Should Bitcoin Embrace New Use Cases | Lyn Alden, Jordi Alexander

Transcript

there are a lot of people around the world that want better money billions of people want better money and that's not a small Market even if it's just gold if it's if it's gold it's available to everybody on a smartphone that can be twice gold 10 times gold this episode of Empire is brought to you by quick node quick node is an end-to-end blockchain development platform that makes building web 3 apps super easy no matter what you want to build you can effortly develop any application by leveraging their elastic apis go to quicknote.com use code to Empire you'll get a free month on their feature back build plan that's right go to quicknode.com you'll get a free month to start playing around you'll hear more about quick node later in the show this episode is brought to you by Quinta the premiere derivatives platform on

optimism that offers deep liquidity low fees and up to 50x leverage across 24 different assets you'll hear more about Quinta later in the show all right everyone welcome back to Empire we have two guests who need no introduction today Lynn Alden and Jordy Alexander Lynn Jordy welcome to Empire thanks for having me good to be here yeah yeah excited excited you guys are here basically we wanted to do this episode because uh think things on bitcoin and like Bitcoin uh world seems crazier than it's been in in many many years I think there are a lot of folks out there looking for kind of what I'd call credible opinions incredible information on the future of Bitcoin in general to frame this conversation

there's this debate on bitcoin's block space that is kind of what I'd call divided the Bitcoin community and it first sparked in February with the rise of ordinals it's now been revived with the emergence of the brc20 asset class um both Creations were made possible uh by this thing called the Taproot upgrade back in November 2021 uh and because of ordinals and now brc20 tokens uh Bitcoin transaction fees have spiked uh they're up 35 x in the last 30 days uh BTC block 788 695 marked this historic moment in which transaction fees exceeded the mining subsidy um and so Lynn and Jordy and maybe Lynn I could just pick on you to go first here would love to get you're just like very high level framework for how you're

viewing Bitcoin today and like viewing what has happened the last several months in Bitcoin land sure um so you know when I analyze Bitcoin over the course of years and with determining whether or not it's investable asset one of the things I covered was the long-term fee um you know model the incentive structure uh you know the security of the network um I actually wrote an article about it over two years ago um and one of the things I mentioned was that there there could be use cases we don't see right now um that might emerge in the future for demanding block space other than just transactions it's already been you know I covered the ones that there's there's been ones in the past and you know they kind of come in waves um and this is the latest wave and so we never really know exactly what the

market is going to determine the best use of block space for um you know when we scheduled this discussion it was about Bitcoin security uh and that was in a pretty low fee environment um and you know during that time there are a lot of um critics of Bitcoin saying you know the fees are too low it's going to be insecure in the long term as the block subsidy goes down and now you see a lot of critics kind of coming out of the woodwork because you have fee Spike and they're saying look bitcoin's unusable the fees are too high and it's like well you know it's like it's funny how quickly narratives can change sometimes from the same people sometimes from different people um and so you know the way I view it is that this is this is the market at work right so right now there's a a big new

speculative use case uh you know as of as of this talk and this could this could change in in minutes hours or days but right now the feast bike's already subsided for the most part I mean it spiked up like 30 a transaction it's down to like three dollars a transaction you know maybe they'll get a second or third win we'll see how this goes I mean this is something that has to be evaluated over time but these are these are not you know at the moment at least not very useful assets um they're really kind of speculation oriented meme oriented Bitcoin purposely doesn't really have the type of base layer programmability that say something like ethereum does um and so there's not a ton of kind of long-term sustainability with what we're seeing right now now and that kind of inherently speculative action kind of

exhausts itself because there's only so much Capital they have to pay for fees to kind of play these games and they only have so many followers that they can kind of use as excellent liquidity in this kind of big speculation pump and dump um and so I I think you know some of the critics of the network are overreacting and I also think that some of the proponents of Bitcoin some of the so-called Bitcoin Maxes that are kind of knee-jerk reaction to want to like you know censor this or change this and and kind of censor it right away I think that's also a problem I I think these things have to play out I think the fee Market is going to sort it out over time and then of course users and devs can always you know assess the network over the very long term and see what kind of

minor consensus uh changes might be useful for the network over time kind of like segwit and Tap Root you know I'm sure there will probably be a couple more in the future to optimize the network as best as possible but I think it's in a healthy State I think it's doing what it's supposed to do Jordy there's kind of two camps here there's like there's camp one which might be um described as like bitcoin's block space and security is purpose built for BTC the the asset and nothing else and that bitcoin's Elegance is its Simplicity and that it's just like it's app specificness of digital gold and then there's camp two which is like Bitcoin is this permissionless platform uh where it's use case and will and should be driven by free market forces and it's cool that we have Innovation

happening on it and like you know maybe Bitcoin like defy on bitcoin comes comes to bitcoin and that's a cool and exciting thing where where do you fall out which one of these camps do you fall into um you know I see I see both sides I'm kind of in the middle I think that it's all about social consensus everything about Bitcoin looked at from just a pure technology lens or a pure monetary lens is uh incorrect in my opinion like the social lens is the most important thing and the value of Bitcoin is just kind of the coordination value and the social construct of it so when it comes to things like this and other things that Bitcoin Maxes get irritated about um it's because they've attached certain social constructs that are not

necessarily like in the code or need to be in the code or or you know it's kind of the story that they tell themselves and um when when you see them going against ethereum for example they want to you know say how ethereum has all these coins and it's uh it's a lot of speculation and then what happens on bitcoin then you know it it looks very negative for what they used to say so they have to kind of go against it just by default right um I'm very neutral on whether like this is good or bad in terms of like whether it solves the long-term security um I think we're very far from that and um you know in a way like it shows some possibilities and kind of what Lynn said like you know we don't

know in the future use cases and things can come up um but you know we can go too far on this thesis we can say that right now we're not helping long-term security by having like a you know temporary speculative bubble on you know some uh coins that are built or some nfts it's not actually going to solve the problem in 20 years the problem is not even now like no one's complaining about um you know the blocks now we're not even uh into the next helvening so um the problem Still Remains because we don't know if in 20 30 years people will still be minting uh you know new coins on on the Bitcoin chain or whether they'll keep wanting to use block space for digital art or or even if the

community will allow that because like you said there's a lot of people who want to censor it so um yeah I'm kind of in the middle on all of this yeah Lynn do you fall into one one or the other of these camps or would you be are you similar to Jordy kind of falling in the middle here kind of in the middle I think the current design is elegant I think it hits the sweet spot where you know it's mostly for transaction does the original tent of the network but you know Satoshi also put arbitrary text into the Genesis block uh you know it's been a feature uh from early on um that it can be used for other things as well uh small bits of information that have various use cases either aesthetic or functional um and you know I think it's good that

