104. Augmenting Bitcoin with Samson Mow
hello i'm safety diamonds welcome to the bitcoin standard podcast bringing you seminars from safedeen.com my online learning and publishing platform where you can be the first to read my work and take my online courses on bitcoin and austrian economics members can read the draft of my next book the fiat standard in full and also receive chapters from my forthcoming textbook principles of economics as they are written by joining 17.com you can also join our regular seminars which you hear on this podcast the bitcoin standard podcast is brought to you by bitmex spot the new bitcoin spot exchange coming very soon from bit max most of you have heard about bit max one of the biggest bitcoin companies which has been at the forefront of bitcoin growth over the years and did a lot to help bitcoin emerge victorious and immutable from the hard fork wars of 2015 to 2017 probably the biggest threat to bitcoin to date bit macs are now rolling out new products and services including a spot exchange 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and initiatives and he's also been involved with el salvador's issuance of the volcano bond and the development of the bitcoin city um samsung thank you so much for joining us today thanks for having me on safety so um let's first of all begin with you and your background um how did you get into bitcoin and um what got you into block stream and what got you into all of this world right so it's quite a while ago i was previously the ceo at btc china or btcc known in the west and it was one of the biggest bitcoin exchanges and mining pools in the world um it was the exchange that everyone went to after mount gox was hacked so there was a period of explosive growth where it was the the biggest in the world and then the mining pool which launched i think in 2016 it grew to about 20 percent of network hash rate at the peak um so that was my original entry point into the bitcoin world formally and i met adam back during the the scaling awards which i think we're going to talk a bit about today and i got to know him and know what block stream's mission was so blockchain was founded in 2014 um to extend uh bitcoin technology through side chains and also uh second layer technologies like lightning but um i thought it was interesting to move into bitcoin infrastructure development and work with block stream so i left btc china and then i joined block stream in 2017 yeah and so um tell us a little bit more about block stream what is it that block stream does right so blockchain was founded based on the sidechain's white paper and i guess you could say the mission of blockchain is to augment bitcoin so there's a number of products and projects at blockstream that do that um the most famous one is probably probably the blockstream satellite network so it's a network of satellites in geosynchronous orbit that are broadcasting the bitcoin blockchain all around the globe um but we have wallets as well block stream green block stream also does mining so that was something i kicked off after i joined in 2017 so we started mining in canada and then later expanded to the us and of course work on the bitcoin protocol itself and the lightning network and the liquid network the liquid network is one of the most interesting things perhaps happening at blockstream um what is the liquid network and what does it do right so the liquid network is a bitcoin side chain um a side chain is simply another blockchain that's anchored to bitcoin and in my definition of a sidechain a sidechain does not have its own native token or currency it would just use bitcoin just like you use bitcoin in the lightning network when you open the lightning channel so you end up locking bitcoin on the main chain and unlocking it in the sidechain and that gives you new capabilities and new properties so there's always a one-to-one relationship between bitcoin and liquid bitcoin but liquid bitcoin is faster because there are one minute block times and you also have the benefit of confidential transactions which i think in today's world we're seeing that is becoming more and more important and necessary the other thing about liquid is you can issue tokens so the base currency of liquid is still bitcoin but you can create assets in the network like stable coins such as usdt there's a jpy stablecoin um that's done out of japan through our partner crypto garage um you have uh lcad from bold bitcoin canadian dollar stablecoin and you can do things like securities so if you uh use a block stream product called amp block stream amp you can create tokens that have the same net effect as something like a smart contract on one of those [ __ ] coin chains so there's a policy server that is managing these tokens which are signed in a two of two format so the policy server will see if you're an accredited investor or qualified investor which is managed through a whitelist by a company and then if you are on that list it'll let you sign off and send the transaction to another person so in effect you can do securities you can do things like the volcano bond we have a at block stream there's a block stream mining note bmn token which is tokenization and securitization of blockstream's hash rate and also pixmatic is doing a game called infinite fleet which has exo token from the publisher which is also a security so it's a way to do securities and permissioned or tracked assets on a blockchain and the beautiful thing is all of these assets in liquid are confidential so when i make a transaction in liquid you don't know if i'm sending uh liquid bitcoin or usdt or a volcano bond so it's a really interesting technology i think that is not paid that much attention to because there's no native token involved so it's all about the tech yeah and i think um you know if you look at uh with the majority of um [ __ ] coin technologies out there um it seems like the um you know the the if you if you spend some time looking into them you you start realizing that the story about the kind of utility that is being offered from the [ __ ] coin chain is really a fig leaf to cover up the fact that they're just issuing a security really and it's um and i think i mean this is something that i'd always thought they're just issuing um ponzi schemes but i think michael saylor's clarity on clarifying that all of this stuff is just securities and i'm not very familiar with securities and also this is not something that occurred to me earlier but after michael sader um and you know when we hosted him here in this podcast and we hadn't we had him um in the second or third time that we had him here we've had him three times so far in the third time we discussed these and he makes a pretty compelling case that these are these