The Wolf Of All Streets - Bitcoin Is Not Ready To Be Legal Tender, Use It For Savings | Robert Breedlove

Episode Date: August 27, 2023

Robert Breedlove, the host of the What Is Money Show, and one of the greatest minds in crypto, discusses the essence of Bitcoin. He explains why he thinks it is too early to use it as a legal tender, and use it as store of value instead, and why Bitcoin is not a simple concept. Robert Breedlove: https://whatismoneypodcast.com/ ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/  ►► OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $10,000! 👉 https://www.okx.com/join/SCOTTMELKER ►►NORD VPN GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #trading Timestamps: 0:00 Intro 1:10 What is BlackRock for Bitcoin? 4:05 Collaborative custody 8:10 Argentina, central banks & Bitcoin 13:40 Bitcoin savings account 21:24 US exports inflation 25:44 Bitcoin vs. crypto 31:00 Bitcoin is not a simple concept 33:10 Advantages of open networks 37:22 Building on Bitcoin 45:00 Energy & ESG 49:30 Demonizing Bitcoin The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

ESG is an absolute scam, first of all. There's this push towards global communism, or cultural Marxism at least, that's being wrapped in things like ESG and wokeism. You can't do anything to Bitcoin at the protocol level, but you can attack it at the social layer. A drug dealer used an iPhone to make a phone call. iPhone should be banned.

LOL-batarians. They weren't robbing the bank, they were literally just trying to withdraw with machine guns. Many Bitcoin maximalists seem to believe that Bitcoin fixes almost everything and that everything else is an attack on Bitcoin. But there are Bitcoiners who are very pragmatic, take a very realistic approach, and who are true libertarians and understand that Bitcoin is just a tool that will be used in both positive and negative manners.

I talked about all this and so much more with one of the greatest philosophers we have in the space, Robert Breedlove. I had Preston Pysh on a couple of weeks ago and I asked him a question. I never usually start with the same question, but I want to know your opinion, which was, should we as Bitcoin enthusiasts, as believers in the asset, be cheering BlackRock and Wall Street coming into the asset class, or should that be a massive red flag? Yeah, I think it's a good question. I guess when we really consider what Bitcoin ultimately means, that it's this major change in fundamental incentives for human beings, that it almost doesn't matter in the long run what institutions become involved.

We celebrate nation states becoming involved, right? And there's not really many worse organizations than nation states in terms of the destruction of human lives and property, etc. BlackRock, I think a lot of the wealth concentration that occurs through fiat currency, through the Cantillion effect, the printing of money, the widening of the gap between rich and poor, a lot of that wealth gets concentrated into these funds like BlackRock. So the fact that they're coming in, I mean, is of no surprise at all. Bitcoin is just a tool. So it's serving the interest of the individual being victimized in a hyperinflation, right? If they're just trying to get their wealth out of the country and survive, it's serving their interests just as much as it's serving the billionaire's interest who is trying to circumvent wealth redistribution schemes on his money. I think short run, it creates more certain risks, especially if they're going to be custodying the asset and people might not be as inclined to take possession of their own keys. When you have a reputable, quote unquote, reputable custodian operating in the space, you see this with things like Fidelity and some of these other big names. But in the longer run, I'm not concerned. If anything,

in the longer run, I would be more optimistic because you're actually widening the channels through which capital can flow into this asset. So I guess I would kind of leave it at that. It's kind of short run, uncertain, more risk, but long run, positive. And so should we be celebrating? I don't know if we should be celebrating. I guess we should be cautiously optimistic at all times because Bitcoin is not inevitable. It's not a foregone conclusion. We have to work to make it work. And institutions that come into the space that have vested interest against it certainly introduce a lot of new

considerations for Bitcoin's ultimate success. But in general, I think it will accelerate Bitcoinization in the long run in retrospect. I agree. I think it's one of those situations where millions of people will come in and a certain percentage of those, whether it be low or not, will eventually find self-custody and do the right thing and handle their assets in the right way. And you mentioned, you kind of put it in quotes, a trusted institution. And we talked about trusted custody. We've recently had trusted institutions that are regulated. And I'm not even talking about the Voyagers and FTXs of the world, but prime trust, right? I mean, we're talking about one of the biggest custodians in the crypto space. They were custodying for a lot of Bitcoin only trusted

companies who very much understand how to secure their keys and the importance of it. Is there anything left? Is there a trusted institution left in this space or is it really just coming down to self-custody and then trusting yourself? Well, you got to go back to Nick Szabo's work, right? Trusted third parties are security holes. There's no such thing as a trusted third party. I mean, it's counterparty risk always. And so I trust self-interest. I don't trust any individual or institution per se. And frankly, the self-interest of these institutions is to earn revenue and generate profits. Other than preserving their own reputation for custody, there's not actually a major motivator for them to perform good services. And the other beautiful thing about Bitcoin is that we don't have to go into this

