All Episodes
Previous Next
March 20, 2023 - Freedomain Radio - Stefan Molyneux
01:18:47
THE (NEW) TRUTH ABOUT BITCOIN!
| Copy link to current segment

Time Text
Hi everybody, this is Stefan Molyneux.
Hope you're doing well. So, boy, why should you even listen to me about Bitcoin?
Well, I run the world's largest and most popular philosophy show called Free Domain.
I first started talking about Bitcoin, oh gosh, it feels almost prehistoric now, in 2011.
I did one of the biggest presentations on the web about the truth about Bitcoin back in 2013, about a decade ago.
I've spoken at a bunch of Bitcoin conferences, and I've been into Austrian economics since I was a teenager or so, 40 years or so.
And I've got graduate degree or graduate school training in economics.
So I hope that you'll listen and I think I'm going to have something valuable to offer you.
And of course, the usual caveats at the beginning, none of this is investment advice.
Make your own choices. This is for informational purposes only.
So, gosh, the truth about Bitcoin, a 10-year update.
Well, of course, it's doing even better.
I thought it was going to be magnificent and it's doing even better than I thought.
And it's actually kind of funny because I wrote a book about a future society about a year and a half ago
Which had Bitcoin as its economic foundation and so people who read it
I hope that you looked into it. All right, so the truth about Bitcoin a 10-year update introduction
So what are we gonna do? Well, we're gonna talk about What Bitcoin is for and why it's important now comparing it
to gold real estate bonds and so on Of course, the what is Bitcoin, how does it work, and how is it enabled by modern technology?
How is it doing now compared to, say, 10 years ago?
Historical milestones and the evolution of Bitcoin are going to dip into that.
And the current, boy, feels even more current now, the current fiat and banking crisis and how it all relates.
And we're going to talk about the Lightning Network, which we'll get into why it's so important and what you need to know, and some technical future options for Bitcoin.
Where is it heading and what's going to happen?
All right, so let's get in there.
Why? Why Bitcoin? Why does it matter?
What's the purpose? Does it seem like voodoo to you?
I can completely understand that.
Okay. Fiat, not just an average car.
Fiat means by force, by government decree.
And fiat currencies, what do they do?
They go to zero.
And empires collapse and people flee the cities and they end up being eaten by wolves in the country.
It's very, very double plus ungood as a whole.
Fiat currencies go to zero.
And so the brief history, of course, is that gold and precious metals like silver and bronze and so on We're a currency, but they were heavy to lug around and they could be stolen.
So people started using paper in place of these, but they were supposed to represent actual gold.
And then they uncoupled, the government uncoupled gold from paper and began to just print paper.
Paper is not really worth that much.
You can see those billion dollars in barbway notes floating around and so on.
So fiat currencies, when governments gain control of currency, which they always want to do, and when governments then uncouple that currency from physical things like oil or silver or gold, they just print until the currency collapses.
So the trend is pretty clear.
Here's a graph. Where you can see the British pound per ounce of gold, the US dollar per ounce of gold, of course the Deutschmark followed by the Euro and the Yen.
And as you can see, this is all pretty brutal, how they lose value over time.
So this is of course from the post-war period, January 1946.
Some of these graphs are not as new as they should be, but I had to go with what's out there.
This is until the sort of mid-20-teens, January 2016 and so on.
And you can see, boom, as things crash, right?
So since the 15th century, a couple of hundred years, 609 fiat currencies have gone to zero.
Pretty much the only one that has lasted more than a couple of hundred years is the British pound.
And by lasting, it means it's lost like 98% of its value.
That's what they call success in the fiat world.
So what problem is Bitcoin trying to solve?
Well, I mean, they call it cold storage.
Cold storage is like a fridge. A fridge.
What was the point of a fridge? Well, your food goes off.
Your food decays, right? So you've got to have something.
You've got a freezer. You've got a fridge to keep it there.
So your currency is decaying.
Your money is decaying.
It is losing value. It is eroding.
It is having this slow theft of time and coercion called inflation.
It's just taking it away, taking it away, taking it away.
So what problem is Bitcoin trying to solve?
Sure, it wants to transmit value across...
Space, you know, from New York to Hong Kong and back again for a couple of pennies.
Sure, it wants to send it across space, but the most important thing that Bitcoin does is send stored value across time into the future.
Can it hold on to the value of your precious labor, the blood, sweat, toil, and tears of your entire life?
Can it hold on to it through time?
That's the big problem.
The crows of fiat currency are always pecking away at your stored value.
They're always grabbing it and taking it away and using it to buy votes and using it to prop up banks with bailouts and other companies and so on.
So what problem is Bitcoin trying to solve?
It's trying to find a way to keep your life secure.
Because your savings...
It's your life. It's what you have created that you didn't need to consume in the moment.
It is all the stored up value of your precious existence.
Can it be kept safe from the predations of fiat currency?
So that's what it's trying to solve.
So why? Why do these fiat currencies keep going to zero?
And again, we're talking 600 plus and these are just in the last couple of centuries, so...
Okay, it's kind of a funny thing, right?
Everybody knows this.
Everybody knows this and everybody ignores it.
Power corrupts. Absolute power tends to corrupt absolutely.
So power corrupts. Now, what's the biggest power in the world?
Ah, I think it's fairly safe to say that the creation of money is, if not the, one of the greatest corruptions or corruptors in the known universe.
I mean, just imagine what your life would be like if you had an edit button on your bank account.
Like, you log into your website, log into your bank account, and then there's an edit button, and you can type whatever you want into your own bank account.
You understand? It would drive you kind of crazy.
It would give you a power lust.
It would give you... Influence disproportionate to your actual labor and you would just type whatever you wanted into your account and should you ever run out you just type more.
Imagine how all of that would change your life, what unbelievable power it would give you.
So the ability to create money out of thin air is one of the greatest corruptions and corruptors in the known universe.
Another reason why these government currencies tend to go to zero is because when you create money, you know, money printer goes brrrr as the thing goes.
So when you create money, then eventually you end up with inflation.
But there's a lag. Now, of course, in the Austrian school, inflation actually means that inflation of the money supply, the price increases are low.
But we'll just use the standard parlance, right?
So when you print money, think you've got 10 oranges and $10, and everyone's trading the oranges for $10.
You've got 10 oranges, $10. Ah, then somebody doubles the money supply.
And now you have 10 oranges, but $20.
Well, each orange, instead of being a dollar, is going to become $2.
So that's what inflation is.
But there's a lag, right?
So you create the money in these sort of hidden Saruman vaults in the middle of nowhere.
You create all this money.
You hand it out to your good crony capitalist buddies.
And then, depending, 12 months, 14 months, 16 months, 18 months lag.
And then, after a while, the prices go up.
And it's kind of disconnected.
Not one person in 10,000 really understands how this works.
There's this disconnection. And so people don't see.
What they do is they go to the grocery store, they say, oh my gosh, the price of beef has gone up 20% and they get mad at the store owner.
They get mad at, quote, the free market.
It's nothing to do with that.
It's that the money supply has increased.
So people can blame companies, not government banking.
You have a scapegoat.
So in really pure totalitarian societies, like real central planning, government runs the whole economy, there's not that third party to blame, right?
If the prices go up, it's the fault of the government because the government runs everything.
When you have a fascistic system with private corporations, private profit, but public funding, public support, public bailouts, Then what happens is people have a scapegoat that they can get mad at called the local business owner rather than the government itself.
So governments kind of like that stuff, as you can imagine.
And of course, when you pump money into a system, it looks like the values of real estate and stocks and so on appears to rise.
You look at your portfolio like, wow, it's up!
Yay! That means good stuff.
Of course, the fact that prices are probably rising even faster is a little tougher to sort of see.
Central banks, of course, influence elections, right?
So if a central bank wants somebody out of power, they'll cut back the money supply.
If they want somebody in power, they'll increase the money supply, which is, you know, like...
