The Breakdown - The Definitive Breakdown of All Bitcoin FUD, With Dan Held

Episode Date: January 15, 2021

On today’s episode of The Breakdown, NLW is joined by Dan Held, growth lead at Kraken and a serial bitcoin entrepreneur.  As the market heats up, so, too, does the number of articles and tweets spreading FUD (fear, uncertainty and doubt). Some of the FUD is new, much of it is old and all of it deserves a response.  Dan and NLW break down 15 categories of FUD, including: Bitcoin is for criminals Bitcoin is backed by nothing/has no intrinsic value Tether manipulation Energy consumption Government bans  And more!  Which are the most legitimate? Which are easily dismissed? Tune in to find out. Find our guest online: Twitter: @danheld -- Earn up to 12% APY on Bitcoin, Ethereum, USD, EUR, GBP, Stablecoins & more. Get started at nexo.io -- Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

People had the same reaction to cars, airplanes, radios, and even the bicycle. Bitcoin is just another new piece of technology that's very new, very innovative. Whenever that much change occurs, people's minds have trouble grasping it, and that's where FUD gets created. 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 Thursday, January 14th, and today we are doing something fun. We're going to do a little bit of fud-busting. Bitcoin is climbing back up. At the time of recording, we had at least briefly reclaimed $40,000. And even regardless of the short-term price movement, there's no denying what a crazy early 2021 this industry has had. Of course, with such a huge new bull momentum going into this year, that's going to bring out a lot of different criticism, critiques, and just outright fud, fear, uncertainty, and doubt. Bitcoin and crypto as a whole have had a number of long-term fud cycles. There are many things that have come up

again that we've been talking about for three or four years. Sometimes Bitcoiners reasonably get frustrated having to rehash the same arguments, to re-litigate the same debunked papers, theses, etc. But at the end of the day, with a whole new set of people coming in, some of these ideas are going to keep coming up. And so what I thought would be fun would be to have someone who has put himself in a position to continuously squash whack-a-mole style different types of fud across three different cycles of Bitcoin, Dan held. Dan is a serial Bitcoin entrepreneur. He is currently at Cracken after they acquired his last company. And you probably know him from his newsletter, his YouTube, or from his Twitter. So what Dan and I are going to do is rip through

10 to 15 different areas of FUD. We're going to talk about how prominent it is this cycle. And we're going to talk about almost kind of the legitimacy of each of these different things. Is it something that is understandable, something that we should actually be talking about? Or is it something that's clearly just designed to obfuscate or to hit the credibility of this industry. One last note before we dive in, we wanted to get this interview out to you fast in the moment. And so the edit is a little bit raw. We get a little bit fiery in it. So just keep that in mind as you're listening. And buckle in everyone. Let's go do some fud busting. All right, Dan, welcome back to the breakdown. It's been too long, sir. It has been. When was the last time? I think it was

like six months ago, which in Bitcoin time, what is that? Like a thousand years ago? Basically, it's pretty historic at this point. I don't even remember what we talked about. That's how long ago it was. But you know, typically I think in the eight years I've been in Bitcoin, I think of time and like a price time. I'm like, oh, you know, six months ago. So Bitcoin was around $8,000 or $7,000. Yeah. It's everything in time becomes intertwined with the price of Bitcoin. I know. Seriously. Well, speaking of that, perfect context. You and I were actually just riffing talking about totally separate things. And two things happened. One, Bitcoin reclaimed 40,000. just as we were starting to record, but it was kind of like showing that it was on the way.

Two, that beautiful article was blaring all over Twitter yesterday. The Bitcoin Dream is dead. And it was just the latest in a sequence of pound your head on the desk moments. And this is to be expected, right? Anytime there's a new bull run, it becomes a good business model to be the voice on the other side of that, of course. But what I thought would be really fun is to do a great big fud busting session, to do a, definitive ranking of Bitcoin fud. So what we're going to do, and Dan gracefully agreed, I think it would be the perfect person to help do this. We're going to quickly go through,

I don't know, 10 to 15 different fuds. Some of them are more recent. Some of them are classic. We'll talk about what they are, how they're appearing this cycle, and whether they're, where they are on the scale of kind of legit to just, you know, don't, don't, is not going to make any headway with anyone. How's that sound? That sounds awesome. Let's do it. Okay, cool. Let's start with a recent gem, one that I definitely didn't think we were going to be talking about this cycle, which is the very nature of math itself. Infinite divisibility means no scarcity. Talk to us about this one, Dan. This one's a zinger. This one's a good one. You know, the thing called fractions that you learned in middle school, right? And I know elementary school. Well, those are really hard for some people. You know, it's the idea that you could take a pizza and feed the whole world if you just cut it up and cut it up and cut. it up into enough small pieces. That's essentially the TLDR of this argument, is that Bitcoin doesn't have scarcity because it has infinite divisibility. As we all know, yes, you could cut a pie into many, many, many, or a pizza into many, many, small pieces. That doesn't mean you have more

