#729 The Bitcoin Bull Case w/ Murad Mahmudov - Pomp Podcast BEST OF

This is a throwback episode that was recorded with Murad Mahmudov that was recorded on October 31, 2018. It was only the 25th episode we had created for the podcast. In the conversation, Murad explains why he is so bullish on bitcoin, including the path to bitcoin reaching $10 million per coin. Enjoy! ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off.

• 0:11Anthony Pompliano?

  Today's episode is a throwback episode. It is the legendary Murad Muwaddav. This episode was recorded approximately two years ago, and it laid out an argument as to why Bitcoin could rise to one day be worth $10 million per Bitcoin. This conversation was shared wide and far when we first recorded it. And so I thought now would be a great time to resurface it in the heart of this bull market. I hope you enjoy it. But before we get into this episode, I want to quickly talk about our sponsors. First up is BlockFi. BlockFi provides financial products for crypto investors. Those products include a high yield interest account, a US dollar loan product against your crypto

• 0:51Anthony Pompliano?

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• 1:34Anthony Pompliano?

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• 2:19Anthony Pompliano?

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• 3:00Anthony Pompliano?

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• 3:36Speaker 02

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:00Speaker 03

  All right, guys, I am here with Murad. We are going to do our best to create a podcast episode that becomes the de facto episode you can send to people when they ask, what is Bitcoin and why is it important? So Murad, a tall task in front of us, but thank you for coming.

• 4:18Speaker 04

  Thank you for having me, Anthony. A pleasure to be here.

• 4:21Speaker 03

  Absolutely. All right. So before we get into this, let's go through your background and then we can jump into everything.

• 4:28Speaker 04

  Sure. So I'm originally from Azerbaijan, was until recently an international student here in America.

• 4:36Speaker 04

  Got into Bitcoin quite heavily after spending a semester abroad in China during the previous bubble in late 2013, early 2014. A lot of the exchanges back there, as you may know, still didn't have tremendous liquidity yet. And some of my foreign friends were trading Bitcoin P2P, bringing it into China, selling it, etc. So attended a bunch of Beijing meetups, been in the rabbit hole since. And made a small pause, as many of us have, in like up to 2015. And then as 2016-year-old and got back into this game, briefly worked in finance.

• 5:19Speaker 04

  And then now doing several different crypto things full-time.

• 5:24Speaker 03

  Absolutely. Okay, and so let's just start with the simplest question, right? What is Bitcoin?

• 5:30Speaker 04

  This is a very good question. And Bitcoin is something that can be described with more than 100 different definitions. And a lot of people debate what they are. But to me personally, Bitcoin first and foremost is a new form of money. And it's a new form of thinking about money, storing money, transferring money, and just dealing, organizing, and understanding money. And all kinds of second-order financial effects that come out of that.

• 6:02Speaker 03

  Absolutely. So let's walk through some of the core components of Bitcoin, right? Obviously, it's built on a blockchain. And then it is divisible, it's fungible, it's all these things. What are the important components to you?

• 6:16Speaker 04

  Blockchain is definitely one of the components. A lot of people think that that's the core one, but really, that's one out of four or five core moving pieces. I don't want to give the term blockchain too much legitimacy right now because it's really been overabused, I would say. And up to this point, it has become little other than a marketing term at this point. I mean, I'm not as fascinated with blockchain as I am fascinated with the Bitcoin blockchain. But as I've said, there are many moving parts.

• 6:53Speaker 04

  Another is sort of the proof-of-work function of Bitcoin. And how the timestamping and the security come into play in this regard. Bitcoin's governance, in particular, is very, very unique and very, very complex and sort of hard to understand, hard to explain. But I just want to underline the fact that it's not just a currency on a blockchain. It's really sort of very, very interdisciplinary and multivariable phenomena, where a lot of different things come into play, and blockchain is merely one out of several.

• 7:29Speaker 03

  Absolutely. So let's go into proof-of-work, right? How does that work, right? And why is it important?

• 7:35Speaker 04

  Proof-of-work is very important because it is the first workable, in my opinion, solution to the double-spending problem at scale. As we know, a lot of different alternative currencies and alternative money forms were created in the 90s, in the early zeros. Unfortunately, though, they didn't work quite well because most of them were centralized, more often than not, of course. And when something is centralized, it is very easy to shut down. A privilege of creating and controlling your own money, let alone a monopoly on it,

• 8:20Speaker 04

  is something that gives sort of the controllers of that system a tremendous amount of power, arguably more than anything else in the world. With Bitcoin, proof-of-work, once again, coupled with several other things, allows the system to be secure and decentralized at scale, as well as allows us to timestamp transactions on the ledger in a sort of decentralized, trustless, or rather, trust-minimized manner.

• 8:54Speaker 04

  Which allows Bitcoin, for the first time, to be an alternative monetary system and an alternative currency, which is several orders of magnitude much harder to shut down, to censor, to stop, and to manipulate than any other project of a similar variety that has ever arrived in the past.

• 9:17Speaker 03

  Absolutely, and so this idea of the decentralization, right, in a centralized world, whether it's the traditional banking system, or other attempts like Digicash, Hashcash, Bmoney, etc., the centralized versions don't have the double spend problem, right? So the double spend problem is this idea, if I have a single US dollar, a physical dollar, and I give it to you, I no longer have a dollar that I can give to anyone else, right? So I only can spend that dollar one time. In a digital currency, the actual unit of value is a digital file, right? And it can be copied, and so therefore, the problem that many of these early attempts

• 9:59Speaker 03

  to build a digital currency ran into is the double spend problem you described. And that was where I give you one unit of value, one Bitcoin, and then I would be able to send that exact same unit of value to somebody else, therefore spending it twice, double spending it, right?

• 10:16Speaker 04

  Right.

• 10:17Speaker 03

  The blockchain, right, structure is what solved this. And so do you think that the solving of that double spend problem is why Bitcoin has been able to thrive when other previous attempts didn't? Or do you think it's something else?

• 10:35Speaker 04

  So technically, centralized currencies and centralized financial systems have a double spend problem as well. However, in order to solve it, you need to, we need to place our trust in a central party, in a centralized authority, who sort of often control the transactions, they control the settlement, they control the issuance of the currency, they control many different things, right? Satoshi, in one of his earliest sort of posts on the Cyberpunk email list... He noted that the traditional currencies have several sort of layers of trust that you have to sort of essentially give into in order to use the system. You need to trust the central banks not to dilute the currency too much. You need to trust commercial banks

• 11:19Speaker 04

  that they're going to let your transactions through, etc., etc., etc., right? And the amazing thing with Bitcoin is that now, in a very, very unique way, Satoshi Nakamoto has managed, in a very elegant way, sort of combined several innovations together, one of which is proof of work, hashcash, together with sort of a chain of blocks, as well as several other things that we can get into, to create a digital currency where the double spending problem is solved in a trustless manner, and in which sort of

• 12:00Speaker 04

  this allows, as Nick Zabo says, for the system to be much more socially scalable than anything else we've had before. And a lot of anthropologists have argued that sort of expanding social scalability with various technologies that allow us to sort of connect with as many people as possible in a way where we don't have to sort of rely on any single party. With more and more inventions of this sort, we can really sort of expand the horizons of commerce and the human civilization at large.

• 12:33Speaker 03

  Absolutely. And so, you know, those previous attempts at this all either had lack of adoption, or they had technical problems, right? There was issues that they couldn't solve. One of the things that often doesn't get talked about with Bitcoin is the governance, right? So everyone is focused on the technology itself and kind of how that is executed. What is so special about the governance of this digital currency?

• 13:06Speaker 04

  So governance of Bitcoin is not formally defined, and I would argue that in a way it is a strength rather than a weakness. Technically, the governance has to do a lot with Bitcoin improvement processes, and how those get proposed, and how those get reviewed, how those get added in, etc. It's a very conservative, extremely meticulous process, which I consider a strength. A lot of people complain that Bitcoin is not evolving, or Bitcoin is too slow. And to me, those people are exhibiting high time preference and impatience. I think the altcoin boom and the ICO boom, a lot of the blockchain boom as well,

• 13:51Speaker 04

  has its origins in part because of this.

• 13:56Speaker 04

  True Bitcoiners understand that this isn't a six-year get-rich-quick scheme, but it can be an 80-year project. It's something that perhaps will continue going on until the end of our lives. And so every changes to the system need to be extremely, extremely careful. I like to compare it to a nuclear reactor, or a heart surgery, or like a moon mission, because there's a lot at stake. More than $100 billion already, and potentially trillions, tens of trillions of dollars someday. And so because it is software, it lends itself to flexibility.

• 14:40Speaker 04

  This malability has allowed us to create a money that is harder and sounder than gold, and fiat, of course. But at the same time, this malability also makes it fragile in a number of other ways. And precisely because it is software, we need to be extremely careful. But the governance process of Bitcoin is what Pierre Richard calls a P2P anarchic network governance. And the fact that it is slow to change is something that really makes Bitcoin far, far stronger than everything else. And the number one reason, and I can give dozens of reasons, but the number one reason why altcoins are far, far behind Bitcoin.

