37 - Crypto is Empowering | Phil Bonello

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- 📢 DEVS OR BUILDER? APPLY TO FILECOIN ACCELERATOR FOR $20K GRANT http://bankless.cc/filecoinapply ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️LEDGER https://bankless.cc/ledger-20%20 - BEST HARDWARE WALLET TO SECURE CRYPTO https://bankless.cc/ledger-20 💳 MONOLITH https://bankless.cc/monolith - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🚀ARGENT https://bankless.cc/argent - OUR MOST RECOMMENDED DEFI WALLET https://bankless.cc/argent 🤖YEARN http://bankless.cc/yearn - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn ------ 37 - Crypto is Empowering | Phil Bonello Phil Bonelo - Director of Research of Greyscale - Former ikigai asset management - Messari. How crypto powers the individual. Phil speaks about technology for the people by the people, a central theme of the Bankless Nation. Crypto is an empowering technology. Elliptic curve cryptography provides the maximum level of ownership assurances over property, a service that the Nation State historically has had monopoly over. Cryptocurrency is a subset of cryptograpgy. Cryptography powers more thing than just 'crypto'. Why is it important to have individual-empowering technology? How does encryption empower the individual? Is this good? How does cryptography impact global labor markets? What does an internet-enabled economy produce? What else can we do with this power? Join us as we go on this journey! ACTIONS: 1) Read the Sovereign individual thesis - https://philjbonello.substack.com/p/the-sovereign-individual-investment ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

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

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, fantastic episode today. Awesome episode today. What'd you think about it?

• 0:35David Hoffman?

  Yeah, this episode with Phil was a big step back away from the intricacies of DeFi and the intricacies of cryptocurrency and into the world of cryptography and how crypto, as in cryptography, is impacting the macro world, right? Because cryptocurrency is really just one instantiation of the use of cryptography. And something that the Bankless Nation, I think, really relies on are not just cryptocurrency, but tools that empower the individual. And all of these tools that we're seeing come out of the world in 2020 and even in and earlier than that are all based in cryptography. And so this episode with Phil is how crypto

• 1:18David Hoffman?

  is empowering and it's changing the world in so many different ways. And we go into a lot of those ways here on this podcast.

• 1:25Ryan Sean Adams?

  It's really, that's why we called Bankless, you know, a movement, right? Because it's really a political movement that we're talking about here. Power to the people, power to the individuals, power to small groups to coordinate without necessarily the big, heavy infrastructure of a nation-state. That's a pretty powerful concept. And Phil wrote this fantastic paper, the Sovereign Individual Investment Thesis paper. I think he took a lot of the ideas that like were, you know, more, he made them more concise. He applied them to crypto, but from a book that both of us really enjoyed, The Sovereign Individual, a book that was written in like, what, 1999?

• 2:04David Hoffman?

  1997, yeah.

• 2:05Ryan Sean Adams?

  Wow, okay, yeah, like, maybe, because we don't talk about it a lot in this, in this conversation with Phil, but maybe you should give folks an overview of that book.

• 2:14David Hoffman?

  The Sovereign Individual was written by these two guys that I think it's for a book of when it was written was one, it is one of the books with the most foresight I've ever read, ever, except for the fact how the first chapter is all about the Y2K. So you can, if you guys want to read that, just skip over that chapter, you won't miss anything. But in 1997, they talked about cyber currencies that are outside the purview of the nation state, right? And what the impacts that happen as a result of the existence of these quote unquote cyber currencies. And so like, they didn't know about blockchain, they didn't know about Satoshi, but they, they just figured out that at some point, there's going to be money on the internet and it's going to be outside of the nation state.

• 2:58David Hoffman?

  And so they use that, and they also talk about just what they call changing returns to violence. And what that really means is, you know, violence maybe puts that in a violent image in your head, but it's really talking about who in society do we allow the privilege of having a monopoly on force and coercion? And right now in our society, that's the police and the military, right? And so we give over the right to be violent to the nation state, and the nation state coordinates us with that privilege, right? And what Phil talks about in the, his Sovereign Individual investment thesis, which is based off of the Sovereign Individual book, is that cryptography really reduces how advantageous

• 3:43David Hoffman?

  it is to have this monopoly on violence. And one way to illustrate that is that, you know, with your private keys, no one can take away your Ether, right? No one can take away your DAI, no one can take away your Bitcoin. It doesn't matter how much force, how many nuclear bombs, how many tanks a nation state has, because cryptography doesn't respond to violence, right? It's in a different universe, it's in a different paradigm. And there's just a lot of different implications that results on just the invalidation of what makes a nation state powerful. And so that's what We get into in this episode with Phil. Yeah, we talked about some of those downstream implications. Of course, we often talk about money printing and the macro landscape.

• 4:22David Hoffman?

  And we certainly touched that here, but we also talk about changing labor markets, which is, I think, an interesting take about how education and population, like labor in populations are going to change as a result of this power transfer to individuals. So it's a fantastic, fascinating discussion, and we're glad you are joining us for it. One really good example that Ryan and I came across recently, that is evidence of how this sovereign individual thesis is playing out, is how we got a graphic designer for the Bankless Q3 Token Report, which you guys should totally check out, by the way. But we tweeted out, we need a designer, we need a graphic designer because we have this report coming out.

• 5:04David Hoffman?

  And we got people in our Twitter DMs, you know, asking, peaked about the job. And we ended up selecting this individual from Nigeria, who really worked hard to produce a really good template for how we wanted our token report to work. The power of internet communications, along with our ability to pay this individual in DAI instantaneously, without a wire transfer, without permission of a bank, without talking to any nation state authority, we just sent him his DAI for his labor. What this is really going to do is really even the playing field between labor markets across the whole entire world. This is going to be a massively globalizing force.

• 5:46David Hoffman?

  And Phil, what Phil talks about is how, you know, first world nations, you know, developed nations have have this advantage that he thinks cryptography is going to erode away. And because global labor markets are about to become far more equalized, because now somebody in in some developing nation can do similar jobs as somebody in a developed nation and likely do it for a lower cost than what was would be the market rate in the developed nation. And so Phil sees this pattern playing out, not just in labor markets, but also in education. And just almost, almost every single industry has implicative changes as a result of cryptography.

• 6:26Ryan Sean Adams?

  The 2020s are certainly going to be a decade of changes and so will the rest of the century. It's going to be exciting to watch. So before we get into this conversation with Phil, we've got to mention an event that is coming up. It is an opportunity, if you are a DeFi developer, to help make the world a bit more decentralized, a bit more serverless, a bit more bankless. It's the Filecoin Accelerator. You have the opportunity to earn a 20K grant by applying to the accelerator, along with a $1 million in follow-up funding. We're huge supporters of what Filecoin is doing with IPFS and with its standards to bring about a decentralized storage network.

• 7:09Ryan Sean Adams?

  So if you want to apply, if you're a DeFi developer or an entrepreneur and you want to apply, go to the link in the show notes and do that by the 15th of November. David, you're actually serving as a mentor for this too. David, you're actually serving as a mentor for this too, right?

• 7:23David Hoffman?

  Yeah, I'm really excited about the development and growth of Filecoin and I'm looking forward to seeing what value I can add to this accelerator. For those that don't know, Filecoin is a decentralized storage solution. So think Dropbox, think Google Drive, but decentralized, right? And this is a perfect time to talk about how cryptography is changing markets everywhere. I wonder what happens when the world has just freely accessible and abundant storage in the cloud that is outside of the control of any one single individual, right? That is what Filecoin is all about. Providing persistent and persistently available data to the world. I think that's a really cool thing to strive for.

• 8:07David Hoffman?

  And so I'm really excited to see what is going to come out of this accelerator.

• 8:11Ryan Sean Adams?

  So to take advantage of this, just apply for the Filecoin Frontier Accelerator by November 15th, using the link in the show notes.

• 8:19David Hoffman?

