The Breakdown - ‘America and Sound Money,’ the Most Important Bitcoin Essay of the Last Year

Episode Date: January 17, 2021

This week’s Long Reads Sunday is a reading of the “Stone Ridge 2020 Shareholder Letter” by Ross Stevens, CEO and co-founder of Stone Ridge Asset Management, discussing the history of America, sound money and Stevens’ bitcoin “aha” moment. 

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, January 17th, and that means it's time for Long Reads Sunday. And this one is a doozy. If you're a regular listener, you will have heard me talk about Stone Ridge. Ridge is a $10 billion asset manager that in 2013, 2014 started to find many of their team getting interested in Bitcoin. As they started exploring, learning, and investing, they also saw their

clients wanting to get in and get involved with them. They found themselves without tools to really do that, and so they started to build those tools, and eventually this led to them spinning out their own division for Bitcoin custody and institutional investing that's called Nidig. NIDIG has become one of the quiet giants in the institutional Bitcoin space, with currently more than 4 billion assets under management. Nidig may best be known so far for facilitating the mass mutual purchase of $100 million of Bitcoin, which is a huge indication to the world of how legitimate this asset had become. This is a company that is moving extremely quickly.

This week, they announced the acquisition of digital assets data to build out their data capacity, as well as a partnership with banking tech provider Move-in to power a new generation of banks offering white-labeled crypto products. Anyway, their 2020 shareholder letter featured prominently a section on Bitcoin, and this letter has gotten huge notice among the investment community.

It discusses their journey with the asset and arguments for it, and even though it's extremely long, I believe it's well worth it. This is written by Stone Ridge CEO and co-founder Ross Stevens, and I hope you enjoy it. Shortly before the genius David Foster Wallace died, he delivered a college commencement speech that opens with a beautiful critique of our default setting. There are these two young fish swimming along and they happen to meet an older fish swimming

the other way, who nods at them and says, morning boys, how's the water? The two young fish swim on for a bit and then eventually one of them looks over at the other and says, What's water? Wallace goes on to teach us that sometimes, quote, the most obvious, most important realities are the ones that are hardest to see. For Americans alive today, one of our what's water questions is what's money. While Wallace asked the graduating seniors that day to think about fish in their relationship with water, I'll ask you to think with me about our own relationship with money, and as

Wallace also asked, quote, bracket for just a few minutes your skepticism of the totally obvious, and reconsider, quote, what is real and essential hidden in plain sight all around us all the time. America and Sound Money Our country is blessed with limitless natural resources, giant. oceans protecting us on the left and the right, and friendly neighbors to the north and south. We've got a military that any other country would trade for theirs, a political class constrained by an ingenious system of checks and balances, and a built-in self-correcting mechanism for free elections. Almost 250 years later, it's easy to forget how uniquely successful the

American experiment has been. Unsound money just isn't us, and hyperinflation is something only other people sometimes have, right? Indeed, outside of our incredible country, the world has experienced an astonishing 56 hyperinflations in the last 100 years. This means that in some country, somewhere over there, every other year, an innocent population lost their life savings and certainly their dignity, simply because they stored it in the wrong vessel. What will continue to make the U.S. different? What will keep our money secure? Our departure from the gold standard is a recent phenomenon, and the unprecedented money printing by developed nations even more so. Let's explore together whether the soundness of money or lack thereof is one of those,

quote, most obvious, most important realities, hardest to see hidden in plain sight all around us. Quote, the most significant monetary achievement in the history of the world. President Nixon thundered these words on December 18, 1971, in a surprise weekend national address announcing the Smithsonian Agreement. The agreement following another surprise weekend address earlier that year, the Nixon shock of August 15th, which took the U.S. off the gold standard, replacing it with the Fiat standard, i.e. U.S. government paper money or U.S. GPM, coordinated the simultaneous anchoring of each G-10 currency to U.S. GPM via fixed exchange rates. Prior to the Nixon shock and the Smithsonian Agreement and as motivation for them,

