TFTC: A Bitcoin Podcast - Tales from the Crypt: Pierre Rochard Pt. I

Episode Date: October 25, 2017

Marty sits down with Pierre Rochard, co-founder of the Satoshi Nakamoto Institute, to discuss a litany of topics. Tune into Pt. I of the three part episode to learn about Austrian Economics, the Tezos debacle, Bitcoin's governance, Linux, hyperbitcoinization, and speculative attacks.

what is up freaks welcome back to tales from the crypt this is marty bent it's been about two weeks since we last saw each other uh sorry for the week hiatus it took me a little bit a little bit of time to get somebody in the studio and i'm very excited for this series of episodes because we had a great guest his name is pierre rochard co-founder of the satoshi nakamoto Institute, thenakamotoinstitute.org. We had a great three and a half hour long conversation last Friday night here in New York City, spanning a litany of topics, including economic theory, the politics of hard forks, how Bitcoin works, Bitcoin versus Ethereum, cold storage, and a bunch of other topics I'm sure you freaks are interested in. Due to the length of the

conversation we had. I'm going to cut down these episodes into three parts. So here is the first part. I hope you guys enjoy. What is up, freaks? Welcome to Tales from the Crypt. This is your host, Marty Bent. We've made it to episode two. If you missed out on the first couple parts of episode one, we covered the history of Bitcoin, myself and Louis Roberts of Barstool. Today, Louis cannot be with us in the studio, but I have a very special guest for you all. Before I introduce my guest, I have some good news for everybody.

I think we've officially made it. We sold our first ad this week. The first ad entails from the crypt history. And here we go. This is my first ever ad read, so bear with me. we've got our buddy Graham Annette. He's looking for a software engineer position. He's previously worked as a developer

and a data scientist specializing in Python, Node.js. And I believe he's done some SQL as well. He's based out of Seattle, looking for a job right now between positions. But he's willing to work remote. He's worked remote for a company in New York before. So you can get that East Coast, West Coast time zone blend if you're looking for a remote developer.

I need you to hit my boy Graham Annette up. You can find him at newseasonofcurbismediocre.ga. That is newseasonofcurbismediocre.ga. You can also go to Graham's personal website, which is grahamannette.me. That's grahamannette.me. G-R-A-H-A-M-A-N-N-E-T-T dot M-E. Graham Annette. highly skilled developer engineer highly recommended by marty so if you're looking

to hire hit my boy up it felt good first ad read and may i uh may i say an ad read paid for with bitcoin at a discount i think i think the discount really really caught graham's eye and he had to go for it but that's enough of the ads let's roll right into the interview today i have with us Pierre Rochard. For those of you that don't know, Pierre is a software engineer, investor, and entrepreneur. He considers himself a Bitcoin maximalist and minimalist. He's actually writing some code for the Bitcoin Core ecosystem. He is the co-founder of one of my favorite resources in the realm of Bitcoin, and that is the Satoshi Nakamoto Institute. So, for those of you that have read any of the popular papers out there, hyper-Bitcoinization.

Problem with altcoins is a very important one. And then, speculative attack is also, I think, you know, that's self-promotional because I wrote that one. But those two other ones you mentioned from our research director, Daniel Krawitz. Daniel Krawitz, yes. So, yeah, let's just jump right into it, I guess. That's sort of how I found you, was this Nakamoto Institute, read your papers years ago, like many. There's something you've read four years ago,

and then you come back to them again today, and it's like, wow, what you wrote is still prescient and still relevant, and it's still happening. Yeah, that's a relief for me. I couldn't tell the future at the time. I was just trolling. But, yeah, so I think that the reason that those papers, those, I mean, blog posts, let's call them what they are, withstood the test of time is kind of my economics background.

I started getting into economics when I was a junior in high school. I discovered the Austrian School of Economics, which is kind of a free market approach to the economy. Particularly what captured my attention was monetary policy. What is money? How does it interact with the economy? How does it interact with economic growth, booms and busts, bubbles, manias, the credit system, the stock market. All of this was fascinating to me. Don't know why I was probably born that way. In the world of Austrian economics, they're very much at odds with the way the current system is set up. The current system is central banks operated by a government that essentially create money out of thin

air and lend it out through banks. These banks operate on what's called a fractional reserve banking model. The accusation from the Austrian School of Economics is that that causes these large macroeconomic booms and busts. And the way to fix that is that you get rid of the central bank, you make the money not, you know, you make it scarce. You don't make it so that someone can arbitrarily create more. So, in the old model, that was gold. In the new model, that's bitcoin. And then, in terms of the payments and credit system, you have it so that it's what's called 100% reserve, which is that you can't create ... And it kind of goes back to creating money out of thin air. You can't just, what I would call

counterfeit, counterfeit money and lend it out. So yeah, I was discovering this in high school. I was thinking about it all through college, debating this. So this is how I met Michael Goldstein and Daniel Krawitz. Did you guys meet at Texas? We met at Texas, hook'em. Dale Horns. We were not at the football game drinking beers and talking economics. We were not that cool.

We started a meetup called the Mesa Circle where we would all go to a classroom and nerd out about all these things I've been talking about. year is this? This is 2012. 2012. Yeah. So, within the Austrian school, there's a debate between those who are for 100% reserve banking and those who are for fractional reserve banking. They're called free bankers. And, you know, we had some of both in our Mises circle. So, we were debating these ideas. And one of our members, Daniel Krewis, was already into Bitcoin, but he played it close to the vest. We didn't find out that he was into Bitcoin until probably, I feel like it

was October, November of 2012 when he brought it up. It was his little secret for a few months. He was keeping it from the Mises group. I don't even know when he originally bought in or got into it maybe maybe it's best that that's left a mystery so that uh you know we provide we protect his privacy bitcoin is filled with mysteries we've been talking about this the first few episodes there's a lot of mysteries a lot of unresolved yes a lot of unresolved conflict and that's something uh that's sort of cool to bring up because you and dan you started this group you started satoshi nakamoto institute yeah then you guys differ on some points too yeah for sure um So, well, yeah. So, I mean, he brought up Bitcoin. I didn't know anything about Bitcoin,

although I'd heard about it before, obviously, because it had been in the news with Silk Road and whatnot. But once he explained to me what Bitcoin's monetary policy is, it just was instantly something that I knew was going to revolutionize the world of money and that it had the perfect monetary policy based on all of the years I'd spent thinking about the issue of monetary policy. So, when we think about from that to today, the current debate is about the block size limit. I think that's kind of like the scaling of Bitcoin is the hot button issue that everyone in Bitcoin is talking about. Daniel and I do diverge on it. He is in favor of larger blocks. I think that he's in favor of not

having a block size limit at all. His point of view has merit. It's not baseless. But I do fundamentally disagree with it. I think part of the disagreement, not just with Daniel, with everyone who is for big block size is that we have a different philosophical view of what Bitcoin's all about. And, yeah. I think at this point, it's a good point to take a step back

and sort of let's describe how Bitcoin works as a technology and how the system works, the nodes, the miners, the users, developers, and where does the block size come into play within how Bitcoin works? So, if we go back to the white paper, some particular sentences don't really withstand the test of time, in particular when it comes to mining. So, there's kind of a notion in the white paper that everyone has a computer, right? and this is like 2008, so yeah, everyone has a computer.