are basically unregistered securities and the reason that there has been such a huge um market in um altcoins is because they are a way to offer unregistered securities so the hype seems to be about the unregistered securities but there's little utility behind there i mean i think there's nothing really that [ __ ] coins do that um that is really different uh from what bitcoin does and i think with liquid that probably disappears entirely and it seems like um you can get all of the functionality of anything that you want but liquid makes it straightforward you know there's no security there um the liquid network itself was just pegged to bitcoin if i understand correctly so that you can't speculate on the liquid token the liquid token is always worth one bitcoin right um but uh it's it it has potential for offering stable coins and offering um many of the other uh securities but to do them in in a way that is regulated right yeah so i think you're you're right about the most [ __ ] coins being securities or unregistered securities and also the the smart contracting i guess theme or messaging for the [ __ ] coins also is a way for them to obfuscate what they're doing too because if you look at a smart contract all you really care about is the end result of that smart contract so you have to rely on some external thing like a price oracle or some input that says the contract has been fulfilled and all that really matters at the end is the output right it's either you pay or you don't pay and you can do that with bitcoin right bitcoin does have smart contracts but that's largely ignored because it's not part of the [ __ ] coin narrative but it's the same for doing a security on liquid at the end of the day you know can you transact it or does it pay out that is all determined by a centralized structure in some place so you can have all this decentralization theater and you can have a as complex uh smart contract as you like on you know as convoluted and hand-wavy blockchain technology as you like but at the end of the day the only thing that matters is pay or don't pay right and that's determined by inputs from an external party it's not determined by the chain itself so you you just need something like liquid and a policy server which is not on the chain of course but it is scalable and it doesn't make sense that you would insert a copy of every single contract into every single node because at that point it'd be not it becomes centralized nobody can run that node and nobody can verify anything you just end up calling an api on infira which is on amazon which makes it pointless absolutely this is i think something that i've been writing about um i mean i you know before i wrote the bitcoin standard i made my name because i wrote an article saying blockchain technology is only good for bitcoin everything else is uh pretty much a waste of time and i've and and this was the idea that if you're going to be looking at um if you're going to be putting anything on a blockchain and if it's going to actually be useful as a blockchain it needs to be decentralized so you need to and if it's actually really decentralized not decentralization theater as is the case with most [ __ ] coins that essentially just have basically a few people in charge and then everybody's running their node on uh centralized infrastructure then you have an enormous computing load that is being distributed you know why do we need to have tens of thousands of computers um you know registering real estate deeds or stocks or securities or whatever there's no need for all of that stuff because ultimately the only person that matters say in the case of real estate is the local uh you know the local police they're the ones that are going to come and kick you out of the house if it's not your house you know that's that's the only real node that really matters there's a local police they have the guns and if they have a piece of paper or a digital record that says this is your house then if i show up and i say this is my house they'll come and they'll kick me out and it'll be your house and it doesn't matter what a million other nodes uh have to say so you're adding uh computation on many many computers in a way that it doesn't really add any any value because ultimately the thing that you're looking at whether it's real estate or stocks it is itself centralized so the house is a centralized single point of failure there needs you know that there's a police in that area and that police controls it so you're already going with a trusted third party and distributing the ownership of the house over thousands of nodes doesn't give you any benefits added to that it just adds computation so there's no logical reason for why this would uh take off and that's why we see you know we've had um so many use cases being offered for why you want to use a blockchain over the years and you know on twitter we've had all the noobs come to us and tell us hahaha you think bitcoin is only useful blockchain well what about real estate in india you know um what's this guy's name the famous [ __ ] coiner harry david paul what about blackjack you know playing blackjack distributed in real estate in india and they've been saying this stuff for what four or five years now and never comes to fruition we don't see real estate in india being put on a blockchain for a very good reason and of course you know the the the pitch is look real estate records in india are so bad then blockchain fixes it well no there are a lot of bad things in the world that blockchain can't fix so it in many cases it is um decentralization theater i think in the majority of cases perhaps the one exception might be and then recently beginning to really think this might be the one exception is stable coins i think they are to an extent centralized and i think i'm surprised that governments haven't shut them down i think if i were to revise what i said about blockchains i you know logically it makes sense to me that governments would shut down stable coins and michael sailor seems to suggest that they likely will shut them down and that you know they're not going to let random companies issue those stable coins they're going to let that they're going to have jp morgan and these big established regulated banks issue them and i think there's another case to be made which i also argued about with uh sailor which is that maybe you know why jp morgan why not just have the fed issue the central uh issue these stable coins themselves so i'm curious what do you think about stable coins as they exist right now and as they are on liquid and where you see this space going in the next few years yeah so i think my thesis is very similar to yours um that uh blockchain technology is really only good for financial