Nobel Prize winners and politicians were convinced that gold gave no value to U.S. dollars. Rather, U.S. dollars gave value to gold. Thus, the U.S. could safely go off the gold standard, and correspondingly, the G-10 could safely peg their currencies to U.S. GPM. Paul Samuelson, Nobel Prize winner, said, Every expert knows that the popular conception that money has more value if it is exchangeable into gold exactly reverses the true relation. Were it not that gold has some monetary uses, its value would be much less than it is today. Congressman Henry Roos said,

When the U.S. government stops wasting our resources by trying to maintain the price of gold, its price will sink to $6 an ounce rather than the current $35 an ounce. In a little over a year, this most significant monetary achievement smashed apart on the rocks of economic reality. Instead of gold crashing to $6.GPM, by early 1973, it was USGPM that crashed to $125 announce, a level unthinkable to Samuelson's every expert and to U.S. congressman. As USGPM crashed, the G10 began to see the P in USGPM for what it was, and one by one quietly abandoned the agreement. Far from a temporal fluke, in the ensuing 50 years, USGPM has depreciated versus gold at around 8% per year. P or paper is P.

What is money? Money is and always has been technology. Specifically, money is technology for making our wealth today available for consumption tomorrow. Modern Americans with a what's water mindset about money, virtually all of us, assume there is a sharp line of distinction between what is money and what is not. That's false. Instead, throughout history, various monies have always existed simultaneously along a continuum of soundness, subject to competitive monetary network effects, sound money along with language, were the first, and have been forever the most important human networks responsible for human flourishing. Imagine life without them. Money is unique among all the goods we seek because we value money not for its own sake, but rather solely for its perspective exchange utility. That's a fancy way of saying

we hope it keeps its value long enough to enable us to trade it in the future for stuff we actually want. The question of which money humans will choose, therefore, boils down to which good or goods any individual believes will best store the sum total of their lifetime of daily labor, i.e. their life force. Because the most important trades we make are the ones we make with our future selves, humanity's Darwinian propulsion towards holding the soundest money possible is based on our intuitive understanding that the longer our choice of money can hold its value, the greater the potential compounding benefits of our life-to-date production. Our timeless search for ever-sounder money is an individual intuition-based optimization, as unstoppable as evolution, because we instinctive

instinctively know that our survival is at stake. Will our life force be durably storable in a particularly well-chosen money and therefore potentially accumulate, enhancing our potential longevity? Or will it dissipate no matter how hard we work because we chose the wrong storage vessel, threatening our very lives and those of our progeny? Life, uh, finds a way. Since its founding in 1913, the Federal Reserve or Fed has upended our Darwinian propulsion. Temporarily, the entire edifice of modern central banking, unbacked helicopter money, is like one gigantic helicopter or parent, never letting their child suffer, quote, the blessing of a skin knee. When the Fed doles out billions or trillions of USGPM, it has the immediate effect of helping those favored few who

first receive it, directly or indirectly, plus all pre-existing financial asset owners at the expense of everyone else. When Chairman Powell says, inequality is not related to monetary policy, I believe he would pass a lie detector test. That doesn't mean it's true. Beyond the fundamental unfairness of both its temporal and ultimately uneven distribution, GPM leaves the fidelity of an economy's relative price signals and tatters. Prices matter. In a ways like matter, prices guide billions of economic turns a day, constantly updating based on new real-time information, made individually by billions of humans around the world, 99.99% of whom don't know each other, will never meet each other, and almost certainly don't realize that price signals

distorted or not, coordinate their actions for better or worse. Then Fed Chairman Bernanke in 2009 succinctly and honestly, if shockingly, referred to the Fed's money creation process fee commercial bank intermediation by saying, quote, we simply use the computer to mark up the size of the account they have with the Fed. The money so A, created, and then B, multiplied, because only fractional bank reserves are required, and then C, lent out by banks. First, as discussed, this impairs the fidelity of economy-wide price signals. Thereby, second, inefficiently draws human and capital resources into activities that cannot be lastingly maintained. Thereby, third, drives temporary illusions of relative prosperity in certain economic segments and despair in others, and therefore,