pie. It's a fixed amount, just divided. It is the denominator is whatever the denominator you want it to be. So this one I find incredibly silly. Also a little bit disturbing, considering that people don't understand basic math. The idea that you could, that something isn't scarce because you can change the numerator. Sorry, the denominator. You know, you can swap out the denominator for, you can divide by two, divide by five, divide by 10. It doesn't matter because it's, there's, it's, you've got one, one pizza, right? There's not an infinite number of pizza. So there's only 21 million Bitcoin and sure they have, you know, Satoshi level granularity. And in the future, you could add even more decimals. You could move the decimal and you could have even more units,

or I think there's even something on lightning. I forget there's a subunit on lightning that's even smaller. But that doesn't mean that there's any more Bitcoin than $21 million. I think the reason that I wanted to start with this one is not to just dunk on it, although it's way too easy to dunk on. It's because I think it's really important as this asset, this phenomenon matures, to push back against good critique, right? To have important discussions and maybe we'll have some of them today.

like spending our time on the nature of math is so counterproductive. So I kind of wanted, I did want to make an example of it a little bit by leaving it right up front. Yeah, it's, it's definitely one that I didn't see in the past cycles. I've been here since 2013. So I've seen Fudd in the 13 cycle, 17 cycle, but this one's a fresh one. I don't remember seeing this before now. Dan McArdle, one of my favorite people on crypto Twitter, everyone should follow him. He's at Robustus.

he's an OGOG from like the 2011 cycle and it's funny because he's seen this FUD like he's seen it on the Bitcoin Talk forums. I don't remember this one. This one seems to be pretty new and fresh and a kind of bizarre one. Speaking of new and fresh and perhaps unexpected, let's talk about the new fear of losing your keys after the big New York Times article that was rolling around. So the FUD is, I mean, maybe we should sum up the FUD as it's so easy to lose track of your own self-custodied asset. You could spend all this time and money acquiring this thing only to have it vanish, right? Yeah, I would say that this one is also intertwined with the, oh, like Bitcoin gets hacked all the time. You know, the people worry that their private key management that like, oh, holding your own Bitcoin is a very insecure thing.

You know, on the legitimacy scale, this one is quasi legitimate because, yes, Bitcoin is self-custody is actually somewhat of a difficult thing to do properly. You can either, if you don't do it properly, you could be hacked and you could lose your Bitcoin. However, this is somewhat of a rare event, right? Like in the early days, so the example used was with Stefan Thomas, who was the CTO over at Ripple, who's got this monster amount of Bitcoin in this hard drive and he's got two more attempts. to break his, to enter his password before it breaks it. Look, I mean, it's like gold, right?

We keep finding gold hordes all over Europe because some Roman or some European forgot where they put it and or died and there was gold buried in the ground for 2,000 years. Similar concept with Bitcoin. If you forget your password, it's kind of like burying it in the middle of the forest and you can't find it again. Does that make gold any less valuable? No, it actually highlights exactly why gold is valuable. the self-custody nature of gold and Bitcoin is why it's valuable.

No one else can take that away from you if you self-custody it correctly. So I think it's, you know, to flip it on its head, it's actually a shining example, a shining brilliant example of the sovereignty that Bitcoin enables. It's a very harsh one that shows that if you don't self-custody properly, that that could be, you know, that could be a very detrimental thing to your funds. But it surely demonstrates how resilient and how seizureship resistant Bitcoin is. Love this answer.

It's not that people shouldn't have the proper awareness and caution and understanding and appreciation of this possibility. It's that that's not a reason not to do it. It's a reason to work hard at it. So are kind of our first semi-legit, but for different reasons. Exactly. Let's move to one that's more of a classic. This might be competing for the all-time most used fud.

right? Bitcoin is not backed by anything. It has no intrinsic value. No, this one's a classic. An old, old, you know, warm classic from, from I think all the eras all the way back to when probably the cipher, the cryptographer mailing list. Okay. A quote I'd love to use here is from the Federal Reserve. So the power authority essentially of the monetary policy behind the U.S. dollar, they say that Bitcoin, like the dollar, the Swiss franc, and the euro has no intrinsic value. So I think that's the ultimate sort of answer to this question. It comes from the central bank behind the strongest currency in the world who says, yes, Bitcoin doesn't have intrinsic value, but neither do we. This term intrinsic value is often used by people who have no idea. why anything around this in this world has value. They sprinkle this word, they salt a intrinsic value onto things when they, they like to use it as a way to undermine confidence and assets that they don't believe in. For example, they might use the same term for gold or they might use the same term for

something else. They'll just be like, oh, it doesn't have any intrinsic value. And I'm like, okay, so what does intrinsic value mean? And if you dig in any deeper, they typically don't have a good answer for that. So, yeah, this one's a classic one, I think, a statement by. the U.S. Fed is about as definitive as you can get there. I think a lot of people still think that they're dollars backed by gold. That's why this is like a legacy narrative that exists. If you walk on the street and go ask 10 people, hey, is the dollar backed by gold? Probably like 40,

50% would say yes. So that's where I think this whole intrinsic value thing comes in because most people on the street don't actually understand that their dollar is not backed by anything. I think we could have a whole conversation about the nature of network. and belief in how they give value. I want to rip through these, so we're not going to go deep down that rabbit hole. I like your answer. I'll only add a quote from Oscar Wilde.