Everyone has a CPU in their computer, a central processing unit. So that's your Intel Pentium 4 was probably what we were on back then. Or today your i5, your i7. Anyway, the idea was that you mining on your computer provide a vote on what is Bitcoin. Now, there's a bunch of other things involved, but fundamentally, that's if we analogize to democracy, which I'm very hesitant to do because there's so many complications that the analogy quickly falls apart. But, you know, there is a notion of one CPU, one vote, one computer, one vote. This diverged when we started getting into other forms of mining, which is basically using specialized hardware to mine. And then you had a centralization that started happening.

Yeah. So if you guys listened to the first couple episodes, we sort of explained, when was it? GPU miners came on the scene. I believe it was summer of 2010 or 11. That sounds right. Yeah. So the way Bitcoin set up originally, it allowed for a mining race, a chip race, basically. Yeah.

People to race to create chips that could mine faster. And this led to, I guess, could you say it led to centralization in the way of it became harder for people to access that hardware to run. So fewer people could run it or were capable of running. so it becomes sort of a smaller circle of people that can use it. Right. So, like, if we really get into the nuts and bolts of it, we had graphics cards. So we start with CPUs, then we have graphics cards, and then we had what's called FPGAs, which is basically a processor that you can reprogram, so it's not hard-coded at the factory.

And then we had ASICs, which are hard-coded at the factory. So, that means you've got to have a relationship with a semiconductor manufacturer. And these factories, they are massive capital outlays. We're talking billions of dollars with a B. So, that means that if you have a relationship with the biggest semiconductor manufacturer, and it's called TSMC in Taiwan, then you can control the market for ASICs, for Bitcoin ASICs. I believe that's what we've seen happen with Bitmain. Now, granted, it's not a monopoly. There are other players out there and they are competing, but it has become centralized

in terms of who is pumping out these chips. That's on the hardware side. If we look on the operational side, the electricity costs apparently are lower in China. That's led to geographic concentration of these data centers that have all these ASIC chips mining away in different nooks and crannies of China, where apparently, if we're to believe, they have subsidized electricity, and that makes them hyper-competitive. You never know with China. I worked at the futures markets for two years, not too long. I'm not an expert by any means, but from what I could gather in the industry, Nobody trusts data coming out of China really too well.

They're always very mysterious with what they're doing, especially with Bitcoin. I've read stories of hedge fund managers looking at satellite data so that they can get a better idea rather than trusting the official numbers. It's an interesting... It would not surprise me. I've seen the documentaries. I'm sure many of you have. They've been out on Vice of the ghost towns.

They make just replica cities that are... Flip side to that is I've seen people say, yeah, well, those ghost towns are filled now. Really? Yeah. So, things are changing. It's a very dynamic society in some respects. So, it's very hard to pin down exactly what's going on over there, what's going right, what's going wrong as an outsider.

But what we do know is that mining has been centralized to a point in China. Right. And so, politically, and there are politics in Bitcoin, politically, it has led to some pushback. And I think the major form of that pushback is that we have to balance. So, OK, let's go back to the white paper. In the white paper, he does say, you know, one CPU, one vote. And, well, OK, he doesn't say that specifically, but he does mention CPU. And he does make it look like basically every Bitcoin node is mining.

And this centralization is such that an infinitesimal sliver of nodes are mining. Maybe let's call it 12. A dozen nodes are mining. In the white paper, he says that as long as 51% of the mining hash power is controlled by honest nodes, then we're okay. The problem is that he provides no definition for what honest is so any anything we read into that is kind of like you know when we're reading the constitution and trying to figure out the founder's intent or trying to you know update it or modernize it or you know there's just there's just no answer there so and it seems like a lot of the two the people pushing the 2x hard fork are sort of relying on these semantics of the white paper and sort of that that's right they go back to satoshi's vision

So, in a sense, I would argue that the big blockers are the equivalent of originalists in a constitutional law who are trying to figure out the founder's intent. And I think that from an intellectual point of view, that's kind of silly. Like, we should try to figure this out and not just fall back on an argument from authority. community. But the counterpoint to that is that, look, Satoshi is the guy who got this to work. So maybe we should take what he says pretty seriously. There might be some wisdom we can get from there. So yeah, the majority of hash power being controlled by honest nodes. And the political dynamic now is that we, the Bitcoin, let's call it the community, Bitcoin space, whatever stupid word we want to throw out there, have decided that the

definition of honest is in our collective hands. And that if my node thinks that your mining node is dishonest, you don't get to push me around and overrule me. And we are equals on the network, and you are free to fork yourself off and take your node and your miners outside of the network, but the rest of us are going to just keep Bitcoin-ing. We're going to keep using the consensus rules laid out by Bitcoin Core. Yeah, and we will attract new minors.

We hired the minors. We'll hire different minors if you're not going to be part of a princesses. And so we just got on a very technical rant there. Yeah. To a point. I'm sorry, freaks, but we're going to bring it down here. We blasted you in the first like 10 minutes. We just came out hot.

We're going to cool it down a little bit now. Cool your jets. So that's sort of, I touched on it in the first couple episodes. We're going through a huge debate in the Bitcoin space right now, which revolves around the block size. And if I can describe this, if I were to, if I am going to describe this to you listeners, this is how I would describe it. Basically, when Bitcoin was really young, there was, was there no initial? There was no block size limit. There was no block size limit.

Yeah, at the very beginning. But at the very beginning, when the network was small, like I said, it was weak and feeble at the beginning. It grew to be anti-fragile. It was very susceptible to DDoS attacks. people basically spam attacks people governments or entities could easily attack the bitcoin network um because of unlimited blocks and because of the satoshi i you know i'm gonna i'm gonna put your feet to the fire there actually uh i don't know that there i think this was a theoretical problem if if i recall correctly because there i don't think there's i don't think that there's

ever been a block that was like one megabyte like back then you know that like someone actually tried to push it i think that he was kind of thinking like on a on a worst case scenario basis but i i'm probably not the best person to ask on this but i do think that there was to an extent it was just like oh i'm throwing this in here just in case and exactly so at the end of the day anyway yeah i'm not positive either i believe you know more than i at this point and And so, at the end of the day, Satoshi put this limit in, and now that Bitcoin has grown up, it hasn't hit the threshold yet. There's a good argument that it was spammed, and it's still not there.