Shot a heroin for an addict versus withdrawal.
So that influenced things as well.
Now, crony capitalists, the people real close to the central banks that create the money, they get the newly created money first at full value.
At full value.
Now, then what happens, though, is as they spend it, it devalues.
And by the time it gets to the bottom, to the poor, to the people on fixed incomes and so on, it's really been degraded.
So those closest to the center of power, the bullseye of economic destruction known as money creation, those at the very closest, the most powerful, the most connected, they get a massive subsidy and then everybody else gets it in the shorts.
It really is a brutally, brutally regressive tax because those with the least money and the least flexibility get the most devalued money and the highest prices.
It allows for governments to spend, of course, without directly raising taxes.
And so just being able to print money is the illusion that you're providing value rather than actually...
It's the same thing if a counterfeiter doesn't have to have a job.
He could just print money. I mean, he's preying upon the whole system, but...
So this is another problem.
It allows people to pass debt down generations.
And this is a huge problem, right?
So once you get a certain amount of wealth in society, which the free market tends to generate because it's a pure meritocracy and there are those magic Pareto principle people who just can produce Midas Touch incomes and companies and productivity and value and profits and so on.
When a society gets a certain amount of wealth, that wealth, when part of it, of course, is seized by the government, that wealth Can be used as collateral to borrow and pass the debt down a generation.
Pass the debt down the generation.
So you think of the people in the 1960s, right?
The boomers. And they were like, oh, yes, greatest generation plus boomers.
60s and 70s, they said, we want...
We want massive social programs and we want a massive charity overseas.
We want foreign aid.
The military-industrial complex is going full-tailed boogie and they didn't have their taxes raised to pay for all of that.
There was just a lot of debt. Of course, another common thing that happens is when public sector unions want more money, the politicians can say, oh, we'll just give you more retirement benefits and pass the buck down a generation.
So Fiat currency allows people to pass debt down generations.
It's kind of like a love test, and I think it's fairly safe to say, given the amount of worldwide debt we'll be talking about, we're a little bit short of love between the generations.
And what happens as well when the government can create money, as just about every government in the world can do at the moment, people become unused to sacrifice.
And so it feels like, oh, your future is being robbed and money becomes like air.
Like the only reason you'd want to deprive someone of air is because you hate them.
And it's the only reason you'd not want to fund this program or give money to this group or overseas.
It's because you hate people.
It becomes disconnected from productivity because it's just made up numbers.
So the people become...
Entitled, they become aggressive and they become utterly unused to sacrifices.
They become really like spoiled children whose parents set no limits and so they react with rage and often violence, aggression and so on.
When any limitation is imposed upon them, it's really, really unhealthy mentally, right?
So, yeah, rage continually erupts towards anybody who says we need to have some restraints going on in France at the moment.
I'm trying not to date this too much, but, you know, it's impossible to miss that for me.
So, virtue, right?
Oh, we want to help the poor.
We want to help people overseas.
We want to help just everyone and free health care and free dental care.
Virtue becomes easy because you don't have to make any sacrifices.
You don't have to give up any of your own income.
You can just yell at politicians to print money.
And so virtue becomes easy and addictive and the high of virtue is one of the greatest highs in the known universe and anybody who then starts to counsel restraint, people who are addicts when they don't get their drug of choice in this case, you know the virtue signal and so on, they get aggressive and violent.
And it's this illusion of unreality, right?
So I mean two fundamental laws or rules of economics, right?
Number one is that all human desires are infinite and all resources are finite.
That's sort of number one.
Number two, of course, is that people respond to incentives.
But if you take away this reality that resources are finite, people kind of lose their minds.
A lot of mental health issues are driven by this Lack of limitations, right?
Mental health is about balancing your limitations and realizing that there are almost no solutions in life.
There are only trade-offs.
But when you don't have limitations, what would happen to your work ethic if you could type whatever you wanted into your own bank account?
It would be pretty terrible.
So this is one of the reasons why, or some of the reasons, why this stuff tends to go to zero as a whole.
All right. So, governments, print money, and this doesn't have to be paper money.
I did a famous presentation on the fall of Rome, and of course the sylvia denarius was heavily diluted.
They just threw a bunch of junk metals in there and all of that.
Or they started shaving off the edges.
This is one of the reasons why there used to be grooves, little grooves around to see if it had been shaved off and so on.
Some people would just take the gold coins, shake them in a sack, and then get the shavings at the bottom of the sack and try and make new stuff.
So, government currency tends to go to zero.
So, what do you do?
What do you do to protect your life?
If your time and stored capital is your time, it is your life.
And if your stored capital is devalued through inflation, through money printing, I mean, you're enslaved retroactively.
And so what do you do to hang on to your life, to the value of what you have created?
Now, there's a couple of places, and we'll look into how they've been doing.
So there are a couple of places that you can put it.
So, of course, gold is a traditional safe haven, and gold has a certain kind of stability over time.
Gold and silver. So traditionally, a really good suit is about an ounce of gold, and a good steak dinner is about an ounce of silver.
And that's been fairly true throughout most of human history.
And here we can see we've got gold versus CPI and CPI adjusted gold, right?
So consumer price index. What can your gold buy?
Now, we got 1720 to 2020, right?
So that's a good couple of hundred years, right?
A good 300 years, and as you can see, of course there's ups and downs, no question, right?
But it's relatively stable.
And I'll sort of give you a historical example of where instability can just wreck society.
So of course when Spain discovered the new world and went and pillaged all of the gold
from the Mayans and the Incans and so on and brought all of that gold into Spain, it drove
massive inflation because it wasn't like Spain had just become more productive but there
was just more gold, right?
More dollars facing fewer oranges, so to speak.
So you got massive inflation and a lot of the smartest people, I mean the smartest people
flee inflation for sure, right?
And so the artisans, the bankers, the intellectuals, and so on, they left.
And Spain, as a result, went into a recession-slash-depression, which lasted, I'm not kidding about this as well, it lasted 400 years.
So yes, it can be pretty bad.
So here's the thing though.
So you can maintain some of your value through gold.
Gold can be relatively stable for sure.
There are negatives to gold, of course, which we can touch on very – let's touch on it briefly here.
So negatives of gold, it's expensive to store.
It can, of course, be stolen.
You can't travel with it.
You can't usually take it across borders very easily.
And so there – and it's relatively easy to grab a hold off of governments, confiscate gold like all the time throughout history.
And it is subject to manipulation from governments, right?
So the U.S. mint gold bullion sales went up 700% in 2021.
And so when the governments sell gold...
Then it keeps the alarm signal of too much money being printed, which is when gold prices go up.
So it can be manipulated in a way that Bitcoin is almost impossible to do.
Again, government could seize a bunch of Bitcoin from criminals and so on, but in general, it's very, very hard to do.
So gold, yes, you can hang on to it, but it's subject to government fiat, subject to government confiscation, and very hard to travel with, very expensive to store, subject to theft, and so on.
You can't obviously really buy a cup of coffee with gold shaving and it's tough to pay overseas and so on, right?
So this is...
It can retain value, but there are issues to it as well.
And it doesn't tend to make money as a whole.
I mean... You can end up with a higher price for gold, but as you can see here, you know, 300 years ago, CPI-adjusted gold was about $2,000.
Now, it's about $2,000.
And again, some of these ups and downs are to do with government stuff, like, you know, wars and so on.
I mean, you can see, of course, the 1920, you got a low, and you got wars, 1780, of course, with America.
And so... It can retain value, but it doesn't make money and it's easy to seize.
So there's some challenges. I had a whole debate with Peter Schiff about gold versus Bitcoin many years ago, so I'll put a link to that below.
All right. Okay, so 650 years of gold values, right?
Again, just touch on this real briefly here.
Real price of gold, $2,000.
It's a little bit lower now.
And as you can see, of course, in the discovery of the new world, and this is one of the problems.
If there's some massive gold deposit that is discovered, then the price of gold is going to collapse.