assets uh you could possibly do real estate but you you need a very robust system to do that right you need something um basically some random guy can't do it you need someone that has the know-how the technological capability and the security processes in place like almost like a stablecoin issuer right you need you can't just have some random company go and do it you need something something bigger right um but creating securities does make sense there are benefits to be gained from using quote unquote blockchain technology right if you have things like stable coins securities on a chain you can get a lot more trading over time you can also have peer-to-peer trading as well so for example the bmn token from blockstream the it's not listed on any exchange right now but people are trading it in a telegram group because it is on the liquid chain and they can do that they as long as they're both white listed they can trade it freely um for things like stable coins right they just don't stop they keep going um 24 7 for things like volcano bonds or anything like that those can follow the same um same principle so you can get a lot more utility out of these things when they are on a blockchain and like that blockchain it could be a side chain like liquid right liquid is a federation the blocks are assigned by 15 federation members there's no excess amount of electricity consumed it's probably the same as a fridge or a small fridge for a year right so when you have things like that decentralization theater for all the [ __ ] coins that is actually wasteful right you're doing proof of work just to pretend to be doing something decentralized when actually you could get rid of all that and just have one guy running that one node on in fear that everyone calls right and that is largely what the networks are for these guys because when inferior goes down or amazon goes down then everything shuts down all the exchanges halt deposits you just have to look carefully what's going on and you understand how incredibly centralized it all is um to the other point about stable coins uh i think a few years back i said stable coins are a mid-step towards bitcoinization so eventually we won't need stable coins and i think that you're right that governments will shut them down eventually um it's just a matter of when and i don't think that they'll get like jp morgan or chase to do them they'll just go directly to the source right just have the central bank issue them why have a middleman right they can collect all the data they can monitor all transactions and you don't have to deal with a bank getting in the way because you'd actually need to do something like get a court order to get data from a bank but if the central bank is the issuer they have all the data already right they can freeze every transaction if they wanted to and we kind of got a feel for that in canada right so you know if you didn't like a bank freezing your account then you're definitely not going to like the central bank freezing your account because that's even easier and closer to government control than the banks themselves but there is a use case for stable coins right now so if you're in an emerging market and you have suppliers and you're paying your suppliers still in fiat currencies everything is denominated in fiat dollars or whatever stablecoin is useful and stablecoins are they they have similar properties to bitcoin even though they're centralized which is you can move them permissionlessly and you know largely if a stablecoin like let's say usct is out in the wild then a normal average person could just get a wallet and get that stable coin without having to go to an exchange right and there is a lot of value in that if you think about it even if jp morgan or chase wanted two do stable coins and give them to people they still would not give them to an unbanked guy with no address or you know identification right that you're going to get to the same problem of which you give them a bank account a proper bank account and the answer is no so the only way that um the underprivileged or unbanked or you know people less fortunate have is to use a stable coin and i think if a government shuts that down then it's largely going to impact probably the less fortunate people than the people that have the means to get a bank account i'm i'm curious why you say that i think you know there's a if you're the central bank of the u.s if you're the federal reserve um you know th if if tether and uh bitfinex can get a stablecoin to run and they can get it to run securely enough that somebody in lebanon or venezuela can use it and trade with it and you know it works it works well enough for them it works much better than their local bank account why wouldn't they just do that why would they need to um make it so that it is um so that you know you need to have you need to have a banking license essentially too or you need to have kyc i don't see why they'd want kyc on that beyond surveillance which they can implement anyway um so i mean i think they let the coins run and you know the more people use the dollar the more people use the stablecoin the more demand there is for it and the more they can uh benefit from inflating the supply you want more users so i see it as i mean i mean this is the trend that has been uh in capital markets for the last 50 years which is all of the world's currencies are eager to collapse next to the dollar because who you know why would you want to hold any currency other than the us dollar if you had a choice everybody would choose the dollar the dollar is more liquid with money everybody wants to prepare the prefers to think that is the most liquid the limit on why people can't just told dollars is because they have local central banks and the local central banks force them to use their local currencies but wouldn't stable coins be a way for the central bank of the us to basically um runner around all the local central banks i think it has more to do with uh regulatory pressure so if a bank is the issuer of a stable coin and anybody like let's say someone in a sanctioned country could access that stablecoin then they would get an immense amount of pressure to do something about that right or even societal pressures like let's say you're uh you have an only fans page or something like that and you live in a country that doesn't like that that they would put pressure on that bank because there is an entity that they can go to that is very much wired into that entire regulatory surveillance framework right like to to reach the effect where a bank could give to could issue a stable coin that would be able to move freely i think you would need to jump that first hurdle which is you would be able to give a bank account to someone