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This is Bitcoin Study Sessions.
Hello.
So today Lucas and I are going to continue our discussion of Lynn Alden's broken money,
why our financial system is failing us, and how we can make it better.
These circuits down here like the picture as how things fail.
They disassociate.
They come apart.
And today we're going to begin to retie them.
Part five of the book is Internet Native Money, which is chapters 20 through 27 of the book.
And so up till now, Alden has been unpacking the failures of the financial system.
And today we're going to get into the realm of solutions or future technology that's going to change things at least.
So as usual, let's begin with a short summary, I hope short, it'll be long, of where the book has started, where we've gone, where it's taken us, and what we're going to talk about today.
I really hope that we can put today's conversation into the context of the book.
So in parts one through four of the book, Alden explores the nature of money and how that nature led to the development of our current monetary system and the ways that our current monetary system is broken.
So the essential nature of money, brass tacks at the bottom, is not as a specific substance like gold or not as something like credit or reciprocal exchange of favors. Rather, money is a ledger, a way to record transactions among individuals. Money is the accounting system through which individuals record transfer of value and store up value to later be exchanged with others.
Alden describes how historically we did initially settle on gold as that ledger that is money primarily because of its characteristic of scarcity.
However, once mankind then later progresses technologically, we invent telecommunications,
the ability to send information at near the speed of light.
Technology disrupts, and this was disruptive.
Gold did not move quickly enough to keep up with the speed at which we were now able to
make transactions nationally, internationally.
So as a result of that, as a result of gold's technological failure to keep up with telecommunications,
modern banking develops as a way to abstract gold, turn it into credit, allow claims for gold to be
transmitted instead of having to transport and authenticate that underlying difficult to move,
difficult to authenticate substance. So before long, gold then just drops out of the loop
altogether. This marks the rise of our current fiat-based monetary order where currency is not
backed by anything. Turtles all the way down or a hole with no bottom. The U.S. dollar then
becomes the fiat currency that serves as the global reserve asset. It is the global unit of
account for important assets, most notably oil from the Middle East. In the petrodollar system,
countries then need to stack dollars in the form of treasuries to ensure access to oil because
that's what the countries, specifically Saudi Arabia and the Middle East, are requiring.
But Alden continues the story. The fiat-based ledger that is indicative of our new financial
order is flexible, it's subject to considerable entropy, and that it allows money creation on
demand. Fiat money is just paper, you can print it, it's just electronic entries in the central
bank, you can just change the entry. This naturally leads to abuse. So the modern financial system
operates in short term business cycles of boom and bust, where lending is encouraged through low
interest rates, leading to increasingly risky lending and over leveraging, which then leads to
the central bank trying to restrain people by raising interest rates, which then leads to a
contraction of the economy and then wide-scale default where the government then jumps in.
And then as we saw in 2008 and other times, selectively bails out the well-connected,
shifts liabilities from the private to the public ledger, and leverage never clears.
And then a new cycle begins. From these short-term business cycles where leverage
never fully clears, they then build up over time into a long-term debt cycle where the end result
is either massive default or massive money creation. And we know that, as it turns out,
it's always going to be massive money creation is what the state's going to do, which is going to
lead long-term all the notes into an inflationary debt spiral as people try to exit the burning house
that is the flexible fiat ledger, by using their fiat, by borrowing more fiat, in fact, to buy hard
assets, then the government historically has responded with capital controls to try to trap
people into the burning house of the fiat ledger as the system defaults on all of its debt through
massive inflation. At the end of part four, Alden summarizes the story of the entropy and decline
of the fiat ledger, describes it as inevitable based on gold's insufficiency as a reserve asset
in an age of speed. So just to get us to part five, I'm going to read what Alden says, because
I think this is really good at summarizing everything and laying the problem down that's
going to, from which chapter five is going to grow. Alden writes, so basically this whole
spiraling debt cycle is empowered by the fact, Alden writes, that the invention of telecommunication
systems allowed commerce to occur at the speed of light, while any sort of hard money could still
only settle at the speed of matter. Gold, despite being of sounder supply than the fiat dollar,
takes considerable time and expense to transport and authenticate, and this could never really
present an alternative to the digital era. Once the fiat dollar came into being, those who manage
it were able to discard gold as a supply constraint without much pushback and use the flexibility of
their ledger to opaquely finance war, entitlements, and all sorts of things in ways that don't add up
in the long run. It was the first time where weaker money globally won out over harder money,
and it occurred because a new variable was added to the monetary competition.
Speed. The speed gap between commerce and settlements empowered banks and central banks
and created an irresistible arbitrage that the whole world turned to,
which led to a greater level of centralization for the public ledger than ever before.
This brings us to part five that we're going to talk about today, internet native money.
Before Lucas and I go on to parse this out in conversation,
I'll give a brief summary of this section to get everybody up to date in case you haven't read.
So the thesis generally, the section would be something like,
as Alden stated earlier in the book, where the thesis overall of the book is,
regards the evolution of technology changes in the prevailing power structures and the incentives
surrounding money from era to era. So this part of the book is about new tech for this era,
the internet era. And the next part of the book, we're going to get to next conversation,
is going to be more about the changes to the prevailing power structures. So
Alden begins this part with a quote from Hayek, which many people are familiar with,
but I think it's a great quote and it bears reading.
Hayek said,
I don't believe that we shall ever have a good money again
before we take the thing out of the hands of the government.
Since we can't take them violently out of the hands of the government,
all we can do is by some sly roundabout way
and do something they can't stop.
So how do we get stateless money?
How do we get money out of the hands of the government?
Alden begins noting that we now have kind of the nexus of the internet
and advances in cryptography.
HTTP and Internet Protocol, all the notes,
initially had in it a, we all know, 404, like page not found.
There was a 402 error as well for payment required.
So the internet presupposed that there would be a payment layer native to it.
Some early attempts were Digicash and eGold,
but all the notes, they were too centralized.
E-Gold in particular was in legal trouble after 9-11 under the Patriot Act and so shut down in 2009.
Meanwhile, 2008, Satoshi Nakamoto releases the Bitcoin white paper and defends it, all the notes, in sort of the manner of a dissertation defense via email with cryptographers.
Satoshi notes that the benefits of digital signatures, all this ability to cryptographically verify transactions, is lost if you have to trust a third party at the end of the day.
So he also notes that he or she that decentralized protocols have survived, whereas centralized systems like Eagle have not.
We still have Tor and other peer-to-peer networks.
So what then makes Bitcoin different than these other early efforts at an internet native money?
It's a distributed public ledger.
Alden has a really beautiful way of describing it.
She notes that some people have referred to it as triple entry bookkeeping.
So you can look at it as three columns, debit, sending Bitcoin, credit, receiving Bitcoin,
And then a third column noting the cryptographically signed record on the shared ledger that notes that it's cryptographically secure.
So participants in the Bitcoin system, I'll give a brief overview of it.
I mean, just in case you do come to this completely without knowledge, but we won't go too in depth.
Participants come to a consensus every 10 minutes in the network.
Anyone can maintain the ledger and enforce rules of the network by operating a node.
So you have people who operate nodes and enforce the rules.
Anyone can earn more Bitcoin by processing transactions by operating a miner.
And anyone can use the network by generating their own keys without a custodian and being simply a user.
So these three parties then eliminate the need for trust in the way that they establish a decentralized distributed public ledger.
They don't need a third party to maintain that ledger.
This closes Bitcoin is then going to close the speed gap in a decentralized way that does not rely on abstraction.
To quote Alden, the invention of Bitcoin as an open source, fast settlement network with its own scarce units provides the first credible way to close that gap between transaction and settlement speeds.
And now it's a matter of researching it and testing it to see if it's robust enough to serve that purpose at a large scale for the long run.
So how does Bitcoin work in a little bit more detail?
So those miners use the processing power to solve a cryptographic puzzle by guessing, using expending energy to do computations to make a guess to answer that puzzle.
Whoever solves the puzzle gets to then take the pending transactions and then process them by placing them in a block and then adding that block of transactions on top of the last block of transactions.
The nodes then ensure that this block that has been compiled of transaction follows the rules of the Bitcoin protocol and is therefore valid.
The miner who solved that block, compiled those transactions, receives a reward of newly minted Bitcoin and then any transaction fees that the parties paid in order to get their transactions prioritized.
The amount of new Bitcoin received follows an emission schedule, which is halving every four years until we kind of asymptotically approach 21 million, which is the hard capped limit of Bitcoin that will ever be available.
Each block that is then solved of transactions added onto the next block in the blockchain contains the cryptographic puzzle, which miners then have to solve in order to add the next block of transactions, repeating that process again about every 10 minutes.
The history of all blocks is in the state of the ledger.
So that's generally how it functions.
Bitcoin is open source protocol.
It can be updated.
Another kind of party, along with node operators, miners, and users, are developers who can propose updates but cannot force people to accept them.
There can be soft forks that are backwards compatible changes that narrow the rule set.
For example, if the block size was made smaller, if the number of transactions every 10 minutes was made smaller, that's a narrowing of the rule set.
And that could be done in a backwards compatible way.
There's also hard forks that are not backwards compatible.
These are changes to the consensus rules. For example, if the block size increased, this would require a hard fork. These hard forks tend to, you know, you have to really have the support of all the nodes and all the parties within the Bitcoin ecosystem. The largest hard fork that ever occurred is now only 0.5% of the market cap of Bitcoin. These are things like Bitcoin Cash and all these other things that are not Bitcoin now.
Who controls the ledger?
This is a question that Alden recurrently asks because, again, her idea is that money is a ledger.
So who controls the ledger that is Bitcoin?
It's a distributed public ledger.
Again, no one party controls it.
You have an ecosystem that manages it.
You have nodes that maintain a copy and enforce the rules for adding new blocks.
You have miners that use energy-heavy computation to solve these puzzles and add new transactions.
And you have developers who propose updates but cannot push them on people, cannot force them.
Bitcoin, then, is different than a central bank.
It can't be debased.
It's hard-capped to 21 million coins.
You can't seize or confiscate it in that it's secured by cryptography with each user holding their own unbreakable code essentially in their hands.
It's also transparent that you can see and verify the entire state of the ledger, read all aspects of the open source code for yourself, and it's secured by real world resources, miners expending energy.
So Alden then discusses Bitcoin's path to monetization.
We have this new technology that needs to monetize to become money.
So the first Bitcoin adopters were early tech enthusiasts.
It's complicated, hard to use.
Essentially, you might consider it a digital collectible, she said.
Then in 2010, it begins to have a quotable price, exchanges develop, and we move on from there.
Alden, this is a question people often ask, what is the utility of Bitcoin?
Alden describes the utility of Bitcoin through an interesting thought experiment.
So imagine if gold was just this boring, dull substance, didn't look good for jewelry, and it wasn't useful for electronics or whatever, other application it currently has.
But what if it had the property that you could transport it through a wire?
