The Wolf Of All Streets - The Biggest Scam: Banks. Fixed By Bitcoin, with Robert Breedlove

Starting point is 00:00:00 What is up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast. Today's guest is a freedom maximalist, ex-hedge fund manager, and thought leader in the Bitcoin space. Robert has set out to answer the seemingly simple question, what is money, but in a deep and philosophical way. It's my goal on today's show to have Robert take me down the Bitcoin rabbit hole to better understand what Bitcoin and money are at a philosophical and deep level. Robert Breedlove, man, thank you so much for coming on the show. Hey, Scott. Thanks for having me. Glad to be here. So once again, you're listening to the Wolf of Wall Street's podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics. This podcast is powered by Blockworks,

Starting point is 00:00:45 the fastest growing media company in the digital asset space. You can check them out at blockworks.co and you can find everything about me, my newsletter, Twitter, podcast information at thewolfofallstreets.io. So Robert, man, let's start from the beginning. What sent you down this path to discover the truth behind money? Well, I suppose like everyone else, it's a tool that I've been kind of forced to interact with throughout life. There's the, there's this old commencement speech given by, I forget the name of the guy, it's Robert something, but it's a really famous speech you can look up online called this is water and he there's a couple of younger fish swimming past an older fish and the older fish looks over the two younger fish says hey hey boys how's the water and the

Starting point is 00:01:37 fish just kind of nod and they keep on swimming by and then the two younger fish get a little ways down and they look at each other and they go, what's water? So the point is, like, money is this thing that is all, it's ubiquitous. It's all around us. We're immersed in it all the time. We think in it, actually, which is interesting. We think in dollars. We think about dollars a lot. We're constantly performing economic calculation, you know, planning, all of these things.

Starting point is 00:02:11 But we very rarely stop and ask ourselves that seemingly simple question, what is money? And I guess my, what got me going into the rabbit hole is I sort of had a predilection for curiosity early on. I've always been an avid reader. Started out reading a lot of science when I was really young, mostly like astrophysics. And then as I got older, you know, my father was an accountant. So I guess it's in my blood a little bit. I knew I wanted to be a businessman. I didn't really know what that meant. When I was younger, I thought that this meant sending, you know, faxes and shaking hands and carrying a suitcase.

Starting point is 00:02:51 But as I got a little older, I learned that accounting is the language of business. And so in economics is the study of the purpose of business, if you will, like why do we trade? Economics sort of goes on that rabbit hole. so i started studying these two things really deeply and around 2004 2005 time frame uh i got into basically the study of central banking which i think is the core it's the dominant institution in the world today it controls the largest market in the world which is money itself. And specifically the book, The Creature from Jekyll Island, really took me into that rabbit hole and seeing that central banking is kind of this corrupt core to the modern economy. So that was my start down the path. And then, you know, fast forward, that was pre-bitcoin fast forward a few years later i had heard about bitcoin but like many people brushed it off initially i'd owned a

Starting point is 00:03:51 little bit in 2014 but just thought it was this you know magic internet money more or less thought it was going to be disrupted by something else um and it wasn't until later, like 2016, early 17, that I started really investing heavily in the space. And I was actually, um, more drawn in by the concept of smart contracts, which Nick Szabo had written about in the late nineties. And it was actually his work that really set the light bulb off for me, which he uses the example of the vending machine. It's kind of this automated commercial relationship between buyers and sellers, where you're basically punching in instructions and certain actions are carried out to facilitate a transaction. My light bulb was that the entire finance industry is that. It is a vending machine or a smart contract that's connecting buyers and sellers of capital. It's an intermediary. It doesn't add any productive value other than it enhances the liquidity of exchange effectively. And a lot of that function I saw stood to be disrupted by, at the time, what I called smart contracts or this wave of innovation we call crypto assets and started allocating pretty

Starting point is 00:05:07 heavily into the top market weighted crypto assets i like to say where my money went my mind followed i actually think money and mind are very intimately connected which we can talk about a little bit later and through that process just went down the Bitcoin rabbit hole and really started asking that question, what is money? You know, why is gold money? What are the properties that it satisfied? What are the services that it renders to market actors to make it money? You know, it's just yellow metal. What's so special about gold? And in answering those questions, I've become increasingly bullish on Bitcoin as a result and you know started writing about it Bitcoin kind of gave me the impetus to start sharing my

Starting point is 00:05:56 perspectives and views and that writing has evolved into talking I was appearing on various podcasts and media outlets people enjoyed what I had to say they enjoyed what I was appearing on various podcasts and media outlets. People enjoyed what I had to say. They enjoyed what I was writing. So now recently I've launched the show that I've named the What Is Money Show, which I think is the key to incepting this idea. Like if you can just get people to ask themselves this question very deeply and research it, you know, kind of to its bottom principles, I think you'll find both the value proposition of gold and Bitcoin in the true free market. It's interesting. I mean, you talk about the ubiquity of money, obviously, that it's pervasive in everything that we do in our thoughts, in our actions, but I don't think most people ever contemplate that. But I would say that

