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All righty, here we go. So Lucas and I are back for another Bitcoin study session. We are currently working through Lynn Alden's broken money, why our financial system is failing us and how we can make it better.

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so we did the introduction chapters one and two last time the thesis kind of broadly writ of this

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book its mission as lynn alden states in the introduction is that at its core money is a ledger

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commodity money serves as a ledger governed by nature bank money serves as a ledger governed by

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nation states open source money serves as a ledger governed by users this book explores the evolution

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of technology, how that changes the prevailing power structures and incentives surrounding

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money from era to era.

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So we saw some of that development last time.

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We did chapter one, ledgers as the foundation of money.

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So I guess first, I'll do a brief summary of chapters three and four, which we're going

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to talk about today.

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And then Lucas and I will add some hashing power to this, hash it all out.

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I'll do just a little run up into chapters three and four to get everybody situated and

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then into three and four and then into the conversation. So again, chapter one was ledgers

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as the foundation of money. Lynn began with, Alden began with a little bit of anthropology

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or history in this book. Money began not as coins, but as a ledger, which can be written

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or oral or based in memory. And the ledger is just this abstract thing, a summary of transactions

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that is used to keep track of who owns what. The whole concept or the thing of money itself

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arises later as a ledger that is maintained by nature. That's kind of the first instantiation

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of money we get in chapter two, the evolution of commodities as money. So the ledger as maintained

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by nature depends most essentially on scarcity. When we have the ledger maintained through a

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thing we call commodity money, we determine what is the most scarce asset that we value,

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and that becomes a form of money. We then learn that one way to hack or debase, or the only way

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rather to hack or debase nature's ledger is through new technology, such as, for example,

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if beads are used as money, then a technology that allows for the super efficient production of

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beads will give one party the upper hand and allow them to dilute the wealth and transfer it to

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themselves. So chapter three, that's what we're first talking about today, how gold won the

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commodity war. So again, scarcity determines essentially, along with some other characteristics,

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but primarily scarcity determines what commodity arises as money. And then technology then will

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invalidate the use of certain commodities, prevent them from being used as monies.

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So how did gold win the commodity war? Well, first, we see that gold and silver do survive the filtering function that technology provides for in filtering out through determining what commodities are not scarce. Gold and silver, they come to the top. Less scarce money falls out of the equation.

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Gold and silver have a high stock-to-flow ratio.

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There's a low stock coming into production per the amount of gold in existence, so it's not suffering from terminal inflation.

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Gold and silver are able to survive their monetary premium through, as Alden frames it, a sort of ongoing difficulty adjustment.

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But as surface deposits are mined, it gets more and more difficult to get at other sources of gold and silver.

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Even as our technology in mining and extraction increases, there is that quote-unquote kind of ongoing difficulty adjustment provided by the difficulty in accessing new sources of gold.

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So gold and silver arise as the champion commodity monies.

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We then have an innovation, or one of the reasons they arise, too, is we have this innovation of coinage, legal tender coinage, which further enhances gold and silver as money.

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So coins, that's simply when an authority specifies a standard unit size, weight, and quality.

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We, of course, know what a coin is, that circular disk that has those standardized qualities.

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They also, this authority will also then specify that that is legal tender, that it be used as currency, which gives gold and silver as legal tender coinage three layers of value in Alden's estimation.

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First is the content of the precious metal itself.

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But second is also a verifiability and convenience.

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It's verifiable.

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Each coin is stamped perhaps with the leader or emperor's face,

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authenticating it.

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And there's also ridges on the sides to prevent shaving.

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Also convenience, you don't have,

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that provides, that verifiability provides for a sort of convenience.

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You don't have to retest to determine if it is real gold.

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You don't have to reweigh it each time the transaction.

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So that's the second layer of value. The content of the metal itself is the first layer of value. The second layer is the verifiability and convenience of having a coin. The third layer of value added by legal tender coinage onto precious metals is a sort of liquidity that's provided, a liquidity premium that's provided by the wide and mandated acceptance of this coin. If it's mandated, then it's going to be sort of universally accepted by merchants.

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So we have this gold and silver rising to the top as commodities used as money, and we have legal tender coinage kind of abetting that.

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But then legal tender coinage allows for debasement.

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When debasement occurs, when these coins that are supposed to be standardized are now the authority that prints them, then begins to mix in other less valuable metals with them.

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So the debasement occurs now because people have this kind of abstract unit in their head of coin. And so once it's debased, people are – they kind of gradually realize that, hey, these new unit of coin that are supposedly standardized are actually less valuable because they have less of the precious metal in them, which is that first layer of value.

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it's also a gradual debasement again because people do have the presumption that coins are

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not debased and there also is the fact that they're legal tender coined so they in fact

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may be mandated to use them so as these new as leaders begin to debase

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gold and silver as currencies by mixing in less precious metals people begin to hoard the coins

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that do have the pure content and people from outside jurisdictions, in fact, who don't have

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to abide by the mandated usage will simply extract the more valuable coins and get away

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with those. So legal tender coinage does allow for debasement. I've mentioned how gold and silver

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rose to the top of commodities to become the commodity money that is used due to their scarcity

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and ability to survive technological innovation, then gold wins over silver.

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This is for two reasons Alvin mentions.

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The first is a sort of historical contingency, just the fact that England set their standard

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a certain way and did begin to use gold.

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England had this kind of dominant empire.

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Its network effects then kind of led to gold being used more and more dominantly.

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The second reason is simply that the best money wins.

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gold's drawback is kind of a lack of, not a lack, but a not, it kind of lacks a certain

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divisibility because gold is so valuable. It's tough to divide it off into a small enough portion

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that you can get like a slice of bread or whatever. So people would use silver in a

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bimetallic standard to supplement gold. Silver is less valuable, so you can use that for more

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daily exchanges. But with the emergence of banking, then people begin to are able to

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divide their gold into smaller units by depositing it with a bank and making paper claims against it.

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So gold has higher stock to flow than silver.

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And now that banking emerges, it also has more divisibility.

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And so gold rises above silver and wins as the best commodity money.

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So there's these two reasons.

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Again, the historical contingent reason of England's usage of gold

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and the second reason of gold being the best money.

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Alden agrees with both,

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kind of says that the second reason

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is a little bit more deeper in explanation and better,

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but synthesizes both saying that

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banknotes made gold more divisible

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and thus the harder money won over time,

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but network effects from political decision

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can impact the timing and specific geographic spread

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of these sorts of changes.

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And I wanted to mention that synthesis

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because that's what Alden's going to be doing

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in these two chapters we're looking at

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is kind of synthesizing two perspectives, and she's really good at that.

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So the end of this chapter, chapter three, gold wins.

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It's still monetary, even though we begin to have paper claims against it,

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but it's kind of mainly as a store of value.

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And gold wins again because it's the most saleable.

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And we can still see, even though gold at this point becomes the gold standard,

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kind of paper claims being made against gold,

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you could still load, you could still, you know, wear your gold on your person. It's portable. You

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could go to another jurisdiction and wherever you go, you could likely find somebody else who would

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buy the gold off you. Chapter four is a unified theory of money. So we've primarily got sort of

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a historical or anthropological account in chapters one and two, and even chapter three,

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until now. And now we're going to get kind of a theoretic perspective on money before we got

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how money actually did arise, how it was used, why certain monies became better monies, etc.

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The two theoretical camps regarding the definition and origin of money, first is the commodity theory.

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The commodity theory is that money at its core is a commodity, and the best commodity wins. And so

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Alden says, quote, the primary concept presented by this theory of money is that barter is

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inefficient due to needing to satisfy the double coincidence of wants and therefore a highly

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saleable good that is resistant to debasement, for example, gold or silver, naturally arises

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in a society as a unit of account, medium of exchange, and a store of value to reduce the

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frictions of commerce. So that's the commodity theory of the nature of money, that a commodity

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that is scarce, the most scarce, and therefore, and has these other qualities make it the most

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saleable, rises to the top and becomes what is used as money. A key aspect of this theory is that

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money is kind of therefore independent of the state, it emerges naturally to satisfy

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the economic necessity of having an efficient means of exchange. So that's the commodity theory

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of money. A separate theory, the other theory is then the credit theory. The credit theory is that

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credit, not commodities, is at the core of what money is. So credit then, the credit theory says

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that a sale is an exchange of a good, not for a commodity, but for a credit, a favor or a promise

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of future payment. So the credit system is then in more complex societies through banks, debts and

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credits of a community are centralized, and the right to payment for the credit is not just against

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the person, but against others in the community who also owe debts. That's kind of the more complex

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elaboration. And the less complex elaboration, it's just that you do me a favor, I do you,

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or you give me something I need, and I promise to do something for you in the future. A favor

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is offered and tendered, and then you accept that credit. So that's the credit theory. Money is credit.

