ever seen. So if you want to learn about trolling, you should follow his Twitter feed. What's a troll organization? So trolling on online forums, like trying to start saying ridiculous things to try to create consternation. There are definitely a couple of things that we've published that are a little bit

over the top and facetious, but, uh, but we, you know, we really do believe in what we're saying. We just take sort of an irreverent attitude towards, towards a lot of it. Yeah, I know. We will be talking about some of this stuff. Well, there is this, this idea in the Bitcoin movement that, um, that Bitcoin, um, um, has an image problem. And, well, you know, as I, as I was saying before, like, it needs to be more serious. We don't, we don't think that. So I think that really a better way to promote Bitcoin is with what's called counter-signaling.

So I think that a way to make people believe that Bitcoin is a good money is to act like you don't care whether they want it or not, because you will want it eventually. so I don't have to evangelize it for you. That's kind of the point. That's why we may seem like a troll organization to the to the unpracticed eye. So can you sort of perhaps, so we can get into the Nakamoto Institute, describe what is the Nakamoto Institute and what are the goals of the organization? Sure. Well, I pretty much already explained that. I mean, we're basically a think tank, a realization, and we're trying to bridge the gap between the cypherpunk ideas and Austrian economics ideas.

And we wanted to keep the original visions of the cypherpunks alive in the Bitcoin movement and pretty, prevent the anarchist wing from being marginalized. Those are really the goals. Promote those kinds of ideas. So how do you feel that has developed over time? Do you feel that is something that's happened that the kind of libertarian, let's say, factions of the Bitcoin space have been sort of pushed aside?

Yeah, that's true to some extent. I mean, I think that the libertarian faction is alive and well, but it's becoming a smaller part of the Bitcoin world. And overall, I think that it's good that Bitcoin is growing and is attracting more normal people. I believe that Bitcoin will serve libertarian goals even if it's not. libertarians who are who are developing it. You know, Bitcoin puts the control in the hands of the individual. So there's an ideology called crypto anarchy that was invented by the cypherpunks.

and it's an idea that you can create a society that can run independent of state control and is able to prevent itself from being controlled by the state using cryptography with the devices available to us with cryptography, anonymity, digital signatures, and that sort of thing. But there's another. way that you could interpret the word crypto anarchy. Like we sometimes say crypto-fascist for somebody who is apparently not a fascist, but whose individual positions lead to fascism. So I would say that somebody who promotes Bitcoin and who is not an anarchist is a crypto-anarchist

because I think they are still promoting, promoting a more free, less state-controlled society by promoting Bitcoin. So I'd like to get into this idea that libertarians are often, I mean, Bitcoin is often associated to libertarian ideas. But before we do that, for those who may not know, I mean, because it's definitely the case here in Europe, when you talk about libertarianism, it's definitely the American idea. and a lot of people that I've talked to are not really sure, you know, what is libertarianism? One of the basic principles of libertarianism is what's called the non-aggression axiom.

And this just means that you don't initiate aggression against other people. So this is something that, you know, pretty much everybody understands in ordinary life. So no running up to people and mugging them and no, no, no, no, no, no, no, randomly murdering people who aren't, you know, already attacking you. And of course, fraud is usually understood to be a kind of aggression because you, you, you, you, you make an exchange with somebody, but they don't, they don't get what. what they understand they're supposed to be getting. So this is something that people, is obvious to people in their ordinary lives.

The difference is that libertarians apply this to government. And we see, we don't think that government is a special kind of organization in any way. It shouldn't be treated differently than someone who, starts a corporation or a private club or a a mafia or or any other kind of human organization so because a government will impose taxation on people and it will claim the right to a share of their earnings and a right to impose rules upon them that these people did agree to. They may have been part of an election, but they didn't individually agree to any of these things. That should all be considered acts of aggression, which the state should not be allowed

to initiate on people. The principle of non-aggression then extends to just imposing things on people. Yeah, so when you get into the definition of coercion, then things become kind of tricky. But one kind of good way of thinking about the libertarian world is just imagine the ordinary left-right spectrum in ordinary politics and then just transpose it into a bunch of people who all think that the state needs to be drastically reduced or eradicated. And that kind of tells you about the different schools of libertarianism. Because we have the right libertarians and the left libertarians.

