204 - What is Bitcoin? with Robert Breedlove

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-robert-breedlove ----- Robert Breedlove is a freedom maximalist and Bitcoin philosopher. Robert is known amongst Bitcoiners to produce content that draws from ancient wisdom, and brings it forward into the modern times, with Bitcoin as the context. In order to tell the story of the bull case for bitcoin we have to tell the story of money. ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 ⁠ https://feeds.flightcast.com/%E2%81%A0https:/k.xyz/bankless-pod-q2%C2%A0%20%C2%A0%20%E2%81%A0 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum https://feeds.flightcast.com/%E2%81%A0https:/bankless.cc/Arbitrum 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku ------ TIMESTAMPS 0:00 Intro 7:02 What is Money? 30:44 The Brokeness of Money 56:44 Bitcoin End State 1:07:17 Bitcoin’s Importance 1:16:49 Explaining Bitcoin to Noobs 1:25:00 Bull Case For Bitcoin 1:39:12 The Gold Path 1:47:35 Propagating Freedom 1:52:45 Closing & Disclaimers ------ RESOURCES Robert Breedlove https://twitter.com/Breedlove22 Robert’s Podcast https://www.youtube.com/@RobertBreedlove22/videos ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Holding physical gold or holding Bitcoin is holding a 100% equity in the asset, right? My possession of it is indication that I own it free and clear. There's no liability attached to it. But in a dollar or in a fiat currency, there is always a liability component that is expressed in the inflation that that asset is subject to.

• 0:21Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman and we're here to help you become more bankless. Guys, a bankless episode dedicated to Bitcoin. We haven't done this yet, David, so we're heading into it and we've got Robert Breedlove on the episode today to tell us, to answer the question, what is Bitcoin? In order to do that, we start with the simple question, what is money? Robert tells us why gold failed, how it was always destined to become fiat money, and then we talk about what Bitcoin actually is. Why is Bitcoin different than other crypto assets, according to Robert? Can Bitcoin avoid the fate of gold? And finally, why Robert thinks Bitcoin is freedom technology? I think, David, you and I have maybe moderate

• 1:06Ryan Sean Adams?

  views versus the views that Robert expressed today, but it was great to just kind of let him talk and get the perspective of a Bitcoiners Bitcoiner on why he is so excited about this technology. I do want to save some of my thoughts for you in our debrief episode, which is available for all bankless citizens to unlock now. I'm sure we have a lot to unpack. And David, you really spent, you spent years talking to Bitcoiners about this. By the way, when I say to Bitcoiners, I would consider myself a Bitcoiner, but I am not a hard Bitcoiner in that I think that there are other crypto assets that have lots of other value propositions beyond Bitcoin. I'm here for Bitcoin, I'm here for Ether, I'm here for all sorts of the things that crypto is

• 1:50Ryan Sean Adams?

  bringing to the world. But this was a perspective from someone who's mainly in crypto, probably wouldn't even call it crypto, we're just for Bitcoin. And that's the perspective that Robert brings today. So I'm curious, David, why was this episode significant to you?

• 2:04David Hoffman?

  Robert's strategy in this episode, and I think many of the episodes that he records when going Through the process of how to explain Bitcoin, I think resembles like years of experience of learning how to articulate Bitcoin to people who don't yet understand it. And that is not with explaining Bitcoin on a technical basis. It is with story and history and significance and being a smaller puzzle piece in the larger world. And talking about the history of money, a bankless listener, you're about to enter an hour of a history lesson, which is where good crypto starts with the arc of technology that results in crypto as we know it today. But we have to start from the very beginning. We have to start from base principles. We have to start from some very basic questions about what is money?

• 2:49David Hoffman?

  There's no way to explain Bitcoin without talking about the past and the learning lessons that humans have gone through implicitly. Our ancestors, as we've, the technology of money has developed. And Robert does a very good job articulating this from a non-technical standpoint. And to me, Robert's articulation of Bitcoin has, it's an example of something I've always understood Bitcoin to be, which Bitcoin's an idea. I think Bitcoiners think, and you're about to hear one from Robert, that Bitcoin is going to take over the world. He uses this phrase, hyper Bitcoinization, which means like, you know, in the same way that we use and denominate everything in dollars today, that will eventually become Bitcoin. This is like the Bitcoin hardliner, Bitcoin is going to take over the world perspective.

• 3:31David Hoffman?

  And I really like, I really like these ideas. These are all learning lessons and examples and to base your knowledge off of. I've absorbed some of these lessons that Robert is about to take, bring forward here on the podcast today. And I consider them to be strong ideas, while the actual specific implementation of Bitcoin, I think, is separate from that idea. These would be my, my, the way I would delineate some of the content here.

• 3:56Ryan Sean Adams?

  David's just dancing around the fact that he doesn't fully agree with everything Robert says, but he likes the way he pitches it. That's for sure. Some fantastic ideas here. Guys, we're going to get right to the episode, but first we disclose, I should disclose, I own some Bitcoin. David, you own any Bitcoin?

• 4:09David Hoffman?

  Do not.

• 4:10Ryan Sean Adams?

  Oh, wow. That's a disclosure in and of itself.

• 4:12David Hoffman?

  I've never owned a meaningful amount of Bitcoin.

• 4:14Ryan Sean Adams?

  There is always a link to all of our disclosures at bankless.com/disclosures. All right, guys. We're getting right to the episode with Robert. But before we do, we want to thank the sponsors that made this episode possible, including our number one recommended place to go buy some Bitcoin. We could say that it's Kraken, our number one recommended crypto exchange. Go create an account.

• 4:34David Hoffman?

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• 5:19David Hoffman?

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• 6:03David Hoffman?

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• 6:20Ryan Sean Adams?

  Bankless Nation, very excited to introduce you to Robert Breedlove. He is a freedom maximalist, self-described, I believe. He's a Bitcoin, what I might say, a philosopher, if that's the right word, Robert. And he's also known amongst many in the Bitcoin community to produce fantastic content that draws upon ancient wisdom, brings it forward to modern times with Bitcoin as the context. Robert, it's great to have you on Bankless. How you doing?

• 6:43Speaker 00

  Great. Thank you for having me and thank you for that wonderful introduction. I am self-described freedom maximalist, not self-described philosopher, but I will

• 6:54Ryan Sean Adams?

  Fair point, but maybe listeners will find out that you're a little bit of both here today. It's for them to decide. Let's actually start with the concept because we, for all of the episodes we've done on Bankless, we've actually never done a what is Bitcoin episode, believe it or not. So we've talked about Bitcoin almost, I don't know, infinite times, so many times. I don't know if there's any episode where Bitcoin doesn't actually come up at least once, but we've never gone back to do a basics, like 101, like what is Bitcoin exactly? Why are we bullish? So this is the episode we're hoping to have with you today, Robert, and I think you're the perfect guest for this. And you have an entire podcast called What Is Money?

• 7:38Ryan Sean Adams?

  And I think that's actually the right place to start this whole conversation about Bitcoin. What is money? Maybe we should ask that question to you. What is money, Robert?

• 7:48Speaker 00

  Yeah, I think it's the natural next question, right? You say, what is Bitcoin? The typical answer is, well, Bitcoin is money. And then the natural next question is, okay, well, what is money? So one, I guess this is sort of start at the end in a way, like what, one thing I've learned on this journey of doing the What Is Money show. Is just how limited language is like we're dealing with a very complex, fluid, continuous reality. And we're dealing with it with these little discrete data packets called words that we put in different arrangements to paint pictures, you know, to try and describe the the nature

• 8:30Speaker 00

  of this complex adaptive system that we all inhabit. And it turns out, most of our disagreements are over broken consensus on terminology, right? I I say a word and it invokes one meaning in your mind and I'm invoking a slightly different meaning in my own and we have an argument and disagree about what the meaning of that word actually is. So not to get too far astray, but um. It becomes very terminological was kind of the point that you get into words, we get into definitions a lot. We're trying to say like, what do you actually mean when you say that? All right, we're trying to reach consensus on big questions like, what is money? And it turns out that question is fundamental in some interesting way.

• 9:15Speaker 00

  It's almost like asking, what is truth? What is beauty? What is justice? Um, what is love? You know, these very fundamental, essential concepts that also have huge definitions, right? People have been spent centuries writing about them and it's still kind of an unsolved thing. There's many definitions that work, et cetera, et cetera. So when you ask me the question, say, all right, what is Bitcoin? Bitcoin is money. Okay, what is money? It's like, well, I've now spent 400 episodes attempting to answer that question and I have more answers and questions than ever, actually. Like I've accumulated many answers from many guests.

• 9:55Speaker 00

  Um, I have more questions about those answers and there's not a very bright, clear cut definition. So with all of that lead in, let me just say, any answer that I'm going to offer you today, uh, the document that I have, I think I have over 50 answers to the question. So I can't enumerate them all from memory, but I'll try to enumerate some useful ones. Um, you could always start with a very simple one, which is just what the Austrian economists have defined as the Austrian economists have defined money, which is as a universal medium of exchange.

• 10:29Speaker 00

  And you know, we probably, but most of your audience probably knows this, right? Indirect exchange is just more efficient than direct exchange. There's a problem where if you're trying to trade goods for goods, you know, chickens for potatoes. Well, there's always the problem of, does the guy that has potatoes want the chickens? And does the guy that has the chickens want the potatoes? And if not, you have the, the non-coincidence of wants problem. So they can't trade efficiently or effectively. They have to find an intermediary to facilitate the trade. It makes trade very inefficient. So money becomes like the intermediary or the intermediate of trade itself, the mediator of trade. So the medium of exchange.

• 11:14Speaker 00

  And in that way, it's just like an economic lubrication in a way. It just makes exchange much more efficient. So it lets us economize much better, right? We can execute, calculate, negotiate and execute trades much more quickly. When we're trading through money and then it also gives us this ability to think in terms of money. Instead of thinking like, oh, this chicken costs 32 potatoes or this potato costs one 32nd of a chicken. You can just denominate all of it in money so that everyone speaks one common language of economic numeracy. And it's, it's a universal language in that way. So, uh, which gets to another definition of money. Money is like the language of value. So that's one answer to the question.

• 11:59Speaker 00

  It's, well, I guess two answers. It's a universal medium of exchange and it's a language of value. Now, when you say language of value, that's kind of interesting because then the question is, okay, what is language? Well, we're all today running the open source software called English. Right? We use, I create patterns in my brain that turn into patterns in my vocal cords. You guys get the pattern on your ear and you decrypt it in your brain. We're all running the same software so we can transact can concepts basically through the medium of English. That's a very useful tool, obviously. Uh, it's what distinguishes us from animals. It, it's, uh, intrinsic to thought itself, right? Like our internal dialogue is facilitated by English. So.

