The Breakdown - Why There Is No 'Bitcoin Is Dead' Talk This Cycle

Episode Date: November 7, 2022

This episode is sponsored by Nexo.io, Circle and FTX US.   On this edition of “Long Reads Sunday,” NLW reads: “Bitcoin Is the Song That Does Not End” – Isaiah Douglass  “End of the Monopoly: How Bitcoin Will Usher in a New Era of Governance in Crypto” – Edan Yago - Nexo Pro allows you to trade on the spot and futures markets with a 50% discount on fees. You always get the best possible prices from all the available liquidity sources and can earn interest or borrow funds as you wait for your next trade. Get started today on pro.nexo.io. - Circle, the sole issuer of the trusted and reliable stablecoin USDC, is our sponsor for today’s show. USDC is a fast, cost-effective solution for global payments at internet speeds. Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsors today is “War” by Enoch Yang. Image credit: tommy/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

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 nexus.com, and FTCS, and produced and distributed by CoinDess. What's going on, guys? It is Sunday, November 6th, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to to dive deeper into the conversation. Come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Also a disclosure as always. In addition to them being a sponsor of the show, I also work with FTX. All right, friends, well today for Longread Sunday, we are

acknowledging the anniversary that happened this week on Monday, on Halloween, which was, of course, the 14th anniversary of the Bitcoin white paper. Today I'm going to read a couple pieces about Bitcoin, sort of in the context of this market cycle, and while they're not exactly direct reflections on those 14 years, they do give a good sense of where Bitcoin in the Bitcoin community is right now. The first is by Isaiah Douglas, and it's called Bitcoin is the song that does not end. Bitcoin prices have fallen, but user interest in developer activity remain as strong as ever. Never mind what the naysayers are claiming about Bitcoin in the midst of this down crypto market, the case for sustained Bitcoin interest and continually improving fundamentals remains

as sound as ever. Recently, a prominent personal finance guru, Rameet Zethi, posted the following comment on Twitter. Remute writes, please notice all the Bitcoin promoters who have tucked tail and vanished. In the next 12 months, I predict the same will happen to the passive income real estate bros. It will be glorious. While I agree with his comment on passive income real estate, I feel the pot shot at Bitcoin is based on opinion and not steeped in the truth. Let me provide some context and explain why I believe Bitcoin interest is as strong as ever. Three proofs of Bitcoin interest. As for context, what most people need to recognize is that the monetization of Bitcoin takes decades, not months. In regards to strength of Bitcoin interest, here are a few

pieces of evidence. First, I've noticed no reduction in interest in Bitcoin despite the recent price decline. Conversations are only just picking up steam as people are starting to probe into unanswered questions, questions about what money is and where the funding is for all the government spending. This became obvious to me after I was recently asked to be in a Bitcoin book club with financial advisors looking to learn more about Bitcoin. Bitcoin is the song that does not end. Second, fewer people are selling Bitcoin than you may realize. Stanley Drucken Miller mentioned that when he was first interested in Bitcoin, a conversation with Paul Tudor Jones helped spur his enthusiasm. A stat Paul Tudor Jones shared stuck with Druckin Miller. Quote, do you know that when Bitcoin

went from 17,000 to 3,000, the 86% of the people that owned it at 17,000 never sold it? The comments on the acclaimed financial gurus posts were also littered with comments like, I'm still here and nothing has changed. But we have facts to back up these claims that Bitcoin holding has remained steady. According to GlassNode, 70% of Bitcoin's supply hasn't moved in six months. Bitcoin is the song that does not end. Third, if the Bitcoin promoters were all gone, the hash rate would be dropping. Hash rate refers to the level of computing power given to the network through mining.

Yet despite the price, the Bitcoin hash rate has been making all-time highs. There is a saying in Bitcoin that miners are the most bullish Bitcoin. coiners of all. That's because of the risks and capital outlays as well as the time it takes to plan, execute, and sustain as a miner. If Bitcoin was on its deathbed, the hash rate wouldn't be climbing the way it is. We can revisit this post 12 months from now, and the odds are that Bitcoin will still be creating blocks every 10 minutes, that the hash rate will be higher, that there will still be a 21 million supply cap, and that the adoption of the network will be increasing. Bitcoin is the song that does not end. Developer activity continues.