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You may have sensed here in the elaboration of both of these that there is a political angle to these, and Alden acknowledges that.

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The commodity theorists tend to favor small government. Money is an emergent phenomena outside of government. Simply whatever commodity has the qualities that are going to make it the most saleable, that is going to rise to the top and be used as money by people as a sort of emergent solution like the Stone of Jordan example from last time.

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It's simply people will arrive at the thing they're going to use as money. The government does not top down impose what money is.

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Commodity theorists also believe that government printed money to the extent it exists should be backed with the best emergent commodity money.

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So that's the commodity theorists in a sort of politicized way.

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The credit theorists in a sort of politicized way is that they have this presumption maybe for a larger role for government where money is a top-down thing.

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It's a social product tied to a specific sociopolitical organization.

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It's not like a natural real-world piece of gold.

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It's simply however that a society is going to enforce and define obligation amongst parties, this idea of credit.

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And the credit theorists tended to also believe that the state should issue currency to achieve its goals and not be bound by the scarcity that a commodity is bound by, by virtue of its nature.

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so

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Alden again is having a unified

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theory between these two theories

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she's synthesizing and

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we look back at her anthropology and history

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and we've seen previously that

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both of these visions have value that

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hunter-gatherers had both the concept

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of proto-money like shells

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and things like that that were commodities

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and they also had the concept of credit

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of this oral and memory-based

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ledger of doing favors

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amongst each other

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so both are in the historical record and then alden looks at what both theories do right and

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wrong before she proposes how to unify the theories so the commodity theorists what they do right

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the hardest money does in fact tend to emerge she gave us the history of gold in the previous chapter

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how it did arise to the top to be used as the commodity money because of the physical qualities

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it had. What is incorrect, though, about the commodity theorists, Alden says, is that they

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kind of premise their whole theory on the idea that historically, the problem of barter is what

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stimulated the need for money, that there was the double coincidence of wants where I have

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spears to trade, but you have nothing I want. And so there's a failed transaction. But Alden says

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The anthropology, the actual history of the situation shows us that social credit did actually solve the problem of barter for small-scale human societies.

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In fact, even predated humans with apes reciprocally picking mites off each other's backs in a sort of credit system.

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Humans then simply elaborated and make this reciprocation, that is, credit, more complex and extensive.

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so that's what's good and bad about the commodity theory that brings us then to the social credit

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the the credit theorists rather um what they got right then is exactly that anthropology or history

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alden says quote human interaction is at its very core a series of formal or informal credits and

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debits to others and is organized by rituals and rules that are tied to our evolutionary instincts

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our earliest religions, and our earliest governing structures. So again, it's essentially a human

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thing that we did and are capable of using credit as a sort of money. But that's what credit

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theorists get right about credit is money. What they get wrong, though, all the notes,

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deficiencies that credit has as a form of money. First is that credit still needs a unit of account.

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It still needs a way to kind of denominate the value of credit in other terms so that people are able to actually use it.

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the way that we denominate the value of it needs to stay constant when you

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denominate it in terms of wheat or gold or something,

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because if it's just,

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I have a favor or credit for three cases of beer and one steak,

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it's still just,

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then I have to barter those credits.

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We're right back at the barter problem.

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So barter credit still needs a unit of account.

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Second,

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another deficiency is what if you leave the community credit is really tied to

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the community you're in.

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You have done favors and been offered credit by and offered credit to the people, your friends and kin who are around you.

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And if you go to another community, we need something that's more universally recognized that they will accept in the other community.

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Third, the third problem or deficiency with the credit theorists, their idea of the definition and origin of money is that it doesn't scale.

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Sure in a small trust society where everybody knows everybody you can have credit as a form of money But once we get beyond that and here a quote from Alden I really love quote honor as a concept is incredibly

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important for human interactions, but does not scale well in an impersonal bureaucracy. So

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credit kind of depends on this honor-based system. I'm going to, in the future, actually fulfill the

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debt I have to you, the credit I've extended. But again, in impersonal bureaucracies,

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in nation states with millions of people, we can't really count on that trust-based credit

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to maintain its value.

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Which brings us to kind of the overarching problem with credit systems that Alden mentions.

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Devaluation, the debasement of currency seems to be a universal aspect of credit-based systems

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that attempt to scale beyond local communities into greater nation states.

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the credit theorists basically rely on unwarranted assumptions to believe that credit will retain its value once we begin to have these bigger, more complex societies.

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First, they assume highly competent and altruistic leaders that are going to maintain the strength and viability of these credits we extend.

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And however, Alden points out that history shows that debts are often discharged, devalued, and defaulted.

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Societies crumble. Classes are given debt jubilees.

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So the credits and debts just don't retain their value.

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Historically, abstract credit has been one of the worst performing assets to hold.

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You should always prefer to hold something material.

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Gold, for example, has done much better historically.

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As governments rise and fall, again, a commodity has been a much better thing to hold when centralized custodians are not to be trusted. The assumption, again, that leaders will be highly competent and altruistic has not been borne out by history.

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The other unwarranted assumption that credit theorists make as to why currency will not be devalued if it is maintained as credit by a centralized authority is that credit theorists, some of them argue that debasement only occurs in response to war, plague, and other disasters when a centralized authority has to pivot to take care of something that they didn't expect to happen.

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All the encounters, though, that historically it appears debasement actually preceded and led to war.

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She says, quote,

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However, what Mitchell Inez missed, he's a credit theorist, I contend, was that the ability to debase the money contributes to the likelihood of war and several other forms of damaged productivity occurring in the first place.

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The temptation for a ruler to debase coinage is too great to overcome because it's usually the path of least resistance when faced with a problem.

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so all the notes maybe you know oftentimes we could avoid a war if rulers had to explicitly

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tax people which tends to be very unpopular instead of being able to secretly tax people

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through debasing the currency so credit actually leads to war not um it's not a response to it all

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the notes so those are the again the good things and the bad things about the commodity theory and

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the credit theory. Alden then gives us a unified theory of money. She synthesizes these two

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theories. She says, quote, she says that the ledger is the key, quote, rather than adhere to

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the commodity theory of money or the credit theory of money to the exclusion of the other,

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a more complete theory must find the underlying logic or foundation that both theories share.

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And what they share is that they both represent ways to maintain a ledger,

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but with different maintainers of the ledger. So credit theorists posit that the maintainer

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of the ledger is a human, a centralized authority who is going to maintain the ledger of credit in

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the society. This maybe works in small groups when it's done informally through friend and kin,

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but for large groups, centralized administrative states, it tends to not work well. Commodity

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theorists hold that the maintainer of the ledger is nature itself. The ledger of a physical

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commodity is settled by physical exchanges between parties on the spot, not deferred as credit,

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of a thing that's highly saleable based on its physical qualities. So social ledgers may be

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convenient and efficient, but they're prone to debasement. Commodity ledgers are relatively

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inconvenient and inefficient, but they're not prone to debasement. The concluding concept,

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though, is, again, that what's key is ledger. I'll give a final quote because this sums up

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the theory that Alden has arrived at based on synthesizing commodity and credit theories.

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Quote, a ledger theory of money, that's the theory she's arrived at, observes that most

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forms of exchange are improved by having a saleable unit of account that can be held and

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transferred over both time and space, and that this unit of account applies the existence of a ledger,

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either literally, which would be commodities, or in the abstract, which is credit. These monetary

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units and the ledger that defines them rely either on human administrators, credit, or on natural

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laws, commodities, to maintain their stability across time and space. So that is the unified

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theory of money. Money is not essentially a commodity and not essentially a credit.

