1 00:00:00,040 --> 00:00:06,920 I do feel like 202425 season is the finally the mainstreaming of 2 00:00:06,920 --> 00:00:09,120 Bitcoin. We crossed 6 figures for the 3 00:00:09,120 --> 00:00:10,960 first time. We crossed 2 trillion in market 4 00:00:10,960 --> 00:00:15,840 cap for the first time. We are up about A7X from the 5 00:00:16,000 --> 00:00:18,800 2022 low. And we've done all of this with 6 00:00:18,800 --> 00:00:23,600 Fed policy rates still above 4%. Bitcoin will have one of these 7 00:00:23,600 --> 00:00:26,280 years that just blows people away. 8 00:00:26,440 --> 00:00:32,000 If belief is the basis of most money today, then people are 9 00:00:32,000 --> 00:00:35,480 under a spell because that credit that people hold, if 10 00:00:35,480 --> 00:00:38,360 they're not trying to do something with it, as in buy 11 00:00:38,360 --> 00:00:44,160 assets or buy Bitcoin, that practice of keeping money in 12 00:00:44,160 --> 00:00:47,200 credit, it negatively impacts people's lives. 13 00:00:47,560 --> 00:00:50,360 It hurts them. The reason that they are hurt by 14 00:00:50,360 --> 00:00:54,640 it is not because they've chosen that, but they are under a mind 15 00:00:54,640 --> 00:00:58,360 trick. The crypto war was won by 16 00:00:58,640 --> 00:01:04,000 Americans versus the government, including the NSA and the State 17 00:01:04,000 --> 00:01:06,240 Department. Joe Biden was involved in that. 18 00:01:06,320 --> 00:01:11,760 They came hard at the private industry's ability to actually 19 00:01:11,760 --> 00:01:15,120 communicate in an encrypted way. The government wanted a back 20 00:01:15,120 --> 00:01:18,760 door and they didn't get it. Say what you want about the 21 00:01:18,760 --> 00:01:23,400 United States, I sincerely believe that we have our First 22 00:01:23,400 --> 00:01:27,320 Amendment right rights and that we express them everyday and we 23 00:01:27,320 --> 00:01:31,400 fight for them by saying and writing controversial things. 24 00:01:31,800 --> 00:01:34,880 And the more people that do it, the healthier the First 25 00:01:34,880 --> 00:01:38,120 Amendment is. I believe that just talking 26 00:01:38,120 --> 00:01:40,520 about it is continuing that fight. 27 00:01:40,560 --> 00:01:44,200 It is a First Amendment issue, the attack on self custody, It's 28 00:01:44,200 --> 00:01:46,760 the same thing, right? Are you, are you trying to make 29 00:01:46,760 --> 00:01:50,840 the argument that writing down 12 words is somehow dangerous to 30 00:01:50,840 --> 00:01:54,040 national security? You can make a very good 31 00:01:54,120 --> 00:01:58,800 argument that the previous administration's stance on 32 00:01:58,960 --> 00:02:02,080 Bitcoin and crypto might have caused them the election. 33 00:02:02,160 --> 00:02:06,480 America is a slow moving decentralized vehicle itself, 34 00:02:06,480 --> 00:02:10,360 and I do believe the will of the electorate and the people in 35 00:02:10,360 --> 00:02:13,560 this great Republic will prevail over the long term. 36 00:02:13,720 --> 00:02:16,080 How important. Was the announcement of the 37 00:02:16,080 --> 00:02:19,960 strategic Bitcoin Reserve for Bitcoin to be integrated into 38 00:02:19,960 --> 00:02:22,120 the financial system itself, Bitcoin? 39 00:02:22,200 --> 00:02:25,640 Is already taking on its financial role, the ETF 40 00:02:25,640 --> 00:02:28,720 adoption, the spread of Bitcoin around the world, these 41 00:02:28,720 --> 00:02:31,960 positions being taken at pension funds and sovereign wealth 42 00:02:31,960 --> 00:02:33,880 funds. All of that stuff happened 43 00:02:33,880 --> 00:02:35,760 before the strategic Bitcoin reserve. 44 00:02:36,040 --> 00:02:38,360 And I believe that financialization of Bitcoin was 45 00:02:38,360 --> 00:02:40,560 heading that way with or without it. 46 00:02:40,600 --> 00:02:43,640 And now the US government likes the idea, and that's going to 47 00:02:43,640 --> 00:02:47,520 bring more people along. And it gives Bitcoin a type of 48 00:02:47,520 --> 00:02:52,160 legitimacy that can grow the network from 500 million people 49 00:02:52,280 --> 00:02:55,520 to 2 billion people. But anybody who was already in 50 00:02:55,520 --> 00:02:58,920 Bitcoin did not need that stamp of legitimacy. 51 00:02:59,120 --> 00:03:02,680 They already believed in it. And belief is key, right? 52 00:03:02,680 --> 00:03:08,600 It it it matters. Hey Nick, how are you? 53 00:03:09,080 --> 00:03:12,560 Long time no talk. Nico, good to see you, man. 54 00:03:13,640 --> 00:03:19,440 That crazy, crazy, crazy world Bitcoin land, you know, the, I 55 00:03:19,800 --> 00:03:22,840 think the first quarter of this year has been absolutely wild. 56 00:03:22,840 --> 00:03:26,400 You know, with this, with the recent election freedom of Ross, 57 00:03:26,840 --> 00:03:29,280 the strategic Bitcoin reserve announcement. 58 00:03:30,120 --> 00:03:33,760 I mean, in a way, a lot of us bitcoiners got a lot of what we 59 00:03:33,760 --> 00:03:36,520 were expecting. But I I don't think as of yet, 60 00:03:36,560 --> 00:03:40,120 you know, that hasn't been yet reflected on the price. 61 00:03:40,120 --> 00:03:43,280 So what's your take on on on the current events? 62 00:03:43,280 --> 00:03:45,080 What's currently happening in Bitcoin, Nick? 63 00:03:45,960 --> 00:03:49,480 Yeah, I think that we are in an exciting time for Bitcoin. 64 00:03:49,640 --> 00:03:54,320 We are in a period of mass awareness. 65 00:03:54,320 --> 00:03:58,280 So I think this is finally the mainstreaming of Bitcoin that 66 00:03:58,640 --> 00:04:02,640 people have been waiting for. Think I think, you know, as a 67 00:04:02,640 --> 00:04:09,880 Bitcoiner that went through 2017 and then 2021, each time it felt 68 00:04:09,880 --> 00:04:12,040 like the mainstreaming of Bitcoin. 69 00:04:12,480 --> 00:04:16,000 I'm you know, that's the kind of just the feeling that you got in 70 00:04:16,000 --> 00:04:21,760 2017, you know when the price went to $20,000 and it was on 71 00:04:21,760 --> 00:04:25,880 the front page of CNBC everyday we were like, OK, Bitcoin is 72 00:04:25,880 --> 00:04:30,360 here mainstream in 2021, you know, we had the Super Bowl 73 00:04:30,360 --> 00:04:36,600 commercials, you know, and Matt, Matt Damon and Larry David and 74 00:04:36,640 --> 00:04:39,880 you know all the stadiums being named and the sports teams 75 00:04:39,880 --> 00:04:46,440 wearing all the Bitcoin logos. But this time around with a 76 00:04:46,720 --> 00:04:50,200 strategic Bitcoin reserve and a Bitcoin presidency in the United 77 00:04:50,200 --> 00:04:54,080 States of Bitcoin having a significant and clearly a 78 00:04:54,080 --> 00:04:56,440 material role in the in the election. 79 00:04:56,960 --> 00:05:00,920 It we'll never know officially if Bitcoin was the swing vote, 80 00:05:00,920 --> 00:05:03,480 right? If the Bitcoiners were the swing 81 00:05:03,480 --> 00:05:06,640 vote or not, we'll never know officially. 82 00:05:06,640 --> 00:05:11,040 But what what we do know is that the contribution there was 83 00:05:11,040 --> 00:05:18,000 material, right, full stop. And so this time around with an 84 00:05:18,000 --> 00:05:23,360 electorate going, you know, Bitcoin and the government 85 00:05:23,600 --> 00:05:29,520 embracing it, it, it is now and and then the world responding, 86 00:05:29,720 --> 00:05:38,440 right, the world getting into a reactionary dynamic to American 87 00:05:38,440 --> 00:05:44,840 political action. I do feel like 202425 season is 88 00:05:44,840 --> 00:05:50,840 the finally the mainstreaming of Bitcoin and that by itself has, 89 00:05:50,840 --> 00:05:55,000 I would say has been reflected in the price and that we crossed 90 00:05:55,000 --> 00:05:57,840 6 figures for the first time across 2 trillion in market cap 91 00:05:57,840 --> 00:06:03,440 for the first time. We are up, you know from through 92 00:06:03,440 --> 00:06:09,320 to peak about A7X from the 2022 low. 93 00:06:10,480 --> 00:06:14,240 So and we've done all of this with Fed policy rate still above 94 00:06:14,240 --> 00:06:18,760 4%. So I think a very strong run for 95 00:06:18,760 --> 00:06:22,960 Bitcoin price action is going to be choppy. 96 00:06:23,800 --> 00:06:26,000 But look at the 200 day moving average. 97 00:06:26,000 --> 00:06:29,160 Look at the realized price of Bitcoin. 98 00:06:29,880 --> 00:06:34,880 This is this is definitely a good time for Bitcoin adoption 99 00:06:35,080 --> 00:06:37,240 and I do think it's being reflected in the price. 100 00:06:37,640 --> 00:06:41,800 You know, even though we can look at the election date versus 101 00:06:41,800 --> 00:06:46,240 today's price and make comparisons or you know, what 102 00:06:46,240 --> 00:06:49,120 happened in on Inauguration Day versus today and make 103 00:06:49,120 --> 00:06:54,440 comparisons, but I think the the trailing 12 to 24 month time 104 00:06:54,440 --> 00:06:56,040 horizon is a better way to judge. 105 00:06:56,960 --> 00:07:00,640 And let me ask you something too, Nick, like, so do you feel 106 00:07:00,640 --> 00:07:05,520 like Bitcoins best days are behind it, like a lot of people 107 00:07:05,520 --> 00:07:10,800 were expecting, you know, a, a, a higher return at this point in 108 00:07:10,800 --> 00:07:12,880 the cycle? Like if you compare the cycles, 109 00:07:13,360 --> 00:07:18,120 it's very clear that, you know, Bitcoin is not performing the 110 00:07:18,120 --> 00:07:20,480 way it has performed in the past. 111 00:07:20,480 --> 00:07:23,600 Is that something to be expected as the market cap continues to 112 00:07:23,600 --> 00:07:28,040 grow and, you know, diminishing returns law of big numbers, you 113 00:07:28,040 --> 00:07:33,600 know, yes, I mean, A7X from the bottom in any type of investment 114 00:07:33,600 --> 00:07:36,840 is absolutely incredible without a shadow of a doubt. 