We Study Billionaires - The Investor’s Podcast Network - BTC130: Inscriptions & High Fees On Bitcoin L1 w/ Tuur Demeester (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have back by popular demand, Mr. Tur Demester. This is the first of a two-part series with Turr because we started recording this chat and we just kept on going. There's a ton happening in this space and there's no one with more critical and deep thinking than him to cover it all. Specifically, in this week's show, we cover all the talk about the inscriptions and the really high fees that we're currently seeing on Layer 1 of the network. We talk about scalability on layer two, regulatory developments, and plenty more. So without further delay, here's my first part chat with Mr. Tur Demester.

Starting point is 00:00:43 You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey everyone, welcome to the show. I'm here with Tur de Meester. I want to start off by saying, we've been having these conversations for quite a few years now. I was looking back and our first chat was in 2017. And I was like, oh, my God, it's been so many years already. Welcome back to the show.

Starting point is 00:01:18 It is so awesome having you here. You just come with a wealth of information. So great to have you. Happy to be here. And you're right. I mean, that's like six years ago. That was a different time. Although, interestingly enough, weirdly, some of these debates are coming back now,

Starting point is 00:01:33 like a blob size and stuff like that. Anyway, I'm sure we can talk about it. Well, that's right. That's exactly where I want to start. because, yeah, I think in our first conversation, we were probably talking about how fees were high, how you needed to have some type of solution that was, you know, second layer for immediate settlement, low fees. And here we are back with inscriptions now happening on the base layer and lots of people saying, oh my God, like what's happening? And you're seeing all the OGs kind of just smirk. What are you what are your thoughts on inscriptions? This is both of us smirking right now for the audio listeners. Yeah, I mean, and the nice thing is that back then, we were saying these things of like, yes, so we cannot do everything on the base layer.

Starting point is 00:02:22 It's just how protocols work in general. You have to engineer these things with a particular function for a particular layer. And if you have a different function, you build another layer on top. That's how you scale. The foundations of a building have a particular function. That's not where you're going to hang the picture. picture, right? The picture is going to be on the first floor, the second floor. But back then, the challenge was that the Lightning Network had been conceived, which is the payment layer on top of

Starting point is 00:02:49 Bitcoin. Theoretically, it had been conceived that it wasn't built yet. And now six years later, it's actually here. We have over 5,000 Bitcoin that are circulating at massively rapid speeds in that lightning layer. And especially, I think that's going to be important for this year, is a large exchanges are starting to implement it, and they're motivated by these high fees because they also pay a part of that and they know they can lose customers if they're going to charge $10 per,

Starting point is 00:03:16 you know, if you have $50 worth of Bitcoin and you get a $10 withdrawal fee, that's really heavy, or $20. I mean, who knows where it's going to go this year. So it's a problem that is solving itself. But it's true, on the other hand, that a lot of people have the same question, and I think it's understandable

Starting point is 00:03:31 because there's always a bit of an eternal September that happens in Bitcoin where there's always newcomers. There's always new people that need to be educated. And so it's great that people are asking these questions. I love the example of not hanging the picture on the foundation. And you have so many people that are literally trying to buy the picture and it literally put it on the foundation of Bitcoin. Talk to us about what inscriptions are.

Starting point is 00:04:00 And when this became capable to even do on the baseline, layer. And because I think there's people that hear inscriptions and they have no idea what we're even talking about. So give them a little bit of context and kind of your thoughts at large at what this is and what it means. Actually, I've been leaning back about this. I haven't dug in deep because I felt like, you know, from the get go, it seemed like an odd thing to do on the main layer. I do think in the main layer can be a place for preservation. Like, you know, literally what you inscribe on the main Bitcoin blockchain could be stored for hundreds of years. So there is a meaning to it potentially, but I haven't taken the deep dive.

Starting point is 00:04:40 I still felt like I was a bit of a hype. So maybe you can take my role here and share it with the audience what you've learned so far. And we can kind of tend us a little bit about this. Yeah, I mean, just in general, the intention is that the storage in each block is for transactions. I don't think that there was an intention for some of that storage on the base layer blocks to be used for things beyond payment. but through the latest updates with the taproot update and Segwit and some of these other things, there's now a way that you can actually inscribe data into the base layer.

Starting point is 00:05:17 You're going to pay a fee to do it. And as we're finding out, I think there's 150 blocks or something like, I mean, it's a really high number that are in the queue of the mempool waiting to be, what's the proper term I should use, term, minted or found by the miners? what would be the correct terminology for... Yeah, I mean, maybe you could say, inscribed or waiting to be broadcasts, you know, broadcasts on the network

Starting point is 00:05:41 and then inscribed in the ledger forever. So in a way, it doesn't even really matter what it is that these people are wanting to inscribe. Like, clearly it's related to some kind of a perceived idea of scarcity. Like there's a collector's value to having something particular inscribed in a particular block, and then you get to claim something,

Starting point is 00:06:02 thing. I mean, people have always, you know, for status, sake, like, people have built statues in the past and all kinds of things that cost money and that don't have, like, clear utility other than to, like, say something about the author or the owner. And so I think it's actually really interesting to think about the quote unquote waste, because there is an ongoing concern that the Bitcoin block rewards are getting less less every four years. So, So this is what people generally think about when they think about mining Bitcoin is that there's new Bitcoin being minted and are given to the miners. And then on top of that, there's transaction fees that are earned by the miners.