So that's the utility of Bitcoin, that ability to be sent anywhere through a wire, to be scarce
and hard capped and to be transmissible at near the speed of light.
To quote Alden, when you hold Bitcoin, especially in self-custody, what you are holding is the
stored up ability to perform global payments that are hard to block, as well as the stored
up ability to transfer your value globally if you want to or need to. You are holding your slot
on a global ledger. So all the notes that this utility is actually already being harnessed,
despite what skeptics say. If you don't see it, check your financial privilege. See how other
people in the world who don't have access to the U.S. banking system are currently using it.
It's used by people who are fleeing countries as refugees.
They can bring all their wealth with them.
It's used by people who are political dissidents cut off from the banking system.
Julian Assange, when WikiLeaks began accepting Bitcoin, the late Alexei Navalny, a Putin opponent, who used Bitcoin after Putin cut him off of the Russian banking system.
Alden also notes Roya Maboub, an entrepreneur in Afghanistan who paid her employees in Bitcoin, who were all female employees, so that they could protect their own wealth from the patriarchal system that would have allowed their male relatives to control it.
So Bitcoin already has utility, is already being used in a way that justifies and demonstrates that utility.
Money, though, is a different type of tech as far as adoption.
It's not like a washing machine with a smooth adoption curve.
In fact, all the notes can't be adopted too quickly.
That would cause the price to skyrocket, which then entices leverage, which leads to a bubble,
which then causes the bubble to burst and then people to be demoralized and then sell all their Bitcoin.
We've seen this in the past.
These bubbles develop, and that all then kind of indicates the natural cycle for adoption of a new monetary technology.
interestingly she says we can also describe adoption in two stages for hard money with
reference to two economic laws gresham's law and tears law gresham's law is the first stage
bad money within the framework of gresham's law bad money and good money both exist in the system
people begin though to save the good money and then to use the bad money because they want to
get rid of it. The bad money then circulates fast, use it with all the merchants you pay,
while the good money is hoarded. That's tended to happen on a bimetallic system with silver and
gold, hoarding of gold, use of silver. Tiers Law is the second stage. Now, good money drives out
the bad money. People want to use the bad money to get rid of it if they still have it, but now
merchants and others insist on receiving the good money and no one accepts the bad money.
So we're at Gresham's last stage.
Bad money circulates.
People hoard Bitcoin for the most part.
Alden doesn't just talk about Bitcoin in this chapter.
She talks about kind of broadly speaking other cryptocurrencies, and then we'll see later on stablecoins and CBDCs.
What are the tradeoffs that Bitcoin has and other cryptos have in relation to Bitcoin?
um adam back uh noted an early cryptographer um that bitcoin exists in a small design space
where things that would seem to improve it actually have trade-offs that make bitcoin
overall worse in other ways for example the block size and speed if you increase the block size you
You can add more transactions, do more throughput, process more transactions.
But if you increase the block size or speed, then the technical requirements of the systems are greater.
It makes it more difficult and costly to operate a node, which in these node operators, remember, are the rule enforcers of the network.
That tends, if you have fewer node operators, that decentralizes the network, makes it less secure.
Another tradeoff, privacy and transparency.
You could design a more private cryptocurrency, but the transparency of Bitcoin allows the base layer to be audited, make sure that there's no inflation bugs, and to allow everybody to see with their own eyes the current state of the ledger.
Code expressivity is another tradeoff.
Bitcoin, other cryptocurrencies offer themselves out as world computers on which you can program on the base layer all sorts of fun programs.
Bitcoin, simple code, allows for the processing of transaction.
When you have complex code, that increases the attack surface for bugs and hackers, also increases the bandwidth, which again decentralizes because less people can operate a node.
So those types of things, Alden says, increased throughput, code expressivity, increased privacy, are better handled on kind of successive layers on top of Bitcoin.
So for example, tech stacks are often stacks.
They often have different layers with different functionality.
The internet protocol has an application layer, a transport layer, a link layer.
Bitcoin also can have different layers.
It's open source.
People can freely build upon it.
And there can be different types of functionality at each layer.
The Bitcoin base layer can be used for settlements, for large, sensitive transactions.
And the higher layers can be used for smaller, faster, and more private transactions, and
perhaps for smart contracts and other uses.
The next chapter indeed talks about the Lightning Network, a specific example of a fast, cheap, and relatively private way of doing transactions on top of the settlement layer of Bitcoin.
And essentially, she says it works like opening a tab on the base layer, making a bunch of transactions with your tab open, and then later closing the tab on the base layer.
This would allow for new types of use cases like micropayments, small transactions, smaller even than credit cards allow, which allow for new use cases like spam prevention and machine payments between AI agents.
Bitcoin layer is not perfect at this point. The network, all the nodes, needs to develop further to establish more liquidity.
And there's more details in the book if you want to know about the Lightning Network.
Another way to distinguish between the different cryptocurrencies is proof of work versus proof of stake, and Alden dedicates a chapter to that.
Proof of work refers to how Bitcoin miners have to do work by expending real-world energy to do computation in an attempt to solve a cryptographic puzzle.
Within Bitcoin, again, they solve the puzzle to be able to get the right to package transactions in a block and get the block reward.
The attempts to solve the puzzle are essentially in the Bitcoin proof-of-work system, essentially guesses. There's no way around simply expending vast amounts of power to do computations necessary to make more guesses.
Proof of work or energy expenditure then is used to minimize trust and explicit forms of government within Bitcoin.
To quote Alden, energy is the arbiter of truth in this case. There is no central authority or oligopoly, oligoplastics, we'll work on that, dub that in, set of validators that decides, rule by oligopoly, that decides what constitutes a valid block or a valid set of transactions or which transaction occurred before or after another transaction.
the block chain with the most work in it is that which is mathematically verifiable at any time
and is recognized as true by the rest of the code, rest of the node network, sorry.
So the proof of work, to summarize all that, creates an unforgeable history based on energy usage for the lesser.
Again, based on whichever chain of blocks has the most history of compiled computation, which represents energy usage, that is the valid chain.
So all of the history is proved through energy.
Energy is the arbiter of truth.
Proof of stake, on the other hand, maintains its ledger in a circular way and has no unforgeable history.
So how does proof of stake work, which is a form of governance that other cryptocurrencies like Ethereum use?
How it works generally is existing coin holders can lock up or stake their coins.
These locked coins can then vote on new block creation on the state of the ledger in any given moment.
The locked coins then get rewarded with more coins by correctly creating a block of transactions and updating the ledger.
In this circular world of proof of stake, there is no objective history based on energy usage to substantiate the correct state of the ledger, just constant voting by coin holders.
This means that the network can never go offline all the notes because there is no objective history you can go back and refer to to restart.
This proof of stake in this way is also inherently centralizing.
Locked coins are rewarded with more coins.
Whoever has the most coins locks gets the most coins rewarded, so they tend to get more voting power accrued to them over time.
Is there a use for proof of stakes as a partially centralized database?
Alden provides kind of a steel-manned speculative perhaps.
Perhaps real-world assets can be put on chains that allow 24-7 operation of stock markets.
You can perhaps reduce settlement times.
Maybe you can allow small businesses to issue their own equity through tokens, things like that.
Whatever it is, whatever that steel man perhaps is, it's not, Alden says, proof of stake is not robust money, which requires something like Bitcoin, which is decentralized with the state of the ledger based on unforgeable costliness.
Again, the ledger is what money is.
Energy in this is the arbiter of truth and not some form of explicit government such as voting through staked coins.
Energy then is essential to Bitcoin and all that devotes a chapter to how Bitcoin uses energy.
There's really two important takeaways from it.
One is that Bitcoin energy usage is limited by the utility it provides to users.
And two, that Bitcoin primarily consumes stranded energy that would otherwise be wasted.
So the first point, Bitcoin energy is limited by the utility it provides to users.
This is a response to skeptics who think that Bitcoin is just going to consume all of the world's energy,
which is in fact what some newspaper articles that Alden cites hysterically said back in 2018 or 2020, something like that.
So Bitcoin, though, its energy use is really limited by the utility it provides.
Electricity is by far the largest input into Bitcoin mining.
Mining then is rewarded by that block reward of new coins and transaction fees in new coins.
And that block reward, again, is going down over time.
It's halving over four years.
So, if the utility of the network goes up, coin prices go up, and so miners are encouraged to use energy to get those coins.
If the utility of the network goes down, then the coin prices of the network go down, and miners then turn off their machines and use less energy.
So, in that sense, Bitcoin's energy use is tied to its utility.
Even with that increasing utility, Alden knows we should keep that energy consumption in perspective with regard to that utility.
She says, if Bitcoin becomes wildly successful with trillions of dollars of utility for users, we could potentially see it consume an amount of energy per year that is comparable to the aluminum production industry.
In other words, despite reaching a massive scale and serving numerous purposes as a global monetary network, it would still be comparable to energy usage to various other random processes that we don't generally become orally panicked about.
So Bitcoin's energy use is tied to its utility. Second, it primarily consumes stranded energy that would otherwise be wasted. Bitcoin miners, all the notes, have three really unique characteristics that's going to allow them to use energy that other energy users don't.
First, most of their, as I said, most of their operating expense is electricity.
So really, they can negotiate any other contract terms as long as they get the cheapest electricity possible.
They also can tolerate an intermittent supply.
They are interruptible.
You can turn them off.
They do not need to be constantly using energy.
If it's not profitable in one moment to use them, you can just flip the switch, turn them off.
They're also flexible with their location.
You just need low bandwidth internet connection, which could be supplied by a satellite, provided by a satellite, and you can place them anywhere around the globe.
So given these characteristics, Bitcoin can utilize energy sources that are not being utilized by other things.
One is stranded hydroelectric power.
Bitcoin mining can – many hydro dams produce extra energy.
The rivers are always running and this extra energy would otherwise go to waste.
Bitcoin can then monetize this extra energy and, in fact, incentivize the creation of new hydro dams that would not be able to justify their creation based on the number of users.
Because, again, Bitcoin is flexible.
It can go anywhere.
Another form of stranded energy is natural gas.
So natural gas is a byproduct of extracting petroleum.
However, there's usually not sufficient quantities to build a pipeline to actually utilize it, to transport it to a place where people would be able to use it.
So instead, usually it's vented, just let out into the atmosphere or flared.
If you've ever driven past one of these petroleum refineries, you can see the flames shooting dramatically into the sky like something in Soran, the place in Lord of the Rings where they go, that hellish landscape.
Bitcoin miners, though, can buy this otherwise wasted gas.
In fact, they're location agnostic.
They can go to where the petroleum is being extracted.
And they're more environmentally friendly in the way that they use it, too, because running this gas through an electric generator is more efficient at converting methane to the less damaging CO2 than is flaring it.
And, of course, that is simply venting it and letting it go.
Landfill can also be utilized. They emit methane. Bitcoin miners don't care where they are. They don't mind the smell. They can go to wherever the landfills are letting off the methane. Bitcoin can also stabilize the grid and make green energy viable. Grids usually need to be overbuilt so that they can provide for peak demand on the hottest day of the year when people and everyone's blaring their AC as well as for the lowest points of demand when not many people are.
