Why Bitcoin Is The Most Secure Network In The World

He's the co founder of Interchange, and he writes a lot about bitcoin, bitcoin security, bitcoin as a store of value, a lot of really good stuff on medium that's caught my eye and so I wanted to dive in deeper with him today. So, Dan, welcome to the show. Thanks for having me excited. Yeah, I'm excited to jump into

some of these topics. Now. Um, I've read a lot of your stuff, as I just said, but maybe for those that haven't, why don't you just kind of tell us who you are, what you're doing, and kind of how you got here to this space right now? Yeah,

that sounds like good place to start. So I got involved in the crypto space, or specifically bitcoin, because bitcoin was the only thing and when I got in back in and I had a friend paid me back for a beer with a capacious coin and for those who don't know what that is, that's the physical bitcoins that you see in all the news articles and that they're using different b roll footage on TV TV programs, And so that was a good way for me to kind of bridge that analog to digital world. And after I

got that, I googled what is bitcoin? Read a little bit into it found that it had a really really cool monetary policy that was rooted in Austrian economics, and for me, as a libertarian and you know, Austrian economics guy, that's what really attracted me to bitcoin. And January I was relocated to San Francisco worked at a small investment firm.

They relocated me out here, and while out here, I got plugged into the bitcoin meetup scene, which at the time was only a dozen people including Jesse pal Crack and Charlie Lee from light Coin, Jed Michaelo from Riple Stellar, Fred and Brian from coin Base, and there's basically all of us and a cooler PBRs and then March hits and that's when the people forget that two specul of the bubbles March when it went from ten to sixty, and then like November December when I went from a

hundred to twelve hundred. So and then at first run in, everyone had a problem in terms of checking the price, the real time price of bitcoin, and so I saw that as a potential opportunity. And while I didn't know what the hell I was doing building products, I found an engineering buddy of mine and I said, hey, let's let's go build this. So I spent a bunch of time looking at different other doing the research and other mobile products, and I knew enough in photoshop that I

could design it. The dirty secret there being that I couldn't design anything more complex. So people really liked the sleek, simple aesthetics of the product, but truth be told, I couldn't design anything anything with more complexity than that. So that turned out to be a great thing because people found value in the product right away. It was simple and easy to use, and it became the most popular

crypto mobile product. Was that it's called zero block. Zero block okay, yeah, and zero block had acquired by blockchain dot Com in December and I came on board. There was the first product manager, Zooming Forward, a bit to keep the keep it kind of short. It was another product as a product manager at another crypto company called

change Tip, which is micropayments over social media. After that, I went to Uber where I worked on Writer Growth, which is the Writer product team, Writer being the app that we all called Uber. And then UM went after that to come back to the crypto space where I go found out a company called Interchange and we build

particuliar reconciliation tools for institutional traders and infrastructure. Cool. Well, that's that's quite a history, UM looking back now today, I mean, imagine how cool that is to sit around with a case of PBS with with those with those industry uh industry people. Was was probably pretty cool. You probably didn't realize at the time, right what you had. Yeah, I don't. At the time, I was I thought it was just cool that people might up and talked about

bitcoin in person. Yeah, because that there was more than like me and my my one buddy, you know, So that was that was pretty cool. Yeah, that's interesting. I UM, I have been an online pioneer. I started online business in two thousand one at the bottom of the dot com crash, which was a horrible time, but did did really well. I've been kind of a professional investor for twenty years as well. UM and I and being on

the online space, I had heard of bitcoin. I remember specifically the bubbles as you're talking about, UM, but it wasn't really until when I decided to jump in. And and as you talk about with your kind of monetary theory or your your ideologies that you have, I kind of have the same. Where I grew up in a really conservative home. UM. In high school, my parents sent me to John Birch Camp. If you know what that is, um, you'll know how you don't know how libertarian and right

wing I I was. And yeah, I was following a newsletter from from called Sovereign Man. If you know about that Simon Black, and uh, he's all about like having the sovereign life and uh who's you know talks about the importance of having secondary passports and off shore bank accounts and and uh. Then I was like, well, bitcoin is the same thing. Like I can have my sovereign life with bitcoin, and so that's that's kind of I was like, man, I gotta jump all in. So anyway, Uh,

same ideologies, but that brought us there. But that's cool. So you've been around the space for quite a while. Um, you've seen bitcoin rise in fall many times. Uh. One of the things that you've been talking about that caught my eye was the bitcoin security model. And I know, when we just went through this bear market, the price of bitcoin, you know, crashed too, then crashed again, and there was a lot of talk about this this death spiral, right because the prices would drop so far that the

security of the network would would be in jeopardy. And I think maybe that's what kind of led to some of these articles that you wrote. Yeah, you're talking about the mining death spiral, right, Well, yeah, because if the mining death bar goes down, the security of the network

is then affected. Yeah. Well, you know, It's the reason why I wrote this article is that there's a certain group of individuals of another prominent cryptocurrency, Um, and they like to use, uh, the potential issues with Bitcoin's long term security as a way to try to undermine confidence to Bitcoin, which I find hilarious considering this currency, by

the way, it's called Ethereum. I find it hilarious that the ethereum community looks at a hundred year potential issues with Bitcoin while their own existing monetary policy is totally garbage. So um or or lack of policy maybe right, precisely, right, yeah, the lack of monetary policy of a laughable um sort

of way they go about choosing an inflation rate. And so for them to criticize Bitcoin, this is like the lost ditch effort to try to undermine confidence in bitcoin, because if you undermine confidence in bitcoin's long term security, it brings into question bitcoins twenty one million hardcap because some hypothesize that you would need to have tail emission essentially a low level of inflation passed the twenty one million hardcap, and that violates, I think, from the core

tent of bitcoin. And after doing my research, I found it's totally unwarranted. And when you say and when you say that the tele emission you're talking about, so after the miners stop earning rewards, meaning they don't make any money anymore, what would be the point of them continuing too?