Starting point is 00:06:42 But for the first, I don't know, five, six years, there were so little transactions happening that there were no fees, basically. And so that was the reward. But then the concern has been, well, if this keeps going and the new Bitcoins get less and less because we know it's going to stop at $21 billion. So by probably in about 20 years from now, the new supply is going to be virtually zero already. And so we wouldn't worry like, well,

Starting point is 00:07:06 how are the miners going to keep making enough money to build that firewall to keep protecting Bitcoin to have enough hash power and throw enough electricity at the network to deter attackers? And the answer is, of course, fees, right? Transaction fees. And so you could argue that when transaction fees are artificially low, say, for example, in a bear market, people will come up with some kind of use for the main blockchain, whatever it is.

Starting point is 00:07:30 It's ordinals or it's NFTs or whatever, some smart contract that sounds funny or fancy or profitable and they'll stick it on the blockchain. And in a way, they'll clog up the slowly, the mentpool until it's high enough, which is the mempool, by the way, is like the queue, the queue of transactions, until finally the blocks are getting full and the fees go up again. So in a way you could say it's a self-regulating, mechanism, if there's not enough naturally occurring just very pragmatic transactions, that there's other uses that are eventually generating profits for the miners. So it's an argument

Starting point is 00:08:07 to say that rather than calling this spam and we have to fight it at all costs, we can just be like, look, the block size is fixed. Like blocks are never going to be more than about four megabytes in size. And so, yeah, let them throw whatever in those blocks because it's going to help us fund the Bitcoin firewall. So Dylan LeClair had a tweet yesterday that I think encapsulates my opinion and probably your opinion quite well. He wrote, Bitcoin has a security budget problem. Fees aren't sufficient. It needs tail emissions, which is the argument that people were making when the fees were too low. Now that the fees are really high, this is the continuation of his tweet. Bitcoin has a throughput problem. Fees are too high. It needs bigger blocks.

Starting point is 00:08:51 And so then he writes, Your inherent desire for human intervention at every turn is exactly what Bitcoin solved. Please just shut up. That's that. People should print that on a poster and hang it on the wall or something. It should be like one of those car stickers. You know, Saylor did an interview and he was talking about how not tinkering with the base layer and it being so difficult to implement changes at this point in the process at the base layer

Starting point is 00:09:24 is akin to not being able to tinker with the laws of physics and how everything can be built and constructed upon such a base layer because people can base their development and base their engineering around these things that are core principles that aren't going to be changed. And it really goes to Dylan's quote that he has there. And I really challenge people to think about how important that is. Your inherent desire for human intervention at every turn is exactly what Bitcoin solves. It's something we can build upon. Yeah.

Starting point is 00:10:01 And Bitcoin's immutability is its bedrock. Like that is what everything is built on. And so what you're saying, exactly what you're saying is Satoshi, you intuitive this. There's this brilliant little throwaway message. that he wrote on the forums back in 2010, I think, where he's like comparing Bitcoin to a boring gray metal. He's like, imagine a boring gray metal that has like no clear use in industry or technology. It's just sitting there.

Starting point is 00:10:31 The only properties it has is that it's scarce and you can send it through a communications channel. Like you can send it around digitally at very low cost. Like what would happen? He was referring to Bitcoin, right? So in his mind, Bitcoin is like one of the atomic elements. It's like a boring gray metal with fixed properties that you can just send around the world. And so, yeah, it's immutability. And this is a learning process.

Starting point is 00:10:56 People have to understand. They're so used to everything being that you can engineer everything. And we come from a financial paradigm where literally you want higher interest rates. We're just going to sit in a room and push a button and the interest rates are higher. Like we can, you know, we're like the Wizards of Oz, like the man behind the curtain. And we're so used to having that man around. So I think it's understandable that people are trying to, whenever they're anxious about something, they think the protocol needs to be tinkered with.

Starting point is 00:11:23 I was at the micro strategy conference last week. And I had the pleasure of having a one-on-one chat with Michael, Saylor. And I said to Michael, I says, well, how about from like an attack standpoint with the inscriptions and they're just inundating it with endless supply of Fiat? And he just kind of like smile. And he says, okay, so now they're incentivizing use of the Lightning Network and everybody kind of moving to building that out and loading that up with additional channels so that they can transact with near, you know, frictionless fees on layer two. He's like, so it's a win. It's a win for layer two. And I just kind of like smile and I was like going back to things that you and I have been talking about for years. It just seems like every attack made on Bitcoin is an opportunity. for it to grow and expand and become stronger in the area that maybe the attacker isn't thinking is necessary.

Starting point is 00:12:20 And then it doesn't even address the fact that these higher fees are going straight into the pockets of miners that then are either retaining that in Bitcoin or buying more rigs to deploy in the lowest cost energy environment or location possible. I don't necessarily know whether the whole inscription thing is good or bad. But whenever I'm looking at this idea of not intervening and not messing with the code, it seems like it naturally incentivizes building in places where it needs to happen. Right. I mean, Bitcoin is an ecosystem with clear rules. And so if you put stress on an ecosystem like that, it's going to grow around it and creatively build around the problem. And that's why.

