TFTC: A Bitcoin Podcast - #182: Vijay Boyapati

Episode Date: July 28, 2020

Join Marty as he sits down with Vijay Boyapati to discuss: - Tales of moving gold across borders - The Bullish Case for Bitcoin - Austrian Economics - The riots - Jevons Paradox - Bitcoin is in its embryo-tic stage - much more Follow Vijay on Twitter Check out The Bullish Case for Bitcoin Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app.

What's up freaks, it's your boy Marty Bent here to introduce this episode of Tales from the Crypt. I sat down with Vijay Boyapati to talk about a bunch of stuff including the bullish case for Bitcoin, personal experiences of moving gold around the world and the stresses that came with that, Jevons Paradox, we hit it all in the tight hour that we had. I think you guys are really going to like it. This episode was brought to you by our good friends at the motherfucking Cash App. you freaks know all about them but if you don't know about them let me tell you about them if you don't know about them you should learn about them because they're helping you stack sats and sats receive sats and they're making sats the standard within the app we're not

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Enjoy this episode. It's the Jay Boyer Party. wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. What is up, freaks? Welcome back to Tales from the Crypt. Tales from the Crypt? Tales from the Crypt. That's the name of this podcast, not crypt. I'm here outside on a Monday afternoon. It's 90 degrees where I am, braving the heat right now. But the heat has to be braved because I'm sitting down with somebody that I've been wanting to get on the podcast for quite some time

and wanted to do it in person, but obviously the nature of the world in 2020 has made that very hard. But regardless, we're here now and we're going to have an interesting hour long conversation about the good side of Bitcoin. I'd like to introduce you freaks to Vijay Boyapati. Vijay, welcome to the podcast. Awesome. Thanks, Mati. I'm really excited to chat with you. I wanted to chat with you a long time and we crossed paths at a conference we didn't get to chat very much but uh yeah i've been hoping i could chat with you for a long time so thanks for having me on yeah bitcoin 2019 last year we uh we met in person um did not get the chat at length so we're here now um again you're

somebody who's written some of probably the most timeless bitcoin content out there right now with with the bullish case of Bitcoin. Today, I really want to focus on, we'll get to the bullish case of Bitcoin, but you wrote a thread about just how nascent Bitcoin is as a protocol and how you did compare it to different types of embryos and they may look similar in the embryonic state,

but turn out to be very different when they reach maturity. We'll dive into that, maybe some Bitcoin marketing and what it's like living in the Chaz. But first, how did you get into all this? What incited you to write The Bullish Case of Bitcoin and what drew you towards Bitcoin initially? Yeah, so my background is I'm a computer scientist.

I worked at Google a long time ago and it was at Google that I got introduced to libertarianism and Austrian economics. And I was really, really interested in that stuff and spent several years sort of going down the rabbit hole of Austrian economics. And I was what you would consider a gold bug. I thought gold was a fantastic store of value. And it was just a good hedge against the Federal Reserve doing really crazy things, especially in 2008 and 2009. So I guess I was already kind of primed

to be interested in bitcoin i was interested in economics and monetary phenomena um and then in let's see i think it was 2011 2000 i believe it was two that i need to go back and look at the blockchain to see exactly what it was but i had a bet with a friend of mine about the federal reserve they had a federal reserve um one of their committee meetings to decide whether or not to increase the interest rate and um the bet was for a single silver eagle which is a one ounce silver coin and at the time silver was worth about 50 an ounce and i won the bet and i was waiting for my friend to send me a silver eagle and he said no no no let's um let me pay in bitcoin i was like like what's bitcoin and he was like it's this new form of money on the internet and i was

immediately interested but i didn't know what he was talking about um and it was just a small bet so i said sure whatever and then he said okay i'm gonna send it to you but you need to download this software and run it and i'm like okay i didn't know what he was talking about so i just downloaded you know bitcoin core and i started syncing and downloading the blockchain and it took hours because i was running it on this tiny dinky little laptop and i was like what the hell is this what am i doing here like i had no idea what bitcoin was about and so i was like why is this like because you know my conception of software is you download it you run it and it's it's working immediately but it was downloading blockchain i was taking a long time and and back

then the core client was less efficient and it just it took and the laptop i ran it on was really it was a piece of crap uh so it took a long time and then he said okay here's how you get an address and i got an address and he sent me um i think the price of bitcoin at the time was somewhere near ten dollars so instead of sending me one ounce of silver worth fifty he sent me five bitcoins and um he said now you can see that i've sent it to you you can go to this explorer and see that i've transferred the five bitcoins to you and block explorers back then were terrible they would i mean nothing like they are now it was just like an html table with a bunch of you know strings of random letters and numbers and i didn't understand any of it i'm like

