SotN #50 - El Salvador Adopting Bitcoin | Nic Carter

Transcript

another state of the nation we release this every tuesday generally two o'clock or so eastern comes on the podcast on youtube live streaming that way also uh via podcast the next day david we gotta talk about this man because this is the big headline this is historic el salvador has adopted bitcoin that is the topic for today's conversation who's the guest we have with us to to talk about this important subject the guest that we have brought on is nick carter who was the host of the twitter spaces uh apparently it was supposed to be just a casual twitter space but in this crazy world of the 2020s in casual twitter spaces presidents of countries show up while that's how bills are going through

the congress to put make bitcoin legal tender so apparently that's things that things like this happen in the in the 20s and so we are bringing nick carter on to uh not only talk about that crazy event and and twitter spaces as like a news media publication at large but also more importantly an entire country putting bitcoin as its legal tender currency um the bitcoiners of the world are up in arms about how awesome this is uh nick uh nick used this uh term that when i was listening to him talk on maybe his own podcast about how bitcoin is being used as its intended purpose and i think the intended purpose line is is interesting to drill into because who's to say what bitcoin is actually intended for so i want to get nick's

perspective on that and then on the other side of things there's a different cohort of people who are a little bit skeptical as to like what this is this really the big deal that we that the bitcoiners say it is and so we want to take on both sides of the of the of the news event on this uh state of the nation suffice it to say nick carter is probably our favorite bitcoiner would you say that david yeah our favorite bitcoiner absolutely how many times has nick been on the show uh this would be number four second podcast he's been on two podcasts and this is his second state of the nation number four all right so he's earned his bankless t-shirt but like nick is the person to talk to you about this subject i think the first half of this conversation plan

to talk mostly about the good side of this um all of like the the reason that this is a perfect fit for bitcoin in the second half we're gonna talk more about the critiques uh super excited for that conversation but dave before we get in we gotta talk about what's new we are still looking for our perfect bankless editor if that is you if you're an editor if you're a writer if you like d5 if you want to join the bankless team we've seen tons of applications we're looking for the perfect one but email your resume sample of your writing is more important your twitter personality whatever you have to applications at banklesshq.com do that david and i review those uh on a weekly basis or so and uh we're excited to hear from you if

that's you also david i gotta talk about ledger ledger's doing some cool stuff in the space hey i put out this meme this is me not all the memes on bankless hq are mine but like i was thinking of this as i was using my ledger the other day this is like your grandpa's non-custodial wallet was just like a pot full of gold right gold coins buried gold coins but what is yours i mean grandpa didn't trust the banks yours is probably a hardware wallet like ledger it was super cool uh david it's actually i think it was last week before um metamask support for there's a new chrome update and metamask support with a ledger was actually disabled didn't

work but you could actually still use ledger using ledger live and that was sort of a another mechanism another way of using the ledger that i hadn't used as much before but ledger live is super cool it is a piece of software put out by ledger hardware and they've added so much more to it probably since the last time you checked all of these crypto services so you can buy sell exchange lend and stake all over getting into default services all the money verbs all through ledger live so that's super cool um yeah what else should we talk add with ledger david yeah it's if there's a lot of new uh people subscribing to bank list and coming into the world of banklessness of crypto uh and ledger is

has always been the easiest hardware wallet to use uh and they also have now a bunch of backend software uh to live a bankless life inside of the the ledger ecosystem so it's a great uh you know first stepping stone into a very complicated world that packages up all the defy services into a very nice interface along with the top tier security of an actual hardware wallet not your your keys not your crypto um but then also ledger and this partners allows you to do all the money verbs that we talked about on the bankless program so check ledger out if you don't have one go to bankless dot cc ledger check that out or also if you have a ledger start checking out the ledger live application david i'm going to ask you the question i ask at the beginning of every single state of the

nation since we started these things that is what is the state of the nation today the state of the nation is expanding uh in the market monday piece that i put out yesterday i used this metaphor this risk metaphor if you've ever played the game of risk it's a game where you have different territories and you have like different armies positioned around the borders and you try and claim the next border bitcoin just claimed el salvador so it is now instantiated in the brisk board you know an orange country el salvador uh and the the question that we have for nick carter is where does bitcoin go next where does it expand next uh i'm getting like kind of i cons like flashbacks not flashbacks i never was alive back in the

70s radius but like of the of the cold war with the uss versus russia and like the containment strategies the u.s like think of the perspective from the dollar trying to contain bitcoin right and so we you know we got bitcoin advancing out of el salvador we got the dollar trying to contain it um but you know if el salvador falls you know what about costa rica what about panama what about the other dollarized countries of latin america like is this the dollar the dom the bitcoin domino effect about to happen uh and so bitcoin is expanding and it's claimed el salvador and who knows what happens next what's so interesting is in order to claim like countries uh and territories in a game of risk you have like soldiers and you know cannons and that sort of thing but bitcoin is doing this without

soldiers without an army it's just doing this through idea propagation essentially so this is a super important story i think in the we call this historic this is absolutely on every single timeline of like you know 20th century 21st century evolution of money the date june 2021 will be there because that is the date that the first nation state actually adopted a cryptocurrency as legal uh tender and like we're here for it so guys stick around for this fantastic conversation we're going to introduce nick carter in just a minute but we want to thank the sponsors that made this episode possible first synthetics is ethereum's decentralized

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official favorite bitcoiner that means a lot fourth time on the show too i know it's been a really long time since i was last on though it has been it's been like months you know we were talking about this uh it's been 11 months it feels like it was way sooner but like so much has happened including the adoption of bitcoin by a country which is the subject of today i want to ask a question of like um this feels like a big milestone to me i know some people say look el salvador is not that big but like it is a nation state it is a country adopting bitcoin did you think this would happen in 2021 or like what was your like mental date for the milestone when this type of thing would happen

yeah i mean i'm like delusionally bullish bitcoin at all times so you know smoking like a true bitcoiner um so i sort of always expect the best possible thing to happen immediately um so i speculated on my own podcast about you know the the first sovereign country to like truly adopt bitcoin but i thought it was going to be like norway or singapore or something like a really you know like i don't know how to describe it but just a country that you know underst you know really deeply understands like sovereign wealth and like i mean singapore already kind of has exposure to bitcoin through

temesek i think um but yeah i didn't think it'd be el salvador i didn't think we'd get illegal to tender law i didn't think we would get actually like a legal tender mandate as in like merchants or mandated to accept bitcoin that was far far more than i expected what i thought was that sovereigns would start buying it yeah converting some of their foreign exchange reserves into bitcoin uh but this is different completely different and um very unexpected but yeah kind of on the timeline i was expecting but again i'm you know i'm like super like delusional about this stuff okay but so like so we're pretty delusional about crypto too right so like i don't think people have

