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Hello, everybody. My name is Daniel Prince, and I'm the host of the Once Bitten podcast.

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This is a podcast focused on Bitcoin. It's my mission to interview as many people as I can

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around the different aspects of Bitcoin and help people understand exactly what Bitcoin could mean

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for them and for their families and for their future. I hope you enjoy the show. Thank you so

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much for listening. Hello everybody and welcome to this episode of the Once Bitten podcast.

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Joining me today is Hubertus the Austrian as he goes by on Twitter and he's here today to talk

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about BitCredit and how he is creating a product to bring less friction to using Bitcoin, especially

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when we are looking at taking this thing, this asset, this whole new monetary system on a global

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scale to be used as the currency for cross-border payments for businesses. This is obviously where

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we need to head. We want the businesses that are actual businesses. We're not talking about spun

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up Bitcoin treasury companies. We're talking about businesses with hard assets that are

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offering goods and services into the marketplace to be able to use Bitcoin in a way that they can

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pay for their supplies, pay their suppliers and get terms in place, much like Hubertus was doing

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back in the 80s in his original banking career. So we're going to learn about bills of exchange here

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and how banking actually used to happen. And he is very much deep down the Austrian economic

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rabbit hole and he brings a lot of so hubertus is 60 so he's had a whole career before finding

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bitcoin and going down the rabbit hole and then bringing austrian economics and traditional

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banking practices all together and that's what they're hoping to achieve here and just to let

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give you a an idea of where his mind is coming from this is one of his recent tweets on first of

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July a central bank is a socialist central planner hiding in plain sight in a supposed

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market economy they manipulate and poison the money production with all the hubris and overconfidence

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as their original brethren bitcoin can free us of them this is where we need to head guys

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right there and I hope this conversation is going to pique your interest with this bills of exchange

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idea and reach out to Hubertus if you want to carry on the conversation or if you have any

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contacts that you might be able to put in in touch with with companies that might be interested in

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joining their beta program and getting this thing off the floor and getting some real life working

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examples out there so don't hold back meanwhile sit back and enjoy and I'll give a quick shout

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out to the show sponsors as always you've got to be stacking your sats if you're not doing that

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you're listening to the wrong podcast please get out there and stack sats do it in a sensible

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fashion don't go out there and just hoon in you want to do this as as responsibly as you can that's

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the word i was looking for dollar cost average is the best way to do that you can set up weekly or

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monthly buys there are look check your jurisdiction check the companies get out to the meetups ask

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actual bitcoiners who they're using in your country because it's different for everybody

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so get over to orange pill app and then find your local bitcoiners first of all find your local

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events we'll get to the conferences but if you download orange pill app yes it's a paid app

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because if it's free you're the product find 17 000 other bitcoiners on there start connecting

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with your local communities, start your meetups, and get your best practices for where you are at.

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If you're in Europe, across Europe, you can use Relay, R-E-L-A-I dot C-H forward slash Bitten.

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Just download the app, start stacking up to a thousand Swiss or equivalent per day. I'm not

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saying do that because that sounds like a lot of cash, but that is the current limit that you can

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do. SwanBitcoin, if you are in the US, swanbitcoin.com forward slash Bitten. Download it,

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both companies have white glove service both companies can help you if you're high net worth

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individual or if you have a business you want to take on to a bitcoin standard as well taking

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self-custody is very very important please make sure if you have been stacking for a little while

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and you haven't taken self-custody get over to bitbox.swiss forward slash bitten use the code

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bitten at checkout get yourself a bitbox o2 bitcoin only edition very easy to set up all of the

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instructions come inside the box and you can even watch video tutorials on their own website

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take care get your bitcoin off the exchanges immediately bitbox.swiss forward slash bitten

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if you want to start supporting this new market that we're entering into go and check out plebeian.market

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for goods and services that you can spend your bitcoin on and paywithflash.com which is a plug

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and play method for you to start accepting Bitcoin immediately. Now, did you listen to my

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recent episode with Kaz? Do you listen to 40 hours of podcasts per week? Do you want to start curating

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this and making it easier for you to get to the parts of the conversation that you want to listen

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to? So go back a few episodes, listen to my rip with Kaz and get over to bubble.fm or hit the link

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in the show notes to check it out. Now sit back and enjoy this one with Hubertus the Austrian.

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Okay Hubertus how are you doing nice to meet you. Hi Dan nice to meet you all good here I hope the

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same at your end. Absolutely and a big shout out to our co-conspirator Max Hillebrand who put me

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in touch with you and said you got to get Hubertus on and find out what he's doing and what they're

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up to because it's a very interesting project and a very interesting guy so here we are thank you

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max i guess the same goes for max i mean uh he's he's also deeply interested in austrian economics

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in freedom um and and uh so to say he's traveled the world and so this is a very good fit in terms

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of uh communicating what this project is about and and what we aim to achieve yeah how do you

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want to start this then well i want to start well first of all for those that are listening um if

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you don't mind sharing how old are you i'm already 60 yeah so so uh quite some gray hair as you can

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see i'm only still here i'm only about 10 years behind you but uh it's always fascinating i think

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to the listeners to to tune in because everybody still thinks about bitcoin and bitcoiners as uh

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young hoodie wearing tech entrepreneurs. And, you know, it's, if you've been to the conferences,

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you just get to see like this whole gambit of people, it brings absolutely everybody in. But

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if you're just sitting there listening to the podcast, and you've not put yourself out there,

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or gone to a meetup, you can have this kind of stigma around, oh, it's all just for young people.

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And you got to be tech savvy. And I don't know anything about finance. But so for those people

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coming in new into the Bitcoin rabbit hole, I think it's really important for them to

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understand that, yeah, we're here represented across all generations and every part of the

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world as well.

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So let's go back then.

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I guess so.

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But see, I do wear my hoodie once in a while because I dropped out of banking pretty much

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in 2001.

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And I've been, so to say, a hoodie, very techie for quite a while then, while building an online brokerage here in Central Europe, which later got acquired by an Austrian bank.

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I've developed three prediction market sites since the early 2000s.

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And so, yeah, I'm a techie, but I'm also a banker who grew up in the euro dollar system.

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and I still actually used the paper bill of exchange in the past,

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which is one of the reasons, I guess, how this project came to be in the end.

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Right. Okay. There's a lot to pull on here.

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When did you enter into banking?

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Was that the first step of your career?

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Oh, yeah, absolutely.

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So I was effectively raised in banking from a very young age

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with Citicore International.

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So I very, very quickly started,

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even at the age of 19,

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started to send me around the world.

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I was hired here in Vienna,

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but then went on to work in Zurich,

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in Geneva, in Amsterdam,

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Bombay at some stage, Amsterdam.

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So that was probably the first five years,

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formative years of my life

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in essentially the leading technology bank

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at the time in the world. Citibank at the time had a CEO called Walter Winston, who effectively

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transformed Citibank into a technology bank very early in the mid 80s. So that was a very,

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it was a great learning experience. So yeah, so that's how I started off in banking.

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banking in 2001 yeah so you you start in like early to mid 80s um this is way before

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i mean i i i walked into a foreign exchange brokerage house in the mid 90s

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and the guys didn't even have emails then you know and that was the mid 90s so back in your day

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like everything is literally what what kind of what departments were you in what was your role

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what were you doing uh well i was hired for actually in control department to do some very

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boring thing called reconciling but about one month later they pulled me out of there put me in

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the uh in the it department later i went to the trading desk for for money market futures that

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type of things and as i was studying uh economics at the same time i ended up as being economist

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trader then at the trading desk at the well and later they sent me off to other countries to build

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systems fix some option problems in in systems it was a very very diverse set of experiences

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i had in extremely short term at an extremely young age right okay so you you mentioned the

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euro dollar system oh yeah do you want to explain to people what that is because a lot of people i

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think just um default to thinking oh it's just the foreign exchange pair um you were in fx right

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you just said yes so i guess i guess uh you must have been in touch with it too right yeah so in

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terms of it was just um i mean you mentioned email yeah um city bank essentially was the first email system i ever knew it was called Citimail And I think it was kind of an in thing

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Yeah. When nobody else used email,

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they also had a standard called Citi Dex,

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which was kind of an early Swift before Swift was around.

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So people at Citi were exposed to all these future technologies really,

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really, really early.

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But we also were exposed to old technology like the Bill of Exchange, which until recently was only available in paper format, certainly at the time was available only in paper format, but which really was used a lot in the B2B commercial banking side of things.

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So that's where I still learned to use that all instrument and essentially what it could do and its role in enabling international trade and, so to say, providing businesses with the liquidity they needed to move goods.

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So that's how I saw the euro dollar system and a relatively free type of banking at the time.

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so uh i'm as we discussed i got way here and um so it's it's really weird to see how the banking

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system goes more into let's say 1984 mode year by year every year more kyc more data more compliance

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more crazy crazy rules changing monthly yeah and and reversing everyone one day um you have esg

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and you're not supposed to invest in that type of energy,

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then you absolutely need that energy.

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Don't invest in weapons.

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All of a sudden, everybody invests in weapons.

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Don't buy sugar, buy sugar.

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So it's a crazy, crazy situation.

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And account opening and doing transactions these days

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is just a chaos of big brother activity

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with all kinds of disclosures,

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unnecessary things to be done.

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while I'm fairly sure that those people whom they want to catch

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know all these things very well and don't have to do them.

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So it's really just the normal people having to do all that rubbish.

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Yeah, absolutely.

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The KYC creep has been, I mean, just endless.

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Like Basel, Basel II.

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Yeah, well, the Dodd-Frank, all of that kind of stuff

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that came after the global financial crisis,

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which was engineered.

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Go ahead.

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Yeah, no, no, no. I'm just saying I was just at a trade finance conference here in Vienna, which, as you may know, is the seat of the UN branch, which deals with international trade, which is also called UNSITAL.

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And they are already talking about Basel 3.5.

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And from what you hear from the people, it's getting madder and madder.

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And essentially, it's all there to just prop up the fiat system, which is a perversion of money.

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And everybody knows that fiat currencies ultimately will fail.

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And so they're just keeping it alive with whatever crazy ideas come to their mind without sort of going to the root of the problem that it is unsound, fragile money.

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So that's interesting.

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I wonder how many people, I often wonder about this because I still have peers that are still there in the business.

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Me too.

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Do they know that the fiat currency is doomed?

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No, not at all.

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Not at all.

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For instance, the people who I met last week, it was kind of shocking to see that within trade finance, they are redefining right now trade finance in a way which seems all right in a working fiat system, but unmentals some of the very sound principles of sound money.

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like trade finance used to used to be especially at special characters to to make sure that we

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have a sound money for instance um but we're going to talk about bills of exchange afterwards

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but trade finance when it was run on bills of exchange paper bills of exchange it was supposed

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to be on goods only um because that's so to say um value which kind of has some has some retention

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It was supposed to be short term because the sooner credit converts back into money, the better the credit quality, the lower the risk, the lower the discount to be applied.

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It was to be done only on commercial invoices, and now the ICC is proposing to remove the word commercial from their rule books so that any old invoice can do, which is a bad idea because only commercial invoices, so to say, have the reflux into money proper to redeem credit money from the system.

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So the banking rules are changing and not do the better.

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And are they talking about any of these guys that you know that are still in the day-to-day? Do they bring up to you like central bank digital coins or do they ever ask you your thoughts on Bitcoin?

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I think at this stage, banking is solidly captured by the politicians. So even those who dare to say slightly, let's say, freedom-oriented words are very, very cautious in expressing themselves.

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So, for instance, one of the people I spoke recently said, okay, yeah, we know that banks are being forced today to do police work, which is not our job.

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The police should do their own job.

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It's a government job.

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Other people will say, okay, there's all these things which we have to do, but still trade will find its way, which is very true.

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And so there is this awareness.

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But in general, the political capture is such that they're getting fed every month with another email or letter from the central banks how bad Bitcoin is and that only criminals use it.

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And it's a complete contrast visiting banking conferences to Bitcoin conferences.

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In Bitcoin conferences, everything is about freedom, saving technology, how inflationary fiat money is bringing the world down, pulling down productivity, pulling the state into tasks which shouldn't be a task of the state but of private business.

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So there's this awareness in the Bitcoin circles of just how bad the banking system is, whereas the bankers, they kind of roll their eyes when you tell them about Bitcoin and how it could, so to say, re-enable sound money.

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And they're not aware of it at all.

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Also, because Bitcoin still needs work, because it is volatile.

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I'm the last person to deny that.

