WBD265 Audio Transcription
What is Bitcoin? With Parker Lewis, Robert Breedlove & Vijay Boyapati
Interview date: Friday 2nd October
Note: the following is a transcription of my interview with Parker Lewis, Robert Breedlove & Vijay Boyapati. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this interview, I am joined by Parker Lewis, Robert Breedlove and Vijay Boyapati to answer the question: what is Bitcoin? We discuss the use cases, what money is, institutional investors and the path to hyperbitcoinisation.
“Of anything I have ever looked at in my life, I would put Bitcoin as nearest to inevitable as I could.”
— Robert Breedlove
Interview Transcription
Peter McCormack: Vijay, Parker, Breedlove, how are you all?
Vijay Boyapati: Good, I'm doing well, Pete; good to see you again.
Parker Lewis: Yeah, doing well. Thanks for having me on and looking forward to catching up with both Robert and Vijay as well.
Robert Breedlove: Good to be here with you guys. Thank, Peter.
Peter McCormack: Well listen, thanks for all coming on. You're all people I obviously respect very well. I appreciate all your work; you've all been on the show before. Listen, I wanted to cover what seems like a simple topic, but I also think it's quite a big topic because you know what I'm like, I always talk about my friends down the pub, and I often get stuck on the most simple question about Bitcoin; what it is. And I know that sounds crazy, it should be a really easy thing to explain, but actually a lot of the conversations we get into about Bitcoin can go in multiple directions, multiple rabbit holes.
I have actually, Vijay, been stealing one of your lines recently that, "It's gold with magical properties of teleportation", but I kind of want to get into what it is, what it really can be and what it all means to us. So, I think a good starting point is just to put you all on the spot and again, we'll start with you, Vijay, and if you end up repeating what you said to Tom Woods, I don't mind; but, what is Bitcoin?
Vijay Boyapati: Well, the simplest explanation I always give is that it's an asset and it's scarce and it's like gold, but it's digital. So, it has the added benefit that it can be transmitted digitally, so it's gold with teleportation built in. That's usually the first explanation I give and, you know, it's not a perfect explanation, but I think it really covers the fundamental core of why Bitcoin is valuable.
Peter McCormack: Parker, yourself, same question, mate?
Parker Lewis: So, I think about how, at its simplest term, or when I start, I tell people that Bitcoin is money, and that today, it doesn't operate or behave like people are used to interacting with their current form of money, or what they associate with money; but from a first principles basis and what Bitcoin will be, on a day-to-day basis, I believe it is today, but that it will increasingly have those properties that people associate money with today, Bitcoin will grow into that over time and will be an evolution.
And really, one of my favourite quotes, and Vijay is somebody who, when I was distilling my own thoughts, first and second people being safe in Vijay, but one of his great quotes was something along the lines of, "People deride Bitcoin because of its volatility as if something can go from nothing to an entirely stable form of money overnight". And so, there's a distinction between how we all have historically thought about the role that money plays, versus how Bitcoin behaves on a day-to-day basis, versus its properties; really, at that most simple point, it is money and it will evolve into thinking about it and behaving in ways that we associate money with today, it just will take time to do that.
Peter McCormack: And, Robert, you finally on that first question?
Robert Breedlove: Yeah, I think this is the perennial question and Bitcoin is clearly a lot of different things to different people at different levels of analysis; so, it really is a rabbit hole. But, if I had 30 seconds to describe Bitcoin to someone, I say simply that it is an insurance policy on the legacy financial system, such that the more dollars they print, the more valuable that policy becomes because throughout history, we've seen repeatedly that fiat currencies end in one common demise, which is hyperinflation or some other form of implicit default. And in that respect, I think Bitcoin is a true barometer for the health of that financial system, and an increase in its price is a higher likelihood of the collapse of the traditional system.
So, I say that in 30 seconds and tell people just to get some, just in case something happens, right, because people understand 2008, people understand the great depression, people know there's something wrong, even if they can't articulate what it is, and I try to just explain the position of Bitcoin as an insurance policy on that "something wrong".
Peter McCormack: You see, that's really interesting though, because we've had three quite varied responses there. Vijay, you've essentially talked about digital gold; Parker, you've talked about money and I understand it's kind of the same thing, but I think people think about money slightly different. They think about it as when they're shopping and they're buying things. And then, Robert, you've talked about the hedge and again, the hedge is really important.
I just had an interview go live today with Lyn Alden where, I don't know if any of you saw her article this week talking about -- she's looking back on the last 100 years, and it looks likely that a devaluation event is going to happen over the next decade. And I'm with you, Robert. I often talk to my friends now about the fact that it is a hedge against systemic issues within the monetary system.
But, back to you, Vijay; I did, in preparation, listen to an interview of yours with our mutual friend, Stephan Livera, and you talked about a lot of people misunderstand the term "cash". We talk about Bitcoin could be money, it could be cash, but they misunderstand cash, because they think it has to be a medium of exchange first. Do you want to talk about that point?
Vijay Boyapati: Sure. I mean, I think the word "cash", people sort of assume it means something that is very stable in value and you can go to your local baker and use it to buy some bread. But, cash also means a bearer instrument, something that's valuable in and of itself. It's not an obligation where you go, you take the obligation to another party, a bank for instance, and say, "Can I get the thing that's valuable?"
An example of this is, gold is a bearer instrument. If I give you a gold coin, you have the thing that's valuable. That's different to if I give you a certificate which says, "You can redeem this certificate for a gold coin". That is not a bearer instrument. And this controversy comes up because people point to Satoshi's whitepaper and say P2P digital cash, and that means that he intended it to be exactly like the dollar, and it should be low transaction fees and whatever. I take it to mean it's an electronic bearer instrument; it's something that is valuable in and of itself. When you have the Bitcoin, you have the thing that's valuable. So, that's kind of how I think about cash. That is the aspect or the meaning of cash that I think is most important when we're thinking about Bitcoin.
Peter McCormack: Yeah, it's interesting you say about the whitepaper, because I often think it isn't the cash bit that is always misleading. I actually often think that the part that misleads people in the whitepaper is when it talks about ecommerce and the issues with ecommerce. I think that's what a lot of people ended up thinking Bitcoin was for; for kind of online digital transactions, and probably in their head then considered it should be of any size. Would you say that's a fair observation?
Parker Lewis: The thing with Satoshi, when you look it his writing, he wrote a lot of things; and, whenever someone writes a lot of things, some of those things are going to contradict each other a little bit; that's just the nature of the game. It's hard to be consistent over a large body of writing, especially when it's in the form of email and so forth.
The thing is, I think with Satoshi, he solved this really fundamental problem of computer science and it's a brilliant thing that he did, but I think people then assume that everything he wrote is correct. I don't necessarily think he had figured out all of the economics. He sometimes talked about Bitcoin in terms of gold and sometimes he talked about it in terms of commerce, but if you think about the rules that are encoded, the consensus rules in Bitcoin, it's just not suitable for commerce until it stabilises in value, because there's this huge opportunity cost of relinquishing it in trade, until it's widely adopted. When it becomes widely adopted, then its purchasing power is going to stabilise. It's not like Bitcoin can go to infinity. It goes to some level where most people on earth have some stake in Bitcoin. At that point it's going to stabilise, and then it becomes suitable for commerce, and that's when you're going to start seeing people use it as a medium of exchange.