Starting point is 00:06:47 since COVID and during the global economic meltdown, that we have had a bit more of a grand awakening in your average person about the insanity of central bank policy. Obviously, nobody can ignore the money printer going burr as people like to say in this space do you think now that your average person is actually thinking about money or do you still think that it's a very very small percentage that are actually contemplating these questions you know it certainly seems like and i'm in a bit of an echo chamber i guess so it's clearly a biased perspective but there's definitely the combination of Bitcoin number go up, which is related to COVID, which is related to the state, you know,

Starting point is 00:07:33 uncertainty and doubt in the state response and the government in general, more generally, I would say, has people looking at this question a little more seriously. Another thing I saw that was pretty popular for a while is when the central banks were running rampant, just, you know, stimulus package after stimulus package, people were wearing shirts and holding signs in these protests saying, if they can just print dollars, then why do I pay taxes? I was going to ask you that exact question. That to me is the single thing that I hear most often that lets me know that people are contemplating these questions.

Starting point is 00:08:10 Or why do I have to pay my rent? If you know, why do I have to do any of these things if they can just print the money? A hundred percent. And it's getting to the heart of the matter very quickly and very simply. And this sort of feeds back into a general thesis I have about the digital age. So in the transition from feudalism into the modern age, there were, I think the year 1490, there were about 10 million books produced in total up until that point. Gutenberg printing press is invented. Over the next 10 years, another 10 million books

Starting point is 00:08:46 are printed. So there's just an exponential explosion in book production. And what this did was it collapsed the cost of information access. And with this collapse in the cost of information access, we had a commensurate increase in the variety and quality of thinking in the world. It just produced a lot more critical thinking, critical thinkers. It sowed the seeds for the Enlightenment and the Renaissance. And in this transition, so it was a technological transition, we just figured out a way to share information more quickly. It destroyed the ideological edifice of the church, which was a dominant institution of the age. They had a monopoly on knowledge. Effectively, they controlled the scriptoria where they controlled the production of books and what books were printed, the flow of ideas.

Starting point is 00:09:34 And this little, you know, seemingly innocuous technological change, which, too, wasn't even a breakthrough in and of itself. The inventor actually pulled together a few different inventions that had already existed and compiled them into this one thing we call the printing press, similar to what Satoshi did centuries later. And that little innovation broke the reality for people, right? Church was, they ruled the world. And then 100 years later, you know, they're falling apart. So I think in the digital age, we're seeing a similar type renaissance or breakthrough technologically. Because once again, with digital technology, as we're proving right now, we have collapsed the cost of information access and distribution. And so I would expect over time to see a commensurate boom in the quality and variety of thinking. And this, this people asking this question that they can just print dollars,

Starting point is 00:10:36 if they can just print dollars, why do I pay taxes? It's kind of an example of that. These things get memefied and they, they go viral, right? And all of a sudden everyone is imprinted with this one idea that one person had globally overnight, effectively. So we can think of the free market itself is truly just a forum for the free exchange of ideas. The more freely ideas can move, the more wealth we can create, the more quickly the economy can adapt

Starting point is 00:11:06 to disruptions, and the more innovation we can drive effectively, because ideas can compete, recombine, you know, basically be tested against the wants of market participants. And the digital age has just given us this radical, like almost a perfected forum for the free exchange of ideas. And so I think that, you know, people joke about memes, like it's an Internet meme, it's funny, whatever. that the ideological space where these means are being exchanged is actually going to contribute to the crumbling of the intellectual artifice of central banking, which is, it's totally bogus, right? It's the great, I would argue is the greatest scam in human history. It is a pyramid scheme. In fact, if you really look at what it is there, you know know these banks are arranged in tiers with the central bank at the top and our the money we use today it's born of borrowing right the central bank is

Starting point is 00:12:16 lending the money to the treasury effectively or lending the money to lower tier banks and then lend it on down and all of those interest payments roll up. And the certificate itself, the US dollar, it is an uncollateralized government debt certificate, right? It used to be backed by gold. Now it's not backed by anything. It's really, it's backed by expected future cash flows of the taxing authority. So it's like, how much do we expect the US government

Starting point is 00:12:46 to be able to impose this tax regime on future market participants? That's a promissory note on trust. That's right. And Taleb calls this, this is really bad, right? This is intergenerational dispossession. So we're actually robbing those through fiat currency that don't have a voice.

Starting point is 00:13:04 We're talking about future generations, the poor, those living on fixed income, the environment, by the way, because this is a violation of private property rights. Anytime you're printing money, you're stealing private property from those depending on fiat currency as a store of value. And when you violate private property rights as Rothbard's laid out, and that's a whole nother rabbit hole, this actually incentivizes pollution

Starting point is 00:13:32 and ecological damage to the environment because people have to externalize these costs somewhere. So that's a lot maybe to unpack there, but in general, I just can't see how this central bank scam can hold up in the sunlight of the digital age. I think it's just going to get incinerated. And I think Bitcoin is the tip of the spear. I want to go there in a second, but interested in something that you said about the free flow of information, obviously the enlightenment and the Renaissance, it's very clear.

