EB56 – Daniel Krawisz: Nakamoto Institute, Bitcoin & Libertarianism, The Problem with Appcoins

Transcript

good idea I [Music] hatey I don't think I have it City I think I have use Quick Time Again test test okay can you uh Brian go in your audio

settings and just make sure that your microphone is selected both in system preferences and uh in whatever app you're using to record oh we lost Brian Daniel are you still there uh D Daniel we can't hear you anymore I can't hear anyone can anybody hear me hello yeah Brian I can hear you uh we

can't hear Daniel H he can hear us I have a problem this this I I can't I'm not able to load uh hang out toolbox ah now it works it works H we lost the presets oh uh yeah when are we going to do the ads which one are we doing first can you hear me now yeah I can hear you now when when I tried doing the sound

recorder it it it would it stopped the the the sound through here so I I think that uh that's not going to work I'm afraid that's uh strange because that I mean it usually works um let's see if there isn't a way to record directly through Hangouts uh record really there shouldn't be any there shouldn't be a re reason why you wouldn't be able to record at

the same time that's strange um could you try again perhaps yeah just a sec okay okay I'm about to test it so if I

um okay if I go out can you hear me yeah yeah okay great Brian are you good I'm just uploading [Music] the the lower thirs okay could you uh turn the volume down on your headphones that we can hear the feedback this is weird I can't upload the shape shift one oh h

h yeah there's some problem here so if I reload it it loses the lower thirds no if you reload what do you mean the Google hang out if I go out and come in uh no it usually save no it usually saves them no

didn't there we go okay okay um let's let's do the demo for the next one we we'll prepare for it um let's just run through it like we usually do okay and let's do so last time it was gems first so we'll do shape shift first and then gems talk about confirmation thing now sure okay and just by the way uh at the end uh I'd like to mention um the fact that we're looking for a graphic designer yeah I

saw it okay cool uh everybody recording oh no okay recording awesome wait a second I'm recording too right [Music] something wrong well I'm it doesn't look

like it's actually getting my uh my microphone just seeing a blank a white or a blue line so okay uh that is uh that's not good [Music] um references devices recording here we go that should do

it blah blah blah blah I still don't see anything test now you should be able to record system audio uh

just I mean your your your mic rather um yeah I'm sorry guys I thought I had this this sorted out but um I I went to uh file um or edit preferences and I think I select the correct microphone but I'm just not oh it's coming out now okay it's good all right cool so everybody's recording everybody's good uh your lower thir is cutting your mouth there we go well I have I have to sit up straight yeah and uh Daniel is

there any way you could just lower your webcam slightly to your fa is somewhat more in the center there we go that's perfect maybe a little higher yeah great okay all right guys we're good yep uh [Music] here okay in five four three hello welcome to epicenter Bitcoin

the show which talks about the Technologies projects and startups driving decentral Iz ation and the global cryptocurrency Revolution my name is Sebastian and my name is cran so we're here today with Danielle kravis and he is the director of research of the Nakamoto Institute so uh he's also libertarian so I'm particularly excited about that aspect because you know as we all know there is a strong libertarian side in Bitcoin a strong libertarian background and we have sort of also deliberately chosen not to do an ideological show not to do a political show but at the same time we totally uh realize this is an important part of it

so I'm excited that we sort of For the First Time perhaps have have some time to dive into a little bit of that side of Bitcoin uh so thanks uh for joining us today Daniel thank you um so perhaps let's get started do you want to introduce yourself briefly tell us a bit about how you got into Bitcoin uh sure um well um I first heard about Bitcoin from Ross interestingly enough uh this was before he was the dread pirate Roberts but I at the time I don't quite remember the conversation but I probably told him it was a stupid idea um so later uh later I I saw a Bitcoin

again uh during the the early part of the of the 2011 Mania and um the you know a lot of people said oh you know Bitcoin is a bubble and so on um but actually this this manic behavior is really what convinced me that Bitcoin is really viable because I couldn't really understand how I could explain it without saying that that Bitcoin really could become money and and that it's its value really was based on uh a a network effect um and this is of this this is the the um the Austrian economics theory

about uh the value of money so that that that observation kind of convinced me that that Bitcoin really was viable so um so I decided I better get some just in case and um that was a good decision so then uh in about 2012 that's when I sort of realized that I should be devoting myself to to bitcoin stuff fulltime and so this started out in my um the my my University the University of Texas at Austin in some of our our economics and politics dis

discussion groups or student groups I was telling people about Bitcoin and about cryptography and the cipher punks there and eventually um some some friends and I from that group started the Satoshi Nakamoto Institute as a way of of um uh in kind of keeping the legacy of the cipher punks alive and um preventing the the the anarchist side of the Bitcoin movement from being marginalized uh there was quite a lot of talk around then about how you know

