Saifedean Ammous: “The Bitcoin Standard” | SALT Talks #127

hello everyone and welcome back to salt talks my name is john darcy i'm the managing director of salt which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy salt talks are a digital interview series where we talk to leading investors creators and thinkers and our goal on these salt talks is really to replicate the experience that we provided our global conferences the salk conference which we host twice a year one in the united states one internationally obviously this year we were unable to host our conferences but we look forward to hopefully resuming our in-person events starting again in 2021 but what we're trying to do at our conferences and on these salt talks is provide a window into the mind of subject matter experts as well as provide a platform for what we think are big ideas that are shaping the future and we're very excited today to bring you the latest installment of our digital asset series uh with our guest today dr safidian amus uh dr amus is the author of the bitcoin standard the decentralized alternative to central banking which is a best-selling groundbreaking study of the economics of bitcoin and for people who are looking to get introduced to the space we thought this is a great place to start when i was going through my personal bitcoin education one of the first books that was recommended to me was the bitcoin standard so we're very excited to have safe uh with us today on salt talks the book was a pioneer in explaining bitcoin's value proposition and the implications of its unique properties bitcoin supply is completely irresponsive to demand making it the hardest money ever discovered and making hard money available to everyone worldwide safe has been at the forefront of the study of the economic implications of this new technology and he teaches and researches the economics of bitcoin on his online learning platform sephidian.com dr amuse holds a phd in sustainable development from columbia university where his doctoral thesis studied the economics of biofuels and alternative energy sources he also holds a masters in development management from the london school of economics and a bachelor of engineering from the american university of beirut just a reminder if you have any questions for dr amos during today's talk you can enter them in the q a box at the bottom of your video screen on zoom and in terms of today's format we're going to do something a little bit different with dr moose he's a fantastic presenter and has fantastic materials that sort of take you even if you're a bitcoin novice you can start to understand some of the economics and the value proposition of bitcoin and cryptocurrency so we're going to have dr amos give a presentation and share his screen for the first 25 to 30 minutes of today's talk and then i'm going to come in and moderate audience q a and ask some follow-up questions for my end as well so uh with that i'm going to turn it over to dr amus to give his presentation thank you very much john thank you for having me and for your very kind uh introduction it's a pleasure to be here um can everybody see my slides i think so i can see you okay cool so uh in today's uh talk i'm going to go over some of the main concepts in my book the bitcoin standard and um the first i'm going to begin with explaining um you know what is bitcoin the definition that i came up with for bitcoin and then bitcoins monetary uniqueness what is it about bitcoin that makes it so unique what is bitcoin good for and what are some of the implications of the use of uh bitcoin so my definition of bitcoin is that bitcoin is a peer-to-peer software for operating a payment network with its own native currency that is protected from unexpected inflation without having to rely on any trusted third parties i think this really captures the essence of what we have here it's a form of software that is peer-to-peer and that it's distributed over the internet and anybody can download it and use it and any member of the network is um appear with other members so it's it's perfectly voluntary and what that software does is that it operates a payment network between participants on the network and that payment network runs with its own native currency which is digital and whose supply is protected from unexpected inflation there's no way for anybody to make more of that uh money which i think is is the most important economic property of bitcoin and all of that is done without having to rely on any single trusted third party there aren't intermediaries that you need to rely on in the transactions that take place on the bitcoin network the significance of bitcoin in my mind lies in two main properties the first one is that it is the hardest money that we have ever discovered or invented and i'm going to discuss this in a little bit more detail now and second is that it is the only working alternative to central banks for international payment settlement so um first of all when we think about the hardness if you think about it anything can be used as money there's no reason why um anything can't be used as money anybody who decides to hold something not for the sake of consuming it but for the sake of exchanging it for something else later on is choosing to hold that thing as a form of money and so uh but anything that gets held as a form of money the value of it rises and because the value rises that gives people an incentive to make more of it so anything that is easy to make ends up being a lousy money because people can make more of it and the value of it will drop so if you look historically you find that the things that have been used as money historically are usually things that are hard to make and in fact you find that whatever is used as money is whatever is the hardest to make at any particular point in time and so there are these examples which i discuss in more detail in my book but um if you look at the beginning of the 19th century at the beginning of the 20th century you see the entire