A cynic is the man who knows the price of everything and the value of nothing. Let's move to another one. Another classic one. Not enough tech innovation. Something new must come along. You know, it's funny that we've got this one in our list. Today, as of 30 minutes ago,

I just published my latest newsletter. and the topic was why does Silicon Valley not understand Bitcoin? And this is part of it, right? Silicon Valley, when we think about building product and tech, so I've been out here for eight years, it's all about building, shipping, and then iterating. You're never perfect on the first try ever. You know, every single product that you see is an iteration of many different types of the products.

I think, you know, look at like early versions of what the Facebook app was when you first used it versus what it is now. You know, that's a prime example. of them going, getting feedback from customers and building new features and functionality. So in Silicon Valley, when people think about Bitcoin, they're like, that's fucking impossible. There's no way it was built perfectly the first time. That's crazy. But what they fail to understand is that with money and the financial layer to the economy,

like the core financial infrastructure for the economy, having something semi-static or very, very rigid and unchanging is great because then we can build on top of that foundation, kind of like how you want to build a skyscraper, skyscraper being the economy on top of a concrete foundation versus a foundation that's being built while the skyscraper is being built. You have to build the foundation first before you build on top of that. So I think in Silicon Valley, totally get why they don't understand it. The idea that something's perfect day one is almost impossible to grok. But Bitcoin was created to create the perfect money. And through that perfect money, Satoshi architected the monetary policy to be 21 million Bitcoin.

That provable digital scarcity enforces the adoption curve of Bitcoin. For example, there's no supply response in response to demand, which creates bubbles, which creates awareness and adoption, the viral loop that creates Bitcoin essentially, the adoption curves. It also is about the security model. So the block reward is comprised of newly minted coins, plus transaction fees and over time. All of these are intertwined together, but what Bitcoin really represents is digital scarcity. Once you invent that once, you don't need to reinvent digital. scarcity over and over again, there's a network effect. There's a shelling point around Bitcoin's

ledger where we've all decided to store our value there. And it's not a reason why we need to go store our value in every new ledger that's created because you're just creating less scarcity and less of a network effect. I think, I think there's another kind of thing that you're hinting at, which I like is this one is the FUD may not be legitimate, but it's certainly understandable, right? It does take a mindset shift. I mean, I was in Silicon Valley and was introduced to at the same time and was introduced to Bitcoin as a payments technology, it was a competitor to square, right? And when you have that sort of mental model of tech disruption and innovation and iteration, one, it is very hard to break out of it and think about

a different context that would reward different things than just pure innovation. And two, it's also, you know, it's just sort of your, uh, applying your, your, your heuristics or your shortcuts, you know, to it. So I think it's totally understandable how this, you know, comes up, but I think that once you start to grok it, you know, it becomes a little bit different. A few more of the classics that have just been rebooted recently. Let's do nefarious activity next. This is another one that probably gives not backed by anything a run for its money as the ultimate overall, you know? I would say this one's probably one of the most popular ones. You know, when I first told my parents about Bitcoin in 2012, I remember it was Thanksgiving dinner.

I had my buddy over because he was an out-of-towner. And he's the one who got me into Bitcoin. And we're sitting there at the dining table. And my parents are just freaking out. My dad's a CPA, you know, very upstanding sort of guy. Perfect. And we're talking about Bitcoin. And all these read in news articles is like Bitcoin's used for drugs and money laundering.

Exactly. Because that's the only articles that were there yet. Yeah. I mean, CoinDisc wasn't even around back then. No, it was wild. I don't, you know, a two-bit idiot built. He had the first Bitcoin blog because I built one of the first aggregate news feeds in the space. and we would scrape our Bitcoin hot thread,

so the subreddit and Bitcoin Talk. And then I remember when Tube Ditya reach out to add his blog to the news feed, we're like, oh, cool, there's bloggers in the space now. So yeah, back in 2012, that was the predominant narrative, especially given Silk Road's popularity. Silk Road kind of put Bitcoin on the map. It demonstrated the immutability of Bitcoin that you could buy anything you'd like with it. This one, you know, very much from that Silk Road,

context was a narrative that persisted for a long time. What's silly with this one is that like no one ever zooms out and reflects upon their own, you know, fiat money. In movies, they still use dollars and euros and pounds to buy drugs. They don't, Bitcoin is very rarely used to buy these things. Bitcoin's on a transparent publicly visible ledger. Of course, there are obfuscation methods through like coin joins and whatnot. But overall, if you were to buy drugs, you want to use fiat cash, which is the most fungible and private money out there because it's not digital. There's no digital record of it. And when we look at the amount of minifference activity, whether it be money laundering or drug dealing, this really facilitated by fiat and big banks, big banks. And I'm trying to make sure that

