TFTC: A Bitcoin Podcast - Tales from the Crypt #81: Dan Held

Episode Date: July 1, 2019

Join Marty as he sits down with Dan Held, Co-Founder of Interchange, to discuss his paper on Bitcoin's future security, the importance of sharpening narratives, the false narratives that seem to persist, and much more. Follow Dan on Twitter: https://twitter.com/danheld Follow Marty on Twitter: https://twitter.com/MartyBent Shoutout to this week's sponsors: Cash App. Head over to the App Store or Google Play Store, download cash.app and start #stackingsats today. Use the promo code: "stackingsats" to receive $5 and contribute $5 to a charity of our choice when you download the app. Unchained Capital. Head over to www.unchained-capital.com/vaults and checkout their 2-of-3 multisig vaults. You get 3-months free of Saifedean Ammous' The Bitcoin Standard Research Bulletin when you sign up.

Well, hey there, freaks. It's your boy Marty Bent here to introduce this week's sponsors before the incredible conversation I had with Dan held well over a month ago at this point. But I think the conversation still is fresh today because we talked about Bitcoin's security and the future of Bitcoin security post block reward issuance cycle. But before we hop into that great conversation, we got to give a shout out to our sponsors this week, Cash app you freaks already know all about them uh they're the number one app and uh excuse me the number one finance app in both app stores for the last two years the first p2p payments app to give you freaks the ability to buy bitcoin and they also have the incredible boost program

so you get a boost card you uh you personalize it with your signature with something uh that you like the lightning bolt of bitcoin thing and then you get the card and you go use it a certain merchants like DoorDash, Chick-fil-A, Whole Foods, Taco Bell. I believe Subway is on the list now. The list goes on. You save a little bit of money. You can stack sats. And now here at TFTC, we officially have a promo code and the promo code is stacking sats. So if you have not downloaded the Cash App yet, use the promo code stacking sats. You will receive $5 and then another $5 will be will be sent to a charity of our choice we're still deciding which charity may be bitcoin related it may not be bitcoin related i've been involved with some non-profits in the past that

i would like to support but we're open to ideas so if you freaks have any bitcoin specific non-profits that you'd like to do like us to help donate to let us know we'll look into them and go download the cash app today at the google store or apple play or at the google play store apple app store. We also get to give a huge shout out to Unchained Capital, our other sponsor for this episode. Unchained is doing incredible things in the custody and loan world with Bitcoin. They're allowing you to use your Bitcoin as collateral takeout US dollar denominated loans. So you do not have to sell your Bitcoin. Friends do not let friends sell Bitcoin. And that is why Unchained exists. And on top of that, again, they're really focused on security as well. So their latest

product the vaults product is a two or three multi-sig solution that allows you to to control two or three keys and sign a multi-sig transaction via their vault whenever you need to and if you need unchained or another third party they can step in and be the the second signature in the two or three scheme if you ever need that to happen so go check out unchained's vault program today at www.unchained-capital.com slash vaults. That's www.unchained-capital.com slash vaults. If you sign up today, you're going to get three months free of Seyfedina Moose's The Bitcoin Standard Research Bulletin, high quality information for free. The Unchained folks are hooking that up. So go check out Unchained today. I hope you freaks enjoy this episode with

Dan Held. what is up freaks it's your boy marty bent here at the final interview of uh of blockchain week here in new york city it's been a hell of a jesus at this point it's been like 10 days 9 10 days um with magical crypto conference consensus and then the festivities afterwards i'd like to reintroduce you freaks to a man who's already been on this podcast Welcome back, Dan Held. Dan, how are you doing? Thanks for having me, Marty.

And I think in dog year, you know, crypto is like, it's like a dog years. So 10 days is actually more like, it's like 70 days. Yeah. That's what it feels like. I'm feeling pretty haggard right now. Pretty haggardly. I feel like I've taken a couple years off my life. It feels a little better that we're on a sunny, beautiful roof with a Bloody Mary in our hands.

I think that definitely makes the week a little bit easier to digest. Yes, yes. We had to end it out in style. It's a beautiful, beautiful Sunday afternoon here in Brooklyn, New York, and we're on the roof enjoying some Bloody Marys. We got some College of the Cross on silent in the background, Penn State versus Loyola. And we're here to talk about your most recent article that you dropped, Bitcoin Security is Fine.

Yeah, it's an important article that I wanted to bring to everyone's attention. I, this is part of a series with my company called Interchange HQ, uh, is the website interchangehq.com. It's a new part of our series called the on-ramp, which is topics for institutional investors, um, around different functionality of blockchains and crypto and Bitcoin. Uh, for example, some of my older articles are around like proof of work. Um, this one is around Bitcoin security model, which is a really important topic that a lot of people have been very concerned about. The idea being that as Bitcoins block subsidy or newly minted Bitcoins, as that drops, as it becomes less of a percentage of the block reward, that Bitcoin will

have to rely solely on transaction fees to fund its security. And there's a concern that the transaction fees won't be large enough to compensate miners and properly secure the network. yes this was a 20 minute article and a 68 tweet thread on twitter if uh if you freaks haven't seen it yet i apologize for everyone normally i'm very succinct and and i was as succinct as i could possibly be um it takes a lot there's a lot of different pieces to touch when writing this it's uh it's not it was one of the most difficult articles i've written why was that yeah well Well, it is very extensive. So how did you attack this? What was like the first principles that you would attack and then go from? Well, there's a couple big components.

One would be the uniqueness of Bitcoin's block space, that it is a prime real estate. It is not just any old real estate. It's not any old block space. It's prime and unique. So that's an entire section. The price elasticity of transactors is another section. So how much much will people be willing to pay in transaction fees modeling what happens in the year 2140 or post post uh block subsidy is that that's kind of a whole you know we had to build an excel model for that um looking at uh let's see what else there was you know in in going down modeling out 2140 transaction fees and and what happens in a post subsidy environment you know you had i had touch on topics like the block reward or sorry the block size which i'm not advocating for an

increase i'm just i had to go you know re-dive down that rabbit hole and look at the what the trade-offs you know it's been a little while since i had thought about it so um let's see yeah we had that um there was also yeah modeling out i had to work with a data scientist on modeling out um you know long-term trends and when like the crossover where transaction fees will you know have a larger percentage of the block reward than the block subsidy so a lot of different components what uh so what's the most important part transaction volume picking up or um or the inflation rate of uh bitcoins being produced falling below a certain level where miners will demand more fees. Yeah, so I'm not sure if there's any one singular most important topic,

but what I found interesting as I dug into it is that what the block reward really represents because it's comprised of the block subsidy and transaction fees is that crossover where transaction fees eventually replace the block subsidy is really just an organic trade-off between increasing adoption and that, you know, essentially as it becomes increasingly adopted, then transaction fees will compensate. And because of the happening event, as Satoshi talks about, you know, when more people are chasing less supply, the prices go up, people FOMO in, price goes higher, people hear about it. We've seen these cycles along the happening events bring in greater and greater awareness to Bitcoin. And so essentially each time the supply gets cut in

half during the halving event, we have a supply shock where demand is chasing less supply. And then the price goes up, people FOMO in. And so as the block reward, as the block subsidy decreases, then we see these spikes and those spikes bring around greater awareness and adoption, which increases transaction fees so it's sort of this nice organic trade-off where as the block subsidy drops more people become aware of bitcoin through the bubbles and then more people transact yes and this is uh something that i'm happy you highlighted and we're touching on right before we hit record is uh comparing uh bitcoin transaction fees to to um the transaction fees of other similar stores of value whether it be real estate or gold um the the movement fees that it's the

fees that you pay to move gold and whatnot um and that's uh something we're trying to we mean you and a bunch of other other people talk a lot about narratives and trying to fix broken narratives of the first decade one of those being is low transaction fees and so we're trying to convince people like hey yes fees are going to rise um especially in u.s dollar terms as the price of bitcoin uh rises because fees are in satoshis per byte so the value of of the tokens going up store fees just naturally and trying to explain and convince people that this is okay. And I really liked you comparing it to other store values. And that's a great way to frame it. Yeah, we can certainly look at other stores of value and what people are willing to pay to

transfer those stores of value as an appropriate price elasticity. And so, you know, unfortunately, we had this early cohort of Bitcoiners, former Bitcoiners, now Bcashers, that, you know, wrongly believe that bitcoin is for their cheap cheap coffee payments um which was not at all what what satoshi and you know and what not at all satoshi's intention when he built something to disrupt central banks so they they unfortunately kind of ruined you know they kind of ruined uh public perception and expectations yeah false assumptions right and so people expected the cost to be zero which doesn't make any sense because why should it be free um and when something's used and valued, expecting it to remain free is kind of absurd. So yeah, as we

look to the future, fees will increase. That is just going to happen due to its natural growth and adoption. And that will not hurt Bitcoin. It will be fine for Bitcoin because you shouldn't be using it for your coffee payments. You should be using Lightning for that. So we can look at other stores of value or other large, large value transfers to look at how much people are willing to pay or their price elasticity to send that money. So wire payments in the United States are between like 50 or between like 30 and $70. That's a, that's much higher than fees are now. And that's what almost everyone does when they wire money. Um, and that's on the lower bound of costs. We can look at gold, physical gold delivery, where you've got security guards and

you've got insurance and you have to you know and then you've got all these other things you've got to do to deliver that gold and that's really expensive donald mcintyre looked at how much it cost the bundesbank when they repaid rep repriate repriate ah man repatriated repatriated yeah sorry that the blood mary's kicking in here uh when they yeah when they brought their brought their gold back from the u.s i think it cost them i forget the number i think it was 4.2 million Yeah, it's like $4.2 million. So that's a very high price elasticity. And then I think one of the ones that really, really touches on how high people's price elasticity might be is real estate transactions. So the Chinese are buying $40 billion of U.S. real estate annually.

We can see some of it here that's being built right now as we look out into the skyline. Real estate is a very common store of value. As Connor Brown recently wrote, like i think 20 of some neighborhoods are solely used as store of value yeah yeah it's um we can again like we we can look out at them right here uh and that's what i actually let's tangent on connor brown's uh that intrinsic value article it was really eye-opening in a different framing that i haven't heard before and i was just accepting the fact that bickwin has no intrinsic value and And this is actually good because it opens up current stores of value that do have intrinsic value to actually, instead of being used as a store of value, to go out and be productive goods. Yeah, Connor Brown kind of exploded on the scene recently, a really brilliant law student from Stanford.