world effectively was on a gold standard or the vast majority of the world was on a gold standard because at that time um gold was the hardest money that we had ever uh had and for a very long time we know that gold supply is only increasing at around one or two percent this has been the case for about a century we look at global gold production we see that every year it goes up at around 1.5 percent and that is in my mind what makes uh gold the most um likely monetary asset the the the most popular monetary asset in the market all over the world at the beginning of the 20th century because it is the hardest money and even um you know the supply continues to grow at a very low rate so there's no way for anybody to make increasingly large quantities of gold and to bring them onto the market now why is this important because if you look today you see that bitcoin is basically the hardest money ever bitcoin's supply grows but flattens out it stops growing at around 21 million bitcoin there will only ever be 21 million bitcoin and uh that's it that's the there will never be more and so the supply growth rate starts off quick starts off high but then begins to drop as the uh already existing supply increases and the new supply becomes less and less significant so the current annual growth rate is around two to three percent for bitcoin and over the next two three years is going to be a little less than two percent and then in 2025 it'll drop again to under one percent and it'll continue to drop under one percent until effectively it reaches zero in um sometime in the next century so this is quite unique and this i think makes bitcoin uh quite uh interesting as an uh as a monetary technology because it is the first money that we have whose supply is completely irresistant to the irresponsib to demand in other words with everything else if they get if something gets chosen as money more people will be uh trying to produce more of it and so the supply will increase but with bitcoin there's no way of producing more of it because of something called the difficulty adjustment when you try and make more bitcoin you don't make more bitcoin you just end up expending more processing power and electricity on making bitcoin more secure and so the way that i like to present this is if you look at it with every other form of money that we've ever known if people use it as a store of value the price will rise there will be more profit to be made from uh mining it and that leads to an increase in the supply which then leads to a drop in the price but with bitcoin on the other hand this cycle this uh process is a cycle and the reason for that is that we have the first same the three steps you know the store of value demand increases it causes the price to rise it causes mining to become more profitable but in the case of bitcoin if you start mining more bitcoin you're not able to increase the supply there's no way of increasing the supply of bitcoin so instead what ends up happening is that more hashing power goes to mining so more people are spending more resources on mining and mining becomes harder and the supply of coins stays the same that's how the difficulty adjustment works instead of the reward for mining rising the reward stays the same but mining becomes harder and so no matter how many people are using bitcoin and how many people are trying to mine bitcoin we're only going to get a certain number of bitcoin produced every day uh around now and around these days it's around 900 coins and for the next three and a half years it's going to be 900 coins a day regardless of how many people are trying to mine bitcoin the 900 coins a day is a set reward and the difficulty of mining adjusts in order to make sure that we continue to average around 900 coins a day and that's how this has been working so in other words when mining becomes more profitable more hashing power is going toward mining but the supply does not increase instead more hashing power is effectively protecting the network so the network becomes harder to attack it becomes more expensive to attack the bitcoin network becomes more inexpensive to make the bitcoin network unusable and that gives bitcoin the ability to survive longer which makes it more attractive as a store of value which attracts more store of value demand and this in my mind is the only way that we can explain and understand the incredible rise in the price of bitcoin that we've seen over the last uh 10 years bitcoin has basically gone up well 11 years now bitcoin has gone up about uh one and a half to two billion percent in 11 years and nothing has ever gone up like that ever and i think this is really the only way to understand it is because bitcoin's supply is completely irresponsive to demand with anything else if there's more supply if there's more demand we can always make more we we're always able to make more of anything else but with bitcoin there's a strict fixed limit on how much we can make from it because of this thing that we call difficulty adjustments so the difficulty adjustment really is the most amazing technology in bitcoin in my mind it's it's the magic sauce that makes bitcoin work because it protects the network from inflation and it ensures the supply is auditable and verifiable by all network members and it converts people's inevitable incentive to increase bitcoin supply into network security so it makes the network more secure and it does that by using the incentive of people to increase the supply of the currency so it's why i like it's the reason why i like to call bitcoin an all-conquering juggernaut of economic incentives whereas everybody competes to inflate all other monies whereas everybody's competing to increase the supply of every other currency that is out there people compete to secure bitcoin not to inflate it so people compete to make bitcoin more secure which ends up making it more attractive so bitcoin really solved the inflation problem in the most neat way imaginable because instead of providing people for with an