Starting point is 00:13:06 Like, that we have these pressures. The fees are going up. people are starting to get uncomfortable, that's what gives the impetus for people to be like, I'm going to install a lightning wallet on my phone for the exchanges that have been like, I mean, Coinbase has been resisting it forever. The same with Binance and all the big exchanges.

Starting point is 00:13:23 Like the exchanges that have been cutting edge that are kind of like, you know, slower players and they're probably going to win in the long run, to be honest, they have been implementing lightning for quite a while, like BitFINX, Krakken. And it's kind of like the big ones that have been running these casinos.

Starting point is 00:13:39 knows, they're the ones that are finally coming around now. And that I think is closing the circle almost. I think that, you know, once these last chains are starting to be lightning compatible, people are going to really experience the power of lightning. And I think you could even make the argument that would El Salvador have adopted Bitcoin if lightning wasn't around? Because as far as I understand, I think Chivo was integrated with lightning so that if people wanted to buy $20 worth of Bitcoin or $10 worth of Bitcoin, it would, maybe I had some kind of centralized, they were like the central relay or something. But I think that's important, you know, these kind of things, they're little stepping stones. So yeah, and sometimes people just have to kind of experience

Starting point is 00:14:22 network effects for themselves, like it, or logarithmic evolution of things. Like, yeah, it's growing at 20% a year, but they don't think it's fast enough. It's like, well, let's give it a few years and you'll see what that means. Yeah, I had a moment recently talking about, layer one versus layer two. So I was using Noster. Everybody's familiar with basically zapping Satoshi's to other people almost like their likes on Twitter. And I tried out cash app. So I was using wallet of Satoshi to use the Zaps. And I was like, you know what? Let me try out cash app. And I used cash app. And what was so amazing to me was I went into cash app. I bought, call it $20 worth of Bitcoin into the cash app. If I wanted to send that layer one to another

Starting point is 00:15:06 wallet. I just put in the wallet address for a layer one Bitcoin address and it just sent it. But everything happening on these zaps on Noster is layer two. It's immediately settling lightning layer two. I go there and I'm zapping somebody's account with some sats and I used cash app and it just immediately sent the sats. And I know that's layer two that's happening. So it's already completely seamless on cash app. whether I'm using layer one or layer two. And I never, like, I just put the, the address for layer two in there, and it just naturally new. And if I put layer one in there, it just naturally new. And so, from a user experience standpoint, the user doesn't even have to understand any of that.

Starting point is 00:15:53 And I can't, I mean, this is, I don't know the market cap size of cash app and square, but I mean, it's probably like a $30 billion company that has implemented this. And I think they're the first one that I've come across where it was literally just seamless, whether I didn't even have to know what I was using. I just knew I was using quote unquote Bitcoin and I could put any address in there and it just worked. Right. Yeah. And this, this is the kind of stuff that is known as like the 10 year overnight success. Like if you've been in the Bitcoin ecosystem, you understand that people have been working on lightning for so long. But if you're an outsider, you're going to all of a sudden, it's like the light is switched on. It's like, oh, whoa,

Starting point is 00:16:30 like this is possible. Yeah. And all of a sudden, all these like, all this concern lingering about like Bitcoin is slow and you can only do three transactions a second and it's never going to scale. All that is just going poof. Yeah. And then the same thing is happening. I don't know if you've been following that is Andrew Poolstar's minisccript and all the incredible new solutions that are opening up for Bitcoin custody and basically smart contracts that are blowing, totally blowing out of the water, these old coin projects that have been huffing and puffing that you need. needed individual professor coin that is like specially designed for smart contracts. That is just also going to go poof.

Starting point is 00:17:15 And that's also going to be part of Bitcoin's 10 year overnight success. Is that like, oh, but the fearmongers were always saying like, no, no, no, Bitcoin is just some kind of weird e-gold. You can never build contracts on that. And then all of a sudden, here we are with ordinals, with confidential asset issuance, all of a sudden, all the stuff that supposedly you could only do on alt-cold. is right here. It's in the Bitcoin world. And it's nuclear proof. Like it has that like really solid bedrock of code that is carefully designed, carefully pen tested for years so that if you

Starting point is 00:17:50 built something, it's not actually all apart. Let's say it's like the Lego blocks. Like, you know, it has that internal logic where you almost can't do it wrong. And that's just so exciting. That's coming, that's happening right now. And what I'm so excited about is if they're trying to do this and inscribe it into the base layer, if they do it and there's no actual users and there's nobody that's actually using this thing that they're engineering, they're going to go bankrupt. They're going to run out of money and they're not going to be able to afford the fees in order to make these inscriptions and use up space on layer one. I'm hopeful that it's all just going to naturally, like, the fee, and as the fees go higher,

Starting point is 00:18:31 it's just going to naturally solve demand for a limited scale. amount of space every 10 minutes. And it's going to incentivize miners to continue to make the network more secure. And yeah, I don't know. I mean, people have made this comparison with, you know, the Bitcoin blockchain and international shipping, you know, the whole ecosystem of international shipping and the format of the shipping container. And that, you know, one, one Bitcoin block you can compare to like a big container ship. And, you know, there's only so many ships. and they go pretty slow. But every block can contain a huge amount of data, right?