sure whatever i don't know what you're talking about um i believe you you've sent me something and um that's really what started my interest in bitcoin those those first five bitcoins and interestingly enough that laptop was uh taken um by an ex-girlfriend when bitcoin wasn't worth very much i let her have it and i never got it back and i asked her in in 2017 i was kind of watching the price of Bitcoin thinking, wow, that laptop is now worth $5,000. Oh man, it's worth $10,000. It's worth, and it got up to what, like $100,000. And I think I contacted her when it was worth around, I think $30,000. And I said, do you still have that laptop? There are a couple of files on there I might want to get back. And she said, oh, I'm sorry, I lost it in

a hotel in minnesota uh so those those those five bitcoin are officially dead you can all thank me all holders of bitcoin i reduced the supply for you it's not 21 million it's 21 million minus my five bitcoin and of course minus all the other lost bitcoin um and you can verify i mean it's never moved those five bitcoins are sitting exactly where they first were when my friend transferred them to me so yeah that's uh that's the story of how i got into bitcoin and then then you know i i started looking into it and the thing i noticed immediately is this is a monetary good this has this feels a lot like gold and but it's digital and and one of the stories i've i've told a couple of times to people is um when i was a kid

um my dad uh sorry my my mother uh developed a brain tumor and got very ill uh and she ended up being fine she had surgery but but the story was that my dad was really worried we grew up in australia and he didn't feel like he could raise two kids without a support system around him so he wanted to move back to india and he had a bunch of savings in australia but no good way of moving those savings back to india there was no there was no way to transfer money to to india via banks back in the early 90s so he decided to sell all of his assets and put them in gold and carry a bag of gold to india now you know i'm sure most people have not done this but let me assure you it's a terrifying thing to do all of your savings in a bag carried on a plane

with multiple people um who are suspicious who want to know why you're doing this why do you have so much and then you get to india where you have very corrupt institutions and uh the police are very corrupt and so you've got to navigate that as well and i i vividly remember how stressed my dad was doing this and so when i when i first came across bitcoin and started to figure out what it was i was like oh i understand why this is valuable i i know exactly why this is valuable if you want to go to another country and take your savings this makes it infinitely easier than carrying a bag of gold and much less risky that is a huge value proposition right there and there are people across the world in places that are not the best places to live who have

built up savings and they're hoping to eventually leave and they have they have the ability to do that now with bitcoin so it was it was pretty obvious to me early on what its value proposition was um and it took it took me a few years to fully wrap my head around why is this valuable why can't people just call it and make a better one and you know wrap wrap my mind around the issues that i think a lot of people try to wrap their head around when they first come across bitcoin but eventually i think i had a pretty good understanding of why i thought it was important and valuable and the economics of it and that came from my background in austrian economics so you know the bullish case for bitcoin which you mentioned i i took me a year to write

that but i published it in early 2018 i had most of the ideas uh for that article in 2000 probably 2013 and i did a podcast with a friend um way back i think 2013 or 2014 and i he mentioned it to me recently and i listened to it and i was pretty gratifying i was like hey wow i did kind of understand a lot of this stuff early on um and it was interesting to sort of listen to and figure out where my understanding was a little bit weak and i figured stuff out over time um so yeah there there you go that's that's how i went down the rabbit hole it's uh an incredible story i can't believe your dad carried gold uh on a plane into india that's insane yeah i still can't believe it either like just think about how scary that is when you've got two kids and you sold a couple

of the houses that you own all everything you have is in this bag and it gave me i mean it's not it's certainly not as scary as what has happened in the past to some people but it gave me a sense of all the people who tried to flee europe in world war ii who who wanted to carry some savings out of europe like the fear of doing that um and at any point you could get you stopped at a checkpoint and someone says what do you have on you let me look at it oh wow this is really valuable why don't i take a cut why don't i take all of it that kind of stuff you only appreciate when you go through it and you have that visceral experience where you understand yeah i mean that's one of the things that really um sort of incited my aha moment even though i

was a bitcoiner for for a while at this point but really drove home sort of the value prop of the network and and the asset particularly is when i recovered um some bitcoin from a seed phrase when i was on a trip and had brought like a piece of paper with 12 words on it and actually found myself in a pinch where i needed some money i was able to recover words via an electrum wallet and send it to an exchange and replenish my bank account within a couple hours and i was like whoa this is this is real yeah yeah for sure and you know one other thing i guess i want to mention because i'm an i'm an american now i'm an american citizen uh and i i feel like a lot of americans take for granted how good they have it they don't understand what it's like to

live in other parts of the world where it sucks or it's scary and people want to leave and escape to a place like america uh so it's not not always immediately obvious to the average american like why why should i care about having being sovereign over my own savings why should i care about being able to cross the border with all of my wealth if I need to. I think eventually people will start to understand that. I hope things don't get bad in America. I think America is such an important beacon for human freedom in the world. I hope bad things don't happen here. But they could, right? It's possible. And it's possible that people may want to leave. But I find some of these things are easier to explain to uh people who've lived in a shitty place and uh and have