incentive to increase the supply it provides them with an incentive to make the network more secure um so um and how secure is bitcoin well bitcoin is it has no single point of failure it has no single piece of critical hardware or infrastructure no single critical individual or organization it basically can't be stopped it's a protocol that is always open to anyone who wants it at any point in time around every 10 minutes a new block of transactions is released and this is basically never failed in the 10 11 years that has been going on and has never confirmed a fraudulent transaction so far nobody has managed to spend money they don't have on the bitcoin network so the hardest money that has ever been invented is basically available worldwide for anyone who can receive two megabytes of data every 10 minutes uh you don't even need a computer or an internet connection there are ways to get around that to use bitcoin it's purely voluntary it does not mean regulation enforcement or the police and it's chosen and valued freely on the market it's sound money it's money that gets its value because the market gives it value not because anybody uh forces its value so what is bitcoin good for then well for me i think the most important uh use case of bitcoin is that it is a store of value um and it it's an obvious use case because it's the first strictly scarce liquid asset that we've ever had and in fact if you think about it um one of my favorite books is a book called the ultimate resource written by economist julian simon and in this book julian simon explains uh that the ultimate resource in the world really is human time because with human time we're able to make more of any other resource the limit on how much we have of oil or silver or gold or copper or nickel or zinc the limit on how much we have of all of these metals is simply how much time we dedicate toward mining and producing them the amount of them that exists in the crust of the earth is far beyond our capability to process and um consume and the the limiting factor really is just the time that we are able to dedicate to producing those goods versus other goods we could always make more of anything and that's why you know we never run out of these metals no matter how much we find no matter how much we consume we keep digging and we keep finding more because you know the limit is not how much exists on earth because that's so far larger than um we can even ever imagine or calculate the earth is enormous the limit is how much time we have for other things the limit is that the the limit is the opportunity cost in terms of our time in terms of other things and so um before bitcoin anything that we chose as a store of value in this world had the imperfection that its supply will increase in response to it being chosen as money but bitcoin doesn't have that so naturally it ends up working out really well as a store of value and so ultimately the only thing that is scarce is time and bitcoin is the second thing that is truly scarce and so for me that's a natural match between the two if you want to store the value of your time in a money you would want to store it in the money that is scarce like your time so this is why i like to call bitcoin the most advanced technology for transferring the value of time into the future the second thing that bitcoin i think is good for is that it is the decentralized free market alternative to central banking until the year 2009 if you wanted to send money from one country to the other the only way you could do it was you had to go through financial institutions that are operated by central banks and so central banks have a national monopoly on this process in every country and um they're able to uh monopolize the market for sending money in and out of the country and um uh you know it's it's uh it's it's had terrible consequences in many places for many people and in many of those places and many of those times people didn't have an alternative because where do you go how do you trade with people outside your country if you can't have a bank you can't send physical gold in reliable ways that are cheap and economical and there was no alternative so you have to have your savings always with the local banking system which was also lending to the government and uh likely to um witness uh significant evaluation bitcoin offers us the first op the first alternative to that it really is the first working alternative to um international payment settlement it's digital and yet it does not require the um the supervision and the control of uh national central banks and um one important aspect that i get into detail in my book is the issue of how bitcoin grows and how bitcoin scales there is i think a common misconception that bitcoin is a payment network that you can think of bitcoin and compare it to paypal but in my mind i try and try and um explain the idea that bitcoin is actually more is better understood as being a settlement network it's a network for a small number of high-value transactions and this is the way in which the network has been evolving over the past few years it's growing in this direction where the number of transactions conducted on bitcoin every day has been roughly constant for maybe five six years now at around 300 to 500 000 transactions a day but uh the value that is transacted continues to increase significantly more and more money is being sent on more and more values being sent on the bitcoin network even though the number of transactions is the same so in that sense bitcoin is growing as a um as a settlement network and i think um in this regard we're going to see it um grow more in this in in in this capacity and i think you see more and more of the businesses that are being uh built around bitcoin at this point are focusing on this kind of uh use case and an important part of this is uh the fact that you know it's um we see it with corporations now looking into bitcoin into using bitcoin as a cash uh settlement um uh sorry as a as a part of the cash reserve