So green sources of energy like wind also tend to provide lots of energy on certain days when it's windy and then less when it's not windy, of course.
But Bitcoin miners, they're intermittent users in addition to being flexible on their location.
So they can buy excess demand when there's lots of energy coming on the grid that's not being used.
And they can shut off when there's – I'm sorry, they can – when there's excess demand, they can shut off.
And when there's excess supply, they can then monetize that excess energy, which would otherwise simply be wasted.
In similar ways, they can help developing countries build out their grids by promising to buy any electricity.
For example, if a country needs to bootstrap a hydroelectric project, but there's not enough current use cases next to that torrential river, Bitcoin miners can drop in and allow it to become immediately monetizable.
To summarize Alden and this is an amazing quote can be profitably tapped into which incentivize people to move to them Alden then moves on to provide a cryptocurrency risk analysis We skip that for now
and Lucas and I will mull that over as in our conversation. She ends this chapter on the
technology of this new era of internet native money by talking briefly about stablecoins and
central bank digital currencies. So stable coins, you could kind of characterize them as privately
issued fiat collateralized redeemable tokens. So how does that work? They're issued, people wire
dollars, they send their dollars to an issuer of stable coin, that issuer then generates a new
stable coin and gives them the stable coin. That stable coin can then move around whatever
blockchain networks. It's designed to move on and be used for whatever purpose, payment, savings,
investment, trading, leverage, DeFi, and do that 24-7. Those tokens then can then be sent back to
the issuer and then redeemed for the amount of currency that they are collateralized with that
they're supposed to be worth. So this is different than Bitcoin in that the issuer of the stable coin,
It's a centralized entity, can freeze accounts if commanded to by the government of the jurisdiction in which they're located.
In addition, you have to trust – they're centralized.
You have to trust that issuer to maintain assets sufficient to allow you to actually redeem that stablecoin.
That's one type of internet native money, we might say.
Another type is the CBDC. That's the central bank digital currency, which are digital versions of
currencies that are issued by already existing central banks. Are they good? Is it good for a
bank to do that? Well, Alden says, good for who? There's an issue of the user versus the issuer
as far as what they want in a money. The user of money wants typically private money. No one's
going to see what they're using it for. They want money to be free. They can use it for whatever
purpose they want, and they want it to be scarce. They don't want to get some money and then to have
it be inflated away by a bunch of it being printed. The issuer of the money might have
different desires. They often want surveillable money to see what people are doing with their
money. They want to be able to control it, manipulate it, and they want it to consistently
devalue over time. The issuer who has these desires is the central banks as issuers. They
want surveillable, controllable, consistently devaluing money. They want central bank digital
currencies that can be programmed to do these things and to enact central bank policies. You
can program a CBDC to have different interest rates for different demographics, different
interest rates for different industries, quotas for spending depending on geographic area. You can
use them to enable quick stimulus payments to send to targeted groups. You can have, again,
money that devalues quicker if you don't spend it. The example of China is given,
lest you think that these examples are farcical, they invented a CBDC that is programmable and
they can set expiration dates to ensure that money is spent, block and track transactions,
deduct or freeze accounts easily, and automatically penalize individuals. If they're jaywalking,
they can facially detect that maybe that it's you doing it and then automatically
deduct money from your bank account. As we saw with telecommunications, so technology usually
presents itself as neutral. Ah, you know, information now moves quicker, but the consequences
are definitely not. Alden ends the chapter this way, or the part five this way on internet native
money. This era represents a fork in the road. One Direction provides a stepwise upgrade to those
who want to continue the multi-century trend of further and further centralization of the
financial system. The other direction reverses that trend, fractures the existing forces of
centralization, and gives more financial autonomy back to individual users who wish to take it away.
So that's part five on internet native money, Alden's discussion of the new technology and
how that responds to the need for speed, essentially. That's a lot of information.
And I left out a lot. There could be more said. Before we kind of maybe jump into some
questions that I noted, was there anything that dropped out of that narrative or anything
specific, notable there, Lucas? No, as usual, great job. I think just zooming far out,
what we're looking at is we do. We have this fork in the road. We have an opportunity.
Um, and it's not so much an opportunity.
It's a, um, it's an imperative, I would say, um, for the individual to make a choice.
And the choice is, do I want to have responsibility for my future?
Or do I want someone else to have responsibility for it?
acknowledging that if I engender someone else with the ability to control my money,
then I am giving them power over literally every aspect of my life except for my thoughts.
And actually, you had brought up this in a direct message that we had had where
there's also an argument to be made that it is control over your thoughts as well due to the
zero cost of spamming people through their screens and through algorithmic,
essentially subconscious programming. And that sounds a little woo woo and out there a little
bit, but, um, but incentives are always subconscious programming, right? Right. Yeah.
And so you, you, you know, I, I keep, it's hard not for me to now frame everything in terms of the, of the Jason Lowry software thesis now that I've been exposed to that.
But yeah, if, if it costs you money every time that you put something in front of my eyes, then that creates a whole new world and that, that whole new world.
And she alludes to it a little bit.
But that whole new world means that I can't just string you up, put you upside down, attach a line and milk and bleed you of your value slowly, but slow enough that you don't die.
Where it's just this extraction economy.
I if I'm going to have a long term relationship and a business, I'm going to have to do something that's productive for the for the people who I collaborate with.
And so no great summary.
Yeah.
So like money is always with the CBDC money could always be judging you ideologically and incentivizing you to do things that central bank planners and by extension politicians.
I mean, they could like, you know, if they want to disperse a protest, they could say anybody who has a bank account in this geographic area, it's going to slowly drain away until you leave the area and then program the CBDCs to do that.
They could say, you know, if you spend your money in this industry on this provider that we really like, you're going to get huge rebates and bonuses automatic, you know, and penalized maybe if you don't spend in this industry.
And so it just offers this level of granular control that's like the wet dream of the central state planner, right?
It's just the amount of power.
In the last chapter, we saw that we're kind of clumsily – the current system kind of clumsily already manipulates people into doing certain things.
And these short-term business cycles that become long-term debt cycles, it's the central planner thinking they can manipulate with these kind of brute tools of interest rate lowering and hiring.
Now they're going to get, with CBDCs, all sorts of new different levers and buttons and dials, and it's just going to be irresistible.
Yeah, let's talk.
So a real-world example, when the automotive industry failed in 2008, first they were bailed out by the government.
And I think it's very important to make the distinction that a government bailout means that we have nationalized that industry.
So it never goes back. There's no such thing. That is now part of the government. It's inextricably tied.
And if you again, if you zoom out and while you were talking, I Googled like what what all industries have been bailed out by the government.
So the agriculture industry has been nationalized. The banking industry has been nationalized, mortgage industry, automotive, airlines.
Um, there's, there was at least 12 examples. And so it just, it's this gradual moving of power towards a centralized state, um, and away from the private sector. And, and you think about, again, view these things from a different light.
all of these bonuses that people were upset about in 2008, these executives that they had companies
that failed yet. They got billion, million, a hundred million dollar bonuses. What is that?
That's the payment that it costs to buy that industry and put it into the government. Um,
when the automotive industry failed, um, not only did we bail them out, there was nationwide
employee pricing was offered to everybody. So if you wanted to buy a new Chevy,
then you could get employee pricing on that Chevy, whatever discount. And it was a massive discount.
And that stimulated an insane amount of vehicle purchases that weren't needed, right? It was nice
to have a new vehicle. That's cool. And yeah, that's great. But what did it ultimately do
was it transferred a whole lot of wealth from the individual to the government by means of the automotive industry
that otherwise would not have gone.
And you're right in saying that that's a very crude way of doing that.
And the scalpel precision sniper way of doing that is the programmable money that this automotive industry has failed.
You have $2,000.
If you don't spend that $2,000 on a down payment for an automotive purchase in the next month, then we'll just take it and we'll just give it to that company.
So, yeah, it is a despot's dictator's dream.
Yeah. And I would say that they would perceive it as a scalpel, but it would still be an instrument that could never match the way that the market naturally matches supply and demand and adjusts prices. It would just, like you said, be something that despots would use to kind of cement their power for sure.
Yeah. Well, I mean, if you think that we have a cyclical market now with booms and busts, exactly. Wait until we can make just hair's breadth decisions on things because the second and third order consequences can never be foreseen.
And so if you do this, you know, if you pull that lever, you don't know how that's going to affect other industries.
You know, create an over demand for vehicles that what are you going to do?
You're going to take raw materials away from other industries that if they had a clear market signal would be able to purchase those supplies at a at a useful price.
But then you artificially inflate tires and radios and paint, whatever it is that goes into that thing. And any other industry that uses that, therefore, cannot compete because they're not being subsidized. They're not being nationalized.
And so the whipsaw effect just accelerates. And it's kind of like a little snap at the end of a mouse's tail right now. But with a CBDC, then you're going to see a bullwhip. And we're seeing that in China where I can't remember if we talked about this before.
So China overbuilt. China overbuilt way too much commercial real estate, massive buildings, 50, 60, 70-story skyscrapers and massive residential areas.
And as a result, they don't have the demand for it because they overbuilt so much.
And now there's no choice for them. They can either let their industry collapse or they can take the action that they're taking now, which is to literally implode brand new buildings that have never been used.
Billions of dollars wasted. And they're blowing them up in order to artificially decrease the supply so that they can try and stabilize so that supply can meet demand and we can have somewhat of a market signal again.
So this is the beginning of what you see with that type of thing.
Just wait till they really get it tuned up and they start running it with AI and really accelerating it.
It is not a good situation.
And the flip side of that, proof of work.
Proof of work is that there's a cost to every decision.
And I think that's just a – there's no free lunch.
You know, nothing in life comes free. You have to, when you make a choice for one thing, you're saying yes to one thing and no to everything else. And there is a cost for that. And we've been skipping along without consequence. Sorry, not without consequence, delaying consequence and mortgaging the future of unborn generations.
Yeah. And exporting consequence to the peripheries as all the notes, sending inflation abroad. Yeah.
Yeah, the exporting. And I really do hope I really do hope that we're able to talk with some people who are in, you know, these developed countries, developing countries that are truly seeing the benefit of using Bitcoin so that they can kind of enlighten people here.
Because we, again, we are being bled slow enough that it's not very noticeable.
But if you're in a country where you have 30, 40, 50 percent annual inflation, then that's a cost that you just simply can't overcome.
You can't out-engineer that.
You can't out-earn that.
I give the example that Venezuela experienced average inflation from 1980 to 2000.
So for a 20-year period, they experienced inflation that averaged enough that – I forget the exact number, but if you made $100,000 in 1980, you would have to make something like $14 quadrillion in 2000 just to have the exact same lifestyle.
And those are numbers that just can't be – it's just impossible.
Like that amount of money doesn't exist.