Starting point is 00:19:10 And just like every single container can contain all kinds of stuff. And it's making the world wealthier. And it's such a great system. And like, no, we don't want bigger containers, right? It just trickles down. Like, people just have to slowly understand these concepts. Let's take a quick break and hear from today's sponsors. All right.

Starting point is 00:19:31 I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas.

Starting point is 00:20:16 These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful main stage talks, hands-on workshops on freedom tech and financial sovereignty, immersive art installations and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedomform.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just

Starting point is 00:21:03 the conference, it's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system.

Starting point is 00:21:36 And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide,

Starting point is 00:22:09 Dismifying AI at netsuite.com slash study. The guide is free to you at netsuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all ecommerce in the U.S. from brands just getting started to household

Starting point is 00:22:48 names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing... Sign up for your $1 per month trial today at Shopify.com. slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. Why do you think people have this urge to always step in and think that they

Starting point is 00:23:44 have to fix the base layer of Bitcoin? Because isn't that kind of like inherently the issue we're talking about is how can we cognitively? How can we convince people, hey, keep your hands off of it. that is truly the thing that was solved for was this, you know, laws of physics type going back to that example. Why do people feel like they have to step in and that they have to do this change? Yeah, that's a good question. It's probably like, there's probably a multitude of like factors that play into that. I think one is, of course, that we've been living in the fiat era since 1913 and that there's all these economic theories that are trying to justify why we need to print money, why we need to intervene. And so in a way that that's just been, and also why

Starting point is 00:24:28 capitalism is flawed and free trade is flawed. And so we need all this interventionism. It's almost become the norm, right? We literally even spoon fed this stuff ever since we went to school. And you don't even have to have studied economics. Like it's in the newspapers. And every time something goes wrong, yeah, like the sorcerer apprentice has to come up with some kind of big intervention. And I think now, interestingly enough, that paradigm is running on fumes. It's kind of like at a dead end and it's going to start deteriorating. And in places like Argentina, like people have been like, yeah, but I already voted

Starting point is 00:25:05 for the interventionist. Like even young people, they're like, I voted for Christina five years ago, 10 years ago, but like everything got worse and worse. So what's the alternative? And so I think that's the beautiful thing is that Bitcoin is such a constructive project. Like it doesn't, it's not, it embodies very naturally all these, all these principles that I think people will, through osmosis and just by handling it, they will start learning, learning a different way of thinking. Like kind of like integrating some of the thinking that engineers naturally have into people's everyday life when they think about economics and finance and maybe even moral things like that. One final question on this. At what point would you say maybe we need to look at a change on the

Starting point is 00:25:51 base layer? Would it be something like the fees associated with conducting a transaction, exceed that of Fedwire, and they've been like this for four or five years? Is that when we have to maybe as a community take a closer look at what's actually happening? Or do you think that even raising the issue is not appropriate? I once was like, flipping on Twitter and I said like one day, the cost of broadcasting a Bitcoin transaction on the Bitcoin blockchain is going to be the same as

Starting point is 00:26:23 leasing a shipping container. I know that's probably out there. Like that's probably excessive. But still the principle is there. Like there are certain things that are done in the real world on a daily basis by people who are just very deep into a certain market. Like, you know, moving a ton of physical gold, for example.

Starting point is 00:26:43 That happens all the time. And it's just a very specialized thing. And it's held mostly by corporations and those kind of things. And so if you, you know, Gregory Maxwell had a great way of explaining what the blockchain really is from a principal point of view. He said it's basically a court, a system. You know, it's a, it's a, it's a, it's a, it's a, it's a, it's a, it's a, it's, it's, it's, to resolve disputes.

Starting point is 00:27:06 And courts are expensive, you know, and, and there are many other ways to prevent disputes, to mediate disputes. by technology or by using mediators, et cetera, and that's the stuff that happens in the higher layers. But if you want to go to the highest court, that's going to be the blockchain. And so, yeah, it's, I don't think that would be a good enough reason.

Starting point is 00:27:27 Lise you have the cost of the court are too high. It's like, no, no, no. We capped the amount of disputes that can be resolved every 10 minutes at this. This is the cap. And so if you cannot afford to get in that pool, or to wait long enough to get it, you know, integrate in one of the blocks, then you've got to find another way. But I mean, if you, your question

Starting point is 00:27:47 was like, is there any role to maybe, you know, tinker with the blockchain? I think or with the rules, the consensus rules, the only thing over the years that I've encountered that I, that would give me pause is if there was some, if Shah 256 was somehow compromise and, you know, the basic cryptography was compromised because of quantum computing or something like that. But even then, some people I've talked to who said that you would probably solve it with the soft fork, which makes sense. It would mean that people who want their, it's almost like there's this biblical flood, right? All of a sudden, the land that we thought was safe is not safe, and we have to move to higher ground. So you could do that with the soft fork as you create a

Starting point is 00:28:30 certain type of Bitcoin UTXO that is more protected against this aggressive form of computing, something like that, or a different form of mining, or I'm probably not explaining it, right? but it's in that direction so that a lot of people would have to take action, but you would still not hard fork the protocol. So just to give a short answer, no, I haven't found a reason why anyone would have to hard fork Bitcoin ever. Ter, you have been writing epic, profound pieces for quite a while. I'm just going to name a couple.

