The Canadian Investor - Episode 24 - Let’s talk Bitcoin with John Vallis from Bitcoin Rapid-Fire

Episode Date: April 20, 2020

In this episode of the Canadian Investor we interview our fellow Canadian John Vallis. John Vallis is the host of the Bitcoin Rapid-Fire Podcast and brings a wealth of knowledge when it comes to Bitcoin and monetary history. John talks about how and why he became interested in Bitcoin and answers our Bitcoin related questions.We hope you enjoy this interview with John!--- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

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Am I pronouncing that correctly, John? Perfect. Okay, perfect. Yeah, my French accent, you know, it's not easy sometimes. So John also has a podcast. It's called Bitcoin Rapid Fire. I've started listening to it probably about a month ago, a month or so ago. So it's really interesting if you guys are looking to learn more about Bitcoin. So we're going to focus obviously on cryptocurrency and Bitcoin today. So, John, I'll lead you to the floor. So tell us a bit about yourself, the podcast and a bit of a primer for our listeners who are not

super who might not be familiar with Bitcoin or crypto. Sure, sure. Well, first, thanks very much for the invite. It's always weird to be on the other side of these interviews because I do so many where I'm hosting things. But I appreciate the invite. Very brief background on me, and I'll leave out the stuff that's not relevant to maybe your audience. But I started my career in finance. I was working in wealth management in Shanghai, and I did that for two or three years. Really didn't like the system, how things worked, just the very sales-like nature of the whole industry.

So I ended up getting out of that and went in another direction for a while. During that time, I had started to learn, as with I'm sure the two of you, I've always been a very curious person, and money and monetary history was something that I always found fascinating. And so I had a lot of questions about the current monetary paradigm that we find ourselves in today. And I was critical of it. And as a result, I was a gold bug since the age of 20, let's say. I was a gold bug since you know the age of 20 let's say and thought you know if not if we even If we weren't going to return to a gold standard to fix some of the

Stuff that was going on and in the kind of the global monetary You know seen that at least it would be a hedge against you know irresponsibility and other issues that might emerge and And then it's somehow I can't remember the exact, you know, kind of origin story. I came across Bitcoin. And like so many, I'm not having the kind of technical background to appreciate the innovation that it represented. I, you know, I kind of overlooked it. And so, you know, more time went by and I kept hearing about it. And every time I heard about it, of course, I got a little bit more exposure, learned a little bit more about it. And just, you know, as is so often the case, you kind of reach a threshold with,

you know, the exposure and what you're learning about it. And then there's just kind of this eureka moment where it clicks for you and you realize what it represents, or at least you start to realize what it represents. And then you kind of, that's where your journey down the proverbial rabbit hole begins. And that was the case for me. And so I really started getting interested in it in 2013, 2014, and started, you know, learning more about it. And, you know, I've always enjoyed recording a good conversation with people, you know, learning more about it. And, you know, I've always enjoyed recording a good conversation with people, you know, regardless of what the subject matter is, pretty much, you know, just, you know, a good chat about something interesting. And so whenever I came across people that were in the Bitcoin industry, I, you know, I wanted to sit down with them. And

the first instance of that was I was living in Shanghai and through a mutual friend, I met Bobby Lee, who at the time was the CEO and co-founder of the longest running and one of the largest Bitcoin exchanges in the world. And, you know, funnily enough, actually, his office building was a stone's throw from my apartment building in Shanghai. So we got connected and I, you know, I went over and we recorded a chat and that was in 2015. And that was my first, you know, formal Bitcoin interview. And anyways, you know, I wasn't at the, you know, other things were going on in my life. Time goes by. And then I left Shanghai in 2019, traveled for a while, wound up in Thailand. And I'd never been really that active

on Twitter. But I, you know, I'd always been kind of a lurker, used it as kind of my own curated news, you know, follow things that I find interesting. And somehow, I guess, just through following enough people that were talking about Bitcoin, I kind of realized that Bitcoin Twitter, I kind of realized that Bitcoin Twitter, as it's known, was was a thing. And it's then that I realized that this conversation that I was always seeking to have with people in the industry was happening on a much broader scale and was incredibly rich, you know, intellectually rich and so many different people from so many different places coming at it from so many different angles. And that's when I decided, okay, you know, I've, I've got to, I've got to try to foster more of these conversations. And that was the impetus for the podcast. And so I just, I started that in August of last year. And I've been speaking with the top, you know, experts, entrepreneurs, technologists,

you know, experts, entrepreneurs, technologists, thinkers in the space ever since. And it's been incredibly satisfying because, you know, it's basically what I've been doing when the opportunity arose for the last five years. And now I'm actually intentionally directing it. And it's great. So that's the story. And so I started the podcast. It's called the Bitcoin Rapid Fire Podcast. And, you know, there's no particular point of it. I mean, it really is just me scratching my own itch and wanting to have these conversations and connect with these people. That's wonderful. And the engagement that I get as a result of that, you know, on Twitter and also, you know, just like emails and stuff has just been awesome. And it just it just allows me to engage and absorb so much more from the community and what's going on in this space than I, you know, than I than I could previously. than I, you know, than I could previously. And so I'm super stoked about that. As for Bitcoin, that's a big question. I think the best way to do it is just to allow your guys' questions to kind of direct which way you want to take it. But, you know, Bitcoin is, you know, the quick summary is it's an open source, you know,

decentralized censorship resistant method of communicating value over a communications channel. And, you know, that doesn't maybe sound like that groundbreaking to to people. But once you understand some of the aspects of it and some of the a lot of the components of it were pre-existing. There was only a couple of innovations, but one of the big, you know, one part of that innovative process was bringing together a lot of innovations that hadn't been brought together before to allow value to be communicated digitally over a communications channel. And to disallow, you know, things like copying and double spending things in the digital realm, which previously had not been possible. And so this is done through a number of different ways, but I don't want to get too far into the weeds too soon. So, you know, I guess for your listeners that, you know, aren't aware at all of Bitcoin, it is money on the internet. And the questions around, well, how can money exist on the internet?