wanted to leave and have dealt with these issues of like how am i going to get my stuff out yeah well the political climate in america today would uh would have you believe that this isn't such a great place to live um there's a lot of people uh trying to change change america but i mean you've experienced this for experience this firsthand uh i guess before we get into the embryonic threat we can talk about your experience uh living in the chas what's that been like yeah so we chatted about this briefly before but um so i live in the neighborhood that the chas is in it's not right next to me it's probably about 15 blocks away from me um but yeah there were there were a couple of weeks where we heard helicopters over our house

every single night and it felt kind of like a police state um and you'd hear gunfire in the distance and we'd have like large mobs of people walking down the street past my kids chanting stuff some stuff which i i you know i find repugnant um and there was a sign posted on the end of my street which said wealth is murder uh and that i find that really upsetting because my parents essentially escaped india or left india to find a better life in the west and to see some of the ideas that impoverished india come over here and be spread by people especially there's this woman in the seattle council her name's um kashama sawant who's a she's an avowed socialist and and to see someone like her come from india and spread what i feel

like is an economic disease um from a country which was you know there was like 50 years where india was a third world nation where millions of people starved because of this economic ideology and she's spreading it here in seattle i i find that really upsetting because i came to america is the land of opportunity, the land of freedom, the land where people really value excellence and personal liberty. And to see someone cut people down because they're successful is just disgusting. So yeah, the experience has been jarring and upsetting. But, you know, on the other hand, I feel like it's still a tiny minority in America. There's a tiny minority of completely crazy people who are peddling this dead economic ideology of karl marx i mean it's the 21st century

who the hell believes in karl marx it's ridiculous so it's still a small minority but they're a very loud minority and in places like seattle they do have influence and that that's worrying it's something that i think uh america as a whole people who care about individual freedom need to pay attention to and realize these people are very very motivated and active they they want they i think want to tear down civilization as we know it and replace it with something that existed in soviet russia and and unless we engage uh and explain why that's a terrible idea maybe they have a chance of that happening and and if even if that chance is small it needs to be stomped out as far as i can as far as you know i'm concerned because my where i am in my life

and the success i've had is because of my parents leaving india if if they had stayed in india uh i wouldn't have anywhere near the economic opportunity that i've had in my life and the the fact that i've been exposed to a nation which values liberty um that's given me everything i have my family my wealth my success everything um so you know i feel this very deeply and very passionately uh and to see to see this ideology um rear its head where i live um it honestly makes me really angry no i mean i can't imagine especially considering what you've experienced throughout your life and i think it's a very good point to say that we need to stand up and fight back against this ideology because even though marx marxism is extremely stupid and an economic

disease i was completely agree with that i think the country is at a vulnerable point where uh people who are uneducated about the ills of marxism are easily manipulable and obviously the wealth inequality gap has been uh driven to a point where it's probably unsustainable at this point and people are looking for answers and maybe this ideology may um may seem appeasing to them but we i think believe we would argue like we got to fix the money if you want to fix this inequality problem it's trying to sort of shift people's eyes towards hey here's the real problem It's not wealth is murder and people who work hard and get ahead are the problem. It's actually the creation of money is really driving why you're disadvantaged right now.

Yeah, that's exactly right. I couldn't have said it better myself. It feels like it's becoming more popular, though. The Austrian economics, and I think Bitcoin is certainly a conduit for that. Do you find that to be the truth as well? Yeah, and I think we're really lucky to have the internet, which allows the relatively free flow of information. Austrian economics was really shunned and ridiculed

in the academic community because there's an old saying, I think it may have been Blaise Pascal, that power creates opinion. and the economics profession is completely politically captured they're they're dependent on government largesse and so they say what governments want spend more money it's good for the economy inflate the money supply it's good for the economy they they don't have any credibility because they're they're captured and they don't have any independent thought And so within the academic profession, I'd say that for every Austrian economist, there's 10 Chicago school economists. And for every Chicago school economist, they sort of pretend to be free market types. For every Chicago school economist, there's probably 10 or 20 Keynesian economists. so there are really a very very few austrian economists out there practicing in the academic

professions and it's usually very you know the low-tier universities that no one's heard of but the internet has allowed for the dissemination of different viewpoints and different ideas and i think this is um austrian economics has really taken off since the early 2000s and it was helped uh there was the first wave i'd say was the ron paul campaign um and that's really what got me super interested in austrian economics and i quit my job at google and i went and campaigned for ron paul um and then i think the second wave is bitcoin i mean there's very obvious connection between bitcoin and austrian economics and the the belief in the the benefit of sound money and a fixed money supply and and that the the money that we should use is a free market money

so i'm really excited um not just for bitcoin but the influence it's having on people understanding economics understanding what i think is correct economics um and you know the other direction as well people who are interested in austrian economics coming along and figuring out bitcoin as well like this is in my mind the most important innovation to money in a thousand years so it's this new subject matter even not from the investment perspective just from the i love to think about economics and this is truly new economics how are you able to create money out of nothing that's valuable it's it's a fascinating subject it is but i would argue that it's hard to to um have those austrians convert to bitcoin there's