I think that during some periods of the day, so like today, fantastic trading day to day, gentlemen and ladies. Days like today, people are moving a lot of Bitcoins around. buying, they're selling, they're arbitraging. And so, you can have peak hours where the blocks are full and arguably there's no spam in them. So, I would say that at specific peak hours, we are hitting the limit. But generally speaking, if you set your target out like 24 48 hours uh you you can pay you know a de minimis fee uh and so on a wider time scale we don't have full blocks yes exactly and there's a segment of again community is a very not a very good term but people that use i still like to say people that use bitcoin there's a segment of

people that use bitcoin that think we need to basically double the block size to to basically plant or take on this this volume of of use that's about to come when it's the next wave of of users that come in but and to do it in a way that existing services don't need to like rethink how they're transacting and just kind of keep it's it's a it's actually a very conservative argument of hey let's just uh keep doing what we've been doing and keep increasing the block size limit yeah and i'm i'm a big fan of it ain't broke don't fix it and going back to i me personally i'm a hodler so i don't i don't care about fees right now i haven't moved bitcoin or anything and i don't care i mean whenever i buy bitcoin and move it to another wallet it gets

there in uh and uh in a timely matter at a at a fee i'm willing to pay right um but again that is uh that is what we're finding out with this weird technology that's what blows my mind about this space because it's something so new and so raw we we're still figuring out how it works and how the game theory plays out between the actors in the system and how how we're actually going to use this this technology going forward i mean you look at the space now we have the icos we We have altcoins, we have Ethereum, obviously, and that whole scene. And we're still figuring out what exactly we can do with this technology. You, myself, I will add, would argue that a lot of these altcoins are pointless.

Not pointless, but... Misguided, perhaps, for the most part. Some are outright, like, frauds or outright, you know, just money grabs. So let's go on to the money grab of the week, what everybody's been talking about, Tezos. Oh, man. $232 million. And now it's worth like $400 million. Oh, yes, yes.

Because of the price going up. And they sold Ethereum at the U.S. dollar bottom this summer. But this is a prime example of, for me, again, I like to take a conservative approach, keep it simple, stupid. I think we're still trying to figure out how to make Bitcoin work. We are. That's absolutely true. And I think people going out trying to start the world computer and create, like, I'm all for innovation, I'm all for experimenting, but I don't know. I go back and forth. I go back and forth. But Tezos is a perfect example of this.

They literally marketed themselves as a project that was going to solve the governance problem. Yeah. So, actually, I was reading, I was trying to figure out, like, yeah, go ahead. Just bring it closer, yeah. So their approach to governance is kind of that you can vote on proposals and amend the consensus on the fly without doing kind of a hard fork. And I was thinking about how that contrasts with Bitcoin's governance and what is the word we use for Bitcoin's governance. You know, it's a network, it's a distributed network, there's got to be a word. So, I was searching on Wikipedia, the word is network governance. I saw that tweet today.

Yeah, that kind of blew my mind. Like, I've been in Bitcoin for years now, I'd never even seen the phrase before. And frankly, it is a perfect description of Bitcoin's governance in that, look, it's not a democracy. It's not a dictatorship. It's not a technocracy, which is like when the experts are in charge. It's a distributed network. It just is. It just is.

And you basically, you know, in law they call it a meeting of the minds. And I really like that figure of speech because humans live in a social context and things kind of exist based on our agreement that they exist and that they are that way. way. It's that way with property, it's that way with family, it's that way with society, and it is that way with Bitcoin. Bitcoin is Bitcoin based on where our minds meet and we agree on something, which is that Bitcoin is Bitcoin, not Bitcoin Cash. It is not Bitcoin Cash. For some of you, I know a lot of my listeners out there are newer to Bitcoin and cryptocurrency in general. Bitcoin.com is not indicative of Bitcoin at all. Let me just make that clear. It is a trash website run by a disgruntled early adopter.

Yeah, a former Bitcoiner. It's now an altcoiner. Now an altcoiner. That is true. Running around with the fake Satoshi. Oh boy, yeah. But let's get back to Tezos, because I think that it's an interesting cautionary tale for people who are new into this space, because you're going to be promised a lot of things. People are going to promise you that they have the next best thing, that it's a fantastic investment opportunity, they have the best technology, they have the most innovation, et cetera. Tezos, if you bought, calling them Tezzies, I don't know how they came up with that name. The cheesiest name. Could you imagine owning something and calling your money Tezzy's?

Yeah, and trying not to laugh. People criticize Bitcoin's name. They're like, oh, there's too much focus on the money because it has coin in it. Come on, man, it's money. It's the perfect name for it. It's digital money, Bitcoin. It's genius. And if you break it down into Bitcoin, I think the etymology, or not the etymology, What it breaks down to is creating information or something like that, or information create. DeSantis blows that up, that nut. So, yeah, you buy your Tezzies, and you think you're buying your Tezzies, but you're actually making a donation. You're making a donation to the Tezos Foundation.

That's the contract that you're entering into, is that you are making a non-refundable donation to a Swiss nonprofit, and that's that. And there's no guarantee that Tezzy's will ever exist. In fact, they specifically say that the project may be abandoned. Okay, so like, and that blows my mind. Yeah. And I think we have to say this. They originally shopped this idea around the banks, and they originally were trying to raise $5 million, and they couldn't even raise $5 million going the traditional route.

Right. And then they wound up raising $232 million. Yes. I think that, well, there's kind of two things here. First of all, I love listening. I'm going to put in a plug for a different podcast. Go for it. It's probably bad for him, but this week in startups with Jason Calacanis. He is an angel investor. He is perhaps one of the most well-known angel investors.

He came out with a book about angel investing. Anyway, the point he makes is that if you're going to be an angel investor, you need to be in Silicon Valley, because the best deals are in Silicon Valley. And if you're in New York, you're only going to see the leftovers, the things that everyone in Silicon Valley passed on. And so, you're getting the bottom of the barrel in terms of deal flow. And obviously, that's true. So, when you look at, okay, this project got shopped around, everyone looked at it, the last resort is an ICO. Because, at that point, you're like, alright, no professional investor is interested in this. No one who has domain knowledge, who has expertise. So,

I'm going to go to the retail public, and I'm going to hire a PR firm, and I'm going to market this and and so this goes to my second point which is yeah the pr firm like lied to people too didn't they yeah i made some misleading statements uh lie yeah it might have been some arguably an extended truth yeah it was they massage the truth um and so i think the second point though is that they did raise 200 million dollars plus and to me that speaks to the incredible amount of ... I don't know if we can even call it retail investment, because clearly there are whales who are involved in this. But needless to say, I think that these people have accumulated capital from owning Bitcoins, from owning Ethereum, and

are interested in looking for the next big thing and deploying the crypto capital that they have accumulated. So, I think that it shows the amount of wealth creation going on in crypto, broadly speaking. Even if we say, hey, there's a lot of paper gains, there's a lot of fake money, but bottom line is, yeah, there's a lot of money flowing through the sector. Yeah, and Tim Draper was a big Tezos cheerleader there. And he, like we talked about him last episode, Freaks, he bought the first auction, the first U.S. Marshalls auction of the Silk Road coins, the first batch of 30,000 coins. He bought them all up.

So, it makes sense to me that Tim Draper, he's a VC. He is looking to invest in 100 companies and have two of them be wildly successful. For him, Tezos might not work out, that's fine. He's got a big diversified portfolio of big bets. For your average punter on Twitter who's looking for the next big thing, they're going to go all in on one of these and they're going to lose big. They're hunting Twitter for cash tags. Yeah, yeah. They're looking for the pump accounts with cartoon character faces.

You don't know who it is. Believe me, I got caught up in that in 2013, 2014, that whole alt hype. It's hard not to. It's a lot of fun. It really is. And that was actually, yesterday I watched an interview Krista Rose just did with, I got to forget her name, but she's a journalist at Coindesk. She's an editor at Coindesk now.