Not only is investor interest in Bitcoin still high, developer interest in crypto continues to evolve. The builders in the crypto industry are rolling out products and services to make storing, spending, and running a business on Bitcoin easier. The building has been nonstop. One of the most exciting things I've seen is the interest in small business owners in looking at how to accept Bitcoin payments. This has always been challenging for merchants given the challenges of confirmations and block times on the Bitcoin main chain being approximately 10 minutes. Here are a few projects that are working to provide solutions. IBEX has a superb offering on Bitcoin's second layer called the Lightning Network. It allows for a plug-in-play solution enabling merchants

to accept lightning network payments and adding margin by cutting their processing fees by 80%. Oshy, another unique project, is helping small businesses with Bitcoin rewards. It allows those businesses an easy way to start earning Bitcoin and offering Bitcoin rewards to customers and clients. Whether your local plumber, brewery owner, coffee shop, or veterinarian, owners want new business. And Oshy's bet is that new customers desire Bitcoin rewards. Fediment was recently released to help bridge the gap between secure but complex self-custody and simple but regulated third-party custody. The third option that this project proposes could help decentralized custody for the masses. Bitcoin is the song that does not end.

The takeaway. Financial media and legacy gurus miss that Bitcoin's price is one thing, and that the adoption story and technology around the ecosystem is another. What they fail to recognize is that the Bitcoin train has left the station, and over the long term, there's no slowing it down. Bitcoin is the song that does not end. The promoters haven't tucked tail, but are instead holding and building for the millions to come next. Now, for those of you who are regular listeners of the show, I don't think there will be anything particularly surprising, or that doesn't jive with your existing opinion. Although I do particularly like his example of a Bitcoin book club for wealth advisors. No, what I wanted to read it and what I

thought would be interesting to make note of is the fact that there has been so much less of the Bitcoin is dead narrative this time around. Remit's post just doesn't read as true. In previous cycles, you could argue that people really did leave en masse, that capital left, the talent left, that there was less interest. This cycle has seen something very, very different, and that's across every aspect of basically the entire crypto ecosystem. Now certainly certain ecosystems are doing better than others. Bitcoin has a strong core that is probably the most resilient

to any of these fluctuations in market pricing. But it really is a different bear market, and one that shows just how here for the long term both Bitcoin and the community around it really are. Want to keep more profits when trading? Get the best possible prices and trade with 50% lower. fees on Nexo Pro. The new spot and futures trading platform uses aggregated liquidity of over

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letting users know that USDA is safe, transparent, and compliant with regulations. Just go to Circle.com backslash transparency to see why USDC is a a trusted stable coin. The breakdown is sponsored by FTX US. FtX US is the safe, regulated way to buy and sell Bitcoin and other digital assets with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCS, you pay no gas fees. Download the FTX app today and use referral code breakdown to support the show.

Next up, we have a piece by Eden Yago called End of the Monopoly, how Bitcoin will usher in a new era of governance in crypto. On the 14th anniversary of the date, the Bitcoin White Paper was published, Eden Yago reflects on the continuing revolution kick-started by crypto. Across the world, people are losing trust in the institutions that underpin society. Any thinking person can see the institutions of governance, finance, and money are corrupt, incompetent, and yet unavoidable. As a result, the world is in a continued state of crisis, gyrating from one emergency to another, with ever-increasing speed and volatility. Progress and growth

are stagnant. Hate, nihilism, and pessimism are culturally dominant. The failings of our institutions are many, but the root cause is the same, monopoly power. We all know that monopolies are bad for everyone except the company concentrating power, yet. When it comes to the greatest monopoly of all, the state, we somehow forget common sense. Why? Because we assume there is no alternative. Of course, a singular entity must oversee the law and control violence within its borders. Until very recently, this assumption was warranted, but on January 3rd, 2009, Satoshi released Bitcoin and showed us an alternative. He showed it as possible to build a system of rules without an administrator. He showed that this can be applied to the most fundamental

institution of property and law, the institution of money. Bitcoin showed that all users can be super users, and that admins are not necessary at all. What Bitcoin demonstrated in the domain of money, tokens have since demonstrated for other types of digital property. More recently, decentralized finance or defy is calling into question the need for admins and financial services. Web 3, or 5, if you prefer, is likewise an effort to eliminate the need for internet services to be monopolies as well. We are part of the most historically radical revolution in human affairs, and few seem to grasp the full magnitude of what is happening. The endpoint of this revolution is that we will finally rid ourselves at the most dangerous and destructive monopoly of them all,