Starting point is 00:14:07 We've reached a time in the digital age when we have an endless quantity of free information, but we can't necessarily gauge the quality of that information in a way that maybe was a bit easier before, because I can certainly say when I was growing up in the 80s and 90s, we had few sources, but they were vetted and trusted,

Starting point is 00:14:22 generally for your information. If you were doing a research paper when I was in high school, you knew the books you were reading and taking notes from were accurate. So is there a flip side to that, you know, free flow of information when people can abuse it for, you know, for malintent? Yes, there, you know, you can't believe everything you read on the internet, right? It's certainly a jungle out there. But the other important point, and I tweeted this recently, that we think that words, verbal and written communication are the primary means by which we interact. But it's not actually the case.

Starting point is 00:15:04 It's very important. Clearly, we need language. We use it every day. But there's another less visible and even more fundamental and important communication protocol, and that is the market price, right? That's actually what communicates the results of human action, where people are actually putting their skin into the game, right? An entrepreneur is staking their reputation, capital, energy, time, uh, to make a bet on the arrangement of future market data. So they think they figured out a way to combine productive factors in a way that they can profitably satisfy a want in the future. So entrepreneurs are literally trying to predict the future and profit in the process.

Starting point is 00:16:00 And I think most when we, through the corruption of media of exchange money, we have broken the price signal. So now when we see an increase or a change for that matter in market price, it's almost impossible for us to disentangle whether that is a result of supply and demand fundamentals, like has this actually an expression of market actor intent and belief, or is this an expression of central bank policy? Is it just artificial liquidity distorting this primary communication protocol we call the price signal? And that to me is a very underestimated perversity of reality it's almost like if you corrupt the this core media of exchange you're actually corrupting media more generally and i you know that may sound like a bit far-reaching but you could look at mainstream media companies today like who are their shareholders who who

Starting point is 00:16:59 holds most of that power um how has that power been consolidated over time? Because we know, again, when we're printing money, we're increasing the purchasing power and asset value of those holding assets at the expense of those holding dollars, right, as a store value, which is the productive economy or the poor, as we said. So we're actually driving a divergence between rich and poor. So the rich get richer, the poor get poorer, classic example, all driven by inflation. And so when the rich get richer and they own these centralized media companies, clearly the incentives for what stories that media companies putting out change based on that ownership structure. And this, I think we could clean a lot of it up if we could just fix the money, right? There's this mendacity in the media, or we call the media, I think is

Starting point is 00:18:04 related to the mendacity in the media of exchange is what I'm trying to get at here. And if we can clear the price signal so that we can reliably know that whatever this asset is trading at is an expression of the collective intelligence of all market actors in the world. I can depend on this thing as the nearest approximation of truth that is available and I can act on this information in a way that best suits my own interests. All of a sudden we have firmer footing again in the marketplace and we better coordinate and organize ourselves. So I guess the general message there is, prices, I would argue, are even more truthful form of speech than speech. And for the same type of reasons, we discovered the importance of the freedom of speech in the 20th century, we saw that if a country is going to become despotic

Starting point is 00:19:06 or there's an aspiring dictator, the first thing he's going to do is try and silence the freedom of speech. He needs to control speech and ideas first to control the society. I think Bitcoin and the digital age is going to teach us a similar lesson about prices. Like not only do we need freedom of speech for a healthy and vibrant and flourishing society, but we also need freedom of economic speech, which is the price signal, which is only possible on a non-monopolized hard money standard. It's official. The digital art market is going mainstream. It's been exploding this past year with over 10 million in sales in December alone, and it's just getting started. There's no better time than now to

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Starting point is 00:22:29 continue to set the standard for fun, fast, and fair gameplay. Deposit, wager, and withdraw on Bitcoin, Ethereum, Litecoin, Tron, and more, all in real time, all the time with BitCasino. Right. Moving along, obviously being accurate price starting at that point. And you call yourself a freedom maximalist, which I love. So how did you kind of come to that title? Why is freedom so important to you? And how did you come to that? Yeah, it's funny. It's a bit of an esoteric title. And you could also say it's libertarian, I think, in a way. But the reason I chose not to go with that word is because it's so many again, we're back to words being abused. So many of our words have been bastardized by what I would argue is this.

Starting point is 00:23:21 Again, the broken media exchange sort of it's connected to our mind. So it disturbs uh the way we think and the definitions we assign to words but uh even something like liberalism sounds like a political party today people think liberal liberal versus conservative but the traditional meaning of liberalism was you know low to no government, like minimized government. But that term has been co-opted by government to now represent the political party. So couldn't really go with libertarian. I mean, you can, I guess, to an extent,

Starting point is 00:23:55 maybe certain people that understand what it means, understand what it means, but most people would think you're just pronouncing your political affiliation to call yourself a libertarian. So I went for something hopefully a little more clear. I think I thought of it myself, but you know, there's no original ideas. So maybe I heard it somewhere. And it just means to me that freedom is in being the state of being able to act across the broadest set of possibilities possible. In that the more optionality market participants have, actually, the more wealth we create so everything and we take this for granted today but everything we enjoy this heritage from our ancestors that basically figured out an idea and said that hey instead of consuming

Starting point is 00:24:55 all this capital i'm just trying to make ends meet you know eating eating the seeds so to speak why don't we start to still there yeah okay oh sorry look like an internet latency um why don't we start to sacrifice current consumption and save for the future and this little idea this is kind of the kernel of economics right it's delayed gratification and the the laissez-faire economists, as they called them a few hundred years ago, they were pushing this idea. It's like, we really need to accumulate capital. That's what will pull humanity out of privation. That's what will reduce poverty. That's what will allow us to satisfy more wants in less time, to eliminate thousands of drudgeries

Starting point is 00:25:43 through technological innovation. This is a really hard fought idea. People resisted this at first. They thought innovation was a job destroyer. It's scary when the factory comes in and all of a sudden you're a custom shoemaker for three generations and now there's a shoe factory down the street. It's existentially threatening, but in this discovery, it's like, if you just let people compete freely, that cost will then become lower as a result.

