The World is Waking Up to Crypto | Raoul Pal

Transcript

[Music] welcome to bankless where we explore the frontier of internet money and internet finance this is how to get started how to get better and how to front run the opportunity this is ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david how are you doing after that epic episode absolutely fantastic ryan raul paul of real vision has a ton of different views and opinions and theses about how this

crypto space is going to unfold and for those that don't know real vision does just a fantastic job of producing content that is distilling and digesting complex information about the world economy about finance into ways where people that don't have you know privileged access to information or specifically a financial background can really understand it and one thing that is really exciting to me is that raul and his company real vision are really putting a big step forward into the world of crypto raul is super bullish on bitcoin he's really interested about ethereum he understands defy and he's also making a ton of content around it so we wanted to get raul on at the bankless podcast to kind of hear about

his thoughts and mental models and ideas about how the story of crypto is going to unfold as it relates to kovid as it relates to mmt as it relates to money printing and all the other theses and conversations that we have on the bankless podcast ryan what did you like about this episode yeah it's just stellar i think i think you summarized it super well but one thing you said when we were having our after podcast conversation that kind of sticks with me is like raul brought a whole new dimension to the types of things that we we talk about generally right and like we brought this other dimension to him so it was almost a little bit of like a meaning of the minds like almost a venn diagram of new material that you wouldn't typically hear on bankless he was talking about you

know macro and he was talking about like you know a practical way to see how nation states and banks might fit into this new open financial paradigm and we were talking about you know monetary policy of of ether and we're talking about how defy could be an underlying layer for these banks and you know it was it was a really nice i think meeting of the minds in that way and if there's anything right so if i were to be sort of introspective and say like bankless the bankless thesis is uh fantastic it's part of how i think the world will play out and i think you do too david um but you know sometimes there are times where we can err on the side of being a bit more revolutionary than

maybe the world is is ready for and raoul comes from the world of existing bankers and things as they were and he's still attracted to crypto and bitcoin but he's very pragmatic and that's why i felt like this was a nice balance we were coming to him with like hey the bankless revolution and raul was coming and saying like hey like this is how i think it's going to work out with the banks and they're going to be cooperating with one another and i felt like it came together really nicely and should be a super interesting listen for folks that are tuned in if there's one thing that raul isn't it's tribal it's really hard to get away from tribalism in the crypto space we do our best here on bank list to not be tribal but i think it probably seeps in every

now and then we are crypto native right so we have the crypto native perspective and sometimes it's hard to get out of the crypto native perspective and raul doesn't have the crypto native perspective he's coming from the outside in and having those two perspectives i think is really valuable to see what conversations happen when you know somebody out from outside of the world of crypto who's as bullish on crypto as we are i would say comes in and gives us his takes and that's what we got here on the bankless podcast today my favorite thing about raul is probably that he just has a curious mind and he's willing to admit the areas where he's strong and he knows a lot and he can articulate why he holds the positions that he holds on things like macro and you know wider

economics and game theory why he holds those positions but he's not afraid to say like hey educate me on other areas where i don't i don't dabble into the monetary policy of ether like you said that at one point and it's just super refreshing to hear someone who's strong on what they know and you know has a curious mind willing to and open to learn about other areas that they just haven't given much thought to so i think that'll come through in the podcast as well one perspective that i really took away from raul that i really enjoyed again coming from the outside of crypto is that he thinks that this is much less of a you know a revolution right we are we are not revolutionaries here in crypto

we're just building technology and that technology is useful and this technology is going to be used by banks and institutions and central governments and where a lot of you know bitcoiners will you know rally the flag saying oh they're going to you know mmt the dollar into hyperinflation and bitcoin is going to go to the moon raul is like well no these institutions are going to figure out the way to soften the blow right we are going to find ways to slowly step off of one system and slowly step on to another system it's not going to be this violent cataclysmic revolution and i think that's an important perspective to take away absolutely and you know they're doing great work of real vision is doing fantastic work to educate the masses it's some of the same work that we are

doing here on bankless and it really takes an ecosystem speaking of ecosystems by the way we should mention the file coin accelerator that is coming up and this is for d5 developers and entrepreneurs who listen to bankless filecoin as you guys know is a decentralized storage network and you can get a 20k grant and up to a million dollars in follow-up funding if you apply for the filecoin frontier accelerator by the 15th of november the reason we mention this is because we think decentralized file storage is hugely important in the journey to get our front ends the bankless front ends uh servers that that you see fully decentralized and david you're actually

going to be a mentor on this so you're lending the bankless nation help that way too decentralized data storage is just a fascinating subject and it's definitely going to be a subject that we talk about in the future on the bankless podcast think for a second a thought experiment what happens when humanity has a persistent library of knowledge that it can always add to that is outside the hands of any one individual just a naturally emergently growing library of knowledge and that's something that something like filecoin with decentralized data storage can really enable and that's something i'm really interested in seeing and so that's why i've chosen to help out the file coin accelerator uh program by being a mentor so if you're interested in applying

there's a link in the show notes you can click and go through the process all right guys we're gonna get into it this fantastic episode with raul paul but first we're going to talk about some of these sponsors that make this show possible when you own crypto what really matters is the security and ownership over your assets being a part of the bankless nation means having complete sovereignty over your crypto the easiest way to do that is with a ledger hardware wallet a hardware wall is a little device that manages your private keys for you so you don't have to worry about proper private key management your ledger hardware wallet keeps your private keys private but still lets you have easy access to your crypto the combination of my ledger hardware wallet and metamask lets me store my crypto assets in the most safe

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the app so you never need to send your crypto assets away from your ledger to make a trade buying a ledger is like buying a fire extinguisher the best time to get one was yesterday especially if you're doing something silly like holding your crypto in a hot wallet that's always connected to the internet if you haven't gained full control over your crypto yet go to the link in the show notes and get your ledger today banklessnation do you want to go fully bankless but in the real world monolith is the defy account that you need it wraps your eth address in a bankless visa card and it does so much more it closes the loop from fiat to d5 so you can onboard fiat to die on monolith with zero fees then you can convert that die to a die which is an interest bearing

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to bring you raul paul of real vision bankless nation we have a really special podcast today today we're going to talk crypto macro central bank currencies d5 ethereum bitcoin and everything else we can think of with raul paul who is a macro investor he's an economist he's the ceo and founder of real vision he he's influenced many of the ideas in the bank list program we've got so much to talk about today we're glad you're with us raul welcome to bank list how you doing sir it's good to be here i'm in the cayman islands i can't complain although it's been raining solidly with all these tropical storms for about

three weeks now so one day the sun will shine again well as the weather is getting colder i i'm certainly envious of the cayman region you know we're also like a day away from the u.s election and i want to start with this question i'm not going to ask you to predict who's going to win trump or biden but it is certainly the case that a biden versus trump world will look a little bit different and it's also the case that no matter who wins they're going to be the leadership of the us is going to be forced into some inevitable decisions just due to macro pressures almost like stuck in the wheel of history so i want to ask this question to kick things off what do you think will happen no matter who wins i think no matter who wins there's no

surprise to anybody i mean the imf have been pounding the table about everybody has is there will have to be more fiscal stimulus and more monetary stimulus this virus is not going away it's going to weigh on growth now whether that comes via lockdowns or just human behavior where people try and avoid getting ill because don't forget we've got 76 million baby boomers in america all aged over the age of 60. so prime candidates for getting ill they have all the wealth in america so you lock those people up at home whether voluntarily or because of mandates um consumption goes down and the economy weakens over time or remains subdued over time we're seeing that in europe too

so i think that whatever happens we're going to see more spending you are famously bullish on bitcoin as one asset as i think a result of of some of this uh these macro trends uh what about this state of the world makes you so bullish on bitcoin sir well it goes back to when i first got interested i was in europe in 2012 when we almost lost the banking system and we almost lost the whole european union i'd also gone through the 2008 crisis and but by 2012 i realized something had to change because the inevitable outcome to everything was more printing and i knew that this was going to become untenable over time that the financial

