Pierre, welcome to the Bitcoin Infinity Show. Nice to have you here.
Hey, thanks for having me on.
This is actually quite the moment for me because yours was the first pod I was ever on.
Back when you had the Noded podcast, I looked it up. It was episode 63, I think, of the Noded podcast.
I had just released Sovereignty Through Mathematics, and we had, I believe, met in Riga, maybe, or maybe it was before Riga.
I remember, I remember it because I missed it.
I missed the date because I was at an amusement park with my kids and I totally fucked up.
And I thought I had made the biggest blunder of my life, but it turned out pretty well.
Now, even though I missed the park.
You can never go wrong going to the amusement park with your kids.
I think that's the right move.
Yeah.
Except in Sweden, because it's shit cold at the amusement parks.
But anyway, that was, that was a good time.
Yeah.
And a lot has happened since.
What, first of all, what, what, maybe we should start with giving our listeners a TLDR
on Piero card, since you haven't been on my show before.
So, so just give them the, the short one.
Yeah, sure.
So, you know, before Bitcoin existed, I got interested in monetary economics.
I was kind of a sound money, gold and silver student of the Austrian school.
And I also got interested in open source software.
So I was listening to Richard Stallman, and I never thought those two things would cross.
But fast forward to the end of 2012, and I really took a deep dive into Bitcoin at the behest of my friends, Michael Goldstein and Daniel Krewitz, who would later go on to develop some of these thoughts at the Satoshi Nakamoto Institute.
And Michael Goldstein continues to maintain the Nakamoto Institute.
He's the president there.
So for people who really want to go deep on coin philosophy and history and kind of cypherpunk and all of the literature around that, I highly recommend it.
And to donate and support it so that it continues to grow in its content.
So fast forward to, you know, kind of, I took a career in accounting.
I got my bachelor and master in accounting at UT Austin.
Started kind of a normal TradFi accounting role.
but really wanted to work in the Bitcoin industry.
So I took a role at BitPay
in their accounting department in Atlanta.
That was a Bitcoin payment processor.
They still exist actually,
but I feel like they're maybe less prominent
than they were at the time.
And worked in TradFi as well,
later at Hudson River Trading,
which is a high-frequency trading shop there.
I was doing accounting, nothing to do with Bitcoin,
but definitely, you know, fiat mining, right?
and also learning a lot about how the financial system and capital markets work.
So when I really wanted to focus on open source full-time, I was really interested in the Lightning
network. I'd started seeing videos of Jack Mahler's working on his Lightning software,
and I thought it was really cool. And I was a Python guy. He was more of a, I think, you know,
JavaScript guy. And I like JavaScript, but I felt more comfortable with Python. So
I started working on some different lightning related projects. I did what they call a residency
at ChainCode Labs back then. And you do a project as part of that. And so my project was
actually an Excel plugin that allowed you to send lightning payments from within Microsoft Excel.
So I had a lot of fun doing that. And then that led me to the node launcher because the hardest
part of that on Windows was actually running a Bitcoin and lightning node side by side and
having them communicate with each other. And that led me to Kraken because Kraken was really
interested in integrating with the Lightning Network. And it took a little while, but we
eventually got that done. And then Elizabeth Warren started attacking Bitcoin miners. And so
I joined Riot Platforms as their VP of research to provide the intellectual arguments for why she's
wrong and pushed back on this by hiring lobbyists, hiring public policy experts to go and make sure
that the regulatory risk around Bitcoin mining in the US was minimized. That was successful beyond
anyone's imagination that we completely won that battle. Nobody cares anymore about Bitcoin mining
from a political perspective and that decided to go out and focus on other things, namely
the financialization of Bitcoin.
I think that's probably the biggest topic for the next few decades.
You know, payments will continue to be important, obviously, and mining will continue to be
important.
But what I'm really excited about is taking over the financial system.
Yeah, there's a lot to unpack there and a lot like we've had parallel careers in this.
like but in completely different directions it's kind of kind of fun to to pinpoint that the timeline
and what happens when and yeah i like to do this with a lot of bitcoiners like uh first of all like
i remember using lightning back the first time we met was baltic honey badger 2019 this is the second
year they do the conference i believe and i remember using lightning then and custodial
lightning of course like i i could accept custodial lightning payments for my book i don't have
anything against custodial lightning in fact you know that's what we need to crack and uh and it
worked really well but i i don't have you know it's like because if you already have an account
open at the exchange it's just so convenient yeah and i mean i view it as a superior form of a bank
account because like sure you can do fractional reserve on on custodial lightning theoretically
you could absolutely do that.
I reckon did proof of reserves, right?
So it was, but yeah, I agree that it's a risk, right?
That that would happen.
I mean, it's safer than a regular bank
because if there was a bank run on a custodial Lightning wallet,
then there is no central bank to bail the Lightning provider out.
Yeah.
So that's actually a good thing then.
So, yeah.
And, you know, it's funny because people say,
oh, what happens if Bitcoin becomes fractional reserve?
It's like, well, what happened to FTX?
What happened to MacGuy's?
The people there get wiped out,
and then everybody else in the Bitcoin economy is like,
hey, you shouldn't have done that.
No, it's as it should be.
It's what banking used to be before the central banks.
If you weren't doing your due diligence
to check if the bank was legit or not as the customer,
you got wrecked.
Yeah.
And no one else got wrecked.
The taxpayer didn't get wrecked.
So that's the difference.
People still get wrecked.
It's just that it's obscured.
And then, you know, to take it even further, like Sam Beckman-Fraid, he's in prison today.
I don't think anybody who was responsible for the 2008 financial crisis is in prison today.
No.
There was one guy who committed suicide.
Slightly shortly after.
But other than that, I've heard of no, if you can call that a repercussion, maybe it shouldn't, because who knows whatever made him make that horrible decision.
But I mean, they haven't been held accountable, that's for sure.