in lebanon like without any identification yeah i mean i'm i'm wondering here if um online surveillance might just replace uh kyc in a sense that you know you'll download the wallet on a phone and then in order to have a wallet it has to be linked to your phone number and then that just acts as the kyc and then you've got global surveillance and so then it's easy for them to um you know if you're in lebanon you're suspected of being engaged in something illegal that the us government doesn't like it's easy for them to link the wallet to the phone number and then shut you down possibly i mean there is a very massive surveillance network and it could perform that function but i think they would still not be willing to give that up like it's too much of a mental or paradigm shift to let someone create an account without knowing who they are right and it might overwhelm their systems too like i don't think the banks are capable of managing something like this to be honest but you know i think stable coins are going to disappear eventually maybe it's five years maybe it's 10 years i don't know i i think we'll end up trading a bitcoin against something like a commodity down the road maybe it's tether gold or some other commodity based uh stable coin not a fiat dollar coin because you're basically wrapping up um some central bank note right and as long as you're doing that they're going to be able to protest and put pressure to shut down but if it's a commodity based stable coin like gold then what can you do right it's not under your control you could pass some law saying you know gold is out now under control maybe it's like 6.02 again but uh yeah yeah you don't know but i think it's
more difficult to do so i think eventually the dollar based or fiat currency based table coins will be phased out in favor of a commodity-based stable coin that's interesting i think the counter to that would be that they do control gold uh almost as much as they do control the dollar i mean i think about a sixth of uh global gold supply is held by central banks but i think more importantly is that um all the trading all of the global trading of monetary gold takes place over a a centralized blockchain platform which is the london boolean market association and i discussed this in my new book the fiat standard you can think about it as essentially being similar to an altcoin but there's a whole bunch of physical gold that's in london and in a few other financial centers and once a bar is in that system you know once a bar goes into that system it gets it's uh it gets a serial number and then it's part of that system and then you can trade it around you can move it around but it has to stay within the lbma um network and then if you actually want to cash it out um then you know if you take it out then it's gone out of the system and uh that's the only way that you can verify that it's an actual gold bar so you have to take their word for it if you want to verify it you are out of the system and then you need to put it back in so it's a pretty centralized it's it's a very centralized system and uh it's it's the only way that you can have a global market in gold so you can't just uh you know if you're going to be pegging tether to gold if you're going to be having something like that ultimately you need final settlement of physical gold in order to um keep this moving and it's going to have to be something far more centralized than you could do with the digital currency so i i'd be a little bit skeptical about the idea of them being able to uh of them letting something like that happen because if they if they're going to let a gold tether survive it's they're more likely to let a u.s dollar tether survive that they control it's difficult to say but i would say uh tethers already ahead of the curve right they already have tethered gold and there's i forgot how many but there's millions of dollars worth of gold that they have in circulation already and that's kept in switzerland and you can take physical possession of it so unless there's a way to prevent taking physical possession then i don't think it's possible to stop a commodity-based stablecoin from taking off so you'll have the london one but you'll also have tether gold or other competitors because tether is usually ahead of the pack when it comes to innovating these kind of financial you know instruments so i i see a world in which you have multiple uh commoditized stable coins and they're all held in their own private vaults and with their own audits and attestations of the reserves and you know there might be a large centralized one that trades purely in paper notes on a legacy system but will also have competing systems in different jurisdictions that are backed by physical commodities and what do you see as the likelihood that these kind of systems are going to migrate to liquid predominantly or maybe lightning um you know we'd have these stable coins built on liquid and lighting versus you know being distributed over many [ __ ] coin networks as it's currently the case well that's what i'm advocating for so i you know i'm strongly trying to get more assets into liquid because i think liquid or any liquid like federation that's using that same technology will be beneficial for society and you know human civilization because we have to restore money as money and not a tool for surveillance and i think having confidential transactions is a key part of that and having um these assets running on lightning is also beneficial in terms of privacy and scalability so if you have a stable coin on liquid liquid will eventually become just a plain settlement network because right now usage is still relatively low you can make transactions for like 10 15 cents right but eventually that's going to go up as block space fills up so you'll still need lightning networks on top of liquid assets and that's what um i think a number of teams are working on but to to have liquid as kind of like the base layer for these things like a commodity stable coin or a dollar stable coin and then a lightning network on top of each one and that will allow us to achieve planetary scale and much more improved privacy on a number of levels because at the base chain you also have that privacy and then you have the lightning network on top of that which also increases that privacy so i think that is the direction where we're going to go in i don't think any of the the shitpoint chains are focused on that use case or or that privacy aspect right and most [ __ ] coin chains are disincentivized to create second layers because you know why make a second layer then you don't need the base layer and you kind of reduce the value of the base layer's native token right so that's why nobody's working on a second