Starting point is 00:29:03 You have an article called The Bitcoin Reformation, one called Bitcoin and Heavy Accumulation. These were both in 2017. You have another one, how to position for the rally in Bitcoin. This was back in 2015 when the price was $200 of Bitcoin. I'm going to have links in the show notes to all three of these articles so people can go back and read them. They are very robust. They go into a ton of detail. Some of the themes that you were writing about back then was scalability, which we discussed

Starting point is 00:29:32 on the first part of the show. User experience, which we also talked about with the cash app and other wallets. that are just way, like insanely profound compared to what we were looking at back in this period of time. Regulatory issues, disrupting power structures, commitment to this long-term vision. When you look back and you audit yourself in what you were writing about, is there anything that you feel like you missed or something that you feel like you got really right? And I bring this up because we're about to talk about your latest behemoth of a report that just came out that's phenomenal. And so I'm trying to kind of highlight that to the reader as you're

Starting point is 00:30:12 just kind of assessing an auditing yourself. When I read through these old reports, it's easy to kind of be like, oh, I could have, you know, tweak this or tweak that. But overall, I am really proud. I am, you know, I feel good about the general content. If I have to think about that particular report, I would say I was a bit overly optimistic about the liquid network, about how that fast that was going to be developed or side chains in general, which is basically somewhere in the middle between the main chain and the lightning network. It's like the idea that you have a faster settlement and more flexible settlement network. I do think that the conclusion was talking about the next five years. So it was still within that range. Five years from the report would be 2024.

Starting point is 00:30:57 So some of those things could really happen. Yeah. And the financialization actually happened, like options and futures have become an important part of the Bitcoin project. And then I'm glad I didn't venture too far into speculating about altcoins could do and the things that we could see there because it is kind of by nature such an unpredictable space. And a lot of it plays on the what is alive at the moment, you know, these fads that come and go. And so I'm glad I didn't really pay much attention to that. Total clownware.

Starting point is 00:31:28 A lot of it. And a lot of it is kind of showing us what doesn't work. So maybe we should be grateful. Yeah, no, that's a great point. It really is showing you what doesn't work. And I think some of the technology is things that people can think about is how can you incorporate maybe some of these ideas into the base layer. So that's a great way to look at it.

Starting point is 00:31:47 Okay, so let's talk about your newest report. How many pages was this? This is like 20 pages or 25 pages or something like that. So some of the themes you have in this that we can just kind of go one by one here. You say Bitcoin is on the brink of decoupling with stocks and crypto. What are you getting at here? That's a good question. I think that the year 2021 was a culmination of, I don't know, something in the air that

Starting point is 00:32:16 was like peak irrationality or something like that or peak animal spirits or whatever you want to call it. There was the, what was it called again? For markets at large, you're saying? Yeah, markets at large. So like the Wall Street bets. were going nuts and they're going, you know, buying short-term options on AMC and all these crappy companies. And then real estate just totally boomed and peaked. And then in the, you know,

Starting point is 00:32:41 I think NFTs were also such a big part of that huge rally. And Bitcoin was kind of caught up in that and that slipstream. And then what we've seen since, like we're only two years later, is that both those markets like crypto and the stock markets, but also the bond markets and housing, they're all deteriorating. It's all kind of coming down. And it makes sense because we had a huge rise in inflation followed by that. I think Michael Sala had a great metaphor of like it's like a fighter jet that like, you know, goes down to the earth and then goes up straight into the air. And, you know, and then the pilot loses consciousness, you know. It's like that's kind of what the Fed is doing to the markets. And the wings get ripped off. Don't forget the wings getting ripped off. He also

Starting point is 00:33:24 included that. Right. Yeah. And so then it's. It's like, all right, well, so this is the economy. This is the $500 trillion economy. So where do we go, right? And so Bitcoin, to me, is a huge part of the answer. It's like we've been stuck in this theater that's now actually on fire. And a lot of the exits are starting to look really bad. You know, people used to flee in bonds and they used to flee in real estate and maybe even, you know,

Starting point is 00:33:49 some of the utility stocks are not looking so good anymore. So anyway, so that's my general framework for why do I think Bitcoin is going to decouple, Well, basically because, and this has been my thesis since 12 years ago, is like, if you want to position for an economic depression, you want to have assets that have high liquidity and low counterparty risk. And of course, scarcity, because that speaks for itself. And that was the big aha moment when I found Bitcoin is like, oh, my God, this is a depression instrument.