• 12:45Speaker 00

  Language being the medium of exchange of human conception, right? That we have certain ideas or concepts that we're assigning words to. And again, this is a social consensus process, right? Like whatever definition is in the dictionary is a pretty strong representation of what the social consensus of the meaning of that word is. So this thing, you know, the concept is independent of the word itself. Right? You could say the dog is dead in, in English and German and in Japanese. These are entirely different auditory patterns, obviously, the way we say it. Obviously, different, it invokes different neural patterns, but it invokes the same concept,

• 13:30Speaker 00

  right? The same image of the dog is dead, right? You could see the dead dog. So it's this tool we're using to convey our concepts through a medium, right? So language is the medium of exchange of human conception in the same way that money is a medium of exchange for human action, like things that have actually been done, work that's actually been done in the world, favors that have been rendered into the marketplace. The entrepreneur has solved problems for consumers and he has earned money or profits. He can now take those profits in the form of money into the marketplace and redeem favors from other people.

• 14:14Speaker 00

  So that's when I say language of value, that's me expanding on, on that definition a little bit.

• 14:19Ryan Sean Adams?

  That's fascinating. So money is a language of value. I've, I've, I've heard much more about the kind of the medium of exchange, but the language of value is, I wouldn't say completely new, but the way they, the way you phrased it is somewhat novel to me, and I think that really fits, right? So it's kind of a protocol in the way that language is a protocol. And then of course, just as we have English. That is only one of many languages, right? We also have the dollar, which is one language of money. We also have Bitcoin, which is another language of money, which we could talk about. So we have different languages. One thing that's fascinating to me about language is it's very much a social consensus technology. I was actually having a conversation with my youngest kid yesterday and we're talking about words. And she's saying, "Well, that word isn't in the dictionary."

• 15:02Ryan Sean Adams?

  And I said, "Well, how do you think words actually come to be?" And she's, "Well, the dictionary." Right? I was like, "Are you sure about that?" So like, I could create a word right now, a new word, to define something. And if I get enough people to believe that word, to say that word, and to socially consent that that is the definition of that word, then guess what happens? Webster comes around and all they do is index it. So who created the word? It wasn't the dictionary. It was some individual actor who memetically spread this particular word and there was social consensus that elevated it to the dictionary. And the dictionary is just an indexing system for a language. And I think money works the same way.

• 15:47Ryan Sean Adams?

  I love that you called it like English software, because money is like software too. And I suppose anyone can submit a push request in GitHub and you'll update the English language as well at any point in time. Yeah, do you have any reflections on that?

• 16:04Speaker 00

  Yeah, so a couple of things. I agree with you, first of all, the dictionary is a lagging indicator of evolution of natural language, right? Like, words will spread via memetics, via social... Ultimately, it becomes a point of social consensus where enough people are using the word that the dictionary says, "Hey, let's include the word." These are, what are these called? Neologisms, right? New words. I can't think of it. Maybe woke is an example that probably that came up recently like I guess woke's always been a word, but now it has a new definition in the dictionary.

• 16:37Ryan Sean Adams?

  We get a lot of Bitcoin. The word Bitcoin meant nothing.

• 16:40Speaker 00

  New word. I was just gonna say, a lot of these neologisms come from technological evolution, actually, like when we get like the word software, for instance. Thirty, forty, fifty years ago was not probably not in the dictionary. I don't know at what point. But it it comes into our common lexicon after it becomes like a technology that we actually use and we have an experience with. Now, we do have many different natural languages, but there is a difference with money. I think it's more like mathematics almost. And that there's a huge advantage to having a single universal language, like in mathematics today, we all use the Hindu Arabic numeral system, the zero-based numeral system.

• 17:22Speaker 00

  And there's a massive efficiency gain to be had by all of us using the same mathematical system. And that there's no, it's the most efficient way to use a protocol. It's almost the purpose of using a protocol, right? It's a common rule set. Or a common grammar that we all subscribe to. And if you have different grammars or different rule sets, there's always translation, frictions, errors, costs, et cetera. Which we would, you know, in natural language, we call this a language barrier, right? If you if you're in a workplace and you're the only guy that speaks English, well, that makes you a lot less effective of a worker.

• 17:57Speaker 00

  Relative to what language is being most widely spoken. So although we'd say money is a language of value, I think it's more like mathematics. In that

• 18:08Speaker 00

  it's it tends towards like a winner-take-all marketplace. And the other thing that's interesting about it is that it's very much a product of social consensus. So you could say it's a social construct, perhaps. It depends how you define social construct.

• 18:23Speaker 00

  When I say so, social construct, I'm invoking something like the calendar, right? Like it's this imaginary tool we use for human coordination. It works to the extent that we all agree upon it. But the slight difference with money is that money is also rooted in physical reality. And the way the calendar is not exactly, like we're observing the motion of the planet and the the moon and the sun. And we're overlaying a calendar on it, but it's not rooted in physical reality. Whereas something like gold or Bitcoin.

• 18:55Speaker 00

  Like the expense necessary to produce a new supply of the money to expand the supply is like an actual physical restriction on the monetary protocol itself. And that's what safeguards savers from artificial debasement. So it is, it's like language, but I'd say it's more like math, less like natural language. I would also say it has this rooting in physical reality, which sort of distinguishes it from natural language. This means that spoken language is very low cost. We know this talk is cheap, right? Put your money where your mouth is, as we say. When you send someone money, it's a very high signal message. And again, we know this intuitively, actions speak louder than words.

• 19:36Speaker 00

  Well, capital at risk speaks higher than actions because capital at risk is the consequence of many, many, many actions across time, right? Especially if it's a lot of money or a lot of capital. So those would be just the caveats, I guess I would add around the metaphor of money as the language of value.

• 19:55David Hoffman?

  Going back to ancient times, if we will, I think there's a parallel of the development of language and the development of money in that if I can assume that if we went back thousands of years, the languages that we spoke as humans were probably much more blunt, much more imprecise. And as humans discover new words to be more precise, the technology of language improves. And as societies come together, different languages are spoken. And then over time, one language tends to dominate when two different societies come together. The arc of history is fewer languages over time as globalism has increased.

• 20:37David Hoffman?

  Now the world tends to kind of just be dominated by two major languages, right? English and Chinese, these are the ones that are growing the most. And they're probably also growing in their precision. We're finding more words to use to discover more precise ways of expressing communication. And I think the arc of money is pretty similar. We had blunt tools of money back in pre-recorded history like cow. Shells. We had inferior precious metals that were used to express value. And then later, we had more that we discovered over time that well, actually, gold is the best precious precious precious metal.

• 21:18David Hoffman?

  Excuse me. Now, after we tried knicker, copper, bronze, and then we discovered, well, gold is the one that wins. And perhaps the answer as to why gold one is rooted in physics, as you alluded to, and the in the difficulty of making new gold, which is impossible. And so like, I think the arc of language as a software and the arc of discovering better monies also trends forwards in history. And this is something that I think people, when they come into the world of crypto, they need to get their brain broken that, well, actually, the money is not the dollar. You thought that it was this static thing that you were born with and were raised with, but no, it's something. It's a technology that is in flux and adapts.

• 21:58David Hoffman?

  And yes, Bitcoin as a money is not used in the same way as the dollar, which is also a money. But it is a money nonetheless. And I think that's perhaps the first lesson that any new crypto person coming into this industry always learns is like, it's much more, it has always been in flux, money has always been in flux and it's in flux right now. And that is the crypto revolution.

• 22:18Speaker 00

  Yeah, no, it's an excellent point.

• 22:22Speaker 00

  One way I've used to describe this, and I didn't, this is not my original thought. I don't even know who said it, but you could think of money more as an attribute than as a thing. So if you read Mingers on the origins of money, he describes it in any trading society. There's always necessarily a particular asset that is most widely tradable or most liquid or most marketable. These are all also definitions for money, like the most marketable good. And whatever that asset is, that's most liquid, that's what everyone will want to trade for, right? Because no matter what you're aiming at obtaining, the most liquid asset asset will be the fastest way to get there.

• 23:04Speaker 00

  If I can trade chickens for money, I know that everyone accepts money or most people accept this most marketable good. That will help me get potatoes or whatever the thing is most quickly. So money emerges naturally as a result of trade. It's an emergent property of direct exchange itself that something becomes the most exchangeable thing. That most exchangeable thing is then by definition, money effectively. So it's, it's important to understand that. And then Assets that are less liquid, they just have less degree of money-ness, right? So when you hold an asset with the intention to consume the asset or the good,

• 23:45Speaker 00

  or to use it as capital, right, in the production process of other goods, that would be an industrial use demand. You actually intend to either consume or use that thing to produce something to consume. But when you hold an asset with the intent of trading it in the future for other assets, that is reservation demand as money, right? You're holding the thing for a monetary use that's non-productive, non-consumptive. So there's kind of this bright line, right? Between the money-ness of the asset, which is your intent to use it in exchange, versus the capital or good, which I summarize as industrial use. Many people call this intrinsic value. I think it's the wrong term because value is subjective. You just say industrial use.

• 24:29Speaker 00

  You're either going to consume it or use it to produce something to consume. So what is gold? Well, gold is the asset that had the most money-ness of all the other assets. Whereas something that is super specific and non-liquid, I always give the joking example of purple telescopes. You know, it's not a widely demanded thing. It's just so specific. There's very few people that want it. Probably has a very low degree of money-ness. And then you could look between gold and purple telescopes, and you'll see a whole spectrum of money-ness across these assets, right? Like something like water would probably have a lot of money-ness. Pretty widely demanded. We all need it for survival, et cetera. However, it doesn't make a great money because it's in such high supply, right? You want something that's relatively scarce to other goods and services,

• 25:14Speaker 00

  so it'll hold value across time. So when we look at gold and we say, okay, but to your point, yes, money is always changing, right? What is that most tradable asset? Well, it's been a lot of different things. It's been glass beads. It's been cattle. It's been salt. It's been different precious metals. There's always a common example of cigarettes in prison. You know, like cigarettes exhibit these qualities that make good money in a limited context.

• 25:42Speaker 00

  And so, one of the most critical answers to the question, what is money that I've stumbled upon, and this is from Gary North's book Honest Money, The Late Great Gary North. It's a free PDF on Mises.com. I highly encourage everyone to read it. It's the principles of money and banking told through a Christian lens, but Gary has a brilliant way of distilling complex ideas into simple language. Makes it very easy to digest. And he narrows down the five properties of good money, or he narrows down the properties of good money to five. And I've, I've gone into detail many times on what these are. People could check this out on other podcasts. I'll just name them here without going into depth, unless you

• 26:24Speaker 00

  guys want to. Gary makes a point that people seek a money that's divisible, a money that's durable, a money that's recognizable, money that's portable, and finally scarce, as we said.

• 26:37David Hoffman?

  These are like the table stakes of money.