the monopoly that backstops all other monopolies, the monopoly of the state. Wrong turns. Since most people do not comprehend the final destination, we are taking many wrong turns along the way. I'm in it for the tech, or blockchain-not-Bitcoin, say those who see just another Silicon Valley-style tech disruption. They're distracted and obsessed by features instead of principles, inviting the admins back into power to eke out faster transactions or greater throughput. One of the most brilliant aspects of Bitcoin's design was that it was a tool for liberty, dressed up as a get-rich-quick scheme. Much of crypto has perversely turned this on its head, pumping out get-rich-quick schemes dressed up as tools for economic freedom. Apart from crypto,

quote-unquote bitcoiners also frequently fail to properly identify the historic moment. From a reliance on centralized services to the commonly held hope for institutional adoption, most traders and many hoddlers are more interested in number go up than on authorities brought down. For all the conviction of token Bitcoin maximalism, it too misses the point. Its central tenet is that no other tokens besides Bitcoin should exist. This is monopolist thinking applied to Bitcoin. The result is a myopic focus on money as the root of all evil, a belief that we can fix all problems if we simply fix the money. Money, if it is the root of all evil, is antithetical to Bitcoin. There's been thousands of years of anti-market thinking, stretching back at least as far as Jesus smashed the merchants and

money changers. The corruption of money is a serious problem, but even the most casual reflection on human history makes clear that it is not the only problem or even the most serious. Some of the most cruel and totalitarian regimes existed on a gold standard. Sound money didn't prevent the slave trade, the prescriptions of August, or the innumerable massacres that occurred in between. Human history is the story of gang, violence, and mob bosses. Fixing money is a heroic start to fixing the corruption of monopoly power, but shouldn't be confused for a universal miracle cure. Satoshi's legions. In a boastful moment, the Roman general Pompeius Magnus declared, I have only to stamp my foot and legions will spring up all over Italy. This is how humanity's mob bosses

have for centuries run the world, through their ability to call forth physical power loyal to them. Then along came Satoshi, the boss of no one, who clicked his mouse and legions of miners sprang up all over the world, loyal to encode rules and function, not men. Satoshi showed us that a decentralized consensus mechanism can call forth and coordinate power in the real world. Take this to its logical conclusion, and it becomes clear that we can and will replace mob bosses and central admins with leaderless consensus rules. We might not rid ourselves completely of violence, power, and policing, but we no longer need a state monopoly in charge to prevent to slide into chaos. We, the legions loyal

to Satoshi's ideas, will construct new institutions of governance that are based on voluntary participation and free market incentives. These institutions, blockchains, decentralized autonomous organizations, and P-to-P networks will be the opposite of monopolies. They will compete for users and members. We will be masters of code rather than the other way around. We will construct a world where, just like BTC, all property will be cryptographically proven, enforced, and immutable. To do so, we will build systems that incentivize and coordinate decentralized police. The world will replace the state with Nakamoto consensus. Not because it is the right thing to do, but because it is the lucrative thing to do. Half the world's gross domestic product is

controlled by governments. Once we realize we can do to government what we are doing to money, the game theory will play out on its own. The next Bitcoin-sized asymmetric bet after sound money and sound finance is sound governance. Get in early. Like Prometheus, Satoshi gave fire and left. its flame lights the way for the next phase of human civilization. We will cast aside the central powers that monopolize sovereignty. With them gone, none will be our masters but ourselves. All right, guys, back to NLW. I think if you find the last part of that a little bit perhaps rah-rah rally,

Eden can be forgiven, given that this was the 14th anniversary of the Bitcoin White Paper. I think that even if you are not sure that the state needs to be completely dismantled and the world to be reborn in a new light, I think it's not hard to appreciate how having an alternative organizing mechanism for the institutions that control much of our lives is a hugely valuable and profound change. If this is a type of topic that interests you, I would definitely recommend reading Baladji Srinivasans, the network state, which talks about many of these same things in much greater detail.

For me, it seems obvious that an internet era, in which geography is, if not supplanted, challenged by global digital connectivity, is necessarily going to be. get the rise of different types of organizing functions that operate across communities. I think Eden's right to point out that many of the experiments that people are involved in now have these much larger implications. Now, I would also argue that for quote-unquote crypto or Web3 companies that don't particularly care about those experiments, there's no reason they can't avail themselves of the same technology to go out and perform other experiments that matter more to them. I very much agree with the assessment that no token or blockchain should have an a-priority

monopoly just because it got there first. However, that won't change the fact that many people will decide over the course of the coming years that what they want to spend their time on, their limited resources, are these bigger challenges, these bigger picture power shifts, as we like to say around here. And for the people who do want to spend their time on that, I'm very excited to see where these experiments land. For now, I want to say thanks again to the authors of these two great pieces, to my sponsors, nexo.io, circle and FTX. And of course, to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.