a lot of gold bugs in that world i mean there are obviously there have been very popular austrians that that accept bitcoin i think jeff dice the president of muses uh institute right now he's a bitcoin fan um but there's some holdouts that that for some reason or another uh just seem to this mental blocker when it comes to bitcoin yeah yeah that's a good point and i think part of it is just um some of them are luddites and and just not uh they're not early adopters of technology and honestly is partly at least amongst austrian circles you can go back to um murray rothbard and you know i mean i'm a big fan of rothbard's writing but rothbard was a luddite he didn't he didn't like to fly on planes he didn't use he didn't like computers he didn't want to use a

computer uh he only used a typewriter to write the copious amount of content that he produced uh and a lot of his disciples kind of follow that pattern as well so there's partly it's that and Partly, I think it's a misplaced obsession with the physicality of gold, that it's physical, that it's tangible, that you can touch it, that that's what's important, that that's what makes gold valuable. And I think it's really a mistaken belief. And it was really only, I think, the neo-Austrians, people who wouldn't necessarily call themselves Austrian school economists, per se, or not purely Austrian school economists. It was the neo-Austrians that I think helped me understand Bitcoin, take my understanding to that next level. People like Nick Szabo and Mencius Molberg. These are people who were influenced by Austrian economics, but they're not really classic Austrian economists.

And those guys really understood it very deeply. And at a level I think most of the famous Austrian economists alive today do not understand it. actually i think i believe the first or second issue of the bent i shared mentions mold bugs um bitcoin is money bitcoin is a bubble or whatever the title of that article was where he dives into um it's the fact that money is is just a bubble of network effects at the end of the day yeah absolutely yeah and it really yeah that really drove it home for me uh sort of putting bitcoin in that context and understanding it from that point of view but you touched on the physical nature of gold and how some austrians cling on to that i think this is a good opportunity

to hone in on that and explain why bitcoin even though it's not tangible it's digital still has that that scarcity and that can drive value as well even though you can't physically touch it yeah i i think scarcity is probably of all the properties of money that make money valuable i think scarcity is the most important property there have been other properties that have been understood since the time of aristotle i think it was aristotle who first sort of elaborated or enumerated the properties of money to make it valuable portability fungibility verifiability um but i think scarcity is the most important one and nick zalbo has a fantastic essay talking about um the history of money called shelling out which i recommend to all your

listeners and he describes it as as um these scarce goods that people used early on things like beads and shells and whatever else they used as kind of proto money um though those things allowed people to transfer wealth across generations they weren't used in as money in the same way that money is used today as a medium of exchange where you go and buy a loaf of bread this was way before you know people were buying and selling loaves of bread in grocery stores obviously uh but it allowed something that wasn't possible with other species that were competing with humans and it's an evolutionary advantage that we had over neanderthals that we could do this we could figure out that there were scarce things which by themselves weren't valuable

but allowed us to transfer wealth between generations it's a very powerful thing um and so bitcoin i think gets its original value from the recognition that it's scarce and it it's been built in a way that it's scarce and it's digital scarcity and once you recognize that and that it has ultimate scarcity it's much more scarce than gold because the supply is completely capped gold while it seems scarce uh actually a technological breakthrough could make gold as commonplace as sand like if it became possible to mine asteroids then you're going to have gold everywhere uh whereas bitcoin has ultimate scarcity and that's a very very uh attractive property for money to have because you think if i just get a piece of this and

other people start demanding it my piece is going to get more valuable uh and and my fraction of the total amount of wealth if this thing becomes money can never go down it's never going to get debased uh so i think uh that was one of the drivers of bitcoin's uh value in the early days along with a few other things like it was used for illicit payments for a while um but i think the scarcity is what people really uh attach them attach themselves to from an investment perspective yeah no this is a great natural segue into the thread we want to talk about today too is you sort of lay out two narratives two competing narratives that have been going around for quite a while and bitcoin is digital gold and then

bitcoin has a fast and easy payments network and the fact that the network is so young sort of confuses people as to to which use case and narrative will win out at the end of the day And I think we would both argue that, yes, digital gold will win out, but that doesn't mean there can't be payments and systems built on top of the base layer. But I think we should dive into just how early we are, like you were describing when you got your first five Bitcoin and how to check it on a block explorer. And it was it was pretty, pretty rudimentary. um and things have evolved pretty uh to a pretty big degree up to this point but still even so with the lack of overall adoption liquidity frankly it's still confusing for some people like fees get more expensive does bitcoin work and i guess you laid out you did lay out these

trade-offs and in this thread pretty beautifully so i'd uh be interested to learn what what inside you to craft this this thread and and um how'd you come up with the embryo example because i think that's brilliant yeah so i wrote about this on twitter and i used the example of the embryos for various species looking very similar in um when the embryo is first made like they basically all look like tadpoles but in the fullness fullness of time you start to see the difference in these species as they grow uh a kangaroo and a fish look very different after you know a couple of years and the point i was trying to make was that in the early days you had these two competing visions of bitcoin bitcoin on one side you had people who believed bitcoin was