And so it's lowering the quality of life for people.
But we're being blinded to that because we do have technology that's making advances that does make life cheaper and it does lower the cost of things.
And so it's this fighting scale of the benefits of technology are extracted and taken by the state in terms of seniorage and inflation.
So, yeah, it burns everything that we have accomplished with technology.
Yeah, and with Venezuela, you get a really visceral example of people fleeing the burning house that is the rapidly entropifying flexible ledger of a country.
So people, I mean, you go to Colombia, Peru, you'll see just as many Venezuelans as in Venezuela. People are getting out of the country. They're fleeing because you can't live that way.
And what Bitcoin does, one of its utility cases, as Alden notes, is it obviates, it goes around the sorts of capital controls that are imposed in the late stage of a long-term debt cycle.
The capital controls that try to keep everybody within the ledger to deflate everybody or inflate everybody, all the debt away together, make everybody suffer, which usually just means making the poorest suffer the most.
But now a person can memorize the seed phrase, take all of their wealth as much as they were able to shift out of the dying currency and then flee to a better ledger.
And you're going to see like the long tail, all the notes, this in this part to the long tail of weak currencies are the first things that Bitcoin eats up even before it gets to gold or silver.
What it's competing with is all of these dying, dying currencies mismanaged by despots, authoritarians, whether democratically elected or not, people that thought that they knew better than the free market.
Yeah, you can think of, I think you can think of Bitcoin as like the lion hunting on the Serengeti and the 160 fiat currencies as the pack of zebras or gazelle or whatever in front of it.
And it's just, it's, you know, how do lions hunt is they, they pick off the weak one and the slow one at the end. And that's just imagine this lion eating first the Naira and then the Turkish lira and then the, you know, the Venezuelan peso, I think. I can't remember what their currency is, but yeah, it's, it's going to get to the United States dollar last probably because it is the strongest, but it's going to get there.
Um, and it, it will, it will take over that the book, uh, she gives that great example from,
uh, Boya Mabook, who was, uh, this female business owner in Afghanistan who paid, I think it was
Afghanistan or Saudi Arabia. It was Afghanistan. Yeah. And, um, so due to the oppressive nature
of the patriarchal system that exists there, females are really not allowed to work.
I mean, they're treated often more like property than they are like humans in some ways.
And so she had this business and she wanted to pay her employees.
But there was a problem that every time she paid her employees, they were subject to having
that money taken by their husbands or their brothers or their fathers, the men in their
life, the patriarchy.
And so they experimented with ways to give them money that couldn't be taken away from them.
And she notes that they even tried the Huala system and the Huala system failed, which we discussed the Huala system earlier, which was one of the first decentralized, I would call it low trust, low trust monetary systems where I give money to you.
and then you send a messenger or a message to someone else.
And then they make a note in the ledger and they pass on that money to whoever I want to.
This essentially is channel-based ledger.
This is the exact same as the lightning system, except there's humans in it, so it fails.
But she gives the example of one of her employees that had accumulated 2.5 Bitcoin,
which is a massive amount. She notes that it's a hundred times more than the annual salary
of a person in that industry, in that country. And when they had the flee in order to keep the
family safe, they went through all these trials and tribulations. They had to work with people to
get them out of the country and through different countries. And during the course of the way,
They were scammed and robbed out of literally everything that they had, in addition to losing possessions when the boat that they were on sank.
Just this horrific ordeal.
Yet because this woman had the seed phrase to her Bitcoin, she was able to make it out.
And that's a beautiful example of correcting the problem that was seen so greatly in World War II, Germany, Jews trying to flee.
And at first, if you wanted to flee, you had to pay, you know, what, 10%, 20%, 30% of your net worth.
Then it was 50, then it was 60, then it was 90.
Then it was the gold fillings in your teeth and everything that you owned.
And so that extractive nature, once it starts, it just never stops. And yeah, beautiful example of a real world, a real world application of that. And I don't want to distance people too far from that. I want, I guess if I, if I want anybody to have a takeaway from what we're talking about is to realize that you're, you're a bad administration.
administration, you're a hair's breadth away. Looking at the administration that almost made
it into office, this go around for the United States, it was their intent to create a central
bank digital currency. It was their intent to raise the ability to have surveillance controls
on capital. It was their intent to be able to have more and more and more power centralized
within a group of people who are by nature, short-term thinkers and narcissists, you know,
they, they just want to maintain power because maintaining power is, um, what they seek. And so,
yeah, I mean, even though it may feel far away for people, um, I, I really hope that there's this
visceral reaction to, oh, like we forked history and potentially have the opportunity to leave
a good impression upon the world.
Whereas we could have gone down a really, really dark path modeling after what China
is doing.
I mean, so I don't think we're on the good timeline.
I do think we're on the better timeline.
I don't think, I mean, Alden is fond of saying nothing stops this train in
reference to this long-term debt cycle and the situation we've got ourselves into. So, you know,
we can maybe manage our transition better. An interesting thing about, you know, we have this
two-party system, we have left and right. Bitcoin is neither of those things. I mean, just hearing
you talk, Lucas, about Roya Maboub and also, you know, us discussing these use cases using terms
like patriarchy, talking about badness of authoritarian governments, talking about protecting
refugees. These are things that oftentimes those who might claim to be on what is currently the
left would say we are doing. Those are the things that we value, ending patriarchy, protecting
refugees. But these are things that agnostically, without caring, the Bitcoin does just by being a
neutral, permissionless, decentralized protocol. So Lucas and I, we listened to this podcast,
which was it's a really interesting podcast it's the one we listened to called money on the left
but what's interesting about it is that they in the podcast we listened to they seemed to diagnose
the same problem that alden talks about but they and they talked about all of the ability of like
cbdc's to granularize control of the central banking system and the population of the managed
thing but they kind of did it with like a sense of hope and promise like we can fix things now
And it was just really interesting to see that some people are so close to seeing once you get past left and right, forget those categories.
Forget like the Bitcoin's current association with Trump as a Bitcoin president.
Forget that.
Forget also the way that the left has in the past claimed to protect refugees.
Forget all of that and just look at what is happening with Bitcoin.
And we can talk about stranded energy usage and bootstrapping development in developing countries.
I mean, that's the interesting thing is it's something that is beyond ideology.
Whereas, again, a CBDC is programming ideology into money.
Yeah. The looking good while doing evil is a symptom.
Yeah, it's a symptom of not recognizing the fundamental problem, which is centralization and control creates an opportunity and it creates an incentive to adjust outcomes in favor of those who have the centralization and the control.
And it really is listening to that podcast Money on the Left, which, you know, like I said, you asked me about it after it was over.
And I said, it sounds like this guy really understands everything about Bitcoin except for what you're supposed to do with it.
Like, it's great. It really was kind of crazy to hear somebody have that good of a grasp, not only of the technology, but of the problems that it solves.
And then just blindly and so ignorantly go, oh, yeah, if we had that power, then we could make everything better.
And no, like that is absolutely wrong.
Everything about centralization of power leads to despotism.
It leads to horrific, horrific humanitarian disasters.
And so, yeah, I don't know.
I thought it was pretty fascinating to hear that.
I'm glad you brought that up.
One of the things that I love how Alden slipped in, and I can just picture her writing this too, by the way, because she's trying so hard to be completely unbiased as a systems engineer, as a macroeconomist, as an expert in a number of fields that Bitcoin affects.
and kind of a historian really as well.
But she does slip in, you know,
what are kind of the effects of a decentralized money?
And one of them is that governments will shrink in size
and there won't be a use for a large government
because it's great that if you can view the world
as a sandbox of different practices.
There's all these different countries trying different things.
And when something works in one country, another country will adopt that because people aren't
stupid at the end of the day.
They are somewhat rational.
The saying that a person is smart, but people are stupid, I really enjoy that because it
does take us back to what we had talked about previously, which was one of the faults of
our system is that it's people in charge, not a dictator. I'm not advocating for a dictator,
but a dictator can make quick moves. A monarchy can make quick moves. But anyways, to take power
away from the government, then you are naturally going to atrophy that muscle and it's going to
shrink in size and shrink in power. And I think what we're seeing with Bitcoin is exposing
the inherent flaws of scaling. Bigger is not better. Better is better. We have been sacrificing
quality for quantity for so long. We look around and we see this in all of our consumer products.
Everything's made of plastic. Everything's made of paper, cardboard. When the quality materials
are so costly now because of inflation that the average person can't afford it.
And so we have Gresham's Law in every aspect of our life. The clothes we wear, the dishes that we
use. You think about somebody who has the fine china that they only get out for holidays,
and then the rest of the time they're using paper plates. That's Gresham's Law applied to
consumer products is that the bad product pushes out the good. You hoard the good thing because
it won't last if you use it. The difference with Bitcoin is that you can't break it. You can't
bust it. You can't drop it and see it shatter into a million pieces. And so, yeah, we've just
never seen anything like that. We've never seen a money that satisfies all the characteristics
of money. And it's the best at all of them. And so it will inherently push everything
push everything to the side.
Yeah, I want to expand on the point you noted about the shrinking, about Bitcoin shrinking
the power of the government in that it's going to take one of the functions out of the government's
hands.
One of the things, when you say shrink the power of the government, people maybe on the
left are thinking that just means you're handing it to corporations.
But so Breedlove retweeted an image that had a cartoon from Jason Lowry's software thesis
that has Bezos, Zuckerberg, and Musk, but they're made up like Egyptian pharaohs.
And then it has that image juxtaposed over the inauguration image where Bezos and Musk and Zuckerberg are sitting there together at the inauguration.
And so when you shrink the power of the government, you don't grow the power of corporations.
You remove the ability of these corporations to exploit the power of the government.
And you also remove the necessity of corporations to get close to the government in order to benefit from bailouts, to benefit from subsidies and things like that.
So you actually – it's a step towards getting rid of a tech oligopoly, the tech industrial complex that Biden warns us against in his outgoing address.
It's a step away from that to, if you don't want a tech industrial complex, then shrink the power
overall of the industrial complex that is the government and make tech then have to compete
for Bitcoin on an open market with everybody else instead of simply getting close to the money
printers that are going to issue the CBDC. So I just wanted to add that point that shrinking the
power of the government is also striking back at tech oligarchs that leverage their power,
their access to capital markets, all of these things to get close to sources of power, to
receive bailouts, to be nationalized in that proto sense where the government, where they're
still receiving profits, but the government is taking on all the losses.
Yeah.
And she talks about a move towards equity and away from debt in the future, because we have
this instant settlement.
And if you think about it, the only, you can't really own equity in your government.
You can, you can own your, owning dollars is kind of like owning stock in your, in the
United States government.
And if you had a choice you would never purchase that stock because all it does is go down It never Yeah It has you know minor periods where it goes up a little bit and then just it on this just sliding scale a ski soap ski soap black down
Um, the different you, the difference with these tech companies is you can participate in that. If you believe in what, uh, the benefit that, uh, meta or Amazon or, um, Tesla are providing to the world, you can own that. And by the way, you don't need to believe in it to benefit from it.