And they're pretty similar to left and right in ordinary politics, except they don't believe in in government solutions at all or very little. So the, and this division has a lot to do with their views on property rights or on the kinds of organizations that they want to create. So a left libertarian would be much more interested in communal property, creating co-ops, that sort of thing. Whereas the right libertarians are much more pro profit-seeking organizations, pro-capitalist, depending on your definition of that. I don't want to go into the definitions of capitalism. But that's sort of how you can think about libertarianism, I think. Okay. And I presume you are identifying yourself more towards the pro-profit side?

Yeah, sure. I mean, in a practical sense, I'm a practical objectivist. If you've read Ein Rand, I basically... As a practical matter, I think that I basically run... run my life like an objectivist, although I don't really follow them on the metaphysical and other aspects of objectiveist thought. But yeah, I believe in making money and in private property. Now, with regards to Bitcoin and libertarianism, it seems definitely. from this side of the pond, it seems when we're looking at what's going on in the U.S.,

and especially as a podcaster, when you look at a lot of the podcasts, the Bitcoin podcasts, a lot of them are sort of libertarian leaning. Why do you think libertarians feel so attracted to Bitcoin? Well, around the world, money is a government-controlled, well, I don't want to say industry, but it's it's a government institution. Most currencies around the world are issued by governments, and the reason that the currency works as a currency, its scarcity is due to the fact that the government chooses how much to issue.

And their currencies are either like that or they're pegs, to the dollar, which is the biggest government-issued currency. So this is something that libertarians aren't happy with. If you have a government-issued currency and you have legal tender laws and capital controls, which make it difficult for people to use other. currencies and to make to make investments in response to a weak weakening currencies then governments can issue more money as a way to enrich themselves so if if you can just create a bunch of money and then spend it it is effectively that's like a tax on all wealth

among the holders of this currency. So if I print a bunch of dollars, everybody who holds dollars is ultimately a little bit poorer as a result. And all governments that issue their own currencies do this. Ultimately, this process can have very grave consequences. It can lead to hyperinflation,

you know, it can impoverish a whole nation. It's a very, it's not a very good way of making money work. So traditionally libertarians have been very pro-gold-based money. But gold has the problem that it is physical and it's costly to transport and protect. and of course, government-issued currencies are much easier. Effectively, they're digital currencies. We do have cash, of course, still, but most dollars are just numbers in a computer. And the only reason that they are scarce is that the banks have to check in

with the Federal Reserve when they move money around. And so there is this centralized consensus process that ensures that new money is only created on the Federal Reserve's terms. Now, Bitcoin is a huge leap forward over this system. It is a system that is absolutely capped at a certain amount. And it is a system that allows you to receive money anywhere without a bank account. Of course, send it to. It's like cash that can be teleported anywhere around the world. It makes commerce independent of government oversight much, much easier.

And of course, this is how we got all these new dark web business models like the Silk Road and its modern descendants. These are all very, very wonderful developments for human freedom and human development. Yeah. I mean, I guess one of the sort of the logical extreme one could take this. And I did this interview, a bit with like 10-minute interview with a guy. I don't remember his name, but it's in one of our Amsterdam episodes. And he was building software to have, like, purely decentralized government.

So he was actually somewhere in Central America, Honduras, I think, or something like that. And they were actually working on setting up city states there that would essentially, you know, comply to these, let's put it, like voluntary rules or ideas of libertarianism. And that would also be cryptocurrency base. So it was very interesting. And I guess we may see things like that. And then I guess there is sort of two sides that right on the one hand, you may have actual governments that run like that, which are like physically located somewhere, right?

They control land, et cetera. Or you may have these sort of maybe governing like or institutions that are purely digital, right, where people can just sort of opt in, opt out, go wherever they go. I mean, I think Ethereum, especially, for example, Gavin Wood, he always talks of Ethereum as crypto law. And I think that's very much this idea. So it would be very interesting, I think, to see to what extent we will have cryptocurrencies sort of realize that libertarian and anarchist dream. So I think it's very much open still, but it's definitely the case that it does. I mean, it makes a lot of sense to me why libertarians would love this.

