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May 13, 2021 - Dennis Prager Show
07:59
What's The Deal With Bitcoin?
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We dematerialize it, make it digital, we make it run on a mobile phone, and we put it on a streaming protocol.
If you want to spread your ideas to people, you put them on the radio waves because everybody can't show up in person.
The physicality of you giving a speech in person is going to be too expensive.
If I wanted to give knowledge...
To billions of people.
I can't do it with books or libraries.
That's too expensive.
So I upload them digitally to Google and I make them available for free.
And you just get an iPad.
You download 100,000 different books for the cost of electricity.
And so the challenge of Bitcoin is how do I give property rights to billions of people?
Property rights meaning, you know, somebody in Africa, Asia, South America, they work, they make $500.
How do they keep it for a decade?
If they invest it in Nigerian currency or Zimbabwe dollars or the Bolivar or the peso, that currency is going to go to zero.
So they can't do that.
And if they try to buy land with it, land's expensive to buy, and someone can take it from you.
And they can't necessarily buy the exact amount of gold.
And so how do you maintain your property rights?
And gold is like the Steinway Grand Piano solution.
It's a physical solution.
It was the best idea we had for 5,000 years.
And Bitcoin is the technical solution, dematerialized property that you can carry in the palm of your hand or put in your head.
And the advantage of dematerialized property is you can have any amount of that property and nobody can take it away from you.
If you want to give it to your grandson or granddaughter or you want to send it halfway around the world, you can do it.
You can't mail your ranch in California halfway around the world.
You can't move a building in Manhattan halfway around the world.
You can't move bars of gold around the world.
And so all the, you know, you can't move shares of stock.
And of course, there's 8 billion people on the planet.
Not many people can buy stock to save their life savings and preserve their wealth.
So Bitcoin running on a cheap smartphone is the most egalitarian idea we've come up with to allow everybody on Earth an instrument of economic empowerment.
So that's why it's important.
I mean, if you were rich and affluent, you could have a library, a piano, or a bar of gold.
But it's just not going to work for the middle class, and it's not going to work in the developing world.
Our best hope?
Is to dematerialize that virtual thing and put it on a digital network and deploy it to somebody's $50 Android phone.
So if I understand it, this is based upon people agreeing that Bitcoin matters.
Without that agreement, it's nothing.
Is that fair to say?
Yeah, you could think of it as like a monetary union or a savings alone in cyberspace.
And as people join it, right, they're joining a monetary network.
And the more people that join the network, the more powerful it gets.
But look, it's just like Facebook.
It's Facebook for money, except, you know, nobody ever joined Facebook with a billion friends.
It's like, you know, Google, YouTube wouldn't work either if nobody actually clicked on YouTube and WhatsApp wouldn't work if nobody actually used the network.
So it is a monetary network, not a social network and not a search network and not a video network.
But everybody needs a monetary network.
So I think we'll have 250 million people on this network by the end of this year.
And what you've got right now is...
Like, three million a week joining?
I mean, Coinbase is like, you know, Coinbase and Binance and PayPal and Square.
The most popular mobile apps that people are downloading right now are so they can get on the cryptocurrency network.
Is it taxable?
Bitcoin's property.
So...
The way to think of it is it's tax-like property.
If you buy it for $1,000 and it doubles in value, if you sell it, you'll owe capital gains tax.
And if you transfer it, you'll owe capital gains tax, just like if you bought a house or stock or any other asset.
So the right way to think of it is it's not currency.
It's not a cryptocurrency because currency isn't taxable when you transfer it.
It's a crypto asset.
It's like digital gold, and it is taxable when you transfer it.
So the right thing to do, of course, is don't ever transfer it and don't ever sell it.
Buy it because it's going up in value over time.
And if you ever need additional money, what you do is you finance it, like taking out a home equity loan.
You're better off to use it as collateral and borrow against it because then you don't pay capital gains tax and you don't incur income tax.
And you don't pay tax on the borrowings either.
The most tax-efficient thing to do is construct a very high-quality portfolio of assets and hold them forever.
Who came up with this idea?
So, Bitcoin was invented by Satoshi Nakamoto, and we don't actually know who Satoshi Nakamoto is.
We think it's one or more computer scientists who are experts in cryptography.
Coming out of the cyberpunk movement.
Satoshi worked on the project for about two years and then just disappeared, never to be heard from again, and gave this as a gift to humanity.
So it's thought of as the immaculate conception.
It's a big advantage for the network.
Because there is no founder and there is no founding company and all of the original coins mined by Satoshi have never moved the first million.
They were just used to start the network and the network decentralized ever since.
So it really is like money of the people.
It's like the only computer program in the world that we have that literally has no architect, founding company, or owner.
It really is just open source, owned by the world.
And somebody in China or Russia or Norway or California or Venezuela, they equally own it.
And they all have the same privileges, the same information.
Do you see this replacing currencies, including the dollar?
No, I don't think so.
It's called a cryptocurrency, so that confuses people a bit.
But if you think about money, money has a couple of aspects.
It's used as a medium of exchange.
It's used as a store of value.
It's used as a unit of account.
And if the money of the world was not inflationary, if, for example, there was a fixed number of U.S. dollars and nobody printed any more of them, then you could use the currency as a store of value as well as a medium of exchange.
That would be perfect money.
But we've never really had that, not since the gold standard, and we got off the gold standard in 1914. So in an inflationary environment, money decomposes into a currency and into an assets component.
The currency component is the U.S. dollar.
The U.S. dollar is the world's reserve currency.
All right, all right.
I don't know if you could stay on.
I hope you can.
I want to hear about your academy.
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