The Breakdown - Rio de Janeiro is the Newest Bitcoin City

Starting point is 00:00:00 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, Abra, and FTX, and produced and distributed by CoinDesk. What's going on, guys? It is Friday, January 14th, and it has been a very good few days for Bitcoin. No, I'm not talking in terms of the price, although that's why you should care less about the price if you have the emotional capacity to do so, I am talking in terms of adoption and adoption and validation by by some unexpected sources. First, though, if you are enjoying the breakdown, please go subscribe to the show wherever you listen to podcast. If they have a rating system, I would love five stars.

Starting point is 00:00:54 Give it a review, or if you want to get deeper into the conversation, come on over and join the Breakers Discord. You can find the link in the show notes, or you can go to bit.ly. Breakdown Pod. And as always a quick disclosure, in addition to them being a sponsor of the show, I also work on marketing with FTX. So let's start in Rio de Janeiro, but first a little bit of background on Bitcoin cities. Over the course of the last year and change, Francis Suarez in Miami has become a model for what it looks like to compete for global talent, particularly tech talent, as a mayor of a

Starting point is 00:01:35 major city. Squares is of course the mayor of Miami and has been working hard to attract talent, companies, you name it, to his city. Part of that has been an interest in Bitcoin and cryptocurrencies more broadly. They've launched a Miami coin built on stacks, and they have a lot of ideas and plans around how the city might accept tax payments in Bitcoin might put treasury into Bitcoin. Last February, Mayor Suarez told CoinDesk that he plans to place a portion of the Miami Treasury into Bitcoin, although those plans have, as of yet, not come to fruition. Well, this week, Mayor Suarez was speaking at the Rio de Janeiro Innovation Week. And around his conversation, the mayor of Rio, Eduardo Paez, had a pretty big announcement. Paiz announced that they were launching

Starting point is 00:02:22 crypto Rio, and as part of that, they will be allocating 1% of their treasury into cryptocurrencies. Pedro Paulo, the finance secretary, said as well that they will also be accepting Bitcoin for tax payments, and even applying discounts for those that pay with BTC. Paolo said, We are studying the possibility of paying taxes with an additional discount if you pay with Bitcoins. You take the discount of the single quota of 7%. It would be 10% if you pay in Bitcoin.

Starting point is 00:02:51 Let's study the legal framework so that we can do that. During Rio Innovation Week, they also discussed tax exemptions for tech companies, and Paez said the government has a role to play, and I think that is the operative line here. We live in a world full of easy transport and remote workers. In that world, there is increasingly a battle for geographies, terrestrial areas, to attract a different type of tax base, a different type of business, a different type of worker, a different type of citizen. The things that made cities desirable before haven't necessarily gone out the window,

Starting point is 00:03:24 but there are a whole new set of tools in the arsenals of interested mayors, interested governors, interested regional officers, etc., that they can deploy to try to attract more people to their region. COVID-19 shutdowns, of course, accelerated a huge number of trends that were already on the way, and they freed many, many people up to think differently and more broadly about the role of government in not just serving citizens, but attracting citizens in creating the citizen base that you want to see. One of the people who has been most cataloging this trend is, of course, Balaji Shrinivasin. He recently tweeted, it was easier to start. Bitcoin than to reform the Fed. It is easier to start a new city than to reform San Francisco.

Starting point is 00:04:05 Many of these mayors are saying, it seems, with these sort of inducements and offerings, hey, you don't need to leave San Francisco to start a new city. Leave San Francisco to build a new city on top of the foundation that we already have. That's making a very interesting dynamic, and it's frankly decentralizing and distributing the technology industry, if nothing else, already. Let's stay now in Latin America for just a second. This story isn't about government adoption, but is still super positive. Strike, the Lightning Company, has launched in Argentina. Argentina is a country I know fairly well. My wife and I got married just over the border in Uruguay, and Argentina has a pretty big and thriving crypto community. In March of 2019, in the very, very depths of the bear market,

Starting point is 00:04:51 I actually took my father-in-law to meet with a bunch of the crypto folks there. Back to this year, Argentina is having a rough go of it, and this is nothing new. Inflation could be up to 55% this year. The GDP is set to contract up to 12%, and there have been overall eight currency crises since the central bank was formed. Now, Argentines have long been big on the dollar. They're famous for what they call their blue markets. Indeed, in his announcement thread, Jack Mahler said that, quote, an estimated 10% of the physical stock of dollars in the world is within the Argentine financial system. Of course, that incredible demand for dollars and that lack of demand for Argentine pesos has tended to leave governments in that country to install more, not less, capital controls.