Those are the ones that perhaps we'll get into as we discuss. But yeah, that's basically it. So I'll let you guys tell me where you want to take it from there. Okay, awesome. It's certainly – yeah, I'm here, guys. I'm here. Don't worry. It's certainly interesting to hear your story.

And as someone who does not invest in cryptocurrency or any commodities at all, it is interesting. And I do have an open mind. And I think a lot of these questions are very important right now around the monetary policy is, you know, the hottest topic in financial news right now, of course, with this pandemic. And it's very interesting to see someone, you know, intelligent like yourself have kind of a lot of the answers to why they're invested in crypto. I think it's gotten a bad name over the last year or two because there has been a lot of sketchy things happening in crypto but the innovation behind it is very interesting so i just want to go into my first question sure uh about you know monetary policy that you touched on right now the fed and

governments have shown all around the world that they will stop at nothing in their stimulus playbook to keep the economy going. And in a crypto-based society, I'm very curious and theorizing in my mind how this pandemic plays out without this kind of intervention and stimulus. How this pandemic plays out without this kind of intervention and stimulus. So I'm just wondering from your stance, in a purely crypto society, if that was potentially possible, how do you see this pandemic going down? Because you're seeing all the airline packages that are coming out today. A lot of these businesses greatly impact, you know, our regular life. So I'm just curious as to how that would affect monetary policy. Well, I mean, I think it's showing a lot of, you know, people like us have probably been following this story and been interested in this stuff for a long time. But I think this is bringing

a lot of these considerations to the mainstream, you know, to top of mind and the mainstream lexicon for some of these terms like fiat money, like money printer, like, you know, you know, all the all these terms that are now popping up. And I think people well, I think it's going to cause more people to just simply question where does that money come from? If the Fed is going to put $6 trillion in or whatever the ultimate number becomes, and you're actually seeing them like Kashkari, who's the head of the Minneapolis Fed, and then you've got Powell talking about the fact that they have unlimited liquidity. talking about the fact that they have unlimited liquidity, right? So they're able to inject unlimited amounts of funds into the market. When people hear that, I think at least some kind of a bell will go off in some people's heads and say, how is that possible? Where is that coming from? Why do I have to work all day every day and put food on the table and a roof over my head and to earn my money? And another group of people in

the same economy, in the same society, are able to print unlimited amounts for free. And so I think, you know, I think that question is going to arise in more and more people's heads, especially in the context of everyone having a ton of time on their hands right now being stuck at home. Now, I know, like, you know, part of that is wishful thinking on my part. I know most people are just going to watch Netflix and have Zoom calls and that kind of stuff. But some people will spend the time and they'll those questions will emerge. As far as, you know, how it plays out, obviously, in the world today, the global financial and economic system is incredibly integrated. And so, you know, no country is really an island. And in particular,

the U.S. dollar is so integrated into global financial markets that, you know, a lot of things can take time to play out. One would think if you print six trillion dollars worth of money and just shove it into the economy, you'd see inflation. But you may not because there's such a high demand for dollars all over the world to cover, you know, leveraged positions and to pay down debt that's denominated in U.S. dollars. So you may see a deflationary period because of that and because demand has dried up. So, you know, there's less demand for goods and services. So you may see, you know, look at what oil is doing. So you may see deflation. And

then there's many other factors to consider, of course. But ultimately, you know, my, I guess, thesis or perspective and that of many people in the Bitcoin space is that, and certainly this is consistent if you study monetary history at all, that there's no free lunch. Ultimately, you cannot, and money that's created at zero cost is not sustainable in the long term. And so I think we'll look back on this as, you know, the grand fiat experiment. And I think the ultimate conclusion of it will be pretty disastrous. And I think we're seeing really desperate attempts right now, whereby, you know, when there's economic turmoil, first of all, the fragility of the

economic system, I mean, you know, to be put in this position. But I think we'll see that the abuses, I mean, most people don't know, but the, you know, the Fed was pretty much injecting liquidity since last September, because there was a lot of imbalances in the system and they were trying to kind of cover those over. And so the virus, yes, I mean, when you dry up all demand, that's going to create a tremendous amount of hurt across the entire economy because all sorts of businesses, whether they're leveraged up or not, basically have zero revenue. So, of course, that's going to cause a lot of pain and hurt. But these problems have been festering for a very long time, and we're coming to a head as early as last September. But I think we're seeing desperate attempts, whether it's injecting liquidity, expanding the balance sheet at the Fed, all the different, they're changing their

mandate in terms of what they're changing their mandate in terms of what they're able to purchase in these quantitative easing rounds and asset purchases. And so this is not how economies are supposed to work. They're not supposed to be completely managed by central banks. And further to that, you mentioned the airlines. Look, I know people are sensitive to saying, like, let gigantic companies fail, whether because they employ a lot of people or whether because they're essential services or whether because they're, you know, national defense or whatever. But the fact is, is that the moral hazard that was created actually in 2008 has been baked into the business models of a lot of the biggest companies in the world, and particularly the United States now. So those airlines, over the last 10 years, they've been borrowing money at extremely cheap rates to buy back shares, to bolster their stock

performance so that upper management could get big bonuses and stockholders could do well, right? Everyone knew that it wasn't sustainable, but the option was there to do it. And they knew that push come to shove, if things really went awry, which they are now doing, that they would very likely, probability is very high, that they would get a bailout. So when you corrupt the economic calculation like that in a supposedly free market economy, economic calculation like that in a supposedly free market economy, then you pervert, you know, so many, you pervert the very essence of what a free market economy is supposed to be. If you mismanage your company, you're supposed to fail. Those who are managing it properly,