So, these are challenges.
Oh yeah, and of course, you know, who's going to know when you can mine the first asteroid for gold, what's going to happen to all of your gold holdings, right?
I don't know a huge amount about asteroid mining, but I can tell you one thing.
One thing for absolute certain, absolute sure, there are no bitcoins out there in the asteroid belt between Mars and Jupiter.
Zero, zero bitcoins will be out there.
Whereas, of course, there could be trillions of dollars worth of gold that you bring back and, you know, that's it for gold as a store of value, right?
U.S. dollar purchasing power by gold.
So this is how much gold can you buy with a thousand dollars?
So again, this is like, look at how stable it was.
Look at how stable it was before central banking, right?
So central banking comes in the early 20th century, in America in particular.
1933, U.S. government gold confiscation, and that was under FDR. 1971, under Nixon, the U.S. government closed the gold standard, so you could no longer redeem anything for gold.
And boom, right?
So... But look how stable it used to be.
And so this is always the pattern.
Always the pattern. Can't be escaped.
Well, until and except now.
So some people say, okay, well, forget gold.
Real estate. Let's go with real estate.
Okay, there's value in that.
And of course, immigration has driven up the value of real estate.
So quite a bit.
And restrictions on building new stuff has done that as well.
So let's look at a traditional value store called U.S. real estate.
And so this is just one year.
Again, you can do longer.
I'm just talking about sort of what's happening at the moment.
So, growth of a hypothetical $10,000 iShares US real estate ETF, right?
So, that's just a big financial instrument reflecting real estate values.
Again, it's not perfect. It's not...
Obviously, there's no perfection in these kinds of economic numbers, but...
And also we've included Dow Jones U.S. real estate capped index.
So $10,000 a year ago is about $8,000 now.
So that's not great.
You're losing 20% in a year, not even counting inflation, could be down by close to a third or something like that, depending on how we get to some of the measurements of inflation as we go forward.
So gold, challenging.
Real estate, challenging.
And of course, 07, 08.
You know, there's a lot of government manipulation of the real estate market, which I've talked about before.
So there's your challenge, right?
We want something that's kind of beyond the realm of human corruption.
And that's exactly what Bitcoin is designed to be.
It's something that is not subject to human integrity.
Because trying to be subject to human integrity is like coming to me for Mohawk advice.
It's just incompatible.
So... Traditional value stores, U.S. bonds, right?
So U.S. bonds, let's look at how they've been doing over three years.
Okay, so we've got some rising in value.
And, you know, a little under 1% to a little over 4%.
Dipped down over the last little while to 3.5%.
This apparently is a massive crisis, of course.
So bonds have been fairly safe and people have gone into that.
And then if you just look at this, again, this is real zoomed in, so forgive me for that, but I just sort of want to point out, not that this March 9th to 19th is super important, but rather that look how sensitive the system is to loss.
Look at how much people have been relying, banks have been relying on just bond prices going up and up and up.
Bond prices take a dip and banks get wiped out.
So... That's tough as well.
Of course, bonds is, you know, often the government says, I know there are private bonds, but government bonds, they say, give me money now and I'll give you more money later.
Okay, well, government's not like investing and creating things, so how are they going to give you more money later?
Well, they're going to raise taxes.
It's not a particularly sustainable system in the long run.
All right, let's get to U.S. bonds versus inflation.
So, again, this is quite the squiggle graph, but I'll just break it down real quick.
The important line, there's a great website called ShadowStats, which calculates inflation as if it was still being calculated the way it was in the 90s or even the 80s and tries to get it.
Because, you know, when inflation gets too high, they just change the calculation so that it looks lower, right?
So, the bottom green line...
That's the real interest rate.
So U.S. bonds versus inflation.
Their argument, and again, I'm just the messenger here.
This is just other people's thoughts, not financial advice.
But their argument is that it's really been since the 90s.
You really haven't made money off U.S. bonds.
And again, they're better than just having your money in the bank because that's just pure inflation skim, but that's their argument.
So, they haven't really been profitable since about 1994.
So, again, is that your place to go?
Hmm. World public debt.
This, again, is a couple of years old.
And some of the numbers here, they're a little bit of, you know, a doctor with a flashlight tells you where these estimates come from.
But global public debt, right?
So, government debt, $61 trillion.
And... Public debt per person, $50,000.
That's just in Canada, $50,000.
Now, that's per person, not per taxpayer.
Per taxpayer, double or 1.5 times that, depending on how you count it, even if you count all the government workers as massively productive taxpayers, which may or may not be the case.
And so, yes, a couple of years old, but that's...
Where this is, US Federal Reserve is the single largest holder of US government debt.
I mean, this is a couple of years old.
So, the Fed owns about, at least it used to own about one-fifth of all US debt.
As of 2021, The true U.S. national debt, including unfunded liabilities, is way north of $123 trillion.
I've heard estimates as high as $180 trillion, which is $800,000 to well over a million dollars per taxpayer.
So it's just deferred future savings, right?
When you go into debt, you just are saying, well, I have to save money later.
So this is the high and then the crash, right?
Alright, let's move on.
So world debt as of 2022, this is public and private, 23% private household debt.
It's US $305 trillion.
38% private debt of non-financial corporations.
39% public debt owed by governments and government institutions.
And of course, this is how people have been surviving.
Inflation is just going into debt.
Not very sustainable. In 2020, the growth rate of this debt was 28% in a year.
There is more debt in the world than there is money in circulation.
Ratio of debt to GDP is another good measure.
It goes from roughly 1.5 in Latvia to 5.0 in Luxembourg.
Debt to GDP is, you know, if you have a GDP of $10 trillion and you have $15 trillion in debt, that's 1.5 debt to GDP. So the world total is 3.5.
Which means the world owes three and a half more times than it makes in an entire year.
Now, that's, you know, that sounds catastrophic.
It's not necessarily. If you've ever had a mortgage, then you owe maybe $500,000 on a house.
Maybe you make $50,000 a year or $100,000 a year.
So, you know, that's a 10 or 5 to 1.
Not necessarily the end of the world, but when it's heading in the wrong direction at all times, it looks that way for sure, right?
Yeah. In 2019, the world's debt exceeded $86,000 in per capita terms, which is more than two and a half times the average income per capita.
I had some suspicion about these numbers.
It does come from IMF. I'll put the links in the show notes.
Seems a little high to me, but...
Because the last I heard was like 20 grand and change.
So it could be too high. This, of course, is prior to COVID. So, of course, it's much worse now, right?
So, yeah, why is there more debt in the world than there is money in circulation?
So, of course, when a bank issues a loan, it creates credit money and debt at the same time.
So the total debt and the total money in circulation are both increased by the same amount.
That's the principle of the loan, right?
So... By the time the loan has to be paid back, the debt has been increased by the compound interest while the credit money has not been increased.
So most of the excess debt originates from compound interest of bank credit.
It's a bit head-turny, a bit head-twisty, but important to understand.
And the most indebted economies in the world are also the richer ones.
And that's important, right?
And the top three borrowers in the world are the United States, China, and Japan.
And that's half of global debt.
So... So, the US Fed funds rate is the highest now since 2007.
Of course, 2007 was pretty thermonuclear for the economies of the world as a whole.
So, of course, throughout COVID, the interest rates were kept very, very low, like effectively zero or just above zero.
And then, of course, they've had to go up.
And so this is the weakness that is occurring now.
At the moment, you know, trying to make economic predictions and manage your money and protect your savings and so on in a heavily government-involved economy is like trying to play basketball when people keep dialing up and down the gravity.
It just is very hard to predict anything.
Or like trying to play chess when people can just keep changing the rules.
So, I mean, people get mad at the banks.
Oh, why didn't they do this? And why didn't they do that?
It's like, well, you know, we're all just going back and forth.
You know, there's an old movie, Airplane, where...