Yeah, Bailey Rutzel, I think. Yes, Bailey Rutzel. and she was saying that it's funny because she covered bitcoin early on in her career or early on in bitcoin's life lifetime for a few years and took a break a hiatus and came back and she's like it's it's it's true detective it's a flat circle like there's there's cycles that happen in the space yes and it's funny for me i think this is my third cycle the second one i was like i feel like this happening and now i'm definitely like okay this is like, there's a theme here. You come into this space, you think, oh my God,

Bitcoin's my space. These new altcoins, they got three mining algorithms working. They got their incentives figured out. It's going to be the next one. Well, part of what attracts us to Bitcoin in the first place is that it is highly innovative. There's a fear of missing out. There's an interest in a new technology and so what leads us to Bitcoin just as well leads us to altcoins once we've discovered Bitcoin and we're kind of tired of Bitcoin because it's just like one thing. Our ADD gets the better of us. And then the cycle is that you come full circle. You get burned on your shit coins. We're allowed to swear, right? Yeah, we can swear. Barstool sports right now.

Okay. All right. Well, awesome. This company was built on swearing. Fantastic. And I'm actually not officially associated with Barstoolers letting us use their studios. Thank you. Thanks, Dave. Thank you. We appreciate that. So, I actually, I use shitcoin on Twitter, but I think that Twitter censors it. Twitter, you can't even say damn on Twitter without having to have somebody click a button to see your tweet.

It's incredible. And this is the home of free speech. This is the home of free speech, folks. You can't say shit coin. Outrageous. It really, it's funny to see how Twitter's evolved and what they're deciding to change. I don't know. I mean, there definitely is an argument to be made that there's harassment.

I mean, there's not an argument to be made. Yeah, there's harassment, there's abuse, for sure, for sure. Going as far to censor shit coin is too far. It's such an important word. It is. It is. Again, in the Bitcoin space, it's filled with memes. Shitcoin being one of the powerful memes, I would say. Shitcoin and HODL are two of the most powerful memes. They are the yin and the yang.

They are. They are. The yin and the yang of Bitcoin memes. Stay away from your shitcoins and HODL. Yeah, exactly. Or HODL your shitcoins. Some people are really, they are just going to bag hold to the end. But, yeah, so the Tezos, I think, was a pretty egregious example, both on the scale of how much they raised, and also just on the lack of a product existing. That's what I've been writing about it all summer, is it was in Austin, Texas.

Earlier this summer, it was in July, I believe, there was like a BitDev's meetup, but it was for Ethereum. It was like, come learn how to spin up an ICO. Literally, it was like, we'll teach you how to do it. You need to come with a marketing plan. It wasn't even come with a product. It was come with a marketing plan. And this is sort of indicative of our culture right now.

People get caught by good marketing all the time. And that is what's happening right now for two of us that have been in the space for five years. This is why I started this podcast, is sort of help people avoid these trends and create, like, a higher base level of knowledge from which people can operate. I want to get into that, specifically the marketing,

because when I was in high school nerding out on Austrian economics, that's not the only thing I was nerding out on. I was also nerding out on Linux, an open-source operating system. So you've got your Windows that everyone uses. You got your Mac OS that your hipsters and creative types use. And then you've got your Linux that your neckbeards that live in, you know, well, they used to live in their parents' basement.

But now they are millionaires at Amazon or something, you know, like they've built out their server farm. um so uh linux is very much it's when you come to open source it's not polished because they don't have the money or the patience or the interest in marketing so they don't care about you know what we call ux user experience like you're in the command line and you're just trying to figure shit out there's there's no hand-holding going on and the graphics are crap like that it's just like low resolution images that they slap together they're good enough because these are volunteers putting these are volunteer software developers putting together this software and they're what they're interested in is like compilers debugging things things that you can't like most people

can't even comprehend. You freaks have never heard the word kernel before. That's what these developers are into. So they're not into the marketing. And so, yeah, I would spend my time installing Linux on exotic hardware and being thrilled by that. So when I downloaded Bitcoin and opened it up, Bitcoin's aesthetic is in line with the open source aesthetic of just a complete completely trash, you know, UI. That is the guy Rusty Twit. Yeah. What's his name?

Rusty Russell? Yeah. He wrote the Bitcoin cold storage guide that I've been sharing with people. If you guys want to know how to do cold storage of Bitcoin, look up Rusty underscore Twit, find his GitHub. Yeah. Cold storage guide. But he, in that guide, basically explains how he came from Linux and compared Bitcoin

to Linux. He was like, Bitcoin is exactly like Linux. It is. And for those of you that don't know that aren't as tech literate as Pierre, I'm not even going to say and myself because I'm not tech literate at all, but Linux is a very powerful tool and something that, like Bitcoin, was open source. When did it start? In the late 80s, early 90s? Oh, yeah. A long time ago. Yeah. And has been sort of built out since. It's a powerful tool that every respected developer, well, not every respected developer, but ... In most job advertisements for a software development job, they're going to ask for Linux,

or they also call it Unix, which, okay, let's not get into that, but yeah, that's what they look for. And I don't want to make fun of Satoshi's Bitcoin QT interface that he put together, But, yeah, it has an amateur feel to it because he is not a marketing guy. And the white paper is not a marketing document. It's a technical document. So that, to me, when I saw this, it screamed to me authenticity. This is the real deal. This isn't someone at a bank or someone at an established tech company, a Google, whatever,

carefully put together this product to scam us. No, it is a legitimate, grassroots, open-source piece of software that happens to run a network that is now worth $100 billion. O' Officially today. Officially today. Honestly, I would contrast that with Ethereum. If you go onto their website, it feels like a typical startup marketing landing page. I think that's a red flag. Then, okay, Ethereum. But then, there's worse. If you go on these ICO pages, they're clearly targeting people who don't know what Linux is people who don't know what

what it takes what it takes like what it takes to make the Bitcoin Network run is a level of of expertise and diligence that I'm pretty sure less than 1% of the people in the world have well I'd say like less than 1% of software developers yeah so even so point zero zero zero yeah yeah one percent of the world is way too many people yeah that's all the world's a big place like what 700 million people now 70 billion yeah we'll cut that part out Marty's bad at math yeah mad math man yeah so that that I think that's that the marketing take it seriously the better the marketing is the more likely you're getting scammed

This is a heuristic here. We got a heuristic here. It's a very important heuristic. And that is something I agree with. And I love that you said that Bitcoin is authentic. And in my mind, that is Bitcoin's biggest advantage. That is truly grassroots and did not have to be marketed at all from the beginning. People were just drawn to it like a magnet and started contributing to it saying, hey, this has potential.

which is sort of a perfect segue into what I want to ask you next about the Satoshi Nakamoto Institute. So this is a great resource for anybody looking to learn about Bitcoin and more importantly sort of the steps that led to Bitcoin. One of my favorite pages is

it's not Mempool. Is it Mempool? The blog? Where we go through all the papers is WayDai. Yeah, yeah, yeah. Literature. Literature. The literature section of Satoshi Nakamoto Institute is, you got to read it. It's going to take a while, but you got to read through those.