Starting point is 00:34:20 If we're going to have a giant wealth transfer, where the economy needs to recalibrate because it's been over-investing and overextending, Bitcoin is going to be the funnel through which a lot of that is going to happen. One of the other main things that you talked about in this new report is Bitcoin Nation State adoption is set to become a big theme. I think everybody's well familiar with the El Salvador, but I think a lot of people are looking around and saying, okay, so there's one country, there's really nobody else that's done this. And you're saying at this moment in time, you think moving forward, what, in the next two years,

Starting point is 00:34:55 that we're going to see a lot of other nation states start to do something similar? Yes, I think the price will speak volumes. I think the reason why there's been a delay in adoption, because you think like, oh, El Salvador is first, but they kind of announced pretty close to the top of the market. And so then it's like once the market goes sideways and it goes down a bit and there's more skepticism, you know, politicians are pretty whimsical. Like they're not going to risk their whole career on, you know, some high volatility. It could be a bubble.

Starting point is 00:35:25 They don't really understand it. So I think in a way it's good that we had this consolidation period, even though for some people it was brutal, financially speaking, I think it's really good. I do think based on the conversations I've had with people that know a lot more about this because they're working on, you know, Chief of Wallet, they're working, they're talking to politicians all the time, is that there's still a lot of hesitation when it comes to like boldly,

Starting point is 00:35:51 doing something so boldly as El Salvador, Or like, you know, he is a bit of a maverick and he is seen that way. But it is possible that we'll have new mavericks being elected. You know, that's possible. People that run on a Bitcoin ticket that are not in power now. And then also, central banks are starting to get really uncomfortable because, like, their claim to fame, they're kind of like, the reason why they have supposedly a strong currency or a strong position is they have that balance sheet that has all kinds of fancy assets and it

Starting point is 00:36:23 has gold and this and that. And now those assets, the balance sheets are deteriorating, like the bonds and the Forex reserves. They're all kind of declining and looking very, very shaky. And then they've been investing in tech stocks, some of these central banks and, I don't know. And so I think it makes total sense that in the next two years we'll have some central banks start putting some money in Bitcoin. And also interesting, there's also kind of a game theoretical element at play where, of course, if you're the first central bank to buy, you're going to get a lot cheaper bitcoins, obviously. But there's also, like, politically speaking, people have noticed that the IMF has gotten

Starting point is 00:37:03 really uncomfortable about El Salvador. Yes. As Salvador being so bold and being, like, going against the IMF and no longer being so subservient. And so even to, like, let up a little balloon, it's like, hey, we're thinking about adopting Bitcoin, you know, talking to the IMF. It's like, you know, maybe if we don't like, you know, maybe if we don't like, your terms, we're just going to switch and we're just going to follow El Salvador. So it doesn't mean

Starting point is 00:37:24 they'll do it right away, but, you know, this is starting to become like a political bargaining chip potential. And the same as with mining, right? If you're cut off from the world, you can be like, let's just build a bunch of Bitcoin mines or just, you know, have low taxes and we want to foster a Bitcoin economy in our country because we're a brick, one of the brick countries or, you know, like, I mean, it does, I don't think it's a coincidence that El Salvador adopted Bitcoin because they're landlocked and they have huge amounts of volcanoes. I think there's over 100. So there is that long-term potential of becoming a kind of a mining powerhouse.

Starting point is 00:37:58 And there's many other countries that have the same problem of energy rich, but kind of constrained in terms of energy transportation. Speaking of country adoption, in Argentina, there's a political candidate right now who looks like he could be a member of the Beatles. And he's pro-Bitcoin. I know you're familiar with Argentina. So what are your thoughts here? Yeah, Javier Milet.

Starting point is 00:38:21 Yeah, yeah, I am familiar, although I haven't been a long time. I really want to go back. I actually learned about Bitcoin in Buenos Aires for the first time. Yeah, Javier Milet, from what I've seen so far is he is a economics professor. He's been teaching economics for over 20 years. When he was a kid in the early, I think it was in the early 80s, he was 12 years old, and there was hyperinflation raging through Argentina. And he said that when he was 12 is when he decided,

Starting point is 00:38:49 he's going to become an economist. And actually, his sideburns are probably a nudge to, I forget his name now, but a famous general in land American history

Starting point is 00:39:01 who kicked the Spanish out. It's kind of like the top of the equivalent of Peru and Argentina and Brazil, I believe. And so young people, they grew up with these stories about this general.

Starting point is 00:39:13 And all of a sudden, there's a guy who very much looks like him. Apparently he's pulling tremendously well. among the young people. People are saying that, you know, likely they don't agree with all his economic ideas because everybody's been raised very much in the interventionist mindset. But at least they understand that he stands for something different. He's been advocating for competing currencies.

Starting point is 00:39:35 So he wants to put, allow for the dollar to just circulate freely again. And so basically redolarize the economy. And then he's not been critical of Bitcoin at all. When people ask him about it, he explains that's very important that we have private currencies and that central banking is a scam because it robs people, the populace of money by means of the inflation tax. And it's very, very interesting how millennials are so galvanized by this new person and new movement. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect

Starting point is 00:40:10 proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a stock two or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and Riter spend 82% less time on audits with Vantta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at vanta.com slash billionaires.

Starting point is 00:40:58 That's vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for.

Starting point is 00:41:39 See a trading opportunity. you'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high-yield savings accounts.