Bitcoin does not have uh you know more sophisticated programming on the base layer that opens up all sorts of complexity extra attack vectors um higher requirements for running a node generally so I I think it's good that it's not further in that direction but I also think it's good that there's a foot in the door to use the the you know the base layer for other things as well and you know the way I would phrase is that Bitcoin so far is like the most decentralized immutable database that people have built um I think the the killer app for that is money that doesn't mean it's the only app for that I think that's the one that can price other things out of the long term or at least you know be a dominant use case but there could be other high value use cases for that you know

securing other things with a lot of economic density uh putting in key pieces of useful information that you really want to pay for the immutability for um and you know when it comes to the long-term kind of fee expectation I think all the long-term thing that most of these have in common is that it's about adoption right so you know basically Bitcoin can do roughly the number of transactions that fedwire can which is the basically the base layer for the U.S financial system uh that Network settles literally one quadrillion dollars in Gross value per year um which is like sounds like a typo but it's not um and and so you know obviously the average transaction size when you have

that few transactions and that much settlement volume is in seven figures for fed wire uh Bitcoin is obviously still much smaller even though you know it's roughly the same kind of size in terms of parameters is basically an open source decentralized fed wire you know kind of with gold combined into it like its own its own bear asset um and I think that's it's I think it's serving its purpose I think the combination of you know primarily being used for for settlements transactions long-term storage of of kind of global portable value is serving that use case and I think it's exciting that there are other things that people can use it for I think that the you know the current iteration of speculative meme coins that people dump on their followers is not

attractive um but you know there's long been a desire to you know either you know connect other other blockchains to it or put in valuable information that people want to exist into the future I think those are valid use cases and I think that you know whatever people are willing to pay for over the long term determines what is what is attractive use of black space I think underpinning a lot of this is is this thing that you you two have both mentioned a couple of times here is the SEC the secure the long-term not one to two years but many many decades like the potential security issue um of Bitcoin and I think there might be some folks uh who are not familiar with that so Lynn can you maybe set up this

conversation and maybe frame this in turn by talking about potentially the bear case actually for Bitcoin um and like the the the argument that Bitcoin Security will will eventually fail um can you maybe set us up by talking about what that is and then we can walk back from there sure so as most people know Bitcoin has a Cap supply of 21 million coins every four years the number of new coins generated per block uh gets cut in half and so that asymptotically approaches uh zero uh within a decade or two that becomes very very minuscule um you know more than 90 of Bitcoin have already been mined so that the last 10 percent long tail is still being mined and so the you know the long-term expectation from the beginning uh even

in satoshi's own words was that fees would eventually um you know be the the primary and eventually only source of of revenue for Bitcoin miners uh which is important for the long-term immutability and censorship resistance of the network and so the bear case is basically to say that Bitcoin block space is not going to be attractive in the long term that even though it's pretty small and tight block space uh that even that you know 10 20 30 years from now will be unattractive enough that people want to substantially pay a significant an amount on a per transaction basis in order to settle value there or to do other things you know documents you know um securing other chains whatever

whatever they might be using that block space for that that'll be unattractive either in general or compared to other chains and that therefore Bitcoin will be open to very you know kind of lower cost censorship attacks um that that would impede it now now personally I don't agree with that view but I think it's a question worth exploring and it's something that I explored when determining whether or not Bitcoin is an investable asset over the long term you know might kind of you know long-term analysis of the network it is it is a question that has to be explored and then I would phrase it I think there are some honest actors that raise the question um and that they've saved reached a conclusion that they're skeptical of the long-term security

um but I also think there are a lot of other people that kind of like a better word flood the network to kind of promote another coin that they might have more affiliation or stake in and that not all the arguments are are genuine around that topic and I would also point out that we I want to bring it up later at least um that you know other blockchains that claim to fix their own security model have their own security flaws in terms of of kind of the long-term sustainability that it's worth comparing to when we're determining what what is actually a viable security model um Jordy you tweeted at us um I think actually that might be how this episode came to be many months ago when I got kept getting pushed on the calendar but you said I agree with Jason and Santi

that the time to discuss solutions to bitcoin security uh model is now not in 10 years though Nick Carter's right we may need to see the whites of the enemy's eyes before a fix um why why why is it so important to discuss this right now so two reasons uh one you know both Lynn and I are from the macro world uh I guess she's a she's kind of deep researcher and a very active Trader in that world and uh we're in a very unique time right now where um potentially the dollar starts being looked at and re-examined in many ways and Bitcoin is one of those things like gold you know that is potentially going to be able to ride that um into like a new social consensus

internationally so there's this huge opportunity for Bitcoin right now and one of the lingering concerns and um you know that I think need to be examined just like Lynn said that for chief for herself she examined it and you know she went into that rabbit hole but it's a lot of work to do that and um you know people can come also come up with different uh beliefs once they do that and I think if we really want there to be a huge adoption to an alternative to the Fiat system that could potentially be Bitcoin um which I think is probably the best suited out of digital currencies for that role if we're going to have that role but there is a huge concern of like what happens in you know 20 years

apart from this blip that we've had now with like the huge fees it's just been trending down very aggressively in terms of like the fee income and the way to think about it is just you know you have to pay security guards to protect you uh when you you know you have something valuable right and if you start paying them less and less a lot of them don't show up for work and then if like in 20 years you keep paying them half their wages every four years um now obviously like you know the price of the coin can go up and make up for some of that but it can't go up 2x every four years in real terms you know just mathematically so uh at some point like there has to be some kind of income

um otherwise people don't show up to protect the network and if they don't show up to protect the network then you know for different reasons uh especially if this is an asset that grows to be like you know many trillions of dollars you can have state actors or other actors coordinate uh you know buy a bunch of Asics or whatever is going to be the technology at the time to start um you know spamming the network or blocking or censoring the network or let's not even go down the kind of double spend route let's just kind of look at it as just purely like making it unworkable like you know they just can't uh you can't really kind of get blocks in uh get proper transactions through making it unusable there's different things that an actor could try to do

um so I think it's really important that in advance of all that happening we have some at least some backup plans um in place and the problem with humans is like we only like want to react in like what's immediately in front of us like with global warming you know it's like this like huge time lag of decades and people don't take it seriously until crazy events start happening with the weather um and that's kind of like the part of the comment about like sometimes you have to like see it as humans we need to like see it like imminently coming and um so yeah I'm not sure if there's going to be enough consensus until until we see it yeah when you look at what's happening right now actually both of you I'd be

really curious about this so like I think you both are saying that we have to move to a model where um uh Bitcoin gradually shifts from paying miners primarily through Bitcoin block rewards today we're going to move to a model where we have to pay the miners primarily through Bitcoin transaction fees when you look at what's happening today with like oh let me let me pull up this number what's the the number of BRC 20 tokens on the network is now 14 000 if this number is even I think this number is correct um you've got like ordinals um and like I mean the influx of these projects has pushed uh the transaction fees to a multi-year peak if wide I think y charts is showing it around like

uh let's see transaction fees have skyrocketed to like 19 bucks um which is about an 800 jump compared to the same time last year when you look at all of this that's happening maybe Lynn I'll throw it to you first like does this seem like this is this like the early inklings of the solution here um or are you like this is not this is not we're not going in the right direction here so the sure I think this is a speculative um you know exploration of it I think this you know the combination of segwit and Taproot opened up some some different use cases that were not present before uh although the you know there's long been the ability to put arbitrary information in the blockchain so that's kind of being you know kind of used or exploited uh in meaningful size for the first time

um so that's kind of new information that the market can sort out um you know the one thing I would say is that we don't have to move to a fee model the model is already in place and so there's no like action to be done it's whether or not the block space will be valuable in the future and the way I would phrase it I think is that you know so far you know bitcoin's been around for 14 years uh it's got generally higher adoption over time uh obviously comes in Cycles um and you know the longer that Bitcoin keeps working and keeps doing what it does and it keeps being functional and keeps being understood by more and more people um you know I expect that adoption to increase you know if if Bitcoin adoption or really the adoption of any blockchain were to stagnate at current levels it'd