ever listened to a bankless podcast that wasn't bullish like crypto in some way but is is this did we do we overhyped this in the intro a little bit like so my question is like this seems like a pretty major historic event here right is there is there is is everything going to be different from here on out like there was a before a sovereign country adopted bitcoin as legal uh tether and then there's an after do you think it's that much of a change agent or is this just a another like piece of the evolution of global adoption no 100 this is i would say one of the most pivotal points in bitcoin's history um

and on a par with like when bitcoin first monetized with that bitcoin pizza transaction so this is at that scale of importance um and i say that because like first bitcoin was this like you know empty like ledger slots that had no value and then it obtained value and then it was a collectible or like a synthetic commodity so it was sort of monetizing but it wasn't explicitly money in like the sense that an economist like george sulgin would describe it as money which is a generally accepted medium of exchange it wasn't generally accepted and then by decree

by law it became um a literal money in a you know entire country um and that's the first time anything like that has happened so yeah i think it's absolutely absolutely pivotal um of course like you know like from uh just from like a narrative sense of course like does that mean that you know millions of more people are actually going to adopt bitcoin no but in terms of like the taxonomy of money it like it's transcended into this new category now let's talk about just keep harping on the the significance of this really quick um because let's just uh imagine you're talking to somebody that is you know they've heard of bitcoin but other

than hearing about it they don't really know what it is and you're trying to explain to them the significance of el salvador or any country really adopting bitcoin as currency how would you explain it to someone who is just you know doesn't really understand what crypto as a whole is trying to explain it to from that perspective i mean effectively we had el salvador had a dollarized monetary system which meant that effectively dollar was the currency of the land i believe they actually do also in tandem have local currency but it's just been kind of irrelevant for a long time uh in parallel to that now there's an additional monetary system which is legal where bitcoin is on an even kind of uh par with uh you know dollar

from a legal perspective so from a tax perspective in terms of the tax treatment of transactions uh in terms of actually paying your taxes in terms of being the accepted and legal uh tender for the settlement of debts um and in terms of merchants having an obligation to accept this so in every conceivable way in this country assuming this law you know actually gets implemented and things like that um you're going to look at bitcoin being elevated to the same you know level of significance in terms of you know your legal rights and obligations with respect to the medium so effectively now el salvador is on this dual monetary

standard dollars on one hand bitcoin on the other so it's been elevated to sort of an equivalent status one of the big deals here is that el salvador and citizens don't have to pay capital gains tax on their bitcoin can you fit that into the story as well yeah so in the u.s bitcoin is taxed as property and actually all crypto currencies crypto assets and so that means that when you make a transaction you purchase something with bitcoin the tax code interprets that as a sale and you are then taxed on the difference between when you acquired that bitcoin and the value of it when you sold it so you have to keep track of that and then you have to pay a shorter long-term

capital gains tax which is an enormous hurdle and that's actually really how uh you know countries like the us maintain this monetary hierarchy with stuff like tax treatment there's no like explicit law saying you know the dollar has to be worth something and you know the dollar is like sacrosanct in practice what we have is um you know a a bundle of like laws um and sort of processes which you know encourage the dollar to have value and sort of instill it with value and tax treatment is you know paramount among them uh and that's how other foreign currencies and foreign assets and things like that are disempowered at the expense of the dollar so eliminating

that um tax hurdle and that just friction through tax that's a really really key thing in sort of elevating bitcoin to sort of this egalitarian status yeah i i think people totally forget this like you know i've said this a few times because i believe it's true and i've heard others say it but like um i think the worst ux for crypto is actually in the tax code right it's like there there have been moves even the u.s to sort of pass some safe harbor sorts of legislation that say under a certain amount of crypto you spend per year say that's not like taxes capital gains it's more taxed as a currency is money but it's never gotten anywhere i think people forget

that like countries don't have to make something like cryptocurrency illegal all they really have to do is make it majorly inconvenient through their existing uh legislative processes and right now using cryptocurrency for anything other than a store of value is like majorly inconvenient just because of the capital gains tax codes like so here's a here's a for instance right so uh according to tax code every time you make a transit transaction on ethereum pay some gas right there's a capital gains event there right like it could be small could be like you know you know very very de minimis but like

that's ux friction i mean i'm paying a few dollars in ethereum gas and that there's a there's a capital gains tax event on there and i have to track that um so yeah plus one on your point there is countries with their existing tax code already make the ux of cryptocurrency very difficult without even having to make it illegal yeah i i just wanted to throw in here that i wrote about this for your newsletter actually uh back in the day uh crypto fiat mutualistic or parasitic and i specifically talk about the implicit and express explicit privileges of the dollar and sovereign fiat relative to all other near monies

and you know crypto is like a near money like it has value people treat it like a money but it lacks a lot of these explicit uh privileges uh and the the tax treatment is is like probably the most important one you see now why nick carter is our favorite bitcoiner because uh you know he even refers to past bankless issues as he's making his points here's the article uh that he mentioned oh you guys have it yeah yeah seriously you scroll down i literally enumerate the dollars explicit privileges and then like the uh you know something it's funny like this stable coin there's so many more stable coins today as opposed to yeah like this uh what was the size back then this was

uh this is from december 20 oh may 2020 may 2020 so we're here we're at 10x from here aren't we yeah yeah just about yeah that's crazy insane so yeah so there's there's implicit and like you know these emergent features like the fact that you know if you want to participate in like u.s securities markets you need dollars like stuff like that so there's like the very explicit stuff and there's the input stuff implicit stuff and then el salvador has you know worked on the explicit side obviously tbd on you know what happens though right so nick uh let's get into the background of president uh naive bouquet uh and you know since he hopped into your twitter

spaces i can only assume that you guys are friends now uh what have you learned about uh president naib before this event right like before that this the uh the announcement went went public that um el salvador was going to put forth a bill that would ratify bitcoin as legal tender uh where do you think bitcoin entered in president naib's life like how how did he become uh pro bitcoin do you know anything about the backstory here that's a great question i believe that it had a lot to do with bitcoin beach which is this kind of like non-profit um uh initiative designed to encourage people to transact with bitcoin um in this specific beach town in el

salvador and i i had heard of a lot of bitcoiners going down there like my friend miles suiter had spent a ton of time down there with jack mallors um i believe peter mccormack was down there i actually thought about going long before i knew anything was going on from a monetary perspective just because i thought it was cool i think it's called elsante and apparently the merchants there accept lightning transactions and stuff like that i haven't been so i can't really you know talk about it um with that much detail but my understanding is that is probably how the president buchelle you know first kind of you know got turned on to bitcoin but i mean he could have learned about it from anywhere frankly i mean

from the internet uh he's like super plugged in he's a very uh very like tech savvy president i mean um a lot of people compare him to aoc in terms of um his level of like online reach and like how active he is on social media and stuff like that um so he's it wouldn't surprise me if he had you know like learned about on reddit or whatever like the same way i did the uh the bitcoin beach uh that actually really really fits well into my whole risk metaphor because bitcoin literally established a beachfront in el salvador a beachhead yeah this is bitcoin's normandy that's right right yeah okay so so not only is