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it's still not being used in as a medium of change in the real economy which i also don't

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deny in fact those are the two things which um which uh the the bit credit project is working

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uh to to resolve and to improve i was shocked as well to learn that um some friends of mine they

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reach out every now and then and just ask about it what's going on they know i have the podcast and

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And it's always, always when the number goes up that, oh, Princey, you're still like, you know, enjoying your Bitcoin.

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I guess you've sold out now.

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And I'm like, oh, my God.

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No.

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And well, OK, what else is there?

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Well, nothing.

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Yeah.

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What about stocks and shares?

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Well, why?

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But then they'll turn around in the same breath and say, actually, don't worry, because I'm not allowed to buy stocks and shares anyway.

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because the bank that they work for has told them

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that they're not allowed to hold stocks and shares

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because that would be construed as a conflict of interest.

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Yeah.

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I mean, I guess the problem is that there are certain shenanigans

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which have been going on there.

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But yeah, it's getting more from a kind of transparency mode

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to a kind of, how do you call it in English,

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of the mass of forbidding activities, of prohibition of things

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instead of leaving freedom to people,

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but so to say make sure it's transparent and handled in a moral, ethical way.

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So it's getting too much in a totalitarian mode, I would say,

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in banking at the moment.

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um yeah so so i hear from people who work in fund management and who have to report i don't know with

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very detailed emails and whenever they they go for lunch with somebody for

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to discuss the situation and so it's just madness i hear so you said um that you started studying

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uh on the uh the economics deeply studying economics um back at the beginning of your

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career was that was that the austrian flavor or was that keynesian or was it a mix of both

215
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yeah i wouldn't believe it but austrian austrian universities are mostly state sponsored so you i

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guess you can guess what type of economics um um they thought and and i also have to admit that at

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the time uh being young i was kind of a little bit socialist minded at the time and i really

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bought into the philosophy and yeah just the government's going to take care of us and it was

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really only later um a couple years later increasingly seeing how this uh conflicted

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with reality uh that i even became aware of that that there was such a thing as the austrian school

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of economics which which probably was when i when i started my first prediction market

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project in 2004.

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And I sort of say observed

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how markets really worked

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in a very experimental way at the time.

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That was the time when Vernon Smith

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won the Nobel Prize about his experiment

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about the Hayek hypothesis

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where they found out that markets

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don't need to be perfect,

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that you can have clever people

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and suckers at the same time in the market

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And still the price which results from the market mechanism is quite indicative and informative.

234
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Right. Okay. So why did you leave the banking then in 2001? What happened?

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What happened? Well, it was a leaving in steps.

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When I was working at an investment bank in 1999 and I got increasingly interested in this new thing coming up called the Internet.

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including some things which were happening in the US,

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internet brokerages popping up.

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And so now we need such a thing in Austria,

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I want such a thing.

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And so I started a project to build it And then more or less we actually got a banking license for that So we had our own bank at some stage

242
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And later, that project got taken over by an Austrian bank,

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which essentially bought into the project and took it over.

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Then it became part of a normal banking.

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And today, as you know, every bank has internet banking.

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There's no way around it.

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But at the time, it required a special type of vehicle to get this going.

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So that was the step number one.

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And once that internet brokerage was sold, I started to work with prediction markets, real money prediction markets at the time, 2004, 2005, which also required a banking license.

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and yeah so that's but that was already done in a purely entrepreneurial way on my own

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on my own initiative self-sovereign so to say so what what's um what was the kind of data that

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you were using feeding into the other prediction market how did you build this oh i i started gen

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one uh i mean it was copied afterwards by well i think there were very early projects there were

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two, three projects in the world at the time in prediction markets.

255
00:24:48,224 --> 00:24:50,984
There was in Iowa something going on.

256
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There was something going on in Ireland and Dublin by John Delaney.

257
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And Vienna where Vernon Smith had, Nobel laureate,

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had taught experimental economics in the late 90s.

259
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So originally the prediction markets were the usual stuff

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which you get nowadays, like on sports events, on stock indices,

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on foreign currency price movements.

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And, yeah, so you use data feeds for those essentially to make sure

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the usual stuff at the time, Reuters type of data feeds,

264
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which were available with good market prices to run those things.

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But I got disenchanted at some stage with the, let's say,

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first-generation prediction markets.

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even though they're still around.

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And I sold that venture Red Monitor off to a British bank in 2008, I think.

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So that ended the real money prediction markets.

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And then I got increasingly interested in prediction markets

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as a truth engine, which led to the foundation of Prediki

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and some new approaches on how to build automated market makers

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but work off human knowledge on questions where the normal existing markets don't reach.

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Because what I learned at the time, I was always interested more in extracting correct information

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to distinguish truth from lies or, let's say, red herrings from proper information.

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And that wasn't possible. That needed human input.

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So the next generation prediction markets we built dealt with questions or with information for which there were not yet already markets.

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Because we realized that where there is already a deep and active market like in FX in stock indices and these things, it's actually not necessary to have a prediction market.

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the real value of prediction markets, and that's how we used it in the end on Predicty,

280
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was to get information and thoughts caught off people's head,

281
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translated into numbers they can trade.

282
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So that was when my interest in Austrian economics got reawakened fairly strongly.

283
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So there was a part in the middle of the 2000s.

284
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So that would be deeply linked with like human action, incentive structures, praxeology. And that's where you started getting it. Where would you find the lies? Like, this is what's really interesting. And how would they be perpetuated into the marketplace?

285
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For example, could you use very far out of the money options to put on positions to try and steer a market in a certain way?

286
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Or were they using headlines?

287
00:27:55,004 --> 00:27:57,484
What did you kind of feel?

288
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Yeah.

289
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What were you picking up on?

290
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Options, in fact, turned out to be a very dangerous type.

291
00:28:02,664 --> 00:28:17,984
But what really triggered this whole thing was the Internet age in the 2000s, in the early 2000s, late 1999, early 2000s, where I noticed a very funny psychological effect on myself.

292
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in the beginning of the cycle

293
00:28:20,604 --> 00:28:23,604
there was a certain amount of skepticism

294
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towards internets and internet stocks

295
00:28:25,644 --> 00:28:29,804
and it more and more turned into a form of mania

296
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which ended in the so-called internet bubble

297
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which you may already have experienced

298
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I don't know

299
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and where essentially anything

300
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which had a dot com at the end

301
00:28:44,484 --> 00:28:47,464
was valued at ridiculous prices

302
00:28:47,464 --> 00:28:54,764
Now, the thing is, I was working at an investment bank at the time and I knew valuations.

303
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And I knew that some of these things didn't really make sense, like projected market shares of Internet business, which exceeded the total market volume of the vertical.

304
00:29:08,244 --> 00:29:14,724
they were in. And it didn't make sense, but the prices showed up. And I found myself taking those

305
00:29:14,724 --> 00:29:22,924
prices in the market, taking them too serious and acting according to them. And this is in line

306
00:29:22,924 --> 00:29:29,864
with Austrian theory. Hayek always says the price system, if understood correctly, we must

307
00:29:29,864 --> 00:29:35,544
understand it as a system to aggregate and distribute information, which is correct. So

308
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I got really interested in how price information could go so wrong.

309
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And one of the conclusions which I had and which was incorporated

310
00:29:45,084 --> 00:29:47,844
and laid in the prediction market concepts for Prediki

311
00:29:47,844 --> 00:29:51,624
was that we needed to not just trade prices,

312
00:29:52,084 --> 00:29:55,804
but we also needed to trade fundamental values,

313
00:29:55,924 --> 00:30:00,384
like how much revenue is a company going to make?

314
00:30:00,784 --> 00:30:02,484
What's a certain product line?

315
00:30:02,564 --> 00:30:03,584
Is it going to be growing?

316
00:30:03,584 --> 00:30:05,284
Is it going to be shrinking?

317
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will customers accept it?

318
00:30:07,844 --> 00:30:11,824
Really the fundamental things which you'd find only on the second level

319
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of a research report instead of just trading future prices.

320
00:30:17,344 --> 00:30:21,364
So that was, so to say, where this interest came from.

321
00:30:21,524 --> 00:30:25,364
And we had some really good results in predicting future trends

322
00:30:25,364 --> 00:30:28,944
and incorporating them later into financial models.

323
00:30:30,524 --> 00:30:33,904
So let's use Warren Buffett as an example here,

324
00:30:33,904 --> 00:30:37,884
so-called value investor, places everything on the fundamentals,

325
00:30:38,364 --> 00:30:39,504
a scholar of Ben Graham.

326
00:30:40,224 --> 00:30:44,484
How can he then not understand the fundamentals of Bitcoin,

327
00:30:44,884 --> 00:30:49,984
i.e. 21 million hard cap, like that's as fundamental as it gets

328
00:30:49,984 --> 00:30:53,224
for anyone looking at an investment.

329
00:30:53,924 --> 00:30:55,544
He's like, aha, say that again?

330
00:30:56,264 --> 00:31:00,524
Yeah, 21 million hard cap, and you are going to measure that

331
00:31:00,524 --> 00:31:03,124
in a currency that is forever inflating.

332
00:31:03,904 --> 00:31:16,864
So therefore, this may cost me if I say that then, but there is a lot to agree with Warren Buffett on this.

333
00:31:16,864 --> 00:31:25,244
I mean, the man comes out of an age when fiat was, so to say, conquering the world, right?

334
00:31:25,384 --> 00:31:27,244
So 70s, 80s.

335
00:31:27,244 --> 00:31:50,424
And the situation that fiat system became what it is today with artificially low interest rates, sometimes even negative interest, which makes the whole stock market mechanics essentially a casino, detached from reality, which is so that the prices don't really make more sense.

336
00:31:50,424 --> 00:32:11,704
I don't know if I need to go into detail on that, but when interest rates are artificially driven so low by fiat money printing that they're approaching zero, the prices, the PEs, the price revenue ratios, everything gets more or less closer to randomness.

337
00:32:11,704 --> 00:32:14,704
so he came

338
00:32:14,704 --> 00:32:17,104
from a time when that wasn't like that

339
00:32:17,104 --> 00:32:17,944
and

340
00:32:17,944 --> 00:32:20,784
without being an expert

341
00:32:20,784 --> 00:32:22,883
on his dealings I hear that

342
00:32:22,883 --> 00:32:24,244
for the past couple of years

343
00:32:24,244 --> 00:32:26,524
he wasn't doing so great either

344
00:32:26,524 --> 00:32:27,764
just average or something

345
00:32:27,764 --> 00:32:30,144
so when he

346
00:32:30,144 --> 00:32:32,744
criticizes Bitcoin

347
00:32:32,744 --> 00:32:34,984
I can completely empathize

348
00:32:34,984 --> 00:32:36,964
because it is those things

349
00:32:36,964 --> 00:32:38,964
which any sound

350
00:32:38,964 --> 00:32:40,424
economist would tell you that

351
00:32:40,424 --> 00:32:44,784
Money is money when any old store of value,

352
00:32:44,844 --> 00:32:47,984
and any good is a store of value, becomes medium of exchange.

353
00:32:48,824 --> 00:32:50,184
That's the core.

354
00:32:50,964 --> 00:32:57,244
And so if Bitcoin has trouble establishing itself as a medium of exchange,

355
00:32:58,164 --> 00:33:02,004
people like him who are businessmen, not economists,

356
00:33:02,664 --> 00:33:06,244
so to say correctly recognize that there is something missing.

357
00:33:06,244 --> 00:33:11,204
because any money is foremost a medium of exchange.

358
00:33:11,644 --> 00:33:16,344
Now, Bitcoin is somehow a medium of exchange, as we all know.

359
00:33:16,784 --> 00:33:20,904
There's a reason why there's Pizza Day.

360
00:33:20,904 --> 00:33:27,104
Pizza Day was the first example of Bitcoin actually working as a medium of exchange.

361
00:33:27,244 --> 00:33:30,024
That's why we celebrate Bitcoin Pizza Day.

362
00:33:30,964 --> 00:33:33,104
And of course, also what Ross did.

363
00:33:33,104 --> 00:33:41,664
I mean, we can discuss the ethics of his venture, but the economics are undeniable.

364
00:33:42,744 --> 00:33:51,584
Economically, he established or his project established Bitcoin as a medium of exchange for a very specialized situation.

365
00:33:52,304 --> 00:33:56,164
The fiat money wouldn't work, right?

366
00:33:56,284 --> 00:33:58,544
I mean, we can say it like that.

367
00:33:58,544 --> 00:34:07,484
And the mad thing is, it's not only Ross Ulbricht's project which acts there.

368
00:34:07,744 --> 00:34:10,184
It's very well known in the fiat world.

369
00:34:10,304 --> 00:34:23,044
In fact, it's in the official news that the fiat system has a so-called trade finance gap of about $2.5 trillion of trade, which just cannot happen.

