TFTC: A Bitcoin Podcast - Tales from the Crypt #65: Johnny Dilley, Tom Garrambone & Matt Odell

Episode Date: April 2, 2019

Join Marty as he sits down with Johnny Dilley (Founder of Mempool Partners), Tom Garrambone (Founder of Tetras Capital), and Matt Odell (Bitcoiner) to have a roundtable discussion covering; Capitalism v. Socialism, Bitmain, 21co, nature, dinosaurs, what could kill Bitcoin, and much more. Check out mempool.io Check out tetras.capital Follow Tom on Twitter: www.twitter.com/tomgarrambone Follow Matt on Twitter: www.twitter.com/matt_odell Follow Marty on Twitter: www.twitter.com/martybent Smash that subscribe button, freaks!

what is up freaks welcome back to tales from the crypt it's your boy marty bent we have a very interesting podcast set up here we have a group a group here i'm sitting with tom garambone who freaks know from uh co-founder of tetris capital now he's been on the pod before it's a nice two part conversation you guys can go check out uh also have matt odell in here for this conversation as well cheers freaks and a very special guest a very prominent bitcoin economist john dilly john welcome and i my company's mempool by the way and from mempool yeah yeah um so yeah we've been shooting the shit for like a half an hour tom was a little late had to wait for him apologies i want to jump in we're using uh the 21 computer box as a mic stand and you told it

a very interesting story dude it's gonna be like that's gonna be a valuable antique one day yeah like you're gonna have it on your shelf and get to tell your grandkids a story about how this one time a company that eventually pivoted into an email company tried to build a useless desktop computer they had uh you had an interesting story about them testing out chips oh man 21 21 that company uh yeah like the the fact that they cooked their chips because they didn't understand basic encapsulation of at the physics level when it comes to using uh oil for removal of heat from from a mining farm uh there's a reason why companies like 3m take you know years to test their their their facilities um so they they um their first major run i think it was a 28 nanometer

i could be wrong about that uh they bought 20 million dollars in chips and just dunked them all in the 3m stuff and because they didn't dimple the chips they just cooked all of them simultaneously yeah you think they would test they would test one you know this actually goes back to exactly what he's talking about no one does due diligence anymore and for anything it's just scammers scamming scammers scamming scammers so it seems like this is something you're passionate about scammers very uh which scams should we start with first i don't know i actually think it's a general problem in the world yeah no one wants to do any work anymore why is that i don't know like there was like this weird there's like this weird transition that's that's happened where it's

like everyone just wants to fucking netflix and chill all day or whatever and no one wants to do any of the work to actually like improve society i actually think it goes to a broader thing you and i've talked about before yeah which is that humanity is in a race between socialism and capitalism really capitalism is racing towards a post-scarcity environment and socialism is racing towards everyone's the exact same person regardless of who you are where you're from how much money you have both of them are laudable goals to some extent some of them are insane some of them are not um but it it's just i don't i don't know i don't know what's happened no one wants to do any damn work that's something that we've been talking a lot about is there's like there seems

to be like a detachment from reality in every aspect of the world i think i just boil it down to just like oh i gave them we were talking about scams whatever i don't think there's I like if you can explain something by human stupidity over malicious intent you should probably go with human stupidity so you can generally make sense of most things by just boiling it down

to human stupidity so in terms of like due diligence KYC stuff they don't do that much work but there's like this bare minimum threshold that everybody's gotten used to this paperwork bureaucracy and it makes sense

It's like the bureaucracy – it's complicated in some ways, but it doesn't go deep enough to actually – Oh, yeah, exactly. But it's a mess. Like to go through it is a mess, but it's actually not testing for – Anything useful. Yeah. So I work with some major banks, and they're lamenting – Canadian banks I'll talk about first. So they're lamenting – they have like three challenges.

One, the regulators like them to basically fill out all this paperwork about all these things they're doing. The paperwork doesn't really do anything. It's just the regulators being able to say, I got this form. Yeah, checklist. So they're like, all right, well, that doesn't actually do anything from the bank's perspective when it comes to minimizing their actual exposure to risk or their actual exposure to what might be money laundering or might be nefarious activity either externally or internally to the bank.

Second one is this new rule in Canada in 2018 made it so that the banks are responsible for the privacy of the data of their users, and they're not allowed to share user data between themselves or other banks. And then at the same time, the bank has a mandate to know the risk profile of their users. So how can I do that if I can't query information from someone else?

I don't understand why this is the case, but regulators are regulators. So I don't know. There's a difference between, like you said, there's a difference between the the threshold that people can say that they've they've met the law and what's actually useful and doing the actually useful work is increasingly done by fewer and fewer people yeah it's like let's get to a point where it's so arduous the sunk cost of complying for a lot of these companies and it just seems like regulations are never being uh taken

away they're always being added like is there are we hitting a head where it's like all right we need to fucking rework the way this whole system is from a compliance i think everybody's been saying it forever right but like how is that going to change like the and we go through periods of deregulation trying to simplify processes but the it's always going to revert back to just complicated paperwork mess because it's it's like how just governance and governments and work um like there's always this knee-jerk reaction to try and solve like small problems and not look at the large scope of things so it's like you know if we didn't have more rigorous uh like this is kind of what socialism is it's the like we'll always revert to socialism because we always want to solve every

problem like we always want to put a stop sign or a uh a light at a street where there was a car accident and so you look at the everybody looks very micro to solve problems and so that then just creates bureaucracy and a bureaucratic mess that just will always happen it's always backwards looking it's never really forward looking so so this is this is the problem with some of aoc's shit where she's talking about how now that corporations who are providing leverage credit or financing should be responsible for the outcomes of the people that they're providing leverage credit or financing to and then it's like where does that stop does it stop does does it end up with like the shareholder in the company who provided the leverage to the company that

provided the service to the person fucked up is that person culpable because if that is financed as we know it doesn't work anymore because that means i can't i can't lend anyone money without knowing everything they're going to do with the money beforehand like the madness and associated with like the amount of fucking diligence you'd have to do with that is absurd you can't know what someone's going to do in the future. People eat it up. They fucking love it.

It's a lot. And that's like, it gets back to what you said earlier. It's a race against capitalism and socialism. What's winning in your opinion? Capitalism.

Yeah? Well, yeah, because profit is king, dude. Like, cash flow is king and socialists don't make any money. So it's just like, so that ultimately is one of the reasons

why they fail. It's why New York is pissed about the loss of the Amazon process. Like, six out of ten people or seven out of ten people is like, what the fuck?

Like, yes, New York has broader infrastructure problems that need to be challenged. You don't solve those challenges by driving away tax dollars. They were getting a $9 billion tax break, though, dude. Or $3 billion. What was it? That money doesn't exist. It doesn't exist. Like, you have to earn money in order to give a tax break in the first place.

It's absurd. AOC is the biggest blessing that I've seen in the last couple of years where it's finally divided liberals in terms of what they actually are. There's been such a unified liberal mindset of how things should be. This is the first time I've ever seen there actually be large debates internally on the left. You know what a debate I would love to see? I've said this on this podcast before. It's AOC versus Thomas Sowell. two people from two neighborhoods that are very close together

with very divergent views on how the economy should work. And that's a lot of AOC's platform. There's a lot of virtue signaling for people in certain neighborhoods and certain conditions. Yeah, and look, I understand. The world sucks for a lot of people, and it sucks in a lot of cases, and it does. The world is not a fair place.

Yes. And that's the difference. This is why I don't think it's worthwhile to be an activist because the way you change the world is the use of a substantial amount of money, not by clamoring to take from other people to try and solve what you want to solve because I think that's theft. No, I would agree. But it's crazy how many people are buying into it these days

after the long history of socialism's failures. It's a very sexy idea. It's very appealing. If you have nothing, it's super appealing to suddenly be given something for nothing. What about Yang Gang and the freedom dividend? That's a whole other thing. Let's secure the bag. are we secure in the bag this election season i just think it's uh i i think it's natural it's

natural there's an inclination to socialism always i think um we were talking about this yesterday marty that i think in like i was like 14 15 i was a hardcore socialist that and like when you start getting interested in politics you want to enact change and like you feel powerful about there's something very seductive about that and it takes a little bit of wisdom and life experience to understand how bad that could actually get uh like it takes wisdom to understand that your thoughts of utopia are like you can't fix nuanced problems exactly not i would love that you said that life isn't fair that's like one thing that my mom mentally beat into us was like life's not fair get used to it it's literally drives the it's one of the

fundamental conditions that you have to understand is that you have to try you have to compete you you have to do something to be useful like and if you're and if you're okay and this is one of the reasons why i'm so alarmed by the green new deal shit too i mean yeah it'd be great if we had a trillion dollars in in renewable energy build out across the united states that would be fantastic i'm all about it but if you try and couple that with social activist change like the original language was she wanted to provide um a universal basic income for those unwilling to work unwilling Dude What the fuck

It was a typo The whole sentence Do you have any idea what happens to society If you allow people to just Sit on their ass More people are like oh I'm going to sit on my ass too Why would I bother working for marginally more If I can sit on my ass

And have enough Now if we're in a post scarcity world Where gold is a penny, platinum is a penny, palladium is a penny an ounce Because we pulled some asteroid shit out of the sky and we quintuple trillion the total supply of those rare resources and everything's cheap

as a result fine like fine if the production of shit costs nothing then it doesn't matter if we give shit away okay

we're not quite there yet we're a ways from that I actually buy into Bezos' idea is that we should the race is towards post-scarcity as fast as possible

it's different from Musk's Musk's approach is like build a secondary lifeboat for humanity Bezos is like fuck that let's fucking asteroid mine

yeah let's asteroid mine soon as possible yeah and so that's tied into bitcoin on this podcast yeah like how does bitcoin sort of change well humanity needs a sound money unit okay why do you believe this a lot of the problems that occur in intermittent and ongoing economic arrangements have to do with the fact that you have counterparty risk associated with the use of a fiat vehicle and that has to do with the fact that when you have government when government is responsible for both the monetary and fiscal policies. So when a government is responsible

for the maintenance of the unit of account and at the same time is responsible for collecting dollars in that unit of account, so collecting and spending dollars in the unit of account, you eventually get to a point where the government runs out of money because governments do that. They spend what they have.