we don't touch on another topic. Okay. So, okay, yeah. So like, you know, with big banks, they've paid over $350 billion in fines for facilitating money laundering. I mean, that is like, that's like half the market cap of Bitcoin of fines paid by banks. That's not even the total value that they've moved. The value that they've moved for money laundering and drug and drug dealing is enormous. I mean, I think it was, yeah, it's HSBC. Didn't they build windows for their tellers in Mexico to accept cash bundles from Mexican cartels? Like the amount of, it's such a silly thing to do because the existing fiat system is rife with this. And then they go to Bitcoin and they use that as a way to disregard Bitcoin as like, oh, it's an illegal money.

It's all of this is part of the process of humans trying to reconcile new technology and reconcile that with their existing framework. And what they try to do with this is they try to undermine confidence in Bitcoin and kind of disregard Bitcoin by saying like, oh, it's just used by, it's used by people who don't trust us. People don't trust the financial system. It's used by the nefarious folks. But in reality, when we look at chain analysis data, very few percentage of Bitcoin

transactions. are used for dark net markets. Yeah, I think this is one that's interesting because the longer it goes on, the harder this one is to apply, not just for the hypocrisy reasons, which are enormous, right? I mean, we didn't talk at all about the FinCEN files, which dropped last year, which shows just what a tiny, tiny fraction of these sort of basically, you know, basically banks are required to indicate when they think there is a nefarious transaction. They are not required to do anything about it. tiny, tiny fraction of those ever get pursued. So all those fees and fines that you talked about represent a tiny little piece of the iceberg. So there's that whole hypocrisy side. But I think

the broader point that you're correct on is like the longer this goes, the more people see it being used for different things, whether it's global settlement, whether it's, you know, global remittances, whether it's savings technology, whether it's, you know, legitimate trading. Like all these things sort of make it harder. I thought the reason to bring it back up was that we just had Christine Lagarde yesterday from the ECB, like, reboot that that Bitcoin as nefarious activity, which I think maybe we'll come back to in the government section, because I think it's a setup for that. Looking for the best way to stay on top of your investment game, nexo.io has you covered in three easy steps with their high-yield savings account for digital assets. Step one, create an account at nexo.

step two transfer assets to your secure nexo wallet with no minimum or maximum limits on funds deposited step three sit back relax and earn up to 12% compounding interest paid out daily on your crypto and fiat your passive income made simple get started at nexo dot io let's go to another very prominent one that has been rebooted in a way kind of from all the macro guys coming to the space which is a little surprising, which is the classic tether manipulation fud. Oh, this one's a long time one. Tether manipulation fud came out in like, I think, 15 or 16. And this one was a really unique one.

And there was some legitimacy to this, right, where people go, okay, Tether, this stable coin is a part of the exchange ecosystem in terms of like different crypto pairs that are paired with it. It's issued by a company that's closely associated. I think Tether's like a subsidiary. Finnex and there's a little bit lack of transparency. So all of that was understandable. It's very understandable why people would be concerned around TetherFud. Okay, so Tether is just another crypto asset, right? We've got Tether. We've got a bunch of other crypto assets out there. Tether only

represents 3% of Bitcoin's market cap. Sure, it has a lot of trading volume, but so do a lot of these other cryptocurrencies as well. Recently, so let's take it on a spectrum of like, okay, Let's start with the worst case scenario. Tether is completely not backed. It's totally made up somehow. There's no transparency, and these people have just decided to create tethers and print them into thin air. Cool. All right.

So let's say that information comes out. What happens to the price of tether? It plummets. People sell their tethers to buy Bitcoin. Good for Bitcoin. Bitcoin hoddler is not affected. The exchanges, by the way, aren't holding tether. Their customers are.

So it's whichever customers decide to hold that asset. Now, same with Ethereum, light coin, XRP, BitConnect, whatever it may be, I'm not saying those are all the same. Whatever crypto asset you hold, you know, some of those being having more stain power and more legitimate versus like BitConnect, which was a scam, you know, people who were holding BitConnect got wrecked holding BitConnect. But BitConnect didn't wreck exchanges. Same with XRP. XRP was recently had a legal issue with the SEC. see, you know, people holding XRP were affected, but the exchanges were not. So that's where I think like people, I like to use the worst case scenario because then you can back

into the other more intermediate and rational scenarios and see that it's really not a big deal at all. So the worst case scenario, just the holders of Tether are affected. That shouldn't impact the exchange ecosystem that much because the worry was that Tether would cause a cascading series of failures through exchanges. Exchanges are very good about managing the risk. They're not holding Tether. The customers are holding Tether. and they've had other cryptocurrencies blow up before in that the exchanges were not affected.