  All right, guys, we're going to get into this episode with Phil about how cryptography is changing the world around us and empowering the individual. But first, we're going to talk about some of our sponsors that are also empowered by cryptography. When you own crypto, what really matters is the security and ownership over your assets. Being a part of the Bankless Nation means having complete sovereignty over your crypto. The easiest way to do that is with a Ledger hardware wallet. A hardware wallet is a little device that manages your private keys for you, so you don't have to worry about proper private key management. Your Ledger hardware wallet keeps your private keys private, but still lets you have easy access to your crypto. The combination of my Ledger hardware wallet and MetaMask lets me store my crypto assets

• 9:04David Hoffman?

  in the most safe way possible, but still lets me easily access Uniswap or all the other DeFi apps that I use on a daily basis. If you already have a Ledger wallet, you can use the Ledger Live app to participate in some of the money verbs that we discuss in the Bankless program. The Ledger Live app is your headquarters for managing your personal crypto finance. It's a great tool to manage the assets you hold on your ledger, as well as receive a portfolio summary of all the assets that you have stored. Using the Ledger Live app, you can buy Bitcoin, Ether, and stable coins and have it sent directly to your Ledger hardware wallet, skipping over the trusted exchanges and getting your assets into your control. You can even use the Ledger Live app to swap crypto assets natively inside of the app,

• 9:48David Hoffman?

  so you never need to send your crypto assets away from your ledger to make a trade. Buying a Ledger is like buying a fire extinguisher. The best time to get one was yesterday, especially if you're doing something silly, like holding your crypto in a hot wallet that's always connected to the internet. If you haven't gained full control over your crypto yet, go to the link in the show notes and get your Ledger today.

• 10:08Ryan Sean Adams?

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• 10:48Ryan Sean Adams?

  gives you all of it. You need to download the app at monolith.xyz to get your Bankless Visa card. It's optimized for European listeners. They'll be coming to the US soon. And when you get that Visa card, the Monolith card, tweet about it when you do. I love seeing people unpackaging their beautiful Bankless Visa cards. It makes me realize that the revolution is here. Search Monolith in the App Store.

• 11:12David Hoffman?

  All right, guys, let's go ahead and get right into this episode with Phil Bonello.

• 11:23Ryan Sean Adams?

  All right, Bankless Nation, really excited to welcome Phil Bonello, who is the Director of Research at Grayscale. He was formerly at IKEA Asset Management and before that, Messori. So he's been around the block in crypto, really knows his stuff. We're going to talk with Phil today about his Sovereign Individual thesis paper. In general, how crypto empowers the individual. This is a technology for the people, by the people, as David and I have talked about so many times. This is a central theme of the Bankless Nation, and we're really excited to have Phil join us to talk a little bit more about it. Phil, how are you doing today?

• 12:05Speaker 02

  I'm doing really well. Thanks for having me, Ryan, dude.

• 12:08Ryan Sean Adams?

  Oh, it's super exciting. I think we are kindred spirits, specifically after like reading some of your writing. I want to start with this question. Do you think cryptography is inherently an anti-authoritarian technology?

• 12:22Speaker 02

  You know, I'm not sure if it's anti-authoritarian. I would say that it's a very empowering technology. And, you know, Vitalik, I think, put it probably best, the best that I've seen. And I'll just quote him here. It's that cryptography is truly special in the 21st century because cryptography is one of the few fields where adversarial conflict continues to heavily favor

• 12:49Speaker 02

  So and then he goes on to say the average person's keys are secure enough to resist even state level actors, you know, and I think that's that kind of sums it up really well. Throughout history and we'll get we'll get into this through the podcast, but throughout history, the leverage of violence has really favored their the attacker. And so it's cryptography has kind of been this this balance for the defender.

• 13:15David Hoffman?

  Let's get into the conversation of defensiveness versus attacking. And I think a lot of people might not understand where we're coming when we talk about, you know, the the leverage leveraging of violence, because we know we're not talking about like a bar fight or, you know, two people, you know, with bloody fists. What are we talking about, Phil, when we talk about the monopoly over violence and being defensive or offensive in terms of technology?

• 13:42Speaker 02

  It's helpful to take a step back a little bit and look throughout history. And this is kind of what the the sovereign individual does. So you think back to hunter gatherer times, no land, no possession, ruled by tribe, right? There's no idea of personal property. Then you go to the agricultural age, there's land possessions. These are things that there's the idea of personal property. There are things that you have to defend. And because of that feudal lords emerge and there's this protection as a service that kind of rises out of this era. And then you go to the industrial age and we see the rise of armies with guns

• 14:23Speaker 02

  and factories run by nation states, you know, so there's continuously consolidation of power. And then we go to the nuclear age and even more leverage on violence, right? We see the development of superpowers in today's world. And then finally, you shift to the information age, which is kind of a big shift in the leverage of violence like we talk about, not only from the point of view of cryptography, where it makes it

• 14:53Speaker 02

  It makes it easy for you to defend your personal digital property. You know, whether it's it's money or you know, your non-fungible tokens or your digital digital assets that are accruing cash flow, whatever it may be, you know, those things are now they can now be defended through cryptography. Along those same lines, we have global access to information. Weapons really have become information. We have virtual reality, you know, it kind of balloons from there.

• 15:24David Hoffman?

  And one of the things that I think it's important for people to understand is is that, you know, who the the entity that is authorized by the people in the social contract to use violence is ultimately the the entity that we that we all trust to use that power correctly, right? But sometimes these structures, these, you know, the nation state structure, but also just like the power structures, the the hierarchies that are generated throughout history that we give authority to. Sometimes they don't act in ways that we really ideally want them to. And what cryptography is is doing is really giving a very strong tool

• 16:05David Hoffman?

  that the individual can leverage against the power structures of authority in order to retain their freedom, right? And and a good illustration on this is is, you know, a nuclear bomb or nuclear missiles, no matter how many nuclear missiles the world generates, can't force anyone to, you know, give up their bitcoins from their private keys, right? It doesn't matter the strength of the physical power of an authority because cryptography is always more powerful than that. So so understanding this, Phil, how how does the world change as a result of the leveraging of cryptography?

• 16:43Speaker 02

  Yeah, so, you know, I think there there are a few different vectors. I mean, One, you can, you can have a lot of things that really happen outside of the purview of governments. And I don't mean this in like an anarchistic or libertarian way. It's, it's really just empowering, right? You can, you can conduct transactions without any, anyone's permission, which literally was impossible before, you know, from around the world, right? And I, I think that's been really evident in the past six months with the rise of DeFi, uh, kind of the rise of decentralized autonomous organizations where, um, people can actually transact without a middleman.

• 17:24Speaker 02

  Um, and there's, there's really bountiful, you know, uh, transactions occurring and people are organizing themselves through Discord. Uh, so, so, you know, not all of this, not all of the communication, not, not all of the organization has to happen in an encrypted environment, but the, uh, the power of encryption and the recent rise of, you know, these cryptographic networks, uh, has allowed for value transfer in a way that, uh, we haven't seen before. Um, I think that's pretty powerful.

• 17:53Ryan Sean Adams?

  I think, you know, one, one question that's been on my mind recently, Phil, with all of kind of the, hmm, has it been an increase in regulatory actions lately? I'm not sure, but it seems almost like it. So FinCEN with BitMEX, we talked about that on a previous, uh, you know, State of the Nation. Uh, FinCEN also, um, you know, actually the DOJ, um, fining Coin Ninja, which is a, you know, privacy technology on Bitcoin for $60 million. I mean, do you think that nation states will be okay long-term with their citizens retaining this powerful technology, this, this cryptography technology?

• 18:36Ryan Sean Adams?

  There was a time, or as I understand it, cryptography was, was sort of a, you know, just a, um, a national security sort of technology, only nation states, uh, could actually use it. It wasn't necessarily legal for individual citizens to use it. Now, now anyone can use it at this point in time, but are we in this special era of history where, you know, maybe it's okay and could nation states suddenly change their mind and outlaw cryptography? Do you, do you, are you concerned about that?

• 19:03Speaker 02

  You know, I think there is some concern there. There's been some recent guidance on the worries of end-to-end encryption. And I think with some of the upheaval that's been going on in society and online specifically, and how much power is aggregated in a few media platforms and in the hands of a few companies. I think the public starts to look towards you know, central governments to say, you know, protect us, fix this. And that's a kind of slippery slope because when you start to ask the government to fix these things, you then place more power in the hands of the government. And, you know, that's not necessarily a bad thing all the time.