There are some counterexamples to this. There are cases where people use it in commerce because the alternative is far more costly or risky. So, for instance, buying drugs online, you're not going to use PayPal for that, right. So, even though there's this opportunity cost, you're willing to pay the opportunity cost, because you don't want to go to jail. And, I think in the beginning, Bitcoin's usage was dominated by things like that; Silk Road was one of the early businesses. And so I think a lot of people, especially libertarians, you know, I count myself a libertarian; a lot of libertarians saw that and thought, "Okay, this is for commerce, it's obviously for commerce. Look, people are using it to buy drugs".
But, I think that was kind of jumping to a conclusion a little too quickly and it wasn't a good example of how things would play out with merchants in general. I think, if you look at merchant adoption, it's pretty disappointing, and this is even with the efforts of people who are going out evangelising Bitcoin to merchants saying, "This is great, this is better than a credit card". Roger Ver spent years and years doing this. He's still doing it with Bcash and really, there's no uptick, there's no usage, because why would you adopt something like Bitcoin as a merchant when 99% of your customers don't have any? What is the benefit to the mental cost you have to pay to figure it out and set up a new payment processing system? The benefits are pretty low.
So, my view is that kind of stuff only happens when 90% of your customers have savings in Bitcoin; then, there's a huge incentive to accept Bitcoin and merchants will be jumping all over themselves to set up payment processes which accept Bitcoin, and figure out the Lightning network, and that sort of thing.
Peter McCormack: It makes sense, because there are people who are using Bitcoin day to day. I invoice in Bitcoin; I'm sure Parker, there's certain things that are done with Bitcoin, because we're in part of the circular economy of this, which will expand as more people come into the system. But, we also have the markets which Bitcoin suits. You talk about drugs, as such; we have the dark markets. Those markets are built up and suited to trade for that. What you're essentially talking about, there is no need. The cost benefit isn't there for mainstream retail to have that right now, but that makes sense.
Parker, we did a long show about the nature of money for my Beginner's Guide to Bitcoin. I can't remember if I told you but outside of the YouTube numbers, that was the biggest show of the whole Beginner's Guide, of all 19 episodes, is Parker Lewis.
Parker Lewis: Actually, you did tell me that it was popular. I didn't know that it was the most popular series. But, I did think that part of that is because it's goes to my initial question about what Bitcoin is, because my explanation, the next layer down, I think, gets to what Vijay's was, which is most people, they walk around and they never even think about, well why do all these people accept the dollar, or the euro, right? They've never had to question those assumptions, it's just always been the case, and it's an assumed default.
What Bitcoin, and one of the best things about it is, is it's causing people to have to ask those really fundamental questions, because when they think about, well what is Bitcoin, they think about, is it for commerce; is it gold? I think the first question that they have to ask is, what is money and why do all these people walking around take this piece of paper, or a digital representation of it? And as they start to ask those questions, and this was one of the critical pieces of my path, is that I first had to unlock because most people, if you explain gold to them, those people don't think of gold as money. I didn't and that was one of the things that helped me understand was, just at a very root level, why gold was valued and why it was valuable as a monetary medium, because some people will not accept a form of payment in a currency if they don't consider it to be a value or ultimately, to be money.
So, I think that when we think about that in the context of Bitcoin relative to gold or Bitcoin and what it will be used as, or for commerce it's that, and I completely agree with Vijay, as the population density of Bitcoin holders increases, the volatility will go down over time as part of that process and just as naturally, a greater number of people are going to be accepting it on their stores or, if you're invoicing it as, you know, a shipping business, whatever it may be, that early on it will be more niche use cases, because the method of payment is that much more valuable that they otherwise wouldn't be able to facilitate the transaction. Potentially, rather than paying PayPal 7% fees, maybe you'll facilitate a payment cross-border with Bitcoin.
But realistically, somebody has to first understand why they want to hold Bitcoin and why they should think about it as money before they're then willing to accept it at their place of business. But, as more people do that, then you're likely -- I don't think it's all going to happen at once; it's that volatility is going to decline as more and more people hold it; and as more and more people hold it, the probability that you're going to walk into a store and someone's going to say, "Oh, you can pay me in Bitcoin or in dollars", that that will, over the next, I think, two, three, four, five years, will become increasingly prevalent, but that the volatility of Bitcoin will decline as part of that process.
Peter McCormack: So, that's a really interesting couple of points in there as well. So Vijay was actually, maybe it's by virtue of others, but was the first person to teach me about the value of Bitcoin as money, and it was the chart within your Bullish Case for Bitcoin series, which explained the different properties of money, and it ranked fiat, Bitcoin and gold. That was a real eye-opener for me in understanding why Bitcoin is important.
And then, Parker, when we made our show, we went into the history of money and what money is. And, I guess what I'm getting at, Parker, is I think a lot of people don't really generally think about money too much in terms of intrinsically what it is. I think for a lot of people, it's like breathing; it's just a natural thing for them. They spend; they don't think about it. But, with Bitcoin, there's a real need to try and understand what money is, to try and understand the money supply, to try and understand what different types of money are. And, getting people to take that journey sometimes can be quite difficult?
Parker Lewis: Yeah, I think it's one of those things where I think sometimes, there's a reaction where if you ask somebody that question, "What is money?" Why is the dollar accepted by 300 million people, if not 1 billion people all over the world? In some way it frustrates people. "What do you mean; what do you mean, 'What is money?'" They don't even have the context to be able to -- they describe it in terms of, "Well, it's what I get paid in and what I pay", but it's like, "No, why do people value it in the first place; what are the properties that create the inherent demand?" And naturally people, when they start to first think about it, if they were to say things, they would say, "Oh, because the government gives it its value", or, "There's guys with guns that give it value", or, "Because it's a collective belief that we all think it's money".
Because Bitcoin is what it is and because people are going through this process in their own way and oftentimes, something clicks for a reason that it does differently for somebody else, that they see the price rise and they see more and more people being engaged and that eventually, they just can't ignore it. As soon as they can't ignore it and as soon as they start to scratch the surface, and I think Michael Saylor's a perfect example of that, I was like, if you're really going to get into it, that the real rabbit hole is, "What is money?" As soon as you start going through that process, you naturally have to, if you're going to really think of it in that grain, you're going to have to start going down to a really root principal analysis of, like what was in Vijay's Bullish Case for Bitcoin where he starts stacking them up next to each other and saying, "Okay, well what are the properties?"
Saife also does a great job with this in his book of comparing them side by side, because it's one of the realisations that I came to, which is money is never absolute; it's always relative, and it's a recognition that it's a tool that man invented to help facilitate exchange and the intermediation of trade. And that in that world, no good is going to "be perfect", but it will be more functional, and it will be more functional based on an objective set of properties, which Vijay did a great job in his article just laying out the various different characteristics that you should think about when you were thinking about a monetary medium.
Peter McCormack: And perhaps some people need to go through the pain. I don't know if you saw it; it was kind interesting; I don't know if any of you saw this, and any of you can jump in, but with Apple you get charts for your podcast rankings. And, about three weeks after the news broke of the crash of the currency in Lebanon, my show was the number 1 financial show in the country which, for me, was really a bit of an eye-opener, but like, okay that kind of makes sense because if you're going through that pain, you might hear about something like that; that might be the driver that brings you into it.
And, Robert, that goes to what you said; it then becomes more of a hedge against inflation. Sadly, it may be a bit too late for people in Lebanon; perhaps Turkey may be a better example. Their rate of inflation is more insidious than say the UK and the US; I think they're at about 12%; but, that may be the kick you need to realise, "I can't keep holding this weak asset"?