Mind blocks, that's what you're referring to it. Essentially, so miners are they sink capex and opex, So capex being the by bitcoin mining equipment, and opex is the electricity miners expend that that expense Um too then earn a percentage of block rewards going into the future, and a block reward is every ten minutes a new block is created in Bitcoin, and that block contains newly minted bitcoins, which is called the block subsidy, and then it contains

transaction fees. The block subsidi decreases over time, and that eventually produces twenty one million bitcoins. And some people worry after the block subsidiy ceases to exist or after all the bitcoins have been minted, which is in the year approximately, that um that transaction fees won't compensate the miners enough to protect the network, right, and so um, you've basically kind of uncovered that may not be the case. I mean, after that, those still have plenty of incentives. After that,

those rewards go away totally. Well a lot of this So the ethereum crowd like to like to poke at this because they felt like it would undermine the confidence in bitcoin and the confidences that the twenty one million hardcap would would potentially be manipulated, which is a pretty good social attack factor. And so I felt like this needed to be comprehensively addressed. And once I dug In deep.

I found that most of their thoughts behind this being an initiative, we're predicated on a few papers from Ivy League schools like Princeton and Harvard. And I read some of these papers and after reading, you know, you read a page or two in and you go, what the hell because these papers essentially made ridiculous assumptions um absolutely ridiculous assumptions. So for example, they assume the coins price

never increases. It's like, oh, of course the security is going to be a problem if it never increases, right right, um? Which also, if the price net for increases, that means that the shared illusion of the number of participants in the bitcoin network never grew. So bitcoin net grew beyond ten or twenty million people, which means I think it

kind of failed. And the reason why the price increases important, I'm guessing, is because of the of the blocks that the happening that's coming, right, So the block reward is getting cut in half, and it continues to get cut in half, and so therefore the amount of bitcoin they get goes down, but the value of that bitcoin should be going up at the same time. That's right, And that's what we've seen the last two happening in cycles.

Is that after the happening cycle, the price increases exponentially. The increase in price brings around greater awareness and speculation, which thereby draws in more users who thereby transact. So the happening events create a supply shock. That supply shock kick starts a new bowl run, and then that bowl run brings the new people to transact, and those transaction fees are place the decreased blocks up speak, got it.

I really liked your point about the miners. I mean they're buying the equipment, which is a long term investment that they have to recoup their their investment on, and then they have their electricity investment as well. So, um, I think that aligns them to the network right there. They need to be good actors. They need to see their their investments returned to them over a long period of time, right Yeah. And so this I think is

a good good segue into how bitcoin security model works. Essentially, bitcoin security works based on game theoretic um game since you game three where the elements are around bitcoin mining

and revenue, so miners are compensated to protect the network. Um. They think that that up from costs to be of the machines, and then they have the continuing cost of the offex of electricity, and then they get a certain percentage of the block rewordpoint in the future, and the percentage is determined based on how many other people are mining,

So what what percentage of the hashway they have? Essentially and um what what has to happen is that bitcoin miners are incentivized to behave properly because they're given a block reward when they do. So. When they're given the block reward, they've already sunk in cost, remember, so they're just recouping their cost and they're hoping that they make the profits. So the confidence and stability of the protocol is paramount for them because they already have up front

costs and they're trying to make their money back. So the game throoretic element here is that bitcoin miners will largely not try to amenitbulue the network. We're engaging fifty one percent attacks even if they had the hash rate, because they would damage the confidence of the protocol, which would damage their future cash flows. So that's the game through retic element. UM. Now, the attack factor that most people are worried about is a government attack factor where

they don't care about burning the money. So governments may not care about buying billions of dollars of money equipment and then that mining equipment becoming useless after they attack the network. So that's what this covers is, you know, what's the first of all, what's an appropriate um? It's an appropriate level of security spend that makes the network secure? How bad is an attack? Um? You know, will transaction fees replace the box ups the over time? What have

we seen historically? What we see that, what does that look like projected into the future, and then some modeling around okay, what what does what do transaction fees look like? And we'll we'll consumers and will businesses pay that transaction fee to transact on the bitcoin network Because a lot of people now a lot of the old bee cash or crowd or the bitcoin is made for payments crowd, they feel really strongly around how much it costs to

send a bitcoin transaction. And so I kind of comprehensively cover the price elasticity of a on chain transactor transactor that's using a block space, not just bitcoins, but any block space, and then other real world comps as to what they'd be willing to spend on the transaction. So let's try to break this down for the average person that's that's kind of listening to this. And and as you said, right, that's one of the big attack vectors that when when I hear people say, you know, what

could go wrong with bitcoin? Kind of that The two maybe are ones that you've already addressed. One like as you said, a nation state of sovereign trying to attack it or to changing the hardcap. And so going back to what you just said, with like a sovereign doing an attack, they don't care about their investment. Um, people think that's a risk. They think, oh, well, all the mining is consolidated in China, so China could just take over all the miners right there and do it. Um,

how big of a risk do you think that is? Um? And I guess so, how big of a risk do you think that really is? And and uh, yeah, that's

a great question. So you know, when I when I store my bitcoin and the bitcoin ledger, I essentially have ownership over x amount of coin that's represented in the ledger, right, and bitcoin miners what they do is through proof of work, so through the mining equipment plus electricity, they are producing new coins, and then they are essentially validating and permanently etching transactions into the recorded ledger via those new blocks.