• 26:39Speaker 00

  These are the qualities that market actors seek in a good monetary technology. Like, you want the asset that, that best balances these five properties, or attributes, or qualities. And, you know, to gloss over a lot of history, basically, of all the things we've experimented with as the best tool for the job, monetary metals were the most divisible, durable, portable, recognizable assets in the world. And then of the monetary metals, gold was the most scarce, meaning that its supply curve was the least flexible. Like, gold is basically indestructible. So every ounce of gold mined across history, which is rumored

• 27:21Speaker 00

  to fill two Olympic-sized swimming pools today, is part of the existing supply. So all the, basically, all the gold we've mined ever is part of the existing supply. And we're only increasing the supply of gold at an average of, say, 2% per year over the past several hundred years, right? There's little pops. There's like the South American Bonanza. It'll go up a few percentage points for a few years, and it comes back down. That basically meant gold was the most reliably scarce or most predictably supplied monetary good, which meant it was the best asset for preserving purchasing power across time. So in a nutshell, that's why people favor gold, right? And again, if if money

• 28:04Speaker 00

  is like a mathematical language, it's very much winner take all. There's huge advantages to having one protocol versus several. That's why gold became gold. And then you could import the Bitcoin argument here and say that, oh, that's what Bitcoin is basically doing. Bitcoin has run and won the race for digital gold. So for the same reasons, we had one analog gold, we're going to have one digital gold, and that is Bitcoin.

• 28:30Ryan Sean Adams?

  So before we get to the Bitcoin story here, Robert, I want to tie off this this whole money discussion. And I think in that that whole conversation, we got a few more insights and really answers to the question of what is money? And it sounds like what you were saying is one answer to that question, another answer to that question, you know, one of the 50, let's say, is the most liquid good is money. And it's a key mental model unlock for people who are not exposed to crypto to really understand that when you think about money, you can think about money-ness, and you should think about money not just as a noun, but money as an adjective. And things can have more money-ness than other things, and it's a spectrum. And I think that's very important to unlock. And the

• 29:15Ryan Sean Adams?

  other aspect that you just unlocked is, and there is a fairly like well-known feature set that make some things better money technology than others, right? And so like, there can be monies that fit or products or assets, let's say, that that fit those criteria and others that don't. And those that fit that criteria are more likely to have a higher money-ness over time. But I want to ask a question before we get into the story of the bull case for Bitcoin and like, why Bitcoin? And maybe maybe the last question is, why do we even care to think about this? Because one possible answer to the what is money question is probably the normie answer. What, you know?

• 30:01Ryan Sean Adams?

  95% of Americans, how 95% of Americans would answer that question, maybe folks around the world, what is money? Dollars. What are you talking about? What is money? I know, I got money, my bank account is dollars, Robert. Why are you even talking about this? And I think the reason we're talking about this, maybe, and I'd like you to frame this, is crypto believes that there are better money technologies out there than the money technologies that we've invented so far. So that's like the positive framing of this. Maybe the negative framing of this, I want you to comment on this too, is we also believe that our money system is broken, or has some flaws. There are some issues with the existing money system. So to answer the question, why are we talking about this?

• 30:45Ryan Sean Adams?

  It's because there's something better out there, and because our existing system has flaws. Can you talk about what is broken about the existing money system that we have? And you could frame this in whatever way. What's broken about dollars? What's broken about fiat? What's broken about the setup that we have right now in the 2020s?

• 31:03Speaker 00

  Yeah, so let's do kind of just a quick gateway from gold to dollars. Because I think that's an important point that many people don't understand. A lot of people still think that the US dollar or other fiat currencies are in some way backed or redeemable for gold, which is not the case. That's the definition of a fiat currency, is that there is no commodity behind it, right? It's just based, that's what the word fiat means, by decree. Use this money because I said so, basically. That's not how dollars originated. So as we briefly touched on, right?

• 31:46Speaker 00

  Gold was the best tool for the job when it came to money. It best satisfied those five properties of money in a way that, once the world was interconnected enough by telecommunications networks, that it sort of settled on one protocol standard, which was the gold standard. Gold became, gold basically outcompeted all other forms of money to become the dominant money in the world. Now, it operated alongside silver for a while.

• 32:17Speaker 00

  And that's because gold had a lot of economic value per unit of volume. So it was very impractical to use for day to day transactions. So if you're going to buy a cup of coffee, for instance, you would be transacting in something like gold dust, which would be difficult to put in your wallet and not lose. So we needed like a transactional currency for small day to day purchases, which silver filled the role for, and gold was used for larger transactions, right? Like larger settlements, buying a house, et cetera. Now, the, the reason, I guess where gold and monetary metals in general were weak in terms of those five properties.

• 33:01Speaker 00

  The one area where they're specifically weak is portability. So if you want to move money across space, monetary metals work, right? We can secure them, you can transport them, you can put them on a boat, et cetera. But all of these processes are expensive, they're high risk.

• 33:21Speaker 00

  And they don't lend themselves well to an economy that's globalizing. And, and you're trying to have a higher intensity of exchange, moving money more quickly, trading goods more quickly to produce more wealth. Monetary metals are sort of a hamstringing of that process, if you will, right? The, the transaction cost related to moving physical metal across the ocean or across the ground, like there's a lot of cost and risk associated with us that we would prefer we didn't have to deal with.

• 33:52Ryan Sean Adams?

  And even just the speed, Robert, I think Lyndon Alden has made this point. I mean, what, how, what's the fastest you can move money from like the United States, like New York to London, let's say, probably a plane, right? So we're talking still hours of transaction time.

• 34:06Speaker 00

  Yes, and that's in the modern age, right? We have to remember that gold monetized over the course of 5,000 years. So, you know.

• 34:14Ryan Sean Adams?

  Months in a ship.

• 34:15Speaker 00

  Yeah, 1700, 1600, the plane wasn't even an option. It was by train, by boat, by wagon at one point. So there were severe limitations in terms of portability when it came to monetary metals.

• 34:30Speaker 00

  So how did we solve this? Well, we figured out that there's an economic, an economy of scale to be gained by just centralizing the custody of gold inside of banks. And then these banks that can communicate with each other can just make ledger entries, right? So they can just say, hey, I'm gonna dock your account this many ounces of gold and credit the account over here. So you get into this debt-based system. You also get banknotes as a result of this process. So originally, these were just warehousing operations for gold. So you would put your gold on deposit. The warehouse custodian would issue you what was called a warehouse receipt, what we call

• 35:15Speaker 00

  today, banknotes. This was an IOU, right? This, I have this many ounces of gold on deposit. This paper receipt allows me to redeem that gold at any time. Well, market actors being smart realize, hey, you know, the portability problems with gold, I can now overcome them by just carrying around this gold-backed currency, this warehouse receipt, and I can trade these things as if they're as good as gold, because indeed they are. You can take it to the warehouse at any time and get your gold, right? This introduced counterparty risk into the gold standard. All of a sudden, you now have to trust the custodian not to overissue these pieces of paper in excess of what their gold reserves can justify.

• 35:58Speaker 00

  So you get into this situation where you've created an incentive trap, basically. Custodian has a huge financial incentive to issue additional sheets of paper. All they have to do is bet that not all their customers are gonna come redeem the gold all at once, right? You can start running a fractional reserve. So you can issue paper in excess of gold reserves, and as long as that fraction is not too extreme, right? If it's just 10 or 20% more, and no more, what we, you would say, no more than 80% of your customers at any time come to redeem the gold at once, then you're fine. You can run this fraudulent operation, and you never get caught, basically. And so you get additional revenue, right? You can engage in lending operations, blah, blah, blah.

• 36:43Speaker 00

  You can basically print money, right? To whatever the extent your fractional reserve is. So this, uh, basically incentive trap.

• 36:55Speaker 00

  Manifest itself. Um, this is not to say that all bankers are evil or anything. It's just sort of a natural incentive trap. Even if even banks that ran honestly, some, some fractional reserve banks would honestly disclose, hey, we're only going to keep 80% of this on reserve. We're going to create an excess 20% and lend it out, try to generate revenue. We'll give you some yield on it. All right. That was always the, uh, the carrot to draw in customer deposits. We'll give you some of the yield that we generate, blah, blah, blah. Even the banks that operated honestly though, would still get targeted by governments eventually. Government would say, oh, well, we're going to war or we're broke or whatever the thing is, how do we raise additional funds?

• 37:37Speaker 00

  Oh, well, the one throat to choke is the bank over here, right? They have a bunch of customer gold on deposit. We can suspend redeemability. We can loan ourselves some of the customer gold or we can seize it. Right? As we did in executive order 6102, 1933 in the U.S.

• 37:56Speaker 00

  When private gold holdings were seized and outlawed under threat of imprisonment. So.

• 38:01Ryan Sean Adams?

  True story, by the way, this is FDR who implemented this and you said 1933.

• 38:07Speaker 00

  So just, I guess to maybe get to the point.

• 38:11Speaker 00

  We put all the gold in one place to overcome the portability shortcoming that naturally through the incentive trap becomes a fractional reserve. And that fractional reserve gets more and more exacerbated over time, either by the bankers themselves or by governments that are commandeering. The operation to fund whatever it is they're doing. And they tend to end up on a zero reserve standard, which is what we call fiat currency. So what are dollars? Well, dollars are fiat currency. The dollar used to be redeemable for gold. The dollar went through this entire process. To go from being a gold-backed currency, and you can look this up, right? Google. What a dollar looked like pre 1930. It says it right there on the face of the dollar.

• 38:57Speaker 00

  This certificate is redeemable for X units of gold on demand. Well, that became a fractional reserve over time with

• 39:07Speaker 00

  intermittent interruptions of the redeemability during wartime, as we mentioned with sixty one oh two. And then finally, in nineteen seventy one. And this is, we're also skipping over World War Two here. We're basically after the United States won World War Two. It held the Bretton Woods Conference. It pegged all international currencies to the dollar. The dollar would be pegged to gold. This peg held for a little less than thirty years from nineteen forty five to nineteen seventy one. With the nineteen seventy one Nixon shock, he takes us off the gold standard. And this basically put the entire world indirectly onto a fiat currency standard, a zero reserve standard.

• 39:47Speaker 00

  Which gives the government the ability to print money ad infinitum with no check. No one can call the bluff. No one can redeem the dollars for gold. So what's the problem? Well, the problem is, this is a giant fucking pyramid scheme.

• 40:03Speaker 00

  If one group, one organization can print the money that everyone else is forced to use, you get really ridiculous consequences like limitless government overgrowth, right? The expansion of government deficits, deficit spending, right? Where the government's actually producing losses. And if it were any other organization in the world, it would go bankrupt. The capital would be reallocated to higher and better uses. But in the case of a monopolist on the money printer, they just print money to paper over the losses. So you're externalizing the cost of the losses onto people via inflation. And you're continuing to grow this organization that's producing losses.

• 40:43Ryan Sean Adams?

  Robert, you said forced to use, though.

• 40:46Speaker 00

  Yeah, legal tender laws. So legal tender laws are one component. You're forced to pay your taxes in dollars. You're forced to accept dollars in settlement of all debts, public and private. Also, when you're inside of the fiat currency system, you're surveyed. Right, your transactions can be frozen, right? If you donated to the Canadian trucker protest or participated in that protest, you saw just how private your property was in those bank accounts. Not only is it not private and that it's surveyed, tracked, traced, it's also not property because it can be seized arbitrarily at any time for any reason, even if you're expressing your peaceful liberal democratic right to protest.