um kind of like a decentralized paypal a payment system that let you do payments very cheaply uh that couldn't be censored and then you had another group of people who saw bitcoin as is kind of like digital gold and it's very scarce and it's good to own some of it because if it gets widely adopted then it's going to be worth a lot and these competing visions kind of simmered in the background for several years and they didn't come to a head until 2015 when the scaling debate became important and people started arguing about whether bitcoin's block size should be increased and and that really culminated in the uh the network split in august 2017 when vcash was created and the debate before that was fierce people were vicious um with each other and

accused each other of bad faith and all sorts of nasty stuff online and i i i participated in those debates in various channels and you know i hope um i was always polite and assumed good faith i mean i remember having debates with eric vorhees a lot of debates over email with him about this um and my view from very early on was a bit bitcoin was digital gold and the the reason i think that was the case is that it's really really difficult to change bitcoin's protocol the core rules the consensus rules that define what bitcoin is and the reason it's difficult is that you you can change like you can change the software you can write uh different software that bitcoin runs on but that doesn't mean anyone's going to run that different software

i can i can create bj coin which increases a supply from 21 million to uh a supply schedule which constantly inflates and say hey i've created a better version of bitcoin and i've read a bunch of keynesian economics and i think this is better that doesn't mean that you marty bent to get to run my software you'll you'll look at this thing and say no way it's not what i want um so i think a lot of people viewed bitcoin as like a piece of software that's easy to change but i think a much better analogy is bitcoin as a protocol um and bitcoin as a protocol tells you that protocols are hard to change and they should be hard to change and one of the examples i gave in in the twitter thread that i where i wrote about this was uh power sockets uh you know power

sockets are all over the place and we depend on them we plug all of our devices into them and there are you know tens of millions of devices that rely on these power sockets being a certain shape uh so it's very difficult you can't just go and say hey we have a better power socket design Let's change it and make the shape different to what it is because then all these devices stop working So so to change the design of a power socket you would need everyone to jump at once You would need all power sockets to be changed at once and all devices to be upgraded at once That's a very difficult thing to do and the same thing is true with Bitcoin as well to change bitcoins block size you need everyone to jump at once and

And not everyone wants to jump at once because not everyone believes that having a higher block size is a good thing. You're sacrificing Bitcoin's most important property, in my opinion, which is its immutability. It's hard to change, which is a good thing, because it means it's hard to attack. if it's hard to change then it makes it hard for a government to come in and say i don't want you to send payments to this person or i don't want you to send more than ten thousand dollars without telling me before you send it uh if bitcoin was easy to change then those things could creep in over time maybe they wouldn't creep in all at once but they'd creep in over time uh so the fact that bitcoin's protocol is difficult to change made it clear to me pretty early on that it can't be decentralized PayPal. It can't have low fees because you can't just increase the block size as you would with a piece of software like Microsoft Office. Every time

you sort of get to capacity where the transactions are filling up the blocks, you can't just change it on a whim. And that's fine. If you believe that Bitcoin is digital gold, as I do, it's perfectly fine that the protocol is hard to change. In fact, it's better. It's what guarantees Bitcoin's monetary policy, a fixed supply, that fixed supply only attracts savings to Bitcoin if it has credibility. And the credibility comes from the fact that the protocol is hard to change. So that was the gist of the thread. And, you know, it's interesting because I think the scaling debate and the fact that the market chose the Bitcoin, which has immutability which is the legacy chain the original chain really settled that debate

and it's interesting that there's still some people who haven't figured that out they haven't figured out that that that's that was core to bitcoin from the beginning we just didn't know it until the scaling debate happened and i think it's one of the most important things about bitcoin versus any other altcoin it went through this test it went it it sort of passed through the fire and survived uh when all of these companies were saying no no no bitcoin needs to be upgraded it's a piece of software it needs to be upgraded all these incredibly powerful companies in the space uh and they couldn't do it they couldn't you had all of the biggest companies in the space trying to get this to happen and they couldn't do it which really to me cements

the fact that bitcoin has a credible monetary policy and that i feel confident having my savings in bitcoin knowing that there won't be more than 21 million bitcoins because you can't change the consensus rules it is incredibly different difficult um and i there was a fellow i've forgotten his name um who wrote about this he called it the ossification of the base layer the ossification of the consensus rules and his point was that we have reached a stage where it is essentially impossible to hard fork bitcoin now uh the people who are running bitcoin and the businesses involved in the space will not consent to a hard fork uh i wish i remember his name but he he also made the point at some point there's going to be an ossification of bitcoin to

the point where people won't accept soft forks either um and and i let me describe what soft forks are for people who don't necessarily know it's a it's an upgrade of bitcoin that's backwards compatible and to go back to the analogy of the power socket protocol you have this shape for the power sockets and you have these old devices but you can upgrade the power socket in a backwards compatible way and a backwards compatible upgrade would be something like the grounding hole so you imagine going back to like the early 20th century when there was just two prongs and you have all these devices with two prongs and then they think,

oh, it would be nice to have a ground in these power sockets and it's okay to add that extra ground because the old devices still work. That's a backwards compatible upgrade and that's what soft forks are. They're upgrades that don't kill people who are running nodes on the network and their nodes stop working.