layer for solana or whatever chain because then you don't need the salt token right you could have just done it on bitcoin at that point yep that's uh that's i think the kind of uh you know the more altcoins proliferate the more they eat into each other's market share and the more they obsolete each other and strengthen the case for one network which is the only one that is neutral the only one that is not centralized um so what do you see is the likelihood that lightning that liquid will continue to grow do you see this as uh do you see it as likely or do you think maybe the project is stalling and that uh maybe it won't pick up what do you think well i think it will continue to grow so one of the things i will focus on next is more nation state bitcoin adoption potentially more bitcoin bonds from different countries and i i will advocate for them to do those on liquid so it doesn't matter that specifically liquid succeeds but that the side chain technology in the current form succeeds so we could have more liquid-like federation spring up um you know run by different federations in different mixes of jurisdictions but the key is that this technology is adopted not that liquid network is the only one because then that'll be a a really central point of failure yeah okay well before we get to the bonds uh what is what are the other things that uh block streams been working on what are other projects and that they've done so i know they do mining they have a lot of mining infrastructure i think in canada mainly yeah blockstream is a canadian company right yes canadian company um there is a an operation out of quebec and also uh in the us in georgia so i think the bulk of the mining operation is now in georgia oh okay interesting and recently you've uh gotten an investment from bali giffords or bayley gifford um an old scottish money management firm one of whom's members i would say or staff members is alan farrington who's been on this podcast before and is regular in our seminars so what is that partnership tell us about it this partnership with kind of old money what is the significance of it i think the significance is really that um it's a i guess it's a vote of confidence in in bitcoin as the most important technology so blockstream is a bitcoin infrastructure company and having this uh super old i forgot how many years 50 100 year old scottish company invest a significant chunk of money into blockchain's b round kind of validates that uh bitcoin is the most important chain and the only decentralized one but also that services products building on top of bitcoin to extend bitcoin are the direction to go in um and you know a lot of the vc firms are i would say they're they're new money right they're looking for quick capital uh a quick wins um flipping companies and things like that and just riding the hype train but you know if you look at bailey gifford they have a long history and they invest in things that are for the long term right i would say like they have a low time preference so them investing in blockchain kind of aligns the idea that the smart money the long-term money is going to go into bitcoin not just for investing in bitcoin companies but also investing in bitcoin as an asset very nice okay so um so you you're leaving brock's stream right yes and what are your plans moving forward um really just to focus on nation state bitcoin adoption so with everything that happened in el salvador there's a lot more interest now in bitcoin a lot more politicians are starting to look at doing their own laws to make bitcoin legal tender i've been working with a senator of mexico in dear campus to try to get something through in mexico but there's a number of other latin american countries and other countries that want to do things with bitcoin whether it's legal tender or nation state bitcoin mining so i think it's a good time for me to step away from block stream and focus on this new opportunity just because you know these doors don't open all the time right i think everything that blockstream is doing is incredibly important but similar to the shift from um working at an exchange to working on bitcoin infrastructure i just think this is the the next step up for me to do something even more impactful than bitcoin infrastructure but getting nation states to adopt bitcoin and to make bitcoin even bigger yes um that is i mean if yeah if the if there's a good career move i guess where you could take a step up from lock stream and infrastructure then yeah i guess nation state adoption sounds like a good one so um what is uh what are your thoughts on uh el salvador's volcano bond i know you might uh not be at total freedom to tell us everything you think but share with us with us what you think as much as you feel comfortable with um what do you think is the case for these bonds what are the benefits to el salvador what are the benefits to investors before we get into that some maybe should just give a little bit of an explanation for because if some of our listeners haven't uh been familiar with this so what's happening is that el salvador as most people probably know they've announced that bitcoin is legal tender and since then um their president naib bouquet has been extremely interested in um what happens with uh uh with bitcoin he's been very active on bitcoin twitter and max kaiser suggested to him that instead of taking on a loan from the imf they should uh mine bitcoin with their volcanoes because they have a lot of volcanoes in el salvador so they should use those volcanoes to mine bitcoin and issue bonds against those uh mines and they started with a one billion dollar uh bond issue right okay so i think it's it's either i think max kaiser and alastair both came up with the idea of of the bonds and it was mr miller yeah also um it's based off of the the volcano mining meme right so i think that's a a good way to monetize their geothermal energy so yeah the bond is uh an important part of their future i believe all the countries especially in latin america that are i would say under the heel of the imf and can only borrow to refinance that this is a way out for them to get capital for the development of their country with uh bitcoin and with bitcoin mining so the only way previously would just to be continue borrowing and the imf would dictate and try to modify policy or you know change the politicians or have some impact right but what this gives countries is sovereignty right bitcoin gives everyone back their sovereignty and that holds true for nation states as well so if el salvador pulls off this bond then it shows the world that you don't need to rely on the imf or any central lending institute that does not necessarily have your best interest at heart but you can just fund everything