115 00:07:37,360 --> 00:07:39,840 But I think as Bitcoiners especially, you know, they've 116 00:07:39,920 --> 00:07:43,240 been around since 2016. You know, we remember the day, 117 00:07:43,240 --> 00:07:46,800 the years where you know, Bitcoin would be up 2000%, 118 00:07:46,800 --> 00:07:49,960 right? So are are those days long gone? 119 00:07:49,960 --> 00:07:54,160 Because despite its great performance to this point, 120 00:07:54,840 --> 00:07:59,120 despite this amazing election, I think a lot of people were 121 00:07:59,120 --> 00:08:02,840 expecting it to be a lot higher right now, especially I, I just 122 00:08:02,840 --> 00:08:06,040 saw a video from the Bitwise CEO and he was saying like, look, 123 00:08:06,040 --> 00:08:07,880 Bitcoin should be at 200K right now. 124 00:08:08,120 --> 00:08:10,440 So what's your take on that, Nick? 125 00:08:10,440 --> 00:08:14,240 And then, you know, we'll talk about, we'll talk about this new 126 00:08:14,240 --> 00:08:17,760 book that you wrote that I'm really excited to talk about as 127 00:08:17,760 --> 00:08:19,040 well. So what's your take on that, 128 00:08:19,040 --> 00:08:20,040 Nick? Yes, Sir. 129 00:08:20,040 --> 00:08:22,920 So I'm going to give you probably the most hedged dancer 130 00:08:22,920 --> 00:08:24,560 of all time, but it's a pure market. 131 00:08:24,640 --> 00:08:29,040 Its answer. OK, so the price is the truth. 132 00:08:29,040 --> 00:08:30,720 The price has all the information in it. 133 00:08:31,720 --> 00:08:34,919 We can talk about bitcoins financialization and the fact 134 00:08:34,919 --> 00:08:38,799 that there are more ways to short Bitcoin now from a paper 135 00:08:38,799 --> 00:08:42,200 perspective. There are also equally number of 136 00:08:42,600 --> 00:08:45,720 you know, equal number of ways, new ways to go long. 137 00:08:45,960 --> 00:08:51,320 So Bitcoin is a market and the price is the reflection of 138 00:08:51,320 --> 00:08:54,920 today's marginal buyer and seller coming to me. 139 00:08:56,160 --> 00:09:00,760 So markets are driven by supply and they're driven by demand. 140 00:09:01,760 --> 00:09:05,840 What we expect is just a figment of our imagination. 141 00:09:06,840 --> 00:09:12,240 OK, So I'll answer your question in a few parts #1 should we 142 00:09:12,240 --> 00:09:14,400 expect a lot of diminishing returns in Bitcoin? 143 00:09:14,400 --> 00:09:22,000 Yes, I think that bitcoins realized return should 144 00:09:22,840 --> 00:09:27,160 marginally decline over time on an annual basis, right? 145 00:09:27,320 --> 00:09:31,520 So the greatest returns in bitcoins history are probably 146 00:09:31,520 --> 00:09:38,000 behind it on an annual basis. That doesn't mean that, you 147 00:09:38,000 --> 00:09:43,760 know, a year where Bitcoin goes up, you know, 1000% is it can't 148 00:09:43,760 --> 00:09:47,120 happen, right? Statistically, it can definitely 149 00:09:47,120 --> 00:09:52,040 happen, right? You know, so I am. 150 00:09:52,400 --> 00:09:56,400 So then it becomes actually my base case scenario that Bitcoin 151 00:09:56,400 --> 00:10:01,360 will have one of these years that just blows people away, 152 00:10:02,440 --> 00:10:04,400 right? I don't think that that is a 153 00:10:04,400 --> 00:10:07,880 foreign concept to Bitcoin just because I believe in the law of 154 00:10:07,880 --> 00:10:10,960 diminishing return. So I've given you a hedged 155 00:10:10,960 --> 00:10:15,040 answer for that one. Now let's talk about the 156 00:10:15,040 --> 00:10:18,160 expectations just being a figment of people's imagination. 157 00:10:19,160 --> 00:10:26,120 If the price is a is a function of demand and supply, then more 158 00:10:26,120 --> 00:10:31,840 demand can only lead to a higher price if the supply doesn't come 159 00:10:31,840 --> 00:10:36,840 to meet it. But in a world where there are 160 00:10:37,040 --> 00:10:40,680 long term holders willing to come to the market and sell 161 00:10:40,680 --> 00:10:44,640 coins, short term holders willing to come to the market 162 00:10:44,640 --> 00:10:49,680 and sell coins, paper sellers willing to do it. 163 00:10:50,200 --> 00:10:56,920 And then now option sellers willing to sell calls basically. 164 00:10:57,720 --> 00:11:03,040 And in the process of selling options and selling optionality 165 00:11:03,440 --> 00:11:10,000 to people that want exposure to the upside, they mute the 166 00:11:10,000 --> 00:11:12,560 volatility. And that's just a that's a 167 00:11:12,560 --> 00:11:18,880 function of the math because implied volatility is, is an 168 00:11:18,880 --> 00:11:22,400 output. The input is the how expensive 169 00:11:22,400 --> 00:11:25,760 options are. So if there's more options 170 00:11:25,760 --> 00:11:29,760 buyers, unless there's more options sellers, volatility is 171 00:11:29,760 --> 00:11:32,120 going to go up, implied volatility is going to go up, 172 00:11:32,240 --> 00:11:35,360 the price of options go up. But if there's sellers willing 173 00:11:35,360 --> 00:11:39,560 to play and collect that premium, willing to risk it, 174 00:11:39,560 --> 00:11:42,360 that I don't think the price will rise that much. 175 00:11:43,320 --> 00:11:46,440 And I will just introduce that insurance into the market. 176 00:11:46,520 --> 00:11:51,280 That knocks volatility down and it has a suppressing effect on 177 00:11:51,280 --> 00:11:55,600 the price because it just dampens the type of moves that 178 00:11:55,600 --> 00:12:00,360 you can get in the market. And so from an implied 179 00:12:00,360 --> 00:12:07,520 volatility perspective, option sellers coming to play this game 180 00:12:07,520 --> 00:12:11,280 and make money, basically think about all the money that was 181 00:12:11,280 --> 00:12:16,040 made from traders that came into the market at 110 and said this 182 00:12:16,040 --> 00:12:19,080 thing is not going to run to 100 and 25150. 183 00:12:19,240 --> 00:12:22,560 I will sell every call to everyone of you for the next six 184 00:12:22,560 --> 00:12:28,040 months at every strike there. You know, they're collecting 185 00:12:28,040 --> 00:12:31,640 their premium and everyday that goes by, they're realizing more 186 00:12:31,640 --> 00:12:34,440 of that gain as options expired that they sold into the market. 187 00:12:35,760 --> 00:12:39,760 So it's just, it is just a figment of our imagination that 188 00:12:39,760 --> 00:12:42,080 we expect the Bitcoin price to do something. 189 00:12:42,640 --> 00:12:46,240 It's just it, it's just a function of supply and demand. 190 00:12:46,520 --> 00:12:51,160 So demand is just it just it's too little of a picture. 191 00:12:52,520 --> 00:12:56,440 And we can, we can love the demand side of it and we do love 192 00:12:56,440 --> 00:13:01,360 the demand side of it right now, you know, but there's also the 193 00:13:01,360 --> 00:13:05,000 whole credit creation machine that makes it easy to print, 194 00:13:05,800 --> 00:13:10,120 print money and sell options. Basically it's that's, you know, 195 00:13:10,120 --> 00:13:12,880 how you have to think of it. It's just a market maker willing 196 00:13:12,880 --> 00:13:18,640 to just print money above the price and, you know, knock that 197 00:13:18,640 --> 00:13:22,400 volatility down. So I hope that answers your 198 00:13:22,400 --> 00:13:24,400 question. No, it absolutely does. 199 00:13:24,400 --> 00:13:29,000 And Nick, I am very excited because you're coming on today 200 00:13:29,000 --> 00:13:33,240 to talk about your book that you just wrote. 201 00:13:33,480 --> 00:13:36,440 It's called The Bitcoin Age by Nick Bhatia. 202 00:13:37,040 --> 00:13:42,000 And I love the fact that essentially you started off with 203 00:13:42,640 --> 00:13:46,600 a star, a Star Wars reference and essentially you were 204 00:13:46,600 --> 00:13:51,440 painting the picture. I think this was episode 1 where 205 00:13:52,360 --> 00:13:57,440 essentially the the guy who trained Anakin, I forgot not not 206 00:13:57,440 --> 00:14:04,920 a not a Obi Wan, but Obi Wan's like master guy, the guy who 207 00:14:04,920 --> 00:14:07,520 trained Anakin. They went to Tatwin, which is 208 00:14:07,520 --> 00:14:11,880 like the desert planet and their Starship broke down and they 209 00:14:11,880 --> 00:14:16,360 wanted to buy a drive and he offered them credits. 210 00:14:16,360 --> 00:14:18,160 I think it was like Republic credits and the guys like 211 00:14:18,480 --> 00:14:21,040 Republic credits are worthless here. 212 00:14:21,440 --> 00:14:23,840 And I thought it was such a great analogy. 213 00:14:23,840 --> 00:14:27,680 Why did you why did you start off your book with with a Star 214 00:14:27,680 --> 00:14:30,320 Wars reference? Because I think with what you're 215 00:14:30,320 --> 00:14:32,800 trying to describe, it was, it was very, very fitting. 216 00:14:33,200 --> 00:14:37,600 Yes, so this is the Jedi Master Qui Gon that he was he was the 217 00:14:37,760 --> 00:14:41,760 master to Obi Wan and both of them taught Anakin, you know, 218 00:14:41,760 --> 00:14:45,280 before Qui Gon, before his demise. 219 00:14:45,280 --> 00:14:54,840 So yes, this is this is a great scene in in Star Wars and it 220 00:14:55,520 --> 00:15:04,400 really encapsulates this, this mind trick that we're under now. 221 00:15:04,640 --> 00:15:10,080 So why did I come up with this? Because credit itself, right? 222 00:15:10,080 --> 00:15:14,600 As we, as I talked about in layered money, credit itself is 223 00:15:14,840 --> 00:15:19,640 just a derivative of money. And that money used to be gold, 224 00:15:19,880 --> 00:15:22,200 right? So we think of, you know, why is 225 00:15:22,200 --> 00:15:24,600 currency worth something? Oh, it's a promise to pay gold. 226 00:15:24,600 --> 00:15:26,640 That's the simple layered money framework. 227 00:15:27,320 --> 00:15:31,800 The promise to pay is backed by something. 228 00:15:31,800 --> 00:15:35,520 It's backed by belief. It's backed by confidence. 229 00:15:35,880 --> 00:15:39,000 And credit literally means to believe, right? 230 00:15:39,000 --> 00:15:41,800 The Latin root of it means to believe. 231 00:15:42,560 --> 00:15:51,360 And so if belief is the basis of most money today, then people 232 00:15:51,360 --> 00:15:56,960 are people are under a spell because that, that credit that 233 00:15:56,960 --> 00:16:02,440 people hold, if they are not trying to the second that they 234 00:16:02,560 --> 00:16:06,160 make that money in terms of income, if they're not trying to 235 00:16:06,160 --> 00:16:11,920 do something with it, as in buy assets or buy Bitcoin or, or 236 00:16:12,280 --> 00:16:16,800 reinvested in something. If they're holding deposits over 237 00:16:16,800 --> 00:16:20,360 any time horizon, even if you want to consider fixed income 238 00:16:20,360 --> 00:16:25,360 securities with next to 0 or sometimes negative real return, 239 00:16:25,760 --> 00:16:28,520 right, your, your interest rate is eaten up by your inflation 240 00:16:28,520 --> 00:16:34,280 rate. That practice of keeping money 241 00:16:34,280 --> 00:16:42,200 in credit is a, it is a negative force on society. 