Bitcoin needs to grow up and uh be serious and uh no no more of this embarrassing Anarchist stuff right so uh we we started the the Satoshi Nakamoto Institute in honor of our favorite Cipher Punk Satoshi Nakamoto and um we kind of have uh been um we've been hosting and and promoting a lot of the original Cipher Punk writings and uh then publishing uh uh articles of our own uh on the the the present Bitcoin movement and uh on on the economics of Bitcoin and where we

think Bitcoin should be going and of course the other the other two members of the the other two Founders are Michael Goldstein who is now the president and uh Pierre rosard um uh so there there has been some uh some controversy over whether the Satoshi Nakamoto Institute is a troll organization uh we are not a troll organization but we do believe in trolling and uh so Pierre is is one of the the the best trollers that I've ever seen so if you want to learn about trolling you should follow his Twitter

feed what's a troll organization uh so trolling on on online forums like trying to start saying ridiculous things to try to create consternation there are definitely uh a couple of things that we've published that are a little bit over the top and factious um but uh but we we you know we really do believe in what we're saying we just take sort of an irreverent attitude towards towards a lot of it yeah I know we will be talking about some of this stuff um yeah well there is this this idea in the

Bitcoin movement that um that Bitcoin um has an image problem and well you know as I as I was saying before like it needs to be more serious uh we don't we don't think that so I I think that really a a better way to promote Bitcoin is with uh what's called counter signaling so I think that that you a way to um make people believe that Bitcoin is a good money is to act like you don't care whether they want it or not because you will want it eventually so I don't have to uh I don't have to uh evangelize it for you um that that's kind of that's

kind of the point that's why we may seem like a troll organization to the um to the uh uh the the unpracticed eye I think we just lost Brian uh hopefully he'll come back oh there he is uh so can you sort of perhaps like so we can get into the ne Institute uh describe what is an aamod Institute and what are the goals of the organization sure well um well I I pretty much already explained that I mean I mean we're basically a um a a think tank a realization and uh we

trying to bridge the gap between the the cipher Punk ideas and Austrian economics ideas um and uh we we want to to keep the the original visions of the cipher punks alive in the Bitcoin movement and prevent the the anarchist Wing from being marginalized that's those are really the goals um H promote promote those kinds of ideas so how do you feel that has developed over time do you feel that is something that's happened that the kind of libertarian say factions of the Bitcoin space have been sort of pushed

aside uh uh yeah that's that's true to some extent I mean I think that the the libertarian faction is alive and well um but it's becoming a a smaller a smaller part of uh the the Bitcoin world and you know I O overall I think that's um it's it's it's good that Bitcoin is growing and is attracting more uh normal people uh I I believe that Bitcoin will serve libertarian goals even if um it it's not Libertarians who are um who who are developing it um uh you

know bit Bitcoin puts the control in the hands of the individual so there um there's an ideology uh called crypto Anarchy that that was uh invented by the the cipher punks and and it's an idea that you can you can create a society that can run independent of State control and is able to prevent itself from from being controlled by the state using cryptography with um the the devices available to us with crypto rography anonymity and digital signatures and that sort of thing

um but there's another way that you could interpret the word crypto Anarchy like we sometimes say crypto fascist for somebody who is uh apparently not a fascist but whose individual positions uh lead lead to Fascism so I I would say that somebody who promotes Bitcoin who is not an anarchist is a crypto anarchist because I I think they are still promoting uh promoting a more free a less State controlled Society by promoting Bitcoin so I'd like to get into this idea that Libertarians are are often I

mean Bitcoin is often Associated to libertarian ideas but but before we do that um for those who may not know I mean because it's definitely the case here in Europe uh when you talk talk about libertarianism is definitely the American idea and a lot of people that I've talked to are not really sure you know what is libertarianism uh the political scale here is very much uh just left and right and there's not much um uh I can't U not so could you could you explain basically what libertarianism is for those who may not know uh yeah sure um so

um so in a nutshell in a nutshell yeah excuse me I said we could talk about it for hours but in a nutshell yeah yeah yeah so the one of the the basic principles of libertarianism is What's called the non-aggression Axiom and this just means that you don't you don't in initiate aggression against other people so this is something that you know pretty much everybody understands in ordinary life so no um no no running up to people and mugging them and no no no no randomly murdering people who aren't

you know already attacking you um and of course uh fraud is usually understood to be a a kind of aggression because you you you make an exchange with somebody but they don't they don't get what what they understand they're supposed to be getting so so this is something that uh people is obvious to people in in their ordinary lives the difference is that Libertarians apply this to government and um we see we don't we don't think that government is a special kind of

organization in any way it it shouldn't be treated differently than someone who who starts a corporation or a a private club or a a mafia or or any other kind of human organization um so because a a a government will um impose tax on people um and uh it will claim the right to a share of their earnings a and a a right to impose rules upon them that these people

did agree to they may have you know been part of an election but they didn't individually agree to any of these things um that that so that should all be considered acts of aggression which um the the state should not be allowed to initiate on people so the principle of non-aggression then uh extends to just um imposing things on on people uh yeah so when you get into the the definition of Co coercion then Things become kind of tricky but what what kind of good way of thinking about