Starting point is 00:26:14 Everyone is seeking to satisfy wants more cheaply and more efficiently. And every time someone has a breakthrough, which we'd call an innovation, you know, in either a tool or a production methodology, they have an incentive to sell that breakthrough into the market such that everyone benefits. And that civilization ends up advancing in these layers of innovation and breakthrough. And that's what we inherit today, right? We are enjoying the lap of luxury like protect the peace of the society so that people can trade private property freely so so we can think of the state or taxes we pay to the state is just network security right we're just securing the trade network and then give them recourse to a means of nonviolent dispute resolution.

Starting point is 00:27:26 So when people have inevitably have conflicts, you know, I thought you were going to pay me this. You paid me that instead of, you know, going to a duel or raising a pitchforks against one another, give them recourse to the courts. Right. So they can go and settle disputes non-violently and that by by basically optimizing for trade and the division of labor not only do we create a peaceful society but we create economic abundance um so that to me like is core to the freedom maximus maximalist philosophy and then the flip side of it too is i really believe that as we accumulate more capital, we become more wealthy. We become more free as a result. Right. All of a sudden, you don't need to work 40 hours a week to pay the bills.

Starting point is 00:28:14 You need to work for or whatever, wherever you are on the spectrum. How do you spend those other hours? Right. You start to ask these questions like, well, money is less of an object now for me. How do i spend my time what do i want to do with my life every day and that's when i think it gets really interesting because people become entrepreneurial right it's like what what is your best skill what is your gift how do you you know capitalize on that gift and sell it to the world and that's where i think you know it's almost intuitive that

Starting point is 00:28:46 if you have a world where people are pursuing what is most meaningful to them like what they're doing uh agnostic to a monetary situation like people just doing what they think is best for them what they think they're best at what they enjoy most they're going to pour most of their heart and soul into it and i think you're going to get the best inventions and breakthroughs and ideas from that process. So I see it as like it just freedom is the whole thing, as simple as it sounds. Yeah, I've had that conversation with Jeff Booth, who obviously champions a lot of these thoughts. But it's interesting because what you're talking about, obviously, is innovation and technology being deflationary. Right. I mean, prices down. It's the dead opposite of the system that we have now, which is forcing, you know, a devaluation of

Starting point is 00:29:30 your currency, which causes you more time trying to gather that currency to pay for more things that you can't afford. So I think that idealistically, we can all understand the idea that it would be wonderful if there was all this innovation, prices of everything came down, robots were doing our jobs, and we had free time to think and do what we want. But how do we get there? Because we're so far on the other side of the spectrum at this point and only flying down that track. Right. That's a great point. Again, back to the bastardization of the language, even those terms, inflation, deflation, I would argue are euphemistic. I like to, not that I don't ever expect us to stick, we're so entrenched with inflation, deflation, but it's monetary dilution is inflation monetary enrichment is deflation right inflation sounds terrible by the way for people that don't understand economics

Starting point is 00:30:31 or haven't thought more than one layer deep deflation sounds awful right it's just what do you mean you want the economy to inflate not deflate of course we want inflation and that is the exact ignorance that central bank propaganda preys on. We need a healthy amount of inflation to incite growth in the economy and to get people spending. And it just, the whole paradigm is completely broken. I'm not entirely sure whether it's intentional or not. I think a Jeff Booth would argue that it's not intentional. We were just creating a system that we thought was best at the time. And now that system has run into exponential technological deflation, right? We're just advancing so quickly in the sphere of productivity that prices are collapsing. But central banks, because they've mired the world

Starting point is 00:31:24 in debt, in the largest debtor, which is the government, they need inflation to erode that real debt burden. So they will do whatever it takes to achieve positive price inflation. In terms of how do we get there? I mean, it's, you can't, to try and fight free market dynamics is like trying to fight the tide. Ultimately, I mean, you're fighting human nature, frankly. And I think we've just been kicking the can down the road for so long now. We've just been printing our way through every economic calamity. And this just further diverges rich and poor. It further delays the inevitable correction

Starting point is 00:32:08 back to reality and exacerbates it, right? This is the Telebian delayed volatility. You can decrease short-run volatility, but it comes at the expense of increased and exacerbated long-run volatility. So we've had this central bank mandate of stable growth, whatever that means. Like what, what is stable growth? Growth is an instable unstable process by its nature.