Robert Breedlove: Yeah, it's a great point. I actually like to encourage people to pursue that question, "What is money?" because that is the rabbit, I think, that takes you down the proverbial Bitcoin rabbit hole. Asking that question, as Parker said, it's so fundamental. We think about money every day, whether we want to or not; you just have to. You think in dollars, right. And it's almost like the software of money is integrated to the software of our mental machinery, right, like our unit of account sort of defines reality for us in a lot of ways. And, it's almost like asking a question like, "What is water?" in organic chemistry. Water just touches everything in life, so by asking that question, you end up interacting and interfacing with all aspects of life.
Back to Vijay's point in terms of adoption for payments, I got this from Vijay's work. I think it was William Jevons that said, "Gold was adopted along a very particular monetisation path". First it was a collectible; then it was a store of value; then after it had accreted enough value, it began being used as a medium of exchange; and then finally, when it's widely adopted enough as a medium of exchange, people actually start to denominate trade and prices in the money. So, I think that is the best analogy for what Bitcoin is doing. Clearly, it's being hoarded right now, used as a store of value and then, as it accretes more value, there's more incentive for early adopters and holders to use it as a medium of exchange.
The thing about dollars is interesting. People do short-circuit when you ask them that question, "What is money?" if they haven't thought deeply about it. But, I always like to draw their attention back to, you only think in dollars today because they were once redeemable for gold. The free market selected gold as money, because it best satisfied the properties of money, which I compress down to five; I know people do five to fifteen. I say it's divisibility, durability, recognisability, portability and scarcity.
The only reason dollars were introduced as a money substitute for gold is because gold lacked in the divisibility and the portability departments. So, paper currency was introduced as a means of satisfying these shortcomings of gold and people began to think in dollars or euro or yen, or whatever it was, but only because it was redeemable for a free market-selected money. And then, it's as if we had this bait and switch pulled on us by government, right, where they gradually increased money supply relative to reserves and then finally, we moved on to the zero-reserve standard we call fiat currency today.
So, it's this long game ledger domain, or this long con by governments, is the only reason people think in dollars today. And I think that's supported too by the total absence of this question being addressed in mainstream education, or mainstream curriculum. There's zero Austrian economics taught in school at all. You go from kindergarten to a master's degree at Harvard; you'll never hear one peep of Rothbard, Mises, Hayek, any of these guys. And it seems to be a bit deliberate because the state is very closely intertwined, to put it nicely, with the university system.
So, it's a big deal. I don't think many people understand it necessarily, that gold does make the world go round. It is still prime money in the world today and if you don't believe me, just look at central bank balance sheets and their buying activities. And, all of the abstractions built on top of that are really just false; they're not actually money; they're dud. Bitcoin is a first principles disruption of money and that is why I think it's such a hard time for people -- people have such a hard time getting their head around it.
Peter McCormack: Vijay, have you added Austrian economics to the home-schooling syllabus?
Vijay Boyapati: Well, I'm sort of doing this hybrid home schooling. My daughter is going to school, but it isn't actual school. I'm really just supervising zoom calls. But, you know, I'm going to expose her to Austrian economics when she gets to a ripe enough age; she's only 4 years old right now!
Peter McCormack: So, Robert, one thing I want to add into that as well, like when you heard about what happened with MicroStrategy, I'd love to know what your reaction was, especially having read a lot of your work recently, because I felt like that -- I mean, all three of you really, it's a real validation of everything you all three have stood for and written about? And you, Parker, as well, Gradually, Then Suddenly is now becoming a meme for actions such as this.
But, I spoke with PlanB shortly he released his updated S2F model, his cross-asset model, and we kind of discussed what phase 5 might be and we kind of thought, well maybe it's nation state adoption; but at no point did it even cross our mind that it might be treasury allocation. And then in comes MicroStrategy, not with just a small purchase; I think it was 1.8% of the supply across two phases.
Just first with you, Robert, what was your reaction to that? Did you feel like it was validation; were you surprised; or, was this something you expected?
Robert Breedlove: I would say it was sudden. I didn't expect someone to jump in to the degree that Mr Saylor did. However I think, yeah, it's a huge validation for all three of us, and all bitcoiners in general. I think we've been beating this drum for a long time. The game theory of Bitcoin sort of operates at all scales, right. We're seeing it adopted first at kind of the grassroots level but then at some point, at the highest level, a central bank would be forced to adopt it at some point, again as an insurance policy against its success. But in between, there are all types, many different sizes and types of capital pools, and I didn't see this one coming necessarily, but it makes all the sense in the world, given Mr Saylor's business, his cash position and what's happening in the world today.
He makes a great point that even if we were on a gold standard and only inflating at 2% a year, that's basically getting your value cut in half after 35 years; and, he's looking at making investments on a 100-year time horizon. So, when you're looking at things in that respect and we see this perpetual violation of property rights by governments through monetary inflation, what else could you invest in? You have to invest in the one asset that has definable certain scarcity and that can't be changed by the result of any government decision.
So, I think it's a huge validation for the space, and I also think it's an escalation of the game theory, and I tweeted about this. So, MicroStrategy is one of 41,000 listed companies globally that collectively control about $80 trillion in balance sheet. I think about $5 trillion of that is liquid, so call it a $5 trillion dollar liquid treasury. Saylor bought 38,250 Bitcoin. Only I think the number was 520 other listed companies globally of the 41,000 could possibly make that same buy, based just on Bitcoin's supply constraints, assuming 20 million Bitcoin total; so, less than 1% of the listed companies globally could possibly buy that much Bitcoin, just based on Bitcoin's supply constraints.
So, it's escalating this game of musical chairs, right, where all of a sudden this corporate treasury has made it part of their strategy, and they've also de-risked it for other corporate treasuries. And it's pushing others to adopt similar courses of action, or face financial detriment. So, I just see this game theory permeating itself upwards from the grassroots level to now we're at the corporate level, and I would say in the next decade, you'll see it at the central bank level.
Peter McCormack: What about yourself, Vijay, what did you make of it when you saw it?
Vijay Boyapati: I mean, it was obviously very exciting to see a public company invest such a large fraction of their balance sheet in Bitcoin and it was really gratifying as well. I messaged Michael and said, "It was very cool to hear that you shared my article with the executive team of the company; that was really cool", and he replied with some nice things saying obviously, he's also been influenced by Parker and Robert as well. Those guys have written some really insightful and fantastic stuff which has influenced me too.
I think the biggest thing I take away from it is that it sets a precedent that public companies can do this, and it reduces the stigma of it; because, I'm old enough to remember when there was a stigma around Bitcoin that it was only used for buying drugs online, and a US senator, Charles Schumer, declaimed it on the forum of the US Senate as this criminal tool. So, I think some of that stigma, or most of that stigma, I think, by mouth has gone away. I think it's widely recognised that this is a very powerful tool. And, seeing a US public company invest is going to further reduce that stigma.
I'm a little hesitant to say that this is going to cause a stampede, because when you look at Michael's background, he has a history of pretty unconventional bets. I mean, the guy made $30 million selling a domain! And that, I actually take from that story -- what I think was interesting about that story about selling a domain for $30 million is that he had an experience earlier in his career which helped him understand digital scarcity; he was already primed for this; he was already ready to understand why Bitcoin is valuable; he had a mental model.
I think most CEOs of publicly traded companies aren't going to start with that mental model. It's going to take a few other companies dipping their toes into Bitcoin. Maybe Square is the next one; maybe Jack Dorsey, because he is such a big fan of Bitcoin. Maybe he pushes Square to invest some of their treasury in Bitcoin. But, for most CEOs, I think they're going to have to hear about it from a number of people that they trust before they're willing to consider this. I don't see this as an imminent stampede.