the the libertarian world is just imagine the the ordinary Left Right Spectrum in ordinary politics and then just just transpose it in into a bunch of people who all think that the uh this the state needs to be drastically reduced or eradicated and that kind of tells you about the different schools of libertarianism because we have we have like the the right Libertarians and and the left Libertarians um and they're they're pretty similar to to left and right in ordinary politics except they don't

believe in in Government Solutions at at all or very little um so the the um and uh this this division has a lot to do with their their views on property rights or on the kinds of organizations that that they want to create so so uh a a left libertarian would be much more interested in uh communal property creating co-ops uh that that sort of thing um uh where whereas the right Libertarians are much more Pro uh pro pro profit seeking organizations Pro

capitalist depending on your definition of that I don't want to go into the definitions of capitalism but that's sort of how you can think about libertarianism I think okay and and I presume you are identifying yourself more towards the the pro uh profit side uh yeah sure I mean as a in a practical sense I'm I'm a practical objectivist if if you read Ein Rand I basically did as a as practical matter I I think that I basically uh run run my life like an objectivist although I don't really follow them on on the uh the

metaphysical uh and uh other other aspects of of objectivist thought but um yeah I I believe in uh in in making money and um and in private property now with regards to bitcoin and libertarianism it seems definitely from this side of the pond it seems when we're looking at what's going on in the US and especially as a podcaster when you look at a lot of the podcasts the Bitcoin podcasts a lot of them are sort of libertarian uh leaning why do you think Libertarians feel so attracted to

bitcoin well um around the world money is is a government controlled um well I don't want to say industry but it's it's it's a it's a government institution um most currencies around the world are uh are issued by governments and the the the reason that the currency works as a currency the the it's it's scarcity is due to the fact that the government chooses how much to issue and uh the their currencies are either like that or

or they're pegged to the dollar which is you know the the the biggest government issued currency um so this is um this is something that that Libertarians uh aren't happy with um I if if you have a a government issued currency and you have legal tender laws and capital controls which make it difficult for people to uh to use other currencies and to make to make investments in response to uh weakening currencies then governments can issue

more money as a way to enrich themselves so if if you can just create a bunch of money uh and then spend it it is uh effectively that's like a tax on all wealth among the the holders of this currency so everyone uh so if if I print a bunch of dollars everybody who holds dollars is ultimately a little bit poorer as a result and uh all governments that issue their own currencies do this ultimately this um this this process can have very grave consequences

it can lead to hyperinflation you know it can impoverish a whole nation um it's uh it's a a very it's it's not a very a good way of making money work uh so traditionally Libertarians have been very Pro gold based money um but gold has the problem that it is physical and it's costly to transport and protect and of course um uh government issued currencies are much easier the effectively they're they're digital currencies uh they're there we do have

cash of course still but most most dollars are just numbers in a computer and uh the only reason that they are scarce is that um the the banks have to um check in with the the Federal Reserve when they move money around and so there is this centralized consensus process that that ensures that new new money is only created on the Federal Reserves terms now um Bitcoin is is a a huge leap forward over this system um it is a system that is absolutely uh capped at a

certain amount and it is a system that allows you to um to receive money anywhere without a bank account of course send it to uh it's it's like cash that can be teleported anywhere around the world it makes uh it makes Commerce um independ of of government oversight much much easier and of course this is how we got all these new dark dark web business models like the uh the Silk Road and its modern um uh descendants um these are all very very wonderful developments for human freedom and in

human development yeah I mean I guess one of the sort of the The Logical extreme uh one could take is and and I I did this interview a very brief like 10minute interview with a guy I don't remember his name but it's in one of our Amsterdam episodes um and he was building software to have like purely decentralized government so he was actually somewhere in Central America Honduras I think or something like that and they were actually working on setting up city states there that would essentially you know comply to these um let's put it like voluntary rules or ideas of of

libertarianism and that would also be cryptocurrency based so it was very interesting and I guess we may see things like that and and then I guess there is a sort of two sides that right on the one hand you may have actual governments that run like that which are like physically located somewhere right they control land Etc or you may have these sort of of uh maybe government like or or institutions that are purely digital right where people can just sort of opt in opt out go wherever they go I mean I think um ethereum especially um for example gin wood he always talks of ethereum as crypto law

and I think that's very much this idea so it would be very interesting I think to see to what extent uh we will have cryptocurrencies sort of realize that libertarian and stream uh so I think it's very much open still but uh it's definitely the case that it does I mean it makes a lot of sense to me why Libertarians would love [Music] this um perhaps let's talk a little bit about you wrote an article an interesting article called I think to correct strategy of Bitcoin entrepreneurship uh we will link to this in the show notes as well uh but

basically the idea is that and and I've talked about it in this way as well that you can think of Bitcoin and I think David Johnson talked about it in in the podcast we did with him uh is you can think of Bitcoin as a sort of decentralized Corporation and Bitcoins um representing shares of that Corporation so if Bitcoin as well then you know your shares increase in value uh and you wrote an interesting article on how that sort of should affect the choic and decisions people make in building Bitcoin businesses can you run us a little bit through what your thoughts are on this topic yeah well so first of all let me just say that the title is a little bit factious because