Starting point is 00:32:34 So they want to have stable growth where they maintain stable employment and stable prices across time. And it's just, it's, it's amazing that it's worked this long, but I don't see how the next correction, especially with Bitcoin now at a trillion dollars, and Bitcoin, by the way, proving it's a true barometer to the failure of this system. My 30-second elevator pitch on Bitcoin is it's an insurance policy on central banking or on the legacy financial system. And the more dollars they print, the more valuable it becomes. So historically, gold would have served that role to some extent. But central banks owning 20% of its supply, systemically suppressing its price in the derivatives markets it's not as truly a barometer right unless and and brought you know gold has

Starting point is 00:33:32 its own issues like you can't settle with it in finality instantly right so you can't force honesty on on um in the same way that you can with Bitcoin. So I think we're going to have a day of reckoning. I mean, it's inevitable at some point that prices have to reset back into the realm of supply and demand at some point. Currencies, and Mises would argue this, the longer you print the currency or engage in quantitative easing one of two things is going to happen it's like you're either going to have a big crash at some point back to the realm of reality where you've artificially pumped prices and they're going to crash back down to reality or you're going to have the crack up boom, which is the total implosion of the currency system. Hyperinflation.

Starting point is 00:34:27 Hyperinflation. And that tends to be, that is the outcome we see time and time again with fiat currency. The largest debtor in the room has an incentive to print, to erode that debt burden, to externalize all of its costs onto the productive economy. They will do that until the currency loses all meaning. We're talking about today the currency has lost a lot of its ability to communicate meaning. In this hyperinflation event, like you see in Venezuela, there's cash clogging the gutters.

Starting point is 00:34:59 Cash means nothing. It can't be used to do anything. All trust breaks down. Society collapses. I think it's inevitable we head that direction. I would like to say optimistically that Bitcoin gives us an alternative to bounce back quickly and that we can all divest fiat and move into Bitcoin and resume normal economic activity more smoothly than, than other hyperinflations historically. But it's a big unknown, you know, it's, it doesn't end well. No, it never has.

Starting point is 00:35:38 It's interesting. You called it a, you know, a hedge against central banks. I had Mark Yusko on the show a long time ago, and he said it was a schmuck insurance is what he called it, which I thought was a very simple way to state the exact thing that you just said. So I guess the question then, you said that there's two routes, hyperinflation, which is the one that inevitably gets sort of chosen, and there's the other route. What is Bitcoin's role if it goes the other way? So I guess the other way would be central banks suddenly decide, hey, we've been wrong about this thing forever. We need to repack the currency to gold

Starting point is 00:36:17 and move back onto a hard money standard. First thing that would happen was gold would be repriced into the stratosphere. I don't even know the number, probably north of $20,000 an ounce at least. I would think you would see a commensurate boom in Bitcoin at that time because I would argue that most of the strong handed market actors in Bitcoin actually do view it now as an alternative to gold, even if it's a call option on a future gold.

Starting point is 00:36:52 I guess you could say future gold standard. And if you want to go a little deeper on just the first principles of money, like why is bitcoin superior to gold um i've talked about this on a lot of shows so i won't go too deep on it but there's basically five properties of money that that market actors choose for that optimize they optimize for and they're divisibility durability recognizability portability scarcity historically monetary metals were the most divisible, durable, recognizable, and portable tool in the world for money. So we used gold and silver alongside one another. Of the monetary metals, gold was the most scarce, meaning it had the highest stock-to-flow

Starting point is 00:37:39 ratio or said differently, the lowest inflation rate. So you can store your wealth in gold and you know that it would be inflated as least quickly as possible. So it was the best store value essentially. Bitcoin looked at through the same lens perfects all those properties. It's just pure digital information. So, you know, portable at the speed of light,

Starting point is 00:38:05 stored in a distributed way, so it's infinitely durable. The example I like to make there is the Bible, which is just distributed information. You can't really change it. The book Outlast Empires. It's infinitely recognizable because you can audit the entire supply and run a full node, verify all transactions yourself.

Starting point is 00:38:24 You are your own central bank effectively. And portable and it's infinite scarcity, basically. It's perfected fixed supply, 21 million. So I think that I actually look at the gold market cap. I would say that the monetary premium of gold is look at the gold market cap. I would say that the monetary premium of gold is clearly part of that market cap is industrial use. Gold around 10 trillion today, maybe 1 trillion is industrial use, 9 trillion is monetary premium. People holding that in expectation of future exchange as money. I think that $9 trillion market cap to me is latent demand for Bitcoin. The market is going to figure out that Bitcoin is superior to gold across all the first principles of money. I think it takes a long time for the market to digest that information because

Starting point is 00:39:20 the big delta here is gold's a 5,000-year-old tool. It's something so old, so ancient as money, we forgot why it's valuable. Everyone knows gold is valuable as money. How many can tell you the principles or properties of money? One in a thousand, maybe. Bitcoin's a 12-year-old digital upstart competing with a 5,000-year-old monetary technology.

Starting point is 00:39:46 So I think it's going to take a while for the market to digest this, that Bitcoin is superior. And even if Bitcoin is successful and superior to gold and surpasses its market cap, I would expect people to hold gold for a long, long time as an alternative store of value because it is such a deep Lindy effect or head start. So in that way, I think that gold is the same. Bitcoin and gold both protect you in both inflationary crack up booms, hyperinflationary situations. If you're holding physical gold, by the way, I don't believe paper gold is going to protect you.