There's a group of people in the airport just running from one gate to another because the announcement is, you know, the flight to New York is now leaving from gate 11.
So everyone runs towards gate 11 and then like a minute or two later, it's like, oh, the flight from New York is now leaving from gate 33.
So everyone's like, oh, you know, so the rules keep changing and everyone's just running around.
And of course, the purpose of Bitcoin explicitly, it's not even, this is Satoshi Nakamoto's idea.
The purpose is to take human...
Power and corruption out of the equation of the economy so you can actually finally get to hang on to the life that you've lived and the savings that you've generated, right?
So the US Central Bank has raised interest rates 4.5 percentage points since March 2022.
That's the fastest rise since the 1980s.
And I was trying to just think about this the other day.
So, gosh, what is it now for me?
So I first became aware of economic problems in the 1970s.
I was in boarding school and there were shortages of everything, especially meat and water.
And the place was freezing because coal was very expensive because the unions were all on strike.
So I remember those being... The 80s were insane.
I remember asking my mother...
Oh, I hear that's a recession.
Why doesn't it feel like a recession?
And she said, well, that's because I just happen to still have my job.
Then in the 90s, I couldn't get a job.
And then I started a software company and then happened to sell it right before the tech crash.
In early 2000 and so on.
And then there was 2007, 2008.
And then there was COVID. And it gets just absolutely mental.
And so hard to keep any kind of consistency.
And again, this is all the business case and human soul case for something like Bitcoin.
Traditional value stores, so real inflation rate, right?
Real inflation. Annual inflation rates 2013 to 2023.
And as you can see, of course, the inflation went through the roof in 2021.
I would imagine, I mean, who knows what the real reason is, but Austrian economics would say because of the amount of money creation under Trump, to be fair, who was not exactly a free market guy, under Trump and particularly during the course of COVID and the pandemic and so on, interest rates, inflation rates went up, therefore interest had to follow on actually to exceed the And so, let's just take 2021.
7% inflation.
Okay, so it's 7% inflation.
You lose half your money in just over 9 years.
You lose half your money in just over 9 years, right?
So it takes your life to save a million dollars.
It's 7% inflation.
You've just lost half your life in nine years.
It's absolutely brutal.
And this is 1980-based data, right?
So the CPI... This is from ShadowStats.com.
So the CPI... It's the red line, and the blue line is if the numbers were still calculated in the way they did it in 1980.
And, of course, here we can see that we're talking, you know, 15, 16, maybe 17 and change percent.
That is wild, right?
And I think a lot, I mean, if you go to the grocery store, I think this is what a lot of people are actually experiencing.
Annual US money supply growth shadow stats continuation.
M3 official was kind of ditched around 2006, but if you look at, of course, starting in 2020, the M1. So the M1 is currency, demand deposits, other liquid deposits, include saving deposits.
It's the most liquid and accessible portions of the money supply, currency, and assets that either are or can be quickly converted to cash.
So M2 and M3 are near money or near near money, stuff that's kind of locked up that you can't just snap your fingers and turn into cash.
So you can see that the M1 just goes through the roof.
And in many ways, you can look at COVID and the lockdowns and so on as fiat currency events, because people got money for staying home and money.
The medical response was funded by the government rather than the cheapest and most effective solution pursued by the free market and so on.
So all of this is around COVID and it's not a result of COVID. It's one of the reasons why COVID was handled the way that it was.
Just a note here, May 2020, the definition of M1 changed to include savings accounts given the increased liquidity of such accounts.
There's a little mention there. Okay.
Okay. So that's...
Your money is being hunted.
Your money is being hunted by politics.
Your money is being hunted by the greed of taxpayers.
Your money is being hunted and eroded by time.
Father time is just wading through your savings and your life with a scythe and a flamethrower and it's just messing up everything that you've worked hard to retain.
So... Let's go all the way back to Aristotle.
I got a whole presentation on the philosophy of Aristotle, right?
So Aristotle said money is a kind of commodity that fulfills three functions, right?
Look at this relative to Bitcoin.
A medium of exchange, yeah?
A unit of account, what you own, and a store of value.
This is what it's always had to be.
Three characteristics of a good form of money.
Think of this relative to Bitcoin, which we'll get to in a sec.
Durable. Must not fade, corrode or change through time.
So one of the amazing things about social media and everyone having a cell phone these days is not just because nobody could seem to find a high definition version of a UFO, but also...
When people look at the craziness of the current time, it won't be in weird stop-motion, faded, shot through a brand muffin kind of orange film.
It'll be like vivid, like they're right there.
People from the past will be right there in front of you with good audio, you know, crisp, 60 frames a second, 4K video, and it won't feel distant, and everything's being recorded.
So digital stuff doesn't fade.
I look at pictures of my childhood.
It looks like they're on the other side of an old fish tank.
But, you know, your childhood for you younger or your kid's childhood is going to be like clear, clear, clear for generations forever, right?
So, electronic stuff doesn't fade, corrode or change through time.
Of course, that's Bitcoin. Portable.
Good money needs to hold up and hold a high amount of value relative to its weight and size.
Well, of course, you got your seed phrase in your mind for Bitcoin.
You can go anywhere in the world and access your Bitcoin.
So, yes. Divisible.
Money should be relatively easy to separate and recombine without affecting its fundamental characteristics.
An extension of this idea, the item should be fungible, freely exchangeable or replaceable in whole or in part for another of like nature or kind, right?
So if you saw a diamond in half, it's not worth, a $10,000 diamond sawn in half is not, each size is not worth $5,000, right?
So whereas gold, you can cut it, you can recombine it and so on.
It's like that Terminator in T2. Oh, sorry, there's a reference you can go ask your dad maybe.
Okay. And intrinsically valuable, this value of money should be independent of any other object and contained in the money itself, starting with rarity.
So gold, of course, has value even when it's not used as a medium of exchange or a unit of account or a store of value.
Because, I mean, especially now, before you could just use it for jewelry really and so on.
Now, of course, in electronics and all this kind of stuff.
So it has to have intrinsic value.
So, being immune to predation, being immune to corruption, and being immune to the ravages of inflation, because it can't just be created on a whim, and it can't be found necessarily quite easily.
It can be, of course, created over time.
There'll only ever be 21 million people.
But is it intrinsically valuable?
Well no, of course a Bitcoin is not intrinsically value in and of itself
but the elimination of human corruption and the elimination of the creation of money at whim
that makes it intrinsically valuable.
So, moving on up...
Okay, we are there.
Bitcoin, what have we got here?
Okay, so Bitcoin is the world's first and most successful decentralized currency.
Its anonymous creator, Satoshi Nakamoto, called it peer-to-peer digital cash, although it is widely held by the community to be a digital store of value.
It was created earlier, but first disseminated in 2009.
So, Satoshi was horrified at the 07-08 financial crisis, and in particular the resulting bailouts, which were only possible because of government-controlled central banking.
So, the separation, like one of the big advantages in the modern world, in many countries, is the separation of church and state.
So, when the state runs the religion, then every religious group wants to gain control of the state to impose its view of religion on others and then ban the other views of religion.
Separation Of church and state foundational to sort of modern liberties.
Separation of state and economics is equally necessary and will be the next great leap forward, right?
You had end of slavery, beginning of free speech, rights for women.
You had separation of church and state, sort of big things that moved humankind forward.
Separation of state and economics, absolutely essential.
So he was appalled.
You can't do bailouts with Bitcoin because you cannot create Bitcoin out of nothing.
You cannot create Bitcoin out of nothing.
There's no edit button, right?
There's no edit button. And of course, if you don't control your money, you don't control your life.
You can't control your life because you work hard, you get up early, you put in your eight hours, you put in your commute, you don't buy trinkets, you save, and then that money just gets...
The crows just come and feast upon it, and it just gets taken away.
It's... Ghosts.
It's like if you have stuff in your house that ghosts can come in and take at any time and regularly do, well, that's inflation.
It's just spectral stealing of your substantive life.