So you can kind of think about it as uh, you know, with the electricity spent by the miners to mental bitcoin to protect the into validate transactions in that block. It's essentially like layers and layers and layers of energy, right that are that are continually pressing down upon all the blocks previous before it. And and so when it comes to when it when it comes to like essentially the security the network, um, you know, when when these

transactions are validated. What people worry about is if you had a entity that had the hash rate, they could try to double spend or try to manipulate the tip of the chain. Even even if that happened, though, it still takes a tremendous more amount of energy to unwind the chain. And even if someone tried to do that, each individual who stored their money into the bitcoin ledger, we all agreed upon a certain set of rules, and those rules didn't have someone going, hey, I'd like to

unwind all of these transactions. So in the event that happens, Bitcoin still don't die because all of the participants in the network have their ledger balances and they can all simply say, Okay, this malicious actor started to try to unwind everything at point A, let's just start over at point A. Um, so the chain, yeah, and for the chain, which is an extreme case, right, this is a non

none advantageous sort of sort of environment. Right. But even if a government did successfully try to influence the ledger through a talk, they still would have a difficult time on winding transactions because bitcoin, like every other money, is merely a social insensus. We all believe in it and that gives it value. So people aren't going to just abandon the bitcoin blockchain and join another one, which would all those other chances with people grew by the way.

People are going to say, hey, let's start over from this point before these militilation has happened and change it or figure out ways to protect it. So that's kind of like a last resort. That's like a worst case scenario. Um. But how resilient would it be to fending off an attack? So? Um, I think the longer that an attack doesn't happen, the harder it gets. I would guess, right, So, um, a year from now, the attack would be harder than it would be today, and then secondary which would mean it

would cost more money. But and also could the other non bad actors, the other miners work to fight that off. Yeah, that's right. I mean good actors could throw more hash rate onto the network and that might super that might become bigger than the malicious attacker. And so yeah, that's a lot less to ch effort. There's many other I think steps in between them that kind of make the sort of attack not realistic. One even purchasing that much

equipment when everyone would notice it. You can't just you can just jump onto the network with that much equipment and no one would know that you even made that, or that you tried to buy that equipment or by the raw materials. Right, we'd all know that the Yeah, we'd all known advance. Um, and if and if China was moving their military to take over every single center, we would know about we'd probably hear about that in

advance as well. Yeah, let's put it this way. In a connected internet world, I don't think anything stays secret for that long. And so you know, you know one, it's you know, like, one, it's really hard to buy

all that equipment without anyone noticing. Two, you have to be willing to burn the money, which you have to go to your tax base and go, hey, by the way, we decided to burn right now, that's five billion dollars, but in the next bowl run, it might be a hundred or a hundred billion dollars a year on mining revenue. So hey, we're willing to burn fifty billion dollars to

attack on network that you all use. We have to remember that citizens of these countries participated in decoin network, and allies of it of this country participate in the network. So if a country like the United States were to attack Bitcoin, they would be attacking themselves and other countries. So this isn't still cut and dry as to like, hey, bitcoin is the enemy. Bitcoin is every one of us. Right, were your friends, family, military members owned bitcoin? So when

you do that, you're permanently you're permanently attacking them. So it's and you have to explain why you wanted to burn fifty to a billion fifty billion dollars to the people who don't even care about bitcoin, like, hey, I don't even care about bitcoin? Why did we waste that much money on this and you're not even guaranteed success to destroy it? Yeah, exactly. So the biggest fear that most people have as of a sovereign wanted to destroy it. And the reality of it is pretty slim. I mean,

anything's possible, but the reality is pretty slim. And we all know in advance. I think that's the biggest thing, right, we all know advance, we'd have the ability to figure something else out. And then the changing the hard cap, that's another one I hear all the time. Um, but again that would I mean, we saw how long SeGW it took to get through, right, Um, imagine how hard it would be to change the hardcap. So again we'd know about that way in advance, which would all give

us a chance to make adjustments. Right. Well, yeah, you know, to kind of finish out at the first part there. Um, you know, as Bitcoin and the next bowl run, the spend on mining annually and the revenue on mining annually will be so large that it basically makes an attack not feasible. Right now, Bitcoin with five billion dollars in

mining revenue annually is still somewhat weak. Um, but I don't think governments really care about it at this moment, so bitcoin is fortunate to have governments kind of look the other way. UM the next bull run, I think it becomes strong enough from a threshold security model, threshold being like how much spend annually is is bitcoin bitcoin mining? Or like how much revenue and generating UM. So I think I think bitcoin is still a little weak right now,

but it's the strongest of any other cryptocurrency UM. But in the next bull run, I think it will be resistant to any attack by even the largest of countries. Now switching gears back over to the twenty one million hardcap essentially with the ethereum side, and some of these intellectually dishonest researchers from those Ivy League schools hypothesizes that Bitcoin's long term security is either not adequate or unstable, which they use ridiculous assumptions to make that up. One

is that bitcoin's price and for increases. The other is that there is no Layer one efficiency gains. For example, they hypothesize that Layer one will never be more efficient in terms of white size for transactions, which we have smaller signatures coming up in the next year or two.