• 41:33Speaker 00

  You know, a country like Canada, which was rated very high on the Liberal Democracy Index, acted very authoritarian in the seizing of those protesters' funds. So the problem is that when you go into a fiat currency paradigm, your property is no longer private property. It's seizeable, it's traceable, it's confiscatable. You become a subject of the state. And there's no way to cast the vote of no confidence against the state because in the past, if a government was printing too much money, people would see that and market actions and say, okay, this country's printing too much money, they're being irresponsible with monetary policy. Let me sell this currency and redeem it for gold and take my gold into another jurisdiction where

• 42:16Speaker 00

  there's more responsible monetary policy being carried out. In a fiat paradigm, you don't have that option anymore, right? You're trapped in a system with no opt-out. And what does this make you? I mean, it makes you a perpetual, you're perpetually subject to taxation via inflation forever. So if you hold dollars in a bank account today, you, your purchasing power is being siphoned away by the central bank, right? Every dollar printed is proof of labor stolen effectively. So that would be the beginning of the central bank rabbit hole. And on this topic, I would point people to the book that got me started, which is The Creature from Jekyll Island by G. Edward Griffin. I actually just had him on the show, which was a big honor.

• 43:02Speaker 00

  We just released that episode. And I think if you listen to his book or read his book, you will come to the same conclusions many of us have, which is that central banking is the primary socioeconomic problem in the world. We have a monetary system built on theft and deception. It's used to fund warfare. It's used to fund mainstream media bullshit propaganda narratives, like keep people confused. It's used to fund the pseudoscience of Keynesian economics in mainstream universities. That is not science. It's not, it's just a justification for the state's monopoly on money printing. It obfuscates Austrian economics, which is actual economic science. And so we're

• 43:43Speaker 00

  just, we're dumber, we're more destructive. Um, and we're, we're incentivized to, to steal and kill from one another in a fiat paradigm. And so I think it's very fundamentally coercive, almost in a spiritual sense. And so that's why I think incorruptible money or money that cannot be counterfeited at scale is very important. And that's what physical gold or Bitcoin would be.

• 44:09David Hoffman?

  A part of this story throughout history definitely is impacted by one of the things you were talking about earlier, Robert, the attributes of money. And I think this division of attributes about money kind of created the conclusion that you just articulated. Silver, for example, is more like the high velocity version of money in comparison to gold. There was like the spending money, the currency money. And then the gold was more of just the low velocity store of value. You keep, you hold on to that and you like denominate your savings in it and you spend your silver. And this, this property about money exists across many different

• 44:49David Hoffman?

  times and contexts. There seems to be like a high velocity and a low velocity version of money, a high spending money, and then the money that you just keep for your savings. When you articulated that like gold has this transportability problem, like it's, it's heavy, it's physical, it can't go over space and time well. And then the banks solved that problem by creating gold banknotes. So actually like silver is just completely Forgotten and replaced by banknotes, which are actually even more transportable and high velocity and spendable than gold and gold through this, what you called an incentive trap, finds itself aggregating across banks, these, these bank institutions. And so more and

• 45:31David Hoffman?

  more gold comes into these vaults and the banknotes become the high velocity currency, which gives, and the centralization of gold is a target capture by the people with the largest army, the government, which is how we end up in this, in this predicament that you just articulated. The high velocity, velocity versus like high value components of money, I think is something that we still see to this day, even in the crypto world, right? We have Bitcoin and then we have stable coins. This is like the spending currency and then the store of value currency. So I just wanted to like note the, the parting of these different components of moniness. One was related to capture. And so when people, when listeners are saying like, oh, money is the dollar. I think

• 46:16David Hoffman?

  it's worth noting. Well, actually that's the money that has been able to have been captured and it's no longer the low velocity storage money. And this I think can account for, since this high velocity money is also the highly printed money. How many trillions of dollars or billions of dollars did we print during COVID? And then also was the rise of the stock market over those last two years? I think perhaps the stock market replaced gold as the place in which people have their low velocity store of value. But I think ever since the, the rise of the fiat currency of the dollar, money as a concept, people have been looking for the, the replacement to gold, the low velocity

• 46:58David Hoffman?

  savings vehicle of money, the, the money with the attribute that gold once served, that quote unquote, got, you know, stolen, got rugged by this paradigm of fiat currency. And so humans have been looking for an alternative to gold to put their savings in and they've kind of been using the stock market equities as a replacement to that. And that's accounted for perhaps one of the greatest wealth bull markets of history over the last 50 years in the stock market. If you, if you control for the rise of the stock market by the inflation of the dollar, it's actually not that bullish. It's actually pretty flat. How would you reflect on this?

• 47:36Speaker 00

  No, that's an excellent point. First, I'll start with the silver thing because you're spot on. Silver was functional alongside gold until we invented gold-backed currencies. Once we augmented the portability of gold via a gold-backed currency, you didn't need this transactional physical metal as much. The need for physical silver was obviated and the monetary premium of silver collapsed. So that's when gold really became dominant. Once we put it, we gathered all the useful monetary properties under one invention, which was the gold-backed currency. It eclipsed silver essentially. So that's a very important point that, you know, you've heard these arguments like,

• 48:18Speaker 00

  oh, Litecoin is to Bitcoin what silver is to gold. And it's like, it doesn't hold water actually, because they both have the portability thing solved, more or less. There's not, in my opinion, a meaningful niche for Litecoin to establish for itself, considering Bitcoin is already a pure digital bearer asset.

• 48:40David Hoffman?

  And importantly, Bitcoin is divisible down to eight decimals.

• 48:43Speaker 00

  That's right. And you can further that divisibility via Softfork, which is something a lot of people don't realize. If ever it were, say, a cup of coffee were half a sat or something like that, you could actually expand the divisibility of Bitcoin via a backwards compatible software update. It wouldn't be a very contentious thing. Softfork is much less contentious than a hard fork, as many of your audience probably know. So the divisibility is basically unlimited, right? It will suit, what did Mises say? That the quantity of money is sufficient to suit the needs for any economy, assuming sufficient divisibility. Well, Bitcoin has unlimited divisibility, so that's, it just works.

• 49:25Speaker 00

  The other point you hit on there was, you know, the problem with a gold-backed currency. Although we fixed, you kind of got all the necessary properties of money in one tool, but the problem was the centralization that it introduced, right? We now needed to centralize the custody of gold inside of bank vaults. And what's a very common definition of money? Money is power. What happens when you concentrate that much power into one place? Right? Power corrupts, absolute power corrupts absolutely. And so the institutions that grew up around these centralized gold hordes, non-coincidentally, in my opinion, happened to be the most corrupt organizations in human history, which are central banks.

• 50:09Speaker 00

  So the problem with gold, in my opinion, is the physicality, right? Again, we already hit on why portability is a problem that leads to centralization. The other problem with physicality is that it invites violence. Right? I don't need to negotiate with you. If I can conquer your country and I can blow up your central bank and take your gold, there's no negotiation that needs to take place. I just need to kill you, blow up the thing, take the gold and march onward. If you recapitulate that idea on a Bitcoin world, where the central bank is holding some or all of its reserves in a Bitcoin multi-sig, all of a sudden, there has to be a negotiation. There can't be this unilateral seizure, right?

• 50:53Speaker 00

  Where they just show up, blow up the central bank and take the Bitcoin. There has to be some negotiation. So it's, it's a, I think, non-physical money is inhibitory to violence and coercion. And that it forces a negotiation with a holder. If the holder is holding it properly, right? In a multi-sig, I don't know if you guys talk about multi-sig much or not, but you're basically taking one private key, chopping it into five, 10, 15, 100, whatever number of shards or pieces. And then you're distributing that out with a trusted circle of individuals. And then you need a quorum, right? You need a simple or a super majority to move funds. So all of a sudden, it becomes very difficult to coerce this party of people

• 51:37Speaker 00

  that you don't even know who they are necessarily. You don't know the protocols, you don't know the safe words, right? If this guy calls at this time and says this word, then shut the whole thing down. There's, there's all this unparalleled security schematic that's possible with non-physical money that is impossible with physical money. So whereas physical money invites violence, I think non-physical money sort of does the opposite, forces the negotiation. And um, so what is that? You know, you're basically saying with Bitcoin, we have a money that is non-physical, doesn't require centralization to scale, and is not responsive to unilateral confiscation. So that's, that's a very, that's a big idea to try and start to wrap your head

• 52:21Speaker 00

  around. Um, the other point I would hit on that you mentioned was, okay, people, people say, all right, what is money? Oh, money is the dollar. Well, it depends on how you define money. So if we say, yes, okay, the dollar is the most widely accepted asset in the world today. It is the most marketable good, if we want to use that term. But what it's not is a final extinguisher of debt. All right. Now, again, we have legal tender laws. We are compelled by the legal system to accept US dollars for settlement of all debts, public and private. But the weird thing about it is that debt is never actually settled, because there's always a liability attached to

• 53:02Speaker 00

  a fiat currency. Even if you stuff these dollars under your mattress, you still have counterparty risk in the Federal Reserve. If they print new dollars, they can debase your purchasing power, even of your physical dollars under your mattress. So it's not enough to take physical custody of dollars. You still have an associated liability. It's not a true bearer asset, right? In accounting, assets equals liabilities plus equity. Holding physical gold or holding Bitcoin is holding a 100% equity in the asset, right? My possession of it is indication that I own it free and clear. There's no liability attached to it. But in a dollar or in a fiat currency, there is always a liability component that is expressed in the inflation

• 53:44Speaker 00

  that that asset is subject to. So you could say dollars are money, but they're not fulfilling the role of money perfectly, which leads to the second point you made. Okay, equities. Why have equities been monetizing? If we've compromised the store of value function of dollars, what do market actors do? They naturally start to hold their purchasing power in assets that cannot be counterfeited or arbitrarily debased. So we get a rise in gold, in commodities, right? Oil, black gold. We get a rise in equities. We get a rise in real estate. We get all of these things that aren't meant to be money start to act like a store of value, because the, the currency itself is not functioning as a store of value.

• 54:30Speaker 00

  Now, that's that's useful to some extent, right? That's market actors adapting to the reality they're inside of. But it's not ideal because all of those asset classes, aside from physical gold, they still have counterparty risk, right? If you own real estate on paper, you have counterparty risk of the government. If you don't pay your property tax, you don't own it. Equities, you have the counterparty risk of the management team, the the exchange, also the government, right? If you don't pay your capital gains tax, they'll seize your stock. Commodities, unless you own the physical commodity and you own a paper claim to it, you have counterparty risk in the issuer of that certificate. So all of these things get monetized that aren't money. And this creates distortions in the marketplace.

• 55:13Speaker 00

  And to your point, I think people are ultimately just seeking the thing that has the least counterparty risk. That's what gold was. That's why its private ownership had to be outlawed in 1933. They needed to force people out of gold into fiat so they could print money. And now that's what Bitcoin is basically perfected, is you can own this digital bearer asset that's non-physical, very hard to confiscate, very easy to anonymize if you're using privacy technology. I wouldn't say easy, okay, maybe that's an overstatement. Possible to anonymize, depending on your level of sophistication. And so that's why I think it's such a big deal, right? You're just giving people.