242 00:16:43,280 --> 00:16:45,640 It negatively impacts people's lives. 243 00:16:45,960 --> 00:16:50,520 It hurts them. And the reason that they are 244 00:16:50,520 --> 00:16:53,520 hurt by it is not because they've chosen that, but they 245 00:16:53,520 --> 00:17:00,200 are under a mind trick. And in pop culture, the Jedi 246 00:17:00,200 --> 00:17:06,160 mind trick and that concept it there's, there's, there's a 247 00:17:06,160 --> 00:17:08,800 relationship there that could, could be explored. 248 00:17:09,240 --> 00:17:14,440 And this scene from Star Wars is something that I have always 249 00:17:14,440 --> 00:17:18,280 loved this scene because I've always loved the idea of money 250 00:17:18,280 --> 00:17:22,839 and versus credit. My whole research career is 251 00:17:22,839 --> 00:17:28,400 basically about this concept, the difference between money and 252 00:17:28,400 --> 00:17:31,240 credit. Did you like the scene before? 253 00:17:31,240 --> 00:17:33,000 Sorry to interrupt. Did you like the scene before 254 00:17:33,000 --> 00:17:38,440 you found Bitcoin? Yes, yes, because I was a a 255 00:17:38,440 --> 00:17:44,280 sound money student before Bitcoin, for years before 256 00:17:44,280 --> 00:17:48,520 Bitcoin. And then Bitcoin was the 257 00:17:48,520 --> 00:17:50,840 solution. So were you a fan of gold? 258 00:17:51,640 --> 00:17:55,000 Yes. And I had gold, I had gold. 259 00:17:55,400 --> 00:18:04,480 So let's I had gold and silver investments and I did liquidate 260 00:18:04,480 --> 00:18:09,400 all of my silver investments at around the time of falling down 261 00:18:09,400 --> 00:18:14,920 the Bitcoin rabbit hole. Yeah, I mean, I think that's 262 00:18:14,920 --> 00:18:17,280 that's what happens where you find Bitcoin and you're like, 263 00:18:17,720 --> 00:18:20,280 and if you're a sound money fan, you're like this is this is the 264 00:18:20,280 --> 00:18:23,400 perfect solution. Anyways, I want to I want to 265 00:18:23,400 --> 00:18:26,960 jump to a specific chapter. It's called Intergalactic 266 00:18:27,240 --> 00:18:31,000 Computer Network and I have a question regarding that. 267 00:18:31,040 --> 00:18:34,880 So how did the early development of communication protocols from 268 00:18:34,880 --> 00:18:40,200 Morse code to the Telegraph influence the creation of the 269 00:18:40,200 --> 00:18:43,600 Bitcoin protocol? It's a it's a great question. 270 00:18:43,600 --> 00:18:48,440 You know, why did I start the networking story so many years 271 00:18:48,440 --> 00:18:52,280 before Bitcoin And Nico, I do have to just point out, and I 272 00:18:52,280 --> 00:18:55,440 hope you don't mind, the book is called Bitcoin Age. 273 00:18:56,080 --> 00:18:59,120 There's no the in it. Did I just put? 274 00:18:59,120 --> 00:19:01,320 Did I put the in there? I apologize. 275 00:19:01,600 --> 00:19:04,600 No, unfortunately there's a gentleman. 276 00:19:05,480 --> 00:19:08,320 His first name is Adam. I've never met him or spoken to 277 00:19:08,320 --> 00:19:11,600 him, but he's written a book called The Bitcoin Age. 278 00:19:11,800 --> 00:19:16,040 It has an orange cover and it is not the same as my book. 279 00:19:16,040 --> 00:19:19,800 So just so people when they're on Amazon, just make sure it's 280 00:19:19,800 --> 00:19:23,680 this one and has my name on it because there is a book called 281 00:19:23,680 --> 00:19:26,920 The Bitcoin Age, but. I, I just searched it on Google. 282 00:19:26,920 --> 00:19:29,440 The good news is that your book is the one that pops up. 283 00:19:30,800 --> 00:19:34,000 But yes, it's the Bitcoin age. We'll put the details, of 284 00:19:34,000 --> 00:19:37,480 course, the Amazon link in the in the podcast description, of 285 00:19:37,480 --> 00:19:38,760 course. Thank you, Nico. 286 00:19:38,760 --> 00:19:43,280 I appreciate it. So the the chapter, it's Chapter 287 00:19:43,280 --> 00:19:47,040 5, Intergalactic Computer Network, it goes into the 288 00:19:47,040 --> 00:19:53,680 history of ARPANET and the ARPANET is the predecessor to 289 00:19:53,680 --> 00:19:57,960 the Internet. Now today's Internet is just 290 00:19:57,960 --> 00:20:01,160 think about going online, going to a website. 291 00:20:01,160 --> 00:20:03,240 What are you, what are you doing there? 292 00:20:03,240 --> 00:20:07,080 You're using really a pair of protocols. 293 00:20:07,280 --> 00:20:11,480 You're using several, but let's just say you're using 2 main 294 00:20:11,480 --> 00:20:16,160 protocols. One of them is HTTP or 295 00:20:16,160 --> 00:20:22,760 Https://rightsoyour. Your web browser, when you go to 296 00:20:22,760 --> 00:20:29,840 www.something you are on the interweb right? 297 00:20:29,840 --> 00:20:35,000 That's using the hypertext transfer protocol HTTP. 298 00:20:35,400 --> 00:20:40,640 That protocol HTTP let's people use websites and access websites 299 00:20:41,120 --> 00:20:43,800 right on the web. But then how does that 300 00:20:43,800 --> 00:20:47,520 information go from point A to point B? 301 00:20:47,520 --> 00:20:52,280 So when I Google something and I hit enter, that information 302 00:20:52,280 --> 00:20:55,920 travels to Google. So how does it travel to Google? 303 00:20:56,160 --> 00:21:00,720 It travels via a pair of protocols, TCP and IP. 304 00:21:01,440 --> 00:21:06,440 And those two protocols are what breaks down the data packets and 305 00:21:06,440 --> 00:21:11,320 then routes them to an address. The address that it routes to is 306 00:21:11,320 --> 00:21:15,120 the IP, right? So your IP address and TCP is 307 00:21:15,120 --> 00:21:17,800 how it breaks down and and reassembles the packets. 308 00:21:18,280 --> 00:21:22,320 So that is the that's the basis of the Internet. 309 00:21:23,040 --> 00:21:25,280 And we all take those two things for granted. 310 00:21:25,760 --> 00:21:28,800 And so when we use Bitcoin, which is also a network 311 00:21:28,800 --> 00:21:36,160 protocol, it's a software that has a cryptographic transactions 312 00:21:36,840 --> 00:21:42,000 and the information about these transactions is sent to other 313 00:21:42,440 --> 00:21:46,040 network participants and it's sent via the Internet. 314 00:21:46,400 --> 00:21:50,840 I know there are offline and parallel ways to use Bitcoin, 315 00:21:50,840 --> 00:21:54,320 but it is an Internet based software. 316 00:21:54,880 --> 00:21:57,560 It uses the Internet. So it's using, it doesn't use 317 00:21:57,920 --> 00:22:03,600 Http://explicitly, but it's using TCPIP as the packets go 318 00:22:03,600 --> 00:22:08,400 around the the world using IP addresses just as anything else. 319 00:22:08,400 --> 00:22:11,200 So every Bitcoin node is going to have an IP address. 320 00:22:11,640 --> 00:22:15,040 So Bitcoin itself is built on top of Internet protocols. 321 00:22:15,400 --> 00:22:21,680 So where did TCPIP come from? They actually came from the 322 00:22:22,080 --> 00:22:27,960 ARPANET, which is the first attempt to network computers 323 00:22:27,960 --> 00:22:32,840 together. And the ARPANET was a project 324 00:22:32,840 --> 00:22:36,680 created by ARPA, which is a Defense Department research 325 00:22:36,680 --> 00:22:40,880 agency. ARPA was started during the Cold 326 00:22:40,880 --> 00:22:47,880 War, and the purpose of ARPA overtime shifted from missiles 327 00:22:47,880 --> 00:22:52,840 to space to the Internet. But when it arrived at the 328 00:22:52,840 --> 00:22:56,360 Internet, it was really the people that were designing it. 329 00:22:56,360 --> 00:22:59,560 We're really thinking about how can the military communicate 330 00:22:59,560 --> 00:23:05,480 more quickly with each other? How can we stop attacks on a 331 00:23:05,480 --> 00:23:09,040 central server or a Tele, you know, our telecommunications 332 00:23:09,040 --> 00:23:12,120 network? And so just thinking about ways 333 00:23:12,120 --> 00:23:15,600 to speed up communication and to actually distribute 334 00:23:15,600 --> 00:23:18,840 communication and to decentralized communication 335 00:23:19,320 --> 00:23:23,200 because it really was this. Paul Baron was a gentleman who 336 00:23:23,720 --> 00:23:27,840 who originated the idea of distributed networking and data 337 00:23:27,840 --> 00:23:29,800 packets. There's actually a person I 338 00:23:29,800 --> 00:23:33,000 didn't mention in the book. He actually Co inventor 339 00:23:33,000 --> 00:23:36,720 parallelly invented this technology in England at the 340 00:23:36,720 --> 00:23:40,240 same time. But anyway, Paul Barron, his 341 00:23:40,240 --> 00:23:45,960 whole purpose was to figure out a way to prevent a a missile 342 00:23:45,960 --> 00:23:49,000 attack taking down the army, army communications. 343 00:23:50,640 --> 00:23:54,200 And so they used Paul Barron's papers to design the Internet 344 00:23:54,600 --> 00:23:57,000 to, I'm sorry, to design the Arpanet. 345 00:23:58,440 --> 00:24:06,800 And so the Telegraph was a way to take messages from horseback 346 00:24:06,800 --> 00:24:12,160 basically or visual signals to electric communication and to 347 00:24:12,160 --> 00:24:16,080 have that communication start travelling much more quickly 348 00:24:16,720 --> 00:24:21,120 than ever before. And the and Arpanet. 349 00:24:21,760 --> 00:24:24,760 And so when we think about telephones, telephones are 350 00:24:25,480 --> 00:24:29,960 actually not that much of A leap in communication to Telegraph 351 00:24:30,200 --> 00:24:35,000 because it was using the same infrastructure, the same lines, 352 00:24:35,200 --> 00:24:39,920 the same switching, manual switching, actually physical, 353 00:24:40,040 --> 00:24:45,280 you know, operators taking out, unplugging it from 1, you know, 354 00:24:45,680 --> 00:24:50,040 a wire from one input to the other to actually allow long 355 00:24:50,040 --> 00:24:53,760 distance communication. So that technology didn't really 356 00:24:53,760 --> 00:24:57,200 change from Telegraph to telephone to teleprinter 357 00:24:57,200 --> 00:25:02,880 exchange, also called telex, if there was no real advancement in 358 00:25:03,280 --> 00:25:08,120 the true speed or infrastructure until the Defense Department got 359 00:25:08,120 --> 00:25:12,160 involved with the ARPANET and then the Internet and the rest 360 00:25:12,160 --> 00:25:14,600 is history. So, but you have to start with 361 00:25:15,600 --> 00:25:21,320 the government starting ARPANET to really bring the whole 362 00:25:21,320 --> 00:25:26,080 communications protocol story together for Bitcoin to give it 363 00:25:26,080 --> 00:25:29,840 the real proper context. Yo, I want to tell you about the 364 00:25:29,840 --> 00:25:33,760 best place to build your automatic self custody Bitcoin 365 00:25:33,760 --> 00:25:35,160 stack. I'm talking about 366 00:25:35,160 --> 00:25:39,200 bitcoinwell.com. What makes bitcoinwell.com 367 00:25:39,200 --> 00:25:42,360 different is that it's a completely non custodial 368 00:25:42,360 --> 00:25:46,720 platform, meaning as soon as you buy Bitcoin and the funds clear, 369 00:25:46,880 --> 00:25:50,120 it goes straight to yourself custody Bitcoin wallet address. 