So we're looking at Taproot as a soft fork that might happen soon, which will be an upgrade that if you want to run it, you can run it. But if you don't want to run it, that's fine too. Your node's going to keep running. But eventually, I think even soft forks are going to be rejected

and people are going to say, we don't want Bitcoin to change at all. We want it to be completely immutable. And any change that we want will happen at higher layers. Things like the Lightning Network and other second layer protocols that are built on top of Bitcoin. Yeah, this is cause for a lot of concern trolling, though. How can you know that the network will be secure and that a fee market will develop if there is a scarce supply of Bitcoins and scarce block space? How can this develop, Vijay?

That's a great question. It's not something I've written about in much detail, but Pierre Rochard has spoken about this and written about this a little bit. The way to think about the block subsidy is it's kind of a tax paid by hodlers of Bitcoin. People are holding Bitcoin to secure the network. uh and eventually that subsidy is going to go away completely i think in 2140 so in about 100

a little over 100 years uh and actually most of the subsidy is going to go away in the next eight years like 90 99 of bitcoin will be mined uh in in the next 10 years so then miners to secure the network and to to verify transactions they're going to have to rely on transaction fees and so if you want to have the same level of security you're going to need transaction fees to increase and and i think that's going to happen naturally just by the fact that bitcoin is growing in adoption and we have a one megabyte block size so it's going to fill up and you're going to have to pay more to get your transactions in there which is fine that's totally fine um and uh i guess the thing that i remember pierre saying is that the level of security we have now

isn't necessarily the level of security that we need to have in the future um right now if you send a large amount of bitcoin you can um the recipient can wait for you know three or maybe six blocks before they feel really confident that they have that bitcoin because you're not going to get a block reorg that that's the scary thing right you get bitcoin and then you get a block reorg and it gets taken away from you um in the future it could be that you need to rely on more confirmations that's fine like maybe instead of six confirmations you need to rely on 15 confirmations and i think that's fine because i think bitcoin is going to be used as a monetary base primarily it's going to be like the backbone of a new financial system and i wrote about this

a little bit in the thread we were just talking about um where i think people got confused about what bitcoin was and they thought it's a payment system and uh everyone can own like a tiny fraction of a bitcoin and send a tiny fraction of bitcoin i i don't think that's the case i think of bitcoin as um kind of like the way the gold standard worked in the 19th century where it's a backbone of a financial system and settlement happens between these big financial institutions where people transact with paper back and forth under a gold standard and then eventually the banks settle with each other you know maybe every six months or year by moving the gold from one vault to another and i think that's going to happen with bitcoin as well we just live in this

period where it's possible for average people like you and me to get a decent amount of bitcoin like you can pay you know nine thousand dollars and have a whole bitcoin um and to me that's the equivalent of living under a gold standard and having like 50 gold bricks in your house it's just that's a very unlikely thing for anyone but um rockefeller to have but because we're so early on we can do that we can have the equivalent of a bunch of gold bricks in our house but eventually i don't think that's going to be the case i think most people are going to have very very small fractions of a bitcoin that are owned kind of um via third parties not in the same way that you own stuff uh dollars uh in a bank but with uh relationships that use things

like lightning and multi-sig and that sort of thing so you don't fully trust them but you you have some benefit of using a custodian for transactional usage yeah and a lot of people get hung up on the term digital cash too and really misunderstand the word cash particularly thinking of cash that they use in a bodega like it's quick instant no fees uh when really the definition of cash refers to the bear instrument aspect of this token and that really throws people through a loop when they they see that fees are going up and they expect it to be like a hundred dollar bill at a bodega when when really it's it's a digital bear asset more akin to the gold that banks are trading as reserves between each other right exactly right

and yeah cash is essentially it's the meaning of cash is bearer instrument something that is valuable in and of itself and is not an obligation to something that's valuable and and cash in uh the 19th century was gold the physical gold uh and you had um it was really inconvenient to move the gold around so think other things developed like promissory notes where you got a note of paper which said this is worth one ounce of gold and you transacted with that because it was easier and safer and more secure to do that um yeah but you're right a part of the problem with the debate was that early on people saw cash and they were like oh that means transactional usage it means low fees no it means that it's something that's valuable in and of itself

yeah and then another thing i think we should try to debunk right now is dive further into the fee market and the ethereum so say you need a minimum viable issuance but you were describing uh taproot if that gets implemented and it would make utxos it would give them more utility at the end of the day right you'd be able to do more with By combining signatures and you have cheaper multi-sig and a bunch of other stuff, more scriptability, I believe, as well, which makes a UTXO more usable and makes it more useful. And this is actually an idea that Pierre Rochard accepted in my brain a while ago. And I'd be interested to get your thoughts about applying Jevons paradox to Bitcoin UTXOs as they become more efficient and more useful. It'll drive demand, therefore driving more transaction volume and value at the end of the day.