assets rather than uh thinking of using bitcoin for payments so a few years ago a lot of people used to think that you know when is starbucks going to adopt bitcoin when is mcdonald's going to adopt bitcoin in their mind the idea was there you know you would be able to pay for your coffee or your burger with uh bitcoin but i think what we're seeing is that um we're going to be witnessing um bitcoin transactions being performed bitcoin coming into those companies from the um balance sheet not from the uh they're going to hold it as cash rather than accept it uh for small payments and i think eventually we we will see small things being built on bitcoin eventually but for now i think that the um the compelling use case is is to hold it and use it for large amounts of settlement rather than for daily small transactions so this is why in my book i analyze bitcoin to gold because similarly you know with gold you the trade was happening with a gold certificate so we'll see second layer solutions uh built on bitcoin similar to second layer solutions built on uh gold i think and um you know the interesting security question then for bitcoin is whether it can resist being centralized like gold was in in central banks um some implications for bitcoin i discuss in the book one that i find extremely important is the issue of time preference i think a problem of easy money is that it loses value and so it makes the future less certain for people and because it makes the future less certain it makes it uh more likely it raises the cost of providing for the future and therefore it makes it less likely for people to save for the future and that reflects on all manner of decisions and outlooks on life which gives people more of a present focused orientation rather than a future focused orientation i think we see the same we see the opposite happen under hard money so if you compare you think of the 19th century to today people used to save much more in the 19th century and if you look at what has happened as western economies went off the gold standard you see that saving rates declined continue to decline the one country that continues to have higher saving rates was the last country to go off the gold standard and that is switzerland so i think there's something there that suggests um if we do move to a bitcoin standard effectively the world would have far less debt and far more saving is the way that i would see it if you move to a hard asset um don't have much time to explain this in detail but if you're familiar with the austrian school theory of the business cycle from that perspective effectively easy money and the ability of governments to manipulate and central banks to um to to extend credit unbacked by real savings effectively manipulating interest rate downward and increasing the money supply that all that is effectively the cause of the business cycle and inflation and recession so um and and for me this is my favorite chart to illustrate this again look at switzerland up until the 1970s when they were on the gold standard they basically had no unemployment there were no recessions there was no real no unemployment and then that started happening as they went off gold and um started having a more conventional 20th century monetary policy one other important application in my mind is that it will end the you know having bitcoin could offer us the way out of the tower of babel that is the foreign exchange market which is uh trading something roughly in the same size of 25 multiples of gdp um in terms of volume all of it essentially because um you know we've unsolved the problem of money uh in the 20th century by uh going off gold which was one universal international a political money and going to many different uh political monies which effectively created the system of international bart partial barter around the world so in conclusion i think bitcoin if i were to summarize what bitcoin is i would say bitcoin is a technological and a political to two and a political solution to two problems the first is uh international value transfer and the second is saving or transferring transferring value into the future bitcoin offers us essentially a technological solution for those things it makes those things the use of them similar to using a computer you're able to store your value in a computer in in in in a way that is um much more reliable and predictable and uh auditable than uh the traditional solutions that we have and i think the the the intriguing possibility of bitcoin is that it offers us the prospect of a real free market in money savings capital and investments um that is all for the presentation thank you very much um for inviting me my website to safeidean.com the bitcoin standard my book is available in 24 languages now you can find them all listed on my website and you can also sign up to receive chapters for my two forthcoming books that i'm working on right now the fiat standard which is the sequel to the bitcoin standard and also a textbook in economics principles of economics thank you very much well safe thank you so much for that presentation we already have a few questions in the queue but i want to remind anybody who's watching if you have any questions for the remaining 15 to 20 minutes of today's salt talk if you're on zoom with us you can enter them in the q a box at the bottom of your video screen if you're watching on periscope on linkedin or on our youtube channel you can email any questions you have to info at salt.org and we will try to get those in before we let safe leave us um the first question that's being asked and one of the reasons why we did this with you safe is that we had some people in our community who are crypto curious but have yet to really dive in and educate themselves completely about you know what bitcoin is and the long-term implications of cryptocurrency so we have a just a very basic follow-up question from victoria who asks how is bitcoin mined and what's the process going to be for mining the rest of bitcoin you know over