370 00:25:50,520 --> 00:25:53,000 And that perfectly aligns with simply Bitcoin ethos of the 371 00:25:53,000 --> 00:25:56,960 separation of money and state support Bitcoin on Rams that are 372 00:25:56,960 --> 00:26:00,160 self custody by default. To get started, go to 373 00:26:00,200 --> 00:26:04,280 bitcoinwell.com today. Takes 2 to 5 minutes to sign up 374 00:26:04,480 --> 00:26:06,760 and bada Bing, bada boom, you're ready to buy Bitcoin. 375 00:26:07,160 --> 00:26:09,120 I have a question regarding Paul Baron. 376 00:26:09,120 --> 00:26:12,120 Right. So you know, and, and AT&T and 377 00:26:12,120 --> 00:26:14,720 if you live in the United States, you definitely know what 378 00:26:14,720 --> 00:26:18,400 AT&T is. Why did AT&T resist Paul Baron's 379 00:26:18,400 --> 00:26:22,120 idea of packet switching? And how did this resistance 380 00:26:22,200 --> 00:26:24,720 ultimately shape the development of the Internet? 381 00:26:25,400 --> 00:26:30,880 Yes. So AT&T came to or Paul Baron, 382 00:26:31,400 --> 00:26:35,640 they proposed this idea to AT&T and they said, we think that you 383 00:26:35,640 --> 00:26:39,760 should distribute your networking, right? 384 00:26:39,760 --> 00:26:43,120 And we can. This is how this is my idea. 385 00:26:43,720 --> 00:26:49,360 And AT&T, at that point, they were so established, they were a 386 00:26:49,360 --> 00:26:52,920 monopoly. They didn't have incentive to 387 00:26:53,560 --> 00:26:59,200 invent because they literally owned the entire long distance 388 00:26:59,200 --> 00:27:05,240 communications network in the United States, and so there was 389 00:27:05,240 --> 00:27:08,080 no incentive for them. So instead of trying to 390 00:27:08,080 --> 00:27:12,480 understand Baron's idea, they actually just paraded executives 391 00:27:12,480 --> 00:27:17,600 and engineers out and explained to that to Baron and his 392 00:27:17,600 --> 00:27:23,120 associates why it couldn't work and how their system actually 393 00:27:23,120 --> 00:27:25,080 functioned. And so they weren't, they 394 00:27:25,080 --> 00:27:26,920 weren't speaking the same language at all. 395 00:27:28,640 --> 00:27:31,480 And so the project, the project died. 396 00:27:31,920 --> 00:27:34,280 You know, AT&T didn't advance it. 397 00:27:35,040 --> 00:27:42,440 And actually, it wasn't until the ARPANET became an idea, a 398 00:27:42,440 --> 00:27:47,840 concept that the engineers at ARPANET went out looking for 399 00:27:48,160 --> 00:27:51,920 those distributed solutions that might be able to allow their 400 00:27:51,920 --> 00:27:55,080 idea. But you know the the answer to 401 00:27:55,080 --> 00:27:58,240 your question, actually, you can even bring in banks and Bitcoin 402 00:27:58,240 --> 00:28:03,720 today. 10 years ago. Why would a bank be motivated to 403 00:28:03,720 --> 00:28:08,040 really study and embrace Bitcoin, right? 404 00:28:08,040 --> 00:28:13,440 Because it has the potential to end them or to obsolete them in 405 00:28:13,440 --> 00:28:15,960 a way. So the Internet and the Internet 406 00:28:15,960 --> 00:28:22,360 did, you know, and AT&T's true monopoly in many ways over time, 407 00:28:22,360 --> 00:28:26,520 it wasn't just the only thing, but communications itself was 408 00:28:26,520 --> 00:28:28,280 changed forever because of the Internet. 409 00:28:28,640 --> 00:28:35,360 And AT&T probably suffered, you know, from its monopolistic from 410 00:28:35,360 --> 00:28:40,040 that angle because of it. So that's why AT&T rejected it. 411 00:28:40,040 --> 00:28:45,440 And, you know, how did it, how did it end up leading to the OR 412 00:28:45,440 --> 00:28:51,720 to any of what, what transpired after a little bit of luck in 413 00:28:51,720 --> 00:28:56,120 timing, honestly, because if nobody had come along. 414 00:28:56,120 --> 00:29:03,520 See, Paul Baron wrote, I believe it was 11 volumes about this 415 00:29:03,520 --> 00:29:06,520 idea of distributed network. And he wrote it over four years. 416 00:29:07,040 --> 00:29:10,800 So this was his life's work. And they were just collecting 417 00:29:10,800 --> 00:29:15,240 dust. So yeah, you know, for years he 418 00:29:15,240 --> 00:29:20,400 wrote this thing in the early 60s, and Bob Taylor and Larry 419 00:29:20,400 --> 00:29:26,400 Roberts at ARPA didn't really get it going until the late 60s, 420 00:29:27,720 --> 00:29:28,880 so. They work, yeah. 421 00:29:29,360 --> 00:29:32,200 And, and all of this is incredibly important because 422 00:29:32,360 --> 00:29:35,440 essentially, and please correct me if if you think I'm using the 423 00:29:35,440 --> 00:29:38,480 wrong word, Nick, but these are the, what you're talking about 424 00:29:38,480 --> 00:29:44,080 is the foundational layer of which a protocol like Bitcoin 425 00:29:44,320 --> 00:29:48,160 can work without this foundational layer called the 426 00:29:48,160 --> 00:29:52,440 Internet, right? Not only is it difficult to 427 00:29:52,440 --> 00:29:56,760 understand Bitcoin, but Bitcoin can exist in its current form 428 00:29:56,760 --> 00:29:58,600 today. So it's just, it's just 429 00:29:58,600 --> 00:30:02,000 interesting how that development happened. 430 00:30:02,000 --> 00:30:05,800 And I forget where I heard this from, but it was, and it's to 431 00:30:05,800 --> 00:30:09,760 add to your point, but it was basically like if AT&T was in 432 00:30:09,760 --> 00:30:13,120 charge of, you know, the development of the Internet, we 433 00:30:13,120 --> 00:30:16,360 would all have a little coin slot in our laptops and we would 434 00:30:16,360 --> 00:30:22,240 have to, you know, add coins to just, you know, extend 435 00:30:22,240 --> 00:30:24,320 essentially your Internet time. So I don't know if you guys have 436 00:30:24,320 --> 00:30:26,520 been around for this, but I remember when I was growing up 437 00:30:26,520 --> 00:30:29,760 and I would travel overseas and I'd have to make a call to the 438 00:30:30,000 --> 00:30:33,560 US, You know, it was ridiculously expensive. 439 00:30:33,960 --> 00:30:37,160 And then you'd get that little annoying message like, please 440 00:30:37,160 --> 00:30:39,520 add a coin if you'd like to continue your conversation, 441 00:30:39,520 --> 00:30:42,840 right? So 100% like AT&T definitely 442 00:30:42,840 --> 00:30:45,760 got, you know, hurt in the process. 443 00:30:45,960 --> 00:30:49,040 I'm sure a lot of their business model came from being able to 444 00:30:49,040 --> 00:30:52,360 monetize long distance communications, but it made the 445 00:30:52,360 --> 00:30:54,880 world a lot better. Right now you have essentially 446 00:30:54,880 --> 00:30:59,120 free instantaneous worldwide communications. 447 00:30:59,120 --> 00:31:01,520 That wasn't the case 20 years ago. 448 00:31:01,800 --> 00:31:06,080 It was it was prohibitively expensive to say the least. 449 00:31:06,360 --> 00:31:12,640 So my next question Nick, regarding your book, which is, 450 00:31:13,240 --> 00:31:15,800 but let's talk about the euro dollar system because that's 451 00:31:15,800 --> 00:31:18,840 something that you keep referencing that you that you've 452 00:31:18,840 --> 00:31:20,400 referenced a couple times in your book. 453 00:31:20,760 --> 00:31:25,040 And you also said that there is parallels that can be drawn 454 00:31:25,040 --> 00:31:28,680 between the unregulated expansion of offshore dollars 455 00:31:29,200 --> 00:31:32,160 and bitcoins decentralized financial system. 456 00:31:33,800 --> 00:31:36,440 Yeah. So the parallel there is that 457 00:31:37,720 --> 00:31:44,280 the banks that operate in a euro dollar realm do so by their own 458 00:31:44,280 --> 00:31:50,320 governance. They don't use the Federal 459 00:31:50,320 --> 00:31:55,880 Reserve as a Reserve Bank. So when they settle between 460 00:31:55,880 --> 00:32:00,560 themselves, they're actually just settling with IO us between 461 00:32:00,560 --> 00:32:03,960 themselves. That's what a euro dollar is. 462 00:32:04,160 --> 00:32:07,960 It's a settlement vehicle for euro dollar banks. 463 00:32:08,760 --> 00:32:15,520 And because they don't, they don't have Fed accounts and only 464 00:32:15,520 --> 00:32:18,000 with a Fed account can you have a Fed reserve. 465 00:32:18,000 --> 00:32:21,320 And if you don't have a Fed account, you don't have Fed 466 00:32:21,320 --> 00:32:24,760 reserves. So you can't settle with other 467 00:32:24,760 --> 00:32:30,920 banks via Fed reserves. So that that bilateral 468 00:32:30,920 --> 00:32:38,400 settlement and is a is a highly decentralized way of settling 469 00:32:39,360 --> 00:32:43,040 versus a domestic. And I guess that is probably the 470 00:32:43,040 --> 00:32:49,480 strongest parallel between the two, that the euro dollar system 471 00:32:49,480 --> 00:32:53,640 doesn't have a central bank. Gotcha. 472 00:32:53,880 --> 00:32:59,200 And and OK. And you also mentioned that this 473 00:32:59,280 --> 00:33:04,160 potentially could be a threat to US monetary sovereignty. 474 00:33:04,160 --> 00:33:08,320 Is that correct? So it's the euro dollar system. 475 00:33:08,760 --> 00:33:12,000 And what I explained in the book is that I believe the euro 476 00:33:12,000 --> 00:33:18,800 dollar system was allowed by the Fed and U.S. policy makers to go 477 00:33:18,800 --> 00:33:23,040 on after they discovered it around 1960. 478 00:33:23,320 --> 00:33:29,320 So it, it started in the 50s, it got going without the knowledge 479 00:33:29,360 --> 00:33:34,880 of U.S. policy makers or the Fed just by the act of European 480 00:33:34,880 --> 00:33:41,440 bankers, European clients, Russian clients, etcetera, and 481 00:33:41,440 --> 00:33:46,560 Soviet clients, I should say. And that system that got going 482 00:33:46,560 --> 00:33:52,000 in the 50s, it news of it got back to the United States in the 483 00:33:52,000 --> 00:33:56,120 late 50s. So around the late 50s, nineteen 484 00:33:56,120 --> 00:34:05,160 60, the Fed sent delegates to Europe to investigate what what 485 00:34:05,160 --> 00:34:08,239 is going on there. How are they using the dollar? 