And then they go, oh, wait a second. I can just print money. And now I can do more things. So you have like this kind of perverse feedback loop that ultimately ends up with the government debasing the population's mechanics for the use of just the tools of commerce, and you get situations like Venezuela, you get situations like Hungary, you get situations like Germany, you get situations like Argentina, you get situations like Zimbabwe, where the government's

just like, well, we can just print another $500 billion, who cares? Because they're in a position of power that empowers them to do that, and that feeds back into the economy at a rate that's dependent on the information asymmetry available to people who understand the dynamics of money as it pertains to the system, and that causes problems. That's actually a prescient topic, because Matt and I went to Baruch College this morning. We spoke in front of a class of young youths interested in Bitcoin and blockchain. Always be shilling.

Always be shilling. Oh, jeez. And we popped up the St. Louis Fred chart, and I think it was the first time any of these kids have seen it. That one got them. that was immediately the fed monetary based what was their background to crypto before this they're in it they're in a class at baruch uh pertains to quote-unquote blockchain um blockchain undergrad class yeah um but yeah it opened up a lot of minds and it goes back to the

fact that people don't know what money is number one and then number two when they do figure it out they're like holy shit what are we doing um but a good question one of the students asks is if bitcoin does become successful will it slow down the economy and we we had a very good like conversation about that so i'm interested to hear your thoughts so i i'm not like super hardcore where i think bitcoin removes fiat dollars it just puts a cap on the on government's abilities to um to move against their population's best interests but it's not like we don't already have sound asset groups which have performed exceptionally well over the last 30 years 50 years 100 years of debasement of the dollar art property land political contributions to the extent that you

think you can purchase people or or their output um those are all things that have rapidly appreciated in price relative to the dollar base because they're they are things that are worth something a picasso there is only one of them of that specific type so long as there is a fiction around the story about its value people buy into that fiction similar now you buy into the fiction of the money and as a result it it's worth something and because it has scarcity it's worth more over time because that group of people want the thing they don't insofar as it's a liquid market quote unquote they have the ability to rapidly enter and exit from those those more solid asset bases so it's not like sound money units don't already exist they're just not as

flexible or not as uh liquid right bitcoin's way more liquid though that's the difference as a result of its as a result of the properties of public key cryptography yes it gains a bunch of benefits associated with easy ease of transit between people so that is one of the things that and as a result of the same public key cryptography mechanics the the ease of catching whether or not something is a counterfeit is categorically easier in bitcoin if you have 102 trans uh blocks on a bitcoin transactions you're pretty much guaranteed that it's not a counterfeit so yeah no it's um no it's a fascinating topic and then we got into like the kpis of the economy right now like are we like for what we're performance tuning for in today's economy like is that the right thing

to tune performance towards going forward like should we rethink uh like our kpis of the economy like obviously we want gdp growth and stuff like that but obviously that's leading uh leading us too precarious situation i would argue um so interested to hear anybody's thoughts on that so i'd say and i talked about this in pierre's podcast a little bit too um due to the dynamic of the majority people literally can't save if they're not in a position to save money bitcoin as a monetary unit right now is a much better savings vehicle than it is a spending vehicle so for people who don't we're not in a capacity to save their cash flow is essentially equivalent to their uh their cash out um bitcoin really right now isn't for them they are not in

a position to save in any form let alone whether or not bitcoin is the form of savings and that gets to kind of a a psychological and i guess it's a function of the economy i guess you could use it as kpi which is what percentage of people are actively saving money like actively saving value in any form or fashion it was like uh there was a really interesting study that showed like something like 65 of americans can't take a three thousand dollar hit without no 40 can't take a four hundred dollar hit yeah yeah it's crazy it's four hundred dollars if you fucking had an four hundred dollar emergency expense i think it is 60 60 of americans cannot cover that yeah that's outrageous i mean in terms of kpis it's like the government it broadly speaking is just

trying to jerry-rig every like the economy and like i think we'll look back at this time period decades from now and be like that's such a weird thing to do like the CPI why are we why are we

fine tuning to the CPI social security a small group of people trying to understand a very nuanced system it's like this is why capitalism

works because nobody's trying to figure it out like we we let it naturally flow right so it's like there's unintended

consequences of every action on a system and I don't think we fully understand all of the actions that we've been making on the system it was it started i got it was pretty consensus view on wall street probably

in the markets that we're in for some tough times over the next five to ten years very consensus view people are thinking more your two years time frame of the party's still happening and like we have this fed put and that's going to keep things rolling it's so everybody's thinking very near term but i think it's becoming a consensus view longer term that something's really off about this and then we put ourselves in a position that we pretty much can't get out of at this point. Gotta be some pain. Yeah, so...

How much pain? How much pain are we talking? It's pretty bad. It looks pretty bad. Dude, if 60% of Americans can't afford a $400 fucking emergency expense, imagine if there's like a 20% contraction in the economy. We're talking about like the fabric of society.

Like how fickle is it right now? Well, I mean, this is one of the reasons why you should have bullets, butter, and water in your home at all times. So in the event this shit goes tits up, You have butter. Yeah, yeah. You need butter.

It's extremely high-calorie value. Yeah. I mean, we see it. When you have short-term disruptions in normal economic function, within 72 hours, people are looting. Right. And that's alarming for a whole bunch of reasons. Meanwhile, you have people like the stablecoin guys. And I'm going to say stablecoin in this case is separate from the custodied money.

Custodied money can be useful. like the like tethered dollars all that kind of shit that can be like the fiat backed fiat or asset backed right but the ones who are trying to reinvent the like the algorithmatized stable value ones those guys are fucking ridiculous is that a banker it's a basis it was basis and maker right banker yeah yeah oh bank core yeah yeah yeah it's a little bit different the um the we were talking about this yesterday of how a lot of crypto is just a derivative off of i think i said this on the last podcast as well is a derivative off of bitcoin trying to solve the problems of bitcoin and not understanding the whole picture therefore becoming like this morphed weird child

that doesn't make any sense so it like that's most of crypto it's like it's a derivative off of this main problem at its core that was like it's grassroots and it's not going away and like it's evolved in a very very weird way thinking very micro and and will obviously end terribly at some point in the near future they think about marketing to VCs basically that's what they're doing I think people believe

this illusion or delusion it's very reflexive so I'm very hesitant to call anything a scam because I think people can do very very dumb things for a prolonged period of time because of their own belief system

this is a perfectly natural transition to Ethereum what do we think about Ethereum 2.0 oh my god uh i mean i talked about that atones confiscatable thing um one it's super alarming that it appears about six people are making decisions for the network it's decentralized dude that's not six people are you kidding me world computer world operating system yeah um so let's let's talk about how much this idea of ethereum has changed over the last five years so oh this is gonna be a long conversation yeah so i someone's gonna miss their flight i understand i understand the interest of of what's behind it and that is it would be nice if in a key

management schema i as a person can enter into arbitrary contracting relationships with you in such a or you being an arbitrary person such that we can have guarantees around the outcomes of the contract or outcomes of the the position that we take between us in such a way that the arbitration costs of the contract going awry or going correct are near zero the problem is is that we don't live in the uh hypothesized 2077 world where everything is hooked up to everything and everything communicates everything and everything is trustless and everything is strongly authenticated we live in a world where people barely do due diligence okay so the the problem with that outcome is that the entire system doesn't exist in this kind of parallel world it exists in the

current world where single people or single institutions or single organizations are who make decide what the outcomes of the outputs are based on the actual real world's undergoing things so you have a system that speaks to a future where people can do these distributed actions amongst each other and don't have to trust one another because of the underlying system but due to the dynamics of the actual mechanics of the world it's useless it doesn't do anything the most used thing platform on it is a loan platform to loan people money it's the most thing is being used maker being used to lever up pretty much like guys defy defy it's taking over the world but i i mean this may sound slightly disingenuous because we're each short thesis but

like broadly speaking i'm a fan of the idea of what ethereum is and potentially prove a stake like we were talking about this yesterday i mean we had a lot of these long conversations yesterday the um i think my view of what the of like crypto is though like taleb said this quoting somebody's that like on the federal level you want to be libertarian on the state level republican on the uh county level democratic and family level socialist so governance really depends on the level what you're talking about and i can agree with you there bitcoin is libertarian And because we're agreeing on the smallest amount of things for the system to work off of, it can become a global money. And that's what global money should be.