system itself was creaking at the seams because of this debt super cycle that we'd had for so long so i had been writing in global macro investor and talking on real vision for some time to say listen crypto and macro are going to um collide at some point in the future and it's likely to be the next recession i didn't imagine this recession was going to be this bad in terms of how much stimulus is needed to put the global economy on a life support system so when you look at this and you look at there is no other outcome but more then you can only imagine that fiat

currencies overall will lose some of their purchasing power against hard assets now i know there's a whole kind of fight goes on about the us dollar is going to collapse i don't believe in that i believe that the dollar goes higher before it goes lower but it's the overall basket of fiat currencies and the easiest way to show that um is against gold so if you i've got a basket 27 currencies versus gold and gold just kind of steps its way higher every time the printing presses go it's harder to look at with bitcoin because bitcoin has some other magic too so if you imagine gold is like a reserve asset and bitcoin has that but bitcoin hasn't yet reached full price discovery phase because there

are two elements of it is one is the adoption curve so you know that will give it more value over time and the stock to flow model stuff like that which is basically the adoption curve but also it's the value of the future technology you know what stake does this have in the future financial system and the only answer can be a lot more than it is today and so i've never found something that is a pristine reserve asset a true store of value that has an adoption curve like this where metcalfe's law applies and has future technology embedded in it that allows

a different future so it's a call option on the future and a fantastic security asset now and and that's why i realized that that this may well provide all the answers now i don't think bitcoin will provide all of the answers i think ethereum and a bunch of the other crypto i think the whole digital asset space is the future of everything um and again bitcoin acts as the easiest most liquid call option on that too here on the bankless podcast i think we are also very bullish on crypto specifically as uh its uh technological merits right rather regardless of the macro environment but before we leave uh to talk about the merits of crypto as a

technology i do want to stick on the macro subject for a little bit longer and you know people are learning that the covid crisis is lesser of a health crisis and much greater of a financial crisis and there's something different about the covid financial crisis that's different from previous financial crisis you know financial crisis crises they happen but this one is a little bit different that specifically has a stronger relationship to something like hard assets and and hard money and raul your explanation of the macro state of the world i think is one of the most salient that i've heard of in the space maybe you could give us and our listeners an explanation as to why this covid financial crisis is is uh

unique as a financial crisis and why that uniqueness is relevant to bitcoin specifically so to start at the end it's the end game and i'll come on to why so this crisis starts like every other crisis every recession basically looks the same you have the realization and that's called the liquidation phase when everyone goes oh out of these assets i don't know what's going on then you get the hope phase when everyone says ah it's not gonna be that bad it's okay it'll be all over and done with and usually that's when everyone starts pricing and reflation and return to normal and then those dreams are shattered and you have normally it's kind of the the phase where everybody gives up and says oh my

god okay this is pretty bad in this case it's somewhat more unique and i call it the insolvency the issue is here is and i've been again writing about this for close to 10 years we were going in to the next recession with the largest ever amount of debt then ad covid which was the largest ever drawdown in gdp and so the recovery from that takes longer than people expect people want to extrapolate to v-shape but it's clear it's not that so why does that matter well it time matters when it's a debt driven recession and it matters because you impair cash

flows because gdp growth globally is still down like four or five percent year on year so forget all these q on q numbers they're just nonsense it's year on year basically everyone's cost base have stayed the same and their their cash flows have deteriorated massively if not entirely so that leads to the rise of bankruptcies small restaurants they can't afford to pay the rent they give up their landlords then give up and everybody and then people start getting tipped out of jobs and then they can't pay their mortgage or their rent and you know and and so on and so on and so it goes so the insolvency is bad it's bad also for corporations because we're

seeing a shifting business model away from the old businesses like ge or at t capital intensive heavy old businesses into the sas business model where you don't need much capital and you don't meet many people and you don't have high costs so you're seeing a destruction of businesses accelerated by this crisis so all of this is happening which is terrifying in itself you've got the banking system that never really recovered from the last crisis particularly in europe because debt is saddled and the velocity of money doesn't work i money doesn't flow around the system because of new regulations in the banks that have stopped it happening but you reached this point just as interest rates were at zero

so what the hell do you do that's when it gets interesting because now all the optionality is for massively increased quantitative easing and negative rates because if we'd started this recession with rates at four percent we'd have a lot of room this was what everybody feared in the first place was going into a deflationary environment with rates at zero and that is why this is such an ex interesting macro environment which is terrifying because what it can only mean is that savers get penalized and that's through the basement overall the fiat currency and that's why it's so incredibly powerful for bitcoin

but also on top of that if the financial system is broken if the europeans end up having to nationalize their entire financial system we've already seen the central banks going to central bank digital currencies it's all coming it's all part of the same thing which is we need a plan b we need a parallel financial system and bitcoin showed the way so one of the things that you frequently discuss is the looming retirement crisis and how does that play into the the macro environment and and what we are seeing play out yeah again into this something i've been writing about for 10 years is these baby boomers the great thing about demographics is predictable so the baby boomers were going to hit retirement and uh 65 years old and they hit it last year

so you got the largest generator of people on earth with all of the savings in the stock market hitting retirement at exactly the same time and once you coincide that with a recession things get ugly because firstly they're incentivized to sell down their assets and we're seeing that because these guys held active portfolios and value portfolios and those just keep getting destroyed versus growth the millennials on the other hand have been throwing money into 401ks into passive vehicles and that's been stretching the valuations of growth so that happens bond yields go to zero that means basically nobody can afford to retire because there's no fixed income the baby boomers don't realize this

because nobody's telling them the truth the fact is they can't retire but they're gonna have to somehow do it but the money they've got is not enough so they are going to be if the market sells off again they are going to be incentivized to try and liquidate assets my guess is the central bank will try and stop that at all costs much like the japanese have done because that is the whole pension system but the pension system is essentially insolvent um and that's at state level and a private level in people's 401ks people don't have enough money that or don't have the money they think they have to retire so that means that you end up with net sellers of equities which we're seeing net sellers of housing at the same time

the interest rates have gone to zero and the financial system is creaky people can't get access to money and people getting tipped out of jobs it's really not a good mix can you get out of this possibly but it's going to take a bloody miracle does this hit all nation-state economies equally or are there some economies some nations that get hit worse by these these macro trends uh versus others essentially you can split the developed world down into the older populations versus the younger so the oldest population of all is japan um they've been going through this for a while but their economy was basically supported by the rest of the world still growing then after that you've got the europeans switzerland being the oldest then

germany and other and italy and spain etc and they have been doing this but they are not equity holders they're fixed income holders and they switched quite a long time ago because the europeans created regulation to avoid this very mess that the us is getting itself into so it's not so bad in europe in a pension situation but with yields so low obviously when you retire you've got no income so everybody everybody's consumption will have to collapse over time so that is a deflationary um offset to anything else going on in the world but there is another part of the world and the us follows that so the us is the younger of the developed populations but not much so now

the rest of the world you can look at an amazing group of countries that i call the monsoon countries based around the indian ocean with india at the center so that's india going up as far north as iran across as far as morocco down the swahili coast of africa indonesia malaysia singapore the gulf all of those countries have the opposite demographic high savings rate low debts young populations so those countries don't look anything like this it's a very very different world for them so it's an extraordinary situation well some a listener hearing this might still be skeptical with why we have to print money right so so maybe you can

illustrate a hypothetical outcome of a world that goes into this financial crisis that we are are seeing ahead of us but for whatever reason central banks decide to uh not print money right and just to throw caution to the wins and say you know what we're not doing it it's gonna we're just gonna let things play out in that world what happens well i'm not sure the outcome is any different the time horizon is so what you're trying to do is smooth the time horizon before you come up with solutions but if you don't do it basically there is no banking system there is no pension system so that means and the pension system is arguably the worst that's where all the wealth is

