Tech Brew Ride Home - (Bonus) Bitcoin- What the Heck? With CoinTalk's Aaron Lammer

Episode Date: June 30, 2019

I didn’t cover it, but you might have noticed that this week, bitcoin did indeed cross that magical $10,000 mark, in fact, got to $13,000 a coin only to flash crash back down again almost to $10,000. But look, seemingly the crypto spring is upon us and I was just curious as to why, so I asked Aaron Lammer, co-host of the only crypto podcast I listen to, CoinTalk to try to find out what is behind this rally. TLDR, it’s a little bit market cycles and a little bit Facebook Libra. Sponsors: HappyCog.com/ride Wix.com/podcast Subscribe to the CoinTalk podcast! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to another weekend bonus episode of the Tech Meme Ride Home. I'm Brian McCullough, as I always am. I didn't cover it this week, but you might have noticed that this week Bitcoin did indeed cross that magical $10,000 a coin mark. In fact, it got to $13,000, only to flash crash back down again to almost that $10,000 mark. But look, seemingly the Crypto Spring is upon us, and I was just curious as to why. So I asked Aaron Lamer, co-host of the only crypto podcast I listen to, Coin Talk, to come on so we could find out what is behind this rally. TLDR, it's a little bit market cycles, and maybe a lot bit Facebook Libra. Please enjoy. What we need to do is what is the Bitcoin price index?

I'm not sure. I think it's about J and there's a robot in the telegram. It's okay. Right now. At 8 a.m. it was 11,850. Okay, listen. Consider us recording. So it is 1124 a. Eastern time. The Bitcoin price index is 11,887. And actually, I do need to frame it because I haven't been talking about this all week. I think I did stay on last weekend's bonus episode that it was approaching 10,000. But okay, so to sum up the week, Bitcoin blew past 10,000. I think got as high as 13,000. close to 14,000. Okay. And then gave up about 20% of that in 20 minutes or something. All while Coinbase was down. All while Coinbase was, all right, see, I wasn't, again, I'm not listening or paying as close attention to this stuff. Okay, so the first question is the worst question, which is, why has Bitcoin roared back to life recently? Obviously, no one knows, but just in a general sense, like, what are the theories out there? Okay, well, so I think there's some macro theories, and then there's some micro theories.

The macro theory would be the grand time-based theory of Bitcoin, which is there is a halving of the difficulty mining algorithm that is due for next year, I believe. And so when Bitcoin crashed down to, what was the Bitcoin low, 3,000 or so? The Kang line? Yeah, it went just under the Kang line. This is for people listening, a joke we make on Coin Talk, which is that Jay said that he would buy back when it was 3200, when the price was over $10,000. And we made a lot of fun of him, and he was indeed correct. the price did go below the king line. So I think once it got that low, at least in my mind,

it was only a matter of time before it eventually rallied back. And that's because I fundamentally believe in Bitcoin. And also because I think there's a larger market dynamics at play in terms of things like this halvening of the difficulty algorithm. It has real repercussions for the supply of new Bitcoin on the market, which affects price. So that does not explain why it's happening now. That explains why from the low, I thought, within the next two years,

we should see a Bitcoin mega rally. And that's why I personally did not sell my Bitcoin. And also because it would have broken my heart to sell my Bitcoin for $3,200. In the more micro way, I think what people are saying, is that Libra, formerly known as Facebook Coin, formerly known incorrectly as global coin, move the market. And I could say several ways in which I think Libra has had a positive effect on Bitcoin price, from the very dumb to the somewhat elegant and subtle. Okay, so put a pin in Libra for now, because obviously we're going to come back to that.

I'm happy to put a pin in Libra for all time. Completely. Yes. Now I'm starting to experience the horror of realizing that Libra could work. It's actually easier to make fun of Libra than to be terrified of it, and I think we should be a little terrified of it. Well, we are definitely going to come back to that. But, okay, so now it jumped up, had the dip back down. You guys spoke a couple episodes ago about like some sort of a sharp rally decline with ledger status. And I think just generally, has it become consensus that the big rally 18? months ago or whatever was to some degree market manipulation. If that is the consensus, is there any sort of signs of that right now as well? Well, what is one man's market manipulation

is another man's market. So I think whether it's market manipulation or just the market kind of depends on your cultural perspective and perhaps your relationship to libertarianism, However, if you do fall on the market manipulation side, I think what people said was the primary driver was what is known as the tether printer, which is every time a bunch of new tethers hit the market, it's been followed by a massive Bitcoin rally. And to answer your question, yes, a bunch of tethers hit the market. So I think that can be a little misleading because a bunch of tethers have hit the market several times and not always caused a massive rally. But if I were to say I think that this move probably had multiple components of why it happened, I think most people would say that the tether printer probably played some role.