I think the really important distinction that you're making is there are two, there are two tether fuds that get wrapped up together. One is the way that tether is run. The second, which is totally separate, is the implications for the Bitcoin ecosystem and whether it's being used to manipulate. So Alex Kruger a week ago tweeted, basically you sum this up in a tweet. He said, Tether is not under investigation by the New York A. for pumping Bitcoin, printing fake dollars or security status, but for fraud committed by making

untrue claims about reserves, backing Tether and their ability to honor customer withdrawal requests. It's not that that's not serious. It's not that you shouldn't have big questions if you're interested in Tether. It's that they are separate issues. And that when we conflate them, it becomes silly. Now, there's all sorts of other people for those who do want to dig into Tether specifically. Sam from FTT has been tweeting recently about how he's like, look, guys, I don't know what to tell you when you keep saying that we can't

redeem them from dollars when we do all the time regularly, you know? It's kind of like there's, there's that whole side too. But I think the point that I wanted to make here that you made really well is there's a difference between what's going on with Tether and should you have confidence in that and using it versus what are the potential implications for Bitcoin as a whole. Totally. And to kind of wrap all that up, you know, we've seen other companies like Dan over at Circle OTC has done billions of dollars through the system. FTCS, you know, Sam over there is really really well-respected guy in the space. So yeah, I use the worst-case scenario. And then also when we go back to the, oh, is tether pumping the price of Bitcoin? That was done that that meme persisted due to an

incredibly intellectually dishonest paper put out by a University of Texas researchers where they violated some of the most basic principles of data analysis where they said that correlation is causation. I mean, why the fuck are these people in a university is ridiculous? Like, it's really disgusting, to be honest. Like they literally said correlation is causation, and they had little to no data to show that there's a causational relationship between Tether and Bitcoin. So that's where most of this FUD comes from is this debunked article that came out years ago that has no intellectual backing. All right, quick time check. We have, you have some constraints. So I want to make sure we get through a bunch of these. So just keep that in mind because we still have a, I don't know, God,

nine. There's so many. China controls mining, another classic. Okay, so with Bitcoin mining, we don't necessarily know where Bitcoin miners are located physically. They participate in mining pools. And those mining pools are certain types of entities that are located in certain countries. So we don't know exactly how many miners are in China, first of all. Second of all, the Chinese government does not control all these miners. Some of these miners may or may not be known by the Chinese government. And then, you know, finally, like, even if the Chinese government does crack down on Bitcoin miners, there's so much mining activity across the world that Bitcoin would only be temporarily

affected. Easy. I think another one that flips into that, too, is quantum computing. This one is sort of still emergent fud, let's call it. Yes, fresh new fud. So quantum, this one is crazy on Clubhouse. So I pop on there, talk with like Alex Thorne. He's got a great Bitcoin group over there.

If you guys are interested in Clubhouse, it's kind of like a group chat on the telephone. The quantum question comes up all the time. And here's the TLDR argument that I make. You've got NSA, CIA, and all of the intelligence agencies in the U.S. that need to preserve the privacy and certain data that they store for decades and or generations. They're involved in things that are very, very sensitive. And they lock up files and they lock up data for decades. They go, sometimes this data can only be released when everyone is dead that was known,

that was involved with the issue. That's how sensitive some of this information is. They use AES 256 bit encryption to encrypt all of those files. If we see them start to change their encryption standard, that is the canary in the coal mine for there to be potentially an issue with this encryption standard due to the threat of quantum computing being able to crack it. If we see them, if we see intelligence agencies, if we see security professionals start to switch over encryption algorithms

because they perceive this being a threat. They perceive that being a threat decades from now. So when they do that, the clock starts ticking on 10 to 20 years in which we might have to worry about this. So one, there's a canary in the coal mine, too. We've got plenty of time to fix it, and there are quantum resistant algorithms. All right.

One that I know is a personal favorite of yours. You've probably spent more ink on this one than anyone else that I've seen energy consumption. Yes, Bitcoin will boil the oceans. the Bitcoin is an unethical money because of how much energy it consumes. Well, first and foremost, let's zoom out. How much energy does Bitcoin use relative to the existing financial system? Think about this. You've got the U.S. government has all of these giant buildings all across the United States.