binary self-custody or third-party custody model. We have this gradient in between called collaborative custody. And I think that's really what wins out. That's how I custody my Bitcoin. These are often called multi-signature or multi-key schemes. You can do a two of three or three of five or really X of Y where you have a majority quorum necessary to unlock the keys and spend. I think you'll see that eventually permeate at the institutional level. You won't be just trusting Goldman or just trusting Fidelity or just trusting BlackRock. You might be trusting two of three of them, or maybe you're trusting one of them and yourself and your accountant or whoever your circle of trust is. So the custody options that are available with an asset like Bitcoin fundamentally reshape all of our institutional realities that we've built up around custody

on a gold standard. So we thought we needed to have this centralized custodian because gold's physical, it can only be in one place at one time. So you build this giant security apparatus around it, which was originally a warehousing function, later became banks, and now we call them central banks today. Preston Pyshkoff Nathanael Malkovich You don't need that in a Bitcoin world. You just don't need it. So I think you'll see a lot more collaborative custody because it gives the actual asset owner maximal control or sovereignty over the asset, but they also have redundancy and they've minimized counterparty risk and that they

can hold a key or two of three or three of five and they can delegate who holds the other shards of that key. And so just the option space that that opens up seems tremendously valuable. It's very unique to Bitcoin. And I can't imagine that not being... It has to be used because it's a means of reducing risk, right? And the more risk you can take out of the ownership of this asset, the more valuable it is ultimately. So I think collaborative custody will become the standard over time. Preston Pyshko I agree. I also use multi-sig. I've talked about it many times. I use CASA three of five and I think it's great, but not everybody's going to go down that rabbit hole, but the environment could send everybody eventually down that rabbit

hole kind of to your point. Nick Huber The pain does eventually, I think. People get burned in these third-party custody models as they have been, right? The first 14 years of history, how many, I don't know, are we in trillions of dollars yet? I know hundreds of billions of dollars burned by people trusting centralized custodians. At some point, the market will wise up to the reality of collaborative custody. Yeah. And I think we've seen that anecdotally. When you were just talking about collaborative custody, you mentioned the lack of necessity for central banks in a Bitcoin world. You and I recently together, we interviewed

Robert F. Kennedy and you asked him that. Would you abolish the Fed effectively right when you get into office or would that be on the docket? And now we see a libertarian candidate in Argentina leading. I make no judgments as to whether he's a good candidate or not. I know nothing about Argentinian politics, but he wants to dollarize Argentina and abolish the central bank. You think that's realistic? Is it doable? What does that look like? How does that actually happen, especially in the United States? Because even Argentina, they're saying we're going to abolish the central bank, but just so they can trust ours, right? And dollar us. Right. Which is sort of a necessary stopgap solution, actually, because you can't just Bitcoinize. I mean, it's not practical for Argentina to just go to a

Bitcoin standard, let's say, because it is very price volatile at this at this point in its history right it's a sub one trillion dollar asset competing to be a 200 plus trillion dollar asset so it's a highly priced volatile so for people that are trying to buy bread and eggs and meat every day well bitcoin is not super practical yet as that medium of exchange so i think he's actually being practical and talking about dollarizing the economy. It is fascinating to me though, that five, six years ago in Bitcoin circles, we were talking about things like this, abolishing the Federal Reserve. Libertarians have talked about this for a long time. We've basically always been laughed at,

right? Everyone's like, that'll never happen. There's no way government will relinquish its monopoly on money. You know, they actually call libertarians LOL-bitarians, right? Like everything they say is just this idealistic, fantastic joke that will never happen. And then you fast forward, you know, again again we're talking about this in bitcoin um five six years ago and then you fast forward those five or six years and all of a sudden you have real candidates running for office in countries like argentina i think he's the leading candidate for prime minister now now and when you when you hear this guy talk, I mean, he is spewing Rothbard, right?

His taxation is theft. The central bank is organized crime. It's used, the debasement of currency is used to fleece the middle class. The first thing I'm going to do is abolish the central bank. Obviously, he was saying to dollarize, but that's kind of a necessary step in that direction. And you could go into Santiago fund, his name's escaping me at the moment, his dollar milkshake theory, right? Yeah, Brent Johnson. That's sort of what you would expect to happen as fiat currencies fail. You would expect

them to fail into the stronger fiat currency. And then ultimately the last few fiat currencies standing fail and they would fail into the strongest money, which is gold or Bitcoin, basically. So I think the candidate's name in Argentina is Javier, I believe is his first name. Miele, I might be mispronouncing that. I think it's Miele. And so, yeah, so Javier, he's, I mean, obviously conceptually and theoretically looking at the world properly, in my estimation, central bank is organized crime. It is currency counterfeiting. Taxation is theft, all of these things. But then he's also practically laying out a path to go from A to B. Bitcoin is the best money, but I don't think you could just install it as the medium of exchange in your country today. That would create a lot