And I thought that article was, I've been in this space for seven years and never thought about it that way. I thought it was brilliant. right that so so the tldr is like that gold by having a dual purpose of being useful for both electronics and a store of value the store of value use of that commodity actually is a net negative because then it displaces that that that gold that could have been used in electronics similarly with real estate we have all these unproductive or non-used real estate assets and all the concrete and all the materials used to build them and so it's use dual use as a living space and as a store of value the store of value use case decreases its utility as a living space

and so bitcoin having no other utility other than being a store of value is the most like efficient store of value out there exactly and it got it and connor uh dove into san francisco and that real estate market in particular where you have the residents who own the houses treating their properties as stores of value and not letting any more real estate be built essentially and this causes some perverse externalities. Oh yeah, I live in San Francisco and the rent is the highest in the nation because people, the earlier older residents, it's kind of a Ponzi scheme, the older residents want to preserve their property values and are stopping all building from happening and so now there's perverse incentives because properties are being used

as a store of value that thwart the essential growth of an entire generation so we're seeing really perverse effects of people using commodities or other assets as a dual purpose store of value and then its original utility yeah no it's uh again shout out connor for for bringing that framing to the fore because it really is like oh shit like imagine if we were we're using gold to get to space to to mine asteroids to make gold basically used uh completely priceless at at that point but like also would help us explore space more like we can open up these these commodities for for things that can help us move into the future move into uh hopefully a type one civilization That's what we're going for.

We're trying to get to the moon, right? And so, yeah, back to the original part about price elasticity. So Chinese transactors are willing to pay pretty high closing costs in the thousands of dollars to purchase this property. And by the way, if there's a trade war with China and Trump wants to, at the snap of his fingers, he could seize all these assets and call them illegitimate or something like that. So what is a price elasticity for someone to transact in an immutable, almost impossible to seize asset? That scenario does not seem too foreign to me or improbable, especially in the last climate of the last few weeks with the trade war heating up. And we've actually seen this already in Saudi Arabia with the Saudi Arabian government freezing the account of one of the princes who had like $8 billion or something like that. Didn't the prince freeze the accounts of all of the other princes, like the main guy?

Yes, yeah. Something happened where they got frozen out and billions of dollars just gone. Yeah, what's a billionaire willing to pay to store their value somewhere? Right. What's an average person willing to pay to take their entire life savings out of a country? Yeah, and so let's hop back into this conversation. How do we make the masses comfortable with this? do we make the masses comfortable with this or is it something uh a quote-unquote problem that

that'll get bitched about in perpetuity yeah i mean it's a lot about expectations i think you know when i did my post subsidy modeling um which paul storks actually came over to me and uh complimented me on on some of the modeling and he liked it which was that was kind of cool i really respect paul i really respect paul too i'm i did not get to introduce myself at the blockchain party. I feel terrible. Yeah. He, he wrote an article about the declining block subsidy and had a different conclusion, but, uh, he still, I think liked a few things that I highlighted. Um, but yeah, if you look at, if you model out Bitcoin's transaction fees for Bitcoin at 10, 10 to a hundred trillion market capitalization, I mean, we're only looking.

And then I also included a lot of assumptions, which were over a hundred and a hundred years. we have um i think yeah i think it was like a you know 4x block size increase over 100 years some people are like that's overly conservative some are like you're out of your mind that's crazy i'm not advocating for a block size increase i'm just i plugged it in junior yell at you he's smaller blocks he hasn't yet but i'm sure he will so yeah um i just you know just to get the conversation going i plugged that in um and then an increase in efficiency on layer one and then modeled out so right now we have a pretty interesting path or sort of a pretty pretty nice curve going in terms of transaction fees as a percentage of market cap and so i use

that to model out bitcoin's long-term costs that chart in particular it is crazy how like uh how the variance uh around sort of the mean of like the like slope at which like transactions are are rising is is pretty pretty smooth but if you look at like over time it's like up and down up and down very volatile right it's uh largely around market cycles yes so as the price goes up people start to trade more people start to move their coins around um but we are seeing established floors at the end of those cycles and it's moving up very very slowly um but we are seeing those floors being established which is good so we're seeing a nice trend and that long-term trend points to transaction fees costing, in aggregate,

0.001% of Bitcoin's market cap daily. So annually, that's 0.365. And you come to the conclusion that the security spend in the hundreds of billions, correct? Yeah, so... Not an exact number, but... Yeah, at $10 trillion, you're looking at a security spend of $36 billion annually.

At $100 trillion, you're looking at a $365 billion security spend, which I think is very, very strong. I highly doubt that a nation state will waste $360 billion and just burn it instead of taking the money. I mean, they have to respond to their citizens if they did that, right? Yeah, so let's dive into these game theoretical threat scenarios where a nation state tries to 51% Bitcoin. One, it's expensive. Then two, the fallout socially seems to be a heavy, heavy cost as well. Yeah, so to zoom out a little for a second before we dive into the nation-state cost estimations or game theory, what is an appropriate level of security spent?

Nick Carter highlighted it really well, which is, is it stock, flow, or threshold? And I think it's not flow because miners purchase these ASICs for long-term purposes. And as ASIC efficiency decreases over time due to the laws of physics, because they can't make the chips any smaller, ASICs will be purchased for their longevity. So miners aren't going to play short-term games and try to game the system for like a short-term payoff. They bought these machines and they need a cash flow for a very long time to make them profitable. So I think stock or a percentage of stock, which is what I modeled my charts after, what's the percentage of market cap that represents Bitcoin's security? And also something I could model using historical data that I think eventually reaches a threshold level where it's just so improbable game theoretically that someone would attack it that we can basically say it's secure. And so what is that value?

We're not sure, right? It depends on what the market cap of Bitcoin hits. Like the final hyper Bitcoinization market capitalization. Yes. And it goes back to that conversation that we were having earlier. If people sort of realize that the current assets they're using for stores of value, whether it be gold or real estate, sort of have opportunity cost by using them as a store of value. And they come to adopt Bitcoin as the only store of value. So, yeah, it's interesting because it would have to eat up most of those market caps.

and it's yeah i mean gold's a what's a 6.5 trillion market cap you got the classic gold plus fiat money which is 50 to 100 trillion and then real estate 250 trillion market cap well we were um we were uh i was telling you about how i interviewed david bailey uh this week um earlier this week and i love his his uh his tab his total addressable market he's like anybody thinking like stores of value like hundreds trillions like real estate uh gold stock market whatever it may be is like take it too small like the total addressable market is is the cost of all the energy in the world on a long enough timeline yeah i mean i i've got some kind of zanier ideas in terms of really out there market caps but uh i don't want to be labeled as like a lunatic

yeah let's let's tame our expectations but yeah exactly it could uh it could be a lot bigger than we expect right and uh what are what are people willing i mean how many people are willing to store their at their value their store time and energy which is their money and something that's immutable and hard to seize well again to bring david back into this like his analogy really opened my eyes like when the internet was created if you were to tell people that it would uh it would record more information in one day than ever was recorded in human history up until the point that the internet was created people would be like fuck you that's crazy there's no way Oh, totally. Yeah, just to pull out a cell phone in 1990, to pull out like an iPhone, people's minds would have just exploded.

It would have been unfathomable. Like, whoa, this is magic. So when we think about projecting Bitcoin's total addressable market in the future, and we're thinking of these constraints that we live under now, just think about the constraints that people are putting on the Internet and how much that exceeded their expectations. Yeah, and also, I mean, when you think about it, like when people buy into Bitcoin, they have to buy it from the HODLers. So it's not going to be a linear, you know, you're not just going to transfer $100 trillion and put that into Bitcoin.

As you buy up, as those other world assets flow into Bitcoin, the price goes up. Yeah, and I think I just saw actually a tweet updating us on HODL where 60% of UTXOs have not moved in over a year. Yeah, so good luck. Right. Good luck transferring your trillions into Bitcoin. I mean, people aren't going to willingly part for that spot. It's going to go up a bit.

Yeah. But let's bring it back to security, how we attain that. What drives demand for fees? And one thing, we brought this concept up before on this podcast, but I want to expound upon it more. On this episode in particular is Jevons Paradox. And so basically the utility of layers or services built on top of Bitcoin driving demand for for the under under the underlying resource, which is block space. So, yeah. So and to kind of make sure everyone's following us here, because this can be complicated. You know, Bitcoin has block space. Every 10 minutes, there's new block space to bid on and people pay transaction fees in order to get their transaction in the block.

and so you know what's uh in terms of the you know can we will will people use bitcoin's block space will it be unique will there be demand to use it so we we've touched on the price elasticity of what people are willing to pay for a store of value use of that block space real estate so to kind of touch on you know we can we can talk about the the density of that block space So, as Nick Carter puts it, we can increase the economic and semantic density. So, semantic, I'll just touch on for a second, which is like Veriblock, where they use Bitcoin's block space to route their own blockchain into Bitcoin's blockchain and have that thermodynamic guarantee of a certain state has been validated at a certain time. With economic density, we're talking about things like lightning. so you know lightning when you open and close a channel those are two transactions on on layer one

how much economic density is included in that is essentially all of the activity that happened on layer two in that channel so block space in the future the demand for it and we're already seeing some of this now will be driven by these other layers and these other other economic and semantic more dense things rather than just a transaction yes and the crux of jevons paradox is that people leveraging the scarce resource which again scarce resources in this uh scenario is block space so lightning uh takes up that space by opening and closing channels vera block by hashing data into the bitcoin blockchain and the one we talked about a crazy chart earlier the craziest chart in my mine was a lightning channel uh activity yeah on on chain like yeah there was a block with 25 percent

of the block was uh opening and closing lightning channels right that's pretty nuts that's crazy yeah and lightning is still very much experimental so that i thought that was incredible there's a worry so a lot of people have argued oh well lightning will suck away transactional demand on layer one and so that's where jevin's paradox comes in whereas lightning makes bitcoin more efficient because you can move more money on layer two and sort of the net value between those two parties on layer two that net value is printed on layer one and people are like oh well that's just going to suck up all the transactional demand from layer one but that's definitely not the case because we haven't seen that happen even though lightning is 25 of some blocks

we through jevons paradox we know this not to be true as well in the real world where as miles per gallon for cars became more and more efficient, so cars became more fuel efficient, more miles were driven. People don't use less of something because it becomes more efficient. They usually use more of it because it becomes more efficient. And so Lightning will drive increasing demand because it makes Bitcoin more efficient and more open to other use cases rather than decrease layer one.