• 55:56Speaker 00

  You know, in 1215, King John signed the Magna Carta and the principles, this was the philosophical scope of government, was to protect life, liberty, and give people inviolable private property. Well, we never had an implementation of that third ideal. Property has always been at the leisure of the state. But for the first time in history, we have a system that can protect people's property rights, independent of the monopoly on violence. And so that's a radical new discovery, right? People around the world, for instance, that haven't had access to a stable or strong currency, now have access to Bitcoin. They can preserve purchasing power over time, and they can build themselves economically. So this is, it's a really, really big deal and.

• 56:41Speaker 00

  I guess that's why so many people are excited about it. It's hard to overstate how big of a deal it really is.

• 56:45Ryan Sean Adams?

  Well, this is gone just about how I think David and I thought it would go, which is like, we would ask the question of what is money? And then we would very naturally find ourselves headfirst into the Bitcoin section of this as kind of the solution to this. And I think you're painting a picture, Robert, of our money system being broken, flawed in all sorts of different ways. And we can't go backwards. So there may be some, there are many who say, let's just go back to a gold standard. But if we go back, then we'll get what we already have. We can't go backwards. And Bitcoin in your mind is the way forward. And I just, maybe I want to like wrap a bow on that.

• 57:30Ryan Sean Adams?

  So you're painting a picture of a set of wins for individuals who can use Bitcoin. Maybe they can use it as their store of value. Maybe they can use it as a unit of exchange. But then you're also painting a picture of wins for society in general and the world in general, right? So there's like kind of the individualistic win. And there's also the systemic societal level wins. Is the end state to you, Robert, that we have like a Bitcoin standard for the world? Is that, is that kind of like what you want? And think we will, you know, head into? Or like, what's your take on that?

• 58:06Speaker 00

  So just echo your first point. I do think fiat currency is the natural end state of gold. For the reasons we basically had out, like you have to centralize it to scale it. Once you centralize custody of gold, you can't, humans can't be trusted. Basically, someone's going to overissue that currency. Once you have a gold-backed currency and you have the man in the middle, you have to trust the guy not to overissue the currency. Well, if it's not the bank that overissues it, it's going to be the government that commandeers the bank that overissues it, gets you into the fractional reserve, gets you ultimately to the zero reserve fiat standard. So I think fiat is the natural end state of any gold standard.

• 58:51Speaker 00

  That's why we can't go backwards. And I don't think gold ever works. It requires trust in human beings to scale. And that is just a fundamental failing of a gold-backed currency system.

• 59:07Speaker 00

  I'm not prescriptive, actually, although I may sound very excited about Bitcoin and obviously a huge proponent of it. I don't think it's for me to decide. I believe in human freedom and I believe in the free market selecting the best tool for the job and the free market discovering the prices for those assets, right? The actual available of capital, the available supply of capital in the world overlaid with the actual demand for those goods, like whatever the free market says is truth. So what I would like to see is just all of the institutional interference in the market

• 59:50Speaker 00

  for money removed, right? We need to end the central planning of money. We know that central planning doesn't work in every single market we have ever tried it in, ever. I don't know why we still have deluded ourselves into believing that the central planning of the largest and most important market in the world, which is the market for money, is somehow an exception to the rule of central planning. And if you need a thorough ontological destruction of central planning, just go read Hayek's The Use of Knowledge in Society. It's a short paper he wrote, I don't know, three or four decades ago, and he basically describes how the nature of knowledge itself means

• 1:00:32Speaker 00

  that central planning is always inferior to decentralized planning, which is pure capitalism, right? Entrepreneurs, the man on the spot, the guy that's responding to the knowledge of his, is specific to his time and place. He's responding to his actual circumstances. He's trading, right? He's buying and selling. He's informing price discovery through his actions. That is the most efficient way to distribute knowledge. And if you instead had to pass those decisions up a central planning hierarchy, wait for a response to come back down and then act upon that knowledge, the knowledge would have lost its relevance. It would have lost its usability effectively. So central planning,

• 1:01:17Speaker 00

  in a nutshell, is always inferior to decentralized planning, which is pure capitalism proper. I might not be doing that. It's full justice, but I would encourage people to read the paper. Like you just, it just annihilates the argument of central planning forever.

• 1:01:34Speaker 00

  We need to take it seriously, right? We I spoke at Jordan Peterson's ARC conference about a month ago. And one of the this is the ARC is the Alliance for Responsible Citizenship. They're trying to be the anti-world economic forum effectively, an international consortium based on traditional values rather than, you know, utopian fantasies about living in the pods and eating bugs and all that. One of the central pillars of ARCs is free markets, right? They're describing how free markets are the best generators of wealth we have ever discovered. You need to remove state interference from markets and let the free market do its thing, right? Generate true prices and discover useful innovations.

• 1:02:17Speaker 00

  Yet no one's talking about the central planning of money itself. So I'm on stage like, hey, guys, the elephant in the room here, as far as I can tell, is no one's talking about the central planning in the market for money. If money is one half of every transaction, you could free every single market in the world, but so long as you still have a central bank, then you are at best a 50% free market because money is one half of every transaction. So until we like wake up to this somewhat hidden in plain sight, semi-obvious reality that corrupt or centrally planned money doesn't work, I think we're going to have really bad outcomes individually.

• 1:02:56Speaker 00

  And I think the only social outcome is composed of individual good outcomes because society is composed of individuals. So if you honor individual life, liberty and property, and when you, I guess, to just add to that, when you print money or you are operating on a fiat currency standard, you are violating the private property of savers. Every time we print a new dollar, savers are being debased, right? Their purchasing power is being stolen by the central bank. So central banking is an anti-capitalistic institution. And this is it comes straight out of Marx's playbook. It's measure number five in Marx's manifesto of the Communist Party.

• 1:03:39Speaker 00

  You need a central monopoly on cash and credit with an exclusive license by the state. That's a component of Marxism. So in central banking, we have monetary Marxism. It's not monetary capitalism.

• 1:03:55Speaker 00

  People need to wake up to this reality. You're not going to have good collective outcomes if you don't have good individual outcomes. You're not going to have good individual outcomes if people don't have life, liberty, and property protected. So that's why I think central banking is a huge problem and gold's not a solution for the reasons we outlined. I only see Bitcoin as a solution. However, I don't prescribe that answer. I don't think we should force Bitcoin's use on people. You let people decide. You lift the restrictions and you let the free market operate. And it's my opinion that market actors would select Bitcoin as money, but it's not my prescription for them to do so, if that makes sense.

• 1:04:32David Hoffman?

  Mantle, formerly known as BitDow, is the first Dow-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest Dow-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 on-boarded, like Game7 for Web3 gaming and Bybit for TVL and liquidity and on-ramps. So if you want to build on the Mantle Network,

• 1:05:14David Hoffman?

  Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle. Are you launching a token? Is it already live? How are you managing the legal and tax for providing token awards for your team? Toku simplifies everything about managing token grant compensation, and you can get started with them for free. You'll have access to top-notch legal and tax support to handle the distribution and management of tokens for your team. Toku caters to every step in the process, from user-friendly legal templates for granting tokens to tracking vesting periods and calculating withholding taxes. Toku understands every grant structure:

• 1:05:59David Hoffman?

  token purchase agreements, restricted token awards, restricted token units, token options, and all the others. Toku is already simplifying this today for leading companies like Protocol Labs, DYDX Foundation, Mina Foundation, and many more. You can learn more about how Toku can help you streamline your token management and get started for free. Visit toku at toku.com/banklist or click the link in the description below. Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world. And now, something big is happening. Introducing the Cello Layer 2. It's a game-changing proposal that's going to bring Cello's rapidly-growing ecosystem home to Ethereum. Vitalik has shared its excitement for the Cello Layer 2 on the Cello Forum, so has Ben Jones from Optimism. But why? The Cello Layer 2 will bring huge advantages like a decentralized sequencer,

• 1:06:42David Hoffman?

  off-chain data availability, and one-block finality. What does all that mean? Rock-solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening. Active addresses on Cello have grown over 500% in the last six months. With the Cello Layer 2, gas fees will stay low and you can even pay for gas using ERC20 tokens. But, Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello Forum. Follow @celloorg on Twitter and visit cello.org to shape the future of Ethereum. I'm always fascinated by when crypto podcasters like ourselves try to answer, you know, "Why Bitcoin? Why crypto?"

• 1:07:24David Hoffman?

  That answer always begins with history, going back into history. Because, at least growing up in the United States, and I'm gonna assume the rest of the world too, there is no, like, academic programming about money. Like, you are never taught about money as a subject. It is just something that is, like you said, invisible to us. And so, in order to appreciate Bitcoin, you actually have to unlearn the preconceived notions that you have, and learn and reconstruct a new knowledge, new understanding about what money is. And it takes us an hour, we're at 59 minutes on this podcast, talking about history in order to actually get to the punchline about "Why Bitcoin." But hopefully, Robert, we can actually turn to Bitcoin now in this conversation.

• 1:08:08David Hoffman?

  Bitcoin is a number of different things. There's many different components that make up Bitcoin. There is the proof of work. There is the 21 million units. There's the internet nativity. There's being passed around at the speed of light. When you look at Bitcoin and you look at all these different components, which one does one stand out to you the most? Or is it more about the coherent semblance of all of them? What component of Bitcoin do you think is the most important?

• 1:08:36Speaker 00

  I would agree. It's definitely the coherent assemblage of all of them. I think is how you said it because if you lack any one component, then you've lost sort of the emergent property that is Bitcoin, right? You need all the ingredients to make the pie, so to speak. But if I had to choose one that really kind of mixes, maybe it's the solvent for the magic sauce that is Bitcoin. It is the difficulty adjustment. All right, the idea that this algorithm is responding to human efforts

• 1:09:16Speaker 00

  to try and produce new units of Bitcoin in approximately real time, right? It resets every two weeks.

• 1:09:25David Hoffman?

  We're going to have to explain the difficulty adjustment.

• 1:09:27Speaker 00

  Yeah, yeah. So what I'm saying here is,

• 1:09:33Speaker 00

  okay, to start with the importance of proof of work, which is another component of Bitcoin. We don't know of any way in this universe to effectively restrain the supply expansion of money without requiring the expenditure of energy. This is what gold was. Again, gold had this inflexible supply because it took time, effort and energy to go out and mine. First of all, discover gold deposits, mine them, refine them. This energy necessary to produce new units of gold restrained its supply from artificial expansion.

• 1:10:16Speaker 00

  Now, if you contrasted this to fiat currency, where there's almost zero cost to increase the supply, right? The US dollar today is an SQL database maintained on premise at the Federal Reserve. It's a one node database. To expand the supply of dollars, it's like Ctrl P, right? There's almost no effort, no work, nothing. That's the problem. That's the core problem with the US dollar, that you can create new units of money without expending energy. And now to try to anchor this intuitively. Using another definition of money, if money is that instrument we use to acquire goods and services, all goods and services require energy to produce.