president nyeb a believer in bitcoin but he also kind of seems to be a straight-up bitcoiner like the guy's got laser eyes man like he speaks like a bitcoiner have you noticed these qualities about him as well i mean he cottoned on to the bitcoin discourse very quickly and like understood even in his spaces conversation with us he he seemed to be uh you know repeating a lot of these like bitcoinery type phrases um so i mean he clearly spent a lot of time with bitcoiners um you know prior to going public with this announcement and passing this law and stuff so it's pretty interesting get to see a head of state so plugged in to like the

bitcoin community and it's narrative and stuff like that it's really interesting nick you compare him to like aoc because like i just looked at his age he's 39 and i think that like barely fits as a millennial so he's like a an elder millennial on that end of the spectrum right and like i mean millennials gen z this very much seems to be sort of the the digital generation here and the the way that he interacted um with the bitcoin community assumed the culture like joined your twitter spaces that like that's a whole social media savvy that you don't see very often uh in u.s politicians anyway but like i'm i'm curious as to why you think he proposed this bill and uh should remind folks too that el salvador in congress

voted overwhelmingly in favor of this bill as well i think it's like 62 out of 84 total votes voted in favor so it wasn't just the executive branch the legislative branch actually voted in favor of it but like what were the reasons it was proposed and why was this so favorable seen as so favorable by the legislative branch yeah i mean he enjoys enormous popularity he's probably one of the most popular uh world leaders domestically something like a 90 approval rating um uh one of the uncertainties was whether they would get a majority or a super majority with the passage of this bill um they announced to us on that spaces as the vote was happening that they got

a super majority um which was crazy to hear the like the votes roll in live on this audio chat um but yeah i believe his party controls the the legislature um you know so they the equivalent of like a blue wave over there um i i mean i don't know if like you would describe his party as blue or red um not to like put it under an american lens but yeah um they have overwhelming like legislative support so it's not like that surprising necessarily uh that you know his bill passed um but yeah the crazy thing is just the speed of execution i mean the text of the bill

was released on where the announcement was on saturday they released the text of the bill on tuesday and then hours later voted on the bill uh and the boat vote concluded at 2 am you know eastern time so they actually had this midnight session in congress which was crazy and i actually think i said on the spaces i would be complaining if i you know were a legislator and i had to read and understand this bill in like 30 minutes and then vote on it right so we've talked about why this event is significant from the bitcoin perspective but let's talk about why this event is significant from the el salvadoran perspective why is this good for el

salvador why what was the incentive for president naib to propose this bill what was the incentive for congress to pro to ratify it and why is this good for el salvadoran citizens why do they think that this is good for the country so like honestly the jury is out whether this will be good for regular old uh el salvadoran citizens um and i want to be honest about that like we don't know um most of them are not bitcoiners obviously i mean like the bitcoin penetration worldwide is like single digit percents so with the reaction i've seen from salvadorans has mostly been confusion um you know like what is bitcoin how did this parallel you know internet

currency come to be a you know tender of the land um you know am i going to have to use bitcoin to buy things um so that's been like the main reaction that i've seen um obviously salvador and bitcoin are just super pumped about it uh but you'd have to assume they're not the majority of the population um so we'll see like we'll see um the fact that article seven makes um acceptance of bitcoin for merchants mandatory that to me is very different from uh just ratifying bitcoin as a legal tender that is optional

that's different because at that point you move from elevating bitcoin um and eliminating frictions and you move to potentially adding frictions because not every merchant is going to have the facility or the technological means to accept bitcoin it's not like bitcoin merchant tools are ubiquitous in latin america they're certainly not um there's definitely startups that are like trying to solve this but uh it it it's far-fetched to imagine that every you know taco stand or supermarket or small business has the means to actually accept bitcoin so i'm very curious as to see what that rollout is going to look like i believe the law goes into effect in 90 days and

whether that's going to be enforced too nick was there like an exception if merchants didn't have the technical capability to accept bitcoin there was sort of like this carve out this exception uh well they created this fund called i think bendisol which is a trust fund which um apparently will help manage liquidity between dollars and bitcoin um but yeah you're right actually i think there might be some language in the bill about that some like like to the best of their ability um it's a very very short bill so a lot of it will depend on the actual means of implementation so again it's kind of a wait-and-see thing so but you know yeah go ahead yeah i was like curious right so if it's not really

for the el salvadorian people if they're kind of like mystified like we're already using a money and by the way bitcoin isn't a great medium of exchange or unit of account anyway anywhere i don't even think bitcoiners would say that it is um but like it seems like the the bitcoin case for why a nation state should adopt bitcoin is um not being dependent on the uh monetary sovereignty of another country right so like um el salvador with us dollars as its money as its currency uh is very much dependent on well what is what is the us's monetary policy and

well interesting last 12 months we've had five percent inflation maybe that's really 12 inflation uh in u.s dollars we don't know and the monetary policy is really in the hands of let's be honest the elite baby boomers uh that are like part of kind of the us um government apparatus right so the the win i i would think bitcoiners would say the win for a nation like el salvador is you have a credibly neutral monetary system rather than being dependent on another nation states is that what you think the president saw in this for his country i believe so so i think there's two things going on so that is my real answer for what i think is happening is

that um it's a beginning of effectively a reprisal against the us for officially dollarized countries to stake out their own monetary sovereignty or to distance themselves a little bit from the federal reserve policy which they're exposed to um now president buchelli denied this on the spaces chat when i asked him which is maybe fair and sort of diplomatic because maybe you don't want to be super explicit about the fact that you sort of intend to de-dollarize long-term um because you know bad things have happened to people who have de-dollarized or like stopped selling oil for dollars like uh gaddafi tried to get off the dollar standard for

the sales of oil uh so did chavez uh iran has tried that uh and um well plus he also doesn't probably doesn't want to scare his own citizens who are just used to the dollar right like we we can in the back of his mind he can think like maybe this is a five to ten year phase out maybe faster maybe slower but there's no point in just like bringing that up on day one right right and and this is an incremental step if that is what he intends to do right um you know first of all make bitcoin on even legal footing with the dollar then maybe later on you know foreign exchange reserve conversion or you know more explicit distancing from the dollar but here's a very interesting data point

which kind of corroborates this theory the us actually has threatened el salvador with sanctions this year earlier this year um one when uh buchelle i believe certain officials in el salvador not state level sanctions some uh buchelli i think uh fired uh like a lot of the uh jurists like in their uh judiciary and like consolidated power in a certain way and the us bristled at this and made some noises about potentially sanctioning you know members of the uh government in el salvador so my hypothesis and i'm not an expert on this at all um you know i only found out about you know the like politics of