fourth, leads inevitably and repeatedly to booms and busts. Modern central banking is the cause of severe economic down drafts, not the cure. By giving into the clamor for ever more abundant and ever cheaper money, central banks cripple the role of the wisest regulator, the market, of the most important mechanism for efficient economy-wide allocation of capital, relative prices of sound money. In the same way a stock certificate is titled to company capital, Money is titled to human time. People sacrifice their time for money, which enables them to trade for commensurate sacrifices from others. When prices are distorted, we are each inhumanly robbed of making fully informed personal decisions with our time. If you give anyone the power to print

money, they will print money. A tool that can command human time is an object of great temptation. Too great. I don't question that central bankers are well-intentioned. I strongly believe they are. But I also know what Lord Acton said about absolute power. It's human nature, not finance, or politics. Just like certain offspring of helicopter parents, those underemployed glassy-eyed 25-year-olds living in their parents' basements, who have neither the will nor ability nor in some cases even permission to leave, the offspring of central bank helicopter money, certain over-levered glassy-eyed companies and certain segments of over-money-supplied industries, cannot survive without ongoing access to the essentially free USGPM they indirectly borrow.

Like the smooth-need 25-year-olds, those over-moneyed zombie firms have neither the will, i.e., when USGPM is free, why bother with financial discipline? Nor ability, i.e., our business model doesn't work at higher interest rates, nor in some cases even permission to leave, i.e., you bail us out because we employ so many voters, or because we intermediate and credit multiply your monetary policy. USGPM facilitates political concession after concession, stimulating ever new expectations of further bounty, making the process itself self-accelerating. Even those in government who genuinely want to avoid printing paper money and handing it out, find it impossible to stop the system. The bottom line, without the rigid barrier of strictly limited funds, that is, with non-scarce

money, nothing will stop indefinite growth of government expenditure. Untethered to the future generational tax burden, it is simultaneously exploding and expropriating. No wonder millennials feel the game is rigged against them. It is. We now exit 2020, with government money printers around the world going burr, cranking out insert country name here GPM by the ton, flying downhill in a nickel a truck with no brakes. Temporarily. Any central bank can control the supply of their money. They can't make their people value it. Enter Bitcoin because life finds away. Darwinian propulsion. At first glance, geography might seem the least dynamic of sciences rooted in the glacial-paced realities of geology. Today's global data linkages, however, lie

blanket-like a top that's slower-moving geological layer. Their high-velocity networks a new kind of geography. Mathematicians and data architects call the landscape they represent a topology, that is, any kind of map that can be rearranged due to connection. Unlike geographies, topologies in this context represent places with distance and speed determining how far apart they are. Geographies are constant. Topologies can change in an instant. New York and Tokyo are always 6,731 miles apart. That's geography. New York and Tokyo are also about 176 milliseconds apart and getting closer. That's topology. Every new piece of a network, every new platform or protocol, has the potential to fundamentally alter how we connect. Something far away, including across national borders, can suddenly be

with one innovation right on top of you. Location can become as changeable as the power of, for example, a new network protocol. Locational utility refers to the nodding together of distance and speed such that something becomes more useful or powerful, as it's drawn closer by increased connection even if it remains the same distance away. Just as the early architects of steamships, rails, highways, airlines, and networked computers each wildly underguessed how popular their spacetime compression inventions would be, Satoshi Nakamoto could not have possibly imagined how popular, and therefore how powerful his new protocol-powered monetary topology could be. The network is robust in its unstructured simplicity. In many countries, it is illegal for women to have a bank account,

or even work, while the men learn, earn, and create independence for themselves. Trapped in a restrictive, oppressive domestic cage, these women have historically been forced to do as they're told, with no freedom to make a living, develop professional skills, or cultivate a sense of self, let alone create financial independence. Bitcoin is fixing this. Leveraging Bitcoin's growing network and their smartphones, these women can and do find jobs online, secretly for now, and get paid. In Bitcoin, they become copy-eders and try. transcriptionists, they proof-read, do data entry, and take surveys. Remotly and quietly, they can do anything that's doable offline.