Starting point is 00:05:35 As Mahlers puts it, as Argentinians lose confidence and flee their peso for dollars, the country's reserves shrink. This has forced the government to devalue their currency, place restrictions on how much foreign currency citizens can hold, and shut down dollar-denominated payment networks. He goes on. With strike, the Argentinian people can now hold a stable cash balance that can be spent both instantly and with no fees. Cheap, instant, cash final global payments of any size for anyone to anywhere, even over Twitter. No inflation, no restrictions, financial freedom. Lynn Alden retweeted Jack's thread and summed it up pretty perfectly. Expanding a Bitcoin-slash-lightening payments operation into a country with 50% annual inflation and 45 million people seems like a

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Starting point is 00:06:59 Today's episode is sponsored by Abra. Join over 1 million users and conquer crypto with Abra, an all-in-one, simple and secure app, where you can trade over 110 cryptocurrencies. Get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Visit Abra.com or download the app from the Google Play or Apple App Store today. ABRA, Conquer Crypto.

Starting point is 00:07:32 The breakdown is sponsored by FTX. FTX is the safe, regulated way to buy and sell Bitcoin and other digital assets. Trade crypto with up to 85% lower fees than top competitors. FtXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. You can trade NFTs with no gas on FTXUS, and gas is subsidized when you withdraw off the platform. Help support the breakdown and visit FtX.us. Today, that's FtX.us. Back to the U.S. now, in Arkansas, the Northern Arkansas Council has released a statement on Wednesday

Starting point is 00:08:14 designed to attract talent to its area. They are offering $10,000 in Bitcoin plus a mountain bike to tech professionals and entrepreneurs who relocate to the region. Nelson Peacock, the president and CEO of the Northwest Arkansas Council, said, northwest Arkansas is one of the fastest growing regions in the country, and we're now seeing more explosive growth in our tech sector. This expanded incentive offer, Bitcoin and a bike, not only embraces the growing trend towards the use of cryptocurrency as a payment option by employers, but also helps increase our pipeline of talent to benefit tech employers, startups,

Starting point is 00:08:47 cities, local businesses, and the region overall. The press release goes on to say that they're looking specifically for folks in the blockchain space, but certainly aren't restricting themselves to that. This program isn't new. It's an expansion of something that started in November 2020, and which has currently seen 35,000 application from folks in 115 countries in all 50 states. The program is made possible by a grant from the Walton's, which I think is great. And for those of you interested, a couple of details. To be eligible for the program, applicants must have the ability to relocate to Northwest Arkansas within six months of acceptance, have full-time remote employment or be self-employed. Additionally, they must

Starting point is 00:09:22 currently live outside of Arkansas, must be 24 years of older, and must be eligible to work and live in the United States. This, of course, is a small story on its own, but it's clearly part of a larger trend. Let's zoom out to even a bigger story, and this one has to do with the U.S. government as a whole. Central Bank digital currencies are one of the hot button issues right now. They are part and parcel of the stable coin conversation that has been heating up in Congress and the Senate over the last few months, and in many ways, they reflect a question for the U.S. about what it believes and wants its next generation of global monetary. leadership to look like in the world? Is the U.S. going to follow China's route, having a

Starting point is 00:10:04 CBDC that doesn't preserve the privacy of cash, and which opens up new opportunities for abuse, or are we going to go a different route? One Congressman Tom Emmer has introduced a bill banning the Fed from issuing a retail CBDC. The key thing the legislation would do would add a paragraph to Section 13 of the Federal Reserve Act that stated, quote, except is specifically authorized under this act, a Federal Reserve Bank may not offer products or services directly to an individual, maintain an account on behalf of an individual, or issue a central bank digital currency directly to an individual. Emmer's thread is important, so I'm going to read it in full.