that your competitors are able to come in, take up your assets on the cheap, repurpose them, and become the dominant player or, you know, an enhancer position in the market. That's not being allowed to happen right now. And I don't think it can persist forever. You know, I thought in 2008 that things were, that the level of intervention was too high and we might see a lot of turmoil as a result. But it seems like the can was successfully kicked down the road another 10, 11 years. And the degree to which the central banks all around the world would go to continue to prop things up exceeded my expectations. And now we're

seeing like a tremendous amount in such a short period of time. And so I guess to answer your question, I think ultimately, aside from this deflationary period that we may find ourselves in right now, there's going to be, you know, obviously tremendous levels of debt. And so when the government, you know, takes on debt, that should just be construed and understood by people as being future taxes. That's what it is for the people of a country. And, you. And when they create money out of thin air, they're baking into the system inflation. Now, there's so many different variables, financial and economic, that may suppress that for a given period of time. But you just can't simply create money out of thin air and not expect inflation to occur. And the last point I'll make on that is, you know, the CPI has been a the consumer price index from measuring inflation is a pretty, it's pretty sketchy way to look at inflation because it kind of takes a basket of goods where inflation is less represented and leaves out the ones in which it is much more represented, just as an example, let's say in college tuition. And so I think, yeah, I think ultimately we'll see inflation. It's not clear exactly when that will happen, but higher taxes as a result of all the debt and inflation to try to monetize that debt

at some point. And in that environment, I believe that hard assets and in my opinion, ultimately at the end of that, a hard money is what we're going to need to return to, to course correct. And that's part of the reason why I'm so interested in Bitcoin. Those are very good points. And I get it. I do. I do get that. What you said on the last piece there is hard money or real assets. is interested in a hedge against fiat currency because of all of those reasons you just listed why don't i just go buy some real gold or or why don't i get guy i go buy some silver and throw it under my bed why crypto well i mean i make the distinction between crypto and bitcoin i don't uh i don't see a case for any any others I think, so the answer to your question is, I think Bitcoin is the next evolution in money.

So, you know, again, going back to that interest in monetary history, human civilization, as long as we have records, we've always recognized the need for money. Money is the fundamental mechanism for organizing human economic interaction, right? It solves, you know, in extremely primitive societies, we might have been okay with barter, right? But, you know, of course, in barter, you have the problem of the double coincidence of wants. You have to want what I have, I have to

want what you have. And if that's not the case, then we can't make a trade and we're both worse off. Or the other way that that was managed way back when was with debt. So you have apples and I want apples, but I have nothing that you want in return. So I say, OK, you give me the five apples and at some point in the future, I'll give you something that you want of equivalent value. Now, as you can imagine, that would get messy very quickly. So money has always been something that we needed to facilitate that voluntary interaction between people. And the specialization that that allowed for is a big part of the reason why we continue, you know, on average over a long period of time to continue to improve and advance as a

civilization um and so you know we've used things like shells and beads and salt and um stones and of course the precious metals as money and money is always uh just assessed based on its attributes how well do its attributes facilitate the function that we require of it? So in this case, it's, well, in all cases, it's what substance fulfills our need the most. And our need is facilitating exchange between people. And so, you know, there's several attributes of money. One is scarcity, one is durability, one is recognizability, another is divisibility. And this is how, this is the kind of scale on which monies in the past have been judged. And the reason why we landed on the

precious metals, and in particular gold, was because extremely durable, of course, it's scarce, is extremely durable, of course. It's scarce. It's very hard to get. It requires a lot of work and energy to access. It's relatively recognizable, although that's also simultaneously a drawback of gold. And I'll just, on a little tangent on that, and bring me back if I lose my spot. But we select money based on how well it fulfills the needs we have for it, but we also have to put up with the gold and, you know, make sure that if you give me a coin, a gold coin, it actually is a gold coin and not some, you know, some lookalike. So what's required to work around that deficiency, that drawback in its inherent attributes? Well, one is use a centralized, a trusted third party. So, you know, to oversimplify things, let's say, you know, way back when, okay, people recognize that gold has all these properties. It's pretty

useful as a medium of exchange and that kind of thing. But we, you know, we can't really trust that you are giving me gold or I'm giving you gold. So let's, you know, let's trust it with a third party. And also as it becomes monetized and it becomes extremely valuable, I don't really want to hold my gold in my house because you or a gang of people could just come rob me. So I'm going to give it to the strongest guy in the village. He and his gang are pretty strong. They can repel any sort of attack. And so we get the centralization of gold as a result. Now, I'm sure there's other variables, but this could very well be the case for why we have kind of the emergent structure of society at that time. And so let's say, you know, this is how kind of a kingship emerges.

And so what do we have back in the day? We have the king's face stamped on gold coins, you know, obviously I'm fast forwarding, but we have that. And part of the reason for that is so that I can be reasonably assured that when you give me a gold coin stamped with the king's face, that the likelihood is greater that it's real gold and it's not some fake stuff. not some fake stuff. So anyways, that's all just to say that money is judged on its inherent attributes and how well it facilitates voluntary exchange and savings, of course. So exchange with each other or exchange across time with ourselves, that would be the store of value function. But we have to deal with its drawbacks as well. And to answer your question directly, backs as well. And to answer your question directly, in the context of today, up until Bitcoin, like I said, I was a gold bug because I thought it was hard money. And hard money just means there's a high cost to its production, and that serves as an effective limit on its supply so that it can't be willy-nilly inflated away by parties that would seek to do so.