Now, for a smaller system, potentially something like Priva State can work, where if you know the intentions of all the other people in the system, you can agree on more things. Like local validators that you can go knock on their door. Yeah, or like 10 banks agreeing with each other. yeah so there's i mean there's some things that proof of stake and johnny's worked on federated side trains and and whatnot for a while but proof of authority works pretty well in that situation too right well yeah so ultimately just like validators that are approved yeah yeah yeah so the the ultimate version of that is going to be deterministic hardware that has like a hardware security module so that that ultimately is going to be the long range sorry guys no but

sticking on ethereum like this is one thing that perplexes me especially their announcement to move to 2.0 it's like what what does this say like has ethereum failed have they admitted failure i don't think ethereum's ever known what it is it is or what it's supposed to be it's always like it's it's a derivative bitcoin and it's always compared itself to bitcoin and so it's got caught up in this like what are we like how do we differentiate ourselves from bitcoin so because of that there's not a very clear identity like the identity of ethereum versus bitcoin when it got started and even today is that we're very pro-innovation we're very progressive right there's an issue with that because like you never settle on any identity

there's never a threshold for like what we are there's always something better exactly so like this is why you see everybody who isn't this is this large debate that's going on in the community right now about ethereum maximalism your maximalism is becoming a thing and and it's like they're all realizing it's beautiful irony they're realizing awesome is what it is they're realizing all of the trials and tribulations of big what bitcoiners have been going through that there is a problem with only being progressive with this ties into general politics as well like you need a balance between innovation and conservatism like you need like there's needs to be a cultural since these are all like all these systems there's there's tech

and the um the protocols are rigorous but what underlies the rigor of the tech protocol is still social um the the social layer is in every governance system the social layer the participants of the system ultimately decide what the system rules are um bitcoin has decided that we're going to make like we know what our social rules are and we're going to stand by them and we're going to make the threshold for changing very very high so we have a lot of stickiness to it and in many ways bitcoin is extremely progressive but compared to the rest of the crypto systems it looks extremely conservative your average person is super progressive right would you say the average person like that no coiner that knows like normal economic theory that's like we're talking about

Like, generally or in crypto? No, no, no. Just the average person that's not even exposed to cryptocurrency at all. Most people don't know what they are. Most people spend no time thinking about anything, and they're just parroting what they hear. Right. Very few people actually spend a fair amount of time

thinking about what they want their system to be. Like, as we were talking about before, I genuinely think that there's a natural gravity to socialism because there's always going to be more activist energy there and the people who are, like most people like 99% of people are easily swayed and so they're easily swayed by

emotional arguments, they're just going to follow that but overwhelmingly, generally people don't care about most things It's like Ethereum, like it's really nice in theory Socialism has got great marketing lines, great things that if everything worked perfectly

it might be awesome if like i guess this is a good way of putting it like most people spend all their time not caring about most things and then when it's time to vote they're they're presented with an emotional appeal they're going to be swayed by the emotional appeal so i mean this week is a perfect highlight of that with the muller report and everything that went on with that for the last two years like people yeah people have been hearing the news about a side of the argument that was that was shown like concretely this is definitely what's happening so nobody was really questioning it um and yeah that's been the comment that i've stayed away from talking about politics for

several years now you're gonna you're gonna make me pull up once this but yeah that's good and honestly is the best example of that like if you were gonna if you were gonna even say like i don't believe that there was there was russia uh russian tempering in the elections people would laugh at you but we had a couple years we don't even have to get like specific with the Mueller I know but most people still don't even believe it because it's

I mean it's just so now and granted for the last couple years like this was this definitely happened yeah but I mean it's coming out that

there were some untruths in the reporting that's been going on that's like 99% of people are going to these news sources and taking what they say and taking it at face value

and turning around but at the same time so those happen like those would be dinner conversations and people but I believe most people

outside of those conversations really don't spend that much energy thinking about things well that's that's the problem that's kind of the problem is because once they are and once there's elections and once there is times to like vote on policy people could be very easily swayed yeah no it's uh how do we get people to start thinking about this or caring about it can we or is it or is it like it's too large of a problem yeah when you're trying to like if yeah the i

think the best you can do is is like tell the truth and you have to at least like i think you have to be optimistic that like the truth in the long term the truth always wins right and so people can be swayed emotionally for a period of time but eventually they'll come back yeah no the truth does prevail i mean what happens if it's just everything's just broken there's a chance it happens but i think you have to be optimistic i mean bitcoin gives me peace of mind right it's like you have a completely separate separate protocol separate network that's just has has no idea what's going on in the outside world just doesn't care just does its own thing yeah according to the specifications

yeah yeah well this the sound money thing is something that we've really never had before and how that could change things is we really don't know and then that's how why i got into all this is that I was socialist in high school and turned libertarian post high school and then I stopped caring about politics it's something that

gives people back an individualism and that how that can change things I only see that as being a very net positive yeah personal sovereignty taking control back into your own hands it's not even personal sovereignty it's personal responsibility because it forces you to be

to exude extreme ownership over yourself in the custody of your wealth to some extent. Yeah, there's very few things in society nowadays where if you fuck it up, someone can just unequivocally turn to you and be like, that was your fuck up. And in Bitcoin, I feel like that's all that happens. Every single time someone loses money,

you're like, that was you, bro. What individualism encourages is people seeking their own truths. So it makes it less likely that groups of people fall into this collective like delusion so and this is why capitalism long term works much better than communism and socialism because in communism socialism you're essentially tying the whole system together so once there's become once there starts it's fracturing in some ways it's going to collapse have a catastrophic collapse with capitalism you're making the

system is much more individualistic and it allows for the individuals to fail by themselves so The whole system can never be compromised. What's weak always burns off, and what prevails is long-term better. And I think if you're a capitalist, you have to have an optimistic... I think this is what the temperament of a socialist and a capitalist is. Capitalists long-term believe that people can...

The truth prevails. And then the incentives prevail, the money prevails. i think socialists are approaching the world where human beings are corrupt we need to fix them and we need to fix them in like a very dramatic way you change chemistry it's not going to happen yeah this is why like i'm getting very like hesitant and scary when people are trying to think about influencing the whole system be like how do we change this like we're talking about activism i think like i'm hesitant to act like like it's just present the truth and they propagate by themselves like you don't need to like hold somebody down and like yell their face and be

like this is how it needs to be so like we it's very it's extremely um what's the word i'm looking for um not uh i'm pretentious it's extremely self-grant like grandizing to think that like what i think is is right and so you should all believe what i'm thinking i think it's a little more humble to say like my views may not be correct let's let this play out like the winner wins and that's probably better for everybody right i think uh if we're talking about externalities within bitcoin bitcoin this is the article that was dropped in the wall street journal today about steve barber and upstream data and what they're doing in alberta by capping the natural gas like this is like a like an overt solution to a problem a big problem that the world is talking about

right now which is global warming and energy efficiency and it's not governments throwing a bunch of money and making more efficient it's the free market basically finding a way to make it more efficient yeah there's two ways to look at like global i don't think it's everybody agrees that there's potentially a very large problem with with global warming co2 emission and all that i think the debate that can't happen um that's that nobody wants to have the productive conversation about is what's the best way of going about it and the like very emotional side of it is we need like massive action by governments that will like force all mass regulation yeah which i don't make like i mean i think this is a complicated issue i don't pretend

to think that i have the answers to it at all i think yeah but i think just like yeah historically governments throwing money at problems is not really solid and efficient. Yeah, that's my major hesitation with it. You need cooperation. You need global cooperation. That's never going to fucking happen. We've never had global cooperation. But you can't, like, you can have like, I mean, like,

this is a weird example of just cooperation in that change, but like militias or whatever, like grassroots movements that people have banded together to solve where there wasn't any enforcement, and those have forced major changes in various parts of history

I think we need malicious to save global I'm saying just grassroots movements do happen and Bitcoin is Bitcoin is an example of people weren't forced to do anything everybody's kind of risen up individually and they've bought into

this idea themselves that we all agree on too I think that's I have an optimistic view of humanity and human beings that Bitcoin's a good thing and that's happened for a reason i think in my hopeful view that should happen with global warming as well like everybody should genuinely see the problem and the grassroots movements should force things so

people can stop um using uh products from companies that are made like that are causing major problems and that that could be the best way of solving it is that we're gonna there's gonna be a lot of unintended consequences of of like global governments all banding together to make hard rules on something. But I don't know. I may be too optimistic about human beings, so I don't know. We'll see.