So we've seen data show that Bitcoin's doing just fine with Lightning taking up 25% of blocks. Jevons Paradox shows us in other areas is that we know that efficiency increases usage rather than decreases it. And finally, Bitcoin transactions in layer one cost, it's Satoshis per byte, which is about the data size. Layer two is about the size of the value. So there's a crossover point eventually to where it's actually more advantageous

to move your transaction in layer one, depending on how big the value is. Yeah, there's an ebb and flow, yin and yang there. And it's all based off the assurances of the protocol level and sort of leveraging that to create utility. And Bitcoin is proving to be useful. And one of my favorite sort of thought experiments that revolves around Jevin's paradox of Bitcoin that's created via Bitcoin and Lightning in their relationship in particular is something I've talked to Pierre about before. Pierre Richard about before is the potential for the Bitcoin protocol level to become

like a quasi-Rystone system where you do on-chain transactions very very rarely but everything's moved to sort of lightning and so this is going to be blasphemous to some big blockers and purists out there

but it's an interesting thought experiment to think about because as we're discussing with Jeff's Paradox uh depending on um the value going through lightning network like you could potentially see it developing into a rise stone system like system uh in the future and is that okay yeah i think that's totally fine i mean what's nice about all this is it's an organic it's a very organic sort of system to where the market will dictate it and i think that's what's so brilliant about a lot of these decisions because these these decisions were largely the market will

side which is great because i believe in capitalism being the ultimate decider for how to allocate capital and how systems are built because everyone's financially motivated incentivized in the right way to do it so do it that way there is no central point of control there shouldn't be a central point of control in capitalism because inherently there's a data problem you can't can't ingest enough data points in order to make decisions for the economy so bitcoin is largely going hey well we're just going to let the system do what it wants to do we're just here to like bitcoin bitcoin sort of like software and rules that have been set up are like largely just a framework yeah and bitcoin doesn't even know how we're using or yeah it doesn't know how we're

using it's just like hey i'm gonna do this thing you guys use it the way you see fit and the market will figure that out right totally and i think like the tldr of my piece is essentially people are worried like oh will bitcoin security be enough and i'm like well if people don't use bitcoin then it's dead anyways so the security doesn't matter like if bitcoin isn't being used for large stores of value and there's not like increased transactional demand on layer two like then it's a failed experiment right and so worries about what happens in 100 years when the subsidy runs out i'm like well if it hasn't like very much succeeded in the next couple decades i think it'll be largely as failed i think i will i will perceive the experiment as failed

when uh when do you think uh so let's talk about the mechanics of the distribution of of the quote-unquote rewards so the reward is the combination of the block subsidy which is dictated by the protocol right now it's 12 and a half bitcoin per 10 minutes and the reward is the subsidy plus the fees and the fees are dictated by the market again depending on the demand for block space at any given point in time um so there will be so there will be a point in the future where um the the subsidy and fees will have to reach parity and eventually fees will have obviously have to overtake uh the subsidy and this has happened before in 2017 in december there was a block where the reward and the the fees were the fees were above 12 and a half bitcoin

yeah the transaction fees in a certain block in 2017 was were larger than the block subsidy so yeah we've already seen that happen um but when when does that have to become consistent do you think yeah so with the modeling that we've seen done again the transaction fees are very the fluctuate quite a bit given the market cycles the bear and bull market cycles and so but we do see floors being established and so i'd recommend checking out the article where these nicely designed charts by awe and wonder he did a great job they're really really slick right um he's one my favorite chartist in the space i think that's the right way to put it like chartists yeah it's crazy it's just like an anon providing this like i don't know his real name yeah i don't know his

real name we did the whole thing over twitter dms so this is how this is what blows my mind about the space i that was blows my mind about this week is apparently there are some people i've been wanting to meet online and i was in the same room with them but was not introduced was like what the fuck mr hodl yo oh he was there because i was at the same party you were at the blog stream If you're listening to this, I'm pissed that you did not introduce yourself. Yeah, I ran into a lot of people I wanted to see. But yeah, I didn't see Mr. Hoddle. That would have been awesome.

Yeah, it would have been. Yeah. It would have been. But yeah, you know, I think a lot of the concern, you know, with the blocks, you know, essentially like people are like, oh, and then I think a couple of other important things to touch on here would be, you know, is Bitcoin's block space unique? a lot of people go, oh, well, in 2017, consumers were, you know, trying to route payments based on cheap, much cheap fees. So I fundamentally dismantle this argument piece by piece.

Yeah, compared to Litecoin. Yeah. So here's the way to think about it. Is Bitcoin's block space just any old real estate or is it prime real estate? And it is very much the most prime real estate you could possibly want. and so bitcoin is prime real estate for four reasons it's due to uh so when when you look at block space it's useful its uniqueness is based on transaction cost coordination cost security cost and volatility cost so users in 2017 transactors in 2017 were not simultaneously looking across bitcoin's block space bcash's block space litecoin's block space and simultaneously looking at like exchange, like slippage, looking at transaction fee and volatility fee. So how

much is it going to fluctuate over your time period? And volatility fee, by the way, has a nasty, nasty problem because as your transaction value goes up, the volatility becomes increasingly more painful. So a hundred dollar transaction that fluctuates 10% will cost you $10 versus a $10 transaction that fluctuates 10% will cost you $1. So users were not simultaneously scanning across all these block spaces evaluating all of those factors and then routing their payment that's fucking bullshit to be frank and on top of that you have capital gains tax that you would have to pay on the switching costs as well yeah let's say it goes up in value instead of decreases in value well now you own capital gains on that so it's a people aren't people aren't people aren't

mentally doing that no one was doing that in 2017 what was really happening is that you know there wasn't the meme of transact bitcoin's transaction fees were increasing therefore people sought out other block space is completely false people were just doing degenerate trading people weren't simultaneously scanning across all those block spaces and routing it based on my cheap transaction fees think of the uh the mental costs that come with that model where you're where you're uh purveying the the field of alternatives uh from a fee perspective to bitcoin it's it's just especially if you if you think about mass adoption and applying it to to quote-unquote normies who we expect like they're not going to think this way yeah as connor brown puts it multi-coinery

is barter he keeps coming up he keeps coming up but it was a good i had that quote in my article because i thought it was really well placed you know it's it is barter it is barter otherwise you're not solving the coincidence of wants problem that's why like yeah that's why the ico craze never meant it meant it made any sense to me excuse me um vodka's kicking in pretty heavy here dare to defy but it never made sense to me because just as a quasi like there's somebody who views himself as a a dumb a dumber user or or not as not an expert level when it comes to using all this stuff i just thought like there's no way anybody's going to interact with the their world like trying to go token to token to token for for every service and quote unquote app they use like

i only use three apps really uh like every day and that's twitter spotify and a couple other things like thinking that you're gonna use these new token apps and insert them in your life just never made sense to me because of the the mental costs that come with it totally and you know to plate devil's advocate i'll defend the other side a little bit so some argue that oh we could obfuscate all of these other coins. So we just put a GUI in between you and that. Interoperability, bro. Yeah, or like we auto-sell your

taco coin for your beer coin. But the problem with that is then you have to have an order book for every single one of these coins and there's no way that order book's going to be as liquid as Bitcoin. Bitcoins will be for big fiat pairs. So you're going to have increased slippage costs for every single transaction, which doesn't make any sense.

It increases complexity, it increases slippage, it increases friction when people transact. and if it were ever become a thing it would just increase uh systemic risk because you have to have market makers step in to create those markets and it would it would yeah for every like whopper coin taco coin yeah vodka it doesn't make any sense no you you want one store value that's also a unit of account where everyone's mentally you know as humans intuitively they're just going to stick to a couple what makes the most sense is you can walk around the fucking world and scan a qr code

and spend bitcoin wherever they can not have to worry about if it's whopper coin or whatever you just know totally no matter where you are somebody eventually at some point in the future all merchants uh will will be able to provide you with a qr code that you know like i hear here's some satoshi some lighting network i mean let's let's get like real fun with it i mean in the future when bitcoin's a unit of account which is a long time from now we ain't gonna be using qr codes we're just like look at something and buy it facial recognition has been a been a hot topic on the pod podcast recently oh what uh what came up about that no it's just that we uh rabbit hole recap this week the bitcoin sign guy he joined us and we talked to the subject of

facial recognition technology being um deployed in the uk in particular because there was a story of the man this week who was walking down the street in london and the cops warned him hey ahead here we're doing facial recognition just to let you know and he did not like that so he put his sweatshirt above his face and tried to walk by and he was stopped because he would not participate in the facial recognition and he was fined 90 pounds it's obviously a sign that our civil liberties are being encroached on and the surveillance state grows and but then you get into a little conversation of, Bitcoin Sign Guy actually brought this up,

like, yes, it's overt right now, like, they have vans with cameras on top that are looking for people, but as the increase of, what's the word I'm looking for? The increase of sort of resistance from citizens becomes more intense, they'll just use cameras, like iPhone cameras,

and put them on places where they're imperceptible. So basically coming to the conclusion that the surveillance state is probably inevitable and that we should be focusing on technologies that do preserve our individual sovereignty and freedom. And that's like Bitcoin presents one of those opportunities. So if facial recognition and being spied on 24-7 is gone, we should focus on things that we can.

Totally. You know, Bitcoin fundamentally is about freedom. and to be able to in money i would argue is one of the most important things in the world because it represents that stored time and energy you know represents your retirement account represents your entire lifetime of working of sacrificing time and energy to earn that so the preservation of that i think will bleed into other things like privacy like from the state as citizens withhold that stored time and energy from the state the state will have to give them liberties or whatever they like in return to give up some of that stored time and energy yeah and we got into the the

concept of uh surveillance free zones and and people willing to pay taxes to to uh have that luxury be a reality we'll pay for it right um it's crazy it's uh we've never lived in a again obviously the the arc of human history and human progress is up and to the right and we're always at the cusp of the pinnacle of man being alive in the present, but it is crazy how much information is being... Again, going back to the internet being able to produce more history in one day,

record more history in one day than was ever recorded up until 1997. It's crazy. And dealing with the consequences of that change psychologically, chemically, socially is something we're coming across with in privacy is a tough problem because how many people use vpns i mean we i don't use it every day i should but i don't yeah it's pretty easy to use right it's a shout out um mulvad vpn i've been using that it's very uh very intuitive very paying

bitcoin and it's just automatically on all the time that's pretty cool yeah nice yeah but yeah It's hard, though, you know, like, people outcry whenever, people cry out whenever they see, like, Facebook and other companies infringing on their privacy. But they continually give it to the state because they still believe the state is working in their best interest, where we see, like, well, they're not. Let's put it this way, if the CIA and NSA were thwarting terrorist attacks, we'd be hearing about it all the time. they'd be like hey we're here we're still here we're saving your life but we don't because they think it's an extremely low interest right now yeah think about the tsa is a 95 failure rate exactly if anyone was motivated it would have easily happened a tsa or how about outside the airport or anything else you know people are willing to sacrifice all their privacy and freedoms