el salvador pretty recently my hypothesis is that that might have motivated this so this might be a populist reprisal to the us government saying like okay like we're dollarized but like we're going to introduce this other parallel currency so in the case that you do proceed with sanctions we're still going to have this you know alternative you know monetary network that we can tap into if necessary yeah i think people miss that there's like two things that that bitcoin provides right one is like the actual um credible neutral monetary policy against issuance so you're not relying on the fed but but the second is uh credibly neutral value transmission right so you

don't have to use like the swift system that basically the us you know controls uh and can impose sanctions on them so there's these two aspects of like we call that in crypto like censorship resistance that you get to benefit from and you're saying it could be both of those potentially it could be either yeah but it's not something you want to come out and say probably probably not probably not but yeah i agree i mean would i be concerned about u.s inflation actually president buchelli did make reference to this he made reference to the cantillon effect although he didn't um you know specifically call it out but he described it so he basically said on the spaces that i hosted he said um the us fed is you know like

aggressively printing money that's effectively monetizing the debt in the u.s and those transfer payments are going to americans but the entire world bears the liability of inflation anyone that's dollarized bears the cost of you know very accommodative fed policy and effectively inflation but they don't uh you know benefit from that issuance certainly those transfer payments that are being funded by monetary issuance are not going to salvadorians they're going to americans and so he did kind of obliquely make reference to this hierarchical system whereby the whole world is exposed to the dollar but right now it's a very nativist policy in the us where dollar inflation is you

know mainly benefiting americans nick one of the big topics of conversation in this whole news is the lightning network and also uh after bitcoin miami 2021 the lightning network did definitely seem to have a big resurgence in just conversation uh and i saw a tweet from you talking about how one of your big takeaways from the bitcoin 20 2021 conference is the maturity of the lightning network and notably jack mahlers who heads up zapp was one of the the um core liaisons with uh president naib and just bitcoiners bitcoinerism uh and and so there was a direct connection between the el salvador and the lightning network through jack mahler's

do you have any like thoughts or reflections as to how the lightning network fits into this story and also like kind of the phase of development that like the lightning network finds itself in at this present moment yeah i mean the strike story is absolutely central in this um you know bitcoinization uh as some people are calling it uh you know of el salvador jack mallors was apparently one of the main conduits here to the to the state um and um you know strike has a lot of usage down there and apparently is growing its user base now you know can uh non-custodial lightning apps power you know an entire country's merchant

payments like in theory there's not really any uh limit to what you know the number of transactions you can do with lightning of course like you need to open and close channels and things like that um could it work like probably like i see no like technical barrier to that working do i think lightning is going to become ubiquitous in el salvador from like brick and mortar merchant payments like definitely not um lightning is complex to reason about you know these apps are still a little you know challenging to use like to be clear like i obviously use lightning a lot but um

it's enough to just understand bitcoin and then you know additionally to understand that there's this you know overlay network built on top of bitcoin you know that's that's like a lot of work uh so i don't think lightning will uh have ubiquity in el salvador um but i do think i agree that it's reached this good stage of maturity where um it certainly works i just i think people are reasoning about payments wrong they think oh you know we can build these uh you know crypto blockchain based payment systems that just replace identically replace like plug and play you know payment experiences in the real world i think lightning is much more interesting for like you know content monetization on

the internet for streaming payments for like brand new payment experiences that weren't possible for not necessarily just replicating these like you know old world payment experiences for for that like centralized services uh or like qr code based payments like you have uh with alipay like that seems to make a lot more sense and if uh if i'm getting my details correct the strike app is actually one of the mechanisms as to how uh companies can kind of plug into this new this new law of bitcoin as legal tender while still kind of denominating and then thinking in dollars because strike has this um treasury in the background and they manage risks so they have a dollar neutral position and

so when el salvador and citizens are using strike they can actually be sending nominally dollars to each other while it's bitcoin in the background uh a are are those details correct to the best of your knowledge and is there any more like illumination that you could you could shed on that yeah it's a little opaque to me you know like we're not investors in strike we've invested in you know similar uh countries providing digital dollars to latin americans um but but not strike so i don't have like precise knowledge i believe there's like some some interplay with tether uh which is like maybe a little perturbing um but uh and that's actually getting a little bit of press um

but yeah i believe that's the case um and um you know we'll we'll see like this will be a huge stress test for that entire infrastructure it's important to me that you know even if there is like a public uh as in state created funded sponsored wallet that you know people use or are invited to use that there be private sector alternatives and that um there be no restriction on the number of uh private sector wallets that people are allowed to use so my hope would be that you know there would be a a good number of like non-custodial semi-custodial you know dollar-backed like private sector wallet

experiences that people could use should they want to transact with bitcoin worst case would be like some sort of like custodial government app which is the only way to make a bitcoin transaction in the country um or if they gave a license to like one or two wallet companies um you know i don't think that would be optimal it's not optimal nick but is it would it be that bad right it's like you you don't have i mean we've had this conversation before about like difference between sort of you know ethereum sort of a d5 vision which is like maximally bankless at all layers and then kind of a bitcoin vision which is it's got lightning some non-custodial sort of things but um can also scale from a bitcoin bank

perspective right and i think you've advocated for like hey that could be a reasonable way to scale so long as there is a free open private market building on top of bitcoin as a settlement network and as a as a monetary network right it's like you can kind of get a venmo type experience finale pay type experience now if you're willing to give up your private keys and just go custodial that can work in an app very simply do you think that would be the end of the world if it all ends up sort of custodial payment driven in el salvador so yeah it's a difficult question because you're right i do believe that um you know a hybrid network uh can be

practical and work whereby you do have um you know custodial experiences like the same way that we've all used exchanges and bitcoin banks crypto banks uh things like that um and so i think that can be a very strong complement to you know a base layer which is sensor resistant um and you know gives you an array of transactional modes um however in the case of el salvador the thing that makes me nervous if this were to end up you know fully custodial is the government mandate um you know the the insistence that merchants accept bitcoin because then you know you're you're eliminating free choice in currency

uh which is important you know like bitcoin is ultimately about free choice and about well maybe if you are using a custodial service you can always withdraw your coins so if the government like ratifies like two or three custodial wallets or says you have to use the state-sponsored bitcoin custodial wallet to do your bitcoin transactions and merchants have to use the state sponsored custodial wallet that eliminates the choice in currency to you know significant degree uh so i'm i'm wary of uh of you know development like that like people don't really know this but in venezuela like the the government has created like bitcoin like remittance services as far as i understand like you can renew your

passport and pay for it in bitcoin or with the petrol um but you know i don't think people are really that excited about that or think it you know that it necessarily empowers venezuelans so there's a big contrast between like the maduro approach to embracing bitcoin and you know just like the laissez-faire approach and you know i naturally hope that um that we get more of the latter rather than the former so just some numbers really quick el salvador is a country of 6.5 million people and for for context that puts el salvador right behind maryland as the biggest state um and right above indiana 17th largest and it's as a gdp as a