I'm optimistic, too. And hey, you freaks out there, if you go to the bodega, don't get a bag. Just carry out your stuff. You're never going to be a bag for the bodega. Bring your own bag. Or bring your own bag.

Yeah, BYOB. BYOB. It's kind of weird where governments aren't letting people do good themselves, right? This is my view of charity as well. it's like in taxes right like it is forcing people to pay for something like we want to like sit back and look like that's a net good thing but was there any actual genuine good act in it

like a genuine good act is doing something when you weren't required to do it and really not talking about it at all like there was other no net benefit for your image or anything else that it was actually a genuinely good act yeah like helping the neighbor bringing the groceries you don't tell people when you go inside holding the door that's a big one it's another one too especially in new york what are you i'm interested to hear your thoughts on this uh what if the government were to enact a regulation for these fracking and drilling sites that said if you have so much flair you need to cap that and mine bitcoin with it well they're kind of doing that i don't i don't not believe in regulation at all i think like there's like um it's like things

should be nuanced right like there's no i'm not a libertarian word no regulation um all regulation is bad i think um this is what could kind of change my view getting deeper into economics in college is like there could be there's points of a system where the system um like resonates out of control and so like you need to find the areas of where a system can resonate and kind of cap those but be very very careful of not going farther than you you have to so like like regulating uh oil and gas in certain ways i think is definitely required yeah that's one that's one regulation i've thought of like if you want to help global warming and you want to regulate in a way don't take money from people be like hey if we have a means to use this energy you

should use it and if you're not being efficient with it you're getting fined but bitcoin does that right i'd love for bitcoin to be involved as well yeah bitcoin does that naturally through its incentives right because we already have the regulation that says you can't flare a certain amount right so now they're they have to cap their production because they can't flare a certain amount so so steve barber comes in with upstream data and he goes he goes you guys don't have to stop production not only that you can even reclaim some money from your flaring at the same exact time and they don't have to actually put in the regulation anywhere that you have to do bitcoin mining right that's just the natural end result because we have good incentives set up where

there's a financial incentive to fucking do it right like if you have a financial incentive to do something it's way more likely that people will do it than just if you tell them you know they have to play ball or else yeah and i'm not trying to become some status i was just throwing that idea sound very status i know it did sound status i'm sorry damn status we were just talking about uh johnny's back johnny's back johnny just had a call we were talking about uh he's wearing a greg maxwell shirt as well it always stares at you greg's staring at me and matt at the same time it's weird i wore a jehan moose shirt at unconfiscatable so you gotta you gotta rep the brand yeah you gotta rep jehan sorry jehan jehan r.i.p bad news week for jehan where did they

fuck up in your opinion uh trusting craig wright in any way shape or form were you around i don't think that was the beginning of the problems uh yeah yeah fine fine so i would say that is one example of of them making an error the biggest error they made uh is thinking that they can drive consensus in bitcoin right no the part of the entire point is isn't this this should be a humbling fact and also should be an empowering fact bitcoin doesn't give a fuck about you she's a cruel unforgiving bitch but but she also loves you right okay like she cares about you she cares It's about humanity. Tough love.

Yeah, it's really tough love. And that's one of the reasons why I think we're going to have some longer term socialist action against Bitcoin is because they're going to try and take your keys. Which the weirdest thing to me is there are a fair amount of socialists involved in crypto. How are they going to try and take your keys? They're going to make you disclose addresses first of all. Yeah, yeah, yeah. Disclose addresses and balances. And then it's like, oh, every time you send a transaction, you got to make sure you pay Uncle Sam.

The weirdest phenomenon to me at all is that there is a fair amount of socialists in crypto. So, I mean, they definitely don't fall to the Bitcoin side, but like, like the unicorn crowd, like the unicorn, something that I, it like fundamentally doesn't really make that much sense. Right. I, I, I don't, I don't know, but yeah, it's all young people who want change, who see a bad world and want change and they have different thoughts. Well, I guess you could explain it, maybe oversimplifying the socialist mindset, but

it's a very fragmented view of how reality worked and it's just very wrong. So it doesn't, it makes sense that things don't make sense in their view. It's not that surprising. Yeah. So, I mean, if you think about it, like the world has always been capitalistic. Everything, nature is capitalistic. Like, the consumption and ownership of resources is basically, like, is what makes you more dominant or less dominant than someone else. Now, does that mean the biggest cougar doesn't sometimes get killed by, like, a spontaneous avalanche?

No. Like, that happens. It happens all the time. But at the end of the day, nature is literally about marshalling resources for your own selfish best interests. Selfish gene. It's going to persist throughout time. I actually never read that. That was a great metaphor.

a large cougar getting the avalanche sometimes it happens let's have a short dinosaur tangent can you explain the spine dinosaur oh spinosaurus well first off I missed this

they found a 10 ton Tyrannosaurus rex in Canada two weeks ago named Scotty so that was 2 tons larger than any Tyrannosaurus rex where did you read about this somewhere on the internet National Geographic or something right so yes i could i guess i could have been like super black billed and it's just all fake

but you know information is information okay so everyone can do it do your own due diligence okay do your own dinosaur research people yeah um so so t-rex had actually been relegated into like the smaller large apex predators it was a beta apex uh yeah because like there were carnotaurus gigantosaurus and all these other larger uh creatures like megaraptor were just proving to be more vicious higher order predators because of their size. Now we know that an adult T-Rex can be as large as 10 or 12

tons. It's competing again. But nothing competes against Spinosaurus. Spinosaurus is a fucking monster. Spinosaurus is a boss. Dude, the spine on Spinosaurus the spine on Spinosaurus alone is larger than most apex predators. Like, his spine, just

the bone structure that he used for heating and Cooing and hunting. Just the bone spine. And that was our dinosaur tangent of the day. We had a 15 minute conversation on dinosaurs before you got here, Tom. I'm really sorry I missed it.

Dude, it's fascinating. I have to get back to it. How did that even come up? Because of my boy. Because he's into it. So then he's into it. I'm reading the books to him. And I'm like, what?

This is so awesome. That makes a whole lot more sense. Because think about it, in the 20 or 25 years that you've, since you were last like super into dinosaurs, because most human males are into dinosaurs when they're young, it's just like, it's a thing, because they're cool. My nephew's into it right now. So 25 years have passed, and the paleo, whatever they're called, the paleontologists, have like discovered all this new stuff, and it's kind of ridiculous.

Like I was telling, I was telling them about, and we'll end this after this, sorry, it's just so cool. Like there's, there's this new, there's this, this breed of raptor called the Utah raptor they've been doing research on turns out utah raptor this thing would have been terrifying in the modern era covered in photochromatic feathers so it was semi-active camo when it's standing still okay yeah like chameleon status all right it was like 32 feet long okay weighed like six tons can move like 35 miles an hour okay has echolocation and strong uh communication between honey packs this sounds like those bird creatures in avatar a little bit a little bit yes but like

bigger and just hyper aggressive because hyper aggression is what basically ruled like you saw something and you just try and kill it because it's meat so it's like i want meat like like the brain process is like meat feed me get like 35 miles an hour terrifying creature chasing after you and then the the ankylosauruses i was telling you guys about that too the um does your does your son know all this these stats he knows more dinosaur names than i do yeah it's kind of hilarious uh he has favorites and he can like he can list like his 15 favorite dinosaurs how old is he now three yeah that's incredible he can say sucamimus sucamimus yeah i can i can't speak too well so your son may be able to speak better than you just said it that was pretty good yeah

now try baryonyx baryonyx yeah there we go there we go all right yeah yeah welcome to your local dinosaur pod yeah come for the bitcoin stay for the dinosaur well well think about it we're It actually kind of applies because you're talking about selection criteria and the success conditions for capitalism. And if you think about it, the same thing happened to the dinosaurs over hundreds of millions or tens of millions of years. Like I was about to say, the ankylosauruses, with the best example of that being Gastonia, it was covered in a six-inch bone plate. It's an entire upper body. Six-inch bone plate. like think about the millions of years of iterative improvements required from like the

apex males and the apex females of that species to end up with where you are literally a walking tank what were they going through that like force them to evolve that way like who was like hitting them on the back and some shit like well that's how all of the well so they're the the major predators attack basically attacked in three ways t-rex would crush to do crushing bites dinosaurs like Allosaurus Carnotaurus Spirionix

Suchomimus would attack with like this slashing function where they would they kind of disjoint their jaw and they come in like an axe

and then they just they hit you and if they hit you you bleed out because it's a fucking Allosaurus it's like a six ton

creature if it hits you if its jaw is an axe and it hits you with the full force of itself you're going to bleed out and then the third

is like the raptors who use like they use their leg the leg claws Talon yeah they use talons to basically

inflict the same kind of damage that occurs from the axe creatures which is fascinating I know right so if you think

about it that is literally capitalism right like the evolution of those skills like for example the reason why

the raptors have that the claw that's like arced up it literally evolved over time so that the claw

didn't drag on the ground so it didn't get dull that is literally a hundred if not tens of millions if not a hundred million year innovation to make it so that

your claw that you use to kill shit doesn't get dull and it's just something simple it's not touching the ground it's arced up which if you think about it from an evolutionary

biology perspective it was like there was a chicken at one point and then the chicken had a slightly sharper claw than everyone else and then it won

as a result of having that and then one or two apex males had like a slight modification where the nail is like a little bit off the ground

and as a result they're more successful predators over time and as a result they have a larger harem like it's literally capitalism right Just played out in nature.