• 19:48Speaker 02

  But it, you know, absolute power corrupts absolutely. And so I think this, the whole trend of encryption and censorship-resistant applications is a really important one. And I think probably a year or two ago, when if you're talking about censorship-resistant applications, you're pretty much going to get blank stares. Nobody's going to really understand the reason behind it. And that was true throughout the 2017, 2018, you know, crypto market, where you try to argue for, you know, why these applications may or may not be valuable. And you start to get into censorship resistance. And so, well, people just don't care.

• 20:34Speaker 02

  And so, you know, in the sovereign individual investment thesis that I put together, one of my theses was people won't care until they have to. So, you know, as bad as it sounds, things have to get worse before they get better. And I think we've been kind of lulled into this idea of,

• 20:56Speaker 02

  you know, outsourcing our defense, right? And now we're entering a period where it's easy to defend yourself from outside attackers. So now with this restored power, I think people are going to start to take, take control for themselves, right?

• 21:15Speaker 02

  And so I've been really hopeful in the last year to see developments with some of these censorship resistant technologies, different parts of the web three stack, so to speak, you know, whether it's kind of DeFi growing up a bit on Ethereum, or you know, Live Peer doing doing some really good work and like getting some strong adoption or like Filecoin and Sia and these, these cool products is building out different parts of the web three stack. And I think that'll be really important.

• 21:48Ryan Sean Adams?

  You know, Ari Paul recently put out a tweet and I, you know, I've been seeing this kind of thing for, for a little bit in different words, but, but he put it like this. He said that he thought the right to cryptography should be a constitutional right, basically. So, you know, in the U S, of course, we have, you know, freedom of speech, the right to assemble, that sort of thing. We should also, he says, have the right to cryptography. That should not be illegal banned by the government. Would you take it that far? Do you agree with that take?

• 22:16Speaker 02

  Yeah. And honestly, I think part of what's so powerful about cryptography is at some point, it won't matter whether it's legal or illegal. It's just, people will be able to transact and use this technology because it's available, because it exists. That, that's, that's part of kind of like why I, I, I think cryptography is so important. It just, it, it doesn't matter what you think, it doesn't matter what I think. It doesn't matter what centralized organizations think. It has the power to exist outside of their purview.

• 22:53Ryan Sean Adams?

  You're saying they can't outlaw it?

• 22:55Speaker 02

  To a certain, yeah, to a certain extent.

• 22:56David Hoffman?

  And I do want the listener to understand that we're not just talking about cryptocurrency. We're not just talking about Bitcoin and Ethereum. We're talking about the technology that enables these really, these things, which is cryptography, which enables a bunch of other things that are highly relevant to what we're talking about and what we're going to be talking about in this podcast where communication nowadays, you know, and even when we roll back the clock, where communication was like a, a, a letter in the Mail, right, where you would need government infrastructure, a government utility to communicate across any distance that's, you know, you know, any, any further than a human to human conversation, right? So if you want to communicate with somebody across the nation, you would need government

• 23:40David Hoffman?

  infrastructure to, um, to facilitate that by sending a letter, right? And, you know, with the, uh, growth of the internet, we no longer needed the government, but we still needed central, uh, centralized intermediaries, uh, you know, Facebook Messenger for one, or SMS text messaging is still using a data provider. Uh, and, and so even with the growth of the internet, we still didn't have a, a individual to individual conversation replicated over the long distance without having like a centralized intermediary facilitating this. And so in addition to replicating cash transactions, like where, where Bitcoin can replicate

• 24:21David Hoffman?

  the handing of cash from one individual to another, cryptography also replicates the instantiation of having one person converse with another person without any centralized intermediary. And so what is really interesting to me, Phil, and I think what's something that, that you've tapped into is that this, uh, cryptographic protocols, be it a cryptocurrency system or cryptographic communication, seems to be creating public utilities, uh, internet-based public infrastructure for replicating peer-to-peer behavior, both as cash transfers and, and communication and, and privacy as well. And we now are able to have internet-based privacy or secrets without an intermediary.

• 25:05David Hoffman?

  And so when this world of public utilities that are cryptography-based, that are peer-to-peer-based, comes into existence in a world where the only alternative was a centralized intermediary. And so, so the, the centralized world has everything to lose and the cryptography, the new cryptography, cryptography protocol world has everything to gain.

• 25:27Ryan Sean Adams?

  What happens when there is the ability to exit? What is the most, the through line behind the ability to exit into the system? What happens to our legacy systems?

• 25:39Speaker 02

  From, from an individual level, I think it's just an equalizing force. Right? Everybody kind of has access to the same markets, the same information,

• 25:49Speaker 02

  the same job market. And, and that, that's going to be a really interesting shift. It, it could be a really great thing for developing countries. And it may be a tough pill to swallow for developed countries. Right? Cause developed countries have benefited from these asymmetries for a long time. And, uh, you know, the developing countries have kind of suffered. And so as, as we, as we kind of move into this, this paradigm, you know, people from developing countries, they may live in areas that are lower cost. Previously, they may not have had access to higher education.

• 26:33Speaker 02

  Previously, they may not have had access to a high paying jobs. But now in this world of, uh, you know, you can call it kind of like a crypto economy, you know, whether it's specifically talking about cryptocurrencies and things built on Bitcoin and ETH and so forth. You, you can actually transact in like this trustless environment and feel good that you're going to receive your payment and, and that you can, you can do work from anywhere in the world. Right? And, and so it's a, it's really interesting.

• 27:08Ryan Sean Adams?

  I think what you're saying is all of these developed countries, so-called, all of the centralized infrastructure they've built no longer matters. Or it matters a lot less now that we have cryptography-enabled technologies like cryptocurrencies, like cryptographic communication, that sort of thing, right?

• 27:27Speaker 02

  Yeah, yeah, I mean, it goes further than just cryptography, which I, you know, I think we'll get into a little bit. But I think cryptography is kind of the last mile for the execution, right? To actually be able to transact and to be able to participate in these markets. You know, trust is, trust is really the backbone of really flourishing markets. And now you can, you can have trust on a global scale.

• 27:57David Hoffman?

  To me, the big thing that I see is the relevancy of borders seems to just fall apart in this cryptographic infrastructure world. Where, you know, the, the border that separates the United States and Mexico means less when I can, you know, pay, pay money and receive services from somebody in Mexico or any other country, like never mind any bordering country to the United States. I can immediately have a relationship with someone across the world. And so, you know, kind of what Ryan was getting into is the, the countries that have all of this great infrastructure set up in order to, you know, promote the wellbeing of their citizens and perhaps have much better infrastructure than, you know, developing or third world countries.

• 28:41David Hoffman?

  That matters less because now third world countries and developed countries are accessing the same infrastructure. And so I, I know you pay attention to the subject of, you know, an internet-based economy where, you know, it's outside of any particular nation, states, you know, authority or regulation. Talk, talk about a, an internet-based economy that leverages these cryptographic protocols. What does that look like and how is that different from the economies that we are familiar with today?

• 29:08Speaker 02

  I, I think the internet-based economy really just allows, allows people to let their skills flourish, right? They don't need to depend so much on accreditation and, you know, the four-year educational system. They can participate in, in something like a DAO, like, you know, we saw with Wi-Fi and all these, all these communities that arise on Discord and you can become a community member. You can, you can help develop the protocol.

• 29:43Speaker 02

  And it doesn't matter where your background is, right?

• 29:45Ryan Sean Adams?

  One thing, one thing I find super interesting about this, and you were talking earlier, Phil, about like cryptography and crypto, crypto economies being the great equalizer, right? I mean, thinking about like, have you ever asked yourself, what's the value of assuming you're a US citizen as well? Like, what's the value of your US citizen, right? It's interesting. That's like, you know, primarily a product of where you were born. It's sort of a geographic lottery. And what are the benefits of living in the United States? There's some drawbacks, of course, but over the years, there have been tremendous benefits, right? That's why sometimes you have individuals immigrate here to the US. And traditionally, it's been things like, well, it's got a, you know, sound legal system

• 30:29Ryan Sean Adams?

  that protects property rights and protects corporate law, right? So that's a benefit. It's, oh, it also has a robust financial economy, so it's a great banking system. Oh, and you know, it's got a good way to set up a business and create capital. So you can create your Delaware LLC company and you can start to raise capital from like Wall Street or Silicon Valley. It's got all of these places. Well, it's interesting in crypto and what you're saying with like these DAOs and these internet communities, all of that becomes flattened. Because now, if I can, I can set up a decentralized autonomous organization, a capital pool on

• 31:08Ryan Sean Adams?

  the internet using Ethereum, I don't even need, I don't need, you know, the, the US legal system to do that. I don't need the US banking system to do that. I have decentralized financial tools like, like Compound and I have a Nosis MultiSig for my bank account, right? I can do all of this stuff at a, even a higher level than I can plugged into the US system. So this is like a great equalizer. It doesn't matter if you're in India or, you know, South America or any part of the world, you have access to the exact same super financial infrastructure, super economic infrastructure that everybody else does. You're no longer locked out.