held and it's held amongst that generation of baby boomers you basically wipe out their savings because if the credit markets are allowed to adjust to account for the bankruptcies that are going on right now then it blows all of those pensions up then if the equity markets are allowed to correct then it blows up the pensions again if there's no access to capital then country companies that are highly indebted start going to the wall too laying off millions of people and then you've got the banking system if the banking system has to deal with that level of insolvency then the banking system shuts down too so then then there is no money available for anybody in any situation and everybody's wealth is being

destroyed so the question is is as a central bank and a government do you allow that to happen or do you allow the slower destruction of wealth via the printing of money to take place while supporting assets for as long as possible it's a moral dilemma and it's not an easy one and we should never have got to the situation in the first place we should have been much freer to allow cyclical ups and downs of the economy that's usually self-clearing it doesn't allow massive um structural issues to build up but we're in this situation now so we can't look back and say well we could have shoulda woulda and we can't scream forward saying they shouldn't they are going to

do what they do because there is no choice because if they do something like that it basically destroys society so it's a rock and a hard place so it's a it's a rock and a hard place and everyone in the world of crypto is more or less convinced that the money printer is about to go burr it has been going bur it's going to go burr uh and and this is why as an industry we're really bullish on bitcoin right it's the it seems to be the diametrically opposed asset to a pro mmt pro stimulus uh pro money printing environment but what would you propose you think what just everyone goes to bitcoin and

blow up every single pensioner i mean that's the issue i've got with with that line of reasoning i get it it's a life raft i think it is yeah i mean the the moral thing is real here you know mmt i understand why people want to try it maybe it's a deluded idea maybe it works for a while but what are the choices there cut rates to negative 10 um and that's not going to work because the banking system doesn't work so it's a really really difficult situation and christ thank god i'm not an investment of a central banker one thing that that me and ryan are worried about with uh this development right is is if if central banks are

cornered and their only outcome to avoid you know civil unrest mass you know mass uh financial destruction is to is to ease the pain by printing printing money and that just incentivizes the rise of bitcoin right again like as the asset that's diametrically opposed to money printing uh what we are worried about and me and ryan have talked about this a lot is well the united states nation is jealous right or it would be jealous if people were taking their stimulus maybe maybe we got some covid stimulus checks maybe ubi comes into favor um either way people are taking the money printing that's being printed and then putting that into bitcoin and what we're worried

about is the jealousy on the united states they're not stupid and the answer is not banning bitcoin the answer is going to be central bank digital currencies and the answer is going to be you will only be able to spend the money in certain ways that's all possible with smart contracts now and we're already hearing noises from the ecb and all sorts of others even the um the premier bermuda um came untalked about this we would like to give stimulus but we'd like to put things attached to it i you can only spend it on certain things so that stimulus can't flow out you're free to put your savings into bitcoin but you won't be free to put your stimulus in so i mean

central banks however their outcomes look stupid to us all i mean they're not necessarily stupid they're just faced with a really difficult set of problems and every outcome that they have is generally terrible so you think raul that the the answer from central banks to like non-sovereign digital currencies like um ethereum or bitcoin is basically that that central bank digital currencies level up that they implement them um but what you just described is i would say uh you know a lot totally a different kind of paradigm from the world of crypto right crypto is about peer-to-peer uh transmission of value it's about permissionlessness it's about

self-sovereign like doing what you want with your own money one individual to another individual are you concerned with the central bank uh transition to digital currencies that they put in place a much more authoritarian sort of restricted uh less free less market driven um digital currency than than the one we'd be familiar with is crypto no because it's not replacing crypto it's not crypto it's a central bank digital currency that does a hundred several different things but the essential thing is it closes the gap between monetary policy and fiscal policy crypto exists in its own sphere in its own right as gold has always existed so it doesn't take away from crypto doesn't stop crypto becoming a

store of value or even a transfer mechanism or a method of payment or any of the other things they've basically accepted that it's here and it's part of the system and i i don't buy the arguments that they're going to get rid of it i think they want to integrate with it it is always very useful for global society to have somewhere to put its store of value and if it doesn't go into bitcoin it goes into art or cars or baseball cards or whatever it is it doesn't really matter bitcoin obviously for a number of reasons is the most superior one that we've seen and will remain so i imagine but i don't think of these things in competition at all i think they're entirely different things i think what

the central bank digital currencies are doing are reinventing monetary and fiscal policy and economics so you think these two worlds coexist and maybe work with each other feed off one another grow with with one another how long do you think this transition takes for central banks do you see like an acceleration central bank's adoption of digital currency like in this next decade are we talking like many decades from now oh i think within five years we'll have a digital euro digital dollar digital pound uh um china's already going digital even small countries like bermuda i think the cayman islands will go digital five years

there's no solution they have to do it okay so what happens to the us as a reserve currency in this world where all of these central banks have transitioned to digital currencies does it withhold does it uphold its reserve currency status or does that start to get eroded away and what replaces the us dollar well firstly you need to know what digital currencies are they're just a different platform for the existing fiat currency so it doesn't change that it's a it's a it's a it's a different method of transfer different method of storage i via digital wallets and can have incentive systems built into it i.e smart contracts so i mean that's a very symbiotic world

with the world of crypto and some of these will be built on some of the you know larger crypto platforms so that's that's good too so you know i don't really see the issue with where that could all go now in terms of the dollar that's a separate issue and it's nothing to do with digital world what is to do with is that the us accounts for 25 percent of global gdp yet global payments are 79.5 all conducted in u.s dollars so that leaves the world short of dollars and under the control of the us if you want to put it that way but basically it makes it very clunky to

operate a globalized system now globalization may withdraw somewhat but globalized trade is never going away and this is a huge problem it's a massive problem for a country like brazil or south africa that is a commodity exporter and the vagaries of the dollar destroy or build its economy that can't go on and so what they're after here is the ability in the imf have been talking about this is the ability to maybe using digital currencies to create a more unique structure where you could have regionalized baskets and stuff like that uh which trade so maybe you have a digital commodity basket so that's a bunch of commodity currencies offset by others you can create this is what libra

facebook's libra was um you can basically recreate different monetary payment mechanisms and that moves the world away from the dollar so yes it's very dollar negative over time but it's not an abandon of the dollar it's actually a fixing of the mess of this dollar standard has got everybody into because it's so all-powerful and restrictive on every single nation that uses it that people just need a different answer and you know in this world where it looks like there's going to be a sharing of power with china the us and others over time well then people don't want to use somebody else's currency so let's say china is trading

with south korea the last thing they want to use is the us dollar in the middle of it so they're going to find solutions to to allow this to work now the world runs on swift payment rails and people can't have that you know russia iran other people have been kind of forced out of the swift system people just don't want that um so it will change and that is dollar negative uh in the meantime in the interim the dollar gets stronger and stronger because in the middle of a debt crisis everybody owes dollars and every time somebody can't pay the debts there's less dollars around and it increases the value of the dollar over time because everybody has to fight for that dollar so i still see the situation where the dollar gets stronger

before everybody is forced into the actions that i talked about which is trying to create using the digital currency baskets that the imf the bis the bank of england the ecb and everybody have talked about bring these roll these things out to try and change the structure of the market obviously don't forget we have the massive euro dollar market which is the um dollar interest rate lending market offshore i mean that basically drives every single global bank that whole thing is creaking at the seams there's not enough dollars around the banks are are not able to lend as much they don't get access to the u.s banking system so there's a real structural problem that needs fixing well when you discussed about how a central bank digital

currency could be programmed as such that it can only be used or spent in ways that are approved by the bank or the state or whoever does the the approving i was reminded of you know some things in history that we've seen such as you know back in the 30s it was illegal for an individual to hold gold uh and argentina as well confiscates gold if you try to leave the country with it right um and something i'm concerned about is while the the a central bank digital currency that dictates what you can and cannot spend it on is kind of a form of confiscation in a way in a roundabout way right it's

it's dictating what it should be valuable and what shouldn't be valuable it seems to be we are at a similar place in time as 1971 when nixon closed the gold window and it was kind of this like statement that we are basically going to use this new freedom to print new money and we seem to be at a similar place in history where we're kind of you know that we're taking down the curtain right we are just going to be more explicit about our our need to print money as well as uh if if what your theory is with central bank digital currencies having approved ways of spending then we seem to be in a way where there's going to be a top-down control over the value of the dollar but um