Starting point is 00:40:20 Holding an ETF. Or holding physical Bitcoin, which is holding your protect you. Holding an ETF, right? Yeah, or holding physical Bitcoin, which is holding your own keys. I think, you know, dangerous to have counterparty risk on that. And also protects you in the opposite situation

Starting point is 00:40:32 where governments say, I'm going to repack currency to gold. We're going to have a massive deflationary shock. Gold will explode. And I think Bitcoin would boom alongside. So that's why for me, it's almost the ultimate risk adjusted bet in the world is to hold physical gold or physical Bitcoin at this

Starting point is 00:40:55 point in the history of the fiat experiment, because it's going one of two ways very sharply. There's only one investment category, which is hard money, that will protect you on both sides of that. Which has somewhat always been the case. When the shit goes down, hits the fan, so to speak. There's plenty of historical precedent, obviously, for that. But physical gold, who can own physical gold? Well, that's why I opted for Bitcoin personally, but, you know, got to throw one out to the gold bugs out there. Yeah, you do. It's just, you know, it's such a sort of meme when you dig into what it would take, no pun intended, dig in to what it would take to actually bury it in your backyard or put it

Starting point is 00:41:46 into a bank in a safety deposit box and that bank could disappear. So it becomes effectively impossible to protect yourself with gold, even if you have it. Yeah, I don't know if you saw this. This is a news article I saw a few weeks ago. A guy had been detained at the airport because he was smuggling a bunch of gold in his ass. And I just tweeted out like, Bitcoin eliminates this pain in the ass. It's like you can just... Pun intended. So how do you equate Bitcoin to freedom? Because obviously your freedom maximus, you have a hardcore belief in Bitcoin. How does it give us freedom? How can it give the average person more freedom?

Starting point is 00:42:29 Yeah, so if we want to try and quantify this qualitative term of freedom, I would argue that you could say that the more optionality you have, the more options you have, the more free you are. This is also closely connected to the concept of sovereignty, which is another term that I don't think people are talking about it more and more today, but historically wasn't very looked at. And we could say that there's this great quote by Carl Schmitt, is that sovereign is he who decides the exception. So we're all, you know, interoperating, playing these games with one another. But if there's any one player in that group that can create an exception to the rules, the protocols through which we're interfacing, then that player has sovereignty

Starting point is 00:43:26 over the others. He can bend the rules to favor himself and disfavor others. And that is essentially what's happening with central banking. Central banking is twisting the rules constantly. Every time they print money, they're breaking contract law effectively. The government has a contract in place with you that which originally was redeemable for gold, real money, later it became kind of this mired legal tender enforced obligation type thing. But the general contractual arrangement is that they're going to manage the money supply responsibly such that you can use it as a medium of exchange and store value over long periods of time. And that's clearly not what they're doing. They've totally violated supply and completely broken the store value contractual arrangement. So in Bitcoin, another way to think about it is that it is, and by the way, when they print dollars, all they're doing is manipulating a centralized database at the Fed. There's an SQL

Starting point is 00:44:34 database maintained by the Fed called the US dollar, right? They go in, make a new entry. They have allocated wealth from some to others politically arbitrarily instantly right so money is just a database as elon musk tweeted out the other day printing is a bit of a misnomer but it's a lot a lot easier to to imagine for people that's right yeah um so we have this manipulable database inside the fed closed closed source technology called the dollar. Bitcoin is the first manipulation proof database in the history of the world. It is the first and only form of global consensus. It's indisputable truth, right? Whatever happened on that blockchain, you could argue about it metaphysically maybe

Starting point is 00:45:26 that it's not true or whatever, but for all pragmatic purposes in the world, it is truth. You cannot argue with it. Once it's enough confirmations deep, it is probabilistically approaches infinity, essentially. So since there are no exceptions on the Bitcoin database, right? So again, sovereignty decides the exception. The Fed is deciding the exceptions to the US

Starting point is 00:45:52 dollar database. No one can decide exceptions in the Bitcoin database. What it does is it maximizes the sovereignty of market participants. So every individual now has these sound and unbreakable rules by which to plan their economic affairs, to calculate and to govern their lives. And that's the big breakthrough here is that it's a breakthrough in sovereignty. It's taken sovereignty away from these large anachronistic institutions that were necessary in the 20th century, perhaps to, to coordinate human action at scale, but we can now do these things with software. And in terms of, to get into like freedom, what that means is if you're sovereign, you have the authority to take action as you see fit.