be cut it would become long-term you know probably insecure uh now so the premise of most of these models uh relies on more adoption than the current number which is still a very small percentage of the world population especially when you actually look at meaningful adoption so not just buying a token on coinbase and and just having it there in you know 500 or something like actually interacting with the blockchain um uh in more involved ways either directly or just you know just you know more interesting ways is a very very very low number and I'd also point out that most of these you kind of minor updates to bitcoin over time specifically we're to try to make block

space more efficient to use so segwit was was kind of a shadow block size increase um that was kind of the main function it also enabled lightning and then Taproot was also um you know it had some various privacy and efficiency gains uh to add on to that and so we've not partly why we've not seen a meaningful flea market develop is because we've had the expansion onto partially other layers but also just more efficient usage of the block space we already have BC exchanges using batching uh more than they used to and so whenever there's kind of this fee pressure eventually there's kind of a response now I think that a lot of the low-hanging fruit has already been addressed um and so to the extent that adoption

goes up another two-fold five-fold tenfold over the next 10 20 years I think that will result in more sustained fee pressure over time and then we also have to take into account that this is a dynamic system so for example if the network is not under attack then fees are mainly determined just by how many fees want to be in the block space compared to how much block space there is whereas if the network actually is under attack um then fees take on another meaning which is you know that the chance that your transaction is going to be reorged uh or to try to incentivize other miners to join the network that are outside of of kind of a you know uh you know attack group

um and so you know it's not just a static system over time it's actually the the way the model's set up it's inherently a dynamic system with push and pull and so that's kind of how I look at it I don't think that this current thing is a solution but I think it's another data point uh to see what things blockchains might be used for and I don't think that Meme coins are a long-term solution but I do think that you know transactions are going to be enough uh in the long term to fill up the block space and then to to the extent that they're not I think there are high value uses of arbitrary data that are also going to compete for Block space Jordy what do you think yeah so I have a different opinion and I guess this is why we have this debate

um on many things uh so starting with I mean the one thing we actually agree is that this is probably not the long-term solution no matter how many fees get accrued in the next you know six months this is not gonna do anything for in 20 years like first of all you know this is not like ethereum where like the fees get burned and somehow this reduces like any extra fees that just get created right now are just you know an extra tip to Miners and they're going to be happy for a few months but this is not going to make them you know do extra work in in 10 20 30 years right so um I think uh Bitcoin does have a little bit of problem and the problem is in the design um I remember when uh when this first came up I asked Lynn and I said

what if Satoshi had said you know it's not 21 million we're gonna end up with you know 0.5 or 0.25 or some kind of tail emission and that was like in the initial design wouldn't that actually be better because it sort of doesn't allow this thing to go to chance we're like oh maybe there's going to be use cases maybe there's going to be sort of speculative reasons or productive reasons right um and I think I think a little agreed like all right if it was actually set that way maybe that would be better um and I understand like a lot of bitcoiner's concerned is it's extremely hard to get Social consensus on changing something that is like you know hard Fork basically like something fundamentally different um and a lot of people have used this like 21 million meme

um to me that's um it's like a misunderstanding of what scarcity is because like gold is scars right like and we find new gold every year there's like a little bit of like you know 0.5 inflation of gold just from gold mines every year um that doesn't make it not scarce like it's it's not like you can just print it infinitely and having a small inflation rate has it has a huge advantage in many other ways that you know people forget um including the fact that when you have a cat Supply it's really hard to get new coins right like right now miners they have to mine them and then they'll have to sell them to somebody in the free market and somebody buys them and new people have their new coins and the kind of dilutes people who are just free writing so

there's a bit of a free writer problem in Bitcoin which is um a huge game theoretic concern you know somebody just buys a lot and then they just sit on it they don't do anything they don't even create fees they literally they'll add no value to the network or in any way and they just benefit from kind of like the the squeeze the the supply squeeze right um I think you know satoshi's paper and if you read it it's just very clearly something about ecash right he thinks that this thing is going to be cash and um because of maybe he even calculate the number of transactions that would actually be needed to be done to to make it worldwide cash because you know the scale of billions of people using something is is different than uh what

Bitcoin was built for if it's not going to be cash which is you know I think people have generally settled on anything more like gold uh which is something that you store you don't kind of go and buy stuff with it um then the number of transactions doesn't really go up you know we've seen a lot more people this cycle than the last cycle uh using Bitcoin or holding Bitcoin let's say but it hasn't increased the the actual transactions so if if we're going down the gold route um I think either taylormation or some other thing might need to happen so I actually disagree because for example even if you just calculate the number of people if they want to do one monthly transaction on the base

chain let's say to pull coins off an exchange into their own custody there's not enough block space for even even a significant minority of the world to do that right so you know basically adoption there's it doesn't take super aggressive adoption um assumptions um to fill up the block space even if it's not used as a medium exchange even if it's still just a storage mechanism that people occasionally want to um you know pull into savings or pull out of savings or make very selective kind of censorship resistant Global Payments with um you know so I think it's primarily attractive as a settlement network uh there's all sorts of things that are are built on top of it currently that can be

built on top of it in the future especially as there's demand or free fee pressure sustained to do so um and so I think that basically the current design is already attractive and I think again a lot of people you know one of the things that the fiat currency system has is that whenever there's responses to it that the people running it always want to do changes right away that's kind of what FIA currency is that's both the strength of fiat currency and the weakness of fiat currency and I think it's also kind of what we see in most other cryptocurrencies that basically they're still fairly centralized and they they can make hard forks and they can you know rather small groups of people can kind of make changes and the you know you don't really know what it's what the Network's going to look like 10

years from now and I think what makes Bitcoin attractive is that by Design it's very hard to change um and the long-term scaling is you know you can make one argument that you know you need tail missions because not enough people are going to want to use block space in the future as just a savings asset but as I just pointed out you can make another argument that even the existing block space is going to be super tight even if just a significant percentage of the world wants to use it as occasional interaction for savings and I think we don't know what the usage of it's going to look like 10 20 30 years from now and that it's already got plenty of flexibility built into it and when it comes to adoption assumptions like if you look at ethereum for example or similar kind of proof of stake type

Concepts you know if there's not enough demand for ethereum Block space in the future let's say that the you know the market goes to multiple other chains it gets diffused across multiple different ecosystems uh the speculation dies out that it goes somewhere else whatever the case may be um then you know the the admission schedule increases There's No Cap Supply if you actually were to have very very little use to the chain you'd have a higher inflate rate and that would kind of have a feedback loop of making it less attractive to hold and so you'd have less validators and you have a higher inflation rate uh and so that that basically tailors things around the inflation schedule whereas Bitcoin uses primarily the you know the

Cap Supply but the Reliance on fees and so there are different security models out there but they all actually rely on sustained adoption uh to kind of a higher degree than exists now or at least you know basically the idea that the current adopt the current level of adoption can be sustained indefinitely good I don't know if you have any thoughts on that yeah I mean uh we've seen like a huge increase in adoption in Bitcoin in the last 10 years right and hasn't shown that people want to do transactions on chain like um we're already I don't know how many people own a physical Bitcoin but a lot of people have

financial interest in Bitcoin whether it's through an ETF whether it's through you know some Financial instrument if you go by some estimates it could be you know tens of millions I don't know it could even be like 100 million people um and we've we've seen this go from you know thousands to millions of people that that's Undisputed right so this like thousand X and and like adoption hasn't really increased the demand for fees and I think it's because of what I said like uh the use case becomes more like gold and the concern is that once miners stop getting kind of block rewards and they need to do activity on chain in order to hedge them and you know do all this kind of transfer them and sell them and all this stuff um

you know people use the money in their checking account but they don't do a lot of transactions with your savings account I don't know about you you know but um like if it's in my savings account it's probably just sitting there and I don't think about it much unless like I have a you know an immediate need um yeah so I mean I'm optimistic that maybe it's enough like I mean let's just put some numbers on it right like how much do we actually need to in US dollars right now current market market value of dollars how many would we need to kind of feel safe that uh you know an actor can't just spin up a a bunch of uh factories and make enough Hardware to uh to attack so I don't know let's say foreign it's hard to say like you know