And is this rally Bitcoin specific or is it, is this rally Bitcoin specific? it largely being shared across the universe of alts and crypto generally? Well, I think the best way to look at that is to look at the Bitcoin dominance indicator, which is basically what percentage of the overall crypto market is Bitcoin, and Bitcoin is gaining, which is to say it's getting higher and higher percentage Bitcoin. So I would say the overall story here is of Bitcoin trouncing. alts and pushing them uh pushing them out to the periphery now alts did in terms of u.s dollar fiat gain value during this rally but bitcoin outpaced them and a lot of people look at the

65 percent amount people say that if bitcoin passes 65 percent dominance it will almost be impossible for alts to ever recover from that and it's at about 61 percent right now 62 percent so we're kind of we're kind of reaching alt oblivion here, at least for some people. Now other people would say that means it's a great time to buy alts, and alt season is right around the corner. Okay, we can't avoid it. On to Libra, which, by the way, I appreciate you and Jay turning me on to the fact that Libra's an astrological sign. What else is an astrological sign is Gemini, which is owned by the Winklewe. So these poor bastards have to be like, what do we have to do to do to get away from Mark Zuckerberg at this point.

Although, obviously, this is joking. We're not saying he's... It's all, there's been some very strong evidence over the last week that we're living in some sort of a simulation. I think that kind of summarizes it all. Like, this may all be a video game that's being played out between Mark Zuckerberg and the Winklewurst twins in the future. It's just kind of incredible that these two people who were like,

rich competing assholes when they were 20 are like back at it again in a totally different sphere. Okay. So fundamentally, the suggestion is that the news of Libra is good for crypto. It's going to mainstream crypto. That's fueling people, that's fueling a rally because people are like, well, this is going to turn so many people on to this idea. I'm going to make the argument. that fundamentally, I don't think that that's true, but what is the argument aside? The argument that Libra is good for crypto is just that it's going to mainstream it, right? That's not the smart argument, I don't think. What's the smart argument?

I don't think you can talk about Libra without talking about Bitcoin. I think that to even express what Libra is, is to talk about the difference between Libra and Bitcoin in a way that is inherently flattering to Bitcoin. Just like if I were to ask you to discuss the difference between email and Facebook Messenger, I think your tone would be, well, email is a protocol that's existed for many years. It's not controlled by any individual body. There's a good chance of being around in 20 more years. You can use it anywhere in the world.

It's not censored. it's totally functional. I think that when people start talking about Libra and they try to explain what it is, they immediately mention Bitcoin and immediately your brain compares the two of them and the comparison is pretty good for Bitcoin.

Because Bitcoin is fundamentally not controlled by anybody, not to mention one of the richest men in the world who's accountable to nobody, right? Correct. It's already works. We already know what it is. You can buy it right now. Libra is not even launching for quite a while.

So I think that when Libra gets mentioned on cable news, they end up having to talk about Bitcoin. I think that is probably bullish for Bitcoin. And in a larger sense, and this is probably the most controversial argument I've made on the show, I fundamentally believe that the hardest thing that Bitcoin is facing is the leaps between the dollar in your pocket and a Bitcoin in your pocket. You have to go through this elaborate system of taking a picture of your ID and signing up for an exchange,

and it's really beyond many people's capacity to buy Bitcoin. And then to have Facebook enter that market, first to validate that market and say, hey, holding a cryptocurrency is something you're probably going to want to do in the future. In fact, it's going to be so mainstream that it's going to be a part of the Facebook experience. That's a huge nod in their direction. And then when I look at these know-your-customer requirements that are stopping so many people from being able to buy Bitcoin, Facebook already has all that data. So this is a dystopian bull case for Bitcoin, but I truly think that within the next couple of years, people will probably be buying Bitcoin with Libra in some official capacity. leans on some of the identity work that Facebook has already done.

And this is actually, you can see it nested in the Libra white paper. They kind of shoehorn in that they see Libra not just as a currency, but as a form of decentralized digital identity. So if you look at all these stories and what they're converging on, thinking of Libra as a competitor to Bitcoin is kind of like, oh, okay, that's an easy step one. But what if Libra opens up this massive Bitcoin market? because it allows for simple transactions from your Libra wallet to, I don't think it's out of the question that your Libra wallet would allow you to hold Bitcoin in it.