• 15:23Speaker 04

  Is precisely because they are much more centralized in relative terms and everything about it is much easier to change. And currencies, first and foremost, are all about trust. As I like to repeatedly say, these crypto assets are, unlike many people sort of in the VC world, San Francisco, California, they think of these things as software platforms. They try to apply the late zeros, early tens sort of tech paradigms to this thing. But really, to me, it's a monetary phenomenon. In very loose terms, I like to describe these things as digital monetary metals.

• 16:07Speaker 04

  To me, that's sort of arguably the closest metaphor for now. I like to even say that they aren't, Bitcoin being compared to digital gold is an understatement. And really what it is, is digital monetary nuclear weapons. Because if you really dig into the third and the fourth order's game theoretic effects that are likely to arise when this thing gets just a little bit bigger, which to me it inevitably will, there is just so much that it is going to cause and reorganize in this world.

• 16:44Speaker 03

  Absolutely. And so, you know, one thing that I think about a lot is if you were to draw a spectrum, on the left side you have the slow development cycles and kind of carefulness of Bitcoin. And on the right side, you have optimization for innovation, right? And I think that Bitcoin obviously is pretty far on the left side of that spectrum and a lot of the ICOs and altcoins, et cetera, are pretty far on the right side, right? They want to quickly build something, they want to get it out, they're trying and experimenting and innovating and doing all these things. And so what ends up happening is because Bitcoin's speed of development is slower,

• 17:25Speaker 03

  more methodical, kind of more intentional, it can pull from the things that work on the innovative end and it can avoid the landmines of the things that don't work, right? Do you agree with that?

• 17:36Speaker 04

  I agree with that and I would even add that sort of the... A lot of people who've started altcoins or sort of gotten into that wave in the last couple of years come from the technology world or the startup world, venture world. And sort of one of the schools of thought, i.e. move fast and break things, it completely does not work for cryptocurrencies. Because, once again, this is not like a dog walking app or a dating app or like a food picture app, right? And you need to be extremely, extremely careful with this. And we want to make it so that a huge chunk of the world financial system eventually gets absorbed into this one digital currency.

• 18:20Speaker 04

  And so conservatism is definitely the way to go here. Some people would even argue that we need to even be more careful and review in an even slower fashion. But I definitely agree with you that Bitcoin can definitely take whatever... If there's ever something that is actually useful and truly innovative that any altcoin does better in any capacity or function, Bitcoin can eventually adopt that, for sure. However, and this is why I believe that sort of privacy coins or coins with more programmability, et cetera, et cetera, they really don't stand a lot of... They don't really stand a chance against Bitcoin at this point in time. Because I believe people will soon realize the truth, and the truth is that the value

• 19:03Speaker 04

  and, AKA, the price, is determined by the monetary premia. And the monetary premia is determined by a combination of the current monetary network effects, monetary liquidity, saleability, marketability, recognizability, the Lindy effect, and first and foremost, the credibility of the monetary policy and just the general trust. And in all of these terms, in all of these criteria, Bitcoin is so far ahead than everything else, that the way I see it, yes, there may be two or three more sort of mini altcoin bubbles.

• 19:41Speaker 04

  Particularly as more people sort of enter into the space, there's a natural sort of incentive to sort of find the next big thing, of course. But I believe that once Bitcoin goes above several trillion dollars or so, a big divergence will happen. And really, all the other cryptocurrencies will be similar to what penny stocks are to the big caps in the equity world right now.

• 20:03Speaker 03

  Got it. And so would it be fair to say that if you take that same spectrum, on the left side, you've got security, and on the right side, you have, you know, low levels of security? Bitcoin conservatism pushes it on the extreme end of the left side around security, right? And do you think that these other blockchains, tokens, et cetera, are lacking focus on security? Or do you think they're making a rational trade-off between security and let's call it innovation, or something like that?

• 20:38Speaker 04

  I think it's a rational trade-off. And the reason for that is because if you even want to compete in Bitcoin in any capacity, then it's really difficult to compete against it in terms of sort of monetary disinflation, which really is the most important thing here.

• 20:50Speaker 03

  Well, so what you're saying is, if somebody wants to compete against Bitcoin, right, another project, you can't beat it on security today, right, because of the network effect. And then you can't beat it on the monetary policy, and therefore, you have to go to other areas in which you may be able to build a competitive advantage.

• 21:09Speaker 04

  That is most of the thinking in, in sort of altcoin creators' heads. And I believe that it might, it has worked a little bit, not really. It might even work a little bit in the upcoming waves, but it is doomed to fail eventually.

• 21:23Speaker 03

  It's like winning the second or third most important aspect, right? It's like saying, look, the most important thing around security-

• 21:30Speaker 04

  It's like sixth or seventh, I would say, right?

• 21:32Speaker 03

  Yep. Yeah, it's super interesting. Okay, so let's talk about the design of Bitcoin, right? So obviously, there's proof of work, there's governance, et cetera. But the actual monetary design, walk us through kind of the disinflationary and deflationary nature of the actual design.

• 21:51Speaker 04

  So before I delve into that, I will say, and I think this is something that people will increasingly realize in the coming years-

• 21:59Speaker 04

  Uncensorability is cool, unseasability is cool as well, but to me, these really are perks. In terms of the price going up and this thing taking over the world,

• 22:09Speaker 04

  if we create a pie chart, the 90%, i.e. the dominant force which will be doing that, is Bitcoin's monetary policy. And really, it's unprintability. The fact that nobody can print beyond 21 million. That is by far the strongest and the most important innovation really here.

• 22:27Speaker 03

  Okay, so the monetary policy of this system is by far the most important part?

• 22:34Speaker 04

  Precisely. And people need to use something as money.

• 22:38Speaker 03

  Yep.

• 22:39Speaker 04

  Right now, some of the better currencies are the US dollar, euro, the Swiss franc, etc. But really, people use those because essentially, they're picking the least bad thing.

• 22:54Speaker 04

  I believe the supply of the US dollar in the last year has increased by 6.2%. Bitcoin's stock to flow ratio today is around 3.8%. And after the next halving, if you go over the 21 million number, it's going to be 1.7%. And actually, I believe that that switch from sort of low 3% to high 1% is going to be the number one sort of driver of the next big wave in 2020. But to answer your question more directly,

• 23:29Speaker 04

  unlike other currencies, which their respective central banks, in the case of fiat, can print essentially whenever they want, and as well as their sort of respective local commercial banks can create more of when issuing that, Bitcoin is limited to strictly 21 million units.

• 23:52Speaker 04

  Some of them, it is believed that several million have already been lost. I believe that when all is said and done, the global supply of Bitcoin is going to be somewhere between 16 and 17 million. The fact that nobody can print beyond the 21 million limit and the fact that the users, the miners, and essentially the everybody in the developers, everybody who has as little as one Satoshi of Bitcoin, they are incentivized in having that rule be the number one and the most important sort of rule and the number one focal point, the number one shelling point, which the community is gathered around.

• 24:32Speaker 04

  And really, this is the number one thing which allows Bitcoin to continuously increase in value. And people are already pricing in its extreme scarcity. I like to say, we've never had an object, let alone a money, as scarce as Bitcoin before. Even gold is expanding at a rate of around 1.6% per year over the last 10 years. Now, I believe that after, by the late 2020s, that number for Bitcoin is going to be lower than 1%. And it is, every year it's getting lower and lower. So technically, that number is getting lower every 10 minutes.

• 25:15Speaker 04

  And as you might know, every four years, there's a particularly additional sharp drop as well. And so I believe that that soundness, that hardness of currency, isn't palpably felt by people yet. And even a lot of participants in the market, a lot of sort of traders and investors, they don't really quite grasp this aspect yet. But I believe that this is the revolutionary thing here, and this is why I believe Bitcoin is going to be in the hundreds of trillions, in today's terms, in the future.

• 25:46Speaker 03

  So, there's a couple of key...

• 25:50Speaker 03

  Terminology and you know, components that you just described, right? So there's the total supply of Bitcoin, right? So when it's all said and done, 21 million Bitcoin, and we can get into why that is and if that could change or not later, but for right now, let's just say there's 21 million total supply of Bitcoin. At the same time, there is the circulating supply. So how many Bitcoins have been produced and are currently available for ownership, you know, by people or organizations? And then what we see is every 10 minutes, every block, there are more Bitcoin that are added to the circulating supply, but that 21 million fixed supply never, never changes.

• 26:33Speaker 03

  And so what occurs is the disinflationary, right? So, so yes, the circulating supply continues to expand until it reaches that 21 million, but that number goes down every four years or so, right? In terms of how many Bitcoins every 10 minutes are added to the supply. And so that's a disinflationary model. What you described is once all 21 million Bitcoin have been mined or are now part of the quote unquote circulating supply, we now get into a deflationary model, right? And so it's still longer disinflationary because actually there's no more being added and now we can only go reverse. We can only lose Bitcoin in the circulating supply, right?

• 27:18Speaker 03

  And so let's talk about the pros and cons of an inflationary system and the pros and cons of that deflationary system, right? Cause I don't think, I think people hear these terms, but they don't really know what they mean or why there's, there's pros and cons to either side.

• 27:33Speaker 04

  We're, we're taught in a lot of schools and sort of the contemporary mainstream neo Keynesian economists argue that mild inflation is best. To me, I think that sort of governments around the world, particularly in the Western world, are incentivized for that kind of academic discourse to be the dominant one in, even in the best institutions. And in my research, I've found that there's a lot of sort of academic grants and academic sponsorships financing that central banks and ministries of finance, ministries of economics, et cetera, that allocate to certain schools of monetary thought than others.