20 billion dollars maybe this is an actual kind of global Computing currency maybe you need hundreds of billions of dollars to to secure it to really kind of feel uh safe um so that would mean that each person has to spend you know that that much in fees or whatever each active user needs to spend a couple thousand in fees uh every year um to kind of provide that value that it has come from somewhere right um so I think it would be more elegant if this was just kind of given out to minors um it's a more fair system as well I think um and to the point about ethereum I

agree that yeah like if no one uses it then it's not going to be attractive anyway so um it'll inflate and it can I think the inflation maximum it can go is like two percent or like 2.1 or something like that um obviously right now it's inflationary because there's activity theoretically if there was no activity it would it would start inflating but I don't think that the one or two percent inflation is ever going to be the reason why something gets the operator doesn't get adopted or is uh kind of appealing as an asset and I think gold has proven that over thousands of years like that's not the reason why it goes up or down it's just because somebody you know one year there's a slightly higher kind of gold mine uh you know output than the previous year

hmm go ahead yeah one thing I want to quantify you know with eight billion people in the world you know Bitcoin can handle depending on how efficiently base layer transactions are used in terms of batching and things like that it's it's limited to tens of millions of transactions per month and so basically less than you know one percentage of the world can use Bitcoin once a month um a couple percentage you know a few percentage of the world can use it once a year if they're only using it as gold right if they're only using it as digital gold they're not transacting with it if they're just occasionally pulling an in or out of savings uh either on a monthly or yearly basis a very small percentage of the world can use the the you know the Bitcoin as we

know it um and so basically to have a view that you know so the past 14 years again there's been still very low adoption for cryptocurrencies in general and Bitcoin specifically has made a number of these soft works that increase the basically increase the effective block space and a more efficient use of block space combined with exchanges using batching so you've had increased adoption but increased efficiency which which in that efficiency has limits which were kind of roughly at more or less most likely and so they really you don't need very aggressive assumptions you know if you just assume that five percent of the world in 20 years is going to want to occasionally directly act with the interact with the Bitcoin base layer

then there's going to be at least some degree of sustained fee market and then you know Bitcoin does it can do you know over 100 million transactions a year um uh even more than that in terms of actual payments so you know a transaction on average has has you know a couple or few payments associated with it you know multiple outputs um and so you know for every like ten dollar average fee you're talking a billion or two in transaction fees and so you know if a base layer Bitcoin transaction costs thirty dollars in the future uh the equivalent of thirty dollars you know kind of the the purchasing power that we roughly think of now as thirty dollars uh you're talking billions and billions of dollars of Annual fees for minors which then you

know the actual Asic value of you know that you need to buy to even attempt an attack is is in the billions or tens of billions at that point and you know maybe fees are maybe fees are a hundred dollars per base layer transaction we don't know right right now for example if you want to ship gold around the world yeah in meaningful size you know like actually as a settlement like as a corporate settlement as a sovereign settlement things like that that's going to cost you probably millions of dollars it took Germany years when they wanted to repatriate their gold from the United States back to Germany and you literally have to like if you're doing it in bars if you want to both transport safely and then validate that the gold is real you then have to like you you transport it and then you actually have to melt the

bars down pretty much and then reform them there's really it's really hard to tell that a gold bar is gold to the core without actually melting it there's a couple other ways that you can kind of know um and so that's the system that's been used for a while it's wildly inefficient and so the the assumptions that Bitcoin has to meet in order to be radically better than that are quite low is how I essentially phrase that that I think that when you actually quantify it um I don't view that as a significant hurdle uh that Bitcoin has to step over in terms of adoption in order to be sustained and secure 20 years from now all right quick break from the show there is this kind of overused cliche

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code Empire you'll get a free month on their build plan so don't forget to use code Empire Santi and I got to get credit for this one so they know that we sent you and you will get a first month free hope you guys enjoy it this episode is brought to you by Quinta trade Smarter with Quinta Quinta is the Premier derivatives trading platform on optimism that features deep liquidity low fees and up to 50x leverage across 24 different assets all powered by synthetics if you want to trade crypto Forex or Commodities on chain puenta is the platform for you it's built for both the casual dgen and advanced Traders it offers stop losses limit orders cross margining and a whole bunch of other

Advanced order types and unlike most of today's web3 products puenta has a super easy to use interface including a position dashboard shards and a leaderboard for a seamless experience go to quinta.io that's Quinta dot IO right now tell them we sent you Tom Santi sent you tomieno sent you Tom Empire sent you puenta dot IO hope you guys enjoy I think at the heart of um the heart of this entire conversation it's it's really it's really money crypto versus Tech crypto which is really the the Bitcoin versus the eth argument I think you could say and like uh there's this guy Eric tornberg who has a pretty good article on this and we

can look at the link it in the show notes but um basically if you look at money crypto money crypto maintains the point that crypto uh crypto currencies uh the goal of crypto is to redefine how money works by reintroducing sound money and specifically if you get into that it's it's like with sound money government governments will now be forced to behave responsible responsibly because they are no longer able to borrow from tomorrow to finance Wars or fund short-term political objectives at the expense of long-term wealth or whatever it may be and right now we have unsound money which becomes this compounding problem and Bitcoin introduces sound money and then you have um so that's like money crypto then you have Tech crypto which believes that um

which believes that instead of studying Austrian economics you should study the development of web 2 and web one uh to understand where this is going and that um I think Tech crypto kind of subscribes to the narrative that the internet started is this decentralized and open system and then quickly became concentrated among five players Google Amazon Apple Facebook and Microsoft and because of that concentration they were able to get really addicted users able to control the attention of their users monetize their advertising shamelessly copy people um and that web3 and crypto has this has this the IDE the the the vision here is like decentralizing that world and at

the heart of like listening to both of you two and then listening to um just like reading a lot of crypto Twitter recently the there's like money you have like money crypto people and Tech crypto people talking not not necessarily YouTube but like I think the main thing is on Twitter right now you have two different groups talking right past each other um and it's just interesting it's interesting to hear you two debate it's interesting to hear Twitter debate um and even like see I don't know if you you guys have been following like uh what munib is working on with stat like stacks and L like l2s on bitcoin and then there's also um uh like roll-up projects like roll Kid are experimenting using Bitcoin as like this data availability layer and like or Babylon using bitcoin's additional

security via time stamping to prevent reorgs it's all this like money crypto people talking with tech like Tech crypto people and they are I don't think they'll be able to see eye to eye I don't know if you guys have thoughts on that there wasn't even a question there but I think the money versus Tech angle I think that is does a lot of work at explaining why these different groups kind of approach this differently um you know you kind of have the Silicon Valley crowd versus the Austrian crowd for lack of a better way to describe it um and I you know I think one is that the Market's big enough for both to some degree which is that I you know I view one of the biggest addressable problems out there is lack of good money you know I mean there's there's 180 different Fiat currencies