Yes, played out in nature with far more vicious outcomes. I mean, the systems in the current state of things are always so much more complicated than we understand. And it's like to reject how things are, like there's obviously you want a part of that to progress, but to reject things as they are, you don't know why those things are there to begin with, right? Exactly. To try to fix millions of years of revolution in one generation. You're not smarter than evolution. Sorry.

Right? Yeah. Well, let's get back to this concept of us not realizing we're in nature. I would argue we do, but a lot of people seem to abstract humanity from nature. It's like a hypothecation of our position as just normal creatures that just happen to have some self-reflection capacity. We're really not that special. Right? Yeah, that's it.

That's our animation. We're actually kind of average, except for that. What do you mean by that? Think about a dolphin. I think you're underplaying the cast. Yes. We got a human Maximus over here. Yeah.

I have a human Maximus. It's fun. It's fun. If you think about, for example, how we would compete in the natural arena of a dolphin, we would lose catastrophically. We are reasonably frail things. I think I could take a dolphin. Have you ever jumped in the ocean and tried to swim?

It's fucking terrible. It's quite hard. It's quite hard. We flail. Big surfer. I've been surfing my whole life. it's still fucking hard so

no it's not yes that capacity is a wonderful thing but I think if we left the chimpanzees and the apes alone

for tens of millions of years as well they will eventually will evolve into that capacity as well we have chimpanzees and apes that can do

fairly complicated things some of them are smarter than the average 6th grader we have crows using vending machines yeah I was watching something the other day about chimps

how they can like they can see a flash of a pattern of numbers like up to like i don't know like 20 or something flash of it and then track those numbers where they were oh cool yeah that's yeah so they have different working numbers like the consciousness thing i think is a different and then they get the concept of fairness too you see that study where the one

monkey was getting grapes and the other was getting cucumbers and or they were both getting grapes at one point and then uh at some point the researcher switched from giving one a grape and the other cucumber and the one that got the cucumber was so pissed off because the other was getting a grape and he was getting a cucumber and just like got that inherent unfairness of the situation

I would prefer eating the cucumber personally yeah that's interesting that was an interesting preference by the chimp really? yeah I don't know well grapes are

probably higher in sugar so that's probably some mechanical you know kind of thing going on we are animals people forget that be aware freaks

you're animals yeah yeah don't reject don't try to be better than that but do as well but do as well Yoda

well this is where I think if we can get to post-scarcity, everything is going to be fine. It's like that's – I like that line. Everything is going to be fine. Let's jump into post-scarcity. How do we get there? What does it look like?

So think about a lot of the resources that are used in the higher order mechanically sophisticated machines we use today. TV, recorder, laptop, computer. 21 computer. 21 computer. Macallan. A car, a fabricator for chips themselves, a mining company, a boring company, all these things require expensive metals, catalysts like platinum, palladium, iridium, fuel sources and energy sources to run. if I can pull an asteroid out of the sky that is a hundred million times

more current supply of the total stock of gold, palladium, and platinum on the earth the prices of those goods drop to nothing and the cost of building machines that currently are limited in infrastructure that's costly to build because of the power constraints or the power costs of building them

or the machining costs for building the machines or the machines themselves if we remove the major cost basis from those building more infrastructure gets radically cheaper and suddenly we don't have all these fucking hard conversations about making resource delineation choices

because we have so many fucking resources it's a fucking no brainer how far away from mining asteroids are we? oh that's a great question do we know how many asteroids are passing us? I got pitched on a really interesting and by really interesting I mean a total scam a blockchain where they were

going to sell you percentages of asteroids that had rare earth metals in them. And then when it's worth enough money, go get them and bring them back. So you're the owner for now. You have a put option on this fucking asteroid.

Good luck getting at it. But don't worry, you own it. It's yours. It's your asset. How can they tell what materials are on the asteroid before they decide to mine it? There's some methods. It has to be on the blockchain as well. oh yeah 100%

with AI and machine learning because think about what that would do to world markets if you went and you pulled one of those asteroids you came back with it

and let's say you don't drop it like a fucking meteor on earth but you just you keep it there yeah but you keep it

you keep it there whoever owns that asteroid owns massive percentages more of the total supply of all the rare earth metals on earth it'd be great for bitcoin everyone is

everyone who was holding those metals is worth nothing worth nothing the resources that they were hoarding or using or kept in the ground

or holding in banks nothing instantaneously it's one of the reasons why I'm short gold in the long run short gold long bitcoin

yeah well in the long run I would like right now gold's not a terrible hedge like how far away from a type 1 civilization are we

what does that mean like harnessing all the energy on the earth and our star oh you mean like a Dyson sphere yeah

that kind of shit we're a ways from that we're having trouble getting people to agree to build nuclear power plants okay like Let alone fucking the infrastructure requirements around building a Dyson sphere. Oh, speaking of, Brian Bishop had a really interesting way to solve global warming.

You send a satellite up with a thin plastic film, and then you just put the plastic film in front of the fucking sun, and it just drops the solar radiation by like 1%. Solves all of our problems. It seems better than chemtrailing ourselves with the particles that people want to do to solve it. Have you heard that? No, no. People want to drop, like, a certain chemical, like, in the atmosphere.

I heard that. Yeah, just building up clouds or whatever. It's like cloud seeding and shit like that, right? Okay. Isn't that what they did in the Matrix? It's like terraforming. They ended up killing everyone? Yeah, they, like, bombed the sky to blot out the sun because the machines were using solar

and they just used human blood as their energy source after that. I can see that as the end result. You know, us fucking with trying to chemically change the environment and fucking with it too much. Yeah, I'd rather not. I'd rather try to not. Well, that's what Bezos wants to turn the Earth into, just light industry and residency. I mean, heavy industry and space.

Why wouldn't we live in space? Why would we live in space? If you are wealthy, you do that too. Okay, true. Because it costs money to get to space. Low-income housing on Earth. Well, but it's not low-income housing because it's nice in that world.

Everything is extremely cheap. I don't know if I'd want to live in space. I like gravity. That'd be pretty cool to live on a planet. You can invent it. You can invent gravity, yeah. terraform mars like dragon ball z gravity chamber stuff i'm more like you just rotate things that's true yes and you're in this sensation yeah so um yes that makes a lot of sense yeah i mean and you

like and on mars like you have two-thirds gravity so that's equivalent enough that you're not going to have like catastrophic effects yeah so now if you live in low gravity environments it starts to mess with the um the biological clock so so you can't you can't do that for very long so sure under those conditions i agree with you under conditions where living in non-gravity affects your health obviously you wouldn't want to fucking live in those conditions yeah can can i run us through a thought experiment no shut up i feel like johnny would be well suited here if you were to kill bitcoin today how would you kill bitcoin oh that's like so you're like a woke regulator you know you're in power you have you have some things you can do what what would you do to kill

bitcoin turn the power off for 72 hours the whole world everywhere worldwide you'd never be able to pull that off very quick answer you'd never be able to pull that would you destroy the world in the process no people would be looting this the the you know the stores and stuff but the time everything came back online everyone's shorting everything and everything goes to zero even bitcoin though probably i feel like we're resilient to that like the bitcoiners will be like this is our shot to shine because there was just a catastrophic event that resulted in all power going off for 72 hours could you individually pull that off maybe like how much am i being paid how much am i being paid is anybody capable of pulling that yes solar flare could pull that

Who would pull that off? You're asking an individual. I'm asking, and there's a couple of ways. The thing is, is it requires substantial coordination. Most things that involve the use of or building of infrastructure towards a common or selfish goal require infrastructure. And to get infrastructure in place requires coordination, and coordination is extremely difficult.

And we're finding that out in real time. So you're saying it's extremely hard to kill Bitcoin. It's extremely hard to kill Bitcoin. I also think it doesn't make any sense to kill Bitcoin. If you're a government, you should want Bitcoin to exist. You should buy it and hold something. Why aren't they? Who's going to be the first one to buy it? Maybe they are.