for this largely illusionary sort of security by the state which i think in the future there'll be cracks in that facade where people realize the state is not actually providing them really any security it's yes if anything they're harming people right the tsa is is a big uh big driver of anxiety and and uh mental anguish for your boy marty because they are the most incompetent uh organization most unnecessary organizations like why do we have the tsa at the airport not the train stations not that i want them at the train stations please do not bring the tsa to train stations about the ferries the ferries it's like false equivalency i'm convinced that the tsa and airport security is just a testing ground for the u.s government to see how much

people will put up with like yeah i mean i'm not a huge conspiracy theorist however i do agree to some extent that like it is sort of testing our willingness to put up with crap like that right like and then if you had done that in 1950 there'd be fucking people rioting on the streets right you know but we're sort of like the frog in the pot of boiling water where you know same with the economy you know our private you know privacy and our freedoms have slowly been eroded to where like people are like oh but i trust the government and you know people kind of forgot why we're here and why america was great to begin with which is about freedom and then we're slowly seeing that happen with the economy where now like the whole economy isn't even looking at fundamentals anymore

or risk it's manufactured they're just looking at the fed it's all about asset flows stemming from the fed right they're just going like well what's the fed gonna do what's trump gonna do and i'm like that shouldn't matter at all the economy should not give a shit whether i mean well sure they play some effect but like that they should not be the driving effect of the economy it should be largely a capitalist system where like people are assessing risk and allocating capital versus like going oh what's the central policy maker doing yeah it shouldn't be whether or not is trump going to tweet this morning or totally yeah yeah and if we have people in that sort of position of power we should look to you know create systems where we don't have

one man or woman with all that power it's it's about it's obnoxious and ancient and kind of ridiculous a great poet we know as kanye west said it best no one man should have all that power um i was gonna try to beatbox here real quick but i'm too i'm too white for that i'm not gonna try it yeah i thought about it for a second i thought about it and then i was like about it too it's gonna be it's gonna it's gonna sound bad yeah the vodka beats are not not as great as uh the tequila beats we'll say that you know coming from texas the uh tequila style you know that's that's that's my jam are you uh tequila neat tequila shots tequila neat yeah oh yeah i like to appreciate it right same with whiskey yeah like on a big cube is preferable

like one big cube i don't want it to be diluted that much it is more of i want to like a little cooler so i can appreciate the flavor yes otherwise the burning of it kind of like overwhelms the flavor of the flavor profile some people probably they a lot of like aficionados thinks i'm probably a i think i'm probably a heretic for saying that but i think i can taste a little bit more when it cools down a little bit what's your uh what's your favorite tequila um you know so let's see florida lisa is pretty awesome um it's kind of my go-to and uh let's see yeah florida lisa is probably like my go-to go-to and then on the whiskey side uh you know i've got like japanese whiskey like nika coffee green fell in love with that so nice i love japanese whiskey too

it's nice and nice and smooth and beautiful but you know like if i'm out yosemite campfire i want like a nice mcallen 12 you know so maybe something a little smoky a little peaty what's uh what's the yosemite campfire like well it's beautiful i mean you've never been to yosemite i've been told i need to go i need to go oh it's beautiful you got these like you're in like a gorgeous valley and you've got like beautiful redwood tree trees um perfect sort of weather uh and you know you got a fire going you've got a glass of really nice scotch you know it's just that that's what scotch was made for it's like being by a fire that sounds like the way to live well when bitcoin hits a hundred thousand in my library we'll have we'll also make scotch by the fire that's what

We'll record episode number maybe 20 or something between us by that point. Yeah, we should do this. We're on pace for semi-annually right now. Yeah. The last time was like over six months ago, right? I think it was just about six months ago. I think it was like October, November last year, right? Yeah.

And we did drink whiskey that time. We did. Yeah, because Matt was over at Matt O'Dell. Yeah. We did a double back-to-back, right? Yeah, we recorded, then we did a rabbit hole recap. And you busted out of there to go on a rickshaw date. a rickshaw date let's see oh yeah yeah i had a dinner date that night yeah

um no well speaking of bitcoin 100 000 that's uh that's another thing it's been more at the top of my head more recently like it seems again bear market everything trends back towards bitcoin the gravity of bitcoin sort of sucks everything back in back to fundamentals we've got lacrosse on here in the background if you're if you're a lacrosse player you know if you're getting back on defense you get you get back to the hole and then you expand from there so uh in the the bitcoin alt uh markets we're we're at the point where everything is uh getting back into the hole getting back into bitcoin but with that being said like the question that that comes to people's mind is how many alt cycles gonna have how intense are they gonna be

are we gonna have returns like ethereum's ico going forward i'm not as convinced that's gonna keep happening because i do think there is a level of of competence and and understanding in the general market and brand recognition of bitcoin uh is growing stronger as well that that i think a hundred thousand is like not that far off you know bitcoin the seed of bitcoin survived all the way to here which is incredibly bullish a lot of things could have killed it flippanines civil war with bcash um you know businesses trying to insert some of their bias in the consensus mechanism um you know in terms of like protocol upgrades i mean it's like with 2x bitcoin survived a lot um transaction fee fud fud fud fud i mean every type of fud you could

possibly imagine can you imagine when people get positive about bitcoin like the journalists are like oh bitcoin's a great thing can you imagine they just need to start buying it and then we'll start writing with it someday someday they're all pre-coiners right now but yeah i think the recent market activity is something that's a i think a great topic uh which i think two things we can touch on one being like alt-season and then the other being Bitcoin being the risk-off trade. Let's dive into it. Yeah. So alt-season is something people like everyone, which by the way, if everyone's thinking that the market might do that, it's probably not going to do that because otherwise it already would have happened in anticipation of everyone thinking that it

might happen. For example, in San Francisco, there was an article that came out about the newly minted millionaires from Uber, Lyft, and other IPOs. Well, people were like, oh my God, you know uh housing prices are going to skyrocket because of all these newly minted millionaires i quickly google it and i check sf housing prices flat people would have already bought in anticipation of those millionaires being minted if people thought that was going to be a thing so it must not be a thing if the market's not reacting to it the market is the ultimate information absorber and reflects everything in the market so if alt season is going to happen we should be seeing it which we saw a little pump from something from like ethereum and a few the

other day but a lot of people don't realize that a lot of you know on twitter when you hear these so-called experts talk about alt season they're being extremely intellectually dishonest because none of them are going back to 2014 the first altcoin boom and comparing returns from 2014 through 2018 no one is doing that which is your largest uh it's your longest data set and your largest data set because there was a wave of alt coins back in 2014 including like dogecoin it was one of the in that cohort but they're not doing that they're looking at 2016 to 2018 and so i think you should look at both data sets we should look at all available data but especially the longest running data set um you know we've got more time to evaluate what happens when alts rise

and fall yeah 2013 2014 alt cycle was all about a proof of stake multi uh algo mining uh oh yeah Yeah, like QuarkCoin. QuarkCoin, and then there's PrimeCoin, which did something useful with the proof-of-work because it found prime numbers. I actually mined a whole block of PrimeCoin back in the day. Really? Yeah.

Hope I don't get crucified for this. Look, I'm a Bitcoiner, right? But look, I thought it was interesting. This is 2014, right? We're experimenting. We're checking things out. And then later down the road, I'm like, well, proof-of-work is already doing something incredibly great,

so it doesn't need to do anything else. It's kind of a silly thing to do, but I realized that later down the road. No, but it's a perfect example of the, again, marketers, snake oil salesmen, if you will, attempting to quote-unquote highlight Bitcoin's perceived inefficiencies and add on them by spinning up a shitcoin that quote-unquote solves that problem. and early on in those days it was uh people were worried about uh proof of work so that they're in and uh to be clear i didn't buy any by the way i just mined it on my company's computers oh that's the way to do it yeah exactly get some clean prime coin exactly exactly but it's like uh i wasn't about to give up my cold hard btc for that no that's for sure it's actually uh it's

funny like another one another famous early all coin name coin was probably yeah probably the best example of um in all coin learning a hard lesson because they shared a scripting algorithm with bitcoin shot 256 and they found that uh these if you have scarce hardware mining hardware in particular uh it's going to compete on the open market and and bitcoin obviously was was the winner in the shot 256 market and name coin became highly susceptible to to 51 attacks well I don't want to mess with Bitcoin's black hole. It'll suck you right in and crush you. Right?

Yeah, I wouldn't want to compete. No, but it highlights almost the naivety of some of these projects. I try to assume that they're more naive than malicious, right? Yeah, I think it's more naive than malicious. But also, if they spent a couple of weeks really reading into it, they'd realize it's kind of bullshit. but essentially what happens is with the 2014 altcoin bubble in the 2017 2016 like ico bubble it was just a black shoals model of all probabilistic narratives so like you want uber coin sure we got that you want lift coin we got that too you want airbnb coin sure

want to decentralize identity management on xyz you want health care on the blockchain we got that So, essentially, whatever meme you wanted to buy into, people made. 2014 was a more primitive version of that, but 2016, 2017 was much more sophisticated. A lot more sophisticated, because the funding mechanism was a lot easier to spin up. That's actually the funny thing, comparing 2014 to 2017, was the scam... I don't want to say scammers. the people launching these projects noticed that because that was the big thing in 2013 2014 was fair pow launches like that was on bitcoin talk.org like that's what you look for when these

announcements were being made like is it a fair pow launch like are we going to be able to like point our miners at it exactly and then like the icos realize like let's not even fucking worry about that let's just sell these tokens straight up before well that's what's funny about uh you You know, Grin is a recent example of that narrative because Grin kind of went back to the OG narrative of a fair launch. Yes. Which I wrote one of my earlier articles is Bitcoin's distribution was fair. A lot of people like to, you know, say Bitcoin is equivalent to a stealth mine, which is completely false. Satoshi gave people a three month heads up, a three month heads up from the white paper to when he launched it.

He shared it with the only people that cared. You know, he didn't just like, he didn't share it on an email list for dogs, right? Like he shared on the cryptographer emailing, the only email list of anyone who'd give a shit, right? Like who the hell is going to, people are like, oh, but he didn't like broadcast it on CNN. I'm like, no one would have cared. And Bitcoin didn't have value for a year and a half anyways. No one valued it for. No one would have cared.