you know there there is never uh one objectively correct strategy of Entrepreneurship but um I I you know I wanted to be provocative and I I Tred to argue that the you know of course Bitcoin changes all the rules about everything um but this this is something that I think some way that Bitcoin kind of changes the rules that people haven't quite um got up up to speed on so um the um the idea is that if you are a Bitcoin startup it is uh your your your growth is kind of capped by

excuse me by the Bitcoin Network itself so you you can't have uh more you can't have a larger user base than people who own Bitcoins and and furthermore uh Bitcoin can live without you so you're you're more you're more a riskier investment than Bitcoin is also like if Bitcoin fails then you fail um but if you fail then Bitcoin doesn't necessarily fail so Bitcoin startups are um as a general rule uh they they have less upside than Bitcoin and greater downside than Bitcoin

so unless you you you know you find some some real exception some you know some absolutely phenomenal startup It generally it it makes much more sense to buy Bitcoins than to invest in startups and this is something that had been uh bugging some of me and my my colleagues for some time is all of these VCS pumping money into Bitcoin startups which you know may may not end up actually accomplishing anything rather than just buying the Bitcoins themselves well not allow to buy the Bitcoins I know that's that is that's sort of the

problem right there um uh they need to they need to change how how they do things so so we came up with the term a um a a a speculative philanthropist for what we want to have in the Bitcoin world and that's someone who um invests in Bitcoins and then uh do donates some of their time and money to projects that will improve the Bitcoin Network um and you can you can model a startup based on this idea too so you you create an organization that just

holds Bitcoins and you you try to try not to spend too much of it and you try to improve the Bitcoin Network so that your Holdings go up so it's not necessarily the service that you provide which has to make a profit it's really um the service you provide has to make the Bitcoin Network as a whole attract more people and and I would say yeah I would say as a as a general rule in in a um when when the overall economy or or when some part of the

economy is growing so rapidly um there there's a point where it kind of makes more sense to just donate to the economy than to try to um you know try to create your own little niche in it um um if I if I may jump in I think I see like two problems with this argument so so the first one is that this only seems to work if like let's say for example an organiz ation or startup is able to become a significant Bitcoin holder at the same time right if all you have to invest or if most of what you have to invest is time and effort

then you know you can invest that time and effort but if your project doesn't you know doesn't generate profits you may not profit very much from the increase in the Bitcoin price uh so that's number one problem and the the second problem is of course you have a free riter problem is that you know you can presume that any one project is not going to dramatically change the course of Bitcoin so you're probably better off uh you know doing something that just seeks to you know maximize your own profits and hope that other people undertake those kind of you know speculative philanthropist uh projects and that that then you sort of profit

from from their projects without having to do any of to work sure um well so if if you don't if you're not a big Bitcoin holder what I would say is your goal should be to get as many Bitcoins as possible uh so trying to get a high-paying job which maybe doesn't involve Bitcoin at all and then try to keep buying the bit the Bitcoins or um you you know if if you are starting a a startup that this should be one of your one of your goals for what what to do with um in money that is invested in you is to try to get

large Bitcoin Holdings and as for the the free writer problem um I I would say that anybody who is uh investing in Bitcoin is contributing to the overall Bitcoin economy so I don't think they they're necessary neily is a a free rider problem here if if um if if all you want to do is just buy a bunch of Bitcoins and take a nap you know I would still say that that is a a worthwhile thing to be doing um right but it's something very different from uh buying a bunch of Bitcoin and then

building an open source wallet that will be used by thousands of people sure but I mean I I think that the empirical evidence shows that people are willing to put plenty of time and effort into creating open- Source projects such as uh wallets uh so another good example of this I think is is the company bitpay so they provide a lot of free services and they are also a large Bitcoin holder and uh my my understanding is that they they've actually been following this very strategy since before I wrote the article so uh good for them um do do you think this is going to

uh continue to be a strategy that's viable let's say two years down the line or like if Bitcoin is at $10,000 or or do you think if at a certain stage where just the upside is not that big anymore that then this strategy will not be viable anymore uh right yeah eventually uh Bitcoin will not grow anymore and then then then this strategy will no longer be viable um at that point um you know Bitcoin companies you know they they'll be providing financial services and they'll they'll have to earn a Bitcoin profit off of

it but I as for the twoe two years that you mentioned I mean I really can't say uh Bitcoin has been showing on average extraordinarily rapid growth since trading began um so um a and uh you know it's hard to say when that'll end but you know I I think that will I I think that it will continue at least in the immediate future so um now let let's talk about where where where Bitcoin goes though so just uh before we do that uh