Perhaps let's talk a little bit about, you wrote an article, an interesting article called, I think, to correct strategy of Bitcoin entrepreneurship. We will link to this in the show notes as well. But basically the idea is that NNF talked about it in this way as well, that you can think of Bitcoin, and then David Johnson talked about it in the podcast, we did with him. is you can think of Bitcoin as a sort of decentralized corporation and Bitcoin's representing shares of that corporation of Bitcoin as well, then your shares increase in value.

And you're an interesting article on how that sort of should affect the choices and decisions people make in building Bitcoin businesses. Can you run us a little bit through what do you foresaw on this topic? Yeah. Well, so first of all, let me just say to the title is a little bit facetious because, you know, there is never one objectively correct strategy of entrepreneurship. But, you know, I wanted to be provocative. And I try to argue that, you know, of course, Bitcoin changes all the rules about everything.

But this is something that I think some way that Bitcoin kind of changes the rules that people haven't quite, got up to speed on. So the idea is that if you are a Bitcoin startup, it is your growth is kind of capped by, excuse me, by the Bitcoin network itself. So you can't have more, you can't have a larger user base than people who own bitcoins. And furthermore, Bitcoin can live without you.

So you're a riskier investment than Bitcoin is also. Like if Bitcoin fails, then you fail. But if you fail, then Bitcoin doesn't necessarily fail. So Bitcoin startups are, as a general rule, they have less upside than Bitcoin and greater downside than Bitcoin. So unless you find some real exception, some absolutely phenomenal startup, generally it makes much more sense to buy Bitcoins than to invest in startups. And this is something that had been,

bugging some of me and my colleagues for some time is all of these VCs pumping money into Bitcoin startups which you know may may not end up actually accomplishing anything rather than just

buying the Bitcoins themselves well they're not allowed to buy the bitcoins I know that's that is that's sort of the problem right there they need to change how they do things so we came up with the term a

speculative philanthropist for what we want to have in the Bitcoin world. And that's someone who

invests in Bitcoins and then donates some of their time and money to projects

that will improve the Bitcoin network. And you can model a

startup based on this idea too. So you create an organization that just holds Bitcoins and you try to try not to spend too much of it and you try to improve the Bitcoin network so that your holdings go up. So it's not necessarily the service that you provide, which has to make a profit. it's really the service you provide has to make the Bitcoin network as a whole attract more people. Yeah. When the overall economy or when some part of the economy is growing so rapidly, there's a point where it kind of makes more sense to just donate to the economy, then to try to, you know, try to create your own little niche in it.

If I may jump in, I think I see like two problems with this argument. So the first one is that this only seems to work if, like, let's say, for example, an organization or startup is able to become a significant Bitcoin holder at the same time, right? If all you have to invest or if most of what you have to invest is time and effort, then, you know, you can invest that time and effort, but if your project doesn't, you know, doesn't generate profits, you may not profit very much from the increase in the Bitcoin price. So that's number one problem.

And the second problem is, of course, you have a free rider problem, is that, you know, you can presume that any one project is not going to dramatically change the course of Bitcoin. So you're probably better off, you know, doing something that just seeks to, you know, maximize your own profits and hope that other people undertake those kind of, you know, speculative philanthropist projects and that then you sort of profit from their projects without having to do any of the work. Sure.

Well, so if you don't, if you're not a big Bitcoin holder, what I would say is your goal should be to get as many Bitcoins. as possible. So trying to get a high-paying job, which maybe doesn't involve Bitcoin at all, and then try to keep buying the Bitcoins. Or, you know, if you are starting a startup, that this should be one of your goals for what to do with money that is invested in you is to try to get, large Bitcoin holdings.

And as for the free rider problem, I would say that anybody who is investing in Bitcoin is contributing to the overall Bitcoin economy. So I don't think there necessarily is a free rider problem here. If all you want to do is just buy a bunch of Bitcoins and, take a nap, you know, I would still say that that is a worthwhile thing to be doing. Right, but it's something very different from buying a bunch of Bitcoin and then building an open source wallet that would be used by thousands of people.