How the hell would he have gotten it on ESPN? Right. ESPN, CNN, wow. Well, and Grin highlighted the issue that like a fair launch is extremely difficult and I would argue not replicable past Bitcoin's initial launch. It's just not, you can't do it again. and this is this is just a product that they're being way too many eyes on the space like you cannot you cannot it's i mean we've talked about it like the the immaculate conception is is cannot be reproduced it is right and that's that's something that scares people too it's like

well we should be able to compete like there was myspace and there was facebook but it's this is something very unique and very ah it scares people it does because it's like it's this rule set that's just not movable and we're in a world of like nothing is like a lot of things are permanent but we can usually change the rules if we don't like things that and what scares people more is that they're it's not like the most efficient in their in many people's eyes the most efficient like technology that could could exist for for this use case and that it's like people don't understand um that like working with what we got with bitcoin is more advantageous than trying to to create something perfect from scratch yeah exactly like bitcoin is a you know equivalent

to a rocket launch like we got everything right it got off the launch pad you know it's it's like 50 miles up in the air it didn't explode yet and people are like oh but what if we change the fins and i'm like fuck man look it's working like it's magnificent the fact that it's 10 years along created by a pseudonymous founder with no market making with no like largely just a forum of bitcoin talk of of a some tiny group of believers a tiny tiny tiny group of believers the fact that it survived through that stage and got to where we are now we're like you've got bank of america and goldman sachs and deutsche bank like writing articles about bitcoin holy shit that's awesome and like bitcoin's daily trading volume and market cap fantastic i am so excited we got this far but

it's there's something just inherent in humans that see again this has been repeated ad nauseum on this podcast but bitcoin is slow dumb and arduous and that is okay it's simple and there's something about its simplicity that scares people or it's like oh you can only get 20 transit there's potential for 20 transactions per second like that's not a lot we need a million like there's blocks every 10 minutes why aren't they one minute there's there's a fee market like why can't it be fee less 99 of those are people just memeing what they hear other people saying rather than like true experts digging in because true experts know that everything in life comes with trade-offs and so the true experts go well we could we could have more transactions per second but we'd give

up some form of decentralization in some manner and so most people are just memeing what they hear from you know quote quote experts in this space cobra cobra uh that guy's got like bipolar disorder or something he's all over the map he or they have bipolar yeah it's a couple people right he they yeah it's a bot maybe it's a maybe it's a bot we'll find out cobra if you're listening let us know let us know to kind of wrap up on alt season let's say let's yeah there are alt pumps sure but you're gonna time it right you're telling me you're gonna sit there and you're gonna buy right when it's at the lowest and then you're gonna sell right when it's at the highest i'll let the experts do that but as an individual buying and huddling bitcoin has outperformed every

other crypto if you look at the return since exchange listing bitcoin outperforms ethereum on that really yep by magnitudes so your best bet is to in and also your highest probable survivable outcome of all these coins is bitcoin so that and also all you freaks listening to this who are thinking about like becoming expert traders realize it's one of the most vicious uh vicious careers vicious things you can do is trade and just literally the way the market dynamics work out only a very small percentage of those people are successful yeah stay stay calm and huddle on it's uh i build accounting software for institutional traders those guys are the experts they're gonna stay up all night thinking about this you got you don't want to

compete with these guys crazy mathematicians writing quant models that exactly you cannot compete with and then that's so that's why we we stress stacking stats here at tales from the crypt is i love stacking stats it's a great meme if if you shout out matt odell if you holla if you uh if you believe in bitcoin and you think it's something worth investing in don't try to play the swings just stack stats uh set a plan it's not financial advice but like create a plan and just stick to it don't get don't get all freaked out by the price movements and volatility it's natural but dollar cost averaging is the way to go and i think a lot of people now look at the price and they're like man you know eight thousand dollars is a lot of money to anyone i think you

know it's a substantial sum so back when i was in it back way back in the day you know when i first told my dad about it i remember it was thanksgiving 2012 and he thought ten dollars was expensive because because as you know he's thinking about it as he's not looking at the total number of units he's looking at the per unit value which the market cap is a more appropriate question right but uh it's funny because like breaking dollar parity then bitcoin was perceived as expensive and so it's always been quote too expensive um so i think look like when you look at the market capitalization of bitcoin what are we at now what's the market cap i think we were like 120 and one between 120 130 i believe yeah i keep calm and hodl on so i don't i don't check

it too much in terms of market cap but check right now yeah let's check it out i i don't think you know i originally bought bitcoin back way back because i believe that bitcoin is gold 2.0 or bitcoin is a new store of value that will be um an incredible value to people to allocate their wealth and preserve it and so bitcoin i think will not even have touched on its 135 135 nice bitcoin hitting a few trillion market cap which is a hundred thousand dollars of bitcoin that's bitcoin barely touching on its original purpose just barely touching on it like lightly tapping it not even not even becoming its purpose like a gold 2.0 or store value that's incredible i mean the fact that that that price movement from here is is many different

many multiples good luck finding an equivalent return in the mainstream markets unless you want to buy some like cannabis stocks which are arguably pump and dump schemes well i think it's hard for people to come to grips with the fact that these types of returns are are possible especially so that's that's another thing is it too good to be true like obviously if bitcoin were to grow into the total addressable market that we're discussing here, this price appreciation is inevitable, but it's something we can sort of see

right in front of us. And I think people are sort of scared, like, is it too good to be true? There's no way it's that easy. And for good reason. Most people, when their friends tell them about amazing 10x returns, they go, wait a second, what's the scam?

And most of the time, they're right. There's typically a scam going on. bitcoin trying to become a new money or a new store of value its pathway was not going to be linear and in fact satoshi hard-coded it in to not be linear he wanted speculative bubbles because that brings around greater awareness satoshi fundamentally understood humans primal nature greed exactly and it's brilliant because satoshi the the code i would argue just enables the the social net the social sort of like socialness of the money and the game theory behind it the code just makes that all work well the code really you know is more frankenstein from a bunch of old code

over the last 30 years it's not really like a breakthrough that's a breakthrough in human incentives which is magnificent it shows that satoshi actually understands humans better than like code exactly which is really cool you talk to any uh bitcoin developer who's very familiar with the code base they'll they'll be the first to tell you like satoshi was a shit developer like yeah yeah in fact yeah yeah yeah yeah i mean he had a big bug initially right like where you could um essentially mess with the supply yeah the inflation bug uh it got exploited in 2011 or is it 2013 it was 2011 well there 2011 was the block reward that was like a billion but it got fixed because the base was never paid out ever 100 blocks and also bitcoin had no value then

yes so it was sort of immaterial yes um yeah i mean maybe there's like a thousand people working on at that time yeah no and i would um encourage all you freaks out there listening to this to go to the nakamoto excuse me nakamoto institute.org and check out the complete satoshi and if you go through the emails uh of 2011 you can see how they handled this bug and it was literally like an email like please upgrade like version whatever it was yeah everyone should go read satoshi's early writing and often with almost all my articles i quote satoshi at least once he thought about a lot of these things um so i you know people go oh well satoshi didn't think of this or that well actually he thought a lot about this you should go read and see his thoughts

directly now don't hold it as like the holy grail the gospel yeah like this is just if you want some insight on as to how the original guy who made this all happen you know it's an interesting context that's um that's another recurring topic is you go back to bitcoin talk.org too and find uh conversations being rehashed today that that were that were hashed out seven years ago right and the one oh yeah so like how a bitcoin how wrote the concept of bitcoin banks like uh bitcoin as a settlement layer like 2010 dude how was super bullish right how predicted like 10 to 100 trillion market cap for bitcoin when almost no one even thought that was possible yeah and he also not only was he bullish but he was prescient enough to sort of mentally

see how this would progress and realize that bitcoin probably isn't at the protocol level probably isn't going to enable coffee purchases but oh yeah the bitcoin banks yeah that that centralization uh look you know it's all about efficiency right and you can't put everything on the blockchain we're finally i think the community crypto community as a whole has finally realized that putting everything on the blockchain is not the way to do it and so bitcoin is about maximal efficiency of compressing data and storing it on chain of only the most valuable data and i think that's incredibly intelligent and the right way to go and we've seen that largely validated by the market by the market validated by the market and then also validated by other projects

which are starting to to adopt bitcoin's narratives that their aim in particular is starting to really hone in on moneyness and uh and being a sound money yeah you've got uh vitalik talking about a hard cap you know that was i think it was published on uh was it the april's april fools but it wasn't a joke and you see a couple different individuals in the space like spencer noon and a few others trying to meme it into existence um but it's sort of like watching your uncle like dance the macarena it just it just looks fucking weird you know it's like wait i thought you were a world computer dat platform defy and now you want to be a sound money and then you you were talking about uh crypto kitties in the blockchain last year and

now you want to talk about keynes like austrian versus keynesian economics and the virtues of a hard cap like welcome to my world i've been here for the last seven years or last decade you know like okay and then and then you're gonna fud on oh will bitcoin security model work long term will transaction fees replace a lot of ethereum people this was why i wrote this a lot of a lot of ethereum people use this as like oh bitcoin hasn't figured out its security long term and when i dug in i'm like wait a second actually it's fine it's trending just as as a market would it's trending in the right direction and a lot of them are being really extremely disingenuous when And I'm like, you're worried about Bitcoin security model and you haven't even figured out your monetary policy.

And you've got a bunch of nerdy engineers in a room who come up with the inflation rate at a whim. And you're worried about Bitcoin's very stable, predictable, set in stone monetary policy. Get out of here. Like you're just you're just you're fighting for just to just to throw a foot on Bitcoin. You're not actually having an intelligent debate. No, you're grasping at straws. And then let's look at facts. So, like, my favorite dominance indicator that's been rising,

we talked about this on Rabbit Hole Recap this week. If you look at percentage of fees paid to miners overall across the cryptocurrency space, as a dominance index, Bitcoin is 92% dominant. Like, 92% of mining fees are from the Bitcoin network. Ethereum's at 8%. But if you want to talk like dominance and actually how secure your blockchain is, Bitcoin is far and away the most dominant chain. It's the Bitcoin double standard.

Fees are too high. Fees are too high. People won't use Bitcoin. Fees are too low. People aren't using Bitcoin enough. Bitcoin can't win. You know, people are like, oh, well, fees are too high. Fees are too low.

Fees are fine. Fees are just a metric that quantifies people using and requiring transactions to be validated in a certain amount of scarce real estate. It's fine. They're fine and they're obviously working. Bitcoin is attracting the most hash power because it is going to be the most profitable for people paying for that hardware. Yeah, and there's the flywheel effect that makes Bitcoin's block space very unique, where as the security becomes higher, then demand for the block space increases due to its thermodynamic guarantee that that transaction will not be reversed.