we'd like to just talk about a sponsor real quick uh because we are running about 30 minutes into the episode uh so I have to I have to interrupt you to uh talk about our sponsor which is uh shapeshift so have you ever tried to buy some all coins um Brian when was the last time you tried buy all coins you know uh good that you're asking me because I actually just used shape shift like yesterday or the day before yeah uh because I have this app called Doge rain which is really cool by the way so you can sort of Make It Rain Dogecoin but I wanted to put some dogecoins on there so you basically you know I I could take

you know five mli Bitcoin and uh send it the shape shift and they would put me the Dogecoin straight into the wallet to like less than a minute yeah so for those of you who don't know shape shift is the easiest way to buy and sell altcoins they support Litecoin pure coin darkcoin Dogecoin namecoin feathercoin blackcoin and they're adding new coins all the time uh it's not an exchange it's really just a service where you can easily change Bitcoin into any of these altcoins and vice versa and and all these I mean you can change pcoin into darkcoin or Dogecoin or whatever so the best thing about Shi shift that is that you don't even need an account uh

there's no need to give them any personal information uh they don't even want your email address and trading with shap shift like Brian just said takes just a few minutes not hours which is what it would usually take you to go on an exchange and create an account and give them your ID and all that stuff in order to be able to buy and sell all coins so let's just walk through how this works so you go to the website and there they've got a conversion tool that looks lot like a currency conversion tool if You' ever use one on one side you have the Curr currency you want to convert and on the other side you have the currency you want to convert to so let's say we want to convert Bitcoin into Dogecoin we'd select uh Bitcoin on one side Dogecoin on the other side and

you enter the amount of does you want for instance and then you hit start and then all you need to do is send a specific amount of Bitcoin that they will um calculate for you to an address and you hit go and that's it and in how long did it take you Brian like 30 seconds to get those SC in your wallet yeah I mean I think if you have to the receiving address ready it takes you like 30 seconds right so it's super fast it's super easy it's the fastest and easiest way to buy and sell alt coins no caps needed no personal information required they're doing seral confirmation uh transactions now so you don't even have to wait for one confirmation you send the Bitcoins or any other currency and and straight away that's it so that's that's one of the

reasons why it's so fast is they do zero confirmations so your privacy is protected uh and you only uh pay a small fee which is calculated up front and it's it's uh it's included in the in in the amount of Bitcoins that you send them so head over to shapeshift.io give it a try and tell us what you think and uh we'd like to thank shapeshift for their support of eper and Bitcoin so uh Daniel you were going to start about uh start talking about the future of Bitcoin was that correct because that's a one big topic we have coming up so if you sort of launch into it straight away then that's fantastic of course yeah sure so um so well you mentioned you know maybe Bitcoin hits $10,000 or something um or 100 of course

yeah or whatever any but so really the um the the the the reason that uh money is valuable whatever whatever good we use as money is just the fact that everybody else demands it I everybody so say say you you go on a a desert island well you're you're Shipwrecked right and the the people on this island all use uh beads as money things that would be completely worthless in in you know in your native land because they could be easily

mass-produced or something but on this this island they don't have the tech technology for that um these these beads seem like a worthless you know thing to you um because you you know of the technology that could could easily mass-produce them but because you're you're trapped on this island and because everybody else on the island wants to uh to grab lots of these beads as much as they can it's rational for you to want want some as well because you know that if you have some it'll be easy for you to spend them um to get whatever you need from everybody

else so the the reason that you want the money on this island is the fact that everybody else wants it uh so there is sort of a a an inherent Network effect with uh the use of money in in an economy uh if if we have a good that is valuable just because everybody body else wants it and it is competing with another good uh that is is valuable for the same reason uh there's sort of a there's an inherent uh conflict there uh anybody

who switches over what so between these two currencies one of them will have the slightly bigger Network than the other so anyone who moves from the smaller Network to the bigger network will be slightly advantaged over how they were before because there will be just that much more opportunity in the slightly bigger Network um but as a result of having moved moved to the bigger Network they've they've increased that Network and they've decreased the the the currency Network that they were in originally so just by switching from one

to the other they've accentuated the difference between these two networks and they've made the smaller Network even smaller and the bigger one even bigger which um which accentuates the the value difference between the two currencies as well it it makes it even uh a it makes it an even better opportunity for people to leave the smaller Network into the larger one and there there isn't any end to this process the the smaller the a currency's network is the less useful it is the the less opportunity it presents to people

who are are holding it and the the less re reason there is to want to collect it um so there's this tendency between currencies and not just not just between Bitcoin and altcoin but altcoins but for all currencies there's a tendency for one to emerge and completely uh Dominate and and destroy the rest um we haven't so um now PE people sometimes say you know empirically we there are lots and lots of different currencies around there's dollars and euros and Yuan and so on but this is a relatively recent

development in world history in uh the 19th century and early 20th centuries currencies were almost always backed by gold and which effectively means that there was one currency and that was gold um it was only in the mid 20th century that we started seeing tons and tons of national currencies that are Fiat and not not backed by gold that that's where this proliferation arose and since then we have actually seen fewer and fewer currencies more more and more