Sure, but I mean, I think that the empirical evidence shows that people are willing to put plenty of time and effort into creating open source projects such as wallets. So another good example of this, I think, is the company BitPay. So they provide a lot of free services, and they are also a large Bitcoin holder. And my understanding is that they've actually been following this very strategy since before I wrote the article. So good for them. Do you think this is going to continue to be a strategy that's viable? let's say two years down the line or like what if bitcoin is at $10,000 or what do you think if at a certain stage

where just the upside is not that big anymore that then this strategy will not be viable anymore right yeah eventually uh bitcoin will not grow anymore and then then this strategy will no longer be viable. At that point, you know, Bitcoin companies, you know, they'll be providing financial services and they'll have to earn a Bitcoin profit off of it. But as for the two years, two years that you mentioned, I mean, I really can't say. Bitcoin has been showing on average extraordinarily rapid growth since trading began. Um, so, um, and, uh, you know, it's hard to say win that'll end, but, you know, I, I think that will, I think that it will continue, at least in the immediate future. So, um, now let's talk about where, where, where Bitcoin goes. Just, uh, before we do that, uh, we'd like to just talk about a sponsor.

real quick, because we are running the 30 minutes into the episode. So I have to interrupt you to talk about our sponsor, which is ShapeShift. So have you ever tried to buy some all coins? Brian, when was the last time you tried to buy all coins? You know, good that you're asking me because I actually just used ShapeShift like yesterday or the day before. Yeah. Because I have this app called Dojureen, which is really cool, by the way.

so you can sort of make it rain doge coin but i wanted to put some doge coins on there so you basically you know i could take you know five milibit coin and uh send you to shape shift and they would put me the dos coins straight into the wallet took like less than a minute yeah so for those of you who don't know shape shift is the easiest way to buy and sell alt coins they support light coin pure coin dark coin doge coin name coin feather coin black coin and they're adding new coins all the time uh it's not an exchange it's really just a service where you can easily change bitcoin into any of these all coins and vice versa and and all these i mean you can change pure coin into dark coin or doge corn or whatever so the best thing about shift shift is you don't even need an account there's no need to

give them any personal information uh they don't even want your email address and trading with shape shift like Brian just said, takes just a few minutes, not hours, which is what it would usually take you to go on an exchange and create an account and give them your ID and all that stuff in order to be able to buy or sell all coins. So let's just walk through how this works. So you go to the website and there they've got a conversion tool. It looks a lot like a currency conversion tool if you ever used one. On one side, you have the currency you want to convert. And on the other side, you have the currency you want to convert to. So let's say we want to convert Bitcoin into Dogecoin.

we'd select Bitcoin on one side, Dogecoin on the other side, and you enter the amount of Doge as you want, for instance, and then you hit Start. And then all you need to do is send a specific amount of Bitcoin that they will calculate for you to an address, and you hit Go, and that's it. And how long did it take you, Brian, like 30 seconds to get those going in your wallet? Yeah, I mean, I think if you have the receiving address ready, it takes you like 30 seconds. Right. So it's super fast.

It's super easy. It's the fastest and easy. way to buy and sell alt coins. No accounts needed. No personal information is required. They're doing zero confirmation transactions now. So you don't even have to wait for one confirmation. You send the bitcoins or any other currency and straight away. That's it. So that's one of the reasons why it's so fast is they do zero confirmations. So your privacy is protected and you only pay a small fee, which is calculated upfront. And it's included in the amount of Bitcoins that you send them. So head over the

shapeshift.io, give it a try and tell us what you think. And we'd like to thank Shapeshift for the support of Episode and Bitcoin. So, Daniel, you were going to start talking about the future of Bitcoin. Is that correct? Because that's one big topic we have coming up. So if you sort of launch into it straight away, then that's fantastic, of course. Yeah, sure. So, well, you mentioned, you know, maybe Bitcoin hits $10,000 or something.

Or 100. So, of course. Yeah, oh, whatever, any, but so really the, um,

the, the, the, the, the, the, the reason that, uh,

money is valuable, whatever, whatever good we use as money, is just the fact that everybody else demands it. I, everybody, so say, say you,

you go on a, a desert island, well, you're shipwrecked, right? And the people on this island all use beads as money, things that would be completely worthless in your native land because they could be easily mass produced or something, but on this island, they don't have the technology for that. These beads seem like a worthless, you know, a thing to you. because you know of the technology that could easily mass-produce them.