And that's something that's really important with distinguishing the difference between a fiat system and a bearer system and a true hard money system, which is that fiat means it exists because we say it exists.
And so when we stop believing in that thing, then tiers law takes over. That money's gone. It just literally has no value.
You see the pictures in Venezuela of streets filled with swaths of currency, you know, just as though like out in western Kansas, you see ditches that are filled with tumbleweeds.
Imagine that the tumbleweeds were instead massive mounds of loose hundred dollar bills.
that has happened in Venezuela. That's happened in, um, um, in Turkey. That's happened in Zaire,
like Zimbabwe, it's happened in so many different countries. It's only a matter of time. 4,000
fiat currencies have existed. Only 160 are left. Every single one of them has lost 99% of its
value. There's not, there's no such thing as a fiat currency that survives because it is a
belief-based system. You have to believe in it. And eventually you stop believing in the thing
that is killing you. And so you move to something that it is a distinction that needs to be made,
is that you don't need to believe in technology for it to serve you, which is fantastic.
It gives power back to the people, provides them an opportunity to
to have some self-sovereignty over their existence, which wasn't there before.
And it does, yeah.
It draws power away from the government.
It is weird to think about it because what Biden was trying to do was emulate Dwight D. Eisenhower's military industrial complex warning.
For sure.
Um, which is just kind of, I mean, on the surface, you can look at those two things and you can call them somewhat similar. Um, the difference though, is that Meta and Tesla and Amazon, they don't have private military corporations. They don't kill people. They don't start wars. They don't have the ability to wage war.
You know, the military industrial complex is it's as powerful as our military, if not more, because it has the it's not handcuffed to any sort of restrictions that that the government is.
And so I said, yeah, I just I found it pretty laughable to hear, you know, what I would consider.
And and this is not I don't this is not a condemnation condemnation of the person.
I think this is a I hope this is kind of an objective analysis of what we've seen.
The leader of what appears to have been the most corrupted, compromised administration in history who was incapable.
I mean, you go back, what, eight months, and he was found incapable to stand trial when they brought charges against him for having classified documents at his house.
They basically like, it's kind of a, you know, it was this fork in the road where it was like, he's either capable of standing trial, which means that he knows what he did. He knows he's a criminal or he's incapable of standing trial, which means he's senile, which means that the guy who controls the nuclear stockpile, um, doesn't know how to tie his shoes and that's not good.
And so, I don't know. Yeah, it's it's it's it's hilarious because it's like it just it shows the power of trying to copy someone else's approach.
Because if you're if you're just looking at it on the surface level, then you're going to think, oh, yeah, this is just like Dwight D. Eisenhower.
The tech complex is just as bad as the military industrial complex.
Forgetting that the military industrial complex only serves the government.
The tech complex only serves the government so that it can serve the people.
I think you brought that up and noted that really well, which is that they have to have these relationships with the government to stay on their good side because otherwise they would be hacked and chopped up into little pieces.
Right. So the military has a more essential, inextricable connection to government.
tech's connection to the government right now is more contingent on the historical situation
where you need to be close to government to be close to the money printer so it's not to me
it's yeah definitely i mean i i guess i'm still pretty skeptical of tech i i do i hope that we
maintain a skepticism of um potential god kings in the form of you know large software providers
And as we've talked about in the past, the software thesis is a way that Bitcoin can tie down the digital realm and make it more computation costly.
There's actually a tie-in to this chapter right here.
Let's see if I can find it.
Alden talks about, she has Sailor's quote about energy, about, I mean, the basic idea is that in the digital realm as it currently exists, nothing is costly.
And so you can copy and paste anything over and over again.
We're all familiar with what spam is. We're all familiar with what spammed comments are. Trolls are like troll farms where it's not somebody having a negative opinion. It's an orchestrated negative opinion by somebody who has a political goal. I'm coordinating a bunch of commentators.
All these types of things, if you can make computation costly through some proof of work mechanism where real world energy has to be expended.
I think Alden maybe mentions this in the context of micropayments, which is a use case enabled by Bitcoin through an additional layer like the Lightning Network, where transactions like a hundredth of a cent can be enabled in a way that, of course, currently they cannot through our credit card system.
And then microtransactions are going to lead to new emergent use cases protecting us from spam because you can require people to pay you a fraction of a cent to send you a message.
And so, yeah, I guess I wanted to just note that we can maintain our skepticism of software providers and also that can reinforce our conviction that Bitcoin decentralized, permissionless is a way to tie the internet down and hopefully provide a neutral jumping off point for an internet where we are not constantly controlled by other people.
So, yeah, I mean, I think your distinction there is good, military-industrial, different than tech-industrial, but still maintain some skepticism.
We all should towards that tech element.
I think I'll take a slightly different view, which is to say that all technology should be viewed agnostic.
It is a tool, and in the hands of someone using it for good, it's a tool.
That's a hammer, and I'm using a hammer to pound in nails.
In the hands of someone with bad intent, it's a weapon.
it's a hammer and I'm using it to bash your skull. And I have a, I have a high school classmate.
This is, I, uh, this is, this is a little departure, but I think it's funny in third
grade. Uh, there was this kid who was a classmate of mine and he was really quiet. He was really
shy. He was on my baseball team. And, um, he, he was just, uh, very timid, um, when he stepped up
to the plate and a couple of times, my mom was always late picking me up for, for baseball
practice. And so a couple of times I would stay after and I taught him, um, I taught him how to
swing and I taught him how not to be afraid of the ball. And he, he did a little better. He,
you know, he definitely got better. And then, um, 10 years later, he gets convicted of beating
his stepdad to death with a baseball bat. So yeah, the teacher has exceed or the pupil has
exceeded the teacher. Now he has something to teach you. Yeah. I guess I hammer too. I think
I think they call him Jimmy the Hammer in jail now.
Oh, no, that's quite the thing.
Yeah, but anyway, I mean, it's just, I had given this kind of, I put up this video a long time ago.
I think I took it down too, but comparing and contrasting myself and my brother-in-law.
My brother-in-law is a special forces soldier.
He was a weapons sergeant, and now he's promoted even higher.
And a gun in his hands is a tool.
A gun in my hands is a weapon.
And there's, it's the exact same technology. It's no different. But it is all about your ability to, to use something with, with knowledge. You know, if I have this saying, like, if you own something and you don't know how to use it, it owns you.
you know, there's always going to be this cognitive friction that exists between you and that thing
that is a burden upon you because there will always be this, oh, I haven't set up my sound
system. I haven't set up my, you know, I've set up my surround sound. I've got this carburetor to
put on the car, but I don't know how to do it yet. And there's always this mental cognitive friction
that lays upon you, which is why I believe in not minimalization, but in maximizing your
ability to use the things around you so that you don't have to have additional things where
we all have like nine different things that each do the exact same thing, but we only use each of
them for one specific purpose. Like my phone does everything, but I have an iPad. My iPad does
everything, but I have a laptop. My, I mean, technically my smart TV does everything. I can
hook up a keyboard to it. And, but I have all of these other devices. And so, you know, we end up
only exploring maybe one tiny percent of what we can do with any tool and then jumping to something
else because the, the cost of entry to get 1% in is so easy, but the cost of entry to get a hundred
percent in and truly become an expert, uh, takes a lot, you know, being a guitar player is like that.
Yeah, well, I just, we can depart from the tech industrial point after this, but I would say that tech is not neutral in the sense when it is a specific iteration of tech. For example, zeros and ones, neutral. Computation, neutral. Facebook, not neutral.
You know, what Facebook is, it's a one way mirror where you sit in front of it, narcissistically admire your own image, think that this profile is you, all of these things are you.
There's a man behind that one way mirror, writing down everything that you do, and then using that to engage in predictive and model modeling processes that can be sold to advertisers and politicians that can be used to influence you.
So tech, telecommunications, neutral, the things that the additional iterations of that tech and that are various corporate entities using that tech, those are not neutral. The tech industrial complex, again, that is specific individuals with specific products. And these products want you to perceive them as neutral, as merely things you can interact with or not. But they're not. They're asymmetrically designed to extract value from you inherently.
So if Facebook – okay, so it also is the tool that enables the overthrow of oppressive governments like the Arab Spring.
So my question then would be if Facebook was instead of a centralized application and it was a decentralized protocol, then would it be neutral?
Maybe that's not the tech industrial complex.
Other iterations of technology, if they're completely transparent and open source, you can look at the code.
anybody can add to them, then that's a different thing than our currently monetized tech industrial
complex, I would say for sure. Yeah. So I'll, I'll, by the way, I will, I will make a prediction
that I'm 100% positive will come true, which is that somebody is going to open source a Facebook
and, um, somebody is going to open source, um, a Google and somebody is going to open source an
Instagram, et cetera, because just like Google did with the Android platform, you know, the story.
So Apple creates the iPhone, which has the iOS operating system, which is beautiful and seamless
and whatever, but it's closed. Google realizing that they're falling vastly behind in the smartphone
own game knows that it's not really worth it to create their own closed operating system.
And so what do they do? They buy Android and then open source it, which was a operating system.
They open source it and then they say, all right, we're going to compete with you in hardware.
So you just move the playing field. Alden gives the example, by the way, of Kodak.
when Kodak, um, they actually creates, they create a website and they have this website
that says, you know, Hey, this is a great place for you to print and share your photos.
And they completely miss that. That's the opportunity that, um, the digital photo was
the opportunity and they needed to abandon their, um, attempts to maintain control over the physical
photo, you know, you have to be able to move. And so, yeah, I just, everything collapses to a zero
point cost. Everything will be decentralized and open source. It may, you know, it may just be some
drunk engineer from meta that's pissed off at Mark Zuckerberg for whipping his ass and BJJ
goes home and says, Oh, you know what, here we go. We're going to upload this source code.
Yeah. Now we've decentralized it and every developer around the world can add to it.
And then we have a Facebook core, just like we have a Bitcoin core.
I don't think we're just one drunk engineer away.
I think there's higher barriers.
But I think we can look at this in the context of the chapter that in the discussion of proof of stake versus proof of work, this is a discussion about the future as partially centralized versus decentralized.
And Alden is very open-minded in this chapter.
She notes, I mean, she says, comes out conclusively, Bitcoin proof of work wins conclusively, conclusively, hands down as robust money because of its decentralized nature and that the proof of work being using energy as an arbiter of truth.
So Bitcoin wins money, but that still leaves open potential other use cases for what she calls partially decentralized proof of stake systems.
So I'll read two quotes, and I think this will lead to a question. If a database is controlled to some extent by a central organization, but it is open source and it is designed in such a way that its contents can be independently backed up and audited in real time by certain high-performance external nodes, does that concept have an addressable market?
So centralized by a central organization, but they open source and they – I think it's maybe what you're describing with this rogue and inebriated Facebook engineer maybe creating a centralized thing he's going to profit from, but open sourcing it, designing it in a way that it can be independently verified, making it transparent and auditable.