Everybody just doesn't really fully appreciate how early on all this stuff really is. That's another thing we talked about in this class today. I don't think you really fully appreciate how early on it is unless you have a real good view of existing market infrastructure and then work into Bitcoin

market infrastructure. It's extremely J-big. you're telling me the exchanges are jv bro i mean we're we're getting we're getting close to like 1980 i don't even think we're there yet the i i mean i think bitcoin goes through these natural boom bust cycles and it and it boom and the bust starts when there's no new buyers and it's prohibited by the infrastructure so like we're the over at so this happens of commodity cycles as well it's like the price increases it allows for an expansion of the infrastructure and then when there's a bust you make the infrastructure a lot more efficient and

so we've been going through into a market infrastructure efficiency process now for about a year and a half and like it's very very like like the from like uh top of the market to now market market infrastructure is extremely better like right because you and it's from multiple angles right segwit's obviously one at the protocol level but like december december 2017 you couldn't use coinbase like if you wanted to buy it so especially that tuesday where they ninja launched the bitcoin cash bitcoin protocol is almost operating as its own thing like how you can i think you could tie price of bitcoin to market infrastructure like custodians like they're acting kind of like banks didn't really come online for bitcoin which is where in my opinion

most of the bitcoins are going to be whole we just got fidelity fidelity was what like two months ago in beta or something that's an extremely new phenomenon

so they also said they're not doing ethereum for at least nine months right yeah yeah too confusing because of their hard fork

I think it's more reasons than that but that's definitely one of them so yeah the like like a market

infrastructure now is kind of set up is it's still very much improving pretty rapidly it's getting set up for like a next cycle

and I think we're going to continue to have these cycles i could kind of see two pretty clearly playing out over the next five ten years yeah i definitely don't think the one we just went through is the last nor the one we're definitely not set up for governments to care about it at all like nor should they honestly they're still super cocky they're still super cocky about it i mean no i don't i don't think it's at all it's we're talking about 65 billion dollars of like a of something it's a drop in the bucket like you really should like if you're in the position you shouldn't be taking it that that seriously they have if they don't take it seriously now they're

fucked no i don't think so i think like you'd be setting yourself up very well if you did you did in my opinion we're all bullish here so that's i'm not saying anything controversial um you would obviously be making a bet on something that i think will play out really well um but i like if you're really being if you're living not in this world and you really shouldn't be taking it seriously yet like the the dominoes haven't fallen yet for you to be doing so i'd also argue that like due to the fact that certain nation states like the states have 12 aircraft carriers the extent to which they care about any other monetary unit or any other asset class is just like can you stop my 12 aircraft carriers right so that's why you can't have five nodes on the network or

something because you just like i don't like i don't think the u.s under any scenario is fucked other governments that have much worse monetary policy and controls including their military force projection are certainly in much more much closer in line to being in trouble especially during maybe the next one cycle or maybe two especially since it looks less likely that america will crack down right so like once you have america complacent america government is still pretty robust where i mean why would they like they're better off just buying it like if i was just the government doesn't care but if you're going to approach it from as bitcoin is a threat like i think the government the u.s government is much more robust where there'd be a much more

rounded discussion about that they're not going to be taking any drastic actions on that side do you think trump owns bitcoin i mean i know his son does he does he definitely owns big i know he does yeah there you go so he basically owns bitcoin trump doesn't own anything it's a blind trust it's a blind trust you can't see it you can't see it i don't know i i honestly don't know i'm sure you've heard of it it'd be hard for anybody to not have heard of it at this this point in time but i don't think i like people saying it's gonna come up in presidential election maybe yang gang brings it up i don't i think yang's gonna give us twelve thousand dollars in bitcoin every year well like essentially like everybody's like so impatient of like

We need hyper-Bitcoinization tomorrow. It's going to be a lot longer process. It sounds so ridiculous to say. I do believe it's inevitable in a lot of ways, but it's just a lot longer than what people think. I've been dropping the hyper from hyper-Bitcoinization, just saying Bitcoinization. No, I mean, 10 years is...

What's your relative time frame? 10 years for... 10 years is a long time. No, 10 years for dramatic change is not... Internet coming online is very, very fast. In Bitcoin years, that's like a century. The iPhone came out 10 years ago. 10 years in terms of being

it was a shitty iPhone it depends on your time frame I think because we've gotten used to tech innovation happening so quickly that 10 years feels pretty long right now but tech innovation which more

impacts social social change on a communication basis is easier to change versus macroeconomics Macroeconomic commerce just goes through longer cycles Right

That's just how it is Yeah And again it goes back to what we were talking When John was on the phone Be the change you want to see in the world Do the change that you want to bring in Thanks Gandhi Buying whole Bitcoin

I'm not as skinny as Gandhi But I do say that line every once in a while Gandhi would have been a Bitcoiner It's the ultimate form of non-violent protest It is a hunger strike is best form of non-violent protest yeah but you can't make any money from a hunger strike

tell that to the Gandhi family that's true fair, touche so let's shift this you've talked to are we talking about you talking to the government about this stuff I mean

so I'm advising the SEC on like custody standards compliance standards and kind of market structure because of some of the work I've done in the space. They're 18 months behind where anyone thinks they are.

Yeah, so what kind of conversations are you having? Or what can you... Well, like we're... Like there's still concern that like no major auditing firm like the big four are auditing anyone's key schemas yet.

To the extent that anyone is auditing anyone's key schemas. That's because the incentives are broken, right? They don't want to take that risk. They don't even want to be involved in that. Yeah, well if you think about it, there's personal incentives

for the individuals at the SEC as well and then there's the incentives for the SEC or the institution. So those are different. I mean at the big four. Like there's no incentive for the big four to even dip their fucking toe in, right?

Same, in a bilateral sense, the same kind of incentive structure exists for the people inside the big four and the institution is one of them itself. So there's a lot to unpack there. The biggest problem that the SEC has right now with what they call the qualified custodianship rule for Bitcoiners is that

Because Bitcoin is not qualified as a security, if I deposit Bitcoin to a registered ATS or a brokerage or an exchange and that exchange brokerage or ATS goes bankrupt, because Bitcoin isn't qualified as a security, it's not clear what happens in a bankruptcy court when the exchange goes to pay out its creditors or those that are entitled to their pound of flesh from the institution. So in a classic brokerage, ATS, or exchange world, when I deposit my IBM shares or when I deposit my Apple shares to the institution, in the event of a bankruptcy of that institution, I get my property back because of securities law. Because Bitcoin's not a security, it's not clear that maybe a bankruptcy judge goes, nah, that goes to the top line creditors. Done, gavel. Are we learning anything from the Mt. Gox situation? So it's more that the first real qualified custodians for the exchange of Bitcoin will just be people who use a trust structure and then the trust will loan the Bitcoin to the exchange brokerage or ATS. And as a result of it being a loan to the actual performing institution, that's a security. You'll have a claim on that.

Yes. And then that will pay back to the trust. And now the solvency chain is the trust actually doing what's required with regards to the proper mechanics around controlling the asset. So I think we're close to having legitimate exchanges, like actual changes like ISIS-backed and Fidelity, where they actually qualify as a real custodian and people can actually sort of trade it with legitimate money. Versus right now, it's like, how do you trade on Gemini or Coinbase? You send like a wire transfer and then it's just like, that's it. You can't trade against your other portfolio.

The asset's stuck in that one specific spot. There's a lot of mechanics that make this a lot like 1980 in normal finance. It's like, I have a single prime brokerage. I put my money with that prime brokerage. I can only trade with people who trust the exact same prime brokerage. 1980. That's where Bitcoin is right now. What's more important at this point, protocol development build-out or infrastructure, do you think?

like do we still have fungibility scalability to solve but scalability is that's a long long long range i think i mean i think bitcoin works as is right i do as well so i mean that's and so yeah i mean both are important but bitcoin works as is i think some protocol changes would have massive uh great fallout as well but um yeah i i think probably infrastructure right now if you're interested in price and adoption um there's just still a major amount of friction involved for the individual that's kind of gone away but for institutions to get comfortable like they're just not comfortable um yeah so i mean the infrastructure is jv is the best way of describing it yeah it's been checked bush league bush league is the best way to describe it not

even jv every like everybody's been kept keeps getting caught off guard by price increasing and then like we were left with the existing infrastructure and look at the 2017 run like they couldn't even open accounts quick enough and verify accounts all the exchanges were going down this is my this is like we're talking about yesterday this is my reason why i think the next cycle happens a lot faster than this everyone says it's bullshit right well i mean there's a reason there's a good reason for that because we're becoming more commodity cycles like just larger movements we're talking about larger mass so we're not really there yet no like i understand the reason for cycles getting longer and i do agree with that in the long run i think the next

cycle happens a lot faster though because um there's a lot more money that's on the side and it's ready it's ready to go and then the friction for them getting involved is like is a massive a massive fraction of that there's so much friction has been removed since the last

cycle that's what I'm saying and there's so many sophisticated investors that literally have their money like their cash just sitting there

that can move into Bitcoin within a matter of hours like they can just come into Bitcoin like super easy there wasn't like

yeah the exchanges were a lot more so 2016 2017 look at Polo for instance Polo is fucking old like gold right now so if you all of a sudden

got interested if you all of a sudden just got interested in bitcoin um in beginning of 2017 it would have taken you probably like like from like from stop to go to buying bitcoin it probably would have taken you like two and a half weeks three and a half months yeah it would have taken you three months to get into bitcoin if you had no connection if you had a connection to coinbase or gemini or whatever what kind of connection well like a buddy that worked there you have to like so in order to get bitcoin nothing i'm interested being in 2017 of a hundred thousand dollars you need to be on board a hundred

thousand dollars coinbase what's the limits when you first sign up for a coinbase account nobody no connections it may take you like three that's what i'm saying yeah no longer than that three months like two months i don't know that i don't know what that but like three weeks um three weeks to get a hundred thousand dollars into bitcoin no coinbase account no nothing about three bullshit no way it took you way longer maybe either way three weeks is a while right yeah and now it's way shorter now it's a matter of like hours pretty much i mean like you could like assuming you're on board which most people are now there's a lot of streams for being onboarded um so the flow there's a lot of dry powder sitting on the side everybody's

kind of playing this bottom hunting game now and even something like cme it'd be super easy yeah so a lot of people are on board there's then the the um the streams and routes for for trading it everybody's kind of onboarded in different types of ways the money flow can happen a lot faster so this next cycle i think is different like can't just look at it broadly these are the metrics the last cycle happened let's lengthen them out I think the situation is a little bit different so once there's some momentum

the price of Bitcoin and the demand for Bitcoin are extremely reflexive and that's why we have these boom bust cycles and everybody forgets the having yeah what having yeah exactly having price in though dude yeah Ari told me Ari Paul told me Mr. 100 million dollar man over there

I had a question to follow you and I forgot it go on what you were going to say. What was I going to say? I don't remember either. My issue with protocol development is I don't think we're in a position.