But because you're trapped on this island and because everybody else on the island wants to grab lots of these beads as much as they can, it's rational for you to want some as well. because you know that if you have some, it'll be easy for you to spend them to get whatever you need from everybody else. So the reason that you want the money on this island is the fact that everybody else wants it. So there is sort of an inherent network effect with the use of money in an economy. in an economy. If we have a good that is valuable just because everybody else wants it, and it is competing with another good that is valuable for the same reason,

there's sort of a, there's an inherent conflict there. anybody who switches over, so between these two currencies, one of them will have the slightly bigger network than the other. So anyone who moves from the smaller network to the bigger network will be slightly advantaged over how they were before, because there will be just that much more opportunity in the slightly bigger network. but as a result of having moved to the bigger network, they've increased that network and they've decreased the currency network that they were in originally. So just by switching from one to the other,

they've accentuated the difference between these two networks, and they've made the smaller network even smaller and the bigger one even bigger, which accentuates the value difference between the two currencies as well. It makes it an even better opportunity for people to leave the smaller network into the larger one. And there isn't any end to this process. the smaller a currency's network is, the less useful it is. The less opportunity it presents to people who are holding it.

And the less reason there is to want to collect it. So there's this tendency between currencies and not just between Bitcoin and altcoins, but for all currencies, but for all currencies, there's a tendency for one to emerge and completely dominate and destroy the rest. We haven't – so – now, people sometimes say, you know, empirically, there are lots and lots of different currencies around. There's dollars and euros and yuan and so on, but this is a relatively recent development in world history. in the 19th century and early 20th centuries, currencies were almost always backed by gold, which effectively means that there was one currency, and that was gold.

It was only in the mid-20th century that we started seeing tons and tons of national currencies that are fiat, and not backed by gold. that that's where this proliferation arose and since then we have actually seen fewer and fewer currencies more and more and more currencies that were originally national fiat currencies become a peg to the dollar which effectively makes them just not not really a currency anymore they're just like another name for dollars And we've also seen that all, you know, or many of the national currencies of Europe come together into the euro. And of course, that's not a market process doing this, but it is the recognition that standardizing to one form of money is going to be beneficial for everyone involved. Now, we haven't seen a rapid, rapid kind of crash that just wastes a bunch of currencies and leaves one in its place because all of these currencies are managed by central banks, and these banks kind of collude to prevent one from gaining too much over the others. Now, in the Bitcoin world, there isn't anything like the central banks.

So there isn't there isn't any in any countervailing tendency to prop up an unstable equilibrium between any of these currencies. So I'm predicting that we will fairly rapidly see the alt coins go down to basically nothing, and Bitcoin continue to be the dominant one. And of course, if Bitcoin is going to succeed, it also has to succeed against all the other national currencies as well. So, I mean, I think that what we should be working toward is one world currency, which is Bitcoin. Now, this argument that you make that altcoins would ultimately disappear, are you making, based that argument only on altcoins that have a unique blockchain or would that also apply to some of these app coins? Maybe we can talk about app coins because you wrote an interesting article about how you feel that can't,

app coins are not generally a good idea. Would that also apply to app coins that are backed by Bitcoin? So counter-party-based apps, et cetera. Because that's a lot, I mean, that's very similar to what you're saying in the sense that much like a lot of newts, like you mentioned, currencies were backed by gold and then now some currencies are back to the dollar. It's very similar, right? I mean, counterparty and op coins are pegged to Bitcoin in a way.

I don't know enough about counterparty to be able to talk about that thing specifically. I know that it operates on the Bitcoin blockchain, but that doesn't mean that it is actually backed by Bitcoin. If it were backed by Bitcoin, that would mean that there would have to be some organization that was holding a bunch of Bitcoins, and which promised to give you a certain set sum of Bitcoin when you gave it a counterparty coin. And I don't think that there's anything like that, although, you know, for all I know there could be. If there is, you know, I apologize, giving the wrong impression. But do you actually, to be backed by Bitcoin, you actually need to have. somebody holding bitcoins and guaranteeing to provide them on request.