The supply can't be increased easily. Gold's inflation rate is about 2%, which just means the new stock that comes on every year to the existing supply is about 2%, which is an effective growth in the supply, which is inflation. And so, you know, that was that was the best money around for a long time. And the Bitcoin innovation, I believe, again, is is an upgrade in that. And so I think there's fewer drawbacks to Bitcoin as a form of money, especially in today's society. I mean, gold is great just as an inflation hedge. society. I mean, gold is great just as an inflation hedge. And as a side note, I think because gold is still so entrenched in, you know, around the world, I think in the environment that

we're going into, it'll probably still perform pretty well. But, you know, I'm not interested in pretty well. I'm interested in what's going to be the best thing for the future. And the fact is that if I can have something akin to gold in that it's, you know, equally hard and expensive and costly to obtain and produce, but it can be sent over a communications channel in extremely, and it's extremely divisible and I can use it to send money around the world instantaneously. Well, that's certainly an upgrade over having a gold coin in a safety deposit box in the bank, which is effectively unusable except for that hedge against inflation. So if I want to convert it to a paper currency at some point in the future, perhaps I've preserved some purchasing power. So, you know, in that context, I'm not that interested in the precious metals, again, though I think because they're so – here's an example.

The three of us probably use Twitter or the internet for the vast majority of our news or the information we want to get access to, right? It can make sense. We can get access to the information we want that's relevant to us at the click of a button. Why the hell would you not? the information we want that's relevant to us at the click of a button. Why the hell would you not? But there's still a lot of people in the world, probably, you know, over the age of 60, that read newspapers every day for their information. They don't choose what news they read. It's in a weird medium where they have to go and pay a buck for it and fold it out in front of their faces. And it's, you know, they have to wait for it to be delivered or what are the cases? So even though a far superior

product exists, i.e. the internet and the apps that exist on it for obtaining news and information, newspapers still exist as well because some people are resistant to change and they're not judging things, um, purely based on, um, you know, their attributes. They're judging things based on things that they're comfortable with and things that they're used to and things that are known. So to bring it back to Bitcoin and gold, I think gold will persist for that reason. But I think Bitcoin is a far superior form of money, especially in the modern world. And that's why myself and many other people are so passionately engaging in it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated

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Well, thanks a lot, John. That was a really good, really thorough answer. And I wanted to ask you, so obviously in 2017, 2018, there was a whole crypto craze. Bitcoin went over, I think 20K US, if I remember correctly, around its peak. And then there was a big correction afterwards, but it was cryptos as a whole. So I know there's other prominent one, XRP, Ethereum. One of my buddies has been like fully in crypto since I think 2010. He's the one who actually got me interested in that. As a side note, I got burnt with one of the exchanges early on. So I only recently started adding to Bitcoin and a little bit of Ethereum. And it is mine. It actually goes back to what you just said is in his mind for him,

Bitcoin is kind of the original cryptocurrency. And his opinion is that there are better ones out there. So what are your thoughts on that? Is Bitcoin still the one like uncorruptible cryptocurrency that really has a limit supply and really an incentive? Like it's very difficult for people to try and corrupt it for various different reasons. So what are your thoughts on that? Do you see value in other cryptocurrencies? Do you think there might be some better ones out there with

more speed in terms of transaction speed and things like that? I just wanted a bit more details on that for your thoughts on it. Yeah's uh i'm only interested in bitcoin um there are deaf i mean there's thousands of cryptocurrencies at this this point because bitcoin kind of let the cat out of the bag you know and so it's it's open source software you can look at it and say oh okay i'll do something similar i'll tweak this i'll tweak that And there are other cryptocurrencies that, you know, that talk about fancy, flashy features that, you know, presume to make it better than Bitcoin. But I think they miss a lot of things. And there's so much to consider here. I mean, one, I think, you know, dominant money and that's just one aspect of Bitcoin. But let's let's focus on that for a second is a a relatively zero-sum game, like a winner-take-most

sort of scenario. And I just think in all of these other cryptos where they're doing X for Y, and it's all very, very interesting and exciting, but ultimately they're also attempting to be a token of value, a monetary instrument, whether they settle out in that after they do whatever they do. And I can't see and I haven't heard a compelling argument why as money you would prefer to hold, you know, fill in the blank cryptocurrency than Bitcoin. Also, I think, you know, I don't think Bitcoin's launch can be replicated. So I think the launches of all these other cryptocurrencies have been highly centralized and big initial payouts to the founders. And also just people jumped on them early to try to get rich quick. Bitcoin's distribution was nobody knew what the hell this was when it was first launched. And so, you know, went out to a cryptography mailing list and they passed the idea back and forth. And some people were for it and some people, you know, some people were critical, I mean, and some people thought it was amazing new innovation. And and so it kind of distributed

itself organically. And I don't think that can be replicated. Then you layer on top of that the network effects that Bitcoin has established. I mean, it's and these network effects are very difficult to to overcome. But Bitcoin has the bulk of the, you know, companies and and apps built on top of its protocol. companies and and apps built on top of its protocol it obviously has the bulk of the the monetary component of all this with you know more than 10 times the i believe or almost 10 times the market cap of of the next uh largest cryptocurrency um i think it's got you know the soundest most immutable unchanging monetary principles um i think it's the most distributed in terms of people who hold it and use it. I think it has the most more robust. And, you know, I know the