of issues because of the price volatility at this point. So it seems like he's got a good conceptual grasp of the world and he's got at least a practical path forward to try and dollarize Argentina. And that, you know, I would expect to see a lot of economic improvement in that country if he is to execute on that plan. Because once you give people stable rules and the ability to store the fruits of their labor across time, and it's amazing how quickly we economically rebound. We've seen this in many different places in the world time and time again. There was a time when Hong Kong was nothing, was just a backwater, right? And then it had very stable rules, good governance, low and predictable taxation, and it boomed into one of the biggest economic hubs in the world. That's really the story behind the United States too, right? We had this

large unregulated landmass. We had low and predictable taxation, no regulation, especially the further west you went went and we are the greatest economic success story in human history basically so I I'm excited to see countries like this adopt to these principles or let's say adopt these principles and set an example for other countries right they're going to become exemplary for other countries that are going to continue failing economically as they try to over-regulate, print more money, et cetera. And you'll see these other countries like El Salvador, Argentina, et cetera, that are moving more libertarian, succeeding wildly economically. So I think

that's going to be the force that starts to tilt the game board in favor of libertarian principles and Bitcoin more broadly. Robert Leonard It's been over two years since we saw El Salvador adopt Bitcoin as legal tender. I think that there was an expectation or hope, certainly, maybe overblown that we would see other countries follow in their footsteps. But it's interesting, a point I don't hear people talk about too often. The currency of El Salvador is the dollar, right? So to your point of it being a stopgap on the way, Argentina cannot go straight to Bitcoin. They even mentioned Bitcoin and the IMF, who was giving them a loan, said no loan if you even mention Bitcoin again, right?

A predatory loan from the IMF, obviously controlled by the United States. Any country that is not dollarized that tries to adopt Bitcoin in any meaningful way is at risk of having their currency attacked, right? So El Salvador is actually the perfect place to do it. And I think that Argentina, if they go on to a dollar standard is one major step towards the potential of a Bitcoin standard. Yes. Yeah, I agree. And the legal tender move in El Salvador, I have mixed views on that because from one perspective, legal tender is kind of coercive, right? It's like you must use this form of money in the settlement of all debts, and private i don't think you need legal tinder to back bitcoin per se um i do appreciate the spirit of what is being done there right they're trying to give people an alternative trying to onboard people into bitcoin um but i think the more practical step would be to encourage people to have Bitcoin savings accounts. That's really what

Bitcoin is right now. We've talked about this and the history of gold, how it evolved. It was initially a collectible, and then people started to use it as a store of value. And then as it stores enough value, people start to use it as a medium of exchange. And then finally, once enough people use it as a medium of exchange, people start to denominate prices in it so it goes to this evolutionary path from you know collectible store value medium of exchange unit of account bitcoin's doing the same thing and we're early in the the store of value phase i think um you know it was a joke early on you would go and go to these online faucets and you can just click it and get 50 Bitcoin, right? It's basically a collectible at that point. Digital beanie baby. Imagine. And no

matter the sort of anecdotally, no matter how early you were in Bitcoin, there's always someone you're jealous of who was earlier. Yes, exactly. And that is something to be very, very jealous of if it was literally free and you could open the faucet. But I very seriously doubt that the people who did that still have their Bitcoin or any meaningful percentage, I should say. Exactly. Yeah. So 50 Bitcoin is like, what, a million bucks today? And you literally just went to a website and clicked the button and held it for, I don't know, eight, nine years. And you had a million bucks, pretty, pretty motivating. But again, to your point at that time, people had no idea, right? Like what is this magic internet money? This is a joke. It's a toy basically. It's a collectible. So we went through that phase somewhere in the 2014 to 2017 timeframe, it became a store value, I think, after we saw it go through probably the second price cycle, right?

Where it ran up to $1,000, it crashed to like $200, and then it came back to $20,000, crashed to $3,000. It's like, oh, wow, this thing appears to have staying power, right? It's not a bubble goes up and goes down, and that's it. The bubble's over, right? This is the bubble that never pops. It just keeps reflating and deflating. And so we're still kind of in that phase. People don't understand Bitcoin. It's kind of new, scary technology. People still look at it. Maybe a lot of people still look at it as a joke, I think, especially normies and NPCs. But smart money is using it as a store value

asset, right? People are actually accumulating it over time, dollar cost averaging, buying dips. It's just an accumulation game. So at some point, the market cap of Bitcoin is going to be so significant that there's going to be greater incentives to use it as a medium of exchange. And then once that becomes significant enough, you're gonna have people pricing things more more broadly in bitcoin so all that said i just don't think it's very practical as a country to try and get your people to use bitcoin as a medium of exchange today because of this this purchasing power volatility that volatility that goes along with the store of value evolutionary phase that we're in. But it would be useful if you gave... I think in El Salvador, they have the Chivo wallet. I think they call it. They gave everybody, I think it was $30 in Bitcoin.