Bitcoin offers them an exit option, an off-ramp. Bitcoin demolishes their cage. Today, gradually. Tomorrow, suddenly. In the 100-plus countries where our what's-water money analogy is as patently obvious to its citizens, as it has been utterly invisible to us, primordial forces are being unleashed in a one-way torrent of increasing human liberty, one impoverished caged human at a time.

While lurching in fits and starts for now, the power of the movement because it rides upon and accelerates our Darwinian propulsion towards sound money, and therefore towards survival, is unstoppable. Fate-changing topological shifts, the Arab Spring, Brexit, Bitcoin, can quickly render the powerful weak and the powerless strong. Institutions and ideologies that can deliver space-time compression will grow, thrive, and accelerate, those that cannot slow, perhaps by their obsession with control over speed, or perhaps by their skepticism of the totally obvious, will miss the turn.

Acknowledging with profound humility that we are only one firm, a major goal of our Bitcoin-focused affiliate is to help America avoid missing the Bitcoin turn. My four big Bitcoin-a-ha moments. Bitcoin is a journey, not a destination, and everyone is on their own path. Every morning when I study Bitcoin, I find myself deeper in awe, humbled by the power and potential of its unstructured simplicity. The more I learn about Bitcoin, the more I realize how much there is to know and how much I want

to know. There's beauty in Bitcoin. I study Bitcoin standing on the shoulders of giants, pioneers who have come before me and blazed the trail. There have been dozens of moments in my past eight years of morning study when I had to put the book down or pause the podcast, sitting in stunned silence for a while after reading or hearing something that I knew immediately would change my worldview forever. If you study Bitcoin intensely with humility and are mindful of Wallace's deep wisdom that sometimes the most obvious, most important realities are the ones that are hardest to see, you will end up seeing a lot you can't unsee? I certainly did. The biggest Bitcoin aha moments from the past eight years of my early morning routine, quite a long list difficult for me to curate to just four, are below.

1. Stability across time. Gold has been a reliable store of value because of its scarcity and historically low annual supply growth of only 1 to 2% per year. There has never been gold hyperinflation. Indeed, gold has held its value over the centuries, while hundreds of other monies have come and gone. However, gold supply is not impervious to its demand. If, hypothetically, gold went up to $100,000 an ounce tomorrow, up more than 50x overnight, we can be sure enormous resources would immediately shift to gold mining, and the miners would find some way, somehow, to accelerate its supply growth driving its value down. In contrast, there will only ever be 21 million Bitcoin. Bitcoin's annual supply growth, which asymptotically approaches zero over time, is now down to about 1%, on par with

the historical annual growth in the supply of gold. While far from perfect, gold is Bitcoin's closest real-world analogy. However, the ultimate supply of Bitcoin is fundamentally limited by the design of the protocol itself and cannot be increased regardless of its value or level of demand. Bitcoin is the first store of value in history for which its supply is entirely unaffected by increased demand. From this perspective, Bitcoin is better at being gold than gold. It's even more saleable across time. Many investors want to be a part of the next bull run. Others seek to build their dream home, finally launch that startup or fund their education.