370
00:34:23,044 --> 00:34:46,204
And this problem, this challenge of the fiat money world, the overregulated fiat money world, fragile fiat money world, essentially hits poor countries the hardest because it's the poorest countries which cannot fulfill the anti-fragility measures which the fiat money system needs.

371
00:34:46,204 --> 00:34:52,824
So it's the poorest countries which are hit, the businesses in the poorest countries which can't go for lack of working capital,

372
00:34:53,364 --> 00:34:58,684
business which then can't pay workers who don't earn enough and who essentially stay in poverty.

373
00:34:59,744 --> 00:35:17,015
So this so trade finance gap is a huge problem essentially caused by the fiat system and its instability So when you were still running the prediction market thing that was leading up to 2007

374
00:35:17,135 --> 00:35:21,675
2008, were you catching the information?

375
00:35:21,876 --> 00:35:27,095
Were you seeing that something was coming with regards to the financial collapse and

376
00:35:27,095 --> 00:35:29,515
the collapse of a few of the big banks there?

377
00:35:29,515 --> 00:35:47,696
I was more in business fundamentals at the time, so not in macroeconomics, but as you may have suspected that really the financial crisis of 2007-2008 was what brought me back into economics.

378
00:35:47,696 --> 00:35:54,115
It was one of my study majors, so I always had a really high degree of interest in it.

379
00:35:54,515 --> 00:35:58,255
And that was the time when I finally switched to Austrian economics.

380
00:35:58,255 --> 00:36:05,436
Until then, I was mostly on it because of free markets, market mechanisms, auction theory.

381
00:36:06,956 --> 00:36:14,615
But at the time, I recognized just how bad the system actually was.

382
00:36:15,255 --> 00:36:27,755
Because I was in a parliamentary, I was called into a parliamentary working group to find out the reasons of the great financial crisis and what to do about it.

383
00:36:28,255 --> 00:36:37,196
And essentially what I noticed was that the political class was not really interested in finding out the real reasons.

384
00:36:37,396 --> 00:36:46,515
They essentially wanted to find out how could the bankers shift the blame to bankers for what they did superficially,

385
00:36:46,515 --> 00:37:02,055
but completely, so to say, ignoring or hiding in the narrative what really happened and how the political class contributed and actually caused the financial crisis.

386
00:37:02,215 --> 00:37:09,936
And even today, if you ask people of the great financial crisis, they will say, yeah, it was the banks, it was Wall Street who caused it all.

387
00:37:09,936 --> 00:37:15,095
And at the time, I came to completely different conclusions.

388
00:37:15,095 --> 00:37:18,315
I put that into the working group

389
00:37:18,315 --> 00:37:19,495
and was sort of shocked

390
00:37:19,495 --> 00:37:22,215
to see that all the politicians

391
00:37:22,215 --> 00:37:25,215
who had ordered that commission

392
00:37:25,215 --> 00:37:27,275
all they were interested in

393
00:37:27,275 --> 00:37:32,575
was being seen as the saviors

394
00:37:32,575 --> 00:37:34,416
they now coming in like Superman

395
00:37:34,416 --> 00:37:37,075
we're going to save the world with our politics

396
00:37:37,075 --> 00:37:41,715
whereas it was them who originally caused the crisis

397
00:37:41,715 --> 00:37:45,075
I can go into detail on the three major things

398
00:37:45,075 --> 00:37:48,155
which they did to cause this problem.

399
00:37:48,495 --> 00:37:49,696
But yeah, let's do it.

400
00:37:49,936 --> 00:37:51,835
Since we are about Bitcoin here, aren't we?

401
00:37:52,215 --> 00:37:52,815
Yeah, I know.

402
00:37:52,936 --> 00:37:53,856
But people love,

403
00:37:54,356 --> 00:37:55,956
Bitcoiners love figuring this out.

404
00:37:56,436 --> 00:37:59,795
And I was just chatting to another Bitcoiner the other day.

405
00:37:59,856 --> 00:38:01,635
He's making a short film about the collapse

406
00:38:01,635 --> 00:38:03,135
of long-term capital management.

407
00:38:03,675 --> 00:38:04,135
Oh, yeah.

408
00:38:04,335 --> 00:38:06,795
Which happened in 1999.

409
00:38:07,856 --> 00:38:12,295
The Big Short is one of like our favorite films in the space

410
00:38:12,295 --> 00:38:17,815
because we believe it's explaining what happened and what went down.

411
00:38:18,515 --> 00:38:22,436
Margin call is another one that people watch and reference.

412
00:38:22,815 --> 00:38:24,295
So I'd be interested to know,

413
00:38:24,376 --> 00:38:27,515
what were the three points that you brought up to the political class?

414
00:38:27,775 --> 00:38:30,815
And I can imagine the air leaving the room

415
00:38:30,815 --> 00:38:34,416
as you're pointing out all of this information to them.

416
00:38:34,416 --> 00:38:39,575
Yeah, look, I think the general narrative,

417
00:38:39,575 --> 00:38:44,956
which the politicians tried to, well, and successfully communicated, because they are

418
00:38:44,956 --> 00:38:49,956
good communicators, if they do one thing well, then they can communicate very well, is, yeah,

419
00:38:50,015 --> 00:38:56,436
the bankers were greedy, they made all these profits, they did everything wrong. And let me

420
00:38:56,436 --> 00:39:02,235
just see out of memory that the three things which struck me most at the time was, how could this

421
00:39:02,235 --> 00:39:08,416
whole thing happen? The first thing happened because of good intentions. Essentially, politicians

422
00:39:08,416 --> 00:39:16,315
sped out regulations, which were supposed to help the needy to get loans, which a normal banker

423
00:39:16,315 --> 00:39:23,135
wouldn't have given to them. So there were regulations which essentially drove bankers

424
00:39:23,135 --> 00:39:30,815
or created a kind of obligation, not just moral, but even economical and regulation-wise to give

425
00:39:30,815 --> 00:39:37,916
loans to subprime, it was called at the time. Now, since the bankers didn't want to do that,

426
00:39:37,916 --> 00:39:39,715
So that was fault of the politicians.

427
00:39:39,896 --> 00:39:50,495
Since the bankers didn't want to do that, the politicians, so to say, created guarantee instruments to hold the bankers harmless if something went wrong.

428
00:39:51,555 --> 00:39:55,055
So essentially, they were inviting reckless behavior.

429
00:39:55,055 --> 00:40:03,495
Now, obviously, from reckless credit giving, you can have fantastic profits for a little while.

430
00:40:03,495 --> 00:40:09,755
But they blamed those profits on the bankers, which were kind of innocent.

431
00:40:09,916 --> 00:40:15,335
But of course, you don't look innocent if you make a profit because of what politicians did.

432
00:40:15,755 --> 00:40:29,215
The other thing which really was wild is the politicians regulated that certain institutional investors only could invest in bonds of a certain rating.

433
00:40:29,215 --> 00:40:34,396
and the ratings which were to be supposedly used by the banks

434
00:40:34,396 --> 00:40:35,815
and by the institutional investors

435
00:40:35,815 --> 00:40:39,195
were ratings from three very specific rating agencies,

436
00:40:39,835 --> 00:40:43,995
effectively creating an oligopoly of three companies

437
00:40:43,995 --> 00:40:47,335
who could say what was investment grade

438
00:40:47,335 --> 00:40:49,335
and what could be bought and what not.

439
00:40:50,476 --> 00:40:53,896
And of course, once you have such an oligopoly,

440
00:40:54,356 --> 00:40:55,476
life is very nice.

441
00:40:55,575 --> 00:40:57,215
You don't take your job too serious.

442
00:40:57,215 --> 00:41:10,995
And then we all know how the story ended when some models about, you know, some risk models were used in a wrong way.

443
00:41:11,376 --> 00:41:22,295
It's called in English now with cluster risk, which essentially led to a breakdown when things did turn sour.

444
00:41:22,295 --> 00:41:29,055
So there was so much political interference in this whole thing, which was causal to everything.

445
00:41:29,356 --> 00:41:37,535
But people didn't see that because those those political mistakes caused excesses in the banking system.

446
00:41:37,675 --> 00:41:40,675
That's that's undeniable, but it was not causal.

447
00:41:41,255 --> 00:41:46,195
So that's that's the Austrian view of of the financial crisis.

448
00:41:46,195 --> 00:41:48,615
it was the fault of the politicians.

449
00:41:49,535 --> 00:41:55,436
And as business people, businesses have to make use of those things.

450
00:41:55,436 --> 00:41:57,655
Otherwise, they lose out in competition.

451
00:41:57,835 --> 00:41:59,075
So there is not really much choice.

452
00:42:00,275 --> 00:42:02,215
Yeah, that's the classic scene, isn't it?

453
00:42:02,275 --> 00:42:06,896
When Steve Carell's character is in the US.

454
00:42:07,715 --> 00:42:10,916
And was it his character or one of the other characters?

455
00:42:11,376 --> 00:42:13,295
It's so long that I've seen that, yeah.

456
00:42:13,495 --> 00:42:15,055
Yeah, but it gets talking to the stripper.

457
00:42:15,055 --> 00:42:23,135
and the stripper explains that she has um three condos and he all of a sudden it twigs for him

458
00:42:23,135 --> 00:42:28,095
it's like oh my god like the leverage in this system is absolutely beyond control and but it's

459
00:42:28,095 --> 00:42:33,995
exactly what you're saying the politicians were forcing so if you're a loan manager like if you'd

460
00:42:33,995 --> 00:42:40,615
have been back in the 80s or 90s early 90s and somebody comes into you asking for a loan for x y

461
00:42:40,615 --> 00:42:48,456
lz it could be anything right and it's up to that loan manager to look at this specific individual

462
00:42:48,456 --> 00:42:55,575
case and say yes or no and nine times out of ten is probably going to be no but we get to this

463
00:42:55,575 --> 00:43:02,255
point where it's like no we have to flood the the the economy uh with money politicians most likely

464
00:43:02,255 --> 00:43:08,835
trying to favor votes as always because that's pretty much all of that's their incentives right

465
00:43:08,835 --> 00:43:11,195
Their incentive structure is to win votes.

466
00:43:11,315 --> 00:43:12,175
So how do you do that?

467
00:43:12,235 --> 00:43:13,655
You give people cheap money.

468
00:43:14,335 --> 00:43:17,535
And you force the banks into giving out these very cheap loans.

469
00:43:17,695 --> 00:43:21,515
And it got down to like 0% deposit in some places.

470
00:43:21,515 --> 00:43:25,356
It was absolute, you know, complete bananas.

471
00:43:25,356 --> 00:43:26,775
Yeah, yeah.

472
00:43:28,015 --> 00:43:29,356
But it was always like that.

473
00:43:29,456 --> 00:43:31,976
I mean, that's how unsound money came around.

474
00:43:32,595 --> 00:43:36,436
I mean, in the US, for instance, they had, while they were on the gold standard,

475
00:43:36,436 --> 00:43:44,035
gold had a straight line price for 150 years, $20 for an ounce of gold.

476
00:43:44,035 --> 00:43:52,035
And even the purchasing power of that one ounce gold remained remarkably stable over 150 years

477
00:43:52,035 --> 00:43:56,295
with some dents, which you could observe during wartimes.

478
00:43:56,295 --> 00:44:00,215
Because what happened during wartimes was that governments, so to say,

479
00:44:00,876 --> 00:44:05,035
suspended gold redeemability of credit money.

480
00:44:05,035 --> 00:44:10,956
and thereby allowed the system to inflate

481
00:44:10,956 --> 00:44:13,255
and people lost their savings.

482
00:44:14,255 --> 00:44:20,175
And when the gold redeemability was reestablished,

483
00:44:20,655 --> 00:44:26,675
gold very soon found back to its fundamental value of $20 an ounce

484
00:44:26,675 --> 00:44:31,595
with a very remarkably, as I said, stable purchasing power over centuries.

485
00:44:31,595 --> 00:44:57,175
And this, by the way, is also why I have a very different expectation of Bitcoin to, I would say, unfortunately, 99% or maybe meanwhile 90% of the Bitcoiners, because I do expect that Bitcoin ultimately will have a very specific fundamental value once it establishes itself as a medium of exchange.

486
00:44:58,396 --> 00:44:59,695
Okay, so.

487
00:44:59,695 --> 00:45:03,195
So there's no unlimited, in my mind.

488
00:45:03,695 --> 00:45:06,876
It could be, if it remains store of value.