with bitcoin backed bonds yeah um you know in in my uh book the fiat standard there's a whole chapter maybe the longest chapter in the whole book um on the development industry which i call the misery industry and um you know the book looks at how fiat money works and at the protocol level in the same way that my book the bitcoin standard looked at how bitcoin works and then trying to understand the implications the fiat standard looks at how fiat works and the key idea is that fiat functions through fiat is mind through lending lending is everything in fiat lending is not just borrowing lending is also mining in the fiat system so every time a new loan is issued by an organization that is backed by the central bank any financial institution that is protected and regulated and backed by the central bank if it issues a loan it's increasing the money supply it's making the money supply uh increase and so naturally that's what gives such an enormous incentive for everybody to get into debt so if you look around the fiat world individuals municipal governments corporations national governments everybody is up to their eyeballs in debt anybody who has any future income is borrowing against it and we're now at a point in which the world economy is basically up to its eyeballs in debt it can't go any more everybody's borrowed up to the hilt against everything that they're going to be earning into the future and um you know the the keynesian idea is that the more you borrow the more growth you get and so the keynesians are just trying to get people to borrow more and so they're lowering interest rates but um the capacity to continue to borrow increasingly is um is is dwindling just because there's a limit on how much you can borrow which isn't the case with bitcoin um well it's it's it's not the the limit is in generating more debt for economic growth but bitcoin doesn't need to generate debt and bitcoin just um his equity in a sense it just appreciates so there's really no limit on bitcoin's number go up but there's a limit on how much borrowing uh can take place but the interesting thing in the in the whole chapter that i do on misery industry is that what the imf and the world bank do is they have a credit line from the u.s federal reserve so basically they can also print money you know when um argentina goes to the imf and asks for 20 billion dollar bailout the imf doesn't need to you know go call brazil and south africa and tell them hey give me some of the money that i lent you i want to go lend it to argentina i found a better deal they don't have a budget they don't have a restraint on how much money they have they're not um they're not an actual real financial institution run by adults who need to be responsible about what they do with their money if the politics is such that argentina should get the next 20 billion dollars the next 20 billion dollars are going to be made and it's it's just a credit line from the federal reserve and so 20 new billion is going to be handed out so as you can imagine you know this gives the imf and the world bank an enormous incentive to get argentina and brazil and all of the planet into debt because it costs them nothing to issue those that debt they get paid that money back and they get it with interest and um so if you work for the imf and you work for the world bank you know your institutional interest is to hand out more debt and that's why if you look at yeah if you look at their you know what they call development economics which pretends to be a a field of knowledge uh when really it's just a loan shark marketing material you know you there are all these problems in the developing countries all over the world and the one thing they all have in common is that they can all be fixed with debt whatever the problem is you know if it's human rights or if it's poverty or if it's a woman empowerment or if it's a girl's education or if it's healthcare or if it's malaria whatever it is whatever the problem is wherever you are in the world africa asia latin america europe wherever you are whatever problem it is the answer is for you to get into debt and there's of course a lot of very sophisticated literature about what the problem is and what the solution is and how we're going to spend the money and what we're going to do with the money and how we need to make sure that the money is spent with stakeholder um involvement and there needs to be participation and there needs to be this and blah blah blah and all the right buzzwords that you have to include you know it has to um all of the human rights buzzwords all of the gender buzzwords all the uh correct now you know the health hypochondria buzzwords that we are adding on to that list with kovid but you know all of that is um details it's like [ __ ] coin marketing pitch you know what's really behind it is they want to make a new um amount of money and they want to hand it out a lot of money so it's no exaggeration to think that the imf is a loan shark it acts like a loan shark because it has every incentive to and unlike loan sharks you know loan sharks need to actually get the money from somewhere and they have an opportunity cost the loan shark if he's going to lend you 10 000 um today you know that's ten thousand dollars you can't lend to somebody else but the imf is a special kind of loan shark where it doesn't matter how many dead beats come to it there's always another ten thousand dollars they can hand out except it's not ten thousand it's ten billion usually and they're always just handing it out so uh i think the the idea that we could just witness com countries break out of that through the use of bitcoin it's just it's it's amazing it's one of those many amazing things that bitcoin slaps you in the face with well that's why a lot of these organizations and i i would say powers in the world they don't want the bonds to succeed because that breaks their entire model um you know if you look at what the imf is doing they're saying you know el salvador chivo is good keep doing that but you need to stop the legal tender stuff right because if you if you no longer control the money you lose control over everything else so money is effectively control um money from a nation state like say the canadian dollar is a way to control the populace right if you have the protest in canada and you freeze people's accounts you can effectively control them right it's a more pc way to kill somebody you kill them financially stop them from eating ruin their finances get them evicted whatever right you didn't put a gun to their head and shoot them but you've effectively killed them or in the winter in canada you might actually do that if you starve them out and they have no recourse but at a nation-state level it's the same