These are, Bitcoin just didn't just appear out of thin air and was an idea that happened overnight. It is an iteration on many technologies that came before it and a perfect, not perfect in any way, but a great combination of sort of technologies that the cypherpunk movement was pushing out. So, the Satoshi Nakamoto Institute started as a joke. I've heard people say that it is still a joke. Who are these people? Well, we've conveniently listed them on one page. If you go to the skeptics page. You just had a nice tweet storm about that.

Oh, yes. You know, when we hit a milestone like $6,000, $100 billion market cap, I cannot restrain myself. I must start trolling on Twitter because there is a rich multi-year history of self-important douchebags who thought that they knew without a doubt in their mind that Bitcoin is going to fail. and that it was going to zero and that it was a libertarian fantasy thing and just, you know, completely useless. And on top of just, you know, it's fine to have a wrong first opinion of anything. That's fine. But when you engage in the dialectic, in the question and answer, they're just very dishonest debaters.

and they're terrible debaters too it's just a bunch of muh tulips muh Ponzi schemes it's like no if you actually understand how the technology works like you

you sound stupid right now like these arguments there's this dude Adam Singer I'm sure I think you hopped in a conversation I was having and I like this dude

I mean he works for Google I think but he is like I've got my tweet deck and got it broken into sections he's on I think my tech section

and without bar once a week shitting on Bitcoin it's like Like, all right, I've engaged him in debate. Like, all right, have you actually used Bitcoin before? He's like, oh, I tried to buy some on Coinbase, but the app wasn't working. He's like, all right, so you've never downloaded a wallet, created a private key, sent Bitcoin,

received Bitcoin, and had that aha moment where, holy shit, I'm exchanging value without. Coinbase can have reliability issues. I'll give them that. I'll give them that. I'll give them that, but- That's not Bitcoin. It's not. That's not Bitcoin.

Bitcoin is extremely reliable. Every 10 minutes, the Bitcoin network creates, well, approximately 10 minutes because there's kind of a statistical, you know, on average 10 minutes. On average, over time. If you look over a seven-day period or more, it's going to be around six blocks an hour. Like clockwork. Or 10 blocks an hour, excuse me. No, six blocks an hour. Six blocks an hour.

Again, the Marty math. The Marty math is not there. I've had five concussions, people. All right, let's stick with me. Yeah, let's give Marty some slack. um so uh yeah so back to nakamoto institute so uh austrian economics right so it always comes back to this um there's a ludwig von mises institute so a big name uh both literally and figuratively uh he he uh i don't know i i i i i can't speak glowingly enough of everything

he's written his main book is human action uh it's just completely transformed my worldview and i still read it like you know and people people will criticize me for this but i do read it like it's bedside like the bible okay you know people are like oh you you libertarian Austrian economists are like religious about it yeah i'm not gonna deny that i might be the nerdiest thing i've ever heard in my life yeah Legitimately the nerdiest thing I've heard in my life. I have a thick, thousand-plus page economics textbook on my nightstand that I turn to for solace, okay, folks? Do you have a favorite page?

Yeah, I have a favorite page, actually. It's what determined my major in college, and it's his page about accounting. Really? Yeah, so I got my bachelor's and master's in accounting at UT Austin, and his page about explaining how financial accounting helps business people make decisions is what determined that I would major in accounting. In hindsight, I should have majored in computer science. But, you know what?

There's just no way to know, right? Maybe I possibly would never have known about Bitcoin if I had not gone into accounting because the fact that I got my master's made it such that I met Michael and Daniel at the Mises Circle. So like, anyway. It's all, it is all. It's all hindsight.

It's all hindsight. And I probably wouldn't be here either if I didn't take the certain path that I did. Like I just, as a dumb 16 year old, I made a good decision to take an economics elective my senior year in high school. And my senior year of high school just so happened to be the fall of 2008.

uh when the world was going to shit and i was in this economics class like learning about what was going on had a very adept teacher who was was willing to dive in and sort of telling us what was going on with the situation we read the tarp we read parts of the tarp bill and at that moment i was a 17 year old sitting sitting at a desk in north philly i was like holy shit i gotta figure out like how how all this works right i'm going to college i'm an econ major uh and i discovered bitcoin while writing a paper on monetary policy and stumbled upon the white paper didn't didn't get sucked into the rabbit hole first i don't think that anyone gets sucked in on the first exposure yeah no it takes a couple i definitely did i think i saw it and then six months later

i saw like a news article and then dove in there you go like probably the spring of 2013 is when i decided to put my snorkel on and dive down fantastic the bitcoin rabbit hole um but yeah And that's what's fascinating about the space is that once you're, and this is what Bailey was saying on the Chris DeRose show as well, once you're in here, it's hard. There's no getting out. There's no getting out because it is, and this is something I really like to get into when you talk about Bitcoin, we're talking about a technology that comes around once every 500 years, which I would argue is- You know what? I'm going to say this is a technology that is coming around once in the history of humanity. There's going to be before Bitcoin and then after Bitcoin. I've heard that before. We're going to start basing our calendar off the Genesis block soon.

That's an entirely reasonable thing to do. Now, let's not diminish the contributions of Jesus Christ to our society, but it is – I think that it's not like the printing press. It's not even like the internet because fundamentally money is one half of every transaction, every financial transaction that goes on. You know, like you're buying something at Target. One half of it is money. And that fact grants, and the fact that money is printed by governments, grants governments a tremendous amount of power over the economy, over our lives. And when that power gets taken away in 10, 20 years, I don't know. We'll see.

Maybe we can discuss that. But that will be epoch changing. That's going to change the course of humanity because I truly do think that markets make better decisions than governments. I do as well. I do as well. We talked about it last week. We're talking about when Chicago bid for the Olympics back in 2013, whenever it was. They sold the rights to their parking tickets to a private entity because they had never been profitable.

Sold it for like a billion dollars. A private entity was profitable in 18 months, and the city will never see any of those revenues. But you guys have heard that story already. We're not going to repeat it. But this is an example of— Government incompetence. Exactly. And it's rampant.

Let's circle back to the Nakamoto Institute because I was saying, like, you know, Ludwig von Mises wrote this book, Human Action. I love it. So there's this institute named after him. And we were like, well, you know, it would be funny if there was a Satoshi Nakamoto Institute. And I think if my memory serves me right, I think those words came out of Michael Goldstein's mouth, also known Bitstein. Follow him, at Bitstein, on Twitter. At Bitstein, he'll yell at you and tell you to eat steak.

Yeah. I noticed that there's quite a few people on Twitter that are not following Michael Goldstein. Really? Yeah, because you go on some of these Twitter accounts, they've got millions of followers. and Michael only has thousands. So clearly, there are a number of people on Twitter, and I don't want to point fingers. I'm sure that our audience is following Michael Goldstein,

and if you're not, go ahead and get on Twitter and fix that. Better hop on it. But clearly, there's a demographic out there that's missing out on his constant stream of carnivory and Bitcoin wisdom. It's egregious. Carnivory. We're not going to dive too deep into carnivory, but just so you guys, if you guys don't know out there, there is another segment of Bitcoin users that only eat meat like a bunch of freak fucks. I cannot do it.