489
00:45:07,255 --> 00:45:10,436
But if it does what the money must do sooner or later,

490
00:45:10,615 --> 00:45:11,795
become a medium of exchange,

491
00:45:11,876 --> 00:45:13,555
then there will be a fundamental value,

492
00:45:13,775 --> 00:45:14,655
just like gold-headed.

493
00:45:15,476 --> 00:45:16,495
Yeah, no, I understand.

494
00:45:17,876 --> 00:45:20,896
But I think what people are looking at

495
00:45:20,896 --> 00:45:23,235
is kind of like the US dollar price, right?

496
00:45:23,356 --> 00:45:25,275
Which if you're going to pay,

497
00:45:25,376 --> 00:45:27,456
if that's the only unit of measurement

498
00:45:27,456 --> 00:45:28,315
that you're going to use,

499
00:45:28,315 --> 00:45:33,275
then it is going to keep going up and up and up because the US dollars are going to be infinitely printed.

500
00:45:34,055 --> 00:45:35,916
Yeah, which you should never do.

501
00:45:36,075 --> 00:45:40,456
So what I recommend to anybody, if he looks at the gold price at a minimum,

502
00:45:40,735 --> 00:45:48,335
please adjust the dollar value for the publicly announced consumer price index.

503
00:45:48,675 --> 00:45:51,735
I mean, that's the minimum you should do when you look at the development.

504
00:45:51,896 --> 00:45:54,476
Otherwise, you get tricked by fear shenanigans.

505
00:45:54,476 --> 00:45:57,695
and what's a good reference also at the same time

506
00:45:57,695 --> 00:46:02,476
which I always watch is how many gold coins is one Bitcoin.

507
00:46:02,655 --> 00:46:04,976
That's also a very good indicator of where we are

508
00:46:04,976 --> 00:46:08,075
in this evolution of Bitcoin to a medium of exchange.

509
00:46:08,356 --> 00:46:12,515
So latest it was 32 one ounce gold eagles

510
00:46:12,515 --> 00:46:15,835
or Viennese Philharmonics for one Bitcoin.

511
00:46:16,195 --> 00:46:19,075
So that's the thing to be conscious about.

512
00:46:19,075 --> 00:46:20,535
It was 32 coins?

513
00:46:21,215 --> 00:46:21,356
Yep.

514
00:46:21,795 --> 00:46:22,615
One ounce coins?

515
00:46:23,615 --> 00:46:24,115
Yep.

516
00:46:24,476 --> 00:46:26,876
Right. Okay. Interesting. All right, cool.

517
00:46:27,775 --> 00:46:31,175
Yeah, you need to build a dashboard for that.

518
00:46:31,175 --> 00:46:33,476
I'm sure people would be interested to watch it.

519
00:46:34,275 --> 00:46:36,876
Yeah, yeah. I mean, it's on charts.

520
00:46:36,876 --> 00:46:43,175
Whoever wants to see it, all kinds of trading websites

521
00:46:43,175 --> 00:46:48,976
have gold, Xau versus XPT or PTC, depending on what code they use.

522
00:46:49,275 --> 00:46:52,396
So it's very easy to follow and it's a very instructive,

523
00:46:52,447 --> 00:47:00,887
chart because as we know, silver has solidly demonetized these days, right?

524
00:47:00,887 --> 00:47:09,447
So it's really only enormous scarce good for industry trade for various applications.

525
00:47:10,067 --> 00:47:16,847
Whereas gold, gold is still not only used in industry, but it's also used as backing

526
00:47:16,847 --> 00:47:18,127
at central banks.

527
00:47:18,127 --> 00:47:30,427
I don't know what it is today, but maybe 17, 80, 19% of gold is backing central banks because they're simply, I think they're still kind of halfway scared of a return of the gold standard.

528
00:47:31,327 --> 00:47:32,847
And therefore they keep it.

529
00:47:33,227 --> 00:47:39,067
And also privately people, of course, hold gold as a store of value.

530
00:47:39,527 --> 00:47:42,907
And then, of course, there's all the jewelry and industrial applications.

531
00:47:42,907 --> 00:47:48,427
But only 17% to 18% of gold are in central banks.

532
00:47:48,547 --> 00:47:54,567
And that's the portion and the market cap to watch to find out what's really going on.

533
00:47:55,407 --> 00:48:03,547
Yeah, so people can go to bitbow.io and just on the top right, drop down, just put in XAU and you'll get the price of Bitcoin to gold.

534
00:48:03,927 --> 00:48:10,307
And yeah, right now it's 31, yeah, 31, 32, 31 ounces, 31.32 ounces.

535
00:48:10,307 --> 00:48:13,427
Yeah, so we're not yet at peak gold.

536
00:48:14,907 --> 00:48:21,287
It's, yeah, what's called Tatoune Mao, the finding of the right level is ongoing.

537
00:48:23,127 --> 00:48:24,927
So we'll see what it is.

538
00:48:25,027 --> 00:48:26,907
You get a good feeling looking at the chart.

539
00:48:27,467 --> 00:48:28,907
So medium of exchange.

540
00:48:29,167 --> 00:48:35,127
This is the big debate at the moment in, well, one of the big debates at the moment in the Bitcoin world.

541
00:48:36,047 --> 00:48:39,807
Some people are saying, well, no, Bitcoin is only going to act as a store of value.

542
00:48:40,307 --> 00:48:45,127
And hopefully lots of people are kicking and screaming and saying,

543
00:48:45,287 --> 00:48:46,327
that's a load of bullshit.

544
00:48:46,547 --> 00:48:47,547
It's a medium of exchange.

545
00:48:47,667 --> 00:48:48,787
That's what it's supposed to be.

546
00:48:48,787 --> 00:48:53,167
And we have to work as hard as we possibly can to make it medium of

547
00:48:53,167 --> 00:48:53,547
exchange.

548
00:48:54,087 --> 00:48:54,227
Yes.

549
00:48:54,927 --> 00:48:58,567
So this is how your project ties in?

550
00:48:59,707 --> 00:48:59,947
Yeah.

551
00:49:00,147 --> 00:49:05,507
I think what's propping up and doing the return waves of Bitcoin,

552
00:49:05,627 --> 00:49:08,807
whenever it gets, so to say, into a sell-off,

553
00:49:08,807 --> 00:49:13,107
So far, we were in a good situation to new things popped up.

554
00:49:13,647 --> 00:49:14,747
People are building.

555
00:49:15,107 --> 00:49:20,427
So I think the builders are really the heroes in the Bitcoin space.

556
00:49:20,627 --> 00:49:25,087
I mean, all the attention goes to the corporate treasury guys at this moment.

557
00:49:25,087 --> 00:49:37,167
But the real heroes in my mind are the ones who are building to improve Bitcoin, Bitcoin's usability, Bitcoin's technology, self-sovereignty, non-custodial businesses,

558
00:49:37,167 --> 00:49:45,867
privacy for censorship resistance. So, yeah, I think those are the really important things.

559
00:49:45,947 --> 00:49:53,247
Of course, I mean, yes, the corporate treasurers, as long as Bitcoin hasn't reached its fundamental

560
00:49:53,247 --> 00:50:00,087
value, I don't see a problem in there. Maybe not even if it slightly overshoots that value,

561
00:50:00,227 --> 00:50:06,227
whatever it is, we don't know yet. We don't have a historic value like we had for gold.

562
00:50:06,987 --> 00:50:09,127
So I guess everybody is contributing,

563
00:50:09,287 --> 00:50:13,827
but the real important ones are the ones building for medium of exchange,

564
00:50:13,907 --> 00:50:14,267
I think.

565
00:50:14,747 --> 00:50:14,827
Yeah.

566
00:50:16,207 --> 00:50:21,027
So let's get on to, you've used the word or the phrase a couple of times here,

567
00:50:21,167 --> 00:50:21,927
bill of exchange.

568
00:50:22,767 --> 00:50:27,227
This is what you've been building and what we wanted to talk about today.

569
00:50:27,907 --> 00:50:29,587
So yeah, lay it on us.

570
00:50:29,587 --> 00:50:31,987
What's been keeping you busy?

571
00:50:31,987 --> 00:50:43,287
What has to be known is there is some false narratives about Austrian economics floating around in Bitcoin space.

572
00:50:43,287 --> 00:50:49,247
So to say that for a complete monetary system, you only need a fixed amount of base money.

573
00:50:49,507 --> 00:50:51,127
That's not true.

574
00:50:51,567 --> 00:50:53,087
That's not what Austrians said.

575
00:50:53,087 --> 00:51:23,067
Yeah. Those who are concerned themselves much with money like Mises, Ludwig von Mises and Friedrich Hayek, they all said that you need bank money, as it was called, an elastic supply of money also to ensure that businesses can work, that there is full employment, that people find work and that the economy can thrive and do its circumstances.

576
00:51:23,087 --> 00:51:27,267
thing. You produce goods, you exchange the goods against the

577
00:51:27,267 --> 00:51:30,967
medium of exchange, and then you use the medium of exchange to get your goods, which

578
00:51:30,967 --> 00:51:35,307
completes the real exchange. So that was always

579
00:51:35,307 --> 00:51:39,227
the case. And somehow that got completely lost in

580
00:51:39,227 --> 00:51:43,247
a, let's say, singular focus

581
00:51:43,247 --> 00:51:46,947
on the fixed quantity of base money, which a good monetary

582
00:51:46,947 --> 00:51:51,207
system needs, an ideal monetary system needs. And

583
00:51:51,207 --> 00:51:58,927
there's very little attention for this needed elastic supply of credit money.

584
00:51:59,127 --> 00:52:00,547
So, business money, credit money.

585
00:52:02,187 --> 00:52:03,047
Okay, yeah.

586
00:52:03,467 --> 00:52:04,907
That's going to get a few people.

587
00:52:04,907 --> 00:52:05,207
Does it make sense?

588
00:52:05,207 --> 00:52:08,327
Well, it's definitely going to get a few people scratching their heads

589
00:52:08,327 --> 00:52:12,627
because I think very much of a, well, I'd say all of us

590
00:52:12,627 --> 00:52:16,987
are very much focused on the fixed supply, the 21 million hard cap.

591
00:52:17,667 --> 00:52:19,367
Which is very important, yeah.

592
00:52:19,367 --> 00:52:28,667
Yes, which it's hard to see past after a lifetime of just complete and utter total fiat fuckery, right?

593
00:52:28,827 --> 00:52:32,087
It's such a refreshing idea.

594
00:52:32,607 --> 00:52:37,547
But what you're saying is you need that fundamental baseline.

595
00:52:37,747 --> 00:52:47,727
But on top of that, you're going to have to use some form of credit, some form of elasticity for trade to be able to prosper.

596
00:52:48,727 --> 00:52:49,287
Exactly.

597
00:52:49,367 --> 00:53:03,987
And in the pre-fiat times, so let's say at least from the Middle Ages in Europe till 1913, 1914, that was the invention of the Bill of Exchange.

598
00:53:03,987 --> 00:53:15,107
So this is a 500-year-old instrument, which arose, let's say, there were some more early versions in China and in India and Arabia.

599
00:53:15,347 --> 00:53:27,947
But in Europe, in modern times, it really arose in Lombardia in northern Italy in the late 15th century, early 16th century, which is the bill of exchange.

600
00:53:27,947 --> 00:53:54,787
I guess many people still know the names of the famous banking families from the time, the Medici and these similar families down there, which invented it and which solved at the time something terrible, which was the so-called Great Bullion Famine, which was a scarcity of species of gold and silver in Europe, which essentially caused a deflationary spiral, as it's called,

601
00:53:54,787 --> 00:53:58,487
whereby businesses couldn't sell their goods,

602
00:53:58,947 --> 00:54:00,727
businesses couldn't pay their workers,

603
00:54:02,307 --> 00:54:09,647
and essentially the production of food and goods in Europe shut down.

604
00:54:09,647 --> 00:54:11,487
That was around 1460.

605
00:54:11,967 --> 00:54:14,887
Now, thank goodness these other instruments came in,

606
00:54:15,047 --> 00:54:17,587
payment instruments, which were called bill of exchange,

607
00:54:18,127 --> 00:54:23,787
whereby one businessman promises another bill of business

608
00:54:23,787 --> 00:54:30,727
man to pay him for B2B goods in a certain period, let's say in a month, two months,

609
00:54:30,807 --> 00:54:35,287
three months, whenever they process them or whenever they sold them on to consumers.

610
00:54:36,067 --> 00:54:41,127
And from that money received from consumers pays back the bill of exchange, which gets

611
00:54:41,127 --> 00:54:46,447
torn apart, burnt, as we would say in cryptography language today.

612
00:54:47,207 --> 00:54:49,087
And the cycle can start anew.