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beyond the development of affordable commercial air travel, and then especially beyond the internet's Cambrian-like explosion of network power, gold's low spatial stability became an acute flaw even the most ardent gold bugs miss. Gold is simply hard to transport. This is where USGPM, or the Fiat standard in general, shines, though Fiat's periodic human nature-induced hyperinflations made it a huge step backward in terms of saleability across time, it was a substantial leap forward

in terms of saleability across space. However, contrary to common misconception, Bitcoin moves much faster across space than fiat, increasing our capacity for long-distance international settlement by about 500,000 transactions a day, and completing that settlement in about an hour rather than the current state-of-the-art three to five days or longer for final international fiat settlement. Bitcoin's protocol and network topology renders national borders irrelevant which is especially empowering to the world's most vulnerable and unprepared for fiat hyperinflations, think Venezuela, Turkey, and Lebanon today. Even within a country like ours, do not confuse the speed of your visa payment with its final settlement.

No settlement occurs when you buy your coffee at Starbucks. Rather, your bank and Starbucks bank generally settled two to three days later, with each bank taking credit risk to the other along the way, with rare but occasionally disastrous results. Bitcoin safely settles about every hour and, as a bearer instrument, credit risk is not a concept. From this perspective, Bitcoin is better at being fiat than fiat. It's even more saleable across space, and because it's not debt like fiat, has no credit risk. 3. The difficulty adjustment. Everything Satoshi did in inventing Bitcoin was non-original. His genius

was in seeing how combining a specific set of previously solved problems could together solve certain unsolved problems, except the difficulty adjustment. The difficulty adjustment entirely original is, in my opinion, most underappreciated breakthrough, a truly genius application of game theory and the fundamental reason why Bitcoin's network has always been secure. So what is it? Suppose Bitcoin's price rises, creating an incentive for more Bitcoin miners to mine. Remember, successful mining results in Bitcoin rewards, thus the continuous link between Bitcoin's price and the total worldwide mining incentive. In this case, the Bitcoin Protocol will automatically raise the difficulty of mining, such that the creation of a new Bitcoin and the timing of transaction verification

does not accelerate beyond its present schedule about every 10 minutes. Instead, suppose Bitcoin's price falls and subsequently higher marginal cost Bitcoin miners rationally turn off their machines. The Bitcoin protocol will automatically reduce the difficulty of mining such that the creation of new Bitcoin and the timing of transaction verification does not decelerate below its present schedule. How does the protocol do this? Imagine that I tell you that the product of two prime numbers is a certain three-digit number and I ask you to guess the two primes. And I also remind that a property of prime numbers is that the product of two primes is uniquely the product of those specific two primes. There is no close-form solution to my question, which is a fancy way of saying

you'd have to randomly guess until you figure it out. Since I told you the product of the primes is only three digits, you'd probably be able to guess the two primes fairly quickly. However, suppose I told you the product was five digits, how about ten digits, how about twenty digits? You can quickly see how much harder and harder and then way, way, way harder the random guessing can become. The difficulty adjustment is akin to adjusting the number of digits of the product of the primes as a function of how much mining power is online at any given time. The more miners, the greater the number of digits of the products. The fewer miners, the smaller the number of digits, such that even if all commercial

Bitcoin miners and their combined supercomputing power suddenly went offline overnight, hobbyist mining on laptops at Starbucks would keep the entire global Bitcoin network just as secure. Bottom line, the difficulty adjustment was the missing piece of decades of previous attempts at decentralized electronic money. It ensures that every 10 minutes a new Bitcoin block is rewarded and all transactions in the interim are accurately and immutably verified. It is what drives Bitcoin's saleability across time discussed above, even amidst periods of surging demand for Bitcoin. It is what drives Bitcoin's salability across time discussed above. Even amidst periods of surging demand for Bitcoin, Bitcoin miners have no ability

to mine Bitcoin faster, making unexpected inflation impossible forever. Typical of Satoshi's understated style, the difficulty adjustment was described in just two sentences in his original white paper. Quote, mining difficulty is determined by a moving average targeting an average number of blocks per hour. If they are generated too fast, the difficulty increases. As an aside, the difficulty adjustment also serves to limit wasted mining energy, further incentivizing miners to mine, but that benefit pales in comparison to its impact-making Bitcoin inflation proof. The difficulty adjustment has now been continuously tested for 12 years at total global network power levels ranging from just a few laptops all the way to enough energy to power in New York City,

and with lots of total network power volatility along the way. The total network power volatility is what requires the Bitcoin protocol to continually adjust the mining difficulty, akin to continually adjusting the number of digits of the product of the two primes. And astonishingly, just as Satoshi design, no matter the global mining capacity or its variability, a new block is verified every 10 minutes, every 10 minutes, every 10 minutes. Speaking of energy. Number four, Bitcoin's use of energy. The amount of energy Bitcoin consumes is the sum total of the energy consumption of all the mining machines that secure the network.