the next decade and you know into into infinity as we know bitcoin having works but could you just explain what the process for mining bitcoin is yeah the the way i think of mining bitcoin is it's almost bitcoins are handed out kind of like uh medals or trophies um in a sports competition in that they're handed out at a specific period of time so let's say every four years there's going to be a gold medal for the 100 meter dash and it doesn't matter how many people compete for it all over the world they're only going to be one medal no matter how many people try and get it so you can't control the supply through mining more or less and the way that works is that the reward for mining is pre-programmed and constant and then if more people try and compete for the reward then all the people that are competing end up getting less and less out of the reward so um the way that it works is that is you use computing power you you you get a machine uh you could initially you could do it on your own computer with any basic uh personal computer but now it's become more sophisticated and complex and it needs its own computer to be done economically so you'll get this machine which will try and solve mathematical problems um to effectively win that reward so all these machines all over the world are mining bitcoin by trying to find the solution to a mathematical problem and then whoever wins uh whoever provides the correct solution ends up winning a reward so those rewards are handed out at a rate of six and a quarter plus or minus plus a little bit for transaction fees every 10 minutes so there's six bitcoins being handed out every 10 minutes roughly six to seven bitcoins more or less every ten minutes and um that adds up to around 900 bitcoins a day today so these will be handed out to people who use their computing power and their electricity to mine to solve these uh mathematical problems and the more computing power you direct toward the problem the more likely you are to find those solutions the more likely you are to have a profit to make a profit so what this leads to is that mining ends up being just a very competitive market where only the people who are the most efficient who have the lowest cost of power and who can secure the best hardware are able to continue to mine profitably because you know it's competitive so the people who have the lowest electricity prices are the only ones who are going to be able to turn off profit because everybody else they won't be making the reward because it won't be economical for them if your electricity is expensive then the reward that you make will not be uh worthwhile so um the the point behind it is to make it so that the supply of bitcoin is regulated by the mining process so that it doesn't increase beyond what it is meant to be increasing at so the schedule right now um the schedule brings us to 21 million in around 100 years from now we're already at 18.5 million roughly today so we already have 18.5 million uh bitcoins that have already been mined so there's only uh two and a half million bitcoin to be mined over the next 100 years and the growth rate is just going to continue to decline over time all right fantastic what do you say to critics who talk about energy efficiency as it relates to mining and computing power to run the bitcoin network that's uh one criticism that's leveled at bitcoin is that it's very energy inefficient i think bitcoin is extremely energy efficient in that regard in that it is constantly punishing anybody who has expensive energy so if you're trying to mine bitcoin with uh grid power you're not going to mind bitcoin profitably there are no grids that are basically competitive with a bitcoin network because the people that are able to be turning a profit on in in bitcoin mining are those who have power that is essentially stranded that is uh uh oversupply uh at a places where it's not easy to move it and you know power is not easy to transport you can't move power a lot so bitcoin is essentially a buyer of last resort of power from people who have excess power that don't know what to do with it and that's why it's mainly mined in hydroelectric dams where they have a lot of a spare capacity and in methane fields i think is another one where it's going to start growing it it's not now now but i think the potential for that one is enormous because methane feels they flare a lot of sorry in oil fields they flare a lot of methane that is not economical to ship because uh methane isn't very energy density so it's not really economical and so uh usually they just burn it but if you use it to mine bitcoin you can recover a lot of your uh costs so i think bitcoin is um efficient is highly energy efficient uses extremely cheap energy and it encourages innovations in finding cheaper and cheaper electricity however there's no denying that bitcoin does consume a lot of energy but i think here you know i find this question strange it's very common for people to think that you know consuming a lot of energy is a bad thing but you know if you think that consuming a lot of energy is a bad thing then you know why would you buy a washing machine why wouldn't you wash your clothes with your own hand why would you get into a car a car consumes more energy than a bicycle and an airplane consumes more energy than both and we use those things precisely because they use more energy because burning energy is a is an extremely cost efficient way to get things done for much more cost efficient than uh using human um uh input and so you know for the same reason i think that we got rid of telephone operators and we uh use we use automated telephones bitcoin essentially automates monetary policy and gets rid of um discretionary monetary policy and automates uh international settlement clearance and i think um you know i i can't think of a better use of electricity so we have a few questions around this theme of bitcoin being digital gold or an alternative store of value and some people enjoyed uh your last slide comparing the