This is something I've talked about a little bit, the psychological process that takes place before someone is willing to even care about Bitcoin, let alone invest some of their savings in it. And, I call this the number of touch points that a person has to have; the number of people that they have to hear from talking about Bitcoin with some interest before the light goes off in their head and they think, "Oh well, maybe I should get involved in this". And typically, it's a number of touchpoints; they've heard about it from a few people, combined with the price rising. Those two factors are very powerful in bringing new people into Bitcoin.
So, I think this bull market may see a number of public companies get interested, with the price rising and seeing that there are other CEOs willing to do this, but the process could take a couple of years. I don't think it's going to happen overnight.
Peter McCormack: Yeah. Parker, I want to ask you the same question, but I just want to throw a couple of other points in there as well that you might want to comment on. So again, I mentioned I interviewed Lyn Alden yesterday and that went live today. One of the things she said that she was very interested about MicroStrategy, is that they've also essentially created a Bitcoin ETF for those people buying their stock.
But, another point that's stood out to me is that, if more companies invest in Bitcoin, like MicroStrategy, potentially they create a legal moat around Bitcoin, which makes it more difficult to regulate away, in that it will cause way too much harm to the companies that have actually invested in it. Do you see that as relevant?
Parker Lewis: Yeah, I definitely do, and echoing Vijay's thoughts on this, probably my first thought was, "Man, that's a lot of Bitcoin!" And then I thought about the people that were on the other side of that trade and said ten Hail Marys for MicroStrategy as they had just scammed a lot of people out of their Bitcoin. But then I thought about the legal and regulatory cover, because I think that on the one side it is validation; but I think more importantly to Bitcoin, it is a public company and Michael Saylor mentioned this, I can't remember which podcast it was on, but he talked about there's disclosure requirements, there's processes that they had to go through, I believe they're audited by KPMG.
So, I don't like to think about the institutionalisation about Bitcoin, but I do think there are important markers that make it very difficult to go back and provide cover, while realistically there should already be sufficient cover when you have the Squares of the world, not only having Cash App, but advertising to buy Bitcoin on Joe Rogan's podcast, and you have companies like the CME trading futures and ICE owning BAC; there already is a lot of cover, but this is just another notch on the belt. I think it is meaningful for those reasons.
And, I also think it is just meaningful for one of the things that Robert mentioned, is that probably to me, one of the most interesting things about MicroStrategy was that they picked this up in 2020 and they went hard down the rabbit hole. It wasn't just one individual; it was one individual with a board and a company and shareholders and having to get consensus, and doing that in a fairly quick timeframe. And again, I agree with Vijay in the sense that, this isn't just going to open the floodgates. On the margin, it is going to cause a number of companies to start going down their own process.
One of the best things about that is, and this is what Robert mentioned, but that Austrian economics just isn't taught. I got an economics degree and it's not fair to say it's not taught anywhere, but realistically it's not part of a standard economics curriculum. If any of us here, but MicroStrategy is a perfect example, if you pick it up later in life or with some world experience, we are all generally educated on the other path, the other side, which I think once you start to learn about Austrian economics, it's not just an intellectual debate; you compare it to the actual real-world experiences that you've had and you've had one education and you're getting a second one. And you're having to ask yourself, because there are real-life consequences, which one is correct, with objective results?
Because we already have the benefit of that past education, we can look at something fresh and be able to more aptly evaluate it, and the more and more people that do that, continually come out on the side of understanding why this other approach is a better approach, based on objective facts. So I think the combination of them being a public company; the combination of there being multiple people that had to gain consensus within an organisation because they do have exposure and they do have liability; but then, I do think it also provides that regulatory cover of a public company doing it, signalling to other public companies that they can, but that going through SEC scrutiny, auditing from Big Four auditors, that it does just mainstream and reinforce that we're not all just a bunch of criminals and drug-dealers.
Peter McCormack: I'll open the next one up to any of you; just put your hand up if you want to answer this, because I'm not sure who's best to answer. Are there any potential downsides to mass adoption of Bitcoin by companies? Has anyone looked into this, any consideration for the distribution; could there be any negative effects of this?
Parker Lewis: One thing that I would say is I believe it's inevitable. So, we can argue the merits of whether or not -- I don't see the downside, first off, but if you have a form of money that has a finitely scarce supply and then that money is a very basic necessity, one of the ways that I distil it for people is, if you stop to think about how clean water gets to your home every day, or how you reliably go to a grocery store and you have tens of thousands of options of food on the shelf, and how gas magically appears at the gas station every single day, the only reason that comfort is possible is because of the coordination function of money.
Then, the extension of that is, money is a very basic necessity. If there's this thing, Bitcoin, that has, by an order of magnitude, stronger monetary properties, then practically everyone in the world is going to demand that. So, I think the reality of debating whether or not it's good or bad, I think, more people being able to speak the same language of value inevitably will be good. Are there some kind of potential landmines in terms of privacy and surveillance and things that we need to not lose sight of? Absolutely; but if we're just dealing in objective reality, I believe it will happen.
So, it's just a matter of how do we manage any potential downsides, of which I expect there to be few, and positive externalities to massively outweigh any potential negative consequences of having a publicly shared ledger of transactions for a global monetary system.
Peter McCormack: Robert, you wanted to add into that?
Robert Breedlove: Yeah, and this is sort of a more generalised risk that I think about with Bitcoin, is actually the timing of hyper-bitcoinisation, or worldwide adoption; whatever you want to call it. I think of it actually, if it were to happen today for instance, if you could flip a switch and Bitcoin would just accrete all the value that it would at maturity, it would actually exacerbate wealth disparity because it's in so few hands today; but it's becoming more widely distributed with each price cycle.
So, I think there actually is a risk there that this tool that is designed in a way to disrupt the monopoly of money, which is one of the cheap drivers of wealth inequality in the world; wealth inequality is clearly a natural phenomenon in a capitalistic system. But, when you're using monetary inflation to artificially syphon wealth off those at the bottom, you're continuously dispossessing people in the economic hierarchy, so it actually exacerbates wealth disparity.
So I think, in a weird way, if we bitcoinise too quickly, this tool that ultimately promises to alleviate wealth disparity and increase wealth generation, could actually exacerbate wealth disparity. So, that's an interesting risk to think about.
And the other thing is, today people don't understand money, as we've clearly laid out. So if banks were to adopt Bitcoin pretty rapidly and rehypothecate and run fractional reserves on top of it and somehow keep their customers satisfied, which I don't think you could maintain that allusion for long, but I think you could financialise Bitcoin in the short term; I think certain banks could do that. Customers don't understand today that even the dollars in their bank account aren't necessarily held at the bank, right; everything's held in a fractional reserve.
I think you could perpetrate something similar with Bitcoin in the short run, which could present downward price pressure on it and cause other complications. So, those are a couple of risks that I think about with more mainstream adoption.
Peter McCormack: Vijay, just moving on from this, I kind of want to move on to what can this really be, where can this really go? I'm sure that somebody like yourself, who's been into Bitcoin for a long time, you always hoped to see the growth, you always hoped to see the expansion of Bitcoin and the adoption of Bitcoin? But perhaps it has even exceeded your expectation by now, because there were so many risks, there are so many opportunities for it to fail or it to be regulated out. But, here we are, we're having this conversation from people all round the world, we're talking about an asset with billions, hundreds of billions in value; but also at a time which is really set up well for Bitcoin.
Again, I'm going to echo Robert's point about wealth inequality and refer back to my interview with Lyn Alden again, but she talks about The Fourth Turning, and the reason she talked about that is that in the boom and bust cycles, we're essentially coming to the end of a super-cycle where wealth inequality is really, really growing, and especially with what's happening with the pandemic and the stimulus packages exacerbating this. So, we're in this really unusual time where we actually have a tool. We could have been in this situation with no Bitcoin; 10 years ago, 11 years ago, if Satoshi hadn't have created this, we could have been in this exact situation, all doing whatever we would be doing with our lives, but not have this tool.