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It is essentially a ledger, a summary of transactions that is used to keep track of

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who owns what. So that's the summary of chapters three and four. And so Lucas, to kick it back to

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you, I got kind of a methodological question. You can, we can just not swing at the wiffle ball,

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or you can take it. The question is, is the importance, is it important to have an abstract

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definition of money in this way? Like, oh, what is money? Going back to the essentials that

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underlying both commodities and credits as money, there's this more abstract concept of a ledger.

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I mean, do you think it's important that we have a theory like that, that tries to unify these

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things that she's at all as all that is done i would say i think it's important i'm not

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entirely certain it's useful and this came out this is something i've been thinking about over

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the last couple of days after reading this and especially after hearing you summarize it

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which is credit and the abstract ledger that it represents,

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I believe could be the oldest example of abstraction that humans have created.

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Because even before having any sort of language or hand signals or writing or anything,

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the I groom you, you groom me type of thing does exist.

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And so I got to thinking about that.

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And so she has them.

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And so we're kind of jumping into chapter four with this,

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but I like where you're going because this has kind of been the thought that's

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been hanging on my head, which is that.

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So she defines two theories of money, credit and commodity,

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and then kind of takes from them in order to come up with a unified theory of money.

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But when I look at it, what I actually see is that money is a technology.

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Abstract money, the social credit score, social credit system, social credit ledger, flexible social ledger, was the first money.

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and commodity money was the second money and commodity money existed because credit money

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didn't work and or sorry commodity money existed because it did the job better than yeah and i

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think about a problem it had yeah exactly so i i think about i don't think of them really as two

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competing theories. I think of them as one and then the other. I think of credit as the four-way

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tire iron. And I think of commodity money as the impact wrench. The impact wrench has not been

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around nearly as long, but it does the job better. And therefore, it is dominant within

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the realm of changing tires. So yeah, that's kind of what I thought.

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I mean, I think that's what the Austrian economic school says as well. Like they just go forward with the commodity theory of money. And then the credit theorists tend to be, Alden mentions in this chapter, modern monetary theory, Keynesians. And then also she mentions the anthropologist David Graeber's work, The Book Debt, which I've read like a third of that. It's actually a phenomenal book.

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um so alden isn't just wholeheartedly full-throatedly or whatever embracing austrian economics

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um as you kind of as a lot of bitcoiners do and as you indicate that you see that as an advance

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and it makes sense um i think that's because i don't so rhetorically i guess i like it because

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it is an olive branch reaching out to credit theorists they do still exist yeah it is like

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Like, right, fiat, people who do like look at fiat money might say, you know, it's not perfect, but it is what we have.

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And it has, quote unquote, worked.

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I mean, a bitcoiner say, no, it hasn't for these reasons.

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But, you know, it is a powerful school, I guess.

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And so if Alden says, OK, yeah, hold still one second.

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Some of the things you guys say are OK and some of the things the commodity theorist says is OK.

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You're saying the same thing, though.

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Like what matters is this underlying idea of the ledger. And so, I mean, like, and I think maybe this is what you kind of meant by it's important, but not, I forget what you said, important, but not useful. It is, it's like the idea of the ledger is so foundational. It's like, seems important, but it becomes so abstract.

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One wonders what the practical use of this wholly abstract ledger concept underlying both schools is if it's not to adjudicate between them and say commodity theorists are better than of what use is this kind of ghostly abstract idea of a ledger.

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And, you know, maybe we haven't got that yet. Like, that's where Alden is going to go with. Like, I think she says an open source ledger is where she's going to go for the future of money with Bitcoin. And so we'll see if she gets there. But on this front, I think you hit like a really interesting thing here. And I want to throw one thing back to you because this is a point I noted. Maybe there are some things that credit theorists get right. So here is Mitchell and Ness describing abstract credits.

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as the perfect form of money. Why credit is important, why credits are good money,

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Ines says, Michelin says, is no corporeal existence, no weight, takes up no room,

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easily transferred with no formality required, movable at will through small cost, the telegram,

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can store it with little expense, and you can use it to pay for anything you need.

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That sounds like qualities of another thing that we like.

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Sounds like Bitcoin.

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Sounds like Bitcoin, right?

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That sounds exactly like Bitcoin.

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Yeah.

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And so, I mean, maybe credit theorists don't realize that why credit is good is actually why Bitcoin is good, too.

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Maybe there is something that can be extracted from the credit theory to help credit theorists see what the Austrian economists have tended to see with more foresight.

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that's interesting that so so credit theorists

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are effectively treating credit as a bearer instrument like the holder of the debt

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essentially they're trying to say owns whatever that debt um whatever that debt can be repaid with

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like it's kind of because bitcoin is a bearer instrument yeah yeah yet it yet it perfectly

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satisfies all the qualities of credit money what makes those good things about credit i do think

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that like maybe credit is not perfectly a bearer asset because at the end of the day it is like an

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obligation enforced by a third party you do need that centralized authority yeah right so yeah

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Yeah. And so like, first, I want to say I do believe that Lynn Alden is being incredibly magnanimous and kind by giving so much credence and offering a seat at the table to credit money.

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and she's kind when you see her interact.

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She's funny, really funny, but has good clapbacks

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and really, I think, is kind of a unifying force.

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But, yeah, I think bringing it to the table

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and giving it some legitimacy, to me,

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I can see how if you're very new to the concept of considering what money is, I can see how that's really beneficial to be like, okay, we're going to put these two things on a scale and we're going to kind of compare them and we're going to see what sort of shakes out.

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But yeah, I guess to me, and it was her writing that clarified it too.

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To me, it was just this very simple thing of like, oh, there's a horse and then there's a car.

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Or there's a milkman and then there's a refrigerator.

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Like just one came before the other and the other did not need to exist but for the fact that the one before it had faults.

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There's something I had a thought that I wanted to throw at you.

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So she talks about, so I want to first define gold.

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The third chapter is about gold emerging as the dominant commodity money.

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I want to first redefine that as a rose by any other name and just get rid of the idea that gold is somehow special.

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It just turns out that it is relatively the best at satisfying the certain characteristics of money that lead to a natural inclination to use it.

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This goes back to kind of how I view and I hope this might be useful for other people to view money, which is to say I'm drafting for a football team.

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I'm drafting a quarterback. I need to get touchdowns. I don't want interceptions.

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I need yards and I, you know, and I don't, I want to avoid sacks or something like that.

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So those are like the, those are like the purposes of money.

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And Alden talks about the three purposes of money.

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There's actually a fourth one that I saw somebody else talk about online, which I thought was

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brilliant, which was a means of payment.

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So you've got, you've got the unit of account, the medium of exchange and the store of value.

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so like dollars are a means are there we think of them as as a means of payment as well but that's

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not actually true the means of payment would be like cash check credit card debit card okay yeah

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like it's how how do you transfer the medium of exchange which is yeah um so anyways um so

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think about drafting your quarterback and those are the things those are the touchdowns the yards

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the sacks, the interceptions, et cetera. Those are the statistics that you want to show up on

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the back of their football card. And then you have to go to the NFL combine and you have to

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look at all these, here's their hand grip. They're like, here's their hand strength.

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Here's how many times they do 225. Here's how fast they run. Like these are those characteristics

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that she talks about that lead to what good money are divisibility, portability, recognizability,

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verifiability um you know there's some i think there's some that she doesn't mention but i think

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there's also some that she doesn't mention because they are really kind of exclusive only to bitcoin

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which would be like immutability and incorruptibility like that does not exist otherwise

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because those are things you don't find in any physical commodity so the the commodity theory of

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money like here are physical characteristics it's nature's ledger you are physical things about a

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thing in the world. Yeah. Yes. Yes. Yes, absolutely. Absolutely. But anyway, okay. So

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the very extended, the super long intro for me to ask you this question was, so she talks about

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how gold led to effectively credit money or led to gold certificates being issued to be redeemable

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for gold because of the fact that she says that divisibility was an issue with gold.