I think this is actually funny because I was watching you guys post all these steak pictures, like just eat a steak, eat a goddamn steak. I started eating more steak, but I wasn't changing my diet in any other way. so I was just getting unhealthier and unhealthier as I continued to eat bread and other shit with the steak. Okay, I would argue that just adding more steak is going to make you healthier. I'll take it. Even if you don't change any of the parts of the equation.

Tell that to my wife. I will tell that to your wife. She had a steak intervention with me. Oh, wow. So you've been eating too much steak lately. I've had one of those with my mother-in-law. Really? Oh, yes.

Oh, yes. All right. We're about to fall down a corner. We're so far off the rails right now. Anyway, Michael Goldstein was like, hey, it'd be funny if we had a Satoshi Nakamoto Institute. We looked at each other. Let's do it. We're doing it.

We got the URL, and then we started throwing up everything that Satoshi Nakamoto has ever written. That's our goal. Get everything on there. And I can't stress how great of a resource that is, because you watch the idea evolve over time. Yeah. And you come to realize that Satoshi is like a fallible person. He's somebody working with people. It's very well known now that he was not the best developer.

He was not the best engineer. He needed help. And sort of seeing the creator, the creator. Oh, it's so religious. There's no going around it. You know what? I argue embrace it. I do embrace it to a certain extent.

It is. And Lewis and I touched on this in the first episode. Like, he, she, it, they, or them? Like, it could be... Yeah. Oh, yeah. Like, you could go on and on and on for Satoshi theories, but... It could be, yeah, a spontaneous manifestation of the internet becoming self-conscious, self-aware,

and manifesting itself as Satoshi. We haven't ruled that out. We have not. We've ruled one person out. We know, beyond any reasonable doubt, that Craig Wright is not Satoshi. Fuck off. He's a fraud. Fuck off.

He's not a fraud. No, he is a fraud. So, for those of you who don't know, this guy Craig White's right, some Australian dude. He claimed to be Satoshi. He got to Wired, I believe, and he got to Gavin Andresen, who was at one point the- Lead scientist. Lead scientist. The maintainer of Bitcoin.

Of Bitcoin Core, but he basically duped Gavin into believing that he was Satoshi, and it later came out pretty evident that he faked the evidence. fake the private key and has since I think he's openly admitted that he's not Satoshi now so I was reading an article about this very issue of

no he has not admitted and he is he is very evasive and refuses to answer the question and basically I mean he just plays off the ambiguity and yeah he's just

a two cent scammer. And so, yeah, so the Satoshi Nakamoto Institute, and we had written, I had written, no, that's not true. I'd not written about Bitcoin before, but I realized, we realized, hey, let's put a blog on this website. Let's put our thoughts on there. And I went into why I instantly knew that Bitcoin was the macroeconomic phenomena of humanity, the history of humanity. And so I put pen to paper, figuratively, it's the 21st century, and wrote up a series of blog posts. Some of the specific sentences in there, I probably wouldn't stand by today. But as a whole, as a body of work, I think that it perfectly encapsulates my thoughts on Bitcoin. And my focus really is on Bitcoin as a currency, as an asset.

And what does it mean to be a good money? What does it mean to be a sound money? And that's what I'm interested in. I think that I've resolved that. and I don't really have anything more to explore there, which is why I haven't written in years. I'm just waiting for shit to go down and for me to be vindicated.

My last blog post was about what's called speculative attacks. I can get into explaining. And that is the paper I meant to mention in the beginning of the podcast. You mentioned hyper-Bitcoinization at the end of speculative attacks. Yes. So, hyper-Bitcoinization was a term invented by Daniel Krewis to describe what it's like when – so, there's a phenomenon called dollarization.

You go to South America, you go to Cuba, you're on your Coke run. You're buying your Coke in Cuba, whoring around, and you're spending dollars, U.S. dollars. And the way that works is that in some of these South American countries, they don't have a local currency. They only use U.S. dollars. I've been to Costa Rica many times. Like, down there, you can use colones or American dollars. If you want to hit up Playa Hermosa, do a little surfing. There we go.

Except either one. And actually, I think there's a few places that accept Bitcoin down there. Beautiful. So, the more places accept dollars, at some point, the whole economy is just dollars. And we call that dollarization. And that happens because your local currency goes to shit because your government is run by incompetent, you know, fuckheads. So, at some point, the local currency is completely trashed. No one cares about it.

You could say that was hyperinflation, like it got hyperinflated away. But, you know, sometimes it doesn't even happen because people don't have the patience for that. They just go to dollars, because dollars are more reliable than your local currency, which is crazy to believe as an American, but that's the truth. It is crazy to believe. And it's crazy to believe as somebody who worked at a futures fund, and my job was to write commentaries. And basically, if you guys don't know what futures funds are,

it's you're buying futures contracts on any type of asset, a commodity, fixed interest, or fixed income, excuse me, currencies uh gold precious metals stuff like that grains coffee and part of my job was being a central bank hawk basically following their their policy meetings their announcements and announcement after announcement meeting after meeting they were setting targets not hitting them setting projections not hitting them boy i wish i could do that at work you know set some targets and not meet them and not get fired exactly uh it's a cushy gig it's a cushy gig It is a cushy gig because they're omnipotent.

It can never be wrong. They know what they're doing. Trust them. Trust them. And that for me, and very similar to your story, that's how I got into Bitcoin. I was from a monetary – Yeah, currency, yeah. And from a financial aspect.

And it is the polar opposite of what we're doing right now. The schedule is set in stone. Yes. It's just happening every 10 minutes. You don't have to predict anything. You can predict the schedule and the release of Bitcoins very easily. It is anathema to the system that we have now, which is throw something at the wall and hope that we hit the targets that we set out. Bitcoin's monetary policy is best described and money supply targeting. We're targeting a specific number of Bitcoins. A specific

number of Bitcoins get created on average every 10 minutes, and the total supply at the end of the day is going to be 21 million. Now, we can get into technicals because it's going to be a little less than that, but hey, that's just cherry on the cake. Bitcoinization. You've got dollarization, which is great and all, but the thing with dollarization is that when a country dollarizes, it creates more demand for dollars, and so it causes the dollar to appreciate. But A, these countries are relatively small compared to the U.S. economy, so you wouldn't really see any effect anyway. And B, the Fed is just going to print more money to meet that demand, and so you just net out to zero. A dollarization

does not affect the exchange rate of dollars at the end of the day. However, with Bitcoin's monetary policy, where we are targeting a specific money supply, we're not going to create more if more people start adopting Bitcoin. That means that when we Bitcoinize, the value of Bitcoins goes up and, in fact, skyrockets, as we're seeing today. Today. And actually, this is a great point. I have this written down to speak with you about. Tom Lee, he's from Fundstrat here in New York. He's been on TV a few times the last couple of months. Oh, yes. I like this guy. Yeah. He's been really good. So, he gave his case for $25,000 Bitcoin in the next five years. Very conservative.

