104 Augmenting Bitcoin with Samson Mow

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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 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about  many topics in which he has been involved he's   helped blockstream launch many of their products  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

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