And it was around $30,000 at the time. So probably not that different now. Yeah. So get people in whatever digital wallet, I guess, is useful for your own. I guess they're using it for transactions too, I assume. I've never used the Chiva wallet. But don't force people to denominate their transactions in Bitcoin per se. Give them access to dollars or whatever the fiat currency is. Because that's the advantage of fiat right now is that it's purchasing power stable relative to other things. So if you are living paycheck to paycheck or you are, yeah, basically let's leave it at that, then you want bread to cost the same thing week over week. Even though long term, obviously fiat currency is not purchasing power stable. It loses purchasing power over the long term. In the short run, it is the most purchasing power stable asset. And so people that are living paycheck to paycheck need that. of their household in something like Bitcoin. So you get that long-term purchasing power. In the case of Bitcoin and gold, it's actually going up as you're debasing fiat currency. So as fiat currency is long-term purchasing power declining, things like hard assets like gold and Bitcoin would go up over time. Luke Gromen, So I think people need this kind of barbell strategy. We have short-term

purchasing power stable fiat, but you have long-term purchasing power, accretive gold or Bitcoin. And that seems to be what would be more practical to give people access to versus trying to force them to use Bitcoin as a medium of exchange before it's gotten to that point. Trey Lockerbie I think that's a really realistic review of what happened there and probably in hindsight, the way that it should have been done. Also a bit of a catch-22, as you pointed out, because when you're in the store value phase, you have to have value to store and poor people do not. So selling a savings asset to people who, to your point, are living

paycheck to paycheck, meal to meal, impossible pitch. Yeah. I would say, I would slightly modify it though and say that when you have access to something like Bitcoin, it does give you more of an incentive to save, right? To curb your consumption a little bit, get your business a little more profitable. Once you start to understand there's a place to store the fruits of your labor that's going to at least stay solid or hopefully appreciate over like four year periods. I think that's a big incentive, right? To cut costs in the business, cut costs in the household, just get profitable. And that's what you want, right? And people start thinking like entrepreneurs in that situation. You're thinking longer term, you're thinking about always being in the black, and you're thinking about creating a savings for yourself and your future. And so again,

and without Bitcoin, you're stuck in the fiat trap. I know this cash is going to get evaporated, so let me just spend all of it. And volatility is certainly a problem, but in Argentina right now, ice cream doubled in price in the last 30 days. My friend actually sends me, he lives in Argentina, he 30 days. My friend actually sends me, he lives in Argentina, he's an American, but he sends me each month pictures of this stack of cash that he has to give his landlord for rent. And it literally doubles in size every single month. Luckily, he can survive that as an American expat living in Argentina. But yeah, it works, as you said, until it doesn't. So the dollar may be the answer short term, but for most of these people, their own currency

is probably more volatile and less stable than Bitcoin. Yeah. Yeah, it's really bad. We benefit a lot from this inside the US that we're exporting a lot of our inflation, right? There's 330 million Americans and there's four and a half billion users of dollars worldwide I don't know how those balances are actually split but that's you know that's over 90 percent of dollar users that are not inside the U.S so I again I don't know that we're exporting 90 percent of our inflation, but it's a large percentage. And again, that accretes to

kind of the purchasing power stability domestically, right? So we can print a lot of money in the US and we don't bear as much of the consequences internationally. I mean, these currencies are getting absolutely wrecked. You mentioned Argentina, Turkey, Venezuela, right? Like these countries, um, Lebanon, like recently had currency crisis that it is so brutal in these other countries. Um, they have no recourse to any sound saving instrument at all. Um, aside from Bitcoin, but again, most people don't understand, uh, understand the utility of bitcoin in that way yet so yeah and you see the chaos that it creates um you know i've traveled a lot and people especially in some of these foreign countries are extremely cash hungry you know

it's like i need to get paid now i need it in physical cash i got to get it straight to the bank i got to turn it into dollars or turn it, you know, there's this urgency always that you need to get the cash when you're getting debased so rapidly. And I think it just creates this kind of like unhealthy fervor in the economy, right? People aren't really thinking rationally or long-term. They're just like, let me get paid now and let me get this thing into dollars and let me consume what I can before this currency gets debased further. And you just see it up close. It's madness. Trey Lockerbie, The same friend has told me, and I've heard this anecdotally from a few people that literally people will get a deposit into their bank account in Argentinian money,

find somewhere on the black market to get absolutely fleece to convert it to dollars, go back to the same bank and put it in a safe deposit box at the bank rather than their bank account. Which I mean, is as broken of a system as you can basically have. I think it's incredible. I can't imagine living that way, which I think is the reason that many Americans haven't adopted Bitcoin because they haven't seen it firsthand. Preston Pyshko, Exactly. And the dollars in the safety deposit box are still not safe from counterparty risk, right? You're still subject to the Fed counterfeiting more of that currency and debasing you further. So those people, even in that situation,

they may think that is the most secure thing they can do, right? Let me get dollars in a safety deposit box. It's not enough, right? You're still opened up to the counterparty risk of the Fed debasing you. And I don't know- And the bank itself, right? I mean, how much do you trust the bank in Argentina? That's right. That's right. The bank, of course, the bank can just seize your safety deposit box. And for people to think that doesn't happen often, I mean, that happened in Beverly Hills a couple of years ago. They went in and seized a bunch of safety deposit boxes there. It was not that long ago. I mean, you mentioned obviously the currency crisis in Lebanon, but those videos went viral of people holding up the banks to get their own money.