• 31:52Ryan Sean Adams?

  So it's, it's no longer a product of the geographic lottery. Everyone gets equal access to this stuff. That's what's so cool to me. It's like, what do you think about that?

• 32:03Speaker 02

  Yeah, and I think to expand on that, it's this idea of automated trust. Automated trust that's successful anywhere in the world. And that's what's so powerful to me. It's that these markets are just now available anywhere to everybody. And you can depend on them, like you were saying. You know, all of these different primitives are being set up so that you can really do most of what you need on the Internet and without the need for a trusted third party. And that's really empowering, that's really powerful for the individual.

• 32:43David Hoffman?

  What Ryan and I call the Bankless Nation is kind of this nebulous set of people that are leveraging this new system for their finance and also for their labor too, right? And so Phil, you call this like a new trust system. But what the legacy nation-state system is, is a nation-state is itself a trust system, but it has very book-ended geographic regions, regions with borders where they don't really commit to any trust. And to me, that's what a decentralized finance system that's based on cryptography,

• 33:24David Hoffman?

  what that is really creating is an Internet-level trust system to create a platform for economic activity and for people from across all labor markets to participate in. And one thing I'm particular, and you kind of, something I want you to expand on is how this is a tough pill to swallow for the well-developed nations like the United States and perhaps a boon to the undeveloped nations of the world. Can you elaborate on why highly-developed nations might have everything to lose and why undeveloped nations have everything to gain here?

• 34:01Speaker 02

  Yeah, and to do that, I'll, I'll take a step back for a second. So I think it really, to me, starts with education and formalized education is becoming much more informal, you know, so you know, like Bankless Nation, for example, I look at you guys as educators, right? Another example is you can go on Codecademy and you can learn how to be a pretty decent Python developer and then, you know, hone your skills in community chats and with other higher level developers, right? And so that, that, that first step of being able to become educated without going to

• 34:47Speaker 02

  a college and spending $200,000, that's a really big deal. And when everybody in the world has access to the same information, they can become educated in the same way, right? So, so now everyone in the world is on the same playing field from an education standpoint. And when everyone in the world is on the same playing field from an education standpoint, now they, you have to look at the, the next level, which is the market. Where are these, where are these educated individuals going? So they're going now to the open market, to the job market. And before, the job market was a little bit more segmented, you know, from one nation to the next. Well, now, through cryptography and through some of the tools that are being built on things like Ethereum,

• 35:33Speaker 02

  anybody can participate in these markets, right? And when anyone can participate in these markets, the people who are in the developed worlds, who have higher cost of living, who paid $200,000 for their education, who expect, you know, much higher wages for the work that they do, those people now have to compete with the people in these developing countries, which they didn't even, the, the people in the developing countries didn't even have the opportunity to go to these four-year institutions, right? They, they didn't have the opportunity to spend $200,000. Their cost of living is, is a fraction of What is seen in in the developed countries. So now they can perform work for a fraction of the

• 36:17Speaker 02

  cost as well. So so this competition between the developed the developing countries which have they can deliver work at a fraction of the cost and the developed countries which have, you know, they have a much higher baseline for for their work. That, you know, that's going to be an equalizing force. And so I expect over the coming years to see the wages in the developing countries go up substantially. And it might be, you know, we might see some difficult times in the developed countries. And what this also speaks to is that there's increased competition for workers, right? People who, you know, increasingly are viewed

• 36:59Speaker 02

  as maybe unskilled laborers or who work for a given organization and do XYZ. Because now there are more people in the world who could do XYZ, right? It is increasingly a great environment for people who are creating things, right? Because you can create an organization, you can create a newsletter, you can create a podcast, you can create whatever it may be from your living room with a laptop and an internet connection. I would also say it's probably a great time for capital allocators because there's going to be so much creativity. These capital allocators have, I think, a larger pool of things to allocate to. So,

• 37:42Speaker 02

  you know, long story short, it's an increasingly competitive environment for workers and an increasing and an environment of increasing leverage for creatives, creators, and capital allocators.

• 37:57David Hoffman?

  And I think we can definitely take lessons from what has recently happened with the the COVID crisis. Two cities that have seen mass exodus are San Francisco and New York, possibly the world's most dense cities with the highest cost of living, right? And, you know, people want to move away from places of concentration because that's where COVID is, you know, that's where the highest For contracting COVID is, but also I would say that that could actually be secondary for people wanting to move away from, you know, $3,000 a month studio apartments, right? Where, you know, they, they are already working from home. And so if they're going to be working from home, like COVID is not going away anytime soon.

• 38:40David Hoffman?

  And so they are going to likely move from places of high cost, high concentration out to places of low cost, you know, low density. Where because they can still do their best work through that medium because technologies like Slack, like Discord, and also payment technologies like cryptocurrency enable this to happen, right? And we don't have to talk about the migration from, you know, San Francisco out to, you know, the middle of California or like Tahoe. But we can also talk about the migration from, you know, first, from countries like the United States or, you know, other, other highly developed countries into lesser developed countries that are more tax friendly or are just more

• 39:25David Hoffman?

  have less and also just have less restrictions. I think we're seeing Raul Paul, who is doing a great job with Real Vision, live in the Cayman Islands. It's a fantastic place to live, you know, who doesn't want to live in the Cayman Islands all day? And I think this is kind of going to be the story of the next few decades is a mass migration, a mass, a mass restructuring of where people want to live as a result of these technologies.

• 39:50Speaker 02

  So one of the big themes in the sovereign individual is this idea of treating citizens like customers. Right?

• 40:00Speaker 02

  In, in a free market, if, if you're, if you're taxing or charging your customers a really high price for a really poor product, then they will go to another product. And I think we'll start to see some of that happen. Singapore over the last forty, fifty years has been a prime example of a country that has

• 40:28Speaker 02

  really supplied a great product at great prices, right? So the taxes are really friendly and they've been really efficient with the income that they have generated. I, I think there is a case to be made that there, there is a lot of bloat in some of the developed countries. There's a lot of bureaucracy involved and that starts to weigh on people, right? And so, you know, like you said, since thi- this is all accelerated since COVID kind of hit, hit the whole world where people are looking to be a little bit more efficient with how they're living their lives.

• 41:12Speaker 02

  So I, I think, I think we, we saw like a really big surge right out of the gate of people exiting cities. I'm, I, I think, I, I still expect to see cities thrive and I expect to see a flood back to cities in the short term. But people start to move out to the country, right? We've seen a lot of people look at places out in the mountains or Wyoming where taxes are super friendly or look at like the Cayman Islands or Singapore, but you know, it's now becoming really difficult to even get into some of these tax havens, some of these jurisdictions that are being a little friendlier to citizens.

• 41:56Speaker 02

  And so I actually think that's a really interesting vector of study is, is just how, how can, how can we work with countries to, you know, develop really interesting programs for people who do want to kind of leave but don't know how?

• 42:16Speaker 02

  You know, I think we're in the early days, but I think we'll see a surge in that in, in the next few years.

• 42:22Ryan Sean Adams?

  It's kind of interesting because that's exactly what the, the sovereign individual thesis, I guess, I guess predicts, right? And crypto, crypto, cryptocurrency anyway, seems to be bringing that closer to fruition.

• 42:34David Hoffman?

  Hey guys, we're gonna pause the episode with Phil and talk about some of these fantastic bankless sponsors that make this show possible.

• 42:41Ryan Sean Adams?

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• 43:26Ryan Sean Adams?

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• 43:55David Hoffman?