Well, I confess I'm not familiar with this paradox. I have not heard Pierre talk about this. but yeah i i from what i understand i'm not an expert on taproot myself but i do understand that it's going to make multi-sig much more powerful uh and make it more powerful in the sense that it'll be very easy to do m of n where m where m and n are arbitrary so arbitrarily large multi-sig and it'll also make it so uh you reveal less when you when you do multi-sig so you can have like a bunch of people who have partial control of an address but you don't know who any of those people are that's very powerful as well where you can enter into arrangements

with other people and they don't know who you are you don't know who they are things like that add to the privacy of bitcoin and i think that's a very powerful thing as well um you know sorry i'm going on a tangent not answering your question but i i actually think the base layer starting out not being very private was totally fine uh and i i kind of view the lack of privacy in the base layer as a trojan horse that gets um governments and law enforcement agencies to kind of uh ignore bitcoin and say hey this isn't that bad it's not going to used for criminal purposes because it's very easy to trace and the trojan horse is that it it gets in a much bigger threat to uh nation states which is a monetary base which they

can't inflate but i have confidence that over time privacy will improve either at higher layers or in the base layer and taproot is something that i feel like will improve privacy at the base layer by allowing multi-seq where the parties don't really reveal anything about themselves yeah no i completely agree and yeah so jevin's paradox basically states it's a paradox because and it's applied uh most famously to the oil industry where as you become more efficient with an asset or a good uh it's a paradox because you think you'd use less of it and you can do more with less but you find that you're actually consuming more because it's more powerful and utility yes yes now thank you for giving me the summary now and

now i know what it is now i actually have heard of that i think a good example of this is uber with the taxi industry uber made transportation much more efficient by you're providing a nice app essentially providing a nice app and providing a review system so that you could weed out bad drivers and reward good drivers and that small insight made the taxi industry much much more efficient and it wasn't the case that because it was more efficient people like oh i don't need to use it as much because it gets the job done more efficiently they said i want to use this a lot more um yeah that's a great point i can i totally see that that people's desire for using utxos would go up as their their ability to use utxos in different ways like as we're talking about

better multi-sig through taproot there would be greater demand for utxos and the greater demand would spur the fee market as well um yeah i had not thought about that's really cool argument yeah no i think i think we may see that play out it's just a theory right now and yeah pierre pierre and i have discussed this in back channels i think uh and i've been trying to to elaborate rate more on it more recently because i i just personally can't stand the 21 million caps going to shoot bitcoin in the foot and you need a one to two percent inflation tail inflation rate if this is going to survive you know people are so indoctrinated with this inflation ideology because it's taught everywhere it's taught in schools the pop the media the mass media believe it it's just

ingrained into society that uh we can't have a fixed money supply and i mean it's it's been ingrained into people for almost a century now since gold was demonetized in the u.s i think if you went back to the 19th century and told people this they would laugh in your face uh so we just live in strange times that you you have to even explain this like that it's good to be able to keep money that doesn't get inflated away no i think it's especially important to understand as we live in this deflationary environment from a tech perspective like everything around us is getting cheaper to produce yet people can't save money still it's it's pretty insane yeah i think that's that's a good point as well the tech industry is an example

where you have massive deflation where the price of things go down all the time and one of the arguments that a keynesian will use for why you need inflation is if you live in a deflationary environment why would anyone buy anything like why would you buy something if you just hold your money and then uh it'll you can buy more with it tomorrow and so they think that because of that people not buying stuff the economy will go into a tailspin and crash and we'll be in a perpetual depression but look at the tech industry do you like say i'm never buying a phone because i can wait longer no you say cool there's a phone here that's way better than my phone and i get benefit from using it now i know that they're going to get even better but i'm going to buy something

now with my money because i get such a tremendous benefit from it so this argument that deflation causes depressions and i mean if any industry is vibrant and um you see see innovation it's the tech industry we gotta and uh no i agree and it it's crazy how indoctrinated people are in that in that mindset oh we need inflation deflationary spirals will happen so that's a paradox i don't agree with is the paradox of thrift and this idea that if we have a deflationary currency people are just going to hoard and i wrote about this in the newsletter i think a month or two ago it's just completely i mean it's a keynesian line of thinking that everybody's just a data point in a model and they're going to act as the model predicts they will which is completely asinine

where people have different time preferences they've accumulated capital with different starting points and different amounts of capital and we'll deploy that differently individuals are going to make different decisions based on what their needs are at any given point in time i always found it really funny because i remember having these debates in when i was at google before bitcoin and i was explaining to people why i thought gold was a better money and people would say well it's deflationary that's bad no one's going to spend it and i was like we use a simple thought experiment imagine if i have like a few gold coins and i have no house and i have no clothes and i'm lying in a gutter on the street but my gold is getting more and more valuable