• 1:10:57Speaker 00

  Doesn't it make intuitive sense that the money we use to acquire costly goods and services should itself be costly to produce in terms of time and energy? If it were not, then the institution that could produce new units of money without cost would do so and use the money to acquire things that were costly. And that's basically what we're saying when we say inflation is legal counterfeiting, counterfeiting is criminal inflation. It's just theft, right? You can print new money that other people are forced to use. You can acquire assets with it that people have to work to produce. You can acquire them without work, right? So that's the fundamental difference between Bitcoin and the US dollar. Well, I don't want to say the a fundamental difference is this proof of work, right? There's a proof of work necessary to produce new units of gold, to produce new units of

• 1:11:42Speaker 00

  Bitcoin. There's not a proof of work necessary to produce new units of fiat currency. So proof of work is very important to assure the supply integrity of the money. Now Bitcoin has done something really interesting with the difficulty adjustment. And so the proof of work in Bitcoin is Bitcoin mining, right? So we're plugging in, we're creating these application-specific integrated circuits, ASICs, right? They do one thing, they mine Bitcoin, they try to solve this puzzle. You have to expend a lot of energy in these machines. They're basically creating lottery tickets, right?

• 1:12:25Speaker 00

  They're trying to solve this global Bitcoin mining puzzle that resolves itself approximately every 10 minutes, trying to win the new Bitcoin and the transaction fees associated with each block. So it's a game, right? It's a global game, anyone can access it. The cheaper the energy, the name of the game is get cheap energy, right? Get cheap energy, get cheap basics, plug into the network, play the game, you turn electricity into digital cash, basically. That is the proof of work mechanism that's ensuring Bitcoin's supply integrity. But the interesting thing about the difficulty adjustment is that game. Gets more, becomes more or less difficult according to how many players are engaging in the game.

• 1:13:09Speaker 00

  So the more hash rate that's coming online, the more operational capital expenditure that's being allocated to the pursuit of Bitcoin production, the more difficult that game gets. And it, it gets precisely more difficult to make sure that it's still averaging a block time of 10 minutes. And ensuring the supply cap of 21 million. So the, so by hitting a block time of 10 minutes, you're only getting the, the block subsidy of whatever it is, you know, according to the, the epoch, right? Every four years, the block subsidy is cut in half. It's adhering to that fixed diminishing supply curve that goes to, to zero new Bitcoin issued

• 1:13:52Speaker 00

  per block in the year 2140, right? It's cutting, reducing by 50% per year all the way until the year 2140. That is a mind blowing innovation because that, I mean, when you talk about a difficulty adjustment, this is an, a manmade algorithmic structure that's responding adaptively to the human actions executed in pursuit of Bitcoin production. So it's like, it's almost like we created a living thing. It's like the harder we try to produce it, the harder it becomes. It's almost like this ever receding horizon, right? Like no matter how close you get to the horizon, the horizon's always still on the horizon. You could never quite touch it.

• 1:14:36Speaker 00

  And if you back up, right? And you get further from the horizon, well, the horizon comes a little bit closer to you. And the difficulty adjustment does that as well. If we start, um, if hash rate declines, well, this global game becomes easier to solve such that it still, uh, adheres to that supply curve. And so I think that is the critical innovation that sort of connects all the pieces. It gives us this money that is composed of the closest thing, the perfect certainty we've ever had. Right? The big value prop of gold again was that it had a predictable supply that you would know that if you stick your savings in gold, you're not going to get debased more than 2% year over year. So you had a lot of predictability.

• 1:15:19Speaker 00

  And with Bitcoin, we have basically perfect predictability because we have a perfectly fixed supply asset. We know what the supply of Bitcoin will be approximately at really any moment in time between now and forever. And you can audit that supply by running your own node. So if money is, there's another definition of money, it's as it's an insurance policy against uncertainty. All right. What's the optimal strategy when conditions are uncertain? The optimal strategy is having the widest possible set of options.

• 1:15:53Speaker 00

  And that's what money is. It's a tool for pure optionality in the marketplace. It can be used to acquire anything. So the more certain the money, the higher the integrity, the supply, the more options it's going to give you. And I think Bitcoin has basically perfected that. So it's a strange one, man. The difficulty adjustment. I can't think of any analogy for that. I don't think we've created anything else. I guess you could maybe buy, you could stretch the analogy and say a thermostat, right? Like, you're sort of telling it what temperature to go to and it's pumping heat or cool air in or out of the room to respond

• 1:16:34Speaker 00

  adaptively to the actual temperature. It's something like that. But but governing a global game of money creation. It's a really mind bending thing.

• 1:16:43Ryan Sean Adams?

  So it's coordinated some competing forces here. So this difficulty adjustment and proof of work, you think, is one of the most important elements of what makes Bitcoin Bitcoin. I want to ask you, Robert, for kind of a framing of this for someone who's new, right, to cryptos. Like, think about somebody in your family who just asks you, okay, what is what is this Bitcoin thing? And your first answer to that is, well, let me tell you first what money is. And we spent a ton of time in the episode doing that. And I think that's great. Now they get what money is. But then they're actually, but okay, but Robert, what is it? What do you go to? Like, how do you answer that question? Do you say things like, well, it's like gold, but it's

• 1:17:26Ryan Sean Adams?

  digital. It's peer to peer. You can you can kind of own it yourself, has some sort of a fixed supply. Like, how do you actually explain what it is in your concrete terms that someone who's completely new to it understands?

• 1:17:44Speaker 00

  So I think I mean, as I was learning about Bitcoin, I was very turned off when people would lead with a technical description. I'm not a techno, I'm not a computer scientist, so it's not my forte.

• 1:18:01Speaker 00

  And so I don't think that's useful when trying to reach most people. Maybe if you're talking to computer scientists or engineers, maybe that's the right way to lead. But for most people, I think you need to go to these more accessible metaphors and analogies. So one, it's like, okay. You always have to curate for the audience you're talking to, right? So I grew up in Tennessee.

• 1:18:29Speaker 00

  If I, most of my buddies in Tennessee, if I go and say to them something that's somewhat radical in front of most audiences, like taxation is theft. They're like, yeah, no shit. Tell me something I don't know, you know, like it's not radical at all. They totally get it.

• 1:18:48Speaker 00

  And so they, they understand that. So it's not much of a leap to describe money printing. It's like, okay, well, have you thought about money printing? It's like, there's one group that can print money. Everyone else is forced to use it. Obviously, supply and demand, the more you increase the supply of money, the lower the purchasing power, right? The price, the price of money goes down as you expand the supply. That's basically tax. So like, oh, okay, that makes sense. So if you're talking to someone that understands money printing is theft. Then Bitcoin, and this is a lot of people in the emerging world, right? Emerging economies, they understand this. They've been living through, go talk to someone in Argentina, right?

• 1:19:29Speaker 00

  There's a reason they just elected Javier Malé. They've had like five hyperinflations in the past 50 years, something like that. We just did an episode on this, what is money in Argentina? Ariel did a great job chronicling Argentina, Argentina's monetary history. It's terrible.

• 1:19:47Speaker 00

  You go to people in Argentina and say, hey, Bitcoin is money that cannot be printed. They're like, oh shit, sign me up. That's amazing. Like they've lived through, they've had the visceral experience of money printing being a catastrophe, right? For, for decades. So if you have an audience that understands money printing is theft or money printing is not good. Then you can just say Bitcoin is money that nobody can print.

• 1:20:11Speaker 00

  Very simple, right? Very straightforward. Um, now, if you're talking to an audience that maybe does not have that prerequisite knowledge.

• 1:20:21Speaker 00

  I've tried to simplify by just saying, like, look.

• 1:20:26Speaker 00

  Finance is confusing. All right, there's a lot of jargon, a lot of math. Um, a lot of kind of hoity-toity people in suits, you know, using big terms and it's just a, it's just hard. It's just impenetrable for a lot of people. But I think most people have a pretty good nose for bullshit.

• 1:20:49Speaker 00

  And so I say, if you've ever detected that there might be something amiss or something wrong in the legacy financial system. Right? We, most of us lived through 2008. Many of us lived through 2001, you know, you can keep rolling back the clock.

• 1:21:07Speaker 00

  These, uh, events, right? These liquidity events or liquidity crises or, um, stock market collapses, recessions, whatever you want to call them. If you view those as indications of a creaking and cracking in the legacy financial system. Just consider Bitcoin an insurance policy on that whole thing. Like, you don't even need to know what's wrong with it. Just like if you detect that there's something wrong, feels like it might be amiss, we might have another catastrophe. Well, then maybe you should own a little bit of Bitcoin as just an insurance policy, right? If this thing does crack or, or break or collapse, well, that policy should really pay off. And now if they get into the why, it's like, well, what, what does that mean?

• 1:21:52Speaker 00

  Obviously, it's an analogy. Bitcoin's not actually an insurance policy. It's like, well, you may have noticed every time we have a financial.

• 1:22:01Speaker 00

  What, what do I want to call this? Disaster, financial disaster, 2008. What was our response? What was our remedy? Let's print $700 billion.

• 1:22:12Speaker 00

  Okay. What was our response in 2020 to the COVID plandemic? Well, let's 10x the 2008 number. Let's print six to eight trillion dollars, right? So the the precedent and the incentive for the response is always money printing, right? They're always trying to increase liquidity in the system to offset

• 1:22:39Speaker 00

  to improve its solvency, which you're not actually doing. You're sort of kicking the can down the road. You're sowing the seeds for greater disaster in the future. This is the Austrian business cycle theory. But if you can just give this to people, it's like, look, every time this thing breaks down, they print more money.

• 1:22:56Speaker 00

  And the money that cannot be printed when it's expressed in terms of money that is being printed means its price is going up. Sorry, this doesn't sound super simple at this point, but I basically just try to say it's an insurance policy on the legacy financial system. If you think there's something wrong with the legacy financial system, you might want to own some of this insurance policy to protect yourself. And then if they want to get into the nitty gritty, I sort of go down that path about money printing. But it's not easy, right? This is not an easy topic. I don't know. I I hope that this is resonating with some people. You know, the show has had some success, so there's definitely some nerdy types out there like probably the three of us that are into this stuff that want to learn and whatnot. But it's not

• 1:23:40Speaker 00

  easy to talk about, because if we go back to the the language metaphor, it's like, how do you talk about the nature of language, right? You're using the the instrument of mediation to describe the instrument of mediation. It's like trying to, you know, we're always looking through the glasses of language or money. How often do we take off the glasses and actually examine the glasses? It's um, I tweeted this the other day. It's like studying money is like looking at the looking glass. Like you have to take off the glass and look at how you're looking at the world. So it's kind of a perceptual shift.

• 1:24:14Ryan Sean Adams?

  I think a lot of people aren't oriented to do that, Robert, is the truth, right? It's like, so you know, the three of us and many others listening might be kind of like geeks when it comes to like trying to figure out, you know, the base principles for this weird anthropological thing that we call money. And but a lot of people are coming to crypto for one simple reason, that is number go up, right? And in fact, I don't actually like, that's fine. That's like market forces at work. And by the way, sometimes people kind of come for the money, come for number go up, and then they start to realize, like, they start to actually study it in the way that we've been talking about it today. And that's their entrance into crypto.

• 1:24:59Speaker 00

  Everyone comes from number go up.

• 1:25:01Ryan Sean Adams?

  I think so. But so let's talk about that for for a second. Let's address that head on. The bull case for Bitcoin, like the from a price perspective, where do you think this thing can go? I mean, what are we? We're just above 30K right now. What's what's your bull case for Bitcoin?