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And I want to push back on that because I think that it not divisibility because silver is actually gold is actually more divisible than silver It softer It easier to divide What we talking about is density

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And it's the fact that the value is so great per unit that it's difficult to divide it into units small enough to use on a daily basis.

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And I would say that we need to redefine that and say that it's not the divisibility.

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the divisibility is easy.

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It's the density,

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which is actually the problem,

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which is that value per unit is so high

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that it renders it useless to be used as money,

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which is, I think, fascinating

351
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because what is the solution to that?

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Which is to have infinite value per unit,

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which is to have matterless, massless.

354
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You know, Bitcoin,

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you can have a trillion dollars nowhere.

356
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everywhere without weight without space it's not taking up room you don't have to carry it anywhere

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um so anyways i wanted to throw that at you to see if uh do you think i'm thinking along the

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right the right lines here when i say that it's actually density value density that leads us to

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select a money and that that density of value as it approaches greater and greater densities,

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as it becomes more and more dense per unit of value, actually creates more and more problem

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because it leads to what we saw with gold, which is so dense that you can't divide it to use it

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every day, which means that we're going to centralize it and issue certificates against it.

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And once we centralize it, we have the problem with any sort of centralization, which is that we have a trusted authority, and therefore we have opportunity for rambunctiousness to occur.

364
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Yeah. So yeah, I see what you're saying about density being the issue and not divisibility. I think what Alden might say is that divisibility is just a broader character. Maybe it's what you're saying too. Divisibility is a broader category. The subcategories of divisibility problems, one is the density problem. Another one might be like the literally not physically dividable problem, like an artwork is not divisible.

365
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You can't cut off the corner of it and have that be the fractional value of that piece of art or whatever.

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So, but yeah, regardless, divisibility, so density perhaps as a subcategory or type of divisibility problem.

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And then, so the thought is that that leads to gold needing to be held by a centralized custodian, which then leads to all of the subsequent shenanigans where it is debased essentially against the paper slips that are issued against it.

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Is that the, like density is what leads to centralization?

369
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I think that's a precise way to say it.

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Um, so because if that's the case, I mean, I agree, like a physical commodity occupying physical space, um, is going to have problems in an age of transnational interactions.

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so in the in the section on the emergence of banking we're going to get this in much greater

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depth i assume um chapter or part two which we're going to begin next time is called the birth of

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banks um in chapter eight is called the speed of transactions versus the speed of settlements

374
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i think we're going to get much more into this but alvin does mention provisionally in this chapter

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that banking emerged to solve the divisibility problem of gold.

376
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And she mentions the telecommunications aspect of it.

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So banks solved the density problem of gold, too,

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as matter that needs to be transported through space

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to finally settle a transaction by making it denseless

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through the form of the telecommunications abstraction.

381
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So paper slips of money abstract the divisibility concern away in our person-to-person interactions, and then transnationally, great distances, telecommunication further abstracts away the density problem, the physicality problem of gold to allow it to be a monetary standard.

382
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But each layer of abstraction is always a layer of potential abuse by a centralized authority.

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Paperslips of money and telecommunication, it just gives control to a centralized custodian to determine how these things are going to go down.

384
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And Alden is like Lowry in software and to this extent where she just gestures towards the history that Mitchell and Ness, this credit theorist, says, you know, everything works fine for credit when you assume highly altruistic and competent authorities.

385
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And Alden's like, what an assumption to make, right?

386
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Like, just like what a worse, what worse assumption could we make if you look at the history and how things have actually panned out?

387
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If you have any basic consideration of human nature, that is not an assumption you want to make.

388
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So, no, I agree.

389
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The density problem, I think it does lead to centralization.

390
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And then that banking emerges as a form of abstraction that then gives power to a centralized custodian.

391
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Yeah, it's a lesson in unintended consequences.

392
00:41:14,541 --> 00:41:16,021
Yeah, it all is, definitely.

393
00:41:16,021 --> 00:41:28,001
You know, you centralize the gold because you have a telecommunications network that exceeds the speed at which you can transfer the gold.

394
00:41:28,341 --> 00:41:34,821
And you want to be able to do business and settle business at the same speed.

395
00:41:34,941 --> 00:41:40,061
You want to be able to buy something and pay for it at the same, you know, lay a claim and pay for it and settle.

396
00:41:40,061 --> 00:41:40,381
Yeah.

397
00:41:40,381 --> 00:41:47,021
And so, yeah, we create this abstraction after centralizing the money.

398
00:41:47,741 --> 00:41:59,901
And what does it do is that it opens this Pandora's box of abuse that is, I would say, arguably far, far, far, far, far, far, far worse for humanity overall.

399
00:41:59,901 --> 00:42:17,341
But it takes back to the concept of concentrated benefits and diffuse harms, where the harm of that, the harm of debasement, it hits every single person that holds that dollar.

400
00:42:17,341 --> 00:42:28,101
And the concentrated benefit means that it is easier for the trusted authorities to centralize their power.

401
00:42:28,861 --> 00:42:38,261
Otherwise, they would have to figure out how to protect the gold or whatever they're using as the bearer instrument to settle.

402
00:42:38,381 --> 00:42:40,561
They would have to figure out how to protect it.

403
00:42:40,681 --> 00:42:42,721
They would have to figure out how to get it there faster.

404
00:42:42,921 --> 00:42:44,521
They would have to figure out how to divide it.

405
00:42:44,801 --> 00:42:45,861
They would have to innovate.

406
00:42:45,861 --> 00:43:08,581
They would have to do something better. And instead of having to do something better, what this allows the system to do is simply spread the harm over all of the participants in the network while making the role a little easier for the role.

407
00:43:08,581 --> 00:43:30,541
And also, you know, by the way, making them stagnant, making it so that they have an imperfect system that they are not thus trying to make better, which I think is an interesting – I just think that's interesting to consider is that I circle back whenever I talk about Bitcoin.

408
00:43:30,541 --> 00:43:39,041
I circle back to how it incentivizes innovation and decentivizes growth as a driver.

409
00:43:40,801 --> 00:43:46,221
And so I find that to be a really valuable kind of mindset to take.

410
00:43:46,221 --> 00:43:58,761
But I think that that does, for me, help me understand why the credit theorist camp is taken more seriously at this historic juncture.

411
00:43:58,761 --> 00:44:22,441
So prior to Bitcoin, considering what the nature of money is, you can look at it and say the commodity theorists are more correct because a physical commodity is protected against debasement as long as technologically we haven't found a way to do it, as in with gold, in a way that credit is not.

412
00:44:22,441 --> 00:44:49,821
But then, I mean, actually, like, at this historical juncture, where we don't have Bitcoin, but we need a way to abstract away the physical density of gold. I mean, we're going to have to rely on some sort of credit, like, like, it's a problem with gold, like, it requires that centralization, or it tends historically to lead to that centralization, where people deposit it with an authority to transmute it into a paper slip they can carry around.

413
00:44:49,821 --> 00:45:09,961
And those centralized authorities then, when they need to settle at large distances, it's a hassle to bring a caravan of gold from one centralized bank to another. Telecommunications seems to solve that as long as we accept the credit of transfer in lieu of the actual transfer.

414
00:45:09,961 --> 00:45:33,901
And so credit theorists, we have like a hybrid system before Bitcoin where at least back when it was a gold standard, where the standard it was redeemable in gold or whatever. So there seemed to be a commodity underlying it. And yet that commodity had been in practice. So its physical qualities had already been abstracted away in ways that were being abused.

415
00:45:33,901 --> 00:45:46,081
And so to give the credit theorists camp credit, they seem to have solved the historical problem of how do we transport gold, how do we teleport it at the speed of light without something like Bitcoin.

416
00:45:46,501 --> 00:45:54,081
Credit allows us to do that, so we'll have a centralized system where banks extend credits to each other rather than settle transactions physically.

417
00:45:54,081 --> 00:46:06,921
So again, I just want to – that's just to say that I don't think that credit theorists are completely ridiculous and that Alden is just rhetorically paying them homage for whatever reason.