And the scariest part about that, and I remember even back then reflecting on this, even though it was happening on the other side of the globe, like the Democrats and the Republicans just colluding and saying that this was the best way forward to just bail out the bad guys.
And I never understood it.
I think that to not do it would have required admitting, like, because they actually didn't do anything illegal.
That's why they didn't go to jail.
because all of this nonsense is legal.
And it's legal by exception.
It says that nobody can do this except this oligopoly,
this cartel that can create money out of thin air
and everybody else, it's counterfeiting.
Yeah, I mean, this is where the distinction
between legal and lawful from a libertarian perspective comes in.
It may be legal, but it sure as hell ain't lawful.
No, not at all.
Because it's breaking natural law.
So, yeah, back when I did the pod with you, that was episode 63 of Noded, which you did with Bitstein or Michael Goldstein.
So when did that whole thing start?
When did you start doing that pod and why?
Like what was the origin story there?
The origin story was that there was an altcoin podcast that was becoming popular.
And I thought, well, there should be a Bitcoin podcast as well.
it might not become popular, but there should be one. And I enjoyed being a guest on other people's
podcasts at that point. And so I was like, well, I could start my own. And with Michael Bilstein as
well, because we have good chemistry together in having some sense of humor about this stuff.
And the title came from a famous Barry Silberg tweet responding to what we would call it today,
a Bitcoin pleb. And he said that the pleb, I forget his name now, but he said something
along the lines of like that he thinks Barry Silbert's a scammer or something, right?
And Barry Silbert replied, noted, N-O-T-E-D, you know, period of like somehow, you know,
Barry Silbert's writing this guy's name down and, you know, their enemies text.
I thought it was a lot of people on Twitter thought it was a funny, you know,
weird, egotistical thing to write.
And so it kind of took off as a meme.
And then I thought, well, how about noted?
I know D-E-D.
It's a playoff of the peer-to-peer network.
And how many episodes did you record in total?
Like for how long did that, is it a latent project, by the way?
Is there a chance you'll revive it?
We try to get an episode out once a year now.
So it's still going.
You know, both Michael and I, we've got kids.
It's hard to find both time that synchronizes with each other and with a guest.
It's a little bit too much overhead.
So we did do just Michael and I podcast episodes for the Nakamoto Institute.
It's called the Reorg.
And we went back and we looked at past writings on the Nakamoto Institute website
and kind of have they withstood the test of time, you know, 10 years later.
So how early was noted, like in comparison to, you know, what Bitcoin did or Tales from the Crypt?
Well, that's a good question.
I'd have to go look because I was the first interview guest on Tales from the Crypt.
I had met Marty Bett in New York.
We were both living there and we had bone broths together while walking the streets of New York, I remember.
And yeah, we recorded the, I think it was a two or three hour rip that we had as the first episode.
So I definitely recommend people go back and listen to that.
I think I want to say that was 2019.
So after we started Noted.
And then what Bitcoin did, I remember I was a guest on pretty early.
I'd have to go look.
but Peter McCormick was asking about like what why are you a Bitcoin maximalist was kind of the
gist of the podcast and I still think it's one of the most important questions in you know in the
world but yeah I'd also recommend people go go listen to that one it was a while back he had just
gotten himself into trouble for for saying something anti-maximalist but he does that right
he gets himself in trouble, then, then, then talks about it for a little while.
And, and it, I think it's an interesting way to go.
Maybe there's a tactic there.
I'm, I'm, I, I w I will not comment any further on that, but it's this trying to
become a big podcaster is a different game than trying to become a, a
respected maxi for sure.
Anyway, anyway, let's not, let's not talk about that.
Uh, I have him down as a respected maxi for the record.
Yeah.
I do too.
Like the, the way I judge people is usually like, is their net contribution positive or
negative?
And like, I, I judged them on that.
So you can have, I mean, it's not a, it's not a purity test in that sense, but like people
do do things that sometimes farnish their reputation, but then they redeem themselves
by just putting out good content, like, and a lot of it.
So on the whole, are they a net benefit or a net detriment?
That's how I try to, like, judge people.
I don't know.
Do you have a method for that?
I try not to judge people.
You know, I feel like who am I to judge?
But also when I think about Bitcoin adoption, yeah, I don't know where some of these things
net out, right?
where I don really know you know for example like let say Mt Gox like you could say well obviously a net negative right But it got a lot of people on self custody
And so how do you balance the positive things that came out of something
negative with, you know, the means don't justify the ends?
Yeah.
I didn't necessarily mean judge meant judging people, but judging people's
actions is a better term, I guess, because like, and how do you balance like, uh, if
because you, you, you can't escape, you, you do value a person's opinion according to how much
you trust them sort of like, you have to base it on some something.
I just find it hard sometimes to disentangle whether their actions were motivated by, like,
I feel like that, that matters is, was it motivated or was it out of ignorance?
And sometimes it's kind of in a gray area.
Yeah.
I don't have all the information.
No, there's a saying nowadays that you either die a big coiner or you live long enough to see yourself become the suit coiner.
You know, I love the term suit coiner.
I would definitely put myself in the camp.
I was a suit coiner, you know, in high school, I was on the debate team.
And so I got to wear a suit all the time.
And, you know, I was into silver coins.
So I was Citcoining, you know, quite early in my life.
And I think that one of the challenges for Bitcoiners is, well, and I think it's true
historically, right?
So if you look at any kind of what we could call a revolutionary movement, if they are
successful, then there's a point where they have to change gears into governing because
they've won.
And I think that that makes Bitcoiners intrinsically uncomfortable.
role and we want to continue the revolution right it's like oh no we're not done yet we can't be
satisfied here and i think that you know that for example like luke is like if if if not everyone is
running a node and using a node then bitcoin has failed that's that's one of his axiomatic beliefs
is that bitcoin has failed if if grandma is not running her node and i think i think the the the
actual quote is like, if not at least 85% of the network of the coins are run by people who run
or are owned by people who run nodes or something like that. I think it's slightly, it's not everyone,
but like the majority needs to run nodes. Which I mean, the obvious problem is how would you know
where you are on that spectrum? It's impossible, right? Yeah, it's impossible. But I also think
that what really matters is the option value, the ability to run a node, the freedom to run a node,
if you want to, is really why Bitcoin is decentralized. It's the cost of entry,
basically. And so to me, the biggest question is, what's the cost of running a node? And what
percentage of the world's population could afford to pay that cost if they were motivated to do so?