• 1:25:17Speaker 00

  Well, the bull case for Bitcoin is the failure of central banking and fiat currency.

• 1:25:27Speaker 00

  And that has a weird outcome, because you know, we're very focused on the US dollar price of Bitcoin today. And we didn't get into this, but we maybe should have earlier. The other thing about money as a language of value is that it facilitates these economic nerve signals called prices. And prices are very important. They're probably more important than natural language in coordinating human action across time, right? Like, your labor has a price, assets have a price. As you just said, number go up, which is Bitcoin price, US dollar price go up, is what draws in basically everyone. I think the price

• 1:26:09Speaker 00

  is the the phenomenon or the instrument that commands the most attention in the world, right? Why is Elon Musk famous?

• 1:26:19Speaker 00

  Because of his price, his net worth, right? It's a, it's a very important metric when it comes to determining where we place our attention. All right, whether it's on an asset or an individual. So the bull case for Bitcoin, um, I guess somewhat unfortunately to say in my opinion, is paved, you could say the path to hyper Bitcoinization is paved with a series of hyperinflations, fiat currency, hyperinflations. And presumably the last of those would be the US dollar. Because the US dollar is the most widely demanded fiat currency in the world today.

• 1:27:00Speaker 00

  There's 330 million people in the US, but there's about four and a half billion users of dollars worldwide. There's an entire offshore derivative dollar market called the Eurodollar system that is not controlled by the Federal Reserve, uh, but drives a massive configuration of demand for the US dollar.

• 1:27:19Speaker 00

  Uh, this is basically the pyramid scheme on top of a pyramid scheme. It's a very meta in that way.

• 1:27:28Speaker 00

  I think we'll see

• 1:27:32Speaker 00

  many weaker currencies collapse into stronger currencies over the decades to come. Uh, we've seen this already before, right? When Zimbabwe hyperinflates, what does the economy do? It dollarizes, right? They switch to a, a purchasing power, stable fiat currency and switch out of a, a hyperinflating fiat currency. So I'd expect a lot of international fiat currencies to collapse into the US dollar over time. This somewhat parallels, uh, the dollar milkshake theory that, uh, that Brett Johnson, uh, advocates for heavily for. I think it's just an expression of the universal demand for one money. Like, again, we had gold for a reason.

• 1:28:18Speaker 00

  The dollar was a derivative of gold and we're, the network effects that the dollar has today are basically an echo of that, right? It's an echo of its redeemability for gold at one point in history.

• 1:28:31Speaker 00

  So after we get enough currencies collapsed into the US dollar, we're probably left with just the US dollar or maybe a few other, you know, you might have East Coin and West Coin, maybe it's Chinese yuan and US dollar, the last two standing, who knows? But when they start to hyperinflate, things get really weird, right? Like the US dollar price of Bitcoin goes up and up and up.

• 1:28:58Speaker 00

  But eventually, the, as the currency, when a currency is hyperinflating, first of all, it's not a straight line. It'll go up and bust, up and bust. You could study the price of gold during the Weimar hyperinflation. Gold is up 800%, it's down 80%. It's up 500%, it's down 92%. It's up 1100%, it's down 75%. Like, it's a very jagged path to hyperinflation. But at some point, like in the Weimar hyperinflation, like the Weimar, what was it? The Reichmark, I think, was the name of their currency? Eventually, the Reichmark price of gold is just meaningless, right?

• 1:29:38Speaker 00

  Like, it was a wheelbarrow of cash to buy, like, a slice of bread. Like, it doesn't, the money has lost its utility as a unit of account. And so I think we're gonna reach that point with Bitcoin at some time, right? When the US dollar goes into hyperinflation, eventually, the dollar price just won't mean anything. Five, 10, 15, 20, 100 million US dollars for a Bitcoin, and at some point, people are like, well, the price of bread in dollars is like tripling every few days. I can't use this thing to buy food, or predictably buy food, then this currency is no longer useful to me. But when I price bread and sats, it's actually going down stably over time, right?

• 1:30:23Speaker 00

  Or, or maybe it's, it's stable in the short run and declining in the long run, something like that. So eventually, there's this mental, this perspectival flip from I see the world in dollars to, well, dollars no longer work as a perceptual apparatus. I now see the world in sats or whatever. Gold, whatever the thing is, that's, that's, that the dollar is hyperinflating against, presumably, it would be gold and Bitcoin. That's gonna be a weird time for people, right? That's gonna be a weird time that this monetary protocol reset drives a psychological perceptual reset.

• 1:31:02Speaker 00

  I don't think people are ready for that. So when you asked me like, what's the bull case in terms of dollar price? I think the bull case is the dollar price becomes meaningless and we we reset all pricing in terms of SATs. Uh, and that's, that's a radical thing to say, so.

• 1:31:22David Hoffman?

  Yeah, the because it's radical because it kind of breaks people's understandings. They're not really prepared to hear that their foundation that their entire life is built on is going to completely collapse.

• 1:31:32Speaker 00

  Yeah.

• 1:31:33David Hoffman?

  But I would also say, uh, I would employ any bankless listener who just listened to that and is feeling resistance towards accepting that, uh, to go check out the Wikipedia article about the collapse of fiat currencies because it actually appears to be the status quo rather than the, um, it is. Given enough time. Given enough time and the fullness of time. They, well, the typical fiat currency, I think the average lifespan is 29 years or something like this. I think the United States dollar is an exception because of the centrality of the whole world based on it, the Petro dollar.

• 1:32:09David Hoffman?

  But the, the base case is that fiat currencies do inflate. It's just a matter of how violently and how rapidly. And so, Robert, that's the Bitcoin versus fiat coin conversation. Yet Bitcoin also spawned this massive world of cryptocurrencies. Uh, and so how does Bitcoin, what's the Bitcoin articulation of its own inherent bull case versus the long tail of crypto assets, for example?

• 1:32:35Speaker 00

  Yeah, I would encourage people, as I was telling you guys offline, I think the operative word to distinguish between Bitcoin and all other crypto assets is decentralization.

• 1:32:47Speaker 00

  And it's not a binary. It's not, this is decentralized, that is not. However, if I'm forced to simplify the crypto asset universe, I say Bitcoin is decentralized. In my opinion, everything else is not, or not enough, not decentralized enough, let's say. I would encourage people to go read Balaji's piece from 2017.

• 1:33:11Speaker 00

  It's titled Quantifying Decentralization. I think it's in the Coinbase blog. And he basically put together something that was inspired by the Gini coefficient and the Lorenz curve. I think he called it the Nakamoto coefficient to try and quantify the decentralization of crypto assets. And he's looking at Bitcoin and Ethereum in particular. I don't agree with all of the subsystems he looks at. He looks at like exchanges. I don't think that actually matters. Like exchanges aren't part of the Bitcoin protocol.

• 1:33:42Speaker 00

  I don't think ownership concentration matters that much. A lot of people get up in arms about that one. But I think ownership concentration doesn't compromise the decentralization of an asset. But arbitrary rule changes, concentration of the consensus protocol or mining network, all of these things can compromise decentralization. And I basically view money as like a winner take all or winner take most marketplace. I think Bitcoin has a very unique first mover advantage and the benefit of path dependence. That it was the first crypto asset.

• 1:34:25Speaker 00

  It was able to grow in a world where awareness of crypto assets was almost nil, right? It was kind of the the original trailblazer. And that afforded it this. Situation where it could really develop its decentralization naturally. It's the most organically grown crypto asset, you might say. And when you put all those things together, I really tried to crystallize my thoughts in the piece that I wrote, the number zero on Bitcoin on this topic. I can't summarize it all now. It's like a 40 minute essay, but I did my best to describe why Bitcoin is,

• 1:35:09Speaker 00

  in my opinion, different than all other crypto assets and the same reason the number zero is different than all other numbers. And there's an interesting history there. Even if you're not into Bitcoin, you could just read about the number zero. It's a very radical innovation. And a good example of an unstoppable idea, like it was just so useful. No one could stop it. Like governments tried to outlaw it, you know, it was the church didn't like it. It sort of undermined the the propagandistic power base of the church because it implied infinity. But the church's story about the world was based on a finite universe and it's a whole thing. It's really, really interesting. Love the concept of a church trying to ban a number. Yeah, yeah, we could. It's funny. We can laugh at that today, right? Because

• 1:35:55Speaker 00

  heads were rolling at one point about that, literally.

• 1:35:59Ryan Sean Adams?

  So, Robert, let me ask you the question. Do you do you own any other crypto assets besides Bitcoin?

• 1:36:06Speaker 00

  I don't. The only shitcoin that I own is US dollars and I'm not proud of that, but.

• 1:36:11Ryan Sean Adams?

  Well, do you do you agree that that other crypto assets are in a monetary competition with Bitcoin, though? You just think that Bitcoin happens to be the power law winner of that, but you would concede that other crypto assets are competing with Bitcoin as money on those dimensions that we were talking about earlier.

• 1:36:31Speaker 00

  I think monetary, you know, competition among monetary technologies is always alive. I don't think that ever goes away, as we described earlier, right? People are.

• 1:36:41Speaker 00

  Experimenting with different tools for the job. And really, any place two people come together and agree to trade favors, you could say those favors are money, right? It's like a deferred, uh, deferred favor, basically, right? Like, hey, I owe you one. That's kind of a form of money, right? It's a, it's a medium of exchange, even if it's just between a tiny network, like two people. So I do, yeah, monetary competition is alive and well at all times. My view would be that Bitcoin has basically perfected the design space of money. Like, it's perfectly divisible, durable, recognizable, portable, and it's fixed supply, so it's perfectly scarce.

• 1:37:23Speaker 00

  I don't think there's any room in the design space left to introduce something that is disruptive to Bitcoin. I kind of view Bitcoin as an ideal money, or even the invention of pure money. This is something we didn't touch on, but you know, the market cap of gold, approximately 20% of that is for gold as an industrial metal, right? Use in computers, dentistry, et cetera. The other 80% is demand for gold as a money, as a store of value. Bitcoin's the first asset that 100% of its market cap is as money, right? It's a pure money. It doesn't have an industrial use.

• 1:38:05Speaker 00

  You can't put Bitcoin in your teeth or as a, use it as a computer component. You know, it's not an industrial metal. It's just a pure monetary technology. And I guess I'm further convicted in that view because even if I'm wrong, Bitcoin is still open source software. So say Ethereum or any other coin, for that matter,

• 1:38:31Speaker 00

  established some product market fit, right? Some other unforeseen monetary property that's really useful. Well, that doesn't mean it can't be imported into the Bitcoin UTXO set. So Bitcoin retains this capacity for useful adaptation.

• 1:38:51Speaker 00

  While at the same time, having basically perfected the design space for money. So I think it's very resilient to disruption.

• 1:39:01Speaker 00

  And that's just my view, you know, views are subject to change, I guess, but that's where I've been for the past several years. And I don't see anything that's shaken my conviction yet.

• 1:39:12Ryan Sean Adams?