613
00:54:49,247 --> 00:54:52,607
So that's what the bill of exchange does.

614
00:54:52,607 --> 00:55:08,587
And it caused it allowed a huge growth in the economy, division of labor, specialization of business, which essentially produced the wealth of nations, which something which Adam Smith already recognized.

615
00:55:08,587 --> 00:55:30,707
So by the time Mises wrote his book, it was already clear that the amount of money in circulation through those bills of exchange of business people exceeded the amount of gold in circulation by a factor 1 to 10 and later 1 to 20.

616
00:55:30,707 --> 00:55:47,227
So that's what kept trade and industry growing, wealth increasing, more goods for consumption and essentially supporting a much larger number of people on Earth, just like agriculture improved at the same time.

617
00:55:48,747 --> 00:55:52,987
So now this leads you to what you've created here, a bit credit.

618
00:55:52,987 --> 00:56:03,747
yeah essentially um uh what what the bit credit initiative does it's an open source project yeah

619
00:56:03,747 --> 00:56:11,267
obviously because uh i can't go into reasons why it has to be um is essentially it it um

620
00:56:11,267 --> 00:56:19,567
reinvents what was happening during gold standard times but uh on cryptography and and using bitcoin

621
00:56:19,567 --> 00:56:24,407
as the finality layer because you need a fixed amount of base money

622
00:56:24,407 --> 00:56:28,947
to make such a system work honestly and recognizable

623
00:56:28,947 --> 00:56:30,947
and non-inflationary.

624
00:56:31,707 --> 00:56:35,007
Yeah, that's essentially what the project is.

625
00:56:35,507 --> 00:56:41,347
So could you talk us through an example then of how it would work?

626
00:56:41,647 --> 00:56:46,007
Yeah, it's essentially what happens if –

627
00:56:46,007 --> 00:56:58,147
I always use this example of apricots in Austria because they're very, let's say, volatile good in terms of it spoils fast.

628
00:56:58,267 --> 00:56:59,547
So you really need to process it.

629
00:57:00,027 --> 00:57:07,227
So if you are an apricot farmer, you need to sell the stuff really, really fast for the apricots not to spoil.

630
00:57:07,567 --> 00:57:15,547
And so if you had, for instance, something like in the Great Bullion famine, a shortage of gold or silver, nobody had gold or silver available.

631
00:57:16,007 --> 00:57:19,887
scarcity, then you couldn't move your goods.

632
00:57:20,547 --> 00:57:29,347
So what the merchants did at the time is they sold their produce against essentially an IOU,

633
00:57:29,927 --> 00:57:37,007
but a commercial IOU between business people, which said, okay, I'm going to pay you, I don't

634
00:57:37,007 --> 00:57:41,727
know, 10 gold coins for your apricots, and I'll pay you those in 10 months.

635
00:57:41,727 --> 00:57:55,047
When I have sold them, when I have produced something like the example of apricot brandy comes to mind because that's a durable good and more durable food than just apricots.

636
00:57:55,767 --> 00:58:11,227
And once the apricot brandy manufacturer then sold his apricot brandy or his apricot jam or whatever, he then gets, so to say, from his consumer customers the money with which he can pay back the bill of exchange.

637
00:58:11,227 --> 00:58:15,967
So that's how the bill of exchange supported a circular economy.

638
00:58:17,127 --> 00:58:28,467
The way this was made payable at the time was a mechanism which was called discount banking.

639
00:58:28,927 --> 00:58:39,859
So it was still something which required a modicum of trust into the institutions which produced credit money from bills of exchange

640
00:58:40,819 --> 00:58:44,219
But that's just the effect of the paper technology they used.

641
00:58:45,439 --> 00:58:51,259
So essentially what happened is that the apricot farmer who produced and sold the apricots

642
00:58:51,259 --> 00:58:57,859
could go to a so-called discount bank and say, OK, I have this bill of exchange.

643
00:58:58,079 --> 00:58:59,159
I signed it.

644
00:58:59,239 --> 00:59:00,279
I'm liable for it.

645
00:59:00,559 --> 00:59:07,619
but it's the apricot brandy manufacturer who will pay, I don't know, 10 Bitcoin in three months.

646
00:59:08,019 --> 00:59:12,879
Please advance me some money so that I can pay my workers, that they can buy their food,

647
00:59:12,979 --> 00:59:17,419
that I can pay my suppliers, pay my lease for my land or whatever.

648
00:59:17,539 --> 00:59:19,999
So that's how the system worked.

649
00:59:19,999 --> 00:59:27,279
And once the farmer, his workers then spent the money, that money earned went back to other businesses

650
00:59:27,279 --> 00:59:31,539
who could also pay their workers and ultimately was spent by consumers

651
00:59:31,539 --> 00:59:36,919
for the company who had to pay back the bill of exchange.

652
00:59:36,919 --> 00:59:42,319
So instead of today's circle of where we buy Bitcoin and then we spend it at merchants

653
00:59:42,319 --> 00:59:46,899
and the merchants sell it for fiat, and so everybody is just buying and selling,

654
00:59:47,359 --> 00:59:53,319
once you have a bill of exchange system, people can start earning Bitcoin and spending Bitcoin,

655
00:59:53,319 --> 00:59:57,439
which means we remove the friction of buy-sell.

656
00:59:57,919 --> 01:00:01,839
And most importantly, we are removing the on-off ramps,

657
01:00:01,979 --> 01:00:07,139
which tyrannically governments will increasingly get under their control

658
01:00:07,139 --> 01:00:14,399
and imply first surveillance and later absolute control and up to confiscation.

659
01:00:16,099 --> 01:00:17,779
Oh, man, there's a lot here.

660
01:00:17,779 --> 01:00:34,239
So, the first thing I'm thinking about is what Hal Finney said about a whole banking system being created around Bitcoin.

661
01:00:34,239 --> 01:00:36,139
And that's pretty much exactly what you're saying.

662
01:00:36,239 --> 01:00:41,259
But you're talking about bills of exchange, which is going back centuries.

663
01:00:42,099 --> 01:00:46,539
When was the last time, you know, bills of exchange, when was the last time that was used?

664
01:00:46,539 --> 01:00:51,279
Have we just gone completely full fiat credit system mad right now?

665
01:00:52,039 --> 01:01:00,299
As I said, in my early commercial banking days, it was still a very normal instrument in international trade.

666
01:01:00,999 --> 01:01:10,999
And in fact, the funny thing is I mentioned this trade finance conference, which organized by the International Chamber of Commerce, the ICC, where it was last week.

667
01:01:10,999 --> 01:01:18,459
they're now talking about abolishing the bill of exchange because believe it or not just out of

668
01:01:18,459 --> 01:01:25,059
tradition even in fiat times they still add a bill of exchange letters of credit but nobody

669
01:01:25,059 --> 01:01:32,139
remembers anymore why that is so so now that they have the fiat system they're thinking of abolishing

670
01:01:32,139 --> 01:01:38,079
it, which may happen.

671
01:01:39,079 --> 01:01:46,479
But again, in Bitcoin, we can rebuild the necessary credit money layer for trade and

672
01:01:46,479 --> 01:01:51,799
industry by using that instrument, because the law of bill of exchange is essentially

673
01:01:51,799 --> 01:01:54,619
in all the important trading nations of the world.

674
01:01:54,779 --> 01:01:59,619
So it has a very solid foundation in commercial law.

675
01:01:59,619 --> 01:02:03,479
where I sort of say disagree with Hal

676
01:02:03,479 --> 01:02:09,019
is I wouldn't call banking anymore

677
01:02:09,019 --> 01:02:10,479
what's happening there

678
01:02:10,479 --> 01:02:14,359
because banking implies that you need money,

679
01:02:14,559 --> 01:02:15,879
central bank money especially,

680
01:02:16,679 --> 01:02:18,659
and there's trust involved.

681
01:02:18,939 --> 01:02:21,819
So what we are building,

682
01:02:22,279 --> 01:02:23,839
and it's still ongoing,

683
01:02:23,979 --> 01:02:25,419
but the first part of the system

684
01:02:25,419 --> 01:02:27,599
already operational and ready to beta test.

685
01:02:27,599 --> 01:02:34,379
um yeah what we are building is essentially a trust minimized version essentially just like

686
01:02:34,379 --> 01:02:40,559
bitcoin is trust minimized yeah that's the other point i was going to make it's the you know there

687
01:02:40,559 --> 01:02:47,139
are no banks existing at the moment that would even want to do something like this uh you know

688
01:02:47,139 --> 01:02:53,019
they've been so ultimately captured since the formation of the federal reserve in 1913 and you

689
01:02:53,019 --> 01:02:58,579
You know, it's been, here we are, what, 110 or so years later,

690
01:02:59,279 --> 01:03:05,299
where if you go back in history, there used to be thousands of banks

691
01:03:05,299 --> 01:03:09,139
and all of these different banks would be competing against each other

692
01:03:09,139 --> 01:03:11,319
and they would have been offering these bills of exchange

693
01:03:11,319 --> 01:03:14,919
and the discount, what was the language he used,

694
01:03:15,119 --> 01:03:20,079
so they could bridge the gap between the writer of the bill of exchange

695
01:03:20,079 --> 01:03:23,059
and the receiver and forward them some money so they could, right?

696
01:03:23,199 --> 01:03:25,319
So there would have been a marketplace for that

697
01:03:25,319 --> 01:03:28,659
within like the thousands of banks that could offer that.

698
01:03:28,759 --> 01:03:31,459
But now those thousands of banks have been whittled down

699
01:03:31,459 --> 01:03:33,199
to a very small core of banks.

700
01:03:33,199 --> 01:03:36,799
And all of these banks have to be members of the Federal Reserve System

701
01:03:36,799 --> 01:03:39,499
or equivalent, depending in which country you live.

702
01:03:39,639 --> 01:03:40,879
So it's completely captured.

703
01:03:41,339 --> 01:03:44,959
So it's not like we're not going to be going to those people for this.

704
01:03:45,339 --> 01:03:47,719
We're going to be going to people like yourself

705
01:03:47,719 --> 01:03:49,059
that are building this system.

706
01:03:49,059 --> 01:03:52,739
and many more entrepreneurs like you, I hope.

707
01:03:53,519 --> 01:03:53,639
Yeah.

708
01:03:53,839 --> 01:03:56,739
I mean, yeah, I mean, this is an open permissionless system.

709
01:03:56,899 --> 01:04:01,799
So anybody will be able to run that just like anybody can run their minor bid eggs if they want.

710
01:04:02,659 --> 01:04:08,279
So, but going back to what you just said, yes, it's actually not so long ago that this was killed.

711
01:04:08,279 --> 01:04:14,419
So when I was working in my youth in Citibank, these bills of exchange,

712
01:04:14,419 --> 01:04:22,839
you could still go back to the then central banks, the hard money ones like the Deutsche Bundesbank, the Austrian National Bank,

713
01:04:23,139 --> 01:04:27,079
and say, OK, here's a bill of exchange by a good business company.

714
01:04:27,339 --> 01:04:31,979
It's backed by goods. Please rediscount that.

715
01:04:32,399 --> 01:04:37,259
And the bank could get liquidity, even though the central bank already had monopoly.

716
01:04:37,259 --> 01:04:51,539
What changed was that with the advent of the EZB, the EU, essentially the victory of the political class over democracy, if I may say so.

717
01:04:52,139 --> 01:04:55,759
So with the advent of the EZB, they stopped that instrument.

718
01:04:55,759 --> 01:05:05,479
So they're not taking commercial bills of exchange anymore, which, so to say, facilitate and are limited by the goods in circulation.

719
01:05:05,479 --> 01:05:09,279
No, they're now essentially creating money from government bonds.

720
01:05:09,859 --> 01:05:15,619
And as we know, government bonds can be produced at will of politicians.

721
01:05:16,419 --> 01:05:34,899
And if the politicians want, then the central banks will also convert them into money when they want the interest rates to go lower, when they want to spend, like Lagarde just announced, that they want to print another trillion dollars for building bridges and producing weapons.

722
01:05:35,479 --> 01:05:40,079
So, yeah, it's an unlimited system, the fiat system where they can create.

723
01:05:40,419 --> 01:05:45,039
And you couldn't do that when you discounted bills of exchange.

724
01:05:45,159 --> 01:05:56,619
There was some leeway, but ultimately everybody could see if a business recovered the money through their product to pay back the bills of exchange or not.

725
01:05:57,239 --> 01:05:58,659
There were short-term instruments.

726
01:05:58,999 --> 01:06:01,939
After one, two, three months, you knew if something was wrong.