And I think that if it's framed that way, then we don't have to continue the revolution until 85% of the coins we verify are being self-custody by people running their own nodes.
And so I think that, yeah, that's where my headspace is at on the suit coining versus the bitcoining.
All right. Yeah, there's a lot to dive into there. A lot of moral questions about how to rationalize for yourself, like merging the Bitcoin world with the legacy world. Isn't that what we're trying to get away from?
And aren't we sort of giving in if we're like on a dollar standard in legal terms?
So I guess the deeper question is, if a politician gets to dictate what a node is or isn't,
haven't we already lost the game?
Or at least on a very slippery slope to do so?
Yeah, I don't know that a politician has that power to decide what is a Bitcoin node or not.
I don't know how they would be able to coordinate that. Maybe the closest thing we have to that is
Luke and the core developers. Maybe they're the politicians who decide what a Bitcoin net is.
Trump isn't really in a position to do that. Also, if you look at, for example, BlackRock,
right they've got this giant ibit etf they're charging fees on it and the c's are so substantial
in the aggregate that it's actually now a material percentage of their revenue for blackrock the
world's biggest asset manager and if you go look at and so to me like larry fink is the epitome of
the suit coiner right like he is the the king of suits maybe not the coiner but the suit well he
was on national television saying that Bitcoin is above governments. And so I think that raises
a really serious philosophical question of whose side is he on, right? And then if you look at their
marketing materials for iBit, you know, the central question they're trying to answer is why does
Bitcoin have value, right? Because they're selling a Bitcoin ETF, right? They're not selling an ETF,
ETF, they're selling a Bitcoin ETF. They sell lots of other ETFs. And if they wanted to,
you know, warn people against that, they could take the Vanguard approach and warn people against
it. So what does the marketing material say on their prospectus on kind of what they're trying
to sell to investors? Bitcoin is decentralized. It's scarce. It's permissionless. And you can,
you know, use it 24-7 globally. And that's why it's increasing in market share. You can self-custody
it. So it's quite the paradox that they're advertising the centralized product using the
properties of the underlying. And obviously, people are very interested in an ETF because
it's convenient. They don't have to think about keys. They don't have to think about all the
tech aspect of it. They can use it for options trading. They can borrow against it at much
better terms than other options out there. And so would Larry Fink want to take over Bitcoin
and co-opt it and centralize it and run all the nodes or decide what a node is?
I actually don't think so. I think that would be against his rational profit maximizing commercial
interests. I think that he would be killing the goose that's laying the golden egg right now for
and that if anything, what I see them actually doing is going in the opposite direction.
For example, they are pushing to be able to create redeem in kind, meaning that you'd
be able to convert from physical, you know, real UTXOs into IBIT and back in as frictionless
of a manner as possible.
And the reason why they want to do that is because that's ultimately how they get paid
the most fees, right?
is to have the most users, have the best product.
And they know that people can opt out very easily, right?
If IBIT is annoying and inconvenient,
people just go use real UTXOs.
And so I think that the option value of self-sovereignty
ultimately puts massive competitive pressure
on anybody trying to build long-term profitable products
around Bitcoin.
The other part of it, when we look at, you know,
So the state, like here in Texas, I had the joy of testifying for a strategic Bitcoin reserve for the state of Texas.
And I couldn't believe it.
The state senator, who is the chair of the Business and Commerce Committee, very serious guy.
He opened up the reasoning why we need to have a strategic Bitcoin reserve is because the U.S. dollar is going to collapse.
and so the state needs to have you know an insurance policy against that and that's where
i think that kind of on one hand okay we don't want to empower the state by having its own you
know having more bitcoin right and more resources on the other hand we do want to disempower the
state by removing its monopoly on the issuance of currency right on the senior edge and that
it's not going to happen overnight. But I think that if we don't build bridges between the fiat
world and the Bitcoin world, because we hate fiat, the outcome is extremely immoral. Because
the outcome is that you have a handful of people who, one, are young and risk-seeking enough to
hold Bitcoin because it's so volatile, and two, tech-savvy enough to run their own node,
hold their own keys. Everybody else in society would have to essentially experience the collapse
of fiat, which might take centuries. Let's be realistic because Soviet Union took decades to
collapse. Fiat could last another century. There's no question about it. I think that that would be
the worst outcome. The best outcome would be that we find ways to help everybody upgrade to Bitcoin
and meet them where they're at. If they think Bitcoin is too volatile, then they can go invest
in securities offered by strategy, like the perpetual preferreds that are powered by Bitcoin,
but are not volatile. And so all of these critiques of Bitcoin ultimately are just
an opportunity for businesses to build products that address those problems by taking advantage
of Bitcoin's properties. Okay, I'm trying to come up with a good devil's advocate angle here,
because it's usually the best for getting the conversation going. If we go back to the core
versus not debate, if there's one thing I think people should be happy about, it would be the fact
that this thing is happening at all because it is making people run nodes to like a lot of people
are now running nodes because this debate is happening and they are doing their homework
sure they might be making the wrong decisions regardless of what side of the debate you're on
you will probably think that they're making the wrong decisions if they're on the other side of
the debate or what but they are running nodes and they are actively participating in the network
and that's a good thing so so like and this is something you cannot say about
the strategic reserve companies like they are not actively they all have their coins with
custodians right and if there's one phrase i miss from mishearing at these conferences it's
not your keys not your coins you never hear that anymore because it's all about these paper bitcoins
And we went sort of from being very, very adamant about the crucial importance of not your keys, not your coins, because it's a whole new form of ownership in a way.