Very conservative. Very conservative in my mind. But he was basically explaining the liquidity glut that you get into because of hodlers, because of people that hold. And every 210,000 blocks, less Bitcoin are being created. So what we're going to see is it hits a certain point of popularity and enough people are holding. There's going to be a vertical line. Right.

So I'd push back on that a little bit. Yeah. Basically, when you think about every Bitcoin that is out there on the market today, each one is owned by someone who acquired it at a certain price. So, they've got their cost basis. Some of them, it might be zero. They got it in 2009. They mined it, whatever. So, their cost basis is zero. Others, their cost basis, as of today, is $6,000. When you think of that spectrum, and then there's everyone in between. That's on one side of the equation. You've got people's cost basis. What price did they get in it? On the other side of the equation, you've got, what price do they get

out at? In their heads, what price do they have where they will voluntarily separate themselves from their Bitcoins. I know it's a crazy concept. I would never do it. But some people have a price in mind that if it gets to $6,000 I'm selling, if it gets to $10,000 I'm selling, X amount. They might not sell their whole stash, but they're going to sell a percentage of it. Because they want to go buy their Lambo, they need to go to Las Vegas. Don't spend your Bitcoin on a Lambo, people. They need to throw dollar bills at strippers. Whatever their interests are, good or bad

bad. Or, frankly, they want to start a R&D lab and pay people to work on Bitcoin. There's hodlers who are into that, too. Is Chaincode funded by Hodler? Because I just saw they gave a grant to Peter Todd, which I was excited to see. Yeah. So, I can kind of speak to Chaincode, but basically, the founders of Chaincode started started a high-frequency trading shop here in New York City, then retired from that and started Chaincode. They were independently wealthy from starting an unrelated business unrelated to Bitcoin. Again, the equation. We have to look at what people's exit prices

And I think that because there's a wide variety of exit prices, layer on top of that, so I'm talking about like purely rational level, you know, like layer on top of that, the emotions, the animal spirits, when you're up 400%, when you're down 80%, boy, that changes the way you calculate in your mind. We are a fold of cognitive biases. That's true. I'm actually sort of happy. I bought my first Bitcoin catching knives after Mt. Gox went down. I bought my first Bitcoin at $800. Folks, buy the dip. Catch those knives.

I caught one, but I rode that all the way down like $1.80. Yeah. And I think that hearted me. I think it hearted me as a person, as an investor. Yeah. I literally didn't know it was $6,000 until I hopped on Twitter today and saw people tweeting about it. I don't check the price anymore. There's a quote in what Nassim Taleb book is it?

I believe it's fooled by randomness where he says he giggles every time he sees somebody on a subway checking their portfolio in live feed. If you're going to invest in this, enter with a long-term mindset and put your money in and forget about it. That's where I'm at right now as a Bitcoin hodler. I'm not as advanced as that. Nassim Taleb would be laughing at me on the subway. In fact, I created a Twitter bot that tweets out the price every 10 minutes so that while I'm trolling on Twitter, I can also keep up on the price. That's how much of a degenerate I am. But, no, I don't look at the price like, should I sell, should I buy?

I look at the price, it's like, where are we in this massive disruption? It's basically like a confidence index. It's a confidence index, and it's a vanity metric. It's something that when it's up, I'm happy. When it's down, I'm buying. And no matter what, at the end of the day, one Bitcoin equals one Bitcoin. One Bitcoin equals one Bitcoin. You know what?

That's good Marty math. That is probably the only Marty math you'll see that's executed perfectly tonight. Perfectly executed. I'll probably try two or more problems. Beautiful equation. I might mess them up as well. Yeah, so I don't think the price is going to go vertically up. I think that we are ... Obviously we're in a bull market right now. I think that this bull market is not

done yet. I wasn't saying the price is going to go vertical during this bull market, but I'm saying when hyper-Bitcoinization happens, there's going to be a certain lock step sort of jump evaluation. Yeah. Let's get into what that's going to be about. Let's say, hypothetical, we go up to 12,000 in the next six months. It crashes back down to 2,000. It's like 2013 all over again. We had two bubbles back to back. Yeah. So, let's say, you know, next year we get another bubble. It's like $40,000 or something crazy like that.

It's not crazy, folks. We're going much higher than that. And so, basically, this gets into speculative attacks, which is that at some point, someone starts borrowing money to buy Bitcoins. You'll see little news stories about someone who took out a home equity loan to buy bitcoins. What a crazy gambler, crazy gambler over here. The one dude, where was it, I think he might have been in the Netherlands, sold all of his belongings for bitcoin. You better have your private keys secured.

You might want to dig a hole somewhere in the woods and hide those private keys in there. Yeah, and to be clear, I'm not giving investment advice. In fact- This is in no way investment advice. Yeah, I would argue, do not invest more than 2% of your net worth in Bitcoin. Let's go through it right now. Don't invest more than you're willing to lose, and please, do your fucking research before you put your money into this.

Like I said, I bought Catching Knives at the end of 2013. I did a heavy six months of research before I dipped my toes. This is something, because you're just doing yourself a disservice at the end, because you have these outlandish expectations of what's going to happen. I'll admit, when I first bought it, I got the get rich quick bug. I was like, yeah, fuck yeah, just bought Bitcoin, going to be rich. It's like that. You'll find in time, like we said, you go through this cycle

where you realize this is sort of a new thing for humanity, for our species, and it's going to take people time. We're going to get rich at a reasonable pace, which is fine. It is, yeah. And you're going to have periods where you get poor. You get super poor because the price goes down 80%. Everyone's bearish. But, yeah, so go ahead.

To get into the next crash, which I wanted to touch on as well, I think I have a theory of what it's going to be probably won't be happy with me a lot of people don't like this guy on Twitter but I agree with Bitfinex I don't like the Tether situation I don't have explain the Tether situation

so from what I understand Bitfinex for those of you who don't know is a huge Bitcoin exchange based out of Hong Kong it was hacked, when was it hacked? about this time last year around this time last year it was hacked 119,000 Bitcoin?

Huge amount. Yeah, a lot of Bitcoin. People thought they were done. People thought they were done. And they basically came back and created Tether, which the way I understand it, I'm not going to say I completely understand it. It's a peg to the dollar. Yeah, it's a one-to-one dollar peg. Apparently, they have these dollars.

Hey, folks, if you're going to Google pegging, go ahead and do that at home. it's you may get not safe for work results um but uh yeah with that little disclaimer yeah tellers yeah you you're gonna get blocked at work and you're gonna be in the hr office next week yeah and it's gonna be an uncomfortable conversation because yeah just go ahead and google pegging but like do it at home in a private browser am i gonna have to google it here should i explain it it's pretty bad we can cut it out if it's bad Pretty bad. So, you know, you got your girlfriend.

We'll cut it out. Just tell me what it is. All right. You got your girlfriend. She's got a strap on. All right. I see where this is going. Okay.

You're getting pegged. Oh. Oh. I knew a girl that did some pegging in college. Oh, boy. Yeah. Oh, boy. She had some stories.

Oh, boy. Let's get it back on the rails here, folks. You know what? We're not hash power or whatever that other. We're not getting very ... Oh, respectable. We're not ... This is gonzo journalism of Bitcoin. It is, yeah.