Ethereum people will get mad at me for this, but I think it has the best approach, let's say, to development. And I think so people see it and they don't know what to think because they think, well, you know, Bitcoin's the MySpace and XYZ could be the Facebook. You know, the first is rarely the best. But I think it's more similar to how the Internet developed. You know, there was different protocols on which, you know, were proposed for the Internet. But, you know, TCP IP and TCP IP were were the ones used to basically, you know, form the basis of the Internet for transferring information on the Internet. And everything else was built on top of that, you know, HTTP, et cetera. And so I think what's important with Bitcoin is that the base layer is ironclad. It's as secure as possible. And, you know, it definitely is that right now. And then when we want to and we going to be lots of parties that seek to slow or stop that, not

least of which will be, you know, the major governments around the world and the major central banking interests. And, you know, the approach to Bitcoin's development is making sure that that base layer, it's not important right now that you can't economically buy a coffee, let's say, with doing a transaction on the Bitcoin base layer. Although right now you probably can, because there's not a great deal of activity on it. But let's say in December of 2017, when it was like $5, $10, $20 to make a transaction. Is that a big problem for the world today? In a world where you have Venmo and PayPal and WeChat and Alipay and all this kind of stuff, buying a coffee with

your phone is not a big pain point. Disrupting the monopoly that central banks have on the issuance of currency and the disruptions that that creates in economies all over the world, that's a big problem. And so Bitcoin is addressing the big problem first in making sure that the base layer protocol is ironclad and secure. And then as things develop, as the economic develop and as the economic mass of Bitcoin grows and it's distributed more and more and more people's hands and it's further integrated into the existing financial system. And then, you know, those battles are won along the way. Then we'll look more to not will, but then, you know, the the community and it's not you know, it's not a definable community. But then the approach to Bitcoin will be solving other problems that

are lower down the ladder. And, you know, just to that point, another protocol that's been built on top of Bitcoin already, and it's still relatively new, but there's lots of development activity on it, is the Lightning Network. And so this does actually or you know it's attempting to solve the problem of you know uh microtransactions let's say so extremely fast and extremely cheap transactions so again it's we're you know 11 years into bitcoin and this is just emerging because it's not a huge pain point in the world. Most of us don't have a problem paying for coffee, but a lot of people have a problem with having their savings destroyed from inflation in their national currency or from the undue power and influence

granted to central banks and governments as a result of being able to create currency for free. And so that's the bigger pain point. And that's why Bitcoin has focused on that. And so I think I don't see Bitcoin being unseated. I actually see Bitcoin unseating or taking market cap, continuing the trend of taking market cap away from the other existing cryptocurrencies that really had a big bubble in 2017 and continuing on its very conservative development can add more functionality into that network or on protocol networks that are layered on top of the Bitcoin base layer once its security and utility on the base layer has been established as ironclad. I think to to want more from it at this stage is being greedy because the I think it's got the right goal in its sights. And I think it's doing extremely well. Listeners of The Canadian Investor, have you been to getstockmarket.com yet?

If you haven't, what are you doing? Head over there and put in your email and I will send you a list of all of the companies that I'm looking at in the US and in Canada that meet my screens. So if you go to getstockmarket.com, it'll redirect you to my website, Stratosphere Investing, and all the info on many, many metrics that you could possibly want are all there. Let's get back to the show here with John. Guy's an absolute weapon with Bitcoin. He knows the ins and outs. I do not own any positions in Bitcoin or cryptocurrency for that matter. But potentially an interesting thing if you're looking to hedge currency. I just want to pipe in here and say,

this is a speculative investment and should be a smaller piece of your portfolio, depending on your risk tolerance. But let's get back to the show. Guys, go to getstockmarket.com. You will get exactly the things that I am looking at in terms of metrics, all the ins and outs of different ratios of companies that I'm looking at. And this begins my investment research. I start with the numbers and then I do real analysis of the qualitative things that Simon and I talk about all the time. So head over there now and back to the show john man you're a wizard jesus you got all these uh and uh we should mention that you're a canadian lad as well so uh this is the canadian investor

podcast so and i'm a new fee on top of that and you're a new fee on top of all that. No, it is. It's refreshing to hear, you know, all these points that you're talking about, because, you know, as someone who's basically not interested in commodities and Bitcoin for, you know, as my entire time as an investor, all of the cases for it. You are definitely swaying my mind. And I'm thinking during this conversation, okay, yeah, that makes a lot of sense. I'm not there yet, but you're doing a good job. So right now, one Bitcoin trades for just a little over $9,500 Canadian dollars right now. And not to keep going back to gold because we've talked

about why you would prefer a bitcoin over owning gold but i i look at them very very similar similarly in terms of the case for them and and for me it's yes there is problems with fiat currency i know that a lot of people know that it is what it is. So when I look at it, $9,500 Canadian dollars, and gold is always compared to what is the price in terms of fiat currency. That denominator is always Canadian dollars or US dollars or whatever it may be. And my question to you is gold bugs or people who are in Bitcoin, they're always tracking that chart. And for me, I look at it and go, wait, why are you tracking it against the one thing that I think that it is seeking to solve or seeking to correct? And when I look at that chart and see how Bitcoin has performed to a fiat

currency, I look at that and I go, well, that doesn't tell me anything. That doesn't mean anything because you're looking at its performance compared to what it seeks to address. So when people are looking to make a buck, improve their life with investing in gold, investing in cryptocurrency or Bitcoin in this case, how do you address its performance beyond just the denominator being fiat currency? Because to me, that doesn't make any sense to my brain. If I'm looking to make money in fiat currency, then why would I be investing in something like Bitcoin or like gold that doesn't produce any sort of value? It just kind of sits there and looks pretty. So I'm curious to hear your take on that when the

denominator is the thing that it seeks to solve. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable

and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new

co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. I think if I understand, tell me if I'm misunderstanding this, but I mean, I think part of that answer is just that, you know, what else, how else are we going to judge it? I mean, the financial world is valued in the various national currencies and the major currencies and, you know, U.S. dollar being chief among them. and the major currencies and, you know, US dollar being chief among them. And so what better really a representation of how well an asset that seeks to be a hedge against the failure of said currency be than reflecting that in the currency itself. So, you know, you could say that Bitcoin has gone from less than a penny in US dollars to, you know,6,700 today. Or you could say the US dollar