Abstract thinking that other people don't have the secret you do, kind of not really owning anything at all, but just keeping a secret.
And we've gone from that to this all of a sudden thinking that paper bitcoins is okay.
And it's the same thing with mining.
If now mining is centralized, which some people raise alarm bells about mining being centralized
and really owned by the same entity.
And if that is true, then Bitcoin still has some type of resilient architecture because
no miner wants to destroy Bitcoin.
They don't have an incentive to actively destroy Bitcoin, but it's not at all as robust as
it would have been if the node runners were actually in charge of what was going on.
So like, what do you, what do you view as the biggest attack vector here?
And is there, is there an attack vector baked into all this to the suit coining,
let's say, or to the paper bitcoins?
Yeah.
I mean, I think that it's, I think the challenge is that the economic equilibrium
outcome is different than our ideological preferences.
And so if we look at, for example, not your keys, not your Bitcoin, that
I think addresses two risks. One is the risk by the custodian of stealing the Bitcoin,
right? Or getting hacked. And if you look at the history of exchanges, there's plenty of examples
to point to, right? But there's also plenty of counter examples to point to. So, you know,
Coinbase, Kraken, BitGo, they've not gotten their private keys compromised.
there have been lots of accounts compromised at these exchanges so I still think that
self-custody is actually better in that regard that you know I I worked at Kraken like I heard
these stories all the time of somebody getting their account drained because their credentials
got you know compromised but that's not materially different than somebody inputting their seed phrase
on an online service and getting swept right Which also happens right But I think that the equilibrium of well actually a lot of these custodians
have done a semi-decent job of, you know,
not stealing people's Bitcoin
or losing people's Bitcoin.
If Coinbase got hacked tomorrow, right,
and the private keys got compromised,
I think that we would see hardware wallet sales take off
and that then there would be kind of a renewal of the ethos
but it's kind of hard to say that oh i hope coinbase gets hacked so that we see more not
your keys not your bitcoin because lots of innocent people would be harmed right so i feel like that's
not not not not necessarily like a good idea to advocate for and then on the 6102 attack side
I think that this one is much more serious in the sense that governments are going to be facing financial difficulties and they're going to be incentivized to seize Bitcoin.
we just saw the u.s government seize i think it was a hundred thousand bitcoin
from this pig butchering scam in asia where these people were you know i think it was chinese men
who were being seduced by foreign women and then they were sending bitcoin or something like that
i'm still asking chat gpt to figure it out for me and somehow the u.s got their hands on the
Bitcoin. So I was like, how did the U.S. seize the Bitcoin on something that seems like it was
not happening in the U.S., right? And so the question is, will the U.S. seize IBIT? And
it could. I think that what we'll start seeing is institutions using multi-sig in multiple
jurisdictions. So if you have a three or five multi-sig and you set it up in areas that have
better asset protection, right? So you put a key in Hong Kong, you put one in London,
you put one in Zurich, and then one in the US, and then one in St. Kitts or Bermuda or something,
where now in order to seize the Bitcoin, the US government would have to jump through a lot more
hoops. And so I think that, or even more practically speaking, civil litigation, right?
What happens if somebody sues BlackRock and, you know, tries to take the Bitcoin or something
like that?
So I think that just reputationally, that's a different situation than we were in five,
10 years ago.
And we could argue against it until our faces are blue and wish, you know, people would
take Not Your Keys, Not Your Bitcoin more seriously.
But ultimately, I think that that responsibility is on the people who are offering those services,
right if if you're like if we look at the landscape of self-custody there's plenty of
services that are open source and free and people can go use those and it's pretty frictionless i'd
point to like sparrow as as an example of something that's really easy to set up multi-sig on and i've
helped other people set them set themselves up on that and i don't really see what the practical
problem is where like why is it that more people are not doing that right and i i think it's just
because they don't have the motivation to do it and then it's like how do you create that motivation
okay let me offer an explanation yeah i i think entities like coinbase and kraken have our forces
in the opposite direction because of course they want people to custody their bitcoin with them
and yeah you rightfully say that they've been good at not losing people's bitcoin
but a lot of that has to do with them making enough money to not lose people's bitcoin because
because they've been scamming people with all this fucking shit coins and and like marketing
shit coins as as legitimate as bitcoin like and uh i mean uh uh what's his name the bog the
the Coinbase guy.
Brian Armstrong, yeah.
Yeah, Brian Armstrong.
He never says the word Bitcoin.
It's always Bitcoin and crypto.
And it's like he can't say anything but crypto
because he needs to keep this fooling people over and over again
to be able to store people's Bitcoin.
So he's not fucking over Bitcoiners, sure.
But he's fucking over other people by legitimizing these other things.
And so don't you see a problem with that?
Is that morally okay?
Or like, what's your view?
Well, I mean, I think that it's putting it.
Look, I think that morally it's not okay.
I like services like River.
I recommend people use river.com over Coinbase.
From a market perspective, it seems like a losing battle for them, right?
that if you look at Bitcoin dominance, it's actually pretty healthy. The S coins keep getting
wrecked. And, you know, even like the Ethereum ETFs have been a lot less successful than the
Bitcoin ETFs. So, you know, even like on the treasury company side, I think that the altcoin
treasury companies are going to underperform the Bitcoin treasury companies. And, you know, it's like
I've met, you know, over the past decade, plenty of altcoiners. Some of them are just trying to
make more Bitcoin. And so that I feel like that's kind of dishonest, right? I think it's more honest
to say like, oh, I actually believe this has utility and like I'm accumulating Ethereum so
that I can spend gas on my future stablecoin payments. That would be the best honest, but
utterly ridiculous, you know, position to have. Usually they're just trying to flip and, you know,
get more Bitcoin at the end of the day. So I think that ultimately the market-driven process
is twofold. One is just the fundamentals, right, of Bitcoin just has more reliable software
parameters than any other network. But two is economic on the liquidity, right? So Bitcoin has
liquidity network effects that are self-reinforcing and ultimately will make it such that these altcoins,
despite Kraken and Coinbase screwing over their customers,
will not really take market share from Bitcoin.