Are there use cases for that?
Before I move on to the second quote, I'll just toss that to you.
What do you think?
this is android this is the android example um so we're we're going to take a
decentralized protocol and we're going to sit on top of it by kind of building
um building an environment sort of on top of it with google phones and um and google products
And what we're going to do then is water the creativity of the world and let it flourish.
Because, you know, what's better than having all the smartest developers and engineers at Google work on your operating system?
It's having all of the smartest developers and engineers in the world work on your operating system.
I love hearing how Elon Musk breaks down why it's important that we correct falling birth rates.
It's very simple.
There are problems in the world.
Humans solve problems.
The more humans we have, the more problems we can solve.
the fewer humans we have the less chances we have to solve those problems and so it just goes back to
decentralized versus centralized decentralized wins every time every time you know well every
time i mean and it's it may be a long tail but it will eventually win and so you don't again it's
Like you don't have to believe in the power of a handgun to keep you safe, but it exists and therefore it will.
And so, yeah.
So here's a use case.
Maybe this is reconcilable with decentralization winning.
This is a use case that Alden speculates on for partially decentralized proof of stake systems.
So she says, quote, what if everyone in a community could invest in a new startup restaurant nearby in exchange for some equity token that gives them a share of profits or discounts or perks for frequent patronage?
This fits well with the hard money world.
So we can imagine that Bitcoin succeeds, right?
If most things are equity finance rather than debt finance, shouldn't it be easier via technology for even small entities, which we centralized as an entity, right, to issue startup equity and to be able to use that equity as collateral when needed?
yeah the example i think of right now is you are seeing a decentralization of the meat packing
industry where we have four major meat packers that control the industry with an iron fist and
in times of in times of need and in times of crisis um you really see how they abuse the power
four or five years ago there was a fire at one of the plants and as a result they basically
undercut the bid to everyone and so oh you know there's this one plant it no longer has the
capacity and it took like i don't know it took like five percent of the capacity offline or
something but in a day the prices that they were paying to producers dropped by like 40 percent
You know, it's just a profit grab to take advantage. And so as a result, what we're seeing is a proliferation of these community individual owned abattoirs. Abattoir is a French word for meat butcher.
Um, so people are taking back their ability to, um, control their own food supply and
they're doing it in a, in a local way.
And by the way, one of the fascinating things that I've been listening to is, um, this Jack
Cruz who talks about the importance of eating.
Like we've always, we've always been told that eating local food is better for you because
it doesn't travel so far and get exposed to different things along the way.
But hearing some of the science behind it, I'm really truly convinced that there's a
definite reason why you should eat local food.
Right now, the average food product that the United States citizen eats travels, I think
it's 1,400 miles on average to get to you.
If you have some grapes and you have an orange and then you have some pork sausage, those things effectively traveled half of the way across the country in order to get to you, bringing with them contaminants and everything that they're exposed to along the way.
And also not being exposed to the contaminants in your area, which would build you up a natural immunity.
So there's so many knock-on effects of the ability to crowdfund and maintain a consistent supply of resources.
And it also decreases the need for massive transportation networks that if you travel on interstate, we saw this on the way back from Florida.
if you're driving past a rest stop at three o'clock in the morning, there's 400 semis lined up there.
And it's just insane the amount of over the road freight that we have, because what we've done is
we have effectively cordoned off parts of our country. This is the part where the fruit comes
from. This is the part where the wheat comes from. This is the part where the beef comes from. This
is the part where the almonds come from. And we forget that you go back a hundred years in Kansas,
had, it was like the number one, two or three producer of wine in the United States. They had
almonds, they had orchards, they had everything. You raise your own fruit and people were healthier.
You know, people didn't get cancer, people didn't get autism. There is a line to be drawn there.
And I'm really interested in exploring how that benefits us. And I think any sort of
decentralized technology allows for the further proliferation of resiliency, anti-fragility,
and self-sovereignty, and moving us closer and closer to being stronger as individuals,
which makes us stronger as communities, which makes us stronger as a world.
Yeah, yeah.
No.
That was a hell of a rant.
I'm sorry.
I ran through all kinds of shit there.
I mean, Alden does leave it as an open-ended question whether equity tokens can be issued
by small businesses
and whether that might be something
that proof of stake chains
could help us,
could enable.
We can think like Ethereum
and Base and Solana.
Those are often used
as jumping off points
for the creation of like meme coins
and other types of utility,
quote unquote, tokens.
So less anybody thinks
that Alden is some inveterate shitcoin
or one, I mean,
that is just speculative.
And I think that
that's a conversation worth having.
What does it mean
to tokenize real world assets?
What does it mean
to allow people to
um individuals maybe even or businesses to issue their own equity i mean it takes a specific legal
framework but it takes a specific technology and we can say that bitcoin is superior robust money
um while you know having the conversation was will a proof of stake or another layer on the
proof of work protocol on bitcoin which of those is maybe going to be best for tokenizing real
world assets maybe we'll read something on that in the future but so just less than anybody though
think that Alden is doing any more than speculating. She does offer the critique or note that the
problem with these often is that you have venture capitalists and early developers dumping low
quality unregistered crypto products on retail investors. In the past, a venture capitalist
might have to lock up capital for a certain amount of time, five to 10 years before exit
liquidity develops to the go public, they get the money or they're purchased by a larger company.
When a VC issues a meme coin, they get the immediate exit liquidity because retail comes in and buys it. And so it leads to dumping venture capitalists, dumping coins that they have no conviction in on retail. So she does offer that critique, but I do think it's, I guess, an open question as to what use cases there might be.
And I'll just quote Alden to summarize that whole debate.
In other words, just like how the internet made it easier for people to produce and distribute their own books and songs, smart contracts made it easier for people to produce and distribute their own financial assets.
And so whatever you think is going to be the base layer for smart contracts, that's cool.
And I just want to check, Lucas, am I still recording?
Am I storing my data?
I'm getting a message that says my phone data is run up, but is it still uptaking?
I think you're just fine.
Yeah, as far as I can tell.
Yep.
Okay.
I'm not positive, but yeah, we should be good.
Yeah.
It's because I never delete anything off my phone.
So like zero free RAM.
So to move the discussion on though.
Hold on.
Can I address that real quick?
Yeah, yeah, for sure.
So meme coins are not bad.
Meme coins are a tool that can be abused.
They can also be used for good.
And the reason why there is a specific legal framework around issuing securities is that it is a way of cordoning off the unclean and the unwashed masses from being able to participate in the beginning of something great.
You know, in order to participate in all these early rounds of financing of venture capitalist companies and, you know, you and I literally could not be early investors in Meta or Tesla or Google or Amazon or anything like that because we're not accredited investors.
And by the way, to become accredited investor, the point is that it's supposed to keep people who are uninformed out of the market. That's the saying that you're doing good.
The doing evil part is that all it does is it provides a monetary barrier that you have to overcome.
$250,000 worth of income and a million dollars worth of assets.
If you don't have that, then we as a legal regulatory framework say that you're too stupid to know that you can invest in something.
And that is just a barrier put up in order to keep ties close to keep power into the people that have it.
So there's a flip side of what meme coins are.
And I was thinking about this because we are on the heels four days, I think, since Trump launched the Trump coin.
And I was thinking about it because there was this horrible backlash.
Everybody hates it, calls him a shit coin or says it's the worst thing ever.
What I'm thinking is that this is the beginning of a direct approval disapproval process of individuals where we just realized with Polymarket coming online that betting is a far more accurate poll than polls.
And what's more accurate than betting?
It's having literally owning stock in an individual.
If I disapprove of your ideas, I'm going to sell your stock.
If I approve of your ideas, I'm going to buy your stock. And so this to me is the kind of the nth state of crowdfunding or raising funds as an individual without having to go through an approval process that is meant to exclude people that are poor.
I view all these frameworks as like, I can't remember who said it, but it's the, it's the, these frameworks were put in place to look good while doing bad by people who don't hate or who don't love the rich.
they hate the poor. And I think it's a way to just keep people down. And when we allow people
to participate in these markets individually, yes, you're going to see people get rugged. Yes,
you're going to see that 100%. And then you'll just learn to take responsibility for your own
actions. The problem is that we are so divorced from taking responsibility for our own actions.
Most people that are multimillionaires will never make a trade on their own. They'll never make a decision on their own. They outsource all of that information to someone who takes a massive cut for doing far worse at their job than you and I have done simply by buying Bitcoin.
so yeah i i don't think that that so i was not endorsing securities law i don't think alden is
either you can say people should be allowed to buy whatever shit coin they want without
celebrating the grifters and the rug pullers that launch the coins i think meme coins may measure
some type of sentiment but they demonstrably do not measure approval ratings because trump's
approval rating did not shoot up and then shoot way down um the barometer is tied to some sort of
Pure market speculation.
That's okay.
But what you're doing there, that's inherently flawed because you're taking the system that we know to be false, which is a poll, and using it to say, because the thing that we know is false doesn't change with the new thing.
Then, of course, the new thing can't be a reflective barometer.
I'm commemorating it to Colesia and Polymarket.
I think Kalshi and Pauly Market are good barometers.
I'm not talking about Poland.
Kalshi and Pauly Market, ways where people put skin in the game by betting on outcomes explicitly.
Kalshi is not Pauly Market.
These are like predictive markets.
And so not even endorsing those specific ones.
Just the idea of a predictive market where you explicitly bet on an outcome by putting money in the game and it pays out if you're correct.
Meme coins don't do that.
They're a proxy for some type of sentiment, but that sentiment is meme coin quants who are speculating on – they're modeling other meme coin buyers and sellers when they're selling and buying the coin.
They're thinking, what are other people going to do?
They're not thinking, is decision-making good or bad right now?
I think people didn't start disapproving of Trump when the Melania coin was issued, and yet the Melania coin causes the Trump coin to go way down.
It's people speculating on meme coin market dynamics.
And so it's this really insular, incestual type of speculation.
And again, I don't necessarily think that should be illegal.
I just don think we should celebrate the rug pullers and the grifters by saying they have some enlightened function as barometers of public opinion where what they measuring is their ability to model other shitcoiters intentionality or whatever You can judge it on the first four days I can judge whatever I want So Alden makes this point by the way about Bitcoin is that you can judge the strength of
Bitcoin and its ability to do its job as a long-term store of value during its stage of infancy,
because it simply doesn't have the liquidity. It simply doesn't have the number of market
participants involved in it in order to accomplish that thing. It is there. We know that it's going to
do that if it gains the network effect. And so, yeah, in the first four days of Trump coin being
announced and then Melania coin, yes, of course, there's going to be volatility because we have not
put in the amount of liquidity into that market in order to make it stable. But once those things
are stable, and once there is that liquidity, then I do think that that is a direct barometer.
And it's not a direct barometer. So polymarket is like specific outcomes. The meme coin would be
like cultural sentiment of all outcomes. Do I approve of all the things?