That's why I love to frame it as a thermodynamic guarantee, because that's what it is. The laws of physics come into play. That's what's so beautiful about Bitcoin, is it uses a brilliant architecture of all these seemingly simple ideas, but when you put them together, it's incredibly brilliant. using provably burnt energy in the real world to validate and protect something in the digital one, Satoshi not only knew cryptography, economics, computer science, but also physics and game theory and human behavior.

And I think that's what makes it so thrilling and compelling. And that's the only way to evaluate crypto networks as a whole, is we should view them holistically. And when Ethereum people or other projects go develop, you know the sweaty steve ballmer developers developers developers i'm like yes i like developers too but but we must also think about other things as well that make this all work yeah it's um and i always go back to the analogy of bitcoin just being this sort of source i always in my mind i don't know this is a weird visualization but the way i visualize it

is like the bitcoin blockchain is something analogous to uh what existed in sumerian times where there was a town center where you would go and you would basically inscribe your debits and credits. You would go to a center of town to basically balance the books of debit and credit. I view Bitcoin as not a personification, but like a mechanized version of that. It's like a pillar of light that exists in the center of town

that anybody can come to and just anchor in, like, hey, I'm doing this right now, I'm doing this right now. And you just, you go to the well and you say, hey, I'm transacting right now, it's going here. And that's all you have to worry about. That's how easy it is, simple it is. It's the ledger that everyone looks at. Exactly.

And this goes back to narratives and simplicity and stuff like that. And so, like, Bitcoin is just being, like, stored digital money and being that pillar in the center of town that anybody can go to and transact in is very simple. And, like, you talk about, like, so Ethereum in particular right now, they're trying to mean programmable money into into existence and and think that's going to lead to mass adoption and quantum narratives was an article i wrote before this most recent one which is around the ebb and flow of narratives in the crypto space and the quantum part is that uh you

know schrodinger's cat is essentially where the the uh the thought experiment is you have a cat in a box and so there's a radioactive material if the box is sealed and you can't you can't observe the cat, the cat is both alive and dead at the same time. Essentially, states that are unobserved can be in multiple states at once until observed. My argument is that, my analogy that I make is that narratives in the crypto world similarly can coexist and be in this kind of foamy state where world computer, DeFi, Uber on the blockchain can all exist until critically observed and then it the wave function collapses upon reality what is real what is the state that is the actual physical state versus all these possible states that it could be all these

possible narratives that blockchain tech could be and what we saw in 2018 is that collapse collapsing of the narrative the collapsing of all these different narratives are all these different quantum states into what's real and we see that collapse upon store of value and we see the ethereum crowd realizing that and trying to pivot the meme pivot the narrative into that as that quantum state collapses yeah it's it's been hilarious to watch unfold and again like going back to to me at least as an outside observer somebody's actually i've been following ethereum's progression pretty intently for a while now just because i'm infinitely curious about and fascinated by the the social uh sort of phenomena that it is but uh if we're talking like memes and and uh

effective memes in particular i think them clinging to programmable money is like hilarious because i don't think that's an effective meme because programmable money you go to like the people who are most likely to use these assets and again bitcoin and other crypto cryptocurrencies their their main purpose is to um is to um is to be there as a last resort like to to be the store of value when when your government or central authority is trying to censor you um and it's really like last last resort sort of value so like programmable money like going after the people who need that which is rich people are probably an older cohort and don't understand computer science or anything like that they hear programmable money or like

well i have to program my money i just can't like keep it in totally vitalik is i would argue a more brilliant marketer than he is an engineer which he's also a very smart guy like but he was brilliant world computer was great oh fantastic meme silicon valley bought it hook line and sinker um you know none of silicon valley ever googled him and realized oh he tried to build a bitcoin quantum miner before that quantum miner he's raising money for it freaks yeah but but no silicon valley vc has ever googled that and actually read that so due diligence nobody does due diligence anymore johnny dilly said this to me totally nobody does due diligence well hey no one ever got fired for buying an ibm same thing with like if goldman sachs went on something or

there's a lot of great silicon valley vcs and if they invested in something and you invested alongside them then you're not wrong so vitalik perfectly crafted ethereum's narrative to resonate it was Silicon Valley. Silicon Valley, it was irresistible. It was what every single baby boomer VC wanted and what every single engineer in Silicon Valley wanted as well. For the baby boomer VCs, it was the decentralized internet they had imagined during the 1990s and early 2000s. It's what they always had wanted. Aligning incentives, common standards, decentralized, you know, it was everything that they had ever wanted. And then for engineers, it was the recognition, to be recognized for your efforts and to now my shiny code could be published and

then I could make money off my shiny code that has no use case, but it validates that I built really cool shiny code. And we've seen that largely become unraveled in 2018, right? As people woke up to reality, which is that like, well, all companies have to solve or all protocols have to solve a problem. Does your protocol have protocol market fit like product market fit from a classic product mindset i mean that's what i applied i'm not a look i'm a bitcoin realist i thought this stuff was cool i mined prime coin i fly drones for fun and i've signed up with the same facility with uh hal finney for cryonics i'm being cryo preserved when i die boss i'm a pretty weird guy like i like to check out all this stuff but what yeah from a product mindset what problem are we

solving and and how doesn't a blockchain elegantly solve that problem and again going back to what i was saying earlier of i like to think that i'm a representative of the masses to the point where like i only use three apps like when you make the the switching and the the the mental cost of interacting with your system so high we have to think of like token economics and in crypto economics and yeah like thinking of something like maker dow where where you have like interest rates moving at any given point in time it's like i don't i don't see how this makes it past a certain demographic right also like you know i ran into cyrus in person the chief risk officer at maker you know him and i have twitter twitter battles which also i would if he ever hears this

i would encourage him to go and actually uh he was a big big uh fudster on bitcoin security model long term so i think he should you know read my article because he was one of the ones i tagged in it because because he was you know really focused on uh oh this is a big issue and i met him in person it was nice that he said hi you know i like you know even with the people i debate with on twitter i like to say hi in person so i appreciated him coming and saying hi but you know him being the chief risk officer like these are incredibly complicated game theoretic sort of things like i don't even know if the smartest people in the world put in a room could figure this stuff out you know so like i hope he i hope he succeeds but it's very very hard and on top of

that like so again so maker down in particular for you freaks i don't know they they have a an interest rate that's not set by the market not set by any mechanism it's voted by committee and they've been raising that interest rate to help pull the the the peg of die to the dollar up closer to the dollar for the last several months because of liquidity i don't want to say problems But to deal with liquidity stuff Essentially maintain the peg Exactly But it's like

Going What was I going to say Make her down But the risk Oh here's what I was going to say So all these DeFi There's 500 million dollars Locked up in DeFi or whatever the meme is right now

In my mind it's just These enthusiasts using these products and pumping these products it's not real use cases it's it's people who wanted to succeed using it but not out of utility more out of altruistic i want to make this a thing oh and and i want to highlight something very important here which is that uh which me and elizabeth stark have been very vocal about this lightning is not defy like defy is a meme that ethereum created to propagate what is defy what is radical markets what is decentralized finance i mean it's all me if i give you a loan is that decentralized finance it's all just me mean something into

existence for typically for their financial benefit or for their products well let's try to let's try to define decentralized finance the way they believe it is like what is it at the end of the day i think something important to highlight though is that when you go to a defy website and they compare lightning like the amount of money locked up in lightning channels compared to defy that is not an appropriate analogy for many reasons one is that you're comparing stock versus flow which is completely disingenuous so elizabeth and i have been very vocal about this because we think it is more of like a subversion technique by the defy community to lump a theory lump lightning into there and be like oh look we're beating lightning no it's not about that

lightning is about flow it's highly experimental there are limits to how much you can even lock up in a channel like and so they're comparing it to lightning yeah and like all these guys are comparing like they're like oh look how much is maker versus lightning defy defy ethereum defy is like like beating beating lightning on bitcoin it's like no we're being responsible this is very risky we take our bitcoiners while they may seem harsh and and very like lightning lightning what are you is is inherently less risky because there's no leverage involved that you're i don't disagree i think bitcoiners are more genuine about how much risk you're taking on interacting with protocols whereas like ethereum defy is yolo and and look that i get that i come from

so like i i've been in silicon valley for seven years built early small mobile products i worked at uber i get it like don't ask for permission beg for forgiveness servers catch on fire that's a good thing but not with decentralized rocket launches like those have to be perfect and you cannot just yolo it it is i i like experimental stuff and i'm an open-minded guy but you gotta be precise about this you gotta be you have to be open about the risks where lightning like reckless was the meme right versus like you know now 20 interest rates are really high for these loans for for maker i mean and on top of like 150 percent collateralization like there's a lot of ethereum people who are like whoa whoa wait a second are like are the interest rates are super

high on these now and a lot of people are getting copper like they're getting they're surprised by this interest rate jump and and rightly so i i didn't expect this either whereas like in bitcoin it's like you know this is reckless don't put your money in it exactly well and another thing with maker in particular is like a lot of people thought that interest rate was mechanized and i was actually surprised to see that people didn't realize it was an interest rate by community like the like it's it's literally what we're trying to get away from like a federal reserve like 12 person community sets the fed funds rate what's the right what's the right rate of risk that's really really really hard to determine something i'm going to touch later this year

touch on later this year you know after i decided you know there's a lot of different things you can cover in research digging deep into bitcoin will tell you will answer almost all of your questions i learned a lot digging into it myself why do you say that because you learn about the trade-offs made that satoshi thought through you learn about like basic trade-offs for blockchain tech you learn about human behavior and and like for example proof of work versus proof of stake uh well that's the other thing with ethereum too like if that's what i wanted to mention earlier when i forgot is uh with the the transaction spend um excuse me the the uh minor fee spend dominance index with bitcoin at 92 and ethereum in a far second at eight percent but like even

they can't use that set they can't even say like hey we're number two like we're like behind bitcoin we're we're the second best like blockchain from uh from a proof of work fee perspective because they plan on moving the proof of stake like they can't even like use that right advantage because well they would have as a meme that exactly that would be like that would be basically undermining their the future roadmap that they have right i thought it was actually interesting to see ethereum having transactional demand on layer one like quite extensively it makes sense with all adapts on there right like yeah but it also like highlights have you looked at the median transaction fee no it's very very low like almost zero they're actually the median is zero i think