do you have any thoughts on that listen we live in a controlled society whether we like it or not you and i are using a google browser they know everything we're doing who we're speaking to how we're doing it what products we use what we shop for what we look at everything so we can't escape the world that we live in it is what it is so the fact that governments are actually slower to the game than corporations have been google has more data on more people than any other entity on earth it is what it is i mean no amount of screaming and shouting is going to change that technology genie is out of the bottle as is behavioral economics now the other question you need to ask is is it confiscation or is it redistribution because we know the system is completely

broken right now in terms of distribution of wealth so is that the worst outcome i don't know there are several bad outcomes and the fact the fact that um bitcoin exists allows us out of those outcomes and i think game theory would imply that in a globalized world if let's say the imf get towards their new britain woods agreement which is basically if you re-believe the headlines it means we'll all agree together to maybe grow our balance sheets 50 or whatever the number is right so we can we can stimulate and if we're not having a currency war we all do at the same time it's all okay i get it great for bitcoin great for gold

um and it helps maybe redistribute wealth um but in that situation a country is going to say oh well we've put bitcoin as our currency or we put bitcoin in our reserves and before you know it it starts to attract assets this is how markets work so i all of these things i think are positive for the adoption of bitcoin because in the end it is the superior asset so if you are argentina and you've had endless currency devaluations and you happen to go through an economic boom well what happens if you started accumulating bitcoin in your reserves does that make your currency more

valuable does it make it harder yes it does and i think that's really interesting because i think if you follow the argument of bitcoin it ends up with adoption by the said by the central banks it just doesn't get that quickly but it happens and we will see some small nation state doing this i think within the next five years and that will be the little flag planted to say okay there is further change coming because as you guys are rightly pointing out this system of endless printing is unsustainable because sure you can extend it by redistributing the wealth not in the hands of the rich but in the hands of many and that will stop the populace from rebelling as much as they currently are

but in the end other countries will take advantage of it so you know it's a really really fascinating thing going on right now and the biggest change any of us will ever live through so it's very interesting how you kind of uh you use that logic so raoul you're you're basically saying that let's say this um basket of fiat currencies become sort of the de facto new bretton woods right and uh regular citizens say hey you guys inflate your money too much so i'm just gonna put my value in bitcoin and they start buying bitcoin rather than government starting to ban bitcoin or as you know fdr did in the 1930s make it illegal you think that that is unsustainable from a game theoretically let me stop you there a sec this fdr thing comes up a lot

it was only the us that tried to ban it and the gold price went up and it didn't work right so everybody else used gold so there is exactly the example i'm using is if you ban one group from using gold guess what switzerland exploded because the u.s citizens and others used switzerland so it's that that argument is always the wrong argument everyone says they'll ban bitcoin look what they did then well they didn't on a global scale could the imf trot on a global scale sure but maybe russia will say well we'll we'll use bitcoin exactly a player incentivized it happened with genetic technology it happened with all sorts of things where everyone goes well we're going to ban it and before you

know it israel brazil and others were allowing it yeah so the fdr example really just proves your point because it's game theoretically when you're dealing with nation states it's not equilibrium right because some nation state can just defect and start adding bitcoin to their balance statement uh she and that like requires all all the other uh nation states to unban it then yeah because however homogenized we can create a society and i don't think you really can particularly easily but let's assume you can create a relatively homogenised society in a country you certainly can't do it internationally with countries with different cultures so somebody is always going to want the advantage over another because its job is to improve the quality of life for their citizens so they are always

incentivized to look for the best outcome what do you think about some of bitcoin's weaknesses you know there are a couple i could point to but what do you see as the main bitcoin weaknesses right now um i think for what it does it's perfect i mean it's a pain in the ass to try and you know integrate it into the current payment rails but that's no real big deal that's being solved its weakness is people who uh the bitcoin maximalists think it should be every form of payments every form of transaction and all of money itself well it's just not set up for that yet could it be that in the future for sure certainly i don't want bloody money to have a 60 volatility because that's not money

but as a store of value over time yeah i'd accept the volatility because of the skewed up side so if there's an evolutionary state that needs to take place within bitcoin itself um and that would be as volatility collapses because we're massively up the adoption curve um and then you could stop moving using it for money but the problem is is the um you know the speed of transactions becomes a problem but i don't think it should be money could you build something on top well between now and 10 years that's a long time to create the technology to allow it so sure maybe the lightning network works but you know again or you just integrate it with ethereum and all the other um

cryptos and blockchain technologies around so i don't really know but i just think it's i don't think it has to solve every problem just to have pristine collateral at the center of the system solves 90 of the problems have you been given any thoughts of one criticism of bitcoin um that comes from all sorts of camps maybe partially the the ethereum camp is that it won't remain the most secure network over time so right now of course um like it's it's economic securities paid through uh new bitcoin issuance essentially inflation so that that subsidizes the system right now but every four years of course quite famously that gets cut in half and eventually the bitcoin network transitions over to economic security by

the value of its blocks transaction fee revenues um have you given any thought to that right so right now we're seeing in front of our eyes and it's called defy once bitcoin has a yield curve people are incentivized to create it and hold it and mine it um so i think that it's just so nascent still that most people in the space haven't been involved in the financial markets to understand time value of money and stuff like that so i i think there are other reward systems that will take place and it doesn't have to be mining so the the reward system for owning the reward system for transfer the reward system for custody there's all sorts of different reward systems that can be baked into this

so i i don't think that that is necessarily going to remain unsolved don't forget let's assume that it goes up to the kind of levels that we're all thinking about so let's say it's suddenly a five ten trillion dollar asset well everybody's oddly enough very economically incentivized to solve these problems it's the same if the quantum the quantum computing conundrum well basically the more bitcoin goes up the more money goes into solving it to protect it um and so it becomes an arms race and i think that's fine you guys there's so much left in this interview with raul we're about to talk about the size of what raul calls the application layer versus the collateral

layer or in bankless terms the d5 layer versus the store value collateral that runs inside of it really interesting part of this conversation but before we get there we're going to pause the interview and talk about some of these fantastic sponsors that make this show possible if you're going bankless you need a good ethereum wallet argent is one of the best wallets for the bankless journey two words to describe it simple and secure what do i mean by that first simple there's a mobile app you download you can get set up in 60 seconds this makes going d5 easy easy easy that means one tap access you can trade any token at the best price you can earn interest and invest with ave set compound uniswap many of the other money legos that we

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i think it's all about interoperability and i think that all of the things we talk about now won't exist in five years time i think that there will be a seamless layer on top that allows us to operate between all of the various systems much like i can send money to you from the cayman islands to america and it's no problem i can send you an email from my apple and it goes to your android phone and you flick it onto somebody else and they're using a microsoft you know we don't notice any of this stuff and i i just think it's all a red herring because you know this this turf war i think gets resolved by technological adoption and use case

so if ethereum proves out the use cases and it can create the yield curve for bitcoin and it gets more adoption than bitcoin's version of its own yield curve so be it and that will work fine and we won't even notice any of this you and i will just say hey listen i'm getting you know 3.7 percent on my five-year bitcoin right now what are you getting and you have no idea that it's yours is based on ripple and mine's based on ethereum it doesn't matter so raul you own bitcoin of course but you've also said that you own ether the asset behind ethereum what's your thesis for ether why do you own it yeah i'm just a macro guy and i'm very simplistic in these ideas and it's basically is i understand the potential

weaknesses of bitcoin which is [Music] right now they haven't sold the transactional speed and the smart contracts element embedded within bitcoin as well as they have in ethereum ethereum's not perfect uh by any means but the amount of intelligence intellectual um application going into developing on ethereum because of the smart contract element means that if there is a platform for the future then ethereum has a really good chance of being that and that's for the financial system or it's a custody system or it's um the store of value or its legal systems