So Bitcoin was and still might be the investment opportunity of a generation.
And again... Make your own decisions.
This is my particular opinion.
I'm not telling you what to do, buy, what not to buy, or anything like that.
But in my view, Bitcoin was and still might be the investment opportunity of a generation.
I've said this for many, many years.
I pegged Bitcoin in my brain at about 750k US. There's a 21 million hard limit on issuance.
So this is why Bitcoin tends to gain in value.
If the economy grows but the currency doesn't, Then the currency grows in value.
If the economy grows but the currency doesn't, or is very limited in its growth, Or just if the economy grows by 6% and the currency only grows by 3%, then your currency has just gone up 3%, right, to get to the 6%.
Again, you know, there's arguments back and forth and so on, but...
Yeah, 21 million, hard limit on issuance, and it's not centralized, right?
It's peer-to-peer. It's not centralized.
You can't turn it off.
There's no central actor.
You can't be deplatformed.
You can't be kicked out of the...
A financial system, you can't be debanked.
None of that stuff can happen in Bitcoin.
Like, it cannot happen in Bitcoin, right?
Because if you have the power to de-platform people from the economic system, that gives you too much power for a human being to handle, and your conscience will blow like those pennies that we used to put in our fuse box when I was a kid.
Bitcoin is free open-source software, or FOSS. This allows anyone anywhere to audit everything it does.
There's no black box.
There's no big mystery, right?
It is a record of provably valid transactions which requires no central authority.
No, it can't be turned off.
You can participate or not, but it can't be turned off.
Like, you can drive on the road or not, but there's no switch to turn off the road that you have.
So, that's really important.
Bitcoin is divisible up to eight decimal places, right?
It's fungible, so you do not need to purchase or transact in whole bitcoins, obviously.
You can use denominations from satoshis or sats, the smallest unit of bitcoin, on up, right?
Stack sats and stay humble is sort of the phrase.
So, now, of course, the government has something called CBDC, Central Banking Digital Currencies.
They want that kind of stuff, but that's all centralized.
It's going to be used, of course, to control people, to punish people for wrong thinking, all that kind of stuff.
So, the decentralized is really the issue.
And... So Satoshi, wherever he is, whoever he is, saw the corruption that happens.
And of course, when you are immune from the consequences of your own bad decisions, you tend to make more and more bad decisions until the system collapses.
So, how does it work?
Now, I'm going to...
I'll give you an analogy here.
Now, analogies are dicey, but, you know, I like to write fiction as well.
So let me play in my brain space here.
So Bitcoin is made possible via the cryptography branch of mathematics.
So cryptography allows the creation of private secret keys that cannot feasibly be broken.
So having this key, knowing this key, allows you and me to own Bitcoin.
And if you secure your Bitcoin, you don't share your secret, then nobody can take your Bitcoin.
This is the challenge. People want to put their Bitcoins on exchanges to more easily buy and sell stuff.
Understandable. But once the Bitcoin is on a centralized exchange, then people have to be able to transact on your behalf, which means you don't have direct control over your Bitcoin anymore.
And this is one of the problems that happens with these centralized exchanges.
I get that it's easier.
To transact and buy and sell and trade and so on.
But the whole point of Bitcoin is to be decentralized.
And when you put it on a centralized platform, you're putting yourself at risk.
So you've got your private key.
That's your proof of ownership.
You've got a public address that's for receiving value and is designed to be shared.
And if you find this stuff helpful, if you find what I'm doing useful...
I do, of course, take donations.
There's no ads on this, right?
I'm not taking any sponsors. I'm not taking any ads.
All dependent upon donations.
So if you could help out, I would appreciate it.
The links are below. So, digital signatures allow us to prove that we control access to stored value, the bitcoins.
And we can transfer or spend that value without any third parties.
An individual can have an unlimited number of these secrets, often referred to as addresses or wallets or accounts.
And you can...
That's called cold storage when you write down your seed phrase and you throw it in a vault or, I don't know, whatever, memorize it and then eat it on rice paper or get it tattooed in some unholy place on your body.
So you can have it completely inaccessible to anyone and just have it in your head or in some piece of paper that you have controlled over.
And so... I mean, was it just last weekend when the bank runs started and before it looked like there's just going to be bailouts from infinity, which again is, to my mind, my opinion, going to drive up the value of Bitcoin because it's more money and the same number of Bitcoin or very few more.
Was it last weekend like a million new Bitcoin addresses were created just to receive, right?
So when we send Bitcoin from one address to another, we digitally sign the transaction with our secret key.
Now, we don't reveal the secret key, but that's how it's signed and that's how it's known.
And this is part of how the network knows it is a legitimate transaction.
Once signed, it is transmitted to the network.
And the network is anybody who's got a node.
Anybody who's running this stuff, right?
It's transmitted to the network where it is validated in what is called the mempool.
Unlike Twitter, which is the meme pool.
It's the mempool.
So, yeah, the decentralized thing is really, really important.
So, a way that you can understand it, and it's called the Byzantine generals problem.
So, you're surrounding a city.
We'll call it... BitTown.
You've got a BitTown. So you're surrounding BitTown and you want to take BitTown.
It's part of the war. You want to take BitTown.
And so you've got a bunch of other generals.
You're a general. You've got a bunch of other generals.
And everybody needs to attack at the same time using the same methodology.
And how are you going to coordinate with that?
How are you going to coordinate with your other generals to make sure that you take the town?
You say, ah, well, you know, I... Maybe I'll use smoke signals.
It's like, well, yes, but your enemy knows you use smoke signals.
Probably do. And so they'll put up their own smoke signals to confuse things.
Ah, well, I'll rely on spies and messengers.
Ah, yes, but what if those messengers are caught and then bribed or threatened to change their story and have different orders go out?
Or what if they just happen to be traitors who come from the end, right?
So you have all of this.
How do you take Bithtown...
If you can't coordinate, right?
So this Bitcoin is specifically designed to solve all of that and it does not need a third party.
It is all happening through the software, through cryptography and through these keys.
So yeah, the code is fully and totally auditable to make sure that there's no hinky stuff in there.
And of course, it's a moral mission.
You understand that. Like, Bitcoin is not like a get-rich-quick scheme.
I mean, it can be, I suppose.
But Bitcoin is a moral mission to take the world and civilizational-destroying power of money creation away.
Out of the hands of inevitably fallible human beings.
Like people with the very best of intentions.
A lot of people go into central banking with the very best of intentions.
But when the incentives are so bad and the fact that power corrupts everyone, you just can't get a good outcome.
Like, under communism, sure, there were some workers who worked really, really hard.
You know, the boxer horses of Animal Farm from George Orwell.
There are people who, but the incentives as a whole mean that that's very much the exception rather than rule.
And, you know, as they say, used to say in Soviet Russia, oh, I know so many Soviet jokes, it's crazy, right?
But they pretend to pay us and we pretend to work.
Should I indulge myself? A little Soviet boy asked, hey, what do you want to be when you grow up?
Thank you.
he's just making all the other workers look bad. One man showed up late to work
and then he was yelled at because he was putting too much burden on the other
workers and one man showed up to time on time at the Soviet factory and he was
thrown in a gulag because clearly he must have owned a foreign watch.
So when you have these transactions flowing across the network,
the validators of the network, these are called miners,
compete to take bundles of these transactions called blocks and validate
them to prove that they were sent in a valid way, that they're going to a
valid address and so on.
Bye.
Bye.
Newly validated blocks are transmitted to the rest of the network.
Their work is checked. The new block is added to the previous blocks called the chain.
And the miner is rewarded in newly minted Bitcoin as well as network fees.
So you can, of course, you can create new Bitcoin.
It started with none and it ends at 21 million.
But Bitcoin requires electricity and processing power to be created.
And I know there's energy issues and so on.
Yeah. Okay, so...
We've eaten, what, two and a half earths through debt, right?
So debt through central banking.