total value of the fx market um what do you think the ultimate market cap for bitcoin could uh climb to is it capped at you know basically taking some market cap from gold and those two assets being your two main alternative stores of value or or how large of a market cap do you think bitcoin could eventually have and and what's the path to getting there um really it's a scary question to consider because you try and draw the line on where demand can stop and you keep struggling so you could say gold i think you know demonetizing gold is a realistic goal and turning gold into an industrial metal um that can happen so bitcoin can eat that market it won't mean gold will go to zero obviously it'll become just a expensive industrial medal but you have to also remember that a lot more of global markets are essentially just looking for a store of value or they're not looking for um investment that yields returns there's a lot of money that is just looking for um store of value and so a lot of real estate a lot of people buy homes that they don't really need because that beats inflation and a lot of people invest in uh all kinds of things and like bonds for instance so bitcoin could eat into the market for um real estate um could eat the market for bonds and so these things could become these things could lose a significant amount of the demand that comes to them because people don't have a solid store of value that can just offer them you know that can be the base of your portfolio that you don't take risks with and uh bitcoin if it grows into this kind of uh digital gold it can offer people that and so you can imagine then it would reduce the demand for other markets and then really the sky's the limit i guess so we have a few questions about uh satoshi nakamoto who is the anonymous figure uh that basically created bitcoin there's been speculation about it being an individual or a group of people but to this day uh the the identity of the people who started bitcoin uh remains a question mark and we've had a few questions like this on other uh digital asset salt talks we've done about whether you think ultimately we'll find out who created bitcoin and whether you think that would enhance confidence in the system and who you think satoshi nakamoto is uh i i don't know who it is and you know a lot of uh people have spent a lot of time digging into it and i don't think there's any satisfactory answer um i think it's hard to explain how who he is or what happened but uh what we know in my mind i think the disappearance and there's the fact that the person who created this uh left is probably an essential part of what makes bitcoin work i think if bitcoin had continued and i don't know if he did it deliberately because he didn't indicate um whether he wanted to do that maybe he did it deliberately or maybe something happened um but i think the fact that there was nobody in charge and the project continued to survive is what makes it extremely tough because um it's what makes the monetary policy set in stone it's what gives it digital value because this is a network that is out of control of anybody there's nobody out there who can take over this network and change the money supply and i think um potentially i think if the owner if the guy who started it was still around they might have had this power and if they had this power they'd set the precedent of doing something like this at an early stage the whole thing would have become much more political and you know i in my mind it would not have this value proposition it would be a far more uh of like uh uh you know an interesting startup more than this neutral protocol which is what bitcoin is right now so i think the disappearance of the uh creator was an enormously important uh factor in the growth of bitcoin in a way in which it had become um neutral and controlled by nobody um correct me correct me if i'm wrong on this but my understanding is that uh satoshi whether that's a person or a group of people still owns a substantial part of of the bitcoin float that exists out in the marketplace and in general bitcoin ownership is very concentrated among a small group of people who are early evangelists of of the cryptocurrency what do you say to people who level the accusation that those groups of people are simply talking their own book and trying to hype up bitcoin as a way to enrich themselves and maybe staying anonymous as a way to avoid you know accusations of conflict of interest as they try to drive bitcoin higher well i mean the uh the part of the mystery is that we don't know who the person is and um they haven't touched their coins so well we don't really know whether they are his coins to begin with but um given their current value is probably something in the range of i think 10 20 billion dollars or something like that it's a lot of money for somebody to be sitting on so um you know i think they probably would have wanted to cash on it earlier so it's it's it's had a pretty nice return yes but they haven't passed out but they haven't cashed out so that's um that is quite mystifying but i think um you know in terms of uh the early adopters in a sense yes but you have to remember that you know as the thing goes up as the price goes up as demand increases the early adopters sell because you know the their uh the prices go up in ways that are that become life-changing and so they sell significant chunks of their assets now with the fact that it you know it's it's insiders who are promoting it i guess you could say that about anything but the key difference with bitcoin and the reason why i think it's completely meaningless to call it the ponzi scheme is that none of the insiders have the way of creating more liabilities or to draw on the wealth uh or backed by the wealth that is uh parked in the network so in a ponzi scheme people would bring in money uh into it and then you know you you're getting new money from new people and you're using that to pay off the old people so the same money is being given as liabilities and now