They've got these giant aircraft carriers, tanks, all of that is intertwined with the U.S. dollar. They also have the printing presses, everyone who works at the Federal Reserve, everyone who works at commercial banks, all the commercial bank local branches, all the banks, all the bank servers, the food and energy required to feed the people who work in those companies in all of their homes and all of their cars and all of their vacations and all of their kids. The energy consumption of the existing fiat system is massive, absolutely massive. And when we compare Bitcoin to that, it's tiny. So Bitcoin is very, very efficient. Bitcoin's proof of work function is a very efficient way to create a new financial system

relative to an existing one. And then, you know, the second part of this is that whenever we purchase, electricity in a free market. So let's see I buy electricity to go watch the Kardashians. You buy electricity to go, you know, cook a burger on the stove. You want to go cook a steak on the stove or something. None of this has a moral component to it. I fucking bought the electricity. I can do whatever the hell I want with it. There's no morality police to weigh in as to how I use my energy post acquisition. No one's going to go, hey, Dan, by the way, you've wasted so much energy on Netflix watching the Kardashians versus like Cosmos, which is a much more

subjectively intellectually stimulating thing to watch. So the idea that like Bitcoin is wasting electricity, but Fiat isn't or watching the Kardashians is better than Bitcoin using energy is totally silly. I hope that no one ever comes to my house at Christmas if this is an argument that they want to make when it comes to the value of energy consumption for for society. I guess the other point that I, it's something that I'll just point people to because we don't have necessarily a ton of time to get into it, is there's a growing conversation around the way in which Bitcoin allows energy capture on site or value for energy on site in remote places. In fact, if you guys go read Ross Stevens, the CEO of Stone Ridge, who's become more prompt,

one of the quiet giants in the Bitcoin space, let's say, their subsidiary Nidig, they were the ones that facilitated the mass mutual buy. In his investor letter for the Q4 of last year, it was largely about Bitcoin, and he talked about his four revelations. And one of them was actually about the energy capture. And he started where you just articulated, Dan, which is kind of the free market, and we get to decide where we put value for energy. But the second was there's this huge potential that it could actually reorganize energy capture in a big way. Totally. Bitcoin miners are the lowest value bid on electricity anywhere in the world. There's tons of trapped electricity. So Bitcoin, people also worry that, oh, Bitcoin's going to compete with my microwave. Like, you know, Bitcoiners are

gonna these miners are like a cancer and they're just going to take over all the energy consumption in the world no bitcoin miners are like we want really really cheap electricity so they go to where energy is stranded and or trapped so for example when you create energy and transmit it down a line you lose some of that energy so bitcoin miners look for these trap sources of electricity and they tap into that so bitcoin miners don't impact the energy usage with the rest of the world they simply suck on all of the excess or wasted energy they're they're more of this a really efficient mechanism to take that wasted energy and convert it into something amazing. All right. Let's do one super fast because then the last three I think are more important.

It's just one because Zero Hedge has been crapping it out all over the place. 2% now on 95% of Bitcoin. You're seeing the stat rip all over Twitter. So it's an inequality thing, a concentration thing. Oh yeah. This one's a great one. When people either aren't intelligent enough to do basic Googling and or are intelligent enough, but are intellectually dishonest. That's typically how this is broken down because a quick Google search would tell you that Bitcoin addresses do not represent unique Bitcoin holders. So either they're too lazy to do that research or they know it and they decide to propagate this information anyways. Very annoying regardless. So one, we don't know how many addresses that I control on chain. So we can see all these addresses,

but how many unique owners are there? That's very, very difficult to figure out. Conversely, one address could have multiple owners. For example, like let's say at Cracken or Coinbase, they have a, you know, the exchange holds all these coins on behalf of millions of customers. You know, you can't go and parse through Bitcoin's blockchain and then look at these couple big addresses and say, oh, the 2% owns 95%. It's like, well, no, those are exchange addresses. It's kind of like going, oh, you know, Bank of America, Citibank and these other large U.S. banks own 99% of all the U.S. dollar. Well, yeah, because they're the banks and there are, you know, bank account holders who have representation and ownership over that money. So no one ever

makes that statement, right? It would be fucking ridiculous if you were like, oh, all these banks control all the U.S. dollar. It's like, well, no, the people own their money and they have claim over that money at their bank. So yeah, it's, this one is a pretty old fud. I think like back in 1415, this one really started to emerge. And Nick Carter has got a great threat on this. I think he does the best job of anyone debunking this fud where he walks through like, why would you be concerned about inequality? Well, typically when inequality like this occurs, that additional money gives them more power over the monetary policy and economy. But with Bitcoin that doesn't occur, no matter how much Bitcoin you own, that doesn't give you any more right to change Bitcoin's protocol to exert your power over other people. So it could be we only have 10 minutes left. It could be a longer discussion, but check out Nick Carter's thread on income. inequality in Bitcoin, he just slam dunks it. It's perfect. Unsurprising for Nick. All right, a couple that I think are pretty critical to this moment. Governments are going to ban it. Maybe with a subset of CBDCs will make it irrelevant. I'll start with the central bank digital

currencies one. CBDCs are an abomination. Essentially, what the government would do with the CBDC is that they're going to exert control over every single transaction in the economy where they could automatically a transaction. They could take a transaction from a certain race or creed and automatically route it to someone else based on their race or creed. CBDCs mean that you have a direct relationship with the central bank as a consumer. Right now you go through a commercial bank. I have a bank account of America and I, through them, I have an interface eventually with the Fed as a counterparty. With this, I would essentially have a digital version of the dollar where the counterparty is the Fed. But the Fed controls the led.