But why approve though? Why is that the thing? I mean, why is it the outcome tied to approval
or disapprove you could buy a meme coin of something you disapprove of to mock that thing
correct yeah yeah yeah and and you will see people that do that but um i don't think that that's going
to be the majority of it i think that the i think that the majority of people um you know
i think if porn i don't i don't think it is i don't think porn i think it's desired it's just
like like brute naked desire to be quickly rich and like what a meme coin measures is it's
absolutely transparent meme coin measures the memetics of a phenomena the ability of a thought
pattern to quickly reproduce itself in other neocortices and like that's what it measures is
the transmission of a thought not the approval good or bad of a thought but the transmission
of a thought and the memetics of trump coin i think are related to like people speculating on
the meme is what are the market predictive market dynamics of this very meme it's just like so
recursive and like looking inside itself to like model the minds of somebody else who is also
looking inside itself maybe that's too deep in the meme coins for something i know nothing about but
yeah i'm not saying it's approval of like the ethics i'm saying it's approval of the value like
i'm not going to put i mean the profit incentive is there i'm not going to put my money in this
thing unless I believe that it's going to go up. But what makes me believe that it's going to go up
is that the underlying asset is going to gain value. Do I believe that the underlying,
do I believe right now, looking at the actions that have been initiated by the new administration
in the first two days, do I believe that long-term that there is going to be value creation based off
that if that continues yes i do and therefore um if i were of the mind to own that coin then then
that's what i would do i i don't believe in it enough to abandon the thing that i believe in more
which is bitcoin um but yeah i don't know i i guess i i see it i see it as having a far more
I think a far more useful, um, utility other than just, um, mania and, and, uh, you know,
I, I think that there is something very real and cultural about, um, about what we're seeing
with meme coins to be something real and cultural, but yeah, no, I think it's just measuring greed.
If we didn't call them, if we didn't call them meme coins, then, you know, it would be personal
stock. We don't call them that because they're not personal stock. We can imagine what personal
stock would look like for an individual. That would be really cool if there was personal stock,
if you could issue equity tokens on your own life to fund your college and to fund a family or
something like that. People who believe in families can buy your family token if they want you to get
married, if you need money for a house or something like that. I just don't think that's a meme coin
anymore. It's not a meme that's propagating. We do that already. When you graduate high school,
when people give you scholarships, when you get married and people give you presents.
But an equity token, though, based on that is what I'm saying, that would be something
different and it wouldn't be a meme coin.
Yeah, it would be better.
Right.
It might be good or bad, but just like, right.
It might be good or bad, but not a meme coin.
I think we should talk about Bitcoin miners, though.
Do.
Go for it.
Not just because meme coins have exhausted themselves inside my head.
I have nothing interesting to say.
I didn't have anything interesting to say when I started talking.
And yet I talked for a long time about Bitcoin. So that doesn't stop me. But I think like Bitcoin miners as new energy tech, this sentence I said was significant from Alden. And I'm gonna double down and say it's incredible. So, quote, the world has never had such a flexible consumer of energy before in terms of both location and intermittency of that energy as the Bitcoin protocol.
And so you and I were talking about Marathon Digital. We listened to a speech from Fred Thiel, the CEO. This is not an endorsement or a negative not endorsement of Marathon Digital. But it seems that Thiel is positioning that company not as a Bitcoin miner, but as an exploiter of energy, as an energy developer or something like that.
And that's what Bitcoin miners are. They enable the development of energy. I mean, you and I and other podcasts have kind of casually referred to it as like bootstrapping us to the next level of the Kardashev scale, which is that scale wherein like a civilization is measured by its ability to harness all sources of energy.
And Bitcoin mining, due to its flexibility, does seem to be not just a monetary technology, but a drilling technology, like a wildcat.
It's like fracking. It's like some sort of new energy exploitation protocol in and of itself, even apart from robust money.
And so, I mean, what do you think about that, Bitcoin as energy tech?
Yeah, Bitcoin mining is the most fascinating, I think. Yeah. So you can judge the flourishing and quality of life of a civilization by taking an account of how much energy is consumed per capita per individual.
The more energy consumed per individual, the more flourishing that civilization will be.
And we've been on a rapid rise with that since like the 1860s or so, the beginning of sort of that period.
And we've dipped.
So it was in this book, I believe, where it might have been a different one, but referring to the 1970s as the lost decade because it was the first time in human history.
Yeah, it was the first time in human history when per capita consumption of energy decreased.
And I strongly encourage people to visit the website WTF happened in 1971 when we started the Fiat experiment or the Fiat disaster.
and everything that has happened since then.
We have been trying to hamstring the energy consumed by saying,
you know, we're killing the planet, so what we should do is kill some people
so there's fewer people to kill the planet.
Like that's the overall kind of thesis of this approach.
You know, we need fewer people, but nobody who is promoting that idea
is just choosing to solve the problem themselves and off themselves in order to help out.
That would be like the direct one-to-one way to really get this done.
But what Bitcoin mining does is it comes in and it says,
look, we understand that you as an entity, as a government, as whatever polity,
it's not financially savvy for you to build out this infrastructure
so that it can handle peak loads that are increasingly going up.
You know, just as you think about it.
So what is the use of building something that is strong enough to handle 12 days out of the year
and then the rest of the time it's just kind of like wasted infrastructure?
It's not really doing anything.
It's not being used.
There's plenty of stories, by the way.
You can look on this.
you can read about this, of companies that are just purging power because they have power that
can't be used during these off times and it has to go somewhere. And so they're really just like
wasting power. So Bitcoin comes in and they say, hey, guess what? We'll buy that.
And not only will we buy that, we'll go to these places where there is no existing infrastructure,
But there is energy. We'll go to these waterfalls. We'll go to these volcanoes. We'll go offshore and we'll use wave power. We'll take what is known as stranded energy or energy that just is not being captured and we'll capture it.
it. And then when you need it in order to satisfy your peak load requirements, we'll sell it to you
for a market price. And when you don't need it, we'll use it to mine Bitcoin. And it works out
great both ways because it gives the Bitcoin miners a opportunity to have consistent income.
If they're mining Bitcoin, they're making money off mining Bitcoin. When they're not mining
Bitcoin. They're selling the energy that they have created or sorry, that they have extracted
back in. And there's a real world example of this. So I went in 2022, the state of Texas
experienced a really severe winter for them. You know, they had zero degree temperatures and
they experienced rolling brownouts where there were millions of people without power during the
coldest times they have ever had in recent history. And people died and billions of dollars
of assets were lost. Cattle weren't able to water because people couldn't get out and they couldn't
break water for their cattle. There was a ton of loss. And that just so happened to coincide with
the time that China decided to shoot themselves in the foot by banning Bitcoin mining. And so
So Bitcoin miners took the opportunity to look at the world landscape and they realized, oh, there's all this stranded power in the state of Texas.
We can come there and we can take that flare gas and we can turn it into energy and we can mine Bitcoin with it.
And now they have stabilized the grid of, I believe it's the most energy intensive state in the United States, like the state that consumes the most power.
But I'm not positive about that.
But so they stabilized the grid.
We have a real world example in our union, the Republic of Texas that has benefited so greatly from solving this problem and stabilizing a very weak and fragile energy grid that covers the United States that can't cover the base load that we need.
So, yeah, it's I don't know. I love everything about it. Taking us from bootstrapping us into Kardashev level one to Kardashev level one would be able would be capturing effectively all of the power on your planet.
I think level two is all of the power of your sun or something like that. And three is all the power of your galaxy or whatever. So, yeah, it does. It gets us to that. And because of the commodity nature of Bitcoin mining, where I compare this to racing NASCAR, where everybody has the same equipment, it's the same stuff, it's a commodity.
So what makes the difference is how well you conserve fuel in a NASCAR race.
And that's what's going to get you to the end, because the fewer stops you have, the more able you're going to be able to go there and more able you're going to be to get you the checkered flag.
So Bitcoin mining is a race towards cheaper and freer sources of energy, which drives the cost of energy to effectively zero, which bootstraps the globe into a higher level of flourishing that we've never seen.
Yeah. No, I totally agree that Bitcoin is energy tech in that way. And I just think a really cool angle to this that I had never heard before. One of the things that Alden mentions is that historically, we live in fertile areas that have access to waterway thoroughfares that are geographic dispersion as humans is dictated by certain things that like ease of transportation and trade with other people, not optimized for us to be clear.
And so not only is Bitcoin bootstrapping us into another phase of energy exploitation, utilization, development, it's also bootstrapping humanity's dispersion over the globe away from perhaps decaying urban centers to settle to, you know, in the chapter she quotes somebody calling these Bitcoin mining communities that arise around hydroelectric dams as front
tier towns summoning back like the westward expansion of the united states as brave westward
travelers set out to make their name um and do it in like an independent sovereign way by going out
into the wide open prairie we now have people who could you know go live next to a hydroelectric
dam in order to first maybe it's like the dam gets bootstrapped and started because a bitcoin
provider, a Bitcoin miner is willing to build next to that dam. So you have something to utilize
the power. The people that then are brought in to operate and manage, take care of that Bitcoin
miner, maybe they set up and live next to it. They then bring in their family. Then people come in
to sell them supplies. And so communities develop and then the power grid gets built out and then
you have a flourishing community. So it's just interesting that Bitcoin is also going to change
migration patterns over the earth's surface, not just change the way that we use and exploit power.
It's going to have like Bitcoin as like future anthropology, the way that it caused new human
development. It's just a very cool thing. Yeah. We had, we had the land rush in, um,
everybody went west in order to get their stake of land there whatever 40 acres and a mule
we had the digital or sorry then we had the gold rush which was everybody went to california because
that's where the gold was and now we're having you can call it the digital gold rush
and the digital gold rush is it's not a specific location it is a um any location with the
prerequisite of having an energy source. And so it is very much dispersed. Dispersal is good.
I think that there is a, I don't think that it takes much to look at a city like New York,
where you can go decades without ever touching the grass or seeing or having an unobstructed
view of the sun. I don't think that it takes a whole lot to look at that and say, that's not
how we're supposed to live. That's not how our bodies were meant to thrive. And so decentralizing
the population, there was this belief that we were overcrowded, that we had too much population,
But it was because we had to crowd into areas that were dictated by our ability to move goods in and out and produce goods.
And we were always moving the energy to that.
Think about what a truck carrying a load of oil or groceries, beef or lettuce or bananas.
Think about what that is.
That is energy being transported from one area to another area.
It's being exported from an area where it can't be used and imported into an area where the people have to cloister and gather because of other parameters.
So now you've got a different decision-making paradigm.
And the decision-making paradigm is I'm going to go where the energy is.
And then from that, I can produce everything.
I can have my own wellspring.
And one of the things I think we're going to see in the future is a massive decrease in exporting energy and transporting goods from one area to another because we'll be able to produce them in a locality because we'll have the energy to do so.