thing if you can keep them in debt if you're the one that's providing them with quote unquote money then they have to listen to you it's a way to control just like controlling your own population but now you're controlling another asian state and that just is an erosion of sovereignty right you're no longer a sovereign nation if you're at the beck and call of one of these unelected you know clown organizations that have no responsibility or even ethics right and everything is corrupt the whole the whole network is corrupt right so you have the rating agencies that are downgrading um old debt from these states which makes it more expensive for them right because now they're paying a higher coupon than is than the face value of the debt so they need to borrow more money in the future so it's just a downward spiral that you can't really get out of and bitcoin is the only way out of that hole so i think a lot is riding on the success of the the model behind backing a nation state with bitcoin and i think uh bitcoin mining is an important thing too so i think president bukley was very smart that he decided to go with uh the volcano bonds right it's not just that it's a funny meme and you're mining with volcano but energy independence is also very key so not only do you need to have bitcoin you need to have energy as well and the best example like there's so many great examples that are coming out in the last month you know of uh why bitcoin right it's almost like the the world is kind of realigning itself to show look at this thing look at bitcoin it's so important you need to look at this right so germany wants to sanction russia but they can't because they rely on russia for energy because their own nut heads shut down all their nuclear plants so they're energy dependent right so energy independence is just like another thing that you suddenly realize you need to have and energy and bitcoin are deeply intertwined if you have energy you can get bitcoin you can get bitcoin without relying on anybody else you can't be cut off from any network right and your energy won't be cut off as well so with el salvador having the bitcoin law bitcoin legal tender uh with bitcoin bonds and with mining they're set up to be a real sovereign nation an actual real sovereign nation out of the control of the imf and world bank yes i think that's that's absolutely fascinating and you know um these rating agencies you mentioned they're uh going on about how el salvador is being irresponsible what's truly amazing for me is how they don't think and they don't mention that borrowing from the imf is actually what's really irresponsible because um you know not only is the imf does the imf have the ability to just make money out of thin air the imf is not accountable to anybody the imf in the world bank i think this is a very very important point that is blatantly obvious but it's one of those very obvious things who which people don't like to think about or don't like to mention and whose implications are not understood so what does it mean that there's nobody that the world bank reports to and there's nobody that the imf reports to there is no boss for the head of the imf to report to the imf and the world bank have their own internal assessment departments those are the only people they report to so the basically it's a self-licking ice cream cone as lots of things are in fiat in that the imf hands out tens of billions of dollars to these deadbeat governments that go and then use it in all kinds of horrific things and then you know nobody is going to go to the imf and say hey why did you give this deadbeat 10 billion dollars that he then used to genocide his ethnic minorities and make himself a leader for life and make his family and his tribe rule the country for a century why did you give this guy 10 billion dollars there's nobody outside the imf who can ask them that question they don't have to answer that question to anybody if you're a journalist you try and ask them that question you don't get to ask them any more questions that's it if you're a government that wants to ask them that question you don't get to ask them any more questions they have their money they have their funding you know they can pay lip service to congress they can turn up against congress up at congress and you know um say that we're doing our best and we're gonna fix all of the problems but it doesn't matter it's it's completely um it it's just noises it's irrelevant because there's no real accountability nobody's going to get fired in the imf because they gave too much loans to a corrupt government nobody's going to lose their job nobody's going to have to pay from their own pocket there is no accountability there's only an internal body in the imf which is hired by the imf paid by the imf career people whose career depends on the imf they're the ones who write the reports assessing the success of imf programs and guess what they're always they're always successful yeah i mean there's always obviously you can learn from it but of course it's always and and and and the problem is you know this is the kind of uh the the the conclusion they always come up with is this this saying which is so frequent and so common in the misery industry this idea that you can take the horse to the water but you can't force the horse to drink and it's just well you know we did our best we told those and this is where like the colonial language begins to show up like we told those um you know nasty third worlders here's how you build the modern government we gave them all the money we told them how to do it but they just didn't want to do it the president was corrupt um this this or that or the other thing got in the way we had cultural uh barriers you know basically those are third worlders and they can't function as if this kind of dynamic could work anywhere you know you could go to any society anywhere it doesn't matter whether it's the first or third world or anything anywhere in the world and you you find a guy and you give him billions of dollars and you tell him here you know you you can centrally plan your entire economy that's not going to work anywhere you could destroy any country in the world by doing that to it but of course they never introspect they never look at themselves and it's always the fault of you know that it's always the fault of the people that are taking that money it's never the fault of the people that give it give them that money bitcoin of course fixes this because when you know when a president issues bonds backed by bitcoin mining he doesn't have any fallback option there is no central bank for bitcoin that can bail him out so if he messes up he's going to have to pay the price and then he's going to have to face his angry people