So that's pretty ridiculous um. They also they also hypothesize that minors, instead of being focused on long term revenue potential of their mining equipment, so focused on the you know, so as as mining equipment essentially reaches the limits of physics. So miners the ASICs that they purchased, the chip sizes get smaller and smaller and smaller, but eventually they can't

get smaller than that because of physics. Once that happens, Bitcoin mining equipment will be built for a very very long period of time, So the mining equipment will be built to run forward decades, and the next scenario, the long term cash flows become super stretched out and the security of the network or the stability of the network is paramount or recoup your cash to recoup yourself cost. So these researchers or I don't even if I don't even know if you could call them researchers. It was

so bad. The researchers claimed that and a fee only environment, miners would play short term games trying to reorb or manipulate transactions based on the size of the transaction, which would mean that miners are willing to shoot them. Miners are willing to take a small reward now to shoot themselves in the foot where they're long term cash flows, which to be makes no sense. Um, And all of this leads to the moment of people going Okay, So then all of these papers suggest, oh, well, you know,

bit quick and solve this non existent problem. They can solve this non existent problem by violating the number one rule a bitcoin, which is the twenty one million hardcare by enabling a tail emission long term. So the hypothesis is that transaction fees wouldn't be enough to compensate miners, So what you'd have to do is have a long perpetual inflation rate of one percent. Yeah, we see that,

I guess all through life. But really we see it in this space specifically where people think that all these potential problems that could happen somewhere way out in the future have to be solved today and that's just not the case. That's not how technology evolves, right, and so UM to think that we have to figure that out and solve that today, this seems yeah, I mean, and

it's also academic versus versus execution. You know, cipher Punk's right code Satoshia was essentially an academic that broke production code and published working models and environment you know, first focusing on practical implications versus sitting in there and they're well pedigreed office and hypothesizing and adding ridiculous assumptions into a model and then loudly proclaiming it's broken. Right it's uh yeah. Now, um, as as you started talking about

the security, and then it goes into the high cost security. Um, then I think some of that and goes into why it's such a good store of value because of that security? Um? Does that Does that kind of lead into that segue there a little bit? Yeah, I think we can make that segue if the bitcoin because if the securities, if the security is high, well, I guess we'd have to make the use case as to why bitcoin is a

good store value. But obviously having my store of value somewhere where it's secure is going to be one of the primary things I would look for, and so the security of the network would have to be considered. Yeah, bitcoin is the most secure cryptocurrency network due to the total a commulative energy, and that creates a market for high value, highly secure transactions in bitcoin, which would be central banks, governments, inter banks, corporate and other large value payments.

So essentially it's got the largest energy wall built around its ledger, which attracts more and more liquidity, which makes it bigger and bigger and bigger. Right now, one thing, um that we hear a lot about is is with Bitcoin and even all the other protocols that have been released over the last couple of years, is speed speed speed speed right Um? To me, I don't know if that's really an argument anymore. It seems like we've kind

of figured out scaling. Um, what do you think about that? Yeah, So when any cryptocurrency proclaims that they're faster or cheaper than Bitcoin, that is a complete lie. There's much more nuanced to it. So how proof of work works is that proof of work isn't final, There is no technical finality.

Proof of work is increasing levels of finality. Like I said before, bitcoin miners expand energy to do proof of work, and through that, essentially through each new block, we have more and more energy that's been used to mind that those blocks, which means there's more and more through mon dynamic guarantees that your transaction will be first, And that's why exchanges make you wait x amount of confirmations before they give you your bitcoints on their side, and those

X amounts of confirmations is the degree of confidence they have in the finality of the payment. So, to be clear, all proof of work systems are um degrees of finality to where the longer it's been confirmed and they're more blocks that have been confirmed after it, the more confidence you have it will never be on wound. And after a certain point that becomes so confident that you don't

need really any more guarantees. So when people talk about confirmation times, so people will be like, oh, you know bitcoin has ten minute blocks and lightcoin has I forget, let's just say one minute blocks. Those blocks are somewhat meaningless. That's not faster than bitcoin. It's just a less of a degree of confidence because bitcoin or because lightcoin has less proof of work. Um, it means that it takes more blocks to have the same degree of confidence that

you would have bitcoin. So there is no such thing as a faster cryptocurrency. You're just talking about a less of a thermodynamic guarantee, and so you're essentially it's it's visually feels that it's faster, but it's not because of the guarantee is less, right, So to put that into a little bit easier to explain. Basically, the finality means that bitcoin can't be reversed. When you pay with your bank, they can always pull those charges back. Your credit card

can pull those back for like six months. But with with bitcoin, it's finality. I mean, it's final can't be pulled back, and it's the amount of time it takes for that finality to be confirmed. Um And so to reach that you're saying is still fast, Yeah, well, you know, and if you have layers on top of Bitcoin, like Lightning, you have what would be perceived by the consumer to be instantaneous, right, And that's what I was kind of

alluding to. With the scaling solutions that we have today, with layer two um options and you know, set side chains and all those things, it seems like we've kind of we have the path to scaling that we need now. Yeah, I think lightning is more more Lightning than side chains. That's more than enough scaling that we need for the next decade. They're not going to onboard three billion people into bitcoin. I mean, I'm a I'm a permeable bitcoin guy,

but that's pretty unrealistic. I think we're going to see it, you know, exponentially increasing the number of users that use it, whether that be government, governments, banks, or people. But I don't think we're gonna see three billion people get on boarded right away, although it does seem like it does seem like all the world governments are doing their best to push people to bitcoin right now. Yeah, I think

I think it will happen pretty fast. I think the regular adoption curve that we've seen with the specled of bubble cycles, I think we're going to see a supercycle happen because never before during bitcoins existence, other than the beginning, that we've seen people lose faith in their governments in mass across the world. When that happens. Bitcoin is a special purpose built to be an excellent store of value.