I think Bitcoin's fine. I don't think anything I think visualize I'm interested to hear what John has to say about this. John, where are we? Do we need fungibility? I would say long term.

I guess there's a reflexivity between the invest in quote unquote there's no such thing as investing in Bitcoin because it's speculation. Investment is a investment by definition

is an expectation of somebody doing something to get a return. If we're thinking of Bitcoin as a commodity, you're just expecting the price to go up for various reasons. It's technically considered speculation. I think there's very much long-term

benefits from like Schnorr Taproot and all these things coming out. AgSigs? It allows for the demand for the Bitcoin ledger to increase exponentially in ways that I don't think we completely understand. And then I think that's very much a long-term benefit for the security of Bitcoin.

And this kind of feeds into one major concern for Bitcoin. Is there, with Bitcoin having a cap supply, is Bitcoin able to have long-term security for that? I think a lot of these implementations allow for much different types of demand into Bitcoin that feed into the fee structure. Jevons paradox comes into play if these are enabled. to some degree well i mean we saw we bitcoin survives well under conditions of extremely high demand and i stress we saw that in 2016 and 2017 so um it's even better in those situations yeah there are there are some long there are some longer range things that we that are not necessarily resolved but they're like they're extremely long yeah the man on your shirt was

popping champagne for yeah yeah it works it works under stress it just you gotta remember that's that's that's really hard for most systems to natively stress test themselves right um uh my word is like the counter argument people make who are not pro-bitcoin being like that was a major fail of the system but it's like saying hey okay if i have to like i can't get into restaurant for two weeks this restaurant has failed right but this restaurant sucks nobody goes there and they demand that got it to that point right and if they charge you ten dollars you get in it's because i think people you know like bitcoin is a system and it's like the demand for it like people have various different types of demand for it and so the fees go up those the

people who have much higher demand for it for various reasons they're prioritized or like they'll yeah and that that whole auction method is kind of foreign to people yeah and it actually kind of speaks to the socialism capitalism argument it makes people uncomfortable to think about the fact that i can cut you in line by paying money right whoa i think why if you're approaching bitcoin as like a tech platform thing then you could you would think that i think this is the case for theorem this is what we wrote in our short thesis it's very very different than bitcoin because the bitcoin has like the inelastic versus elastic demand part of it bitcoin can survive high periods of fees because it being primarily a money thing like they're and versus the like the alternatives

it will always kind of make sense right you might not want to pay ten dollars for a debt but you will pay yeah yeah so if like if a like ethereum's fee market is kind of going up 10 or like extremely volatile and trying to handle a large number of contract calls or whatever it will completely cut demand and so there's daps built on it and now daps haven't all um have the ability to port over to different contract smart contract platforms they're going to be doing that yeah so and it's It's like they're going to be doing that and not looking back. So it's like you can't, like, inelastic versus elastic supply. Or not inelastic versus elastic demand.

My fear is two years down the line, U.S. government says, disclose all your addresses, tell us exactly how much Bitcoin you own. We're not ready for that. We need protocol improvements for that, right? So from a fungibility perspective, you think that the United States government is going to demand to know all of your assets? I think they're going to send us, like, a questionnaire that's going to be like, give us all your... Did you see what Canada sent out?

Well, Canada's a socialist nation. We are not a socialist nation. So let's be clear. This nation is based on the premise of liberty and free enterprise. If those conditions change, I will no longer be an American. I would leave. Like, liberty and free enterprise is what defines an American. I mean, there are other historical things that also define what it means to be an American. but that ultimately is that the enforcement of the conditions of free enterprise and liberty if you don't have those things that exist in america anymore it's not america anymore you're talking about a totally well let's this is another theme on this podcast in particular like

we i think we are frogs boiling in water and trending towards the socialist sort of tendencies i wouldn't i wouldn't buy i wouldn't buy the mainstream media's attempts to brainwash you about that no it's not it's not the mainstream media i worked my the cio the investment fund i worked for out of college was dimitri alexiev he came from post-soviet russia he immigrated in 94 and i'll never forget the conversation we had in 2012 it revolved around the tsa in particular but he talked about immigrating in 94 and walking to the airport and crying because of the amount of freedom he felt like the first time walking to the airport and he said like somebody who's coming from that perspective uh 16 or excuse me 20 years later almost 18 years later uh was sitting

there looking me in the eyes being like Marty like we're slowly but surely getting to what I ran away from in Soviet Russia using the TSA as an example and other things of course like the security apparatus around us has gotten substantially more sophisticated because of terrorism

well is the TSA even that sophisticated? No but there are other mechanics in play that you don't see that's just security theater it's a jobs program basically same as with the army almost army proper what is a jobs program? Socialism? um so yes like but again and this is why i say we're in a race against socialism capitalism is

in a race it just matters who's just does capitalism lose the lead so i don't think it's lost the lead so that's why i don't worry so much about getting a demand letter about all my balances um on the technical front on the defensive mechanics for your ability to obfuscate in the event of those things uh in the event of that as an american you know not as a big As an American, there are a lot of very, very interesting fungibility improvements that are happening to Bitcoin. The zero-link one is pretty fascinating. The simultaneous open and close that leverages the Lightning Network, as we talked about earlier, is another fascinating one. In the longer run, I think that the mechanics of surveilling Bitcoin users, the surveillers just lose.

There's too many ways for us to blow up the search set. heuristics yeah so and believe me I'm one of the first people that's right there with you thinking that the people who like

chain analysis and stuff they're kind of evil people like what they do I'm fine with them you know it's the incentives that sets it up if they can do it

they're gonna do it yeah yeah so they're entitled to do it but they can go fuck themselves but I'm fine with them I'm still not gonna sit down and have a beer with them

alright I don't have to do that I don't have to like the choices that person made they have to feed their own family fine do that but

that can be I mean it's an inevitable thing I don't look at it as evil I think it's pretty evil it's nuanced at the very least it's nuanced but the mechanics of what happens once we have simultaneous

open and close with lightning in the middle it makes it so that the search mechanics for any surveiller it just blows up the search set too much they can't do it is this just lightning development that needs to happen No, it's just a couple of things.

We need ag-sigs, so aggregated signatures, which can allow us to pile into a simultaneous multi-sig for all of our... Which is post-SNOR, right? That is SNOR. SNOR will support that. And then you need an application or a series of applications that coordinates varied users in varied places to all deposit the same amount of money into Lightning at the same time using that aggregated signature.

Everyone does all their Lightning shit, whatever they want to do in that time. and then you close out for the same amount to different balances so what i just did is i made it so everyone put deposits one bitcoin as an example in the network at once say 200 people all do that at once everyone is all their lightning for a while and then everyone settles back out to one bitcoin again to different addresses what do you have like a flag day yeah you bet it's a coordination it's a coordination event it's like coin join in and out yes so simultaneous coin joining in and out for the same amounts and then lightning in the middle

which and surveilling lightning as it matures uh basically requires the same surveillance characteristics that tor does so you can surveil tor if you're a majority or a plurality of the guard nodes in the network because you can just know who you're reading what traffic you're relating to where uh but to do that in the lightning network requires that you have funds tied up in the network so it's like staking almost yeah so if the requirements for you to have strong surveillance in bitcoin is that you have to stake a substantial amount of bitcoin i think we've won okay like i don't think that they're gonna have to buy it yeah we were talking this earlier that's an awesome incentive yeah so it's like a positive feedback loop fine you want

to know you want to know all my balances all my transfers but to do so you have to per you have to own a huge percentage of total bitcoin fine fine take take my relative degree of minimal privacy i as an individual have in return for making the asset literally something that you as the surveyor have to sit on have you been have you been following this ellen big controversy at no it's that Alan Big is I don't even know what his work is

he's like he seems like kind of like a dark net type of guy no one knows who he is and he makes up 60% of lightning capacity or something like that