which means that they could subjectively weigh on every single transaction. I mean, they could, first of all, they would monitor it. Second, they would weigh in on it. So like I said, automatic taxation. Automatic, like negatively yielding interest rates could be applied because you wouldn't be able to convert your digital dollar into cash to escape a very punishing system. Like, for example, in the EU, if you have a certain amount of money over a certain balance,

the bank requires that you pay them to hold it, which is insane. Totally breaks the fundamental understanding of economics, totally broken system. But with CBDCs, they'd be able to enforce that very effectively. Now, governments are going to ban it. That conversation is a classic one where people, and this is what I worried about for a long time too, until realizing that. Okay, to ban Bitcoin, what you really have to do is you have to kill the idea of Bitcoin in everyone's head. You have to kill the belief and trust in storing value in Bitcoin. You really have to undermine that.

And when we look at governments, they typically do very poorly at banning something altogether. For example, climate change and drug policies across the world have been largely ineffective due to their inability to work together and or, you know, most government entities are grossly incompetent. Yeah, they're not able to execute very basic functions. So their ability to ban Bitcoin would be, they would all have to do it together, which they've never done before in history, even for bigger issues that they care about, like climate change. Second is there's a game theoretic environment where it's advantageous for governments not to work together. So if a government bans Bitcoin and you accept Bitcoin, then you may draw more high net worth individuals to your country who then would bolster your tax base.

Also, central banks will eventually start buying Bitcoin. And that creates a race to build trust in their economy. Bitcoin is a money for enemies, right? It's the enemy of your enemy. And that's where I just don't see central banks and governments across the world, colluding when many of them have incentives not to collude. And then finally, governments can only ban Bitcoin if Bitcoin remains a niche small group. So right now, Bitcoin ownership in the U.S. surveys indicate that's between 5 to 10%. What happens when that's 40 to 50%? If 50% of the population owns Bitcoin banning it would be incredibly unpopular for a political, for a politician.

In that environment, I think that's where Bitcoin is the strongest, where through these cycles, through hallowing, through adoption, which is, hoddling is adoption. Through that, that's how Bitcoin defends itself. And it defends itself because we'll all have skin in the game, which then makes us politically and financially incentivized to ensure its success and survival. In this next cycle, I do think Bitcoin might hit 20 to 40% of the U.S. population in terms of ownership percentage. At that point, I think it's too large to ban. No politician wants to anger 30% of their population base because what's interesting about Bitcoin is it's not right or left.

It's both. It's right. You know, so you can't isolate this community with bipartisan politics and be like, okay, only the right buys Bitcoin. No, a lot of the very liberals do as well. So regardless of political affiliation, it would be detrimental to the success of them getting into whichever elected seat that they want to get into. What do you think about? What do you think about speaking of this cycle, the idea that with all these new institutions coming in, Bitcoin is somehow going to be captured, that it's just a casino game for Wall Street now alongside anything else. Yeah, that's a very new piece of fud, often touted by those competing cryptocurrencies, whether it be privacy coins or other coins that aren't doing as well. It's a pretty weak piece of fud.

I don't I don't know how other people imagine this going, but first of all, A, Bitcoin's permissionless. Anyone can buy it. You can't stop that. Nothing's going to stop that. Two, this was inevitable. As Bitcoin or any other sound money or any other cryptocurrency becomes very popular, it means that institutions were going to buy it.

So this was all anticipated and not a bad thing. And you can't stop it. Wall Street buying Bitcoin doesn't give them any more power over Bitcoin. That's the real concern. here is that like, oh, well, then buying it gives them influence over the protocol. No, it doesn't. It doesn't give them any influence over the protocol. As we saw with like Roger Verre, who was a very big holder of Bitcoin, he wasn't able to influence Bitcoin. He can't change Bitcoin to what he wants it to be. There's no amount of ownership of Bitcoin that will give a new institution claim or

cause to change Bitcoin. Also, I find it very irrational that these institutions are buying Bitcoin because it's permissionless and not centrally controlled, if they were to try to exert that much force onto Bitcoin to insert some people worry about inserting more surveillance, so like making Bitcoin less private or some other function or increasing the number of units, if they did that, they would undermine why Bitcoin is valuable and their ownership of Bitcoin, the value of it would drop.

So I don't really understand that argument that, like, Wall Street is, look, it's a boogeyman, right? Like people were like Bitcoin is anti-Wall Street for so long, that whenever Wall Street started to buy Bitcoin, they can't really grok that new narrative. Like they can't really grok like what's happening. And I'm like, look, guys, we can still be the rebels. And now like, now Wall Street is becoming the rebel with us. Like, it's not like, it's not like they're going to disrupt or change Bitcoin. Bitcoin's not going to change at all. The world is bending to our perspective, not the other way around. And that's an incredible thing.