• 28:16Speaker 04

  But I believe that sort of those currencies are local monopolies and those currencies are forced upon us from top down. Bitcoin is a free market phenomenon. I would argue that Bitcoin is an experiment in Austrian economics that so far in its 10 years of existence is succeeding massively. My belief is that money is a product, just like anything else. And I think we will not have truly pure capitalism and truly pure free markets until money, which is a product that we utilize, which is a product which is a half of every single transaction in our society, is

• 28:57Speaker 04

  something that is originates from the free market as well. I believe that money is ultimately a product of the market rather than a product of the state. And I think the last 47 years in history have sort of are a temporary phenomena. For thousands of years, gold was the predominant money, or gold and silver were the predominant two currencies around the world, until sort of the paper notes became more widespread as a technology. You can think of paper notes as a layer two technology on top of monetary metals. And at that point, once you had paper notes,

• 29:41Speaker 04

  which sort of were redeemable for metals, there was no longer the divisibility problem of gold was solved, so the need for silver was drastically reduced, and thus silver was demonetized further. It's very interesting to look at the gold-silver sort of price ratio. And after 1881, you see sort of gold skyrocket in silver terms. But I believe that something similar will happen with Bitcoin versus all other monetary instruments, and even other financial assets, which is really, which is really quite eerie. I think that when all is said and done, Bitcoin will be the second

• 30:23Speaker 04

  or the third single biggest asset class, the single biggest asset in the world. Maybe real estate will be the only one bigger. And sort of this is my reasoning around this. Right now, it is believed that the total money supply of all fiat currencies around the world is somewhere around $80 trillion.

• 30:44Speaker 04

  If you consider M1, M2, M3, if you add them all up around the world. And I strongly believe that that number is artificially diluted and artificially kept small because essentially by continuously printing, governments are disincentivizing the world and disincentivizing investors and even average people to store too much money in currencies.

• 31:08Speaker 03

  And you're doing this because if I take $100 and I put it in my bank account, as they print money, that $100 loses purchasing power every single year.

• 31:20Speaker 04

  For sure. I mean, every single day where the money creation occurs, see, it's interesting because the cost of creating that money for the government is near zero. All it takes is just a push of a button, right? But essentially, every single unit of fiat currency that gets created reduces the wealth of the fiat holder around the world. And Bitcoin is an unimaginably new phenomenon where for the first time, nobody can seize your wealth, not just directly like they did with gold in the 30s, but just like they do with stealth inflation in fiat, nobody can print more. And for the first time, you have this currency that you can have full, or at least very

• 32:03Speaker 04

  strong confidence, that for the rest of your life, the percentage of the money supply of this entire system will always remain the same, which really is completely unprecedented because even with gold, you don't have that. And so here's the thing, the total amount of wealth that is stored in currencies is artificially small. People, essentially, the system doesn't want us and doesn't want people to have a good, robust, unseizable store of value. Because if that were to exist, then governments and central banks would lose a tremendous amount of sort of seniorage privileges because every time they print, they essentially enrich themselves at the expense of everyone else a little bit, right? And so.

• 32:50Speaker 04

  This current system, because the money is constantly getting diluted, people like surgeons, artisans, dentists, etc., engineers, they either have to play part-time investors on the side, or they have to sort of outsource those services to registered investment advisors and brokers, etc. And that's part of the reason why the financial system is much bigger than it has to be, and why Wall Street is just a ginormous part of the world's economy. If we had something like gold, or better yet Bitcoin, then you could save your wealth, and it would actually gain a little bit of purchasing power every year, without having to sort of have this anxiety-riddled wave of activities that you need to do.

• 33:34Speaker 04

  And it's actually quite crazy how in today... I'm not even talking about the second or third world, where this isn't even an option. Even in the first developed civilized Western world, you have to create a diversified portfolio of equities, bonds, small caps, mooneys, commodities, FX, derivatives sometimes, etc., just to preserve your wealth. I'm not even talking about making some tremendous outsized returns. I'm talking about just to save your wealth. And this is crazy. And like in biblical times, there's a famous Jewish proverb, which says, "Keep a third of your wealth in money," which was gold, "keep a third of your wealth in land, and keep a third of your wealth in your business." And even as recently as in the 50s and 60s,

• 34:18Speaker 04

  you could notice that in portfolio allocations, some of sort of the traditional mutual funds and the early big asset allocators, they had a much bigger allocation to cash when sort of the trust in currency was much greater. And you saw that reduced as years went by, and in recent decades with quantitative easing, essentially the trust in currencies gets incrementally reduced. But I believe that if Bitcoin were to become global money, which I believe it will, or something like it definitely will, because genie's out of the bottle, and sort of the idea is here to stay forever. The percentage of people's average portfolio that will be in cash as opposed to today will be much greater, perhaps not a third, but it will be much higher than it is today and much closer to a third than it is today. And precisely because of that, I believe

• 35:03Speaker 04

  that the total wealth in the world that is held in a currency, and note, this one currency will not be inhibited by inflation, it will not be inhibited by borders, it will not be inhibited by centralized control, all these things will contribute to it being the single biggest currency in the world. And I think that eventually, I increasingly believe that the cryptocurrency market, even soon, not just in the future long-term equilibrium, it will be a winner-take-all rather than a winner-take-most game. And I believe that Bitcoin, as it currently stands, will probably take 94% to 95% of this entire market.

• 35:37Speaker 03

  So, there's a lot here to unpack, and I think it's really important, right? What you're describing is the idea, an inflationary model, like what we have with the US dollar, for example, incentivizes me to get out of cash, right, and get into either hard assets, or to spend that capital, because if I hold it, it loses value, right? And so, that inflationary model, for many people, they spend, or they take that cash and they buy real estate, or they buy other investment opportunities, because they know that they have to at least

• 36:18Speaker 03

  do better than 2%, right, on their yield for the year, because if they leave it in cash, they're going to lose 2%, right, give or take, based on inflation. And so, the argument that you're making here is, let's take, I don't know, 5, 10, 20, 30% of the real estate market, is actually wealth preservation, right? And if people were given the choice, rather than buy real estate, they would rather take that exact same value and hold it in the cash equivalent, right? They don't do it because today that loses money. But if there was a global, digital, deflationary currency...

• 37:02Speaker 03

  The real estate total market cap would shrink because people would move from real estate back into that global currency. And this would not only happen in real estate, but in a number of kind of store of value type asset classes where people today find safety to get out of cash and preserve wealth, but that may not be true in the future.

• 37:25Speaker 04

  Precisely. And I think that this really the market for the global total addressable market for monetary instruments is a zero sum game. For Bitcoin to win, other things have to lose.

• 37:37Speaker 03

  Other currencies or other asset classes?

• 37:40Speaker 04

  Currencies, both, both. And that is part of the reason why I believe that Bitcoin, the single currency, will be bigger than in sort of in their quote unquote market cap or in the amount of wealth that is stored inside it will be greater than not just any, but all of current fiat currencies and monetary metals added together. Because I believe that Bitcoin is such a good store of value that it will take more than 95% of the current market cap of fiat currencies. It will take more than 75% of the current market cap of monetary metals. And then, and this is sort of the interesting part, I think because the current fiat currencies are inflationary, a lot of high net worth individuals and asset managers around the

• 38:25Speaker 04

  world use the stock market, use the fixed income markets, use the real estate markets as a store of value. That is part of the reason why if you try to buy an apartment in Tokyo, London, or New York, the prices are insane. And this is because both American high net worth individuals and foreign high net worth individuals use these sort of prime city luxury apartments as one of their stores of value. And I believe that sort of because the fiat currencies are constantly diluted, at the same time, this has caused an artificial sort of increase in the value of. Other asset classes and other financial instruments as people are hunting for yield. The aggressive sort of quantitative easing and the aggressive sort of unorthodox negative

• 39:10Speaker 04

  interest rate monetary policies of some central banks since the financial crisis have exacerbated this effect even further. And if you look at the inequality and the Gini coefficient, it has increased sharply since 2008 in the last 10 years even more. One of the reasons for that, out of several, I mean, of course, it's a very multivariate topic, but one of the reasons is because the working class and the lower classes, they mostly store their wealth in cash. Most of them live paycheck to paycheck and whatever savings they have, they do keep it in cash, just for simplicity's sake. Now, the asset owners are those who own real estate, stocks, bonds, et cetera.

• 39:49Speaker 04

  And a lot of the wealth has flown there and a lot of people, although essentially the people who've benefited the most from this grand wealth effect experiment are people who are holding these assets. And much of the time, it is the central banks themselves who are indiscriminate and price insensitive buyers of these financial instruments.

• 40:11Speaker 03

  Well, so this is important because there's a thought process that inflation is merely the act of stealing wealth from the poor and enriching the elite and wealthy, right? And so what that means is if you live paycheck to paycheck and you leave a high percentage of your net worth in cash, then every year you're losing value, right? You're losing purchasing power. But if you actually have other assets and a lot of them, inflation continues to drive the price of those assets up.

• 40:54Speaker 03

  And therefore, those that own non-cash assets actually benefit drastically from inflation and are incentivized to keep the party going, right? And so if you switch to a deflationary model, actually the people with the preference to have a high percentage of their net worth in the currency will benefit drastically and those in non-cash assets will actually not benefit.