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But isn't the strategic reserve companies, Bitcoin on the balance sheet companies,
isn't that this cycle shit just this cycle shit coins then because a lot a lot of them are going
to rug people right like it's uh there's a lot of added third-party risk third-party risk upon
third-party risk since it's held by a custodian and then you buy the stock of the company that
is keeping its coins with it's double right so so do you view them as as that i'm i know you're
involved with some of them so so obviously you don't view the ones you're involved with as that
But I see a big risk there.
Do you?
So I don't.
I think it's a huge opportunity.
And so one is on, are these, this cycle's S coins?
And what I look for is like, what is the valuation model for the asset?
So when I look at SHIB or Dogecoin or, you know, all these other altcoins,
like, okay, what is almost, I know this is anti-Austrian, but just, you know, the terminology
intrinsic value, right? Fundamental value, right? Or what's my, or my subjective valuation of them
would be the more Austrian way to put it. And when I do my subjective valuation of Dogecoin,
the value I come to is zero, right? Zero BTC is what one Dogecoin is worth from my perspective.
When I look at the value of a Bitcoin treasury company, I first start with how many Bitcoin per share do they have, right?
As kind of the first fundamental.
Then secondly, kind of what's the trajectory for that?
Is that going to increase or decrease?
And then what risk probability do I assign to having to rely on third parties, right?
And basically, in order for a Bitcoin treasury company to be interesting from a valuation
perspective, my subjective valuation of it has to be less than the market price.
So if the market price is greater than my valuation of it, then that overvaluation
is the S-coin component of it, where I just think that it's overvalued relative to its
fundamentals.
But it could also, you know, there could be times where sentiment is bad and people's expectations, I believe, are incorrect subjectively.
And that coin treasury company is undervalued relative to my subjective valuation of it.
And so, you know, whether at any particular point in time the company is overvalued or undervalued in its stock price, I think that that's open to debate.
what I don't think is open to debate is to say,
oh, the fundamental value of these companies is zero, right?
That's just saying my subjective risk assessment,
I multiply the probability of the Bitcoin disappearing by 100%.
And so there I would say, well, you're mispricing the risk.
And that really, you know, it's from a, but that's subjective, right?
So you can disagree with me and that's what makes a market.
Yeah, but if you extrapolate into infinity, so if you think of this on the longest timeframe you can, then they do go to zero.
because either Bitcoin outperforms them in case it was better to hold Bitcoin
than to hold these paper Bitcoins with added counterparty risk,
or Bitcoin goes to zero and then they also go to zero
because then they have no underlying asset.
So what timeframe are we talking about here?
Or do we have to reevaluate these things every year or every month or every week
or every decade?
Nate, what's your time frame when you talk about these things?
Yeah, you have to reevaluate them on a daily basis.
I think that's really the strongest argument against Bitcoin treasury companies,
is that the active management of the asset, you have to keep your eyes on it
if you actually want to understand when to sell the stock or buy the stock.
And I think that most Bitcoiners are not interested in investing in equities.
They want to save money. They want to hold stats in cold storage and hold Bitcoin.
And so that's why I think that Bitcoin treasury companies are not particularly interesting to most Bitcoiners.
It's kind of a niche interest of you have to be interested in capital markets.
You also have to believe that the U.S. rule of law and property rights are going to hold together well enough
that this isn't going to be an issue going forward.
And yeah, so I definitely don't think that it's, for most people,
something that they can wrap their heads around and keep tabs on.
Even within the Bitcoin treasury industry,
sometimes I'll hear people say things that I believe are incorrect
and they're in the industry, right?
So it's like, well, yeah, I think that even I say things incorrect
because I would also point out this is very new.
So the Bitcoin Treasury playbook only, I would argue, started getting written this year because
of the perpetual preferreds that started this year.
So before it was only about convertible bonds and what Sealer was doing with that kind of leverage Now we on a completely new model And so I think that not only are you underwriting all the risks that we discussed you also kind of underwriting
a new business model. And so it's almost like you're a startup VC more so than just a value
investor. Yeah. I mean, the biggest positive I see with them is that they somehow managed to tap
into this giant pond of boomer money that was inaccessible to that wasn't flowing into bitcoin
before but now somehow it's like everything connects to bitcoin in a way that it didn't
before like it's it's even in the swedish pension funds now because they own some micro strategy
stock or something so like inadvertently like everything touches bitcoin and all the boomer
money and they're going to have to live with it. That's a good aspect of it, I guess.
I think it's crucial from a political perspective. This is actually what minimizes the risk of a 6102
is that everybody in society has some kind of exposure to Bitcoin. So everybody is getting rich
together. Yeah, there is though in the EU, there's a 6102 light in a way because they're trying as
hard as they can to ban what they call unhosted wallets. So they're basically trying to prevent
you from owning or from holding your own keys, which is like vulgar to a Bitcoiner. I mean,
I never wanted to meddle with these. Like you say, if you have to check the price every day,
I mean, the reason I found Bitcoin so compelling, one of the reasons was that I didn't want to be a
trader. Like, I don't want to watch charts all day and not know if I was going to win or lose when
I can just hold the sats for a decade and be happy. And I believe you can still do that. You're still
going to win massively if you hold sats for a decade. Like, the chances that you will are
enormous. The upside is still enormous. So, yeah, where was I going with this? I don't really know
where I was going with this. Thoughts? Yeah, so, I mean, I think that to me, like, what big picture
from an economic perspective, the reason why I think Bitcoin treasury companies came about and
will continue to grow at an astonishing rate is really because they are doing a speculative attack
on fiat currencies. And so on one hand, they are going leverage long Bitcoin with the equity part,
let's say MSTR. On the other hand, they're shorting fiat currencies by issuing these
perpetual preferreds. And so they, for example, you know, yesterday they announced STRE, which is
a stream, which is aimed, it's denominated in euros. And I think it pays like a 10% yield or
something like that. I'd have to go double check, but it's basically, you know, double digit
percentage. In Europe, the current fixed income products are paying single digits, low single
digits. And so what happens when an investor in Europe, they sell their government bond that's
paying 1% or 2% or whatever it is, and they go buy Stream that pays 10% and they give euros to
Michael Saylor and then Michael Saylor goes out and buys Bitcoin. And then Bitcoin does better
than 10% over the long run, that then this fixed income instrument was smoothing out
the returns of Bitcoin in the short run so that the boomer has price stability and has
income on his euros or her euros.