they're all basically these local monopolies that have frictions between them when you look at a global like level uh the dollar kind of serves as the glue between them but that obviously is this kind of you know closed Source permissioned uh inflationary base that they all connect with um and so I think that the the money argument is that basically that the one of the you know the kind of the you know 100 trillion dollar problem out there is that there's just not good money and that there could be better money and you one of the arguments is that Bitcoin can serve is that money um the tech view says okay there's other things we can do with this technology as well or adjacent Technologies uh you know an example I mean a company I work with uh you know was trying to receive

an international wire got held up for like a week it's an opaque kind of old Antiquated system uh they cancel the wire and like reset it and it's kind of like stuck for more days and then it's like could we just use stable coins for this I mean you know and so there there obviously are Tech rail layers that can be improved by adjacent types of technology is this um and I think that's a valid argument whether or not they should be actual kind of free-floating blockchains or layers or similar types of distributed ledgers you know I think that'll be sorted out by the market over time I think a lot of them are Equity like at the moment that for lack of a better word Securities or adjacent to Securities that kind of

thing and there's a room for that um but I do think yeah a lot of this happens when when tech people have money people kind of talk past each other I would agree with all of that or go ahead Jordan I want to hear your your thoughts on this no no I mean you know Brooklyn and I are are more money people I think uh we both kind of approach the asset from an investment standpoint and looking for kind of like the portfolio construction and that was also like my initial kind of foreign to into like the space um so we're not talking past each other in that sense like we're very much aligned I think uh it is a spectrum though like people are not just like zero one they're you know even you can see like now within like the Bitcoin ranks and Bitcoin people are like more

money than Tech which are usually on ethereum but even within the Bitcoin Community there's there's like different opinions and like you know you have Udi and Eric Wall on one side uh you know wanting a lot more kind of creative and and to be honest like I kind of I love that kind of more uh giving some cultural creativity to the whole space and let us examine what is this because it is a social construct the people who are very uh dogmatic about you know what this is uh forget that you know it's changed multiple times it was envisioned in one way it keeps adapting and we have to be kind of more flexible and more fluid with it I mean you see even like even Michael Saylor is kind of okay with what's currently happening I guess maybe he's happy with uh you know miners

getting getting more rewards and maybe that's uh that's his back who knows but uh in a way like um everyone is looking at it from a different angle and we have to accept that there is no fundamentally like um objective way to look at it nothing is objective with Bitcoin so if there are use cases I can make use of this asset I think it's actually great like you should be able to use at least use your savings account as a collateral um you know to get loans or maybe like maybe there's some version of die where you know you secure it with Bitcoin and there's some kind of stable version maybe there's other things we could do

on like layer twos like uh you know ZK Roll-Ups or something like that in the future I think that's definitely like an interesting path and it does seem that Bitcoin potentially could secure uh Roll-Ups like that um so we have to kind of accept that um there's a fluidity through the situation it's not as clean as we would like and we have to adapt and Bitcoin does have to adapt and it's very possible that as Computing increases um you know the current uh security model of uh I'm not talking about like the mining security but just the actual cryptographic security might need to have some adoption right like if computers get really powerful um and they can crack the kind of uh

uh you know private key public keys that we have right now we might have to change the code right and like do like quite a hard Fork on on that side so um yeah I think social consensus is the most important I think that's my only pushback to lint to Lynn what you said which is like the world is big enough for for both of them um true but a chain like a network is only big enough for one of them um you can't and the reason for that is because of social consensus and branding and it's like even if you are a company with a hundred thousand people for example like a huge company you only usually get if you look at this from like a marketer's lens like one or maybe two words to describe your company like you can't you can't have it all and um

and if you're like a stock uh you you'll you only get one or two words to describe it and some like my concern with Bitcoin like I I love Bitcoin I love Bitcoin as digital gold I love Bitcoin is like what you were saying with like Germany moving like I love Bitcoin as digital gold I don't like Bitcoin as like trying to do D5 because they're not going to be able to do D5 as well as like ethereum is doing defy um and that's where and I think if you're like let's say an Institutional allocator next bull market happens and you're looking at the industry and trying to allocate Capital like if it's like I'm in I'm in I think you're if you can make like two Investments you invest in Tech crypto that's ethereum invest in

money crypto that's Bitcoin but now that bitcoin's trying to do like defy and things like that I think it's like I don't know it just makes that less clear um from an investment angle I'm just curious how you think about that Lynn well one thing I'll point out is that they're both well one I would say that bitcoin's not trying to do anything because Bitcoin is just a protocol so some people on top of Bitcoin are trying to do something with it it's not like the developers you know were like hey let's do this change to do D5 so Bitcoin just is and we build on top of it um so that's number one number two is that in some way if you look at say Bitcoin and ethereum they're both uh there's developers on both trying to cross over so ethereum's got their ultrasound money meme uh for example

where they're saying hey we are this programmable thing that's also ultrasound money um and then you have Bitcoin which in the beginning has been money and then there's some you know for a while now there's been you know ever since you know Omni layer and things like that there's been efforts to you know put more complex programmability on top of layers on bitcoin and so I actually think that the investment thesis is still very clear that basically if someone and appreciates the immutability of proof of work and kind of the you know the the kind of long-term just um you know verification of proof of work uh and they say okay what is the what is the the Network that has the most proof of work and it has small

nodes that users can run rather than relying on you know third parties to to get their transactions into the blockchain OR to initiate them I should say um then Bitcoin is there's no competitor anywhere close to Bitcoin in that regard now when you look at the at the D5 landscape I mean right now ethereum dominates it there's obviously in this last bull market there were all sorts of um you know l1s that made different trade-offs uh generally they sacrifice some degree of further decentralization in order to have more throughput lower fees uh different you know different models like that um and so I you know I think that from a institutional allocation standpoint I think the thesis is still pretty clear for these types of assets I don't you

know I think that there's always some degree of crossover um but I think it's pretty clear and I think that I think a main thing that if I were to argue that the tech people Miss compared to what some of the money people see um is that the money angle is such a big Market when you look globally um basically that there are a lot of people around the world that want better money billions of people want better money um and that that's not a small Market even if it's just gold if it's if it's gold it's available to everybody on a smartphone you know that can be twice gold 10 times gold right and then if it's yeah and if it's also gold with layers built on top of it with other

stuff who knows lightning or or side chains and things like that that also allows for payments which we have now to some degree uh then that's even a bigger idea and I think that that is still a completely underappreciated Market size again like this idea that like defy on bitcoin can't be as good and I agree on the programmability side it's obviously like you know uh less flexible in certain ways than ethereum or you know some of the other newer chains but the more important thing on D5 is TBL right like if you have a uni swap club you don't have any money in it and you have a slippage and you can't do anything you can't do any substantial activity and then it's useless right so above like

programmability is like how much tvl do you have and if the thesis is correct that this is the better form of money and it's 10 times gold then the tvl is going to be here and if the TBL is there forget like you know you can't do like all these complex smart contracts that are maybe you can't actually like you know on Ezekiel who knows what you can do but even if you can't with just having a ton of like people's wealth held in this asset you should be able to use it in some Financial way like defy just in the general sense of like I said use it for collateral you know uh get a house and you use like Bitcoin to uh you know provide some security for the mortgage uh provider or

um you know a lot of kind of basic things that you might still want to do with it and um it being you know such a huge monetary asset should have some use cases I think I think both those are phenomenal points yeah I I very much agree with both of those um before we started recording you were talking about this like derivatives take that I I'll be honest I was not really following can you explain what you were talking about there like the bit there's this whole other bear case uh that maybe Ari has written a paper about can you can you explain this yeah I mean uh reluctantly because you know some people I'm personally not concerned about this so I'm happy to talk about this but you know when we look at attack vectors like

we actually should be more specific about you know their security and we can put a dollar amount on like how much uh you know the the equipment costs and how much miners getting paid but we should look at specific attack vectors and what do those mean and why would somebody attack right and one of the reasons they would attack is they want to make money right there's like a financial incentive to attack and you start thinking okay how would somebody make money by attacking and uh you know there's like the double spend for example they they'll they'll do some ways to like you know send Bitcoin and then cash it out and send it again and you know they kind of reorg the chain so I think Antonopoulos has like talked about that and there's some great clips of him uh talking about that specific attack