country it's the 101st largest gdp country in the world so you know very relatively small country relatively modest um but still for bitcoin it's a it's a whole entire country and so to me this is this is like bitcoin's biggest test right we get to ask and hopefully answer the question do 6.5 million people want to use bitcoin when the barriers for using bitcoin are their lowest in the world right is the lightning network actually suitable to help facilitate this growth and adoption and help uh just grow usage of bitcoin as a utility to me this is like bitcoin's make it or break it moment where we kindly kind of find out like do

does people actually want bitcoin um is that kind of how you see this event as well all right it's i don't know if i want to put so much pressure on the people of el salvador but [Laughter] i mean i it's gonna be very very interesting to see how this plays out there's a lot of ways it could go terribly wrong from a narrative perspective uh for bitcoin um but it does mean that every economist now has to concede that bitcoin is legal tender in at least one jurisdiction so to me that's like the strongest thing is that it just signals bitcoin's progression to a new phase of life now do i actually expect six million also you know salvadorans to use bitcoin and day-to-day payments

absolutely not like i think usage will still be pretty de minimis i think the relevance of bitcoin is chiefly like attracting crypto entrepreneurs to the country you know attracting capital inflows that seems to be a big part of what buchelle is interested in and then more long-term potentially kicking off a dedolerization or at least diversifying the set of monetary networks that el salvador is exposed to um and you know they're not the first country to do that like iran has already kind of explicitly said like we're you know looking at the bitcoin network in terms of like a way to settle international you know trade uh payments you know

things like that venezuela also apparently has like state-sponsored bitcoin mining so el salvador is actually continuing this trend started by pariah states what's interesting is they're the first non-pariah state the first like sort of state that's actually part of the international community to do this but yeah that's that's the big trend is like actually at the state level i think um you know like diversifying their monetary exposure that's interesting you say like um el salvador is the first non-pariah state to start doing this right although you did mention that it has kind of gotten in trouble uh in the past with maybe uh the us government and some of the choices with um with this most recent president but like i guess this is

another way at which bitcoin is being stress tested right so this could be as david said bitcoin's biggest test and you have to wonder if it's also a test on the nation-state level right so like the imf issued something last week um talking about uh having to seriously analyze the move of el salvador and you wonder if that's kind of tied into uh bank loads loans and international bank loans this sort of thing and you kind of wondered like the the analogy dave and i were talking about in the intro to this is does this lead to a bitcoin cold war right if we're talking about dedolorization which is this has got to mean dedolorization to um the powers that be right it's kind

of a signal towards that um does the u.s actually want that does the international community want that will they take steps to contain it will they take steps to sanction it in in small ways or big ways how do you think bitcoin holds up against that we've always called this the the final boss right but like at some level nick i feel like look the final boss hasn't really been paying attention to crypto at all over the last 12 years it's just like this sideshow okay geeks yeah you have your internet money cool uh not really a threat too volatile to be a threat now we have a nation-state a non-pariah nation state that's adopted it so

what are the powers that be going to do how are they going to react to this that's the most fascinating part of this whole thing and i think we've all known i mean you guys make this analogy all the time talking about like the nation this is the state of the nation right uh talking about like you know blockchain based systems as like a new like new sovereign collectives right so like we've known for a long time now that there are geopolitical stakes here and that um you know crypto users are like staking out a new territory that's just not it's not physical territory but um you know it's very real in terms of

um you know reimagining what their most relevant political affiliation and political unit is right so we've known this is happening but this is just fascinating it's it's an acceleration of what was happening and i agree i think that is going to be really the enormous big test here is to see how the imf how the bis and obviously just like how the u.s like policy establishment is going to react to this um i think a lot of latin american countries that have this kind of historical trauma from imf intervention and from like sort of imperialistic us uh policy and meddling and supporting coups and things like that they're not that happy with being vassal

states of the us uh we all know that the washington consensus like the the like system of institutions the us set up after world war ii is declining in stature that's a fact um china has set up their alternatives you know so now you have the belt and road initiative china's has more um you know bilateral trade with more countries than the us does right now so you know there's like a neo cold war there but what balaji said on the space was fascinating he said el salvador could be the first in this new non-aligned movement because if you remember in the cold war the first world which was just western countries they're affiliated with capitalism in the us the second world which was soviet states and then you had the so-called third

world and that was used to refer not to their level of development but to their alignedness to who politically they were aligned with and they had chosen to not be aligned with either side and i find biology's reasoning on this incredibly compelling so you've got the dollar system and you have to opt into the you know the um the imf the world bank uh you know the wto uh things like that and and that tends to come with like if you can get that capital inflow into your country it comes with stipulations you know become a free market democracy uh you know like um stop the dollar adopt the dollar expose yourself to you know

the you know that that discretion of like expose yourself to the risk of being you know beholden to the to the dollar infrastructure which clears through one node in new york you know and so that comes with stipulations there's strings attached on the other hand you have like the chinese model which is probably except you know the sino cbdc the the digital renminbi you know it's a pretty like exploitative model frankly if you look at the way china uh interfaces with a lot of its trade partners um but yeah you know maybe uh we'll give you this nice package of of investment we'll build bridges and we'll sell you know your president's surveillance technology uh

and we'll give you you know this is this payment system bundled so like there's an emerging chinese alternative too but then maybe this is a third way this is a third way you know you have a monetary network where you're not exposed to beijing you're not exposed to washington you can store value outside of the confines of those two systems you can transact outside of those two systems and you can attract this capital base of sort of crypto entrepreneurs you know uh crypto natives digital nomads uh and you know maybe that can be like the alternative in terms of foreign direct investment uh and so i think president buchelli is kind of signaling that he wants the third way i mean he could have you know subjugated

him you know their their country to to chinese influence uh or remained in you know the tight you know u.s circle with the imf and like the various other you know international institutions but this is potentially a signal that there's a third way here uh and that's one of the most fascinating things i've i've you know come across a long time this is super fascinating right so you've got the us the first way china the second way now this third way which is adopting cryptocurrency and this is kind of like the crypto domino theory and maybe el salvador is just kind of the first domino to fall what what other uh countries are next you think is it going to happen in uh latin america for instance i've i've heard some murmurings from like you know

mexico and some other you know latin american countries about this is this where the next domino falls we don't know but a lot of policy makers that have you know witnessed this and then immediately signaled their own affinity for bitcoin are in latin america i won't enumerate them all but you know you're talking about ecuador colombia argentina brazil mexico uh panama like policymakers representatives politicians in all those countries have made noises about bitcoin laws you've also seen you know governors of states in places like texas and florida uh you know expressing kind of pro-crypto views but