727
01:06:02,379 --> 01:06:05,659
Right now, this can go on for years with the fiat system,

728
01:06:05,659 --> 01:06:09,539
which is why this perversion has been going on so long.

729
01:06:10,979 --> 01:06:12,359
So this is what we say all the time.

730
01:06:12,459 --> 01:06:14,179
We have to build the parallel structure.

731
01:06:15,239 --> 01:06:18,919
We literally have to opt out of that madness

732
01:06:18,919 --> 01:06:22,139
and start trading with each other.

733
01:06:22,339 --> 01:06:24,559
So have you got any use cases yet?

734
01:06:24,799 --> 01:06:27,539
Has anyone found you yet and started using the services?

735
01:06:27,899 --> 01:06:28,919
You've done any tests?

736
01:06:29,079 --> 01:06:30,779
You've got any good...

737
01:06:30,779 --> 01:06:37,859
Yeah, we were in alpha testing since about February.

738
01:06:38,579 --> 01:06:44,359
We're just, while we are changing the system over to be completely on NOSTA,

739
01:06:45,819 --> 01:06:48,519
we're also starting some beta tests now.

740
01:06:49,759 --> 01:06:54,859
There are quite a few Bitcoin businesses who are, so to say,

741
01:06:54,859 --> 01:06:59,859
feeling strong enough about the medium of exchange future

742
01:07:00,519 --> 01:07:01,899
where Bitcoin is circular,

743
01:07:02,019 --> 01:07:04,859
where Bitcoin serves real trade,

744
01:07:05,639 --> 01:07:08,639
that they're willing to spend the energy

745
01:07:08,639 --> 01:07:12,079
to beta test this with real use cases.

746
01:07:12,459 --> 01:07:15,719
This would be in soft commodities,

747
01:07:15,999 --> 01:07:20,459
like agricultural products of all kinds,

748
01:07:20,559 --> 01:07:24,219
cotton, timber, beef, that type of thing.

749
01:07:24,219 --> 01:07:34,699
But also in import-export, we found people importing things from China, selling them and redistributing them in Europe.

750
01:07:35,879 --> 01:07:38,939
Yeah, so we are starting beta testing as we speak.

751
01:07:39,499 --> 01:07:41,279
So let's use an example.

752
01:07:41,279 --> 01:07:52,279
We've got a Bitcoiner somewhere in the UK that has a timber yard and is milling wood into lumber.

753
01:07:52,279 --> 01:07:55,299
and wants to export that.

754
01:07:55,419 --> 01:08:00,339
As a founder buyer, some other Bitcoiner in a different country

755
01:08:00,339 --> 01:08:04,539
is looking to build a Citadel and wants 10 log cabins built there.

756
01:08:05,139 --> 01:08:09,619
So how would this start looking from the flow of things?

757
01:08:09,619 --> 01:08:14,979
The guy that wants to build the cabins, he needs the lumber.

758
01:08:15,799 --> 01:08:15,959
Yeah.

759
01:08:15,959 --> 01:08:30,079
So if the lumber producer is satisfied enough that the cabin builder will be able to sell his cabins then to some Bitcoiners, he may say, OK, you have a good business.

760
01:08:30,219 --> 01:08:34,259
You have your customers. You have your pipeline. I trust that you will be able to do it.

761
01:08:34,259 --> 01:08:46,459
So on the wholesale level, between businesses, there must be this mutual understanding of each other's business.

762
01:08:46,639 --> 01:08:47,859
And people do that.

763
01:08:48,059 --> 01:08:53,679
So if I'm a lumber salesman, most likely I know the construction business with timber.

764
01:08:54,119 --> 01:08:54,839
This is very different.

765
01:08:54,839 --> 01:08:58,139
That's getting back to good old-fashioned business deals, right?

766
01:08:58,139 --> 01:09:13,899
Like another thing of the past where you will build that relationship between the two owners of the business and get to know each other and go and visit the site if need be, or at least get a walkthrough and do a little bit of due diligence.

767
01:09:14,159 --> 01:09:17,039
You might hire some outside help to do that as well.

768
01:09:17,039 --> 01:09:23,479
exactly this is very different to what's happening in the in the fiat system today where you have the

769
01:09:23,479 --> 01:09:32,759
the banks acting as a state captured intermediary who essentially is following strict rules of

770
01:09:32,759 --> 01:09:41,099
basel of compliance blah blah blah with a lot of paperwork a lot of red tape incredible red tape

771
01:09:41,099 --> 01:09:48,879
getting more every year. So, so they almost forgot the need to watch what they're here for,

772
01:09:48,979 --> 01:09:55,179
which is to, is this good risk or is it not? Whereas if the two business people just do it

773
01:09:55,179 --> 01:10:02,459
directly, this intermediating the, the old style banks. Yeah. They know each other's business. They

774
01:10:02,459 --> 01:10:07,659
can, can judge that they probably have been in, in, in a business relationship. They have a mutual

775
01:10:07,659 --> 01:10:24,851
interest because the timber salesperson has an interest and makes a profit if the transaction happens The profit of the intermediary of the bank is extra So yeah I fully with you And it also people who know each other anyway

776
01:10:25,431 --> 01:10:27,631
So the problem, so to say,

777
01:10:27,631 --> 01:10:32,111
of the KYC requirements of the banks go away.

778
01:10:32,431 --> 01:10:34,671
There's no need for that

779
01:10:34,671 --> 01:10:37,571
because the business partners know themselves anyway.

780
01:10:38,431 --> 01:10:42,431
So yeah, it's a completely different paradigm.

781
01:10:42,771 --> 01:10:43,651
It's peer-to-peer.

782
01:10:43,671 --> 01:10:47,771
and it's on an absolute need-to-know basis.

783
01:10:48,771 --> 01:10:51,831
So now they've met and they've formed this idea

784
01:10:51,831 --> 01:10:53,691
that he wants to build the 10 log cabins.

785
01:10:53,851 --> 01:10:55,091
He can provide the lumber

786
01:10:55,091 --> 01:10:58,431
and he's absolutely certain

787
01:10:58,431 --> 01:11:01,231
that the guy is going to be able to sell these off

788
01:11:01,231 --> 01:11:02,911
and be able to pay him back.

789
01:11:02,911 --> 01:11:06,131
And again, going back to old-fashioned business,

790
01:11:06,591 --> 01:11:09,491
you're putting a lot of reputation at stake as well.

791
01:11:09,671 --> 01:11:11,351
There's reputational risk.

792
01:11:11,491 --> 01:11:12,851
There's real skin in the game,

793
01:11:12,851 --> 01:11:18,071
especially in Bitcoin circles now, because word will get out if you are a bad business partner,

794
01:11:18,191 --> 01:11:18,891
and then that's you done.

795
01:11:20,071 --> 01:11:21,331
Everybody knows everybody.

796
01:11:21,671 --> 01:11:21,691
Yeah.

797
01:11:21,811 --> 01:11:21,991
Yeah.

798
01:11:22,311 --> 01:11:24,511
So what's the next step?

799
01:11:24,591 --> 01:11:27,571
The guy that needs the wood, what does he do?

800
01:11:27,711 --> 01:11:32,071
So in the most primitive version, which we are testing right now,

801
01:11:32,571 --> 01:11:37,051
simply the timber producer draws a bill of exchange on the buyer of the timber,

802
01:11:37,051 --> 01:11:41,691
says, okay, you need a month or two to produce your cabins.

803
01:11:41,691 --> 01:11:44,491
then your customers will buy them, pay them.

804
01:11:44,771 --> 01:11:46,231
Okay, you pay them in two months.

805
01:11:46,291 --> 01:11:48,191
It's essentially the same as trade credit,

806
01:11:48,751 --> 01:11:52,771
but with a payment instrument being exchanged instead.

807
01:11:53,371 --> 01:11:55,711
So the exchange is instrument.

808
01:11:56,311 --> 01:12:02,151
And whenever the cabin producer has sold his cabins,

809
01:12:02,231 --> 01:12:03,891
he can pay back the bill of exchange.

810
01:12:03,991 --> 01:12:06,031
That's the most primitive case.

811
01:12:06,031 --> 01:12:29,831
And since there is no absolute certainty about the future, normally, if the business grants terms, they usually add a certain percentage for the risk of things going sour over the next few months.

812
01:12:29,831 --> 01:12:40,551
However, we know from the past, there's lots of archives about those transactions that if these are established businesses with a solid business model, the risk is fairly low.

813
01:12:40,731 --> 01:12:56,271
So the price of that risk is far less than what you have to add if you involve the traditional banking sector with all its overhead and red tape and bureaucracy these days and legal cost and all kinds of cost you have to add.

814
01:12:56,271 --> 01:13:00,531
So it's a very cheap form of trade finance.

815
01:13:01,151 --> 01:13:03,031
So that's the most primitive case.

816
01:13:03,331 --> 01:13:12,831
In the more advanced case, which we envisage with the bid credit protocol, is the timber

817
01:13:12,831 --> 01:13:20,211
seller in, you said, in England, could then go and use a credit mint, as they're called,

818
01:13:20,211 --> 01:13:25,871
the Wildcat, we call them, to essentially snip that bill of exchange into divisible,

819
01:13:26,451 --> 01:13:28,851
fungible, mini payment instruments.

820
01:13:28,971 --> 01:13:29,971
We call them mini bills.

821
01:13:30,311 --> 01:13:34,931
And the mini bills are represented by something called Xiaomi and eCash,

822
01:13:35,031 --> 01:13:37,651
for which there are some very good projects in Bitcoin space.

823
01:13:38,631 --> 01:13:42,951
There's Calais Cashew project.

824
01:13:43,511 --> 01:13:45,831
There's the Fediment project.

825
01:13:45,831 --> 01:13:52,051
So eCash is a rapidly evolving, rapidly improving technology within the Bitcoin space.

826
01:13:52,391 --> 01:13:56,351
Still problematic because it's still custodial.

827
01:13:56,771 --> 01:14:10,851
But we have good hopes that by the time we finish this, that the credit part, the credit Satoshi part, can be non-custodial through some game theoretical arrangements between mints.

828
01:14:12,671 --> 01:14:13,431
Interesting.

829
01:14:13,431 --> 01:14:23,691
So now the lumberyard, the timber merchant, he ships over all of the timber to the guy that's going to build the cabins.

830
01:14:23,831 --> 01:14:28,591
Meanwhile, he can now go to what you called the Wildcats.

831
01:14:29,331 --> 01:14:33,211
A Wildcat is essentially a name for a credit mint.

832
01:14:33,431 --> 01:14:43,071
We used the term because it was a term used by the politicians in the 19th century to actually kill free banking.

833
01:14:43,431 --> 01:14:59,591
Yeah, because there was the odd case in somewhere in the Wild West of the USA where there was some, you know, a bank, you may know them from Western movies, some little bank out in the Wild West, which didn't have full gold coverage for some reason.

834
01:14:59,591 --> 01:15:07,171
So they must have discovered one or two really rare cases where there was not full gold coverage.

835
01:15:07,171 --> 01:15:15,851
And the politicians then, of course, used that to create a narrative that only central banking is safe.

836
01:15:17,711 --> 01:15:21,211
And, yeah, OK, there were these cases. That's a historic fact.

837
01:15:21,591 --> 01:15:27,931
But the actual losses from that was far less than what people lose every year nowadays to inflation,

838
01:15:27,931 --> 01:15:29,951
even if it's just 2% inflation.

839
01:15:30,411 --> 01:15:33,811
But the losses in the altars were minimal compared to those 2%.

840
01:15:33,811 --> 01:15:38,291
And they were especially minimal to when the fiat system goes haywire,

841
01:15:38,431 --> 01:15:40,311
producing 10% or inflation or more,

842
01:15:40,591 --> 01:15:44,371
like we had during the COVID money printing excesses.

843
01:15:45,931 --> 01:15:49,991
I suppose it could also work in such a way that,

844
01:15:49,991 --> 01:15:54,911
say, the business owner of the lumber

845
01:15:54,911 --> 01:16:01,931
could build relationships with other Bitcoin holders

846
01:16:01,931 --> 01:16:06,711
that could also step in to backstop if need be

847
01:16:06,711 --> 01:16:10,511
for a small charge maybe on the back end

848
01:16:10,511 --> 01:16:13,351
once the bill of exchange was settled.