currencies that were originally National Fiat currencies become a peg to the dollar which effectively makes them just um not not not really a currency anymore it they're just like another name for dollars um and we've also seen um the all you know or many of the national currencies of Europe uh come together into the Euro uh and of course that's not a market process doing this but it is the recognition that uh standardizing to one form of money is going to be beneficial for for everyone involved um now we haven't seen a rapid uh rapid

kind of Crash that just wastes a bunch of currencies and leaves one in its place because all all of these currencies are um managed by central banks and these Banks kind of collude to prevent one from uh from Gaining too much over the others um now in the Bitcoin World there isn't there isn't anything like the central banks so there isn't there isn't any in any counterveiling tend tendency uh to um to uh prop up a a an unstable equilibrium between any of

these currencies so I I'm predicting that that we will uh fairly rapidly see uh the the altcoins go down to basically nothing and you know Bitcoin continue to uh be the dominant one and of course if if Bitcoin is going to succeed it also has to succeed against all the other National currencies as well so I I I mean I think that what we should be working toward is One World Currency which is Bitcoin now do this this argument that you make that altcoins would would ultimately disappear are you make basing that argument only on altcoins that have uh a unique

blockchain or or would that also apply to some of these appcoins and maybe we can talk about appcoins because you wrote an interesting article about how you feel uh that can't um appcoins are not generally a good idea would that also apply to appcoins that are backed by Bitcoin so counterparty based apps Etc that's I mean that's very similar to what you're saying in the sense that uh much like a lot of new like you mentioned currencies were backed by gold and then now uh some currencies are back ped to the dollar it's it's very similar right I mean counter coins are pegged to bitcoin uh I I I don't I don't know enough about

counterparty to be able to talk about that that thing specifically um um I know that it operates on the Bitcoin blockchain but that doesn't mean that it is actually backed by Bitcoin if if it were backed by Bitcoin that would mean that there would have to be some organization that was holding a bunch of Bitcoins and which promised to give you a certain set sum of Bitcoin when you gave it a a counterparty coin um and I I don't I I don't think that there's anything like that although you know for all I know

there could be uh if there is you know I apologize for you're right giving the wrong impression but do you actually to be backed by Bitcoin you actually need to have somebody holding Bitcoins and guaranteeing to um provide them you know when on request I guess there's a distinction by pegged and backed by the network and in the sense that the network effect is there I I mean uh yeah counter part is neither of those right uh all it does essentially uses big on blockchain to encode data in that and then it has its own interpretation of data which is used to for example issue other currencies or do other things but

so I don't know if this is your um sort of field of expertise but do you really believe that Bitcoin especially when we start talking about maybe non-monetary uh uses of the blockchain ETC do you believe that the Bitcoin blockchain will be able to accommodate those and handle those and perhaps also scale with a a demand that could very easily uh become perhaps even many times larger than uh credit card networks today especially if we start talking about non-monetary transactions yeah so I mean that's a

that's a very difficult software engineering question and you know I certainly can't say for certain that Bitcoin will well let me say I mean I think it certainly theoretically I think Bitcoin can be the world's money uh it it it it is a question how how rapidly um technology will develop to Able this to really work uh I don't think that Bitcoin could immediately uh become the world's money now there there would need to be quite a lot of upgrades

to the underlying software and I I think we need to assume that uh the uh data storage capacity is going to continue to get cheaper and the internet is going to continue to get faster and faster but if what I do say is that if you believe I in Bitcoin that that that should be your end game is Bitcoin is the world's money um and if if if that isn't then uh maybe you should if you don't think that's possible then then maybe you should

rethink your involvement in Bitcoin well I want to come back to this in just a second uh with some other uh perspective on this but before we do that which is extremely timely also through our discussion uh we would like to run a second ad for second sponsor gems and gems is basically well one of the things they were doing they're building a social messaging app and they are also issuing their own currency so one could call it nap coin I guess um and so here is how this works so gems is yeah it's a social messaging app a lot like WhatsApp it's also Bitcoin wallet and they they use their own cryptocurrency gems uh to

basically incentivize behavior on that uh like of the uses of the app and also to start off and sort of bring new people into the cryptocurrency ecosystem so uh for example exle if you have that app and then you invite new people to it you will receive gems right so if you think of WhatsApp that went to this huge um huge user base they didn't incentivize actually financially the people to do that and Jims do so that's cool and of course people just get used to uh using cryptocurrency straight away Sebastian do you want this app I can't wait to use this I I mean for for one for one because I believe that uh has a real