So we could very well see you know, two hundred million move over in a bitcoin over the course of six months because they're trying to flee terrible central banking policies. I want to get into the store of value stuff because there was some stuff I heard you say that really caught my eye. But before we just dip right into that, um, we're talking about kind of the speed,

and we're talking about lightning and whatnot. And I know you had kind of poked the poke the bear poked the hornets nest a little bit with your talk about so Toshi's original vision of venus s O V versus a cash system. Um. And it does seem that the narrative today really is store of value. Um. Obviously he talked about cash cash system. You've talked about you know why that may not be the case. Um. So do you think it's it's better as a store of value.

They don't o hand in hand necessarily. Yeah, it's not that they're mutually exclusive. It's that Bitcoin as a money has to adopt in certain sort of its evolution. Is to becoming money, it has to first start as a store of value and then become the medium of exchange and unit of account. The unit of account means like your groceries are priced in dollers. Bitcoin won't be the pricing mechanism for things because the purchasing power of the

bitcoin fluctuates so often that is not very realistic. The fluctuation of the volatility and bitcoin's price relative to your local fiat. Bitcoin has to become has to have a lower volatility than your local fiat to become a medium of exchange and unit of account, and that's a long ways off. This is a we've never seen the evolution of a new money in real time, you know. Gold. Gold was a very long process that we don't have a lot of visibility into, but we do. This point

is happening much much faster with bitcoin. And it's very intuitive as well. It has to start out as a store of value before it can be these other functions. And so that's where think I understand the evolution of money, and it kind of starts as a collectible then moves to a store of value. Um, do you think we've made it past the collectible into a store value already? Are we still working through that stage? Well, that's a

great question. I would say we're in between the collectible and a speculative store of value, which actually was confirmed by the Fed yesterday drum hell, which was really really

cool to see that come from the FED. That definitely shows that they know what's going on because it is very much a speculative store of value, but it was special purpose built to be that store of value, and right now people are speculating that it will be adopted worldwide from the government's banks and citizens across the world as a recognized store of value. And he even he even said like gold, right, that's right, Like that was

pretty wild. That was pretty wild to hear him say that, and also really cool to see recently that the bitcoin becoming a risk off trade or a safe haven asset. That meme is also perpetuated in the investment banking space, where we had like invest Co and other other big players go hey and in bar plays as well saying

that bitcoin is goal two point oh. And so this is a huge, huge turning point because most of these banks were i think, really didn't understand what bitcoin is about, and they talked about, oh, it's it's a it's a cheap Pisa, cheap PayPal, And now they're all coming to realize, now it's a goal two point it's a store of value, it's a risk off trade, it's a safe haven asset. And that's incredible because that's what a special purpose built

to be. And if more and more of the existing institutions start to believe that, the more likelihood they're gonna start moving billions or trillions of dollars into bitcoin. Yeah, it's a self fulfilling prophecy at that point. So so we we're seeing it evolved. It's going from collectible to a store value. You believe that in line with Satoshi's original vision. Um, the security is good because that's what

we want our store value to be. Um. There's a lot of people that think that Peter Shift comes to mind, right, that that that bitcoin has no value. And I would argue that that's maybe you don't see the value that other people do. And we do see, uh, this store of value taking place in these other countries, you know, in Iran or China or Venezuela. Right, so we do

see there's there's value there. Um, But I think you have a case why you believe bitcoin is not just a store of value, but is really the best store of value. That's right. Yeah, So why is it better you I know, you outline several different uh, you know, stores of value that people would use today. How does bitcoin stack up? Why is it the best option that

we have? Yeah, that's a that's a great question. So if we look at you know, if we think about money as different or store values, if we think of money or store values as different species. Um, you know, what is what is the genetic code that each of those species has as a species of money, and what are the traits that are surfaced from the genetic code. And so if we look at the different types of species of money, bitcoin has the most desirable genetic code

and that manifests itself via traits. So the closest equivalent to bitcoin is gold gold, and that's why people call it gold to point o or digital gold. Because bitcoin isn't controlled by centralized entity. Bitcoin similarly uses proof of work gold mining. You can't just mint gold via via out of thin air. You have to go find it and that requires resources um and bitcoin replicates that resource

consumption with the difficulty adjustments. So as the price of gold increases, miners are willing to dig deeper and deeper and expend more energy or costs to go find that gold. And bitcoin has a similar function. As the price of bitcoin goes up, the costiness to produce it goes up as well. This is good for a lot of reasons, one one being that the costiness of money gives it some of its value in terms of the alley doesn't come from the costliness, but the costliness ensures that there

is no free lunch. That the cost money money has to have a true cost of capital. That's right. Otherwise you could just print as much as you'd like. And so the house rate or cost follows price. So as the price increases, the cost of mind and bitcoin increases as well, and that ensures the unforgeable costiness of the currency. Um, you've got the scarcity element, which scarcity was a big thing that's Atoshi focused on. I don't think a lot of people really understand how much he focused on that.