So, sorry, this is a big lead up, but how far can this go and realistically for you, what's the realistic outcome here?
Vijay Boyapati: Well, I believe Bitcoin will be the world's monetary base. I believe it's going to be essentially the same thing that gold was in the 19th century. I believe it's going to be the foundation of a new financial system and all sorts of financial infrastructure is going to be built on top of it. That's what I think the end goal of this is.
I'm not necessarily one who thinks Bitcoin solves every problem, but I think it solves a very, very important problem, which is a non-inflatable, censorship-resistant, monetary basis that dramatically changes the way the world works. Because, current governments fund their operations through inflation and if governments have to switch to funding operations through direct taxation, that inherently limits the scope of government, because there's always going to be pushback when people see money being taken out of their pocket.
Inflation and taxation are quite different. Taxation, you see the money going out and people get upset. There's a point where your government takes 40% or 50% out of your paycheck and you reach for the pitchfork. But, when they use inflation, people don't really understand that that's even happening, that money is being taken out of their pocket and given to someone who's in a privileged position, like a banker.
And, you know, central banking began as a way to fund war, and for me that's one of the big political issues that will help make the world a better place, if Bitcoin becomes the world's monetary base, because I think it's going to be much harder to fund warfare. That, I think, is a tremendous boom to my children and my grandchildren and so forth, so that's what I'm excited about, is Bitcoin changing the world for the better by limiting the scope by which governments can spend and distribute money to people who are politically well-connected.
Peter McCormack: When you talk about Bitcoin being the monetary base, essentially a Bitcoin standard, similar to what we had with the gold standard, the gold standard was something that was created by governments and it was something they adhered to and eventually, they ended the standard. Do you feel with Bitcoin that we're in this unique position, in that it's essentially a voluntary standard that you either choose to become part of or not; and essentially, the gravity of Bitcoin would force you to because other people may say, "Look, I don't want to trade with you because you are not using Bitcoin"?
Vijay Boyapati: Well, I would slightly disagree with that.
Peter McCormack: Okay.
Vijay Boyapati: I don't think governments created the gold standard. I think gold was chosen as money by the market, because it was just inherently superior to everything else that was tried before; seashells and cows and even silver. And gold eventually triumphed because there's this network effect and it sucked savings in. People realised that they want to keep savings in the monetary good that everyone else uses.
So, it's getting theoretic in a sense. You were sort of looking around saying, "I want to keep my savings in something; what do I keep it in? Should I keep it in shovels; should I keep it in fishing rods? No, I want to keep it in the thing that everyone else wants to keep it in, which is gold". So, this network effect gets bigger and bigger and bigger. And I think governments just ultimately recognised that gold was the most demanded money and so they said, "Okay, well that's what we have; we have a gold standard".
And of course, governments manipulated the gold standard. They issued their own bills and said, "These bills are redeemable in gold", so that's what you might call the classical gold standard that a dollar or a pound was redeemable for a certain amount of gold, and nations traded back and forth these bills, but really they were referring to gold underneath.
So, I think it has to be a market phenomenon, and I think the same thing is going to be true for Bitcoin. Bitcoin is going to be adopted by the market, because it's so much superior to the alternatives, and superior to gold as well. The big disadvantage of gold is its physicality. It's a physical object which really, it causes these problems in centralisation of custody. If you hold a large amount of gold, if you're Rockefeller or you're JP Morgan and you have a lot of gold, you're not going to keep it under your mattress; you're going to put it somewhere where it's secure, in a bank. The problem with that is that banks are easily raided. It's very easy for a government to come in and say, "Look, all your gold is ours now".
The fact that Bitcoin is digital and not physical gets away from that custody problem. People, if they want, at fairly low cost, can custody their own Bitcoin. And, if there's ever a question of lack of trust in a financial institution, you could pull your Bitcoin very quickly. The same was not true for gold. You would have periodic bank runs where people would lose confidence in a bank and then run down to the bank and try to pull out their gold, but I think the digital nature of Bitcoin makes it so that centralised custodying is less of a risk than it was with gold.
Peter McCormack: And yourself, Parker, how about yourself; how do you feel right now? If we went back a year, I used to see you every couple of months. I'd be flying over to the States and I'd always have a little trip to Austin and we'd catch up. Now I can't get on a plane, the world's a very different place, a lot of weird stuff's going on … It's sometimes hard to celebrate it because you don't want to see people going through hard times, but we do have this tool of Bitcoin. How far do you think this can go?
Parker Lewis: I actually miss the days. I think this time last year, we were in Wyoming.
Peter McCormack: Yeah, we were.
Parker Lewis: At a Bitcoin hackathon. So, the world has changed, but we'll get back to that hopefully someday soon. But I do agree with Vijay. I think that Bitcoin will over time, and I probably more so than most people think that it will be on a more accelerated basis than a lot of people, but that the entire world will shift over to a Bitcoin standard, and that Bitcoin will be, you know again, things will always be considered near money in that there will never be 100% adoption of Bitcoin money. As money, everything is relative and ultimately, through money, we are using it as a medium to facilitate a series of transactions and exchanges.
One of the authors and writings that helped me understand, not just Austrian economics, but then also as it relates to Bitcoin, it was Hayek and a couple of pieces, The Use of Knowledge in Society, particularly where he talks about the function of a pricing mechanism; and that the pricing mechanism is really a channel of communication, or a communication system in which only the relevant information is passed along, and it's essentially a filter.
I don't know if it's the example he uses, but it's one that I relate to; it would be like if there's an earthquake in Chile and the copper supply chains get disrupted and you're a producer in the United States and you're building houses and it involves copper for telecommunications, or whatever requires copper, you may not know that there was an earthquake in Chile, but you know that something happened in the cost of copper and you need to either charge more to your end-customer, substitute, or do something else; but that the price mechanism is really a communication channel.
The realisation that I had was that a pricing mechanism and a price system only emerges out of the common use of a common medium of exchange, or a common currency; that the pricing mechanism is the output of convergence on a common form of money; and that at the end of the day, that is us all being able to speak the same language of value. The value is an inherently subjective concept and it is the common use of money that allows us to be able to objectively gather to what value is, or how we think about value, which is an inner subjective problem.
So I think that at that highest level it is, we are all going to be using, 95% plus of the world, the same form of money, and what that's going to allow us to do is, in a more direct way than we've ever possibly been able to, to speak the same common language of value to more people; and that, as Vijay mentioned, that the end result of more people being able to communicate the same language.
But then, I think, as he pointed out, taking away that ability to cause distortion in that function, to allow a central bank or a government to intervene to be able to print money, that that also requires that anybody that is voluntarily participating in the monetary network, not necessarily requiring, but will be the preponderance, is that if you want to obtain some of that form of money, you're going to have to deliver value in a peaceful way. Not to say, in a 100%, we're not, I think, naïve; we don't live in a utopian world, but that more and more people will have that channel to cooperate and to coordinate, because they will be able to speak a common form of language, and that monetary standard will all be built on Bitcoin.
Peter McCormack: So, Bitcoin is the international language of cooperation?
Parker Lewis: Yeah.
Peter McCormack: Amazing. All right, Robert, you as well, man, what do you think? You've already mentioned hyper-bitcoinisation; what do you think right now? I know you're a deep thinker about this stuff.