um median being like the most common not the average and uh yeah i actually emailed nick carter about it he's like emailed nick carter i was like hey i think coin metrics is hasn't a data issue he's like oh yeah because it's median it's the average it's the it's the it's the essentially the most common value so what does that say yeah the the demand for the block space isn't isn't as high as bitcoins yeah the the demand for that and putting putting they even have eight percent of that dominance index though put in put in other words the demand for that real estate well the median zero percent like who's paying the higher fees and what for i don't know i don't spend a lot of time digging into those transactions back to my point like i think

ethereum is a chain for enthusiasts who want to make something happen that probably will not work out and experimentation is great people should go try things you know and uh that's where like you know there are like as a bit corner i have i've been through the space a long time and seen a lot of different things come and go and i i've approached it from a product and rational mindset of like what problem are we solving how does it solve it survivability probability of surviving game through game theory bitcoin's in a great spot it's fantastic i've never been more bullish we're in an awesome spot and after digging into proof of work so proof of work is efficient as my most popular article digging into distribution you're digging into hodlers being the core life

blood behind what makes these protocols work is the shared illusion or shared belief in the system that really breathes life into it and to look at narratives quantum narratives to look at the origins of bitcoin with planting bitcoin to look at bitcoin security model after digging into all of these it's it's hard to be excited about other things because they make such horrible trade-offs you're like well and i'm not talking about theory i'm just talking about in general he makes such horrible trade-offs i'm like i'm sorry i just can't be excited about this no and i want to harp on we said with the shared illusion i've been coming more and more convinced that this is not even a shared illusion like money at the end of the day like bitcoin like going back to our

conversation in the beginning of the podcast of uh other sort of value assets having intrinsic value that can be tapped uh that can be utilized other places like bitcoin like is actually a tool it is it is something that exists in like the shared the shared illusion quote the quote unquote shared illusion of a store of value uh in the past may have been a shared illusion but like now we have like a tool it's not an illusion it exists it is a vehicle through which we can we can store this wealth and i think illusion is kind of a strong word that i use for that because some people think illusion they think oh fabrication yeah but the shared belief i think maybe a stronger word for it let me find the uh no it's not belief it's uh shared recognition

Shared recognition. I like that. That's a new meme. I like it. Shared recognition. That's much more solid than the other ones. The shared recognition that this is a useful tool. I need to give credit where credit is due.

I did not come up with this. And words are important. How we phrase this and how we communicate this to the next wave of adherents or believers in Bitcoin is key. And that's something I spend my free time on is like, how do we bring in the next wave? How do we make the narrative compressed enough? look i'm i'm a i'm a big libertarian so sound money makes sense to me but how do we explain sound money to maybe my brother who's not uh he's not like he's not really into this stuff right he's a geologist you know maybe more of like financial consent or fair money or free money like it's

freedom money like that's what it really is money that's for speaking of free speech money really resonates and then shared recognition over shared illusion i think is uh very powerful and shout out to richard benzberg nice good job that uh that came out me neil wood fine from block stream and neil's great and matt odell got drinks uh this week and we we really honed in on shared recognition over shared illusion i think that makes a lot of sense um totally i and i think like when i got into it there's bitcoin talk and reddit and then that moved to twitter and and medium we're iterating on different channels to communicate with people with it right now we're on a podcast and marty does a great job thank you sir one of the few podcasts i actually listen to

thank you sir yeah well it's only it's only a thing because the people like you come and uh come and get drunk with me we're totally tober here totally tober uh what's what's the officer problem we only drank a half bottle bottle vodka but i'm super excited about the people that come after me and and you you know the the well we've we've had like you know joe rogan like talk to andreas and like andreas is one of the few who was early in his communication style that was preserved through time whereas as we saw like roger dropped out of favor due to due to his intellectual dishonesty and also i'll push back a little bit andreas was was very big on like fee list transaction or like that was the meme back then i was there too he he clung on to the

meme and that was the first pm at blockchain yeah so yeah yeah i remember the meme but i was still like wait no one's using this no that's like so that's another topic of conversation that i got uh onto with david bailey is is is and again this is this came out this weekend like this weekend like segue 2x battles being rehashed on twitter and it's at some point like bitcoiners in particular like hardcore bitcoiners have to realize you don't want to become like the hardcore leftist in america who uh say if you do not believe in this and this and this and this and you don't you don't check all the boxes you are not on our team you are an outcast like i worry that bitcoiners like turn into that like if you don't believe this this and this and this you are not

in bitcoin anymore like you have to be careful that we do not become uh the the the fanatical crazy uh people who are trying to dictate uh conversation it's a tricky balance right because we have to adhere to our core beliefs yes but also let people make mistakes yes exactly and so that's where like i don't fault people for like look i mined prime coin look i'm dan heddle i mined prime coin i'm sorry sorry not sorry i experimented with it it was interesting i didn't sacrifice my my great btc for it but i tried it you know i thought about it and they keep coming back to bitcoin over the last seven years so it's uh it's okay to think about other things it's okay to explore it but like um and i believe in reconciliation as well

as much as i dislike roger roger did buy buy my first company and i dm'd him a little bit on this but and i think he's pretty much set on his direction but if he came back and apologized and apologized actually apologized i think it'd be good if we like said okay sure i believe in reconciliation but i find it very unlikely that he will apologize i think it's almost impossible but if he did i would probably be like all right roger i'll give you a chance i'll give you a shot everyone makes mistakes but and you did you did some terrible damage to bitcoin no but i'm not trying to even like provide cover for anybody i'm just trying let's be realist here like and i've said this is another topic conversation on this podcast a lot bitcoin

is an expanding universe that we discover every every day as as more activity happens on the network as as more blocks are produced like we expand the limitation we excuse me we discover the limitations and uh the the ways in which this network will be used and you can't fault people this early on in bitcoin's lifetime for for for having assumptions that were proven wrong like that's going to happen again connor brown comes up here connor brown said at first i was a b cacher and you know he read deep into it then he realized oh wait a second actually i'm a little bit off the mark here but it takes a little while you know people think about oh well is bitcoin the myspace versus the facebook right and so and rightly so they should they should they should

examine it using the mental models that they have um and our best bet for bitcoin is to make the the the narrative for bitcoin so simple and easy to digest that when they begin their journey into crypto they find our content they read it and they're like oh wow okay this is really really this is insightful and that's how they then go evaluate everything else that's our best bet is through knowledge information sharing quality information exactly and that's what i like to hopefully i write you know this this last article was very lengthy i apologize i'd normally write it much more succinctly it was a very very good flowing read was 20 minutes but it did not feel like it i stand on the shoulders of giants i mean i didn't come up with all this stuff i cite people

in there and there's some people that additionally like provided insight this is very much a community thing i'm just trying to distill the narrative to be comprehensive same with my proof of work article like that was largely a lot of other people's thoughts including paul storks like you know i had to reread his article three times because he's very eloquent three times it's like eight hours of your day yeah well he he uses uh you know very big sat words um whereas i try to make things a little bit more understandable for the layman so yeah i think we're and what i'm really excited about is in the future i think the narrative will be so compressed that we'll have the like aha moments when like consensual money or something like that like a meme like that right

Like even the leftists on the West Coast, that makes sense to them. You have consent over your body. I think free speech money is the strongest right now. What's great about Bitcoin's marketing is that we have a decentralized marketing approach. You meme free speech money. I meme consent money. And we'll see which one resonates with our target audience. And then whichever one works is either one.

Either one's great. Win-win for both of us. Precisely. Yeah. It's incredibly exciting. I come from a, like my, my core role in tech has been growth, growth products and growth marketing. And, uh, same with actually Peter McCormick and, and, and pump.

So if you notice how, yeah, they understand how memes work. They understand how narratives work. So that's, that's the interesting thing here at TFTC. We don't have like typical marketing backgrounds trying to figure that out. We have stacking, like we, I think we're good. Stacking stats is awesome. That's a good stats. Um, wait, Oh, lolly.

Dude, lolly, by the way. Awesome. The Lollipump Guild. We're all a part of the Lollipump Guild. Pump it. If you're buying anything online, make sure that you're checking to see if the merchant that you're buying from is from Lolli.

Why wouldn't you want cash back in Bitcoin? Not from Lolli, excuse me. It has a partnership with Lolli where you can get cash back in Bitcoin. And for the listeners that have made it this far, Lolli is great for newbies because Bitcoin is perceived by your friends and family as magic internet money.

it's hard to get them to take their dollars and buy bitcoin but when they earn bitcoin through just buying things they normally would i've seen this and i've been trying to get people into bitcoin for seven years this is one of the most powerful ways to get people into bitcoin because they get it for free what have you seen in particular what are the reactions you know there was a a couple friends of mine to where like i was like hey by the way before you buy stuff online use this chrome extension they're like whoa oh i can just earn like this magic internet money aka bitcoin for free when i go shopping online and i don't want to like overly generalize who that group might be but people who like to shop online a lot i think it's great

because like they get it for free and you know while as mark twain says to make a man or woman covet a thing all you have to do is make it hard to obtain they still it is the aha moment where they at least have it they may have not have had to obtain it very hardly because a very like very it was effortlessly sort of obtained but at least they have it now and that now they pay attention to it and then maybe they'll commit some more of their dollars to it later right it's a little it's a little uh foothold it's it's uh so the man who helped me start this podcast lewis roberts formerly from barstool uh now the ceo and founder of any day rosé um but he's he is rosé all day rosé all day baby he is a huge uh believer lolly and he's somebody who uh in my life has really

opened me the key in my eyes like somebody who gets like the mass marketing and and how to to sort of hone into the given sort of theme and vibe of pop culture at the time and he is convinced somebody who's seen some pretty pretty good trends play out barstool being one of them um he looks at lolly is like this is the way to get in the hands of masses like i'm earning it like you know i was at change tip back in 2015 and we did the micro payments over social media r.i.p changed it that was my favorite way to send people bitcoin for the first time like hey thanks send uh i have i have tweets uh nice like at at change so i have a shout out zuki underscore chaylock actually uh photocred for my avatar from him as well but he uh he's the first person i ever

sent a change ship to a buddy from chicago buddy from depaul that i changed yeah he's trying to make bitcoin transactions fun it's not it's more than a like it's more than a favorite it's like a little attachment of a beer and like you designate what the price of a beer is a four dollar beer and You know, like, here's a beer, bro. And you do a little beer emoji and then cheers. No, a little too early. Wrong timing. Bitcoin 2015 winter was very, very harsh.

It was very, very cold. But, yeah, there's so many cool ways to stack sats now. I actually, after trying Lolli, I went down the rabbit hole. Which one? Stacking sats. Oh, yeah. Hashtag? Stacking sats, but the products around, like, how to maximize efficiency.