• 41:27Speaker 03

  In this scenario.

• 41:29Speaker 04

  For sure, and I like to describe Bitcoin and sort of this entire sort of phenomena as a grand wealth transfer event, and I believe that it will be arguably the single biggest wealth transfer event in human history. It will be a wealth transfer from the old to the young, from the tech savvy to sort of the more conservative, from the open-minded to sort of the more closed-minded, and of course, from the people who will be holding these crypto assets, and most of all Bitcoin.

• 41:59Speaker 04

  And the losing side in this case would be people holding fiat currencies, gold, etc.

• 42:03Speaker 03

  Absolutely. So, let's say that everything you've described is true, right? And you just laid out the blueprint for how this is going to play out over the next decade, two, three, four decades, right? How big is the opportunity, right? What is the market cap of Bitcoin 10 or 20 years from now?

• 42:22Speaker 04

  So, like, before I answer that question, I'll say that as Bitcoin, let's say, in six to eight years from now, as it's a bit bigger, much more volume, much more Lindy effect, much more trust, much more credibility, etc., much more mainstream, people will simply compare two things, and Bitcoin will be in a free-market battle against fiat currencies and gold simultaneously, and even other things when you just isolate the store of value component, as we have discussed. People will simply say, okay, this thing is expanding at 6% per year in its supply, and this thing is expanding at 1% per year in its supply. Which one should I pick as a store of value? And that's why, to me, sort of this feedback loop is inevitable.

• 43:07Speaker 04

  It will be so difficult to stop.

• 43:10Speaker 03

  The math becomes undeniable.

• 43:11Speaker 04

  It is, really, if you sort of extrapolate this phenomena, and extrapolate this sort of wave of financial change, Bitcoin will be a black hole that will absorb a tremendous amount of value. I believe... The total addressable market is somewhere between 100 and 200 trillion. I like to say it will be 160 trillion. So if Bitcoin, and that is if we go off of the $10 million per Bitcoin price in today's terms, without even counting the inevitable hyperinflation of fiat currencies. And so this is my reasoning.

• 43:48Speaker 03

  So you think that a single Bitcoin will be worth $10 million?

• 43:54Speaker 04

  In today's money. Yes, I do.

• 43:57Speaker 03

  Which would give us a market cap of what, like 100?

• 44:01Speaker 04

  160 trillion. Right now, the current market cap of Bitcoin is 110 billion. I believe when this bear market is done, give or take, we'll bottom somewhere around 80 billion. And so that's a 2,000x that is still possible between right now and what is probably our death. And I think there's still a tremendous opportunity here. And I think high net worth individuals, more sort of edgy, open-minded, tech-savvy institutions, and eventually government institutions will push this to the extreme.

• 44:35Speaker 03

  These are big numbers you're talking, and you realize that very few people in the world believe what you believe right now.

• 44:41Speaker 04

  I realize that. But if you spend months and months studying this, it becomes a self-fulfilling prophecy to you. I'm very confident Bitcoin will be bigger than the US dollar, and potentially even bigger than all of them combined. Because there's an interesting table that Vijay Boyapati has made, and he says that cryptocurrencies, or Bitcoin in particular, are harder to tax, harder to seize, easier to transfer, harder to steal, cheaper, easier, faster to send around the world, they are borderless, they are uber-competitive, they're highly deflationary, and there's dozens and dozens of reasons.

• 45:25Speaker 04

  And all of these combined, I believe, will make Bitcoin incredibly big, similar to what the gold standard was in the late 19th century. But given the fact that the economy is much bigger today, and given the fact that it is digital and much more fluid, I believe it will be far, far greater than even that. And yeah, these are my thoughts.

• 45:47Speaker 03

  Absolutely.

• 45:50Speaker 03

  Let's talk about this idea of hyperinflation and the fiat currency experience or experiment, right? So 1971, was it Richard Nixon, right, takes us off the gold standard. The gold standard being the thought process that for every paper currency, every US dollar, you could go and redeem the equivalent in gold, right? It was being held in the central banks. At the time, what a lot of people don't realize is, Richard Nixon said, "We're going to go back to the gold standard." It was a temporary decision, right? Or at least that's how it was presented. And so, we obviously didn't. And since 1971, what we have seen

• 46:34Speaker 03

  across the world, at different times and different locations, is fiat currencies start to fail, right? And these fiat currencies, where they appear to be failing most, is in regions or countries where a government or the overseeing organization loses discipline, right? And the thought process is, in the developing world, we have much more discipline, right? There's checks and balances, and the Fed can't press the print button too much, right? Because there's those checks and balances. But in, let's say, a country where a dictator comes into power, there's less checks and balances, there's a higher probability that

• 47:16Speaker 03

  they will lose discipline, that you can hit in the print button too much, and you get into hyperinflation, devaluing of the currency, and we know how that ends, right? Let's talk about that hyperinflation period. Why are we seeing this in the countries we're seeing it today, right? And do you think that this is going to happen to every fiat currency in the world? Why or why not?

• 47:41Speaker 04

  I believe it's a combination of incompetence as well as outright grasping for power. And I do believe that this will eventually happen to all fiat currencies around the world. But it will happen sort of stage by stage. Of course, the second and the third world currencies will be the first to collapse. And sort of the more established euro and dollar, the leak from sort of the financial leak from there to towards Bitcoin will be a bit more gradual. It will be more like an S curve and then it will reach a point where the money will just like rapidly flow rapidly flow into Bitcoin because people will, as I've described, people will simply realize that this money is harder than the other one. The other money, there's people behind it and these people can do whatever they want. However, this

• 48:26Speaker 04

  is governed by such a strong, unbreakable algorithm and the community of people sort of strengthening it that the, I believe, the sort of the credibility and the faith and the trust in Bitcoin relative to fiat currencies will keep growing. And as I've said in the beginning, currencies and sort of the cognitive monetary premium that's placed atop them is first and foremost is about trust and it's about credibility.

• 48:54Speaker 04

  Swiss, the Swiss franc, for example, people like it because the Swiss don't print too much. They, they have sort of 300 years of credibility. They have, they have temperance, they have discipline, as you've described. A lot of sort of, and it's important, Safety Namus in his work, he often says that hyperinflation has never occurred with metals because there are natural limits to creation and there are natural sort of free market balances there. But it's in 99% of cases, it has occurred with fiat currencies because they are at the behest of humans. And George Guddeholsman, who is arguably the most prominent Austrian economist today in the world, he says that sort of this money supply inflation has traditionally been the means of financing war.

• 49:40Speaker 04

  But as of late, it has become, it's not just used in wartime, it's been being used perpetually. And I like to say that, so this inflation, it essentially shifts some activity from long-term projects and long-term capital goods production to more sort of short-term consumption.

• 50:03Speaker 04

  I'm a believer that it is not the consumption that really drives the sustainable long-term growth of the economy, the kind that actually increases our quality of life. But rather us engaging in long-term projects, long-term capital goods production, long-term production of tools, instruments, research, innovation, and things like that. And really, the best things that have ever been created, they were 10, 20, 30-year efforts, rather than sort of us going and buying something useless, right? And so I believe that if we have a currency that's more deflationary, people will be incentivized instead of thinking, instead of going out there and, as you've described, investing

• 50:48Speaker 04

  in something else, or even buying like a pack of crisps, or just new shoes, or really something that's really useless right now. Instead, people will be, just due to the deflationary nature of it, it will be seen and felt as more precious. People will be more incentivized to A, save, and B, invest in long-term projects, in the long-term sort of craft.

• 51:11Speaker 03

  Absolutely. And so I think with the, this hyperinflation, right? What we're seeing for maybe the first time, or one of the first times, humans have a choice. Do I trust the machines, the software code, the math, right, and the algorithms? Or do I trust the humans? And as more people elect to take fiat currency and convert it to Bitcoin, they are electing to trust the machines over the humans, right? And I've described this before as the machines are unbiased, they're emotional, they're disciplined, and they do what they're supposed to do.

• 51:55Speaker 03

  The humans are undisciplined and greedy. And when you lay it out that way... I think this is going to happen in a lot of different facets of our life, right? You already see some of this with the advent of Uber and that type of stuff. But with money specifically, the problems arise from human lack of discipline. And therefore, as more people trust the machines, they are rewarded because money acts how money's supposed to act. Agree or disagree?

• 52:28Speaker 04

  Definitely. I definitely think we will see a similar phenomenon in different facets of technology and capitalism as a whole. And as I've described in the beginning, Bitcoin, I don't want to use the word entirely trustless because there are still certain things you can trust, but they are far, far more distributed and in my opinion, harder to change than centralized solutions. And this allows commerce to happen on a global scale. And this allows you to trust this payment rail like never before. Bitcoin is extremely secure and it allows us to, I believe that another thing that it

• 53:10Speaker 04

  will do to finance is it will eliminate the Forex industry completely because if we only have one global currency instead of the dozens of currencies that we have today, hundreds of currencies, then the foreign exchange market will cease to exist because we will just have one currency. Hans-Hermann Hoppe describes the current state of affairs and state of fiat currencies as a mild state of barter. Whenever one company or one corporation in one country has to do business with another, they first have to exchange their currency to another country's currency, then need to change that for goods, and then need to go back and forth and every time. So it's kind of like barter in the sense that you first need to make these extra transactions. But with Bitcoin, several layers of those transactions will just get abstracted away.