And that, okay, well, wouldn't it be better if these people could just buy Bitcoin and
be okay with being down 80% and then up 5,000%? Yes, in theory, it would be better. In practice,
they would panic sell, or they would sell too early during the bull market. They would make
trading mistakes despite us yelling at them to hold it in cold storage and ignore it.
And one of the reasons why is that either they're very risk averse or they need the income this year,
right? They needed the 10% income this year. And so they have to go sell some percentage of the
Bitcoin if they were holding Bitcoin. And that a lot of people are just, they're worried about
the principle. And what if Bitcoin goes sideways or down for three years that they can't hold
through that psychologically or economically? So I think that these products are solving a real
problem for the people buying them. And they're solving a real problem for strategy because
strategy wants to get leveraged along Bitcoin. And so that's the two legs of the Bitcoin treasury
trade. And so, you know, how do we get to a world without fiat? Well, the governments are going to
have to do some things, right? If people are selling government bonds to buy Stream or any
of these other fixed income products, the governments are either going to have to compete
and raise interest rates.
They can't do that because they're over indebted.
And so that would cause the financial system, the fiat financial system to, you know, get
into some serious problems or they impose capital controls.
You could imagine that the EU could ban strategy from issuing perpetual preferreds or, you
know, Elizabeth Warren could try to ban strategy from holding Bitcoin. They could say you can't
have more than 50% of your Bitcoin or balance sheet in Bitcoin. So that's capital controls.
And I would argue that's what they tried here in the US with Operation Chokepoint 2.0,
where they were trying to stop Bitcoin companies from having bank accounts.
So they try to separate. It's funny, it's kind of the horseshoe theory. Like,
there's Bitcoiners who want to separate the financial system from Bitcoin.
And there's also fiat Nazis who want to do the same thing, right?
They don't want Bitcoin to get intermingled with the financial system.
The third thing that governments can do and I think should do in order to stabilize their
currencies is to print fiat to buy Bitcoin and to do that until they can back the fiat
one-to-one with Bitcoin and speed run the gold standard in reverse with Bitcoin.
Yeah, we're going to have to see how that plays out because like, that seems like
Those are the only three options.
There's not like a fourth option that they have.
Well, there's the non option, which is just letting it die.
And it's sort of, this seems to me like, you know, a dead horse having spasms.
Like it's already dead.
Yeah.
It's like already dead when you can get this product that has based on Bitcoin that can
guaranteed 10% yield, which is probably not really 10% because I believe the real euro inflation is
above 10%, and especially if it's denominating Bitcoin. And as an Austrian, we know that
the natural state of the free market is falling prices. So stable currency is a lie in itself,
right we should have see falling prices and it's definitely not going to cover if you take that into
account so so like i agree i mean it's just about having the the least worst product right it it's
it's like when you're running from the bear you just have to be faster than the slowest person
oh yeah i saw that in some some documentary about a guy that was worried about peak oil once
yeah that very analogy but that's that's a good yeah the other analogy is the musical shares like
that's how fiat works there's always a loser and on a bitcoin standard there there are no losers
like we're all winning together and i think people have such a hard time wrapping their heads around
that because they never lived in an economy where in order for someone to win someone else always
had to live, always had to lose.
They never realized
that it can be
all boats rise with the tide
game. It doesn't have to have losers.
The money
printing is creating the losers.
And also
the very notion of
separating the two systems.
Sure, we want Bitcoin to win
and the dollar to eventually die
but us to have a lifeboat when it does.
Still,
if you just look at the internet movie database are you aware of kevin bacon numbers and how
interconnected people are like the the the they could find like six degrees of separation between
a person who has been in a movie with kevin bacon that has kevin kevin bacon himself has kevin
bacon number zero and if you've been in a movie with him you have kevin bacon number one if you've
been in a movie with a guy who's been in a movie with kevin bacon number two and so on the longest
chain they could find was six degrees of separation. So there is no circular economy. There is no fiat
economy in a Bitcoin economy. We're all connected and every action we take has an effect on other
people's lives. Butterfly effects are everywhere. So I don't believe they do coexist for now and one
is going to win and the other is going to lose in the end. We can't have them coexist forever.
I don't know about that.
I mean, I think that the way Bitcoin wins
could be through the continued existence of,
let's say, dollars,
where $1 equals one Satoshi.
And so people just use those words interchangeably.
And that, you know, there's JPMorgan Chase
has dollar bank accounts that are just,
you know, you can deposit there with lightning.
Yeah, but why though?
like it's because people are um uh you know not highly regarded but they're they're set in their
ways i could smell that word coming yeah you know if you've been it's like do you know how many
people still think the dollar is backed by gold most i guess yeah it's an astonishing percentage
And so I think there's a huge amount of momentum.
And there's also just the ethical question of, okay, somebody was saving dollars their whole life for their pension fund.
And then the dollar goes to zero and they don't have any savings for retirement.
it. And it's not because they had any kind of moral culpability in the dollar. They're just
basically collateral damage from this. And so I just think that it would be much better if we
actually bridged it so that dollars become Bitcoin and that dollars become backed by Bitcoin one for
one. And you might say, well, you know, if we're recreating the gold standard, won't the same thing
happen again, where the government will default on the exchange ratio between dollars and Bitcoin
and print too many dollars? Maybe, right? But that's certainly less bad than the alternative
of the dollar going to zero. And that's just, I look at it from the perspective of the people
who are relying on the continued existence of the dollar. And they're not all parasites,
right some of them were just people who grew up in the dollar system and are retiring of it
no most of them like if they are parasites they're probably unaware that they are
but the whole system is is corrupt right and there's nothing ethical about it
if you can conjure i mean fiduciary media is by its very nature unethical it's giving out
conjuring up a loan out of thin air and demanding to get paid back with interest,
it's stealing from everyone else who holds that currency.