Santoshi had a really great example that he wrote about on the Bitcoin forums, which he said, essentially, you know, imagine like a base medal, as scarce as gold, but with the following properties of not being a good conductor of electricity, not being strong, not being malleable, being boring gray in color, and not being practical for any other purpose. But it's one magical property was that it could be

transport transported over communications channel. And so essentially the TLDR of that, as he goes, if there was nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something and scarce here means limited potential supply. And that's the brilliance of bitcoin and that's what makes it, I think, more attractive than gold is you know, a couple of different reasons. One, it's digital. You can't really

move gold around or around very easily. Bitcoin is more divisible than gold. Um, I would argue, I would argue this, let's see what else it's uh. And as far as the scarcity, what I'd like to say on that is that, um, you know, we have all these pH ds in economics or finance and they're in these think tanks and they're trying to control you know, the markets and whatnot. Um, And a lot of times maybe they've gotten too smart for their own good. But when you talk about scarcity, right,

we learned, I mean, every kid knows supply and demand. Right, It's like pretty basic, uh, supplying demand, and that's where that scarcity falls in. And Yeah, sometimes just going back to those those core basic princes will seem so simple but but so solid at the same time. Yeah, this, you know, the twenty one million hardcap is an incredibly important monetary policy. And that's what makes it much more interesting than gold as well, is that gold is not

finite in this world. It is in somewhat finite qualities. However, we could find a bunch of gold tomorrow, We could find a huge, huge amount of goal tomorrow, which would totally undermine confidence in the being used as a store of value. And actually we know for certain that eventually, when we make it to space, that some asteroids have trillions of dollars worth of gold. So we know that

gold's lifetime is finite. As a species of money, It's genetic code and traits are inherently um subpar, and bitcoin, being the apex predator of money, will will consume it too. Over time, the best store of value will always win. Right. Gold is a remnants of our physical bodies and physical world, but we're moving into a digital one. And the digital world, combined with the lack of confidence over the supply, completely

undermines gold use cases a store value. And and really, at the end of the day, you know, gold bugs, and I'm a gold bug. I mean I've I've been I've been a big believer in gold for a long time. Um, you know, I thought we should have gone back to the gold standard, and I still own gold today, so not to not to uh not to come down on them. I do agree with you that bitcoin makes a better case for being a store value because of the digital properties. As you've said, um, but you know, they want to

say that it has value, it has intrinsic value. I like to say that. You know, my dad taught me when I was a kid that something's only worthless someone is willing to pay for it. So value subjective, And that's exactly right. It's a it's a shared belief system. And in gold, by the way, you know, a lot of people go, oh, well, gold has utility. It's been used in electronics, it's been used for jewelry. You know.

One gold had no other utility other than a store of value for thousands of years, and only very recently when we started to make electric electronics did it also have additional value for that um right, which isn't necessarily a good thing, because that means that its purpose is split between a store of value and some raw utility, which actually undermines its value as a store of value because then the demand for it fluctuates, whereas demand simply

distilled as a store of value, demand is much more pure and allows it to behave properly as a money Yeah, what I what I liked about? Um, what I was hearing you talk with Stephan Lavera. Also is you know besides gold, which is what is the big talk. And everybody knows about gold and the store value, but there's also a lot of other places that people store value or park their value. Right, So real estate is a big one, which which has caused all types of problems

in the real estate market. Um, offshore banking is a big one. Trillions of dollars ten tens of trillions of dollars in each of those those categories, right, Yeah, hundreds of trillions, agrees. And I live in San Francisco, and we see this as a as a huge, huge problem when the store value asset is not used for its original, huge tility purpose to where you know, an average apartment in San Francisco is at least a million dollars and

that's kind of like a really shitty one bedroom. Um, if you wanted something nice, you're looking at two to three million at a minimum. And so that's happening because supply is constrained. Existing homeowners won't allow nobilions to be built, and so people are starting to park their wealth increasingly more and more into this real estate. But the real estate isn't getting better. These are old, really crappy apartments.

These aren't brand new buildings. These are from nineteen thirties. Um, they're terrible insulation, terrible plumbing, really bad layouts, no electronics support, and you're just seeing you know, in terms of like there's no cable routed through it. You're seeing these assets being used as a store of value really damage the social fabric of the community because because they're not being allowed to be used for the utility that's a place to live. Instead, they're being using used it as a

place to park money. It's totally changing who can live in the city, how much is realistic to even pay to live. And we see this problem as well in New York and Vancouver where other people across the world, like Russians and Chinese or parking their value in a different store of value real estate assets. It's kind of crazy when you start to see, um, the amount of problems that really stem from having a poor store value

or no no store of value today. Right, so, um, everyone's scrambling to store value somewhere and some go to stocks. We've seen what's happened there. Some go to real estate and look at all the problems that spiral from that totally. And that's where you know, if we look at I think one of bitcoin's best features is the immutability of the transaction and the hard disease nature of the asset.

So with real estate, that's extremely easy to seize. So hundreds of trillions of dollars at a snap of a finger could be seized from you by your government across the world. That is by far the easiest asset disease um. And you look at gold. Gold's nice, but you have to carry it, you have to validate it, you have to store it. It's a little bit clunk here. Especially in the digital world. Bitcoin is much much more efficient.