• 53:54Speaker 04

  And I believe that this will expand the economy and accelerate capitalism and free markets and borderless commerce even more.

• 54:02Speaker 03

  Absolutely. So, all right, here's what I want to do. I want to play devil's advocate, right? I want to take the seat of the Bitcoin detractors, the people who don't believe or think that your view of the world is wrong, right? And so, I'm going to throw some ideas out at you and some detractions and you kind of respond as you see fit. Can Bitcoin go to zero?

• 54:27Speaker 04

  I believe that theoretically it could, but with every 10 minutes that it successfully adds another block to the blockchain and doesn't fail, the probability of that is reduced every 10 minutes or every single day.

• 54:40Speaker 03

  Okay, so there's a non-zero chance it could happen, but the addition of time makes it less likely?

• 54:47Speaker 04

  Precisely, and this is precisely where our constant discussion of Linde effect comes from. The longer a piece of technology like this exists, the more likely it is to persist even more in the future. And the longer it exists, it also gives trust to the people. Because say you discard Bitcoin in 2011, a lot of us thought, "Oh, it's a joke, it's whatever." We've seen that before, right? Now, you read it again in 2013, you're like, "Oh, this is still not dead." In 2015, you're like, "Oh, this is still here." Now, in 2025, people are going to be, "Oh, this thing is here for almost 20 years. This is here to stay." You know, and, "Oh, like, they still in 20 years haven't printed any additional Bitcoin beyond 21 million." This is really, really strong, you know?

• 55:28Speaker 04

  Bitcoin, yeah, it's not just the trust in the security, and not just the trust in sort of the decentralization, but also the trust in the currency as money is also growing, which is very, very important. And like, as I've said, trust and market cap over the long term is really the same thing.

• 55:44Speaker 03

  Absolutely. If it did fail, if it did go to zero, what's the most likely reason why?

• 55:53Speaker 04

  Catastrophic bugs, probably. Once again, as we've said, it is software. And software, it's an increasingly complex software. So many thousands of lines of code, so many things, so many moving parts at the same time. And really, unfortunately, very few people of that caliber that are, and that are simultaneously working on these kinds of technologies right now. And so... The main sort of 10 to 15 contributors to the Bitcoin project are people. Sometimes, once every four or five years, they do make mistakes, as we've seen recently with the bug. Luckily, it was fixed pretty quickly.

• 56:38Speaker 04

  There will be bugs. I mean, as I've said, this is a multi-decade project. This is a 50, 60-year project. This is software. We're likely to see three, four, or five bugs more before sort of this thing takes over. But this is inevitable, and as I like to think, it's better we take care of these things right now, when it's only a couple hundred billion, rather than when it's a $20 trillion system with the world's economy running on it.

• 57:02Speaker 03

  Of course. Okay. Bitcoin is too volatile to be a store of value.

• 57:07Speaker 04

  So to me, this is like the easiest, this is the easiest sort of piece of myth or misconception to parry, because you actually want Bitcoin to be volatile. Bitcoin cannot go from $1 to being the global digital store of value standard global currency without volatility. In fact, you desperately want Bitcoin to be volatile, preferably upwards, of course, but you do want it to be volatile, especially versus fiat. When you use the term volatile, you need to understand volatile versus what? And typically, we mean versus US dollar, right? I think the Bitcoin's volatility is great.

• 57:48Speaker 04

  If you zoom out and look over the last years, especially on a log chart, this volatility has been predominantly upwards. And this volatility is so good, it shows people that Bitcoin's strength versus fiat currencies is strengthening, and fiat currencies per unit of Bitcoin are weakening. And this volatility isn't just inevitable, it's desirable by the time Bitcoin completely takes over and in the long-term equilibrium. But a more practical answer is that as Bitcoin's traded volume grows, as Bitcoin's liquidity gets deeper, as Bitcoin's order books become more abundant, as more and more people sort

• 58:31Speaker 04

  of cognitively recognize it, as there are more hodlers, as there are more users, as there's more infrastructure, as there's greater security, and most importantly, as there is a bigger market cap, Bitcoin's volatility will decrease.

• 58:46Speaker 03

  So what this tells me is Bitcoin is a net positive volatile asset, right? There's violent volatility, but over a long period of time, it continues to increase in value and therefore, the only way to go from worthless to worth a lot, you have to have volatility. And that's a good thing.

• 59:05Speaker 04

  Precisely. I mean, you can't have all these trillions of dollars of wealth stored in one asset flow into another asset without volatility being there on the way. And money is really a technology. It's a financial technology that enables us to do a lot of things. And Bitcoin, to me, is a far superior technology than any monetary metal or any state currency. And so, people will, the world, because it is a superior technology, it will win in the free market and the world will adopt this better technology and this better technology will expand everything.

• 59:39Speaker 03

  Okay. Bitcoin can't scale. The transactions, the blockchain can't handle the number of transactions needed for a global adoption.

• 59:49Speaker 04

  So, a lot of people make a very big mistake. They compare, they think of Bitcoin as exclusively a payment rail, where it's only like one of the six things it does, and they compare it to, say, Visa or PayPal. Now, Bitcoin, the main blockchain is sort of the layer one of the whole system. You have to think of Visa as, it's like a layer three or a layer four of the current status quo of financial system, which is like the dollar, then you have the central banks, then you have the commercial banks, then you have sort of like the rails, and then you have sort of Visa or PayPal, and they all sit on top of this thing. And so, we will, Bitcoin is also, as you might know, developing layer two, layer three solutions already.

• 1:00:30Speaker 04

  And so, those are the ones that you will eventually need to compare against Visa and PayPal. The base layer isn't so much as a payments rail for daily transactions when you're buying crisps or a cup of coffee, but it's a settlement layer for very big and very serious transactions that require a lot of security. Eventually, I believe the base layer will... It will be much more expensive than it is today, but rightfully so, because most of the security will come from fees. And it will be large institutions and sort of large sort of business transactions, large commercial transactions that will predominantly and ultimately eventually be settled on layer one. But I believe that the trillions of transactions will be occurring on layer two, if not higher,

• 1:01:15Speaker 04

  as well as possibly on the side, the side chains, drive chains, etc. But my argument, and Nick Carter has put it very, very well. He said, these are, layer one is not parcels, it's container ships. So they will eventually be used as settlement for very, very big transactions. And if you compare it with gold, for example, today, do you know how much it costs? And gold right now is a means of final settlement between central banks, which they do once every several years. When moving gold from Europe to America or vice versa today takes tens of millions of dollars and months, if not years in time.

• 1:01:53Speaker 04

  Bitcoin, even if you run the math at the very equilibrium, the price to settle like several billions of dollars on a layer one of Bitcoin will still be orders of magnitude cheaper than you can do with gold today, which is still a huge, huge advantage. And all of those daily sort of small miniscule transactions that doesn't require hyper-security and hyper-decentralization will be done on much cheaper, much faster, layer two, layer three solutions, which sacrifice some security for greater speed and greater availability, etc.

• 1:02:25Speaker 03

  I think that's fair that Bitcoin is being compared not to the US dollar, which it is superior to in a lot of ways.

• 1:02:33Speaker 04

  Yes.

• 1:02:34Speaker 03

  Right? But it is being compared to payment rails that aren't accurate comparisons.

• 1:02:41Speaker 04

  Precisely. And a lot of people have pointed out very, very well, Safety and Amusa, I believe, was the first one to point this out. Bitcoin isn't competing against Venmo. It's not competing against PayPal or Visa. Bitcoin is competing against central banks, or even more precisely, it's competing against the Bank of International Settlements as a major settlement network for large transactions, as well as against central banks for currency issuance. And those are really the two things where it has a competitive advantage. And those are the things that you need to be comparing and not sort of the small value transactions.

• 1:03:16Speaker 03

  Absolutely. Okay. Bitcoin is not accepted anywhere.

• 1:03:23Speaker 04

  So I believe that people, and this is sort of what a lot of people behind Bitcoin Cash and this Nano Ripple etc., that's Litecoin even, they don't understand. I believe that the monetary progression, and there's a lot of debate about this, but this is sort of my strong belief, is that money has to move a new pre-money, sort of a new synthetic commodity that has properties of becoming money. It needs to go through this evolutionary process. And if you go on my Twitter page, it's pinned right on the top. It sort of shows a step-by-step progression. And I believe, and this is historically what has happened to gold and silver as well, and I believe is what's going to happen to Bitcoin.

• 1:04:07Speaker 04

  First, it needs to be a collectible, then it needs to become a store of value, then it's going to be a medium of exchange, and finally it's going to be a unit of account. So this sort of merchant adoption, to me, that's more for later. Right now, we need to develop Bitcoin in the criteria that make it as the best store of value. I believe that Bitcoin right now is still somewhere between the collectible and the store of value phases, but sort of every year, it's moving ever closer to the store of value stage. Early on, a lot of people argued that it was a collectible for cypherpunks, nerds, anarchists, libertarians, etc. And right now, as we've discussed, as market cap is getting bigger, as liquidity is getting

• 1:04:48Speaker 04

  bigger, as sort of the comparisons to gold are becoming ever more obvious, as a market cap increases a bit more, as custody solutions improve, it will be seen more and more as a store of value. Now, as it grows, as we've already concluded, volatility decreases. It is my strong belief that people prefer their day-to-day currency, i.e. their medium of exchange, to be relatively priced stable in terms of purchasing power. And that's why I believe the goal isn't to spend Bitcoin right now. The goal is to make Bitcoin as good of a store of value. As Bitcoin grows, its disincentives to spend also decrease. Right now, I'm not spending my Bitcoin. Frankly, I'm not going to be spending my Bitcoin for another 15 years or more. I'm not going to spend my Bitcoin until it's at least 15, 20 trillion dollars.