Robert Breedlove: Yeah. I think it's really important to understand the history of government as largely this system that has, time and time again, plundered the Commonwealth through monetary inflation, right. Every government gives in to the temptation to control money; they always manipulate the rules and supply to their own benefit and externalise all the costs on to society, up to the point of basically social disintegration. That was the fall of Rome; we see hyperinflationary events in Venezuela today; and arguably, we're not far off from something similar in the more developed world.
I think that context frames up Bitcoin's importance really nicely, because Bitcoin -- if you consider that governments continuously plunder their Commonwealth through inflation, Bitcoin is basically plunder-proof money. It's money that cannot be easily confiscated directly, because it's non-corporeal, it's really hard to physically confiscate; and you can't inflate it at all, so it completely eliminates stuff to the inflation. So in that respect, I consider Bitcoin, in its distant future, to become this base money for global, digital, non-state economy.
That has two functions, right. To Parker's point about providing us this universal language of value, or this channel of exchange, that's totally free from the noise of unexpected inflation; it actually increases wealth generation, because it's lowering the barriers to trade and trade is what causes wealth. It also reduces capital and wealth destruction, to Vijay's point, by defunding the war machine. War is the most anti-economic activity we can possibly engage in; we're literally mobilising capital to go and destroy other capital, so it's totally maniacal and insane. So I think Bitcoin, in that grand sense, sort of saves us from ourselves in a lot of ways and really pushes us and forces us to become more economic and cooperative.
Another thing I think about is the nature of -- man has a simple nature, right, as someone will tell you from a Christian perspective, and it's actually greed, I think, that drove the game theory of gold. Everyone's looking to have their wealth stored in a medium that is least subject to compromise by others, intentional compromise by others, and that's what drove people to adopt gold. No matter what you did, you couldn't counterfeit it; alchemists couldn't produce it; no one could inflate its supply, however hard they tried.
So, in that sense, I think Bitcoin's interesting too, because greed is what actually drives Bitcoin's market value; there's this huge incentive to hold it and hoard it. And, it also secures its network; Bitcoin mining is a purely capitalistic activity where the race for profit margins actually creates a larger and more robust and anti-fragile network. So in that sort of, I guess, religious sense, I look at Bitcoin as this system that converts the individual centre of greed into our collective salvation. So, I think that's just a really interesting way to look at it.
Peter McCormack: Damn! Do you think about the road to hyper-bitcoinisation? Do you think about perhaps the collapse of modern governance? I mean, I wouldn't call myself a libertarian like Vijay, but I'm definitely a sympathiser to the ideas; I've just always struggled to really understand a society without government. Have you thought about the road to hyper-bitcoinisation and perhaps that it might be like a bloody road, that we might have to go through a period of turmoil to get there; have you considered that?
Robert Breedlove: I always point people on the subject to the book we've probably all read, The Sovereign Individual. I think that's the most accurate portrayal of the direction I think things would take over time. But the funny thing about government is that, effectively it started out as a localised protection racket, right. It's like, "We have the monopoly on violence so that you, all citizens, aren't violent against one another. We'll provide you this non-violent means of dispute resolution called, The Rule of Law", and that was meant to support trade and wealth creation. But the weird thing about that is when a government -- so basically, it's the biggest protection group in the room.
But, when two protection groups conflict and one defeats the other, all citizens kind of want to go to the guy that won, right. So, government has this inherently centralising effect. I think that that's what got us to where we are today, is that the state is the biggest gang in the room with the most guns and violence, but they can only support their size because of fiat currency; because they're able to confiscate wealth at scale. So again, in that book, Sovereign Individual, it actually depicts a decentralisation of those monopolies, so something looking much more akin to Game of Thrones, or like old-style organised crime, where you have local mafias. I think that's kind of the direction we will move.
But the counterbalance to all the traditional incentives to violence is, we're living in a knowledge-based economy now, right, more and more, so there's a big disincentive to violence there from a nation state level; and then, the unconfiscatability of Bitcoin. It doesn't make as much sense to go to war or go into a gang war to try and defeat your enemy if you can't confiscate any wealth from them, which gets into a whole other aspect of Bitcoin that is super interesting, which is collaborative custody, Multi-Signature solutions, like what Parker and Unchained are working on. These things were simply not possible with any monetary technology before, so it's this huge impetus for us to become again more cooperative and economic.
Peter McCormack: All right. That sounds like a whole show in itself, my man. I'll have to grill you on that at some point. Vijay, okay, so listen, I'm obviously borne in, I've got skin in the game with all this. What do you think are our biggest hurdles here collectively as bitcoiners, but also potentially in terms of all the different tools or options of things out there; what are the biggest hurdles for us to get us to this better place? Is it education; it is technical; is it apathy; is it regulation; what are the things that are the biggest hurdles for us to get over?
Vijay Boyapati: I think it's just the size of the fiat onramps. I think the biggest impediment to more money coming into Bitcoin is the ease with which people can get their money into Bitcoin; you still kind of need to -- I mean, it's not that hard, but you still need to figure out going to an exchange and putting in a buy order and, do I keep it on the exchange; do I keep it on a hardware wallet; that sort of thing. I think something like a Bitcoin ETF would help a little bit.
I just view it as the number of onramps that you have is going to help Bitcoin; the ease with which you can get your money into Bitcoin. So, we have Coinbase, Square Cash, Kraken, etc. I think it's going to help when the larger financial institutions see that the smaller institutions are making a lot of money from people buying and selling Bitcoin. I mean, if you are a payment processor, you can't help but notice that Square is making a lot of their profit from Bitcoin.
I mean, Square is not a particularly interesting or successful payment processor compared to the others in the space; it's not like it's dominant or anything, but they're making a lot of money from this. If I was Venmo or I was Stripe, I would definitely be paying attention. And eventually, I think the larger financial institutions are going to see the amount of profit that's being made and that's going to increase the onramps to Bitcoin.
So really, education's great. It helps, I think, to get certain people down the rabbit hole but ultimately, I think most of adoption is going to be due to greed; people just want to be involved. And, that's why you have these waves getting bigger and bigger, where people have heard a little bit about it in the previous wave and so they're somewhat primed. Maybe they bought a little bit of Bitcoin in the previous wave and then in the next wave, they've seen their stake grow to something that's somewhat meaningful in their portfolio and they get really interested and they jump in because naturally, they're greedy. And each wave sees a new batch of people coming in because of this.
It's just, we need to get to the place where the average person, or you know, my mother feels like it's something that she can do; it's easy for her to do. And that process is just going to take time. I'm not worried. I'm extremely bullish on Bitcoin; I'm as bullish as anyone I know, but I'm also not necessarily a person who thinks this has to happen overnight, or is going to happen in a couple of years. Over the time period of 50 years, I'm extremely bullish; I have extreme conviction in Bitcoin; and, it's something that I think whatever Bitcoin I have is going to benefit my grandchildren. But, the process of opening these onramps and the financialisation of Bitcoin, I think is going to take time. So, time and onramps would be my answer.
Peter McCormack: How do you feel about that as well, Parker, because Cash App is great; we also have the Greyscale Trust; talks of Fidelity creating fund, I've heard; we have a lot of custody solutions now. How do you feel about this range of onboarding solutions that maybe take people away from custodying themselves or operate in a node; do you think that matters; do you think it's important that we have a lot of people at the grassroots level doing this; is there a certain way that people should be bitcoining?