Starting point is 00:46:46 So you could look at the field of options and say, hey, I'm going to do A, B, and C. And there's no authority that stands between you and that course of action effectively. So Bitcoin is freedom in a way. We say, first of all, money, it's an instrument of pure freedom or pure optionality in the marketplace. That's by definition what it is. It can be used to attain anything in the marketplace, goods, services, knowledge. Bitcoin is inviolable money that maximizes the sovereignty of its individual holder um and it's and the last piece to that i guess is people like okay that all sounds good but the government's just going

Starting point is 00:47:34 to shut it down or they're just going to executive order 6102 your ass and just come take it in terms of confiscation resistance there has never been a property right more resistant to forced seizure than Bitcoin. It is just pure information. So it can be custodied. And, you know, your imagination is the limit, basically. Any information bearing medium in the world can be used to custody Bitcoin. People have encrypted it into public articles and like say the New York Times, that article gets published once, it's distributed information. The article

Starting point is 00:48:11 is out there for everyone to see, but only you have the key to decrypt the private key from that article. You can, you know, multi-signature is a big one. You can chop it into a lot of pieces, distribute it geographically. You can get very creative with how you custody this asset. So I think on all sides, you know, Bitcoin, it maximizes freedom across time to hold a guaranteed fraction of the total money supply. Like if you hold a thousand and 21 million Bitcoin, that's the only asset in the world you can say that I hold a thousand and 21 million forever. You can't even say that about gold.

Starting point is 00:48:47 Maximizes your freedom for moving it because it's just information. Maximizes your freedom for custodying it because it's just information. And it's this, if it works out, right? It's a call option on all the money in the world. It's a call option on all capital and all future human productivity. So it is the most, in terms of gaining freedom, we need asymmetric bets, asymmetric investments. I would say at this point in Bitcoin's existence, it's still the most asymmetric investment opportunity in the world. So it's a lot to take in. And that's why this is the Bitcoin rabbit hole. You can think about this

Starting point is 00:49:29 thing nonstop for years. You're still not going to get to the bottom of it. But it's equally exciting. It's interesting. So everything you just described is so compelling to someone who's been down the rabbit hole. But when you try to explain that to the average person, they find it terrifying because they trust their bank. They trust their bank or a centralized authority or whoever it is more than they trust themselves, especially for custody. So I think it's funny, we've seen be your own bank on the side of buses in Hong Kong as a pitch for Bitcoin. But I think that's actually sort of terrifying for your average person. I don't want to be my own bank. What if I lose it? What if I don't understand

Starting point is 00:50:08 it? So is that a barrier to mainstream adoption? Because of that, does it remain something for the privileged few who study it and understand it and are willing to take that risk? Or is there some happy medium in the future where we find mainstream adoption, it becomes accessible, but still safe? Yeah, so the original purpose of banking, as we said earlier, was to custody money for monetary metals, right? So in terms of those properties of money, metals and gold specifically really lacked portability. They're very heavy. They're hard, expensive to move across space. You know, you have to secure them. That was the original economic purpose of a bank is to centralize the custody of the metal, issue warehouse receipts that people can then transact with and use to redeem.

Starting point is 00:51:05 They can redeem that paper for real money whenever they want. And this actually let gold scale, basically. And by the way, when this happened, just a quick aside, the reason silver worked alongside gold is because silver had greater portability. So gold would be used for large settlements, typically. Silver was used more commonly for day-to-day transactions. Once we abstracted gold into paper currencies, silver was largely demonetized because that portability function had been gathered under a gold standard.

Starting point is 00:51:39 You didn't really need physical silver as much. So original purpose of bank was custodian to money. So they're issuing a bank note that's redeemable for money. And they would also do maturity matching. So the people that would lock up their monetary deposits for an amount of time, like your traditional CD, the bank would then go out, entrepreneurs would come to the bank actually to borrow money to fund their ventures. And the banks would match maturity on these time deposits with entrepreneurial borrowing. So they're performing a risk matching function that they would generate revenue from. So they earn revenue from custody and earn revenue from risk matching. I think,

Starting point is 00:52:27 and clearly the world of banking today has gotten way past that. Like we don't need to go into all the things that banks do today that aren't that, but that's all they were originally intended to do on the free market. I think those two functions are perfectly, banks are perfectly capable of continuing to satisfy those functions on a Bitcoin-denominated world. People should be able to custody their Bitcoin with their bank. I think the custody model will change, by the way, when you could instead chop that key into three pieces and trust two out of three or three out of five or pick your number? So in terms of mitigating counterparty risk, there's no better option in the world of Bitcoin. You can't chop your gold into pieces and custody it with different banks. You're then just exposed to different centralized custody models where Bitcoin enables

Starting point is 00:53:31 this decentralized custody model. It's really interesting. And then I think too that there's going to come a point, because Bitcoin is this like pristine collateral that you can, you know, it's unencumbered, it's liquid 24 by 7. I think it will become the new foundation to a parallel financial system. We can say like a digital non-state global financial system. And in that world, people will be time locking their Bitcoin for a year. Maybe they're locking it up in lightning channels. Maybe they're locking it up with a bank or with banks in this multi-signature custody model. And then those banks, perhaps they'll start to form their original function, which was to match savings with borrowers, basically.

Starting point is 00:54:22 So people can go out and lend that Bitcoin at a market rate. Another thing that I think will happen, because this is an interesting point that people brought up, they said, well, if Bitcoin eats all the money, then how are you going to borrow against your Bitcoin? Like what, there won't be a fiat to borrow in. So if there's no US dollar, what happens?

Starting point is 00:54:43 And there's a great piece written by Lewis over at Mimesis Capital on this. He focused on residential real estate, but effectively, you'll borrow the goods and services. You'll post your Bitcoin as collateral, say, to borrow a home. And then that collateral, you can either pay rent or the lease, whatever you want to call it to the property owner. They're holding the Bitcoin as collateral. If the house ever declines in price, then they can liquidate you. Or you have a call option.