• 1:05:32Speaker 04

  In today's terms, as Bitcoin gets bigger, say it's reached 20 trillion. Then the amount of gains in percentage terms that you can have from there on until the ultimate future become less. There's no longer going to be the thousand X that's still possible today. The maximum from then on is going to be like, what, five, six X. And at that point, the disincentives to spend that are very, very present today are no longer there. So you know, everybody knows the pizza story where in 2011, somebody spent 40,000 Bitcoins on a couple of pizzas. And today, that could have been like half a billion dollars or something, right? And so a lot of people now know they don't want to be the pizza guy, right?

• 1:06:14Speaker 04

  And so right now, the key is to optimize Bitcoin for a store of value. And as more sort of liquidity pours into the system, we will optimize Bitcoin for a medium of exchange after I believe the store of value functionality has been more or less saturated. Of course, in monetary academic terms, the medium of exchange and the store of value functions of money are inextricably linked. But right now, I believe we need to optimize for the latter, and then the former will come with it.

• 1:06:43Speaker 03

  Today Bitcoin is 21 million total supply, right? That is what is written into the code. Detractors would argue that that can change through two different ways. One is if the miners all agreed to allow an increase in the total supply. Or two is a hard fork like a Bitcoin Cash that would incorporate a different supply schedule would then have Bitcoin not be 21 million fixed supply. How do you respond to either one of those?

• 1:07:17Speaker 04

  Yeah, so the latter is easy to respond. It's like saying, does the printing of Zimbabwe dollars hurt the US dollar? Not really. In fact, I think over the long term, this kind of currency competition is impossible. If Bitcoin is really not government money that we're saying this is the only one that you're allowed to use, and that it actually needs to win in the free market. And Bitcoin still has to win. Twenty other contenders before and as it wins these contenders, the trust in those 21 million becomes ever more and people realize that these 21 million are much more precious than all the other stuff. And Bitcoin is far, far more unique than any other cryptocurrency in this sense. So, once again, Bitcoin Cash printing their own 21 million is like,

• 1:08:03Speaker 04

  if Zimbabwe or Venezuela prints their currency, it doesn't weaken the US dollar. If anything, it makes us stronger because you have wealth into the quality you want. And over the long term, I actually think these altcoins are good for Bitcoin because they're showing that this is, this one is far, far stronger. And over longer term periods, the way monetary instruments work is that you want to derisk your wealth as much as possible and you're incentivized to, instead of like being too contrarian, eventually you want to bet on what's the most converging asset. And people will eventually, the one that's less liquid is risky, riskier to store your wealth in. And eventually, I believe that not just with other financial assets, before it has to fight with gold and fiat,

• 1:08:48Speaker 04

  it will first have to predominantly defeat other cryptocurrencies. And to answer your first question, miners aren't in control of Bitcoin. Okay. Full nodes, i.e. users, are in control of Bitcoin and the user activated,

• 1:09:05Speaker 04

  the user activated Softfork is something that has essentially proved that. More than 93% of miners wanted to increase the block size in sort of their way. More than 85% of the companies, exchanges, wallet providers were on their side as well. Essentially, all of the, even many of the wealthiest Bitcoiners were on their side. However, so the users and those people running full nodes, they decide what kind of code to run and as well as what kind of transactions to approve. Miners cannot make these changes to the code without consensus.

• 1:09:45Speaker 04

  And at the end of the day, Bitcoin is this impenetrable fortress of full nodes, which really collectively, as we've previously discussed, in a P2P network fashion, control the network. And I strongly recommend Stop and Decrypt's article titled Bitcoin is an Impenetrable Fortress for more nuance on this topic.

• 1:10:09Speaker 03

  Awesome. Alright, let's switch to the creation of Bitcoin, right? So, one of the things that Bitcoin is able to point to that most other cryptocurrencies and even fiat currencies cannot is that the creator of the system is unknown, right? So anonymous, pseudonymous, etc. We don't know if it was a man, a woman, a group. And there is folklore and myth around who this may be. Who do you think it is? Should we spend our time trying to figure out who it is, right? Is it important?

• 1:10:48Speaker 03

  And if we do figure out he, she, they, is Satoshi, is that good or bad for Bitcoin?

• 1:10:56Speaker 04

  I have certain suspicions, but I'm not going to, I'm not going to say any names out loud precisely because nobody knowing who that is for sure is what makes Bitcoin so strong. And as a Bitcoin evangelist, I am incentivized in this pseudonymous myth and pseudonymous strengths to continue going. Frankly, I don't think that the search for who the Bitcoin creator is, is a productive activity. And the fact that it is still unknown and it is still merely a thing of theories is, once again, one of the dozen things that makes Bitcoin far stronger than 99% of other cryptocurrencies.

• 1:11:40Speaker 03

  Absolutely. Because you won't say names, I think that's completely fair. Will you at least tip your hand in whether you think it is an individual or a group?

• 1:11:49Speaker 04

  I think it is one person.

• 1:11:51Speaker 03

  One person. Alright, well, at some point, somebody's going to get that out of you.

• 1:11:57Speaker 04

  Sure, but I mean, there are, there are sort of six or seven theories on this topic. Frankly, it really doesn't matter. Even if we, even if we found out who it is, it doesn't matter. It wouldn't even damage Bitcoin at that point. I mean, it's, it's good right now that we don't have any, any quote unquote heads of the dragon to cut and that no, there's no single party in control of it, as well as the myth is a nice sort of... of cherry on the cake, but

• 1:12:22Speaker 03

  the story is almost just as important as the technology.

• 1:12:24Speaker 04

  For sure, because I mean, you can have an emergence of this neo money phenomenon without this cult like religious like wave accompanying it, right? But it doesn't, it doesn't matter. There, the work that has been done on Bitcoins since 2010 is so immense. And now there are so many contributing individuals, contributing coders, contributing companies that it, it wouldn't even matter. Bitcoin is is it's, is far bigger than Satoshi right now.

• 1:12:56Speaker 03

  Absolutely. All right, we're going to, to read a quick message from the sponsors and then we'll be right back. All right, so what I want to talk about now, I had Travis Kling on, right? So Travis previously was at Steve Cohen's shop, right? Now he's got a crypto fund. And one of the things that we talked about was this idea of musical chairs in the institutional world, right? So there's a fixed supply of Bitcoin, 21 million, and right now the music's playing and everyone is walking or jogging around the chairs. And at some point, the music will stop and people will have to grab a chair. They'll begin to sit down, right? And one of the ideas that Travis presented was this idea that some institutions aren't going to wait for the music to stop.

• 1:13:42Speaker 03

  They're going to just start sitting down, right? And so he recently tweeted and said, you know, look, I talked about musical chairs. Yale came out and it's now public that they've invested in two separate crypto funds. And so Travis made the point that Yale just sat down. Yale just grabbed their seat. The music hasn't stopped, but Yale sat down and said, we're going to make sure we have a seat at the table. How do you think institutions, central banks, you know, world leaders, et cetera, should be thinking about Bitcoin? Thinking about how to diversify assets into Bitcoin? And possibly even fearing Bitcoin, right? What do you think that kind of rational thought process should be?

• 1:14:25Speaker 04

  David Swensen, who is the head of the Yale Endowment Company, has been the trendsetter in the endowment space as well as the large asset sort of allocation space for the last 20 years.

• 1:14:36Speaker 03

  Legend, absolute legend.

• 1:14:38Speaker 04

  Right. Now that he has invested in two crypto funds, I believe.

• 1:14:46Speaker 04

  I strongly believe that we will see other Ivy League syndicates, other Ivy League endowment companies, as well as big asset managers and even hedge funds in general, start dabbling in the space.

• 1:14:58Speaker 03

  And it's important to call out, so they invested in funds that aren't just Bitcoin. It's not like they just went and bought Bitcoin and put it in custody account.

• 1:15:10Speaker 04

  Yes.

• 1:15:11Speaker 03

  They invested in funds that, from my understanding, a majority will go into liquid kind of late-stage opportunities like Bitcoin, Ethereum, etc.

• 1:15:22Speaker 04

  Yes.

• 1:15:23Speaker 03

  But some portion of it will still go into ICOs, venture capital equity investments, etc. So it's kind of a broader basket than just Bitcoin. But Bitcoin, Ethereum, these liquid cryptos are a big percentage of the allocation. So obviously, if they had just bought Bitcoin and Bitcoin alone and just put it in their own custody account, that would be an even bigger deal, right? But this is still a pretty big deal. How do people respond other than just backing funds? If you're a central bank right now, what do you do?