Factor so it's not worth getting into right now I think there's uh better people to speak about why that's not necessarily a huge concern um another concern is like somebody can make it unusable like they can just you know buy all the block space to control the block space now the transaction get through and it becomes kind of like a a frozen chain right like it becomes Frozen in time even if like social consensus knows what coins everybody has they can't actually use it as settlement layer so uh how can somebody make money on this well potentially they do a lot of shorting they they kind of short derivatives they derivative Market is always much much bigger than the spot market right you can do like 10x you can you can do like huge derivatives uh bets and somebody might

potentially you know bet billions and billions of dollars that bitcoin's gonna go down shorted in different ways uh they can borrow it and then sell it and you know try to rebuy it cheaper Etc so um this is another another attack Vector I think making the chain unusable uh and trying to show derivatives for me is not a real Attack factor and I just want to kind of point out why um we'll all see as social consensus as I'm talking about that this is happening we'll all see that the Bitcoin chain has become unusable and it'll be pretty clear that someone is financially kind of shorting and as we've seen with uh you know GameStop and like other times when a gang uh of like uh people around the

world realize that someone is really short um there's there's like a huge short squeeze possible and people can just buy the price and kind of try to squeeze somebody out of a short position and just you know make make the opposite happen um and there are like large Financial actors that can coordinate such such a squeeze so um yeah like the attack vectors I would say are uh maybe not financially related the ones that I'm concerned about are more um kind of State related like you saw Hillary Clinton recently talk about how you know Bitcoin is potentially this big threat right like they're already kind of seeing it as a threat to the dollar into the US government it's like the U.S power so uh those type of threats I think are uh

more dangerous where it's it's done just purely to to disrupt the system and not so much for monetary game hmm I would agree this data tax or a bigger concern than financial tax uh you know in addition to the uh what do you point out of being able to squeeze um derivatives attackers I would also point out that because it's a real world component here um some Financial analysts are easy to kind of like Theory craft things whereas if you actually look at an engineering perspective it's like 10x harder than they think so for example you can say well you know you could do a massive derivatives position and then buy a 51 of the hash rate and then you know send to the network and then cat you know

whatever the steps may be for the Pacific attack but if you look at actually what it takes to get 51 of the network um you know even if the total amount of A6 are only worth a few billion you know you have to like so for for example when the when the chining China ban happened and like you know big U.S mining corporations they bought a lot of A6 um you know Marathon for example bought a ton and they were they were setting up all their facilities and then they ended up you know they had frictions getting those facilities abilities in place and so they actually had like miners sitting in like warehouses for a while because they didn't have the they didn't have the data center infrastructure to get them plugged in properly I think when you actually look at when you look at

what it takes to like acquire or build out you know the property rights the the data center the power agreements and then the Asics themselves in order to amount any sort of sustained attack on the network in order to to you know benefit a derivatives position is harder than financial Theory crafting would suggest I think that there's a countless frictions you'd run into and it would very likely be visible to the network ahead of time it'd be hard to do that in secret even if you somehow could pull it off and so that you know that's another reason I would just I would you know for the most part not be concerned about derivatives attacks and then as far as yes data tax I think are more of a concern and then you can look at it you know what if

um you know all of the institutional proof-of-state coins were confiscated and then put into validators right there'd have to be some sort of network response against that um I think confiscation of miners you know that is another risk uh you know back when when China attacked it you know one of the valid concerns what if they just take all the miners and and try to attack the network for example um what if the United States one day tries to do it I think nation-state attacks are more you know valid concerns to to kind of theory craft around than derivatives attacks I I think you're uh I think you're giving the government too much credit that seems like too complex of a thing for uh for them yeah that's why it hasn't happened yeah yeah exactly

um one thing actually from our earlier conversation about block space you guys have me thinking is um like one of the things you've seen in the last one of the things you've seen recently with ethereum is a lot of proposals that help ethereum manage the demand for Block space and if Bitcoin continues down this route um Bitcoin is also going to have to learn how to manage the demand for its block space in similar ways that other chains have such as you know I'm thinking about like eip1559 Dynamic block sizes or like eip4844 uh the ephemeral data blob thing um like Mev markets are we is this when you think about like the next couple years for Bitcoin is this kind of the path that we go down you're going to start seeing these like

I don't know like we all saw how crazy the the block size the block Horrors were in in 2017 like what's how do you think about Bitcoin strategy for for managing the demand for its blocks uh for its block space is that at me or Jordy at either one yeah whoever wants to take this out tough question um so I think uh right now obviously you're seeing a lot of people that are discontent with not being able to you know get a transaction through when people are uh you know spamming the network with all kinds of

other coins and uh images and things um you know there'll have to be some kind of solution at some point either they'll segment the block space in certain ways or um maybe create some kind of roll up where certain things happen and that's kind of how they can maybe get checked into the to the base layer um I don't know like in a way it's okay if people want to like pimp their satoshi's like they have individual satoshi's and they want to pimp them out in a certain way and give them some some extra uh like value or uh you know creativity around it um but you know we'll have to see like if this is still a problem in a year or two

years like this this could be kind of like a short-term um idea it's still unclear right it's very new I have a prediction for for you guys which is uh and and then Lynn I want to hear your thought on that too but I think that the block size Wars scarred so many people from introducing like some of these proposals that that it actually won't happen and and maybe it shouldn't even happen by the way but uh I do think one thing that we'll see maybe not this year but probably next year is some sort of L2 on ethereum where all of the fees are actually paid in Bitcoin and which actually uses Bitcoin as the data availability layer instead of ethereum and I think that could be like a really that would be a really interesting thing from a tech

lens but also from a social consensus lens of like Bitcoin and ethereum kind of working together I don't know that's something that would be an interesting experiment to try out Lynn I interrupted do that I want to hear your your thoughts on this yeah I was going to say I think I think fees will sort it out and I think that con so constraints are kind of the source for creativity right when when designers have constraints to work around that's that's where Innovation tends to happen and you know for a while people have said why isn't there more uh Layer Two activity on bitcoin and it's it's like well why would there be when base layer transactions are like 75 cents um and most people prefer to huddle their Bitcoin rather than actively spend it right so you'd have basically small

l2s for people that actually want to use that like let's say you want to do more frequent payments with lightning uh and things like that that existed it was increasingly a vibrant thing but compared to the size of the base layer l2s have been small and that's partially because there's been no no constraint that there's there's been very little fee pressure in most times and the brief periods we actually had free pressure like before segwit um and and now uh those are generally Catalyst for change we've already seen seen you know more exchanges announced they're going to use lightning more exchanges announced that they're going to batch transactions better well we've had some of these Bitcoin exchanges or Brokers um announce new ways aside from lightning you know basically basically