i think like your most likely candidates would be already dollarized nations because these are places that already don't have the monetary independence right so they're not giving anything up so already dollarized nations that maybe feel similarly to el salvador they feel hard done by historically in terms of the influence of the united states um and so and where remittances are you know pretty material as well in terms of inflows uh with the theory that you know bitcoin-based remittances are maybe more efficient i guess that kind of remains to be seen whether that's true or not so you might be looking at um yeah you know panama is a dollarized country um uh officially uh costa rica is a

unofficially dollarized country but if you've been to costa rica you know you can transact with dollars there um actually they tend to merchants their ass for dollars and they give you back the sucre i think um so you get the soft money back here take my liability yeah yeah um you know that would be an interesting one i think ecuador ecuador had their own cbdc back in 2015. nobody knows that um they didn't really succeed it was kind of tether-like had some issues but ecuador had this spontaneous bottom-up dollar organization that i talk about a lot there's some good papers on that by larry white um so those are maybe my three choices for like if this is to continue to

happen in latin america i would actually expect to see it from maybe one of those countries so historically we have not seen good things happen to countries that deny or reject the dollar america tends to invade these countries um i mean that this was what all of this was what vietnam was this was what all the cold war was um maybe we've supported multiple coups in latin america so it's not like out of the question for us to look at you know good ol uncle sam and like the the hegemony of the dollar and say like oh like what's going to happen next the difference between the 70s and 80s cold war and the other coups that in the america and the cia has sponsored in in latin america is that this time

it's that there is a cohort of bitcoiners inside of america right it's it's not communism it's not it's not whatever that mess was this is bitcoiner and and bitcoin is a global network with a global community and that global community is very significantly domiciled inside of the united states how do you see that this dynamic really changing out this version of the future that we see coming for um coming to toward us yeah i mean like the us empire's military adventurism has not been popular for two decades now um you know the iraq war like there was significant protest around that the iraq war had no justification for it it was based on a contrivance a lie and you

know after the fact we now learn that it was probably more to do with up upholding this oil for dollars um you know trade which keeps the dollar afloat or at least policymakers thought it kept the dollar afloat um and that was probably you know the primary justification for the iraq war you know it now today looking back on it everybody virtually everyone would say it was a waste of money and you know a pointless conflict so you know does the american people have the appetite for more military adventurism to support a fraying dollar standard that doesn't even work for regular americans like the the you know the federal reserve policy has created enormous inequality which is

equivalent you know in magnitude to you have to go back to like the 1920s to find inequality that bad um so i don't think you know most americans have any allegiance really to the to the dollar system it doesn't work for most americans so would they really support you know a military expedition to you know reinsert the dollar and these countries that are just peacefully opting out of it i don't think you you would find that level of popular support um so i'm not sure that um that the dollar system has the credibility to attract um you know that level of a popular mandate and yeah as as you say there's probably 30 to 40 million bitcoiners in the us

alone so it's like an enormous demographic and they're all going to be sympathetic to the salvadorians yeah i've always uh i think it's it's pretty easy to to say without evidence that in 2020 the global population very much has a distaste for violence these days we're too global of a too global of a population to really accept that anymore nick there's a number of conversations that we want to get to and we also want to bring in like the perhaps the etherean or non-bitcoiner perspective uh to this whole debate um and as well as a few other things as well as a a article from the mises institute as well which had a critique on this move by el salvador so we're going to get to those conversations but first a moment to talk about some of these fantastic sponsors that make this

show possible bankless is proud to be supported by uniswap uniswap is a new paradigm in asset exchange infrastructure instead of a cumbersome order book system where trades are matched with other humans uniswap is an autonomous piece of software on ethereum which is what ryan and i call a money robot no human counterparties or centralized intermediaries just autonomous code on ethereum input the token you want to sell and receive the token you want to buy something brand new in the uni-swap ecosystem is the uniswap grants program is now accepting applications for grants we have been saying this for a while and we'll say it again dows have money and they are in need of labor if you think that you have something to contribute to

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an editorial and i thought the conclusion was worth bringing up here they they wrote hopefully el salvador is on a path to a more prosperous future it's long-suffering people surely deserve as much for that new ideas are needed but an oily keynesian president with slick american advisors question mark that's nothing new not even when they put their plans in modern language about bitcoin and put laser eyes on twitter account if the president really wants monetary freedom for el salvador he should not have presented them with what was effectively a government handout for bitcoin holders and the companies behind the strike app and other potential intermediaries instead he should have simply repealed existing legal tender provisions and announced that the people would be free to use whatever medium they prefer for their transactions

uh nick how how do you feel about this take from from the meezies institute yeah no i'm sympathetic to that take i mean it's cool to see a nation state ratifying bitcoin and making it legal tender but i am you know fundamentally skeptical of state power right that's like my stance on all this stuff um and i am not a fan of state mandates regarding currency i you know think that ultimately uh you get the best um you know consumers product um if there is a free and open choice um and so salvadorans are not exactly being presented with a choice here um because of this uh this merchant mandate um

so i think yeah a better way would be you know eliminate um you know the the like the legal tender provisions as the business institute says so like certainly like this is exciting but it's not without its drawbacks um and uh yeah i wish that the language of the law wasn't as focused on like enforcing certain types of behavior um but rather on you know eliminating hurdles although i guess all of that said if you do want to foster a new monetary network effect maybe you need uh some like encouragement to get it started um but again i don't actually see why you would necessarily strictly want a whole country to bitcoin eyes i mean i'm you know if it is happening

organically great but is there a need is there a policy need to accelerate it i don't see a need you know in the first half nick we were talking about the reasons that president naib like adopted bitcoin and pushed uh so ardently for this and we talked about you know maybe the the sunny side of things which is like monetary independence for my people and a censorship resistant value transmission network that no other sovereign can control and those sound really good but like the truth the critics perspective would be what if president naib is just another bitcoin holder and wants to pump his bags right like so like he's got that is the reason why right so like

let's be honest we are are all really excited about the upside with crypto and everyone in crypto likes to talk about um value price go up and in fact bitcoin's mantra his number go up he wouldn't be a bitcoiner unless he didn't want number go up is he just trying to pump his bags here well we don't know if he has bitcoin i mean i think it would make more sense to if that was the plan to covertly acquire bitcoin in their state reserves and then make a big song and dance about this whole thing that doesn't appear to have been the way that it happened um it you know it seems like through this um this trust uh liquidity facility they might acquire some bitcoin over time

but um they haven't gone about it in that in a way you know that would suggest okay well we have a financial incentive to make the value of bitcoin go up or rather they could have extracted more value from it had they planned to do it in that way um so that's the thing that kind of shocked me a little bit it's like making bitcoin legal tender is like a big deal and it's gonna impose like new obligations on your citizens and it might make them a little upset with you right so why not acquire bitcoin in your reserves first and then do that um you know and then provide that sort of pr dividend and you know reap the benefits of that that's the thing that kind of confused me about this whole