Starting point is 00:42:19 Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes, thanks to the Fundrise income fund, which has more than $600 million invested in a 7.97% distribution rate, With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025.

Starting point is 00:43:07 carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. And for people that aren't familiar with Argentina, their inflation for their local currency is 100% annual right now. Bitcoin has already made new highs in that country in their local currency. In their local currency, terms. And I recently read that they have cut off citizens' ability to use apps to buy Bitcoin and basically accumulate it through like traditional exchanges like we have here in the U.S. and abroad. Yeah, I mean, it's getting really interesting. One of my main concerns on this

Starting point is 00:43:56 one, turf, I just have to be quite frank, is I've been talking a lot about this idea that if you're not a net producer, it's near impossible for you to store your savings or you. your retained earnings in Bitcoin because you're a net consumer, right? And all of those bills and all those expenses for net consumers are often in the local currency that they're living in. And so why introduce the insane amount of volatility that you get with Bitcoin when you're a net consumer and you have all these bills that need to be paid by introducing that volatility? Sometimes you're making it way harder for yourself in order to complete the obligations that you're already accumulating liabilities on your personal balance sheet. So this applies for the individual,

Starting point is 00:44:42 this applies for the business, this applies for the country. And so when I look at a lot of these countries where they have really poor currencies, Argentina, you name it, like just go around the world. Most countries are dealing with insane issues with their local currencies. A lot of these same countries are net consumers. They're not net producers, not all, but a lot. And so where I think it's hard for these, and you also look at these same countries, and they're heavily influenced by the IMF and the World Bank that just continues to snowball and roll their debt so that in nominal terms, the debt just keeps getting larger and larger and literally impossible to repay as they roll into the next loan, which is an even larger amount that they have to borrow just to have liquidity in

Starting point is 00:45:29 their system. And so when I look at what's happened in El Salvador, and he absolutely is a maverick, because they fit that complete description that I just explained, right? And so many other countries are in that same situation and they're looking at the IMF and they're like, okay, I can get liquidity, which will solve my short-term issue. I understand Bitcoin is the solution, but there's no way for me to actually save and store this thing because I'm a net consumer. I'm not a net producer. And so there's kind of this quandary that's playing out where maybe the citizens are getting it

Starting point is 00:46:03 And maybe some of those citizens are net producers and they can store their savings in Bitcoin. But as you go up the architecture to the business, to the country, it's really hard for that to flow up just because of the sheer overreach that has occurred with the IMF and the World Bank for a lot of these domains that we're talking about. So I'm curious to hear kind of not that I disagree with your thesis. I think your thesis is true. And I think we are going to see more of this in the coming years, but that's the hurdle, I guess, that I see as we're looking at it. I definitely think that it would be wrong to completely, to kind of impose Bitcoinization or something like that, right? I think that what we want is let a thousand flowers blossom,

Starting point is 00:46:48 and we all speak our minds freely and we have competing currencies in the world or that the artificial tax on Bitcoin is removed, which we totally have, right? If you save in Bitcoin in the U.S., you're going to pay capital gains tax whenever you sell your money. It's kind of weird, right? You spend money. But the reason why is it's treated as an investment in many places. So that's basically the only thing you would need to do is just remove that tax and then let the economy slowly via osmosis and kind of like, you know, Bitcoin is going to flow

Starting point is 00:47:19 where the resistance is least and people that have low time preference and who have the luxury of being able to save will be able to save some in Bitcoin. And then when there's a big bull market, then they have the money to build. to build out some infrastructure and start a business. I mean, you're probably familiar the little richest man in Babylon book, right? I mean, the Bitcoin is that kind of money. That was the advice of the wealthiest man in Babylon is like, you just save a little bit of your money over the long run.

Starting point is 00:47:43 And then when the opportunity comes around, you invest it in a business. But with Fiat, that is taken from you. That opportunity to build a nest egg is rug pulled from you. And also there's that, you know, I don't know if it's a fair analogy. But I do, you know, when I, the Bitcoin Reformation, I drew some analogies between organized religion and money and Bitcoin today. There is some example, right, where there was a new movement that Protestantism was first just kind of rebelling against the church, but then they did certain things their own way.

Starting point is 00:48:14 And in continental Europe, a lot of Protestantism became almost like that imposed version. Like, we're going to impose the Bitcoin standard. And then you got a lot of conflict because it was either or, either you were Catholic or you're Protestant and they kind of both became calcified and just the source of incredibly bloody conflicts and poverty. Whereas, you know, I think the stellar example of the other way was New York, you know, New Amsterdam and then New York City, which had freedom of religion from the get go and it just kept on flourishing and flourishing because the market just adjusted and there

Starting point is 00:48:50 was this general tolerance where individuals could make their own choices. And that's what I would like. let these technologies coexist. And it's way too complicated for you and I individually to figure out what technology needs to be used were. I mean, that's what the Soviets tried to do, right? How many tractors do we need in this area? I'm like, this is impossible.

Starting point is 00:49:10 We need markets to figure those kind of things out. Amen. Amen to that. Hey, this was a powerful quote in your new report. You said, generally speaking, we can expect for economic activity to switch from emphasizing the production of consumer goods. and services towards goods at the very beginning of the value chain. Explain what you mean by this.