has lost that much value against Bitcoin. And obviously, it's not either of those exclusively. Part of the reason investing is speculating, right? You're deploying your capital today and thinking that it doesn't even really matter if the thing that you're investing in produces value or not. Your bet is that in some future, a point in the future, somebody is going to pay you more for the asset that you hold. It's up to them to make that value determination. All you're, you're speculating that an asset that you acquire today will be worth more in the future. And so, you know, as far as why the denominator, I mean, what else could we use? Now, I'll say something that, you know, only the hardcore Bitcoiners will get. But kind of speaking to

your point is a lot of people in this space, because of, you know, for the reason you mentioned, prefer to just quote the price of Bitcoin as one Bitcoin, which, you know, is more playful than anything else, because it's not very helpful in determining, you know, how this is growing or the economic mass that that Bitcoin represents. But, you know, like all inflation hedges, like whether it's commodities or gold, wheat, sugar, Bitcoin, whatever, I mean, that is the measuring stick. And actually, that is part of the problem, you know, in having a measuring stick that is so inconsistent, right? If we used, you know, let's take the metric system as an example. If the length of a meter was always changing, then we'd have fucked up buildings everywhere and we'd have weird slants to things and we'd have,

it would be very disruptive in architecture and engineering and everything else we use the metric system for. Well, money is meant to be the primary unit of measure for economic calculation. And so when we have a money that's whose measuring stick constantly changes, i.e. its value constantly changes because of the increase in supply, then it makes it it becomes a very disruptive force, unbeknownst to most people, of course. But it becomes a very disruptive force in the process of economic calculation, which is why historically we've been on some kind of a hard money standard or the hardest that was available, whether they be seashells or gold, because at least we knew that as a unit of economic measure, the range of change, the kind of bands of change that we would expect from something like

gold would be relatively minor. Yeah, from one year to the next, you know, the supply might go from the supply increase might be 1% or 3%. But with fiat currency, we don't know, you know, we have, you know, central banks might publish the differences in the money supply figures. But, you know, to have the money supply change so rapidly and, you know, in many ways, in very kind of secretive ways, that just causes a lot of disruption with economic calculation. So I think, you know, Bitcoin, you could presume that it's just a reflection in, you know, weakness or degradation in whatever fiat currency is being used to price it in. Okay, so just one more quick question because I'm an absolute noob. So if I have one Bitcoin that's worth $9,500 Canadian dollars,

do they plan on having some splitting mechanism in the future if it was to be used as a i'm gonna go buy a starbucks because obviously we're talking about fractional amounts of bitcoin to be able to to do that purchase and if that's something that's super elementary uh sorry but i'm just trying to wrap my head around that yeah oh man i know that answer it, man. No, no, it's all good. You're all, you go ahead. Well, I was going to, yes, it's elementary, but I'm happy to answer it. And the answer is that every Bitcoin is composed of 100 million what's called Satoshis.

And Satoshi Nakamoto is the pseudonymous creator of Bitcoin. And these, so every Bitcoin is composed of 100 million Satoshis. This is the smallest unit of a Bitcoin. And these so every Bitcoin is composed of 100 million Satoshis. This is the smallest unit of a Bitcoin. And so, you know, you take the price of Bitcoin divided by 100 million and that's how small a Satoshi is. So it's, you know, it's less than pennies. And and yeah, so that's how you you never have you never have any problem spending a fraction of a Bitcoin if that's what your question is because it can be divisible up to, I think, eight decimal points. So it's not currently a problem. Now, if we see $100 million Bitcoin in the future, then for sub-dollar payments, we might have to come up with something else. But as far as I know, that's already in the works.

come up with something else but i as far as i know that's already you know in the works and can you currently buy them in the measure of satoshi's or are you just in fractions of bitcoin and you so you currently can buy it in that denomination yep you can buy a dollar worth of bitcoin and either in in the app that you get it in it'll be represented as like 0.000 whatever however many zeros one or you know some apps are beginning to actually uh if you choose it's a you know it's just in the settings you can choose this to represent it in satoshi's which are also shorthand called sats s-a-t-s and so you know if you if you had uh half of half of a bitcoin you your app might just say it as 50 million sets. Okay, thanks for answering the rookie of all rookie questions.

That makes a lot of sense to me, though. So that goes back to the function of money of being divisible, right? So it's extremely divisible. And again, that's another reason why Bitcoin, in my opinion, and if we just compare it to something like gold, I mean, this is the reason for fiat currency in the first place, because gold was not very divisible. And so this is, you know, one of my comebacks when I have these talks with gold bugs is gold is why we're here. Gold is not going to fix any of these problems. You know, going back to a gold standard, even if there was political will to do that, we'll be as

short-lived as the last time we did it. Because gold is not easily divisible, what happened was you store your gold at a centralized, trusted party that would protect it for you, and they would issue paper notes to represent the gold that you own in whatever denominations you acquired. And so this is where paper money originally came from, is they were receipts for precious metal metals held in banks or storage vaults or warehouses or whatever. And so fiat currency is the was meant to, you know, again, going back to what I said right at the beginning was one of the workarounds for the the one of the inherent drawbacks of using gold as money. So all monies have inherent drawbacks, and they also have qualities that we desire. And we need to strike a balance, obviously,

to make them work for the purposes that we have for them. And part of striking the balance for gold was, OK, it's a hard money. It's hard to get. It's inflation resistant. You know, it's it ticks the boxes on a sorry, it scores highly on a lot of the the criteria that we have for money. But, damn, you know, it's hard to divide it up and spend it if I want to buy a loaf of bread or, you know, whatever. And so fiat currency was the workaround to make it more usable. And as we're seeing now, it's a workaround that was not resistant to abuse. And in 1971, that became abundantly clear when we came off a gold standard and went to a completely fiat currency system. And again, it's an example of a fatal flaw in gold.