Yeah, no, that's great. I wholeheartedly agree with that sentiment. I agree with the positive spin you put on it for the nature localized and reducing all of these vast supply chains. You noted earlier Jack Cruz talking about the negative. I haven't listened to it, but moving.
And anybody can imagine why it's negative to move a bunch of food around the Earth's surface rather than consuming it locally.
So, yeah, fantastic.
So the last thing, I bracketed this in the summary, that there's a chapter called Cryptocurrency Risk Analysis.
So I want to get your thoughts on some of these.
And I'll just note that right at the intro, so Alden says, I think it's a healthy and natural response to be skeptical of the long-term financial value of this technology.
So I don't want to over or undersell that.
I think all of these, I'll just say up front, it's very good that...
I lost.
Yeah, you're back.
Oh, now you're gone.
Uh-oh.
Oh, God, what am I going to do?
I can't juggle.
Spirit fingers, spirit fingers.
Many, many years ago when I was 23, I was married to a woman who was pretty as can be.
This widow had a grown-up daughter who had had her bread.
My father fell in love with her, and soon they, too, were wed.
It's made my dad my son-in-law and really changed my life.
For now my father was—now my mother was—I forget it.
It's Ray Stevens.
It looks like we lost Grant.
And I think we'll probably start the next conversation by picking up with where we were going to end this one,
which was talking about healthy skepticism of cryptocurrencies. I will preface that conversation
by leaving you with this. In digital markets, because there is no barrier to entry,
we create natural monopolies. And so all value flows to the best thing.
The reason, oh, hey, he's back. Dude, I was riffing hardcore. I was singing Ray Stevens,
And then I decided to go off and just start rattling on something.
You're, you're, uh, you're 90 degrees rotated to the left, but, and you're gone.
Oh, this is getting entertaining.
Okay.
So Grant's gone.
Don't listen.
Anyways.
Um, yeah.
So digital markets, uh, value accrues to the best.
Um, the reason why not everyone owns a Mercedes is because not everyone can.
Uh, the reason why not everyone owns a Rolex is because not everyone can.
There are certain restrictions.
You have to buy the whole thing.
You may be geographically constrained from being able to participate in that market.
Digital markets don't have those constraints.
And so the punchline is natural monopolies.
One thing rises to the top.
Twitter is the online digital news.
Facebook is the online digital whatever friend zone.
Google is the online digital search engine.
And now these things may change over time as someone increases the veracity of the digital nature of that thing to do its job.
I'm still just rattling on trying to save us.
I'm just keeping – I'm bailing water out of this boat, man.
So I'm visible now, though, and I'm also not like perpendicularly oriented towards the normal viewing way.
You're perfect.
Do you want to wrap this up by talking about cryptocurrencies and underlying skepticism that we should have?
Yeah, yeah.
And so I was just leading into that.
There's a few risks, potential risks.
But I just wanted to note that Alden raises these because she's a critical thinker and not because any of these.
She doesn't weight them.
If you read this chapter, you'd see that she doesn't weight these such that it should prevent a person from looking further into Bitcoin for sure.
So, I mean, there's four or five.
Maybe I'll just really quickly summarize.
I want to see if you think what you think is the most serious of these threats and get your thoughts on that.
So first is market dilution.
I think that she kind of says that even that one is not really a threat.
It was maybe like the thought is that many more cryptos can't be created.
So we could see Bitcoin's, one could think that Bitcoin's market share would decrease relative to the number of cryptos.
But she says the design space is very tight.
There is no absolute guarantee that Bitcoin won't be outcompeted or surpassed in some way.
this must be considered a risk. But she just goes through, again, all the Bitcoin strength relative
to any other potential crypto. Two, the critical software bugs. She notes that there were some bugs
early in Bitcoin's development. These appear to have been worked out. Three was government bans.
I mean, you can imagine, of course, that can take many forms of what it might be.
But basically, the government attack vector towards Bitcoin through explicit legal prohibition,
a type of executive order 6102 maybe in which bitcoin is ordered to be seized something like
that so those are the different um big risks government ban critical software bug um and
market dilution that to do her due diligence all that at least think thinks fit oh and also
computational threat that the algorithm that secures bitcoin could be um broken through like
quantum computing or something like that. So what do you think about those different attack
vectors on Bitcoin, those different sources of risk? So market dilution, what we're seeing is
that the more entrance we have into this market, the more robust Bitcoin becomes because it proves
itself against all other ones. Market dilution is simply a way of saying, I get the opportunity
to look at everything. And I am further solidified in knowing that Bitcoin is the best of those
things. That's not a thing to be afraid of. If something is invented tomorrow that is better
than Bitcoin, people will recognize it. The network effect will change. And that may just be
how things go is that we iterate from one thing to another. I doubt it because as we've talked
about it, you know, and Adam Back specifically mentioned, you know, it appears that any change
that you make to Bitcoin actually makes it worse. And so it doesn't seem to be yet that there is
something. So this goes back to there was a fantastic podcast that I listened to with Joe
Rogan and a guy named Steven C. Meyer, who is a, um, who, who's written a bunch of books about a,
like a computer scientist's rational explanation for the existence of God. And during the whole
conversation, they go back and forth and, and Joe keeps on saying, you know, but what if,
what if this thing happens? What if this thing happens? And the guy finally stops him and he goes,
Look, man, we make decisions based on the information that we know.
When the information that we know changes, then we change our decision.
But what we don't do is we don't make decisions now based on theoretical things that may or may not happen.
All you can do is make the best decision for you right now.
So market dilution to me strengthens Bitcoin.
Government ban. I look at a government ban as an endorsement of Bitcoin.
First off, it won't work.
We know it won't work.
It's not going to work.
Government bans have never worked.
All they do is embolden people to find a way in order to get around it.
And they also create opportunities for other more forward-thinking countries to go, hey, we're not going to ban that thing.
And now we're going to flourish while you guys suffer.
So government ban is not a concern.
Market dilution, not a concern.
And so I just said one good quote that – I don't have the exact quote, but one good sentiment that Alden expresses to like, hey, central government, if you are threatened by a decentralized Excel spreadsheet, maybe you're the problem.
And I think that's a pretty good way of putting it.
So I just wanted to say that.
I mean I look at any sort of government ban, government antagonism towards any sort of technology, by the way.
I look at that as an explicit endorsement of that thing.
And I therefore want to own as much of that thing as possible.
Right, right.
Next thing is the bugs.
So the bugs, this wasn't in here, but I listened to Jimmy Song talk about one of the bugs.
So there is a bug where it's like the timestamping has, I think it's like-
The Unix timestamping, the 32 integer or like the number of integer.
Yeah, yeah.
Yeah. Two to the 32 minus one integers or whatever.
Yeah. That's in that. Right.
Yeah. That runs out in 2106. Right.
He talks about it. He's like, look, it's not ideal, but it's a two.
It's it is effectively the exact same thing as the 2K bug.
Yeah. And so that that can be resolved.
There have been bugs and those bugs have been resolved and there will possibly be more in the future.
And then the last thing is I love hearing people bring this up is the quantum computing thing.
Okay, so before I start on the software bugs, another good point that Alden makes, flip the discussion and just remind us, you know, Bitcoin is as simple as it gets.
So if you're worried about bugs in Bitcoin, I mean, any other piece of software is probably going to be orders of magnitude, especially once you get into proof of stake, orders of magnitude more complex, orders of magnitude more attack surface area.
So I just wanted to add that, but that's it.
Yeah, that's I mean, that's I think the proper view to look at these things.
You have to look at it relative and you have to look at somebody says, oh, Bitcoin is too complicated.
It's like, have you heard of the dollar? Do you understand how you have any idea how that mockery works?
Everything is relative. The last thing would be like the computational threat, which would be the quantum computing.
What if we invent a computer that's more powerful than any computer that's ever existed and therefore we're able to crack all of the encryption that's ever existed?
Well, in that case, I would prefer to have my wealth stored in the most powerful encryption that's ever existed, which is Bitcoin.
I mean, you're better off being in the strongest thing. This is not a case to be made for stacking up gold. Like, again, this is the argument that was made by Stephen C. Meyer to Joe Rogan. When the decision parameters change, when we have new information, then we can change.
but also there are theoretical ways to make to make Bitcoin quantum proof.
And so those, those things are being worked on right now. So, you know,
the computers that we have today,
they could have hacked any sort of program that existed in the 1960s yet,
yet we were able to, we were able to fight that off. So yeah. Yeah.
These are, these to me are, are not concerns.
They are endorsements, and they are a note to stay vigilant, I suppose.
Yeah.
Okay.
Here is the now, like Alden creates the nightmare scenario, a concerted attack.
So I'll read this to you.
This is like everything at once.
So, quote, overall, we can imagine several risks occurring together to combine into a
serious threat.
Governments could ban or severely restrict usage of the Bitcoin network, force various
financial institutions to sell their holdings to crash the price and drive the technology into the
black market. From here, they could go after the supply chain and do their best to prevent the
construction and distribution of new SHA-256 ASICs, which are Bitcoin miners. If Bitcoin's price
remains low for a long time, many miners become unprofitable and disconnect from the network until
the difficulty adjustment reduced enough to find a new steady state. This would sharply reduce the
cost of attempting a 51% censorship attack, which is when one group of miners is able to get the
majority of the network's power and so determine either censor transactions or do double spend
transactions. So this would try to reduce the cost of attempting such a 51% attack. And at that point,
perhaps some large government entity would spend the resources to do it for the sake of eliminating
the threat of stateless money entirely.
Throwing on top of that, even adding more onto all the shit file here, what if the United
States has an $800 billion military budget?
What if that entire military budget is thrown at that?
Yeah.
I think that's equivalent to me saying, I want your house, and so what I'm going to do is
burn it down.
it's an attack that destroys it right it's yeah it doesn't yeah exactly like um that's that's the
the beauty of understanding what bitcoin does is it aligns incentives is that you're actually
better off and everyone benefits from collaborating than they do from competing right yeah and and so
yeah it's just i think yeah yeah it's just you're you're destroying something so that someone else
can't have it but in the act of destroying it you're also removing your ability to benefit from
it so yeah yeah good luck at that point it's going to be like we're going to be in an alliance with
the deep sea aliens versus like advanced agi and so there's going to be a lot of shit to worry about
that's a lot more um yeah kind of forefront i'm gonna ride a hippo hippo with a 50 cal
on top of it.
That's pretty cyberpunk there.
You bet. Hey, wrap us up. I got another one coming.
Yeah, no. So
that's all I have. I would say
that Lucas is taking off. He has a job
interview. So if you wanted to hire Lucas,
your time to do so is quickly diminishing.
So reach out and grab him. Otherwise,
he's going to be grabbed by someone else
in a good way. Coin rules preferred.
Remote preferred.
I appreciate anybody who
points me to something.
And I genuinely would really appreciate anybody from the community that reaches out.
So thank you all.
Right on.
Giddy up.
We'll see you next time.