to several people and then the whole thing comes crashes down but nobody can do that in bitcoin the you know you are the only one who can own your own keys and nobody can generate more uh liabilities nobody can make more bitcoins so um you know the the rules of the game are open and transparent for everybody and um in in a sense this sounds little more than just sour grapes like yes some people took a risk early when you were mocking it and laughing at it and saying it was stupid and you know the market found out that maybe it wasn't very stupid so it seems to me that it is a little bit unfair to be turning around now and saying that it's unfair that the people who took the risk that you derided and didn't take a particular reward for it right so your book is called the bitcoin standard obviously you're very enthusiastic about bitcoin are you a bitcoin maximalist meaning you think it's going to be a winner take all type scenario in the digital asset space where bitcoin is going to be the overwhelming winner and you're going to have maybe a few other coins out there that that lag well behind bitcoin do you think this is a a space that's going to develop as a mature asset class and you're going to have other coins and cryptocurrencies and digital assets that have tremendous value as well no i think it's really it's bitcoin robust there's really only one protocol one neutral protocol here and there's only neutral protocols here i think the the use case ultimately of the tokens that underlie value transfer it has to be one protocol and it's um and the only one that can make a claim for being a neutral protocol that is controlled by nobody that's controlled by that isn't controlled by anybody is uh bitcoin and that's really ultimately you know it's it's what i see as the value proposition that it's the guarantee that this thing should have value the reason these digital bits of data are able to have economic value is because there's a guarantee that nobody can go and change the supply which is trivial in my mind with all the other uh digital assets so none of them can demonstrate to me that they have anything like there is the resilience that bitcoin has because we saw with bitcoin in 2017 uh some of the most influential bitcoin companies and some of the most influential bitcoin developers and some of the bigger investors in bitcoin all tried to change one simple uh metric and parameter in the bitcoin network and failed um but you don't see that happening with any of the other uh currencies which are you know to be frank after bitcoin if any of these has made a name where people have heard about it it only made that name because it had a group of people behind it working in a concerted effort and for those people changing the supply and controlling the supply is more or less a bit of a trivial problem and we've seen with some of the bigger ones that they've been you know they don't even know what their supply is going to be like so for me um i i i think the value proposition is just not there in in in having any of these uh digital tokens attain the scarcity that is necessary for them to have uh uh reliable market value in the long run that's why we see that you know a lot of these uh copycat coins come into the bitcoin space and there's a lot of hype initially but then eventually they crash and they um essentially they all flatline and head towards zero next to bitcoin it's happened with thousands of them and i think um you know we're still at a point where in terms of market cap which uh is a very flawed measure bitcoin is about 70 of the market um but in terms of real world liquidity the you know the real world liquidity for the other currencies is it it's likely more that more likely that bitcoin is about 90 percent of the total uh real liquidity not just the kind of market cap which can be easily spoofed so in if we're talking about a world in which you know the market has for 11 years after 11 years of all these thousands of competitors coming in and they still can't get to more than 10 percent of the liquidity of bitcoin i think it's time to consider that this is not this is not pepsi and coca-cola this is not different providers of different software packages this is a neutral protocol versus uh really proprietary uh currencies um and it it it's more like there's the internet and then there are uh other people trying to sell their own a local um work network as um as being the other internet but there's only really one protocol for the web itself so you're a believer in the austrian school of economics and you think that our current keynesian fiat monetary system is inevitably flawed and you know eventually going to implode as as we try to inflate our way out of our problems what do you think the ultimate path for bitcoin is do you think it's something that the united states government and other global governments are going to eventually acquiesce and come up with regulation that allows it to coexist with something like the us dollar do you think if the system starts to collapse a little bit that they'll start to crack down on cryptocurrency with capital controls and and try to prosecute people that use cryptocurrencies what do you think the ultimate path to acceptance and and mainstream use for bitcoin is over the coming decades i have to say i don't really necessarily think that this current system has to crash it's it's been going around 50 years and you know for all i know it could go for another 50 and maybe even more um and in my mind i i don't really have much of the idea that bitcoin is uh it could be that bitcoin is the savior in hyperinflation and it certainly was my savior from hyperinflation in lebanon where i used to live until recently and the currency collapsed so i think you know if hyperinflation does happen bitcoin is a great thing to have however i don't think that bitcoin needs a hybrid inflation scenario in order for it to rise i think this is a point that i keep trying to uh communicate which is that bitcoin is we need to stop thinking about it