  Wearn is DeFi's first self-building project on Ethereum, focused on producing products for those who are interested in earning yield in DeFi. Wearn's various products are all built to suit each individual investor's preferred level of risk, from various vault strategies that leverage DeFi tokens to the safer Earn system which relies on stablecoins. Vaults are aggressive yield-farming robots, each with a unique strategy that is designed to maximize the yield of the deposited asset. Wearn employs some of the most informed developers in DeFi to keep the vault strategies updated with the various yield-farming opportunities on Ethereum. For customers who are more risk-adverse, the Wearn's Earn product may be for you.

• 44:37David Hoffman?

  Earn is a yield-aware, dynamic money market that automatically seeks the best interest rates across the various DeFi protocols. And regularly migrates your deposited stable coins between the DeFi protocols that are returning the best yield at the present moment. Yearn is a system that is just a little over four months old, so things are still very much an experiment. However, this hasn't stopped people from depositing over $700 million worth of assets into the Yearn system in order to find yield on Ethereum. Perhaps the people that deposited all this money were tired of constantly making daily transactions to follow the best DeFi interest rates. And maybe the gas fees that they were paying ended up eating too much into their profits. With Yearn, it doesn't remove the risk of these various protocols that it leverages,

• 45:21David Hoffman?

  but it does remove the overhead of constantly trying to make sure you're finding the best yield and also so that you don't have to pay for gas to switch up your assets. Check out the products that Yearn has to offer at yearn.finance. That's Y-E-A-R-N dot finance, which they also have a nice statistics page to see what other people are doing.

• 45:40Ryan Sean Adams?

  But it's like, it goes back to the question I asked earlier, like, what is the value of your US citizenship, right? Well, you get to be proximate to a pretty good economy, like a global financial system, like, you know, the S and P, all these publicly traded companies. Well, what if those network effects start to become less valuable? Even like the reason why some people immigrate is, as you're saying, feel like the fantastic post-secondary education system that the US has traditionally had. Well, if that becomes less valuable, well, there's less reason to immigrate.

• 46:17Ryan Sean Adams?

  The value of the US system as a network decreases and the value of your citizenship decreases as well. But to your point, you know, it is somewhat a geographic lottery, depending on where you were born, but it's also something that you pay for on an annual basis through taxes. And if those taxes get out of whack, then you start to wonder, as I guess a customer of your government, what exactly am I paying for? It's sort of interesting, like, you know, Dave and I launching Bankless, that sort of thing. We try to use crypto systems. As much as possible. So we obviously have to maintain traditional bank accounts because there are some bills that just you have to pay in fiat, right?

• 47:02Ryan Sean Adams?

  But the bulk of all bankless activity is actually on crypto networks, right? And so when the bulk starts to transfer outside of the US network and we start to rely less on the US network and like doesn't really matter where we live to work for a protocol, which is what David and I do. We work for cryptocurrency protocols. Well, you start to wonder what are we paying for? From a tax perspective, there's certainly tons of things we are paying for, right? Like, you know, public education, there's lots of things, but it starts to erode the value proposition of these developed nations and these traditional networks.

• 47:39Speaker 02

  Yeah, absolutely. And I think it it goes further to when we discuss how more and more is happening outside of the jurisdiction of, you know, regulatory bodies, right? So traditionally, we pay for these type of regulatory bodies to keep trust intact, to keep markets functioning properly, to keep us safe. But more and more, like we've talked about this entire episode, those things are happening outside of the purview of regulation. And so if those things are happening outside of the purview of regulation, then we're not necessarily paying for those services.

• 48:23Speaker 02

  So it's further to the point that there's a growing disconnect between what we're paying for and what we might actually be receiving as a, you know, customer, you know, quote unquote. So

• 48:38Speaker 02

  yeah, I mean, I think

• 48:42Speaker 02

  and this is all not, I'm not trying to bash, you know, the US or developed countries, you know, I'm I'm proud, you know, to have grown up in a, in a great city, you know, in the city of Chicago and I'm fortunate for how I was brought up, but I just think that there are trends that signal that, you know,

• 49:07Speaker 02

  There's reason to kind of exit the cities and exit, um, exit developed countries if, if the, the price that you're paying isn't in line with the service that you're receiving.

• 49:19Ryan Sean Adams?

  One, one question I have about this customer model of the world, which is sort of what the self-sovereign individual kind of talks about, right? The citizen is a customer of the state is there's a difference. Uh, if I'm a customer of Amazon and I opt out of Amazon or I do something that they don't think is okay, or they, they don't like, um, whatever, they can't do anything to me, right? But with the nation state, because we talked about earlier, this monopoly over violence, uh, if I do something the nation state doesn't like or doesn't agree with, um, you know, they could throw, they could throw me in jail. So, uh, thi- this is a different type of relationship maybe than a customer. Just a little pushback on that. What's, what's your reaction to that?

• 50:03Ryan Sean Adams?

  Like in a typical customer relationship, the, the company who's providing the service can't throw you in jail, doesn't have a monopoly on violence, but the nation state does. Does that put individuals in a bit of a different position than a customer?

• 50:18Speaker 02

  No, it absolutely does, but I, I think, uh, I don't think this is controversial necessarily. It's the state exists to serve its citizens. And so if, uh, if enough, um, I guess unjust actions happen from the state towards its citizens, uh, especially in this age of, uh, free flowing information, uh, it becomes evident that the citizens should, uh, take a stand, I guess. Um, so, you know, I, I think the relationship still holds. Um, you know, in, in that people can either say, you know, they can, they can either stand up

• 51:00Speaker 02

  or they can exit. And yeah, I think the barrier to exit is probably lower than it ever has been. Uh, because of all the different things that we've been talking about, the fact that you can leverage education from anywhere in the world, you can leverage global markets. anywhere in the world, you can protect your currency, you know, and just by knowing your private key, right? You can protect all your data just by knowing your private key and and we're continuing to see systems that will empower the individual, you know, to act more as a customer to exit a system if they if they feel strongly about it. And and so so I I think it's, you know, I think it's just

• 51:45Speaker 02

  a positive trend. It's just a checks and balances system, right? And in the information age, the individual has the ability to to do a little bit more checking.

• 51:56David Hoffman?

  The line that I think we're circling around that I remember from the Sovereign Individual book is that nation states won't be able to charge more for their services than the value of the services than that they offer. And the authors of these books had incredible foresight because they wrote these things over a decade before even Bitcoin came around and 15 years before Ethereum came around. And, you know, juxtaposing these two systems, you know, the the nation state is a system that is supposed to scale trust across all of its constituency. And it's also supposed to be this massive property management system, right? Like, according to the nation state, they know who knows what, like which piece of real estate, which piece of, you know, stock certificate

• 52:38David Hoffman?

  or money, who owns what? That's kind of they're kind of the master node of the massive ledger of the nation state. Whereas Bitcoin and Ethereum do very similar things where they use cryptography to replicate that, to replicate the scaling of trust across, you know, the widest reaches possible and also keep track of who owns what. Those are like the main roles that Bitcoin and Ethereum play. However, there's a fundamental difference where, you know, the United States nation is also or any nation state is a generalized bureaucracy, right? And one of my one of my friends CK said this very well, where any institution or organization is always interested in expanding

• 53:19David Hoffman?

  itself, right? Like, every institution wants to get bigger. And, you know, Ethereum and Bitcoin don't necessarily have that baked Into their social contract, right? Like Ethereum is based off of cryptography, which means that it actually has hardcoded limits as to what it can and wants to do, right? And so the United States nation, the average tax rate is thirty four ish percent. But Ethereum, the average tax rate is the gas that you pay on your transaction. And so it's it's it's explicitly a pay per use taxation system, which I think is the most ultimate fair way to view things. And so when Philly, when you say that there's just this massive checks and balance between these two systems,

• 54:02David Hoffman?

  that that's what I see where, you know, the United States has this arbitrary tax rate, or any nation state has this arbitrary tax rate. And Ethereum and Bitcoin have this tax rate that's a very pay per use type of type of system. One way to view this is, you know, checks and balances. But another way to view this is that Bitcoin and Ethereum are diametrically opposed to the nation state. You know, is is this an acceptable way to view things? Or is there flexibility with how to view the opposition between things like Bitcoin and Ethereum and nation states?