Yeah, sure.
But if I look at, for example, insurance contracts are denominated in dollars,
the insurance contract can be completely libertarian and not coercive at all
and perfectly rational.
But because it was denominated in dollars, now its value goes to zero
if the dollar goes to zero.
And so I just think that there's a lot of systems
that are depending on the dollar as a unit of account
that if the dollar goes to zero,
it tears apart the social fabric of society
in a really chaotic manner that is unnecessary
if we build bridges
and we actually get the government to do the right thing.
Yeah.
Yeah, we'll see. It's a hopeful thought, and I hope you're right in that this is a good transition thing, because you say it's less bad than what the dollar is now, yes, but it's also less good than just educating people to hold their own keys and doing it better and properly.
do we have time?
Do we have the time to do that?
I think that
if we had
how long would it take to
onboard everyone onto Bitcoin?
Currently, let's say
we've got about 100,000 people
or maybe a million people
holding their own keys? I don't know what your estimate would be.
Closer to a million, but maybe a hundred thousand in the US. Yes.
Or globally, a million?
Yeah. I don't have, like, I'm pulling numbers out of my ass.
Just like...
Well, let's say it's like 10 million even, right?
In 16 years, the growth rate has not been accelerating as far as I can tell.
You know, on-chain is kind of empty. That's why we've got all this spam coming on.
And so how many more decades would it take to get everybody onboarded?
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and brush your teeth. Well, let me offer you a perspective on that. Because I think the
dichotomy between store of value and medium of exchange is false and very influenced by
Keynesian mindset. So I view them as two sides of the same coin and medium of exchange over space
and time. Like, store of value is just medium of exchange with your future self from a certain
perspective and that's that that whole framing is just to to point out that the the you can't have
one without the other really and gold was a good store value and fiat was good medium exchange that's
the narrative and now we have something that can do both right but we still come from a fiat mindset
where velocity of money is a is a important metric according to keens like that's why the that's why
why they're pro money printing because they think they create value every time a hundred dollar bill
changes hands yeah that's basically basically the kinsian theory what they what they omit from the
theory is that yeah but what's the alternative that could have what can that hundred dollar bill
have been used for if if it had been sounder and people were saving and you know delaying
gratification and so on and so forth so we think that it's not being used at the mean medium exchange
but maybe we just have the wrong time frame.
Maybe people just choose to not use it for 100 years.
And who's to say that that's wrong or right, right?
So if Bitcoin is just...
And I can predict, like, right now, there's a ton of micropayments everywhere.
You pay to go to the bathroom in the central station somewhere in Europe
by putting a coin in a slot to open the door,
blip your card at a machine somewhere.
there's always a transaction and i think on a bitcoin standard it's much more likely that you
buy a lifetime subscription service to all the train rides you can and wash your rooms you could
ever want because the the seller always has an incentive to acquire the bitcoin sooner rather
than later so so what i what i take away from that is like fewer transactions in total because
Because you don't need as many transactions.
It's like if you have 10 poor friends who eat together for 10 days, then they all buy
a pot of noodles each because no one can afford to pick up the bill If you have 10 billionaires who eat together for 10 days then they someone picks up the bill every night and maybe it the
same person picks up all bills regardless there's fewer transactions taking place because when
when everyone's wealthier and you have money that goes up in value you don't need to transact as
often as you do when when you have inflation like the whole point of the inflation according to the
inflationists themselves is that they want many transactions to happen. So yeah, thoughts about
that? Yeah, I mean, I think that like one way to think about market share would be transactional.
The other would be balance sheet, right? So Bitcoin's a $2.1 trillion asset at this point.
Global wealth, you could say it's like 500 trillion of stocks, bonds, real estate, art,
gold. And so how do we get more market share for Bitcoin in this context? I think that essentially
we're firing on all cylinders on Bitcoin as a spot commodity, right? Whether it's because of
self-sovereignty reasons that people have demand for real Bitcoin, or it's because they like the
risk return profile. And so they've got IBIT, right? In order to tap those other adjacent
markets like the bond market or like the equity market, then you have to actually build products
for those. And so I don't think that there's a path to, well, so I mean, the other path would be
that bonds go to zero, stocks, you know, really in SATs terms go to zero and that we're only
onboarding people onto real Bitcoin. And I feel like that's the nirvana fallacy of,
because that would be the ideal world, we're going to reject the existing...
It's kind of the Soviet new man thing. We're going to create a new person,
and he is the sovereign individual. And he holds his own keys, and he runs his own node.
and we're going to reprogram society and re-educate everybody to be like this.
And I don't know that we have time to do that, I'll be honest. I also think that in order to
get to that pragmatically, the best way to do that is to upgrade society to Bitcoin through
these products. And so I really see it as long-term, even if your goal is to just have people
self-cost eating Bitcoin, the shortest path to that is all of these custodial products.
And it's as frustrating as that may be.
Yeah, well, time will tell, I guess.
There's also, like, we use the word we a lot here in this discussion.
And maybe that's, like, the crucial, from an Austrian perspective, that would be a mistake
because who's we, really?
Like, what society?
And so on and so forth.
And there is a point to it being more important that, you know, honest and daring and intelligent people hold Bitcoin than everyone holds Bitcoin.
Like Bitcoin is more for anyone than for everyone from a not your keys, not your coins perspective, I guess.
and and because right now we have like you can you can become very wealthy from quite bad bad
behavior like from quite immoral you can have a quite immoral code of conduct and still get very
wealthy and that's much harder on a bitcoin standard because you can't manipulate stuff as
easily so so maybe it's more important to just on board honest entrepreneurs than than everyone
And then these derivatives and stuff could be for everyone else.