in terms of this system is going to collapse and bitcoin is the only answer i think we need to just think this is just a better technology this is just a more advanced system and it's likely to take over just because a political settlement that is accessible and verifiable uh for anybody anywhere around the world at a very low cost is just a much more powerful proposition than um than than having to go through political institutions every time you want to send and receive money and to having to go through political institutions that have a monopoly and that can um you know devalue the currency so i think by being harder money and by offering international clearance independently bitcoin is just a new ecosystem and in my mind i don't see that it is um that it is necessary for the fiat system to collapse for bitcoin to grow i think the two can continue to coexist for a long period of time while bitcoin grows and um it's it's not impossible in my mind that this bitcoin continues to grow uh peacefully next to a relatively shrinking fiat economy and then effectively we upgrade uh to a scenario where we're using more uh bitcoin and i think uh the use case ultimately in my mind i i like to compare it to dynamite um when dynamite comes up you know it changes or gunpowder it changes the dynamics of power and you know if you have an army of soldiers who have swords you don't like uh gunpowder so what do you do do you ban gunpowder banning gunpowder is not going to be effective because you know the people who are going to fight your soldiers are not going to good luck with that right exactly they're still going you're just banning your own soldiers from having gunpowder so for me i think you know individuals corporations and governments will start just understanding the massive potential for bitcoin as um effectively digital dynamite gold and see that you know the the um their their own interest is better served by using bitcoin rather than fighting bitcoin right so in your view what are the biggest risks to bitcoin becoming this major store of value that we're talking about as a digital gold and an alternative to other uh stores of value that you've described i think the main risk to keep an eye on is the decentralization of the network if the network uh if the number of nodes and that's really the the key metric to keep an eye on if the number of nodes in the bitcoin network declines significantly then there's or if the cost of running a node rises significantly then you expect that the number of nodes would decline and as a result you would have a smaller number of nodes and then that becomes more concerning because it becomes more um plausible that they could collude with one another to change the supply so if you have a situation where there becomes that develops an asymmetry between the people using bitcoin and the people who are able to validate the blocks and are able to validate the consensus rules of the network if that split becomes too big and the number of the nodes becomes too small and concentrated then in my mind that really compromises the value proposition because it makes it you know it makes it likely that you could get some kind of collusion um or at least more likely at least that you could get some kind of collusion that could alter the monetary policy so this for me is is the main risk is the decentralization for people who are interested in owning bitcoin what do you think is the optimal path to buying bitcoin that's currently available in the marketplace today so you have some over-the-counter uh investment products that have started to emerge but you have yet to have a sec approved and registered etf for example you have exchanges like coinbase gemini and others that you can buy and sell bitcoin in your view what's the most secure safest uh and uh method for buying bitcoin today i mean it's it's not an easy question because it depends on who's asking it and how they want to do it obviously there are many commercial options uh for individuals and for institutions um for my personal um i work with a company called nydig the new york digital investment group and they offer a full suite of solutions for institutional grade solutions fully regulated then they have the bit license so that would be the kind of solution for uh that i would recommend for institutions um with individuals i uh recommend the most important thing is that you hold your own keys of bitcoin if you don't hold your own private keys of bitcoin for bit for your bitcoin then these are not your bitcoins and that's i i recommend personally individually holding your own uh bitcoin for yourself but obviously that might not be feasible with institutional money which might require more [Music] more elaborate custody arrangements and for that you know there are there's there's the night but uh yeah i think that it's it's difficult to recommend something too specific just because there are too many options and it depends on what person prefers and for their own security the best solution is the one that makes sense for you um that you're likely to stick to safely there you go that's responsible advice dr amus safe it's been a pleasure to have you on we look forward to hopefully having you at one of our in-person salt conferences here in the future as we talked about before we started and as you can see by all the episodes of salt talks that have covered digital assets we have a growing enthusiasm and interest in the space so we look forward to continuing our our journey uh both academically and potentially in practice in the future but thanks so much for joining us and we'll look forward to seeing you soon thank you very much for having me this was a lot of fun you

Channel: SALT

Views: 45,593

Keywords: bitcoin, btc, crypto, cryptocurrency, bitcoin news, crypto news, fintech, digital assets, blockchain, finance, financial literacy, financial education, investing, tech, technology, salt talks, podcast, saifedean ammous

Id: kxdLy-ByHpY

Length: 51min 23sec (3083 seconds)

Published: Fri Dec 11 2020