418
00:46:07,041 --> 00:46:17,101
I think that she's acknowledging that maybe with the emergence of banking to take care of the density and divisibility problem, we at least did have credit seeming to be a viable source of money.

419
00:46:17,101 --> 00:46:40,101
And again, her abstracting away from that and saying, no, no, no, what's valuable in that is only the ledger. And again, that's also what's essential to the physical commodity is the ledger. And I think that's going to prove to be a very smart step when we do get into the future, which is the present, and talk about Bitcoin as a way to resolve and solve the problems of the centralization of gold.

420
00:46:40,101 --> 00:46:44,361
I think of

421
00:46:44,361 --> 00:46:48,941
I think credit theorists

422
00:46:48,941 --> 00:46:50,921
get legitimacy

423
00:46:50,921 --> 00:46:52,001
right now

424
00:46:52,001 --> 00:46:53,741
because

425
00:46:53,741 --> 00:46:56,961
people that rode horses

426
00:46:56,961 --> 00:46:57,961
got legitimacy

427
00:46:57,961 --> 00:47:00,481
for the first five or ten years

428
00:47:00,481 --> 00:47:01,721
after the car was invented

429
00:47:01,721 --> 00:47:04,841
I think it is just merely

430
00:47:04,841 --> 00:47:06,901
not recognizing

431
00:47:06,901 --> 00:47:09,181
that a superior technology

432
00:47:09,181 --> 00:47:14,721
exists and thus, um, but is the car in this analogy gold or is it Bitcoin?

433
00:47:15,201 --> 00:47:16,021
It would be Bitcoin.

434
00:47:16,521 --> 00:47:17,081
Yeah.

435
00:47:17,501 --> 00:47:17,761
Yeah.

436
00:47:18,121 --> 00:47:18,461
Yeah.

437
00:47:18,501 --> 00:47:23,101
Because, um, so like no credit money can exist.

438
00:47:23,101 --> 00:47:27,421
Like no fiat money has ever existed that did not start as backed by something.

439
00:47:27,421 --> 00:47:36,961
So like credit in its truest nature, um, the way that it's described here, it, it's not

440
00:47:36,961 --> 00:47:42,641
that it doesn't have an underlying commodity money it's that it turns everything into an

441
00:47:42,641 --> 00:47:51,581
underlying commodity money where every single good and service is monetized as debt um so that

442
00:47:51,581 --> 00:48:00,321
you can settle with your credit of yeah of said debt right and so what does that do well that

443
00:48:00,321 --> 00:48:06,261
creates the instance where you are pricing things like everything has to be priced in terms of

444
00:48:06,261 --> 00:48:11,881
everything else. It's just wholly inefficient. It, um, it's, it involves what's called

445
00:48:11,881 --> 00:48:17,981
combinatorial explosion, which means that it's, there's just too much. Um, it's, it's just too

446
00:48:17,981 --> 00:48:28,261
complex, too complicated, I guess, maybe, um, to be useful. Um, so yeah, I, I think that credit

447
00:48:28,261 --> 00:48:36,041
theorists, so basically I think that credit theorists get a buy right now because there are

448
00:48:36,041 --> 00:48:41,501
kind of like two types of people existing in this world right now, which are

449
00:48:42,221 --> 00:48:49,361
credit theorists and people who have learned about Bitcoin. And all of those people used to

450
00:48:49,361 --> 00:48:54,221
be credit theorists. Like that's what it was before. Basically. I mean, that's what I was

451
00:48:54,221 --> 00:48:58,201
before. I was a master's in economics. And so I thought that you were supposed to

452
00:48:58,201 --> 00:49:05,841
metal and pull levers and adjust rates and increase supply and, and, and, and fiddle here

453
00:49:05,841 --> 00:49:11,981
and fiddle there so that, uh, you can, you can level the growth and, you know, and, and so, yeah.

454
00:49:12,341 --> 00:49:17,461
Um, I just truly think there's like, you know, there's like people that ride horses and there's

455
00:49:17,461 --> 00:49:23,721
people that have had one ride in a car and they're like, Oh, way better. Like, um, the, the, the

456
00:49:23,721 --> 00:49:29,581
quote from Sherlock Holmes in the second movie that Robert Downey was in. I can't remember what

457
00:49:29,581 --> 00:49:36,661
the movie's called, but he says like, horses are crafty at both ends and dangerous in the middle.

458
00:49:37,601 --> 00:49:44,081
And that to me just perfectly describes what a credit system is, what a fiat system is,

459
00:49:44,081 --> 00:49:48,501
because it does, you know, just like riding a horse requires trust in a horse, and you have

460
00:49:48,501 --> 00:49:53,441
no idea what the horse is going to do, but you do know that it's going to prioritize itself

461
00:49:53,441 --> 00:49:59,821
over you. That is exactly, I guess, how I would think about credit theorists. So, I mean, I'm not

462
00:49:59,821 --> 00:50:06,541
knocking Lynn Alden at all. I just think that the way that she framed it gave me an opportunity to

463
00:50:06,541 --> 00:50:13,301
look at this and just to say, you know, this is literally just a lesson in recognizing an

464
00:50:13,301 --> 00:50:19,981
advancement in technology. And by the way, it's hard to recognize. This is what Michael Saylor

465
00:50:19,981 --> 00:50:26,661
is doing right now is he is utterly destroying people that have no idea what he is doing.

466
00:50:27,101 --> 00:50:34,181
And the reason he's doing it is because he recognized that diversification is an indication

467
00:50:34,181 --> 00:50:36,361
that you have not solved the problem.

468
00:50:37,101 --> 00:50:38,861
Like, it means that you're not sure.

469
00:50:39,941 --> 00:50:44,341
Like, that's why he's like, you know, when they talk about like, oh, you know, what's

470
00:50:44,341 --> 00:50:45,981
your recommended allocation for Bitcoin?

471
00:50:46,121 --> 00:50:47,441
He's like, well, it's the best idea.

472
00:50:48,461 --> 00:50:48,641
Yeah.

473
00:50:48,641 --> 00:50:52,401
And like, yeah, so does that mean you recommend the allocation of 1%, 5%?

474
00:50:52,461 --> 00:50:53,861
And he's like, it's the best idea.

475
00:50:54,201 --> 00:50:58,821
So you go with the best idea until it's no longer the best idea.

476
00:50:58,821 --> 00:51:04,821
The problem is that prior to Bitcoin, there was no best idea that existed.

477
00:51:05,241 --> 00:51:12,821
There were all kinds of, that's why we had to have bimetallic monetary systems.

478
00:51:12,821 --> 00:51:22,301
systems because Gresham's law existed because the reason I would argue, so Gresham's law is that bad

479
00:51:22,301 --> 00:51:28,921
money pushes out good so that the good money goes out of circulation and the bad money is what is

480
00:51:28,921 --> 00:51:33,881
used to transact on a daily basis, right? Right. So if you have the impure coins issued by the

481
00:51:33,881 --> 00:51:37,941
centralized authority, people are going to want to get rid of those, use those and hoard the pure

482
00:51:37,941 --> 00:51:43,561
coins. Exactly. And, but the same thing right now that, that, that happens right now is that

483
00:51:43,561 --> 00:51:47,981
people want to transact in cash or dollars. They don't want to transact in Bitcoin. Like

484
00:51:47,981 --> 00:51:54,301
look on the, um, you can look on what's called the HODL wave, which shows like how long coins

485
00:51:54,301 --> 00:52:00,241
have been held. And it's like 50% of all Bitcoin has been held for like seven years or longer.