• 54:33Speaker 02

  Yeah, I I personally don't view it as binary. I I think, again, like there it's it's a check, it's a check on on the power, right? There there's reason to have regulations. But there's there's reason to not allow those regulations to get too too large and too burdensome. And I think your comment just a minute ago about these systems, these companies, these government organizations, they naturally want to get larger, right? That's that's often their goal there. Each sector wants to have more, right? And so there's a there's a constant reach, there's a constant overreach.

• 55:18Speaker 02

  And to then have these systems that are outside the purview of government kind of take away some of that, I think, is just a healthy, is just a healthy check on the on the whole system. And I I would maybe push back a little bit in in the idea that, you know, Bitcoin and Ethereum are not trying to get, you know, as large as they can be, right? And I think Ethereum and Bitcoin have done a really good job of. Programming certain focal points into their into their communities, right?

• 55:55Speaker 02

  Bitcoin is is this idea of sound money, something that can that can't be stopped. You know, you can't change the supply. And and because of that, there's been a religion that has been built around it. And similarly with Ethereum, right? Like it's a it's a different ethos and, you know, there the whole Ethereum ecosystem is is trying to build a kind of like the Bitcoin ecosystem, but more expand more expansive and kind of pushing the limits a little bit more. And, you know, I don't think it's controversial either to say that both of those communities

• 56:37Speaker 02

  are are really fighting hard to to be bigger than each other. Right? And so so I think it's I think it's just a kind of natural. It's a natural competition and it's healthy. It's just healthy to have more competition. And so the rise of Bitcoin, the rise of Ethereum, the rise of digital money and these digital goods is a healthy check on kind of the the physical, the meat, kind of the meat space that that we've grown up in.

• 57:12David Hoffman?

  One of the topics of conversation that is frequent on the Bankless podcast and in the Bankless newsletter and everything about Bankless is the Protocol Sync thesis, where we think that protocols like Bitcoin and Ethereum and also DeFi protocols found on Ethereum are quote unquote dense, right? They fall down to the bottom of a stack. And and one thing I think is relevant to this conversation is the possibility that, you know, rather than being diametrically opposed to the nation state, there is room for the nation state to sit on top of these protocols, where maybe we have like a nation state that is quote unquote powered by Ethereum, right? Or powered by Bitcoin. Have you thought about this world?

• 57:49Speaker 02

  Yeah, I think that's absolutely right. These these systems definitely, they they provide optionality, right? They sit at the bottom, like you said, of of the the whole stack that can be built on top. And so not everybody wants to interact in a trustless way all the time. Not everyone cares about that level of of security or sovereignty, right? And so I I think it's it's about building, building all these different options on top of these completely trustless, self-sovereign protocols. And optionality is just, you know, such an important characteristic of of these of these networks.

• 58:31Ryan Sean Adams?

  I do think that that's the right model. It's like the Protocol Sync model for for this, for nation-states. You know, there might be a time where nation-states feel like crypto is threatening, just like there was a time where nation-states felt like the Internet was threatening. And then they'll figure out how they can actually leverage, not not take over, not control, but actually leverage these credibly neutral protocols for their own purposes. For example, so the great thing about Ethereum and Bitcoin is these are intra-national protocols. And by that, I mean like nation-state to nation-state. You don't have to trust, Russia doesn't have to trust the United States of America in order to send Bitcoin or Ether on a network to them, right?

• 59:15Ryan Sean Adams?

  There's no banking system in the middle, there's no SWIFT transactions, there's nothing. It's just a lower, like in the in the in the stack, infrastructure that they can leverage. And like, there there could be tons of ways that nation-states wake up to how this technology is useful. I was just reading this morning that Goldman Sachs, right, our favorite banking company, just got caught by the DOJ stealing $600 million from the country of Malaysia. $600 million. So the DOJ caught him red-handed, and Goldman is paying a $2.3 billion fine. All of this is done behind the scenes. It makes one wonder, like, about

• 59:59Ryan Sean Adams?

  All of the other theft we haven't caught in these these massive banking organizations and banking companies. But what if a whole bunch of that activity was on public open ledgers, right? Like the DOJ and regulators could kind of tap into that. It would be transparent, it would be open. We wouldn't have to like listen in on closed conversations and go look at the evidence and track down transactions. So there could be ways even regulators start to use these crypto systems to, you know, to help to even enforce their their national laws. Is that is that kind of what you're saying, Phil? Like you, you agree with that vision of the world?

• 1:00:41Speaker 02

  Yeah, and I think it's a constant push and pull, right? Throughout history of of kind of the old guard versus the the new up and coming technology. I I I think I saw a Twitter thread recently that was looking at women riding bicycles. And and maybe just bicycle riding and generally like 80 years ago or something. And it was comparing that to kind of the the uproar of social media and the control that these big corporations have over us.

• 1:01:23Speaker 02

  And the reason I bring up that that idea is just that when new when new ideas, when new technology come to the market, they seem spooky. And and sometimes they are, and sometimes they have the the potential to do to do bad for society. But oftentimes, you know, they can be used for enormous good. And so I I think it's it's just a it's just about educating everybody. And I think that that is a that's really what it comes down to. And education is just a it it takes a it takes a while. And you guys are you guys are doing, you know, God's work just.

• 1:02:07Speaker 02

  Educating everybody on Ethereum and all of these ideas and it just takes time.

• 1:02:13Ryan Sean Adams?

  Yeah, you know, on the time thing, I got, I got to be honest too, like the bankless nation probably skews a lot younger than the general population. I like, I wonder if some of this is just going to be generational, Phil, right? So, you know, it's really difficult to understand this stuff. But if you grow up with it, it's difficult to understand, it's, it's far harder to understand the fiat system, you know? So maybe that's why some of this needs to play out over decades.

• 1:02:39Speaker 02

  Yeah, absolutely. I, I, I completely agree with that. And it just, you know, it, it just takes time. Simple, it's as simple as that almost.

• 1:02:49David Hoffman?

  Phil, the reason why we got you on here is because you wrote this fantastic piece called The Sovereign Individual Investment Thesis, where you labeled five different characteristics that align with human motivation. Acquire, defend, bond, learn, and feel. Can you elaborate on these five characteristics and how they relate to some of the ideas or thoughts that we've been describing here so far on this podcast?

• 1:03:12Speaker 02

  Yeah, so when I read The Sovereign Individual, I was trying to kind of develop a worldview. And I was between jobs and I was, you know, just trying to, just trying to understand what was going on and what I wanted to do.

• 1:03:31Speaker 02

  Especially with respect to kind of the crypto market and what was going on at the time. So I, you know, I was looking at some of, some of what was going on in Ethereum and some of what was going on in Bitcoin. The adoption or the lack thereof in some of these applications. And I was trying to figure out a way to kind of develop a framework to evaluate why some of these protocols or applications will or will not be adopted, right? And so I, I think I borrowed these from the book, Drive. So the, the five, the five motivations are acquire, defend, bond.

• 1:04:15Speaker 02

  Learn and feel. So this is really just like greed, fear, belonging, curiosity, and feeling as like kind of these core human motivations. And the reason that I kind of went down this road was the quote from Jeff Bezos talking about, you know, 10 years out, people ask me, what's going to change? And I think a better question to ask is, what is not going to change? Well, human motivations don't really change. It just, I think they just shift, right? A little bit. And my, my, I think my assertion is that right now people are kind of under indexing

• 1:04:57Speaker 02

  the fear part of things, or the ability to defend. And the reason they're doing so is because for a long time, we've outsourced defense, right? There hasn't really been a way to,

• 1:05:15Speaker 02

  you know, mount a really good defense for one's personal property. You always had to outsource, right? Whether that is to a government organization, or whether that is to a third-party entity like a business or a bank, they're going to hold your data, they're going to hold your money, they're going to protect your personal property. And now that has changed a little bit. You know, we talked about cryptography earlier in the episode. Now, you know, we think about like money, we think about our data. The trend is just starting to change where I think people are starting to take a little bit more ownership over those, over their own wealth and over their

• 1:06:00Speaker 02

  own data. Some of the systems aren't in place yet, you know, to be, to be fair, right? Like, it's really hard to interact on the internet as an individual if you're not super technical, and not have data leak. So, so it's still early days, but I, that is kind of the lens through which I looked at the sovereign individual and then evaluated kind of these three different pillars. The three different pillars being, you know, the fact that instant information dissemination sort of breaks down barriers to entry and exit.