Okay, but to use your terminology, this is my huge bare case. Like, if I'm in crypto, I would be angry and scared about Libra from the get-go, not only because it betrays these decentralized ideals. I mean, this is like, okay, we want to get away from central banks and things like that. oh, no, well, the solution is is handed over to Mark Zuckerberg. But then the more important thing is, is again, to use your terminology, once you train a bunch of people to use fake internet money, why would they, I don't, if I dabble in investing in euros, doesn't mean I'm going to get into drachma or rubles. Like once, if Libra works, why would anyone, you were just suggesting

it, that it would turn people on or turn people off and they'd want an alternative. But I don't know that that's true. I think once people have, okay, I've got cash, I've got credit cards, and I've got fake internet money, I don't need anything else. How much money have you ever kept in your PayPal account at a given time? Yeah, like $100 or less. Right. Right. So if a bunch of advertisers on TechMeme, all this said, hey, could I play PayPal this month? You'd be like, yeah, okay. And you would, let's say, immediately withdraw it. Yeah, let's say you have 10 grand in there. first thing you do would be like, how do I get this money out of my PayPal account? Now, a hundred bucks is fine. And I think I usually have, you know, the last 200 bucks I sold on eBay is usually in my PayPal account. And I usually use it to buy something else with PayPal and I just sort of wash myself of the money. I certainly wouldn't keep a part of my life savings in there. So to me, there's a future in which Libra is accepted lots of places. It's a very easy to use digital currency in the vein of Venmo or PayPal.

And you hold savings or the money that you like really, really are keeping for the long term in something like Bitcoin that's not controlled by a Visa or MasterCard. Because I think we all implicitly know that you shouldn't keep a ton of money in PayPal. I think Libra will be the same way. And I think people will be looking for a, you know, I think in the future, people may look at Bitcoin the way they look at like bonds. Like I have a bunch of bonds sitting in a savings deposit box. I know this is crazy right now because Bitcoin just shed 20% of its value in like 15 minutes. But in the everything goes to digital currency landscape, I would expect people to be trading between Bitcoin and Libra. Libra for everyday spending. Bitcoin as a more portable international wealth transfer.

So maybe you do send money home to your family in Libra. But maybe they don't want to keep all of that money in Libra forever. Maybe they swap that back to Bitcoin for the nest egg. I credit you specifically on the show. Thank you. As the person that when this idea of a Facebook cryptocurrency first came around, you were the one that made the coherent argument to me of why it would work, why it's brilliant. Do you still feel that confident about why it that it probably will work?

Granted, of course, we don't know. They don't even know all the details they have to work out yet. But can you see Libra catching on for someone like your mom? I don't think so. Well, my mother doesn't even use Facebook, so she's probably a bad can. it. Right. But I can see it, yeah, I can see it becoming as universal as social networking is universal. That said, I'm not sure I'm so much bullish that Libra itself is going to work. I see Libra as an imitation of a lot of the stuff that's happening around messaging, identity,

and transfers in Asia. And I think it's smart. strategy on Zuckerberg's part. I think he is skating to where the puck is going, which is something that Facebook has historically actually been pretty good at, reinventing itself in the model of what's happening now instead

of what was happening two years ago. So in that way, I'm like, well, he didn't make a terrible choice if he was going to rebrand what Facebook is here as not the news feed, but whatever Libra is, that doesn't necessarily mean I think it's going to work, though,

I think what he's imagining for Libra will work for someone. And that's sort of ultimately what I find bullish for Bitcoin is I actually see less competitors for Bitcoin than I do. Libra has to compete with the 90 other services that are doing similar things to this that are all basically allowing you a digital buck that you can transact with. Bitcoin feels more distinguished, honestly. And I don't know if there's going to be other American competitors emerging, but my impression is internationally, this isn't just like a market that Facebook walks in and scoops up immediately. Like, we pay and things like that are already huge. Yeah, let me, this is going to take a while to get through, but let me throw a theory. I got nothing but time.

Let me throw, it's a weekend special episode. On the, on the, it's a scale, okay? on the low end of the scale, this is just, you know, news feeds are on the way out, social networking, as we've understood it, all this time is on the way out. The future is the super apps like exist in Asia. That's the low end of the scale. Then the high end of the scale, I joked on Twitter that this is happening all because we didn't let Mark Zuckerberg run for president. But I'm kind of not joking about that in the sense. I sort of agree with that. Yeah, because here's how I mean that. you and I, if we imagine having a billion dollars, we're like, you know what, you're never going to see me again because I'm going to buy my island in the South Pacific, and that's it, right?