and suddenly my 10 gold coins can buy a massive mansion and a nice suit and a car am i going to stay living in the gutter or am i going to spend my gold i'm going to spend my gold maybe i won't spend all of it but i'm going to spend it it doesn't take much to figure out that people will spend their money when they get benefit from spending their money yeah everybody's brainwashed it's great not everybody obviously we're not uh maybe we are we just brainwashed in a good way right and uh well you brought up earlier yeah the fact that right now in its current state bitcoin is pretty easily traceable and this is probably a topic we we can end on i know you got

go here soon is uh the twitter hack and it's becoming evident that that hacker was an idiot and probably will get caught and arrested due to the way in which he moved his transactions but a big debate sprouted up as all these accounts were getting uh taken over and and um tweeting out uh basically a bitcoin scam hey send me bitcoin i'll send you back 2x whatever you send me and a lot of people were were uh saying that that's bad press for bitcoin but i think you would argue otherwise i know i think it got it exposed a lot of people to bitcoin and i've made the point in the past that it takes time before you your interest in bitcoin develops to the state where you realize that it's worth having some savings in bitcoin and i call this a number of touch points

and for different people they need a different number of touch points and those touch points could be hearing about it on the news or hearing about it because of a Twitter hack or hearing about it from a friend they trust. For me, it took a couple mentions from people that I really trust as being smart before I realized, hey, I need to pay attention to this. So I kind of view it as any press is good press

because you're just getting more touch points. People are being exposed to this. and eventually you know the average person is going to hear about bitcoin from 10 different people that they know about and they're going to be like why do i not own any of this so i i don't see it as a bad thing and even in the early days uh when bitcoin was being used for silk road a lot of people who didn't want to use it illicitly got exposure to it and they read about it there are a lot of stories from the early days where people who read about bitcoin in wired and it's used in silk road thought what is this thing and they went and bought some uh so i think

people's exposure give give them a chance to understand its utility and its value to them um and uh money is always going to be used for bad things because it's the it's the the global medium of exchange you can't get around using it and if we're going to talk about money being used for bad things the u.s dollar is used for orders of magnitude more worse things than bitcoin is bitcoin's usage for illicit trade is small potatoes compared to what the u.s dollar has been used for funding wars drug cartels saddam hussein was found with pallets of u.s dollars hidden in the desert in iraq so if you're going to talk about money that's used for harming the world and used for for criminal activities it's the u.s dollar

yeah i mean we're witnessing that today as family members of the judge presiding over a class action lawsuit against deutsche bank for helping jeffrey epstein move money between bank accounts um sorry about that um it's i mean it's being it's being really driven to the fore today that this elite pedophile was using the u.s dollar and skirting kyc aml aml laws at that to do pretty nefarious things um i guess we'll end it on that weird it ended on the jeffrey but uh do you have any any parting thoughts or or anything you want to get out there before we wrap up here i i feel like we're at a really interesting point in bitcoin's history where it's on the doorstep of being very widely used and being geopolitically significant i don't think

this is my just my opinion i think bitcoin achieves geopolitical significance once it attains a large fraction of gold's market capitalization and right now i think gold is still worth somewhere in the order of 20 to 50 times more than bitcoin so a lot it's a lot bigger than bitcoin and but gold has geopolitical significance nation states around the world look at the price of gold and when the price of gold spikes they start worrying because it's a signal that their monetary policies are failing and that people don't uh take them seriously anymore and that their savings want to leave those currencies and go into something that they can trust when bitcoin gets to that level i think it's going to have that same geopolitical

significance and i think we're one one maybe two bull markets away from that happening so i think now is a really good time to learn about bitcoin um there are some fantastic resources out there to learn about it your your podcast being one of the best so i just encourage people to to learn about it and find people who are open-minded who have experience or background who might be interested in in bitcoin and tell them about it and and why you think uh they would benefit from having some of their savings in this non-sovereign uh unsensible unconfiscatable non-debasable money go out and tell people about it like you do yeah well you're too modest vj uh your bullish case uh for bitcoin is probably

the piece i most share with people who are looking to learn about bitcoin i send them that and then i send them to parker lewis's gradually then suddenly and say hey do your research dive in all this and and you'll come out with a better understanding of what's going on so i want to thank you for uh putting out such incredible content and just this conversation alone i think people really appreciate this episode because i think you do an incredible job of breaking down these somewhat complex topics in very lucid form. Yeah. And I can't wait to do this again.

I can't believe it took us this long. Hopefully we definitely won't take us this long to do our second episode. Yeah. Definitely. And in person, hopefully. Well, I hope you enjoy the rest of your afternoon. Again, thank you for your time.

And it's been an honor talking to you. and seeing your beautiful kids behind you. Thanks, Marty. I had a lot of fun. Cheers. All right. That's all we got this week, freaks. Peace and love.

Take care.