Is there a middle of the bell curve thing here going on?
I don't know.
Yeah.
Well I think that it you know it it reminds me of like the the Hal Finney forum post where he was saying like oh this is going to end up you know decentralizing the banking system but people will still use banks
I think that was kind of the gist of the Bitcoin standard book from Safety and Amos as well and the conclusion of it.
And I think that ultimately the past is the best predictor of the future.
And so I do think it'll continue to be a mix of people self-custody and of companies,
large platforms being trusted third-party custodians.
But at the same time, I like to point out all of the Bitcoin are self-custody, right?
So Coinbase is self-custody against Bitcoin.
And you've got claims on those Bitcoin and they have specific properties and trade-offs.
but ultimately you know from a systemic perspective it's not like there is some
kind of ephemeral permanent trusted third party here no this is uh this is the point i'm trying
to make all the time when i talk about these things and that is that some guy at coinbase
has a lot of power at this point and could could just evaporate and buy an island some somewhere at
any point. That could still happen. Yeah, then he'd end up in prison like SBF, right? So I think
that in the current context, with great power comes great responsibility. If we were to descend
into chaos, maybe that would change, right? If there really was a destruction of society such that
the whole judicial system fell apart, then people could get away with just looting like that. But
SPF went to jail. So I don't know that there's one person at Coinbase who has control over the keys.
I imagine they've got a slightly different system, but also that those people, they're getting,
they are getting paid money to hold those roles, right? They're not like doing it for free because
they know they're going to be able to steal the Bitcoin. I think they're requiring to get paid
because they're having to have this responsibility hanging over their head.
Yeah, absolutely. And it seems to be working for now, and hopefully it does.
The not your keys, not your coins part is, for me, that was what intrigued me from the get-go.
I was fascinated by the promise of something on the internet that couldn't be copied.
And it took me like 10 years to realize why.
And that is because the coins are actually not on the internet.
They're in people's heads, like really literally in people's heads,
because it's just keeping a secret from everyone.
And also believing that the system is set up in such a robust way
that it will not change to such an extent that the 21 million cap will change or something
so that my coins become valueless.
So I was thinking about this the other day.
You know, we back up our private keys on metal plates,
was 12 or 24 words, to be resistant to fire or flood, right?
Yeah.
Why don't we back up the entire Bitcoin source code and the 600 gigabytes of transactional history onto metal plates and just add a plate every day that has that day's history somewhere or in multiple places that protects it from EMP attacks or more extreme scenarios?
I was thinking about this. I asked ChatGPT how much it would cost. About $30 million.
there's nothing yeah this is a really cool project this is because i've been thinking for a long time
like these metal plates that i heard somewhere there was like 70 competing companies worldwide
that are manufacturing like steel seed solutions like and my my question is like will these things
even exist 50 years down the line or even 10 years down the line Like will people are these things as permanent as they pretend to be And maybe they are but only if we can store the rest of it So that would be the ultimate insurance against
quantum computers, right? Because then we can always freeze the chain in time and then solve
the problem and start building on the last metal block. Yeah. So 30 million, let's say you need it on
all different continents so that that's 150 million maybe and yeah super cool idea i bet that
i bet that that thing would be worth more than 30 million once it's actually done
well it's kind of a tragedy of the comments because everybody would benefit from this right
yeah but but you could being the custodian of the blockchain on metal plates it's a pretty
cool thing to be like, and how big would each plate like, so so so a block is at most four
megs. So how much is four megs etched into it into metal? Like, yeah, I'd have to dig into the most
efficient encoding method, because then you want to be able to scan them back in right as well.
So maybe giant QR codes. I don't know. Yeah, or just the hashes. But that's sort of you want the
The raw data.
Yeah.
The raw data.
Yeah.
So yeah, I think that, you know, it would take some laser etching, but it's not like it's
infeasible, right?
It's not like an unsolved physics problem.
It's just purely, you know, a cost engineering consideration.
Yeah.
Well, cool idea.
Pierre, it's been absolutely great talking to you anywhere we haven't gone yet.
the stuff you wanted to talk about that we haven't covered yet?
No, we covered so much.
I really appreciate the tough questions.
I think that it's important to get people's perspectives out there.
Yeah, absolutely.
I think so too.
Like civil debate is we humans have two ways of resolving conflicts
and one is aggression and the other is communication.
And I, I definitely prefer the latter.
So, so anywhere you want to send our listeners, where can they find you?
Pierre on X. I'm also on Nostra, but I won't, I won't, you know, spell out my whole Nostra key here.
But yeah, come, come and find me. Watch out for impersonators.
Yeah. And are you coming to Historico next week?
Unfortunately, I won't be able to make it. I really wanted to go, but I have a conflict.
Oh yeah. I think I saw you on the, on the list there somewhere.
Yeah, I was a yes. And then something family related came up that I couldn't say no to.
Oh, well, I hope it's something good.
It is.
Yeah.
Good to hear.
Family is the most important thing.
So we won't see each other there.
When's the next time we'll see each other?
I don't know.
Are you going to Las Vegas?
No, I'm not.
I'm boycotting them.
That's okay.
What about BitBlockBoom?
Gary Leland?
I'd love to go to BitBlockBoom.
Yeah.
I think that's probably the most based Bitcoin conference in the US at the moment, don't you think?
I do think so.
And it's an easy drive for me.
So I'm definitely going to be there.
Yeah.
When is that?
I believe that's in April.
Let me double check for our audience so that they don't book tickets on the wrong date.
April 9th to 12th.
Yeah, I should check that out, actually.
I'm writing it down.
I know I might be going to the U.S. end of next summer to Lake Satoshi.
Oh, yeah.
We'll see.
Anyway, great chat.
Good luck with everything and see you next time.
Thank you.
See you next time.
Thank you.