Well, hard to know exactly, a good estimate of the global total consumption is about 8 to 10 million people worth of energy. Absolutely enormous. In a warming world, how can this be good? First, the principle. Bitcoin is a better technology for performing central banking than the current government monopolies on central banking. In the same way that cars consume far more energy than the bikes and horses they replaced,

and electric lights replaced candles, and central heating replaced chimneys, and computers replace typewriters, Bitcoin's better monetary system consumes far more energy than the current central banking system. Throughout history, energy use has grown whenever free people making free choices have decided for themselves that the price of the extra energy for the new technology they wanted was worth it. Today, every day 24-7, Bitcoiners around the world make the decision that the price of Bitcoin's energy use is worth it because Bitcoin is better technology for money. Second, the practice. Bitcoin mining is the only profitable use of energy in human history that does not need to be located near human settlement to operate. The long-term implications of this

are world-changing and hiding in plain sight. Before Bitcoin, the problem of energy has never been its scarcity, but only our ability to channel it geographically where it is needed most. Before Bitcoin, that was exclusively where humans lived. In contrast, Bitcoin's mining energy is solving a different problem. Because of satellites and wireless internet connections, Bitcoin mining can be located anywhere. For example, remote destitute areas blessed with moving water can monetize their natural resource good fortune by creating clean hydro energy and use it to mine Bitcoin. Thus, bitcoins can make monetizable, isolated energy sources all over the world, like waterfalls, running rivers, or creatable dams, now entirely untapped because they would be cost-prohibitive

to connect to electric grids close enough to residential or industrial areas. In doing so, Bitcoin can fundamentally change the economics of energy by introducing a highly profitable use of electricity that's location independent. The world has never had a profitable use of energy that's location independent. Now it does. And since fossil fuels are already too expensive to be a profitable source of Bitcoin mining energy, I believe the only long-term profitable Bitcoin mining will be powered by hydro. Imagine a future with Bitcoin mining firms unsubsidized in extraordinarily isolated locations, visualize a waterfall in a largely population-free part of an African country suffering from abject poverty, easily connected to the Bitcoin network, building serious energy

infrastructure to monetize the local clean energy source for mining. However, once the industrial strength profitable infrastructure is in place, let's extend it, let's build roads and housing, and schools, and hospitals, ultimately leading to human settlement. The net result can be people locating around new Bitcoin-driven hydroelectric energy infrastructure, with more and more of humanity clustering around cheap, clean energy sources. Historically, our energy challenge has been to move the power to the people. With Bitcoin, we can move the people to the power. Consider that the world's major population centers, think New York, London, Paris, Tokyo, each developed where they are geographically because of natural seaports, waterways, and trade

routes. Energy was a non-factor because the placement of these cities was all pre-energy, i.e. pre-fossil fuels. As Bitcoin finances the for-profit development of cheap, clean energy infrastructure on a massive scale, it can lead to a future in which more and more of the world's population lives near abundant energy with an extraordinarily low marginal cost of production. This matters because cheap energy equals human flourishing. That's an equation. Cheap energy equals human flourishing. Beyond the revolution and monetary policy that Bitcoin already represents, Bitcoin may also represent the biggest catalyst the world has ever known for developing abundant, clean, cheap energy, and therefore one of the biggest catalysts in the world for human