Starting point is 00:10:42 Today I introduce a bill prohibiting the Fed from issuing a central bank digital currency directly to individuals. Here's why it matters. As other countries like China develop CBDCs that fundamentally omit the benefits and protections of cash, it is more important than ever to ensure the United States digital currency policy protects financial privacy, maintains the dollar's dominance, and cultivates innovation. CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users,

Starting point is 00:11:12 and track their transactions indefinitely. Not only does this CBDC model raise single points of failure issues leaving Americans' financial information vulnerable to attack, but it could be used as a surveillance tool that Americans should never be forced to tolerate from their own government. Requiring users to open an account at the Fed to access a United States CBDC would put the Fed on an insidious path akin to China's digital authoritarianism. Any CBDC implemented by the Fed must be open, permissionless, and private. This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash. In order to maintain the dollar status as the

Starting point is 00:11:51 world's reserve currency in a digital age, it is important that the United States lead with the posture that prioritizes innovation and does not aim to compete with the private sector. Simply put, we must prioritize blockchain technology with American characteristics rather than mimic China's digital authoritarianism out of fear. There is a lot to unpack here. Obviously, you have the China narrative and how we don't want to be like them. We have an affirmation of the qualities of cash as something to preserve, not something that was an accident of history to be eliminated. And you also have these Bitcoin-style principles built into any future CBDC approach. Remember, accessible to all, transact on a blockchain that is transparent to all and maintain the

Starting point is 00:12:29 privacy elements of cash. The community reaction was strong. Nick Carter said the most important thread by a policymaker in some time. CBDCs are incredibly dangerous and it's important that everyone understands why. Jason Lowry, who currently works at Space Force, says let's take a moment to appreciate the amazing irony of central bankers, now having to worry about the government banning their CBDCs. The American public rejecting CBDCs is not priced into Bitcoin. Finally, Danielle Di Martino Booth wrote, Major Threat Alert. Despite Powell's misgivings, Representative Emmer,

Starting point is 00:13:00 voices the same concerns as Powell on ensuring the anonymity of any CBDC, emulating the Chinese as a non-starter, at least it had better be in America if we're still red-blooded. Finally, a last note as we wrapped up, I said at the top of this show that it was a good couple days for Bitcoin, and the last story that I wanted to tell on that front is that Jack Dorsey and his team at Block, formerly Square, have decided to follow up with their,

Starting point is 00:13:24 exploration on building an open Bitcoin mining system. Templeton Thomas tweeted in October, we announced that we're considering building a Bitcoin mining system, out in the open and alongside the community, and we've decided we're doing it. We thought we'd share some more details of how our initial discussions are going and where we're headed next. We want to make mining more distributed and efficient in every way from buying to set up to maintenance to mining. We're interested because mining goes far beyond creating new Bitcoin. We see it as a long-term need for a future that is fully decentralized and permissionless. We started by digging into two questions. What are customer pain points today,

Starting point is 00:13:57 and what are the specific technical challenges? We spoke with members of the mining community to learn more about their experiences, and here's what we've found so far. One, availability. For most people, mining rigs are hard to find. Once you've managed to track them down, they're expensive at delivery can be unpredictable. How can we make it so that anyone anywhere can easily purchase a mining rig? Two, reliability. Common issues we've heard with current systems are around heat dissipation and dust. They also become non-functional almost every day, which requires a time-consuming reboot. We want to build something that just works. What can we simplify to make this a reality? Three, performance. Some mining rigs generate unwanted harmonics in the power

Starting point is 00:14:32 grid. They're also very noisy, which makes them too loud for home use. Unsurprisingly, all miners want lower power consumption and higher hash rates. What's the right balance of performance versus other factors? They go on to talk about what they're going to do next. And of course, there are lots of critiques and questions on Twitter. How will you make sure these get to individual customers, not mining companies. How will you make it so that if they're optimized for home use, they won't be just inherently an a priori worse than existing miners? I think these are, of course, legitimate questions, but still, it's exciting to have another powerful market actor asking these questions and trying to build new solutions. So there it is, a good week for Bitcoin,

Starting point is 00:15:11 whatever the price had to say, you have adoption, you have the global battle for talent, and so much more. I want to say thanks again to my sponsors, nexo.io, Abra, and FtXX.X for sponsoring the show, and of course to you guys for listening. I hope that you are headed off to a wonderful weekend, and until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Rio de Janeiro is the Newest Bitcoin City

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