But on a fundamental level, these rich, powerful guys, like, at some point, like, you want to keep going. Like, you have all the money in the world and you want to do stuff. And if Zuckerberg, Zuckerberg saw all you need to have is celebrity and you can become president, that would have a great next 10 years of life for him, right? It would have been something different, and he would have, you know, continued to do things. So the high end of the scale, I'm starting to think, because have you seen, I mean, this is a real thing. Like, they're almost writing a constitution right now. Like, Facebook is putting together this, like, Supreme Court for adjudicating, like, content issues on the platform. And, like, the people on this board will, like, serve for

four-year terms and things like that. So as much as hyperbolic as it's been all these years for us to say, well, Facebook has a bigger population than any nation state. I'm not saying this in a Dr. Evil sort of way, but the high end of the scale I'm thinking now is, is that Zuckerberg is like, well, I didn't get to be president. And, you know, I do affect the lives of billions of people. So maybe I can create, I've already have a successful business, but what if I create a business that is beyond what we've thought businesses are, so that it is some sort of a hybrid of a government and a business. And again, it's hyperbolic to say, well, the first thing you would do is create your own currency. So, I guess, like I said, that was rambling.

I don't think it's hyperbolic to say a person who counts more than half of the earth as customers, creating his own form of money, is a form of becoming a nation state. I would say that's pretty literally, like, bluntly true. So that's my question. When you start issuing money, you are taking on the role of a country. Where are we on the spectrum, where the low end is just imitating the Asian apps and the high end is, well, you know what people have been saying this is a nation state all along? So, hey, maybe I can make it into some sort of hybrid version of that.

Well, the other thing is that by doing this, instead of running away from attention, which was Zuckerberg's historical role, he's sort of courting the attention of regulators. You have a company that's already under investigation, and people are already calling to break it up. And that company says, we want to issue our own currency. It's going to be based out of Switzerland. And it's not even us. We're like decentralizing it to some other independent body while we create judicial bodies to police our country. content. I see this is like a very clear like we see ourselves as some sort of transnational nation that emulates the way that people live today, which is often living and working

in a different country that they have citizenship from, moving money back home. They basically are like saying we're like citizenship 2.0 here. And part of that I think is inspired by the fact that Zuckerberg realizes that like the industries he landed in, like media, and which is really what like newsfeed has become, are just not very good industries. That's not an industry I would want to own particularly. I'd much rather own the banking industry. So I would look at this as Zuckerberg moving into the business

that's traditionally associated with either being a government or a large international bank. Right. And, you know, there's – and when you come to peace with this, it makes a lot of our current politics and situations make sense. There's the whole idea that people at a certain level have the sense that governments around the world are weak in the sense that no one really can stop you if you are Mark Zuckerberg and you want to create your own currency and you want to create your own quasi-government. Just like no one stopped Uber when Uber like broke all of the taxi laws all over the world. Right. So if that is true and people have come to that conclusion, then, you know, why not? Why not? Like, 100 years from now, the legacy of Zuckerberg won't be, oh, he created this interesting business.

He was the first to realize that business could be something beyond business. You know, something. We said on Coin Talk that if this works, the Wikipedia page will be like, did you know that Facebook was actually originally some kind of a weird social networking company before it became the world's bank? Right. Well, right, right. You read things about that, like in the 1900s. Like, oh, this guy was like selling like, you know, selling suits door to door. And then that company became the largest life insurer in America. Well, the best tech example of that is Nokia, which literally was a fishing company in Finland for years and then got into manufacturing. And then,

obviously tech stuff but wasn't um nintendo right some sort of like um what did they do they did like uh cigarette like uh cigarette like cigarette ad cards or something like that originally and then got i'm wrong about that people are going to gaming cards or something yeah right yeah it's like it's two or three totally radical steps between video games and nintendo but that's what happens when companies last for like 50 plus years Like the industry you started and just won't exist anymore. I don't think social networking is going to exist as a business in 10 years. Real quick before I let you go, and this is a little self-indulgent, but it's my show. And as I have said, and I'll say again, Coin Talk is the only crypto podcast I listen to regularly. I don't know that I know your personal story in terms of how, why, when you got into crypto.