486 00:34:09,360 --> 00:34:11,760 Why are they using the dollar? How are they using the dollar 487 00:34:11,760 --> 00:34:13,679 without our knowledge, without our permission? 488 00:34:13,679 --> 00:34:16,600 How is how does it work? What's going on? 489 00:34:16,760 --> 00:34:21,679 They went, they came back and they basically said banks are 490 00:34:21,679 --> 00:34:24,719 using dollars. They called them continental 491 00:34:24,719 --> 00:34:27,719 dollars. They're using dollars to settle 492 00:34:27,719 --> 00:34:30,760 balances, to invest in a money market, to gain yield. 493 00:34:31,719 --> 00:34:34,800 You might recall that there was Regulation Q at the time in the 494 00:34:34,800 --> 00:34:37,960 United States, in the United States, which which capped 495 00:34:37,960 --> 00:34:40,440 interest rates. So a New York bank could only 496 00:34:40,440 --> 00:34:45,639 offer 3% yield, where a, a euro dollar bank, a London bank could 497 00:34:45,639 --> 00:34:48,280 offer whatever market yield they wanted to. 498 00:34:48,719 --> 00:34:52,639 So money was flowing over there. Dollars were leaving the United 499 00:34:52,639 --> 00:34:55,880 States for these investments. Companies in Europe that were 500 00:34:55,880 --> 00:34:59,560 making dollars would invest them in the euro dollar market, 501 00:34:59,560 --> 00:35:05,000 invest them in basically funding other banks with deposits. 502 00:35:06,080 --> 00:35:12,560 And that system, when the United States became aware of it, when 503 00:35:12,560 --> 00:35:15,880 the Fed became aware of it and they published about it, they 504 00:35:15,880 --> 00:35:23,800 said this is on net a good thing for the dollar, a good thing for 505 00:35:23,800 --> 00:35:29,240 the United States because it increases the size of the dollar 506 00:35:29,240 --> 00:35:32,800 network. Importantly, at the time, it 507 00:35:32,800 --> 00:35:36,080 kept dollars in Europe instead of calling gold out of the 508 00:35:36,080 --> 00:35:38,120 United States. So that was a key. 509 00:35:38,280 --> 00:35:42,040 That was one of the one of the great benefits at the time of 510 00:35:42,040 --> 00:35:44,240 the euro dollar system. It kept dollars in Europe 511 00:35:44,520 --> 00:35:50,480 instead of claiming US gold. The US wishes that it was 512 00:35:50,480 --> 00:35:55,560 actually probably used more because France and Spain were 513 00:35:55,560 --> 00:36:00,640 actively calling gold away from US gold reserves with their US 514 00:36:00,640 --> 00:36:05,600 currency during the mid 1960s. So it wasn't attractive enough 515 00:36:06,400 --> 00:36:09,720 because there was this understanding, Charles de Gaulle 516 00:36:10,440 --> 00:36:13,880 had an understanding that there were too many dollar credits 517 00:36:13,880 --> 00:36:18,280 floating out there and they probably wouldn't be worth $35 518 00:36:18,840 --> 00:36:20,920 for one ounce of gold for that long. 519 00:36:21,120 --> 00:36:25,520 It would probably take more dollars in the future to get 520 00:36:25,520 --> 00:36:29,160 that one ounce of gold. And so let's convert now. 521 00:36:29,760 --> 00:36:33,120 And so there was a run on the dollar during the 1960's. 522 00:36:33,480 --> 00:36:38,280 The BIS and and the Fed basically went to Switzerland 523 00:36:38,280 --> 00:36:42,360 and said we need to form a gold pool in which we sell gold into 524 00:36:42,360 --> 00:36:47,320 the market and suppress the price and prevent it from going 525 00:36:47,320 --> 00:36:50,040 up from 35 and continue that mind trick. 526 00:36:50,560 --> 00:36:54,320 This is why the mind trick is so strong, because the mind trick 527 00:36:54,800 --> 00:36:56,600 it. They tried so many different 528 00:36:56,600 --> 00:37:00,400 ways to employ this mind trick. How did you find all this out, 529 00:37:00,400 --> 00:37:01,960 Nick? Because this is not common. 530 00:37:01,960 --> 00:37:04,680 This is not common knowledge. What you just what you just 531 00:37:04,680 --> 00:37:08,800 talked about. Yeah, so I did a lot of 532 00:37:08,800 --> 00:37:11,160 research, Nico. I love this topic and I read a 533 00:37:11,160 --> 00:37:14,760 lot of books for layered money and I've read a lot of academic 534 00:37:14,760 --> 00:37:17,000 research papers over the course of my time. 535 00:37:17,000 --> 00:37:19,960 I've been teaching at USC fixed income since 2019. 536 00:37:19,960 --> 00:37:23,240 So it's six years of syllabus formation and just reading 537 00:37:23,240 --> 00:37:26,040 papers and, you know, understanding this topic. 538 00:37:26,200 --> 00:37:30,120 And I'm still a student, right? I'm, I teach, I teach my 539 00:37:30,120 --> 00:37:33,360 students, but I am a student and I'm not a master. 540 00:37:33,360 --> 00:37:36,560 I, so I, I want to just keep learning. 541 00:37:36,760 --> 00:37:42,600 I have so many learning goals and research goals, but there 542 00:37:42,600 --> 00:37:47,080 were, there were two books that changed the course of Bitcoin 543 00:37:47,080 --> 00:37:49,880 age research for me. I'm holding both of them right 544 00:37:49,880 --> 00:37:53,120 now. The first one which I read 545 00:37:53,840 --> 00:38:00,800 during the spring of last year. So this would have been about 546 00:38:01,040 --> 00:38:06,760 11-12 months ago. This is called central bank 547 00:38:06,760 --> 00:38:13,680 cooperation by an Italian economist, Tony Yolo, Gianni 548 00:38:13,680 --> 00:38:16,040 Toliani. Tony Yolo. 549 00:38:16,040 --> 00:38:18,600 So I'm sorry for all the Italians out there for 550 00:38:18,600 --> 00:38:21,920 butchering that central bank cooperation at the Bank for 551 00:38:21,920 --> 00:38:25,160 International Settlements 1930 to 1973. 552 00:38:25,640 --> 00:38:32,960 So at the time, I was understanding that the BIS had a 553 00:38:32,960 --> 00:38:37,040 main role in protecting the euro dollar system, which was a story 554 00:38:37,040 --> 00:38:38,960 that I was hip to for a while, right. 555 00:38:39,120 --> 00:38:42,320 So the euro dollar system was a story that I told and layered 556 00:38:42,320 --> 00:38:44,040 money. And, and it's something that 557 00:38:44,040 --> 00:38:46,760 I've taught in my class for 5-6 years. 558 00:38:48,160 --> 00:38:51,720 So I wanted to go deeper into the euro dollar system. 559 00:38:52,640 --> 00:38:57,960 And so I, I, I have a academic research database for all the 560 00:38:57,960 --> 00:39:00,400 people that are students at universities. 561 00:39:00,880 --> 00:39:05,560 You can go to jstore.org and login through your university 562 00:39:05,560 --> 00:39:09,560 and get access to more things than you'll ever, ever have the 563 00:39:09,560 --> 00:39:13,480 time to read. So I basically did a a euro 564 00:39:13,480 --> 00:39:19,120 dollar be at, you know, a bank for international settlements 565 00:39:21,000 --> 00:39:27,400 money markets crossover search in J store and read dozens of 566 00:39:27,400 --> 00:39:33,520 papers from the 50s, sixties, 70s and 80s just poured through 567 00:39:33,680 --> 00:39:37,000 papers and papers and papers. And I just I made these 568 00:39:37,040 --> 00:39:39,200 incredible discoveries. And so you if you guys are 569 00:39:39,200 --> 00:39:43,000 looking at the footnotes, one of the authors is a Mr. Byrne, 570 00:39:43,760 --> 00:39:46,680 Katherine Schenk. This was an incredible story. 571 00:39:47,040 --> 00:39:51,360 Katherine Schenk who wrote one of the foundational papers about 572 00:39:51,360 --> 00:39:54,560 Midland Bank in the Euro dollar system in the 50s. 573 00:39:56,000 --> 00:40:01,520 I found out that my editor Joe Kim book, who also edited Aaron 574 00:40:01,720 --> 00:40:05,880 von Weirdem's book The Genesis Book, which I used in my 575 00:40:05,880 --> 00:40:11,600 research, that Joe Kim was a student of Professor Shank at 576 00:40:11,880 --> 00:40:18,600 his Business School in Europe. A a a couple decades ago or a 577 00:40:18,600 --> 00:40:22,880 decade or so ago, so there was an amazing crossover and through 578 00:40:22,880 --> 00:40:27,600 those papers, I found this book on the bank for you can even see 579 00:40:27,600 --> 00:40:32,560 my, my dog ears. I've I get really active when 580 00:40:32,560 --> 00:40:36,840 I'm when I'm doing my, when I'm doing my research here and. 581 00:40:37,240 --> 00:40:41,240 It's a small world. This, this book was, I mean, 582 00:40:41,240 --> 00:40:45,320 this book was so foundational and I learned so much about the 583 00:40:45,320 --> 00:40:48,600 history of the monetary system and the euro dollar. 584 00:40:48,880 --> 00:40:52,240 And but the gold pool stories were really from here 585 00:40:53,360 --> 00:40:56,640 specifically. And the, the great, the greatest 586 00:40:56,640 --> 00:40:58,840 euro dollar stories were in those papers. 587 00:40:59,480 --> 00:41:05,240 Then in this book, which I, I'm trying to remember how I 588 00:41:05,240 --> 00:41:08,920 stumbled upon this one. This one is about Walter 589 00:41:08,920 --> 00:41:13,840 Wriston, Citibank, and the rise and fall of American financial 590 00:41:13,840 --> 00:41:16,160 supremacy. I believe that this book was 591 00:41:16,160 --> 00:41:20,120 cited also in one of my papers. That's how I came across it. 592 00:41:20,560 --> 00:41:24,680 And in this beast, it tells basically the history of 593 00:41:24,680 --> 00:41:27,320 American finance through the lens of Citibank. 594 00:41:28,120 --> 00:41:32,280 So all the way back to its founding in 1812, which I 595 00:41:32,280 --> 00:41:35,960 learned from this book that Citibank was basically founded 596 00:41:35,960 --> 00:41:40,520 by a bunch of New Yorkers after the first central Bank of the 597 00:41:40,520 --> 00:41:45,120 United States, Hamilton's bank expired after its twenty year 598 00:41:45,120 --> 00:41:49,160 charter in 1811. And they needed they needed a 599 00:41:49,160 --> 00:41:55,320 bank to continue on with their activities, helping, you know, 600 00:41:55,320 --> 00:41:57,560 the government finance its activities. 