or its notarization systems and all of this stuff well ethereum looks pretty good for that and i don't think of ethereum as a currency i think of it as a share and a platform in the success the network effect of that platform well bitcoin i think of as a reserve asset so why not let me push back on that ral why why don't you think of ether as a currency as well as a reserve asset there are some ways it is acting as that today it is a non-sovereign story of value and the most trustless non-store uh non-sovereign story value on the ethereum network for instance on ethereum it doesn't have any other dependencies so it's being used as as collateral as a trading pair as all sorts of things derivatives are being

built on top of ether as a store of value in some ways when you port bitcoin over to the ethereum network you lose some of that trustless dimension that you had in the first place on the bitcoin network and ether provides a substitute why couldn't ether be a currency a reserve asset and non-sovereign store value for me it feels more like a bond than it does a currency um so bonds are just a layer on top of currency right so the dollar's the currency in the treasury market is is the application layer and equities of the application layer it just feels more more like that doesn't mean it doesn't have value or store of value or anything like that

but it's it just feels different and i could be dead wrong and it doesn't matter to me whether i'm wrong or right because i own it but the idea is is that i think and i think there is a world of which the ethereum network is worth more than the bitcoin network what would have to happen for that to be true to for that world to exist just the applications layer is larger than the collateral layer i mean the collateral layer in the in the world right now versus the derivative layer is a small fraction so i don't really see why that should be a problem in fact you don't want the collateral layer to be everything to everybody you actually want it to be the safe place

so we have a take on bankless uh on ether the asset called the triple point asset theory which is which is basically using you know kind of uh how a matter can be a gas and a liquid and also a solid right and ether can be three components i think it fits into what you're talking about with a bond but we think you know there are three asset super classes right you have capital assets you have commodities you have store value type monies and uh ether it seems can be all three in at different times so it could be a commodity when it's used to pay for a transaction like gas like oil and that's always been used ether is oil right well that's true but it can also serve as a money as a store of value like bitcoin when it's used in

defi as collateral so you can print stable coin on top of ether as uh collateral but then when it's staked it becomes a bit more bond like right so uh ether moving from ethereum moving from proof of work to proof of stake well what's uh what's stake essentially you're putting it into a bond you're not touching it and you're getting a yield curve from that bond so then it becomes bonded and our thesis is that ether is all three of those things at once it can form between the gas and the liquid and solid and be all three of those what's your take on that i don't know um you know i i don't know it could be is that how it ends up being used we'll

have to see i mean the problem is there's so many unknowns within this universe um and you know it's like bitcoin could be everything too it just depends how it gets adopted again microsoft could have been a database company or you know google could have been something else it just depends what gets adopted in the end so i i really don't know but again i i can see why the tokens have value i don't i don't i don't doubt that for a second but what i don't know is such a dramatically fast-moving technology is all of this space it's almost impossible to calculate the

odds of what is going to develop and it was the same when the internet came around we had no idea where this was going to go and i think that's good i'm happy i'm happy with that because all i know is it's going to go from here to somewhere and that somewhere's a lot bigger than here so i'm a macro guy again you know to get into the weeds of of how it does it or what the actual outcome is is irrelevant because all of the outcomes mean a higher price for ether but i think it's interesting that you've chosen both bitcoin and ether have you have you chosen any other assets in this space that are appealing no i mean i love the whole idea of tokenization the digital asset space overall um and but i'm again i'm a macro guy so

i don't generally buy equities you know i'll buy or sell indices you know i'm i'm very top down and you know it's just not my knowledge set to be deep deep in the weeds of stuff i can be deep in the weeds in terms of the philosophy of where i think things are going and how they interact and how you connect all the dots that's my kind of expertise but when it comes to the different technologies i have no clue how this is going to work so could something else also feature for sure but i'm unlikely to invest in it yet because i don't understand it yet but i do understand tokenization but again i'm not the kind of single stock

investor so i'm unlikely to do something in that space yet but i'm super interested in it because i think everything gets tokenized so raul we have a thesis the bankless thesis uh which kind of illustrates a uh in my mind like a marriage between bitcoin and ethereum um but but it also does some other things as well and and you've you've labeled some of these characteristics that bitcoin has that it also has some weaknesses and then there's also some strengths that ethereum has that also has some weaknesses and namely the strength of ethereum as a smart contract platform that can host defy is one of its greatest strengths right and then also bitcoin's monetary policy is also one of its greatest

strengths our thesis here at bankless is that bitcoin didn't go all the way when it comes to bringing trustlessness and decentralization to the world of finance right it just kind of focused on the central decentralizing or providing a new alternative to central banks and in in a world that is cryptocurrency cryptography uh first that isn't enough because if you interact uh via bitcoin via bitcoin banks you know bitcoin it has scaling difficulties right there's only so many transactions that can get on to the main chain and so that means that we need to not make it more valuable no i think that i think that could mean

that it's much actually hamstrung in the long term i think i'm not sure because collateral as itself doesn't need to be high velocity so i'm not i'm not entirely sure that its restrictions don't end up being part of its value because then you don't build the derivatives layer on top of it you don't do a bunch of things on top of it because it doesn't function well for that which is you know what what a theorem does super well because it is much faster it's much more flexible and bitcoin's inflexibility is its very advantage as is ethereum's flexibility i just you know i just think of them as entirely complementary like pepper and salt yes yes and this is why we were talking

earlier about like the jealousy of the nation state when money printing goes on and people are putting all that money into bitcoin and then also we have also seen nation states you know ban gold right or ban bitcoin based off of this you know not wanting to be able to control the value of their own currency and in a world where bitcoin uses bitcoin banks and institutions to manage transactions to the main chain in a world where the a nation state doesn't want their citizens to have a relationship with bitcoin bitcoin needs ethereum to be able to have the optionality of being a financial store of value in a way that doesn't require centralized intermediaries which are

ultimately extensions of the nation state and that's largely what the bankless thesis is it's not only the automation of the uh central bank as bitcoin but also the commercial bank layer via ethereum yeah and i don't think of bitcoin as the automation of the central bank i just think it's entirely different like gold i mean gold stands on its own merits has nothing to do with anything else yeah i think that's what i mean i think that's what i mean yeah so and yes i agree interoperability that is going to be the key word for the next 10 years because it all can exist side by side it is not one against the other it's the whole space together is more powerful than than any individual

component part i think so ralph what do you think of this wacky world of defy right so on bitcoin like inherent in the network you can hold bitcoin of course you can transact with it on bitcoin of course we've there's transactional limitations on ethereum you can do other like money verbs right so you could also lend you can also borrow there's something called uniswap where you can you can trade without a intermediary without a bank as we'd call them banklessly what do you think of this this wacky world of d5 does it make sense to you yeah totally it's it's just reinventing the money markets for the digital era you know i have no problem you have to have the time value of money nothing works without it

literally it's as old as money itself and that is what is happening in d5 the markets are struggling to price the time value of money and taking into account risk we don't know the risk yet so we don't know what are the right solutions what what has more risk than others we have no analysis of that but what we're doing is planting the seeds of the future of a whole financial system because without the time value of money you don't have a financial system because nobody's incentivized to lend and so yeah it's super important super interesting it will fail many times it's like opening up in a village square and saying right all of you can become money lenders money lend money or borrow money

from who you want that's what's going on right restricted money lending guess what 99 of people blow up and one person figures it out it's always the case it's perfect it's just survival of the fittest going on in front of our eyes and what it'll do it'll keep iterating and improving all the way through so what we know now as d5 will not be what we know in five years time yeah i agree it does it does it feel a little bit like the early internet in that way right so like the internet you know you had aol and closed gardens like that but the internet really hit its stride when anybody could build a website right like any browser could view whatever you want on you know the web it's all open it's all permissionless you want to do something on the internet you create your own website right this

almost has that for assets and like money markets you know you want a new money market write some code publish it to ethereum no one can stop you you don't have to ask anyone for permission do you see some analogies there with the early internet well it is the internet of money i mean i totally agree with that um what that really means i mean that's a big philosophical question that i don't think any of us really understand yet because i know that things are changing so dramatically and so fast but i think that's right and what i love about something like this is here is capitalism in its purity where everybody's trying to develop the best solutions and the best will win fantastic what still doesn't make sense to you