And then you look at like offshore banking. You know that works until the US government really leads on that offshore banking country like Switzerland where essentially the I R S destroyed centuries worth of privacy and Switzerland, and so we we've seen these other store value assets be kind of hunted down over time and really not represents there you know, true true ownership or true you know property

rights that you would have, and bitcoin gives you property rights. Yeah, the censorship resistant and the immutable are the two really big factors that make them jump out across all those, like you said, offshore bank accounts. We've seen in Switzerland they're taking the Russians money. Now, hundreds of millions of dollars in accounts are gone real estate for sure. Um. Now, So so we can see it's pretty easy from those

perspective censorship, resistance and mutability, portability. How it's how it's better. One more thing just to touch on real quick would just be the cost difference. So bitcoin is so expensive and it costs so much money to transfer, and it's never gonna work because of the high fees. But I think you would argue that it's way cheaper than any

of those other stores of value. Yeah, that's right. A lot of people, a lot of the old be cash or crowd of a lot of the crowd that felt that bitcoin is a cheap PayPal or a cheap visa, which was totally incorrective. Is purpose built to be a store value. Um. Hence twice a tocia. There's a bunch of different reasons, but tocia refers to bitcoin as as

as as a precious metal. Five times. It also writes in the first block in the blockchain, UK chancer on the verge of second bailout for banks, which is the only message of sociator writes into the blockchain, not Visa on the verge rasing processing piece. So the original crowd that felt that bitcoin was best best made for Visa a cheap PayPal, they were really concerned a round bitcoins transaction fees because as if they got too high, it

makes it not practical for day to day transactions. So firstly, paying anything being any transaction fee is more expensive than traditional payment methods, just to be clear, because yes, there is a processing fee for my credit card, but I don't feel it as a consumer, and same with my cash. So people are like, oh, you know, technically you're paying a transaction fee as a consumer, but I'm like, I don't feel it, I don't hear it, I don't see it.

And so with bitcoin bitcoins like, hey, pay this transaction fee, and a consumer who never had an upfront transaction fee before it goes, what the hell is this especially for a retail payment, um, you know, and then you know, before we dive into you know, looking at bitcoins transaction fees, relative to other types of store value transaction fees. We must also remember that the cost to send any sort of crypto asset is not just the transaction fee, but

it's also the exchange fee. How much money did you have to spend to buy it, because typically that's between ten ten BIPs and a hundred bibs at that's basis points, So that scales with the size of your transaction, which is a really nasty, nasty sort of a fee. And then then you have volatility fee as well, because crypto

assets are very volatile. So but when you buy the asset, between then and when you sell it to purchase whatever item you'd like to purchase, you have a volatility fee, and that as well scales with the size of the transaction,

which makes it super nasty. So for example, let's say you have a light coin transaction that the transaction fee is a penny, much cheaper than bitcoin, but it fluctuated ten percent between when you bought it and when you sold it, so you have on a ten dollar transaction, you have a dollar fee on top of the penny fee, and then as well, you had to pay you know, maybe one percent to purchase it. So that's ten cents on top of that too, and so uh, that's the

full cost of a transaction. So I just wanted to highlight that before we dive into the into other story value assets, because people don't really consider that when they look at trans action fees for crypto assets. You just look at the transaction for itself and they go, oh, man, bitcoin is so much higher, and it's like, no, there's other posts that are incurred when you transact across a

block space. I mean, and I think I think, you know, it would be fair to compare it against other crypto assets, but when you compare it against other stores of value, I think it's no, no, no comparison. How cheap it is. I mean, I own physical gold. If I want to turn that into cash, I have to physically mail that back to somewhere that it's expensive to mail gold across the country, and uh, they charge me a hefty fee

to convert that for me, So totally totally. So you know, gold is one of those that's that's immensely costly to send. You have to have insurance for it, you know, if you're doing bigger physical to gold delivery, like like the New York Fed Transfer of three hundred metric times to the Bundesbank, the German German Central Bank. That cost four point eight million dollars and it took three years um. You know, if you look at the average feed that people paid a wire fiat money in the US, that's

between thirty and eighty dollars. If you look at the cost to set up an offshore bank account, that's between two and four thousand dollars plus the wiring fiat fee that you incur every single time. And then you look at real estate people are and by the way, real estate is the most sensorible asset and the most seizable asset out there. Chinese are buying thirty billion dollars of US real estate annually, and they spend on on aferage

four hundred and thirty thousand dollars on these transactions. And when they do that, they are paying closing costs, they're paying maintenance costs, they're paying taxes like property taxes, all of that money just to store their value into real estate. And they're doing that at thirty billion dollars a year. So bitcoin transaction fees are very cheap compared to something

I thought. I think we've made a very compelling case as to why bitcoin is the best store of value, especially compared to where the stores of value are today, Like you said, with hundreds of trillions of dollars sitting there that eventually will be sucked into what I you know, the best store of value. UM, We're kind of running short on time now, but I'd like to just ask like a little bit of maybe forward thinking looking into

the future, if you will. Um. You mentioned that, Um, there's an evolution right where it goes from collectible store value eventually to a medium of exchange and then maybe to a unit account. Um, do you see this going? You know that? Do you see this evolution taking place over a long period of time or do you think there might be ways to uh speed this up complemented by using bitcoin as an s o V. But then um, having like a stable coin or something else that could

be used as that kind of cash mechanism. Yeah, interesting, interesting poth process. Yeah, it's it's you know, I think the problem at bitcoin is solving if we look at bitcoins, you know, kind of like product market fit or protocol market fit. Is to solve the problem with central banking and to solve the problem of story in your assets in a place that governments can't seeze it or a more powerful adversary can't seaze it. And so to use to use that super secure story value for payments, I

think is a multi tech paid process. As bitcoins volatility slowly subsides over time as it absorbs more and more market cap and becomes larger and larger and more liquid. Then when it becomes less volatailed than your local fiat currency, you'll start to denominate items and in bigcoin ors to toss and use it as a medium of exchange. Um. But that is a very long process generations, because money is a shore belief system, and to change everyone's belief

and money isn't going to happen overnight. I think we'll see, you know, leaps and bounds in terms of adoption, maybe during periods where people lose faith in the government. Although it is it is, it is somewhat surprising how fast, um, the loss of gold belief has happened. I think, to me, it's asked. I mean, you know, my kids, I mean even the millennials, I don't think whatever that they don't care about gold, don't even know about gold. Yeah, you know,