601 00:41:58,040 --> 00:42:04,440 And the history on the 1812 version of Citibank is then, but 602 00:42:04,560 --> 00:42:07,440 that you know, some of those stories are back there and and 603 00:42:07,440 --> 00:42:10,920 I've snuck them in the book. But but City's role in 604 00:42:10,920 --> 00:42:17,040 discovering the existence of the Euro dollar from the New York 605 00:42:17,040 --> 00:42:22,040 vantage was fascinating in this book because all of a sudden it 606 00:42:22,040 --> 00:42:28,760 was like a trader, a forex trader in London heard that a 607 00:42:28,760 --> 00:42:33,720 bank in London had solicited dollar deposits and paid out a 608 00:42:33,720 --> 00:42:37,560 rate that was higher than the Regulation Q capped rate. 609 00:42:37,960 --> 00:42:42,720 And it was just like a rumor on AFX desk in a City Bank branch 610 00:42:42,720 --> 00:42:50,040 in London that started the wave of U.S. banks moving into London 611 00:42:50,520 --> 00:42:55,200 to capitalize on non regulated dollar activity. 612 00:42:55,880 --> 00:43:00,080 And that move of U.S. banks taking over a City of London 613 00:43:00,080 --> 00:43:03,720 happened in the early 60s. So the timeline is important. 614 00:43:03,960 --> 00:43:08,240 The 50s was when the game got going and the early 60s was when 615 00:43:08,240 --> 00:43:09,960 the New York banks joined the game. 616 00:43:10,400 --> 00:43:15,000 So it happened after Alfred Hayes, the president of the New 617 00:43:15,000 --> 00:43:21,840 York Fed, went to Basel in 1960 and said, OK, the euro dollar 618 00:43:21,840 --> 00:43:24,560 system is fine, but what we really need is a gold pool. 619 00:43:25,880 --> 00:43:29,480 Then the American Bank said, you know, basically, let's go. 620 00:43:30,320 --> 00:43:33,560 So, and you said and, you know, and this, this is fascinating 621 00:43:33,560 --> 00:43:36,280 because it's like shadow banking, you know, kind of 622 00:43:36,280 --> 00:43:37,960 happening in, in, in the back in the. 623 00:43:37,960 --> 00:43:40,680 Background shadow banking. It's not like shadow banking. 624 00:43:40,680 --> 00:43:44,280 This is what shadow banking is. And and you say there's 625 00:43:44,280 --> 00:43:47,640 parallels with the Bitcoin. What are those parallels 626 00:43:47,640 --> 00:43:55,200 exactly? So the parallels in Bitcoin and 627 00:43:55,880 --> 00:44:02,920 the euro dollar, yeah, the the euro dollar system is that it 628 00:44:03,000 --> 00:44:09,800 has, it's not governed by an entity, right? 629 00:44:09,800 --> 00:44:14,160 It's it's not governed. And so I had this debate 630 00:44:14,160 --> 00:44:19,080 actually with Saifuddin. He said, no, the euro dollar 631 00:44:19,080 --> 00:44:25,480 system is explicitly allowed by the Fed and therefore it's 632 00:44:25,520 --> 00:44:31,440 controlled by the Fed. But it actually emerged outside 633 00:44:31,440 --> 00:44:34,160 of the Fed. And then the Fed basically said, 634 00:44:34,160 --> 00:44:40,640 OK, so from my perspective, who who controls whom, right? 635 00:44:40,760 --> 00:44:46,000 There is a strong argument that it's actually euro dollar banks 636 00:44:46,000 --> 00:44:53,320 and global banking dollar bank, a banking cabal that is in 637 00:44:53,320 --> 00:44:59,280 control of the US currency via the Federal Reserve Channel. 638 00:44:59,520 --> 00:45:05,480 There's a strong argument there. I also debated whether to try to 639 00:45:05,480 --> 00:45:08,280 formulate an idea to split the dollar between a nationally 640 00:45:08,280 --> 00:45:12,920 sovereign dollar and a a global banking dollar and to lay out an 641 00:45:12,920 --> 00:45:15,600 idea. I do have an idea there for how 642 00:45:15,600 --> 00:45:19,000 the US can take its currency back, but there's so much 643 00:45:19,000 --> 00:45:24,680 speculation there that that was a real challenge. 644 00:45:24,920 --> 00:45:28,280 I know I'm not doing a great job maybe of answering the question 645 00:45:28,280 --> 00:45:31,680 to your satisfaction of the parallels between the euro. 646 00:45:31,680 --> 00:45:33,680 Dollar, I think and. Bitcoin. 647 00:45:34,040 --> 00:45:36,480 I think the way you described it, Nick was perfect. 648 00:45:36,480 --> 00:45:38,840 There is just no central authority and it's just 649 00:45:38,840 --> 00:45:43,040 something that happened organically like it happened out 650 00:45:43,040 --> 00:45:45,320 of market. There was a market necessity of 651 00:45:45,320 --> 00:45:50,680 this and the and the system essentially happened organically 652 00:45:52,160 --> 00:45:55,080 because it was in need. It was in something that was top 653 00:45:55,080 --> 00:45:57,000 down. So you did answer my question 654 00:45:57,240 --> 00:46:00,400 need liquidity without having to sell your Bitcoin. 655 00:46:00,560 --> 00:46:04,040 For more than six years now, Leaden has been the trusted 656 00:46:04,040 --> 00:46:08,360 choice for Bitcoin backed lending with transparency, 657 00:46:08,440 --> 00:46:11,280 security and trust at their core. 658 00:46:11,520 --> 00:46:15,280 I absolutely love these guys and I personally have not only an 659 00:46:15,280 --> 00:46:17,400 account with them but also alone. 660 00:46:17,480 --> 00:46:20,000 And some of the key features that I love about Leaden is the 661 00:46:20,000 --> 00:46:22,560 fact that there are no monthly payments. 662 00:46:22,560 --> 00:46:27,160 You pay at the end of the term. 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Check out leaden dot IO today. 674 00:47:08,000 --> 00:47:10,360 I want to continue because there's so many good things. 675 00:47:10,360 --> 00:47:15,160 And the the latter, your book, you start, which is the really 676 00:47:15,160 --> 00:47:18,280 fascinating part to me, right? You, you lay out the context, 677 00:47:18,600 --> 00:47:22,920 you give the history and then you start tying in Bitcoin, 678 00:47:23,080 --> 00:47:25,400 right? So that's the direction we're 679 00:47:25,400 --> 00:47:27,160 heading right now. And one of the things that you 680 00:47:27,160 --> 00:47:31,800 talked about was essentially the NSA had a monopoly on 681 00:47:31,800 --> 00:47:36,480 cryptography. And until these three people by 682 00:47:36,480 --> 00:47:41,080 the name of Whitfield Diffie, Marty Hellman and Ralph Merkel 683 00:47:41,640 --> 00:47:44,600 challenge that monopoly. And you made the case that 684 00:47:44,600 --> 00:47:49,840 essentially, their discoveries actually lay the foundation for 685 00:47:49,840 --> 00:47:52,400 not only modern digital security, but Bitcoin. 686 00:47:53,320 --> 00:47:58,040 Absolutely, yes. So the NSA was an agency founded 687 00:47:58,040 --> 00:48:03,360 by President Truman under a secrecy order. 688 00:48:04,280 --> 00:48:10,440 And the efforts were, you know, military, militarily inspired, 689 00:48:11,640 --> 00:48:19,320 and the government needed an arm to engage in security 690 00:48:19,320 --> 00:48:24,880 intelligence. And so part of that effort was 691 00:48:24,880 --> 00:48:30,320 the study of applied cryptography and protecting or 692 00:48:30,320 --> 00:48:37,840 encrypting, because security and encryption go hand to hand. 693 00:48:37,840 --> 00:48:45,360 But the first, the first US agency or first US actors that 694 00:48:45,440 --> 00:48:50,800 tried to take advantage of this was the NSA. 695 00:48:51,400 --> 00:48:55,160 And so for a few decades, they had a monopoly and basically 696 00:48:55,160 --> 00:49:00,120 every student that went through any cryptography related work 697 00:49:00,440 --> 00:49:07,120 in, in, you know, science departments went into the NSA to 698 00:49:07,120 --> 00:49:11,000 work. And so 100% of the development 699 00:49:11,280 --> 00:49:15,760 of encryption technologies happened in what, you know, 700 00:49:15,760 --> 00:49:20,160 behind the triple fence, which is the nickname at the time for, 701 00:49:20,720 --> 00:49:26,360 for this triple, this triple fence electric fence facility 702 00:49:26,360 --> 00:49:32,680 that they had in Maryland. So the NSA with its monopoly 703 00:49:32,680 --> 00:49:38,640 over encryption, there was no private sector because everybody 704 00:49:38,640 --> 00:49:41,400 that studied just went into the NSA. 705 00:49:41,800 --> 00:49:47,320 But then the breakthrough moment came when a pair of 706 00:49:47,320 --> 00:49:54,400 whistleblowers from the NSA went to the Soviet Union and, and 707 00:49:54,400 --> 00:49:57,440 basically spilled a bunch of secrets about how the NSA 708 00:49:57,680 --> 00:49:59,920 operates. And, and basically they're in, 709 00:50:00,000 --> 00:50:03,800 they're encryption secrets. And a gentleman by the name of 710 00:50:03,800 --> 00:50:07,640 David Kahn wrote a book. It took him years to write it. 711 00:50:08,240 --> 00:50:12,920 It's called The Code Breakers. And that book was actually 712 00:50:14,640 --> 00:50:19,720 submitted to the government as basically a warning that, hey, 713 00:50:19,720 --> 00:50:24,560 this is coming out. We're about to expose a bunch of 714 00:50:24,560 --> 00:50:26,840 things about. In the end the government came 715 00:50:26,840 --> 00:50:30,600 back and said please take a couple things out but it didn't 716 00:50:30,600 --> 00:50:33,800 materially change the story in any way and he got to publish 717 00:50:33,800 --> 00:50:36,800 basically this. Tell all of the NSA. 718 00:50:36,880 --> 00:50:43,240 That was 1967. Before that book, awareness of 719 00:50:43,240 --> 00:50:48,680 anything that even happened at the NSA was minimal, let alone 720 00:50:50,320 --> 00:50:53,840 actual P Americans walking around on the street or in 721 00:50:53,840 --> 00:51:00,600 universities, inspired to learn and explore cryptography, 722 00:51:01,200 --> 00:51:04,360 encryption, computer based encryption. 723 00:51:06,720 --> 00:51:11,480 There, there was nobody. So the first readers of the Code 724 00:51:11,480 --> 00:51:17,600 Breakers were those founding fathers to encryption, leaving 725 00:51:17,600 --> 00:51:23,080 the mind hive of the NSA and landing on the streets of the 726 00:51:23,080 --> 00:51:26,280 United States of America. Where there is free spirit, 727 00:51:26,280 --> 00:51:29,760 there's innovation, there's computer science departments 728 00:51:30,120 --> 00:51:36,760 and, you know, brilliant people. And so that event was the the 729 00:51:37,000 --> 00:51:39,760 defining event was the publishing of the Code Breakers. 730 00:51:40,040 --> 00:51:43,440 And then Whitfield Diffie being one of those first readers. 