about this world is there anything that you're like like ethereum or it's modern eats monetary policy or like d5 is there anything that still leaves you scratching your head no again because i again i don't look at stuff like eath monetary policy because i just don't care simply this fight about how many eats are there because you're comparing apples and oranges you're saying my apple's not hasn't got a skin on it like an orange i'm just ridiculous so what i want to ask you guys is why the ridiculous tribalism why can't people just say you know what this is the most exciting space i've ever seen and there's a number of permutations and combination that can play out and we should be embracing that why the

relentless tribalism of of my house is better than yours oh i love that question yeah i think we we try to push back against that tribalism to be honest like so i mean it's a huge feature of the space right yeah it's it's in our dna for sure yeah it is the bankless take is like both eth and uh bitcoin because it's similar to yours we're building a new financial system from the ground up and you want both of these networks and both of these assets in the long run right these are these are assets for a new monetary system but i mean i think there's something to the tribalism that this is not just a technology but it's also like a social technology it's you know there's there's an element of it it's a bit less like

using microsoft versus apple and a bit more like i don't know being a christian or being a muslim or a different religion right there's some religious element to this social layer at least that's what that's what we've certainly observed yes and the reason religions have that element is because they then become self-sustaining rights for adoption purposes right so i do understand that a feature what looks like a bug is actually a feature which is tribalism as a feature because it allows things to survive here's another question i'll ask you let's move away from finance because i'm also interested in you've seen verizon has just made this announcement about putting news on blockchain

the authentication of people and information and photographs in the world of deep fakes and ip for music rights and all of this stuff can ethereum solve this because this is a huge layer that nobody's really talking about yet because everyone still thinks this is all about money it's not it's all about trust i i do think that you know sometimes especially with related to like this election sometimes you show some evidence to people and they just don't care and i don't think ethereum solves that problem however in the world of deep fakes where there's a bunch of fake news coming out and there's a video of somebody saying something and you don't know if they actually said that or not what can really happen is what we call time stamping right where

we use ethereum as a a way to register when something happened and we can trustlessly verify that and when so like a time stamp on a piece of news or a video where the validity of this video is the first time this video has ever been surfaced ever and we can verify that timestamp and so it could be timestamped with an authentication right so let's say i'm a i'm a registered creator so i then release it with my timestamp and authentication code which is on the blockchain it solves all the problem overnight right well i think there's a more complexity to solving that problem but i think the base puzzle pieces are there yes where

there is some sort of verification tool where you can figure out which piece of information or which piece of data really what we're really talking about is data what piece of data came into the world first and we can organize that via what we call a merkle tree on ethereum i mean i i think it's an interesting vision but i also think that this will probably happen with money first and then we'll gradual graduate to other things like identity and that sort of verification verification of data because one one challenge with this row is that um everyone is in a market competition for block space right so like who's gonna pay the most for the next ethereum

transaction right because ethereum the network the protocol just like bitcoin it'll just sell it to the highest bidder so at what point in time do those sorts of data verification jobs become more valuable that's a great point so what's to stop that going on eos or some other platform i think some of it could right also a lot of it could happen in ethereum's layer two which is sort of a lightly say i mean the value of so money is the most valuable thing right right there's money and so and so as you move down the value chain which is let's say your own informational data yeah that's worth less per person right so therefore it just goes into a different blockchain

goes into a different blockchain goes into a layer two i mean you wanna use something like ethereum when you want completely decentralized credibly neutral settlement and in a lot of cases that's probably going to happen for money use cases first at least on the main chain other things could migrate to a layer two or to a different blockchain again if they have market value the cool thing about this as you pointed out earlier is like the market figures it out over time the valuable things persist and things that aren't valuable bridges go away which goes back to our conversation about bitcoin blockchain nothing else is going to go on it there is no point it's too valuable yes that that is probably the case yeah it's like trying to use diamonds for you

know some ridiculous use but in fact they can only be used for the most expensive things whether it's jewelry or whether it's for drilling you know it's it just becomes its own value proposition in its own right because it has value it's kind of weird yeah it's very interesting it's very like self-fulfilling but you know we have argued that there is actually sort of a and others in the bitcoin bitcoin space have argued that there's actually a problem with that over time because uh eventually bitcoin's whole economic security uh depends on the value of its block space that that transaction uh value like that that the blocks the amount of blocks uh and the money spent on those blocks are going to be the sum of if you know bitcoin's security budget

it's like a national defense budget right it's no longer funded by issuance of new bitcoin it's over time every happening it becomes more funded on the tax blocks demand exactly which is why which is why in these networks um you do need an element of wow the block space has to be super valuable um or else the economics of the system you know it's a trade-off right you can't have fixed the prices of the token is less attractive that's okay too you don't have not every token has to be worth what bitcoin is worth they all have different spaces yes exactly but the like the block space

the the demand for the block space uh does actually matter because so bitcoin makes this trade-off which is different right so uh the bitcoin trade-off in terms of economic securities basically we're going to fix the amount of bitcoin that we have there's only going to be 21 million right but we're going to stop issuing and subsidizing economic security and transition that economic security to transaction fees the value of the block space people people spending money on on you know bitcoin block space essentially ethereum's monetary policy is a little bit different it says basically like we're not going to sacrifice security minimum viable issuance to maintain the same security level right so that we don't we don't have a fixed cap so there's like these different monetary policies and

economic security policies competing too which is another dimension beyond just like the technology and you know bitcoin can do some things or ethereum can do some things that bitcoin doesn't we also see like these monetary and economic systems uh competing in those ways too fixed cap versus minimum necessary issuance it's definitely where a large part of the tribalism comes from as well because people believe in one strategy over another strategy and therefore they fall into that that that camp that that believes that yeah and you know my instant reaction to anything like that is to not take one side or the other just it just doesn't make sense to me i'm just not that kind of person

because you know i'm looking at the overall opportunity set as opposed to one versus another because i think but i understand that it's important to have tribalism because it's what drives bitcoin right now because it's adoption without tribalism you don't get adoption religions wouldn't get adopted without that religious fervor the adoption of the of it itself and the the this is the one exclusive of all others anybody who starts a religion says well just include all other religions in it kind of doesn't really work because it doesn't adopt so it's fascinating how do you think institutions are viewing this space these days raul like they see the tribalism and the wackiness that goes on

a little bit right but like are they taking this space seriously now um yes they are i don't know anybody who's not yes there's a bunch of dismissive people but overall everyone can see what's happening well for god's sake if the imf are talking about it then everybody is it's not i mean no longer underground right even the imf though like in their words they're they're a bit more dismissive right like using terms not necessarily the imf report that you're referencing but like so-called stable coins right um definitely relegating bitcoin in a position of too volatile to be a real competitor to anything um but you think they're they're taking this whole space seriously now which is maybe different

than a couple of years ago is it are we in a totally different world now yeah we're in a totally different world i keep talking about the wall of money um i i don't know anybody who's not looking at it or understanding it everyone's still in the park so far in the past thinking about narratives if they want to ban it you know nobody gets it the banks don't want it and everyone's like okay it's here we get it we understand so what's holding it back right can we imagine you're a pension fund and you want to buy bitcoin you have to get your trustees to agree or a bunch of crusty seven-year-old guys you don't really trust that just takes a long time the financial markets are slow they move fast in price but slow in terms of development it takes time you've got to

get legal agreements you've got to get people on side you know a bearer asset is a bloody nightmare for anybody so fidelity tries to solve it and a bunch of others because bearer assets are horrific i mean we used to have better assets assets in equity markets and bonds we got rid of them all because there's just too much of a nightmare um yeah so you know it's going to take time for people to go back to bear assets do you think some of the recent i don't know somebody could call it cleanup right but like uh actions against the bit maxes of the world and other other kind of exchanges that are not as cftc friendly do you think that is part of regulators attempt to kind of clean this up and get