  We basically think that like they're in the kind of the monetary space Bitcoin sort of got it right. And so if it got it right, then like, there's not a lot of room for for competitors. And yeah, I think that obviously we could have an entire podcast talking about this. And, you know, many things that like many episodes that David and I have done in the past have been to kind of dissect some of these things. Bitcoin or, you know, Bitcoin versus other crypto assets. I think that's beyond the scope of this podcast because Robert, what we really wanted to do was lay out the 101 and kind of like the Bitcoin bull case from a Bitcoiner. And I think you've done that very effectively, starting with what is money and getting to like, why Bitcoin?

• 1:39:57Ryan Sean Adams?

  And why you're so excited about it? I do want to introduce maybe one kind of question to you, though, that I think is broader than other crypto assets and just a general concern that I have with not just Bitcoin, but but frankly, a lot of crypto assets, unless we do things right. And that's the worry that what if Robert were on a similar path as gold? And so what if the Bitcoin ends up out of individuals' hands, out of our hardware wallets and our multi sigs and that kind of thing? And back into the hands of some sort of banks? In fact, we saw some of this, didn't we, in 2021 and 2022 with a lot of Bitcoin going into like BlockFi, for instance, and like going into Celsius, these things. What are they banks and what do they do?

• 1:40:42Ryan Sean Adams?

  The classic thing that banks always do, they offered yield, they offered some upside for us. And so I worry about like, with respect to the kind of the Bitcoin, right? Bitcoin can only support a certain number of transactions per second, and then it gets more expensive, right? Well, guess what? If you take Bitcoin IOUs and you put these on a sidechain of some sort, in kind of a bank-type structure, you could do infinity transactions per second. You're back to a SQL database, trading around IOUs. And so I want to present this general question to you, or like a concern I have for not just Bitcoin, but all crypto assets unless we do this right. Are you worried we could be on a similar path to gold here? Where we've got this fantastic, you know,

• 1:41:25Ryan Sean Adams?

  non-inflatable supply money, the same as gold, but the bankers will come in and take it over, and they'll offer us features, they'll offer us yield, you know, they'll fractionalize it, for instance. They'll accrue it in these centralized depots and depositories. And then the nation state will take control and choke it off once again. And then we're like full circle, only rather than doing it with gold, we've just done it with Bitcoin. Do you have any concerns about that? Or do you think we can resist that?

• 1:41:54Speaker 00

  Yeah, it's a good question. I guess the first important thing that can't be said enough is not your keys, not your coin, right? Like, if you don't control the private key, you don't own Bitcoin. It's just really that simple. You know, if it's on BlockFi, or if it's with a bank, or this custodian, that custodian, it's very much that simple. If you don't control the private key, you do not own Bitcoin. You have a Bitcoin IOU at best. And as we've seen, those IOUs have frequently been defaulted on, either via exchange collapse, or theft, or hacking, or whatever.

• 1:42:38Speaker 00

  So if you're serious about using Bitcoin as money, I don't even think it's possible to use it as money if you don't hold the private key. So that's kind of the first thing that you can't really say enough. Because I think there's a lot of unfortunate people that held Bitcoin in any of the things you just said, thought they had Bitcoin, woke up one day and realized they got rugged, right? So not your keys, not your coin. Put it on a t-shirt, put it on a hat, say it repeatedly. Very important mantra in Bitcoin.

• 1:43:16Speaker 00

  To the question, how does it, could it end up like gold? I think the main, well, a main difference between Bitcoin and gold that we touched on earlier is just portability, right? The fact that it's trivial to take settlement of your Bitcoin private key, like to withdraw your Bitcoin from a custodian, is basically an email request, right? Or some electronically transmitted request, and then you provide them with an address and you take receipt of that Bitcoin versus trying to take settlement of physical gold, right? It's expensive, it's costly, you gotta put it in a safe, you're taking the risk of custody, et cetera, et cetera.

• 1:43:59Speaker 00

  I think that lends itself to a more effective self-regulatory environment that basically the custodians that have the best reputation would be those that succeeded the most. I also think that where you're not gonna have, I don't think singular custodial models hold up in the future, because you can, through multi-sig that we described, you could do the same thing at the institutional level, right? You could have a quorum of custodians, right? Rather than putting all your assets on deposit with JP Morgan, whoever it is, maybe you've

• 1:44:40Speaker 00

  got JP Morgan, Goldman Sachs, Chase, whoever your quorum is, and each one of them is holding a piece of the private key, and you're cryptographically proving that that Bitcoin is held in reserve on-chain, it's not encumbered, it's not being lent out, or maybe it is to the extent that you want it to be lent out, like you actually have visibility and control

• 1:45:02Speaker 00

  over the asset in a way that you don't with gold in a vault that's audited once a quarter or once a year, or once every few years, or never, as in the case of the Federal Reserve.

• 1:45:16Speaker 00

  So that additional degree of transparency, auditability, portability, I think it's just a fundamentally different market space than what we see with gold.

• 1:45:29Speaker 00

  One where consumers have more control.

• 1:45:33Speaker 00

  One in which, again, I don't, I think consumers would always opt for either self custody or multi-key custody, whether at the individual level or at the institutional level, because you can fully control the asset more or less, but you can mitigate almost all counterparty risk when you, when you do a proper multi-key slash multi-sig setup. I don't see, you know, what a market soup. Markets effectively separate capital from the passionate into the hands of the dispassionate. So the people that properly evaluate risk and say, look, I can custody this thing in a multi-sig fashion in a way that minimizes my counterparty risk,

• 1:46:17Speaker 00

  but maximizes my control or sovereignty over this asset. Those that adopt that strategy will keep their Bitcoin and thrive over time. Those that do not will get rugged and be naturally selected out of existence so that the net market outcome is those that held their Bitcoin in a multi-sig survived and thrived. So eventually the entire market is held in multi-sigs, either at the institutional or individual level. That puts a lot of restraint on what you can do in the marketplace, right? You can't just go paper it up and have all these Bitcoin IOUs shooting all over the place because someone will be demanding accountability and settlement for that asset. Traceability,

• 1:46:58Speaker 00

  like all of these things we get through cryptographic proofs that we don't have when we're using a shiny dumb rock as money, I think add a lot of, what would you say, just market efficiency

• 1:47:13Speaker 00

  into the, into the, the market for money that we don't have with gold. So.

• 1:47:19Speaker 00

  I think the concerns are valid. Like, there's a lot we can learn from the history of gold and how it went wrong. But it's also a different creature, you know? We're talking about a non-physical, digital gold. That's it's different in fundamental ways than analog gold.

• 1:47:35Ryan Sean Adams?

  Well, the reason we wanted to do this podcast, Robert, is because Bitcoin is the first bankless digital money that we've ever created, and that in itself is a marvel. And certainly a fantastic technology for freedom, power to the people, power to individuals, and power to the community. And I think that's a theme in your What is Money? podcast, isn't it? That this concept of freedom. Can you can you talk about how Bitcoin and digital monies like it, that's, you know, private keys in the hands of individuals? How does that help propagate freedom? And why is that important? Just maybe lastly, as we close.

• 1:48:13Speaker 00

  Yeah, well, this is a very big topic for the last one. I mean, we already touched on money as the ultimate tool for economic freedom and that it affords you

• 1:48:26Speaker 00

  basically perfect optionality in the marketplace, right? Anything, any good or service the marketplace can bear, money can be used to acquire. So if you're, again, as we said earlier, when you're dealing with uncertainty, that's what money is useful for. It's like insuring you against uncertainty. No matter which way circumstances move, right? You know, this situation happens or that situation happens, path A, path B, path C. I know that if I have savings and money, that I can use that to acquire whatever good or service I will need to navigate that path. So it's it's it's an instrument of pure optionality, which is another way of saying it's an instrument of economic freedom, right? Very important. But maybe more fundamentally.

• 1:49:11Speaker 00

  We touched on this earlier too, life, liberty and property. I think these are just the temporal. First of all, the preservation of life, liberty and property is the only purpose of government. That's all you want government to do, right? It's a monopoly on force. It's there to preserve your life, your liberty and your property. You don't want government really to do anything else. You want the government to get out of the way and let the market do the rest. But you need, maybe you need a monopoly on force to preserve peace in a way that you let the market process unfold and generate wealth and discover prices, et cetera. Well, what is life, liberty and property? I think they are three temporal aspects of human freedom. Right?

• 1:49:56Speaker 00

  If I take your life, that's equivalent to murdering you. That's to take your future freedom, right? I've taken that away by taking your life. If I take your liberty, that means I've restrained your physical movement or I've incarcerated you in some way. That means I've taken your present freedom, your ability to move about in space. And if I take your property, I'm taking the fruits of your past freedom, the things of value you have created for yourself or traded for through consensual exchanges with others. If I take that away, then I'm taking the fruits of your past freedom.

• 1:50:35Speaker 00

  So, you know, Bitcoin as being this new form of private property that's non-physical. As we said, if it's stored in a multi-sig, it's very difficult to separate from its owner. So it makes crime and the spoils of war, like these things become less profitable, right? If. When Germany conquered Poland, the first place they go is they go and raid the gold stores of its central bank. Well, if that central bank is holding Bitcoin instead of gold, then all of a sudden, the carrot at the end of the stick for the German war machine is removed.

• 1:51:18Speaker 00

  So the incentive for violence is lowered. So that's, what are we saying? We're creating a more fortuitous environment for life to flourish when stealing is not profitable. Like, the less profitable stealing is, the less profitable killing is, or coercing is. So Bitcoin is, it supports life. Since Bitcoin is this non-physical digital bearer asset, you know, you can put a private key on your brain and cross any border in the world, right? You have basically limitless ability to move about spatially without any restriction. That's a, I think that maximizes liberty, in an economic sense at least, right?

• 1:52:00Speaker 00

  You can vote with your feet, vote with your wallet, go to the jurisdiction that treats you best. And then finally, you know, again, if it's custodied properly, it's damn near impossible to separate from its owner. So it's like, it's a realization of that ancient ideal of inviolable private property. And so, in a way, it's like Bitcoin really supports life, liberty, and property, which are the three temporal aspects of human freedom that matter most and are the exclusive philosophical scope of government. So I could go on. There's many other dimensions to freedom. Freedom's a huge topic. It's like asking, what is money, or what is truth, or what is beauty? But I think those are the ones that are maybe most relevant to our discussion today.

• 1:52:45Ryan Sean Adams?

  Hey, Robert, maybe sometime in the future, we'll have you on and ask the question, what is, what is freedom? But we don't have time or scope for that today. This has been a fantastic explanation of this freedom technology that is Bitcoin. Bitcoin, of course, was the first time you could hold and secure digital property without a bank. And without a government using the coercive threat of violence to enforce it in pretty marvelous technology. Thank you so much, Robert. This has been a lot of fun.

• 1:53:12Speaker 00

  Thank you, Ryan. Thank you, David, for having me.

• 1:53:14Ryan Sean Adams?

  Action items. Bankless Nation. Robert's got a podcast, just like Bankless. It's called What Is Money? We will include a link in the show notes, so you're gonna go check that out. Sounds like he's had some fantastic conversations lately. We'll include some of those in the show notes as well. Gotta end with this. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.