731 00:51:43,720 --> 00:51:46,800 And he carried that thing around everywhere he went. 732 00:51:46,840 --> 00:51:50,280 And, you know, he treated it like religion, literally he 733 00:51:50,280 --> 00:51:51,880 would. He even said that. 734 00:51:53,880 --> 00:51:57,960 And, you know, then he started to look for people. 735 00:51:57,960 --> 00:52:00,400 He met Marty Hellman, They published together. 736 00:52:00,400 --> 00:52:04,040 Ralph Merkel read their paper, Then Ralph Merkel got involved 737 00:52:04,400 --> 00:52:06,000 and then they published together. 738 00:52:06,080 --> 00:52:09,200 Even though Merkel's name wasn't on one of the ground breaking 739 00:52:09,200 --> 00:52:12,880 papers. Merkel went on to publish, you 740 00:52:12,880 --> 00:52:18,560 know, based off of Diffie and Hellman's papers and through 741 00:52:18,560 --> 00:52:25,400 their papers that trio, the what was in the NSA behind closed 742 00:52:25,400 --> 00:52:29,120 doors was now on the street. There was a break. 743 00:52:29,200 --> 00:52:34,680 Whether or not Diffie, Hellman and Merkel invented something 744 00:52:34,680 --> 00:52:39,760 that the NSA never knew or not. We actually, I don't, we might 745 00:52:39,760 --> 00:52:46,880 never know that, but it was, it was discovered outside because 746 00:52:46,880 --> 00:52:50,760 there were people that really wanted to know and learn and 747 00:52:50,760 --> 00:52:53,480 explore. And from that we have modern, 748 00:52:53,480 --> 00:52:56,000 modern encryption. We have public key cryptography 749 00:52:57,120 --> 00:53:01,840 which is the root of Bitcoin. That's that's app first of all, 750 00:53:01,840 --> 00:53:04,680 absolutely incredible and fascinating. 751 00:53:05,080 --> 00:53:09,480 And that's a perfect segue to my next question, which is the 752 00:53:09,480 --> 00:53:12,200 cypherpunk movement, right? And I remember, you know, and I 753 00:53:12,200 --> 00:53:16,480 think it like the, I remember, like Adam back was part of the 754 00:53:16,480 --> 00:53:19,560 so-called crypto wars that was happening in the 90s for the US 755 00:53:19,560 --> 00:53:23,040 government's attempt to essentially ban certain types of 756 00:53:23,040 --> 00:53:27,440 cryptography. But in, in, in your book, you 757 00:53:27,520 --> 00:53:30,280 essentially one of your chapters is, is about this. 758 00:53:30,280 --> 00:53:32,360 And I, I wrote a question regarding it. 759 00:53:32,360 --> 00:53:35,440 So how did the cypherpunk movement's battle against 760 00:53:35,440 --> 00:53:39,080 government control over encryption contribute to the 761 00:53:39,080 --> 00:53:42,000 creation of Bitcoin? And why was? 762 00:53:42,000 --> 00:53:45,680 Proof of work a. Crucial innovation in achieving 763 00:53:45,840 --> 00:53:48,760 decentralized digital money. Yeah. 764 00:53:48,760 --> 00:53:51,400 So we'll do the, we'll do the proof of work. 765 00:53:52,480 --> 00:53:59,560 Second, the the government wasn't trying to ban types of 766 00:53:59,560 --> 00:54:02,560 encryption. It actually was trying to 767 00:54:02,560 --> 00:54:05,640 classify encryption. As a weapon, I. 768 00:54:05,640 --> 00:54:10,280 Mean as a weapon. And so and so posting it online 769 00:54:10,960 --> 00:54:14,080 is a version of exporting a weapon. 770 00:54:15,320 --> 00:54:18,000 And you know, it's exporting munitions. 771 00:54:19,800 --> 00:54:27,200 And so that was the stance taken by the government with Phil 772 00:54:27,200 --> 00:54:35,040 Zimmerman and PGP, which Halfini was instrumental in helping beef 773 00:54:35,040 --> 00:54:39,320 up that code base. And then versus Daniel 774 00:54:39,320 --> 00:54:44,080 Bernstein, who was a student who just wanted to publish and he 775 00:54:44,080 --> 00:54:47,400 submitted his paper. I found this tidbit very 776 00:54:47,400 --> 00:54:50,600 fascinating. When he submitted his paper, not 777 00:54:50,600 --> 00:54:53,720 only was he told, hey, you can't, you know, this is you're 778 00:54:53,720 --> 00:54:59,560 exporting munitions or you're, you're getting involved in, in 779 00:54:59,640 --> 00:55:01,920 an area that we would deem illegal. 780 00:55:02,240 --> 00:55:10,800 But now if you have any foreign classmates that might ever read 781 00:55:10,800 --> 00:55:16,880 your paper, they have to register with us as just to get 782 00:55:16,880 --> 00:55:22,800 permission as foreign because they could be foreign agents to 783 00:55:22,800 --> 00:55:27,520 gain access to American intellectual property in this in 784 00:55:27,520 --> 00:55:32,080 this crypto regard. So it was a very specific 785 00:55:32,080 --> 00:55:37,240 approach and the victory was a First Amendment victory. 786 00:55:37,800 --> 00:55:39,440 Yep. Right. 787 00:55:39,440 --> 00:55:44,760 And so the in the Bernstein case, 3 consecutive federal 788 00:55:44,760 --> 00:55:50,760 courts protected his right to publish under the 1st Amendment, 789 00:55:51,160 --> 00:55:57,240 basically saying if economist can have mathematical models, 790 00:55:59,360 --> 00:56:04,160 then, you know, encryption scientists can publish code 791 00:56:05,720 --> 00:56:09,040 because it's part of their work. Yeah, and it's part of their 792 00:56:09,040 --> 00:56:13,040 research. So that's, that's the the origin 793 00:56:13,040 --> 00:56:16,640 of the crypto war. And Adam back what he made 794 00:56:16,640 --> 00:56:20,560 shirts with the PGP code on it. I'm wearing. 795 00:56:20,960 --> 00:56:23,800 I'm wearing a weapon. Yeah, I'm wearing a weapon. 796 00:56:24,440 --> 00:56:27,160 So if you get on a plane with that shirt, you're, you're 797 00:56:27,160 --> 00:56:33,320 proving the absurdity of, of the ban or not the ban, the, you 798 00:56:33,320 --> 00:56:35,520 know, the classification. Of course. 799 00:56:35,920 --> 00:56:42,840 Itself, so you know that the the cypherpunks reacted, Zimmerman 800 00:56:42,840 --> 00:56:44,640 said. I read the letter that he wrote. 801 00:56:45,280 --> 00:56:52,240 He said that publishing PGP was a reaction to what the 802 00:56:52,240 --> 00:56:56,600 government is trying to do. You know that this is this is an 803 00:56:56,600 --> 00:57:01,280 effort to break free and to get gain privacy. 804 00:57:02,960 --> 00:57:06,600 And this isn't this. He basically said I am the 805 00:57:06,600 --> 00:57:10,040 crypto war, you know, in, in his, in his letter. 806 00:57:10,760 --> 00:57:13,800 And he said, I'm this is the frontline and he knew it. 807 00:57:14,080 --> 00:57:18,440 He got the support. The cases were won or the 808 00:57:18,440 --> 00:57:24,800 Zimmerman case was dismissed. Bernstein won his case and the 809 00:57:24,800 --> 00:57:32,280 crypto war was won by Americans versus the government, including 810 00:57:32,280 --> 00:57:34,880 the NSA and the State Department, right. 811 00:57:34,960 --> 00:57:41,920 And you could even say not even you could say the the 812 00:57:41,920 --> 00:57:44,760 legislative branch because the Senate came hard. 813 00:57:44,880 --> 00:57:49,560 Joe Biden was involved in that. They came hard at the private 814 00:57:49,560 --> 00:57:54,720 industries ability to actually communicate in an encrypted way. 815 00:57:55,040 --> 00:57:58,280 The government wanted a back door and they didn't get it. 816 00:57:58,760 --> 00:58:01,200 The, you know, the Senate wanted a back door. 817 00:58:02,360 --> 00:58:07,920 And so there were a lot of victories and you know, all of 818 00:58:07,920 --> 00:58:17,440 that. It just made the desire for that 819 00:58:17,440 --> 00:58:21,760 freedom to grow stronger and stronger. 820 00:58:22,160 --> 00:58:27,560 And, you know, say what you want about the United States, I 821 00:58:27,600 --> 00:58:32,960 sincerely believe that we have our First Amendment rights and 822 00:58:32,960 --> 00:58:37,280 that we express them everyday and we fight for them by saying 823 00:58:37,280 --> 00:58:39,200 and writing controversial things. 824 00:58:39,600 --> 00:58:42,680 And the more people that do it, the healthier the First 825 00:58:42,680 --> 00:58:46,360 Amendment is. And we owe a lot to the people 826 00:58:46,360 --> 00:58:48,440 in the 90s that fought for the 1st Amendment. 827 00:58:49,200 --> 00:58:54,840 And I believe that just talking about it is continuing that 828 00:58:54,840 --> 00:58:57,240 fight. So it it's a First Amendment 829 00:58:57,240 --> 00:58:59,160 story. It still is. 830 00:58:59,160 --> 00:59:02,120 And. I would say what's up the the 831 00:59:02,120 --> 00:59:06,440 fight, the fight for because I had the the the way that I would 832 00:59:06,440 --> 00:59:08,800 and nick me and you are in totally different. 833 00:59:08,920 --> 00:59:11,640 I'm a I'm an I I have to cover the news every single day. 834 00:59:11,640 --> 00:59:18,960 So I remember vividly for the last two years the previous 835 00:59:18,960 --> 00:59:24,520 administration's attack on Bitcoin and we we reference the 836 00:59:24,600 --> 00:59:27,840 original crypto war that happened back, I believe it was 837 00:59:27,840 --> 00:59:32,200 in the 90s multiple times because it is a First Amendment 838 00:59:32,200 --> 00:59:35,480 issue, right? It and you know, if if you you 839 00:59:35,480 --> 00:59:40,040 know the the crypto War 2 point O, you know the attack on the 840 00:59:40,040 --> 00:59:43,360 attack on self custody, it's the same thing, right? 841 00:59:43,520 --> 00:59:46,080 Are you are you trying to make the argument that writing down 842 00:59:46,080 --> 00:59:49,800 12 words is somehow dangerous to national security? 843 00:59:50,000 --> 00:59:52,120 They were using essentially the same arguments. 844 00:59:52,120 --> 00:59:54,960 Now I think it was solved in a different fashion. 845 00:59:54,960 --> 00:59:58,120 I think this one was solved via an election, right? 846 00:59:58,880 --> 01:00:03,600 That one was more solved through the judicial process, but it 847 01:00:03,600 --> 01:00:05,160 will still work solved regardless. 848 01:00:05,160 --> 01:00:09,640 And tying this up with what you were saying earlier on regarding 849 01:00:09,640 --> 01:00:13,200 the election. You can make a very good 850 01:00:13,240 --> 01:00:19,720 argument that the previous administration stance on Bitcoin 851 01:00:19,720 --> 01:00:23,760 and crypto they tried to walk it back might have caused them the 852 01:00:23,760 --> 01:00:28,640 election because a big part of their voting demographic we is 853 01:00:28,640 --> 01:00:31,360 the younger generation. The younger generation tends to 854 01:00:32,000 --> 01:00:36,240 own Bitcoin and crypto, right? So, yeah, I mean, I, I think 855 01:00:36,240 --> 01:00:39,320 this is all it, it still is a First Amendment issue. 