there is no getting out of that by just going to the imf and the world bank to bail you out so if anything it is far more responsible um but as you said you know these rating agencies and the media they're all in the same fiat um they're all eating at the same trough of fiat money and they all benefit from it so what is what is the case then for the um bitcoin bonds for an investor this has been unclear so far but has has it been decided whether this is going to grant you citizenship or residency in el salvador if you invest in those bonds um i believe yes um the president did say that that would be the case any investment would lead up to a citizenship fast-tracking but i believe they haven't created the new laws that would enable it yet but there is a raft of laws going to congress soon which will include the new digital securities laws which will enable the bond issuance so i i think we'll get clarity that on that in the coming weeks but right now it's still tbd okay excellent all right so um i want to go back to the block size war you were pretty high profile in the block size war and it wasn't just because you made the famous hats although that i think was enormously inherently it helped enormously um speaking of which you scammed me out of a signed copy of the bitcoin standard by sending me a bunch of hats and then after i got the hats i realized hang on a second i never wear hats so you got a bitcoin standard copy from me without me really getting anything out of it but you know well played and the hats are pretty cool so you could wear a hat one day if you needed a hat it's really sunny outside or something yeah i guess yeah so uh tell us a little bit more and there's there's a book that was published by the by uh bit max research jonathan beer from bit max research and the book's called the block size war which does a good job of documenting um the events of this war um can you tell us a little bit about your role and the um just the the the war itself what happened what you think uh went down how likely you think it was that this would be the outcome do you think it was just um destined that the small blockers would win or do you think there was a real risk that the big blockers would win i think long term the small block camp would have won it's just a question of how nasty that war would have been because you can't really change bitcoin right um you might end up with uh a lot of hash rate potentially going with bigger blocks but the small blockchain would still continue and you know it's a slippery slope and that's why we preferred we didn't go down that route and that's why we advocated strongly for the small blocks because the if if there was a split and there was a big block blockchain which technically there was right i mean it did happen it's called be cash or whatever they call it i think they rebranded it now right but they have their big blocks but they can once they set that preset they can change whatever they want they can keep changing whatever they want right so it would have died eventually but i think the outcome was the ideal outcome which was game theory all worked out nobody was willing to make the first move and you know try to effect change and modify the protocol and everything i think worked out pretty good right it was better that we did that war when bitcoin was about a thousand dollars then right now when it's what is it now 40 something thousand dollars um it's better to have gotten through that phase in bitcoin's growing pains um come out on the other side unskated and set the example that you cannot modify bitcoin and i think the ethereum hard fork also had a place in that right showing that you know you can modify it but then what's the point because if you can modify the chain and change the rule set then anything goes and there's no point to it anymore right so i think it was the right move and i think i'd like to think i contributed to winning that war um aaron van wortum says i was the only sea level executive at that time that was standing up and supporting the small block camp because if you remember back then it was every single bitcoin company out there saying we want bigger blocks you know brian armstrong leading the charge and now you see he's an eth head you know it's bryan armstrong.eth so you kind of naturally selected away everyone else and got them out of bitcoin because they're not bitcoiners right and they have no connection to the bitcoin ethos whatsoever and i think we have a much healthier ecosystem now because of that and i remember when your book came out i think it was just after the the wars had kind of subsided i thought wow it's good someone actually wrote something and now there's a body of material that we can look at and see why it's important to have bitcoin as bitcoin is right now because back then there was not a lot of material i think a lot of material came after the war but if that existed before it would have been great right and i i think jonathan johnny beer's book is good too right documenting that history so that we don't need to go back and relive that in the future yeah i think you know when you see when you talk about the bitcoin ethos i think this was the this was the fire that forged that that ethos and it was forged really as you said by just um everybody who doesn't agree with it rage quitting and going into their own [ __ ] coin and i think it's it's um before then we could say bitcoin was immutable but it wasn't very clear that that was the case and it was um you know i didn't think somebody like gavin andreessen who um was probably the face of bitcoin up until 2016. i remember i think it was in 2013 or so that the financial times had written something along the lines of maybe the economist one of these uh fiat uh publications had said that gavin andreessen was more important to bitcoin than satoshi and that he's the face of bitcoin and gavin and recent was pretty clear from 2014 or so that bitcoin needs to have its blocks increased we need to hard fork and that's just going to be straightforward and there was there was even you know he had some posts some emails in which he spoke you know i'm sick of waiting uh for people to come along i'm just going to use my prerogative as i can't remember what it was but you know something along the lines of uh if you guys won't just come along i'm just going to do it myself and then you're going to have to join i think a lot of people did not understand the um immutability of bitcoin as it is and i think they thought that they could change it and you know uh it's difficult to tell in retrospect how likely they could have been they could have gotten to changing it but i think um this the this war and the way that it went i think was enormously influential
2022-03-10 06:17