it ready for mainstream institutions 100 wow they know the space they know what's coming they know what they have to do and they have to make sure it's not the wild west out there and you know i'm sure you know arthur of bitmex and a bunch of other people also realize and they did realize they knew it you know a couple of years ago that the world that they came in from which was the frontier was going was moving towards a more regulated uh playing field and that's fine yes i thought the libertarian dream of many bitcoin is from the beginning but if you're going to integrate into a country's tax system and monetary system unfortunately that's the price you're

going to pay do you think the banks know what's coming for them so if this thing is like the internet right it could do to banks the banking system what the internet did to media and there's both opportunity there but there's also like disruption they do and they don't they are a little bit arrogant because they have monopolistic power of monopolistic rent so you tend not to be open to disruption but you know i know the guys that people like goldman and jp morgan i mean they all know this stuff inside out they're all waiting to have trading deaths and they're all building out blockchain stuff internally so i mean they're not gonna let it go past them i mean if anybody thinks that goldman's gonna get disrupted by this uh it's on the wrong planet

well how soon until they just acquire a coinbase or something when we're going to start to see that activity well um not yet because they don't want the liability of all the retail side but trust me the moment the pension fund start moving all of these banks are in it so coinbase has a big problem then um you know so it's not going to be a straightforward fight here it's going to be a big fight back from the banking sector to get involved and they have a lot of capital although look if bitcoin goes up 5x from here many of these um exchanges have huge amounts of capital um so you know it's going to be a war and that's okay don't forget we've seen the opposite

we've seen um crypto companies acquiring banking licenses kraken and coinbase are about to uh we've seen um um caitlin long's uh bank as well so it's all happening there's definitely seemingly a meeting in the middle where you know legacy banks aren't flirting with with crypto and crypto exchanges are kind of morphing into uh you know being becoming banking institutions and these these sides are getting closer and closer and closer on yeah sorry the one that's going to really get killed are the other medium small size money center banks just have no place in this world elaborate on that

well it's fine if you're a dominant player because you can make the moves that are necessary to survive be you goldman sachs jp morgan et cetera but if you're the xyz bank of the midwest and you're just a money center bank that does normal banking stuff i mean you just don't have a business model it's much like you know the what happened over covered in the rise of video and what's happening at universities mean that almost all of the second tier and 13 universities are basically going to zero over time because anybody can do it on the internet now so you turn a very cost intensive business into a sas business model that is what's about to happen the banking

industry and none of these guys can deal with it when you see legacy banks start to flirt with crypto is is acquiring something like coinbase a first move or what what other first moves do you think are on the horizon for legacy institutions that want to get into i think they'll build their own custody first because then they've got ownership of the asset and then they'll offer when i fight swaps and all of the stuff that everybody else uses so what i find so fascinating about this t-rowell is not only do the banks have to contend with these um with crypto and adapting that they also have to contend with the tech companies who are entering right like facebook wants something to say about banking yeah and you know

probably google and other large technologies and again anything's going on read the ecb statement and the imf statement they're like good luck there's going to be a huge fight in fintech and that's right i mean they're accepting it because they said the private sector will innovate much faster than the governments can it'll also invade faster than the banks they know it it's interesting though that like banks have had uh some kind of protected status i would argue like in nation states right so yeah this is the answer right this is why why the central bank digital currencies are coming what are the europeans going to do with the banking system there is no way to solve it there's just not enough money

so what are they going to do i think if they end up nationalizing it move to a central bank digital currency for distribution of money and allow fintech to be the layer that distributes it it solves their problems what do you think of china's strategy though do you think they're going to eat everyone's lunch before the west can get its act together and figure this central bank digital currency out no they just have their place as everybody else will and china's place is going to be large you know because in the end south korea will transact not only in in digital d1 but you know with a basket that contains that um with maybe other trading partners so i think i don't think there's a first come first served winner takes all in this i don't think it's a race for the central banks

because it's the same currency it's just digital it depends on the applications layer and stuff like that but again i don't really know well we're talking about banks one of our most bullish d5 thesis is that basically the banks the new banks whether they're fintech companies tech companies old banks whatever they're going to start building on top of d5 protocols right maybe on ethereum um just as just as coinbase is built on bitcoin as a as a value store so that might mean something like uniswap is the pooled liquidity shared across all of these all of these banks or there's some lending and borrowing money market protocols that are all code based not owned by anyone that these banks then build services on

top of have you ever thought about that world yes i mean i i think it's all available right and we've seen it in in the internet itself and the apps that we've built and all of this stuff that that yes there are big centralized repositories for internet usage be it google or facebook or whatever but there's millions of other participants some of whom can make super normal profits and some of whom fail so i do think all of that is coming but there is going to be regulation around lending there has to be because humans have proven time and time again they're not very good at borrowing money how do you think regulation is

going to be expressed when some of these defy protocols are the social contract of some of these things is inherently to be anti-regulated there was a is a very off-piste story back in the mid 2000s like about 2010 out of china into the uk and other countries around europe came something called plant food plant food was basically genetically modified genetically engineered cocaine mdma cross and because it was not banned because it wasn't cocaine or mdma it it was available everywhere

then the government's tried to ban it so they looked at the chemical bonding and said this is bonded oh this is banned and then the chinese produce another one and another one and another one they ban one after the other of the other new zealand actually gave up and said forget it we're just not banning this stuff any longer it's just too complicated while the eu and the uk tried to devise broader rules around it so i don't know what format that will take some countries will choose not to regulate at all and and others will choose to have broad top-down regulation because um granular regulation is not going to work do you think your game theory uh like rationale might apply here too right so i don't know some countries have the

security than the wild west right so i'd be much happier with somebody i know and trust uh that is probably regulated because you know i'm not using money for criminal activities i don't really care whether the government knows i've got money or not you know it's it's not it's that's not relevant to me um so now could that change over time depending on more nefarious uses by government of course um but i would rather go to a place that's better regulated where i know my money's secure than the place that's less regulated and i don't think my money's so secure and that's ah proven true with the crypto exchanges one thing that defy does promise though hopefully if its potential holds up is

that all of that information the assets that uh it holds is available in a transparent way on chain so anybody can honor it yeah um does bitcoin and guess what there's still tons of bitcoin stolen that never gets recovered so trio you know it's yes it's good but it's far from perfect raul this has been uh fantastic to talk about do you have we want to do a quick lightning round which is we ask you a question and you just do a quick reply like five or so questions you have a few minutes for that yeah of course first question have you tried d5 yet no what would make you try nobody's going to prise my bitcoin away from me so

i have no interest in taking any risk with it whatsoever um because that would be stupid um i don't in this day and age if i look at bitcoin's upside versus the potential to earn you know five percent yield i don't care to be honest it's just not relevant in you know something that's skewed with a 50x upside can i earn another five percent year in interest just doesn't matter so for me it's not on my radar screen not on your radar screen until there's some kind of investable thing that you can do that you can't do somewhere else something that doesn't provide the risk return that let's say ethereum or bitcoin have then i'll worry about a yield

but you know we've learned from the vc markets that capital appreciation is can be extremely powerful versus income so with your opinion about what defy is is it is it centered around providing yield is that is that what defy is to you and you you're just saying that the yield that is being offered on on bitcoin and d5 is just not worth the the risk of some of these platforms is that correct well some of the it's not worth the risk or the opportunity cost of of um some of the potential upside if something goes wrong so the point being is this very nascent we don't really know what's going to work within it and i'm i don't yeah i'm literally won't take that risk with my bitcoin now could

i deal with other money and put it on ethereum can i use my ethereum for it again it just it's not going to drive my returns so it's not worth my effort to discover how to do it or why to do it i want to ask about your hard money allocation so allocation of eth versus bitcoin versus gold what's that like in percentages right now it's a third sorry a quarter three quarters so gold is a quarter three quarters is bitcoin and ethereum and split between those two it's like 80 to 85 bitcoin okay that moderately matches the market caps of these systems that makes sense to me i haven't even thought of it that way

but probably does yeah although gold will be much bigger if that was the case yeah specifically between bitcoin and ethereum well if you had to guess what would be the first central bank to buy crypto and put it on their balance sheets one of the caribbean nations uh no actually yes one of the caribbean nations that doesn't have a pegged currency or one of the latin american countries do you do you think a central bank is buying some now and just not telling anyone maybe iran's mining operations for example uh possible it's not liquid or big enough yet right 200 billion dollars it's a mid cap s p stock you know i don't see them rushing out to buy zoom shares um you know so i you know no

but somewhere somebody is thinking about it do you have any opinions as to which political party that gets elected into office how one might impact the world of crypto versus the other no i don't really think that the outcomes are wildly they're societally potentially different but from a monetary point of view i think they're both roughly the same and so in terms of that so then it would be regulation and who allows it and who doesn't allow it uh i would be more i think it would be more likely that a democratic government a democrat government

would allow for the disruption of the banks versus a republican government at the margin so with things generally being the same uh so it doesn't matter too much what are your price predictions by the end of 2021 for bitcoin and then for ether i don't know you always sound stupid when you give these uh end of 2020 i you know i don't know call it i'm going to give it a bit off a spread of 100 to 250.