thing i thought that there would be like a definite like chronology to it i'm curious about your take on this uh too nick so let's say it was the case that uh president i just did this to pump his bags maybe he's made some secret purchase had a lot of bitcoin he's a big holder or maybe he bought in you know 2012. we don't know um and let's say he did this is that is that a bad thing necessarily or is this just like is the second order analysis here that this is ultimately how cryptocurrency and how bitcoin gets adopted it's through number go up it's through greed and this is how you build a bottom up store of value asset um there's no really like there's no other way to do it other than

this sort of thing so i'm curious what you think of that second order analysis that even if that's the case maybe that's still good maybe that's how bitcoin propagates yeah that's a very good point and uh i was reflecting on this because i was rereading hayek's denationalization of money which is like funny because we're talking about you know the collision with the nation state and hayek felt that the best currencies would be price stable right relative to some basket of goods and services and they would actually out compete other currencies on the basis of that stability but you know reflecting on that it looks like def deflationary non-stable but uh you know like constantly or you know over the long term

uh deflationary currencies are the ones that are winning out uh private deflationary private currencies like bitcoin and so maybe hayek was wrong about that and making these things you know deflationary by design by you know implementing ngu technology um like maybe that's more viral and more maybe that's the like the secret um to successfully monetizing a new uh non-state currency from scratch uh so like we celebrate when we see like members of you know the biden administration that disclose they have bitcoin um like there was a high-level official recently i think uh that that did a disclosure and so that is kind of the

way this thing warms its way into society like penetrates every every echelon of society um and then people are positively disposed towards it's not that much you can do to stop it i mean people are ultimately gonna act in their own economic interest yeah it's funny this is not hayek but uh hasu uh who whom you also know most of the argument are you right close enough our modern uh hike is hasu and he basically made the argument that hey all all crypto communities that are trying to be a non-sovereign store of value will converge on a deflationary monetary policy right so like we see with ethereum the uh ethereum community is really excited about ultrasound money why it's this

convergence right and that's how a bottom-up money grows if you're taking an academic or systemic perspective you might say well actually you know four percent four point three percent annual inflation is actually the the optimal golden number for a money economy right um but then you turn around to like the academic you say yeah but like how do you get it adopted in a decentralized way because if that 4.3 inflation money is competing against deflationary story value it's going to lose so that's kind of the argument that uh high cost i don't know how you got 4.3 percent the golden number arbitrary like what is it like a local local maxima or something you know like

maybe it's not the perfect equilibrium but it's an equilibrium exactly so like you know ultimately you have to look at it from an evolutionary perspective what are the what are the traits that enable uh you know this organism to uh survive and replicate and maybe one of those traits that's uh you know conducive to selection or whatever is is like an attractive monetary policy as opposed to just a flat one nick one of the other lines of conversation that i've been hearing go around is uh uh president naib is has ha previous flirtations with authoritarianism he once marched the military into congress and forced them to sign a bill that would give him like a bunch of like you

know helicopter tanks and some militia equipments of surveillance equipment he also ousted like five uh judges and the attorney general and the concern from the ethereum community the ethereum culture towards the bitcoin community the bitcoin culture is that all these bitcoiners are just over the joy over the moon enjoyed with um president naive and el salvador adopting bitcoin when he has a track record that stands for something that is very antithetical to bitcoin uh how does it concern you that there's a some portion of the bitcoin community that is just like ready to praise president naib regardless of past actions just because he accepted bitcoin yeah i think that's a really really

great question i'm glad you asked it honestly um because it's like a fine line right you're trying you're excited that we're seeing literally nation-state adoption of bitcoin but at the same time like no state is perfect in el salvador i think is like defined as like a troubled democracy or something um depending on whom you ask like um so yeah i mean certainly i actually the the first time i heard about bouquet was i read an economist story about him long before this happened saying like there's like a millennial authoritarian in control of el salvador and so i tried to you know ask him some tough questions on the

space certainly alex gladstein was on there and asked him some tough questions too so i like to you know say that we weren't you know 100 purely positive and uh you know um you know obsequious or whatever um that we weren't pure sycophants but um you know it could certainly look that way to outsiders uh that see bitcoin's cheerleading bouquet i mean i haven't like pulled punches like when i went on bloomberg and and also you know described him as an authoritarian so um i'm you know fully aware of like the contradictions there i think like maybe the synthesis is you know we can't stop anyone adopting like

whether it's a nation state or a dictator whatever um already some like pretty questionable places or you know states have like have some engagement with bitcoin whether it's north korea is believed to be behind a lot of those attacks on exchanges um at the state level um iran venezuela etc and you know that doesn't mean that bitcoiners are like embracing those countries just because they share the same network uh you know i think the point of the network is that there is no moral or political uh like gating factor you know on like who can do a transaction or whether transaction is valid unlike you know the dollar network for instance where that absolutely exists

and so because bitcoin is intended to be or is you know truly permissionless in its usage you're gonna share a network with you know bad people and so that's that's why we say money for enemies um i think a lot of people need to remember that uh is that uh yeah like we support you know censorship resistance that also means you have to bite the bullet and say censorship resistance for you know like people that like are questionable in some way does this does this feed into like elizabeth warren's narrative recent narrative for instance which is like hey like cryptocurrency bitcoin specifically is the money for um terrorist criminals and rogue nation states now here's the

first millennial authoritarian and no no big surprise he's adopted bitcoin because that's what authoritarians like uh does this give that narrative argument more power yeah but you know you can just flip it on its head and say like the biggest network is the one that has social scalability and uh doesn't impose any you know requirements or standards of behavior for those who choose to use it and in my view the best money is the one with the biggest network the most number of nodes in the network um and so that's one reason why i think like bitcoin will out compete the dollar ultimately because the dollar increasingly has all these conditions to

like who you have to be and how you have to act to use the dollar network and the administrators of that network the node operators uh you know the validators uh they are like getting increasingly aggressive in in you know uh imposing those conditions so and like warren is like she's she you know as far as i can tell she wants to promote the cbdc and and use it to you know implement her political agenda in society through the means of the money um that doesn't seem too dissimilar from like social credit frankly um or any other like highly surveilled um you know digital money system uh and so like in my view like i just think organically

people will long term be attracted to a network that doesn't have these um you know like political um mandates built into it uh you know that doesn't really care about who you are or like what you believe in uh and yeah of course that's gonna include a lot of um you know a lot of rogue nations and you know like other criminals and things like that but i you know that's i think that's actually the recipe for a successful monetary network so part of the recipe i guess for for defy has been and you know um nick though like the bankless kind of thesis on all of this is we love bitcoin we think it's fantastic uh we're probably more bullish on ethereum and the reason is uh defy right so