So, of course, up until 2009, we didn't have a choice. It was still the best form of money we had. But now we do. And, you know, again, hence my excitement around Bitcoin. I think that it's good you touched on that piece of gold because, like I said, up until this very moment, I've thought of them as the exact same investment in terms of they are a hedge against fiat currency. And gold is not the solution. And that's why, like you said, the current system has gone on for so long and gold has not been a solution because it's not divisible. It's not convenient. Nothing about it is electronic as we move to a completely cashless society. So I do, I get it more than gold and it makes sense. So from a pure currency perspective, I get it. Now, my investing style is investing in quality companies that create value for customers and for society, purely creating value, whatever form that may be. If I'm an investor and I'm looking to invest in a currency, in this case, Bitcoin,

other than just sit there and hope that the price of it goes up, what is your goal? Because as an investor, you have to be goals-oriented. You have to position your whole portfolio around what your goal is. I don't know what your portfolio consists of, if you're 100% wholly in Bitcoin or whatever it may be. It doesn't really matter. But what does the end game look for you? What does the target like? And I know that's a really broad question, but I'm just wondering what you seek long term other than its value increases or you move to that as a society. Yeah, great question. And I'll touch on the last point you made about gold before I move on. But one of the things that's always going to

be detrimental to gold and one of the things that people are so excited that, you know, in Bitcoin, because it changes that dynamic, is that no matter how hard, you know, you'll get a lot of the gold bugs and the, you know, the hard money folks really interested in gold. But the thing is, is it's always going to be permissioned, right? So yes, the US might return to a gold standard, but they can come off it whenever they want and your use of it will require third parties. Now, whether that third party is a central bank that issues a fiat currency

so that you can use your gold that's stored in a vault, or whether it's a company that allows you to have a debit card that basically shifts around allocated gold when you want to spend money and that kind of thing. It's always going to be permissioned. And in an environment that we're seeing today where there's a tremendous amount of censorship of all kinds, that's not satisfactory for a lot of people. And one of the prime value props of Bitcoin is that it's permissionless. Now, I'm not saying that people can't, that large organizations, powerful in that it doesn't require a third party to use it. And you don't require the cooperation of anyone other than the person, in that it's a primary mechanism for organizing human economic interaction between voluntarily exchanging individuals, then that's a pretty powerful concept. To answer your question about what's my goal, actually, I'll answer the first part of your question where you said, you know, I'm interested in investing in companies. Actually, I'll answer the first part of your question where you said, you know, I'm interested in investing in companies. And to that, I would say, you know, I get it. But one, I don't think so. You said I'm interested in investing in companies that create value. And my genuine belief is that nothing in civilization and human culture is more valuable than the money in use. And we have, you know, it's very easy to prove that because money is the other side of every single transaction. And again, if I can take a little bit of a tangent, is that money is always just the most saleable good

in a free market, right? Obviously, we have legal tender laws, which, you know, the government requires us to use the money that they produce. But in, you know, if in free emerging free markets, what we we've always required money, we've even subconsciously recognize a need for money in order to facilitate cooperation and exchange. And in any given market, the thing which is the most saleable becomes money. A great example is a prison environment, right? We all know that in a prison environment, cigarettes become money. Why? Because they're the most in-demand product in that market. There might be soap, there might be bedsheets, there might be shivs or whatever the hell

else, but cigarettes are the most in demand so they become the currency if the three of us were in a market and you know braden had apples simon had oranges i had peaches and i we all liked peaches and then for the other ones only two out of three liked them then peaches would become the currency so currency. So the most saleable good in a free market becomes money. And so I think nothing is more valuable than the money that freely emerges in a free market because of the function that it serves, the most important function, which is facilitating the trade of all other goods. That's why it's so important. And that's the value that it has. And so that's why I'm, you know, from an investment perspective, I do think I'm investing in something that is creating the most value far from, you know, not creating any at all. And then a lesser point to that is if in, let's say, 95, early 90s,

you could have invested in, I don't know, AltaVista, a search site that's no longer with us but was around for a while back then. Or even let's make it current, Google, right? That would have been an amazing investment. But what if you could have actually invested in a piece of the internet itself and derived value from all the companies and services and apps that use the internet to provide their services, right? So what if basically you were on the toll road that led to all the different things that people wanted to go to? Would that be a safer, more conservative, and ultimately better investment than trying to pick and choose which companies on top of that system were going to be successful? I think yes, but of course that's for everybody to decide. And then to answer your question directly is what's the end goal? I mean, for me, the end goal is twofold. On a macro level, it's simply engaging in the ongoing process that's been

happening since as far back as we know of adopting new forms of money, sorry, adopting upgraded forms of money when they emerge because of what they represent and because of what they are able to create in terms of the society, culture, and civilization in which we live. In my view, you upgrade the money. And again, I think this is easily provable if we go back through the history of money, but I won't touch on it here. But just to succinctly say, you upgrade the money, you upgrade the civilization. the more frictionless it flows, rather, the more exchange you get, the more wealth that's created, the more products and services and goods and innovation you will see. And so from, you know, my macro level desire is to see that. I want us to advance. I want to have the most prosperous, peaceful, enjoyable existence for myself and, you know, everybody else on this planet that we can have. And I believe adopting the best form of money is the most reliable way to get there. As a secondary

goal, or kind of on the way to that goal, is I just think it's an incredible injustice that we are currently in an environment where very small groups of people all over the world have the power to create wealth out of thin air for free at no cost. And the power that they derive from the ability to do that creates a tremendous power imbalance in the world, which in some areas, jurisdictions and instances, has manifested in really horrible results, and in others, less horrible or more insidious or less obvious. But I just think the power imbalance that that creates, creates a lot of undesirable manifestations in the world around us, which, you know, some are obvious and some take a little bit more inquiry to be aware of. And I want that to end. And so,