Right. They weren't robbing the bank. They were literally just trying to withdraw. Right. It's machine guns. That is the madness our world descends into in fiat currency. You have people robbing banks to get their own money back. It doesn't even make sense. You talked about, obviously, where we are on the path with Bitcoin. As you described, it sounds like it's the awkward teen years. We have this strange situation where you described, it sounds like it's sort of the awkward teen years. We have this strange situation where you said people don't understand it. There's still people who think it's a joke or a scam, but it's literally a part of mainstream financial media every single day. It's a ticker on CNBC. It's a ticker on Fox Business. They dedicate a segment to it every single day. So my feeling is that now they view it

as a lottery ticket or an investable asset or a stock and just haven't gotten there, but that should be encouraging that we're on the right path, right? Yeah, it's certainly getting the attention now, right? I think most people are aware of it. Most people have heard of it. This wasn't the case even again, five, six years ago, I would say the opposite, right? 90 plus percent of people hadn't even heard of it. Um, 2017 seemed to be the year that it really put on the radar for a lot of people, but then 20, when we had to run up to 70,000, that seemed to be kind of the final, almost everyone's heard of it at that point. Yeah.

And I think that we can give Saylor the credit for being the catalyst to that, quite frankly. I don't think people view it that way, but it was really the micro strategy buy that set that entire bull market. Yeah. I think definitely a massive contributor. I would argue, I think the halving cycle still has a lot to do with price action. That's 100%, which is why I can't wait till next year. I do think, so there's the note, let's say Bitcoin has the notoriety now. However,

there's still a very significant degree of confusion between Bitcoin and crypto, right? People sort of look at Bitcoin and Ethereum and Dogecoin and ABC, all the coins is like, you just pick one, right? It's stock picking, it's diversification. If I'm going to allocate into this asset class with 30,000 cryptos, well, I should put one 30,000th of my capital in each one of these things and see which one hits. And as we know, like being in Bitcoin, there's a very bright line between Bitcoin and everything else. And that is not easily explained. Bitcoin's decentralization, like the level of decentralization that it has, that is, let's say, at least an order of magnitude stronger than even Ethereum, the second leading crypto asset. Very hard to unpack that for people. The term decentralization, obviously a bit confusing. It's not a black or white term. It exists on a gradient. There's a number of different dimensions at which you would evaluate that. Balaji wrote a piece on this in 2017. I think it's called

Quantifying Decentralization. He went through a number of perspectives to evaluate the decentralization of an asset. And so Bitcoin exists, in my view, in the view of what most people would call Bitcoin maximalists, I think Bitcoin's the only truly decentralized crypto asset. And now, so that distinguishes it from everything else, which is subject to a centralized will of some kind, right? Whether it's an individual, a development community, a foundation, whatever it may be. And so that confusion is going to take some time to work itself out. There's also the fact that Bitcoin was the first mover. Bitcoin has these network effects surrounding it. They're actually unique in a way. The network effects of Bitcoin are very multi-sided. So you have buyers,

sellers, miners, and developers, and entrepreneurs that are all building on this one open network. To try and disrupt the cohesion between those cohorts, you need to introduce a superior value proposition for all four of them at once. Very difficult to do. We've seen two-sided marketplaces like Craigslist, where they just have buyers and sellers in one place, that's hard enough to disrupt because the sellers don't want to move. If the buyers don't want to move and the buyers don't want to move, the sellers don't want to move. So if you're going to disrupt Craigslist, you need to introduce superior value prop for both of them simultaneously. And that's why something like Craigslist has survived. It's still thriving today.

And if you go to the website, it looks like it's from the fucking mid-90s. It has never changed. Like it's still thriving today. And if you go to the website, it looks like it's from the fucking mid nineties. Right. There's no change, very little innovation, very basic, very simple, but they have that network lock with a two sided market makes it very hard to disrupt.

And so Bitcoin has this network lock with a four sided market makes it extremely difficult to disrupt. There's also this, the concept of path dependence. Like there's various, very nuanced concepts like network effects, path dependence, decentralization that you have to internalize into your mental model to understand why Bitcoin is different than all other crypto assets. That confusion might take a long time to work itself out which way you come in. I tell the story all the time. I came in 2016 just trading. So I bought Bitcoin so that I could go buy Doge, Ethereum, the ripples, as we called them at the time. I didn't even know it was called ripple, right? Trying to make money.