849
01:16:14,111 --> 01:16:19,151
So now you can see how free market banking

850
01:16:19,151 --> 01:16:21,851
peer-to-peer would start exploding,

851
01:16:21,851 --> 01:16:28,171
especially with what you've you know bit exchange absolutely also because now with the technology we

852
01:16:28,171 --> 01:16:36,111
have we can trust minimize those things nobody needs to rely anymore that in some safe uh in in

853
01:16:36,111 --> 01:16:42,071
the wild west there are really the gold coins um deposited to pay back the the bill of exchange

854
01:16:42,071 --> 01:16:47,231
or i don't know that you don't have some cowboy come along and then rob the bank

855
01:16:47,231 --> 01:16:50,091
as was fashionable then according to the movies.

856
01:16:51,831 --> 01:16:58,171
Yeah, so you can always verify and have cryptographic proof

857
01:16:58,171 --> 01:17:03,091
that a wildcat mint can actually fulfill its promises

858
01:17:03,091 --> 01:17:06,171
and much better proof than today's banking system

859
01:17:06,171 --> 01:17:12,671
because we know it's all house of cards built on government bonds out of thin air.

860
01:17:13,391 --> 01:17:16,951
And so if one bank, which is not even a top 10 bank,

861
01:17:16,951 --> 01:17:22,211
these days topples, it could essentially kill the whole system,

862
01:17:22,611 --> 01:17:25,691
which is what we have recently seen again in 2022,

863
01:17:26,131 --> 01:17:28,611
Silicon Valley Bank and these things.

864
01:17:29,091 --> 01:17:33,751
So this instable system, at some stage, it will implode.

865
01:17:33,911 --> 01:17:34,731
It's very clear.

866
01:17:36,011 --> 01:17:36,811
Yeah, absolutely.

867
01:17:37,491 --> 01:17:39,691
And this is why you made it free and open source, right?

868
01:17:39,791 --> 01:17:44,491
So you can have this explosion of these so-called banking services.

869
01:17:44,491 --> 01:18:05,171
Yeah, no, it's free and open source because it must be. Because the situation when Bitcoin has a chance to establish itself as a medium of exchange based on this mini bill e-cash is exactly when the banking system breaks down.

870
01:18:05,171 --> 01:18:07,071
And there are these cases all the time.

871
01:18:08,171 --> 01:18:16,491
We've seen, for instance, Greece, which was cut off from the money supply of the EZB in 2015.

872
01:18:16,991 --> 01:18:22,891
We've seen Lebanon, which essentially the central bank killed the monetary system in 2019.

873
01:18:23,551 --> 01:18:28,831
There were multiple such situations in Venezuela.

874
01:18:29,651 --> 01:18:31,371
Bolivia is about to break down.

875
01:18:31,371 --> 01:18:35,451
So there's always something going on somewhere in the fiat system.

876
01:18:35,891 --> 01:18:53,431
And in that situation, Bitcoin people, businesses must be able to immediately just enter a URL, be ready to go to the electronic bills of exchange with other merchants, create a mini bill e-cash, credit e-cash to pay their workers.

877
01:18:53,531 --> 01:18:57,971
So workers earn money immediately based on the goods which are going into the channel.

878
01:18:58,111 --> 01:19:00,151
The workers can spend the money, pay back the bill.

879
01:19:00,151 --> 01:19:07,171
So essentially the goal is to replace the system on the spot.

880
01:19:09,071 --> 01:19:09,591
Wow.

881
01:19:11,011 --> 01:19:12,131
I'm ready for it.

882
01:19:12,311 --> 01:19:13,351
I'm ready for it.

883
01:19:13,411 --> 01:19:16,691
And I'm sure most of the listeners of this show are ready for it as well.

884
01:19:18,071 --> 01:19:21,671
So if people want to look at the website, it's very easy.

885
01:19:21,671 --> 01:19:27,491
Just go to bit.cr and there's a landing page there.

886
01:19:27,491 --> 01:19:36,511
So, yeah, that landing page is currently, so to say, in under construction for the for the beta version of the thing.

887
01:19:36,611 --> 01:19:40,631
So it focuses exclusively on what businesses have to do.

888
01:19:40,811 --> 01:19:47,571
It doesn't talk at all about about the macroeconomics, about it, the Austrian economics powering it.

889
01:19:47,571 --> 01:19:54,551
We are also building another website for the community of builders who want to get involved.

890
01:19:54,551 --> 01:19:57,811
So that should be also coming out in the next two months again.

891
01:19:59,331 --> 01:20:03,431
So that would be bitcr.org for those who want to.

892
01:20:03,831 --> 01:20:18,691
But meanwhile, it's easiest to join the project by either going to BitCredit community on Telegram or follow bitcr.org on Twitter.

893
01:20:18,831 --> 01:20:22,291
So those are the main channels to follow us at the moment.

894
01:20:22,291 --> 01:20:40,731
And what we are currently looking for is as we are ramping up for the beta tests is we are looking for Bitcoiners who want to support the effort to get this software ready for the big day when a fiat currency breaks down to make it rock solid, make the UX absolutely smooth.

895
01:20:40,731 --> 01:21:04,591
And so the more better use cases we can get, things like the timber you just mentioned or any agricultural producer, cotton producers, food producers, apricot producers, but also construction industry, import, export, hard commodities like metal producers or construction materials of all kinds.

896
01:21:04,591 --> 01:21:18,691
And any Bitcoiner who's in the real economy or knows a CFO in the real economy who kind of has the freedom mindset of separating money and state, that's what we're looking now.

897
01:21:18,691 --> 01:21:27,731
So the more real-life use cases we have to test this out, the better we'll be able to kickstart this once Bitcoin gets going.

898
01:21:27,931 --> 01:21:37,591
Also, if people are interested to test out the minting, because the idea is that anybody will be able to spin up a mint, just like you can spin up a miner.

899
01:21:38,871 --> 01:21:44,311
Also, those type of testers would be very welcome.

900
01:21:45,091 --> 01:21:47,191
And how many people do you have working on the project?

901
01:21:47,191 --> 01:21:48,431
Do you need more developers?

902
01:21:48,431 --> 01:21:54,691
It's a community driven project.

903
01:21:54,691 --> 01:22:07,063
So we do have also a lab because we found a sponsor from the ecosystem who also believes in Bitcoin as a medium of exchange and wants it as a medium of exchange So that was very helpful

904
01:22:07,743 --> 01:22:13,563
So we have a lab where some people work on this actually a good part of the time.

905
01:22:14,123 --> 01:22:18,923
The community on Telegram is usually the best to join the system.

906
01:22:19,083 --> 01:22:22,923
There's an open source GitHub, of course, with a Kanban.

907
01:22:22,923 --> 01:22:26,403
where we'll probably add some tasks soon

908
01:22:26,403 --> 01:22:30,023
for what type of tests would be appreciated.

909
01:22:31,003 --> 01:22:34,103
So yeah, those are the channels

910
01:22:34,103 --> 01:22:36,623
where we interact with the community.

911
01:22:37,703 --> 01:22:39,443
All right, mate, this is awesome.

912
01:22:39,763 --> 01:22:41,963
I didn't even ask you how you found Bitcoin.

913
01:22:41,963 --> 01:22:44,363
When did you actually find Bitcoin?

914
01:22:44,503 --> 01:22:46,963
After being like Mr. Banker and Markets Predictor

915
01:22:47,563 --> 01:22:50,063
and everything, Fiat, Keynesian,

916
01:22:50,063 --> 01:22:56,523
And all of a sudden, all of a sudden you find Austrian economics and Bitcoin comes along in your life at some point.

917
01:22:56,523 --> 01:23:00,163
Yeah, no, it was a funny story, but it's probably too long.

918
01:23:00,283 --> 01:23:08,523
So to cut it very short, while I was working in San Francisco for a while on something completely unrelated, I saw this message somewhere.

919
01:23:08,623 --> 01:23:15,223
I don't even know that somewhere in the Heath district of San Francisco, there was a hundred dollar party of Bitcoin.

920
01:23:15,223 --> 01:23:18,343
And at the time, Bitcoin was really just a rumor.

921
01:23:18,623 --> 01:23:19,303
And I had heard it.

922
01:23:19,403 --> 01:23:22,023
I heard this and I must know it.

923
01:23:22,503 --> 01:23:38,483
So I went to that $100 party, which was in a really shonky bar somewhere with, I don't know, a couple of people running around and showing QR codes and doing things.

924
01:23:38,483 --> 01:23:43,883
And on one table, there were three guys from Ripple trying to explain how Ripple is better than Bitcoin.

925
01:23:43,883 --> 01:23:48,083
And I was thinking, so yeah, that was just really funny.

926
01:23:48,183 --> 01:23:49,123
So I don't know when that was.

927
01:23:49,663 --> 01:23:52,603
I always forget when it was, must have been 212 or 213,

928
01:23:53,083 --> 01:23:54,303
some of the time.

929
01:23:54,303 --> 01:23:57,303
And then of course there was this disappointment after,

930
01:23:58,043 --> 01:24:04,303
after the Cyprus crisis and the Greek crisis that Bitcoin couldn't,

931
01:24:04,303 --> 01:24:04,883
so to say,

932
01:24:04,923 --> 01:24:10,083
establish itself as a counter economy money against the fiat shenanigans.

933
01:24:10,583 --> 01:24:12,123
So that's, that's how it started.

934
01:24:13,243 --> 01:24:13,503
Yeah.

935
01:24:13,503 --> 01:24:18,023
Well, it's nice to hear that the meetups haven't changed that much.

936
01:24:18,103 --> 01:24:18,803
It's still the same.

937
01:24:19,023 --> 01:24:21,803
People running around, showing QR codes to each other.

938
01:24:21,923 --> 01:24:24,923
I was at one this weekend in London,

939
01:24:25,343 --> 01:24:28,863
and it was really excellent grassroots level stuff.

940
01:24:29,003 --> 01:24:31,743
Max was there, so I got to hang out with Max,

941
01:24:31,803 --> 01:24:34,363
and he was hosting just like basic questions

942
01:24:34,363 --> 01:24:36,503
because people were walking in off the street.

943
01:24:37,003 --> 01:24:38,543
We had at least three or four walk-ins,

944
01:24:39,963 --> 01:24:43,083
and somebody did their first peer-to-peer trade with me.

945
01:24:43,083 --> 01:24:50,763
they gave me 10 pounds i sent them like i love seeing that flash of oh my god in their eyes when

946
01:24:50,763 --> 01:24:57,063
they hold it in their hands like what oh shit wow this really is real why have i not been paying

947
01:24:57,063 --> 01:25:06,903
attention that's exactly the feeling uh we need to create for you know when things go sour

948
01:25:06,903 --> 01:25:12,703
for businesses yeah imagine that first business that has that bill of exchange they're like oh

949
01:25:12,703 --> 01:25:18,563
shit this unlocks opportunities i could only have ever dreamed of because now i don't have to go

950
01:25:18,563 --> 01:25:24,583
cap in hand to the bank manager to get a hundred thousand pound advance to mill the timber to find

951
01:25:24,583 --> 01:25:34,723
the um yeah businesses i said what an it's actually it's a mockery of how to run and um

952
01:25:34,723 --> 01:25:36,703
do business.

953
01:25:38,043 --> 01:25:41,023
This is not the way that we evolved

954
01:25:41,023 --> 01:25:43,263
to interact with each other

955
01:25:43,263 --> 01:25:46,023
and to enter into business partnerships with each other.

956
01:25:46,243 --> 01:25:47,923
We're forced into these corners

957
01:25:47,923 --> 01:25:50,143
and they're complete and utter total

958
01:25:50,143 --> 01:25:53,803
fiat monstrosities in clown world situations.

959
01:25:55,263 --> 01:25:55,403
Yep.

960
01:25:55,763 --> 01:25:58,103
That's exactly what we're up against.

961
01:25:58,283 --> 01:26:00,263
But anyway, it's going to be...

962
01:26:00,263 --> 01:26:01,643
Let's see how this is.

963
01:26:01,643 --> 01:26:04,503
It's a very difficult project.