• 1:15:53Speaker 04

  The two best things to do is to either invest in Bitcoin directly or to invest in a GP of one of the top five best funds. The latter, given the superiority of the fund over others, might be the single best decision. But, and then the third best is to invest in the LP of the best funds, of course. But those three are the best opportunities. I don't quite agree with the portfolio construction of, without naming any names, of the, I don't

• 1:16:31Speaker 04

  quite personally agree with the portfolio construction of the two funds that are relevant to the story here. I believe that a leveraged, a mildly leveraged play on Bitcoin will have a better sharp ratio than doubling in altcoins. But I think it is, I mean, I will personally be having 10% to 15% of my portfolio in

• 1:17:02Speaker 04

  Two or three premium altcoins as well, but really my heart predominantly belongs to Bitcoin. And I believe that at this point in time, from a technological perspective, it is fiduciarily irresponsible not to have at least 60% of your cryptocurrency portfolio in Bitcoin.

• 1:17:22Speaker 04

  My own fund will be engaged in more active management, but the sort of the long-term portion of our portfolio will be predominantly Bitcoin or leveraged, long-leveraged place on it. And here's the thing. A lot of people, perhaps rightfully, believe that this sort of altcoin game, so to speak, this blockchain project game, will still go on for two or three more cycles, and that might be true. And given that that is true, the two funds that we are discussing, they have tremendous pedigree and tremendous sort of networks that they can tap into.

• 1:18:04Speaker 03

  And they've got the names and they've got the track records.

• 1:18:07Speaker 04

  They also can't really justify putting three-quarters of their portfolio into Bitcoin, because then essentially, many, if not most of their LPs will be able to just do the same themselves. They need to take advantage of sort of the opportunities that they have, the tremendous deep discounts on future altcoins and the future ICR projects that they will receive, undoubtedly. And perhaps even they might, some of these things might outperform Bitcoin in the near term, and thus, if they sort of change their direction at a precise enough time, they might even make more Bitcoin for the investors that way. So I actually think that something like this is a strategy.

• 1:18:52Speaker 04

  A lot of similar people that I've talked to, they believe that when all is said and done, there will be six or seven currencies. I think that's nonsense because if you study monetary history and given the globalized, increasingly fluid, increasingly interconnected and interoperable nature of these technologies and the world at large, I believe, I used to think it was winner take most as well. I used to think it would be like 70, 20, 6, 4, like in a Pareto distribution type way. But I increasingly believe that it will rather be winner take all rather than winner take most. And I would also say to many of these investors that you have to, you absolutely have to think of these crypto assets as money first and software second.

• 1:19:37Speaker 04

  A lot of people who come from the entrepreneurial VC or the technology world, they think of it the other way around. They think about it the other way around. And I think that is going to lead to a lot of losses. It's going to lead to a lot of losses. And a lot of even the premium big hedge funds will not perform as well as those who managed to position themselves in accordance to more correct monetary theories.

• 1:20:03Speaker 03

  Yeah, look, I'll even take it a step further, right? In most cases, you have more extreme views than I do, but in this case, I may have more than you, in that if you're an institution today and you have zero exposure to the cryptocurrency asset class or market, you're violating your fiduciary duty, given that it was the best performing asset over the last decade, right? It has very unique characteristics when it comes to lower levels of correlation, upside, the per unit of risk that you take by allocating capital here.

• 1:20:45Speaker 03

  And so those institutions that are on 0% exposure have to do what we call get off zero, right? Each portfolio is different. So some it's 10 basis points, 50, 75, 200, 500, whatever the basis point number is. It's all about what their goals are, what their current allocations are, all of that. But zero is the wrong number, right? And so that's much easier, I think, for long-term macro investors who have experience and even expertise in the alternative space. So Dave Swinson is like a perfect example at Yale. But I think that

• 1:21:24Speaker 03

  this is actually true at the central bank level, at the individual level, etc. And so let's go into a hypothetical world where the US central bank is playing that game of musical chairs and they sit down. And it comes out that the US central bank bought 5, 10% of the network on the open market. What happens to Bitcoin, the price, and kind of the macroeconomic world if that was to come to light?

• 1:22:01Speaker 04

  Well, them buying 5% would be impossible.

• 1:22:04Speaker 03

  Why?

• 1:22:05Speaker 04

  Because people need to realize that more than 10 million of Bitcoin, I believe, somewhere between 10 to 13 million are like held and not like actively trading or actively circulating. Only 3 to 4 million are being actively traded. And as Bitcoin's price will be increasing, I believe that people will be realizing that this is some, there's really a financial revolution going here. And this is something to be kept for a long time. Relative to the amounts of capital that are sloshing around in capital markets around the world, Bitcoin is really so small still, right? And it's really quite, it's really

• 1:22:47Speaker 04

  liquid, really. And as they even try to buy half a percent, like that very act will raise the price so much in a vertical fashion that just buying the next half a percent will be... Eight times more expensive and like this continues compounding in an exponential fashion. It will need to be done in an extremely stealthy, in an extremely clever, in an extremely patient manner over months, over years maybe even. And maybe even then they'll only be able to get to two, two and a half percent at ballpark, right?

• 1:23:26Speaker 04

  Here's what I like to say. Governments buying Bitcoin, really I think they will be buying Bitcoin last. There's two things I want to say here. First of all, governments buying Bitcoin will essentially be putting the final nail in the coffin of reducing their own size by half. Because Bitcoin is unprintable, which we have discussed how it's going to destroy fiat currencies, and Bitcoin is increasingly untaxable. I mean, the privacy technologies around these technologies, as you know, will also keep improving rapidly. This is inevitable. And so I believe that governments buying Bitcoin will probably be the latest group of people to buy them.

• 1:24:09Speaker 04

  And that will be the final ultimate credibility because essentially the biggest competitor is capitulating. Something like that will not just be a rumor, something like that, given Bitcoin's liquidity, will be extremely difficult to hide. I like to joke that once a, and some Asian central bank or a sovereign wealth fund announces that they put 2% of their assets into a portfolio of blue chip cryptocurrencies, it's game over. But I don't think that central banks will, are really the people. By the time they will try to be accumulating any of them, Bitcoin will already be huge. I actually believe, and this is one of the things that my views differ from many people in the space actually.

• 1:24:51Speaker 04

  I actually think that Bitcoin's ascent will be driven predominantly by the wealthy.

• 1:24:59Speaker 04

  The three people, the three, sort of the three niches of investors that will sort of make Bitcoin's price skyrocket over the coming decades will be open-minded, ultra-high net worth individuals. It will be savvy funds and fund managers. And it will be

• 1:25:26Speaker 04

  I think politicians and dictators and sort of these fringe third world, second world individuals who will need this currency perhaps more than anyone else. And I like to joke that essentially the people and the institutions who Bitcoin was designed to destroy will be precisely the people who will drive Bitcoin's price and Bitcoin's success to the sky. Because if you think about it, the people who censor the most need uncensorable currency the most. The people who seize the most need unseizable assets the most. And of course, the people who print the most need unprintable currency

• 1:26:07Speaker 04

  the most. These people, every week you read about some fringe countries, wealthy individuals and government officials, bank accounts in Switzerland, in Luxembourg, in the Caribbean, being frozen, in America being blocked, transactions being censored. And this technology allows those very precise people to have unseizable store of value where they can essentially accumulate wealth with absolutely no one else in the world being able to take it away from them. So for better or worse, this is how free market instruments and free market technologies work. So it will be of course used for the good and the bad, but irregardless, these very people whose Bitcoins is fighting against ideologically will be the same people who will be helping it financially.

• 1:26:53Speaker 03

  Absolutely. And I tend to think that you are more right than wrong on that. Right? Okay. So before we kind of go into some rapid fire questions, if an institutional CIO, a central bank authority, a government leader is listening to this, give me your 60 second pitch to them why they should buy Bitcoin.

• 1:27:21Speaker 04

  Bitcoin is the soundest, hardest currency that has ever been invented in the history of human civilization. This inflation is second to none. Its monetary policy is known years in advance, and it is becoming increasingly credible. It will also be increasingly a threat to the very currencies that you guys control. I think getting in before most other central banks and most other sovereign wealth funds and most other rich people will, in the next decade, will prove to be one of the smartest investment decisions in the course of human history. And if you are able, the countries that are able to stealthily

• 1:28:02Speaker 04

  accumulate Bitcoin and adopt Bitcoin more than other currencies will thrive in the age of hyper Bitcoinization, while the other countries that haven't done so will suffer tremendously.

• 1:28:15Speaker 03

  Long Bitcoin, short the bankers. I think we are in agreement there. All right, so you've answered some of these already, but what do you think is your most controversial thought? Is it the opportunity that exists for Bitcoin still?

• 1:28:33Speaker 04

  I mean, the opportunity for Bitcoin is better than ever. I would say the risk reward, so the reward is technically low, in and of itself is lower than it was in like 2013 or whatever, but the risks are also massively reduced. We already have 200 companies building for this thing, building on the side of this thing, building on top of this thing. The number of engineers involved are ever greater. If you watch the slides and the lectures from Scaling Bitcoin Tokyo that's happening over the past couple of days, the amount of just genius inventions that are being potentially added to Bitcoin and the improvements added to Bitcoin are incredible. And the liquidity today and the volumes today and the marketability of the brand today is far greater than back then. So risk

• 1:29:18Speaker 04

  reward might even be higher, I would say. The opportunity is still there. It's at least a couple of hundred X and in the very, very long run, more than 1,000 X. So there's still a lot of wealth to be created here, doing a mildly leveraged play via various

• 1:29:39Speaker 04

  Instruments or derivatives is a way to boost returns even further. But I believe that the opportunity is definitely here. And my other controversial opinion is what I've described is that Bitcoin isn't necessarily sort of going to be adopted bottom up, but rather, and it's not necessarily going to be adopted top down either, but it will really be the wealthy who will be adopting it. Unfortunately, due to the nature of the world, those are the people with the money, and it's the people with capital who are going to be sort of boosting the market capitalizations of these assets.