486
00:52:00,241 --> 00:52:05,001
I think that's what it is. Or maybe it's fine. But like, you don't have dollars that you've

487
00:52:05,001 --> 00:52:11,301
held on to that long. Like not really like they're your retirement account, but it's just your

488
00:52:11,301 --> 00:52:16,841
retirement account. And what's your retirement account? It's mutual funds that are constantly

489
00:52:16,841 --> 00:52:24,841
every single day making different decisions. Oh, I've, I've got, I own pieces of 12,000 different

490
00:52:24,841 --> 00:52:31,001
stocks and bonds and real estate investment trusts and et cetera, et cetera. And every single day

491
00:52:31,001 --> 00:52:37,081
they're rebalancing. Why? Because they don't know which one's the best idea. Because today,

492
00:52:37,401 --> 00:52:42,661
real estate's a better idea. Tomorrow, gold is a better idea, et cetera, et cetera. And I think

493
00:52:42,661 --> 00:52:47,861
that's why it's so shocking and it's so hard to recognize because there has never before existed

494
00:52:47,861 --> 00:52:55,861
a best idea when it comes to money. There was always a fault with the dominant natural commodity

495
00:52:55,861 --> 00:53:01,621
money. Gold's fault was the density, which led to the divisibility problem, which led to

496
00:53:01,621 --> 00:53:07,981
centralization, which led to certificates being issued against it, which meant that trust was

497
00:53:07,981 --> 00:53:12,921
required in a higher authority, which meant that we were going to lose us. It made me think of how

498
00:53:12,921 --> 00:53:18,841
Shaq couldn't shoot free throws. Shaq would have been the greatest player in NBA history if he

499
00:53:18,841 --> 00:53:38,712
could have shot free throws And because he couldn shoot free throws that meant that there was a way to take Shaq out of circulation So just like gold was taken out of circulation and the gold certificates were transacted

500
00:53:39,412 --> 00:53:43,292
the strategy in basketball became the hack-a-Shaq strategy,

501
00:53:43,572 --> 00:53:48,592
which was to take Shaq out of circulation by putting him on the line

502
00:53:48,592 --> 00:53:51,932
and thus making other players beat you.

503
00:53:51,932 --> 00:53:55,812
But that was my metaphor for that.

504
00:53:55,952 --> 00:53:56,832
I thought it was interesting.

505
00:53:57,492 --> 00:53:58,152
I think it's interesting.

506
00:53:58,152 --> 00:53:59,172
I got to throw Shaq into it.

507
00:53:59,352 --> 00:53:59,572
I know.

508
00:53:59,612 --> 00:54:02,512
I was going to say the way that your mind works is very interesting.

509
00:54:02,652 --> 00:54:07,392
My mind does not have a node that is Shaq that connects to monetary theory, but it now

510
00:54:07,392 --> 00:54:08,292
does have one of those.

511
00:54:08,772 --> 00:54:09,452
You're welcome.

512
00:54:09,452 --> 00:54:18,152
I was an excellent exposition of Bitcoin as an idea and the value of ideas because that

513
00:54:18,152 --> 00:54:21,972
answers the question, the wiffle ball that I tossed that you read at the beginning, which I was

514
00:54:21,972 --> 00:54:26,952
sincerely curious about, which is, is the importance of an abstract definition of money

515
00:54:26,952 --> 00:54:32,072
in this way important? Like, that we get like, oh, we arrive at ledger as a theory of money.

516
00:54:32,892 --> 00:54:36,872
That kind of, yeah, we're taking account history, but we're really like abstracting from two

517
00:54:36,872 --> 00:54:43,552
existing theoretical frameworks to arrive at a framework that unifies both of them. And we get

518
00:54:43,552 --> 00:54:48,532
the idea of money as a ledger. Like, why is that important? And it is important because,

519
00:54:48,732 --> 00:54:56,032
as you mentioned, like, Saylor has infinity conviction, because he has an idea, and he

520
00:54:56,032 --> 00:55:03,052
understands this idea. And that idea entails the way that he should act. And if you have,

521
00:55:03,052 --> 00:55:09,212
you have to walk people to Bitcoin to help them see that it is money. And you need a theoretical

522
00:55:09,212 --> 00:55:15,552
framework to do that. And maybe the commodity framework is not the best one. The credit one

523
00:55:15,552 --> 00:55:20,052
is definitely not the best one. So what is the framework that's going to help people germinate

524
00:55:20,052 --> 00:55:26,352
this idea that's going to give them this sailor level of conviction that Bitcoin is money? And so

525
00:55:26,352 --> 00:55:32,612
a ledger theory, I can see where all is going with this. This is a good way to walk people

526
00:55:32,612 --> 00:55:40,792
into the future through an abstract idea, which again, is necessary for the sort of conviction

527
00:55:40,792 --> 00:55:48,152
that one actually has to have for Bitcoin to have any value. If Bitcoin, if you have no underlying

528
00:55:48,152 --> 00:55:55,292
idea undergirding your belief about why you're holding Bitcoin, if it's just number go up

529
00:55:55,292 --> 00:55:58,772
completely, you're going to get rid of it, you're going to panic sell all of these things.

530
00:55:58,772 --> 00:56:05,672
Bitcoin is one of the few areas in life where the more knowledge you have, literally more material

531
00:56:05,672 --> 00:56:10,612
wealth is going to come your way. Like conviction is based on knowledge. Knowledge is based on an

532
00:56:10,612 --> 00:56:15,952
underlying theoretical framework. And the more you know about Bitcoin, the more you kind of

533
00:56:15,952 --> 00:56:20,172
bolster this theoretical framework and the more that your conviction is thereby going to be

534
00:56:20,172 --> 00:56:26,452
bolstered. And so, I mean, I think it's just, I just love that. I mean, here we are talking about

535
00:56:26,452 --> 00:56:31,732
ideas. Ideas, we often wonder, do they have value? We're sitting here talking about abstract idea

536
00:56:31,732 --> 00:56:40,512
of money, but absolutely it has value for humans who have to have some sort of understanding of

537
00:56:40,512 --> 00:56:45,992
the, you know, in order to have any sort of conviction. Yeah. Knowledge is power. Bitcoin

538
00:56:45,992 --> 00:56:59,612
is power yeah um knowledge in action is wisdom um and the wise thing to do is to take your power

539
00:56:59,612 --> 00:57:08,332
and project it in what you think is the most advantageous direction um so what you're doing

540
00:57:08,332 --> 00:57:16,712
as you deepen your knowledge is that you are further refining and intensifying the way that

541
00:57:16,712 --> 00:57:25,292
you project your power. And it does make sense that you might come upon something very similar

542
00:57:25,292 --> 00:57:31,752
in design, which is Bitcoin, which is a, I love Jason Lowry's definition of it as a power

543
00:57:31,752 --> 00:57:39,632
projection technology. It really, yeah, it really, I think has value even in this context.

544
00:57:39,632 --> 00:57:49,732
I wanted to talk about, so in chapter four, Alden talks about the ways effectively that a

545
00:57:49,732 --> 00:57:57,792
commodity money falls out of flight. So the stock to flow is kind of the determinant. It's not the

546
00:57:57,792 --> 00:58:05,392
determinant, but it's like of the things that can be used for money, the stock to flow is the

547
00:58:05,392 --> 00:58:11,672
determinant. But there's other things that she mentions that have higher stock to flow ratios,

548
00:58:11,672 --> 00:58:19,012
but they are less useful as money because of other things. And she notes some other things.

549
00:58:19,592 --> 00:58:26,812
So basically, it breaks down to innovation, consumption and discovery. So innovation would

550
00:58:26,812 --> 00:58:31,492
be like a technological advancement that allows you to make more of that money.

551
00:58:32,672 --> 00:58:40,452
Consumption would be that the utility of that money is high enough that it has a utility

552
00:58:40,452 --> 00:58:49,312
value that exceeds its monetary value such that people are going to use it and consume

553
00:58:49,312 --> 00:58:54,712
it and take it out of supply and necessitate more.

554
00:58:55,652 --> 00:58:56,492
And then discovery.

555
00:58:56,812 --> 00:58:59,812
So you could just simply discover more of it.

556
00:58:59,812 --> 00:59:09,072
And I think about this because there's, I guess, El Salvador just discovered a $3 trillion deposit of gold.

557
00:59:09,312 --> 00:59:12,172
So, you know, what is gold's market cap?

558
00:59:12,232 --> 00:59:13,252
I think it's like $10 trillion.

559
00:59:13,672 --> 00:59:24,732
So they just discovered 30% more of something that historically, you know, was not increasing in supply at all.

560
00:59:24,732 --> 00:59:32,612
I just think it's interesting to see acted out this thing that like we,

561
00:59:32,712 --> 00:59:34,832
we know that gold is not good money.