• 1:06:39Speaker 02

  The other being that non-sovereign digital money really decreases the power that nations have for inflation and taxation. And then the last one is like the fact that encryption gives the ability for applications to exist outside of the purview of regulation. So I walk through each one of those pillars through the lens of, and I'm mostly focused on the choir and defense mindsets and how censorship-resistant technology and some of the applications that have been built thus far, why they have or have not kind of gained adoption.

• 1:07:22David Hoffman?

  I see this dynamic being particularly salient in Bitcoin or culture where there's two things that Bitcoiners emphasize above almost all others, which are stack sats and, you know, hold your private keys yourself, right? Where acquire Bitcoin and then, you know, you leverage the maximum power of cryptography to defend them, right? Defend your stack. But this emphasis on defense implies that there is something to defend against. So what are we so worried about, you know, coming to take our Bitcoins? What are we trying to defend against?

• 1:07:58Speaker 02

  Anybody who wants wealth, right? I think, I think there are always people who will be trying to take wealth however they can and through coercive forces. And, you know, this isn't just, this isn't just governments or, you know, it might just be someone down the street, a hacker of some sort. And so I think the idea is just... We now have the the power. So with that power, let's take some responsibility for for our own goods.

• 1:08:40Speaker 02

  And then, like I said, you know, a lot in in a lot of instances, it feels good to have layers of abstraction in between. But what's important is having that optionality to to kind of say, OK, you know, I I saw something here or there. And I now no longer no longer want to trust an organization or or an institution. You know, but but I I think that need will always exist and and that that want will always exist to to have an easier way to interact and to kind of take the burden, take the blame, take the responsibility off of the individual and ask someone else to kind of, you know, carry some of the weight.

• 1:09:26Ryan Sean Adams?

  So Phil, when you filter things through the sovereign individual investment thesis, particularly through the lens of acquire, which is like plays to basic human greed desire like, and then defend, which plays to basic human fear. You went through a whole bunch of different, I guess, technologies or industries. What did you kind of come away with? What are some of the the strongest, I guess, assets or industries or categories that really exemplify the the sovereign individual thesis?

• 1:09:56Speaker 02

  You know, I think I think we're in a really great industry and in the whole crypto industry. It's it's it's really kind of the perfect industry for the sovereign individual thesis.

• 1:10:10Speaker 02

  And all of this has been accelerated since COVID, right? So with with all this money printing that we've seen, there's been

• 1:10:20Speaker 02

  a reaction and that reaction has been OK. Maybe this digital scarce money, something like Bitcoin, uh, makes a whole lot of sense. Right? And so I, I think that has, uh, that has resonated with a lot of institutions. It's resonated with a lot of individuals uh, around the world. And, uh, and I think we've, you know, we've seen adoption, uh, just start to tick up in the last couple of months. Uh, you know, again, with increased upheaval, uh, there is censorship. There is a call from censorship even by, uh, the citizens, you know, of, of our country, of countries around the world.

• 1:11:01Speaker 02

  Um, and when there's censorship of these applications, then there will ultimately be a cohort of people that uh, kind of opt out and create alternative platforms. And so I think we've started to see that too. Um, we've started to see, uh, people develop on, on something like, you know, Urbit or something like Ethereum and develop these applications that are outside the purview of government regulation. So those are, those are two big ones. Uh, obviously remote work. I, I think we've seen the pendulum swing, you know, super aggressively into the, on, onto the side of remote work and, you know, no one's going into the office. I expect that to, to kind of shift back a little bit, but, uh,

• 1:11:45Speaker 02

  um, I, I think in the long run, uh, in-person work will be more of a luxury than it is a necessity. Uh, and I think the tools to make remote work feel as much like in-person work will, will be a, a, a big area for improvement. Um, I mentioned education.

• 1:12:08Speaker 02

  The edu- ed- education is probably the most interesting and important vector to me. Uh, just because.

• 1:12:16Speaker 02

  You can educate people without even know like without without them even knowing they're being educated, right? And so I've said said this a couple of times, but you guys are educating your audience and that's that's a huge service. I I think educators will kind of be like the next celebrities, like the next uh the next wealthy cohort, uh the people that uh are looked up to that are paid the most. Uh, and you know, I think we kind of see that already, like you look at kind of what's what Rogan has done on podcasting. I think it's been really powerful, bringing in uh people from all walks of life and educating his audience on uh, you know, a bunch of different topics that I don't think they would have uh previously thought thought about.

• 1:13:02Speaker 02

  Uh, Pomp has made some really interesting uh developments recently, so he's kind of taking personal finance responsibility to the TikTok crowd. I forget who the exact uh person he he partnered with was, but I think that's a really interesting uh angle. Uh, so yeah, just uh education, I think is just massive and it's a it's a really empowering tool. Um, and then uh this and we're still so early in this part, but the idea of being able to do work for a DAO, for a decentralized autonomous organization. And to, you know, to to just plug yourself in as part of this organization, nobody actually

• 1:13:44Speaker 02

  needs to know who you are as a as a person, they just need to know who you are as like a this digital identity is super powerful, um whether you're contributing code or you are developing memes for the community or you're uh organizing the Discord chats or you're developing the token structure. These jobs can be done from anywhere in the world. And you don't even know, you don't need to know who the individual is. So I think those are a couple of the, the big, the big trends that I see. You know, being in the, in the crypto space, I'm, I'm really excited about Bitcoin and Ethereum and all the innovation that's, that's going on there.

• 1:14:29Ryan Sean Adams?

  Yeah. One example recently, you know, David and I, so Bankless Nation, we were looking for someone to do some graphics design work for us. Someone just within our circle, part of the Bankless Nation from Nigeria just stood up, send us his portfolio of work. Send us an ETH address, did some fantastic work for us. We sent him die from our bankless, bank account. Transaction done, work delivered. I don't know how this individual was educated. He lives in Nigeria.

• 1:15:00David Hoffman?

  Didn't care.

• 1:15:00Ryan Sean Adams?

  Didn't really matter, didn't matter at all for the work product, did an excellent job. And that's all part of this new digital economy that's, that's rising up. Geographic barriers don't matter. We didn't have to wire or ACH transfer funds from one bank account to another. He didn't even have to open a bank account. Maybe he doesn't have a bank account. I don't know. It doesn't matter. Once again, because this system is completely equal for everyone who has an internet connection. It's powerful stuff.

• 1:15:31Speaker 02

  Yeah, absolutely. You know, just, you're just basing, you're, you're basing the, the transaction based on the quality of the work. You know, and then, and that's it. And that's really cool.

• 1:15:42David Hoffman?

  To me, what I'm seeing, and again, especially with COVID and how COVID has changed the world is a pretty strong reaction against universities, at least with private higher education universities, especially private universities. And they're very exorbitant costs. And on the Jesse Walden podcast that we did a while ago, talking about the ownership economy. He described this like S curve of adoption and it was mainly talking about Silicon Valley tech platforms like Twitter and Facebook, where they, these systems initially start off as something more or less a public good or a public utility. Facebook as a public utility to socialize with your friends on the internet, or Twitter as a public utility to, you know, share your thoughts.

• 1:16:25David Hoffman?

  And as these platforms grow, they, you know, grow to the size of the world, size of the internet. But then they can't grow anymore, and so they start to turn extortionary, right? In order to grow the value of their shares, they need to, you know, first expand to absorb as many people as possible, and then, and then extract as much, you know, advertising revenue out of these individuals as possible. And I think we can say that this S-curve of growth of, you know, first being a useful utility and then being an extortionary institution also applies to the nation state. But I want, I want to keep this conversation on education because I think we're seeing that same education, that same S-curve of growth apply to private universities,

• 1:17:09David Hoffman?

  where universities grow based off of being like a utility, a useful service. And then, you know, especially with Ivy League schools, they kind of have been like resting on their laurels, right? And, you know, it has turned into a institution for education, and it has then manifested into a system of generating hoops for people to jump through, right? Just to provide them a quarter million dollar piece of paper at the end of four years so that you can share that piece of paper with other people to tell them all about the hoops that you've jumped through. And maybe that's a disingenuous or incomplete illustration of what the university is, but it's at least some part true.

• 1:17:50David Hoffman?