you know, having a money that no central authority controls, that no entity, no matter how powerful, can, you know, manipulate, I'm, you know, I'm for that, because I think it will net and manifest a far, far, for lack of a, you know, more descriptive term, a far better world for everybody, a fairer world, a world where there's more equal opportunity for people. And so those two things are the primary reasons. And then I guess the third is just, you know, I'm intellectually extremely curious about it. And every kind of nook and cranny I go down that rabbit hole that I mentioned earlier is so rich with so much to learn and so many great people to learn from. And so it's not only do I have this kind of goal,

as you mentioned, kind of at the end of the tunnel, but the journey itself is just so damn rewarding and enjoyable that I can't think of anything I'd rather be doing. So, John, I have, I guess, to wrap things up, two quick questions for you well maybe not so quick but uh the first one would be uh the first one would be is um what do you think what will it take for the world to no longer use the i guess you can make a case that the us dollar is probably the the standard currently in terms of fiat currency yeah and um so what would it take for that to massively change around the world where they would change to a Bitcoin standard? And obviously there's there's a book called The Bitcoin Standard, which I strongly recommend that people read or listen to the audio book like I did in the past month. So what would it take to do that? And my second question for those who want to learn more about Bitcoin or cryptocurrency, do you have some books or material for people to learn more or just some tips, advice to provide our listeners?

is what would it take? Look, the whole point of this is that nobody's going to decide it, right? It's going to be an economic reality that people realize. And this has been the trend since Bitcoin's inception. You know, I'm not the guy that was always meant to proselytize for Bitcoin. I'm just a normal person who came across this thing and it just made sense and it made more and more sense the deeper i got into it and so that's part of bitcoin's genius in what it represents and the aligned incentive structure um that it permits and and allows for so and how resistant it is to people messing with that so i have i don't think for a second although it's certainly possible but i i don't think it's probable that any major government or central bank around the world is going to manipulate the supply of the money, if they don't have the power to restrict the flows of the money, if they don't have the ability to skim off the top

of being the ones to create and initiate the money into that system, then it's not valuable to them. Bitcoin, that's the whole point. It can't be controlled. So I don't think any centralized body or authority that seeks to control money will be interested in it. And again, it will probably resist it pretty aggressively. But that's one of the genius aspects of Bitcoin's design is that it's incredibly resistant to attack, both from a technological perspective and as well as the way that its incentive structure was devised. And so people realize very quickly that you're better off instead of attacking Bitcoin, which can be very costly, just, you know, acquiescing to how the incentive structure is because you stand to benefit economically from doing that. And so I don't know how it's going to play out. I'm sure there's going to be a ton of unexpected twists and turns in this story. unexpected twists and turns in this story. You know, who knows? It's often said in Bitcoin,

like first suddenly and then all at once, whether we're talking about someone's kind of journey down the rabbit hole or whether we're talking about adoption or whether we're talking about price action or whatever. You know, it could be the case that we are kind of in the ninth inning of We are kind of in the ninth inning of global fiat currency. And whether that inning lasts another one year, five years, 10 years, 20 years, again, I don't know. And then after that time, we're really going to need something else. And more and more people will recognize how detrimental that system was. And Bitcoin may be there to say, you know, how about this? Or maybe it will be done consciously out of economic self-interest and greed. Or maybe it will be done, you know, through some other means.

I don't know. I don't have an answer to that question. But I don't think, I think it's unlikely that governments around the world will willingly adopt it because of the degree of power and control they have to give up to do so. And then in terms of resources for people, there's a ton. There's so many. As you mentioned, the Bitcoin standard is a great primer for people to kind of get concise but sufficient context on monetary history and how this story has played out several times in the past when a new money emerges on the scene and displaces the previous money that was being used. I think it's great for that. It doesn't get stuck in the weeds at all with Bitcoin's technology, but it does give you enough to kind of appreciate it,

even as a, you know, quote unquote layman. What other books? I mean, I hate these questions because I've spoken to all these people and know a lot of them very well. And I just I blank on their stuff. But one one resource is Bitcoin dash resources dot com.'s aggregated a lot of the best stuff and put it in a way that's prioritized. So he says, like, these are the books you should read. These are the articles, et cetera. And then he's just listed pretty much all the ones that are worth checking out uh there so you know um in order to uh not go on a long extended rant about all the different books and stuff out there i would say check out that website um and then another website that i'm i'm less familiar with because you know i don't um i just haven't been there in a while but lop.net lnet, L-O-P-P.net is another one that basically aggregates resources as well.

But between the two of those, there's so much excellent, excellent content out there on this subject these days. You know, even so much more than there was, you know, during the big run up in 2017. during the big run-up in 2017 that if you're interested in this stuff and you're curious, you're spoiled for choice at this point because there's so much great content out there by so many just super impressive people. Man, thank you, John, for coming on the show.

Appreciate you giving us all this knowledge, all this insight. And we can find you on the Bitcoin Rapid Fire podcast, correct? Yep. Or if you have specific questions, you can hit me up on Twitter. I'm at John K. Vallis, J-O-H-N-K-V-A-L-L-I-S. And you can hit me up there. Cool. So if you are interested in Bitcoin or learning more, potentially a piece of your portfolio going towards a lot of the problems that we just addressed with fiat currency, this seems to be, in my mind, a very, very good choice.

So, John, thanks for coming on the show. Appreciate you taking the time. Everyone, stay safe out there. We'll be back to normal soon. At least you got the podcast. Keep it going. Two episodes a week from Simon and I. John, thanks so much for coming on the show, and we will see you guys next week. My pleasure, guys. Thanks for having me. Keep up the great work.

The Canadian investor is not to be taken as investment advice. Braden or Simon may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions. Thanks for listening to this episode of The Canadian Investor. To get a list of the top Canadian dividend stocks right now and other valuable investing resources, go to GetStockMarket.com.