I guess there's a distinction by pegged and backed by the network in the sense that the network effect is there. I mean, yeah, counter party is neither of those, right? All it does essentially uses big on blockchain to encode data in that and then it has its own interpretation of data which is used to, for example, issue other currencies, or do other things. But so I don't know if this is your sort of field of expertise, but do you really believe that Bitcoin, especially when we start talking about maybe non-monetary uses of the blockchain, etc., do you believe that the Bitcoin blockchain

will be able to accommodate those and handle those and perhaps also scale with a demand that could very easily become perhaps even many times larger than credit card networks today, especially if we start talking about non-monitory transactions. Yes, so, I mean, that's a very difficult software engineering question. And, you know, I certainly can't say for certain that Bitcoin, will well let me say I mean I think certainly

theoretically I think Bitcoin can be the world's money it is a question how how rapidly technology will develop to able this to really work

I don't think that Bitcoin could immediately become the world's money now. There would need to be quite a lot of upgrades to the underlying software. And I think we need to assume that the data storage capacity is going to continue to get cheaper and the internet is going to continue to get faster and faster. But what I do say is that if you believe in Bitcoin, that that that that should be your end game is bitcoin is the world's money um and if if if that isn't then uh maybe you should if you don't think that's possible then maybe you should rethink

your involvement in bitcoin i want to come back to this in just a second uh with some other perspective on this but before we do that which is extremely timely also through our discussion We would like to run a second ad for second sponsor, Jems. And Jems is basically, well, one of the things they were doing. They're building a social messaging app, and they are also issuing their own currency, so one could call it an app coin, I guess. And so here's how this works.

So Jems is, yeah, it's a social messaging app, a lot like WhatsApp. It's also a Bitcoin wallet. And they use their own cryptocurrency, Jems. to basically incentivize behavior on that, like, of the uses of the app, and also to start off and sort of bring new people into the cryptocurrency ecosystem. So, for example, if you have that app and then you invite new people to it, you will receive gems, right? So if you think of WhatsApp that went to this huge user base,

they didn't incentivize actually financially the people to do that. And gems does. So that's cool. And of course, people just get used to using cryptocurrency straight away. Sebastian, do you want this app? I can't wait to use this. I mean, for one, for one, because I believe that GEMS has a real, there's real value in what it offers in terms of functionality, being able to have all your conversations encrypted. But also just the, I'm very interested in the model that they're trying to build where,

people get to pay you for your attention. And this is what we wanted for so long. So I really believe in this project. And I think like you said, it's very timely with this discussion. And we'll be able to get back into this and sort of debate whether or not this is a good idea or not. And of course, another side of this is that they are pre-selling that currency, which is sort of why we are running this ad. So if you want to sort of participate in that and have a stake in that project, you can do so

now and the pre-sails run by coinify so you can go to coinify.com and so that's coinedify with a k and uh you can um participate in that pre-sail now and that's actually another interesting use case when we talk about app coins is the funding model right because you are able to essentially sort of bootstrap these uh these projects and and the cheaper do that in a crowdfunding way which you can't really do otherwise right so if you do like let's say they did gems and they didn't use their own currency, but they used Bitcoin. Now, even if that, you know, Daniel, you're right and Bitcoin is going to be the one currency, this wouldn't help them in funding all the development and it wouldn't help them in giving users a stake in a

project. So I think that's sort of an interesting dynamic that we have. Of course, nobody thinks that James is going to be the world currency. That's not going to happen, right? It has a very specific niche use case, although that could be a very significant one. So coming back to our episode, I would, if we talk about, so there's one thing I've been thinking about recently. And I've, and that's the question is to what extent are you right, you know, to what extent will we have become becoming the world currency? I mean, I certainly hope so. It would be great, right? but I'm not so sure.

And one reason, and I think it's quite an interesting one, is the question of, you know, how good of a currency is it actually? So what if you, for example, could have a much more stable cryptocurrency? Because volatility does seem to be an issue for a lot of people. And I know Vita Libertarian has talked about this and also Robert Samson, and we're actually going to have both of those guys on over the coming weeks. So what are your thoughts on this? Do you think Bitcoin will ever be stable enough, for example, to be a unit of account?

And I made the example, I think, in a previous episode where, you know, let's think ahead 20 years or however long it takes. And let's think someone has to enter a life insurance contract now. And say for the next 15 years, I'm going to pay a certain amount of Bitcoin or some kind of, or let's say Bitcoin. and then I'm going to get a payment out. Of course, that only makes sense if you can have a realistic expectation of what's the real value of those payments. Do you think we'll ever get to the stage where Bitcoin will have such a stability that you can enter these kind of legal contracts confidently and without running big economic risks? Sure.