I think it's a beautiful thing. Last one. We could sum this up in so many different ways. it's all roughly the same thing. Bad at being a currency, Ponzi, it's a bubble, volatility. That's a lot of foot. That's a lot of fun to take on. So most people think of currency as a medium of exchange. And with a currency, it's got three functions, medium of exchange unit of account and store value. First has to enter the store of value stage before it becomes a medium of exchange stage. You have to hold it and trust to store value in it before eventually enough of a network effect occurs in your region and or the region being the internet to where in the price becomes stable and the market penetration is high enough to where I want to eventually go spend it,

which might be a decade from now. So that's where, for example, like the B cash narrative was just, it wasn't, it was, it was just too soon that the store of value stage has to occur first. Most people think about money as their government money. Most people don't transact in gold. Most people don't own gold. So for them, Bitcoin is a foreign concept and it was really hard to wrap their head around so they try to compare it to existing fiat money which only serves one function which is the medium of exchange fiat money is a very poor store value as it continually loses value year over year part of that you know it loses value year over year so it's it's it's not volatile it's it's consistently loses value but for a lot of people you know they have a lot of financial planning that

they have to do so they don't like to think about an asset that's super volatile to store value in because they go oh i'm just living like day to day and i need something that will pay my bill tomorrow So with Bitcoin, Bitcoin was going from $0 per Bitcoin all the way up to where we are now with no market makers with no institutional buy-in, no university buying, no government buy-in. That price discovery process of Bitcoin going from literally a group of people on an email newsletter thread going from that to now were 100 million plus people in the world own Bitcoin that wasn't going to be a nice linear smooth path. That price discovery process is very choppy. As Bitcoin's price increases, people become more aware of it. And that's where we see in those bubbles, the price spikes. Tons of people come in.

People come for the speculation. Some stay for the sound money. And then that creates the floor for the bear market. And then we see it again. So volatility is Bitcoin's calling card. It's actually a beautiful mechanism that pulled in awareness and adoption for Bitcoin. If Bitcoin had stayed at $10, none of us would be here. No one to be listening to this podcast.

No one to be talking about it on Wall Street. Volatility isn't a bad thing. It merely means that it's a new asset that is being discovered and being discovered by many, many more new market participants. If we look at Bitcoin over a long time horizon, it consistently grows in value. Yeah, sure, it's choppy on the short term, but zoom out and have some patience. And then part of that goes into it being a Ponzi, being a bubble. So, JPMorgan had a great quote. Fads typically don't last 12 years.

If you look at the, I think the Dutch East Indies company bubble and the tulip bubble, those didn't last for this long. They were very short, faded out. And, you know, all of this, I think, to kind of wrap up here because we were at time, all of these different pieces of FUD represent the world trying to grok and understand Bitcoin. It's this crazy new concept that we've all become accustomed to because we've been in the space for so long. but most people don't want to challenge the core fundamental nature of their world. They don't want to look at their government and go, I can't trust them. That requires a really big catalyst. And COVID was that catalyst to where we're starting to see this conversation become more and more relevant.

And that's why we're seeing big institutions go, wait, we're not sure if we can trust our governments either. And that's what all this fud represents. It's the gut reaction of an emotional animal, which is a human, coming, you know, getting new information, new technology that's that's showing. to them. People had the same reaction to cars, airplanes, radios, and even the bicycle. So I use the bicycle in a previous newsletter. The Pessimist Archive, one of my favorite Twitter accounts, goes back to like the 1890s and 1900s and like 1910 and cuts out old newspaper clippings of like FUD about other technology. It's hilarious. So Bitcoin is just another new piece of technology that's very new, very innovative. Whenever that much change occurs, people's

minds have trouble grasping it, and that's where FUD gets created. Dan, awesome to hang out, do some Fud busting. I appreciate you jumping on last minute, short notice. Can't wait to have you back. Next conversation has to be about the Bitcoin super cycle. So for everyone listening, watching, get ready for that too. I had a blast. Thanks for having me. And I always like to go fud busting. Obviously, each of these different areas could justify a lot more conversation. Well, at least a couple of them could. And for me, I guess the way that I wanted to close is to make this point. I'm not trying to squash, nor am I interested in trying to squash legitimate critique, debate, and discussion around Bitcoin or crypto, or any of these themes. For me, what becomes frustrating

is when we spend time having stupid conversations, debating silly things, rather than having important conversations, difficult conversations, engaging with real challenges. Anyone who listens to this show with any regularity will know that I do think it's worth discussing the relationship that central banks and governments have to Bitcoin and other crypto assets in the context of the emergent phenomenon of CBTCs. Not in a fud kind of way, not as in a way that delegitimate Bitcoin, but because I believe it is going to be a defining macro context for this asset and for the economy as a whole.

I would much rather spend all the time we're talking about losing your keys or infinite to visibility and instead talk about that sort of rich issue. Hopefully you had fun with this. It was meant to be a little bit lighter and more fun even than the normal breakdown show. Let me know what you think. Let Dan know what you think online at NLW at Dan Held. And until tomorrow, guys, be safe and take care of each other. Peace.