So if you're into pegging, cool. Whatever floats your boat. Just don't Google about it at work. Just don't Google it at work. I'm sure if you're into it, you're not doing that. But if you are curious about it, don't Google it at work. There might be a correlation between the two kinds of ... The sexual and the non-sexual pegging.

I think, personally, that they're related. So, what this conversation started out with is what I think is going to be the cause of the next Bitcoin crash. Actually, I don't think. I don't know. I speculate it could be. Yeah, okay. It's a theory.

So, the theory is, so again, Bitfinex hacked for 119,000 Bitcoin around this time last year. They shut down operations for a couple weeks. People were very freaked out about what was going to happen. Yeah. And they basically came out and said, we're going to wholesale, like, cover the loss. We're going to eat it. And at the same time, they got their banking taken away, so they have no way of, sort of similar to what's happening to medical marijuana companies here in the States.

These banks won't do business with Bitfinex. But Tether, apparently, there's one bank in Taiwan that will do business with them, and they have an equal amount of dollars stashed away in this bank in Taiwan that's tied up to Tether. So it's pegged to those dollars in that account. right from what i that's the way i understand it gotcha but again i don't completely understand i'm a man of of of intuition and gut feelings and my gut feeling is that this is a lot like gox similar to that feeling of of roger veer coming out and saying mount gox is is liquid uh then that's sort of the vibe i'm getting with bitfinex is apparently you can't withdraw u.s dollars from Bitfinex. You can't withdraw Bitcoin, which is good. And let me be clear, this is not

going to hurt Bitcoin. Well, I actually wanted to get back to that. So basically, my view is that every bubble we've gone through, on the way up, we have memes and narratives. So if you'll remember the bubble that went to 270 in 2013, the meme there was Cyprus. Oh, yep. Yep. Right. Cyprus went. Okay, but if you went to Cyprus, you'd know that there's no Bitcoin going on there.

So for those of you who don't know, in Cyprus, what was that, 2012, 2011? They had a run on the banks in Cyprus. They had a haircut on the banks. So if you had $100,000 in the bank, you got back $90,000. Yeah. Bum deal. Sort of like negative interest rates, just more overt. Yeah, yeah, that was pretty bad.

So they call it a bail-in. Bail-in. going back to economics and being very aware of language that's some Orwellian doublespeak right there in my opinion

the connotation of bail-in is you're going to help out everybody but at the end of the day you're just helping out bad decisions or condoning bad decisions that's exactly right so yeah so there's always a meme a narrative, both on the way up. When we went to 1200, it was all about China, capital controls.

Then during the crash, there's also a narrative about why the crash is happening. But I think that fundamentally, we have a run-up because people are momentum traders. At some point, and they run out of money. And then you've got more sellers and buyers, and it crashes. To me, that's what the bubble is. But we've got things floating around in the news that we want to bring in to say, hey, this is the explanation. But really, I think it's really simple. It's that people start seeing the price drifting up, and they start buying in because they think the price is going to continue going up, and it's kind of a virtuous cycle until we run out of new buyers and then we have a crash

and then it starts all over again. Or that's, I think, what's going to happen. And this is what we can get into the future from here. So that's what I was just, how long is this going to go on, do you think, these booms and busts? Is it going to go on forever or do we do boom and bust until hyper-Bitcoinization, then we get to a certain point where it becomes a medium of exchange as well

instead of a store of value? So, I think that we reach an event horizon. Folks, let's go back to our physics class with black holes, okay? Again, this is not a sexual term. This is like we're talking about astronomical phenomena. And the event horizon is when you're going to get sucked into the black hole and there's no going back. As soon as light touches the event horizon, there's no getting out. Boom. Gone. Black hole.

So, that event horizon I'm calling hyper-Bitcoinization. And I think that we probably have a few more bubbles before we reach the event horizon. I could be completely wrong. We could be on the cusp of it and tomorrow Bitcoin goes to the moon. But I think that basically we go through a few more of these bubbles. And at some point, and this goes back to people borrowing money to buy Bitcoins. And so, here's the insidious, here's the kind of why speculative attacks are a thing. Is that when people borrow dollars, when they borrow euros, when they borrow any kind of fiat currency that's coming out of this fractional reserve banking system that I've been describing,

the fractional reserve banking system creates new money to lend out. And, when it doesn't have the ability to do so, the central bank comes in and helps them do it. So, usually, this money goes into bonds. That's why we've got bonds that are yielding 2%. O' So, the Fed will go to the banks and say, is this how it happens? The Fed will go to the banks and say, hey, why don't you print up a couple treasury bonds and we'll buy them off of you for cash? Well, the mechanics of it are, the U.S. government runs a massive deficit. We've

got a huge spending problem. We can't cut anything. Our political leadership is incompetent, et cetera. So the Treasury Department issues bonds. The Fed, they're not buying them directly from the Treasury. So these banks buy them from the Treasury, and then the Fed buys them from these banks. That was QE. But when we're talking about commercial lending or residential lending, the banks go out and they create money, and they have a certain amount of reserves that they're required to hold at the Fed, but they have ample reserves because of the Fed essentially helping bailing them out during the financial crisis. Here's the thing, too. Money is fungible. If you're a small business owner and you have assets in your business

that you can borrow against from a commercial bank, you can borrow that money, and then you take the money out of your business, and then you go and buy Bitcoins. Or, if you have a house and you have paid off the mortgage, you can go get a new mortgage, take the proceeds, invest in Bitcoins. When that happens ... By the way, Pierre is not advising you to do this right now. This is an explanation of an economic phenomenon called a speculative attack. I'm not suggesting that you do this, it's purely hypothetical, but hypothetically you could make a lot of money doing this. New money, New dollars, specifically, new U.S. dollars are created when someone goes and borrows

from a bank. That actually causes the value of dollars to go down, and then the fact that you're taking those dollars and buying Bitcoins causes the value of Bitcoins to go up. Then, what do you do? You can sell a portion of your Bitcoins, pay off your loan, and boom. Boom, you're done. That's been my investment thesis since the beginning. We're going to see a great rotation sort of from fiat currencies not completely at first but eventually over time over hundreds of years but a rotation from these fickle currencies to to a better monetary system which is i see it happening in like decades decades yeah and we're going to stop it there for today ending on hyper bitcoinization

I'm sure all of you want to be hearing more but for the sake of time I know it's very hard for people to listen to three hour podcasts we're going to cut it here so make sure between episodes you go on Twitter and follow Pierre at Pierre underscore Rochard that's P-I-E-R-R-E underscore Rochard R-O-C-H-A-R-D

and look him up look up the Satoshi Nakamoto Institute when you get a chance to start reading through those papers uh there's a wealth of knowledge and i can't stress how important it is to to understand uh sort of the technologies that came before bitcoin and sort of the ethos around the economic theory uh that that bitcoin sort of rose out of so uh if you guys like this episode uh please subscribe review give us five stars Tell your friends, tell anybody that's been asked or talking about Bitcoin to check us out. And we'll be back tomorrow.

I think I'm going to post the second part of the interview tomorrow. So if you're hurting for more, you don't have to wait too long. Hope you guys enjoy the rest of your day. Peace and love.