Parker Lewis: I don't think that there's a way that people should be bitcoining. I think that there are natural tendencies and propensities to facilitate a flow from, "I come in, I know nothing, I follow price, I buy and then, I will start learning and understanding more about Bitcoin and become more comfortable, so there's a transition". I think realistically, the best thing about Bitcoin is that it's voluntary and that there are economics involved and that a free society will actively and ruthlessly compete to come up with the best ways, not just to buy Bitcoin, but to secure it, and for different use cases; because, I think that while there's a reason why the longer people remain in Bitcoin, the more likely they are to facilitate self-custody and that's the way we think about it at Unchained, why we've developed around multisig and tried to put keys in the hands of our clients, because that's where we see the most mature bitcoiners ending their journey; but I also agree with Vijay, I think it's really a function of the size of Bitcoin.
As Bitcoin increases in value, there's more capital being invested and the more that Bitcoin is worth, the more infrastructure that can be built. And Bitcoin, generally because of human psychology, is adopted in waves and in some ways, you can look at that as irrational; in other ways, you can look at it as rational that people are following a pricing system and a pricing mechanism and a price signal and saying, "I don't know why I'm supposed to be buying Bitcoin, but other people are; I need some of that". And, as people do that, again value increases, more people get sucked down the rabbit hole, more people understand it. But then also, it's stealing mindshare away from a legacy monetary system. And as that process occurs, with more people's attention on it, the better the technology gets and the better the infrastructure gets and the wider the distribution becomes.
One of the ways that I describe it is, because I think this came up previously, or Vijay mentioned it, but when you think about gold as a monetary medium, it wasn't something that was agreed upon by governments; at one point in the time, gold was ore in the ground. And then, as more people found it valuable, whether it be for decorative or collectible reasons, more and more people owned it. As more people owned it, then a monetary network was built around it.
I think about where we are in Bitcoin today as, Bitcoin is ore in the ground and it's becoming money as we build the monetary network around it. That monetary network is dependent on infrastructure and there naturally is not going to be a one size fits all solution, but that more and more people, and I think just as Bitcoin experiences positive externalities from value, the dollar and all other fiat systems have a negative selection problem. As more people think about how, you know, more people like the Stripes of the world, like Vijay mentioned, they're looking at Square and saying, "How are people going to be moving Bitcoin around in the future? I have a skillset and maybe technology in place that I can use to be leveraged in that new monetary system", and it only gets better.
I think that while we're making certain investment decisions on our side around self-custody, because we think it's where most people, for the lion's share, their economics will be stored when they're holding Bitcoin, we're also recognising that everyone doesn't get there overnight and that realistically, just based on the nature of money, that there's going to be various different applications and they're going to look differently, but that's going to evolve and only get better in time as 500 million people have Bitcoin, 1 billion people, just because competition will dictate that it will.
Peter McCormack: All right, listen, I've got a couple of questions left I want to get through; I don't want to take up too much more of your time, but I do appreciate it. Robert, what are the risks here? How could we fuck this up? And I don't mean just us, I mean collectively, society as a whole. What's the shit that you worry about, or is it just inevitable?
Robert Breedlove: I mean, nothing is inevitable. I definitely hesitate to ever use that word, but I will say that of anything I've ever looked at in my life, I would put Bitcoin as close as near inevitable as I could.
I think there are risks with, there's a battleground to be had now for privacy with Bitcoin. It may actually be the battlegrounds of the next hard fork. Some people think you need privacy at the base layer, but there is sort of a trade-off there with guaranteeing the 21 million. And then there's also the need to increase transaction throughput for Bitcoin to evolve into its medium of exchange role. There's a lot of promise in the Lightning network to sort of resolve both of those issues, with privacy and transaction throughput, but that's still very early.
In terms of other risk, I just say, you know, again nothing is in inevitable. So black swans, by definition, are unknowns; Bitcoin is still very young, even though it's got quite the track record in its short life, it is still very young. So, I just advise people to be cautious, invest in education and never invest more than you can afford to lose, unless you're irresponsibly long, like some of us may or may not be.
Peter McCormack: Yeah, I'm at irresponsibly long, but fuck it! Vijay, is there anywhere you think -- well, I say that, but do you know what; some people are irresponsibly long on the pound or the dollar. If you really look at it, you could say I'm irresponsibly long on Bitcoin, but the reason I moved up to 60% of my cash reserves from my company in is because I felt I was irresponsibly long on cash. I've got no need to spend this money over the next year to two years and that's what I felt and I kind of flipped the script on myself; does that make sense?
Robert Breedlove: Absolutely. That's a Saylor move and I support it.
Peter McCormack: Cool! So, Vijay, yourself; what are the risks here yourself? You've been a long-time bitcoiner, you've been deep in this for a long time?
Vijay Boyapati: I commented on Twitter that I think Bitcoin has been substantially de-risked in the last three years. I think significantly, this isn't like -- it's gradually de-risked. I think the biggest risk that Bitcoin faced with the hard fork and the contentious-type fork in 2017, when you had a real attack on Bitcoin, the biggest, most powerful companies in the space tried to change Bitcoin to suit themselves. They had businesses and they thought, "We want to change Bitcoin to benefit us. We want to reduce transaction fees and that's what we think Bitcoin should be", and they failed.
Bitcoin's the only cryptocurrency that has faced a test like this and ultimately, I think the only risk that matters and the risk that will eventually matter, is a state attack, because Bitcoin is a non-sovereign currency and eventually, states are going to realise it's going to threaten their monetary policy. You see slight inklings of this where people say, "Well, if Bitcoin gets really big, then it's going to make it hard for central banks to manipulate interest rates". Yeah, that's what you want.
But, there will come a point where nation states, if they feel threatened enough, may try to attack Bitcoin and the question is whether or not it can survive that attack. That is the only attack that I think is significant, except perhaps the protocol risk; that is still lingering. There will always be a lingering protocol risk, because it's built on cryptography and perhaps we'll learn something about cryptography that we didn't know that blows this all out, like quantum computing becomes really cheap, or something like that. I think the risk there is very small and has diminished significantly over time, and that's partly because of Satoshi's genius. He was extremely conservative in the cryptography he used; the choices he made were to build Bitcoin on very well-established, well-understood cryptography that had been well-tested for many, many years. He could have gone with the bleeding edge, but he didn't.
And honestly, that's part of Bitcoin's ethos, is to be conservative and boring, which is really good. You don't want to build a financial system on a base that is constantly changing and has an ethos of move fast, break things which, when I look at Ethereum, that's what I see. I see, essentially, an experiment. It's an experiment in computer science and well and good, they've yet to play with that and try an experiment, but I would never want to build a financial system on top of something like that. So, Bitcoin's core ethos has been to be stable and to be conservative and I think that's helped reduce the risk over time.
So, I would say that an attack by a nation state is the only risk that I think is meaningful. And, the question in my mind is whether we get to political capture fast enough for that risk to diminish. I'll give you an example of Uber, the ride-sharing app. What happened with Uber is that they would go into markets and they would disrupt the existing taxi business, and it was very, very unpopular with the taxi companies, and they would lobby hard and local governments would be very sympathetic, having got a lot of donations and having many crazy relationships with taxi companies. And they would fight back and they would try and regulate Uber and try and make it like a taxi company.
But, Uber had an advantage that it had all of these drivers out there, who were very incentivised for Uber to succeed and not to be regulated, and they have a lot of uses as well. You go into a city and people would say, "I don't want it to be a taxi company; I want it to be Uber; I want it to work the way it is; I don't want to pay all these extra fees". And so, they very quickly built up a sort of natural lobbying group and they were able to get political capture because of that.
The same thing can happen with Bitcoin as well. If you have wide enough ownership, especially ownership among people in power, people who have substantial amount of capital, or people in Congress. There are a few members of Congress who have Bitcoin. But really what you want is a large fraction. And, I think I read some paper where there's a theory that if you get to somewhere between 30% to 40% of a population wanting something, even though they're not a majority, they have enough influence to push things through, a sort of tireless minority.