And it took me through an entire cycle. And listen, I still trade those assets, but I have the same view as you, that they're completely different, nothing to do. And my goal is to earn more Bitcoin. But it took me until there was a full market collapse and comeback to really go fully down the rabbit hole and understand the difference. And I was in it every single day. So how do you expect your average person who's maybe just heard of it to even care enough to learn. That's the problem. It's kind of what you said. There's no simple way to explain it. I used to say we have a bad PR problem or we have bad marketing for Bitcoin, but the reality is it's just not a simple concept.

It's not. It's complicated. The best analogy that I have, I don't know if it's useful for others, but when the internet was emerging, we were using all these weird analogies to try and describe it. It was the information superhighway. It was something libraries, like global libraries, something like this. And there was a time, so the internet's emerging, it's considered a toy, kind of like Bitcoin was early day. Like, oh, people look at porn and whatever, send emails on there. And major companies, like Fortune 1000 companies did not take it seriously at all. I said, okay, this thing's kind of an interesting consumer toy it does have some features that are useful however right like communication features email chat etc so what we're going to do we don't need to use the internet us i fortune 1000 company what we're going to do instead is create our own internet our little private walled garden permissioned internet

and we're going to call it an intranet right So Procter & Gamble would have an intranet. Forbes would have an intranet. Apple would have their own intranet, whatever, obviously pre-Apple. But each company would have their own little private internet. And that was the vision of the future from mainstream corporate America at that time. Well, fast forward 25 years and what happened? The open source internet, the open network devoured and out-competed all the closed source networks. And there's an economic principle behind this. This comes from the work of John Piaget, actually. And he talked about equilibriated versus disequilibriated systems. Equilibriated being a system in which the rules are voluntarily adopted and they're

open to all. So you can centrally sign up, you join a game. I say, these are the rules I want to play by. As other people say, these are the rules I want to play by, the social consensus that emerges becomes the game. So you can think of chess. No one's enforcing the rules of chess. We just all sort of decided, hey, these are the rules we all want to play by. And the game of chess is the emergent property of that collective decision. The disequilibriated structure is one in which rules are imposed. So you control a game, players come into the game, and then you actually have to enforce the rules on them. So you might not want to drive the speed limit out here per se, but that's a rule that's imposed on you, that if you break the speed limit out here per se, right? But that's a rule that's imposed on you that if

you break the speed limit, a cop will pull you over and they will impose a fine on you or they'll put you in jail or whatever the thing is. So in those structures, there's a cost associated with securing the territory that the game is being played within. And there's a cost to enforcing the rules. Whereas in a game where the rules are voluntarily adopted, there's none of those costs. So the open network actually has this huge economic advantage over the closed source network in that it doesn't incur the security and enforcement costs. So therefore, it's more profitable to users. It's more economically viable, let's say. And so for that reason, we saw intranets be out-competed by the internet. So now we all use the internet today.

This includes major corporate players in the US and across the world. Intranet is a term that no one uses anymore. They don't exist so far as I know. So what's the moral of the story is that the open permissionless network outcompetes the closed permissioned networks. And I think that for me is the best analogy to what Bitcoin is to the rest of the crypto universe. It's like Bitcoin is the latest layer in the internet protocol suite. It is this open permissionless protocol for moving economic value, just like HTTP, SMTP, TCP, IP. These things let us move information permissionlessly. Well, now we have one for moving economic value. All the other crypto assets are just copy paste of Bitcoin

trying to be a private company effectively, either compete with Bitcoin directly or try to address a different market niche. And they're all closed source to some degree. You can argue, people say, no, Ethereum is open source. And it's like, well, then you go back to 2016 and you look at the hard fork and you tell me what happened there. There was an quote unquote exploitation of the rules. Actually, the exploiter was just following the existing rules, found a loophole. And then Vitalik and team decide, okay, we didn't like how those rules were used. So we're going to roll back the chain, pretend like it never happened, and then we'll move forward. And you get this split into Ethereum and Ethereum Classic. So that level, that type of

maneuvering couldn't happen in a Bitcoin world where there's a higher degree of decentralization. So I think that's the general principle is that people are always going to move towards the free and open network, and they'll move away from the closed tyrannical networks. And that includes crypto assets, that includes fiat currencies. And in the long run, I think this starts to include nation states too, right? The nation states that treat people best will be those that succeed in a Bitcoin world. We have another catch-22 as a result of exactly what you just described, which is that there's certain behavior in the crypto side of the market and certain things that maybe you would not ideally want built on Bitcoin, but it is open source and it is an open network and

trustless and people can build on it. So now you have maybe this positive trend of people building things on Bitcoin that they learned in other protocols and the other environment, right? Coming back. But some of those things are the last things that you would want to see potentially on Bitcoin. So what do you make of this massive trend to build on Bitcoin? I think everyone agrees it's a better base layer for the financial system, but we're also getting ordinals and meme coins and NFTs and all of it yeah i you know there's a lot of staunch bitcoin maximalists that are you know saying this is terrible and awful and it must be condemned and maybe maybe it does need to be called out you know morally condemned or whatever but i try to look at things just pragmatically