Well, so if Bitcoin does take over the world, will be stable, but Bitcoin will never be stable priced in other currencies. It will, it can only be stable if the other currencies are eliminated because of this network effect. So now, there isn't necessarily any inherent value in having a stable price. If the, if the, if, the economy is changing rapidly, then nothing is, then nothing, you know, things shouldn't be stable. And instability in prices reflects rapid changes in the underlying availability of goods. But you need stability to end contracts, no? Well, so I'm getting to that.

So I would say that the instability of Bitcoin is due to the fact that people are rapidly learning about its superiority as a currency. And I would say that if we are in an economy that is switching from one currency to another, then it's just a bad idea to give out loans. Like that's just not something that you could do very easily under those circumstances. You know, that's just sort of the underlying reality of switching from one currency to another. During that transition period, you know, I wouldn't give out any loans. If I could, and I apologize if I haven't intervened very much. I'm not very well, actually. But I just want to, although I agree with, I think I agree with the economic reasons why having multiple currencies is difficult or perhaps impossible.

I really don't agree with this idea that Bitcoin will be the world currency. And I think there's a lot of reasons for that. But one of the primary reasons, and I think one of the reasons why we need altcoins is that Bitcoin just has terrible marketing. Like there's nobody, I mean, Bitcoin as a product is just a horrible thing, you know. I mean, I believe it is. I mean, clearly Dogecoin is much superior in terms of the marketing, right? No, but what I mean is, what I mean, and not to, I mean, I mean, we are sponsoring gems, but I also really believe in that sort of product because I think that it brings real functionality

to cryptocurrency that people will use and value. And I really see a future where, perhaps not gems, but maybe some other app down the road and a few years from now gains like a massive amount of users. And, you know, you walk into a bar and they accept that coin because it's just like, you know, if Facebook started issuing money, you could expect that a lot of places would start using Facebook cash, right? Or accepting Facebook cash.

I really think this is how we're going to get to the Adopt. option of cryptocurrency is through apps. And these are the guys doing the work and the marketing and, you know, bringing people in. I don't think that's happening with Bitcoin. I mean, if I, if I may sort of point of my perspective, I don't see that happening at all. I mean, I think those currencies will happen and those, all those coins that are sort of app specific or function specific will emerge.

But those, you know, they will never be money, sort of universal money. There will be money in a very specific context. Not universal money, but I think we're going towards a diversification of money. Right. Yeah, the interesting other perspective, right, is maybe you don't need one currency, right? Maybe if you can have instant conversion everywhere that costs you a fraction of a percent, perhaps, let's say it's 0.1% or something. And I, as a bar owner, can say, I take cryptocurrency. Like, let's say something like ShapeShift is in the middle, and you can just pay with whatever cryptocurrency you want and the person gets, you know, Bitcoin or whatever cryptocurrency they want.

At least from a transaction standpoint, I don't see a problem with there being tons of them. Of course, the face flip side of that is when you talk about a store of value, then that becomes a different matter, right? because that is definitely instable, you know, when you say like, where do I keep my money in? If this composition of which currency is attractive and not gaining in value and not is constantly changing, well, that is a problem. Okay, well, you both said a lot of different things there. I'll try to respond to all of them, but if I forget something, you know, I can't remember everything. So first of all, you shouldn't think of Bitcoin as a product. Bitcoin is an investment.

And the driver of adoption is not, it shouldn't be thought of as what you can immediately do with Bitcoin. Well, I have an article called How to Market Bitcoin. And this is where I talk about the idea of counter signaling as marketing. I don't think I use the word counter signaling. But, you know, you try to market Bitcoin by showing that you don't care whether other people get it. Because that communicates your self-assurance that they are going to want, Bitcoin in the future at some point, whether or not they get it right now. So let's see.