all sorts of ways to buy Bitcoin withdraw Bitcoin things like that um and that's in response to fees and you know obviously fee spikes cause those changes but also if there were a gradual period of just you know if adoption goes up 3x and we've already kind of you know made a lot of efficient use of block space and now there's just a more sustained fee Market from that point let's say you know five years from now uh then that creates another set of incentives that basically incentivizes more L2 development um and so I I think that the the incentives and the foundation are already there and that's why I you know even I you know I I do some venture capital in the space that I'm funding some scaling Solutions as well uh and

funding some privacy Solutions because we've seen obviously there's been challenges to to privacy over the past few years including on top of Bitcoin and ways to make Bitcoin more private it's also been challenged on ethereum with the sanctioning of tornado cash um and so you know I'm I'm personally funding types of scaling and privacy Solutions and and this was before the current fee spikes this Feast bike is just yet another kind of reason I can point to to why those things have to exist and they might be uninteresting to people during periods of low fees but then they become a lot more interesting during periods of high fees um I think one other thing I'll point out is you know lost the discussion is often you know that no the ability to

run a node is a key part of security you know if you can't run a node then you're reliant on third-party node operators and if that's kind of a challenging and network effect type thing and there's only a few big providers it's easy for them to be sanctioned controlled it's hard for people other than very very power users to interact with the network in a in a you know super uncensored way and so when you look at say ethereum you know there's something like you know less than like 7 000 visible nodes um if you look at the percentage of those that are actually hosted like on Amazon and things like that it's most of them so there's less than 3 000 like nodes that are not hosted on these like Cloud providers uh ethereum nodes are

also too big to run over Tor so we actually have a probably more visibility into the actual number of nodes out there whereas when we look at Bitcoin there's like 17 000 visible nodes there's on it's unclear how many nodes there are they're not visible because you can run Bitcoin nodes in those more private ways using Tor and things like that um and so you know I think that the ability to even 10 years from now or 20 years from now if we're talking about long-term security we also have to talk about the long-term viability of how many nodes there are both in terms of decentralization of the network but then also from a practical standpoint if you if you you know if you just want to interact with the network as privately and as censorship resistant is possible being able to use a node is kind of one

of the key parts of that in addition to the the other layer of whether miners or validators are able to actually censor the you know the network itself any other I have a couple like macro related Bitcoin questions um so maybe we could transition to that as we think about wrapping this up but any anything else that you think is important to cover on the like block space ordinals brc20s uh security part of the conversation I mean just the one thing I want to reiterate is that I think uh taking a very binary stance that you know this is what Bitcoin is it's very clearly defined and there's like very pure Maxi approach um is being shown as what it is which is

not sustainable like things change over time people have slightly different opinions but slightly different things and like even Michael Saylor is kind of taking a different stance than a lot of the other Maxis I think having that um visibility is probably good overall it kind of creates a more realistic environment where you try to find Social consensus and um in that sense I'm you know I'm quite pleased that we're seeing some of these assumptions get questioned and some of the uh like memes and kind of you know repeated arguments um that a certain subsection of uh Bitcoin holders were kind of kept like uh repeating over and over again and kind of trying to present this

as being the truth uh are not a base truth and there's a lot of Bitcoin holders and I know a lot of Bitcoin holders around the world that I meet with and talk with that don't share those kind of default uh views of like you know let's just call them like the the sponsored podcasts by you know like the same companies and the same kind of like few few people um so you know I'm looking forward to as Lynn said over time seeing you know what things come out and even on the Venture space and scaling Solutions and other ideas and I think it's generally positive what's happening one one um and I don't I don't disagree with that but one one addition I would make to that is that one trap we fall

into a lot is that we exaggerate the importance of loud groups on say Twitter right and then let's say put Bitcoin aside that happens in politics right you know you like you see like Bill Maher despite his scale there'll be like a couple angry people on Twitter and he like that's he's he's fine-tuned to overreact or something like that and people you know the loudest people capture the most they have they have the biggest microphone and so you know when it comes to bitcoin like you know say Troy cross just did a poll um about you know this usage of block space um and you know what to what to determine what is Spam or what is a viable use of the block space and 80 of the results said the you know the basically the market the fee Market um and and that you know it wasn't

wasn't people trying oh no this is the only viable use of block space the the by far the majority answer was basically whatever people pay for um and so I think you know if you if you factor out a couple hundred people on Twitter that's that's really not that's that's like the tip of the iceberg of Bitcoin Bitcoin is this Iceberg under the surface around the world uh you know countries all over the place people that are all very different than each other that have you know certain shared interest in the technology and you know even even I think those people are still a valuable role I mean a lot of them played a key role I think in in bitcoin's immutability I think disagreeableness is a the especially the best kind of disability disagreeableness is a part of

network defense um and I think the technology in some ways the fact that you can run your own node and that if someone wants to change the code and you're like well you're not going to change my node and then so the the burden of proof or the burden of difficult is always on people that want to change the code right which means that if you're a super if you can do something so good that like most people want to change to it uh especially like a soft Fork you can um but otherwise it's the the default status is immutability and I uh you know I think that balance is struck right that there's going to be loud people I think they are useful um but they shouldn't be thought of as Bitcoin that that's one that's one segment of Bitcoin and there's a you

know there's millions of people around the world that interact with Bitcoin in some way or another very well suddenly yeah I I completely agree with that um a couple macro related Bitcoin questions before we wrap this uh do both of you think that I guess this is kind of a layered question here but uh would would you say that bank the banking failures are priced into Bitcoin right now I mean I think Bitcoin in anyth as well I think both of them are extremely undervalued for you know the potential that they have and um I think there's there's going to be a huge supplies please on both of those assets at some point uh so I don't I don't think that the current price reflects a fair value like if you're looking at like kind of like a five-year

Horizon for both of those assets um in terms of banking crisis you know we're seeing a bit in gold in general um I think that bit makes sense I I see Bitcoin is kind of different than gold I see gold as being the game that central banks play with each other to kind of coordinate you know who has wealth um it's not a retail game and I think Bitcoin is more uh the retail version so gold has its use you know it's it's like let's described before it's a terrible thing for actually sending around the world it's only for nation states that are trying to you know deal with like huge uh foreign reserves and kind of try to keep a ledger of those foreign

reserves it's great for that um but for like normal humans I think Bitcoin is is a different version and it and it's not digital gold it's just the human version of code it's a retail version of code um so I think there is a lot more that will happen in the Bitcoin space as people start looking for this alternative over over like the next years I agree I I think the so the bank crashing narrative um is decent for for Bitcoin uh and gold and you know things like that um you know I think possibly the boring answer is that you know the bank um crashes the bank issues uh changed Market expectations of the the fed's forward level of hawkishness so the

forward expectations of what they're going to hike rates to um and when those flatlined or go down uh that is generally a positive Catalyst for various anti-dollar or anti-rate trades which includes Bitcoin gold other cryptos to varying degrees tech stocks you know long duration uh High valuation tech stocks um those all some very degrees got a bid um based on the fact that people started assess the banking system as a as a potential constraint for how hawkish the FED can be uh in their inflation fight so I think that's that's a a key macro thing that doesn't cleanly fit into that narrative but it still is adjacent to the narrative