Starting point is 00:55:14 You have the ability. It's like a rent to own almost. You posted Bitcoin as a collateral. You're getting service from the home or whatever asset it is. And then if you decide you want to keep it and take ownership of it, you can actually transact the Bitcoin completely

Starting point is 00:55:28 to take title of the asset. So banks could be useful in that transaction as well, but they're actually facilitating flows between buyers and sellers. So I think, I don't think banking goes away. I think we just move like Bitcoin is it's crazy about it. It's a bit of a paradox is that it's imposing free market principles on everything and everyone it's forcing us all to be more honest in our dealings.

Starting point is 00:55:59 And another just example of this came to mind is like the Grayscale Investment Trust, 2% management fee and large premium, right? Well, NYDIG just announced they're filing for an ETF. It's gonna be a 50 basis points management fee, trades at no premium, settles in Bitcoin. So it's like the, I saw this as like the ethos or the principles of bitcoin sort of imposing themselves into the financial system it's actually causing market actors at that level to be to deal

Starting point is 00:56:32 more honestly with our consumers so yeah just just really interesting to think of it that way i had never considered uh multisig beyond the three or five devices, right? Which is what I mean, I personally use multisig to custody my own Bitcoin, but I never thought of it as three out of five institutions. It's really an interesting way to consider it because it eliminates the county party risk of trusting a single bank. That's right. So just really, really interesting. And you also talk about Bitcoin being pristine collateral. We see that the OCC is saying that banks can now custody Bitcoin in theory, so we know that they're

Starting point is 00:57:13 going to start cussing it and start lending against it. I wonder when that will happen. I saw Michael Saylor recently joke that he can use his yacht as collateral, but it could be floating on the other side of the planet. Come get it, right? If I default on my loan. But do you see a world where the actual banks start to loan against Bitcoin? I mean, it sounds like you do. And that sounds like a risk. It sounds like putting our beloved asset into a system that we don't believe in. That's right. Definitely. I mean, it necessitates a Bitcoin holder to give up their keys to a lender so that the lender has control over the collateral.

Starting point is 00:57:59 There are interesting approaches to this being done, again, involving multi-sig. A company like Unchained Capital, they have multi-sig product, and they have multi-sig loan product. Right, lending, yep. Yeah, so you're giving up control, and they do, what, like a two or three multi-sig, hold one key they'll hold one key neutral third party holds the third key so the advantage there is you get to see you first of all you have a contractual arrangement between three parties that they can't take custody of the second key from the neutral third party unless certain contractual um uh obligations or obligations are met.

Starting point is 00:58:48 So there's a little bit more of assurance there, but they also, because it's because no one can move the Bitcoin, you get to actually see the Bitcoin sit in the vault and not move, you know, there's no re-hypothication or any other shenanigans going on with your Bitcoin. So I think the market will move that direction. This, This asset just gives us the ability to have cryptographic certainty of reserves. It enables really high degrees of transparency. You can prove reserves by signing a message or whatever. So I think these features of Bitcoin will permeate the institutional infrastructure, if you will. Like market actors will demand

Starting point is 00:59:31 that from their providers. If providers don't do it, because it's a freely competitive market, someone else will. And because Bitcoin can be moved instantly anywhere in the world, it's very easy to switch custodians or switch banks. So I think this will just cause a, you know, again, in the free market, the sovereignty of the consumer is paramount. So it's whatever the people want is what tends to happen. So I think people are going to naturally desire these features that maximize their security, minimize their risk, and maximize their return on the asset as well to get into lending and such. Yeah, that makes perfect sense. And I love the idea of the cross section between multi-sig and lending so that at least you have a bit of security for that. So I can't believe it. I'm looking up and I see that we're kind of up against it and out of time. So I feel like I could have this conversation for five hours. So we're gonna

Starting point is 01:00:27 have to do like a part two, three, four and five down the road if you're up for it. But where can people follow you and, and obviously check out what is money your show? Yeah, so you can find me on Twitter. My last name is breed love. So my Twitter handle is at breed love 22. That's B R double E D L O V E two, two. On my Twitter bio, I've got links to the what is money show YouTube channel. What is money show podcast, which is the what is money podcast.com for to go that route. And I've also got links to my medium page where I post most of my writing.

Starting point is 01:01:03 They got me started in to all of this new digital media landscape. And yeah, feel free to reach out to me on Twitter. My DMs are open. I really consider this to be my life's work. I think Bitcoin is the most important innovation we've seen in our lifetimes. I think it's a bigger deal than the Internet. And I spend a lot of time thinking, talking and writing about it. So happy to engage. Yeah, I suggest we talk about going

Starting point is 01:01:31 down rabbit holes here all the time. I've been down the rabbit hole of your medium and it's amazing. So I suggest very, very highly that everybody does that and watch the show. So man, thank you so much for taking your time. And I really mean it that I would love to love to have you back and continue this conversation. Yeah, Scott, this was great. Happy to do it.

The Wolf Of All Streets - The Biggest Scam: Banks. Fixed By Bitcoin, with Robert Breedlove

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