Now, this idea about instant conversion between currencies, I would say that this means that one currency will win out much more quickly than if there were transaction costs from moving from one currency to another, because that makes it easier. to switch from the smaller network to the bigger network. Well, finally, let's talk about this idea of a store of value. I would say that a store of value is not the empirical fact of a good maintaining the same price over a long period of time. the cause that makes a good into a store of value is a difficulty of reproducing it and a difficulty of counterfeiting it or ease of verifying that it's real so like most most of what people use use

gold for is just storing it. I mean, gold does have industrial uses, but because it's, you know, relatively, it's relatively easy to verify that a coin is real gold and it's very difficult to increase the world supply of gold. that's what allows gold to act as a store of value. And Bitcoin has the same qualities, but even more so. So I would say that the fact that price is volatile doesn't mean that it's not a store of value. I would say that the fact that it is not reproducible and that it's easily, verifiable is what makes it a store of value. Now, of course, Bitcoin is different from gold because it depends on branding.

So in the sense that people have to know that Bitcoin is the biggest currency and it's the one that matters. And if Bitcoin were perceived as just another alt coin, then it wouldn't have, it wouldn't have that the store of value properties because it wouldn't have a brand, whereas gold doesn't require that. Cool. Well, I think we're sort of at the end of our show, but maybe one last thing, and you're not really going to have time to go into depth, so you just have to answer, Daniel, I apologize beforehand.

But do you think Bitcoin will become, you know, there are generally three things thought of as money, right? Three sort of functions that money can have, so that one is a medium of exchange, so it's something that's used to facilitate transactions. Second, there's a store value which we just talked about, and third is a unit of account. Do you believe Bitcoin will achieve all three,

and what order? So just very briefly, if you can do that, can you give an answer to that? Sure. I mean, I think that it already is all three, and I've written an article. We don't have time to go into units of account, but I've written an article called Bitcoin is the best unit of account. And you should go and read that one. Okay, cool.

No, that's a good answer. We'll add those to the show notes. So, yeah, we were at the end of Web to say, thanks so much for joining us, Daniel. Yeah, if people want to check out the Nakamoto Institute, is it, what's the URL? Nakamoto Institute.org. Okay, cool. So, and you also have a podcast. No, you started a podcast called, what was it again?

Texas. Texas, well, Texas Bitcoin Frontier. That's, that's the organization that started this. So we have a series on the history, let's see, the theory of money and the history and prehistory of Bitcoin. Now I don't remember exactly what it's called. but you can you can go search for search for those terms and find it we're going to we're going to start this this monday with a new format but we're not entirely certain what that's going to be yet okay perfect and you can find that on on youtube it's a hangout as well i believe yeah cool cool yeah so thanks so much we're going to be back next week uh we will have a hangout with alan scott he's the chief editor of coin telegraph actually i'm not going to be here because i'm going to be traveling to go We're actually willing to some Bitcoin workshop on starting a cryptocurrency bank. So I'll be on the plane.

But Sebastian will be doing it. Yeah, Brian, do you care to tell us about your setting? What's this in the background? Yeah, so I'm in the mountains in Switzerland right now. It's very nice. Which you can... You sort of let those candles behind you. Yes.

And Sebastian, you wanted to talk briefly. Well, let me mention it. So we're having a graphic designer, mainly, I think, to do album, artwork and maybe some other things. So, you know, if that's you, please get in touch. Of course, you pay in Bitcoin. Right. So we're looking for, specifically, we're looking for actually two types of profiles. We're looking for a graphic designer, but we're also looking for a web designer developer.

So the graphic designer, we're looking for to do our episode covers. So every time we publish an episode, we do a little episode cover, you know, kind of an album art. And I've been doing that and I've been doing it horribly in my opinion. So we're looking for someone who can do that for us professionally and sort of design those covers for every episode. And we're also looking for somebody who can work with us on our new website that we're building. So we're looking for a web designer slash front-end developer. Also, if you have any experience with WordPress, you can eat. email me directly at Sebastian at Epicenterbrickworn.com.

That's with an E.N at the end. S-E-B-A-S-T-I-E-N. And, oh, by the way, the hangout with Ellen Scott will be next Sunday at 1800 UTC. That's 10 a.m. Pacific, 1 p.m. Eastern. So there you go. Yeah. Well, thanks so much for listening. You can follow us on Twitter, have Epicenter BTC or leave us night with you if you piece to show,

which helps you do people. us and we'll be back next week. Thanks for listening.