• 1:30:14Speaker 03

  Absolutely. What's the most important company in crypto right now?

• 1:30:17Speaker 04

  Chaincode Labs.

• 1:30:18Speaker 03

  Why?

• 1:30:19Speaker 04

  They have some of the most prolific developers, and Blockstream as well, of course.

• 1:30:24Speaker 03

  Got it, so those working on Bitcoin?

• 1:30:25Speaker 04

  Yes, John Newberry, Alex Marcos, Matt Corallo, they're just on a whole nother level of genius.

• 1:30:34Speaker 03

  Absolutely. All right, if you had a magic wand and you could wave it, what's the one regulation that you would improve or change?

• 1:30:48Speaker 04

  I would reduce taxes, and I would privatize a lot more things around the world.

• 1:30:53Speaker 03

  Interesting.

• 1:30:54Speaker 04

  I believe that free market, capitalism, and individual entrepreneurs are much more efficient at providing solutions and are much more efficient at making what Austrian economists call economic calculations. In very, very crude terms, a thousand clever, smart, talented entrepreneurs with a million dollars each will do a lot more, both for themselves and the world, than just a bureaucrat, an emotionless bureaucrat with no connection to that particular money will do with a billion dollars. And I believe that a lot of the things that governments do around the world today, if you privatize or even partially privatize those things, the world will be much more efficient. Because essentially, seven fiercely competitive companies will always achieve the result

• 1:31:37Speaker 04

  much better than one sort of bureaucratic, fat government institution, so to speak.

• 1:31:42Speaker 03

  I don't think anyone is surprised that you believe that, and I tend to, I tend to agree on most facets there. Okay, so let's talk about something for two minutes that's non-crypto related, so aliens, right? We've just got to admit that they exist. Most people think of aliens as a human equivalent, right? They're depicted that way in movies and sci-fi, etc. But nobody ever really talks about alien animals, right? Do we think that there are multiple species of aliens? And if so, do we think aliens have pets?

• 1:32:15Speaker 04

  Well, if you make the assumption aliens exist, then it is likely that many different kinds of aliens exist, right? Just due to the vastness of space, statistically speaking. This vastness is so immense that if we do go off of the assumption that at least one other species exists, it is likely that hundreds of others do as well. And it is also likely that several species exist on sort of one planet or ecosystem, flora, fauna, or whatever, together. And I wouldn't be surprised if those civilizations have animals as well. Yeah.

• 1:32:45Speaker 03

  Yeah. You think they have pets, though? You think they take the animals and then make them their pets?

• 1:32:49Speaker 04

  Possibly.

• 1:32:50Speaker 03

  And like a domesticated?

• 1:32:52Speaker 04

  It is hard to say. Some of the alien species would have pets. I think probabilistically speaking, that's very likely. It really depends sort of on the culture and the order of that particular world.

• 1:33:03Speaker 03

  Yeah. I think that's fair. All right. So I end each one of these with allowing the guest to ask me one question. What one question do you have for me?

• 1:33:13Speaker 04

  I guess you've asked this question to me, but I would like to sort of hear your version as well. I know we've already previously talked about this, but I just sort of like to rehash these bullet points in my head as well. You personally, and sort of with your work with Morgan Creek and other ventures, how do you go about pitching Bitcoin and sort of this ecosystem at large to not individual investors, but the more conservative, large asset allocators?

• 1:33:50Speaker 03

  Yeah, look, I think that it's custom given who we're talking to, right? So there's kind of different things that we emphasize or de-emphasize depending who we're talking to. A lot of it is informed by who they are, what their current allocation is, what their goals are, etc. But there are some common threads through each conversation, right? One of them is this asset class has some of the highest yield opportunities per unit of risk. Across the entire world, right? Any asset, any asset class, any strategy. This is one of, if not the highest potential yield per unit of risk. So that's one.

• 1:34:35Speaker 03

  Two is that the idea of scarcity around Bitcoin specifically is something that they have likely not thought deeply about, nor do they actually understand the gravity of the implications. So it's one thing to just understand, okay, if there's a fixed supply, an increase in demand, price should appreciate. It's another thing to understand 21 million Bitcoin exist and there are hundreds of trillions of dollars of wealth in the world that are going to be competing for those 21 million. Hundreds of trillions of dollars exist.

• 1:35:14Speaker 03

  And so if you manage 500 million, a billion, 10 billion, 100 billion, you're nobody. And if you don't have your seat at the table now, you may not get a seat later. Right? So I think that's the second one. And then the third one is we actually make a economic argument looking at other asset classes. So the opportunity cost. If you do not invest in cryptocurrencies, Bitcoin, blockchain, et cetera, what else is out there? And what you find, depending on who you listen to, right? My partner, Mark Yusko, is very well versed in kind of the endowment model and comes out of that world.

• 1:35:57Speaker 03

  And he walks people through this idea that the yield that they target or goal on may not be available in other asset classes. Right? So if you look at stocks, bonds, currencies and commodities, only four assets that you can own, the ability to drive six and a half, seven, seven and a half, eight percent annualized yield may not be there over the next decade. And so if that is true, that doesn't necessarily mean you should take 100% of your assets and go put it into Bitcoin, for example. But you should have exposure, right? And so those three core components make up this kind of verbal campaign that we're on

• 1:36:42Speaker 03

  called Get Off Zero, right? And it's the idea that if you are sitting in a fiduciary seat and you have a zero exposure to the asset or the asset class, you're wrong, right? There's a qualitative argument, there's a quantitative argument. We're happy to discuss either one of them, but you're wrong. Zero is the wrong number and you have to get off zero. And so whether it's 10 basis points, 50, 100, 500, that's a customized conversation for who it is, what their goals are, what their current allocation, et cetera. But zero is the wrong answer. And what we find is that specific argument of you have no skin in this game and this

• 1:37:24Speaker 03

  could be the most important game available, really resonates, right? And so I think that Yale jumping in, very big deal, right? We've got some institutions that I think when people find out are going to be shocked, right? And again, more people grabbing seats. I think what we are going to see over the next, I put it like 36 months, is a FOMO or a, just an inflow of capital from very, very sophisticated people that most of the financial world is not expecting, right? So there's a, I think as Bill Gates says, you know, we overestimate what we can accomplish

• 1:38:07Speaker 03

  in two years and we underestimate what we accomplish in 10 years. I'm probably with you in that even the most hardcore Bitcoin believers are actually drastically underestimating what we're talking about here and what the potential is. And if that is true,

• 1:38:28Speaker 03

  This is the most important piece of technology that the world's seen.

• 1:38:31Speaker 04

  Without a doubt, and those are amazing points. To add to the discussion on yield, I would say, one of my old bosses told me that making money for you guys will, in general, as an aggregate, as a demographic, will be much harder than it was for our generation or the generation before that. And as you might know, in the 50s or 60s, you could have just a regular job and still be able to buy one house or even two houses, have a big family, etc. Today, that's impossible. The world, not just America, but the world as a whole, is becoming fiercely competitive. We are sort of, obviously not at the end of the S-curve, but we are sort of, it's kind of sloping down. Innovations are harder

• 1:39:13Speaker 04

  to create. The technologies are more sophisticated to sort of incrementally push further. And the amount of, I guess, ideas that are easy pickings are scarcer nowadays. I generally, like, obviously, getting, becoming wealthy takes a decade at least, or more, for anybody. But I like to say semi-jokingly that crypto might be the last easy way to get rich in my generation.

• 1:39:43Speaker 03

  Look, I, we obviously today have, you know, the richest man in the world, over $100 billion of wealth, I mean Jeff Bezos. It would not surprise me that the richest company in the world, right, which is over a trillion today, is matched by the richest person in the world in the future, so we'll have a trillionaire. And the odds of that person comes from the cryptocurrency world, in my opinion, is the highest probability

• 1:40:19Speaker 03

  out of any other industry. And so, if that is true, the amount of millionaires, centimillionaires, billionaires, centibillionaires that will be created in this asset class will be unparalleled in anything else in history. And so, I think that's part of the excitement.

• 1:40:39Speaker 04

  For sure, in monetary terms, within that particular asset,

• 1:40:46Speaker 04

  Bitcoin will actually increase inequality. Because the way it is, the distribution is improving with every cycle, of course. But if hyperbitcoinization were to actually occur, the Gini coefficient of Bitcoin would probably be higher than any fiat currency today, among the predominant ones. So we would definitely see some of trillion, a couple of trillionaires in today's terms, I think, without a doubt.

• 1:41:14Speaker 03

  Absolutely. All right, man. This is epic. I really, really appreciate the time. I hope that this is valuable to everybody and I want to do this pretty regularly to check back in and see kind of how all this is progressing. So thank you.

• 1:41:28Speaker 04

  For sure. Thanks for having me, man.

• 1:41:30Speaker 03

  Absolutely.