The legalisation of marijuana is an example of this. It was illegal to use marijuana for a long time, but there was a group that was very passionate about legalising marijuana; and it eventually got to the point where some large enough fraction of the population thought, "This is stupid; why are we making this illegal?" that they were able to get it over the line. And I think the question for me is, can we get to that state with Bitcoin before we see a state attack? I'm hopefully, but I think that's an open question, and we'll see; we'll see over the next decade what happens.
Peter McCormack: All right. Look, final question, and I'll put this to all three of you and I'll start with you, Parker. What would you say for the doubters, the people who still doubt, because this still happens, right? I've had, at least three times in the last week, conversations on Twitter where people are coming up with different reasons, centralisation of mining in China; it's too volatile; the similar same arguments. But, rather than address those particular arguments, what would you say to those people, the people who are still doubting this?
Parker Lewis: Well, I take the approach, and I included this quote from common sense in one of my articles, but it's that, "Time converts more people than reason", or along that thought process. To me, it's just not worth the energy to try to convince somebody, and that in my experience, something has to have peaked somebody's intellectual curiosity, and they have to be interested in understanding why or how for them ever to be potentially able to see or understand Bitcoin as money; that it inherently has to be a voluntary and forward process on whoever wants to know. So, if somebody's loosely called a denyer, or someone that doesn't want to see it, they're never going to see it.
One of the things I tell people is that Bitcoin is basically the opposite of intuitive; it's extremely counter-intuitive. And then over time, as you stare at the problem long enough, something eventually clicks in your understanding of money, your understanding of how Bitcoin, in its finite scarcity, can be that; and that actually over time becomes, in most people's minds, order of magnitudes better; that it goes from being the opposite of intuitive to intuitive to hyper-intuitive, just as a function of time. If you are staring at the problem in good faith, trying to understand it, and you have that own curiosity that only an individual can control in themselves.
I like to think that if somebody doesn't want to know, it's like talking to a brick wall and it's not worth anybody's time, it's not worth theirs or yours; and that time will convert more than reason, because more and more people, when they're looking at an objective set of facts, will come to that conclusion, that Bitcoin is a better form of money. And at a certain point of time, their hands become forced. That right now, we have the luxury and the benefit to be able to sit down, think about it, but as a consensus emerges, again people can continue to use the dollar and the euro but as more and more people decide to say, "Hey, let me evaluate this", they're going to come to that conclusion that Bitcoin's a better form of money and once we hit a tipping point, then everyone else is just going to be dragged along.
Peter McCormack: Fantastic. Breedlove, man, what about yourself; do you anything for the doubters?
Robert Breedlove: Yeah, I think if nothing else, 2020 reinforced the truth that human beings are really poor at understanding exponential functions. I think there's actually a quote out there, "The greatest inability of the human race is our inability to understand exponents". And so, we had this thing, this COVID situation, starting in Wuhan and people, especially in the US, wrote it off; it's never going to happen here. Then, two months later, we're all wearing masks, the world's shut down, etc.
So, things that change exponentially can have huge outsized impact on the world, very rapidly, and it's important to understand that Bitcoin is the first money we've ever had characterised by an exponential decay of new supply flow. Its new supply flow was cut in half every year. And, just for a sense of scale on those numbers, I think we're around 300,000 new Bitcoin issued per year to day in 2020. That number contracts by the year 2100 to 0.3 Bitcoin produced per year. So, that's seven or eight orders of magnitude contraction.
And the other thing I like to tell people is that the market is smarter than you think you might think you are, and that's true for everyone. And, this is the best performing asset in history. So, at what point do you get stopped out and say, "All right, I need to have some exposure to this thing", because it's still going, right; it hasn't stopped; there are no indications of it abating any time soon. So, I think you need to have the real conversation with yourself about when you take it seriously.
Peter McCormack: All right, Vijay, take us out, man?
Vijay Boyapati: I would say that money is the biggest market on earth, by far. People like to talk about how big these tech companies, like Apple and Google and Amazon and Facebook are, but they're drops in the bucket compared to the size of the market for money. And in my opinion, Bitcoin is the most important innovation to money in 1,000 years. So, you're talking about an innovation disruption of the biggest market on earth by far.
So, I would just say, "Go get some. Don't worry about figuring it out or going down the rabbit hole, or anything like that; go get some right now. And, you know, that might sound crazy, "If I don't understand it, why would I invest in this kind of thing?" Anything, no matter how risky it is, can be put into a portfolio by just choosing an appropriate size. And maybe the comfort level you have is 1% of your portfolio, or 0.1%. There is some number where you would think, "It doesn't matter if it goes to zero; my portfolio moves that much per day".
So, my advice is go get some, get a stake, because this has the potential to be important. Even if you don't understand it, you probably understand that the market for money is big and that disrupting it is potentially very valuable. So, go get a stake. That will give you enough skin in the game to figure it out later on if that stake becomes large enough.
Peter McCormack: Amazing. Listen, this has been amazing. Thanks, guys. Look, I owe you all a huge thanks. I picked the three of you to come together for this by design, because you're my three favourite writers on the topic of Bitcoin. Vijay, very early on your article, The Bullish Case for Bitcoin, changed my entire thinking about Bitcoin as money and why it is the best form of money. Parker, your series on, Gradually, Then Suddenly, made me realise the impact this could have on everyone else. And, Breedlove, obviously I've only read some of your stuff recently, but I think of your work as like the magic mushrooms of Bitcoin writing, because it just fucking takes me into this new dimension and I'm like, "What! What's going on here?"
But, you're my three favourite writers, you all do an amazing job, and I couldn't make a show without people like you coming on. So, look, a big thanks. Just to end, Vijay, tell people how to find you and your work?
Vijay Boyapati: My article, The Bullish Case for Bitcoin, is on Medium, and you can find me on Twitter, @real_vijay on Twitter. I mostly, being a parent, I wish I had time to do more long-form articles. The last time we spoke, which I think was it two years ago?
Peter McCormack: You owe me!
Vijay Boyapati: I wanted to write, The Bearish Case for Ethereum, and it's been very difficult to find time. I have three young kids, so most of my thoughts are on Twitter. If I have a longish thought, it appears in a Twitter thread, so find me there.
Peter McCormack: Yeah, I get it, man; I've got two kids, so I understand. Parker, how do people find you, man?
Parker Lewis: Well first, thanks for having me back on, I always enjoy it and I hope that you get back to Austin sometime soon. But, people can find me on Twitter, @parkeralewis. I work at Unchained Capital. I distribute all of my content on our blog, unchained-capital.com. And, if anybody is looking for better ways to secure their Bitcoin for the long term and you need Bitcoin financial services, reach out.
Peter McCormack: Breedlove, take us out, man; how do they find you?
Robert Breedlove: Thanks, Vijay and Parker, this was a lot of fun and thanks, Peter, for having me again. You can find me on Twitter, @Breedlove22. That's my last name, Breedlove, 22. Then, all my writings are on Medium. Also, you can check out our website, I post a lot of the same things; parallaxdigital.io.
Peter McCormack: The 22, was that your jersey number?
Robert Breedlove: It was my lucky number. I don't really know where it came from; I've had it my whole life.
Peter McCormack: I thought it might be your football jersey number! Well, listen, thank you all, I'll share it out on the show and I just can't wait to get this out; I'm sure people are going to love it. Take care and I hope to see you all in person at some point. Hopefully this coronavirus will end and we'll get back on the planes. Take care and, Vijay, we'll share some recipes soon!