Starting point is 00:49:32 I think this is a really profound comment, and I think it can help guide people as they're trying to navigate the chaos in these markets, kind of as a guidestone to how to think about things from a very first principles kind of way. Yeah, I'm going to draw an analogy, and it's a very simple one, and I know a lot of people are going to say that's too simplistic, and it's not. So let's try and go there. Basically, we know that many economies have been living above their means. They've been, you know, getting into debt way too much because the interest rates were artificially low for so long.

Starting point is 00:50:08 And so this is the equivalent of having a family living and they are, they have the opportunity to borrow as much as they want at a half a percent interest per year for however long they want, unlimited time to pay it back. So what are they going to do? They're going to borrow lots of money on average, of course. They're going to borrow lots of money. They're going to build a pool in the backyard. All kinds. They're going to really have a lot of their spending be focused on consuming, consumer products, clothing and all these nice things.

Starting point is 00:50:38 And then imagine the same situation. The debt stays the same, whatever they've accumulated in debt. And then you're like, oh, sorry, guys, we're changing the rules. The debt is now to be paid at 20% interest per year. Like that kind of shock is all of a sudden happening. So how is the spending going to change with that? that family, well, I mean, it's going to be focused on just having enough heat, having some food on the table, very basic foods, maybe having some gas for the car. They're probably going to

Starting point is 00:51:07 sell some of their cars. They're probably going to downside, live in a smaller house. So imagine that happening on almost a global scale. Like, that's what we're talking about. And that's that shift. And that's what Austrian economists talk about when they talk about credit expansion during the bull phase of the bubble. We've seen a. a huge bubble accumulate over 40 years of credit expansion and all this spending above your means. And now the Piper has got to be paid. And so just keep that in the back of your head when you're thinking about investing. Like Apple, yeah, but it's a great company. Yeah, yeah, but they sell consumer products. A lot of the NASDAQ companies, great companies, but it won't matter

Starting point is 00:51:46 if the consumer doesn't have the funds to keep consuming those products. It's very simple. And so then what you go back to is basically the market real. as we've been underinvesting in just simple things like pulling oil out of the ground and, you know, growing grain and having like a store of value for your family. Because all of a sudden my pension fund blew up. All of a sudden, my insurance company apparently was invested for 75% in bonds that are evaporating. So my insurance is not going to be worth anything. I need to self-insure. How do I do that? Hard money, gold, Bitcoin, those kind of basic things. So that's my framework going into this depression. I think it honestly, I think it started with the pandemic. I think

Starting point is 00:52:26 that's 2020 is kind of my marker. And in my mind, it's like this is going to be a 10 year period where we're going to have some flare-ups and things are going to look better for a while and then they'll kind of look worse and we'll try and muddle through. You know, I think it's really profound because you're talking about in your example, these families had locked in rates at zero percent. But it's even more profound than that, because if you're 60, 65 years old or younger, all you know is that the rates have continued to go down for your entire life. And so there's a cognitive conditioning bias that everybody has, that they can roll their debt. Like, let's say you took out a loan for 10 years and you didn't really pay back the principal on it. You were making interest payments and you need to roll it.

Starting point is 00:53:14 it was always easier to roll it at a lower rate for everybody under the age of 60 or 65 years old that are alive today. That was their experiences. I could just overconsume. I don't actually even have to pay back the principal. I can just roll it at a lower rate. And so they've been totally conditioned into thinking that they can live in exuberance and just kind of expand their debt load for their whole life.

Starting point is 00:53:41 And then at the very, the icing on the cake is what. you're saying, which is then it got down to literally like a half a percent interest and they really loaded up and they really went out on the risk curve at the absolute worst time possible. Often at the advice of their parents who knew the same thing. Who knew the exact same things. My parents bought their first house in their early 20s in 1982, 14% interest rate and they've only ever seen a decline. Yeah.

Starting point is 00:54:09 It's exactly what you're talking about. And so yeah, you're right. I mean, we millennials, I don't know if you're still part. of it or not, but barely, barely. So it's kind of like, it's going to mean incredible, incredibly difficult adjustment. You're totally right. There's that mental cost of making that switch. And it's also what we've seen is that people who doubled down on the rolling over,

Starting point is 00:54:31 they've gotten the rewards. Like all the books about how to get rich were always about get one apartment, buy one apartment and then use that as collateral to get more and then use that as collateral. It's like, the sky's the limit. And then meanwhile, if you're really, like the prudent saver, you kind of look like a schmuck. Well, yeah, there was no way for you to outperform somebody who was levered like that in a system where, you know, rolling debt just got easier and easier to play.

Starting point is 00:54:57 Until Bitcoin. Until Bitcoin, yeah. Yeah, what an exciting time. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can

Starting point is 00:55:19 leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I'll catch you again next week. Thank you for listening to TIP. To access our show notes, courses, or forums, go to the The Investorspodcast.com. This show is for entertainment purposes. only. Before making any decisions, consult a professional. This show is copyrighted by the Investors podcast network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC130: Inscriptions & High Fees On Bitcoin L1 w/ Tuur Demeester (Bitcoin Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.