There's real value in what it offers in terms of functionality uh being able to have all your conversations encrypted but also just the uh I'm I'm very interested in the model that they're trying to build where people get to pay you for your attention and this is what we've wanted so for so long um so I I I really believe in this project and I think it like you said it's very timely with this discussion and we'll be able to toh get get back into this and and debate whether or not this is a good idea or not and and of course another side of this is that they are pre-selling that uh currency which is sort of also why we are running this ad so if you want to uh sort of participate in that and have a

stake in that project you can do so now uh and the preets Run by coinify so you can go to coinify decom and uh so that's coinify a k and uh you can um participate in that prale now and that's actually another interesting use case when we talk about appcoins is the funding model right because you are able to essentially sort of bootstrap these uh these projects and and achieve a they do that in a crowdfunding way which you can't really do otherwise right so if you do like let's say they did gems and they did they didn't use their own currency but they use Bitcoin now even if that you know Daniel you're right and Bitcoin is going to be the one currency this wouldn't help them in funding all

the development and it wouldn't help them in giving uh users a stake in a project so I think that's a it's sort of an interesting Dynamic that we have of course nobody thinks that James is going to be the world currency that's not going to happen right it has a very specific Niche use case although that could be a very significant one um so coming back to our episode um I would if we talk about big so there's one thing I I've been thinking about recently um and I've and that's the question is to to what extent are you right you know to what extent will we have Bitcoin becoming the world currency I mean I certainly hope so it would be it would

be great right um but I'm not so sure and one reason and I think it's quite an interesting one is the question of you know how good of a currency is it actually so what if you for example could have a much more stable cryptocurrency Cy because volatility does seem to be an issue for a lot of people um and I know V pan has talked about this and also Robert Sams and we're actually going to have both of those guys on over the coming weeks um um so what are your thoughts on this like do you think Bitcoin will ever be stable enough for example to be a unit of account and and I made the example I

think in a previous episode where you know let's think ahead 20 years or however long it takes and let's think uh someone has to enter a life insurance contract now and say for the next 15 years I'm going to pay a certain amount of Bitcoin or some or let's say Bitcoin and then I'm going to get a a payment out of course that only makes sense if you can have a realistic expectation of what's the real value of those payments and do you think we'll ever get to the stage where Bitcoin will have such a stability that you can enter these kind of legal contracts uh confidently and without running big economic risks um sure well so um if if if Bitcoin does take over the

world then it will be stable but Bitcoin will never be stable priced in other currencies it it will it can only be stable if the other currencies are eliminated um be because of this network effect um so now there isn't necessarily any inherent value in having a stable price uh if the if the economy is changing rapidly then nothing is then nothing you know things shouldn't be stable that the a an an

instability in prices reflects rapid changes in the underlying availability of goods so uh I would say ability to ENT contracts now well so I'm I'm I'm getting to that so so I would say that the the instability of Bitcoin is due to the fact that people are rapidly learning about its superiority as a currency um and I I would say that if we are in an economy that is switching from one currrency to another then it's just a bad idea to to give out loans like that that's just not

something that you could do very easily under those circumstances um you know that's that's that's just sort of the underlying reality of switching from one currency to another during that transition period uh uh you know I I wouldn't I wouldn't give out any loans if I could um and and I apologize if I haven't intervened very much I'm not bring very well actually uh but I just wanted to I I although I agree with I think I agree with the economic reasons why um having multiple currencies is difficult or perhaps impossible I I really don't agree with

this idea that Bitcoin will be the world currency and I think there's a lot of reasons for that but one of the primary reasons and I think one of the reasons why we we need altcoins is that Bitcoin just has terrible marketing like there's nobody I mean Bitcoin as a product is is just a horrible thing you know I mean I believe clearly Dogecoin is much Superior in terms of the marketing right what I what I mean is what I mean is and and not to uh I mean we are sponsoring gems but I also really believe in that sort of product because I think that it brings real functionality to to uh

cryptocurrency that people will use and value and I really see a future where perhaps not gems but you know maybe some other app down down the road and a few years from now gains like a massive amount of users and you know you walk into a bar and they accept that coin because it's just like you know if Facebook started uh issuing money you could expect that a lot of places start using Facebook cash right or accepting Facebook cash I I I really think this is how we're going to get to the adoption of cryptocurrency is through apps and these are the guys doing the work and the marketing and and you know bringing people in um I don't think that's happening with Bitcoin I mean if I if I may uh sort of point my eyes perspective I I don't see

that happening at all I mean I I think those currencies will happen and those all those coins that there sort of app specific or function specific will emerge but those you know they will never be money of universal money there will be money in a very specific context not not Universal money but I think we're going towards a diversification of money we're going through I think the interesting yeah the interesting other perspective right is maybe you don't need one currency right maybe if you can have instant conversion everywhere that costs you a fraction of a percent perhaps let's say say 0.1% or something and I as a bar owner can say I take

cryptocurrency like let's say something like shape shift is in the middle and you can just pay with whatever cryptocurrency you want and the person gets you know Bitcoin or whatever cryptocurrency they want um at least from a transaction standpoint I don't see a problem with there being tons of them um of course at the the face flip side of that is when you talk about a store value then that becomes a different matter right because that is definitely instable you know when you say like where do I keep my money in if this composition of which currency is attractive and not gaining value and not is constantly changing well that is a