flourishing. Can you tell why I'm all in? The mystery of the missing Amazon millionaires, and is it too late to buy Bitcoin? Investing in Bitcoin now exiting its 12th year, and especially after a 200-plus percent return in 2020, is extremely uncomfortable for most everyone. Just as investing in Amazon stock, AMZN, was for almost everyone following its 12th year as a public company. Even for investors who see the long-term potential of Bitcoin's monetary properties, they may wonder if they are just too late to invest. Did they miss it? Has all the future value been price? I believe our evolutionary biology makes us hardwired to consistently underguess the power of

modern technological network effects, since nothing in our history resembles them. For the vast, vast majority of human time, we lived in small tribes, entirely unconnected to other humans around the world. Combined this observation with prospect theory and regret aversion, and we can solve the mystery of the missing Amazon millionaires. Why do so few Americans today own more than $1 million worth of Amazon stock? In Amazon's early years, most investors were hesitant to buy it, even as they loved using the service, believing that each year they missed it again and the price had run away from them. Why? Because in each of those first 12 years, Amazon's high price that year was, on average, 175% higher than Amazon's open price of that year. Whoa. With that kind of price action,

it is understandable why, year after year, investors thought they missed it again. Yet, though understandable, year after year, investors were with high consequence very wrong. In the ensuing 12 years, years 13 through 24, Amazon increased 62x. Bitcoin is now 12 years old. What will one Bitcoin be worth 12 years from now? $100,000, $500,000, $1 million? $100? I have absolutely no idea whatsoever about Bitcoin's future price. However, I strongly believe that the centralized class will continue to significantly underguess the appeal, and therefore likely the price of a decentralized monetary network to the rapidly emerging decentralized class, us Bitcoiners, just as they significantly underguess the power Google and Facebook and Netflix and Amazon every year for

decades, and even as they love those services and use them daily. From a valuation framework perspective, I believe Bitcoin should be viewed identically to those network business models, the value of the network growing with the number of users, except for two major differences. First, money is primordially more important in a way even the most hilarious on-demand cat videos or same-day delivery of any product we want will ever be. There is no comparison. Second, Bitcoin lacks the possibility of antitrust enforcement ever, no matter how big and no matter how valuable it gets. Nor can Bitcoin ever be globally confiscated. Yes, individual countries can attempt to confiscate Bitcoin and over time, some may try. Just like gold was confiscated

by the Gold Reserve Act in the U.S. in January 1934, nine months after FDR's April 1933, executive order made it a criminal offense for U.S. citizens to own or trade it. However, just like the internet can be censored in certain countries but cannot be turned off, Bitcoin can be attempted to be confiscated in a country but cannot be turned off. And just as no global off switch exists for the internet, for the same reasons in others, no such switch exists for Bitcoin. With regard to confiscation and putting aside property rights for a moment, Bitcoin is really nothing more than a password to a private key that can be easily stored in anyone's memory via simple phrase memorization, which, to me, makes it more saleable across space than gold in fiat in more ways than one. If anything, in

my view, it is more likely we see a country peg their currency to Bitcoin, perhaps a developing country escaping a hyperinflation in the coming decade, before we see one that tries to unsuccessfully confiscate it. Remember, unlike gold, with Bitcoin, there's no vault, and good luck confiscating my memory. Final thoughts on Bitcoin. The trillions of dollars of central bank-driven lower negatively yielding financial instruments demolish the dreams of savers and retirees. prohibiting an enormously large and growing group of individuals from meeting their retirement wants, wishes, and tragically even needs. Free money has consequences, because it is not free.