So, what's cool about Lolly is what they do is they take the referral fee that they get by referring traffic from Lolly to the merchant website. And they split that referral fee with you. Now, this isn't a new concept. There's Ebates as well and a few others that do this. So, Lolly was birthed out of the Ebates team. Right. Makes a lot of sense. So, what's cool is like not only should you do that, but with your credit card, you already get 1% to 4% back.

So, that compounds on top of that. so we're talking about you know lolly it's 3.5 to 9 that's plus your credit card and there's actually other ways turn a little bit more stats let's jump in or sorry sorry stats um uh let's so the tito's the tito's is feeling pretty nice right now there's an app called pay p-e-i and i'm not even going to show my referral code i've just been trying it out you can stack on top of that how so on like lifts and ubers so what they do is like they work with lifts and uber and other companies to like be incentivized to essentially like you you connect your credit card accounts so you are giving up some of your data to be explicit you are giving up some of

your data and you're getting paid for it i assume but you're getting paid for it and that's like a one to three percent on top of lolly and credit cards so we're talking like triple stacked triple stack sats and that's uh that's what we aim to do here is to educate you freaks on how to stack sats most efficiently and most uh into compound sats as efficiently as possible compound those those those pay p-e-y p-e-i p-e-i okay i've been playing around with it a little bit you know i need to dig in a little bit more but so far it's worked and they give you rebate in bitcoin so that's where like there there are other ones who don't give you rebate in bitcoin which i won't mention i'm just talking about the bitcoin ones so you got lolly plus pay gives you a little bit

more which is kind of cool compound the stacking freaks yeah dan i'm drunk yeah we've had a good time out here on the roof it's it's such a beautiful day it's hard not to like talk for we could talk for another three hours if we wanted to we got plenty of time what uh is there anything else in particular you want to talk about or let's see so we did cover the meme of alt alt season but There's another one. Oh, the risk-off trade. Oh, yes. Let's jump into this.

Is it real? Well, I was quoted on CNN as to have seen it. So, okay, I have waited seven years. So Bitcoin is definitively a risk-on trade that whole time. It's very risky. Actually, the altcoin bubble in 2017 was largely because of the riskiness of the mainstream financial world. People are chasing yield. and that was like the final bubbly top um but bitcoin was purpose built to be the gold 2.0

the store of value the safe haven the safe haven asset when you don't trust anyone else as satoshi put it the core problem is with central banks and he's right and that's why he purpose-built bitcoin implanted that seat in the middle of the financial crisis bitcoin amongst it you know amongst everything else is a vote for yourself a vote for freedom a vote for a vote for like a non-correlated asset that you can store your value in and so we're starting to see tremors in the mainstream financial world and on monday this week during blockchain week the mainstream markets dipped significantly and bitcoin went up 10 and there's a few other publications alongside cnn which i was quoted in talking about bitcoin becoming the risk-off trade including pomp um pomp and a few

others and ari paul i've been talking about this for a while that i believe that this meme could come come into existence by accident markets dip mainstream markets dip bitcoin goes up that coincidentally happens three or four days in a row people talk about it becoming the risk-off trade and then it becomes that but that's what it's made for so it's not lying it's it's just like finally making it a thing it's finally making it like what it was always meant to be now in the uh so like the huge debate around this topic in particular this week is is is this price uh price pop coinciding with the the uh fall off in equities and uh depreciation of chinese yuan correlation not correlation and not causation so the way that i phrased it is that

But for a moment, we saw a glimmer that Bitcoin might be the risk-off trade because also the trading volume was largely dictated by institutional money. Let's talk about the conditions which led to this trade, this price action in particular. And it's, again, the trade war with China. And so that's when I worked at the Managed Futures Fund, that's a lot of what I covered was currency markets, trading currency markets. And basically, as a result of this trade war, trade wars basically result in a race to depreciate your currency as much as possible to make your exports as palatable as possible to the rest of the world. Who would have guessed people would flee or flock to a safe store of value when a president is largely dictating the economies of the two biggest economies in the world? Yes, the two biggest and most intertwined economies in the world. Don't trust, verify.

i choose to put my trust in mathematics yeah well but you look at so in so let's try to be as um try to be as scientific as possible not a scientific science not as scientific as possible um we don't know if this is like a risk on trade but here's the scenario that happened like this the trade war heats up tariffs become uh more intense in the mainstream and like more threatened on on china and basically what happens is you see number one uh there's a there's a medallion in hong kong and the price of that went up precipitously and that medallion is typically used by chinese nationals to store capital through which they can get it out of out of the country

on top of that you have the yuan devaluing against a dollar and then bitcoin appreciating pretty heavily uh against that uh while this is going on equities are are going down as well so if you're you're a short-term trader and you're looking at this one day two-day movement it looks like they were they were they were moving inversely um again correlation is not causation but it i do think it was a first little shot across the bow of international markets like yo this could be a safe haven play yeah and this is the first time where institutional money by volume led this price movement that is what's interesting and that's where i think the meme does have some justification as being real is that you know this is this isn't um this isn't back in 2014 2016 where it's all

retail traders this is cme volume is what led this market that that's what's important cme volume went up like 10x like exactly it's highest day ever institutional money and in ari paul and a lot of the experts like a lot of the big crypto hedge funds even lawmaster came out even uh even the larry larry larry cermak even the uh the staunch uh skeptic came out like yo this was actually led by serious inflows into institutional yep from institutional clients excuse me i've waited seven years to see this moment right to see the moment where like the largest players this is the game of thrones which tonight is the season finale or the series finale right series finale this is the final game this is the real game bitcoin survived to make it to the final

game of the game like this isn't this isn't the amateur league so so let's say it arrived and this happens is this just an anomaly this one one off one day two day do you think it'll take more time for this to become common or does it it'll take a long time yeah but but at least we made it to the final round right and i'm still huddling the fact that we made it this long and survived and like we're thriving and there's all these companies being built and that mean like you've got ex wall street guys memeing that bitcoin is a risk off trade and that is gold 2.0 like we did it like that's the meme like that's and it's what bitcoin was purpose built for 10 years ago well that's what it was made for this isn't like a fake meme this isn't a an attempt to

make a meme this is this is what is made for bitcoin by hodling you will be set free by by hodling everyone in the world doesn't have to worry about the politics of is aoc going to be elected or is trump going to be elected you just you vote for yourself you vote for in a world of uncertainty you vote for you and that's what every human should do because you are for a free human no matter where you live and you deserve to be free and you deserve yes thank you for saying this because this is uh actually got no a debate with a friend this week about the concept of collectivism versus individuality like the world is losing the concept of individuality picking yourself up from your bootstraps taking care of yourself and socialism is at an all-time

high yeah um as deutsche banks a journey into the unknown report puts which by the way every bitcoiners should read this report it's fantastic 800 years of financial history if you really want to know why bitcoin's valuable look at this they don't mention bitcoin once but when they look out when they zoom out to all financial history we are truly in a journey in the unknown and including socialism or populism those are in all-time highs compared to right before world war ii the most equivalent time period is right before world war ii now i don't think we're going to see major wars like that happen again i think i think bitcoin provides uh the first opportunity for a bloodless peaceful revolution absolutely bitcoin is inherently peaceful because you

voluntarily choose to put your money into something that can't be that's very hard to seize and is immutable and by doing that you do it in a non-violent way bitcoin is very much agrees like with the non-aggression principle and like the adherence to voluntary action and that's what freedom is about is like people should choose if they want to or not yeah and it's uh it's funny because it feels like people don't want to don't want to have that decision they want they want it to be decided for them unfortunately we've seen the state start to dictate largely our tolerance for risk with the federal reserve we've seen our state dictator tolerance for security which is like tsa in freedoms gun policies etc and that's where i think you know hopefully bitcoin because

money is one of the most important things in the world because it is the representation of all the stored collective time and energy and energy hopefully that changes the the the dynamic of other freedoms because it's the most compressed version of our freedom stored into a simple unit value but i hope that that brings us greater freedom across all things uh speech thought privacy everything else i that's where alex gladstein and i are good buddy of mine from san francisco he's uh the chief strategy officer at human rights foundation well you freaks listening to this episode if you've listened to a couple episodes before this i'm sure you heard alex because we had a great conversation as well alex is a huge proponent of freedom

across all types of freedom in the whole world. You want to talk to somebody who actually understands the granular problems that each country has. He can spitball you about Yemen, Zimbabwe, Nambia, whatever it may be. He can tell you the crux of the problem going on, the cause of it, the people in charge, everything. When Alex wrote his Time article,

Bitcoin is about freedom, that's when I reached out to him. And since then, we've become pretty good friends. i'm even going to the oslo freedom forum not for work for fun because i i freedom is why i got into bitcoin a long time ago seven years ago it's what i believed in i'm a libertarian at heart the freedom to transact and like silk road was a great example of what you could do with that freedom you don't have to participate in that but you could and the idea that you could to me i didn't know how the technology worked but i was like if it could enable this this is magical

and then from there it like hooked me i had to go learn more about it yeah it's uh it's like we're rediscovering the principles of the founding fathers who wrote the declaration of independence in 1776 so hot take here founding fathers were about decentralization oh totally states rights yeah that's what i wrote about in the bent this week is there's a natural entropy that's existed since the declaration of independence was signed right you had that that is the peak of freedom in america was literally when we told king george the eighth or third the eighth to fuck off and we were our own like free society then and at that point in time we were the most free that we ever will be and since then there's just been a natural entropy of centralization and

and loss of freedom and decay of freedom i would argue we were still one of the most free if not the most free country in the world but and i still love america we've got a lot of problems yeah but i love it so much that i want to help try to fix it exactly and you can't get complacent like complacency kills it's another thing totally like in the the sometimes you have to fight for new freedoms and bitcoin is the manifestation of a representation of freedom and digital age and we need to fight for that exactly just because we score a c on the test and everyone scores a d doesn't mean that we can just rest and be like, okay, we did a good job.

No. We're America. We're a great country. We need to strive for more freedom. If we see something that provides more freedom, the idea of America is acquire that and make that. In every country in the world, I believe in humans. Fundamentally, that is who I am. I'm a humanist. Dan, we're about to have the stepbrothers.

Are we just best friends now? Can we do a little high five? I think this is where we end it because I'm getting drunk. It's been great. This is two hours. We're almost two hours in. It's always a pleasure. Like I said, we're on a semi-annual schedule right now. Maybe we'll increase that to quarterly.

I think quarterly might make sense, yeah. Thanks for having me. Dan, thanks for joining us on the Riff. I hope you enjoyed the Bloody Marys. I'm sorry we ran out of ice. This was great. Thanks, everyone. Cheers.

Peace and love, freaks. Peek-a-boo!