Think of how much of nature's scarce and precious resources are eaten up by excess money.
And when you print more money, you hand out more money, people use that money to buy stuff.
They consume stuff, which otherwise they wouldn't consume.
So the idea that, oh boy, the electricity that Bitcoin uses is just really bad.
Hey, you know what? You can't have an offensive war with Bitcoin.
You can have a defensive war, because people will give up Bitcoin to protect their region, but you go to everyone and say, oh, I want to go invade XYZ country on the other side of the world.
You need central banking for that.
Or huge taxation which people rarely submit to.
So this is why the gold standard was largely destroyed in World War I because if countries had been restrained by the gold standard, World War I would have lasted like one-eighth as long and a million people would have died instead of 10 million and Western civilization wouldn't have taken its body blow from which it barely ever recovered.
So... You know, war is pretty bad for the environment, pretty huge waste of electricity.
The army's purpose is to kill people and break things.
So they all have to, you know, you have to get new people and you've got to repair the things that are broken or rebuild things that are shattered.
So the idea that Bitcoin energy consumption compared to the energy consumption of fiat currency and war and debt and all of that, I don't know.
It's a little precious, to put it mildly.
So in 2013, when I did my first real major Bitcoin presentation, the market cap, our Bitcoin was about 1,770 bricks of gold.
Should have been 1776, but 1770.
Today, March 19th, 2023, the market cap is about 665,000 bricks of gold.
So, well, that's a big change.
That's a big, that is a big change.
Of course, people do complain.
Oh, it's so volatile. It's so volatile.
It's like, hmm, not really.
Not really. So Bitcoin, as a hedge against inflation, when inflation is low, the value of Bitcoin goes down.
When inflation goes up, as you can see right now, the value of Bitcoin goes up.
So, it's not unstable.
It's in an unstable environment, right?
So, if you see a video of a guy just staggering all over the place and the ground is perfectly flat and still, you see a guy staggering, oh, he must be drunk or having some sort of seizure or something like that.
And... We can criticize him or whatever, judge him for that.
But if he's in the middle of some incredibly violent earthquake, he's not drunk, he's not dizzy, he's not unbalanced.
He's just trying to navigate this crazy, unstable environment that he's in.
So complaining that Bitcoin...
Is unstable? No.
Bitcoin is a ninja trying to survive the grasping hands of time to steal its value through inflation.
So there's a lot of nimbleness.
There's a lot of ups and downs because the levers of gravity, in a sense, are being manipulated wildly.
The entire physics of the economy is being manipulated wildly.
In 2013, a barrel of oil would have cost you a little less than a whole Bitcoin.
Today, you can get 351 barrels of oil for one Bitcoin.
2013, there are about 50,000 transactions a day.
Today, there are roughly 300,000 transactions per day.
This doesn't count the Lightning Network, which we'll get into in a second.
It's real tough to count the transactions in the Lightning Network, but there are a lot because they're off-chain, they're more private and so on, right?
In early 2018, there were about 3 Bitcoins worth of value on the Lightning Network.
Today, there are about 5,500 Bitcoins, a couple of million dollars, I guess.
So, 5,500 Bitcoins staked on the Lightning Network for brief and peer-to-peer transactions.
So fees, I'm not super happy with the fees, but what the heck, right?
Fees in 2013 to send was less than a penny.
It's about $1.60 today.
And again, not counting the Lightning Network, which is virtually free.
So again, if you're sending a million dollars, $1.60 is pretty good.
If you want to buy a dollar coffee, $1.60 not so good.
There are now over 200 million Bitcoin wallets.
Since 2013, the concentration of Bitcoin by a small percentage of whales has trended downward.
So this is whole cute terminology like whales and sharks and all of that.
So it is disseminating out and the ownership, I mean, Satoshi Nakamoto, I think, is still the biggest owner.
Of course, as you'd imagine, he created it.
But nobody's heard from the guy and nothing's been touched in like forever and a day.
So he went dark and maybe dead or whatever a long time ago.
So it is disseminating.
It is decentralizing. It is becoming less aristocratic.
So I think that's a good thing.
And people say, oh, what do you use Bitcoin for?
Okay, I'm going to do a whole separate presentation on objections.
And listen, I respect the objections.
I think the objections are great.
They need to be asked. That's how the technology improves.
But there are a lot of global use cases for Bitcoin.
So, of course, remittances, payments as a store of value to hide it from the eye-pecking crows of inflationary tendencies.
Some nation states will allow it as legal tender, decentralized finance, and as a means of survival.
Fiat inflation, like the Venezuelan Bolivar, you just kind of need that stuff as a whole.
El Salvador is working with it.
There's African nations that are working with it.
And again, you get a cell phone and you can start to do transactions around the world in ways that are pretty much impossible with fiat.
Institutional investors, that's been the big thing over the last couple of years, institutional investors have entered the fray, which it increases fluctuations in some ways, but it puts a fairly good bottom to it.
And of course, since 2013, the legal and tax situation for Bitcoin has become much, much clearer.
Of course, it's not done. It's a sabotage slash, sorry, work in progress, work in progress.
So, historical milestones, what's been going on?
Okay. 2016, there was a scaling conflict within the Bitcoin community regarding the need to accommodate more transactions.
The community could increase the size of each block or defer smaller, more frequent transactions to a second layer of the network, the Lightning Network.
So the more blocks, the more transactions.
But the more blocks and more transactions, the more transactions in each larger block The tougher it is to keep decentralized.
This is the big balance, right?
So Visa, of course, can do 2,000, 3,000, and even theoretically 10 times that amount of transactions per second, right?
Bitcoin, not so much.
We'll get to that in a bit more detail.
But you can do more transactions, but that means the blocks have to be larger and then they're tougher to disseminate.
They're tougher to sort of get out and get decentralized.
So this is the... Do we want to keep the money part of Bitcoin separate from the transaction part of Bitcoin?
And this is a bit odd, right? So, okay, well, we'll get to that when we get to Visa, right?
So there's money, and then there's transactions, right?
So Visa runs transactions, but it doesn't run the money.
It doesn't run the currency. It doesn't run the supply.
So is this the foundation?
Is the money, Bitcoin, and then the transactions on a second layer of the network, and the Lightning Network is M1? And there's more than one, and there will probably end up being more than one.
So in 2016, ultimately those who wanted a smaller block size, or at least didn't want to increase it, won the debate, and this is what Bitcoin has evolved into.
In December of 2020, the market valuation of Bitcoin surpassed that of Visa, and there have been times, of course, where Bitcoin is doing more transaction value than Visa.
Of course, not individual, but as a whole.
7th September 2021, El Salvador became the first nation to officially accept Bitcoin as legal tender.
April 2022, the Central African Republic became the second nation to adopt Bitcoin as legal tender.
November the 14th, 2021, the Taproot update was activated.
On top of improving privacy and efficiency of the network, Taproot has extended the possibility for smart contracting and various other uses for the chain.
So back in 2013, I'll put the link to the original presentation below.
Back in 2013, I was like, oh, it's going to be all this smart contracting stuff.
It's amazing, you know, you can program Bitcoin and the blockchain so that when you're...
Obituary shows up in a newspaper, then your funds can be released according to the will that you programmed into the blockchain, like all kinds of cool stuff.
And then that stuff kind of fell by the wayside as things evolved, and it seems to be coming back.
So like most things, I was just a smidge early.
So yeah, that happens.
And it's very democratic, right?
So if people don't want where Bitcoin is going, they won't update their clients, they won't take the new programming, they won't take the new software, and so...
Now, I just want to sort of mention this.
I am as neutral as Mall Beige.
I am Switzerland. I am neutral regarding these...
Conflicts, fights, because people are very passionate and I respect the passion.
I don't have a dog in the fight.
I'm not one way or the other.
I'm simply describing without judging or taking a side.
I just wanted to mention that because people get quite excited about this stuff, which I love.