um and again i don't know i'm i should all of this. I'm not an expert in this topic. I don't build any of these things. I don't trade any of these things. I just kind of at a high level understand what's being done, right? What do they call them? BRT tokens? Is that the- BRC20 and Ordinals, of course. Yeah. Yeah. So you're basically creating shit coins on Bitcoin in a nutshell. And the way I look at Bitcoin is that it really is ultimately just a tool. And a tool is not, there's no moral substance to a tool itself. You can use a hammer to do something productive, like build a house. You can use it to do something destructive, like bash someone's head in. So the tool itself is not at fault. So I would never blame Bitcoin or say Bitcoin is bad because people are doing bad things with it. That wouldn't make any sense. That'd be like someone got stabbed and say, well, let's outlaw knives all over the world. A drug dealer used an iPhone to make a phone call. iPhone should be banned.

Exactly. And actually, this argument is often made by politicians that, oh, drug dealers are using Bitcoin. We need to ban Bitcoin. When we know drug dealers are using more dollars than anything else, but that's all a side point. So I guess the first point would be that no matter how people are using this open permissionless tool, it doesn't make any sense to try and condemn the tool itself for the ways it's being used. That's almost by definition what a permissionless network is. You don't need to ask anyone's permission as to how you use it.

You can do whatever service Bitcoin can render to you. You are able to go and have that service rendered without asking anyone's permission. That's the beauty of it. All right. Most of us use it as money to some extent, but it's potentially useful for other things. Right. And this would be this would fall into that category of other things. So, and now again, that said, I don't think I'm not going to condemn Bitcoin maximalist either for calling this out and saying, oh, BRTs are a scam and this is a rug pull or this, that's like, okay, free speech, you know, call it out, call it what it is. Hopefully you can reach potential victims of these scams before they get rugged.

Right. That's a, that's a valiant thing to do. That's fine um I don't believe though in trying to ban or restrict or other course otherwise coercively limit the use of Bitcoin for any of these use cases because again that defeats the purpose of a permissionless Network um so I don't think there's any legal... Let's just say this, no one's life, liberty, or property is being violated by the generation of BRT tokens or BRC tokens on top of Bitcoin. Preston Pyshko People are choosing to invest in them or not. I mean, they have the freedom to make those decisions and to calculate the risk accordingly.

Nick Neuman Yes. And now that's not to say they're not deceptive per se, but this is where do your own research, right? This is not investment advice. You need to really take responsibility for the places you put your wealth and economic energy. investor protection laws and all this stuff that we have related to investor accreditation and whatnot in the US. I think that's all bogus. It's all bullshit. So I'm much more of a self, I have a view that people should be self-responsible, self-sovereign, all of that. To have power and responsibility are two sides of the same coin. So if you're going to take responsibility away from people, you're also going to disempower them and i don't think that's a useful way for human beings to be i think people should at least have the option to be empowered if they want to abdicate some of that responsibility to a custodian or a financial

advisor whatever so be it in a consensual transaction but you don't need a course of sec saying until you have a two million dollar net, you can invest in this stuff, blah, blah, blah. I don't buy into that as a libertarian, I guess you would say. But finally, I think there is a silver lining to all of this, is that these ordinals, inscriptions, BRC tokens, et cetera, it's just registering new demand for block space, ultimately. This is just another use case for Bitcoin. Even if it is a shitty use case and people are getting rugged and whatever, it is at least driving up demand for block space. And that creates further incentives to develop at layer two, like on Lightning and other layer two, layer three solutions,

because while block space is getting more crowded, it's getting bit up. So therefore, it's more economically viable to transact at layer two versus layer one. So you would expect to see more innovation, more talent, more capital pouring into layer two technologies. We know how important layer two technologies are for the success of Bitcoin as a medium of exchange. So again, I think there's a silver lining here that you would see probably an acceleration of development in the Lightning network and other similar networks as a result of these new use cases coming online. This is Lightning's moment. There's no question about that. If ever something was going to light

a fire under their asses, this has to be it. I also find it interesting that in addition to all of that, at least this dispels the myth that miners will have no incentive to secure the network in the future when all the Bitcoin is mined. Given we're talking about hundreds of years down the road, but that's always been one of these talking points from the pundits saying, well, one day all the Bitcoin will be mined and there'll be nobody there to secure the network. Well, there was a time here where these ordinals and BRC20 tokens were actually paying miners more than the transaction fees and the minting fees and such than even their mining rewards. Yes. It totally demolished that critic counterpoint on Bitcoin or critique of Bitcoin, let's say, that in the

year 2140, when the last Bitcoin was mined, if Bitcoin didn't add a tail emission, I think it was called, like a little bit of inflation, that there would not be an adequate incentive for miners to secure the network. And this little episode totally evaporated that whole conversation because transaction fees went through the fucking roof, right? I think that's worth all of it, to be honest, just to even dispel that myth. And it's interesting to watch Bitcoin systematically, it's not Bitcoin, but systematically dispel each of these major myths and pieces of FUD that have carried it through each cycle. I want to put bookmarks on this before we end.