this sort of um gives essentially a nation state like el salvador an entire banking system in a box where maybe we can get even further in the dream of having a venmo type experiment experience that's totally peer-to-peer right and you have an entire financial system and so like a question in the d5 communities of ethereum communities mind is i we wonder whether this is going to be the gateway to other crypto networks for instance and if you're doing bitcoin i know you're a big advocate of crypto dollars for instance why not crypto dollars on defy rails uh it seems like that could be actually a bigger gift potentially to the el salvadorian people where they get essentially this entire banking network

that's digital out of the box and and maybe it's going to become one of the like the best banking network on the planet it's an internet scale banking network what are your thoughts on that will bitcoin be the gateway to defy for el salvador or other latin american countries yeah i guess the question would be you know like what does defy offer to salvadorans you know that's like really addressable to their lives and like you know early in the episode i said like i actually don't think bitcoin is that relevant to most salvadorans um so you know taking off my like crypto rose tinted glasses like ultimately it's like cool to see nation state adopting bitcoin

um but you know is it gonna move the needle for your everyday salvadoran in a really material way i'm not clear on that and so i would probably extend that to d5 like is there a feature of d5 that would really materially benefit you know salvadorian um i'm not sure you know i'd have to think about that well one thought for you then is like so 80 of el salvadorans are bankless and i don't mean that in the way that we mean it i mean they literally have no bank right yeah and so you could imagine something like if ethereum gets its roll-up ecosystem working kind of a layer two you combine sort of a mobile type experience with like metamask and crypto dollars and

maybe you have a digital uh bank account like right up the gate uh i know there's probably not laptops and sort of thing but the mobile phone saturation uh like might be a bit higher there might be a way to do that um as like one potential idea thoughts on that yeah no it's plausible it's plausible there's just a lot of work that has to be done primarily around education i would say in terms of uh getting people to understand what it's like to use a digital bearer asset uh and you know the the responsibilities involved there um so that that could well emerge um you know like high-yield dollar-based savings accounts that are um you know plug into d5 on the back end

um i think that will require like probably intermediaries that look like regular old fintechs um and uh and make those experiences totally frictionless um but uh i think that's probably more of like a medium-term outlook nick as we come to a close here i want to kind of zoom out and have more of a higher level philosophical conversation uh using this el salvadorian event as as context uh one thing that i think has become really obvious to me is the um the priority differences between bitcoiners and ethereums with how they approach adoption right bitcoin wants to be very very physical right like the the risk metaphor of bitcoin claiming el

salvador like bitcoin is bitcoin wants a march through physical territory throughout the world and become you know legal or supported tender throughout the world and you can also see the same sort of interest in you know bitcoin mining where bitcoin mining really wants to be hooked into the physical power grid of the physical world right and even within this el salvador uh news event like the they have plans to literally make a bitcoin volcano where the bitcoin integrates with with a volcano theory is very different ethereum has no interest in being the unit of account or legal tender for any sort of nation state it wants to be the unit of account on the internet right and not only and it also doesn't want to

be instantiated in a proof of work network it wants to be instantiated in a a nebulous online virtual proof of stake network how do you how do you do you have any reflections on this cultural divide and differences in goals for these two different crypto networks yeah that's uh that's that's really like fascinating way to put it um the i mean bitcoin is to me like bitcoin isn't just like a digital version of gold it's like literally synthetic gold like i think of it as like the successor like two gold um and so the yeah these physical analogies make a lot of sense to me like you know the way we talk about mining it's very physical

a lot of bitcoiners think bitcoin is literally backed by energy i don't think that but a lot of bitcoiners do um so you're right it's it's got this kind of like some people describe proof of work as gravity as attaching weight to blocks so all these physical metaphors do exist and yeah i think of it as like following this progression of uh of like gold like this neo gold that's like spreading throughout the world and like mostly households and then later investment funds and then later governments you know holding some gold the same way like the the same distribution that gold has um so i think that's a very apt comparison and uh you're right ethereum it doesn't really aspire to these things it's completely different it's a you

know computational lubricant kind of thing um so yeah no i don't have that much to add that's well put so nick let's project this uh if you can make any sort of crazy projections or predictions for you know the next the as a result of the repercussions of this particular event like what do you what do you think is the most likely next steps in this story i think there will be a backlash probably as the law gets implemented and uh you know salvadorans are like what the heck is this bitcoin thing like you know i lost my channel back up on the lightning network or whatever um you know and some like the ux difficulties come to the fore and then the press is gonna you know go to el

salvador and be like hey no one's using bitcoin so it was a you know it's like a flop or whatever i think that's probably pretty likely i also think the imf is going to start to say like their assistance is conditional on countries not adopting bitcoin so i think we'll see some uh yeah i think we'll definitely see some backlash from the international development organizations um imf is is the most important one because they deal with you know short-term lending to governments that are troubled um i do think that we'll continue to see sovereign adoption i think we will see countries adopt bitcoin in their foreign exchange reserves not just with legal tender laws but the most obvious move here for me

is uh diversifying their foreign currency exposure by adding bitcoin bitcoin is now a foreign currency right it is the currency of the land in el salvador they could never take that away from us but yeah i i do think this progression will continue i think some of the younger politicians that are more forward-looking um will recognize that there's this big corner demographic which is spontaneously emerged in their countries and they want to appeal to it and they won't this bidding war is going to be kicked off between nation states um you know using tax policy as the primary thing to attract like this like very liquid uh wealth uh you know which is uh which

has emerged um and is controlled by like young crypto entrepreneurs you know like digital nomads like that sovereign individual thesis is real uh you know like it's happening but kelly was one of the first heads of state to realize it but he's not gonna be the last so you know it's a very exciting time to be uh you know kind of a sovereign individual uh you know like like to to the heads of state of the world like you know you're welcome to bid for my you know for my presence like i will happily like join nick on twitter spaces talk about make me an offer like i'll move to your jurisdiction you know there's a lot of us there's like 100 million of us now so we're mobile

we we talked about this nick thank you so much for for joining us on this this is definitely we've talked about in our josh rosenthal episode that this is kind of the crypto renaissance like the 2020s are certainly going to be interesting for the sovereign individual we're glad you are with us on that journey nick thanks for stopping by and telling us all about this this has been fun guys really fun let's do it in less than a year next time for the next episode and we'll uh we'll lubricate those gears get you a bankless t-shirt for next episode nick uh guys risks and disclaimers first of all david wanted me to let you know like and subscribe if you are enjoying this feed that's how we propagate it to more hearts and minds this is a battle for hearts and minds

nation state versus crypto networks of course risks and disclaimers none of this was financial advice eth is risky bitcoin is risky all of crypto is defiance too you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot hey we hope you enjoyed the video if you did head over to bankless hq right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence we recommend joining our daily newsletter podcast and community as a bankless premium subscriber to get the most out of your bank list experience you'll get access to our market analysis our alpha leaks and exclusive content and even the bankless

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