I think it's fantastic that people are so pumped and excited about all of this stuff, but that's the reality.
All right. So, of course, this has come up just as I was...
I started working on this presentation last week, and then the...
Well, the excrement hit the rotational devices.
So, three major U.S. banks have recently entered voluntary liquidation or were taken over by regulators.
Last year, of course, we saw the collapse of many centralized crypto projects and businesses.
Terraluna was a stablecoin.
The Celsius Network was an over-leveraged lender.
Three Arrows Capital, they were venture capitalists, and the eponymous...
FTX. And I was going to have a long description about what happened with FTX, but I think that would result in far too much swearing for this to be as shareable as it should be.
So, yeah, three major bank collapses.
We've got Silvergate March 8th, Silicon Valley Bank March 12th.
At $209 billion, the bank failure was the second largest in all of U.S. history.
Signature Bank, New York, March 12th, today March 19th, somewhere between 1.5 bill and 2 bill is the going rate for Credit Suisse, which means people aren't going to get much on the dollar and all of that, so who knows what's going on.
So Silicon Valley Bank Financial failed March 12th, second biggest failure, Wednesday, March 8th, Moody's still had an A3 rating on Silicon Valley Bank Financial.
And of course, Sam Bankman-Fried was the Elizabeth Holmes of the new FTX. Said he was all over the place and everyone thought he was the greatest thing since sliced bread.
So, yeah.
Now, on the other side, in January of this year, 2023, Custodia Bank, an entirely unleveraged Bitcoin-related bank, was denied Federal Reserve System membership.
And I think they've been working on that for a long time.
Now, bailouts, right?
So the bailouts, right?
So, you know, there's a story.
It's like, ah, well, the bank pays all these fees, and now you're going to get these bailouts.
The original cap, I think, was $100,000.
Like, if you had more than $100,000 or up to $100,000 was guaranteed by the Federal Deposit Insurance Corporation.
And then I think after 0708, it went to a quarter mil.
And now it's basically been extended to infinity because only a few small percentage points of the accounts in Silicon Valley Bank were 250 or less.
So it's basically gone up to infinity.
So how are they able to protect all of these reserves, all of these accounts?
Well, they can't. I mean, there are some fees, which I don't think it's nearly enough to cover.
So they're just... Create money.
Print money. And you can go to the Fed's begging window, but of course banks don't want to do that because it makes them look unstable, which I guess they would be if they did do that.
But you can't...
There's no bailouts under Bitcoin because you can't create Bitcoin out of nothing.
You can't create Bitcoin out of nothing.
Like, if...
Think of gold, right? So when the price of gold goes up enough, what do people do?
They go to their...
Jewelry drawer. Oh, am I going to sell some gold?
And miners...
I mean, I did gold padding and prospecting when I was a teenager before university.
It's hard work, let me tell you that.
But when the price of gold goes up, then all these mines get reopened and people start...
So it starts coming out and there's a lot of slack.
There's a lot of... Your grandmother dies and she leaves all of her jewelry to her son who doesn't really want it.
So he sells it or it gets melted down.
So there's a lot of slack. Now of course there are more bitcoins but it's a declining number and it's going to get really tough towards the end to make any new bitcoins.
But they're not just lying around.
You can't just melt down Granny's Bitcoins, which have been out of the market, and so on, right?
And of course, a lot of Bitcoins get lost.
There is that aspect as well, which raises the value.
It's like a little subsidy towards everyone else.
It raises the value for everyone else's Bitcoin a little.
But there are no bailouts under Bitcoin.
That's why Bitcoin was created.
Fundamentally, I'm not trying to read Satoshi's mind, but that's certainly what he said.
He was pretty horrified at the bailouts, right?
Because... You know the meme, right?
Like, the bank, you know, when you want a $2,000 loan, the bank is like expecting your soul and scraping your DNA and going back five generations for fiscal responsibility, but apparently when they have a...
$100 billion in 30 or 50 to 1 leveraged assets, they just don't really care at all.
It's just wild, right? Or how aggressive are they when you overdraft, you write a bad check or you overdraft by $5, man?
They're all up in your grill, but then they're all kinds of sweet when they themselves have screwed up.
I said this in a show recently when I was...
When I was working up north, I deposited a paycheck, and the bank lost it, so I had to go back and get it reissued, this, that, and the other, or look up the paperwork or something like that.
And yeah, I just stood in the bank and I said, you guys owe me $100, because every time I make a mistake, you charge me through the yang, you guys made a mistake, you owe me $100.
And I just didn't leave until I got it, or I think I got $50 or something like that.
But I mean, the bank was like, what are you talking about?
It's like, no, no, no, there's a relationship here.
What are you doing? So, yeah, the FDIC is only possible in fiat, right?
So that's a few more details.
So Terra Luna, the one that went down May 7th, was a self-described stablecoin that over-leveraged and collapsed amid a run.
The Celsius network went down June 6th, a replacement for a bank.
18% interest annually, you know, if it's too good to be true it almost certainly is.
Celsius chose to stop paying out as a result of the collapse, it caused Celsius to drop
in value by more than 50% within an hour.
I guess there was another one, Three Arrows Capital, June 14th, a crypto hedge fund that
went from forex trading to bankruptcy due to mismanagement.
And FDX, a crypto exchange that seems to have engaged in gross fraud and mismanagement and
so on, right?
Now, I mean, people say, well, the bank goes bankrupt and so on.
Yeah, but you get to spend the next five or ten years in lawsuits and all of that.
It's a pretty miserable existence, I suppose.
But, yeah, every gold rush brings the people who will cheat.
I mean, it's just inevitable, right?
Every, quote, new economic opportunity is going to bring the people who are going to cheat.
And the idea that, let's say, Bitcoin is somehow invalidated, By people who run centralized exchanges, right?
Because these are generally centralized exchanges.
The idea that Bitcoin, which says a centralization in finance will corrupt people.
Centralization in finance will corrupt people.
That's really the major driving moral...
Human, life-saving and economic driver behind Bitcoin.
Centralization corrupts.
Having too much power over other people's money corrupts.
You've got to have control over your own money and nobody else can devalue it and nobody else can print it and nobody else can inflate it away.
So decentralization is the only opportunity.
Like competition is the only opportunity to reduce human corruption.
Wherever you reduce competition, you increase human corruption, which is one of the reasons why there's so much corruption in the fiat currency world.
So the fact that centralized Crypto.
Not all centralized is bad.
Again, it's cost-benefit, right?
I'm not trying to say centralized trading platforms are bad.
It's totally fine. It's voluntary and so on.
But you've got to keep an eagle eye on this kind of stuff.
There's got to be independent auditors.
There's got to be a commitment.
There's got to be open books.
There's got to be whatever you need to make sure that they're not over-leveraged or pilfering or hand-in-the-till kind of stuff.
So the idea that A cryptocurrency, Bitcoin, which was designed on the basic premise that centralized control of currency is bad or centralized control of other people's money or money as a whole is bad.
The idea that that whole model is somehow invalidated When it says centralized control tends to lead to corruption, it doesn't always tend to lead to corruption.
The idea that that is invalidated because centralized control of other people's money has led to corruption, it's like it's just validated the entire business case, not somehow eradicated its business case, right?
And of course, just as, oh gosh, I think at one point the French franc was the world's reserve currency, then at another point it was the British pound, for the last while it's been the American dollar.
That stuff always comes and goes, and so if the dollar loses its reserve currency, if it's perceived to be used as political punishment and reward, massive budget deficits with no chance to rein them in, constantly raising the debt ceiling, and so on, and if...
There is more of a flight to digital currencies.
Of course, central banks are going to fight back and do the things that they normally do.
Human beings are not big fans of giving up power as a whole once they become addicted to it.
And, of course, people focusing on the Chinese yuan, the euro, and other currencies as international trade settlements and so on, these could all have very big effects.
And Bitcoin certainly helps with that.