562
00:59:34,832 --> 00:59:39,032
And the reason we know gold is not good money is that fiat money exists.

563
00:59:39,032 --> 00:59:42,432
Like fiat money doesn't exist, but to solve a problem that,

564
00:59:42,492 --> 00:59:46,032
that gold has. Yeah. And, and it's,

565
00:59:46,132 --> 00:59:52,072
it's just an evolution in that process and just, but just to see it, you know,

566
00:59:52,072 --> 01:00:02,212
So I don't know what that'll take gold stock to flow ratio to, but I know right now it's like she's a gold gold stock to flow ratio has historically been around 50.

567
01:00:02,412 --> 01:00:04,812
Sometimes it's been down to like 25 up to 100.

568
01:00:04,812 --> 01:00:12,492
So this means that if there's if stock to flow is 100, that means that there's 100 tons that exist.

569
01:00:12,792 --> 01:00:20,712
And each year, one more ton is added to that and increasing by that just for for people that don't understand.

570
01:00:20,712 --> 01:00:24,952
Bitcoin stock to flow right now is like 87 point something.

571
01:00:25,692 --> 01:00:28,452
And every four years, the stock to flow doubles.

572
01:00:28,852 --> 01:00:30,772
So it already exceeds gold.

573
01:00:32,132 --> 01:00:37,592
And it is it is going to get even harder to produce more of it.

574
01:00:37,752 --> 01:00:40,472
And so I think that's why we're seeing right now.

575
01:00:41,652 --> 01:00:46,612
I do believe that we're on kind of the edge of this hyper Bitcoinization where the game

576
01:00:46,612 --> 01:00:54,292
theory plays out where it is now recognized that it is the hardest money. And we move further and

577
01:00:54,292 --> 01:00:59,672
further in that direction. So anyways, that was, that was again, just a, it's not an advertisement

578
01:00:59,672 --> 01:01:06,332
for Bitcoin. It's just that I can't help but go there. I mean, that's what we see in this chapter.

579
01:01:06,332 --> 01:01:13,072
We like, we get the pros and cons of each form of money. And it's hard not to read into the con

580
01:01:13,072 --> 01:01:20,012
stated for each that Bitcoin is the solution to that thing. I mean, it's, it is not debasable.

581
01:01:20,012 --> 01:01:28,072
So it solves the credit theorists problem with their proposed currency. And it's, you know,

582
01:01:28,092 --> 01:01:35,092
not physical. And so it has all these properties, of course, that physical gold that tend, as you

583
01:01:35,092 --> 01:01:39,292
mentioned, tend to lead to centralization, the emergence of banking, the emergence of fiat.

584
01:01:39,292 --> 01:01:51,292
So yeah, just Bitcoin, if you know anything about it, immediately advertises itself as the solution once you see the problems described in detail with historical examples.

585
01:01:52,892 --> 01:01:54,392
Yeah, I've got a question for you.

586
01:01:54,452 --> 01:01:56,392
So there's three layers of value premium.

587
01:01:56,812 --> 01:02:01,012
The utility, the second layer is the convenience and verification.

588
01:02:01,532 --> 01:02:02,772
The third layer is the liquidity.

589
01:02:03,792 --> 01:02:05,972
Does Bitcoin have utility?

590
01:02:05,972 --> 01:02:11,672
because i guess i i remember thinking about this in like terms of gold so like

591
01:02:11,672 --> 01:02:19,772
i i heard that i think 90 of the market cap of gold of the value of gold's market cap is

592
01:02:19,772 --> 01:02:27,632
monetary value and 10 is utility value so like 10 of it is gold being used for what it's actually

593
01:02:27,632 --> 01:02:34,712
useful for which is like a conductor and um you know this this metal that is easily malleable and

594
01:02:34,712 --> 01:02:43,532
cannot decay and yeah but so um so there's utility even to go and and i would argue that

595
01:02:43,532 --> 01:02:50,152
the reason why gold has a high stock to flow ratio is that it

596
01:02:50,152 --> 01:02:58,892
i feel like it has less utility than silver i don't know if that's true but i i think so

597
01:02:58,892 --> 01:03:03,592
because like gold's so soft that you can't really do a whole lot of stuff with it um

598
01:03:03,592 --> 01:03:05,852
I think it tarnishes less, maybe.

599
01:03:05,872 --> 01:03:06,832
It doesn't tarnish at all.

600
01:03:07,372 --> 01:03:07,612
Yeah.

601
01:03:07,952 --> 01:03:15,592
So like in certain like electrical, like computer or something applications, maybe it has higher utility, but I don't know.

602
01:03:15,592 --> 01:03:20,412
But anyway, so I guess my question is, does Bitcoin have utility?

603
01:03:21,312 --> 01:03:25,832
Or is everything convenience and verification, liquidity, you know, all that?

604
01:03:25,912 --> 01:03:26,312
Yeah, yeah.

605
01:03:26,512 --> 01:03:28,092
Because I think that actually might be true.

606
01:03:30,632 --> 01:03:32,132
Three points on that.

607
01:03:32,132 --> 01:03:41,752
First, like those three layers of value arise in the context of gold as legal tender coinage.

608
01:03:41,752 --> 01:03:50,332
So that legal tender coinage in a certain respect introduces a bit of abstraction to gold itself.

609
01:03:50,652 --> 01:03:53,172
These are standards imposed by a centralized authority.

610
01:03:53,872 --> 01:04:06,232
So Bitcoin does not have any extra and it need not have any extra layer of abstraction specified by an authority in order to make it standard in size, weight, quality, etc.

611
01:04:06,232 --> 01:04:13,232
So that's actually like an advantage. It doesn't have utility in that way, which is an advantage.

612
01:04:13,232 --> 01:04:33,972
Whether it does have utility is an interesting question. I think that's part of the software thesis is that maybe the military application or as an alternative potential infrastructure for cyberspace that is tied to the real world. These are forms of utility that it might have.

613
01:04:33,972 --> 01:04:40,992
um i don't think this is yeah contemplated with so that's one but another one i don't think this

614
01:04:40,992 --> 01:04:47,352
is contemplated within this consideration of utility but if you say utility as money right

615
01:04:47,352 --> 01:04:53,312
i mean like the fact that it's teleportable low fees instantaneous i mean i don't think

616
01:04:53,312 --> 01:05:02,212
i think you want your money to only have utility as money as money as an insulator or uh or a

617
01:05:02,212 --> 01:05:03,512
Yeah, something like that.

618
01:05:03,972 --> 01:05:04,612
Yeah, yeah.

619
01:05:04,972 --> 01:05:08,052
So maybe, I mean, there might be software alternatives.

620
01:05:08,052 --> 01:05:17,832
And once we branch out and begin to consider whether Bitcoin coin is a metaphor, that's actually, you know, we can consider Bitcoin as other things that might have value.

621
01:05:18,572 --> 01:05:22,932
Maybe it has utility then as spam protection or something like that.

622
01:05:23,012 --> 01:05:30,692
But yeah, no, I think generally it's good that money not have utility and instead just be an absolutely pristine store of value.

623
01:05:30,692 --> 01:05:37,652
I've been rethinking about like since Jason's reclassification of Bitcoin as bit power.

624
01:05:38,472 --> 01:05:47,692
I think in my head, I just think of little cyber soldiers, like little cyber master chiefs from from Halo.

625
01:05:48,512 --> 01:05:50,712
And it's like that's what every little bit is.

626
01:05:50,712 --> 01:05:59,612
It's like it's all I get why I get why Saylor describes it as a as a, you know, a cyber cyber cyber hornets, an army or a swarm of cyber hornets.

627
01:06:00,692 --> 01:06:02,692
It makes perfect sense to me.

628
01:06:03,192 --> 01:06:05,352
I think those metaphors are important too.

629
01:06:05,532 --> 01:06:08,512
That's why I posed a question to you in one of the conversations.

630
01:06:08,992 --> 01:06:15,312
What is the piece of sci-fi literature or cinema that helps us conceptualize Bitcoin as BitPower?