856 01:00:40,120 --> 01:00:43,360 And in a way, you know, I wish it was solved through the 857 01:00:43,360 --> 01:00:48,720 judicial process because what happens in 2028 when the next 858 01:00:48,720 --> 01:00:52,600 election comes around, right? I, I just hope it, it, it 859 01:00:52,600 --> 01:00:56,960 doesn't remain a partisan issue. But anyhow, I I didn't mean to 860 01:00:57,200 --> 01:01:00,480 go off on a tangent, but. Let me just say quickly, I'm 861 01:01:00,480 --> 01:01:01,760 just. Connecting the dots. 862 01:01:02,080 --> 01:01:06,400 On the judicial process, the legislative process, America is 863 01:01:06,400 --> 01:01:09,720 a slow moving decentralized vehicle itself. 864 01:01:10,280 --> 01:01:14,200 And I do believe the will of the electorate and the people in 865 01:01:14,200 --> 01:01:18,760 this great Republic will prevail over the long over the long 866 01:01:19,000 --> 01:01:22,680 term. And so, you know, we need laws. 867 01:01:23,160 --> 01:01:25,840 Those laws will inevitably be challenged. 868 01:01:26,040 --> 01:01:27,560 The courts will have to uphold them. 869 01:01:27,920 --> 01:01:31,760 And that process will take years, regardless of who who had 870 01:01:31,760 --> 01:01:34,840 won the election, you know, because somebody would have sued 871 01:01:34,840 --> 01:01:37,400 then the courts would have ruled. 872 01:01:37,680 --> 01:01:41,240 The courts were already starting to rule in the favor of Bitcoin 873 01:01:41,920 --> 01:01:46,520 if we look back at the Grayscale case in late 2023. 874 01:01:46,520 --> 01:01:47,880 And that was before the election. 875 01:01:47,880 --> 01:01:55,360 So the election definitely helped us skip a lot of 876 01:01:57,040 --> 01:02:02,120 jurisprudence, but it doesn't mean that we'll avoid it in the 877 01:02:02,120 --> 01:02:09,280 future. And legislation should be and 878 01:02:09,280 --> 01:02:11,960 that's why legislation is important in addition to 879 01:02:11,960 --> 01:02:17,120 executive orders and changes at the regulatory level because the 880 01:02:17,200 --> 01:02:20,640 those, those can be fleeting, which I think is you know what 881 01:02:20,640 --> 01:02:24,880 you're what you're referring to. Yeah, you know, and, and you 882 01:02:24,880 --> 01:02:28,480 know, This is why the Bitcoin Act is so important. 883 01:02:28,480 --> 01:02:32,840 Like This is why, you know, the, the IT because there's only so 884 01:02:32,840 --> 01:02:34,880 much they can do via executive order, right? 885 01:02:34,880 --> 01:02:38,560 And executive order is just one election away from it being 886 01:02:38,560 --> 01:02:40,960 reversed. If you know, if they want this 887 01:02:40,960 --> 01:02:45,880 to essentially remain, you know, policy for the long term, right, 888 01:02:45,880 --> 01:02:49,160 something like the Bitcoin Act or something equivalent to it is 889 01:02:49,160 --> 01:02:52,640 incredibly important. Now I know we are getting to the 890 01:02:52,640 --> 01:02:54,880 top of the hour and I want to be respectful of your time, Nick 891 01:02:54,880 --> 01:02:59,520 and I want to tie in one of the one of the chapter, one of the 892 01:02:59,520 --> 01:03:01,240 one of the final chapters of your book. 893 01:03:02,040 --> 01:03:06,200 So the US government has had an evolving stance on Bitcoin. 894 01:03:06,280 --> 01:03:10,200 Obviously early skepticism in the beginning, now full-fledged 895 01:03:10,200 --> 01:03:13,920 adoption. How does that shape that it's 896 01:03:13,920 --> 01:03:16,960 global legitimacy? And as bitcoiners, I, I, I, you 897 01:03:16,960 --> 01:03:19,600 know, I hate saying that, right? Because it's like, I don't need 898 01:03:19,600 --> 01:03:21,720 the approval of the US government for Bitcoin to be 899 01:03:21,720 --> 01:03:23,720 legitimate. But in the eyes of the world, 900 01:03:24,320 --> 01:03:27,720 you could make that argument. And then how? 901 01:03:28,440 --> 01:03:31,280 How important was the announcement of the strategic 902 01:03:31,280 --> 01:03:35,560 Bitcoin Reserve for Bitcoin to be integrated into the financial 903 01:03:35,560 --> 01:03:38,400 system itself? Yeah, I'll take the second 904 01:03:38,400 --> 01:03:41,160 question first. I don't think that important. 905 01:03:42,360 --> 01:03:47,360 I think you know, Bitcoin is already taking on its financial 906 01:03:47,360 --> 01:03:52,840 role. The the ETF adoption and the, 907 01:03:53,040 --> 01:03:55,960 the spread of Bitcoin around the world, these positions being 908 01:03:55,960 --> 01:03:59,200 taken at pension funds and sovereign wealth funds, 909 01:03:59,480 --> 01:04:02,960 strategic mining positions across the world. 910 01:04:03,240 --> 01:04:06,400 All of that stuff happened before the strategic Bitcoin 911 01:04:06,400 --> 01:04:09,480 Reserve, and I believe that financialization of Bitcoin was 912 01:04:09,480 --> 01:04:12,080 heading that way with or without it. 913 01:04:12,920 --> 01:04:16,040 Does Bitcoin need the government, U.S. government, for 914 01:04:16,040 --> 01:04:17,240 legitimacy? No. 915 01:04:17,720 --> 01:04:22,840 What it does is it brings in, it brings the net, it grows the 916 01:04:22,840 --> 01:04:28,040 network, it grows the potential size of the network because 917 01:04:28,040 --> 01:04:32,520 there are people who are leaders and people that are followers. 918 01:04:32,760 --> 01:04:36,800 So the leaders get in first, the followers get in second, and the 919 01:04:36,800 --> 01:04:41,440 followers don't come until certain leaders say this is OK. 920 01:04:42,320 --> 01:04:45,280 And so Bitcoin has its own leaders without the government, 921 01:04:45,280 --> 01:04:52,600 but it has a new leader, meaning it has a another participant for 922 01:04:52,600 --> 01:04:55,480 people to say, oh look, that person is doing it. 923 01:04:55,480 --> 01:05:00,160 I think I'm going to follow them because every Bitcoin person was 924 01:05:00,840 --> 01:05:05,360 told about Bitcoin by somebody or read about Bitcoin from 925 01:05:05,360 --> 01:05:09,040 somebody else, right? Hal Finney being the first 926 01:05:09,120 --> 01:05:11,520 really person who read Satoshi's idea. 927 01:05:11,520 --> 01:05:13,560 And he was like, I like that idea. 928 01:05:14,280 --> 01:05:16,880 And, you know, then Hal Finney liked the idea. 929 01:05:16,880 --> 01:05:18,320 Then Hal Finney joined the network. 930 01:05:18,560 --> 01:05:20,280 Then other people liked the idea. 931 01:05:20,560 --> 01:05:24,400 And then, you know, then you and I liked the idea several years 932 01:05:24,400 --> 01:05:27,560 later. And now the US government likes 933 01:05:27,560 --> 01:05:30,480 the idea, and that's going to bring more people along. 934 01:05:30,760 --> 01:05:36,960 And it gives Bitcoin a type of legitimacy that can grow the 935 01:05:36,960 --> 01:05:41,120 network from 500 million people to 2 billion people. 936 01:05:41,960 --> 01:05:45,600 And that might not have happened without the political shift in 937 01:05:45,600 --> 01:05:48,840 the United States. I think it's a good thing for 938 01:05:48,840 --> 01:05:51,440 Bitcoins network to gain more participants. 939 01:05:51,840 --> 01:05:55,600 It's a good thing for the United States of America to understand 940 01:05:55,600 --> 01:06:00,720 Bitcoin really well, and I'm happy that we have some leaders 941 01:06:00,720 --> 01:06:04,720 who do now. I would say that there are some 942 01:06:04,720 --> 01:06:10,520 excellent people in the Senate and the House that understand 943 01:06:10,520 --> 01:06:14,480 Bitcoin. The executive branch is getting 944 01:06:14,480 --> 01:06:17,360 there. They also have some people that 945 01:06:18,000 --> 01:06:22,040 do understand some of the right things too. 946 01:06:22,760 --> 01:06:27,360 They won an election with a lot of support from Bitcoin people. 947 01:06:29,800 --> 01:06:36,880 But the actual Bitcoiners in the government are in Congress, and 948 01:06:37,120 --> 01:06:41,840 that's a good thing for the electorate, especially if people 949 01:06:41,840 --> 01:06:45,920 voted for those people because they are bitcoiners. 950 01:06:46,720 --> 01:06:50,080 I think that that's relevant. So I don't, I mean, I don't want 951 01:06:50,080 --> 01:06:53,520 people to walk away from this interview or from my book 952 01:06:53,520 --> 01:06:58,600 thinking that I think the USA gave Bitcoin legitimacy in 2024 953 01:06:58,600 --> 01:07:01,720 and 2025. That's definitely not what I'm 954 01:07:01,720 --> 01:07:03,640 saying. But it increases the size of the 955 01:07:03,640 --> 01:07:08,080 network and it does make Bitcoin legitimate in many more eyes 956 01:07:08,280 --> 01:07:12,440 than before, right. But anybody who was already in 957 01:07:12,440 --> 01:07:16,240 Bitcoin did not need that stamp of legitimacy. 958 01:07:16,400 --> 01:07:19,880 They already believed in it. And belief is key, right? 959 01:07:19,960 --> 01:07:23,000 It it it matters. Yeah, I, I love the way that you 960 01:07:23,000 --> 01:07:26,880 phrase that right, which is it doesn't need to just me, but it, 961 01:07:26,920 --> 01:07:30,680 it definitely it, it, it made the network bigger. 962 01:07:30,680 --> 01:07:34,840 Exactly, exactly what you said. So guys, go check out Bitcoin 963 01:07:34,840 --> 01:07:37,960 Age by Nick Bhatia. It's on Amazon right now. 964 01:07:37,960 --> 01:07:41,480 And I do want to read a quote by Senator Lummis. 965 01:07:42,480 --> 01:07:45,680 Nick is a master at deconstructing bitcoins 966 01:07:45,680 --> 01:07:48,480 complexities to make it digestible for the average 967 01:07:48,480 --> 01:07:51,800 reader. Bitcoin Age brilliantly bridges 968 01:07:51,800 --> 01:07:56,200 the knowledge gap and is a must read for both seasoned Bitcoin 969 01:07:56,240 --> 01:08:00,520 veterans and curious newcomers in the age of digital currency. 970 01:08:00,840 --> 01:08:03,960 So get it on Amazon today. Bitcoin Age by Nick Bhatia. 971 01:08:03,960 --> 01:08:06,200 Nick, thank you so much for joining me today. 972 01:08:06,200 --> 01:08:08,760 I appreciate it. Nico, I appreciate you very much 973 01:08:08,760 --> 01:08:10,880 and all the best to you and your family. 974 01:08:11,360 --> 01:08:11,680 Thanks.