Yeah, so is the dollar safe as the world's reserve currency?
I don't know. It's hard to say.
It's hard to say. But certainly, historically, it doesn't tend to last.
Okay, so let's just talk about Bitcoin speed.
So it's the buy a coffee test, right?
So Visa is centralized, Bitcoin is decentralized.
Centralized, you get the corruption, potential corruption of centralized control, but you also get speed, right?
So it's that balance. So Bitcoin does roughly 10 transactions per second, and it takes 10 minutes to go through, and for total certainty, you wait an hour for about six confirmations.
So The reality.
Visa does about 2100 transactions per section and can scale much higher than that.
But of course, remember, Visa is only running the transactions.
It's not actually running the money itself, the monetary system.
I mean, you throw in the Fed computers and all the banking computers and it's going to slow down a lot, right?
So yeah, no question, Bitcoin alone cannot handle...
The modern economy.
So the solution, the solution, a solution, an evolving solution is the Lightning Network.
Now, there are a lot of criticisms about the Lightning Network and I will let you delve into those.
I'm going to give you the architecture and a lot of it is working and quite well.
So... The Lightning Network is a means of expanding the financial capabilities of Bitcoin by allowing transactions to be made off-chain or on a second layer attached to the network.
So, you know, think of a dozen friends of mine and I, we went out for dinner the other night, right?
Great, great night. So, let's say there's 12 of us as a whole, right?
So, when you go to dinner and they say, what would you like to drink, right?
They don't come and charge everyone for the drink.
And they say, oh, do you want appetizers?
Okay, come and charge everyone for the appetizers.
Settle that up. Oh, you want a main meal?
Okay. Charge everyone for the main meal.
Oh, you want dessert?
No, no, no. You want coffee? No, no, no, right?
They don't, right? What they do is they accumulate everything up and all of your transactions, and they could be 50 or 75 transactions from start to end.
All of those transactions get settled up at the very end.
Right? Or, you know, a bar tab.
You know, you take a bunch of friends out and everybody has like 30 drinks over the course of the night.
You just run up a tab and you pay it all at the end.
So that's kind of like the Lightning Network.
And there's lots of different analogies.
You could say it's also like a gift card and so on, but that's the general idea behind it.
So how does it work? Well, payment channels are created by two participants, and they lock up a quantity of Bitcoin in a special address that requires the approval of both participants to settle the transaction.
So if you spend $2 buying a coffee every morning on the way to work, you can put $20 worth of Bitcoin in, and then you just settle.
After 10 coffees, you settle that, right?
And so that's...
Very helpful, of course, for these kinds of repetitive things, and it's virtually friction-free.
Once these channels are created, the two participants can send Bitcoin back and forth at no fee.
A single participant can connect to many others.
So it can hop and skip and jump and move through the Lightning Network without a direct connection between two people.
It can just sniff its way across.
So Bitcoin can be sent across the network without direct connection by going from one channel to another traversing it.
There can be fees to use the network.
They're still very, very low.
And because the transactions are off-chain, they can be more private than Bitcoin transactions.
And privacy is sort of a big deal as a whole.
So you could say it's like a decentralized verifiable banking system that's backed by gold.
Or you could say you put money in escrow to prove that you are going to be, that you have the money to do something and all of that, right?
And the idea that anything else solves this, how does everything else?
You want to buy a coffee? Let's say that you've got a whole bunch of gold.
How are you going to buy a coffee? Yeah.
Saw off a tiny shred of gold and have it weighed to pay for your coffee.
That's not going to happen.
Or let's say you're in real estate.
Okay, well, what are you going to do?
Let someone stay at your house for five minutes to get a coffee?
I mean, none of this makes...
You can use the washroom, right?
Or bonds or whatever, right?
So financial instruments being used for small things...
It's kind of like a big deal.
And we are limited, of course, because Visa is like, what, three, three and a half percent, plus 30 cents per transaction.
So micropayments are impossible.
Of course, with the Lightning Network, micropayments are certainly possible.
And could be a great way to help people who produce content to get funded and so on, right?
So that's the Lightning Network.
Where could it go? Oh, the possibilities.
It's a programming framework built upon a foundation of very much established value.
So these are possibilities, not necessarily the consensus of Bitcoin community.
I remain as neutral as a Canadian accent, or at least a Toronto Canadian accent.
Nothing newfy. So what could happen, right?
Smart contracts. You could code on-chain.
Code on-chain that automatically executes when terms and conditions are met.
Oof. We're good to go.
Sidechain. So this is a separate blockchain connected to a parent blockchain via a two-way peg.
That's another scaling alternative to take some of the load off of the blockchain as a whole.
Rollups. A means to process transactions off-chain yet keep the transaction data on-chain.
Again, just trying to take that load off.
Another scaling approach. And all of these, of course, could be parallel to or replacements or in competition with the Lightning Network and so on, right?
Privacy, of course, yes.
Big, big deal. Zero-knowledge proofs, reusable payment codes, and so on, right?
So... I'll go into this.
If you want more technical details about this, we can do this another time, but it's just a way of having people not see what's going on for you.
If they know your public address on the blockchain, then they can see what's going on, and there's ways for this to work.
So... And look, there's brilliant people involved in and behind Bitcoin, incredibly dedicated.
I've met some of them, just very passionate, very powerful people, very bright, very morally and ideologically motivated, which is just about the best motivation that you can possibly get.
So... Whatever the market wants, whatever the market wants, there has not been a demand for Bitcoin to replace the general fiat currency system.
I mean, because it's an investment parallel to it and a way of activating and actually buying and selling things.
And for moving large sums of money, it's absolutely unparalleled.
So, yeah, strength and weaknesses, pluses and minuses.
I think most of the objections are...
Kind of nonsense. Because you want to compare apples to apples.
Say, ah, well, you know, Bitcoin, you need energy to produce it.
It's like, well, you know, fiat currency ain't free.
And debt is also energy consumption in the here and now, which is bad.
War is bad.
International debt... Slavery is bad.
Foreign aid, which is taking money from poor people in rich countries and giving it to rich, largely corrupt people in poor countries, that's also bad.
So there's, you know, we compare apples to apples.
So when people compare the strengths of fiat with the weaknesses of Bitcoin, that's just boring.
Like, I mean, it's just not interesting, and it's a very low-brain take.
It's a very midwit take.
Take. So you compare the strengths of anything with the weaknesses of something else, and you think you've achieved something, and all you're doing is manipulating.
So you've got to be honest about the strengths and weaknesses as a whole, which both systems have, of course.
The big thing, of course, is that I'm a non-aggression principle guy.
You do not initiate the use of force.
Bitcoin is peaceful.
Bitcoin does not require coercion to operate.
Bitcoin is voluntary.
Bitcoin is peace and Bitcoin rewards integrity and does not enable corruption.
And if we Finally, after 100,000 years of development as a species, if we finally have a system that rewards the best among us and does not tempt those with the darker angels of their nature to grab other people by the throats and balls and erase their money slowly over time through greed and increasingly rapidly now, wouldn't that be the most wonderful moral advance in human history?
Second almost to nothing else.
In terms of giving people stability, giving them peace, and giving them their lives back so they're not constantly being jerked around by the mad money leavers of the masters that be.
So I am massively keen on this as a moral philosopher, which is my primary occupation as a moral philosopher.
It's second to absolutely nothing else, and it is the greatest advance in the history of the world in terms of having a future where we can finally not just be at peace internationally, but be at peace in our lives, in our souls, in our histories, and stop preying upon the next generation to feed the endless political greed of the present.
Taking the levers of power away from those tempted to jerk them for their own profit at the expense of everyone else.
Wow. This is a consummation, devoutly to be wished.
This is Stefan Molyneux from Freedom Aina.
I hope to see you again. Thank you so much for sitting through the presentation, where you can find me, where you can find more information about Bitcoin, all in the show notes.
Thank you, my friends. Lots of love.
▲
Export Selection