631
01:06:16,012 --> 01:06:20,512
And you mentioned Tron, which I think – I want to go back and watch Tron now through that lens.

632
01:06:20,992 --> 01:06:25,672
There's also – is it William Gibson who has – I think – is it Neuromancer?

633
01:06:25,672 --> 01:06:30,852
It's where you get this, we get this one of the really kind of proto ideas of cyberspace.

634
01:06:31,352 --> 01:06:34,592
There's all these, there's lots of potential things out there.

635
01:06:34,612 --> 01:06:49,192
And I do want to go back and revisit these pieces of science fiction, art, literature, cinema, and just have in my mind Bitcoin while I'm reading them in order to gain conceptual clarity of what something like power might be.

636
01:06:49,192 --> 01:07:05,432
And I think there's value in that. I hope that people begin to consciously produce art where they represent an ethereal concept like Bitcoin as a material, tractable, character based personality ridden thing to help our ape minds get traction on it.

637
01:07:05,432 --> 01:07:08,672
there's another one that has Justin Timberlake in it.

638
01:07:08,892 --> 01:07:10,372
I think it's called out of time,

639
01:07:10,472 --> 01:07:14,072
but I'm not certain or might just be some sort of time derivative in the

640
01:07:14,072 --> 01:07:14,352
title,

641
01:07:14,352 --> 01:07:15,832
but it's a,

642
01:07:16,032 --> 01:07:20,452
it's set in the future and everybody has these little watch things that has

643
01:07:20,452 --> 01:07:23,472
their credits of how much time they have.

644
01:07:23,472 --> 01:07:24,672
And when they run out of time,

645
01:07:24,772 --> 01:07:25,212
they die.

646
01:07:26,352 --> 01:07:27,152
And so,

647
01:07:27,472 --> 01:07:29,272
and so they're constantly like,

648
01:07:29,332 --> 01:07:29,552
you know,

649
01:07:29,572 --> 01:07:32,772
like he's working two jobs so he can get home to get,

650
01:07:32,772 --> 01:07:39,592
give his mom some time so that she can continue living. Um, and then people bet with their time

651
01:07:39,592 --> 01:07:46,452
by doing this, uh, this ritual of a, of a arm wrestling thing where you're basically like

652
01:07:46,452 --> 01:07:52,292
trying to suck the time out of the other person. It's very interesting. Um, that would be a good,

653
01:07:52,392 --> 01:07:56,552
that would be a good one. But yeah, I think Tron, I think Tron's my best as far as, uh,

654
01:07:56,552 --> 01:07:57,972
Bitcoin is BitPower.

655
01:07:58,552 --> 01:07:59,512
No, no, I haven't.

656
01:07:59,512 --> 01:07:59,872
Have you found anything else?

657
01:08:00,392 --> 01:08:01,252
I have not.

658
01:08:01,432 --> 01:08:01,872
I have not.

659
01:08:01,992 --> 01:08:09,172
I want to – you also mentioned this last time and your mention of this, what I'm assuming is very fine, Justin Timberlake Cinema.

660
01:08:10,692 --> 01:08:11,312
The idea that –

661
01:08:11,312 --> 01:08:11,732
Good actor.

662
01:08:12,552 --> 01:08:13,072
Fantastic.

663
01:08:13,072 --> 01:08:28,812
The idea is that to have something be about Bitcoin, it can also be about the nature of time as money, just about the nature of money, and to help us understand what money is, that will also help us understand what Bitcoin is.

664
01:08:28,812 --> 01:08:39,632
And like, again, this back to the purpose of this chapter, very abstract consideration that this idea of the ledger underlies the existing theories of money.

665
01:08:40,092 --> 01:08:44,552
Why is that valuable? It's, again, going to help us get traction on something like Bitcoin.

666
01:08:44,552 --> 01:08:48,152
That is a new thing. And we need new models to understand it.

667
01:08:48,152 --> 01:09:03,672
Yet today, the most useful metaphor for what money is, I think, is what Saylor talks about, which is that it's like Jack Mallers to a bunch of people, I think, have kind of adopted this approach, I think probably because it makes sense.

668
01:09:03,672 --> 01:09:08,432
but just that money is literally energy. It's life. It's life force.

669
01:09:08,752 --> 01:09:16,452
It is the way that you store what you expend your time, effort and skill towards.

670
01:09:16,632 --> 01:09:20,992
And it's an abstraction of that as valued jointly by everyone.

671
01:09:21,252 --> 01:09:30,152
And I think thinking of it as, you know, like you think of Bitcoin as the container into which you put your life force,

672
01:09:30,152 --> 01:09:31,612
into which you put your energy.

673
01:09:32,152 --> 01:09:36,672
And it just happens to be that it's the only container that doesn't leak.

674
01:09:36,772 --> 01:09:38,652
It's the only boat that doesn't sink.

675
01:09:39,232 --> 01:09:43,872
And it turns out that that's really important when it comes to a container

676
01:09:43,872 --> 01:09:46,232
that you're storing your life force and your energy.

677
01:09:46,252 --> 01:09:46,572
Yeah, yeah.

678
01:09:47,072 --> 01:09:50,072
It might turn out that that's just an abstract ledger.

679
01:09:50,172 --> 01:09:53,312
That's just what the ledger is in its most abstract consideration,

680
01:09:53,312 --> 01:09:58,092
is a perfect container once you've taken away all real-world contingency and frictions.

681
01:09:58,832 --> 01:09:59,872
Yeah, the perfect handbag.

682
01:10:00,152 --> 01:10:06,152
Yeah, you got like a, did some very comfy heater turn on in your house?

683
01:10:06,152 --> 01:10:07,052
Yes, the heater just turned on.

684
01:10:07,052 --> 01:10:10,812
I can feel the comfort viscerally in the air of that hot air blowing.

685
01:10:11,452 --> 01:10:12,172
That's good.

686
01:10:12,612 --> 01:10:13,672
I'm getting ready to take off.

687
01:10:13,872 --> 01:10:17,212
I am turning the Tesla into a deer blind tonight,

688
01:10:17,252 --> 01:10:20,932
so I am walking out of here and going to go kill a deer in the morning.

689
01:10:21,492 --> 01:10:25,692
But yeah, yeah, we got a lot of action going on right now.

690
01:10:25,692 --> 01:10:26,132
Yeah, yeah.

691
01:10:26,352 --> 01:10:27,112
No, that's fantastic.

692
01:10:27,112 --> 01:10:33,932
I hope you'll apprise us as to what happens via Twitter or some other way to see if this is successful, if this is the future right here.

693
01:10:34,452 --> 01:10:42,392
If nothing else, it'll be an interesting adventure to go throw a 270 in the back of Tesla and see if I can shoot out of it.

694
01:10:42,492 --> 01:10:43,172
It'll be fun.

695
01:10:44,272 --> 01:10:46,252
Yeah, another great one.

696
01:10:46,372 --> 01:10:48,432
I think we have had a good stopping point, are you?

697
01:10:48,992 --> 01:10:49,572
Yeah, I think so.

698
01:10:49,612 --> 01:10:50,332
That's what I have, man.

699
01:10:50,752 --> 01:10:51,072
Awesome.

700
01:10:51,512 --> 01:10:53,792
Well, I want to thank everybody for joining us.

701
01:10:53,792 --> 01:11:00,172
Again, Grant is at the whole frame on X and I am Lucas Maddy on X.

702
01:11:00,912 --> 01:11:02,912
And next time we will go over.

703
01:11:03,072 --> 01:11:06,312
So this has been chapters three and four of Broken Money.

704
01:11:06,672 --> 01:11:08,912
Next time we will go over four and five.

705
01:11:10,092 --> 01:11:11,232
And yeah, we appreciate everybody.

706
01:11:12,772 --> 01:11:13,512
Right on.

707
01:11:13,952 --> 01:11:14,152
Thanks.

708
01:11:14,352 --> 01:11:14,892
Appreciate it.

709
01:11:15,232 --> 01:11:15,772
Thanks, guys.

710
01:11:15,832 --> 01:11:16,232
Have a good one.

711
01:11:16,332 --> 01:11:16,432
Bye.