i'm aligned there that sounds about right to me oh it could be hot skewed to the upside right but what way i don't really know you were talking bitcoin they're not ether price right yeah i don't really look at ether in the same way so i just think if bitcoin goes up it probably goes up maybe a bit more maybe a bit less so i actually don't really actually don't even look at the ether price i own it but i never look at it really last question for you raul a lightning question for you why did you move to the cayman sir besides the beautiful weather we talked about that i there's a number of reasons actually i had a dream

in my life of two things one was the mediterranean and one was tropical beaches uh i was i managed to you know move to spain and live there and i still got a place there but this tropical beach thing because i went around the world diving with sharks basically uh all around the world and i love beaches and so that been a dream and i ended up in a fortunate situation where i stumbled across the cayman islands because i was on a dive boat in the galapagos with a bunch of people i was buying something potentially in the bahamas they said come to cayman i said no it's not my kind of place anyway subsequent to that two years later i happened to discover little cayman this little island and i thought okay this is perfect second day i bought a piece of land built a house

and then ended up by accident moving here because i started real vision from here but one of the reasons i built the house was also because i knew where the world was likely to be going and i wanted to be out of that i wanted to be out of the societal disrupt that i saw coming from 2012 and probably from 2008 and that hasn't yet been resolved so this um and so i wanted to be in a system where a i knew that others would come to because there is no income tax capital gains tax that kind of thing so that means that property over time will do well as governments struggle with having spent so much money on stimulus that they have to raise taxes over time or

devalue their currencies to be in a place that's slightly freer in that respect i thought was very attractive it's also an extremely entrepreneurial place there's a lot of bureaucracy here but it's also full of entrepreneurs so it's a really interesting place and it's very well connected i wanted to be on this side of the world for a bit closer to the us and so it's an hour from miami three hours from new york it's got flights to dallas houston and chicago and denver and a bunch of other places from here and direct flights to london so at many levels it works it's got a great legal system because it ends up in the british legal system at the very top of the structure so there's good resolution of anything so there's a great rule of law

um and you know it's very serious about it's how it regulates and how it looks after itself so on a number of levels it's just a great place the only problem with hurricanes and it's bloody expensive i mean god when you go to the supermarket and buy like three lettuces a tomato and a bottle of water it's like 600 bucks it's crazy it sounds like you might be pre uh preparing for a rocky decade though you think we're gonna have a rocky decade raul yeah for sure how can it not be there's no smooth resolution for this whether that's civil unrest or they cost the civil unrest by giving money to more people which i think is the outcome but then there's monetary issues and how do governments recover from such budget deficits and we don't know any of the answers

so i like protecting myself a bit and that that led me to bitcoin it's led me to gold it's led me to the cayman islands do you think other people may be following you to the cayman islands or you know sometimes i get me i get an email or two every single day now about about people moving there yeah and they're about to start a big kind of um crypto initiative here so i they're gonna make it extremely attractive for people to start crypto businesses here i mean a whole bunch of them here from break browser to block one are all here on ireland um they're starting to get physical presence because physical presence is now the new norm and that's what they have to do so people are going to be moving here there'll be developers moving here there'll be the business heads moving

here um so yeah i see a huge amount of of upside here in that particular space well expect one more uh email a day for my co-host david hoffman i think he's uh itching to go if i'm reading this conversation right raul it's been such a pleasure hey last question for you can you tell us a bit about what real vision is doing in crypto the content you guys are providing is off the charts amazing these days and i know you're doubling down on crypto what uh what's what's going on there yeah we already made the world's best finance content but crypto been part of the journey from day one the first ever video had bitcoin in it and as i've been explaining the macro and crypto worlds we're going to combine they've now combined so many of the largest players in the industry came

to us and said listen we need that unbiased high quality deep dive in-depth analysis that that real vision has um can you do something so we are launching real vision crypto we've launched it internally for our existing members but it will be launched globally on i think november the 18th it'll be probably the biggest launch in the entire crypto media space um and it'll be free and we're doing that in conjunction with um with some of the largest partners in the industry who shared our mission to democratize the very best financial information and help the space grow grow up develop and gain a better understanding to maybe knock down some of those tribal barriers and

maybe just bring everybody's understanding up whether it's hedge funds family offices pension funds or the the guy in the street um so that's what we're doing um and it's so look out it's going to be something really amazing that's fantastic for the bankless community more ethereum more defy content is is that coming our way to you with this new crypto focus well if you look at the content now it's been about 50 that at least maybe 70 at the moment we have to in fact so much so that we had an editorial meeting saying we need some bitcoin people on because there is so much going on in the space right everything is about to go music ip through to through to you know d5 through to you know platforms that that build

interoperability interoperability to i mean there is everything going on it's crazy you can't keep on top of it it's crazy exciting dave and i make this a full-time job and we're both we both miss things like on a daily basis so it's fantastic you guys are doubling down in this space we really appreciate it raul it has been such a pleasure thanks again for coming on the bankless podcast it's been a lot of fun a very different conversation and a very interesting one so yeah well done guys really interesting awesome well action items bankless listeners the first is you have to check out what real vision is doing uh we will include some links to our favorite videos including videos with raul in the show notes so check that out and get ready for their launch

november 18th also just so people are aware real vision itself is crypto and macro coins have met and the point being is anybody who's come from the crypto side need to understand what's going on the macro side that's what that's the language the bridge language that i'm trying to speak to you in um real vision does all of that um pay a dollar for the free trial you won't leave because it's going to give you a huge advantage in understanding what's going on um if you can't afford the dollar it goes up to 250 which is the full subscription price if that's out of your price range we've got a youtube channel and a podcast so look it's really important we we built this for you we built it for everybody to give out and

democratize the world's best financial intelligence so it's not just in the hands of the hedge funds and the elite it's in the hands of everybody so take advantage of it could not agree more guys a dollar is pretty cheap for what you're getting and linking the worlds is super important uh the second thing is i don't know if raul knows this but i'm actually going on real vision this week i've got an interview this week so there'll be some bankless content on there probably i'll be talking value proposition of ether and also d5 so are you speaking to that question sebastian yeah he's really in the weeds on this stuff so you'll love it oh yeah he he was great very knowledgeable so um there'll be some uh i guess cross cross media intersection there as we as we educate each other it's part of the same

space and it's all of our jobs to educate as many people and help as many people as possible because honestly this is the first chance in any of our lifetimes where the average guy the little guy and the big guy have been given the same opportunity at the same time and it's ahead of the institutions that never happened could not agree more guys maybe maybe you missed the internet in the early days don't miss crypto in the early days this is early days stuff get educated on this stuff and uh raul and his team are helping out with that um all right written disclaimers none of this was financial advice of course guys ethan is risky so is bitcoin all crypto is risky defy is to you could lose what you put in but we are headed west this is the

frontier it's not for everyone but thanks so much for joining us on the bankless journey [Music] [Music] you