Yeah. So give me the... Too late, too late, would be my main summary. Well, just real quick, give me the two-minute summary of why you got intrigued by it and why you still are. Well, I was like a pretty typical, like, you know, skeptic make fun of Bitcoin kind of person. I think I probably had the same attitude as most people who write for Gizmodo and The Verge, which was, Isn't this ridiculous? And I did follow it as an isn't this ridiculous story. I do think that the narratives that have been produced by the crypto era have been pretty

incredible. I mean, the Silk Road story was just unbelievable. You know, like, what a story. And I had also followed some of the dark web stuff that came after at, like, the Alpha Bay guy. I think, like, right around when I was getting interested in crypto, I remember actually the guy who ran Alpha Bay, which was the secret. successor to Silk Road, hung himself in a Thai prison. And they were like, he had this many Bitcoin and this many

Ethereum and these wallets and it was $80 million. And we'll never know how much Monero he had because Monaro is totally anonymized and it's impossible to break into a wallet. And I was like, whoa, what's this Monero stuff? What's going on over there? Monero was literally your entry drug. So yeah, I mean, and that I had already bought like a small, small amount of Bitcoin at that point, like $100 worth.

And I started reading about altcoins and something about that flourishing, even though it was ridiculous, like realizing that it was going to be many, many things each with their own slant and logo and something about it. I don't know. It tickled some part of my brain that's probably related to collecting and also being kind of always interested in like real nascent internet technology stuff like I was real into like bulletboard systems when I was in high school and I've always I've always found the sort of fringes of tech culture to be the most interesting and this just

felt like one where there was this like new extremely bizarre cultish con mannish fringe and so I wanted to like buy some alt coins and that kind of involved like of various learning how to do it kind of stuff, you know, too much time on Reddit, basically. And I was getting so deep into it and sort of also rapping my co-host, Jay Kang, who was a little bit just slightly behind me getting into crypto, but had already gone through the whole online poker boom

and his friends with a lot of online poker players who almost all were already deep into Bitcoin. So he was kind of my initial source for like, these are the alt coins we should buy. And like, here's how we do it. And it was so fascinating that it just sort of felt like it'd be fun to share in that weird voyage we were on. Last question.

And this is not mutually exclusive. And I don't mean this in any pejorative sense at all. But how much of it is you truly believing in the promise of crypto as a technology? And how much of it is? like, well, hey, this is a chance to get rich myself. I almost feel like those things are sort of the same thing. I think everyone sort of wants to make a bet with their time or their entrepreneurial spirit

or whatever that they get into something. And that thing also proves to be the thing. and it being the thing has some sort of personal advantage or financial advantage to you. I think like sort of investing in like becoming literate in internet stuff and programming, which I'm really pretty amateur at myself. But all of those things are sort of bets on a certain kind of future. I think Bitcoin takes that basic framework and just puts it on crazy steroids to the point where it really is gambling. And I would say I'm probably driven more by the market and price

than I should be. I think I'd have a pure view if I just thought of it as a technology. But the only way that Bitcoin works is a million people buy in. So it kind of has to have that greed factor to work. So I guess I don't spend too much time thinking about which it is. I'm always just sort of impressed by the elegance of the Satoshi design, which sort of runs on greed. Like greed is kind of its gasoline. Which is sometimes not a bad thing. Well, like, when you look at like, well, why is the chain secure? It's like, well, people are mining. Well, why are they mining? Well, because of greed. It's like, okay. All right, I'm starting to get this. You know, like, well, Why are people not doing a 51% attack where they destroy the chain?

Well, you'd have to have so many Bitcoin to do that attack. You'd be costing yourself millions and quickly billions of dollars by doing so. So in some ways, it's sort of protected by capitalism itself, which I think you could argue that a lot of Western nation states are also protected by capitalism. like when we think, well, why is this whole thing not going to fall apart? Or like, well, there's a lot of people with some pretty big investments in this not falling apart. I think that they're probably going to protect those investments. And for many people, that's meant keeping capitalism in place or keeping whatever version of democracy we have in place.

So I think when you start talking about Bitcoin, it goes very quickly from sort of a gambling discussion to a business discussion to a political. discussion because as we discussed with Libra, I think that ultimately these kinds of ideas, whether they're done by Facebook or Satoshi Nakamoto, are disruptive of what states do.

I've mentioned coin talk so many times on the show that I can't imagine everyone listening is not already a subscriber, but plugging Coin Talk, the podcast, anything else you want to because you do all sorts of things. I'll just say that if you want to go in here a very early take on Lieber before it existed, sort of outside of being spun. We did an episode,

I think it's called Mark Toshi Zuckermodo. It's in the archive that is about it. And that was sort of before anything was known about it. I also co-host Longform, the Longform podcast, which TechMeme Ride Home podcast has been a generous sponsor. So shouts to both of those entities. And I do other stuff. You can find it on my website aaron lammer.com thank you Aaron this has been great i love what you do