problem okay well you you both said a lot of different things there I'll try to uh I'll try to respond to all of them but if I forget something you know um uh I can't remember everything so so first of all um you you shouldn't think of Bitcoin as as a product uh Bitcoin is an investment and the the the the driver of adoption is um is is not shouldn't be thought of as as what what you can immediately do with Bitcoin it's the the that in the future Bitcoin is going to be worth a lot more I don't

know why what was going on there on the show we we always like to have another guest on sorry you were saying um must be annoyed with me about something I don't know but um so um that's uh um and this is also well I I have an article called um how how to Market Bitcoin and this is where I uh talk about the idea of of counter signaling as marketing I don't think I use the word counter signaling but you know you try try to Market Bitcoin by by showing that you don't care whether other people get it because um

that that uh communicates your self assurance that they are going to want Bitcoin in in the future at some point um whether or not they they get it right now um so uh let's see now this idea about instant conversion between currencies that I I would say that this means that one currency will win out much more quickly than if there were transaction costs from between moving from one currency to another uh because that makes it easier to switch from the smaller Network to the bigger Network um and and

um well finally let's let's talk about this idea of a store of value I I would say that a a store of value is not the the empirical fact of a good maintaining the same price over a long period of time the the cause that makes a good into a store of value is um and and a difficulty of reproducing it and a difficulty of uh counterfeiting it or ease of of verifying that it's real so like most most of what people use gold for is just storing it I mean gold does

have industrial uses but because uh it's you know relatively it's it's relatively easy to to verify that a a coin is real gold and um and it's very difficult to increase the world supply of gold that's what allows gold to act as a store of value and bit Bitcoin has these same qualities but even more so so I you know I would say that the fact that it's price is volatile is doesn't mean that it's not a store of value I would say that the fact that it um is not

reproducible and uh that um that it's easily verifiable is what makes it a store of value now of course bit Bitcoin is different from gold because it depends on on branding so in the sense that people have to know that that Bitcoin is the the biggest the biggest currency and it's the one that matters and um if if Bitcoin were perceived as just another altcoin then then it wouldn't have it wouldn't have that that the store of value properties because it wouldn't have a a brand

um whereas gold doesn't require that cool well I think we're sort of at the end of our show but uh maybe one last thing and you're not really going to have time to go into depth so you just just have to answer Daniel I apologize beforehand but do you do you think Bitcoin will become you know there are generally three things thought of as as money right three uh sort of functions that money can have so that one is the medium of exchange so it's something that's used to facilitate transactions second is a store value which we just talked about and third is is uh a unit of account do you believe Bitcoin will achieve all three and what

order so just very briefly uh if you can do that can you give us an answer to that uh sure I mean I I think that it already is all three and I've I've written an article we don't have time to go into units of account but I've written an article called Bitcoin is the best unit of account and um you should you should go and read that one okay cool no that's those show notes so uh yeah we are at the end of say thanks so much uh for joining us Daniel all right well thanks for hear about it yeah if people want to check out Nakamoto Institute is it what's a URL uh Nakamoto institute.org

Okay cool so uh and you also have a podcast now you started a podcast called what was it again Texas Texas well Texas bit coin Frontier that's that's the organization that started this so we have a a series on the history uh U let's see the the theory of money and the history and prehistory of Bitcoin well now I don't remember exactly what what it's called but well you can you can go search search for those terms and find it we're going to we're going to start this this Monday with a a new format but we're not entirely certain what what that's going to be yet and you can find on YouTube it's a hangout as well I believe yeah

cool um yeah so thanks so much we're going to be back next week uh we will have a hangout with Alan Scott he's the chief editor of coin Telegraph actually I'm not going to be here because I'm going to be traveling to go back to Berlin to some Bitcoin workshop on starting a cryptocurrency bank so I'll be on the plane yeah you care tell us about the your setting what what's this in the background yeah so I'm in the in the mountains in Switzerland right now it's very nice you can it is very nice you should have left those candles behind you [Music] yes um and sebastia you wanted to talk

briefly well let me mention it so we're Hing a graphic designer uh mainly I think to do album artwork and and maybe some other things so you know if if that's you please get in touch of course you pay in Bitcoin right so we're looking for uh we're specifically we're looking for actually two types of uh profiles uh we're looking for a graphic design but we're also looking for um a uh web designer developer so the graphic designer uh we're looking for to do our uh episode covers so every time we publish an episode we do a little uh we do a little uh episode cover you know kind of an Al art and I've been doing that and I've been doing it horribly in

my opinion so we're looking for someone who can do that for us professionally and sort of design uh those covers uh for every episode and we're also looking for somebody who can work um with us on our new website that we're building so we're looking for a uh web designer slf frontend developer also if you have any experience with WordPress uh you can email me directly at Sebastian epicenter.com that's with an En at the end s EB a s t i n and uh oh by the way the hangout with alen Scott will be next Sunday uh at 1800 UTC that's 10: a.m.

Pacific 1 pm Eastern yeah there you go well um thanks so much for listening uh you can follow us on Twitter at eper BTC or leave us iTunes if you P to show uh which helps you people find us and we'll be back next week thanks for listening [Music]