I'm thirty one, so I'm in the millennial cohort. Okay, you know, I was originally attracted a gold back when I was a libertarian, and then once I found Big Point, I became pretty uninterested. Um, because yeah, I mean, it's it's a it's a physical thing. You know. My my age, the millennial age group, we were the first analog to digital cohort. So we went from the transition from cassette

tapes two MP three's so into streaming. So we we I saw the whole thing happened at once during my youth, so I think our minds were a little bit more malleable for this new idea of digital money that's not controlled by a government. Definitely grew up on the Internet, definitely. But so back to the question, just real quick. So let's say, Um, let's say though in another country where

you know, the capital controls are increasing, the money's crashing. Um, I want to get into bitcoin to store my value, but I also need to spend money on a regular basis. So I mean, do you see a temporary world over the next couple of decades while there while bitcoin makes its evolvement to where that could help, or you think, I mean, you think will be stuck with the bitcoin fiat system. Just future casting a little bit here. Yeah, local said, don't think it's going to be a long

duration per local geo that you're in. If Bitcoin is more stable than you're, like, more stable in terms of price purchasing power than your local fiat currency, then I could see people using that on a geo specific basis. Um. I don't think it's gonna happen all at once. I think we're going to see countries that have really terrible monetary policies where the value of the purchasing power of the local fiat is worse or fluctuating and worse than bitcoin.

Then Bitcoin will be used in the medium to exchange format, likely and like a lightning esque transaction, because that makes it a faster or cheaper, um a little bit easier and also preserves privacy in uh In in the Manger and the Manger theory, Manger is like one of the

original for those listening. You know Dan, but you know he's one of the original guys in the Austrian school of thought, I think right, um, And in one of his papers, I can't quote it exactly top of my head, but he had talked about where like it would be almost impossible for new money to take uh, to take hold and to grow unless there was some huge event that caused people to do that. Um, And we're kind of seeing that stage being set right now. So while

under normal circumstances it could take a really long time. Uh, there are some factors that are sitting out there in the world right now that could speed it up. That'd be interesting to see. But that's all just speculates. I mean, I've never been more bullish than all, you know, even I think that the return per unit of risk that you're taking a bitcoin right now is phenomenal. The fact that it survived this long and survived a civil war,

survived long enough to get institutional adoption is fantastic. Um. I don't see a lot that can kill bitcoin. I think the risks are super minimal. I see an increasing amount of demand in the future as people flee socialists policies, as they flee bad central banking policies, as they flee

governments that they don't like. You know, bitcoin is essentially a vote against any sort of risk in the mainstream world, and I think there's a lot of risk that people are seeing, whether it be political, um, you know, political, financial or social unrest. I think we're seeing it kind

of bubbling up all across the world. And bitcoin is that one antidote, and it's it's something that you can make as a personal decision that gives you confidence in your future because you can store your money, which is your time, your store time and energy. You can store that into something that you don't have to tell anyone else about it, and that's a vote for you. It's a vote for your future. And I think across the world that's going to be an increasingly attractive option. Yeah. Wow,

such such a good uh, such a good statement. And I guess that's a really good statement for us to wrap up on because I know we've exceeded our time limit here. I've been writing down things as we're talking, and so many things I wanted to come back to. But man, we could just go on forever, and we're not going to do that, so we'll have to circle back around and do it again at a at a

later time. Uh. But man, you have so much good stuff to say, and like I said, I've gotten so much out of out of reading your your medium posts and whatnot. So for anybody that wants to follow along, I mean, the best place to keep up. What what is your Twitter? Yes, so my Twitter is at dan Held. Um, my name on there is Dan hedel Held is my real last name. It's a lot of people think I made it up, but it's actually my real last name. Um. I like to think that. You know, in the past

renamed ourselves after what we did, like Baker or Smith. Right, I was born to be a huddler. It's Dan Held on Twitter or dan Held dot com. Is is where my blog is. If you want to read more long form content. Just so everyone knows, each each blog put, each blog post has a corresponding tweet storm, So if you ain't got time for that, go read the tweet storm. It's a lot easier, I know, and now we don't have a lot of time in our day. So if you want the quick hits, go read the tweet storm.

If you want them to get a little bit further, the long form articles create. It also comes with the soundtrack, which makes it I think a little bit more engaging, So you get a little bit of a reward if you go read the long form. Cool and we'll definitely put links to the to those to those resources in the show notes to anybody that's listening can just check out the links and UH, with that will wrap it up. Thanks so much, Dan for your time. I appreciate it.

Thanks for having me. Cheers. Hey, if you like this episode of the Market Disruptors Podcast, please help us take this to the top of the podcast charts. Just please do me a favor and rate, review and subscribe. Taking fifteen seconds to just leave a quick review goes a long way and helping us reach more people and disrupt more markets. I really appreciate you listening and I'll see you next time on the Market Instructors podcast.