70% of lightning capacity I did see something about this he can't hold that up forever but that could be that could be a surveillance actor

that's an example of a surveillance actor but meanwhile he's doubling lightning capacity in the meantime I mean it's supposed to be

a slow boat the entire this entire thing is supposed to be a slow boat i think because we had such rapid price appreciation we have way more interest in the space and on on the asset uh i agree with peter that it would have been better for bitcoin's medium-term health if it had been more obfuscated for a longer period of time but again but again like the fact that we've weathered and survived the challenges that we have mean that becomes actually worth the effort in the first place so we could be in a a lot worse situation i don't like a very good situation maybe controversial within bitcoin a

little bit i think most people actually believe this is that um i think lightning being used is not we're like eight years or more away that's not an unpopular opinion at all we were just talking about this earlier i'm kind of pro like something like uh cash app being like a centralized layer to point like call it layer two whatever but it's some centralized things above bitcoin but bitcoin being its own thing and you can you have the ability to opt out right so like market infrastructure looking pretty similar to um regular markets but like and you'd be able you most people using their bitcoin in centralized ways but the ability to opt out is what actually really gives it its value so everybody being like service providers you're not really stuck to them

you're not really stuck to your bank you can move really easily the option is there i think it's just i it's i view i'm more approaching it from market perspective is that this is probably like how my desires and wishes on the world are relevant to how i think actually human behavior is going to play out and that's just i think just such a large force and i don't necessarily see that as a bad thing either because i think in my view i think bitcoin's value really is being a non-sovereign money thing and as long as the protocol is really robust that's what really It gives it its value. So, yeah, I think, like, in my view, Lightning, I do see long-term that's going to be playing out and being a very useful thing.

But for, like, right now, it's almost like a proof of concept of what you could really do with Bitcoin protocol. If you read BitMEX's research piece this week, like, what you have to do to be, like, a profitable routing node, it's so hands-on. It's such a hands-on process at this point. Yeah. Your normal user is not going to be able to do that. All this stuff needs to happen. But your normal user doesn't need to be a routing node either. That's true.

but it should be easier I don't think it's 8 years away all this stuff definitely needs to happen but I don't see it Bitcoin's value being completely dependent on this lightning can fail and Bitcoin be fine

that's the whole point right so let's talk about it the problem is that I think crypto people who are outside of Bitcoin are looking at lightning as being the saving grace the quote unquote scaling solution And I think to approach the problem with that mindset doesn't really understand what this is all about, right?

It's just like the Bitcoin, one Bitcoin is one Bitcoin. And if you have the ability to gain access to that, but you're still in the centralized service, that's probably, like, that creates a different system than we're already in. That's a different value proposition. Let's talk to a man who created another second layer solution, Liquid. Yeah. So let's talk about second-layer solutions, how they're being tested out and the trade-offs. When we went into liquid in the strong federation model, the exchanges were just not – there still isn't as much coordination as we'd like between the exchanges because you can't – when you have more liquid markets, you have healthier markets. So the settlement lag between deposits and moving between exchanges still to this day causes price discrepancy.

Slippage on us. Yeah, slippage. So Liquid is basically supposed to be a solution for those slippage mechanics because I can cut the transfer time of Bitcoin down by like 98% or 99%. So in that kind of a system or that kind of a reality, there's just a stronger market. That's what the prime brokerage did when it was literally deployed in the 80s is it enabled you to clear across a central pool of assets that everyone owned

and everyone agreed to the conditions under which those assets exist. So that's just normal market evolution. The problem is that coordinating people is difficult, especially people who have selfish interests in keeping their own piece of the pie. So convincing exchanges to actually participate and to use that methodology in concert with the fact that it's reasonably sophisticated technology in the first place,

it just makes for a difficult challenge. Yeah, but again, it's a solution being tested out. Yeah. Lightning's being tested out. What other types of second-layer solutions are you excited about or paying attention to? No. I think Marty's Fabric, like the Eric Martindale's Fabric protocol is pretty interesting. He's calling it Layer 3.

Layer 3 on top of Lightning. He has payment channel arrangements that you can agree to bilaterally. I was really drunk when he explained it to me, and I only remembered like 25% in the morning. It's cool. I'm waiting to see him again. It's like a more flexible mechanic. It's a good bootstrapping mechanism. I mean, he's already got 100,000 users

that he's sort of form-fitting this on top of, right? He has 100,000 users? Yeah, of this game-creating website that he has. Wow. So that's interesting. I think stuff like the Shift Network with Joe Weinberg and Chris over at Alchemy is pretty cool, too.

That's where you can have second-order controls over the asset. So the key management schema is not just mandated or controlled by... It can be subject to rules and conditions associated with like for example an asset fund

or an institutional or something like that but besides that it like I think that there's so much hype in the space about all the things

that can be done when everyone forgets that like most of the things that people are trying are just kind of stupid ideas like

what do you mean by this it's like let's point to specific examples it's just this innovators dilemma of like people needing to do something

with their time yeah yeah it's just like no one needs another photo app dude like no one like this is the problem

is everyone wants to be their own person and have their own like their own story but ultimately most people are destined to at best supporting roles

in other people's stories and that's a hard stop telling these hard truths yeah that's a hard VC culture yeah oh my god

I think Silicon Valley is destined for a hard awakening I think they're in the process of a hard awakening well for some of them sure but like I actually think

going to Silicon Valley and working for silicon valley company is terrible for you right now why do you think that creates the the nature and the the characterization of the companies are caustic it's not totally toxic um the risk reward schemas are totally off base not to mention the fact living in the bay is like the most expensive place in the entire world psychically and your mental health uh on literally just the fact that the state you live in is 62 effective taxes and the most expensive living costs associated in the entire fucking world like this is not a this is not a recipe for healthy people right um and it's

a recipe for the buildings aren't even that tall their buildings not only the buildings are not that nice and they don't build that many of them i i the first time i went to san francisco was a couple years ago i actually liked it a lot more than i thought because i had come from the new york city first time i went to san francisco i got robbed definitely there's definitely new york city bias of like having some contempt for san francisco so when i went to san francisco the first time i was i had such low expectations that i actually liked it and every single time i've gone back i just it's i'm meeting my original expectations it gets worse every time i've had i've had two san francisco experiences my first one was terrible i was literally in the city for

two hours we went to sonoma for wine country and we came back to fly out of san fran early and we went to golden gate park to go to an aids memorial that my wife's uncle his name was on it so it was It was a very emotional afternoon. It was Martin Luther King Day. There was thousands of cars parked by the park, thousands of people walking by. We go back to our car, window smashed in,

all of our luggage taken. It was just like, are you fucking kidding me? One time. You should have practiced better OPSEC, Marty. That was your fault. Personal responsibility. Well, yeah,

I was a younger Bitcoiner at that point in my time. And second time I went was the interview with Jack and it was just like, I walked to the Tenderloin. It was like a zombification in real life. I lived in the Tenderloin for two years.

what was that why were you walking through the Tenderloin I accidentally booked a hotel there one night I lived in the Tenderloin I lived in the Tenderloin for two years

and the Mission for three years how expensive was the hotel there it was like it was like $200 for one night yeah

relatively cheap yeah New York City whatever yeah so the TL and the Mission were where I lived

in the Bay and that was Berkeley five years before that the Bay's gotten worse every year every year I lived there for 10 years

that's why I just left yeah I know some good people there too I feel for them all the people that I know have been moving out yeah

I don't understand why you would stay Everybody I know Is moving to LA Austin or Miami Yeah Austin's hot right now Austin's hot right now Austin Miami tax reasons LA

At least My expectations of LA were similar To San Francisco initially as well I have a very Very good view of LA now I actually broached the subject of potentially moving to Texas To my wife recently and she was like open to it LA can go

it's awesome I recently met Patrick Henry's great great great the 11th grandson John Henry the guy give me liberty

give me death guy really yeah we hung out it's awesome man Texas is amazing there's high vibes there he was a good dude

he dropped out of school in the 5th grade to support his family wow and his older sister yeah I know and I describe him

as like one of the least educated people I know but one of the smartest people I know like he has like these bits of wisdom I was like

John Henry you're on point man and then it's like he doesn't know what the word articulate means or are we educated so at the same time

it's like it's really weird it's like it's a very interesting dynamic well he wasn't he wasn't indoctrinated you know so that's part of it

he also has his commercial firearms license which is nice to have well it's been nice to have you in the studio John oh I love this place this has been

this has been like I've been a quiet fanboy I think your your podcast appearances over the years, particularly with Roger Burr and then on The Noted. Very enlightening. I'm so pumped that you came

through. I mean, I'm just glad we got to talk about dinosaurs. Yeah, well. I was well. Come for the Bitcoin, stay for the dinosaurs. Anybody have like a final thought you guys want to say throughout? I mean, remember that audacity is the fuel of success. And if you actually are striving, then you're on

the windswept precipice of ambition and despair. And we're going to end it there, freaks. Peace and love. Stay humble, stack sets. that was awesome alright I gotta get out of here because I'm going to miss my toy