  And going along the theme of using tools or having a new world or economy that kind of does away with all this superfluousness and just, you know, valueless work in order to get a piece of paper that shows all the hoops that you've jumped through in lieu of a world where, you know, merit and, you know, your actual labor as your resume. I think that's what a lot of this technology really enables. Do you have any thoughts on that?

• 1:18:20Speaker 02

  Yeah, and I think it goes with what we mentioned earlier, right? That organizations tend to want to continue to grow, right? There's, there's just, there's continuous reach. And I think that's what we've seen with education institutions, right? They've just continued to grow because that's, that's their goal. And you can't knock them for it. But a- as you grow, like, there are going to be more administrative costs, more bureaucracy. It's going to be harder to move as fast. And we've just seen alternative technologies and alternative education systems come to fruition.

• 1:19:02Speaker 02

  That it, it, it just makes it difficult for the brick and mortar system to kind of keep pace and to deliver the same education for the same cost. So, you know, I, I don't think it's like, you know, evil corporation or evil education systems. I, I just think that it's a sign of the times and the technology and the systems have developed to a point where you can, you can do all of this. You can become educated informally at a fraction of the cost. The, the last, I, I, I think, and I think it's been pretty agreed upon that, like,

• 1:19:46Speaker 02

  one of the things, one of the main value propositions of these institutions is, is not necessarily the credit or the education, but rather the accreditation, right? And you mentioned this, you have, you finish your education, you have a piece of paper that says you went to school.

• 1:20:07Speaker 02

  And I think that, that is one of the key, key missing pieces in the online economy right now. You know, how, how will accreditation be handled? Because if you're not going to go to school, if you're not going to be a writer, you know, what is it? So, and I think GitHub is probably a great, a great tool. Your Twitter presence, writing is a great tool. If you have like a trade log, then a trade log is a great tool, you know, just to be able to show that you are competent in the field that you hope to work in.

• 1:20:43Ryan Sean Adams?

  So let's finish with this, Phil. Let's talk about another system institution that just wants to grow like a rent-seeking hungry monster, and that's the banking system. And that's both the central banking apparatus that we have and also the commercial banking system. And similar to education, right? Like the whole bankless journey is like, okay, what, what happens if we don't need you guys anymore, right? If, if we, we can outsource all of this and our security and our property rights management and our entire monetary system to a series of public available ledgers. What happens then when individuals have the option to opt out? Maybe let's first start talking about central banks, right?

• 1:21:27Ryan Sean Adams?

  So we've got modern monetary policies in, in full swing with modern monetary theory, which is basically, you know, fiscal stimulus to print money. And it, it seems like the governments, doesn't matter which political party is in charge, it doesn't matter where you live in the world, they're just going to continue to print money. But now crypto has entered this space. What effect will that have on governments' ability to do that? Do you have any insights into how the sovereign individual plays a role and how crypto plays a role in the banking institutions today?

• 1:22:08Speaker 02

  Bitcoin and Ethereum, it, it decreases the exit cost, right? So governments can, and I think will, continue to print a lot of money. And that's fine. That is their tool. There's no, there's no use, in my opinion, in getting angry about it or, you know, worrying about. Their policies because now we have a tool to just kind of opt out of that. If you don't think that it's right that the US is printing a ton of currency, that's fine, then you should hold an alternative currency. And now there are other alternatives.

• 1:22:52Speaker 02

  And so I think that again, that optionality, that ability to opt out of the system is really powerful.

• 1:23:01Speaker 02

  And then so like we'll see how far, you know, how far it goes before a majority of the population decides to kind of take that road and decides to opt out. We're seeing, I think, the just the very beginnings of that. And, you know, I certainly think that we at Grayscale have seen that narrative of, you know, trying to escape dollar debasement growth in 2020. Whereas previously, I think that was kind of, you know, it was kind of a dream. So actually, for the first time in 2020, you know, because of all of this printing,

• 1:23:45Speaker 02

  the narrative has actually begun to solidify itself.

• 1:23:50David Hoffman?

  One dot I want to connect for the listeners is earlier we were talking about the demand or desire for defensive technologies or things that allowed you allows an individual to, you know, defend against capture or extortion, et cetera. And one thing I'm thinking about right now is Bitcoin, specifically Bitcoin's hard cap. And along also it's, you know, unconfiscatability is a defensive technology specifically against money printing. Right? Where, you know, cash under your mattress is pretty assured to be there. Right? You know, there's always the risk of theft, but if you, you know, you can, there are plenty of ways

• 1:24:30David Hoffman?

  to securely hold cash in your house that prevents against confiscation or theft. But there's the concept. Of the money printer where you know you can have your cash and but because it's dollars. The money printer can confiscate value from you regardless, right? It can it can steal the value from your cash under the mattress. And by printing new dollars, and this is what we call inflation, right? And so Bitcoin's hard cap is itself a defensive technology because and this is what Bitcoiners love about Bitcoin is that no one can steal. Away your percentage share of all of all of Bitcoins out there. Is that is that an appropriate use of the term defensiveness as you were using it in your paper?

• 1:25:14Speaker 02

  Yeah, absolutely. And so to expand there, there are two main revenue generating mechanisms. In my view, for nation states, for governments. And that is, you know, number one, money printing, and number two, taxation. And inflation and, you know, printing more money typically has benefited the wealthy because the wealthy. Hold assets which appreciate in that denominated currency, right? However, as in like on the inflation or on the taxation side of things. The wealthy don't necessarily always win.

• 1:25:58Speaker 02

  And there's a growing narrative that I've heard. You know, pleading for a wealth tax, pleading for a tax on not realized gains, but unrealized gains. On literally just the money sitting in in one's bank account. And I think that creates a really slippery slope, and I think that will be a wake up call to. A lot of wealthy individuals. Who, you know, may be keeping their money in a bank account on shore somewhere, right? And and and. So you start to think about those two, those two vectors of revenue for the government.

• 1:26:43Speaker 02

  And I think it's a pretty scary thought and that is Bitcoin fixes fixes that on on on both of those angles, right? Like it's unconfiscatable. You you unless you know the private key, you can't take Bitcoin away. And it's resistant to inflation. It's resistant to supply changes. And so you can touch it. You can just leave it alone. You don't have to touch it. And your Bitcoin will be safe. It won't be devalued. It won't be debased over time. And I think both of those are just really, really powerful characteristics that the majority of the population has has yet to appreciate. But I think we're kind of at a tipping point.

• 1:27:27Ryan Sean Adams?

  Phil, it has been a pleasure to have you on the Bankless Podcast. Thanks for going through your thesis. What's so exciting is that even in a world of increasing control, increasing authoritarianism, increasing feeling like your digital rights are being taken away from you, something emerged, which is cryptography, which gives those rights back to the individual, gives those rights back to the people. And it's certainly tools that we can use in our everyday lives. That's what the Bankless journey is all about. So thanks, Phil, for coming on and talking about that a little bit more.

• 1:28:00Speaker 02

  Absolutely. Thanks so much for having me. It was it was great taking some time to discuss these topics. It's a it's quite a fun time in the crypto space, and I'm excited for the years to come.

• 1:28:12Ryan Sean Adams?

  It is an exciting time to be alive, folks. We were born at just the right place and time for crypto. We may have missed the early Internet, but crypto is upon us now. Take advantage of it. A couple of action items today. Read the Sovereign Individual Thesis by Phil. We will include a link in the show notes as well. Of course, the Sovereign Individual book is a fantastic book written in 1999, but is still super relevant today. I just finished reading it not too long ago. And it, you know, it's lots, lots of lessons that I think you guys will apply here. The second thing you can do is become a member of the Bankless Nation.

• 1:28:53Ryan Sean Adams?

  So that's more than just subscribing to the podcast or the newsletter or connecting with the community. Those are all, those can all be part of it. But this is about taking control of your money, using these crypto economic systems, going bankless, so that you don't have to depend on central intermediaries in your everyday life. This is the new competitive advantage. This is the new citizenship, and we want you to take advantage of it. So start using crypto, start using DeFi, start using Ether and Bitcoin in your everyday life. And of course, guys, risks and disclaimers. None of this was investment advice. The assets we talked about today are risky, including Bitcoin and Ether. So is all of crypto. So is DeFi.

• 1:29:38Ryan Sean Adams?

  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.