No matter how well-intentioned, runaway global money printing and the resulting financial repression is society's largest global challenge. Regardless of Bitcoin's future ascent or descent, the long-dated monetary liabilities of individual Americans are denominated in U.S. dollars. Tackling our collective Fiat-based societal retirement challenge head-on leads to an interesting an important question. What do you have to believe to be true for Bitcoin to be your vessel for savings? The answer, point to point, meaning from today until your long-dated liabilities, e.g. your retirement spending starts coming due, and regardless of USGPM volatility along the way,

you only have to believe one thing, that USGPM will depreciate relative to Bitcoin over that time period, as it has 80% in the last two years alone. Remember that the most important trades are the ones we make for our future selves, that our search for Eversounder money is an individual intuition-based optimization, and that instinctively, we know our survival depends on durably storing our life force. In this context, is it any surprise that millennials voting with their dollars and with more distrust for traditional institutions than their forebears have already made Bitcoin the millennial savings account? And in this context, is it any surprise that two highly rated life and annuity insurers and two highly rated property and causality reinsurers

among the most brilliant forward-thinking investors I know, and each by virtue of their business models, with extraordinarily long-dated-documented U.S. dollar-denominated liabilities, have direct or indirect exposure today to more than $350 million in Bitcoin, all purchased and held through our Bitcoin-focused affiliate. One thing I know for sure, they, and insurers in general, are just getting started. The point of the insight that only point-to-point US-GPM depreciation matters, not volatility, will lead, I believe, to an explosion in Bitcoin-driven financial innovation, including Bitcoin-denominated life insurance for the 30-to-50-year-old crowd,

and Bitcoin-denominated annuities for the 50-to-70-year-old crowd. Having a non-zero allocation to Bitcoin-denominated life insurance and annuities may represent our most potent defense against the malevolent consequences of benevolent, well-intentioned past current and future central bank activity. Given the potentially revolutionary impact of these products on our great country's retirement crisis, I will be working tirelessly on them. Stay tuned. When the Fed creates $3 trillion in a matter of weeks by pushing a button,

it consolidates the power to price and value human time. In our country, humans are not supposed to have that kind of power over other humans. John Adams in 1826 said there are two ways to enslave a country. One is by the sword, the other is by debt. When a regional Fed president brags in March about having, quote, an infinite amount of cash, he toxically undermines the American virtue of thrift, dangerously decouples risk-taking from the consequences of risk-taking, and epitomizes the influence of absolute centralized power.

When Chairman Powell, no matter how well-intention, says in June, we're not even thinking about thinking about raising rates. As Stone Ridge, we respond. We're not even thinking about thinking about not buying more Bitcoin, and we did. Bitcoin is our peaceful weapon of choice against central bank-driven time theft. However, buying Bitcoin this year wasn't new for us. Bitcoin has been the principal component of our firm's Treasury Reserve strategy since 2017, and many of us have been personally involved since 2013. Like everything we do at Stone Ridge, we have skin in the game. The owners of Stone Ridge Holdings Group together collectively own more than 40,000 Bitcoin, all purchase and held through our Bitcoin-focused affiliate.

Actions speak louder than words. Larry Fink may call Bitcoin an index of money laundering, but I call it an index of money printing. Bitcoin definitely does not care what Larry Fink thinks, and P is P. As long as money printer go burr, I'll keep buying. Perhaps just in time, each U.S. citizen now has a choice. You can stay on the Fiat standard in which some people get to produce unlimited new units of money for free, just not you, or opt into the Bitcoin standard, in which no one gets to do that, including you. With the option now of a monetary system governed by rules instead of rulers,

on behalf of myself, my family, and the firms I'm responsible for leading, I've made my choice. At the most superficial level, buying Bitcoin as a portfolio advisor or as a hedge against inflation, makes good sense, and I obviously strongly believe that a 0% allocation is the wrong number for every investor. However, Bitcoin is anything but superficial. In a world replete with monetary unfairness, injustice, the institutionalization of moral hazard, and the state's increasing domestication of our individuality, Bitcoin's incorruptible fairness, justice, truth, and beauty represent a beacon for all optimists who seek personal sovereignty, personal improvement, and peace. As the founder of one of the largest Bitcoin-focused firms in the world, I don't mind

if you come to Bitcoin for the price. I just hope you stay for the principles. Bitcoin is far more important than a non-zero portfolio allocation.