um because you know if you if someone believes that the FED can get back get back to a period of positive real rates for the next 10 years then the the attractiveness especially in in the United States first you know other assets decreases by some marginal percentage um and you say well I can hold T bills and and you know I'll sustain my purchasing power uh but if your macro view is that there's so much debt in the system and and other adjacent problems and that they're unable to get back to a sustained period of positive real yield so they might be able to do it for period of time like they technically are right now but that they're unable to sustain that then the you know the case for alternative assets um goes up and so um you know the bank failures play into it directly but then

it's you know it also adds as to there as well and you know when it comes to the Sovereign layer I think you know so gold is attractive um as often you know Flack of a better word Off the Grid asset for people that really want say disaster insurance if they're afraid the power is going to go out and they want some gold uh it's good for sovereigns uh if they don't want to be able to have one country like the United States just like shut off their reserves for example or inflate their reserves um so I think you know gold attractive in that sense you know the thing about Bitcoin and again this goes back to my prior point about the total adjustable Market of a good money um right now bitcoin's really too small for sovereigns to really be able to use it effectively I mean you know oil the

oil Market is you know two or three trillion dollars a year um you know even even gold has trouble kind of um being big enough for that market to settle you know between countries and things like that let alone other types of trade Bitcoin is still a small and volatile market and it's one of those things like if people can bid up Bitcoin and adopt Bitcoin at 2x 5x or 10x what they have now and it becomes a bigger uh more widespread more liquid less volatile Market than the sovereigns can get more involved we already see I mean the kingdom of Bhutan is mining it and El Salvador is doing their thing I mean around the margins you see you know smaller players that are more Nimble perhaps uh or more out of the core of

the system get interested in it um but the thing about money is that the more it's success accepted or the more liquid it is the more desirable it is and so you kind of have up to a certain point that flywheel and so I still think people underestimate the total adjustable Market of good money I agree um Bitcoin having is in about a year from now it's like April or maybe May to probably end of April 2024 if you think back to what feels like yesterday but was three years ago the the last Bitcoin having uh kind of right right as covered was kicking off um I think it was like May 2020 it took about six months for the market to

really start ripping so when the market really started pumping was like I think it was like November or December of 2020. um you had like some defy summer action but like for like the big stuff to really start booming um I think it was like November or December of 2020 if I remember correctly so if you apply the like super left bell curve take which is okay next the the next uh Bitcoin having is April 2024. six months after that is like October maybe it's November 2024 and that kicks off uh this bull market which like rips us into 2025. that's the like very left bell curve uh take on like how to assess when the next bull market is going to

happen I'm curious how you guys think about that I mean there's there's two parts right like there's the initial part which is like the six months before where the the kind of speculators I already anticipate that there's going to be a price rise and then there's the reality which is that there's like less selling demand because there's like you know miners get less uh and that's that's kind of like the part that you mentioned the most but I think the the first part the kind of lead-in uh I can see a lot of like big price action um I think we're gonna see it again this happening my kind of uh clues about it or even like the Litecoin happening that's just kind of like going on a bit early now it already had a very clear kind of move uh based around around the happening

timeline so if that can have it and yeah I think that's kind of like a niche kind of side asset at this point Litecoin is still around this is a still uh we're still doing Litecoin stuff we're still doing it I mean there's there's still uh there's still some people playing that game so um there's a lot more Bitcoin uh holders than there were four years ago right now uh you know after covet and I think we are going to see um both the pre-pump which is kind of like this purely speculative you know this everyone's going to be uh talking about the happening so let's buy an anticipation of that I think that will work um and then you know potentially there will be a uh a bit more of a supply squeeze after

it is true that every time there's a happening the effect diminishes just because like you know as a percentage um you go from four percent to two percent that's two percent uh reduction in Supply we go from two to one that's only a one percent reduction I think it's still at this point uh it's still going to be significant maybe not in eight years but I think I think this time around it still will be hmm I agree I mean one way to quantify I mean you know something like 900 Bitcoins are produced a day so a thirty thousand dollar Bitcoin that takes 27 million dollars worth of um you know new capital that wants to to find a home either the miners themselves just holding it or new buyers coming in if the miners are selling what they mine um and when you when you if you have the

same price and you cut the supply in half that reduces the amount of new capital that needs to come in so if the same amount of capital is still coming in um that has a upper upward force on price um and I think that I think the having is a plays a key it has a well one is to point out it's the narrative number two it says I think a higher floor um and you know it helps squeeze the price and then you get that another wave of adoption and people say wait this thing didn't die yet and then they get in and you know it's around for another cycle and more people know it more people usability more people listen to podcasts more people read about it um and more people kind of you know change their view on it um and then it takes a a lower level of

um you know new sustaining capital in order to set a higher floor in the next bear Market um the one part where I think the having is is maybe overdone as a concept is that you know I for the past few years um I've done analysis on what drives bitcoin price and you know what obviously the having is important over the long term um it's not the thing I find is most correlated with Bitcoin price I generally find that various liquidity indicators are better correlated with Bitcoin price um and if you if you look at say the purchase manager's index which is like a rate of change measure of of the economy um Bitcoin is more correlated with that than the having that's roughly a three

year cycle and so is liquidity liquidity Cycles in in recent era have been more or less three-year Cycles they kind of correspond with that PMI and so it's really easy to kind of mistake a three-year cycle and a four-year cycle and wonder which is actually driving price what what is that the index there the P what is the PMI purchasers manager purchasing managers index it's basically that these surveys that have been done for for decades um it looks like a sine wave over time and when it's above 50 it means the economy is accelerating the higher it is above 50 the the faster it's accelerating and the cool thing about that is it's not just are you growing or Contracting it's it's are you decelerating like are you still growing

but you're growing at a decelerating rate um and so that that sine wave that the sine wave of economic growth and acceleration or contraction um is actually pretty correlated with the Bitcoin price and then liquidity conditions are heavily correlated with PMI and even front run it um and so if you just simply take Global M2 so Global broad money and you denominate it in dollars so the the dollar value of global M2 um and that's obviously mainly determined by how much money printing has happened how much lending is happening and then also how strong is a dollar relative to other major currencies and if you look at that in rate of change terms and map it with Bitcoin price it's extremely correlated

basically when when when Global M2 in dollar terms is is ex increasing rate of change terms that's generally a very positive for Bitcoin and when that's when that's decreasing or especially when it's Contracting that's generally not very favorable for Bitcoin and so the way I tend to phrase is that in the in the near term let's say any kind of 6 to 12 to 18 month period I think liquidity is one of the biggest actors that drives Bitcoin obviously there's other factors but liquidity is is key one um but then that having plays in both in terms of narrative in terms of how much new supply has to be absorbed by new buyers or existing you know dollar cost averages and then it helps set the floor in in the you know the next bear Market

hmm Jordy Lynn any last thoughts before we wrap this up no I mean I think it's I think it's been good to really kind of examine these issues from uh I think both both Lane and I try to be very objective um you know we're not just trying to back a certain team uh just trying to look at the facts and I think it's been really productive you know it doesn't make for as good of media when I ask you questions like which Camp do you fall into and you say a little bit of both kind of in the middle but it does make for a much better conversation so I I do appreciate both of your responses to all of this so Lynn anything else that you're thinking about not really I think we I think we covered a lot um uh thanks for everyone for listening

um and hopefully they get they get something out of this yeah amazing we will put links to uh Jordy and Lynn's Twitter's websites newsletter links all of that fun stuff whatever they have to plug we will put it in the show notes you can find them there and yeah as always thanks for listening folks see you next week foreign [Music] foreign