One of those is the energy narrative. And BlackRock is the king of ESG, basically is the creator of ESG, basically has made ESG investable and made it a thing around the world. So isn't the ESG environmental concerns about Bitcoin narrative completely dead when you get the stamp of approval from BlackRock? I, again, I don't know enough about this. I mean, ESG is an absolute scam, first of all. Gated basically by Larry Fink and BlackRock. Yeah. It's a total, there's this push towards global communism or cultural Marxism at least that's being wrapped in things like ESG and wokeism and uh you know a number of other cultural things we don't have to go into but it's way for

almost giving regulators carte blanche right into trying and engineering economic policy what companies should be doing carbon emissions emissions, right? It gives you a lot of teeth into basically every industry because every industry uses energy. And, you know, this regulatory framework or policy guidelines, and I'm not sure what they call ESG exactly, basically gives this top-down authority the capacity to regulate almost everything right every industry that uses energy which is basically every industry so the question is does there does Blackrock coming into Bitcoin by launching a spot ETF does that effectively give Bitcoin kind of the stamp of approval from an ESG standpoint? I don't know. I'm not sure you

would think so. It seems intuitive that that would be the case. I think there's also been some work done and strong arguments made that Bitcoin is one of the most ESG investable assets out there, given how much of it is generated with renewables, how it can bring stability and efficiency to power grids. We've had some guests on the show recently talking about that. So I would say that realistically, Bitcoin is definitely a boon to ecological conservation, a boon to power efficiency and stability, as I mentioned. it's actually good for the environment uh obviously it's sucking vitality out of the global war machine which is the thing that's worst for the environment worldwide in terms of destroying not just nature but also humans

and capital right like war is the most destructive thing humans engage in bitcoin's sucking some energy out of that i don't know if that will be reflected though in blackrock's actual publicly stated views on bitcoin right i'm still as we started off the beginning of the show i have a lot of short-term hesitancy and uncertainty about what games they're going to try to play um given that again a lot of the wealth inside of Blackrock I would argue is wealth acquired through statism and Central banking right a lot of people that have run this machine to extract wealth out of the world for decades and centuries even sits inside of Blackrock right Bitcoin is the ultimate enemy of the state in that regard. It's the most disruptive technology there's ever been to all of those legacy business models that have made several individuals inside of BlackRock extraordinarily wealthy. So how are they going to

try to game Bitcoin? We've seen up until this point everyone that tries to game bitcoin gets burned right bitmain trying to go to bitcoin cash uh roger ver and all these guys trying to go to bitcoin cash the guys that launched bitcoin satoshi's vision the guys that um i mean the list goes on and on right the shit coins, like everyone that's trying to game Bitcoin ends up getting humbled by Bitcoin. So my big outstanding question is, in what ways is BlackRock going to try to game Bitcoin? And will they get humbled by Bitcoin? Or will they find a successful exploit? Like, you know, we've thought about this for years.

We talk about it a lot, like all the game theory related to Bitcoin. There's not a lot of good attack vectors. We really can't come up with a solid one, which makes you incredibly bullish on the asset. Maybe they've identified something we can't think of. These are the biggest money, smartest money guys in the world. Who knows what they've got up their sleeve but um i you know my money's on bitcoin still i until i see something fundamentally change i think they're going to keep pushing the cultural attack vector because that's probably the most viable one you can't do anything to bitcoin at the protocol level but you can attack it at the social layer and so you knowizing it, calling it bad for the environment, probably blaming financial crises on it. All this cultural Marxism they're injecting with wokeism, they'll probably press

the button on those individuals that Bitcoin is racist or whatever the thing will be. I'm sure we'll hear a lot of social engineering and social narratives. Preston Pyshko There was a bit of that. There was actually a bit of that when it crashed that black people disproportionately lost money in crypto and Bitcoin assets over others. There actually was a cycle of articles there on the drop down from 69,000 to 15,000. My new favorite one is sort of this quiet narrative that Bitcoin is leading legacy markets markets crash you know leading indicator of all risk off assets and whatever yeah i i would just say you know watch out don't ingest mainstream media basically would be the punchline there because they're going to say all kinds of things do your own research learn about bitcoin and um I think you'll come to understand that there's, again, nothing that can be done at the protocol layer. So you'll see these vested interests attack it at the social layer. And when you get that level of understanding, these headlines become comical to you.

Totally agree. So you just mentioned we shouldn't be listening to mainstream media, but we should be listening to podcasts. So where can people check yours out? Yeah, thank you. So we're at whatismoneypodcast.com. And we do a lot of long form discussions on the history and nature of money. And if you were into cerebral kind of nerdy podcast, I think we're the place for you. I don't know how you fit it all in your brain, but it's impressive. Although you do have a much bigger head than me. I learned in person, but it makes sense. So thank you so much for the time. I always appreciate your insight. We got to do this more often, man. Yeah, man. Thanks for having me. It's great to see you again, Scott. Let's go.