964
01:26:04,503 --> 01:26:10,503
one shouldn't underestimate it because the volatility of bitcoin will be making this hard

965
01:26:10,503 --> 01:26:19,463
fiat-backed stable coins have it far easier but i i kind of i'm very much expect that the politicians

966
01:26:19,463 --> 01:26:27,803
will sooner or later be able to kill stables in favor of cbdc's it's if we don't do something

967
01:26:27,803 --> 01:26:32,923
which is completely uh non-custodial like like on bitcoin and you can't do that with stables

968
01:26:32,923 --> 01:26:39,603
no exactly so um anyway um dan it was really good to talk to you uh sorry for that i have to run at

969
01:26:39,603 --> 01:26:45,363
this moment yep i just need the time as well so thank you very much for coming on uh i i do

970
01:26:45,363 --> 01:26:51,843
one word one word one word answer if you could give one orange pill to somebody who would it be

971
01:26:51,843 --> 01:27:00,183
a certain dairy company

972
01:27:00,183 --> 01:27:03,403
which could be a very good

973
01:27:03,403 --> 01:27:04,883
beta user

974
01:27:04,883 --> 01:27:06,263
oh that would be excellent

975
01:27:06,263 --> 01:27:07,363
alright I love it

976
01:27:07,363 --> 01:27:08,183
thanks Hubertus

977
01:27:08,183 --> 01:27:09,143
I'll let you run

978
01:27:09,143 --> 01:27:09,743
take care

979
01:27:09,743 --> 01:27:10,463
bye

980
01:27:10,463 --> 01:27:10,903
thanks bye

981
01:27:10,903 --> 01:27:14,123
well thank you Hubertus

982
01:27:14,123 --> 01:27:14,763
thank you everybody

983
01:27:14,763 --> 01:27:15,643
for listening

984
01:27:15,643 --> 01:27:17,623
and I hope you enjoyed

985
01:27:17,623 --> 01:27:19,443
that discussion

986
01:27:19,443 --> 01:27:20,603
going down the rabbit hole

987
01:27:20,603 --> 01:27:21,743
there was a few things

988
01:27:21,743 --> 01:27:29,163
there. So yeah, looking at the price of Bitcoin compared to gold rather than your local fiat

989
01:27:29,163 --> 01:27:35,923
currency. Easily done. Just head over to bitbo.io. That's an unofficial shill. I'm sure you can find

990
01:27:35,923 --> 01:27:41,203
it on all the other trading platforms or wherever else that you're hanging out if you're looking at

991
01:27:41,203 --> 01:27:47,103
charts. And yeah, just choose that currency pair. Dollar, excuse me, dollar. Bitcoin against gold.

992
01:27:47,103 --> 01:27:53,863
The all-time high of Bitcoin against gold is $38.51.

993
01:27:55,583 --> 01:27:57,383
Excuse me, 38 ounces.

994
01:27:57,943 --> 01:27:59,223
You see how difficult this is?

995
01:27:59,363 --> 01:28:05,243
38 ounces and 38.51 ounces of gold to a Bitcoin.

996
01:28:05,843 --> 01:28:08,563
Currently hovering around 32.68.

997
01:28:09,183 --> 01:28:14,383
So this is a great point for you to start thinking about.

998
01:28:14,383 --> 01:28:28,503
Don't just keep looking at the sticker price and cheering that on because any fiat currency is going to get printed into complete and utter irrelevance against Bitcoin.

999
01:28:28,663 --> 01:28:35,383
So it's always going to go up and you're getting distracted by the shiny things if you keep looking at that.

1000
01:28:35,603 --> 01:28:40,303
So very good point there and very much worthy time starting to look at that.

1001
01:28:40,303 --> 01:28:50,623
And the other thing Hubertus touched on was the, it sounds so against the narrative, doesn't it?

1002
01:28:50,643 --> 01:28:52,483
The elasticity of money.

1003
01:28:52,743 --> 01:28:59,643
And he was quoting Mises and Hayek when he was talking about that.

1004
01:28:59,923 --> 01:29:04,023
And obviously having the base monetary supply fixed is obviously very, very important.

1005
01:29:04,023 --> 01:29:08,883
But having some kind of elasticity on top of that is what he was talking about.

1006
01:29:08,883 --> 01:29:18,803
This bills of exchange idea, certainly like a 500-year-old practice before we got to where we are today under a complete fiat system.

1007
01:29:19,223 --> 01:29:22,783
That was already in existence and it shouldn't be anything new to us.

1008
01:29:22,863 --> 01:29:29,563
It's just that because we have been where we have been, I mean, what is it now, 111 years of central banking?

1009
01:29:29,563 --> 01:29:35,723
yeah there's two or three generations that we just have been completely programmed brainwashed by

1010
01:29:35,723 --> 01:29:43,763
this idea of this modern monetary theory and just nonsense uh but the there is a quote from ludwig

1011
01:29:43,763 --> 01:29:52,223
uh von mises that uh hubertus has on his twitter thread about the theory of elasticity and he says

1012
01:29:52,223 --> 01:29:59,523
the theory of elasticity is correct banks increase and decrease their circulation pari passu which

1013
01:29:59,523 --> 01:30:06,643
means an equal amount with variations in the demand for money in doing so they help to stabilize

1014
01:30:06,643 --> 01:30:16,063
the objective exchange value of money so a lot to uh to unpack there and as we discussed in this

1015
01:30:16,063 --> 01:30:22,203
conversation that ain't ever going to happen under the current regime where we only have a handful of

1016
01:30:22,203 --> 01:30:28,523
banks controlling all of the levers uh and socially engineering us through these levers

1017
01:30:28,523 --> 01:30:37,923
They can socially engineer us by changing the amount that they're willing to lend money to us poor plebs at the bottom of the pyramid.

1018
01:30:38,523 --> 01:30:40,063
They do that on a whim.

1019
01:30:41,123 --> 01:30:51,943
And that has incredible effects, ripple effects throughout the economy and throughout your life and your decision making and everybody around you and their decision making.

1020
01:30:51,943 --> 01:30:57,963
and the other option is either to stop printing money into the system

1021
01:30:57,963 --> 01:31:04,343
or to start printing money into the system at ridiculously abrupt rates.

1022
01:31:05,563 --> 01:31:11,143
Just printing as much money as you possibly can between 2020 and 2022, for example.

1023
01:31:11,703 --> 01:31:17,623
Look where that has led us and the inflation and prices for everyday goods and services that we need

1024
01:31:17,623 --> 01:31:19,243
that have gone through the roof.

1025
01:31:19,243 --> 01:31:26,243
but you know inflation is transitory right if you're if you're willing to sit there and listen

1026
01:31:26,243 --> 01:31:34,083
to Christine Lagarde uh I'm not I'm opting out I'm opting for bitcoin and I'm opting to

1027
01:31:34,083 --> 01:31:39,943
carry on listening to these interesting conversations and watching these new projects

1028
01:31:39,943 --> 01:31:44,603
get built out and this is certainly one that's caught my attention and I hope it's caught yours

1029
01:31:44,603 --> 01:31:47,303
and it's definitely worth you getting over to the website.

1030
01:31:47,463 --> 01:31:48,083
Go check it out.

1031
01:31:48,623 --> 01:31:51,283
It's very easy, bit.cr.

1032
01:31:51,543 --> 01:31:54,163
So B-I-T dot C-R.

1033
01:31:54,643 --> 01:31:56,943
And reach out to Hubertus or myself

1034
01:31:56,943 --> 01:31:58,623
and I can put you in touch.

1035
01:31:59,163 --> 01:32:00,423
Don't forget to stack your sats.

1036
01:32:00,663 --> 01:32:02,143
Swan Bitcoin over in the US.

1037
01:32:02,323 --> 01:32:03,183
Relay across Europe.

1038
01:32:03,503 --> 01:32:04,343
Please self-custody.

1039
01:32:04,423 --> 01:32:05,223
That's very important.

1040
01:32:05,423 --> 01:32:06,643
Bitbox have got you.

1041
01:32:07,343 --> 01:32:08,903
Get yourself an orange pill app.

1042
01:32:09,043 --> 01:32:11,143
Get connecting with people in real life.

1043
01:32:11,143 --> 01:32:13,443
Go and check out paywithflash.com

1044
01:32:13,443 --> 01:32:17,223
because this is the way that you are going to be able to start accepting Bitcoin

1045
01:32:17,223 --> 01:32:19,483
for your goods and services in the marketplace.

1046
01:32:20,243 --> 01:32:24,963
And if you do want to support people who are building in the Bitcoin space

1047
01:32:24,963 --> 01:32:30,003
and spend your sats, plebeian.market is a place for you to go and check out.

1048
01:32:30,323 --> 01:32:32,863
And don't forget what I said about Bubble at the beginning here.

1049
01:32:33,183 --> 01:32:34,163
We're out of music again.

1050
01:32:35,043 --> 01:32:39,083
I'm going to have to either lengthen the music or cut short my rants

1051
01:32:39,083 --> 01:32:40,663
at the end of each episode.

1052
01:32:40,663 --> 01:32:42,483
But whatever, here we are.

1053
01:32:42,483 --> 01:32:44,863
It's all just good old-fashioned pleb work.

1054
01:32:45,403 --> 01:32:46,003
Bubble.

1055
01:32:46,223 --> 01:32:47,823
I had Kaz on recently.

1056
01:32:48,483 --> 01:32:57,383
And if you are looking to track or try and curate all of the Bitcoin conversations that are happening across thousands of podcasts right now,

1057
01:32:57,783 --> 01:33:05,723
you can use Bubble FM, which monitors the entire system and will find exactly what you want to listen to.

1058
01:33:05,723 --> 01:33:14,243
They'll help you super focus your attention on the exact things that you want to listen to.

1059
01:33:14,403 --> 01:33:23,343
So no need to miss any crucial insights and no need to listen on two and a half-hooks speed or something until you get to that point.

1060
01:33:23,643 --> 01:33:30,483
You can pick a topic and it will curate a bunch of different conversations with different people from different shows for you.

1061
01:33:30,483 --> 01:33:39,523
So there is a link in the show notes that you can hit or just get over to bubble.fm and start curating your listening experience.

1062
01:33:39,663 --> 01:33:44,803
But I would honestly recommend coming back and listening to the episode with Kaz.

1063
01:33:44,895 --> 01:33:47,455
because he's the guy that made this.

1064
01:33:47,595 --> 01:33:49,075
He's another builder on the Bitcoin space

1065
01:33:49,075 --> 01:33:51,955
and he explains it very, very clearly.

1066
01:33:53,015 --> 01:33:54,715
If you've got any interest

1067
01:33:54,715 --> 01:33:56,115
in getting across to a conference,

1068
01:33:56,675 --> 01:33:57,555
what do we have coming up?

1069
01:33:57,815 --> 01:33:59,255
Riga in August.

1070
01:33:59,455 --> 01:34:00,635
You can use the code BITTON

1071
01:34:00,635 --> 01:34:02,535
at checkout for 10% discount

1072
01:34:02,535 --> 01:34:03,835
and BTCHELL.

1073
01:34:03,935 --> 01:34:05,755
That's going down in Helsinki.

1074
01:34:06,075 --> 01:34:07,575
That's in mid-August.

1075
01:34:07,875 --> 01:34:09,195
All the links are in the show notes

1076
01:34:09,195 --> 01:34:09,835
to these conferences.

1077
01:34:10,235 --> 01:34:11,815
You will get discounts

1078
01:34:11,815 --> 01:34:13,655
if you use the code BITTON

1079
01:34:13,655 --> 01:34:16,155
and it will change your life.

1080
01:34:16,315 --> 01:34:18,275
I mean, we had a great time in Prague again

1081
01:34:18,275 --> 01:34:22,095
and it's great to see so many first-timers,

1082
01:34:22,635 --> 01:34:25,235
people that came to a conference for the first time.

1083
01:34:25,235 --> 01:34:31,175
It was really a large percentage of that conference

1084
01:34:31,175 --> 01:34:33,335
were at their first Bitcoin conference

1085
01:34:33,335 --> 01:34:34,695
and I got to meet a lot of them

1086
01:34:34,695 --> 01:34:37,475
and it was individuals, couples, families

1087
01:34:37,475 --> 01:34:41,495
bringing their kids and having the most incredible time.

1088
01:34:41,675 --> 01:34:42,835
It will change your life.

1089
01:34:42,835 --> 01:34:45,435
I am not pumping that up.

1090
01:34:46,095 --> 01:34:50,595
It's amazing when you get out there and experience talking to Bitcoiners in real life.

1091
01:34:50,675 --> 01:34:52,275
If you haven't done that, you're missing out.

1092
01:34:52,615 --> 01:34:57,655
Get to Orange Pill app, find your local people, start building your meetups, start building

1093
01:34:57,655 --> 01:35:00,675
your conferences or your events, whatever it is.

1094
01:35:01,255 --> 01:35:05,415
And yeah, this is how we're just going to educate as many people as we possibly can

1095
01:35:05,415 --> 01:35:06,035
going forward.

1096
01:35:06,435 --> 01:35:07,355
And I'm here for it.

1097
01:35:07,655 --> 01:35:08,575
So that's the end of that.

1098
01:35:08,835 --> 01:35:10,995
I hope you guys enjoyed the episode.

1099
01:35:11,315 --> 01:35:11,755
Take care.

1100
01:35:11,755 --> 01:35:12,695
I'll catch you on the next show.

1101
01:35:12,835 --> 01:35:13,435
Thank you.